UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-06142
THE JAPAN EQUITY FUND, INC.
(Exact name of registrant as specified in charter)
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c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302-3051
(Address of principal executive offices) (Zip code)
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302-3051
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201)
915-3054
DATE OF FISCAL YEAR END: October 31, 2004
DATE OF REPORTING PERIOD: April 30, 2004
Form N-CSR is to be used by management investment companies
to file reports with the Commission not later than 10 days
after the transmission to stockholders of any report that is
required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR
in its regulatory, disclosure review, inspection, and
policymaking roles. A registrant is required to disclose the
information specified by Form N-CSR, and the Commission will
make this information public. A registrant is not required to
respond to the collection of information contained in Form N-
CSR unless the Form displays a currently valid Office of
Management and Budget ("OMB") control number. Please direct
comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission,
450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has
reviewed this collection of information under the clearance
requirements of 44 U.S.C. ss. 3507.
THE JAPAN EQUITY FUND, INC.
GENERAL INFORMATION
THE FUND
The investment objective of the Fund is to outperform
over the long term,
on a total return basis (including appreciation and
dividends), the Tokyo Stock
Price Index ("TOPIX"), a composite market-capitalization
weighted index of all
common stocks listed on the First Section of the Tokyo Stock
Exchange ("TSE").
The Fund seeks to achieve its investment objective by
investing substantially
all of its assets in equity securities of companies listed on
the TSE or listed
on the over-the-counter market in Japan or listed on other
stock exchanges in
Japan. Daiwa SB Investments (U.S.A.) Ltd. is the Fund's
Investment Manager.
Daiwa SB Investments Ltd. is the Fund's Investment Adviser.
The Fund implements
an "active" portfolio management policy, which is an approach
that involves
quantitative valuation of securities to identify an
appropriate universe of
securities from which to select investments, with judgmental
analysis then
applied to this universe to determine the actual investments
to be made by the
Fund.
SHAREHOLDER INFORMATION
The Fund's shares are listed on the New York Stock
Exchange ("NYSE"). The
Fund understands that its shares may trade periodically on
certain exchanges
other than the NYSE, but the Fund has not listed its shares
on those other
exchanges and does not encourage trading on those exchanges.
The Fund's NYSE trading symbol is "JEQ". Weekly
comparative net asset value
("NAV") and market price information about the Fund is
published each Monday in
THE WALL STREET JOURNAL, each Sunday in THE NEW YORK TIMES
and each Saturday in
BARRON'S, and also appears in many other newspapers. The
Fund's weekly NAV is
also available by visiting www.daiwast.com or calling (800)
933-3440 or (201)
915-3020. Also, the Fund's website includes a monthly market
review, a list of
the Fund's top ten industries and holdings, the proxy voting
policies and
procedures, the code of ethics and the audit committee
charter.
INQUIRIES
Inquiries concerning your share account should be
directed to PFPC Inc.
(the "Plan Agent") at the number noted below. All written
inquiries should be
directed to the Fund, c/o Daiwa Securities Trust Company, One
Evertrust Plaza,
9th Floor, Jersey City, NJ 07302-3051.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
A Dividend Reinvestment and Cash Purchase Plan (the
"Plan") is available to
provide Shareholders with automatic reinvestment of dividends
and capital gain
distributions in additional Fund shares. The Plan also allows
you to make
optional annual cash investments in Fund shares through the
Plan Agent. A
brochure fully describing the Plan's terms and conditions is
available from the
Plan Agent by calling (800) 331-1710 or by writing The Japan
Equity Fund, Inc.,
c/o PFPC Inc. P.O. Box 43027, Providence, RI 02940-3027.
May 18, 2004
DEAR SHAREHOLDERS:
It is our pleasure on behalf of the Board of Directors
to present the
Semi-Annual Report for The Japan Equity Fund, Inc. (the
"Fund") for the six
months ended April 30, 2004.
PERFORMANCE AND REVIEW OF THE JAPANESE STOCK MARKET
- During the period November 2003 through April 2004,
the Fund's portfolio
increased by 12.33%. Over the same period, the TOPIX
advanced by 12.10%
in U.S. dollar ("USD") terms.
- On the other hand, in Japanese Yen ("JPY") terms, the
performance of the
Fund, excluding expenses and the cash position effect,
represented
16.27%, whereas the TOPIX was up 13.70%.
- Relative to the TOPIX, stock selection contributed
substantially to the
relative performance while sector selection within
sectors was slightly
negative (see Table 3).
- As shown below on Table 4, stock selection was
primarily strong in
Wholesale Trade and Transport Equipment. On the other
hand, stock
holdings in Other Financing Business hurt the results.
- Out performance in the Retail Trade sector in which we
were overweight
provided positive relative performance, while the
underweight stance in
Banks detracted from the relative result.
MARKET REVIEW (NOVEMBER 2003 - APRIL 2004)
During the six month period, the Japanese stock market
showed solid
movement with the TOPIX advancing by 13.70% on a JPY basis.
To review the
Japanese equity market for the period:
- November 03: From the outset of November, the market
was upbeat mirroring
the surge in U.S. stocks and the Yen's depreciation.
However, on November
17th, the Nikkei 225 Index ("Nikkei 225") fell below
the psychologically
important 10,000-mark as investor sentiment cooled
ahead of the House of
Representatives elections and in response to the
decline in U.S. stocks
and the U.S. dollar and the recent terrorist attacks.
During this period,
liquidation of margin positions by individual
investors was also
apparent. As the U.S. market began to pick up, the
Nikkei 225 recovered
to move above 10,000 on November 26th. Even so, the
TOPIX closed below
1,000 points at month-end following a Nikkei Shinbun
report on November
28th indicating that Ashikaga Financial Group was to
receive an injection
of public funds. During November, the average daily
trading volume on the
Tokyo Stock Exchange ("TSE") First Section was 1.06
billion shares, with
an average traded value of JPY1.09 trillion, both
being below October's
levels.
- December 03: The stock market rose sharply at the
beginning of December
upon positive expectations for the U.S. Christmas
sales season, but with
the Yen continuing to appreciate and U.S. stocks
declining, the Nikkei
225 slid below 10,000 points on December 10th. After
that, the Nikkei 225
was heavily moved by expectations following the
disappointment
surrounding U.S. stocks after the capture of former
Iraqi President
Saddam Hussein. Even so, momentum gradually declined
in the run-up to the
holiday season for non-Japanese investors.
Nevertheless, toward the end
of the month (and the year), the United States and
other leading overseas
markets strengthened and the Nikkei 225 ended the
month with a three-day
rally, despite relatively thin trading, on both a
sense of lagging behind
overseas markets and expectations for the overall
market in the new year.
With this, 2003 was the first year since 1999 that the
market closed the
year higher.
2
- January 04: In January, Japanese stocks made a strong
start at the
opening session of the year, reflecting the global
rise in stock markets
at year-end and through the New Year's holiday.
Nevertheless, the TOPIX
recorded five consecutive days of decline for the
first time since April
2003 at January-end, slowing its monthly growth rate
to 0.4%. Individual
investors remained active players from start to
finish, and the Nikkei
JASDAQ Stock Average rose for 21 days in a row during
the course of the
month, indicating the good performance of small-caps.
Aggressive buying
by non-Japanese investors of Japanese equities was
seen as the Japanese
market was deemed to be lagging overseas stocks.
However, domestic
investors began to take profits ahead of the end of
the fiscal year in
recognition of the strength of the Yen and the
unwinding of cross
shareholdings. As a result, rising prices were quickly
capped as the
market approached its 2003 high. From mid-month
onwards, investors began
to expect an expansion in high tech firm's earnings
ahead of third
quarter results announcements, with leading electrical
machinery stocks
recording highs. In spite of this, adjustments by
major banks, the
slowdown in non-Japanese investors' activity ahead of
the month-end and
the plunge in U.S. stocks after the Federal Open
Market Committee (FOMC)
meeting led to a cooling in investor sentiment,
bringing the market to a
close on a weak note at the end of the month.
- February 04: The Tokyo stock market in February was
characterized by a
stronger rising trend from the middle to the end of
the month. Continuing
from the end of the previous month, attention in early
February remained
focused on major high tech companies' earnings
announcements. While the
results themselves were not bad, they did not surpass
expectations and
failed to fuel a rise in the overall market.
Meanwhile, the Nikkei 225
temporarily endured a stronger declining trend as
overseas investors
withdrew from buying amid a market that was
susceptible to a wait-and-see
mood. This attitude was attributed to the upcoming
special inspections at
major banks and the G7 meeting.
Following these intial trends, both U.S. and Japanese
stocks turned
around and entered a rising trend, encouraged by U.S.
Federal Reserve
Board Chairman Alan Greenspan's testimony. Although
there were concerns
about supply/demand deterioration factors in light of
an offering of JR
West shares and the unwinding of cross-shareholdings
before the end of
the fiscal year, stocks remained in a rising trend
throughout the month.
This was due to increased expectations that the
domestic economy would
continue to recover on the back of the U.S. dollar
recovering to Y109/$,
high October-December Gross Domestic Product ("GDP")
growth and improved
industrial production in January. During this period,
investors sought a
wide range of stocks, covering everything from export-
related to domestic
demand issues. The Nikkei 225 recovered above 11,000
points.
- March 04: In March, the stock market generally
remained on a rising
trend, with the TOPIX closing the month at its highest
level since the
beginning of 2003. It rose by 49.6% in fiscal year
2003, the first rise
since fiscal year 1999 and the biggest gain since
fiscal year 1986
(47.8%). Throughout the month, non-Japanese investors
continued to be
aggressive buyers of Japanese stocks on the back of
expectations that the
recovery in the domestic economy would spread. There
were a number of
negative incentives, such as concerns over a rise in
the unwinding of
cross shareholdings ahead of the end of the fiscal
year, the terrorist
attacks against trains in Spain, the assassination of
the founder of the
Hamas movement by Israeli forces, a temporary
adjustment in U.S. stock
prices and a return of JPY appreciation. However,
these were counteracted
by prospects of further rises in stock prices over the
medium term, as
indicators such as corporate statistics and land
prices boosted
confidence even further. With expectations of
increased consumer
spending, an end to deflation and the bottoming out of
land prices, stock
selection focused on domestic demand issues, with
materials issues also
sought after toward the end of the month.
3
- April 04: In April, although the stock market was
mostly unchanged over
the month, it was firm overall on the back of an
improvement in the
Japanese economy and expectations of growth in
corporate earnings. The
TOPIX was above the 1,200-point level for most of the
month. Even when
the market was sent down by negative incentives, such
as reports that UFJ
Holdings had more bad loans than it had admitted, the
adjustment of U.S.
stocks and news that three Japanese nationals had been
taken hostage in
Iraq, buying on decline promptly kicked in. As a
result, trading volume
maintained a high level, but the upside appeared to be
capped at the end
of the month. On April 30, the last trading day of the
month, the TOPIX
closed below the 1,200-point level on adjustments of
cash positions, due
to incentives running dry, with the end of earnings
announcements at
leading companies and uncertainty in overseas markets
as a result of
fears of an economic slowdown stemming from monetary
tightening in the
United States and China. Total trading volume in April
exceeded the total
trading volume in March to hit a record high.
OUTLOOK
Concerns about higher interest rates, contraction of
excess liquidity and a
slowdown in China have resurfaced as new realities. After an
over 50% rebound in
the last twelve months, a consolidation or correction in the
Tokyo market seems
natural at this stage, as is the case with other equity
markets around the
world.
The market has reacted to the wave of positive earnings
news from
technology firms. We expect companies, particularly
manufacturers, to present
conservative outlooks for fiscal year 2004 (vs. market
expectations). We think
the TOPIX will settle down into a box range of 1000 to 1200
due to a lack of
news once non-manufacturer result announcements run their
course in May.
We believe medium and long-term investors should take a
buy-on-dips
strategy in the mean time. After bottoming out in January
2001, the Japanese
economy has been in a recovery phase that could be a
historically durable one.
While cyclical factors may cause a slow-down in corporate
earnings in the second
half of this year, valuations in the Japanese stock market
remain near the
bottom of their trading ranges. One-year forward earnings-
per-share, at 19 times
earnings, is based on the assumption of a 30% increase in
bottom-line profit in
fiscal 2004.
The initial stages of the recovery favored cyclicals,
lower-quality
equities, and smaller capitalization companies. However, we
would expect
higher-quality companies with sustainable growth
characteristics to lead the way
as global growth momentum stabilizes.
Major factors to be scrutinized in the meantime will
continue to be the
U.S. and Chinese economies, and the Japanese economy's
relative sensitivity to
them.
(1) Recent U.S. economic statistics, including job
reports and factory
orders, indicate the necessity of interest rate
hikes this summer,
aside from U.S. political considerations. A key
question is whether
capital expenditure will recover sufficiently to
cover a possible
slowdown in housing and consumption, which are more
sensitive to
short-term interest rate movements. It is
reasonable to expect a
slowdown of economic growth in the second half of
2004 and in 2005.
(2) The Chinese government is serious about combating
excess investment in
basic industries, including steel, cement, aluminum
and automobiles.
Monetary tightening, including higher reserve
requirements and direct
control of bank lending, has already hit the world
commodities
markets. This, in combination with probable U.S.
interest rate hikes
and a stronger U.S. dollar, has been forcing
speculators to leave the
commodities markets. The correction of the
commodities markets itself
is not a negative factor, as it will relieve raw
material cost
pressures on manufacturing industries. We believe
the Chinese
4
economy will be able to achieve a soft-landing this
time unlike
1993-94, as money supply growth and inflation are
much lower than the
previous cycle and excesses are limited to several
sectors as
mentioned above. Economic policy performance over
the next three to
six months should be watched, as China has become a
big theme in
financial and commodities markets.
(3) The Japanese economic recovery, triggered initially
by exports, has
permeated through capital expenditures and personal
consumption.
However, the momentum of Japanese economic recovery
seemed to be
slowing down sequentially in the quarter ended
March 31, 2004 given
the erratic movements in industrial production and
machinery orders.
On the other hand, business sentiment remained
quite high and there
were improvements in lagging sectors such as
services and small
enterprises. Whether Japan will be able to sustain
its economic
recovery based on consumption and capital
expenditure will be tested
by the less friendly external economic
circumstances outlined above,
particularly any slowdown in China, in late 2004
and in 2005.
FUND PERFORMANCE
Table 1. Performance in comparison with the benchmark
(TOPIX), USD base
LATEST SIX MONTHS
(NOV 03 - APRIL 04)
%
-------------------
Japan Equity Fund (Equity Only)
12.33
Benchmark (TOPIX)
12.10
-------
Difference
0.23
Table 2. Performance in comparison with the benchmark,
JPY base
LATEST SIX MONTHS
(NOV 03 - APRIL 04)
%
-------------------
Portfolio (Equity Only)
16.27
Benchmark (TOPIX)
13.70
-------
Difference
2.57
Table 3. Attribution Analysis Summary, JPY base
LATEST SIX MONTHS
(NOV 03 - APRIL 04)
%
-------------------
Portfolio (Equity Only)
16.27
TOPIX
13.70
-------
Difference
2.57
BREAKDOWN
Sector Selection
(0.12)
Stock Selection
2.03
Others
0.66
-------
Total
2.57
5
Table 4. Sector & Stock Selection Effects, Sector by
Sector as of April 30,
2004
SECTOR STOCK
PORTFOLIO MARKET ALLOCATION
SELECTION
POSITION WEIGHT PORTFOLIO BENCHMARK EFFECT
EFFECT
(%) (%) RETURN RETURN (%)
(%)
---------- ---------- ---------- ---------- ---------- -
---------
TOPIX INDUSTRY
Fishery, Agriculture & Forestry
0.00 0.09 0.00 21.40 0.00
0.00
Mining
0.00 0.14 0.00 8.91 0.01
0.00
Construction
0.92 2.29 12.71 -0.07 0.14
0.18
Foods
1.64 2.46 28.68 19.51 -0.07
0.14
Textiles & Apparel
2.48 1.04 8.88 15.08 0.01 -
0.17
Pulp & Paper
1.00 0.53 2.39 13.40 -0.02 -
0.02
Chemicals
7.77 5.44 9.48 12.05 -0.02 -
0.21
Pharmaceutical
3.74 3.94 22.16 17.69 -0.05
0.15
Oil & Coal Products
0.00 0.69 0.00 12.18 0.02
0.00
Rubber Products
1.16 0.66 30.36 29.16 0.07
0.00
Glass & Ceramic Products
1.22 1.09 24.25 26.96 0.21 -
0.03
Iron & Steel
1.77 1.69 4.81 9.03 -0.02 -
0.08
Nonferrous Metals
1.07 0.86 7.31 6.69 -0.01
0.05
Metal Products
0.00 0.66 5.85 18.84 -0.01 -
0.03
Machinery
5.14 3.29 8.72 13.08 -0.04 -
0.20
Electric Appliances
17.75 14.83 11.71 9.16 -0.08
0.46
Transport Equipment
10.21 9.89 21.77 15.59 -0.06
0.62
Precision Instruments
0.00 1.20 4.77 7.51 0.08
0.05
Other Products
0.95 1.83 33.26 13.72 0.03
0.31
Electric Power & Gas
1.51 3.58 5.77 4.22 0.17
0.02
Land Transport
1.97 3.40 4.36 9.72 0.05 -
0.01
Marine Transport
0.88 0.45 7.93 9.22 -0.02
0.02
Air Transport
0.00 0.34 0.00 9.93 0.02
0.00
Warehouse & Harbor Transport
0.42 0.19 4.09 15.57 0.01 -
0.10
Info & Communication
9.66 9.81 11.08 5.98 -0.03
0.59
Wholesale Trade
4.89 3.59 24.39 10.70 -0.07
0.71
Retail Trade
5.29 5.09 24.73 22.76 0.17
0.13
Banks
8.65 10.41 38.43 33.97 -0.39
0.25
Securities
3.23 2.40 -7.45 3.65 -0.10 -
0.38
Insurance
1.13 2.21 14.39 18.89 -0.07 -
0.03
Other Financing Business
1.88 2.61 18.10 36.29 -0.06 -
0.33
Real Estate
1.50 1.55 18.66 30.86 0.06 -
0.19
Services
2.15 1.75 14.36 15.06 -0.01 -
0.01
100.00 100.00 16.27 13.70 -0.12
2.03
6
As of April 30, 2004, the Fund's net assets were
approximately $95.3
million, which represents a net asset value of $6.61 per
share. The change in
net asset value in USD depends on several factors such as:
(1) the percentage
change in the benchmark during the period; (2) the over-or
under-performance of
the Fund's portfolio, after expenses, relative to the
benchmark; and (3) the
change in the JPY/USD exchange rate.
Our investment strategy is to invest in undervalued
securities based on
intensive bottom-up analysis supported by quantitative
screening. In our
research efforts, we place a priority on evaluation of the
top management, and
its commitment to enhance shareholder value through clear-cut
strategies,
including restructuring, that will be eventually reflected in
share prices. We
add value primarily through a bottom-up stock selection
approach for the
fundamental Japan equity product.
It is important to emphasize again that it has not been
an objective of the
Fund to predict changes in its benchmark. Rather, its goal is
to outperform the
benchmark, while staying fairly fully invested. Specifically,
the goal is to
hold no more than 5% in cash. On April 30, 2004, the
proportion of the Fund's
net assets invested in Japanese equities listed on the First
Section of the TSE
was 97.65%, while short-term investments and other net assets
represented 2.35%.
The invested position of the Fund's assets consisted of
common stocks of
Japanese companies operating in 27 different industries. The
Fund had relatively
large weightings in Electric Appliances (16.68% of net
assets), Transportation
Equipment (9.98%), Communication (9.13%) and Banks (8.44%).
During the six months ended April 30, 2004, the Fund's
market price on the
New York Stock Exchange ("NYSE") ranged from a low of $6.15
per share on
December 18, 2003 to a high of $7.75 on April 12, 2004. The
Fund's NYSE market
price closed at $6.79 per share on April 30, 2004.
The NYSE trading price in relation to the Fund's net
asset value per share,
as measured by the weekly closing prices during the six
months ended April 30,
2004, ranged from a low premium of 1.80% on January 29, 2004
to a high premium
of 22.90% on November 6, 2003, and ended the period at a
premium of 2.72%.
On December 23, 2003, the Fund successfully completed a
rights offering
resulting in the issuance of 3,605,229 new shares,
representing proceeds to the
Fund of approximately $19.4 million, after deducting for all
expenses.
The Fund has not invested in derivative securities.
Although foreign
currency hedging is permitted by the Fund's prospectus, the
Fund has not engaged
in any foreign currency hedging.
7
PORTFOLIO MANAGEMENT
Mr. Koichi Ogawa, CFA, is the Executive Director and
Chief Portfolio
Manager of Daiwa SB Investments Ltd. ("DSBI") for all North
American clients. A
senior member of the Investment Policy Committee (IPC) of
DSBI, Mr. Ogawa
possesses 29 years of investment experience and has been
responsible for Japan
stock selection since 1984. He spent nine years with Daiwa
Securities as an
institutional research analyst and three years in New York
analyzing U.S.
securities. He graduated from Tohoku University with a B.A.
in Law in 1972.
Mr. Kazuhiko Hosaka, CMA, is a Senior Portfolio Manager,
with a total of 15
years of experience in the Japanese equity market. He joined
Daiwa in 1990 as a
portfolio manager after spending two years as a securities
analyst at Barclays
Securities Group. He has been directly responsible for
managing Japanese equity
portfolios for several North American and European pension
clients. He graduated
from Aoyama Gakuin University with a B.A. in Law in 1988.
We thank you for your support of The Japan Equity Fund,
Inc. and your
continued interest in the Japanese economy and marketplace.
Sincerely,
/s/ Hiroshi Kimura /s/ Shunsuke
Ichijo
HIROSHI KIMURA SHUNSUKE ICHIJO
CHAIRMAN OF THE BOARD PRESIDENT
8
THE JAPAN EQUITY FUND, INC.
PORTFOLIO OF INVESTMENTS
APRIL 30, 2004 (UNAUDITED)
COMMON STOCKS--97.65%
SHARES
VALUE
------------
--------------
BANKS--8.44%
347 Mitsubishi Tokyo
Financial Group Inc.
$ 3,091,020
150,000 Mitsui Trust Holdings,
Inc.
1,062,681
630 Mizuho Financial
Group, Inc.
2,983,128
150,000 The Sumitomo Trust &
Banking Co., Ltd.
903,483
--------------
8,040,312
--------------
CHEMICALS--7.58%
150,000 Asahi Organic Chemicals
Industry Co., Ltd.
434,053
275,000 Denki Kagaku Kogyo
Kabushiki Kaisha
920,492
4,000 Fuji Photo Film Co.,
Ltd.
128,810
51,500 Hitachi Chemical Co.,
Ltd.
943,668
160,000 Mitsui Chemicals Inc.
843,251
21,000 Nichiyu Giken Kogyo Co.,
Ltd.
219,068
39,000 Shin-Etsu Chemical Co.,
Ltd.
1,577,830
101,000 Sumitomo Bakelite Co.,
Ltd.
662,400
120,000 Sumitomo Chemical Co.,
Ltd.
555,152
230,000 Toagosei Co., Ltd.
513,244
100,000 Toyo Ink Manufacturing
Co., Ltd.
428,157
--------------
7,226,125
--------------
COMMUNICATION--9.13%
22,200 Hitachi Information
System, Ltd.
670,591
240 KDDI Corp.
1,439,042
280 NTT Corp.
$ 1,473,150
1,570 NTT DoCoMo, Inc.
3,118,922
56,000 Tokyo Broadcasting
System, Inc.
1,117,562
23,000 Trend Micro Inc.
882,529
--------------
8,701,796
--------------
CONSTRUCTION--0.88%
27,000 Daiwa House Industry
Co., Ltd.
302,476
135,000 Maeda Corp.
538,824
--------------
841,300
--------------
ELECTRIC APPLIANCES--16.68%
30,000 Canon Inc.
1,575,653
25,000 CMK Corp.
371,236
50,000 Dainippon Screen
Manufacturing Co.,
Ltd.
341,528
170,000 Fujitsu Ltd.
1,182,783
56,000 Hitachi Kokusai
Electric Inc.
443,469
130,000 Hitachi Ltd.
913,915
95,000 Koito Manufacturing Co.,
Ltd.
684,234
9,200 Kyocera Corp.
761,938
148,000 Matsushita Electric
Industrial Co., Ltd.
2,176,234
143,000 NEC Corp.
1,124,646
8,200 NEC Electronics Corp.
577,957
36,000 Nichicon Corp.
418,977
40,000 Nippon Chemi-con
Corp.
221,335
3,900 Rohm Co., Ltd.
487,146
18,000 Seiko Epson Corp.
707,003
19,000 Sharp Corp.
342,979
13,000 Stanley Electric Co.,
Ltd.
245,873
9
SHARES
VALUE
------------
--------------
ELECTRIC APPLIANCES (CONCLUDED)
5,000 Sumida Corp.
$ 180,515
58,000 Taiyo Yuden Co., Ltd.
970,700
7,500 TDK Corp.
536,103
10,100 Tokyo Electron Ltd.
615,675
146,000 Toshiba Corp.
671,462
25,000 Yokogawa Electric
Corp.
339,940
--------------
15,891,301
--------------
ELECTRIC POWER & GAS--1.46%
65,000 Tokyo Electric Power
Co., Inc.
1,394,458
--------------
FOODS--1.60%
53,000 Asahi Breweries, Ltd.
596,154
80,000 Fuji Oil Co., Ltd.
928,882
--------------
1,525,036
--------------
GLASS & CERAMIC PRODUCTS--1.19%
16,000 Nippon Electric Glass
Co., Ltd.
377,358
218,000 Nippon Sheet Glass Co.,
Ltd.
761,339
--------------
1,138,697
--------------
INSURANCE--1.10%
70,000 Aioi Insurance Co.,
Ltd.
307,964
140,000 Nissay Dowa General
Insurance Co., Ltd.
737,845
--------------
1,045,809
--------------
IRON & STEEL--1.72%
240,000 Kobe Steel, Ltd.
333,091
250,000 Nisshin Steel Co., Ltd.
503,447
180,000 Sumitomo Metal
Industries, Ltd.
217,163
160,000 Toyo Kohan Co., Ltd.
587,808
--------------
1,641,509
--------------
LAND TRANSPORTATION--1.93%
250 East Japan Railway Co.
$ 1,279,028
95,000 Nippon Express Co.,
Ltd.
555,833
--------------
1,834,861
--------------
MACHINERY--5.71%
90,000 Amada Co., Ltd.
506,985
80,000 Fujitec Co., Ltd.
383,890
97,000 Komatsu Ltd.
553,456
13,000 Nippon Thompson Co.,
Ltd.
87,972
236,000 NSK Ltd.
1,087,518
33,000 Ricoh Co., Ltd.
658,563
9,000 SMC Corp.
1,032,747
58,200 THK Co., Ltd.
1,127,150
--------------
5,438,281
--------------
MARINE TRANSPORTATION--0.85%
200,000 Nippon Yusen
Kabushiki Kaisha
814,586
--------------
NON-FERROUS METALS--1.05%
108,000 Sumitomo Electric
Industries, Ltd.
999,274
--------------
OTHER FINANCING BUSINESS--1.84%
52,000 Hitachi Capital Corp.
877,830
6,000 JAFCO Co., Ltd.
489,840
1,870 SFCG Co., Ltd.
384,042
--------------
1,751,712
--------------
OTHER PRODUCTS--0.93%
75,000 Toppan Printing Co.,
Ltd.
882,393
--------------
PHARMACEUTICAL--3.65%
56,000 Takeda Chemical
Industries, Ltd.
2,260,523
36,000 Tanabe Seiyaku Co.,
Ltd.
346,154
10
SHARES
VALUE
------------
--------------
PHARMACEUTICAL (CONCLUDED)
26,000 Yamanouchi
Pharmaceutical Co.,
Ltd.
$ 867,925
--------------
3,474,602
--------------
PULP & PAPER--0.98%
150 Nippon Unipac
Holding
747,007
30,000 Oji Paper Co., Ltd.
187,500
--------------
934,507
--------------
REAL ESTATE--1.47%
127,000 Mitsui Fudosan Co.,
Ltd.
1,399,719
--------------
RETAIL TRADE--5.16%
46,900 EDION Corp.
516,904
13,300 Fast Retailing Co., Ltd.
1,037,554
2,000 Hard Off Corp. Co.,
Ltd.
44,358
55,000 Isetan Co., Ltd.
760,341
45,000 Marui Co., Ltd.
707,003
14,000 Matsumotokiyoshi Co.,
Ltd.
424,165
5,000 Nafco Co., Ltd.
161,919
50 Nitori Co., Ltd.
3,234
37,000 Seven-Eleven Japan Co.,
Ltd.
1,258,618
--------------
4,914,096
--------------
RUBBER PRODUCTS--1.12%
300,000 Yokahama Rubber Co.,
Ltd.
1,066,763
--------------
SECURITIES--3.16%
80,000 Nikko Cordial Corp.
455,733
157,000 Nomura Holdings Inc.
2,552,105
--------------
3,007,838
--------------
SERVICES--2.43%
24,500 H.I.S. Co., Ltd.
$ 673,394
22,400 NEC Fielding Ltd.
709,144
3,000 Nomura Research
Institute, Ltd.
310,504
14,500 Secom Co., Ltd.
622,143
--------------
2,315,185
--------------
TEXTILE & APPAREL--2.40%
225,000 Mitsubishi Rayon Co.,
Ltd.
789,868
240,000 Teijin Ltd.
722,787
76,000 Wacoal Corp.
776,959
--------------
2,289,614
--------------
TRANSPORTATION EQUIPMENT--9.98%
36,000 Denso Corp.
759,253
40,000 Honda Motor Co., Ltd.
1,607,402
360,000 Isuzu Motors Ltd.
969,884
202,000 Mazda Motor Corp.
643,160
43,000 Showa Corp.
445,836
67,000 Tokai Rika Co., Ltd.
772,469
119,000 Toyota Motor Corp.
4,307,057
--------------
9,505,061
--------------
WAREHOUSING--0.41%
130,000 Mitsui-Soko Co., Ltd.
391,509
--------------
WHOLESALE TRADE--4.80%
15,000 Autobacs Seven Co.,
Ltd.
404,118
368,000 Marubeni Corp.
928,012
174,000 Mitsui & Co., Ltd.
1,436,321
182 Net One Systems Co.,
Ltd.
775,943
214 NIWS Co., Ltd.
693,015
11
SHARES
VALUE
------------
--------------
WHOLESALE TRADE (CONCLUDED)
15,000 Paltac Corp.
$ 333,364
--------------
4,570,773
--------------
Total Common Stocks
(Cost--$81,455,974)
93,037,117
--------------
SHORT-TERM INVESTMENTS--0.35%
PRINCIPAL
AMOUNT
(000)
------------
U.S. DOLLAR TIME DEPOSIT--0.35%
$ 329 Bank of New York
Time Deposit, 0.05%,
due 5/3/04
(Cost--$328,899)
328,899
--------------
Total Investments--98.00%
(Cost--$81,784,873)
93,366,016
Other assets less liabilities--2.00%
1,907,623
--------------
NET ASSETS (Applicable to
14,420,917 shares of capital stock
outstanding; equivalent to $6.61
per share)--100.00%
$ 95,273,639
==============
TEN LARGEST EQUITY CLASSIFICATIONS HELD
APRIL 30, 2004 (UNAUDITED)
PERCENT OF
INDUSTRY NET ASSETS
-------- ----------
Electric Appliances 16.68%
Transportation Equipment 9.98
Communication 9.13
Banks 8.44
Chemicals 7.58
Machinery 5.71
Retail Trade 5.16
Wholesale Trade 4.80
Pharmaceutical 3.65
Securities 3.16
TEN LARGEST EQUITY POSITIONS HELD
APRIL 30, 2004 (UNAUDITED)
PERCENT OF
ISSUE NET ASSETS
----- ----------
Toyota Motor Corp. 4.52%
NTT DoCoMo, Inc. 3.27
Mitsubishi Tokyo Financial Group
Inc. 3.24
Mizuho Financial Group, Inc. 3.13
Nomura Holdings Inc. 2.68
Takeda Chemical Industries, Ltd. 2.37
Matsushita Electric Industrial Co., Ltd. 2.28
Honda Motor Co., Ltd. 1.69
Shin-Etsu Chemical Co., Ltd. 1.66
Canon Inc. 1.65
See accompanying notes to financial
statements.
12
THE JAPAN EQUITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2004 (UNAUDITED)
ASSETS
Investment in securities, at value (cost--$81,784,873)
$ 93,366,016
Cash denominated in foreign currency (cost--$1,562,647)
1,543,912
Interest and dividends receivable
481,131
Prepaid expenses
24,317
--------------
Total assets
95,415,376
--------------
LIABILITIES
Accrued expenses and other liabilities
141,737
--------------
NET ASSETS
Capital stock, $0.01 par value per share; total 30,000,000
shares authorized; 14,420,917
shares issued and outstanding
144,209
Paid-in capital in excess of par value
126,627,010
Accumulated net investment income
60,836
Accumulated net realized loss on investments
(43,100,007)
Net unrealized appreciation on investments and other
assets and liabilities denominated
in foreign currency
11,541,591
--------------
Net assets applicable to shares outstanding
$ 95,273,639
==============
NET ASSET VALUE PER SHARE
$ 6.61
==============
See accompanying notes to financial
statements.
13
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of withholding taxes of $39,486)
$ 522,581
Interest
155
--------------
Total investment income
522,736
--------------
EXPENSES:
Investment management fee
151,240
Administration fee and expenses
80,484
Custodian fees and expenses
67,672
Legal fees and expenses
37,335
Audit and tax services
35,803
Reports and notices to shareholders
25,360
Insurance expense
21,811
Directors' fees and expenses
14,191
Transfer agency fee and expenses
7,957
Other
20,047
--------------
Total expenses
461,900
--------------
NET INVESTMENT INCOME
60,836
--------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gains on investments
5,158,558
Net realized foreign currency transaction losses
(120,721)
Net change in unrealized appreciation (depreciation) on
investments in equity securities 5,872,320
Net change in unrealized appreciation (depreciation) on
assets and liabilities denominated
in foreign currency
(39,640)
--------------
Net realized and unrealized gains from investment activities
and foreign currency transactions 10,870,517
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$ 10,931,353
==============
See accompanying notes to financial
statements.
14
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS FOR THE YEAR
ENDED ENDED
APRIL 30, 2004 OCTOBER 31,
(UNAUDITED) 2003
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss)
$ 60,836 $ (253,257)
Net realized gain (loss) on:
Investments
5,158,558 (5,224,636)
Foreign currency transactions
(120,721) 209,459
Net change in unrealized appreciation (depreciation) on:
Investments in equity securities
5,872,320 21,082,931
Translation of short-term investments and other assets
and liabilities
denominated in foreign currency
(39,640) (2,396)
-------------- --------------
Net increase in net assets resulting from operations
10,931,353 15,812,101
-------------- --------------
FROM CAPITAL STOCK TRANSACTIONS:
Sale of capital stock resulting from:
Net proceeds from the sale of shares
19,423,914 --
-------------- --------------
Net increase in net assets
30,355,267 15,812,101
NET ASSETS:
Beginning of period
64,918,372 49,106,271
-------------- --------------
End of period (including undistributed net investment
income of
$60,836 and 0, respectively)
$ 95,273,639 $ 64,918,372
============== ==============
See accompanying notes to financial
statements.
15
THE JAPAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Japan Equity Fund, Inc. (the "Fund") was
incorporated in Maryland on
July 12, 1990 under its former name "The Japan Emerging
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 following significant accounting policies are in
conformity with
generally accepted accounting principles in the United States
of America for
investment companies. Such policies are consistently followed
by the Fund in the
preparation of its financial statements. The preparation of
financial statements
in accordance with accounting principles generally accepted
in the United States
of America requires management to make estimates and
assumptions that affect the
amounts and disclosures in the financial statements. Actual
reporting results
could differ from those estimates.
VALUATION OF INVESTMENTS--Securities which are listed on
the Tokyo Stock
Exchange or listed on the over-the-counter market in Japan or
listed on other
exchanges in Japan and for which market quotations are
readily available are
valued at the last reported sales price available to the Fund
at the close of
business on the day the securities are being valued or,
lacking any such sales,
at the last available bid price. In instances where
quotations are not readily
available or where the price as determined by the above
procedures is deemed not
to represent fair market value, fair value will be determined
in such manner as
the Board of Directors (the "Board") may prescribe. Short-
term investments
having a maturity of 60 days or less are valued at amortized
cost, except where
the Board determines that such valuation does not represent
the fair value of
the investment. All other securities and assets are valued at
fair value as
determined in good faith by, or under the direction of, the
Board.
FOREIGN CURRENCY TRANSLATION--The books and records of
the Fund are
maintained in U.S. dollars as follows: (1) the foreign
currency market value of
investment securities and other assets and liabilities stated
in Japanese yen
are translated at the exchange rates prevailing at the end of
the period; and
(2) purchases, sales, income and expenses are translated at
the rate of exchange
prevailing on the respective dates of such transactions. The
resulting exchange
gains and losses are included in the Statement of Operations.
The Fund does not
isolate the effect of fluctuations in foreign exchange rates
from the effect of
fluctuations in the market price of securities.
TAX STATUS--The Fund intends to continue to distribute
substantially all of
its taxable income and to comply with the minimum
distribution and other
requirements of the Internal Revenue Code applicable to
regulated investment
companies. Accordingly, no provision for federal income or
excise taxes is
required.
The Fund is not subject to any Japanese income, capital
gains or other
taxes except for withholding taxes on certain income,
generally imposed at rates
of 10% on interest and dividends, paid to the Fund by
Japanese corporations.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--
Investment transactions are
recorded on the trade date (the date upon which the order to
buy or sell is
executed). Realized and unrealized gains and 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 from Japanese
securities which may be
recorded after the ex-date, as soon as the Fund acquires
information regarding
such dividends or corporate actions. Interest income is
recorded on an accrual
basis.
16
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--The Fund
records dividends and
distributions payable to its shareholders 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 generally accepted accounting principles.
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 reclassifications.
Dividends and
distributions which exceed net investment income and net
realized capital gains
for tax purposes are reported as distributions of paid-in-
capital.
INVESTMENT MANAGER AND INVESTMENT ADVISER
The Fund has entered into an Investment Management
Agreement with Daiwa SB
Investments (U.S.A.) Ltd. (the "Manager"). Daiwa SB
Investments Ltd. ("DSBI" or
the "Adviser"), an affiliate of the Manager, acts as the
Fund's investment
adviser pursuant to an Investment Advisory Agreement between
the Manager and
DSBI. For such investment services, the Fund is obligated to
pay the Manager a
monthly fee 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 net assets, of which fee 60% is paid by the Manager to
DSBI. In addition,
the Fund has agreed to reimburse the Manager and the Adviser
for all
out-of-pocket expenses related to the Fund. For the six
months ended April 30,
2004, there were no out-of-pocket expenses incurred by the
Manager or the
Adviser.
At April 30, 2004, the Fund owed $27,659 to the Manager
and the Manager
informed the Fund that it owed the Adviser $16,595.
Brokerage commissions of $26,364 were paid by the Fund
to Daiwa Securities
America, Inc., an affiliate of both the Manager and DSBI, in
connection with
portfolio transactions during the six months ended April 30,
2004.
ADMINISTRATOR AND CUSTODIAN AND OTHER RELATED PARTIES
Daiwa Securities Trust Company ("DSTC"), an affiliate of
the Adviser,
provides certain administrative services to the Fund, for
which the Fund pays to
DSTC a monthly fee at an annual rate of 0.20% of the first
$60 million of the
Fund's average weekly net assets, 0.15% of the next $40
million and 0.10% of the
excess over $100 million, with a minimum annual fee of
$120,000. In addition, as
permitted by the Administration Agreement, the Fund
reimburses the Administrator
for its out-of-pocket expenses related to the Fund. For the
six months ended
April 30, 2004, expenses of $4,350 were paid to the
Administrator, representing
reimbursement to the Administrator of costs relating to the
attendance by its
employees at meetings of the Fund's Board.
DSTC also acts as custodian for the Fund's assets and
has appointed
Sumitomo Mitsui Banking Corporation (the "Sub-Custodian"), an
affiliate of the
Manager, to act as the sub-custodian for all of the cash and
securities of the
Fund held in Japan. As compensation for its services as
custodian, DSTC receives
a monthly fee and reimbursement of out-of-pocket expenses.
Such expenses include
fees and out-of-pocket expenses of the Sub-Custodian. During
the six months
ended April 30, 2004, DSTC and the Sub-Custodian earned
$22,810 and $44,862,
respectively, as compensation for custodial service to the
Fund.
17
At April 30, 2004, the Fund owed $14,596 and $4,303 to
DSTC for
administration and custodian fees, respectively, excluding
fees and expenses of
$5,995 payable to the Sub-Custodian.
During the six months ended April 30, 2004, the Fund
paid or accrued
$37,295 for legal services in connection with the Fund's on-
going operations to
a law firm of which the Fund's Assistant Secretary is a
partner.
INVESTMENTS IN SECURITIES AND FEDERAL INCOME TAX MATTERS
For federal income tax purposes, the cost of securities
owned at April 30,
2004 was $81,543,867. At April 30, 2004, the net unrealized
appreciation of
investments for federal income tax purposes, excluding short-
term securities, of
$11,493,250 was composed of gross appreciation of $13,333,917
for those
investments having an excess of value over cost, and gross
depreciation of
$1,840,667 for those investments having an excess of cost
over value. For the
six months ended April 30, 2004, total aggregate purchases
and sales of
portfolio securities, excluding short-term securities, were
$54,417,656 and
$35,294,182, respectively.
At October 31, 2003, the Fund had a remaining capital
loss carryover of
$48,137,844, of which $6,264,639 expires in the year 2005,
$16,909,841 expires
in the year 2006, $6,225,150 expires in the year 2009,
$13,474,882 expires in
the year 2010 and $5,263,332 expires in the year 2011
available to offset future
net capital gains.
CAPITAL STOCK
There are 30,000,000 shares of $.01 par value common
stock authorized. Of
the 14,420,917 shares of the Fund outstanding at April 30,
2004, Daiwa
Securities America Inc. an affiliate of the Manager, Adviser
and DSTC owned
14,532 shares.
The Fund issued 3,605,229 shares on December 23, 2003 in
connection with a
rights offering of the Fund's shares, the proceeds of which,
net of fees and
expenses, were approximately $19.4 million. Shareholders of
record on December
4, 2003 were issued one transferable right for each share of
common stock owned,
entitling shareholders to acquire one newly-issued share of
common stock for
every three rights held at a subscription price of $5.68,
which was determined
on December 23, 2003. Offering costs of approximately
$416,000 ($0.03 per
share), including $100,000 paid to DSA, as reimbursement for
its expenses
incurred in acting as dealer manager, were charged to paid-in
capital in excess
of par value upon completion of the offering. Dealer manager
and soliciting fees
of $637,580 ($0.04 per share) were netted against the
proceeds of the
subscription. DSA earned approximately $255,971 of the
aforementioned fees with
respect to its participation in the offering.
18
THE JAPAN EQUITY FUND, INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding during
each period is
presented below:
FOR THE SIX
MONTHS ENDED
APRIL 30,
FOR THE YEARS ENDED OCTOBER 31,
2004
-------------------------------------------------------------
-----
(UNAUDITED)
2003 2002 2001 2000 1999
------------
---------- ---------- ---------- ---------- -----
-----
Net asset value, beginning of period $ 6.00
$ 4.54 $ 5.59 $ 8.35 $ 9.39 $
6.08
----------
---------- ---------- ---------- ---------- -----
-----
Net investment income (loss) 0.01
(0.02) (0.04) (0.04) (0.04)
(0.01)
Net realized and unrealized gains (losses) on
investments and foreign currency transactions 0.75
1.48 (1.01) (2.72) (1.00) 3.32
----------
---------- ---------- ---------- ---------- -----
-----
Net increase (decrease) in net asset value
resulting from operations 0.76
1.46 (1.05) (2.76) (1.04) 3.31
----------
---------- ---------- ---------- ---------- -----
-----
Less:
Dilutive effect of rights offering (0.12)
-- -- -- -- --
----------
---------- ---------- ---------- ---------- -----
-----
Offering costs charged to paid-in capital in
excess of par value (0.03)
-- -- -- -- --
----------
---------- ---------- ---------- ---------- -----
-----
Net asset value, end of period $ 6.61
$ 6.00 $ 4.54 $ 5.59 $ 8.35 $
9.39
==========
========== ========== ========== ==========
==========
Per share market value, end of period $ 6.790
$ 7.160 $ 4.150 $ 4.990 $ 7.063 $
9.813
==========
========== ========== ========== ==========
==========
Total investment return:
Based on market price at beginning and
end of period+ (1.39)%
72.53% (16.83)% (29.35)% (28.02)%
42.73%
Based on net asset value at beginning and
end of period+ 12.01%
32.16% (18.78)% (33.05)% (11.08)%
54.44%
Ratios and supplemental data:
Net assets, end of period (in millions) $ 95.3
$ 64.9 $ 49.1 $ 60.5 $ 90.3 $
101.6
Ratios to average net assets of:
Expenses 0.97%*
1.50% 1.44% 1.12% 0.96% 1.08%
Net investment income (loss) 0.15%*
(0.48)% (0.74)% (0.51)% (0.48)%
(0.11)%
Portfolio turnover 44.54%
84.00% 76.19% 63.39% 61.91%
58.70%
----------
+ For the period ended April 30, 2004, the total investment
return includes
the benefit of shares resulting from the exercise of
rights.
* Annualized.
19
RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)
On June 2, 2004, the Annual Meeting of Stockholders of
The Japan Equity
Fund, Inc. (the "Fund") was held and the following matter was
voted upon and
passed.
Election of two Class II Directors to the Board of
Directors of the Fund,
to serve for a term expiring on the date on which the Annual
Meeting of
Stockholders is held in the year 2007.
NUMBER OF SHARES/VOTES
PROXY AUTHORITY
CLASS II VOTED FOR
WITHHELD
--------------- ----------
---------------
David G. Harmer 12,236,285
214,397
Oren G. Shaffer 12,219,390
231,292
In addition to the two Directors re-elected at the
Meeting,
Austin C. Dowling, Martin J. Gruber and Hiroshi Kimura were
the other members of
the Board who continued to serve as Directors of the Fund.
AN IMPORTANT NOTICE CONCERNING OUR PRIVACY POLICY
This Privacy Notice describes the types of non-public
information we
collect about you, the ways we safeguard the confidentiality
of this information
and when this information may be shared with others. In this
Privacy Notice, the
terms "we," "our" and "us" refer to the Fund. The term "you"
in this Privacy
Notice refers broadly to all of our individual stockholders
(including
prospective and former individual stockholders).
In order to provide you with services, we collect
certain non-public
information about you. We obtain this personal information
from the following
sources:
- Applications and other forms you submit to us.
- Dealings and transactions with us or others.
We do not disclose any non-public personal information
about you to anyone,
except as permitted by law. For instance, so that we may
effect transactions
that you request or authorize, we may disclose the
information we collect to
companies that perform services on our behalf, such as
printers and mailers that
assist us in the distribution of investor materials. These
companies will use
this information only for the services for which we hired
them, and are not
permitted to use or share this information for any other
purpose.
We maintain physical, electronic and procedural security
measures that
comply with federal standards to safeguard your non-public
personal information.
Access to such information is restricted to those agents of
the Fund who are
trained in the proper handling of client information and who
need to know that
information in order to provide services to stockholders.
20
(This page has been left blank
intentionally.)
(This page has been left blank
intentionally.)
(This page has been left blank
intentionally.)
BOARD OF DIRECTORS
Hiroshi Kimura, CHAIRMAN
Austin C. Dowling
Martin J. Gruber
David G. Harmer
Oren G. Shaffer
OFFICERS
Shunsuke Ichijo
PRESIDENT
John J. O'Keefe
VICE PRESIDENT AND TREASURER
Yuko Uchida
SECRETARY
Laurence E. Cranch
ASSISTANT SECRETARY
ADDRESS OF THE FUND
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, NJ 07302-3051
INVESTMENT MANAGER
Daiwa SB Investments (U.S.A.) Ltd.
INVESTMENT ADVISER
Daiwa SB Investments Ltd.
ADMINISTRATOR AND CUSTODIAN
Daiwa Securities Trust Company
TRANSFER AGENT AND REGISTRAR
PFPC Inc.
LEGAL COUNSEL
Clifford Chance US LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
Notice is hereby given in accordance with Section 23(c) of
the Investment
Company Act of 1940 that from time to time the Fund may
purchase shares of its
common stock in the open market at prevailing market prices.
This report is sent to shareholders of the Fund for their
information. It is not
a prospectus, circular or representation intended for use in
the purchase or
sale of shares of the Fund or of any securities mentioned in
the report.
The financial information included herein is taken from the
records of the Fund
without examination by the Independent Registered Public
Accounting Firm which
does not express an opinion thereon.
SEMI-ANNUAL REPORT
APRIL 30, 2004
[JAPAN EQUITY FUND LOGO]
THE JAPAN EQUITY FUND, INC.
C/O DAIWA SECURITIES TRUST COMPANY
ONE EVERTRUST PLAZA
JERSEY CITY, NEW JERSEY 07302
INVESTMENT MANAGER
DAIWA SB INVESTMENTS (U.S.A.) LTD.
INVESTMENT ADVISER
DAIWA SB INVESTMENTS LTD.
ITEM 2. CODE OF ETHICS. Not applicable for semi-annual
report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for
semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not
applicable for semi-annual report.
ITEMS 5-6. (RESERVED)
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES
FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not
applicable for semi-annual report.
ITEMS 8. (RESERVED)
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the registrant's
disclosure controls and procedures as of June 2, 2004,
the disclosure controls and procedures are reasonably
designed to ensure that the information required in
filings on Forms N-CSR is recorded, processed,
summarized, and reported on a timely basis.
(b) There were no significant changes in the
registrant's internal controls or in other factors
that could affect these controls subsequent to the
date of our evaluation, including any corrective
actions with regard to significant deficiencies and
material weaknesses.
ITEMS 10. EXHIBITS.
(a) Any code of ethics, or amendment thereto, that is
the subject of the disclosure required by Item 2, to
the extent that the registrant intends to satisfy the
Item 2 requirements through filing of an exhibit: Not
applicable for semi-annual report.
(b) A separate certification for each principal
executive officer and principal financial officer of
the registrant as required by Rule 30a-2 under the Act
(17 CFR 270.30a-2) in the exact form set forth below:
Attached hereto.
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.
(Registrant) The Japan Equity
Fund, Inc.
By (Signature and Title)* \s\ John J.
O'Keefe
--------------------------
---------
John J. O'Keefe, Vice
President & Treasurer
Date: June 28, 2004
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 (Signature and Title)* \s\ John J.
O'Keefe
--------------------------
---------
John J. O'Keefe, Vice
President & Treasurer
Date: June 28, 2004
By (Signature and Title)* \s\ Hiroshi
Kimura
--------------------------
---------
Hiroshi Kimura, Chairman
Date: June 28, 2004
* Print the name and title of each signing officer under his
or her signature.
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John J. O'Keefe, certify that:
1. I have reviewed this report on Form N-CSR of The Japan
Equity Fund, Inc.
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of
cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Rule 30a-2(c) under
the Investment Company Act of 1940) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize, and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: June 28, 2004
\s\John J. O'Keefe
---------------------------------------
John J. O'Keefe, Vice President & Treasurer
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Hiroshi Kimura, certify that:
1. I have reviewed this report on Form N-CSR of The Japan
Equity Fund, Inc.
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of
cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Rule 30a-2(c) under
the Investment Company Act of 1940) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize, and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: June 28, 2004
\s\ Hiroshi Kimura
---------------------------------------
Hiroshi Kimura, Chairman
CERTIFICATION
Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
The undersigned, the Vice President & Treasurer of The Japan
Equity Fund, Inc. (the "Fund"), with respect to the Form N-
CSR for the period ended April 30, 2004 as filed with the
Securities and Exchange Commission, hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. such Form N-CSR fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. the information contained in such Form N-CSR fairly
presents, in all material respects, the financial condition
and results of operations of the Funds.
Dated: June 28, 2004
/s/ John J. O'Keefe
----------------------------------
John J. O'Keefe
This certification is being furnished solely pursuant to 18
U.S.C. Section 1350 and is not being filed as part of the
Report or as a separate disclosure document.
CERTIFICATION
Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
The undersigned, the Chairman of The Japan Equity Fund, Inc.
(the "Fund"), with respect to the Form N-CSR for the period
ended April 30, 2004 as filed with the Securities and
Exchange Commission, hereby certifies, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. such Form N-CSR fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. the information contained in such Form N-CSR fairly
presents, in all material respects, the financial condition
and results of operations of the Funds.
Dated: June 28, 2004
/s/ Hiroshi Kimura
----------------------------------
Hiroshi Kimura
This certification is being furnished solely pursuant to 18
U.S.C. Section 1350 and is not being filed as part of the
Report or as a separate disclosure document.
EXHIBIT B(1)
NYA 612686.1
EXHIBIT B(2)