NOMURA PACIFIC BASIN FUND, INC.
(Graphic omitted)
November 23, 1998
To Our Shareholders:
We present the Semi-Annual Report of the Nomura Pacific Basin Fund, Inc.
(the "Fund") for the six months ended September 30, 1998.
The Net Asset Value per Share ("NAV") of the Fund as of September 30,
1998 was $8.37.
The NAV of the Fund decreased by 10.3% and 21.1% during the quarter and
the six-months ended September 30, 1998, respectively, based on the changes
in share prices. The total net assets of the Fund aggregated $9,724,223 and
the total number of shares outstanding was 1,162,231 on September 30, 1998.
The average annual return of the Fund for the one-year, five-year and
ten-year periods ended September 30, 1998 and since inception (July 8, 1985)
were minus 36.9%, minus 8.5%, 0.2% and 8.6%, 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 influenced the Fund's
performance for certain of the specified periods. (Please refer to the Fund
Highlights for additional performance data.)
The United States dollar-based returns of the Pacific Basin, as measured
by the Morgan Stanley Capital International Index ("MSCI") (an unmanaged
index), for the three months and the six months ended September 30, 1998 were
minus 13.6% and minus 21.2%, respectively. The Fund outperformed the MSCI
Index by 3.3% in the quarter ended September 30, 1998. The outperformance was
attributable to stock selection in all the countries except Hong Kong.
Results in Australia and Singapore were particularly noteworthy. The strategy
in Australia was to increase the exposure to Telecommunications and other
sectors that are all well positioned to resist deflationary pressure and
overcome the negative impact from the global turmoil in financial markets. In
Singapore, electronics stocks demonstrated a remarkable recovery, as the
industry's prospects improved following disastrous second quarter results.
The Fund outperformed the MSCI Index by 0.1% for the six months ended
September 30, 1998, which was again brought about by effective stock
selection. The Fund's strategy proved to be successful during the period
despite an extremely difficult environment, which culminated in a capital
market collapse in Russia and unexpectedly severe losses at some of the
world's largest and most respected financial institutions. The period was
marked by increased volatility, reflected in a wide divergence between the
market performance of different countries.
The foreign exchange rate of the Japanese yen ("Yen") at September 30,
1998 was 136.605 Yen to one U.S. dollar. The Yen appreciated by 1.2% and
depreciated by 3.5% against the U.S. dollar for the quarter and six months
ended September 30, 1998, respectively.
The NAV of the Fund as of November 20, 1998 was $10.15.
The Portfolio
The Fund's strategy has remained basically unchanged with the emphasis on
an overweight position in Australia and underweight position in Japan. The
exposure to Japan was decreased due to the resurgence of the domestic
financial crisis and deterioration of economic conditions. The exposure to
Malaysia was also decreased due to the implementation of stringent capital
controls.
The Stock Market
The Japanese stock market resumed its downward trend during the quarter
ended September 30, 1998 due to the resurgence of the domestic financial
system crisis and the deterioration in economic conditions, both in Japan and
throughout the rest of the world. The TOPIX, consisting of all companies
listed on the Tokyo Stock Exchange (the "TSE"), decreased 15% over this period
to set another post-bubble low. Investors were disappointed by the attitude of
Japanese politicians, who displayed a lack of sense of crisis in their
negotiations to effect measures to stabilize the financial system. Turmoil in
financial markets globally, and initial signs of an economic slow down in the
U.S. made conditions even worse as it appeared certain to depress Japanese
exports. The Financial sector and the Export/High Technology sector were the
worst performers during the period.
Asian stock markets have remained generally weak, but began to stabilize
toward the end of the quarter, resulting in a third quarter decline in the
MCSI (ex. Japan index) of 7.6%. There were four important developments driving
the Asian markets during this period.
First, the continuing Asian economic turmoil has reverberated through
other emerging economies, including Russia followed by Latin American
countries, and it has since spread into developed economies such as Europe and
the U.S. This contagion process has created a vicious circle, which has again
left its mark on Asia. This process resulted in significant losses for many
investment banks and large hedge funds.
Second, Japan's stock market weakness, particularly, the unbroken decline
in bank shares which mirrors the uncertainty surrounding the progress of the
master plan to clean up the bad-debt stricken Banking sector, has weighed on
all Asian markets.
Third, the drastic turnaround in Hong Kong's long standing laissez faire
tradition, which was demonstrated by the government's heavy stock market
intervention in August, resulted in $13 billion being spent out of a total
foreign currency reserve of $97 billion.
Finally, the Malaysian government's decision to launch stringent capital
controls starting September 1, 1998 came as a severe shock to the global
investment community. Coupled with the arrest and reported maltreatment of
Deputy Prime Minister, Anwar Ibrahim, investors have grown increasingly
worried about the political and economic developments in Malaysia, and have
been carefully monitoring the situation.
This action by Malaysia and Hong Kong represents a new trend among those
Asian nations that have been hit hard by the region's economic turmoil. Such a
return to market regulation or intervention is seen as a response to what has
been termed "violent speculation with short-term capital flows under the name
of globalization."
Capital controls and the new-found willingness to intervene represent a
significant retreat from the prevailing free market ideology in global
economies. Developing countries in Asia are closely monitoring events to see
which economic model the International Monetary Fund ("IMF") will prescribe,
free market or capital controls, in bringing about economic stability and
revitalization. It seems that the world's seven major economic power nations
("G7") are considering that some sort of regulation needs to be introduced to
alleviate the liquidity shortage caused by the economic contagion. Regardless
of the outcome of the G7 deliberations, what counts is that the structural
reforms be faithfully pursued by the developing nations, while they borrow
time through interventionist measures, which may be seen as a last resort amid
unprecedented difficulties.
The Investment Outlook and Strategy
Japan
The TOPIX declined by 15.2% during the quarter ended September 30, 1998.
Despite further deterioration in the real economy, concern over the viability
of many Japanese financial institutions and a stock market decrease,
politicians continued their debate over the most appropriate scheme to bail
out The Long Term Credit Bank and to revitalize the financial system.
Meanwhile, the Bank of Japan eased monetary policy by lowering the overnight
call rate to 0.25% in mid-September to support the troubled banks.
Faced with a global financial market crisis, and a shrinking domestic
economy, the perception that the Japanese government is oblivious to the
gravity of the situation forced foreign investors to aggressively liquidate
Japanese equity positions in September.
Nippon Leasing, a subsidiary of The Long Term Credit Bank of Japan,
announced its application for bankruptcy protection on September 28, which led
to a sharp decline in bank stocks, since loans to the company would now add to
the burden of bad debts. Potential losses from the failure of the Long Term
Capital Management ("LTCM") in the U.S., a highly leveraged hedge fund, were
additional concerns to investors. In contrast to the broad market weakness,
electrical power company stocks appreciated, as the dividend yield of 2.0% to
2.5% and the sector's minimal bankruptcy risk attracted investors.
Unless the government can resolve the current impasse on the financial
revitalization immediately, and implement a bail-out plan for the banks
together with large-scale economic stimulus measures, then the stock market is
likely to remain under downward pressure.
Australia
The Australian stock market increased by 4.3% during September. In a rare
display, the Resource sector outperformed industrial stocks by 8%. The Gold
sector led the rally, increasing 42% as gold regained some of its lost status
as a safe haven in times of crisis. The Banking sector underperformed the
Resource sector by 11% with concerns over asset quality growing globally as
the contagion spread from Asia to Latin America and the U.S. Federal Reserve
orchestrated the rescue of LTCM.
The domestic economy is slowing down, although personal consumption
remains surprisingly resilient even though the housing cycle has turned down
sharply. The ten-year government bonds rallied by 79 basis points as their
U.S. counterparts rallied by 40 basis points. The Australian dollar rallied 3
cents against the U.S. dollar to 59.7 cents.
In a close election result, the Coalition Government was returned to
office with a reduced majority. The new government will now face a more hostile
upper house with amendments to the tax package likely. The result may be benign
for the stock market.
Despite a relatively encouraging reporting season, market expectations
for Fiscal Year 1999 earnings remain vulnerable. Top down analysis suggests
that earnings growth of 4% to 5%, in contrast to the bottom-up analysis, which
gives an expected growth earnings of 10%.
The rally in the bond market and the decrease in equity prices have
improved the valuation of the Australian stock market. The risk of valuation
has been removed, but the Australian stock market is still vulnerable to
external shocks resulting from lower global growth and earnings revisions in
Europe and the U.S. Due to the proximity to Asia, earnings in Australia are
well in advance of many international markets and this suggests limited
downside risk.
Hong Kong
Faced with a severe speculative attack on the Hong Kong dollar in late
August and a subsequent increase in interest rates, the Hong Kong Monetary
Authority ("HKMA") intervened decisively to support the stock market. The
intervention raised the Hang Seng Index from 6,600 to 7,800. Stock market
rules were also tightened to curb speculation. Although successful in its
short-term aims, the cost of the intervention was high as the authority spent
an estimated $13 billion or approximately 13% of its foreign currency
reserves, while Hong Kong jeopardized its free-market reputation. Meanwhile,
monetary measures introduced by the HKMA in September reinforced the
government's will to protect the U.S. dollar peg system.
Market characteristics changed during the third quarter as concern over
growing bad debts hit the formerly resilient Financial sector. Especially
noteworthy was that Hong Kong Shanghai Banking Corp. lost its relative
immunity from the Southeast Asian crisis, and the Property sector remained
sluggish.
Indebted companies are struggling for cash flow amid chronically high
interest rates; developers are selling properties at below cost, while even a
robust company like Hong Kong Telecommunications, Ltd. announced a 10% company
wide wage decrease. The three month average unemployment reached 5% and has
yet to peak. A 17% decline in retail sales attests to the collapse in consumer
confidence. While interest rates are decreasing due to the HKMA's monetary
measures, the market is still sensitive to the global financial crisis and the
lingering effect of high interest rates may depress the economy for at least
two more quarters. Hong Kong's function as a financial window to attract
foreign capital for Mainland China is fading with further deterioration of
economic fundamentals coupled with the confidence crisis caused by the policy
change.
Real economic decline is unlikely to be reflected in the stock market
while it is under the strict control of the HKMA. The abandonment of the U.S.
dollar peg system is also unlikely. The Fund expects the stock market to stay
within a narrow trading range until the pressure on the currency disappears.
Malaysia
September 1998 will be remembered as one of the most dramatic months in
Malaysia's recent history. The capital controls implemented on September 1,
1998 shocked the investment community, culminating in the arrest of Deputy
Prime Minister, Anwar Ibrahim under the Internal Security Act. Aggressive
monetary easing is being implemented to reflate the economy as swiftly as
possible. Meanwhile, the stock market since the announcement of the capital
controls has staged a strong rally, which was largely due to aggressive buying
by the state-owned funds and local retail funds.
The capital controls effectively barred the conversion of Malaysian
ringgit proceeds from the sale of Malaysian securities into foreign currencies
for a period of 12 months. However, Bank Negara has announced that dividends,
interest, rentals, commissions and profits will be exempt. Non-resident
trading on the Kuala Lumpur Commodities Exchange and the Kuala Lumpur Options
and Financial Futures Exchange are also excluded.
The three month intervention rate has been lowered to 8% and the
Statutory Reserve Requirement ("SRR") deceased to 4% to inject liquidity into
the system. Bank Negara has instructed all banks to expand their loans by at
least 8% this year and to reinstate credit lines withdrawn. The maximum rate
that banks can charge their best customers will now be capped at 2.5% above
the Base Lending Rate ("BLR"), down from 4% above the BLR previously.
Non-performing loans have also been reclassified from three to six months.
Moody's Investors Service and Standard & Poors ("S&P") have both reduced
Malaysia's long term foreign currency ratings to Baa3 and BBB-, respectively,
just one notch above junk bond status.
With capital controls in place for at least the next 12 months, Malaysia
has become closed to foreign investors. However, given the aggressive
loosening of monetary policy and the deliberate effort by the government to
artificially prop up the stock market, the Kuala Lumpur Stock Exchange
Composite Index is likely to increase, perhaps to the 500 to 600 level, over
the next few months. The recommended strategy is to sell into strength, as the
rally is unlikely to be sustainable in the longer term.
New Zealand
The New Zealand stock market declined by 5.6% in September. Brierley
Investments fell to a record low following the company's announcement of New
Zealand's largest corporate loss following its decision to write down assets
valued at $1.2 billion. Market sentiment was also undermined by the decision
from S&P to downgrade their outlook for the New Zealand dollar, while rising
political concerns also had a negative impact. New Zealand avoided an early
election when a vote of no confidence in the Government failed.
Interest rates decreased to their lowest point in four and half years as
the ten year government bond decreased to 5.6% in response to the U.S.
government bond rally. Meanwhile, the decline of 0.8% in the second quarter
Gross Domestic Product ("GDP") confirmed that the recession in New Zealand was
deeper than first expected. This has generated further earnings uncertainty,
but in common with Australia, due to the proximity to Asia earnings revisions
in New Zealand are well in advance of many international markets and this
implies a relatively limited downside risk.
Declining bond yields and equity prices have enhanced the attractive
valuation of the New Zealand stock market; however, the relative
attractiveness of the market; is due to the cyclical stocks. Telecommunications
Corp. of New Zealand is benefiting from the decline in bond yields and the
Telecommunications sector as a whole continues to grow faster than GDP.
Singapore
The local industrial index rose by 9.7% during September to close at
939.65, after reaching an intra-month low of 805 following Malaysia's
introduction of capital controls. Uncertainty over the future of the Malaysian
over-the-counter ("OTC") market caused some investors to liquidate their OTC
holdings at steep discounts to the traded prices on the Kuala Lumpur Stock
Exchange. Meanwhile, interim corporate results confirmed the sharp slowdown in
domestic and external demand. Higher provisions squeezed profits at banks and
property companies. The capital controls in Malaysia also undermine the
quality of the Malaysian ringgit loan assets of Singapore's banks.
Hints emerged that the National Wages Council was likely to recommend a
decrease in employers' Central Provident Fund ("CPF") contribution; but the
government stated that counter measures, including loan payment rescheduling,
would ease the burden on those affected. The government is also examining
other ways of reducing business operating costs.
The Singapore dollar strengthened against the U.S. dollar to 1.686,
driven partly by short coverings. Interbank rates have been softened sharply
over the same period, to the relief of local corporations. Prime rates were
decreased by 25 basis points. Bank margins should be preserved given the
steeper decreases to deposit rates.
Stronger electronics exports helped non-oil domestic exports to grow 5%
in August, reversing a 2.3% decline in July. However, retained imports
continued to decline (down 26.8%), signaling that the current trend has
further downside risk.
Regional developments will continue to affect Singapore's economy and
stock market. The Fund expects fiscal measures to support certain key sectors
and ease unemployment pressures in the form of tax, rent and levy reductions.
However, fears of a decrease in CPF rates will encourage precautionary
savings, thereby accentuating the downturn in domestic demand. Balance sheets
remain under pressure despite lower interbank rates, while trade will suffer
amid escalating problems in Indonesia and Malaysia.
Investment Strategy
The Fund's basic investment strategy for the coming months will be as
follows:
1) Remain underweight in Japanese equities, while bracing for an increase in
exposure on any significant market decline. The Fund's sector strategy
will be to remain heavily underweight in the Financial sector, as it will
take a long time before the bad debt problem is resolved and the banks
return to profitability. Though the Fund is conscious of the risk posed by
a significant U.S. economic slowdown, the Fund will maintain an overweight
position in the Export/High Technology sector. The recent correction in
this sector has made valuations attractive and the U.S. economy still
looks better than Japan's domestic economy.
2) Maintain the overweight position in Australia.
3) Maintain the neutral to overweight position in Singapore, given that the
situation in Indonesia and Malaysia will remain extremely difficult.
Singapore has gained relative importance as a surrogate vehicle for
investment in the region despite its weakening economy
4) Maintain or reduce the overweight position in Hong Kong as the
deterioration in the territory's economic fundamentals continues in the
aftermath of the currency turmoil. Meanwhile, the Hong Kong government
will remain adamant about its policy of "cracking down on speculators" to
avoid a market collapse.
As for the Malaysian equity exposure, the short-term rally in the stock
market appears to have resulted from technical factors amid the chaos
generated by the introduction of capital controls. Therefore, coupled with the
continuing deterioration in economic fundamentals, the Fund intends to reduce
the Malaysian exposure gradually as the capital controls will drive money
away from Malaysia and exert a negative impact on the economy and stock market
in the medium term. Nevertheless, as many aspects of the situation in Malaysia
remain fluid, particularly with regard to interpretation of the new
policies, including security for settlement, etc., the Fund will have to wait
for these intricacies to be clarified before the Fund can implement its
investment policies. The Fund will continue to monitor the situation closely
We appreciate your continuing support of your Fund.
Sincerely,
Haruo Sawada
President
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--SEPTEMBER 30, 1998
(UNAUDITED)
KEY STATISTICS:
Net Assets ................................................ $ 9,724,223
Net Asset Value per Share ................................. $ 8.37
Average Annual Total Return*
Year Ended 9/30/98 .................................... (36.9%)
Five Years Ended 9/30/98 .............................. (8.5%)
Ten Years Ended 9/30/98 ............................... 0.2%
Since Inception (7/8/85 to 9/30/98) ................... 8.6%
Cumulative Total Return'
Five Years Ended 9/30/98 .............................. (35.9%)
Ten Years Ended 9/30/98 ............................... 2.0%
Since Inception (7/8185 to 9/30/98) ................... 204.5%
______________
* Performance date quoted above represents past performance, and the
investment return and principal value of an investment in the 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 reimbursamen performance would have been lower.
GEOGRAPHICAL ALLOCATION:
<TABLE>
<CAPTION>
% OF NOT ASSETS
----------------------------
CASH AND % OF
EQUITIES CASH EQUIVALENTS TOTAL MSCI INDEX+
-------- ---------------- ----- ----------
<S> <C> <C> <C> <C>
Japan ............................................... 44.6 - 44.6 77.9
Australia ........................................... 24.4 - 24.4 10.3
Hong Kong ........................................... 14.2 - 14.2 7.5
Malaysia ............................................ 1.9 - 1.9 1.3
New Zealand ......................................... 1.7 - 1.7 0.7
Singapore ........................................... 4.7 - 4.7 2.3
United States ....................................... - 8.2 8.2 -
---- ---- ----- -----
Total Investments ................................... 91.5 8.2 99.7 100.0
Other Assets in Excess of Other Liabilities, Net .... 0.3 -
----- -----
Total ............................................... 100.0 100.0
===== =====
</TABLE>
______________
+ Source: Morgan Stanley Capital International Index (an unmanaged index).
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
FUND HIGHLIGHTS--(CONTINUED)
SEPTEMBER 30, 1998
(UNAUDITED)
INDUSTRY DIVERSIFICATION:
% OF
NET ASSETS
----------
Japanese Securities
Chemicals and Pharmaceuticals ...................................5.0
Consumer Electronics and Parts ..................................4.1
Electrical and Electronics ......................................3.6
Miscellaneous Manufacturing .....................................3.1
Telecommunications ..............................................3.1
Motor Vehicles ..................................................3.1
Construction ....................................................2.8
Electrical Machinery ............................................2.7
Banking and Insurance ...........................................2.4
Precision Machinery .............................................2.3
Commerce ........................................................2.2
Information and Software ........................................1.6
Wholesale .......................................................1.5
Automotive Equipment and Parts ..................................1.2
Iron and Steel ..................................................1.0
Food and Beverage ...............................................0.9
Retail ..........................................................0.9
Textiles and Apparel ............................................0.8
Securities ......................................................0.6
Non-Ferrous Metals ..............................................0.5
Transportation ..................................................0.4
Services ........................................................0.3
Shipbuilding ....................................................0.3
Oil and Gas .....................................................0.2
Australian Securities
Banking .........................................................6.1
Non-Ferrous Metals ..............................................4.3
Financials ......................................................2.4
Telecommunications ..............................................2.3
Transportation ..................................................2.2
Miscellaneous Manufacturing .....................................1.7
Oil and Gas .....................................................1.7
Food and Beverage ...............................................1.3
Retail ..........................................................0.9
Mining ..........................................................0.6
Publishing and Printing .........................................0.6
Building Materials ..............................................0.3
Hong Kong Securities
Conglomerate .....................................................4.2
Utilities ........................................................3.8
Telecommunications ...............................................2.4
Banking ..........................................................1.9
Real Estate ......................................................1.9
Malaysian Securities
Telecommunications ...............................................0.6
Conglomerate .....................................................0.4
Utilities ........................................................0.4
Banking ..........................................................0.2
Construction .....................................................0.2
Gaming ...........................................................0.1
New Zealand Securities
Telecommunications ...............................................1.2
Forest Products and Paper ........................................0.3
Building Materials ...............................................0.2
Singapore Securities
Telecommunications ...............................................1.0
Banking ..........................................................0.9
Conglomerate .....................................................0.7
Airlines .........................................................0.6
Electrical and Electronics .......................................0.4
Miscellaneous Manufacturing ......................................0.4
Real Estate ......................................................0.4
Publishing and Printing ..........................................0.3
TEN LARGEST EQUITY HOLDINGS BY MARKET VALUE:
MARKET % OF
SECURIIY VALUE NET ASSETS
- -------- -------- ----------
National Australia Bank, Ltd . ......................... $449,710 4.6
Hutchison Whampoa, Ltd . ............................... 410,696 4.2
The Broken Hill Proprietary Co., Ltd.................... 252,069 2.6
Hong Kong Telecommunications, Ltd ...................... 231,836 2.4
Telstra Corporation, Ltd ............................... 221,278 2.3
Brambles Industries, Ltd ............................... 215,854 2.2
Hong Kong and China Gas Co., Ltd . ..................... 202,628 2.1
Lend Lease Corp . ...................................... 201,223 2.1
Rohm Company ........................................... 190,330 2.0
Hong Kong Shanghai Banking Corp . .................... 183,254 1.9
<PAGE>
<TABLE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
<CAPTION>
% OF
MARKET NET
SHARES COST VALUE ASSETS
------ ---- ----- ------
<S> <C> <C> <C> <C>
JAPANESE EQUITY SECURITIES
AUTOMOTIVE EQUIPMENT AND PARTS
Bridgestone Corp . ........................................... 6,000 $ 127,741 $ 120,786 1.2
--------- --------- ----
Automobile tires
BANKING AND INSURANCE
The Bank of Tokyo-Mitsubishi, Ltd . ......................... 16,450 358,234 105,368 1.1
Commercial bank
The Dai-Ichi Kangyo Bank, Ltd . ............................. 10,000 53,001 41,799 0.4
City bank
The Sanwa Bank, Ltd . ....................................... 7,000 62,115 36,638 0.4
City bank
The Tokio Marine & Fire Insurance Co., Ltd . ................ 6,000 72,635 53,585 0.5
--------- --------- ----
Non-life insurance
Total Banking and Insurance ................................. 545,98 237,391 2.4
--------- --------- ----
CHEMICALS AND PHARMACEUTICALS
Mitsubishi Gas Chemical Co., Ltd . .......................... 51,000 154,721 114,615 1.2
Basic chemicals
Nippon Soda Co., Ltd . ...................................... 16,000 106,023 81,988 0.8
Chemical products
Shin-Etsu Chemical Co., Ltd . ............................... 3,000 60,400 47,546 0.5
Synthetic resins
Taisho Pharmaceutical Co., Ltd . ............................ 5,000 95,510 105,047 1.1
Over-the-counter drugs
Takeda Chemical Industries, Ltd ............................. 5,000 111,742 133,597 1.4
--------- --------- ----
Pharmaceuticals
Total Chemicals and Pharmaceuticals ......................... 528,396 482,793 5.0
--------- --------- ----
COMMERCE
Ito-Yokado Co., Ltd . ....................................... 2,000 115,988 95,165 1.0
Supermarkets
Mitsui & Co., Ltd . ......................................... 11,000 95,696 45,255 0.5
General trader
Sangetsu Co., Ltd . ......................................... 6,000 97,958 68,738 0.7
--------- --------- ----
Wall interiors and carpets
Total Commerce .............................................. 309,643 209,15 2.2
--------- --------- ----
CONSTRUCTION
Obayashi Corporation ........................................ 29,000 119,060 102,961 1.1
General contractor
Toda Corp ................................................... 47,000 218,139 166,624 1.7
General contractor
Yokogawa Bridge Corp . ...................................... 200 2,739 496 0.0
--------- --------- ----
Bridge construction
Total Construction .......................................... 339,938 269,981 2.8
--------- --------- ----
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
% of
Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Consumer Electronics and Parts
Sony Corp ................................................... 1,600 $ 89,175 $ 111,153 1.2
Consumer electronics
Taiyo Yuden Co., Ltd . ...................................... 15,000 158,421 149,445 1.5
Ceramic capacitors
TDK Corporation ............................................. 2,000 102,747 136,159 1.4
--------- --------- ----
Magnetic tapes
Total Consumer Electronics and Parts ........................ 350,343 396,757 4.1
--------- --------- ---
Electrical and Electronics
Advantest Corp . ............................................ .2,800 182,505 118,883 1.2
Semiconductor testing equipment
Rohm Company ................................................ 2,000 129,379 190,330 2.0
Custom integrated circuits
Tokyo Electron, Ltd . ....................................... 1,800 54,919 43,878 0.4
--------- --------- ----
Electric wires and cables
Total Electrical and Electronics ............................ 366,803 353,091 3.6
--------- --------- ----
Electrical Machinery
Fujitsu Ltd ................................................. 13,000 161,812 112,295 1.1
Computers
Minebea Co., Ltd ............................................ 7,000 75,228 56,931 0.6
Miniature bearings
NEC Corporation ............................................. 15,000 133,104 97,178 1.0
--------- --------- ----
Computers, telecommunication devices, electric
appliances and circuit boards
Total Electrical Machinery .................................. 370,144 266,403 2.7
--------- --------- ----
Food and Beverage
Kikkoman Corp . ............................................. 17,000 91,207 84,872 0.9
--------- --------- ----
Soy sauce
Information and Software
Fuji Soft ABC, Inc . ........................................ 4,500 151,050 154,826 1.6
--------- --------- ----
Computer systems development
Iron and Steel
Nippon Steel Corp ........................................... 64,000 111,805 91,827 1.0
--------- --------- ----
Steelmaker
Miscellaneous Manufacturing
Nihon Cement Co., Ltd . ..................................... 12,000 25,638 20,204 0.2
Cement
Onward Kashiyama Co., Ltd . ................................. 6,000 88,371 73,658 0.8
Ready-made suits
Shiseido Co., Ltd ........................................... 9,000 101,759 79,389 0.8
Cosmetic and toiletry products
SMC Corporation ............................................. 1,900 154,477 128,517 1.3
--------- --------- ----
Pneumatic equipment
Total Miscellaneous Manufacturing ........................... 370,244 301,768 3.1
--------- --------- ----
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)
SEPTEMBER 30, 1998
<CAPTION>
(Unaudited)
% of
Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Motor Vehicles
Honda Motor Co., Ltd . ...................................... 4,000 $ 119,152 $ 121,518 1.3
Motorcycles, automobiles and power products
Toyota Motor Corp ........................................... 8,000 206,146 178,617 1.8
--------- --------- ----
Automobiles
Total Motor Vehicles ........................................ 325,298 300,135 3.1
--------- --------- ----
Non-Ferrous Metals
Sumitomo Metal Mining Co., Ltd . ............................ 15,000 99,305 47,326 0.5
--------- --------- ----
Copper, gold, and nickel mining
Oil and Gas
Teikoku Oil Co., Ltd . ...................................... 8,000 46,076 21,668 0.2
--------- --------- ----
Oil and natural gas products
Precision Machinery
Amada Co., Ltd .............................................. 22,000 120,866 101,460 1.0
Metal cutting, forming and pressing
Canon, Inc .................................................. 6,000 92,781 121,665 1.3
--------- --------- ----
Visual image and information equipment
Total Precision Machinery ................................... 213,647 223,125 2.3
--------- --------- ----
Retail
Circle K Japan Co., Ltd . ................................... 3,040 76,493 85,900 0.9
--------- --------- ----
Convenience stores
Securities
Nikko Securities Co., Ltd ................................. 25,000 91,189 53,622 0.6
--------- --------- ----
Securities brokerage
Services
Dai Nippon Printing Co., Ltd . .............................. 2,000 44,817 25,651 0.3
--------- --------- ----
Commercial and industrial printing
Shipbuilding
Mitsubishi Heavy Industries, Ltd ............................ 9,000 64,237 30,768 0.3
--------- --------- ----
Shipbuilding and heavy machinery
Telecommunications
Japan Telcom Co., Ltd ....................................... 23 191,891 138,062 1.4
Telecommunications
Nippon Telegraph and Telephone Corp ......................... 23 195,304 167,529 1.7
--------- --------- ----
Telecommunications
Total Telecommunications .................................... 387,195 305,589 3.1
--------- --------- ----
Textiles and Apparel
Kuraray Co., Ltd ............................................ 2,000 17,435 18,008 0.2
Synthetic fibers
Naigai Clothes Co., Ltd . ................................... 11,000 62,564 63,936 0.6
--------- --------- ----
Clothing
Total Textiles and Apparel .................................. 79,999 81,944 0.8
--------- --------- ----
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
% of
Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Transportation
Yamato Transport Co., Ltd ................................... 4,000 $ 46,967 $ 43,337 0.4
--------- --------- ----
Parcel delivery service
Wholesale
ArcLand Sakamoto Co., Ltd ................................... 12,000 64,161 65,883 0.7
Home appliances
Hakuto Co., Ltd ............................................. 5,900 99,699 84,221 0.8
--------- --------- ----
Electric parts
Total Wholesale ............................................. 163,859 150,104 1.5
--------- --------- ----
TOTAL INVESTMENTS IN JAPANESE EQUITY SECURITIES 5,302,381 4,338,822 44.6
--------- --------- ----
AUSTRALIAN EQUITY SECURITIES
Banking
Australia & New Zealand Banking Group, Ltd .................. 28,000 185,588 149,605 1.5
International bank
National Australia Bank, Ltd ................................ 37,223 352,723 449,710 4.6
--------- --------- ----
Commercial bank
Total Banking ............................................... 538,311 599,315 6.1
--------- --------- ----
Building Materials
Boral, Ltd .................................................. 23,971 67,248 33,379 0.3
--------- --------- ----
Building materials
Financials
Colonial Limited ............................................ 10,000 28,651 28,241 0.3
Financial services
Lend Lease Corp .............: .............................. 9,433 148,232 201,223 2.1
--------- --------- ----
Insurance and financial services
Total Financials ............................................ 176,884 229,464 2.4
--------- --------- ----
Food and Beverage
Fosters Brewing Group, Ltd .................................. 57,000 109,498 124,293 1.3
--------- --------- ----
Beer
Mining
Pasminco, Ltd . ............................................. 85,000 148,461 62,455 0.6
--------- --------- ----
Zinc, lead and silver mining operations
Miscellaneous Manufacturing
Tabcorp Holdings, Ltd . ..................................... 29,000 138,241 168,403 1.7
--------- --------- ----
Computer software components and games
Non-Ferrous Metals
Santos, Ltd . ............................................... 30,000 117,297 83,016 0.9
Oil and gas exploration and production
The Broken Hill Proprietary Co., Ltd ........................ 35,215 502,778 252,069 2.6
Minerals exploration and production
Western Mining Corp. Holdings, Ltd .......................... 25,941 158,830 78,040 0.8
--------- --------- ----
Mineral and petroleum products
Total Non-Ferrous Metals .................................... 778,905 413,126 4.3
--------- --------- ----
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
% of
Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
Oil and Gas
Australian Gas & Light Co., Ltd ............................. 24,329 $ 137,114 $ 167,516 1.7
--------- --------- ----
Distribution of natural gas and oil
Publishing and Printing
News Corporation, Ltd ....................................... 8,000 54,184 51,576 0.6
--------- --------- ----
International media
Retail
Coles Myer, Ltd ............................................. 20,209 98,187 86,219 0.9
--------- --------- ----
Operates diversified retail stores
Telecommunications
Telstra Corporation, Ltd . .................................. 79,000 196,617 221,278 2.3
--------- --------- ----
Domestic and international telecommunications
Transportation
Brambles Industries, Ltd . .................................. 10,000 176,031 215,854 [2.2
--------- --------- ----
Railroad car rentals
TOTAL INVESTMENTS IN AUSTRALIAN EQUITY SECURITIES 2,619,681 2,372,877 24.4
--------- --------- ----
HONG KONG EQUITY SECURITIES
Banking
Hong Kong Shanghai Banking Corp ............................. 10,000 129,218 183,254 1.9
--------- --------- ----
International bank
Conglomerate
Hutchison Whampoa, Ltd ...................................... 78,000 405,746 410,696 4.2
--------- --------- ----
Property and shipping related services
Real Estate
New World Development Co., Ltd .............................. 40,000 200,685 53,686 0.6
Property development
Sun Hung Kai Properties, Ltd . .............................. 36,000 262,543 127,529 1.3
--------- --------- ----
Property development
Total Real Estate ........................................... 463,228 181,215 1.9
--------- --------- ----
Telecommunications
Hong Kong Telecommunications, Ltd . ......................... 117,800 235,989 231,836 2.4
--------- --------- ----
Telecommunications
Utilities
Hong Kong & China Gas Co., Ltd . ............................ 165,000 240,202 202,289 2.1
Hong Kong & China Gas Co., Ltd. (warrants) .................. 7,500 0 339 0.0
Distribution of gas and gas appliances
Hong Kong Electric Holdings, Ltd ............................ 50,000 167,490 171,962 1.7
--------- --------- ----
Gererates and supplies electricity
Total Utilities ............................................. 407,692 374,590 3.8
--------- --------- ----
TOTAL INVESTMENTS IN HONG KONG EQUITY SECURITIES............. 1,641,874 1,381,591 14.2
--------- --------- ----
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENT--(Continued)
SEPTEMBER 30, 1998
(Unaudited)
% of
Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
MALAYSIAN EQUITY SECURITIES
Banking
Malayan Banking Berhad ...................................... 42,000 $ 142,418 $ 34,758 0.2
--------- --------- ----
Banking and financial services
Conglomerate
IOI Corporation Berhad ...................................... 70,000 52,430 21,093 0.2
Oil palm, rubber, and cocoa
Sime Darby Berhad ........................................... 10,000 23,946 5,390 0.0
Manufacturing, trading, banking, property,
and heavy equipment
UMW Holdings Berhad ......................................... 45,000 76,422 18,143 0.2
--------- --------- ----
Investment holding company
Total Conglomerate .......................................... 152,798 44,626 0.4
--------- --------- ----
Construction
IJM Corporation Berhad ...................................... 70,000 37,672 21,835 0.2
--------- --------- ----
Cival engineering contracts
Gaming
Berjaya Sports Toto Berhad .................................. 11,000 30,560 7,003 0.1
--------- --------- ----
Forecast games
Telecommunications
Telekom Malaysia Berhad ..................................... 37,000 158,856 47,109 0.6
--------- --------- ----
Telecommunications
Utilities
Tenaga Nasional Berhad ...................................... 42,000 129,926 32,620 0.4
--------- --------- ----
Power supplier
TOTAL INVESTMENTS IN MALAYSIAN EQUITY SECURITIES 652,230 187,951 1.9
--------- --------- ----
NEW ZEALAND EQUITY SECURITIES
Building Materials
Fletcher Challenge Building ................................. 20,000 57,554 19,217 0.2
--------- --------- ----
Building materials
Forest Products and Paper
Carter Holt Harvey .......................................... 46,000 86,092 30,387 0.3
--------- --------- ----
Paper and wood products
Telecommunications
Telecommunications Corp. of New Zealand ..................... 29,000 82,546 111,025 1.2
--------- --------- ----
Telecommunications
TOTAL INVESTMENTS IN NEW ZEALAND EQUITYY SECURITIES 226,192 160,629 1.7
--------- --------- ----
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)
SEPTEMBER 30, 1998
(Unaudited)
% of
Market Net
Shares Cost Value Assets
------ ---- ----- ------
<S> <C> <C> <C> <C>
SINGAPORE EQUITY SECURITIES
Airlines
Singapore Airlines .......................................... 10,000 $ 88,490 $ 54,799 0.6
------------ ----------- ----
International airline
Banking
Development Bank Singapore, Ltd ............................. 20,600 152,789 82,986 0.9
------------ ----------- ----
International bank
Conglomerate
Keppel Corp., Ltd ........................................... 24,750 90,400 29,178 0.3
Shipyards, properties, financial services and engineering
Singapore Technologies Industrial Corp., Ltd . .............. 40,000 69,134 39,100 0.4
------------ ----------- ----
Construction, information technology, logistics,
management, and leisure activities
Total Conglomerate .......................................... 159,534 68,278 0.7
------------ ----------- ----
Electrical and Electronics
Elec & Eltek International Co., Ltd . ....................... 8,000 50,217 39,680 0.4
------------ ----------- ----
Printed circuit boards
Miscellaneous Manufacturing
Venture Manufacturing (Singapore) Ltd . ..................... 12,000 45,949 36,967 0.4
------------ ----------- ----
Contract manufacturing for electronics companies
Publishing and Printing
Singapore Press Holdings, Ltd ............................... 4,000 46,154 33,175 0.3
------------ ----------- ----
Newspapers and magazines
Real Estate
City Development, Ltd . ..................................... 7,000 64,313 15,344 0.2
Property development
DBS Land, Ltd ............................................... 30,000 53,102 20,793 0.2
------------ ----------- ----
Property investment and development
Total Real Estate ........................................... 117,415 36,137 0.4
------------ ----------- ----
Telecommunications
Singapore Telecommunications, Ltd ........................... 60,000 103,051 100,237 1.0
------------ ----------- ----
Basic telecommunications and postal services
TOTAL INVESTMENTS IN SINGAPORE EQUITY SECURITIES 763,599 452,260 4.7
------------ ----------- ----
TOTAL INVESTMENTS IN EQUITY SECURITIES ..................... $ 11,205,957 $ 8,894,130 91.5
------------ ----------- ----
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS--(Continued)
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
% of
Principal Market Net
Amount Cost Value Assets
--------- ---- ----- ------
<S> <C> <C> <C> <C>
NVESTMENTS IN FOREIGN CURRENCIES
Hong Kong Dollar
Standard Chartered Bank,Hong Kong non-interest
bearing call account ..................................... HKD 7 $ 1 $ 1 0.0
Japanese Yen
The Fuji Bank Limited, Tokyo 0.25%-interest
bearing call account ..................................... JPY43,231 320 316 0.0
Malaysian Ringgit
Satndard Chartered Bank Malaysia Berhad, Kuala Lumpur,
non-interest bearing call account ........................ MYR 2,520 599 535 0.0
------------ ----------- ------
TOTAL INVESTMENTS IN FOREIGN CURRENCIES .................... 920 852 0.0
------------ ----------- ------
INVESTMENTS IN SHORT-TERM SECURITIES
State Street Bank and Trust Company, interest bearing
call account 5.25% due 10/l/98 ........................... 804,221 804,221 804,221 8.2
------------ ----------- ------
TOTAL INVESTMENTS IN SHORT-TERM SECURITIES ................. 804,221 804,221 8.2
------------ ----------- ------
TOTAL INVESTMENTS .......................................... 12,011,098 9,699,203 99.7
OTHER ASSETS LESS LIABILITIES, NET ......................... 24,776 25,020 0.3
------------ ----------- ------
NET ASSETS ................................................. $ 12,035,874 $ 9,724,223 100.0
============ =========== ======
</TABLE>
Portfolio securities and foreign currency holdings were translated at the
following exchange rates as of September 30, 1998.
Australian Dollar AUD. 1.688=$1.00
Hong Kong Dollar HKD. 7.75=$1.00
Japanese Yen JPY. 136.605=$1.00
Malaysian Ringgit MYR. 4.713=$1.00
New Zealand Dollar NZD. 1.998=$1.00
Singapore Dollar SGD. 1.688=$1.00
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30,1998
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at market value (cost-$11,205,957) .................................... $8,894,130
Investments in short-term securities, at market value (cost-$804,221) ............................ 804,221
Investments in foreign currency, at market value (cost-$920) ..................................... 852
Receivable for investments sold................................................................... 43,235
Receivable for capital stock sold ................................................................ 15,000
Receivable for dividends and interest, net of withholding taxes .................................. 36,375
Receivable for expense reinvestment .............................................................. 26,622
Prepaid expenses ................................................................................. 9,973
----------
Total Assets ................................................................................ 9,830,408
----------
LIABILITIES:
Payable for capital stock redeemed ............................................................... 6,013
Other accrued expenses ........................................................................... 100,172
----------
Total Liabilities ........................................................................... 106,185
----------
NET ASSETS:
Capital stock (par value of 1, 162,231 shares of capital stock outstanding, authorized
200,000,000, par value $0.10 each) ............................................................. 116,223
Paid-in capital .................................................................................. 16,772,583
Accumulated net realized loss on investments and foreign currency transactions ................... (4,738,715)
Unrealized net depreciation on investments and foreign exchange .................................. (2,311,655)
Accumulated net investment loss .................................................................. (114,213)
----------
Net Assets .................................................................................. $9,724,223
==========
Net asset value, redemption price and offering price per share ................................... $ 8.37
==========
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30,1998
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INCOME:
Dividend income (less $6,918 withholding taxes) ................................ $106,178
Interest income ................................................................ 20,522
------------
Total Income .............................................................. $ 126,700
EXPENSES:
Management fee ................................................................. 44,620
Custodian fee .................................................................. 40,077
Legal fees ..................................................................... 30,012
Auditing and tax reporting fees ................................................ 27,816
Shareholder reports ............................................................ 25,071
Transfer agency fees ........................................................... 25,071
Directors'fees and expenses .................................................... 20,092
Registration fees .............................................................. 7,503
Insurance ...................................................................... 3,147
Miscellaneous .................................................................. 2,745
------------
Total Expenses ............................................................ 226,154
Expense Reinbursement ..................................................... (71,242)
------------
Net Expenses .............................................................. 154,912
------------
INVESTMENT INCOME (LOSS)-NET ................................................... ($28,212)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Realized loss on investments and foreign currency transactions:
Net realized loss on investments................................................ (479,501)
Net realized loss on foreign exchange ......................................... (763,673)
------------
Net realized loss on investments and foreign exchange .......................... (1,243,174)
------------
Change in net unrealized appreciation (depreciation)
on translation of investments, foreign currencies,
other assets and liabilities denominated in foreign currencies................ 189,607
Change in net unrealized depreciation on investments ........................... (1,623,200)
------------
Net realized and unrealized gain (loss) on investments and foreign
exchange transactions......................................................... (2,676,767)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ ($2,704,979)
============
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
September 30,1998 Ended
(Unaudited) March 31,1998
----------------- -------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment loss ....................................................... $ (28,212) $ (101,642)
Net realized loss on investments .......................................... (479,501) (1,189,233)
Net realized loss on foreign currencies ................................... (763,673) (1,479,215)
Change in unrealized appreciation (depreciation) on investments
and foreign currency ................................................. (1,433,593) (1,691,156)
----------------- -------------
Decrease in net assets derived from investment activities ................. (2,704,979) (4,461,246)
----------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from continuous offering ......................................... 63,644 1,592,510
Net asset value of shares issued to shareholders on reinvestment
of dividends and distributions ....................................... -- 76,483
Cost of shares redeemed ................................................... (1,370,191) (5,499,073)
----------------- -------------
Decrease in net assets derived from capital share transactions ............ (1,306,547) (3,830,080)
----------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ..................................................... -- (57,437)
Realized gains on investments and foreign currencies ...................... -- (43,078)
----------------- -------------
Decrease in net assets derived from distributions to shareholders ......... -- (100,515)
----------------- -------------
Net decrease in net assets ................................................ (4,011,526) (8,391,841)
NET ASSETS:
Beginning of period ....................................................... 13,735,749 22,127,590
----------------- -------------
End of period (including accumulated net investment losses of
$114,213 and $86,001, respectively) .................................. $ 9,724,223 13,735,749
================= =============
SHARE ACTIVITY:
Shares offered on continuous offering ..................................... 6,809 117,523
Shares issued to shareholders on reinvestment of net investment
income and realized gain on investments .............................. -- 7,155
Shares redeemed during the period ......................................... (138,784) (438,381)
----------------- -------------
Net shares redeemed during the period ..................................... (131,975) (313,703)
Shares outstanding at beginning of period ................................. 1,294,206 1,607,909
----------------- -------------
Shares outstanding at end of period ....................................... 1,162,231 1,294,206
================= =============
</TABLE>
See notes to financial statements
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 the 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 other 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 September 30, 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) 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 in come or net realized gains for financial reporting
purposes, but not for tax purposes, are reported as distributions in excess of
net investment income.
(d) Capital Account Reclassification-For the year ended March 31, 1998, the
Fund 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 in
vestments in passive foreign investment companies.
(e) 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
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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.
(f) 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 TRANS- ACTIONS WITH AFFILIATED PERSONS
Nomura Asset Management U.S.A. 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 Asset Management Co., Ltd. ("NAM") and Nomura Asset
Management Singapore Limited- ("NAM 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, 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
$44,620 for the six months ended September 30, 1998 (see voluntary expense
reimbursement arrangement as described below). For the six months ended
September 30, 1998, the Manager informed the Fund that no payments were made to
NAM, NAM-Singapore and NSI, due to the voluntary expense reimbursement
arrangement. At September 30, 1998, the fee payable to the Manager, by the Fund,
was $0.
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. Under the voluntary
reimbursement arrangement, the Fund has recorded expense reimbursement of
$71,242 for the six months ended September 30, 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 $1,239 in
commissions on the execution of portfolio security transactions for the six
months ended September 30, 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 $20,092 for the six months ended September 30, 1998.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments for the six months ended September 30,
1998, exclusive of investments in foreign currencies and short term securities,
were $2,392,477 and $3,096,488 respectively.
As of September 30, 1998, net unrealized depreciation on investments,
exclusive of investments in foreign currencies and short-term securities, for
Federal income tax purposes was $2,311,827 of which $577,928 related to
appreciated securities and $2,889,755 related to depreciated securities. The
aggregate cost of investments, exclusive of investments in foreign currencies
and short-term securities, at September 30, 1998 for Federal income tax purposes
was $11,205,957. The Fund has a capital loss carryforward as of March 31, 1998
of $1,097,538 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 currency losses of $0 to the taxable 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
SIX MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED MARCH 31
1998 -------------------------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period:.. $10.61 $13.76 $16.52 $15.07 $18.07 $14.33 $12.49 $15.19 $15.36 $19.15 $20.59
Income from investment operations:
Net Investment income (loss) ........ (0.02)+ (0.07)+ (0.14)+ (0.04)+ (0.01)+ (0.01)+ --+ --+ 0.04 0.08 0.03
Net realized and unrealized gain (loss)
on invesbmnts and foreign currencies (2.22)+ (3.01)+ (0.87)+ 2.07+ (0.74)+ 4.03t 1.87t (1.84)+ 2.53 0.20 (0.21)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total from investment operations .... (2.24)+ (3.08)+ (1.01)+ 2.03+ (0.75)+ 4.02t 1.87t (1.84)+ 2.57 0.28 (0.18)
Distributions to shareholders from:
Net investment income ............... -- (0.04) (0.28) -- -- (0.05) (0.02) (0.01) (0.04) (0.10) (0.05)
Net realized capital gains .......... -- (0.03) (1.47) (0.58) (2.25) (0.21) (0.01) (0.85) (2.70) (3.97) (1.21)
In excess of net investment income... -- -- -- -- -- (0.02) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total distributions .................. -- (0.07) (1.75) (0.58) (2.25) (0.28) (0.03) (0.86) (2.74) (4.07) (1.26)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of period ....... $8.37 $10.61 $13.76 $16.52 $15.07 $18.07 $14.33 $12.49 $15.19 $15.36 $19.15
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== =======
Total investment return .............. (21.1%) (22.4%) (6.9%) 13.7% (4.2%) 28.2% 15.0% (12.9%) 17.4% (1.7%) (0.9%)
Ratio to average net assets/supplemental data:
Net assets, end of period (000) ..... $9,724 $13,736 $22,128 $34,022 $42,684 $55,060 $46,095 $43,203 $54,274 $53,933 $73,169
Operating expenses net of
reimbursement ...................... 2.47%* 2.49% 2.21% 1.78% 1.38% 1.39% 1.51% 1.46% 1.42% 1.32% 1.25%
Total expenses ...................... 3.60%* 2.91% 2.21% 1.78% 1.38% 1.39% 1.51% 1.46% 1.42% 1.32% 1.25%
Net investment income ............... (1.14%)* (0.55%) (0.87%) (0.28%) (0.07%) (0.10%) 0.01% 0.00% 0.28% 0.40% 0.07%
Portfolio turnover .................. 23% 45% 62% 45% 49% 76% 55% 41% 76% 46% 37%
Average commissions per share paid on
equity transactions** .............. $0.0232 $0.0265 $0.0146 -- -- -- -- -- -- -- --
</TABLE>
_____________
+Based on average shares outstanding.
*Annualized
**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.
<PAGE>
BOARD OF DIRECTORS _________________________________
William G. Barker Jr. _________________________________
George H. Chittenden
Haruo Sawada
Chor Weng Tan
Arthur R. Taylor
John F. Wallace
OFFICERS
Haruo Sawada, President
Mitsutoyo Kohno, Vice President
John F. Wallace, Vice President NOMURA
John J. Boretti, Secretary and Treasurer
Terence R Brennan, Assistant Secretary and Pacific Basin
Assistant Treasurer
Fund, Inc.
MANAGER
Nomura Asset Management U.S.A. Inc.
180 Maiden lane
New York, New York 10038-4936
INTERNET ADDRESS
www.nomura-asset.com
INVESTMENT ADVISERS
Nomura Asset Management Co., Ltd.
2-1-14 Nihonbashi, Chuo-ku,
Tokyo 103-8260, Japan
Nomura Asset Management Singapore Limited
6 Battery Road
Singapore 049909
DISTRIBUTOR
Nomura Securities International, Inc. SEMI-ANNUAL REPORT
2-World Financial Center
New York, New York 10281-1198
CUSTODIAN AND SHAREHOLDER SERVICING AGENT SEPTEMBER 30, 1998
State Street Bank and Trust Company
P.O. Box 8500
Boston, Massachusetts 02266-8500
COUNSEL
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
INDEPENDENT ACCOUNTANTS [LOGO]
PricewaterhouseCoopers 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.
The accompanying Financial Statements,
including the Schedule of investments,
have not been examined by the Fund's
independent accountants, Pricewaterhouse-
Coopers, LLP, and accordingly they
express no opinion thereon. --------------------------------------
--------------------------------------
