It is water cooled. Having said that, it has a centrifugal water pump and a second water tube extending back down to the pump region. That second tube is a siphon tube so the weight of the water going up equals the weight of the water going back down. Because it is a siphon system, it will not work if there are any leaks in the cooling system. Because there cannot be any leaks, there cannot be any above water discharge holes. The only way to tell if it is cooling is if it gets hot. Fortunately, there is very little to go wrong with the cooling system other than getting plugged up.
BTW, those systems don't work very well if running in a tank. Too much turbulence and air in the water. Run it on a boat, where it is designed to run.