As filed with the Securities and Exchange Commission on July 29, 1997
Securities Act File No. 2-96612
Investment Company Act File No. 811-4269
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 13 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 14 | |
(Check appropriate box or boxes)
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Nomura Pacific Basin Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
180 Maiden Lane
New York, New York 10038
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212) 509-8181
John F. Wallace
Nomura Pacific Basin Fund, Inc.
180 Maiden Lane, New York, N.Y. 10038
(Name and Address of Agent for Service)
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Copy to:
Brown & Wood LLP
One World Trade Center
New York, N.Y. 10048
Attention: John A. MacKinnon, Esq.
It is proposed that this filing will become effective (check appropriate box):
|X| immediately upon filing pursuant to paragraph (b)
|_| on (date) pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(l)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date
|_| for a previously filed post-effective amendment.
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The Registrant has registered an indefinite number of shares of Common
Stock under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Pursuant to paragraph (b)(2) of Rule 24f-2 under
the Investment Company Act, the Registrant was not required to file a Rule 24f-2
Notice for its most recent fiscal year because no shares of Common Stock were
sold during such fiscal year in reliance upon registration pursuant to such
Rule.
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<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-IA Item No. Location
------------ --------
PART A
<S> <C> <C>
Item 1. Cover Page .................................... Cover Page
Item 2. Synopsis ...................................... Fee Table
Item 3. Condensed Financial Information ............... Financial Highlights;
Additional Information
Item 4. General Description of Registrant ............. Investment Objective and Policies;
Additional Information
Item 5. Management of the Fund ........................ Management of the Fund;
Additional Information
Item 5A. Management's Discussion of Fund Performance ... Not Applicable
Item 6. Capital Stock and Other Securities ............ Additional Information
Item 7. Purchase of Securities Being Offered .......... Purchase of Shares; Additional Information
Item 8. Redemption or Repurchase ...................... Redemption of Shares
Item 9. Pending Legal Proceedings ..................... Not Applicable
PART B
Item 10. Cover Page..................................... Cover Page
Item 11. Table of Contents ............................. Back Cover Page
Item 12. General Information and History................ Not Applicable
Item 13. Investment Objectives and Policies ............ Investment Objective and Policies
Item 14. Management of the Fund ........................ Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities ....................... Not Applicable
Item 16. Investment Advisory and Other Services ........ Management of the Fund; General Information
Item 17. Brokerage Allocation and Other Practices ...... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities ............ General Information--Description of Shares
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered ............................... Determination of Net Asset Value; Purchase
of Shares; Redemption of Shares
Item 20. Tax Status .................................... Dividends, Distributions and Taxes
Item 21. Underwriters .................................. Purchase of Shares
Item 22. Calculation of Performance Data................ Performance Data
Item 23. Financial Statements .......................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
Nomura Pacific Basin Fund, Inc.
180 Maiden Lane, New York, New York 10038 [LOGO]
(Telephone: (l-800) 833-0018)
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Nomura Pacific Basin Fund, Inc. (the "Fund") is a no-load, open-end
diversified management investment company seeking long-term capital appreciation
primarily through investments in equity securities of corporations domiciled in
Japan and other Far Eastern and Western Pacific ("Pacific Basin") countries. The
Fund contemplates that under normal conditions at least 70% of its assets will
consist of equity securities of Pacific Basin issuers and that a substantial
portion of its assets will be invested in securities of Japanese corporations.
Investments on an international basis involve certain special considerations and
risks. See "Investment Objective and Policies--Special Considerations and
Risks".
Nomura Capital Management, Inc. acts as the Manager for the Fund. Nomura
Investment Management Co., Ltd. and Nomura Capital Management (Singapore)
Limited act as Investment Advisers for the Fund. The Manager and the Investment
Advisers are affiliated with The Nomura Securities Co., Ltd., Tokyo, Japan.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
Shares of the Fund are being offered at a price equal to the net asset
value per share next determined after receipt of the order, without sales
charge. The minimum initial investment is $1,000, and there is no minimum
subsequent investment. Shares may be redeemed at any time at net asset value as
described herein. See "Purchase of Shares" and "Redemption of Shares".
================================================================================
This Prospectus is a concise statement of information about the Fund that
is relevant to making an investment in the Fund. Investors are encouraged to
read this Prospectus carefully and retain it for future reference. Additional
information about the Fund has been filed with the Securities and Exchange
Commission in a Statement of Additional Information, bearing the same date as
this Prospectus, which information is incorporated herein by reference and is
available without charge upon request by calling or writing the Fund at the
above telephone number or address.
Nomura Capital Management, Inc.--Manager
Nomura Investment Management Co., Ltd.--Investment Adviser
Nomura Capital Management (Singapore) Limited--Investment Adviser
Nomura Securities International, Inc.--Distributor
July 29, 1997
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Fund, the Manager, the
Investment Advisers or the Distributor. This Prospectus does not constitute an
offering in any state in which such offering may not lawfully be made.
------------------
TABLE OF CONTENTS
Page
----
Fee Table................................................................ 3
Financial Highlights..................................................... 4
Investment Objective and Policies........................................ 5
Investment Restrictions ............................................. 7
Special Considerations and Risks .................................... 7
Management of the Fund .................................................. 9
Board of Directors .................................................. 9
Management and Investment Advisory Arrangements ..................... 9
Purchase of Shares ...................................................... 11
Through Securities Brokers and Dealers .............................. 11
By Mail ............................................................. 11
By Telephone ........................................................ 11
By Bank Wire ........................................................ 12
General.............................................................. 12
Redemption of Shares .................................................... 13
By Mail.............................................................. 13
By Telephone......................................................... 13
Repurchase........................................................... 14
Dividends, Distributions and Taxes ...................................... 14
Additional Information .................................................. 16
Determination of Net Asset Value .................................... 16
Portfolio Transactions and Brokerage ................................ 17
Shareholder Services ................................................ 17
Organization of the Fund ............................................ 17
Performance Data .................................................... 18
Shareholder Inquiries ............................................... 18
2
<PAGE>
FEE TABLE
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)...................... None
Maximum Sales Charge Imposed on Dividend Reinvestments
(as a percentage of offering price)...................... None
Redemption Fees............................................... None
Exchange Fee.................................................. None
Annual Fund Operating Expenses (as a percentage of average net assets) for the
year ended March 31, 1997:
Management Fees............................................... 0.75%(a)
12b-1 Fees .................................................. None(b)
Other Expenses
Custodian Fees ....................................... 0.29%
Shareholder Servicing Costs .......................... 0.19%(c)
Other................................................. 0.98%
Total Other Expenses (as a percentage of
average net assets) .................................. 1.46%
-----
Total Fund Operating Expenses ...................................... 2.21%
=====
- ------------
(a) See "Management of the Fund--Management and Investment Advisory
Arrangements"--page 9.
(b) See "Purchase of Shares--General--Distribution Plan"--page 13.
(c) See "Shareholder Services"--page 17.
Example:
<TABLE>
<CAPTION>
Cumulative Expense Paid for the Period of:
------------------------------------------------
1 year 3 years 5 years 10 years
------ ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $ 1,000 investment assuming an
operating expense ratio of 2.21% and
a 5% annual return throughout the period........ $22 $69 $118 $254
</TABLE>
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The Example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations. The Example should not be
considered a representation of past or future expenses or annual rate of return,
and actual expenses and annual rate of return may be more or less than those
assumed for purposes of the Example.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been examined in
conjunction with the audits of the financial statements of the Fund for each of
the periods noted by Price Waterhouse LLP, independent accountants. Financial
statements and the report of Price Waterhouse LLP for the year ended March 31,
1997 are included in the Statement of Additional Information, copies of which
may be obtained by shareholders as noted on the Prospectus cover page. Further
information about the performance of the Fund is contained in the Fund's most
recent annual report to shareholders which may be obtained, without charge, by
calling or by writing the Fund at the telephone number or address on the front
cover of this Prospectus.
Selected per share data and ratios for a share of common stock outstanding
throughout each period:
<TABLE>
<CAPTION>
For the Year Ended March 31,
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............ $16.52 $15.07 $18.07 $14.33 $12.49 $15.19 $15.36 $19.15 $20.59 $24.20
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income
(loss).............. (.14)+ (0.04)+ (0.0l)+ (0.01)+ 0.00+ 0.00+ 0.04 0.08 0.03 0.06+
Net realized and
unrealized gain (loss)
on investments and
foreign currencies.. (.87)+ 2.07+ (0.74)+ 4.03+ 1.87+ (1.84)+ 2.53 0.20 (0.21) 6.87+
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations.......... (1.01)+ 2.03+ (0.75)+ 4.02+ 1.87+ (1.84)+ 2.57 0.28 (0.18) 6.93+
Distributions to
shareholders from:
Net investment income.. (0.28) -- -- (0.05) (0.02) (0.01) (0.04) (0.10) (0.05) (0.08)
Net realized capital
gains............... (1.47) (0.58) (2.25) (0.21) (0.0l) (0.85) (2.70) (3.97) (1.21) (10.46)
In excess of net
investment income... -- -- -- (0.02) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions...... (1.75) (0.58) (2.25) (0.28) (0.03) (0.86) (2.74) (4.07) (1.26) (10.54)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period............. $13.76 $16.52 $15.07 $18.07 $14.33 $12.49 $15.19 $15.36 $19.15 $20.59
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total investment return.. (6.9%) 13.7% (4.2%) 28.2% 15.0% (12.9%) 17.4% (1.7%) (0.9%) 35.3%
Ratio to average net
assets/supplemental
data:
Net assets, end of
period (in 000)..... $22,128 $34,022 42,684 55,060 46,095 43,203 54,274 53,933 73,169 94,786
Operating expenses.... 2.21% 1.78% 1.38% 1.39% 1.51% 1.46% 1.42% 1.32% 1.25% 1.22%
Net investment income. (0.87%) (0.28%) (0.07%) (0.10%) 0.01% 0.00% 0.28% 0.40% 0.07% 0.28%
Portfolio turnover.... 62% 45% 49% 76% 55% 41% 76% 46% 37% 61%
Average commission
per share paid on
equity transactions*.. $0.0146
</TABLE>
- ----------------
+ Based on average shares outstanding.
* For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for equity
security trades on which commission is charged.
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund is designed for United States investors seeking diversification of
investments by participating in the economies of Pacific Basin countries. The
investment objective of the Fund is to seek long-term capital appreciation
primarily through investments in equity securities of corporations domiciled in
Pacific Basin countries including Japan, Australia, China, Hong Kong, Indonesia,
Malaysia, New Zealand, Singapore, South Korea, Taiwan, Thailand and the
Philippines. Current income from dividends and interest will not be an important
consideration in selecting portfolio securities. The Fund may, however, for
defensive purposes as described below invest in non-convertible fixed income
securities denominated in currencies of Pacific Basin countries and in United
States dollars. The investment objective described in this paragraph is a
fundamental policy of the Fund and may not be changed without the approval by
the holders of a majority of the Fund's outstanding shares. There can be no
assurance that the Fund will realize its objective.
The Fund anticipates that under normal conditions at least 70% of its
assets will consist of Pacific Basin corporate securities, primarily common
stock and, to a lesser extent, securities convertible into common stock and
rights to subscribe for common stock. It is expected that the Fund's investment
in securities of Japanese corporations will constitute a substantial part of its
assets under normal circumstances due to the size and liquidity of the Japanese
market and the availability of investment alternatives.
Over the past few decades to the present, certain foreign economies,
especially in the Pacific Basin region, have grown faster than the United
States' economy, and the return on equity investments in these markets has often
been superior to similar investments in the United States. The securities
markets of the Pacific Basin region have at times in the past moved relatively
independently of one another due to different economic, financial, political and
social factors. To the extent the various markets move independently, total
portfolio volatility tends to be reduced when the various markets are combined
into a single portfolio. A low correlation may, however, reduce the gains the
Fund might otherwise derive from movements in a particular market. Exchange
rates frequently move independently of securities markets in a particular
country. As a result, gains or losses in a particular securities market may be
affected by changes in exchange rates.
The Fund will attempt to maximize opportunity and reduce risk by investing
in a diversified portfolio of companies in different stages of development.
Portfolio companies will range from large, well-established companies to
medium-sized companies and smaller, less seasoned companies in an earlier stage
of development.
Investments in larger companies present certain advantages in that such
companies generally have greater financial resources, more extensive research
and development, manufacturing, marketing and service capabilities, more
stability and greater depth of management and technical personnel. Investments
in smaller, less seasoned companies may present greater opportunities for growth
but also involve greater risks than customarily are associated with more
established companies. The securities of smaller companies may be subject to
more abrupt or erratic market movements than larger, more established companies.
These companies may have limited product lines, markets or financial resources,
or they may be dependent upon a limited management group. Their securities may
be traded only in the over-the-counter market or on a regional securities
exchange and may not be traded every day or in the volume typical of trading on
a major securities exchange. As a result, the disposition by the Fund of
portfolio securities to meet redemptions or otherwise may require the Fund to
sell these securities at a discount from market prices or during a period when
such disposition is not otherwise desirable or to make many small sales over a
lengthy period of time. However, the Fund has adopted an investment restriction
pursuant to which it may not invest in securities which are subject to
restrictions on resale, or which are not otherwise readily marketable, if as a
result more than 5% of its total assets would be invested in such securities.
See "Investment Objective and Policies" in the Statement of Additional
Information.
5
<PAGE>
Although there can be no assurance that the conditions described above will
continue in the future, or that Nomura Capital Management, Inc. (the "Manager")
will be able to identify and invest in companies participating in the faster
growing foreign economies and markets, the Manager believes that investment in
foreign securities offers significant potential for prospective long-term
capital appreciation and an opportunity to achieve effective investment
diversification. The investment program of the Fund has been developed in light
of these beliefs.
Among the countries in the Far East, direct investments in listed
securities in certain countries by non-residents have historically been limited,
due to limitations set by the respective governments. The Fund may invest in the
shares of investment companies organized to invest in such markets subject to
the provisions of the Investment Company Act of 1940 and the policies and review
of the Board of Directors of the Fund. The applicable limitations under the
Investment Company Act of 1940 are discussed under "Investment Objective and
Policies" in the Statement of Additional Information.
If the Fund purchases securities of other investment companies, the
management fee paid by the Fund to the Manager will be proportionately reduced
to reflect the amount of management or other investment advisory fees paid by
such investment companies attributable to the value of the Fund's investment in
such companies.
Subject to policies and review of, and overall control by, the Board of
Directors of the Fund, the allocation of the Fund's assets among the various
securities markets in the Pacific Basin countries will be determined by the
Manager. In making the allocation of assets among the securities markets, the
Manager will consider such factors as technological developments in the various
countries, the condition and growth potential for the various economies and
securities markets, currency and taxation considerations and other pertinent
financial, social, national and political factors. Under certain adverse
investment conditions, the Fund may restrict the securities markets in which its
assets will be invested, and may increase the proportion of assets invested in
United States Government and money market securities.
As indicated above, the Fund anticipates that under normal conditions at
least 70% of its assets will consist of Pacific Basin corporate securities,
primarily equity securities. The Fund reserves the right as a defensive measure
to invest in non-convertible fixed income securities denominated in currencies
of Pacific Basin countries and in United States dollars. (For this purpose,
investments made for defensive purposes will be maintained only during periods
in which the Manager, subject to review by the Board of Directors, determines
that economic or financial conditions are adverse for holding equity securities
of Pacific Basin corporate issuers.) Securities held for defensive purposes,
which include non-convertible preferred stock, debt securities, government
securities issued by United States and Pacific Basin countries and money market
securities, may be held in such proportions as, in the opinion of the Manager,
prevailing market or economic conditions warrant. Debt securities that may be
held by the Fund include Euro-yen securities, which are debt securities
denominated in Japanese yen issued in the Euromarket. The Fund may also hold
cash (in United States dollars or Pacific Basin currencies) or short-term
securities denominated in such currencies to provide for redemptions; it is not
expected that such reserve for redemptions will exceed 10% of the Fund's assets.
Money market securities which may be held for defensive purposes or to
provide for redemptions include short-term corporate or government obligations
and bank certificates of deposit. The Fund may invest in securities subject to
repurchase agreements with banks and securities firms, which are instruments
under which the purchaser (i.e., the Fund) acquires a debt security and the
seller agrees, at the time of sale, to repurchase the obligation at a mutually
agreed upon time and price, thereby determining the yield during the purchaser's
holding period. Repurchase agreements may be construed to be collateralized
loans by the purchaser to the seller secured by the securities transferred to
the purchaser. The underlying securities will be limited to those which
otherwise qualify for investment by the Fund. In addition, the Fund will require
the seller to provide additional securities to it if the market value of the
securities falls below the repurchase price at any time during the term of the
repurchase agreement. In the event
6
<PAGE>
of default by the seller under a repurchase agreement, the Fund may suffer time
delays and incur costs or losses in connection with the disposition of the
underlying securities. The Fund will not enter into repurchase agreements
maturing in more than seven days.
The Fund may invest in the securities of foreign issuers in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs) or other securities convertible into securities of
foreign issuers. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by an American bank or trust company which evidence ownership
of underlying securities issued by a foreign corporation. EDRs are receipts
issued in Europe, typically by banking institutions in London and Brussels,
which evidence a similar ownership arrangement. GDRs are receipts issued
globally, typically by banking institutions, and evidence a similar ownership
arrangement. Generally ADRs, in registered form, are designed for use in the
United States securities markets, and EDRs, in bearer form, are designed for use
in European securities markets. GDRs are tradeable both in the United States and
Europe and are designed for use throughout the world.
Investment Restrictions
The Fund has adopted a number of restrictions and policies relating to the
investment of its assets and its activities, which are fundamental policies and
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act
of 1940. Among the more significant restrictions, the Fund may not:
--Invest in the securities of any one issuer if, immediately after and as a
result of such investment, the value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the Fund's total assets, taken at market
value, except that such restriction shall not apply to securities issued or
guaranteed by the United States Government or its agencies or instrumentalities
or with respect to 25% of the Fund's total assets, to securities issued or
guaranteed by the government of any country which is a member of the
Organization for Economic Co-operation and Development.
--Invest in the securities of a single issuer if, immediately after and as
a result of such investment, the Fund owns more than 10% of the outstanding
securities, or more than 10% of the outstanding voting securities, of such
issuer.
--Invest more than 25% of its total assets, taken at market value at the
time of each investment, in the securities of issuers in any particular
industry.
Nothing in the foregoing restrictions shall be deemed to prohibit the Fund from
purchasing the securities of any issuer pursuant to the exercise of subscription
rights distributed to the Fund by the issuer, except that no such purchase may
be made if as a result the Fund will no longer be a diversified investment
company as defined in the Investment Company Act of 1940 or fail to meet the
diversification requirements of the Internal Revenue Code of 1986, as amended.
Special Considerations and Risks
Investing on an international basis involves certain considerations and
risks which are not typically associated with investing in United States
securities. Since the Fund will invest in securities denominated or quoted in
currencies other than the United States dollar, changes in foreign currency
exchange rates will affect the values of the Fund's portfolio securities and the
unrealized appreciation or depreciation of investments. Foreign corporations are
not generally subject to uniform accounting, auditing and financial reporting
standards, or to practices and requirements comparable to those applicable to
United States corporations. There may also be less government supervision and
regulation of foreign securities exchanges, brokers and listed companies than
exists in the United States. In addition, there maybe the possibility of
expropriation of assets, confiscatory taxation, political, economic or social
instability
7
<PAGE>
or diplomatic developments which could affect assets of the Fund held in foreign
countries. Moreover, certain foreign economies may also differ adversely from
the United States economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments position.
Many of the securities held by the Fund will not be registered with the
Securities and Exchange Commission nor will the issuers thereof be subject to
the reporting requirements of such agency. Accordingly, there may be less
publicly available information about foreign companies and governments compared
to reports and ratings published about United States companies. Although many
foreign financial markets have grown in volume of trading activity, securities
of some foreign companies are less liquid and their prices more volatile than
securities of comparable United States companies. Brokerage commissions and
other transaction costs on foreign securities exchanges are generally higher
than in the United States. Foreign markets also have different clearance and
settlement procedures, and in certain markets there have been periods when
settlements have been unable to keep pace with the volume of securities
transactions. The inability to make intended purchases or dispositions of
securities due to settlement problems could result in losses to the Fund.
The Fund has authority to deal in forward foreign exchange contracts
between currencies of the different countries in which it will invest as a hedge
against possible variations in the foreign exchange rates between these
currencies. This is accomplished through contractual agreements to purchase or
sell a specified currency at a specified future date (up to one year) and price
set at the time of the contract. The Fund's dealings in forward foreign exchange
will be limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of forward foreign
currency with respect to specific receivables or payables of the Fund arising
from the purchase and sale of its portfolio securities, the sale and redemption
of shares of the Fund or the payment of dividends and distributions by the Fund.
Position hedging is the sale of forward foreign currency with respect to
portfolio security positions. The Fund will not speculate in forward foreign
exchange. Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or prevent losses
if the prices of such securities decline, and it precludes the opportunity for
gain if the value of the hedged currency should rise. Risks associated with
transactions in forward foreign exchange contracts are discussed more fully in
the Statement of Additional Information.
The Fund may from time to time lend securities from its portfolio, with a
market value not exceeding 10% of its total assets at the time of the loan, to
banks, brokers and other financial institutions and receive collateral in cash
or securities issued or guaranteed by the United States Government or its
instrumentalities which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. During the
period of such a loan, the Fund will receive income on both the loaned
securities and the collateral or on the investment of any cash received as
collateral and thereby increase its yield. With respect to the lending of
portfolio securities, there is the risk of failure by the borrower to return the
securities involved in such transactions, in which event the Fund may incur a
loss.
The operating expense ratio of the Fund can be expected to be higher than
that of an investment company investing exclusively in domestic securities since
the expenses of the Fund, such as custodial costs and advisory fees, are higher.
8
<PAGE>
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
Board of Directors
The Board of Directors of the Fund consists of six individuals, four of
whom are not "interested persons" of the Fund as defined in the Investment
Company Act of 1940. The Directors of the Fund are responsible for the overall
supervision of the Fund and perform the various duties imposed on the directors
of investment companies under the Investment Company Act of 1940. The Directors
of the Fund are also directors of Jakarta Growth Fund, Inc., Japan OTC Equity
Fund, Inc. and Korea Equity Fund, Inc., closed-end, non-diversified investment
companies also managed by the Manager and advised by Nomura Investment
Management Co., Ltd.
The Directors of the Fund are as follows:
WILLIAM G. BARKER, JR.--Consultant to the television industry since 1991.
Senior Vice President and Chief Financial Officer of The CBS/Fox Company from
1982 to 1991.
GEORGE H. CHITTENDEN--Director of Bank Audi (USA).
HARUO SAWADA--President and Director of the Manager since 1997. General
Manager of Nomura Investment Management Co., Ltd. from 1994 to 1996. Vice
President and later Senior Vice President of the Manager from 1986 to 1994.
CHOR WENG TAN--Managing Director for Education, The American Society of
Mechanical Engineering since 1991; Dean, School of Engineering, The Cooper Union
from 1975 to 1987. Director of Tround International, Inc.
ARTHUR R. TAYLOR--President of Muhlenberg College since 1992. Dean of the
Faculty of Business of Fordham University from 1985 to 1992. Chairman of Arthur
R. Taylor & Co. (investment firm). Director of Pitney Bowes Inc. and Louisiana
Land & Exploration Company.
JOHN F. WALLACE--Senior Vice President of the Manager since 1981, Secretary
since 1976, Treasurer since 1984 and Director since 1986. Senior Vice President
of Nomura Securities International, Inc. since 1978.
Management and Investment Advisory Arrangements
Nomura Capital Management, Inc. (the "Manager") acts as the management
company for the Fund. The Manager, a New York corporation with its office
located at 180 Maiden Lane, New York, New York 10038, is a wholly-owned
subsidiary of Nomura Investment Management Co., Ltd. The Manager also provides
global investment advisory services, primarily with respect to Japanese and
other Pacific Basin securities, for United States institutional clients. The
Manager also acts as one of the investment advisers to six other investment
companies, three of which are registered investment companies.
It is anticipated that NIMCO will merge with and into The Nomura Securities
Investment Trust Management Co., Ltd. ("NSITM"), an Affiliate of Nomura, on or
about October 1, 1997. Concurrently, the Manager will merge with a subsidiary of
NSITM. The Fund expects that a meeting of its shareholders will be held in late
September 1997 for shareholders to consider the approval of new agreements to be
entered into by the Fund with the successor entities to the Manager, NIMCO and
NCM-Singapore. The new agreements will not alter the rate of management
compensation presently payable by the Fund or the services provided to the Fund.
Under its management agreement with the Fund (the "Management Agreement"),
the Manager agrees to provide, or arrange for the provision of, investment
advisory and management services to the Fund, subject to the oversight and
supervision of the Board of Directors of the Fund. In addition to the management
of the Fund's portfolio in accordance with the Fund's investment policies and
the responsibility for making decisions to buy, sell or hold particular
securities, the Manager is obligated to perform, or arrange for the performance
of, the administrative and management services necessary for the operation of
the Fund. The Manager is also obligated to provide all the office space,
facilities, equipment and personnel necessary to perform its duties thereunder.
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Pursuant to the Management Agreement, the Manager has retained Nomura
Investment Management Co., Ltd. ("NIMCO") and Nomura Capital Management
(Singapore) Limited ("NCM-Singapore") to act as investment advisers for the Fund
and Nomura Securities International, Inc. ("NSI") to provide administrative
services for the Fund. NIMCO and NCM-Singapore are referred to together as the
"Investment Advisers".
Investment Advisory Agreements. Pursuant to the Investment Advisory
Agreement between the Manager and NIMCO, NIMCO has agreed to furnish the Manager
with advice as to the allocation of the Fund's assets among various Pacific
Basin markets in which the Fund may invest. NIMCO will also provide economic
research, securities analysis and investment recommendations and will review and
render investment advice with respect to issuers of securities domiciled or
based in Japan and certain other Pacific Basin countries. NIMCO will not be
responsible for the actual portfolio decisions of the Fund. NIMCO, a Japanese
corporation with its principal office located at 1 - 12-11, Nihonbashi, Chuo-ku,
Tokyo 103, Japan provides investment advisory services for Japanese and
international clients. NIMCO, together with its affiliates, had approximately
$30 billion in assets under management as of March 31, 1997. NIMCO is a
subsidiary of Nomura Research Institute ("NRI") and an affiliate of The Nomura
Securities Co., Ltd. ("Nomura"), the largest securities firm in Japan. NRI is a
diversified research organization which undertakes business consulting, economic
and social research, investment research and other projects for a variety of
Japanese and international clients.
Pursuant to the Investment Advisory Agreement between the Manager and
NCM-Singapore, NCM-Singapore has agreed to furnish the Manager with economic
research, securities analysis and investment recommendations with respect to
securities of companies domiciled or based in Pacific Basin countries other than
Japan. NCM-Singapore will not be responsible for the actual portfolio decisions
of the Fund. NCM-Singapore, a Singapore corporation with its principal office
located at 6 Battery Road, Singapore 049909, provides investment advisory
services relating to Pacific Basin securities to institutional clients,
including pension and profit sharing plans. NCM-Singapore is a wholly-owned
subsidiary of NIMCO.
Mr. Haruo Sawada, President of the Fund and President of the Manager, is
primarily responsible for the day-to- day management of the portfolio of the
Fund. Mr. Sawada has held such responsibilities for the Fund since 1997 and has
served as President of the Manager since 1997.
Administrative Agreement. The Administrative Agreement between the Manager
and NSI obligates NSI to assist the Manager in administering shareholder
accounts and handling shareholder relations at its expense on behalf of the
Manager. NSI, a New York corporation with its principal office located at 2
World Financial Center, New York, New York 10281, is a registered broker-dealer
under the Securities Exchange Act of 1934 and is a wholly-owned subsidiary of
Nomura Holding America Inc., a Delaware corporation that is a subsidiary of
Nomura.
Compensation and Expenses. As compensation for its services to the Fund,
the Manager will receive a monthly fee, computed daily, at the annual rate of
0.75 of 1% of the value of the Fund's average daily net assets. This fee is
higher than that paid by many investment companies. For the year ended March 31,
1997, the Fund paid or accrued fees to the Manager of $245,892. At June 30,
1997, the net assets of the Fund aggregated approximately $24.4 million. At this
net asset level, the annual management fee would be approximately $183,000. For
services performed under the Investment Advisory Agreements and the
Administrative Agreement, NIMCO, NCM-Singapore and NSI will receive monthly fees
from the Manager at the annual rates of 0.26125 of 1%, 0.0275 of 1% and 0.10 of
1%, respectively, of the average daily net assets of the Fund. For the year
ended March 31, 1997, NIMCO, NCM-Singapore and NSI received $73,734, $7,761 and
$28,224, respectively, from the Manager. As set forth under "Purchase of
Shares--Distribution Plan", the Fund has adopted a Distribution Plan which
authorizes NSI to utilize its administrative compensation for distribution
activities.
The Fund pays certain expenses incurred in its operations, including, among
other things, the management fee, legal and audit fees, unaffiliated directors'
fees and expenses, custodian and transfer agency fees, costs of issuing and
redeeming shares and certain of the costs of printing proxies, shareholder
reports, prospectuses and statements of additional information. For the year
ended March 31, 1997, the ratio of expenses to average daily net assets was
2.21%.
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PURCHASE OF SHARES
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The Fund's shares may be purchased as described below at a public offering
price equal to the net asset value next determined after receipt of the purchase
order by NSI or the Fund's transfer agent, State Street Bank and Trust Company
(the "Transfer Agent"), without a sales charge. If purchase orders are not
received by NSI or the Transfer Agent prior to 4:00 p.m., New York time, such
orders will be deemed received on the next business day. The Fund has
established a minimum initial investment of $1,000. There is no minimum
subsequent investment. Any order may be rejected by NSI or the Fund.
Through Securities Brokers and Dealers
NSI is the principal underwriter of the Fund's shares. Shares may be
purchased directly from NSI, or from securities brokers and dealers which have
entered into agreements with NSI. Such securities firms may impose a charge to
the investor for their services. Such fees and services may vary in amount among
securities brokers and dealers, who may impose higher initial or subsequent
investment requirements than those established by the Fund.
Order numbers are assigned to telephone purchase orders in order to
distinguish payment for those purchase orders from mail purchase orders. If a
securities broker or dealer who utilizes the telephone purchase order service
fails to include the order number on the payment for such purchase order, the
securities broker or dealer should be aware that the Fund may treat this as a
separate and additional purchase order. If such an event occurs, resulting from
the securities broker's or dealer's failure to include the order number assigned
to the purchase order, the securities broker's or dealer's account will be
charged for any loss incurred from the cancellation of the purchase order. In
the event the securities broker's or dealer's account balance is insufficient to
cover the loss, the Manager will reimburse the Fund for the difference.
By Mail
Shares of the Fund may be purchased at the per share net asset value by
sending a completed purchase order to the Transfer Agent, State Street Bank and
Trust Company, accompanied by a check payable to Nomura Pacific Basin Fund, Inc.
in payment for shares. Purchase orders sent to the Fund will be forwarded to the
Transfer Agent, and will not be effective until received by the Transfer Agent.
Subsequent purchases by mail (no minimum) may be made by sending to the Transfer
Agent the stub from the shareholder statement with the shareholder's full name
and account number along with a check payable to Nomura Pacific Basin Fund, Inc.
The Fund will not accept mail orders without payment enclosed, nor will the Fund
accept a conditional purchase order.
By Telephone (ONLY FOR INVESTORS WHO HAVE MADE A WRITTEN ELECTION TO DO SO--SEE
"GENERAL" BELOW)
Subsequent investments may be made by telephone (only for accounts coded
for ACH purchases) by calling the Transfer Agent at (800) 680-1836. Telephone
purchase orders from existing shareholders may be placed in a minimum amount of
$ 1,000 or such lower amount as may be established by the Board of Directors.
Telephone orders will be taken in dollar amounts only, for full and fractional
shares. If there are insufficient funds in the shareholder's bank account, the
transaction will be canceled and the shareholder will be responsible for any
loss the Fund incurs. The Fund may redeem shares from an existing shareholder
account as reimbursement for any loss incurred. The Fund may prohibit or
restrict all future purchases in the Fund in the event of non-payment of such
shares. For assistance, shareholders should call the Transfer Agent at (800)
680-1836.
Accuracy of Investor Account Information. The Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Such procedures may include, among others, requiring some form of personal
identification prior to acting upon telephonic instructions, providing written
confirmations of all
11
<PAGE>
such transactions, and/or tape recording all telephonic instructions. ASSUMING
PROCEDURES SUCH AS THE ABOVE HAVE BEEN FOLLOWED, NEITHER STATE STREET BANK AND
TRUST COMPANY, THE FUND'S TRANSFER AGENT, NOR THE FUND WILL BE LIABLE FOR ANY
LOSS, COST, OR EXPENSE FOR ACTING UPON AN INVESTOR'S TELEPHONE INSTRUCTIONS. THE
FUND SHALL HAVE AUTHORITY, AS THE INVESTOR'S AGENT, TO REDEEM SHARES IN THE
INVESTOR'S ACCOUNT TO COVER ANY SUCH LOSS. As a result of this policy, the
investor will bear the risk of any loss unless the Fund has failed to follow
procedures such as the above.
By Bank Wire
Shares of the Fund may be purchased by domestic or overseas bank wire. The
wire order must contain registration instructions (i.e. full name of account
registration and the account number). For new accounts, a completed application
must be forwarded, via facsimile mail, to the Transfer Agent at (617) 774-2796.
Upon transmission of the application, the investor must contact the Transfer
Agent to obtain an account number and pertinent wire instructions. Shareholders
opening an account must telephone in advance to obtain a new account number. The
name of the Fund must appear on the wire for proper credit. The investor must
have the bank wire transmitted to the Transfer Agent, State Street Bank and
Trust Company, ABA No. 011000028, for credit to Boston Financial Data Services,
Inc. A/C No. 99029944 further credit (Nomura/Shareholder's Account Number and
name). Wires received by the Transfer Agent will be executed at the Fund's net
asset value per share as next determined after receipt of the wired funds. (The
tax identification number will not be certified until an original Form W-9 is
received by the Transfer Agent.) For assistance the shareholder should call the
Transfer Agent at (800) 680-1836.
General
After an initial investment, a shareholder may participate in the telephone
purchase and redemption service only by making a written election to do so. The
election may be on the initial application form or by writing to the Fund, with
the shareholder's signature guaranteed. A shareholder who wants to change any
telephone service option previously elected may do so by filing with Fund a
letter with instructions.
All purchases made by check should be in U.S. dollars and made payable to
Nomura Pacific Basin Fund, Inc., or State Street Bank and Trust Company. Third
party checks which are payable to an existing shareholder of Nomura Pacific
Basin Fund, Inc. and endorsed over to the Fund or State Street Bank and Trust
Company will not be accepted. When purchases are made by check or periodic
automatic investment, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 business days.
If payment for any purchase order is not received by the Fund or the
Transfer Agent, as specified herein, or if the investor's check is not honored
upon presentment, the order is subject to cancellation by the Fund, and the
purchaser's existing account with the Fund immediately will be charged for any
loss incurred.
Each subscriber will be sent a Confirmation Advice in lieu of a stock
certificate reflecting full and fractional shares purchased, unless a stock
certificate is specifically requested in writing by all registered owners of
such shares with their signatures guaranteed. It is recommended to all
shareholders that a stock certificate not be requested unless needed for a
specific purpose. This eliminates the trouble and expense of safeguarding the
stock certificates and the cost of a lost instrument bond in the event of loss
or destruction.
The Fund reserves the right to discontinue the acceptance of telephone
orders, without notice, and to waive minimum purchase requirements at its
discretion. The Fund may also decline to accept any purchase when, in its
judgment, acceptance would not be to the advantage or in the best interests of
existing shareholders and may, on a case-by-case basis, prohibit or restrict
purchase of its shares by an investor whose activity it deems excessive.
A new account application can be obtained by calling (800) 833-0018.
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<PAGE>
Distribution Plan. The Fund has adopted a Distribution Plan pursuant to
Rule 12b-1 under the Investment Company Act which authorizes NSI to utilize its
administrative fee to finance sales and promotional activities. These activities
and services relate to the sale, promotion and marketing of shares of the Fund,
and the Plan permits NSI to compensate salesmen and dealers who sell shares of
the Fund.
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
Shares of the Fund may be redeemed at any time for cash at the net asset
value per share next determined after the request for redemption is received in
proper form by the Transfer Agent.
By Mail
A shareholder wishing to redeem shares by mail may do so by tendering the
shares directly to the Transfer Agent, State Street Bank and Trust Company, P.O.
Box 8500, Boston, Massachusetts 02266-8500. If shares are held in
non-certificate form, a written request for redemption signed by the
shareholder(s) exactly as the account is registered is required. If certificates
are held by the shareholder(s), the certificates, signed in the name(s) shown on
the face of the certificates, must be returned in order to be redeemed. The
certificates may be signed either on their reverse side or on a separate stock
power. Any signature appearing on a redemption request, share certificate or
stock power must be guaranteed by an "eligible guarantor institution" as such
term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, the
existence and validity of which may be verified by the Transfer Agent through
the use of industry publications. Additional documentation may be required for
redemptions made by corporations, executors, administrators, trustees or
guardians. Redemption payments will be mailed within seven days of receipt of a
redemption request in proper form by the Transfer Agent.
If the Fund is requested to redeem shares for which it has not yet received
good payment, the Fund may delay or cause to be delayed the mailing of a
redemption check until it has assured itself that good payment (e.g., cash or
certified check drawn on a United States bank) has been collected for the
purchase of the shares. In the case of purchases by check, it may take up to 10
days to ascertain whether good payment has been received.
By Telephone
In order to utilize the procedure for redemption by telephone, a
shareholder previously must have elected this procedure in writing, the
shareholder's account must have been opened previously by the shareholder and be
reflected as such in the computer records of the Transfer Agent, the stock
certificate for shares being redeemed must be held by the Transfer Agent, and
the redemption proceeds must be transmitted directly to the shareholder's
predesignated account at a domestic bank. A shareholder may elect at any time to
use the telephone redemption service. Redemption requests must be received by
the Transfer Agent prior to 4:00 p.m., New York time, on any business day. For
assistance the shareholder should call the Transfer Agent at (800) 680-1836.
When utilizing the telephone redemption service, the shareholder must give
the full name, number of shares to be redeemed and account number or the
redemption request will not be processed.
Shareholders should understand that with the telephone redemption option,
they may be giving up a measure of security that they might otherwise have if
they were to redeem their shares in writing. The Fund will employ procedures it
considers reasonable to confirm that redemption instructions communicated by
telephone are genuine. Assuming that the Fund's procedures are followed, neither
the Fund nor the Transfer Agent will be liable for any loss or expenses
resulting from acting on telephonic redemption instructions. In addition,
interruptions in telephone service may mean that a shareholder will be unable to
effect a redemption by telephone when desired.
The Fund reserves the right to change or discontinue without prior notice
telephone service for redemption requests.
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<PAGE>
Repurchase
The Fund will also repurchase shares which are presented by wire or
telephone from a shareholder's listed securities dealer. The repurchase price is
the net asset value per share next determined after the repurchase order is
received. These repurchase arrangements are for the convenience of shareholders
and do not involve a charge by the Fund; however, securities dealers may impose
a charge on the shareholder for transmitting the notice of repurchase to the
Fund. Repurchase orders received by dealers prior to the close of business on
the New York Stock Exchange on the day received will be priced at the net asset
value next computed after receipt of the order by the dealer. It is the
responsibility of dealers to transmit such repurchase requests to NSI or the
Transfer Agent not later than 4:00 p.m., New York time, in order to obtain that
day's applicable redemption price.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
It is the Fund's intention to distribute substantially all of its net
investment income, if any, in dividend payments declared at least annually. All
net realized long-term or short-term capital gains, if any, will be distributed
to the Fund's shareholders at least annually. Dividends and distributions will
be automatically reinvested in shares of the Fund at net asset value, without a
sales charge, unless the shareholder elects in writing to receive any such
dividends or distributions, or both, in cash. Dividends and distributions are
taxable to shareholders as discussed below whether they are reinvested in shares
of the Fund or received in cash.
The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue Code
of 1986, as amended (the "Code"). If it so qualifies, the Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains which it distributes to
shareholders. The Fund intends to distribute substantially all of such income.
Dividends paid by the Fund from its ordinary income or from an excess of
net short-term capital gains over net long-term capital losses (together,
referred to hereinafter as "ordinary income dividends") are taxable to
shareholders as ordinary income. Distributions made from an excess of net
long-term capital gains over net short-term capital losses ("capital gain
dividends") are taxable to shareholders as long-term capital gains, regardless
of the length of time the shareholder has owned Fund shares. Any loss upon the
sale of Fund shares held for six months or less, however, will be treated as
long-term capital loss to the extent of any capital gain dividends received by
the shareholder. Distributions in excess of the Fund's earnings and profits will
first reduce the adjusted tax basis of a holder's shares, and after such
adjusted tax basis is reduced to zero, will constitute capital gains to such
holder (assuming the shares are held as a capital asset).
Dividends are taxable to shareholders even if they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, generally will not be eligible for the dividends received deduction
allowed to corporations under the Code. If the Fund pays a dividend in January
which was declared in October, November or December of the previous year to
shareholders of record on a specified date in one of such months, then such
dividend will be treated for tax purposes as being paid by the Fund and received
by its shareholders on December 31 of the year in which the dividend was
declared.
Ordinary income dividends paid to shareholders who are nonresident aliens
or foreign entities will be subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident shareholders are urged to consult their
own tax advisers concerning the applicability of the United States withholding
tax.
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<PAGE>
Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Shareholders
may be able to claim United States foreign tax credits with respect to such
taxes, subject to certain conditions and limitations contained in the Code. For
example, certain retirement accounts cannot claim foreign tax credits on
investments in foreign securities held in the Fund. If more than 50% in value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible and may file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their proportionate shares of such withholding taxes in
their United States income tax returns as gross income, treat such proportionate
shares as taxes paid by them, directly, and deduct such proportionate shares in
computing their taxable incomes or, alternatively, use them as foreign tax
credits against their United States income taxes. No deductions for foreign
taxes, however, may be claimed by noncorporate shareholders who do not itemize
deductions. A shareholder that is a nonresident alien individual or a foreign
corporation may be subject to United States withholding tax on the income
resulting from the Fund's election described in this paragraph but may not be
able to claim a credit or deduction against such United States tax for the
foreign taxes treated as having been paid by such shareholder. The Fund will
report annually to its shareholders the amount per share of such withholding
taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.
The Fund may invest up to 10% of its total assets in securities of
closed-end investment companies. If the Fund purchases shares of an investment
company (or similar investment entity) organized under foreign law, the Fund
will be treated as owning shares in a passive foreign investment company
("PFIC") for U.S. Federal income tax purposes. The Fund may be subject to U.S.
Federal income tax, and an additional tax in the nature of interest (the
"interest charge"), on a portion of the distributions from such a company and on
gain from the disposition of the shares of such a company (collectively referred
to as "excess distributions"), even if such excess distributions are paid by the
Fund as a dividend to its shareholders. The Fund may be eligible to make an
election with respect to certain PFICs in which it owns shares that will allow
it to avoid the taxes on excess distributions. However, such election may cause
the Fund to recognize income in a particular year in excess of the distributions
received from such PFICs. Alternatively, under proposed regulations the Fund
would be able to elect to "mark-to-market" at the end of each taxable year all
shares that it holds in PFICs. If it made this election, the Fund would
recognize as ordinary income any increase in the value of such shares over their
adjusted tax basis. Unrealized losses, however, would not be recognized. By
making the mark-to-market election, the Fund could avoid imposition of the
interest charge with respect to its distributions from PFICs, but in any
particular year might be required to recognize income in excess of the
distributions it received from PFICs and its proceeds from dispositions of PFIC
stock.
Under Code Section 988, foreign currency gains or losses from certain debt
instruments, from certain forward contracts, from futures contracts that are not
"regulated futures contracts" and from unlisted options will generally be
treated as ordinary income or loss. Such Code Section 988 gains or losses will
generally increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to shareholders as ordinary income.
Additionally, if Code Section 988 losses exceed other investment company taxable
income during a taxable year, the Fund would not be able to make any ordinary
income dividend distributions, and all or a portion of distributions made before
the losses were realized but in the same taxable year would be recharacterized
as a return of capital to shareholders, thereby reducing the basis of each
shareholder's Fund shares and resulting in a capital gain for any shareholder
who received a distribution greater than such shareholder's basis in Fund shares
(assuming the shares were held as a capital asset).
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A loss realized on a sale of shares of the Fund will be disallowed if other
Fund shares are acquired (whether through the automatic reinvestment of
dividends or otherwise) within a 61-day period beginning 30 days before and
ending 30 days after the date that the shares are disposed of. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on United States Government obligations. State
law varies as to whether dividend income attributable to United States
Government obligations is exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Fund.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Determination of Net Asset Value
The Fund's net asset value per share is determined once daily after the
close of business on the New York Stock Exchange (generally, 4:00 P.M., New York
time), on each day during which the New York Stock Exchange is open for trading.
The Fund's net asset value per share is computed by dividing the sum of the
market value of the securities held by the Fund plus any cash and other assets
(including interest and dividends accrued but not yet received) minus all
liabilities (including accrued expenses) by the total number of shares
outstanding at such time, rounded to the nearest cent. Expenses, including the
management fee payable to the Manager, are accrued daily.
Portfolio securities, including ADR's or EDR's which are traded on stock
exchanges, are valued at the last sale price (regular way) on the exchange on
which such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated by or under the authority of
the Directors as the primary market. During periods when one or more securities
exchanges are closed for holidays and the New York Stock Exchange is open,
securities traded on such exchanges will be valued on the basis of their last
sale price on the relevant exchange unless management of the Fund believes that
such prices are not representative of the current value of the securities.
Securities traded in the over-the-counter market are valued at the last
available bid price in such market prior to the time of valuation. Any assets or
liabilities expressed in terms of foreign currencies are translated into United
States dollars at the prevailing market rates quoted by State Street Bank and
Trust Company at the time.
Securities and assets for which market quotations are not readily available
will be valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund. Such valuations and procedures
will be reviewed periodically by the Directors.
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<PAGE>
Portfolio Transactions and Brokerage
In executing portfolio transactions, the Manager will seek to obtain the
best net results for the Fund, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), size of order,
difficulty of execution and operational facilities of the firm involved and the
firm's risk in positioning a block of securities. While the Manager will
generally seek reasonably competitive commission rates, the Fund will not
necessarily pay the lowest commission or spread available. The Fund has no
obligation to deal with any broker or group of brokers in the execution of
transactions in portfolio securities. The Fund contemplates that, consistent
with its policy of obtaining best net results, brokerage transactions may be
conducted through Nomura and other affiliates of the Manager, and the amount of
such transactions may be significant. As of the date of this Prospectus, the
Manager and NIMCO have determined not to place any brokerage transactions with
Nomura in light of certain allegations by the Ministry of Finance of Japan of
unlawful loss compensation by Nomura. The Manager and NIMCO reserve the right to
change this determination in the future at their discretion. The Manager and
NIMCO have each informed the Fund that neither of them had any involvement in
the transactions in which violations of Japanese law have been claimed. Fixed
commissions are charged on the securities exchanges of Japan and certain other
Pacific Basin countries. Such fixed commissions are generally higher than
negotiated commissions on comparable United States transactions. For the year
ended March 31, 1997, Nomura and its affiliates earned $5,943 of the aggregate
commissions of $235,409 incurred by the Fund.
Shareholder Services
The Fund offers a number of shareholder services and investment plans
designed to facilitate investment in its shares. Full details as to each of such
services can be obtained from the Fund or NSI.
Investment Account. An Investment Account is established by the Transfer
Agent for each shareholder. The shareholder will receive statements with respect
to share transactions showing the activity in the shareholder's Investment
Account since the beginning of the year. Share certificates for full shares will
be issued without charge upon the request of the shareholder to the Transfer
Agent.
Reinvestment of Dividends and Capital Gains Distributions. Unless specific
instructions to the contrary are given as to the method of payment of dividends
and capital gains distributions, dividends and distributions will automatically
be reinvested in additional shares of the Fund. Such reinvestments will be at
the net asset value of shares of the Fund, without sales charge, as of the close
of business on the ex-dividend date of the dividend or distribution.
Shareholders may elect in writing to receive either their income dividends or
gains distributions, or both, in cash, in which event payment will be mailed on
the payment date.
Shareholders may, at any time, notify the Transfer Agent in writing that
they no longer wish to have their dividends and/or distributions reinvested in
shares of the Fund or vice versa, and commencing ten days after the receipt by
the Transfer Agent of such notice, those instructions will be effected.
Retirement Plans. Shares of the Fund may be purchased in connection with
individual retirement accounts. Copies of plans to establish such accounts are
available from First Trust Corporation (800) 525-2124.
Capital gains and ordinary income received in retirement plans are
generally exempt from federal taxation until distributed from the plans.
However, as described under "Dividends, Distributions and Taxes", there may be
foreign withholding taxes on dividends and interest received on portfolio
securities which shareholders of the Fund can offset either by claiming a
deduction, or, as the alternative, use as a foreign tax credit against their
United States income taxes. However, because the retirement plans are exempt
from United States income taxes, participants in such plans will not be able to
offset such withholding taxes. Investors considering participation in any such
plan should review specific tax laws relating thereto and should consult their
attorneys or tax advisers with respect to the establishment and maintenance of
any such plan.
17
<PAGE>
Organization of the Fund
The Fund was incorporated under Maryland law on March 14, 1985. It is a
diversified open-end investment company. All shares of Common Stock are of the
same class. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held and will vote on the election of
Directors and any other matter submitted to a shareholder vote. Shares issued
are fully paid and non-assessable and have no preemptive or conversion rights.
Upon liquidation of the Fund, shareholders are entitled to share pro rata in the
net assets of the Fund available for distribution to shareholders.
Performance Data
The Fund may from time to time include its average annual total return in
advertisements or information furnished to present or prospective shareholders.
Total return figures are based on the Fund's historical performance and are not
intended to indicate future performance. Average annual total return is
determined in accordance with a formula specified by the Securities and Exchange
Commission.
Average annual total return quotations for the specified period will be
computed by finding the average annual compounded rates of return (based upon
net investment income and any capital gains or losses on portfolio investments
over such periods) that would equate the initial amount invested to the
redeemable value of such investment at the end of each period. Average annual
total return will be computed assuming all dividends and distributions are
reinvested and taking into account all applicable recurring and nonrecurring
expenses.
The Fund's average annual total return will vary depending upon market
conditions, the securities comprising the Fund's portfolio, the Fund's operating
expenses, changes in foreign currency exchange rates and the amount of net
capital gains or losses realized by the Fund during the period. An investment in
the Fund will fluctuate, and an investor's shares, when redeemed, may be worth
more or less than their original cost.
On occasion, the Fund may compare its average annual total return to
various indices, including those comprised of Pacific Basin securities, and to
performance data published by various sources, including that published by
Lipper Analytical Services, Inc. As with other performance data, performance
comparisons should not be considered representative of the Fund's relative
performance for any future period.
Shareholder Inquiries
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.
18
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
================================================================================
Manager
Nomura Capital Management, Inc.
180 Maiden Lane
New York, New York 10038-4936
Investment Advisers
Nomura Investment Management Co., Ltd.
1-12-11, Nihonbashi, Chuo-ku,
Tokyo 103, Japan
Nomura Capital Management
(Singapore) Limited
6 Battery Road
Singapore 049909
Distributor
Nomura Securities International, Inc.
2 World Financial Center
New York, New York 10281-1198
Custodian and Shareholder Servicing Agent
State Street Bank and Trust Company
P.O. Box 8500
North Quincy, Massachusetts 02171-8500
Counsel
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036-2798
================================================================================
================================================================================
Nomura Pacific Basin
Fund, Inc.
[LOGO]
Prospectus
July 29, 1997
================================================================================
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[LOGO]
Nomura Pacific Basin Fund, Inc.
180 Maiden Lane, New York, New York 10038
(Telephone: (l-800) 833-0018)
================================================================================
Nomura Pacific Basin Fund, Inc. (the "Fund") is a no-load, open-end
diversified management investment company seeking long-term capital appreciation
primarily through investments in equity securities of corporations domiciled in
Japan and other Far Eastern and Western Pacific ("Pacific Basin") countries.
Nomura Capital Management, Inc. acts as the Manager for the Fund. Nomura
Investment Management Co., Ltd. and Nomura Capital Management (Singapore)
Limited act as the Investment Advisers for the Fund. The Manager and the
Investment Advisers are affiliated with The Nomura Securities Co., Ltd.
================================================================================
This Statement of Additional Information of the Fund is not a prospectus
and should be read in conjunction with the Prospectus of the Fund, bearing the
same date as this Statement of Additional Information, which has been filed with
the Securities and Exchange Commission and is available without charge upon
request by calling or writing the Fund. This Statement of Additional Information
has been incorporated by reference into the Prospectus
Nomura Capital Management, Inc.--Manager
Nomura Investment Management Co., Ltd.--Investment Adviser
Nomura Capital Management (Singapore) Limited--Investment Adviser
Nomura Securities International, Inc.--Distributor
July 29, 1997
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
================================================================================
The investment objective of the Fund is to seek long-term capital
appreciation primarily through investments in equity securities of corporations
domiciled in Japan and other Pacific Basin countries. Reference is made to
"Investment Objective and Policies" in the Prospectus for a discussion of the
investment objective and policies of the Fund.
While it is the policy of the Fund generally not to engage in trading for
short-term gains, the Manager, subject to the overall supervision of the Board
of Directors, will effect portfolio transactions without regard to holding
periods, if, in its judgment, such transactions are advisable in light of a
change in circumstances of a particular company or within a particular industry
or in general market, economic or political conditions of a particular country.
As a result of the investment policies of the Fund, under certain conditions the
Fund's portfolio turnover may be higher than that of other investment companies;
however, it is impossible to predict portfolio turnover rates. For Federal
income tax purposes, however, the Fund is subject to the requirement that less
than 30% of the Fund's gross income be derived from the sale or other
disposition of securities held for less than three months. The portfolio
turnover rate is calculated by dividing the lesser of the Fund's annual proceeds
from sales or cost of purchases of portfolio securities (exclusive of purchases
or sales of United States Government securities and of all other securities
whose maturities at the time of acquisition were one year or less) by the
monthly average market value of the securities in the portfolio during the year.
The rates of portfolio turnover for the years ended March 31, 1995, March 31,
1996 and March 31, 1997 were 49%, 45% and 62%, respectively.
As indicated in the Prospectus, the Fund may invest in shares of
investment companies organized to invest in certain countries in which it would
not be practicable for the Fund itself to invest because of limitations on
foreign investment. Under the Investment Company Act of 1940, the Fund may not
own more than 3% of the outstanding voting stock of an investment company or
invest more than 10% of the Fund's total assets in the securities of investment
companies. These investments are also subject to the Fund's investment
restrictions set forth below.
Generally, the foreign exchange transactions of the Fund will be conducted
on a spot, i.e., cash basis, at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market. This rate under normal market
conditions differs from the prevailing exchange rate in an amount generally less
than 0.15 of 1% due to the costs of converting from one currency to another.
However, the Fund has authority to deal in forward foreign exchange contracts
between currencies of the different countries in which it will invest as a hedge
against possible variations in the foreign exchange rates between these
currencies. This is accomplished through contractual agreements to purchase or
sell a specified currency at a specified future date and price set at the time
of the contact. The Fund's dealings in forward foreign exchange will be limited
to hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward foreign currency with
respect to specific receivables or payables of the Fund arising from the
purchase and sale of its portfolio securities, the sale and redemption of shares
of the Fund or the payment of dividends and distributions by the Fund. Position
hedging is the sale of forward foreign currency with respect to portfolio
security positions denominated or quoted in such foreign currency. The Fund will
not speculate in forward foreign exchange. The Fund may not position hedge with
respect to the currency of a particular country to an extent greater than the
aggregate market value (at the time of making such sale) of the securities held
in its portfolio denominated or quoted in that particular foreign currency. If
the Fund enters into a position hedging transaction, its custodian bank will
place cash or liquid equity or debt securities in a separate account of the Fund
in an amount equal to the value of the Fund's total assets committed to the
consummation of such forward contract. If the value of the securities placed in
the separate account declines, additional cash or securities will be placed in
the account so that the value of the account will equal the amount of the Fund's
commitment with respect to such contracts. Alternatively, no such segregation of
funds need be made when the Fund "covers" its open positions. The position is
considered "covered" if the Fund holds securities denominated in the currency
underlying the forward contract having a value equal to or greater
2
<PAGE>
than the Fund's obligation under the forward contract. The Fund will not attempt
to hedge all of its foreign portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by the Fund's
management. The Fund will not enter into a forward contract with a term of more
than one year.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline, and it precludes the opportunity for gain if
the value of the hedged currency should rise. Moreover, it may not be possible
for the Fund to hedge against a devaluation that is so generally anticipated
that the Fund is not able to contract to sell the currency at a price above the
devaluation level it anticipates. The cost to the Fund of engaging in foreign
currency transactions varies with such factors as the currency involved, the
length of the contract period and the market conditions then prevailing. Since
transactions in foreign currency exchange are usually conducted on a principal
basis, no fees or commissions are involved.
The Fund's ability and decisions to purchase or sell portfolio securities
may be affected by laws or regulations relating to the convertibility and
repatriation of assets. Because the shares of the Fund are redeemable on a daily
basis in United States dollars, the Fund intends to manage its portfolio so as
to give reasonable assurance that it will be able to obtain United States
dollars to the extent necessary to meet anticipated redemptions. Under present
conditions, it is not believed that these considerations will have any
significant effect on its portfolio strategy.
The United States Government has from time to time in the past imposed
restrictions, through taxation and otherwise, on foreign investments by United
States investors such as the Fund. If such restrictions should be reinstated, it
might become necessary for the Fund to invest all or substantially all of its
assets in United States securities. In such event, the Fund would review its
investment objective and investment policies to determine whether changes are
appropriate. If changes in the Fund's fundamental policies were deemed
appropriate, they would be submitted to shareholders for their consideration.
Investment Restrictions
In addition to the investment restrictions set forth in the Prospectus,
the Fund has adopted the following restrictions and policies relating to the
investment of its assets and its activities, which are fundamental policies and
may not be changed without the approval of the holders of the majority of the
Fund's outstanding voting securities (which for this purpose and under the
Investment Company Act of 1940 means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares). The Fund may not:
1. Make investments for the purpose of exercising control of management.
2. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase in
the open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved and only if immediately thereafter not more than 10% of
the Fund's total assets, taken at market value, would be invested in such
securities.
3. Purchase or sell real estate; provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interest therein.
4. Purchase or sell commodities or commodity contracts, provided that this
restriction shall not be deemed to prohibit forward foreign exchange
transactions.
5. Purchase any security on margin, except that the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities, or make short sales of securities or maintain a short
position.
3
<PAGE>
6. Make loans to other persons (except as provided in (7) below); provided
that for purposes of this restriction the acquisition of bonds, debentures, or
other corporate debt securities and investment in government obligations,
short-term commercial paper, certificates of deposit, bankers' acceptances and
repurchase agreements shall not be deemed to be the making of a loan.
7. Lend its portfolio securities in excess of 10% of its total assets,
taken at market value. Any such loans shall be made in accordance with the
guidelines set forth below.
8. Borrow amounts in excess of 10% of its total assets, taken at market
value. Any such borrowings shall be made only from banks as a temporary measure
for extraordinary or emergency purposes such as the redemption of Fund shares.
The Fund will not purchase securities while borrowings are outstanding except to
exercise prior commitments or to exercise subscription rights.
9. Mortgage, pledge, hypothecate or in any manner transfer (except as
provided in (7) above), as security for indebtedness, any securities owned or
held by the Fund except as may be necessary in connection with borrowings
mentioned in (8) above, and then such mortgaging, pledging or hypothecating may
not exceed 10% of the Fund's total assets, taken at market value.
10. Invest in securities which cannot be readily resold because of legal
or contractual restrictions or which are not otherwise readily marketable if,
regarding all such securities, more than 5% of its total assets, taken at market
value, would be invested in such securities.
11. Underwrite securities of issuers except insofar as the Fund may be
deemed an underwriter under the Securities Act of 1933 in selling its portfolio
securities.
12. Write, purchase or sell puts, calls or combinations thereof.
13. Purchase or sell interests in oil, gas or other mineral exploration or
development programs.
14. Invest in securities of issuers having a record, together with
predecessors, of less than three years of continuous operations if more than 5%
of its total assets, taken at market value, would be invested in such
securities.
Subject to investment restriction (7) above, the Fund may from time to
time lend securities from its portfolio to brokers, dealers and financial
institutions such as banks and trust companies and receive collateral in cash or
securities issued or guaranteed by the United States Government or its
instrumentalities which will be maintained in an amount equal to at least 100%
of the current market value of the loaned securities. Such cash will be invested
in short-term securities, which will increase the current income of the Fund.
Such loans will not be for more than 30 days and will be terminable at any time.
The Fund will have the right to regain record ownership of loaned securities to
exercise beneficial rights such as voting rights, subscription rights and rights
to dividends, interest or other distributions. The Fund may pay reasonable fees
to persons affiliated with the Fund for services in arranging such loans. With
respect to the lending of portfolio securities, there is the risk of failure by
the borrower to return the securities involved in such transactions.
The Fund expects that a meeting of its shareholders will be held in late
September 1997 for shareholders to consider the removal of investment
restrictions (10) and (14) above.
Because of the affiliation of Nomura Securities International, Inc.
("NSI"), the Fund's distributor, with the Fund, the Fund is prohibited from
engaging in certain transactions with such company or its affiliates except for
brokerage transactions permitted under the Investment Company Act of 1940
involving only usual and customary commissions or transactions pursuant to an
exemptive order under the Investment Company Act of 1940. See "Portfolio
Transactions and Brokerage". Without such an exemptive order, the Fund is
prohibited from engaging in portfolio transactions with NSI or its affiliates
acting as principal and from purchasing securities in public offerings which are
not registered under the Securities Act of 1933 in which such company or any of
its affiliates participate as an underwriter or dealer.
4
<PAGE>
The Board of Directors has established the policy that the Fund will not
purchase or retain the securities of any issuer if individual officers and
directors of the Fund, Nomura Capital Management, Inc. (the "Manager"), Nomura
Investment Management Co., Ltd., Nomura Capital Management (Singapore) Ltd. (the
"Investment Advisers") or NSI who individually own beneficially more than
one-half of 1% of the securities of such issuer own in the aggregate more than
5% of the securities of such issuer. Portfolio securities of the Fund may not be
purchased from, sold or loaned to The Nomura Securities Co., Ltd. ("Nomura") or
its affiliates or any of their directors, officers or employees, acting as
principal.
The Fund has adopted a policy pursuant to which it will not invest in
warrants if, at any time of acquisition, its investment in warrants, valued at
the lower of cost of market value, would exceed 5% of the Fund's net assets;
included within such limitation, but not to exceed 2% of the Fund's net assets,
are warrants which are not listed on the New York or American Stock Exchanges.
For purposes of this policy, warrants acquired by the Fund in units or attached
to securities may be deemed to be without value. This policy may be amended
without the approval of the Fund's shareholders.
The investment restrictions set forth in the Prospectus contain an
exception to limitations on the Fund's aggregate investment in a single issuer
or single industry that permits the Fund to purchase securities pursuant to the
exercise of subscription rights, subject to the condition that such purchase
will not result in the Fund ceasing to be a diversified investment company
within the meaning of the Investment Company Act of 1940 or in a failure to meet
certain diversification requirements of the Internal Revenue Code of 1986, as
amended. Corporations in Pacific Basin countries frequently issue additional
capital stock by means of subscription rights offerings to existing shareholders
at a price substantially below the market price of the shares. The failure to
exercise such rights would result in the Fund's interest in the issuing company
being diluted. The market for such rights is not well developed and,
accordingly, the Fund may not always realize full value on the sale of rights.
Therefore, the exception applies in cases where the limits set forth in the
investment restrictions in the Prospectus would otherwise be exceeded by
exercising rights or have already been exceeded as a result of fluctuations in
the market value of the Fund's portfolio securities with the result that the
Fund would otherwise be forced either to sell securities at a time when it might
not otherwise have done so or to forego exercising the rights.
MANAGEMENT OF THE FUND
================================================================================
Directors and Officers
The Directors and principal executive officers of the Fund, their ages and
their principal occupations for at least the last five years are set forth
below. Unless otherwise noted, the address of each Director and officer is 180
Maiden Lane, New York, New York 10038.
WILLIAM G. BARKER, JR. (64)--Director(2)--111 Parsonage Road, Greenwich,
Connecticut 06830. Consultant to the television industry since 1991. Senior Vice
President and Chief Financial Officer of The CBS/Fox Company from 1982 to 1991.
GEORGE H. CHITTENDEN (80)--Director(2)--155 Buffalo Bay, Neck Road,
Madison, Connecticut 06443. Director of Bank Audi (USA).
CHOR WENG TAN (61)--Director(2)--345 East 47th Street, New York, New York
10017. Managing Director for Education, The American Society of Mechanical
Engineering, since 1991. Professor, School of Engineering, The Cooper Union from
1963 to 1991. Dean, School of Engineering, The Cooper Union from 1975 to 1987,
Executive Officer, The Cooper Union Research Foundation from 1976 to 1987.
Program Director, Presidential Young Investigator Awards of National Science
Foundation from 1987 to 1989. Director of Tround International, Inc.
5
<PAGE>
ARTHUR R. TAYLOR (62)--Director(2)--2400 Chew Street, Allentown,
Pennsylvania 18104. President of Muhlenberg College since 1992. Dean of the
Faculty of Business of Fordham University from 1985 to 1992. Chairman of Arthur
R. Taylor & Co. (investment firm). Director of Pitney Bowes Inc. and Louisiana
Land & Exploration Company.
HARUO SAWADA (47)--President and Director(1)(2)--President and Director of
the Manager since 1997. General Manager of Nomura Investment Management Co.,
Ltd. ("NIMCO") from 1994 to 1996. Vice President and later Senior Vice President
of the Manager from 1986 to 1994.
JOHN F. WALLACE (68)--Secretary, Treasurer and Director(1)(2)--Senior Vice
President of the Manager since 1981, Secretary since 1976, Treasurer since 1984
and Director since 1986. Senior Vice President of NSI since 1978, Secretary from
1977 to 1991 and Director from 1983 to 1991.
MITSUTOYO KOHNO (48)--Vice President(1)(2)--Director of the Manager since
1994, Senior Vice President since 1991 and Vice President from 1989 to 1991.
- ---------------
(1) "Interested person", as defined in the Investment Company Act of 1940, of
the Fund.
(2) Such Director or officer is a director or officer of one or more other
investment companies for which the Manager or the Investment Advisers act
as investment advisers.
The Fund pays fees to each Director not affiliated with the Manager an
annual fee of $5,000 plus $500 per meeting attended, together with such
Director's actual out-of-pocket expenses related to attendance at such meetings.
Fees and out-of-pocket expenses paid to unaffiliated Directors aggregated
$38,187 for the year ended March 31, 1997. The Fund's audit committee consists
of all of the non-affiliated Directors. At June 30, 1997, the Directors and
officers of the Fund as a group owned an aggregate of less than 1% of the
outstanding shares of the Fund.
The following table sets forth for the periods indicated compensation paid
by the Fund to its Directors and the aggregate compensation paid by all
investment companies managed by NCM or advised by NIMCO to the Directors:
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Total Compensation from
Compensation Benefits Accrued as Part of Fund Complex Paid to
from Fund for Fund Expenses for its Directors During the
its Fiscal Year Ended Fiscal Year Ended Calendar Year Ended
Name of Director March 31, 1997 March 31, 1997 December 31, 1996*
--------------- ------------------ ---------------------- ---------------------
<S> <C> <C> <C>
William G. Barker, Jr.................. $8,500 None $33,000
George H. Chittenden .................. $8,500 None $33,000
Haruo Sawada .......................... -- None --
Chor Weng Tan.......................... $8,500 None $33,000
Arthur R. Taylor....................... $8,500 None $33,000
John F. Wallace ....................... -- None --
</TABLE>
- -------------
* In addition to the Fund the "Fund Complex" included Jakarta Growth Fund,
Inc., Japan OTC Equity Fund, Inc. and Korea Equity Fund, Inc.
Management and Investment Advisory Arrangements
Reference is made to "Management of the Fund--Management and Investment
Advisory Arrangements", in the Prospectus for certain information concerning the
management and advisory arrangements of the Fund.
Securities held by the Fund may also be held by other funds or other
investment advisory clients for which the Manager, the Investment Advisers or
their affiliates act as an adviser. Because of different investment objectives
or other factors, a particular security may be bought for one or more clients
when one or more clients are selling the same security. If purchases or sales of
securities by the Manager or an Investment Adviser for the Fund and other funds
for which they act as investment adviser or for their other advisory clients are
to be made at or about
6
<PAGE>
the same time, such transactions will be made, insofar as feasible, for the
respective funds and clients in a manner deemed equitable to all. To the extent
that transactions on behalf of more than one client of the Manager, the
Investment Advisers or their affiliates during the same period may increase the
demand for securities being purchased or the supply of securities being sold,
there may be an adverse effect on price.
As discussed under "Management of the Fund--Management and Investment
Advisory Arrangements" in the Prospectus, the Manager receives as compensation
for its services to the Fund monthly compensation at the annual rate of 0.75 of
1% of the average daily net assets of the Fund. For the years ended March 31,
1995, March 31, 1996 and March 31, 1997, the Fund paid or accrued fees to the
Manager of $430,670, $307,917 and $245,892, respectively. For such years, the
Manager paid fees of $150,017, $106,591 and $73,734, respectively, to NIMCO,
fees of $15,791, $11,220 and $7,761, respectively, to Nomura Capital Management
(Singapore) Limited ("NCM-Singapore") and fees of $57,423, $40,800 and $28,224,
respectively, to NSI. As set forth under "Purchase of Shares--Distribution
Plan", the Fund has adopted a Distribution Plan which authorizes NSI to utilize
its administrative compensation for distribution activities.
The Manager has agreed, for an indefinite period, to reimburse the Fund in
any amount necessary to prevent the aggregate ordinary operating expenses
(excluding taxes, brokerage fees and commissions and extraordinary charges such
as litigation costs) from exceeding in any fiscal year 2.5% of the Fund's first
$30 million of average net assets, 2.0% of the next $70 million of average net
assets and 1.5% of the remaining average net assets. No reimbursement to the
Fund was required under this limitation for the year ended March 31, 1997.
Although the Manager has no present intention to do so, this voluntary
reimbursement arrangement may be terminated at any time.
The Management Agreement obligates the Manager to provide, or arrange for
the provision of, investment advisory services and to pay all compensation of
and furnish office space for officers and employees of the Fund, as well as to
pay the fees of all Directors of the Fund who are affiliated persons of the
Manager or any of its affiliates. The Fund pays all other expenses incurred in
its operation, including, among other things, taxes; expenses for legal, tax and
auditing services; costs of printing proxies, stock certificates, shareholder
reports, prospectuses and statements of additional information (except to the
extent paid by NSI); charges of the custodian, sub-custodians and transfer
agent; expenses of redemption of shares; Securities and Exchange Commission
fees; expenses of registering the shares under Federal, state or foreign laws;
fees and expenses of unaffiliated Directors; accounting and pricing costs
(including the daily calculation of net asset value); insurance; interest;
brokerage costs; litigation and other extraordinary or non-recurring expenses;
and other expenses properly payable by the Fund. As required by the Fund's
Distribution Agreement, NSI will pay the promotional expenses of the Fund
incurred in connection with the offering of shares of the Fund. See "Purchase of
Shares--Distribution Agreement".
Duration and Termination. Unless earlier terminated as described below,
the Management Agreement, Investment Advisory Agreements and Administrative
Agreement will remain in effect from year to year if approved annually (a) by
the Directors of the Fund or by a majority of the outstanding shares of the Fund
and (b) by a majority of the Directors who are not parties to such contracts or
interested persons (as defined in the Investment Company Act of 1940) of any
such party. Such contracts are not assignable and may be terminated without
penalty on 60 days' written notice at the option of either party thereto or by
the vote of the shareholders of the Fund.
It is anticipated that NIMCO will merge with and into The Nomura
Securities Investment Trust Management Co., Ltd. ("NSITM"), an affiliate of
Nomura, on or about October 1, 1997. Concurrently, the Manager will merge with a
subsidiary of NSITM. The Fund expects that a meeting of its shareholders will be
held in late September 1997 for shareholders to consider the approval of new
agreements to be entered into by the Fund with the successor entities to the
Manager, NIMCO and NCM-Singapore. The new agreements are not expected to alter
the rate of compensation paid by the Fund or the services provided to the Fund.
7
<PAGE>
PURCHASE OF SHARES
================================================================================
Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Fund shares.
The Fund's shares may be purchased at a public offering price equal to the
net asset value next determined after receipt of the purchase order by NSI or
the Fund's transfer agent, State Street Bank and Trust Company (the "Transfer
Agent"), without a sales charge. If purchase orders are not received by NSI or
the Transfer Agent prior to 4:00 p.m., New York time, such orders will be deemed
received on the next business day. The Fund has established a minimum initial
investment of $1,000. There is no minimum subsequent investment. Any order may
be rejected by NSI or the Fund.
Distribution Agreement
The Fund has entered into a Distribution Agreement with NSI. Such
agreement obligates NSI to pay certain expenses in connection with the offering
of the shares of the Fund. After the prospectus, statement of additional
information and periodic reports have been prepared and set in type, NSI pays
for the printing and distribution of copies thereof used in connection with the
offering to dealers and prospective investors. NSI also pays for other
supplementary sales literature and advertising costs.
The Distribution Agreement referred to above is subject to the same
renewal requirements and termination provisions as the agreements described
under "Management of the Fund--Management and Investment Advisory Arrangements".
Distribution Plan
The Fund has adopted a distribution plan (the "Distribution Plan") in
compliance with Rule 12b-1 under the Investment Company Act of 1940 which
authorizes NSI to utilize its administrative fee to finance sales and
promotional activities. These activities and services relate to the sale,
promotion and marketing of shares of the Fund, and the Distribution Plan permits
NSI to compensate salesmen and dealers who sell shares of the Fund.
The use of the administrative fee for distribution purposes is subject to
the provisions of Rule 12b-1 under the Investment Company Act of 1940. Among
other things, the Distribution Plan provides that NSI shall provide and the
Directors of the Fund shall review quarterly reports of the distribution
expenses and the purpose of such expenditures made by NSI. The Distribution Plan
further provides that, so long as the Distribution Plan remains in effect, the
selection and nomination of Directors of the Fund who are not "interested
persons" of the Fund as defined in the Investment Company Act of 1940
("Independent Directors") shall be committed to the discretion of the
Independent Directors then in office. In approving the Distribution Plan in
accordance with Rule 12b-1, the Independent Directors concluded that there is a
reasonable likelihood that the plan will benefit the Fund and its shareholders
by providing NSI with alternative methods of financing sales and promotional
activities. The Distribution Plan can be terminated at any time, without
penalty, by the vote of a majority of the Independent Directors or by the vote
of the holders of a majority of the outstanding voting securities of the Fund.
Rule 12b-1 further requires that the Fund preserve copies of the Distribution
Plan and any report made pursuant to such plan for a period of not less than six
years from the date of such plan or report, the first two years in an easily
accessible place.
REDEMPTION OF SHARES
================================================================================
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption and repurchase of Fund shares.
8
<PAGE>
The right to redeem shares or receive payment with respect to any
redemption of shares may be suspended by the Fund for a period of up to seven
days. Suspensions of more than seven days may not be made except (1) for any
period (a) during which the New York Stock Exchange is closed other than
customary weekend and holiday closings or (b) during which trading on the New
York Stock Exchange is restricted; (2) for any period during which an emergency
exists as a result of which (a) disposal by the Fund of securities owned by it
is not reasonably practicable or (b) it is not reasonably practicable for the
Fund fairly to determine the value of its net assets; or (3) for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of security holders of the Fund. The conditions under which (i)
trading shall be deemed to be restricted and (ii) an emergency shall be deemed
to exist within the meaning of clause (2) above will be determined pursuant to
the applicable rules and regulations of the Securities and Exchange Commission.
The value of shares at the time of redemption or repurchase may be more or
less than the shareholders' cost, depending on the market value of the
securities held by the Fund at such time.
PORTFOLIO TRANSACTIONS AND BROKERAGE
================================================================================
Subject to policies established by the Board of Directors of the Fund, the
Manager is primarily responsible for the execution of the Fund's portfolio
transactions and the allocation of the brokerage. In executing such
transactions, the Manager will seek to obtain the best net results for the Fund,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), size of order, difficulty of execution and
operational facilities of the firm involved and the firm's risk in positioning a
block of securities. While the Manager generally seeks reasonably competitive
commission rates, the Fund does not necessarily pay the lowest commission or
spread available. The Fund has no obligation to deal with any broker or group of
brokers in execution of transactions in portfolio securities. The Fund
contemplates that, consistent with the above policy of obtaining the best net
results, brokerage transactions may be conducted through Nomura and its
affiliates, and the amount of such transactions may be significant. Subject to
obtaining the best net results for the Fund, brokers who provide supplemental
investment research to the Manager may receive orders for transactions by the
Fund. Information so received which includes research reports as to particular
industries and corporations, will be in addition to and not in lieu of the
services required to be performed by the Manager under its agreement with the
Fund, and the expenses of the Manager will not necessarily be reduced as a
result of the receipt of such supplemental information. It is possible that
certain of the supplementary investment research so received will primarily
benefit one or more other investment companies or other accounts for which
investment discretion is exercised. Conversely, the Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other accounts or investment companies.
In seeking to obtain the best net results for the Fund's portfolio
transactions, the Manager may aggregate orders for the purchase or sale of
securities on behalf of the Fund with those of the Manager's other clients.
Under procedures governing such transactions, the Manager will determine in
advance its proposed allocation of transactions among client accounts. At the
end of each day, each client account participating in an aggregated order will
participate at the average share price for all of the transactions of the
Manager's clients that day, with transaction costs allocated pro rata on the
basis of the client's participation in the transaction. If an aggregated order
is not executed in its entirety on a given day, securities purchased or sold on
that day will be allocated to clients on a pro rata basis.
The Fund anticipates that its brokerage transactions involving securities
of companies domiciled in Pacific Basin countries will be conducted primarily on
the principal stock exchanges of such countries. Fixed commissions are charged
on the securities exchanges of Japan and certain other Pacific Basin countries.
Such fixed commissions are generally higher than negotiated commissions on
United States transactions. Generally, the supervision and regulation of foreign
stock exchanges and brokers differ from, and in some countries may be less than,
the supervision and regulation of exchanges and brokers in the United States.
9
<PAGE>
Foreign equity securities may be held by the Fund either directly or in
the form of American Depositary Receipts (ADRs), European Depositary Receipts
(EDRs), Global Depositary Receipts (GDRs) or other securities convertible into
foreign equity securities. ADRs and EDRs may be listed on stock exchanges or
traded in over-the-counter markets in the United States or Europe, as the case
may be. ADRs, like other securities traded in the United States, will be subject
to negotiated commission rates.
The Fund may invest in securities traded in over-the-counter markets and
intends to deal directly with the dealers who make markets in the securities
involved except in those circumstances where better prices and execution are
available elsewhere. Under the Investment Company Act of 1940, persons
affiliated with the Fund are prohibited from dealing with the Fund as principal
in the purchase and sale of securities. Since transactions in the
over-the-counter market usually involve transactions with dealers acting as
principal for their own account, the Fund will not deal with affiliated persons,
including Nomura and its affiliates, in connection with such transactions. See
"Investment Objective and Policies--Investment Restrictions".
For the year ended March 31, 1995, the Fund incurred brokerage commissions
of $268,325. Nomura and its affiliates earned $93,939 or 32.8% of such amount
for effecting transactions involving 21% of the transactions in which the Fund
incurred brokerage commissions. For the year ended March 31, 1996, the Fund
incurred brokerage commissions of $216,677. Nomura and its affiliates earned
$43,176, or 19.9% of such amount for effecting transactions involving 14.5% of
the transactions in which the Fund incurred brokerage commissions. For the year
ended March 31, 1997, the Fund incurred brokerage commissions of $235,409.
Nomura and its affiliates earned $5,943, or 2.5% of such amount for effecting
transactions involving 2.5% of the transactions in which the Fund incurred
brokerage commissions.
The Board of Directors will from time to time consider the possibilities
of seeking to recapture for the benefit of the Fund brokerage commissions and
other expenses of possible portfolio transactions by conducting portfolio
transactions through affiliated entities. For example, brokerage commissions
received by affiliated brokers could be offset against the management fee paid
by the Fund.
Section 11(a) of the Securities Exchange Act of 1934 generally prohibits
members of United States national securities exchanges from executing exchange
transactions for their affiliates and institutional accounts which they manage
unless the member (i) has obtained prior express authorization from the account
to effect such transactions, (ii) at least annually furnishes the account with a
statement disclosing the aggregate compensation received by the member in
effecting such transactions, and (iii) complies with any rules the Securities
and Exchange Commission has prescribed with respect to the requirements of
clauses (i) and (ii). To the extent Section 11(a) would apply to NSI acting as a
broker for the Fund in any of its portfolio transactions executed on any such
securities exchange of which it is a member, appropriate consents have been
obtained from the Fund, and annual statements as to aggregate compensation will
be provided to the Fund.
DETERMINATION OF NET ASSET VALUE
================================================================================
The Fund's net asset value per share is determined once daily after the
close of business on the New York Stock Exchange (generally, 4:00 P.M., New York
time), on each day during which the New York Stock Exchange is open for trading.
The Fund's net asset value per share is computed by dividing the sum of
the market value of the securities held by the Fund plus any cash and other
assets (including interest and dividends accrued but not yet received) minus all
liabilities (including accrued expenses) by the total number of shares
outstanding at such time, rounded to the nearest cent. Expenses, including the
management fee payable to the Manager, are accrued daily.
10
<PAGE>
Portfolio securities, including ADR's or EDR's which are traded on stock
exchanges, are valued at the last sale price (regular way) on the exchange on
which such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated by or under the authority of
the Directors as the primary market. During periods when one or more securities
exchanges are closed for holidays and the New York Stock Exchange is open,
securities traded on such exchanges will be valued on the basis of their last
sale price on the relevant exchange unless management of the Fund believes that
such prices are not representative of the current value of the securities.
Securities traded in the over-the-counter market are valued at the last
available bid price in such market prior to the time of valuation. Any assets or
liabilities expressed in terms of foreign currencies are translated into United
States dollars at the prevailing market rates quoted by State Street Bank and
Trust Company at the time.
Securities and assets for which market quotations are not readily
available will be valued at fair value as determined in good faith by or under
the direction of the Board of Directors of the Fund. Such valuations and
procedures will be reviewed periodically by the Directors.
SHAREHOLDER SERVICES
================================================================================
The Fund offers a number of shareholder services described below which are
designed to facilitate investment in its shares. Full details as to each of such
services and copies of the various plans described below can be obtained from
the Fund or NSI.
Investment Accounts
Each shareholder whose account is maintained at the Transfer Agent has an
Investment Account and will receive statements from the Transfer Agent after
each dividend payment and capital gains distribution showing the cumulative
activity in the account since the beginning of the year.
Share certificates are issued only for full shares and only upon the
request of the shareholder. Issuance of certificates representing all or only
part of the full shares in an Investment Account may be requested by a
shareholder directly from the Transfer Agent.
Reinvestment of Dividends and Capital Gains Distributions
Unless specific instructions to the contrary are given as to method of
payment of dividends and capital gains distributions, dividends and
distributions will automatically be reinvested in additional shares of the Fund.
Such reinvestment will be at the net asset value of shares of the Fund, without
sales charge, as of the close of business on the ex-dividend date of the
dividend or distribution. Shareholders may elect in writing to receive either
their ordinary income dividends or capital gains distributions, or both, in
cash, in which event payment will be mailed on the payment date.
Shareholders may, at any time, notify the Transfer Agent in writing that
they no longer wish to have their dividends and/or distributions reinvested in
shares of the Fund or vice versa, and commencing ten days after the receipt by
the Transfer Agent of such notice, those instructions will be effected as to
subsequent payments.
Retirement Plans
Shares of the Fund may be purchased in connection with individual
retirement accounts. Copies of plans to establish such accounts are available
from First Trust Corporation (800) 525-2124.
11
<PAGE>
Capital gains and income received in each of the plans referred to above
are generally exempt from Federal taxation until distributed from the plans.
However, as described under "Dividends, Distributions and Taxes", there are
withholding taxes on dividends and interest received on portfolio securities
which shareholders of the Fund can offset either by claiming a deduction
therefor, or, as an alternative, use as a foreign tax credit against their
United States income taxes. However, because the retirement plans are exempt
from United States income taxes, participants in such plans will not be able to
offset such withholding taxes. Investors considering participation in any such
plan should review specific tax laws relating thereto and should consult their
attorneys or tax advisers with respect to the establishment and maintenance of
any such plan.
DIVIDENDS, DISTRIBUTIONS AND TAXES
================================================================================
It is the Fund's intention to distribute substantial all of its net
investment income, if any, in dividend payments declared at least annually. All
net realized long-term or short-term capital gains, if any, will be distributed
to the Fund's shareholders at least annually. Dividends and distributions may be
automatically reinvested in shares of the Fund at net asset value without sales
charge. Shareholders may elect in writing to receive any such dividends or
distributions, or both, in cash. Dividends and distributions are taxable to
shareholders as discussed below whether they are reinvested in shares of the
Fund or received in cash.
The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue Code
of 1986, as amended (the "Code"). If it so qualifies, the Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains which it distributes to
shareholders. The Fund intends to distribute substantially all of such income.
Dividends paid by the Fund from its ordinary income or from an excess of
net short-term capital gains over net long-term capital losses (together
referred to hereinafter as "ordinary income dividends") are taxable to
shareholders as ordinary income. Distributions made from an excess of net
long-term capital gains over net short-term capital losses ("capital gain
dividends") are taxable to shareholders as long-term capital gains, regardless
of the length of time the shareholder has owned Fund shares. Any loss upon the
sale of Fund shares held for six months or less, however, will be treated as
long-term capital loss to the extent of any long-term capital gain dividends
received by the shareholder. Distributions in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of a holder's shares, and after
such adjusted tax basis is reduced to zero, will constitute capital gains to
such holder (assuming the shares are held as a capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, generally will not be eligible for the dividends received deduction
allowed to corporations under the Code. If the Fund pays a dividend in January
which was declared in October, November or December of the previous year to
shareholders of record on a specified date in one of such months, then such
dividend will be treated for tax purposes as being paid by the Fund and received
by its shareholders on December 31 of the year in which the dividend was
declared.
Ordinary income dividends paid by the Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% United States
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders are
urged to consult their own tax advisers concerning the applicability of the
United States withholding tax.
12
<PAGE>
Under certain provisions of the Code, some shareholders may be subject to
a 31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.
Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Shareholders
may be able to claim United States foreign tax credits with respect to such
taxes, subject to certain conditions and limitations contained in the Code. For
example, certain retirement accounts cannot claim foreign tax credits on
investments in foreign securities held in the Fund. If more than 50% in value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible and may file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their proportionate shares of such withholding taxes in
their United States income tax returns as gross income, treat such proportionate
shares as taxes paid by them, and deduct such proportionate shares in computing
their taxable incomes or, alternatively, use them as foreign tax credits against
their United States income taxes. No deductions for foreign taxes, however, may
be claimed by noncorporate shareholders who do not itemize deductions. A
shareholder that is a nonresident alien individual or a foreign corporation may
be subject to United States withholding tax on the income resulting from the
Fund's election described in this paragraph but may not be able to claim a
credit or deduction against such United States tax for the foreign taxes treated
as having been paid by such shareholder. The Fund will report annually to its
shareholders the amount per share of such withholding taxes.
A loss realized on a sale of shares of the Fund will be disallowed if
other Fund shares are acquired (whether through the automatic reinvestment of
dividends or otherwise) within a 61-day period beginning 30 days before and
ending 30 days after the date that the shares are disposed of. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the Fund does not distribute, during each calendar year, the sum of 98% of its
ordinary income, determined on a calendar year basis, and 98% of its capital
gains, determined, in general, on an October 31 year end, plus certain
undistributed amounts from previous years. While the Fund intends to distribute
its income and capital gains in the manner necessary to minimize imposition of
the 4% excise tax, there can be no assurance that a sufficient amount of the
Fund's taxable income and capital gains will be distributed to avoid entirely
the imposition of the tax. In such event, the Fund will be liable for the tax
only on the amount by which it does not meet the foregoing distribution
requirements.
The Fund may invest up to 10% of its total assets in securities of
closed-end investment companies. If the Fund purchases shares of an investment
company (or similar investment entity) organized under foreign law, the Fund
will be treated as owning shares in a passive foreign investment company
("PFIC") for U.S. Federal income tax purposes. The Fund may be subject to U.S.
Federal income tax, and an additional tax in the nature of interest (the
"interest charge"), on a portion of distributions from such a company and on
gain from the disposition of the shares of such a company (collectively referred
to as "excess distributions"), even if such excess distributions are paid by the
Fund as a dividend to its shareholders. The Fund may be eligible to make an
election with respect to certain PFICs in which it owns shares that will allow
it to avoid the taxes on excess distributions. However, such election may cause
the Fund to recognize income in a particular year in excess of the distributions
received from such PFICs. Alternatively, under proposed regulations the Fund
would be able to elect to "mark-to-market" at the end of each taxable year all
shares that it holds in PFICs. If it made this election, the Fund would
recognize as ordinary income any increase in the value of such shares over their
adjusted tax basis. Unrealized losses, however, would not be recognized. By
making the mark-to-market election, the Fund could avoid imposition of the
interest
13
<PAGE>
charge with respect to its distributions from PFICs, but in any
particular year might be required to recognize income in excess of the
distributions it received from PFICs and its proceeds from dispositions of PFIC
stock.
Any dividends paid shortly after a purchase of Fund shares by an investor
may have the effect of reducing the per share net asset value of the investor's
shares by the per share amount of the dividends. Furthermore, such dividends,
although in effect a return of capital, are subject to Federal income taxes.
Therefore, prior to purchasing shares of the Fund, the investor should carefully
consider the impact of dividends, including capital gain dividends, which are
expected to be or have been announced.
Special Rules for Certain Foreign Currency Transactions
In general, gains from foreign currencies and from foreign currency
options, foreign currency futures and forward foreign exchange contracts
relating to investments in stock, securities or foreign currencies will be
qualifying income for purposes of determining whether the Fund qualifies as a
RIC. It is currently unclear, however, who will be treated as the issuer of a
foreign currency instrument or how foreign currency options, futures and forward
foreign currency contracts will be valued for purposes of the RIC
diversification requirements applicable to the Fund.
Under Code Section 988, special rules are provided for certain
transactions in a foreign currency other than the taxpayer's functional currency
(i.e., unless certain special rules apply, currencies other than the United
States dollar). In general, foreign currency gains or losses from certain debt
instruments, from certain forward contracts, from futures contracts that are not
"regulated futures contracts" and from unlisted options will be treated as
ordinary income or loss under Code Section 988. In certain circumstances, the
Fund may elect capital gain or loss treatment for such transactions. In general,
however, such Code Section 988 gains or losses will increase or decrease the
amount of the Fund's investment company taxable income available to be
distributed to shareholders as ordinary income. Additionally, if Code Section
988 losses exceed other investment company taxable income during a taxable year,
the Fund would not be able to make any ordinary income dividend distributions,
and all or a portion of distributions made before the losses were realized but
in the same taxable year would be recharacterized as a return of capital to
shareholders, thereby reducing the basis of each shareholder's Fund shares and
resulting in a capital gain for any shareholder who received a distribution
greater than such shareholder's basis in Fund shares (assuming the shares were
held as a capital asset). These rules, however, will not apply to certain
transactions entered into by the Fund solely to reduce the risk of currency
fluctuations with respect to its investments.
The Fund may effect forward foreign exchange transactions that are subject
to the provisions of Code Section 1256. Such forward foreign exchange contracts
that are "Section 1256 contracts" will be "marked to market" for Federal income
tax purposes at the end of each taxable year, i.e., each forward foreign
exchange contract will be treated as sold for its fair market value on the last
day of the taxable year. In general, if the Fund is eligible to make and does
make a special election, gain or loss from transactions in such forward foreign
exchange contracts will be 60% long-term and 40% short-term capital gain or
loss. Application of these rules to Section 1256 contracts held by the Fund may
alter the timing and character of distributions to shareholders. The
mark-to-market rules outlined above, however, will not apply to certain
transactions entered into by the Fund solely to reduce the risk of changes in
price or interest rates with respect to its investments.
Code Section 1092, which applies to certain "straddles," may affect the
taxation of the Fund's sales of securities and transactions in forward foreign
exchange contacts. Under Section 1092, the Fund may be required to postpone
recognition for tax purposes of losses incurred in certain sales of securities
and certain closing transactions in forward foreign exchange contracts.
One of the requirements for qualification as a RIC is that less than 30%
of the Fund's gross income be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly,
14
<PAGE>
the Fund may be restricted in effecting closing transactions within three months
after entering into a forward foreign exchange contract.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury Regulations promulgated thereunder. The Code and the Treasury
Regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state
and local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on United States Government obligations. State
law varies as to whether dividend income attributable to United States
Government obligations is exempt from state income tax.
Shareholders are urged to consult their own tax advisers regarding
specific questions as to Federal, foreign, state or local taxes. Foreign
investors also should consider applicable foreign taxes in their evaluation of
an investment in the Fund.
GENERAL INFORMATION
================================================================================
Description of Shares
The Fund was incorporated under Maryland law on March 14, 1985. It has an
authorized capital of 200,000,000 shares of Common Stock, par value of $0.10 per
share. All shares are of the same class. Shareholders are entitled to one vote
for each full share held and fractional votes for fractional shares held and
will vote on the election of Directors and any other matter submitted to a
shareholder vote. Voting rights for Directors are not cumulative. Shares issued
are fully paid and nonassessable and have no preemptive or conversion rights.
Redemption rights are discussed elsewhere herein and in the Prospectus. Each
share is entitled to participate equally in dividends and distributions declared
by the Fund and in the net assets of the Fund upon liquidation or dissolution
after satisfaction of outstanding liabilities.
NSI provided the initial capital for the Fund by purchasing 10,000 shares
for $100,000. Such shares were acquired for investment and can only be disposed
of by redemption.
Independent Accountants
Price Waterhouse LLP has been selected as the independent accountants of
the Fund. The independent accountants audit the annual financial statements of
the Fund and provide tax accounting services to the Fund.
Custodian and Transfer Agent
State Street Bank and Trust Company (the "Custodian" or the "Transfer
Agent") acts as custodian of the Fund's assets and as its transfer agent. The
Custodian, under its contract with the Fund, is authorized to establish separate
accounts in foreign currencies and to cause securities of the Fund to be held in
separate accounts with sub-custodians outside of the United States. The
sub-custodians include certain foreign banks. The Custodian and sub-custodians
are responsible for safeguarding the Fund's cash and securities, handling the
receipt and delivery of securities and collecting dividends on the Fund's
investments. The Transfer Agent is responsible for the issuance, transfer and
redemption of shares and the opening, maintenance and servicing of shareholder
accounts.
Legal Counsel
Brown & Wood LLP, New York, New York, is counsel for the Fund.
15
<PAGE>
Performance Data
The Fund may from time to time include its average annual total return in
advertisements or information furnished to present or prospective shareholders.
Total return figures are based on the Fund's historical performance and are not
intended to indicate future performance. Average annual total return is
determined in accordance with a formula specified by the Securities and Exchange
Commission.
Set forth below is the Fund's average annual total return information for
the periods indicated:
<TABLE>
<CAPTION>
One Year Five Years Ten Years July 8, 1985(a)
Ended Ended Ended to
March 31, 1997 March 31, 1997 March 31, 1997 March 31, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Average Annual Total Return(b) ...... (6.9%) 8.2% 7.2% 14.5%
</TABLE>
- ------------
(a) Commencement of operations.
(b) Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based
upon net investment income and any capital gains or losses on portfolio
investments over such periods) that would equate the initial amount invested
to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and
distributions are reinvested and taking into account all applicable
recurring and nonrecurring expenses. Change in foreign currency exchange
rates favorably affected the Fund's performance for certain of the specified
periods. The Fund's average annual total return will vary depending upon
market conditions, the securities comprising the Fund's portfolio, the
Fund's operating expenses, changes in foreign currency exchange rates and
the amount of net capital gains or losses realized by the Fund during this
period. An investment in the Fund will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost. On
occasion, the Fund may compare its average annual total return to various
indices, including those comprised of Pacific Basin securities.
Reports to Shareholders
The fiscal year of the Fund ends on March 31 each year. The Fund sends to
its shareholders at least semi- annually reports showing the Fund's portfolio
and other information. An annual report, containing financial statements
together with the report of independent accountants, is sent to shareholders
each year. After the end of each calendar year, the shareholders will receive
Federal income tax information regarding any dividends and capital gains
distributions.
-----------------
To the knowledge of the Fund, no person or entity owned beneficially 5% or
more of the Fund's Common Stock on June 30, 1997.
The Prospectus and this Statement of Additional Information do not contain
all of the information set forth in the Registration Statement and the exhibits
relating thereto, which the Fund has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Nomura Pacific Basin Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Nomura Pacific Basin Fund, Inc.
(the "Fund") at March 31, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the ten years in the period
then ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 1997 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
May 9, 1997
17
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
` Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
JAPANESE EQUITY SECURITIES
Banking and Insurance
Sumitomo Trust and Banking....................... 16,000 $ 201,652 $ 128,083 0.6
Trust bank
The Bank of Tokyo-Mitsubishi, Ltd. .............. 16,450 358,234 256,720 1.2
Commercial bank
The Sumitomo Bank Ltd............................ 10,000 184,160 118,865 0.5
City bank
Tokio Marine & Fire Insurance Co., Ltd........... 14,000 154,895 142,638 0.6
--------- --------- ----
Non-life insurance
Total Banking and Insurance ..................... 898,941 646,306 2.9
--------- --------- ----
Chemicals and Pharmaceuticals
Daiichi Pharmaceutical Co., Ltd.................. 4,000 64,509 60,807 0.3
Ethical drugs
Mitsubishi Gas Chemical Co. Inc.................. 35,000 114,436 123,676 0.5
Basic chemicals
Taisho Pharmaceutical Co., Ltd................... 14,000 272,719 327,161 1.5
--------- --------- ----
Over-the-counter drugs
Total Chemicals and Pharmaceuticals ............. 451,664 511,644 2.3
--------- --------- ----
Commerce
Ito-Yokado Co., Ltd.............................. 5,000 278,551 222,366 1.0
Supermarkets
Mitsui & Co., Ltd................................ 27,000 234,389 198,237 0.9
General trader
Sangetsu Co., Ltd................................ 5,000 142,224 86,925 0.4
--------- --------- ----
Wall interiors and carpets
Total Commerce .................................. 655,164 507,528 2.3
--------- --------- ----
Construction
National House Industrial Co., Ltd............... 11,000 178,972 127,193 0.6
Housing materials
Yokogawa Bridge Corp. ........................... 13,200 182,063 94,034 0.4
--------- --------- ----
Bridge construction
Total Construction .............................. 361,035 221,227 1.0
--------- --------- ----
Consumer Products
Nintendo Co., Ltd................................ 1,200 83,924 86,165 0.4
--------- --------- ----
Home video game machines and software
Consumer Electronics and Parts
Mitsumi Electric Co., Ltd........................ 3,000 57,406 55,066 0.2
Electric parts and components
</TABLE>
See notes to financial statements
18
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
` Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Sony Corp........................................ 4,000 $ 205,476 $ 279,777 1.3
Consumer electronics
TDK Corporation ................................. 3,000 153,126 206,194 0.9
--------- --------- ----
Magnetic tapes
Total Consumer Electronics and Parts ............ 416,008 541,037 2.4
--------- --------- ----
Electrical and Electronics
Hitachi, Ltd. ................................... 10,000 97,900 88,946 0.4
Communications and electronic equipment
Rohm Company..................................... 4,000 258,758 294,978 1.3
Custom integrated circuits
Sumitomo Electric Industries, Ltd. .............. 20,000 270,530 271,691 1.2
Electric wires and cables
Tokyo Electron, Ltd.............................. 8,800 292,418 291,744 1.3
--------- --------- ----
Electric wires and cables
Total Electrical and Electronics ................ 919,606 947,359 4.2
--------- --------- ----
Electrical Machinery
Fujitsu Ltd...................................... 25,000 278,060 254,710 1.2
Computers
Omron Corp....................................... 10,000 229,226 177,893 0.8
--------- --------- ----
Control systems
Total Electrical Machinery ...................... 507,286 432,603 2.0
--------- --------- ----
Engineering
Toyo Engineering Corp............................ 25,000 106,981 102,895 0.5
--------- --------- ----
Plant engineering
Miscellaneous Manufacturing
Japan Synthetic Rubber Co., Ltd.................. 25,000 169,229 182,947 0.8
Synthetic rubber
Kokuyo Co., Ltd.................................. 7,000 172,300 152,826 0.7
Paper products
NGK Insulators, Ltd. ............................ 12,000 119,416 102,854 0.5
--------- --------- ----
Insulators
Total Miscellaneous Manufacturing ............... 460,945 438,627 2.0
--------- --------- ----
Motor Vehicles
Toyota Motor Corp................................ 10,000 257,043 253,093 1.1
--------- --------- ----
Automobiles
Non-Ferrous Metals
Sumitomo Metal Mining Co., Ltd................... 10,000 80,619 60,403 0.3
--------- --------- ----
Copper, gold and nickel mining
</TABLE>
See notes to financial statements
19
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
` Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Oil and Gas
Teikoku Oil Co., Ltd............................. 16,000 $ 92,092 $ 70,640 0.3
--------- --------- ----
Oil and natural gas products
Other Products
Aisin Seiki Co., Ltd............................. 15,000 241,800 202,555 0.9
Automobile parts
Taikisha Ltd..................................... 10,000 175,488 123,716 0.6
Automobile paint finishing systems
Tachi-S Co., Ltd................................. 16,000 168,498 142,314 0.6
--------- --------- ----
Automobile seats
Total Other Products ............................ 585,786 468,585 2.1
--------- --------- ----
Precision Machinery
Canon, Inc....................................... 10,000 147,456 214,280 1.0
Visual image and information equipment
Hoya Corp........................................ 4,000 121,492 179,187 0.8
--------- --------- ----
Optical glass for semiconductors
Total Precision Machinery ....................... 268,948 393,467 1.8
--------- --------- ----
Retail Stores and Food Services
Circle K Japan Co., Ltd.......................... 5,040 136,716 211,919 1.0
--------- --------- ----
Convenience stores
Securities
Daiwa Securities Co., Ltd. ...................... 12,000 146,665 86,553 0.4
--------- --------- ----
Investment securities
Services
Dai Nippon Printing Co., Ltd. ................... 8,000 128,634 133,905 0.6
--------- --------- ----
Commercial and industrial printing
Shipbuilding
Mitsubishi Heavy Industries, Ltd................. 30,000 221,051 195,278 0.9
--------- --------- ----
Shipbuilding and heavy machinery
Telecommunications
DDI Corporation.................................. 16 90,170 101,043 0.4
Long distance telephone and mobile
communications
Nippon Telegraph and Telephone Corp.............. 9 64,952 63,386 0.3
--------- --------- ----
Telecommunications
Total Telecommunications ........................ 155,122 164,429 0.7
--------- --------- ----
Textiles
Toray Industries, Inc............................ 34,000 225,931 197,671 0.9
--------- --------- ----
Synthetic fibers
</TABLE>
See notes to financial statements
20
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
` Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Transportation
Yamato Transport Co., Ltd........................ 11,000 $ 126,437 $ 108,515 0.5
--------- --------- ----
Parcel delivery service
TOTAL INVESTMENTS IN JAPANESE
EQUITY SECURITIES ............................. 7,286,598 6,779,849 30.6
--------- --------- ----
AUSTRALIAN EQUITY SECURITIES
Banking
National Australia Bank, Ltd..................... 47,984 427,655 607,511 2.7
--------- --------- ----
Commercial bank
Building Materials
Boral, Ltd....................................... 41,645 108,584 123,734 0.6
--------- --------- ----
Building materials
Chemicals
ICI Australia, Ltd............................... 4,000 41,649 36,033 0.2
--------- --------- ----
Paints, pharmaceuticals and specialty
chemicals
Financials
Lend Lease Corp.................................. 17,000 233,811 291,330 1.3
Insurance and financial services
QBE Insurance Group, Ltd......................... 36,000 196,379 185,419 0.8
--------- --------- ----
Insurance underwriter
Total Financials ................................ 430,190 476,749 2.1
--------- --------- ----
Food and Beverage
Coca-Cola Amatil, Ltd............................ 10,000 77,798 95,085 0.4
--------- --------- ----
Bottler and distributor of Coca-Cola products
Mining
Henry Walker Group, Ltd.......................... 124,911 227,026 240,891 1.1
Contract mining services
Newcrest Mining, Ltd............................. 572 1,890 1,874 0.0
Gold mining and other precious metals
Pasminco, Ltd. .................................. 80,000 136,669 154,343 0.7
--------- --------- ----
Zinc, lead and silver mining operations
Total Mining .................................... 365,585 397,108 1.8
--------- --------- ----
Miscellaneous Manufacturing
Tabcorp Holdings, Ltd............................ 43,000 205,213 196,527 0.9
--------- --------- ----
Computer software components and games
</TABLE>
See notes to financial statements
21
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
` Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Non-Ferrous Metals
The Broken Hill Proprietary Co., Ltd............. 58,711 $ 740,851 $ 782,445 3.5
Oil, minerals and steel
Western Mining Corp. Holdings, Ltd. ............. 25,000 154,627 157,965 0.7
--------- --------- ----
Mineral and petroleum products
Total Non-Ferrous Metals ........................ 895,478 940,410 4.2
--------- --------- ----
Oil and Gas
Austrailian Gas Light Co., Ltd................... 38,000 209,496 215,977 1.0
--------- --------- ----
Distribution of natural gas and oil
Publishing and Printing
News Corporation, Ltd............................ 42,000 206,487 195,908 0.9
--------- --------- ----
International media
Resources
CRA Ltd.......................................... 16,000 226,230 236,563 1.1
--------- --------- ----
Integrated resources
Transportation
Brambles Industries, Ltd......................... 15,000 264,047 246,590 1.1
--------- --------- ----
Operates a railroad car rental in Europe
TOTAL INVESTMENTS IN AUSTRALIAN
EQUITY SECURITIES ............................. 3,458,412 3,768,195 17.0
--------- --------- ----
HONG KONG EQUITY SECURITIES
Banking
Hong Kong Shanghai Banking Corp.................. 10,000 129,218 232,297 1.0
Worldwide banking
Dao Heng Bank Group, Ltd......................... 90,000 454,729 411,166 1.9
--------- --------- ----
Commercial Banking
Total Banking ................................... 583,947 643,463 2.9
--------- --------- ----
Conglomerate
Hutchison Whampoa, Ltd........................... 80,000 387,661 601,391 2.7
Property and shipping related services
Wharf Holdings................................... 90,000 397,469 344,380 1.6
--------- --------- ----
Property, infrastructures, hotels, terminals
and warehousing
Total Conglomerate .............................. 785,130 945,771 4.3
--------- --------- ----
Lodging
Hong Kong & Shanghai Hotels, Ltd................. 128,333 225,939 202,883 0.9
Hong Kong & Shanghai Hotels, Ltd. (Warrants)..... 8,333 0 1,516 0.0
--------- --------- ----
Hotel management
Total Lodging ................................... 225,939 204,399 0.9
--------- --------- ----
</TABLE>
See notes to financial statements
22
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
` Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Real Estate
Great Eagle Holdings, Ltd........................ 60,000 $ 230,834 $ 198,227 0.9
Property development
New World Development Co., Ltd................... 40,000 200,685 215,778 1.0
Property development
Sun Hung Kai Properties, Ltd..................... 30,000 195,977 317,473 1.4
--------- --------- ----
Property development
Total Real Estate ............................... 627,496 731,478 3.3
--------- --------- ----
Utilities
Hong Kong & China Gas Co., Ltd................... 200,000 368,008 375,547 1.7
--------- --------- ----
Distribution of gas and gas appliances
TOTAL INVESTMENTS IN HONG KONG
EQUITY SECURITIES ............................. 2,590,520 2,900,658 13.1
--------- --------- ----
INDONESIAN EQUITY SECURITIES
Banking
Bank International Indonesia .................... 250,012 136,977 190,034 0.9
Bank International Indonesia (Warrants).......... 22,224 0 7,868 0.0
--------- --------- ----
Commercial and foreign exchange
Total Banking ................................... 136,977 197,902 0.9
--------- --------- ----
Cement
Semen Gresik .................................... 70,000 225,312 174,198 0.8
--------- --------- ----
Cement manufacturer
Consumer Goods
H.M. Sampoerna .................................. 25,100 95,945 117,607 0.5
--------- --------- ----
Cigarettes
Machinery
United Tractors.................................. 80,000 151,364 239,900 1.1
--------- --------- ----
Assembly and distribution of heavy equipment
Telecommunications
Telekomunikasi .................................. 100,000 170,698 153,061 0.7
--------- --------- ----
Telecommunications
TOTAL INVESTMENTS IN INDONESIAN
EQUITY SECURITIES ............................. 780,296 882,668 4.0
--------- --------- ----
</TABLE>
See notes to financial statements
23
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
` Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
MALAYSIAN EQUITY SECURITIES
Automotive
Cycle & Carriage Bintang Berhad ................. 29,000 $ 185,647 $ 198,927 0.9
Assembly and distribution of motor vehicles
Tractors Malaysia Holdings Berhad ............... 170,000 355,449 349,836 1.6
--------- --------- ----
Distribution of heavy equipment and
agricultural and industrial machinery
Total Automotive ................................ 541,096 548,763 2.5
--------- --------- ----
Conglomerate
Antah Holdings Berhad ........................... 300,000 510,475 474,519 2.1
Food and beverage, oil and gas services and
financial services
Magnum Corporation Berhad ....................... 220,000 446,758 417,221 1.9
--------- --------- ----
Gaming, property development, finance,
printing, and resort management services
Total Conglomerate............................... 957,233 891,740 4.0
--------- --------- ----
Construction
Gamuda Berhad ................................... 74,999 222,432 284,465 1.3
Gamuda Berhad (Warrants)......................... 16,666 3,915 5,380 0.0
Civil engineering and construction services
Road Builder Holdings Berhad .................... 50,000 303,680 290,522 1.3
--------- --------- ----
Road construction
Total Construction............................... 530,027 580,367 2.6
--------- --------- ----
Financials
Commerce Asset Holdings Berhad................... 100,000 342,762 702,094 3.2
--------- --------- ----
Banking, brokerage and leasing
Publishing
New Straits Times Press Berhad................... 68,000 389,439 417,060 1.9
--------- --------- ----
Newspapers
Restaurants
Kentucky Fried Chicken Berhad.................... 60,000 243,723 280,838 1.3
--------- --------- ----
Fast food restaurants
Telecommunications
Telekom Malaysia Berhad.......................... 67,000 599,342 521,769 2.4
--------- --------- ----
Telecommunications
</TABLE>
See notes to financial statements
24
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
` Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Utilities
Tenaga Nasional Berhad........................... 70,000 $ 301,854 $ 341,766 1.5
---------- ---------- ----
Power supplier
TOTAL INVESTMENTS IN MALAYSIAN
EQUITY SECURITIES ............................. 3,905,476 4,284,397 19.4
---------- ---------- ----
NEW ZEALAND EQUITY SECURITIES
Forest Products and Paper
Carter Holt Harvey .............................. 56,000 104,808 118,652 0.5
---------- ---------- ----
Paper and wood products
Telecommunications
Telecommunications Corp. of New Zealand.......... 32,000 91,085 145,606 0.7
---------- ---------- ----
Telecommunications
TOTAL INVESTMENTS IN NEW ZEALAND
EQUITY SECURITIES ............................. 195,893 264,258 1.2
---------- ---------- ----
PHILIPPINE EQUITY SECURITIES
Banking
Metropolitan Bank & Trust Co..................... 7,410 162,948 192,522 0.9
---------- ---------- ----
Commercial bank
Telecommunications
Philippine Long Distance Telephone Co............ 3,000 177,019 180,353 0.8
---------- ---------- ----
International communications
Utilities
Manila Electric Co. ............................. 13,000 85,405 103,546 0.5
---------- ---------- ----
Power supplier
TOTAL INVESTMENTS IN PHILIPPINE
EQUITY SECURITIES ............................. 425,372 476,421 2.2
---------- ---------- ----
SINGAPORE EQUITY SECURITIES
Banking
Development Bank of Singapore, Ltd............... 37,000 225,042 430,322 1.9
---------- ---------- ----
International bank
Conglomerate
Keppel Corp., Ltd................................ 15,000 72,355 94,496 0.4
---------- ---------- ----
Shipyards, rigbuilding, shipping, properties,
financial services and engineering
</TABLE>
See notes to financial statements
25
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
` Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Miscellaneous Manufacturing
Amtek Engineering ............................... 50,000 $ 84,168 $ 87,574 0.4
Precision metal parts
Van Der Host .................................... 60,000 225,549 203,531 0.9
----------- ----------- ----
Re-manufactures and electroplates marine,
oilfield and general industrial
precision equipment
Total Miscellaneous Manufacturing................ 309,717 291,105 1.3
----------- ----------- ----
Oil and Gas
Keppel Fels, Ltd................................. 40,000 229,777 122,395 0.6
----------- ----------- ----
Offshore drilling vessels
Real Estate
City Developments, Ltd........................... 30,000 283,027 265,836 1.2
----------- ----------- ----
Property development
TOTAL INVESTMENTS IN SINGAPORE
EQUITY SECURITIES ............................. 1,119,918 1,204,154 5.4
----------- ----------- ----
TOTAL INVESTMENTS IN EQUITY SECURITIES .......... $19,762,485 $20,560,600 92.9
----------- ----------- ----
</TABLE>
See notes to financial statements
26
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)*
MARCH 31, 1997
<TABLE>
<CAPTION>
% of
Principal Market Net
Amount Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
INVESTMENTS IN FOREIGN CURRENCIES
Australian Dollar
Westpac Banking Corporation, Sydney, 2.0%-interest
bearing call account ................................ AUD. 8,177 $ 6,428 $ 6,410 0.0
Japanese Yen
Sumitomo Bank & Trust Co., Ltd., 0.25%-interest
bearing call account .................................. JPY. 191,402 1,548 1,548 0.0
New Zealand Dollar
Australia and New Zealand Banking Group Ltd.,
Wellington 1.50%-interest bearing call account ........ NZD. 3,133 2,164 2,176 0.0
South Korean Won
Seoul Bank-Seoul 1.0%-interest bearing call account....... KRW. 640,789 721 715 0.0
----------- ----------- ----
TOTAL INVESTMENTS IN FOREIGN
CURRENCIES .................................................. $ 10,861 $ 10,849 0.0
----------- ----------- ----
INVESTMENTS IN SHORT-TERM SECURITIES
Euro-Dollar Time Deposit
State Street Bank and Trust Company 2.75% due 4/1/97 ..... $1,332,938 $ 1,332,938 $ 1,332,938 6.1
----------- ----------- ----
TOTAL INVESTMENTS ....................................... 21,106,284 21,904,387 99.0
OTHER ASSETS LESS LIABILITES ............................. 208,203 223,203 1.0
----------- ----------- ----
NET ASSETS ............................................... $21,314,487 $22,127,590 100.0
=========== =========== =====
</TABLE>
- -----------------
*The description following each investment is unaudited and not covered by the
Report of Independent Accountants.
FORWARD FOREIGN CURRENCY CONTRACT
- ---------------------------------
<TABLE>
<CAPTION>
Cost Delivery Maturity Unrealized
(Local Currency) Value Date Appreciation
--------------- ------- -------- ------------
<S> <C> <C> <C> <C>
U.S. Dollars-Long Contract........ JPY68,300,000 $580,000 9/05/97 $14,598
============= ======== =======
</TABLE>
Portfolio securities and foreign currency holdings were translated at the
following exchange rates as of March 31, 1997
Japanese Yen JPY. 123.67 = $1.00
Australian Dollar AUD. 1.2756 = $1.00
Hong Kong Dollar HKD. 7.7487 = $1.00
Indonesian Rupiah IDR. 2,401.00 = $1.00
Malaysian Ringgit MYR. 2.4783 = $1.00
New Zealand Dollar NZD. 1.4395 = $1.00
Philippine Peso PHP. 26.37 = $1.00
Singapore Dollar SGD. 1.4445 = $1.00
South Korean Won KRW. 895.50 = $1.00
See notes to financial statements
27
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
ASSETS:
Investments in securities, at market
value (cost--$19,762,485) ........................... $ 20,560,600
Investments in foreign currencies, at market
value (cost--$10,861) ............................... 10,849
Investments in short-term securities, at market
value (cost--$1,332,938) ............................ 1,332,938
Unrealized appreciation on foreign
forward currency contract ............................ 14,598
Receivable for investments sold ........................ 820,709
Receivable for capital stock sold ...................... 100
Receivable for dividends and interest,
net of withholding taxes ............................ 58,796
Other assets ........................................... 203
------------
Total Assets ..................................... 22,798,793
------------
LIABILITIES:
Payable for capital stock redeemed ..................... 455,394
Accrued management fee ................................. 37,056
Other accrued expenses ................................. 178,753
------------
Total Liabilities ................................ 671,203
------------
NET ASSETS:
Capital stock (par value of 1,607,909 shares
of capital stock outstanding, authorized
200,000,000, par value $0.10 each) ................... 160,791
Paid-in capital ........................................ 21,928,569
Accumulated net realized loss on investments
and foreign currency transactions .................... (613,423)
Unrealized net appreciation on investments
and foreign exchange ................................. 813,102
Accumulated net investment loss ........................ (161,449)
------------
Net Assets ....................................... $ 22,127,590
============
Net asset value, redemption price and
offering price per share ............................. $ 13.76
============
See notes to financial statements
28
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1997
INCOME:
Dividend income (less $41,085 withholding taxes) .... $ 366,758
Interest income...................................... 39,207
---------
Total Income................................... $ 405,965
EXPENSES:
Management fee ..................................... 245,892
Legal fees........................................... 100,486
Custodian fees....................................... 86,494
Auditing and tax reporting fees...................... 67,471
Shareholder reports.................................. 58,579
Transfer agency fee.................................. 52,220
Directors' fees and expenses......................... 40,393
Registration fees.................................... 12,390
Insurance ........................................... 2,796
Miscellaneous........................................ 29
---------
Total Expenses................................. 666,750
------------
INVESTMENT INCOME (LOSS)--NET ....................... (260,785)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES:
Realized gain (loss) on investments and
foreign currency transactions:
Realized gain on investments--net .................. 2,949,946
Realized loss on foreign exchange--net............... (1,024,130)
------------
Realized gain on investments and
foreign exchange--net........................... 1,925,816
Change in unrealized depreciation on translation
of investments, foreign currencies and other
assets and liabilities denominated in
foreign currencies--net........................... (3,061,509)
Change in unrealized appreciation on investments ... (473,680)
------------
Net realized and unrealized gain on investments
and foreign exchange.............................. (1,609,373)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................. $ (1,870,158)
============
See notes to financial statements
29
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended
March 31,
------------------------------
1997 1996
------------- -------------
FROM INVESTMENT ACTIVITIES:
Net investment loss ....................... $ (260,785) $ (108,812)
Net realized gain on investments .......... 2,949,946 301,055
Net realized gain (loss) on
foreign exchange ....................... (1,024,130) 1,636,874
Change in unrealized appreciation
(depreciation) on investments
and foreign exchange .................... (3,535,189) 3,316,142
------------ ------------
Increase (decrease) in net assets
derived from investment activities ....... (1,870,158) 5,145,259
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from continuous offering ......... 3,037,977 5,902,737
Net asset value of shares issued to
shareholders on reinvestment
of dividends and distributions .......... 2,675,034 1,084,722
Cost of shares redeemed ................... (12,360,445) (19,461,493)
------------ ------------
Decrease in net assets derived from
capital share transactions .............. (6,647,434) (12,474,034)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment loss ....................... (536,659) --
Realized gain on investments
and foreign exchange .................. (2,840,646) (1,332,752)
------------ ------------
Decrease in net assets derived
from distribution to
shareholders ............................ (3,337,305) (1,332,752)
------------ ------------
Net decrease in net assets ................ (11,894,897) (8,661,527)
NET ASSETS:
Beginning of year ......................... 34,022,487 42,684,014
------------ ------------
End of year (including
accumulated net investment
losses of $161,449 and
$201,994, respectively) ................ $ 22,127,590 $ 34,022,487
============ ============
SHARE ACTIVITY:
Shares issued on continuous offering ...... 194,457 371,069
Shares issued to shareholders on
reinvestment of net investment
income and realized gain on investments . 175,261 68,871
Shares redeemed during the year ........... (821,891) (1,211,801)
------------ ------------
Net shares redeemed during the year ....... (452,173) (771,861)
Shares outstanding at beginning of year ... 2,060,082 2,831,943
------------ ------------
Shares outstanding at end of year ......... 1,607,909 2,060,082
============ ============
See notes to financial statements
30
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Nomura Pacific Basin Fund, Inc. (the Fund), is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund was incorporated in Maryland on March 14, 1985 and investment
operations commenced on July 8, 1985. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of Securities--Investments traded on stock exchanges are
valued at the last sale price on the primary exchange on which such securities
are traded, as of the close of business on the day the securities are being
valued or, lacking any sales, at the last available bid price. Securities traded
in the over-the-counter market are valued at the last available bid price.
Securities for which market quotations are not readily available and restricted
securities are valued in good faith at fair value using methods determined by
the Board of Directors. In determining fair value, consideration is given to
cost, operating and other financial data. Short-term debt securities which
mature in 60 days or less are valued at amortized cost if their original
maturity at the date of purchase was 60 days or less, or by amortizing their
value on the 61st day prior to maturity if their term to maturity at the date of
purchase exceeded 60 days. Securities and assets, including futures contracts
and related options, are stated at market value or otherwise at fair value as
determined in good faith by or under the direction of the Board of Directors of
the Fund.
(b) Foreign Currency Transactions--Transactions denominated in foreign
currencies are recorded in the Fund's records at the current prevailing rate at
the time of the transaction. Asset and liability accounts that are denominated
in the foreign currency are adjusted to reflect the current exchange rate at the
end of the period. Transaction gains or losses resulting from changes in the
exchange rate during the reporting period or upon settlement of foreign currency
transactions are included in operations for the current period.
The net assets of the Fund are presented at the exchange rate and market
values at the end of the period. The Fund isolates that portion of the change in
unrealized appreciation (depreciation) included in the statement of operations
arising as a result of changes in foreign currencies at March 31, 1997 on
investments and other assets and liabilities. Net realized foreign exchange
gains or losses includes gains or losses arising from sales of portfolio
securities, sales and maturities of short-term securities, currency gains or
losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid.
(c) Financial Instruments with Off-Balance Sheet Risk--At March 31, 1997,
the Fund had outstanding one forward foreign currency exchange contract
("forward contract") in order to hedge against changes in the Japanese exchange
rate. The forward contract involve elements of market risk in excess of the
amounts reflected in the Statement of Assets and Liabilities. The Fund bears the
risk of an unfavorable change in the foreign exchange rate underlying the
forward contracts. Risks may arise as a result of the potential inability of the
counterparty to meet the terms of the contract.
(d) Security Transactions, Investment Income, Distributions to
Shareholders--Security transactions are accounted for on the trade date.
Dividend income is recorded on the ex-dividend date and interest is recorded on
the accrual basis. Realized gains and losses on the sale of investments are
calculated on the identified cost basis.
Dividends from net investment income and distributions from net realized
gains, if any, are paid semi-annually.
31
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Distributions from net investment income and net realized gains are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. To the extent these "book/tax"
differences are permanent in nature (i.e., that they result from other than
timing of recognition-- "temporary"), such accounts 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 or net realized gains for financial reporting
purposes, but not for tax purposes, are reported as distributions in excess of
net investment income.
(e) Capital Account Reclassification--For the year ended March 31, 1997,
the Fund's paid-in-capital was decreased by $8,594 with a decrease to
accumulated net realized gain of $829,395 and an offsetting increase in
accumulated net investment income of $837,989. This adjustment was primarily the
result of the reclassification of net foreign currency gains and gains and
losses from the sale of investments in passive foreign investment companies.
(f) Income Taxes--A provision for United States income taxes has not been
made since it is the intention of the Fund to continue to qualify as a regulated
investment company under the Internal Revenue Code and to distribute within the
allowable time limit all taxable income to its shareholders.
Under the applicable foreign tax laws, a withholding tax may be imposed on
gross sales proceeds on the disposition of equity securities, interest,
dividends and realized gains at various rates; such withholding taxes are
reflected as a reduction of the related income or realized gain.
(g) Use of Estimates in Financial Statement Preparation--The preparation
of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from these estimates.
2. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH AFFILIATED PERSONS
Nomura Capital Management, Inc. (the Manager) acts as the Manager of the
Fund pursuant to a management agreement. Under the agreement, the Manager
provides all office space, facilities and personnel necessary to perform its
duties. Pursuant to such management agreement, the Manager has retained its
parent company, Nomura Investment Management Co., Ltd. (NIMCO) and Nomura
Capital Management (Singapore) Ltd. (NCM-Singapore) to act as investment
advisers for the Fund and Nomura Securities International, Inc. (NSI) to provide
administrative services to the Fund.
As compensation for its services to the Fund, the Manager receives a
monthly fee computed daily, at the annual rate of .75 of 1% of the Fund's
average daily net assets. For services performed, NIMCO, NCM-Singapore and NSI
receive a monthly fee from the Manager at the annual rates of .26125 of 1%,
.0275 of 1% and .10 of 1%, respectively, of the average daily net assets of the
Fund. Under the Management Agreement, the Fund paid or accrued fees to the
Manager of $245,892 for the year ended March 31, 1997. For the year ended March
31, 1997, the Manager informed the Fund that NIMCO, NCM-Singapore and NSI
received fees of $73,734, $7,761 and $28,224, respectively, from the Manager. At
March 31, 1997, the fee payable to the Manager, by the Fund was $37,056.
The Manager has agreed, for an indefinite period, to reimburse the Fund in
any amount necessary to prevent the aggregate ordinary operating expenses
(excluding taxes, brokerage fees and commissions and extraordinary charges such
as litigation costs) from exceeding in any fiscal year 2.5% of the Fund's first
$30 million of average
32
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
net assets, 2.0% of the next $70 million of average net
assets and 1.5% of the remaining average net assets. No reimbursement to the
Fund was required under this limitation for the year ended March 31, 1997.
Although the Manager has no present intention to do so, this voluntary
reimbursement arrangement may be terminated at any time. Certain officers and/or
directors of the Fund are officers and/or directors of the Manager and/or NSI.
The Nomura Securities Co., Ltd., parent of NSI and the Manager's indirect
parent, earned $5,943 in commissions on execution of portfolio security
transactions for the year ended March 31, 1997. The Fund pays fees to each
Director not affiliated with the Manager and/or NSI an annual fee of $5,000 plus
$500 per meeting attended, together with such Director's actual expenses related
to attendance at meetings. Such fees and expenses for the unaffiliated Directors
aggregated $38,187 for the year ended March 31, 1997.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments for the year ended March 31, 1997,
exclusive of investments in foreign currencies and short-term securities, were
$17,767,831 and $28,363,130, respectively.
As of March 31, 1997, net unrealized appreciation on investments,
exclusive of investments in foreign currencies and short-term securities, for
Federal income tax purposes was $715,532 of which $2,290,410 related to
appreciated securities and $1,574,878 related to depreciated securities. The
aggregate cost of investments, exclusive of investments in foreign currencies
and short-term securities, at March 31, 1997 for Federal income tax purposes was
$19,845,068.
Capital losses and currency losses incurred after October 31 within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. Accordingly, the Fund incurred and elected to defer capital losses
of $684,562 and currency losses of $89,332 to the taxable year ending March 31,
1998.
33
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share of common stock outstanding
throughout each period:
<TABLE>
<CAPTION>
For the Year Ended March 31,
-------------------------------------------------------------------------------------
1997 l996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year................. $16.52 $15.07 $18.07 $14.33 $12.49 $15.19 $15.36 $19.15 $20.59 $24.20
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income (loss)........ (0.14)+ (0.04)+ (0.01)+ (0.01)+ --+ --+ 0.04 0.08 0.03 0.06
+Net realized and
unrealized gain
(loss) on investments
and foreign
currencies ........... (0.87)+ 2.07+ (0.74)+ 4.03+ 1.87+ (1.84)+ 2.53 0.20 (0.21) 6.87+
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations ............ (1.01)+ 2.03+ (0.75)+ 4.02+ 1.87+ (1.84)+ 2.57 0.28 (0.18) 6.93+
Distributions to
shareholders from:
Net investment income ... (0.28) -- -- (0.05) (0.02) (0.01) (0.04) (0.10) (0.05) (0.08)
Net realized capital
gains.................. (1.47) (0.58) (2.25) (0.21) (0.01) (0.85) (2.70) (3.97) (1.21) (10.46)
In excess of net
investment income ..... -- -- -- (0.02) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions ........ (1.75) (0.58) (2.25) (0.28) (0.03) (0.86) (2.74) (4.07) (1.26) (10.54)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end
of year.................. $13.76 $16.52 $15.07 $18.07 $14.33 $12.49 $15.19 $15.36 $19.15 $20.59
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total investment return .... (6.9%) 13.7% (4.2%) 28.2% 15.0% (12.9%) 17.4% (1.7%) (0.9%) 35.3%
Ratio to average net assets/
supplemental data:
Net assets, end of year
(in 000).............. $22,128 $34,022 $42,684 $55,060 $46,095 $43,203 $54,274 $53,933 $73,169 $94,786
Operating expenses ...... 2.21% 1.78% 1.38% 1.39% 1.51% 1.46% 1.42% 1.32% 1.25% 1.22%
Net investment income.... (0.87%) (0.28%) (0.07%) (0.10%) 0.01% 0.00% 0.28% 0.40% 0.07% 0.28%
Portfolio turnover ...... 62% 45% 49% 76% 55% 41% 76% 46% 37% 61%
Average commissions
per share paid on equity
transactions*............ $0.0146 -- -- -- -- -- -- -- -- --
</TABLE>
- -------------
+ Based on average shares outstanding.
* For fiscal years begining on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commission is charged.
34
<PAGE>
================================================================================
TABLE OF CONTENTS
Page
----
Investment Objective and Policies ......................................... 2
Investment Restrictions ............................................. 3
Management of the Fund .................................................... 5
Directors and Officers .............................................. 5
Management and Investment Advisory
Arrangements ...................................................... 6
Purchase of Shares ........................................................ 8
Distribution Agreement .............................................. 8
Distribution Plan ................................................... 8
Redemption of Shares ...................................................... 8
Portfolio Transactions and Brokerage ...................................... 9
Determination of Net Asset Value .......................................... 10
Shareholder Services ...................................................... 11
Investment Accounts ................................................. 11
Reinvestment of Dividends and
Capital Gains Distributions ....................................... 11
Retirement Plans .................................................... 11
Dividends, Distributions and Taxes ........................................ 12
Special Rules for Certain
Foreign Currency Transactions ..................................... 14
General Information ....................................................... 15
Description of Shares ............................................... 15
Independent Accountants ............................................. 15
Custodian and Transfer Agent ........................................ 15
Legal Counsel ....................................................... 15
Performance Data .................................................... 16
Reports to Shareholders ............................................. 16
Report of Independent Accountants ......................................... 17
Financial Statements ...................................................... 18
================================================================================
================================================================================
Nomura Pacific Basin
Fund, Inc.
[LOGO]
Statement of Additional
Information
July 29, 1997
================================================================================
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a)Financial Statements
Contained in Part A:
Selected per share data and ratios for the years ended March 31,
1988, March 31, 1989, March 31, 1990, March 31, 1991, March 31,
1992, March 31, 1993, March 31, 1994, March 31, 1995, March 31,
1996 and March 31, 1997.
Contained in Part B:
Schedule of Investments, March 31, 1997. Statement of Assets and
Liabilities, March 31, 1997. Statement of Operations for the year
ended March 31, 1997.
Statement of Changes in Net Assets for the years ended March 31,
1996 and March 31, 1997.
Financial Highlights for the years ended March 31, 1988, March 31,
1989, March 31, 1990, March 31, 1991, March 31, 1992, March 31,
1993, March 31, 1994, March 31, 1995, March 31, 1996 and March
31, 1997.
(b)Exhibits:
Exhibit
Number Description
--------- -----------
1 --Articles of Incorporation of Registrant. (b)
2 --By-Laws of Registrant. (b)
3 --None.
4 --Copies of all instruments defining the rights of holders of the
securities being registered, including relevant portions of the
Registrant's Articles of Incorporation, By-Laws and Specimen
Share Certificate. (d)
5(a) --Management Agreement between Registrant and Nomura Capital
Management, Inc. (c)
(b) --Investment Advisory Agreements between Nomura Capital
Management, Inc. and Nomura Investment Management Co., Ltd. and
Nomura Capital Management, Inc. and Nomura Capital Management
(Singapore) Ltd. (c)
6 --Distribution Agreement between Registrant and Nomura Securities
International, Inc. (b)
7 --None.
8 --Custody Agreement between Registrant and State Street Bank and
Trust Company. (a)
9(a) --Transfer Agency Agreement between Registrant and State Street
Bank and Trust Company. (a)
(b) --Administrative Agreement between Nomura Capital Management,
Inc. and Nomura Securities International, Inc. (c)
10 --None.
11 --Consent of Price Waterhouse LLP, independent accountants for
the Registrant.
12 --None.
13 --Certificate of Nomura Securities International, Inc. (a)
14 --Prototype Individual Retirement Account Plans. (a)
15 --Distribution Plan. (a)
16 --Schedule for computation of performance quotations. (e)
17 --Financial Data Schedule.
- ---------------
(a) Filed on June 5, 1985 as an Exhibit to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement under the Securities Act of 1933.
(b) Filed on March 22, 1985 as an Exhibit to Registrant's Registration
Statement under the Securities Act of 1933.
(c) Filed on May 29, 1992, as an Exhibit to Post-Effective Amendment No. 8 to
Registrant's Registration Statement under the
Securities Act of 1933.
(d) Filed on July 29, 1993, as an Exhibit to Post-Effective Amendment No. 9 to
Registrant's Registration Statement under the Securities Act of 1933.
(e) Filed on July 29, 1996, as an Exhibit to Post-Effective Amendment No. 13 to
Registrant's Registration Statement under the Securities Act of 1933.
C-1
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
Number of Record
Holders at
Title of Class June 30, 1997
-------------- ----------------
Shares of Common Stock, par value $0.10 per share....... 862
Item 27. Indemnification.
Reference is made to Article VI of Registrant's Articles of Incorporation,
Article VI of Registrant's By-Laws, Section 2-418 of the Maryland General
Corporation Law and Section 9 of the form of Distribution Agreement.
Article VI of the By-Laws provides that each officer and director of the
Registrant shall be indemnified by the Registrant to the full extent permitted
under the General Laws of the State of Maryland, subject to the provisions of
the Investment Company Act of 1940. The Registrant has been advised that such
indemnity shall not protect any such person against any liability to the
Registrant or any stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. Absent a
court determination that an officer or director seeking indemnification was not
liable on the merits or guilty of willful misfeasance bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, the decision by the Registrant to indemnify such person must be based
upon the reasonable determination of independent counsel of non-party
independent directors, after review of the facts, that such officer or director
is not guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
The Registrant may purchase insurance on behalf of an officer or director
protecting such person, to the full extent permitted under the General Laws of
the State of Maryland, from liability arising from his activities as officer or
director of the Registrant. The Registrant, however, may not purchase insurance
on behalf of any officer or director of the Registrant that protects or purports
to protect such person from liability to the Registrant or to its stockholders
to which such officer or director would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office.
Insofar as the conditional advancing of indemnification moneys for
actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must be
limited to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise by,
or on behalf of, the recipient to repay that amount of the advance which exceeds
the amount to which it is ultimately determined that he is entitled to receive
from the Registrant by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an equivalent form
of security which assures that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance, or (b) a majority of a quorum
of the Registrant's disinterested, non-party Directors, or an independent legal
counsel in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
In Section 9 of the Distribution Agreement relating to the securities
being offered hereby, the Registrant agrees to indemnify the Distributor and
each person, if any, who controls the Distributor within the meaning of the
Securities Act of 1933, against certain types of civil liabilities arising in
connection with the Registration Statement or Prospectus.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Directors, officers and controlling persons of
the Registrant and the principal underwriter pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Director, officer,
or controlling person of the Registrant and the principal underwriter in
connection with
C-2
<PAGE>
the successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person or the principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by the controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisers.
Pursuant to the management and advisory arrangements described in the
Prospectus constituting Part A of the Registration Statement and in the
Statement of Additional Information constituting Part B of the Registration
Statement, the Registrant's Manager, Nomura Capital Management, Inc. ("NCM"), is
responsible for providing the Registrant with advisory services. The Manager has
entered into Investment Advisory Agreements with Nomura Investment Management
Co., Ltd. ("NIMCO") and Nomura Capital Management (Singapore) Ltd.
("NCM-Singapore").
(a) NCM provides investment advisory services both to United States and
foreign clients. NCM also acts as an investment adviser to Jakarta Growth Fund,
Inc., Japan OTC Equity Fund, Inc. and Korea Equity Fund, Inc., registered
closed-end investment companies. The principal address of NCM is 180 Maiden
Lane, New York, New York 10038.
Set forth below is a list of each executive officer and director of NCM
indicating each business, profession, vocation or employment of a substantial
nature in which each such person has been engaged since March 31, 1995 for his
own account or in the capacity of director, officer, partner or trustee.
<TABLE>
<CAPTION>
Other Substantial Business,
Name Position with NCM Profession, Vocation or Employment
----- ------------------ --------------------------------
<S> <C>
Haruo Sawada.................. President and Director General Manager of NIMCO from 1994 to 1996, Vice President
and later Senior Vice President of NCM from 1986 to 1994.
John F. Wallace............... Senior Vice President, Treasurer, Senior Vice President of Nomura
Secretary and Director Securities International, Inc. ("NSI") since 1978,
Secretary from 1977 to 1991 and Director from 1983 to
1991.
Brian X. Fitzgibbon........... Senior Vice President and Director None.
Mitsutoyo Kohno............... Senior Vice President and Director General Manager of NIMCO since l996, Deputy General Manager
from 1991 to 1996.
Marti G. Subrahmanyam......... Director Professor, Stern School of Business, New York University
since 1974.
Takeo Nakamura................ Director Managing Director of NIMCO since 1992, Director of NCM since
1984, Director of NCM-U.K. and NCM-Singapore since 1997.
Takahide Mizuno............... Director Director and Chief Investment Officer of NIMCO since 1997,
Senior Portfolio from 1984 to 1997. Director of NCM-U.K.
since 1994 and NCM-Singapore since 1997.
Naotake Hirasawa.............. Director Director of NIMCO, NCM-U.K., and NCM-Singapore since 1997,
Statutory Auditor of NIMCO from 1995 to 1997.
Milton J. Ezrati.............. Senior Vice President None.
John J. Boretti............... Senior Vice President None.
</TABLE>
(b)NIMCO provides investment advisory services to Japanese and
international clients. NIMCO is a subadviser to Jakarta Growth Fund, Inc., Japan
OTC Equity Fund, Inc. and Korea Equity Fund, Inc., registered closed-end
investment companies. The principal address of NIMCO is 1-12-11, Nihonbashi,
Chuo-ku, Tokyo 103, Japan.
C-3
<PAGE>
Set forth below is a list of the principal officers and directors of NIMCO
indicating each business, profession, vocation or employment of a substantial
nature in which each such person has been engaged since March 31, 1995 for his
own account or in the capacity of director, officer, partner or trustee.
<TABLE>
<CAPTION>
Other Substantial Business,
Name Position with NIMCO Profession, Vocation or Employment
----- ------------------ --------------------------------
<S> <C> <C>
Tadashi Takubo................ President Executive Vice President of The Nomura Securities Co., Ltd.
("Nomura") from 1993 to 1996.
Naoki Sauto................... Executive Managing Director None.
Isao Teranishi................ Executive Managing Director Managing Director of Nomura from 1995 to 1997.
Takeo Nakamura................ Managing Director Director of NCM since 1984, President from 1984 to 1994;
Director of NCM-U.K. and NCM-Singapore since 1997.
Shinzo Katada................. Managing Director None.
Tadashi Akimoto............... Director None.
Mitsunori Minamio............. Director General Manager of Nomura from l995 to 1996.
Takahide Mizuno............... Director Director and Chief Investment Officer of NIMCO since 1997,
Senior Portfolio Manager of NIMCO from 1984 to 1997.
Director of NCM and NCM-U.K. since 1997; Director of
NCM-Singapore since 1996.
Naotake Hirasawa.............. Director Director of NCM, NCM-U.K., and NCM-Singapore since 1977,
Statutory Auditor of NIMCO from 1995 to 1997.
</TABLE>
(c)NCM-Singapore provides investment advisory services relating to Pacific
Basin securities to institutional client, including pension and profit sharing
plans. The principal address of NCM-Singapore is 6 Battery Road, Singapore
049909.
C-4
<PAGE>
Set forth below is a list of the principal officers and directors of
NCM-Singapore indicating each business, profession, vocation or employment of a
substantial nature in which each person has been engaged since March 31, 1995
for his own account or in the capacity of director, officer, partner or trustee.
<TABLE>
<CAPTION>
Position with Other Substantial Business,
Name NCM-Singapore Profession, Vocation or Employment
----- ------------- -----------------------------------
<S> <C> <C>
Takashi Kusano Managing Director Director of NIMCO from 1993 to 1996, Managing Director of
NCM-U.K. from 1993 to 1996.
Reginald J. Frank Director None.
Takahide Mizuno Director Director and Chief Investment Officer of NIMCO since 1997,
Senior Portfolio from 1984 to 1997, Director of NCM-U.K.
since 1994 and NCM-Singapore since 1997.
Takeo Nakamura Director Managing Director of NIMCO since 1992, Director of NCM since
1984, Director of NCM-U.K. since 1997.
Naotake Hirasawa Director Director of NCM, and NCM-U.K. since 1997, Statutory
Auditor of NIMCO from 1995 to 1997.
</TABLE>
Item 29. Principal Underwriters.
(a) Nomura Securities International, Inc. ("NSI") acts as the principal
underwriter for the Registrant.
(b) Set forth below is information concerning each director and senior
executive officer of NSI. The principal business address of each such person is
2 World Financial Center, New York, New York 10281. Except as indicated, no
officer of NSI is an officer or director of the Registrant.
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with NSI with Registrant
----- -------- -------------
<S> <C> <C>
Joseph R. Schmuckler................ Co-President and Director None
Atsushi Yoshikawa................... Co-President and Director None
John E. Toffolon, Jr................ Chief Financial Officer and Director None
</TABLE>
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of the Registrant (180 Maiden Lane, New York, New York
10038) and State Street Bank and Trust Company (P.O. Box 1713, Boston,
Massachusetts 02105).
Item 31. Management Services.
Other than as set forth under the caption "Management of the
Fund--Management and Investment Advisory Arrangements" in the Prospectus
constituting Part A of the Registration Statement and under "Management of the
Fund--Management and Investment Advisory Arrangements" in the Statement of
Additional Information constituting Part B of the Registration Statement,
Registrant is not a party to any management-related service contract.
Item 32. Undertakings.
The Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's annual report to shareholders, upon
request and without charge.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, and
State of New York, on the 29th day of July 1997.
NOMURA PACIFIC BASIN FUND, INC.
(REGISTRANT)
By /s/ HARUO SAWADA
----------------------------
(Haruo Sawada, President)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ---- ----
/ s/ HARUO SAWADA President and Director July 29, 1997
- ---------------------------------- (Principal Executive
(Haruo Sawada) Officer)
/s/ JOHN F. WALLACE Treasurer and Director July 29, 1997
- --------------------------------- (Principal Financial
(John F. Wallace) and Accounting Officer)
WILLIAM G. BARKER, JR.* Director
- ----------------------------------
(William G. Barker, Jr.)
GEORGE H. CHITTENDEN* Director
- ----------------------------------
(George H. Chittenden)
CHOR WENG TAN* Director
- ----------------------------------
(Chor Weng Tan)
ARTHUR R. TAYLOR* Director
- ----------------------------------
(Arthur R. Taylor)
- ---------------
* This Amendment has been signed by each of the persons so indicated by the
undersigned as attorney-in-fact.
/s/ JOHN F. WALLACE July 29, 1997
- ----------------------------------
(John F. Wallace, Attorney-in-Fact)
C-6
<PAGE>
EXHIBIT INDEX
Exhibit
Number Page No.
------- -------
11 --Consent of Price Warehouse LLP, independent
accountants for the Registrant.............
17 --Financial Data Schedule.......................
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 13 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated May 9,
1997, relating to the financial statements and the financial highlights of
Nomura Pacific Basin Fund, Inc., which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
the Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036-2798
July 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
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