NOMURA PACIFIC BASIN FUND, INC.
[LOGO]
May 14,1998
To Our Shareholders:
We present the Annual Report of the Nomura Pacific Basin Fund, Inc. (the
"Fund") for the fiscal year ended March 31, 1998.
The Net Asset Value per Share ("NAV") of the Fund as of March 31, 1998
was $10.61.
The NAV of the Fund increased by 1.8% for the quarter ended March 31,
1998 and decreased by 22.4% for the year then ended, based on the change in
share prices and the reinvestment of income and capital gains distributions of
$0.04 and $0.03 per share, respectively, paid in December, 1997. The net
assets of the Fund aggregated $13,735,749 as of March 31, 1998.
The average annual total return of the Fund for the five-year and
ten-year periods ended March 31, 1998 and since inception (July 8, 1985) were
0.0%, 1.4%, and 11.0%, respectively. Total return consists of changes in the
NAV and the reinvestment of dividends and capital gains distributions. This
performance information represents past performance, and investment return and
principal value of an investment in the Fund will fluctuate so that, when
redeemed, it may be worth more or less than the original cost. Changes in
currency rates have for certain periods influenced the Fund's past
performance. (Please refer to the Fund Highlights for additional performance
data.)
The United States dollar-based return of the Pacific Basin, as measured
by the Morgan Stanley Capital International Index (the "MSCI") (an unmanaged
index), increased by 6.7% and decreased by 13.5%, for the quarter and the year
ended March 31, 1998, respectively. The Fund underperformed the MSCI Index by
4.9% in the quarter ended March 31, 1998. The underperformance was
attributable to negative country allocation caused by the under weight
position in Malaysia and this outweighed the positive contribution from the
underexposure to Japan and the overweight position in Australia. Stock
selection also produced negative results as the Japanese and Australian
portions of the Fund underperformed their local benchmarks.
The Fund underperformed the MSCI Index by 8.9% for the year ended March
31, 1998, due to country allocation and stock selection. The exposure to
Malaysia, Indonesia and the Philippines were primary causes for the negative
country allocation effect as Pacific Basin stock markets experienced a severe
meltdown in the second half of 1997 following the Thai baht devaluation. In
Singapore, the relative performance was undermined by the shrinking premium on
the price of foreign shares, due to concerns that foreign and local shares
prices would be merged. Singapore's MSCI Index is quoted in local share
prices. The Fund is only allowed to invest in foreign shares, the relative
performance was eroded significantly.
The foreign exchange rate of the Japanese yen at March 31, 1998 was
133.23 Japanese yen to one U.S. dollar. The Japanese yen appreciated by 3.5%
and depreciated by 1.9% against the U.S. dollar for the quarter and the year
ended March 31, 1998, respectively, and played a negative role for the U.S.
dollar denominated total return of the Fund.
The NAV of the Fund as of May 13, 1998 was $9.94.
THE PORTFOLIO
The Fund remained generally positive on Australia and cautious on the
balance of the Pacific Basin region including Japan. Maintaining the country
allocation in accordance with that view, the Fund modified its allocation.
First, the overweight position in Australia was reduced. The stock market
continued to rally but, at its current level, the stock market could not
tolerate any earnings disappointments. Second, the exposure to Singapore and
Malaysia was increased as the International Monetary Fund (the "IMF") bail-out
packages to troubled countries, such as South Korea, Thailand, and Indonesia,
restored some stability to the currency markets in the Pacific Basin region.
Approximately 5% of the Fund's net assets was hedged back to the U.S.
dollar, at March 31, 1998, by one Japanese yen/dollar forward currency
contract
THE STOCK MARKET
Stock markets in the Pacific Basin region enjoyed a significant recovery
during the first two months of 1998. Stock markets in Malaysia, Thailand and
South Korea, for example, registered gains of 25%, 42% and 49%, respectively,
during the first quarter. The launch of IMF bail-out packages for South Korea,
Thailand and Indonesia brought a subsequent stabilization in currency values.
This was coupled with growing expectations about the implementation of
structural reforms by newly elected presidents or governmental bodies, and
together, these factors supported the stock market rallies across the region
during this period.
However, the structural reforms, required by Pacific Basin countries as a
foundation for a stronger economic base in the next century, are not going to
be implemented overnight. The high expectations were diminished given the
negative impact of the currency devaluation that has penetrated the entire
economic system.
The effects include a significant increase in corporate bankruptcies and
unemployment, and a higher rate of inflation. In fact, the South Korean
unemployment rate increased to 6% in February, which brought home the real
pain caused by the Pacific Basin turmoil. Likewise, Indonesians had to
confront acute shortages of food and other daily necessities, while the
inflation rate increased to 39% in March. Elsewhere, the ongoing consolidation
in property prices in Hong Kong and Singapore also indicates the after effects
of this turmoil.
THE INVESTMENT OUTLOOK AND STRATEGY
JAPAN
The TOPIX, consisting of all companies listed on the Tokyo Stock Exchange
(the "TSE"), declined by 1.6% in March, 1998. Senior members of the Liberal
Democratic Party (the "LDP") and the government continued to discuss
additional economic packages throughout March with the aim of supporting the
Japanese stock market. Meanwhile, investors concentrated on whether or not the
government would request that postal savings and postal insurance funds be
used to increase the Japanese stock market as senior LDP officials had
repeatedly suggested. The planned intervention was intended to increase the
Nikkei Average Index (a price weighted index of 225 leading stocks on the TSE)
over 18,000 by the end of March.
Although the LPD proposed a 16 trillion Japanese yen economic package,
the largest ever, and former Prime Minister, Mr. Miyazawa, hinted at an
additional income tax reduction of three to four trillion yen in late March,
the stock market failed to respond to the policy suggestions, indicating
investor concerns over the worsening economic conditions. Weak economic
statistics continued, with February housing starts declining 13.6% year over
year ("yoy"), auto sales declining 20.6% yoy and housing starts declining 5.4%
yoy. Downward revisions to corporate earnings also continued, making investors
increasingly cautious about equities.
Postal savings were actually used to purchase stocks towards the end of
March, but the market did not recover to anywhere near the level that the
government had wished to achieve. Public stock investment seemed to have been
applied selectively and blue chip stocks recovered substantially toward the
end of March.
AUSTRALIA
The Australian stock market continued its rally during March, rising by
1.7%, after briefly reaching 2,800 on the All Ordinairies Index. The Resource
sector outperformed the Industrial sector by 2.9%. Even though Japan continues
to procrastinate over a fiscal stimulus plan and the U.S. dollar strengthened
during the month, the Resource sector has benefited from the sharp rise in The
Broken Hill Proprietary Co., Ltd. ("BHP") share price on optimism about
restructuring and cost reduction efforts.
Expectations are rising among investors for another easing of monetary
policy by the Resource Bank of Australia. This appears premature given
Australia's current account deficit problems and the growing possibility of an
early Federal election.
From a stock market perspective, the reporting season was slightly
positive as earnings were marginally above consensus. The industrial sector is
expecting an earnings growth rate of 7% in the Fiscal Year ("FY") ending June
10, 1998, which appears probable given the good performance of the first half.
There could be some risk to earnings in FY 1999 as forecasts are
optimistically calling for a 10% earnings growth rate. Given the current bond
yield of 5.7%, the stock market appears to be fully valued. At the current
price, the stock market will not tolerate any earnings disappointments. With
the Australian ten-year bond almost at parity with its U.S. counterpart, some
risk premium is warranted. Traditionally, a real differential of approximately
100 basis points has existed between U.S. bonds and Australian bonds. Part of
the current narrower differential can be explained by Australia's lower
inflation rate, but certainly not the full 100 basis points. In periods of
market weakness, selected Resource sector issues may be worth a closer
examination, particularly companies with exposure to the bulk commodities,
zinc and aluminum. Meanwhile, the Banking sector continues to offer excellent
value.
HONG KONG
The speculative attack on the Hong Kong dollar and the government's
resolution to defend the peg system at all costs, increased the already high
short-term interest rates at the start of this year. Three-month interest
rates increased from 9.8% at the end of 1997 to 18% on January 12, 1998.
Consequently, the Hang Seng Stock Index collapsed to a three-year low of
8,121. The government's quick response, including the curtailment of its
aggressive housing supply policy by cancelling a land release program, and the
repeated expression of its determination to maintain the peg system, helped
fend off the speculative assault. The pressure on the currency eased as the
interest rates were stabilized and the stock market staged a strong recovery.
The economy started to feel the pain of adjustment with unemployment
increasing from 2.2% in the third quarter of 1997 to 2.5% in February. Layoffs
announced by financial and consumption related companies could increase this
figure. Retail sales growth turned negative since the fourth quarter of 1997
and posted an 11% yoy decline in January. Tourist arrivals have decreased by
20% from the July, 1997 level, reducing the hotel occupancy ratio from over
90% to about 60%. Meanwhile, some department stores have decided to withdraw
Hong Kong.
A genuine recovery in property prices or in consumption is unlikely in
the foreseeable future and the downward pressure on corporate earnings should
continue. Moreover, the Fund believes it is premature to conclude that
property price adjustment is over because various methods of calculation
suggest that the gap between market value and fair value remains relatively
large. Consequently, the Fund will remain cautious toward property stocks.
MALAYSIA
After the significant rally in February, the stock market became mixed
and settled into a narrow trading range toward the end of the quarter.
Although microeconomic fundamentals were deteriorating, heavily underweighted
investors continued to return to the stock market and increased the index
higher on the assumption that the risk of a relapse to below the 600 level had
receded.
Corporations' final results for the year ended December 1997 started to
emerge, with the reported figures accounting for 30% of market capitalization.
Revenue growth rose by 19% yoy, but net profit fell by 22% yoy due to the
drastic erosion of margins over the past few months and provisions for
unrealized foreign exchange losses.
Non-performing loans (the "NPLs") in the Banking sector rose to 8.7% in
February 1998 from 3.6% in June 1997, and the NPLs are forecast to increase at
a faster rate for the rest of this year. Assuming banks maintain a minimum
aggregate loan loss cover ratio of 50%, the Banking industry is likely to post
pretax losses at the end of 1999, if NPLs reach a peak of 17%.
The stock market is anticipating the announcement of a bail-out plan
rather than bracing itself a wave of bankruptcies. It is rumored that the
Employment Provident Fund will purchase 20% of the Project Lebuhraha Utara
Selatan (a subsidiary of United Engineering Malaysia) ("UEM"), for 1.5 billion
Malaysian riggits, which is higher than the market capitalization of UEM.
With the Kuala Lumpur Composite Index over the 700 level, valuations are
stretched at the current price to book ratio ("PBR") of approximately 2.0, and
an earnings recovery is not expected in 1999. The Fund will remain cautious
about the possible impact of a withdrawal of liquidity, if any, as Malaysian
stocks are fundamentally overvalued.
NEW ZEALAND
Domestic and foreign investors did not expect that the current account
deficit for the quarter ended December 31, 1997 would expand to an annualized
rate of 7.7% of Gross Domestic Product ("GDP"), since the quarter ended
September 30, 1997 GDP was originally reported as 6.4% and subsequently
increased to 7%. Interest rates rose steadily in March, peaking at 9.8% in
response to the current account deficit and the lowering of the Monetary
Conditions Index by the Reserve Bank of New Zealand. The New Zealand dollar
weakened during the period.
With the yield curve steeply inverted, the downside risk to the GDP growth
forecast is rising. Some economists are suggesting that a recession is possible,
while the consensus forecasts a 2% growth. However, much is riding on the tax
reductions and hopes that the proceeds from the demutualization of Australian
Mutual Provident Fund will be consumed and not saved.
In this environment, earnings risk is rising. Stocks with exposure to
public works and infrastructure spending and exports to Europe and the U.S.
should perform well. Telecommunications Corp. of New Zealand will also benefit
as the Telecommunications sector continues to grow faster than the GDP.
SINGAPORE
Singapore's stock and currency markets were once considered to be safe
havens. However, both eventually succumbed during the first week of January to
the effect from the troubles plaguing its large neighbor, Indonesia. There was
speculation that Indonesian buyers of Singaporean properties could default on
their mortgages, while the heavy lending exposure of Singaporean banks to
Indonesia could turn sour, causing an increase in non-performing loans.
The stock indices were driven higher after the Chinese New Year holiday
in January, mainly by introduction of a more coherent and rigorous austerity
package in Indonesia and partly due to short stock covering by hedge funds.
Toward the end of the quarter, results in the Banking and Property
sectors reflected the impact of bad debt provisions. Given that such
provisions from property companies had been relatively uncommon in the recent
past, both Keppel Land, Ltd. and Wing Tai Holdings, Ltd. market values
decreased. Meanwhile, Temasek Holdings issued a $1 billion tranche of
convertible bonds for Singapore Telecommunications, Ltd. ("ST"), which has the
eventual impact of increasing ST's free float, causing its share price to
plummet by 5.8% in a single day.
Later in March, the Development Bank Singapore, Ltd. abruptly announced
its decision to reduce its prime rate by 50 basis points to 7% and this gave
some direction to the stock market, especially among the Property and Finance
sectors. The stock market appeared to be discounting not only the possibility
that the other three major banks would reduce their prime rates, but also the
hope of a further round of interest rate reductions. With the recent softening
of the Indonesian government's position regarding conditions for the suspended
$40 billion IMF bail-out package, the risk arising from Indonesia appears to
have somewhat lessened. Therefore, the Fund has decided to increase
Singapore's weighting slightly, given that its risk premium, as a neighboring
country of Indonesia, has been reduced.
INVESTMENT STRATEGY
The Fund expects the Pacific Basin markets to move further towards
stabilization over the coming months due to the growing awareness among the
region's political leaders of the real necessity for structural reform. With
the correction now under way, following the period of over investment fueled
by excessive liquidity, stock markets appear to entered into a base firming
phase, enabling them to make an upward move in tandem with the future progress
of economic reforms. Most notably, South Korea and Thailand have been moving
increasingly in that direction.
Nevertheless, in the near term, the Fund still believes it is premature
to be fully invested in these Pacific Basis countries. There are three
elements to be closely assessed.
First, the Japanese economy. The weakness in the Japanese economy has led
to a decline in the Japanese yen and the Tokyo stock market. This has a
negative impact on other Pacific Basin economies, because it curtails bank
lending to the Pacific Basin countries and damages their export prospects.
Therefore, the policies to be adopted by the Hashimoto government will
determine the direction of the regional economy. The stock markets appeared
somewhat encouraged by the government's decision to launch a real fiscal
stimulus package of 8 trillion Japanese yen. But, investors have yet to be
convinced that the measures will be sufficient to lead the troubled Japanese
economy and therefore, remain skeptical about the future course of corporate
earnings and the Japanese stock market.
Second, the Indonesian economy. While there are increasing signs of
progress in revising the accord with the IMF, there are still conflicting
signals, which indicate the difficulty of enforcing a commitment to tough
reforms.
Third, the Chinese economy. This will have to be closely monitored, not
only for the risk of an imminent Renminbi devaluation, but because of the way
China is coping with its economic slowdown, which may inevitably lead to
heightened expectations of a future devaluation.
The Fund will maintain the same basic approach as in the previous
quarters in terms of overall strategy, i.e., underweight positions in Japan
and the Association of Southeast Asian Nations (the "ASEANs"), while remaining
overweight in Australia, and maintaining a high cash position. Nevertheless,
in the light of some improvements in the Indonesian situation, the Fund sees
the risk premium required there diminishing slightly. Therefore, an upgrade of
this part of the Pacific Basin region could be justified, it appears to be
time to increase the weight the Singapore market to neutral or slightly
overweight.
We appreciate your continuing support of your Fund.
Sincerely,
[HARUO SAWADA'S SIGNATURE]
Haruo Sawada
President
Nomura Asset Management Co., Ltd. ("NAM") provides investment recommendations
to Nomura Asset Management U.S.A. Inc. ("NAM-U.S.A."), the Manager of the
Fund. Mr. Haruo Sawada, President of the Fund and President of NAM-U.S.A., is
primarily responsible for the day-to-day management of the Fund's portfolio.
Mr. Sawada has held such responsibilities for the Fund and has served as
President of NAM-U.S.A. since 1997.
SHAREHOLDERS ACCOUNT INFORMATION
Shareholders whose accounts are held in their own name may contact the Fund's
transfer agent, State Street Bank and Trust Company at (800) 680-1836 for
information concerning their accounts.
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
FUND HIGHLIGHTS-MARCH 31,1998
(UNAUDITED)
KEY STATISTICS
Net Assets ............................................... $13,735,749
Net Asset Value per Share ................................ $ 10.61
PERFORMANCE COMPARISON CHART AND TABLE
Average Annual Total Return:*
Year Ended 3/31/98 .................................... (22.4%)
Five Years Ended 3/31/98 .............................. 0.0%
Ten Years Ended 3/31/98 ............................... 1.4%
Since Inception (7/8/85 to 3/31/98) ................... 11.0%
Cumulative Total Return:*
Five Years Ended 3/31/98 .............................. 0.1%
Ten Years Ended 3/31/98 ............................... 15.5%
Since Inception (7/8/85 to 3/31/98) ................... 286.0%
- --------------
*Performance data quoted above represents past performance, and the
investment return and principal value of an investment in the Fund will
fluctuate so that, when redeemed, it may be worth more or less than the
original cost. Changes in currency rates have influenced the Fund's
performance for certain of the specified periods. Expense reimbursement is
in effect, and without such reimbursement performance would have been lower.
This chart is intended to compare the performance results of a hypothetical
$10,000 investment in Nomura Pacific Basin Fund, Inc. since the Fund's
inception on July 8, 1985 to a $10,000 investment made in the Morgan Stanley
Capital International Pacific Basin Index ("MSCI Pacific Basin Index") for
the same period. The performance of the MSCI Pacific Basin Index does not
reflect brokerage commissions and other expenses that would be incurred to
acquire and manage a comparable portfolio of securities.
HISTORY OF $10,000 INVESTMENT IN FUND SHARES ASSUMING REINVESTMENT OF
CAPITAL GAIN AND INCOME DISTRIBUTIONS VERSUS THE MSCI PACIFIC BASIN INDEX.
[CHART]
Performance data represents past performance and assumes that all dividends
and distributions are invested in additional shares. Past performance is not
predictive of future performance. Expense reimbursement is in effect, and
without such reimbursement performance would have been lower.
The MSCI Pacific Basin Index is an arithmetical average weighted by market
value of the performance of some 546 securities listed on the principal stock
exchanges of Australia, Hong Kong, Japan, Malaysia, New Zealand and Singapore.
The combined market capitalization represents about 60% of the average market
value of the stock exchanges of the above six countries. The performance data
of the Index included dividends reinvested.
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
FUND HIGH LIGHTS--(Continued)
MARCH 31,1998
(Unaudited)
GEOGRAPHICAL ALLOCATION:
<TABLE>
<CAPTION>
% of Net Assets
-----------------------------------
Cash and % Of
Equities Cash Equivalents Total MSCI Index+
-------- ---------------- ----- -----------
<S> <C> <C> <C> <C>
Japan ............................. 45.1 -- 45.1 76.0
Australia ......................... 20.2 -- 20.2 8.8
Hong Kong ......................... 13.8 -- 13.8 8.3
Malaysia .......................... 3.3 -- 3.3 3.2
New Zealand ....................... 1.9 -- 1.9 0.9
Singapore ......................... 4.9 -- 4.9 2.8
United States ..................... -- 17.8 17.8 --
---- ---- ----- -----
Total Investments ................. 89.2 17.8 107.0 100.0
Liabilities in Excess of Other
Assets, Net ...................... (7.0) --
----- -----
Total .......................... 100.0 100.0
===== =====
</TABLE>
- -----------
+ Source: Morgan Stanley Capital International Index (an unmanaged index).
INDUSTRY DIVERSIFICATION
% OF % OF
NET ASSETS NET ASSETS
---------- ----------
JAPANESE SECURITIES HONG KONG SECURITIES
Miscellaneous Manufacturing.... 5.2 Conglomerate................. 3.9
Consumer Electronics and Parts. 5.1 Utilities.................... 3.1
Electrical and Electronics..... 4.5 Real Estate.................. 2.8
Banking and Insurance ......... 4.1 Banking ..................... 2.2
Commerce ...................... 3.5 Telecommunications .......... 1.4
Telecommunications ............ 3.0 Services .................... 0.4
Chemicals and Pharmaceuticals.. 3.0 MALAYSIAN SECURITIES
Motor Vehicles ................ 2.6 Conglomerate ................ 0.8
Construction .................. 2.5 Telecommunications .......... 0.7
Automotive Equipment and Parts. 2.2 Banking...................... 0.6
Retail ........................ 1.9 Utilities ................... 0.6
Electrical Machinery........... 1.7 Gaming....................... 0.4
Precision Machinery ........... 1.3 Construction ................ 0.2
Information and Software ...... 1.1 NEW ZEALAND SECURITIES
Shipbuilding................... 1.0 Telecommunications .......... 1.1
Securities .................... 0.9 Forest Product's and Paper .. 0.5
Services ...................... 0.8 Building Materials .......... 0.3
Oil and Gas ................... 0.4 SINGAPORE SECURITIES
Non-Ferrous Metals ............ 0.3 Banking ..................... 1.4
AUSTRALIAN SECURITIES Conglomerate ................ 0.9
Banking ....................... 5.1 Airlines .................... 0.7
Non-Ferrous Metals ............ 4.5 Real Estate ................. 0.7
Miscellaneous Manufacturing.... 2.2 Telecommunications........... 0.5
Transportation ................ 1.5 Electrical and Electronics .. 0.3
Food and Beverage ............. 1.3 Publishing and Printing ..... 0.2
Financials .................... 1.3 Miscellaneous Manufacturing . 0.2
Oil and Gas ................... 1.2
Building Materials ............ 0.7
Publishing and Printing ....... 0.7
Mining ........................ 0.6
Telecommunications ............ 0.6
Retail......................... 0.5
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
FUND HIGH LIGHTS--(CONTINUED)
MARCH 31,1998
TEN LARGEST EQUITY HOLDINGS BY MARKET VALUE:
Market % Of
SECURITY Value Net Assets
National Australia Bank, Ltd........................ $529,521 3.9
Hutchison Whampoa, Ltd.............................. 450,134 3.3
The Broken Hill Proprietary Co., Ltd................ 404,038 2.9
Hong Kong Shanghai Banking Corp..................... 305,854 2.2
Rohm Company........................................ 274,723 2.0
Hong Kong and China Gas Go., Ltd.................... 251,652 1.8
Sun Hung Kai Properties, Ltd........................ 245,070 1.8
TDK Corporation..................................... 231,938 1.7
Nippon Telegraph and Telephone Corp................. 224,958 1.6
Ito-Yokado Co., Ltd................................. 216,776 1.6
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 the Nomura Pacific
Basin Fund, Inc. (the "Fund") at March 31, 1998, 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
five 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, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
1177 Avenue of the Americas
Now York, New York 10036
May 12,1998
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*
MARCH 31,1998
<TABLE>
<CAPTION>
% Of
Market Net
Shares Cost Value Assets
------ ---- ------ ------
<S> <C> <C> <C> <C>
JAPANESE EQUITY SECURITIES
AUTOMOTIVE EQUIPMENT AND PARTS
Bridgestone Corp.............................. 5,000 $ 106,009 $ 113,342 0.8
Automobile tires
Tachi-S Co., Ltd.............................. 16,000 168,498 88,152 0.6
Automobile seats
Taikisha Ltd.................................. 10,000 152,126 108,088 0.8
----------- ----------- -----
Automobile paint finishing systems
TOTAL AUTOMOTIVE EQUIPMENT AND PARTS.......... 426,633 309,582 2.2
----------- ----------- -----
BANKING AND INSURANCE
Daiwa Bank, Ltd............................... 45,000 219,353 109,777 0.8
City bank
The Bank of Tokyo-Mitsubishi, Ltd............. 16,450 358,234 200,030 1.4
Commercial bank
The Sakura Bank, Ltd.......................... 12,000 52,732 42,605 0.3
International bank
The Sumitomo Trust and Banking Co., Ltd....... 12,000 123,369 77,553 0.6
Trust bank
The Tokio Marine & Fire Insurance Co., Ltd.... 12,000 139,019 134,209 1.0
----------- ----------- -----
Non-life insurance
TOTAL BANKING AND INSURANCE................... 892,707 564,174 4.1
----------- ----------- -----
CHEMICALS AND PHARMACEUTICALS
Mitsubishi Gas Chemical Co., Ltd.............. 35,000 114,436 90,111 0.7
Basic chemicals
Shin-Etsu Chemical Co., Ltd................... 5,000 125,794 99,081 0.7
Synthetic resins
Taisho Pharmaceutical Co., Ltd................ 4,000 74,908 89,473 0.7
Over-the-counter drugs
Takeda Chemical Industries, Ltd............... 5,000 111,742 127,228 0.9
----------- ----------- -----
Pharmaceuticals
TOTAL CHEMICALS AND PHARMACEUTICALS........... 426,880 405,893 3.0
----------- ----------- -----
COMMERCE
Ito-Yokado Co., Ltd........................... 4,000 225,770 216,776 1.6
Supermarkets
Mitsui & Co., Ltd............................. 22,000 191,393 140,034 1.0
General trader
Sangetsu Co., Ltd............................. 9,000 199,066 118,221 0.9
----------- ----------- -----
Wall interiors and carpets
TOTAL COMMERCE................................ 616,229 475,031 3.5
----------- ----------- -----
CONSTRUCTION
Dalwa House Industry Co., Ltd................. 15,000 122,924 109,777 0.8
Residential building
Toda Corp..................................... 41,000 191,357 196,960 1.4
General contractor
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*--(CONTINUED)
MARCH 31,1998
<TABLE>
<CAPTION>
% Of
Market Net
Shares Cost Value Assets
------ ---- ------ ------
<S> <C> <C> <C> <C>
Yokogawa Bridge Corp.......................... 13,200 $ 182,063 $ 42,406 0.3
----------- ----------- -----
Bridge construction
TOTAL CONSTRUCTION............................ 496,344 349,143 2.5
----------- ----------- -----
CONSUMER ELECTRONICS AND PARTS
Kyocera Corp.................................. 1,700 86,558 89,323 0.7
Electronic parts producer
Sony Corp..................................... 2,400 130,155 203,565 1.5
Consumer electronics
Taiyo Yuden Co., Ltd.......................... 15,000 158,421 171,139 1.2
Ceramic capacitors
TDK Corporation............................... 3,000 153,126 231,938 1.7
----------- ----------- -----
Magnetic tapes
TOTAL CONSUMER ELECTRONICS AND PARTS.......... 528,260 695,965 5.1
----------- ----------- -----
ELECTRICAL AND ELECTRONICS
Hitachi, Ltd.................................. 14,000 127,907 101,933 0.7
Communications and electronic equipment
Rohm Company.................................. 3,000 194,068 274,723 2.0
Custom integrated circuits
Sumitomo Electric Industries, Ltd............. 6,000 74,700 77,463 0.6
Electric wires and cables
Tokyo Electron, Ltd........................... 4,800 148,815 161,771 1.2
----------- ----------- -----
Electric wires and cables
TOTAL ELECTRICAL AND ELECTRONICS.............. 545,490 615,890 4.5
----------- ----------- -----
ELECTRICAL MACHINERY
Fujitsu Ltd................................... 13,000 161,812 135,635 1.0
Computers
Omron Corp.................................... 6,000 137,994 90,974 0.7
----------- ----------- -----
Control systems
TOTAL ELECTRICAL MACHINERY.................... 299,806 226,609 1.7
----------- ----------- -----
INFORMATION AND SOFTWARE
Fuji Soft ABC, Inc............................ 4,500 151,050 147,270 1.1
----------- ----------- -----
Computer systems development
MISCELLANEOUS MANUFACTURING
Japan Synthetic Rubber Co., Ltd............... 15,000 101,537 71,946 0.5
Synthetic rubber
Kokuyo Co., Ltd............................... 4,000 99,118 72,959 0.5
Paper products
NGK Insulators, Ltd........................... 12,000 119,416 107,187 0.8
Insulators
Nippon Paper Industries Co., Ltd.............. 15,000 84,801 73,635 0.5
Paper products
Nippon Thompson Co., Ltd...................... 15,000 133,956 86,695 0.6
Specialized needle roller bearings
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*--(CONTINUED)
MARCH 31,1998
<TABLE>
<CAPTION>
% Of
Market Net
Shares Cost Value Assets
------ ---- ------ ------
<S> <C> <C> <C> <C>
Onward Kashiyana Co., Ltd..................... 14,000 $ 193,084 $ 173,391 1.3
Ready-made suits
SMC Corporation............................... 1,900 154,477 141,332 1.0
----------- ----------- -----
Pneumatic equipment
TOTAL MISCELLANEOUS MANUFACTURING............. 886,389 727,145 5.2
----------- ----------- -----
MOTOR VEHICLES
Honda Motor Co., Ltd.......................... 4,000 119,152 144,117 1.0
Motorcycles, automobiles and power products
Toyota Motor Corp............................. 8,000 206,146 213,173 1.6
----------- ----------- -----
Automobiles
TOTAL MOTOR VEHICLES.......................... 325,298 357,290 2.6
----------- ----------- -----
NON-FERROUS METALS
Sumitomo Metal Mining Co., Ltd................ 10,000 80,619 39,032 0.3
----------- ----------- -----
Copper, gold and nickel mining
OIL AND GAS
Teikoku Oil Co., Ltd.......................... 16,000 92,092 52,122 0.4
----------- ----------- -----
Oil and natural gas products
PRECISION MACHINERY
Canon, Inc.................................... 8,000 120,115 180,747 1.3
----------- ----------- -----
Visual image and information equipment
RETAIL
Aoyama Trading Co., Ltd....................... 2,300 57,236 55,245 0.4
Men's chain store
Circle K Japan Co., Ltd....................... 3,124 78,512 128,970 0.9
Convenience stores
Mos Food Services, Inc........................ 6,000 105,083 77,913 0.6
----------- ----------- -----
Hamburger chain
TOTAL RETAIL.................................. 240,831 262,128 1.9
----------- ----------- -----
SECURITIES
Nikko Securities Co., Ltd..................... 37,000 136,380 119,422 0.9
----------- ----------- -----
Securities brokerage house
SERVICES
Dai Nippon Printing Co., Ltd.................. 7,000 125,052 115,594 0.8
----------- ----------- -----
Commercial and industrial printing
SHIPBUILDING
Mitsubishi Heavy Industries, Ltd.............. 35,000 255,814 133,196 1.0
----------- ----------- -----
Shipbuilding and heavy machinery
TELECOMMUNICATIONS
Nippon Telegraph and Telephone Corp........... 27 220,948 224,958 1.6
Telecommunications
Japan Telcom Co., Ltd......................... 25 210,042 191,406 1.4
----------- ----------- -----
Telecommunications
TOTAL TELECOMMUNICATIONS...................... 430,990 416,364 3.0
----------- ----------- -----
TOTAL INVESTMENTS IN JAPANESE EQUITY SECURITIES 7,076,979 6,192,597 45.1
----------- ----------- -----
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*--(CONTINUED)
MARCH 31,1998
<TABLE>
<CAPTION>
% Of
Market Net
Shares Cost Value Assets
------ ---- ------ ------
<S> <C> <C> <C> <C>
AUSTRALIAN EQUITY SECURITIES
BANKING
Australia & New Zealand Banking Group, Ltd.... 25,000 $ 164,683 $ 166,991 1.2
International bank
National Australia Bank, Ltd.................. 37,223 352,724 529,521 3.9
----------- ----------- -----
Commercial bank
TOTAL BANKING................................. 517,407 696,512 5.1
----------- ----------- -----
BUILDING MATERIALS
Boral, Ltd.................................... 38,236 103,820 95,232 0.7
----------- ----------- -----
Building materials
FINANCIALS
Lend Lease Corp............................... 7,433 110,089 173,037 1.3
----------- ----------- -----
Insurance and financial services
FOOD AND BEVERAGE
Coca Cola Amatil, Ltd.. ...................... 10,000 100,553 78,370 0.6
Bottler and distributor of Coca-Cola products
Fosters Brewing Group, Ltd.................... 45,000 83,681 97,913 0.7
----------- ----------- -----
Beer
TOTAL FOOD AND BEVERAGE....................... 184,234 176,283 1.3
----------- ----------- -----
MINING
Pasminco, Ltd................................. 85,000 148,461 92,754 0.6
----------- ----------- -----
Zinc, lead and silver mining operations
MISCELLANEOUS MANUFACTURING
Southcorp Holdings, Ltd....................... 25,000 92,637 99,037 0.7
Wine, packaging and appliances
Tabcorp Holdings, Ltd......................... 39,000 186,078 209,075 1.5
----------- ----------- -----
Computer software components and games
TOTAL MISCELLANEOUS MANUFACTURING............. 278,715 308,112 2.2
----------- ----------- -----
NON-FERROUS METALS
Santos, Ltd................................... 25,000 101,447 93,581 0.7
Oil and gas exportation and production
The Broken Hill Proprietary Co., Ltd.......... 39,568 568,060 404,038 2.9
Minerals exportation and production
Western Mining Corp. Holdings, Ltd............ 33,597 212,181 115,096 0.9
----------- ----------- -----
Minerals and petroleum products
TOTAL NON-FERROUS METALS...................... 881,688 612,715 4.5
----------- ----------- -----
OIL AND GAS
Australian Gas & Light Co., Ltd............... 20,000 110,417 162,031 1.2
----------- ----------- -----
Distribution of natural gas and oil
PUBLISHING AND PRINTING
West Australian Newspapers Holdings, Ltd...... 25,000 122,401 93,085 0.7
----------- ----------- -----
Daily newspaper
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*--(CONTINUED)
MARCH 31,1998
<TABLE>
<CAPTION>
% Of
Market Net
Shares Cost Value Assets
------ ---- ------ ------
<S> <C> <C> <C> <C>
RETAIL
Coles Myer, Ltd............................... 15,000 $ 75,132 $ 74,898 0.5
----------- ----------- -----
Operates diversified retail stores
TELECOMMUNICATIONS
Telstra Corporation, Ltd...................... 30,000 62,141 77,180 0.6
----------- ----------- -----
Domestic and international telecommunications
TRANSPORTATION
Brambles Industries, Ltd...................... 10,000 176,031 207,995 1.5
----------- ----------- -----
Railroad car rentals
TOTAL INVESTMENTS IN AUSTRALIAN EQUITY SECURITIES 2,770,536 2,769,834 20.2
----------- ----------- -----
HONG KONG EQUITY SECURITIES
BANKING
Hong Kong Shanghai Banking Corp............... 10,000 129,218 305,854 2.2
----------- ----------- -----
International bank
CONGLOMERATE
Beijing Enterprises Holdings, Ltd............. 32,000 52,116 82,387 0.6
Produces, distributes, and sells consumer
products
Hutchison Whampoa, Ltd........................ 64,000 336,821 450,134 3.3
----------- ----------- -----
Property and shipping related services
TOTAL CONGLOMERATE............................ 388,937 532,521 3.9
----------- ----------- -----
REAL ESTATE
New World Development Co., Ltd................ 40,000 200,685 141,183 1.0
Property development
Sun Hung Kai Properties, Ltd.................. 36,000 262,543 245,070 1.8
----------- ----------- -----
Property development
TOTAL REAL ESTATE............................. 463,228 386,253 2.8
----------- ----------- -----
SERVICES
Cosco Pacific, Ltd............................ 60,000 57,013 50,330 0.4
----------- ----------- -----
Container leasing and terminal management
TELECOMMUNICATIONS
Hong Kong Telecommunications, Ltd............. 92,800 189,312 191,617 1.4
----------- ----------- -----
Telecommunications
UTILITIES
Hong Kong & China Gas Co., Ltd................ 150,000 240,202 251,652 1.8
Distribution of gas and gas appliances
Hong Kong Electric Holdings, Ltd.............. 50,000 167,491 171,639 1.3
----------- ----------- -----
Generates and supplies electricity
TOTAL UTILITIES............................... 407,693 423,291 3.1
----------- ----------- -----
TOTAL INVESTMENTS IN HONG KONG EQUITY SECURITIES 1,635,401 1,889,866 13.8
----------- ----------- -----
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*-(CONTINUED)
MARCH 31,1998
<TABLE>
<CAPTION>
% Of
Market Net
Shares Cost Value Assets
------ ---- ------ ------
<S> <C> <C> <C> <C>
MALAYSIAN EQUITY SECURITIES
BANKING
Malayan Banking Berhad........................ 21,000 $ 142,418 $ 80,548 0.6
----------- ----------- -----
Banking and financial services
CONGLOMERATE
1O1 Corporation Berhad........................ 30,000 24,426 23,014 0.2
Oil palm, rubber, and cocoa
Sime Darby Berhad............................. 30,000 71,838 33,534 0.2
Manufacturing, trading, banking, property,
and heavy equipment
UMW Holdings Berhad........................... 45,000 76,422 48,575 0.4
----------- ----------- -----
Investment holding company
TOTAL CONGLOMERATE............................ 172,686 105,123 0.8
----------- ----------- -----
CONSTRUCTION
IJM Corporation Berhad........................ 50,000 27,406 28,904 0.2
----------- ----------- -----
Civil engineering contractors
GAMING
Berjaya Sports Toto Berhad.................... 22,000 58,155 59,671 0.4
----------- ----------- -----
Forecast games
TELECOMMUNICATIONS
Telekom Malaysia Berhad....................... 30,000 138,377 103,562 0.7
----------- ----------- -----
Telecommunications
UTILITIES
Tenaga Nasional Berhad........................ 32,000 110,365 80,658 0.6
----------- ----------- -----
Power supplier
TOTAL INVESTMENTS IN MALAYSIAN EQUITY SECURITIES 649,407 458,466 3.3
----------- ----------- -----
NEW ZEALAND EQUITY SECURITIES
BUILDING MATERIALS
Fletcher Challenge Building................... 20,000 57,554 40,019 0.3
----------- ----------- -----
Building materials
FOREST PRODUCTS AND PAPER
Carter Holt Harvey............................ 56,000 104,808 76,456 0.5
----------- ----------- -----
Paper and wood products
TELECOMMUNICATIONS
Telecommunications Corp. of New Zealand....... 32,000 91,085 152,471 1.1
----------- ----------- -----
Telecommunications
TOTAL INVESTMENTS IN NEW ZEALAND EQUITY SECURITIES 253,447 268,946 1.9
----------- ----------- -----
SINGAPORE EQUITY SECURITIES
AIRLINES
Singapore Airlines............................ 13,000 114,480 92,584 0.7
----------- ----------- -----
International airline
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*--(CONTINUED)
MARCH 31,1998
<TABLE>
<CAPTION>
% Of
Market Net
Shares Cost Value Assets
------ ---- ------ ------
<S> <C> <C> <C> <C>
BANKING
Development Bank Singapore, Ltd............... 24,200 $ 181,768 $ 176,845 1.3
Development Bank Singapore, Ltd. (Rights)..... 4,400 0 8,992 0.1
----------- ----------- -----
International bank
TOTAL BANKING................................. 181,768 185,837 1.4
----------- ----------- -----
CONGLOMERATE
Keppel Corp., Ltd............................. 24,750 90,400 74,491 0.6
Shipyards, properties, financial services
and engineering
Singapore Technologies Industrial Corp., Ltd.. 40,000 69,132 46,323 0.3
----------- ----------- -----
Construction, information technology,
logistics, management, and leisure
activities
TOTAL CONGLOMERATE............................ 159,532 120,814 0.9
----------- ----------- -----
ELECTRICAL AND ELECTRONICS
Elec & Eltek International Co., Ltd........... 8,000 50,217 47,600 0.3
----------- ----------- -----
Printed circuit boards
MISCELLANEOUS MANUFACTURING
Venture Manufacturing (Singapore) Ltd......... 7,000 27,438 26,010 0.2
----------- ----------- -----
Contract manufacturing for electronics
companies
PUBLISHING AND PRINTING
Singapore Press Holdings., Ltd................ 3,000 35,231 34,371 0.2
----------- ----------- -----
Newspapers and magazines
REAL ESTATE
City Development, Ltd......................... 10,000 92,617 49,234 0.4
Property development
DBS Land, Ltd................................. 24,000 43,459 40,576 0.3
----------- ----------- -----
Property investment and development
TOTAL REAL ESTATE............................. 136,076 89,810 0.7
----------- ----------- -----
TELECOMMUNICATIONS
Singapore Telecommunications, Ltd............. 40,000 70,979 70,351 0.5
----------- ----------- -----
Basic telecommunications and postal services
TOTAL INVESTMENTS IN SINGAPORE EQUITY SECURITIES 775,721 667,377 4.9
----------- ----------- -----
TOTAL INVESTMENTS IN EQUITY SECURITIES........ $13,161,491 $12,247,086 89.2
----------- ----------- -----
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*-(CONTINUED)
MARCH 31,1998
<TABLE>
<CAPTION>
% Of
Principal Market Net
Amount Cost Value Assets
------ ---- ------ ------
<S> <C> <C> <C> <C>
INVESTMENTS IN FOREIGN CURRENCIES
AUSTRALIAN DOLLAR
Westpac Banking Corporation, 1.5% interest
bearing call account........................ AUD6,158 $ 4,072 $ 4,072 0.0
JAPANESE YEN
The Fuji Bank Limited, 0.25% interest
bearing call account........................ JPY125,799 965 944 0.0
MALAYSIAN RINGGIT
Standard Chartered Bank Malaysia Berhad,
non-interest bearing call account........... MYR648 176 178 0.0
SINGAPORE DOLLAR
The Development Bank of Singapore, Ltd.,
non-interest bearing call account........... SGD720 454 446 0.0
------------ ------------ ------
TOTAL INVESTMENTS IN FOREIGN CURRENCIES....... 5,667 5,640 0.0
------------ ------------ ------
INVESTMENTS IN SHORT-TERM SECURITIES
TIME DEPOSIT
State Street Bank and Trust Company, 5.25%
interest bearing call account due 4/l/98.... 1,446,557 1,446,557 1,446,557 10.6
------------ ------------ ------
COMMERCIAL PAPER
American Express Corporation, 5.52%
due 4/24/98................................. 500,000 498,237 498,237 3.6
General Electric Capital Corporation, 5.53%
due 4/3/98.................................. 500,000 499,846 499,846 3.6
------------ ------------ ------
TOTAL INVESTMENTS IN SHORT-TERM SECURITIES.... 2,444,640 2,444,640 17.8
------------ ------------ ------
TOTAL INVESTMENTS............................. 15,611,798 14,697,366 107.0
LIABILITIES IN EXCESS OF OTHER ASSETS, NET.... (997,988) (961,617) (7.0)
------------ ------------ ------
NET ASSETS.................................... $14,613,810 $13,735,749 100.0
============ ============ ======
</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.................... JPY 89,229,000 $ 700,000 6/16/98 $23,053
============== ========= ======= =======
</TABLE>
Portfolio securities and foreign currency holdings were translated
at the following exchange rates as of March 31, 1998.
Japanese Yen JPY. 133.225=$1.00
Australian Dollar AUD. 1.512=$1.00
Hong Kong Dollar HKD. 7.75=$1.00
Malaysian Ringgit MYR. 3.650=$1.00
New Zealand Dollar NZD. 1.809=$1.00
Singapore Dollar SGD. 1.615=$1.00
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31,1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at market value (cost-$13,161,491)............................. $ 12,247,086
Investments in short-term securities, at market value (cost-$2,444,640)................... 2,444,640
Investments in foreign currency, at market value (cost-$5,667)............................ 5,640
Unrealized appreciation on foreign forward currency contracts............................. 23,053
Receivable for investments sold .......................................................... 265,101
Receivable for dividends and interest, net of withholding taxes........................... 56,019
------------
Total Assets ................................................................... 15,041,539
------------
LIABILITIES:
Payable for investments purchased ........................................................ 1,188,855
Payable for capital stock redeemed ....................................................... 1,158
Other accrued expenses ................................................................... 115,777
------------
Total Liabilities .............................................................. 1,305,790
------------
NET ASSETS:
Capital stock (par value of 1,294,206 shares of capital stock outstanding, authorized
200,000,000, par value $0.10 each) ..................................................... 129,420
Paid-in capital .......................................................................... 18,065,932
Accumulated net realized loss on investments and foreign currency transactions............ (3,495,541)
Unrealized net depreciation on investments and foreign exchange........................... (878,061)
Accumulated net investment loss .......................................................... (86,001)
------------
Net Assets ..................................................................... $ 13,735,749
============
Net assets value, redemption price and offering price per share........................... $10.61
============
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
INCOME:
Dividend income (less $24,124 withholding taxes)...... $292,621
Interest income ...................................... 69,535
--------
Total Income ............................... $ 362,156
EXPENSES:
Management fee ....................................... 160,712
Legal fees ........................................... 86,762
Custodian fee ........................................ 77,529
Auditing and tax reporting fees ...................... 55,840
Shareholder reports .................................. 48,930
Transfer agency fee .................................. 47,178
Directors' fees and expenses ......................... 41,755
Registration fees .................................... 16,205
Annual meeting fee ................................... 1,522
Insurance............................................. 1,800
Miscellaneous ........................................ 3,491
--------
Total Expenses ............................. 541,724
Expense reimbursement ...................... (77,926)
--------
Net Expenses ............................... 463,798
-----------
INVESTMENT INCOME (LOSS)-NET ......................... (101,642)
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCIES:
Realized loss on investments and foreign currency transactions:
Realized loss on investments-net ..................... (1,189,233)
Realized loss on foreign exchange-net ................ (1,479,215)
-----------
Realized loss on investments and foreign exchange-net. (2,668,448)
Change in unrealized depreciation on translation of
investments, foreign currencies, other assets and
liabilities denominated in foreign currencies-net... (544,921)
Change in net unrealized depreciation on investments.. (1,146,235)
-----------
Net realized and unrealized loss on investments
and foreign exchange................................ (4,359,604)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.. ($4,461,246)
===========
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended
March 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment loss ....................................... $ (101,642) $ (260,785)
Net realized (loss) gain on investments ................... (1,189,233) 2,949,946
Net realized loss on foreign currencies ................... (1,479,215) (1,024,130)
Change in unrealized depreciation on investments
and foreign currencies .................................. (1,691,156) (3,535,189)
----------- -----------
Decrease in net assets derived from investment
activities............................................... (4,461,246) (1,870,158)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from continuous offering ......................... 1,592,510 3,037,977
Net asset value of shares issued to shareholders on
reinvestment of dividends and distributions ............. 76,483 2,675,034
Cost of shares redeemed ................................... (5,499,073) (12,360,445)
----------- -----------
Decrease in net assets derived from capital share
transactions............................................. (3,830,080) (6,647,434)
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ..................................... (57,437) (536,659)
Realized gains on investments and foreign currencies....... (43,078) (2,840,646)
----------- -----------
Decrease in net assets derived from distributions to
shareholders............................................. (100,515) (3,377,305)
----------- -----------
Net decrease in net assets ................................ (8,391,841) (11,894,897)
NET ASSETS:
Beginning of year ......................................... 22,127,590 34,022,487
----------- -----------
End of year (including accumulated net investment losses
of $86,001 and $161,449, respectively) .................. $13,735,749 $22,127,590
======= ========= =========== ===========
SHARE ACTIVITY:
Shares offered on continuous offering ...................... 117,523 194,457
Shares issued to shareholders on reinvestment of net
investment income and realized gain on investments ....... 7,155 175,261
Shares redeemed during the year ............................ (438,381) (821,891)
----------- -----------
Net shares redeemed during the year ........................ (313,703) (452,173)
Shares outstanding at beginning of year .................... 1,607,909 2,060,082
----------- -----------
Shares outstanding at end of year .......................... 1,294,206 1,607,909
----------- -----------
</TABLE>
See notes to financial statements
<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,
1998 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, 1998,
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 involves 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 forward contracts. Risks may arise as a result of the potential
inability of the counterparty to meet the terms of the contracts.
(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 at least annually.
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, 1998,
the Fund's paid-in capital was decreased by $63,935 with a increase to
accumulated net realized loss of $170,592 and an offsetting increase in
accumulated net investment income of $234,527. This adjustment was primarily
the result of the reclassification of net foreign currency gains and gains
from the sale of investments in passive foreign investment companies.
NOMURA PACIFIC BASIN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(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 Asset Management U.S.A. Inc. (the "Manager") (formerly Nomura
Capital Management, Inc.) 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
Asset Management Co., Ltd. ("NAM") (formerly Nomura Investment Management Co.,
Ltd.) and Nomura Asset Management Singapore Limited ("NAM Singapore")
(formerly Nomura Capital Management (Singapore) Limited) 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, NAM, NAM-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 accrued fees to the Manager
of $160,712 for the year ended March 31, 1998, a portion of which was waived
as described below. For the year ended March 31, 1998, the Manager informed
the Fund that NAM, NAM-Singapore and NSI received fees of $24,616, $2,591 and
$9,422, respectively, from the Manager. At March 31, 1998, no fee was payable
to the Manager, by the Fund.
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 average net assets, 2.0% of the next $70 million of average
net assets and 1.5% of the remaining average net assets. The Manager waived
fees of $77,926 from the Fund under this limitation for the year ended March
31, 1998. 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 $538 in commissions on the execution of
portfolio security transactions for the year ended March 31, 1998. 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 $40,384 for the year ended
March 31, 1998.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments for the year ended March 31, 1998,
exclusive of investments in foreign currencies and short term securities, were
$7,634,069 and $11,568,029, respectively.
As of March 31, 1998, net unrealized depreciation on investments,
exclusive of investments in foreign currencies and short-term securities, for
Federal income tax purposes was $979,656 of which $1,127,954 related to
appreciated securities and $2,107,610 related to depreciated securities. The
aggregate cost of investments, exclusive of investments in foreign currencies
and short-term securities, at March 31, 1998 for Federal income tax purposes
was $13,226,742. The Fund has a capital loss carryforward as of March 31, 1998
of $1,907,538 which expires March 31, 2006.
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 $1,585,700 and $0 currency losses to the year ending March 31, 1999.
<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,
--------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $13.76 $16.52 $15.07 $18.07 $14.33
======= ======= ======= ======= =======
Income from investment operations:
Net Investment income (loss)............ (0.07)+ (0.14)+ (0.04)+ (0.01)+ (0.01)+
Net realized and unrealized gain (loss)
on investments and foreign currencies. (3.01)+ (0.87)+ 2.07+ (0.74)+ 4.03+
------- ------- ------- ------- -------
Total from investment operations........ (3.08)+ (1.01)+ 2.03+ (0.75)+ 4.02+
Distributions to shareholders from:
Net investment income................... (0.04) (0.28) -- -- (0.05)
Net realized capital gains.............. (0.03) (1.47) (0.58) (2.25) (0.21)
In excess of net investment income...... -- -- -- -- (0.02)
------- ------- ------- ------- -------
Total distributions....................... (0.07) (1.75) (0.58) (2.25) (0.28)
------- ------- ------- ------- -------
Net asset value, end of year.............. $10.61 $13.76 $16.52 $15.07 $18.07
======= ======= ======= ======= =======
Total investment return................... (22.4%) (6.9%) 13.7% (4.2%) 28.2%
Ratio to average net assets/supplemental data:
Net assets, end of year (000)........... $13,736 $22,128 $34,022 $42,684 $55,060
Operating expenses, net of
reimbursement ........................ 2.49% 2.21% 1.78% 1.38% 1.39%
Total expenses ......................... 2.91% 2.21% 1.78% 1.38% 1.39%
Net investment income................... (0.55%) (0.87%) (0.28%) (0.07%) (0.10%)
Portfolio turnover ..................... 45% 62% 45% 49% 76%
Average commissions per share paid on
equity transactions*................... $0.0265 $0.0146
</TABLE>
(table continued)
<TABLE>
<CAPTION>
For the Year Ended March 31,
--------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period:..... $12.49 $15.19 $15.36 $19.15 $20.59
======= ======= ======= ======= =======
Income from investment operations:
Net Investment income (loss)............ -+ -+ 0.04 0.08 0.03
Net realized and unrealized gain (loss)
on investments and foreign currencies. 1.87+ (1.84)+ 2.53 0.20 (0.21)
------- ------- ------- ------- -------
Total from investment operations........ 1.87+ (1.84)+ 2.57 0.28 (0.18)
Distributions to shareholders from:
Net investment income................... (0.02) (0.01) (0.04) (0.10) (0.05)
Net realized capital gains.............. (0.01) (0.85) (2.70) (3.97) (1.21)
In excess of net investment income...... -- -- -- -- --
------- ------- ------- ------- -------
Total distributions....................... (0.03) (0.86) (2.74) (4.07) (1.26)
------- ------- ------- ------- -------
Net asset value, end of year.............. $14.33 $12.49 $15.19 $15.36 $19.15
======= ======= ======= ======= =======
Total investment return................... 15.0% (12.9%) 17.4% (1.7%) (0.9%)
Ratio to average net assets/supplemental data:
Net assets, end of year (000)........... $46,095 $43,203 $54,274 $53,933 $73,169
Operating expenses, net of
reimbursement ........................ 1.51% 1.46% 1.42% 1.32% 1.25%
Total expenses ......................... 1.51% 1.46% 1.42% 1.32% 1.25%
Net investment income................... 0.01% 0.00% 0.28% 0.40% 0.07%
Portfolio turnover ..................... 55% 41% 76% 46% 37%
Average commissions per share paid on
equity transactions*...................
</TABLE>
- -------------
+Based on average shares outstanding.
*For fiscal year beginning 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.
U.S. TAX INFORMATION (UNAUDITED)
During the fiscal year ended March 31, 1998 the Fund paid $43,078 of
long-term capital gains distributions. The Fund makes an election under
Internal Revenue Code Section 853 to pass through foreign taxes paid by the
Fund to its shareholders. The total amount of foreign taxes passed through to
the shareholders for the fiscal year ended March 31, 1998 was $24,124. The
foreign source income for information reporting purposes is $317,153.
This information is given to meet certain requirements of the Internal
Revenue Code and should not be used by shareholders for preparing their
income tax return.
<PAGE>
-----------------------------------
===================================
-----------------------------------
BOARD OF DIRECTORS
William G. Barker, Jr.
George H. Chittenden
Haruo Sawada
Chor Weng Tan
Arthur R. Taylor NOMURA
John F. Wallace
Pacific Basin
OFFICERS
Haruo Sawada, PRESIDENT Fund, Inc.
Mitsutoyo Kohno, VICE PRESIDENT
John F. Wallace, VICE PRESIDENT
John J. Boretti, SECRETARY AND TREASURER
Terence R. Brennan, ASSISTANT SECRETARY AND
ASSISTANT TREASURER
MANAGER
Nomura Asset Management U.S.A. Inc.
180 Maiden lane
New York, New York 10038-4936
INVESTMENT ADVISERS
Nomura Asset Management Co., Ltd.
2-1-14 Nihonbashi, Chuo-ku,
Tokyo 103-8260, Japan
ANNUAL REPORT
Nomura Asset Management Singapore Limited
6 Battery Road
Singapore 049909 MARCH 31, 1998
DISTRIBUTOR
Nomura Securities International, Inc.
2 World Financial Center
Now 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 [LOGO]
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.
180 MAIDEN LANE
NEW YORK, NEW YORK 10038-4936
- ------------------------------------------
This Report is not to be construed as an
offering for the sale of shares of Nomura
Pacific Basin Fund, Inc., or as a
solicitation of an offer to buy any such
shares, unless accompanied by an effective
prospectus setting forth both details of -----------------------------------
the Fund and other material information. ===================================
-----------------------------------
