NOMURA PACIFIC BASIN FUND, INC.
May 26, 1999
To Our Shareholders:
We present the Annual Report of the Nomura Pacific Basin Fund, Inc. (the
"Fund") for the fiscal year ended March 31, 1999.
The Net Asset Value per Share ("NAV") of the Fund as of March 31, 1999
was $11.63.
The NAV of the Fund increased by 11.2% for the quarter ended March 31,
1999 and 9.6% for the year then ended, based on the change in share prices.
The net assets of the Fund aggregated $12,725,074 as of March 31, 1999.
The average annual total return of the Fund for the five-year and
ten-year periods ended March 31, 1999 and since inception (July 8,1985) were
(3.1%), 2.5%, and 10.9%, 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 11.3% and by 10.7% for the quarter and the year ended
March 31, 1999, respectively. The Fund underperformed the MSCI Index by 0.1%
and 1.1% for the quarter and year ended March 31, 1999, respectively. The
underperformance was attributable to negative country allocation in Malaysia
and Singapore reduced by positive stock selection in Japan's Export/High
Technology sector and Australia's Financial sector.
The foreign exchange rate of the Japanese yen at March 31, 1999 was
118.415 Japanese yen to one U.S. dollar. The Japanese yen depreciated by 4.5%
and appreciated by 11.3% against the U.S. dollar for the quarter and the year
ended March 31, 1999, 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 25, 1999 was $11.98.
The Portfolio
The country allocation of the Fund remained unchanged during the quarter,
continuing to be underexposed to Southeast Asia. Despite a strong surge in
Southeast Asian stock markets, there were few accompanying improvements in
economic fundamentals. While currency and inflation have become more stable,
unemployment and non-performing loan rates have not reached their peaks,
hampering recoveries in domestic economies. The Fund continued to favor
Australia. Despite the sluggish economies among its major trading partners and
weak commodity prices, Australia recorded a remarkably strong economic growth
figure, supported by buoyant domestic consumption. Meanwhile, the Fund
increased its exposure to Japan, albeit very modestly, as bank
re-capitalization and serious corporate restructuring efforts have finally
begun to take place.
The Stock Market
Stock markets in the Pacific Basin stabilized near their three month
highs in the quarter ended March 31, 1999. This came in the wake of a
substantial increase in stock prices supported by the strength of the Dow
Jones Industrial Average, which exceeded the 10,000 level for the first time.
There were two notable developments unfolding in the Asian markets during this
period.
First, the substantial rally in the Japanese stock market was one of the
most striking features of the first quarter. The gains came in clear
contradiction of earlier fears that the fiscal year end in Japan would bring
extensive selling of stocks by institutions intent on unloading their cross
shareholdings. The Nikkei Average Index, (a price weighted index of 225
leading stocks in the Tokyo Stock Exchange (the "TSE"), increased nearly 20%
in the quarter, mirroring investor perceptions, especially among foreign
buyers, that the Bank of Japan's policy had finally shifted in favor of the
"monetization" of government debt. This may lead to the weakening of the
Japanese yen, which could in turn undercut the economy. The stock market was
also buoyed by the recognition that the beleaguered Japanese banking system is
nearly over the worst of the crisis, while Japanese corporations appear to be
embracing meaningful measures, as illustrated by the example of Sony Corp.
While these perceptions are partly based on rather naive assumptions,
suggesting that some disappointments are likely at a later stage, it is
important to note that the Japanese market has, for the first time in nine
years, reacted in such a positive manner to structural changes. Nevertheless,
not all investors are fully convinced. The recent strength can be sustained as
long as the stock market perceives that the Japanese government and companies
are taking the right steps. Meanwhile, the recovery of the Japanese market has
strengthened the feeling that Asian stock markets have almost cleared the
worst phase of their current economic predicament, and the aftermath of the
market collapse in mid 1997.
The Hong Kong stock market enjoyed an unexpectedly strong rebound, with
the Hang Seng Index breaching the 10,000 level. The rally was triggered by
reports of Hong Kong being the favored site for a future Disneyland
development, coupled with diminishing concern over the property market due to
recent improvement in presale figures. The rally, however, is expected to
encounter some difficulties. Primarily, Hong Kong interest rates are unlikely
to decline much further from the current level, given the robust growth of the
U.S. economy; while secondly, the Chinese economy, despite a significant
increase in government fiscal priming, is expected to face intensifying
deflationary pressure. China remains troubled by stagnating personal
consumption, depressed exports, and foreign investment inflows hampered by the
Guangdong International Trust & Investment Corp. default.
Elsewhere in Southeast Asia, signals are mixed. There are some
encouraging signs, indicating a return to currency stability, controlled
inflation, and monetary discipline. Meanwhile, economic fundamentals remain
depressed, as shown by the high unemployment figures in many countries. At the
same time, structural reforms also appear to be progressing gradually. South
Korea and Thailand, for instance, are endeavoring to stabilize their financial
systems, and stock markets are being encouraged by these efforts despite their
limited success. With the reform process under way, credit rating agencies
have now moved toward upgrading their outlook for Malaysia, following an
upward re-rating of South Korea in January.
The Investment Outlook and Strategy
Japan
The TOPIX, consisting of all companies listed on the TSE, rose by 16.6%
during the quarter. Large-scale buying by foreign investors was encouraged by
some positive changes, including a shift in monetary policy, a series of
aggressive restructuring announcements by major companies, and the injection
of public funds to re-capitalize the banking system.
The stock market bottomed out in early January and staged a modest
rebound toward early March as the drastic decreases in the U.S. dollar and
Japanese government bond market were reversed. Meanwhile, the Financial
Recovery Committee ("FRC") urged major banks to apply for public funds to
enhance their capital base. The FRC requested that banks take a more
aggressive attitude writing off bad loans to justify such an unprecedented
injection of tax payers' money. The intake of public funds triggered a massive
buyback of bank shares and helped to increase the TSE. There were other
announcements of aggressive restructuring plans involving companies such as
Sony Corporation, Nippon Paper Industries Co., Ltd., and Mitsubishi Gas
Chemical, Co., Inc.
Early in March, the Bank of Japan decided to ease monetary policy
further, thereby leading the unsecured overnight call rate down to an
effective zero rate. This move helped to stabilize the currency and the bond
markets, and provided further support for the nascent stock market rally.
The latest corporate restructuring announcements also represent an
encouraging development, as they should lead to meaningful cost reductions and
the elimination of excess production capacity. There are some signs that the
economy is bottoming out, as the decline in industrial production halted
during the quarter and inventory adjustment has been progressing. However, the
Fund believes the economic prospects for the second half of this year should
be viewed with caution.
Australia
The Australian stock market increased by 3.3% in March and 5.5% during
the quarter. The strong performance of the Banking sector and The Broken Hill
Proprietary Co., Ltd. ("BHP") underpinned the rally. The Banking sector
rallied 14.2% as investors focussed on the solid fundamentals and the buoyant
Australian economy. BHP benefited from higher oil prices, recovery
expectations in Japan and the restructuring announcements. Cyclical Industrial
sectors, which had performed so strongly in February, were among the weakest
sectors in March and throughout the quarter.
Ten year bonds weakened by 62 basis points during the quarter to 5.6% as
economic expectations improved globally, and the spread between Australian
bonds and their U.S. counterparts widened to 38 basis points. The Australian
dollar rallied in March by $0.0163 to $0.6351 to one U.S. dollar.
Domestic economic momentum remains positive, with fourth quarter Gross
Domestic Product ("GDP") figures again highlighting Australia's strong growth
performance. GDP rose 1.1% in the quarter ended December 31, 1998, giving 4.7%
growth in 1998. The consequence of a buoyant economy when Australia's regional
trading partners are in near recession is that the current account will
deteriorate. This looms as the main investment risk given the implications for
the Australian dollar and interest rates.
The Australian market still offers value at current interest rates.
Aggregate earnings growth during the most recent reporting season exceeded
expectations for Industrial companies by 3.6%, (Resources produced a negative
surprise of 4%, but they now account for only 13.5% of the index compared with
30% three years ago.) The Fund remains underweight in the Cyclical sectors, in
favor of Financials (in particular the Banking sector). The Banking sector is
expected to outperform as the combination of earnings visibility and
attractive fundamentals continues to attract investors.
Hong Kong
Renewed pressure on the Chinese Renminbi, caused by International Trust &
Investment Corp. ("ITIC") problems, boosted Hong Kong's interest rates and
weakened the stock market in January and February. Hong Kong Shanghai Banking
Corp.'s ("HSBC's") positive decision to list on the New York Stock Exchange,
news of an expansionary budget for next fiscal year, and the absence of
disappointing results announcements, improved sentiment in March. Hutchison
Whampoa, Ltd. and Chueng Kong were driven by speculation that aggressive fund
raising is related to a major overseas acquisition. Hong Kong
Telecommunications, Ltd. is expected to become the largest beneficiary of the
joint venture with Microsoft Corp. and the Cyberport project, which also
fueled speculative interest among investors.
In the budget for fiscal year 1999, the government revealed concrete
steps to stimulate the economy in general and private consumption in
particular. These include short-term reflationary measures, such as a 10%
rebate of fiscal year 1998 taxes. They will also address strategic areas,
including tourism, technology and shipping. To achieve this, the government
is promoting a Disney development in Hong Kong, construction of Fisherman's
Wharf, and the proposed Cyberport development. To minimize the deficit, the
government will resume land sales, reduce its equity holdings and encourage
privatization, starting with the Mass Transit Railway in 2000. Nonetheless,
the fiscal deficit is expected to swell to 36 billion Hong Kong dollars in
fiscal year 1999, but this can still be covered by Hong Kong's cumulative
fiscal surpluses.
Fundamentals remain depressed. Unemployment and bankruptcy numbers are
increasing, while deflationary pressure continues, and savings rates grow.
The ample bank liquidity is leading to a price war in the mortgage loan
market, forcing banks to reduce their prime rate.
Malaysia
The Malaysian stock market reversed the strong performance of the
previous quarter, declining by 14.2% in the quarter ended March 31, 1999. The
market held up relatively well in January, amid talk of a new exit tax system
to replace the capital controls implemented last September. However, after
this new exit tax system was introduced in February, some foreign investors
used the opportunity to eliminate their Malaysian equity exposure, pulling the
market down as a result.
Malaysia's GDP contracted by 6.7% in 1998, very much in line with
expectations. The Central Bank forecasts growth of between 1% and 2% in 1999,
with an acceleration in the second half of this year. Inflation increased 5.3%
in 1998 and the country's current account surplus surged to 36.1 billion
Malaysian Ringgits. The Central Bank expects inflation to decline below 4%
with a continuing current account surplus. Industrial production remains weak,
declining by 11.2% year-over-year in January, largely due to a collapse in
domestic demand while exports (in U.S. dollar terms) have resumed positive
growth since October 1998. In fact, exports of electronics and electrical
products jumped 22.7% in January, 1999.
Meanwhile, other than the appointment of the new Deputy Prime Minister
and Finance Minister in January, the other major political event was the
victory of the ruling coalition Barisan Nasional in the Sabah state election,
taking 31 out of the 48 seats (one seat short of the two-thirds majority).
The stock market is unlikely to stage a dramatic recovery until Morgan
Stanley Capital International Index reinstates Malaysia in its benchmark
indices. Given that the private lending arm of the World Bank will restore
Malaysia to its International Finance Corporation ("IFC") Investible Composite
Index and IFC Investible Asia Index, effective November 1, 1999, the
likelihood that it will be reinstated is getting higher. Hence, downside risk
should be limited at current levels.
New Zealand
New Zealand stocks gained 3.8% in the quarter. Toward the quarter end,
however, Telecommunications Corp. of New Zealand led the market lower ahead
of the liquidity call from its second installment. The upcoming privatization
of Contact Energy, Ltd. ("Contact Energy") also capped market momentum.
The Reserve Bank of New Zealand ("RBNZ") dropped the Monetary Conditions
Index in favor of a more conventional Official Cash Rate ("OCR") for
signaling monetary policy. The OCR was set at a slightly higher than expected
4.5% and gave a benign assessment of the economy. RBNZ expects the OCR to
remain steady over the next few quarters due to the tame inflationary outlook.
Ten year government bonds ended March at 5.81%, a 56 basis points spread
over U.S. Treasuries. Positive economic data caused an increase of the ten
year yields by 35 basis points during the quarter. The New Zealand dollar
rose, $0.01, ending March at $0.5350 to one U.S. dollar.
In the quarter ended December 31, 1998 GDP growth decreased 0.7%
quarter-on-quarter, down 0.4% year-on-year, while the current account deficit
narrowed to bring the annual deficit down to a better than expected 6.0% of
GDP. Although positive, this remains an issue as the economy recovers.
The market appears slightly overvalued at current interest rates. In the
near term, some activity is likely ahead of the Contact Energy, Ltd.
privatization. Investors will also focus on increasing political uncertainty.
The governing National Party has regained a lead in the polls for the first
time in several months. The Fund still prefers domestically focused companies
given the better consumer sentiment and recent GDP improvements.
Singapore
The Straits Times Index ranged between 1300 and 1550 points during the
first quarter, ending at 1,518 with a 9% gain. January's interest rate driven
rally led by bank and property stocks stalled in February when rates hit
downside resistance. Anxiety over the possible merger of local and foreign
listings, issuance of call options on locally listed bank shares, and an
overhang in Development Bank of Singapore, Ltd. ("DBS") (Foreign) from a
Temasek offering, all helped to reduce momentum. The budget brought few
surprises and trade figures for January and February were weak.
However, the government later hinted at a possible second half recovery
in trade and GDP. Although aggregate corporate profits decreased by almost
90% year-over-year, banks would not have to repeat the huge bad debt
provisions. Discussions of recoveries as early as this year raised hopes that
the worst might be over. Car sales and mortgage rate competition signaled a
return of domestic confidence.
The real estate price recovery has spread, increasing market activities,
with some developers making block acquisitions. The Fund estimates that
residential prices have risen 5% to 15% off their lows. New unit sales this
year should exceed 7,000.
Weak exports and a declining Japanese yen weakened the Singapore dollar
to 1.725 from 1.65 to one U.S. dollar. Negative consumer price inflation and
relatively high real interest rates suggest that a weaker currency may be
tolerated. Although non-oil exports fell short of expectations, industrial
production expanded strongly, consistent with rising non-oil retained imports.
U.S. dollar based exports posted a smaller year-on-year decline.
Retained imports and business surveys offer initial signs that the
economy is bottoming. Home and car sales signal a nascent recovery in
confidence, and a second half recovery is possible. Improvements in Malaysia's
economy are positive, but the more positive assessment of Indonesian risk is
being discounted gradually.
Investment Strategy
While the problems in Southeast Asia are far from over and it will take a
few more years for their economies to recover to a normal economic growth
path, the Fund should not miss any indications of a change in trend. Under
these circumstances, the Fund feels it is now time to take a somewhat less
cautious approach to Asian equity exposures.
As for the Japanese stocks, the Fund has decided to alter its sector
allocation strategy slightly by reducing exposure to the Pharmaceutical/
information and Utilities sectors and increasing exposure to the Financial and
Capital Investments sectors. This change is aimed at reducing the defensive
character of the portfolio and making it more aggressive. On the Financial
sector, the worst seems to be over now for the banking stocks with the recent
injection of public money for recapitalization. In addition, the recent stance
taken by the Financial Supervisory Agency ("FSA"), requiring tougher disclosure
standards and stringent restructuring plans by banks will help to restore
credibility into the banking system and improve their profitability in the
medium to long term.
Stock selection will focus on those companies that undertake serious
restructuring and pay more attention to shareholder value.
New Classes of Shares
Beginning in late July 1999, the Fund expects to offer three classes of
shares as part of a new distribution program designed to offer the Fund to a
wider range of investors. These shares will be designated Class A, B and Z
shares. Each class of shares will have different sales charge arrangements and
bear different on-going expenses. To permit existing shareholders to continue
to purchase shares of the Fund on a no-load basis, shares of the Fund
outstanding on June 17, 1999 will be designated Class Z shares and holders of
these shares will be eligible to purchase additional Class Z shares in the
future without a sales charge.
Management of the Fund believes that the new classes will benefit the
Fund by enhancing its marketing program. The changes will not affect existing
shareholders and Management urges any shareholder with questions to call the
Fund at its toll-free number (1-800-833-0018).
We appreciate your continuing support of your Fund.
Sincerely,
Haruo Sawada
President
The Board of Directors and officers of the Nomura Pacific Basin Fund,
Inc. take this opportunity to express their appreciation to Mr. Haruo Sawada,
who has been reassigned, effective May 31, 1999, to new duties at Nomura Asset
Management Co., Ltd. ("NAM"). Mr. Sawada has served as President of Nomura
Asset Management U.S.A. Inc., the Fund's manager ("Manager") and President and
Portfolio Manager of the Fund since 1997.
The Board of Directors of the Fund has elected Mr. Nobuo Katayama to
serve as the President of the Fund and a member of its Board of Directors. Mr.
Katayama, who will succeed Mr. Sawada as President of the Manager, will also
act as Portfolio Manager of the Fund, effective June 1, 1999. Mr. Katayama has
been Marketing Officer of NAM, the parent company of the Manager, since 1997.
Mr. Katayama served as Director and Chief Portfolio Manager of NAM from 1993
to 1997.
NAM provides investment recommendations to the Manager regarding the
Fund's portfolio. As Portfolio Manager for the Fund and President of the
Manager, Mr. Katayama will be primarily responsible for the day-to-day
portfolio management of the Fund.
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.
Year 2000 Issues. Many computer systems were designed using only two
digits to designate years. These systems may not be able to distinguish
the Year 2000 from the Year 1900 (commonly known as the "Year 2000 Problem").
Like other investment companies and financial and business organizations, the
Fund could be adversely affected if the computer systems used by Nomura
Asset Management U.S.A. Inc. ("NAM-U.S.A.") or other Fund service providers do
not properly address this problem prior to January 1, 2000. NAM-U.S.A. has
hired consultants to analyze these issues and to implement any system
modifications necessary to prepare for the Year 2000. In addition, NAM-U.S.A.
has sought assurances from the Fund's other service providers that they are
taking all necessary steps to ensure that their computer systems will
accurately reflect the Year 2000, and NAM-U.S.A. will continue to monitor the
situation. However, no assurance can be given that the Fund's service
providers have anticipated every step necessary to avoid any adverse effect on
the Fund attributable to the Year 2000 Problem.
In addition, the companies in which the Fund invests, the markets for
their securities and related securities trade processing could be adversely
affected by the Year 2000 Problem. If the value of a Fund investment is
adversely affected by a Year 2000 Problem, the Fund's investment return will
be reduced.
INTERNET WEBSITE
NAM-U.S.A. (the "Manager") has established an Internet website which
highlights the Manager's history, its investment philosophy and process and
products, which includes the Fund. The Internet web address is
www.nomura-asset.com. We invite you to view the Internet website.
<PAGE>
NOMURA PACIFIC BASIN FUND, INC.
FUND HIGHLIGHTS-MARCH 31,1999
(Unaudited)
KEY STATISTICS
Net Assets ..............................................$12,725,074
Net Asset Value per Share ....................................$11.63
PERFORMANCE COMPARISON CHART AND TABLE
Average Annual Total Return:*
Year Ended 3/31/99 .............................................9.6%
Five Years Ended 3/31/99 .....................................(3.1%)
Ten Years Ended 3/31/99 ........................................2.5%
Since Inception (7/8/85 to 3/31/99) ...........................10.9%
Cumulative Total Return:*
Five Years Ended 3/31/99 ....................................(14.4%)
Ten Years Ended 3/31/99 .......................................27.8%
Since Inception (7/8/85 to 3/31/99) ..........................323.1%
- ---------
* 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.
[GRAPHIC OMITTED]
-------------------------------------------------------------
Nomura Pacific Basin Fund, Inc. MSCI Pacific Basin Index
....................... ...................
-------------------------------------------------------------
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, New Zealand and Singapore. The
combined market capitalization represents about 60% of the average market
value of the stock exchanges of the above five countries. The performance data
of the Index included dividends reinvested.
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
FUND HIGHLIGHT-(Continued)
MARCH 31,1999
(Unaudited)
GEOGRAPHICAL ALLOCATION:
% of Net Assets
----------------------------------
Cash and % of
Equities Cash Equivalents Total MSCI Index+
-------- ---------------- ------- -------------
<S> <C> <C> <C> <C>
Japan.......................... 48.1 -- 48.1 79.5
Australia ..................... 22.9 -- 22.9 9.7
Hong Kong ..................... 13.8 -- 13.8 7.3
Malaysia ...................... 2.2 -- 2.2 -
New Zealand ................... 1.3 -- 1.3 1.0
Singapore ..................... 4.9 -- 4.9 2.5
United States ................. -- 6.4 6.4 --
------ ----- ------ -----
Total Investments ............. 93.2 6.4 99.6 100.0
Other Assets Less Liabilities, Net.. 0.4 --
------ -----
Total ...................... 100.0 100.0
======== =====
- -----------
+ Source: Morgan Stanley Capital International Pacific Basin Index (an unmanaged
index).
</TABLE>
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION
% of % of
Net Assets Net Assets
----------- ----------
<S> <C> <C> <C>
Japanese Securities Hong Kong Securities
Consumer Electronics and Parts... 4.4 Conglomerate................... 4.4
Banking and Insurance ........... 4.1 Utilities ..................... 2.7
Electrical and Electronics....... 4.1 Real Estate.................... 2.4
Telecommunications .............. 4.0 Banking ....................... 2.1
Electrical Machinery ............ 3.8 Telecommunications ............ 1.8
Chemicals and Pharmaceuticals.... 3.6 Electrical and Electronics..... 0.4
Motor Vehicles .................. 3.6 Malaysian Securities
Miscellaneous Manufacturing...... 2.9 Conglomerate................... 0.6
Construction .................... 2.7 Banking ...................... 0.5
Wholesale ....................... 2.1 Telecommunications ............ 0.4
Information and Software ........ 1.8 Utilities ..................... 0.4
Retail .......................... 1.8 Construction .................. 0.2
Food and Beverage ............... 1.7 Gaming ........................ 0.1
Iron and Steel .................. 1.6 New Zealand Securities
Commerce ........................ 1.5 Telecommunications ............ 1.1
Precision Machinery ............. 1.5 Forest Products and Paper ..... 0.2
Textiles and Apparel ............ 1.0 Singapore Securities
Financials ...................... 0.7 Banking ....................... 1.1
Non-Ferrous Metals .............. 0.7 Conglomerate .................. 1.0
Shipbuilding .................... 0.5 Telecommunications ............ 0.7
Australian Securities Real Estate ................... 0.6
Banking ......................... 7.8 Airlines ...................... 0.5
Non-Ferrous Metals .............. 3.6 Miscellaneous Manufacturing ... 0.4
Telecommunications .............. 3.2 Electrical and Electronics .... 0.3
Financials ...................... 2.0 Publishing and Printing ....... 0.3
Publishing and Printing ......... 1.6
Oil and Gas ..................... 1.4
Retail .......................... 0.9
Food and Beverage ............... 0.8
Miscellaneous Manufacturing...... 0.8
Transportation .................. 0.8
</TABLE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
FUND HIGHLIGHTS-(Continued)
MARCH 31,1999
TEN LARGEST EQUITY HOLDINGS BY MARKET VALUE:
Market % of
Security Value Net Assets
- -------- ----- ----------
<S> <C> <C>
National Australia Bank, Ltd. ........................ $676,282 5.3
Hutchison Whampoa, Ltd. .............................. 558,875 4.4
Telstra Corporation, Ltd. ............................ 413,558 3.2
The Broken Hill Proprietary Co., Ltd. ................ 283,301 2.2
Sun Hung Kai Properties, Ltd. ........................ 269,437 2.1
Nippon Telegraph and Telephone Corp. ................. 264,493 2.1
Hong Kong & Shanghai Banking Corp. ................... 263,398 2.1
Hong Kong Telecommunications, Ltd. ................... 232,575 1.8
Toyota Motor Corp. ................................... 231,728 1.8
Fuji Soft ABC, Inc. .................................. 229,722 1.8
</TABLE>
- -------------------------------------------------------------------------------
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, 1999, the results of its op-
erations 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, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
May 11, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*
MARCH 31,1999
Market % of Net
Shares Cost Value Assets
------ ------ ----- ------
<S> <C> <C> <C> <C>
JAPANESE EQUITY SECURITIES
BANKING AND INSURANCE
The Bank of Tokyo-Mitsubishi, Ltd. ............ 12,450 $ 190,131 $ 171,586 1.3
Commercial bank
The Dai-ichi Kangyo Bank, Ltd. ................ 19,000 144,581 126,758 1.0
City bank
The Sanwa Bank, Ltd. .......................... 17,000 151,167 184,478 1.5
City bank
The Tokio Marine & Fire Insurance Co., Ltd. ... 3,000 35,174 34,227 0.3
--------- -------- ----
Non-life insurance
Total Banking and Insurance ................... 521,053 517,049 4.1
--------- -------- ----
CHEMICALS AND PHARMACEUTICALS
Mitsubishi Gas Chemical Co., Ltd. ............. 45,000 135,507 126,166 1.0
Basic chemicals
Nippon Soda Co., Ltd. ......................... 16,000 106,023 69,451 0.6
Chemical products
Sankyo Co., Ltd. .............................. 3,000 66,294 64,350 0.5
Pharmaceuticals
Shin-Etsu Chemical Co., Ltd. .................. 3,000 60,400 78,791 0.6
Synthetic resins
Takeda Chemical Industries, Ltd. .............. 3,000 67,045 116,286 0.9
--------- -------- ----
Pharmaceuticals
Total Chemicals and Pharmaceuticals ........... 435,269 455,044 3.6
--------- -------- ----
COMMERCE
Ito-Yokado Co., Ltd. .......................... 2,000 115,988 128,700 1.0
Supermarkets
Mitsui & Co., Ltd. ............................ 5,000 43,499 33,822 0.3
General trader
Sangetsu Co., Ltd . ........................... 2,000 28,846 32,090 0.2
--------- -------- ----
Wall interiors and carpets
Total Commerce ................................ 188,333 194,612 1.5
--------- -------- ----
CONSTRUCTION
Nippon COMSYS Corporation ..................... 9,000 105,177 126,166 1.0
Telecommunication engineering
Obayashi Corporation .......................... 12,000 49,266 66,883 0.5
General contractor
Toda Corp. . .................................. 29,000 137,514 156,737 1.2
--------- -------- ----
General contractor
Total Construction ............................ 291,957 349,786 2.7
--------- -------- ----
CONSUMER ELECTRONICS AND PARTS
Sony Corp. .................................... 1,600 89,175 147,954 1.2
Consumer electronics
Sanken Electric Co., Ltd. ..................... 15,000 85,788 89,938 0.7
Semiconductor devices
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*-(Continued)
MARCH 31,1999
% of
Market Net
Shares Cost Value Assets
------ ------ ----- ------
<S> <C> <C> <C> <C>
Taiyo Yuden Co., Ltd. ........................... 12,000 $ 127,383 $ 155,555 1.2
Ceramic capacitors
TDK Corporation ................................. 2,000 102,747 161,973 1.3
--------- ------- ----
Magnetic tapes
Total Consumer Electronics and Parts ............ 405,093 555,420 4.4
--------- ------- ----
ELECTRICAL AND ELECTRONICS
Advantest Corp. ................................. 2,800 182,505 213,993 1.7
Semiconductor testing equipment
Matsushita Electric Industrial Co., Ltd. ........ 2,000 33,558 39,015 0.3
Videos, home systems and industrial equipment
Rohm Company .................................... 1,000 64,689 119,495 0.9
Custom integrated circuits
Tokyo Electron, Ltd. ............................ 2,800 89,764 144,948 1.2
--------- ------- ----
Electric wires and cables
Total Electrical and Electronics ................ 370,516 517,451 4.1
--------- ------- ----
ELECTRICAL MACHINERY
Fujitsu Ltd. .................................... 9,000 117,128 144,559 1.2
Computers
Minebea Co., Ltd. ............................... 15,000 152,668 155,048 1.2
Miniature bearings
NEC Corporation ................................. 15,000 127,400 180,509 1.4
--------- ------- ----
Computers, telecommunication devices, electric
appliances and circuit boards
Total Electrical Machinery ...................... 397,196 480,116 3.8
--------- ------- ----
FINANCIALS
Hitachi Credit Corporation ...................... 4,500 75,267 89,305 0.7
--------- ------- ----
Consumer financing services
FOOD AND BEVERAGE
Kikkoman Corp. .................................. 17,000 91,207 115,999 0.9
Soy sauce
Meiji Seika ..................................... 23,000 94,021 102,943 0.8
--------- ------- ----
Confectionery
Total Food and Beverage ......................... 185,228 218,942 1.7
--------- ------- ----
INFORMATION AND SOFTWARE
Fuji Soft ABC, Inc. ............................. 3,510 89,825 229,722 1.8
--------- ------- ----
Computer systems development
IRON AND STEEL
Nippon Steel Corp. .............................. 70,000 122,591 143,647 1.1
Steelmaker
Yodogawa Steel Works, Ltd. ...................... 15,000 60,221 57,637 0.5
--------- ------- ----
Steelmaker
Total Iron and Steel ............................ 182,812 201,284 1.6
--------- ------- ----
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*-(Continued)
MARCH 31,1999
% of
Market Net
Shares Cost Value Assets
------ ------ ----- ------
<S> <C> <C> <C> <C>
MISCELLANEOUS MANUFACTURING
Onward Kashiyama Co., Ltd. ...................... 6,000 $ 88,371 $ 71,190 0.6
Ready-made suits
Shiseido Co., Ltd. .............................. 6,000 67,839 83,098 0.6
Cosmetic and toiletry products
SMC Corporation ................................. 1,000 79,181 89,516 0.7
Pneumatic equipment
Taiheiyo Cement Corporation ..................... 44,000 101,763 124,477 1.0
--------- ------- ----
Cement
Total Miscellaneous Manufacturing ............... 337,154 368,281 2.9
--------- ------- ----
MOTOR VEHICLES
Honda Motor Co., Ltd. ........................... 5,000 147,738 225,900 1.8
Motorcycles, automobiles and power products
Toyota Motor Corp. .............................. 8,000 209,500 231,728 1.8
--------- ------- ----
Automobiles
Total Motor Vehicles ............................ 357,238 457,628 3.6
--------- ------- ----
NON-FERROUS METALS
Sumitomo Metal Mining Co., Ltd. ................. 23,000 125,027 98,087 0.7
--------- ------- ----
Copper, gold, and nickel mining
PRECISION MACHINERY
Amada Co., Ltd. ................................. 17,000 78,705 90,445 0.7
Metal cutting, forming and pressing
Canon, Inc. ..................................... 4,000 65,455 98,974 0.8
--------- ------- ----
Visual image and information equipment
Total Precision Machinery ....................... 144,160 189,419 1.5
--------- ------- ----
RETAIL
Circle K Japan Co., Ltd. ........................ 2,740 72,635 136,520 1.1
Convenience stores
Shimachu Co., Ltd. .............................. 3,700 72,536 87,801 0.7
--------- ------- ----
Furniture
Total Retail .................................... 145,171 224,321 1.8
--------- ------- ----
SHIPBUILDING
Mitsubishi Heavy Industries, Ltd................. 14,000 84,133 63,252 0.5
--------- ------- ----
Shipbuilding and heavy machinery
TELECOMMUNICATIONS
Japan Telcom Co., Ltd. .......................... 7 57,097 100,494 0.8
Telecommunications
Nippon Telegraph and Telephone Corp. ............ 27 229,856 264,493 2.1
Telecommunications
NTT Mobile Communications Network, Inc. ......... 3 107,952 148,208 1.1
--------- ------- ----
Mobile telephone network operator
Total Telecommunications ........................ 394,905 513,195 4.0
--------- ------- ----
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*-(Continued)
MARCH 31,1999
% of
Market Net
Shares Cost Value Assets
------ ------ ----- ------
<S> <C> <C> <C> <C>
TEXTILES AND APPAREL
Kuraray Co., Ltd. ............................... 5,000 $ 44,259 $ 54,258 0.4
Synthetic fibers
Naigai Clothes Co., Ltd. ........................ 11,000 62,564 75,244 0.6
--------- ------- ----
Clothing
Total Textiles and Apparel ...................... 106,823 129,502 1.0
--------- ------- ----
WHOLESALE
ArcLand Sakamoto Co., Ltd. ...................... 12,000 64,160 133,767 1.1
Home appliances
Hakuto Co., Ltd. ................................ 6,490 99,699 132,085 1.0
--------- ------- ----
Electric parts
Total Wholesale ................................. 163,859 265,852 2.1
--------- ------- ----
TOTAL INVESTMENTS IN JAPANESE EQUITY SECURITIES 5,001,019 6,118,268 48.1
--------- ------- ----
AUSTRALIAN EQUITY SECURITIES
BANKING
Australia & New Zealand Banking Group, Ltd. ..... 28,000 185,588 203,308 1.6
International bank
National Australia Bank, Ltd. ................... 37,223 352,724 676,282 5.3
Commercial bank
Westpac Banking Corp., Ltd. ..................... 15,000 101,950 109,392 0.9
--------- ------- ----
Commercial bank
Total Banking ................................... 640,262 988,982 7.8
--------- ------- ----
FINANCIALS
Colonial, Ltd. .................................. 30,000 87,217 119,284 0.9
Financial services
Lend Lease Corp. ................................ 10,866 92,291 138,440 1.1
--------- ------- ----
Insurance and financial services
Total Financials ................................ 179,508 257,724 2.0
--------- ------- ----
FOOD AND BEVERAGE
Foster's Brewing Group, Ltd. .................... 34,000 68,209 100,065 0.8
--------- ------- ----
Beer
MISCELLANEOUS MANUFACTURING
Tabcorp Holdings, Ltd. .......................... 14,000 66,627 106,537 0.8
--------- ------- ----
Computer software components and games
NON-FERROUS METALS
Santos, Ltd. .................................... 30,000 117,297 86,752 0.7
Oil and gas exploration and production
The Broken Hill Proprietary Co., Ltd. ........... 33,215 454,828 283,301 2.2
Minerals exploration and production
Western Mining Corp. Holdings, Ltd. ............. 25,941 158,830 82,581 0.7
--------- ------- ----
Mineral and petroleum products
Total Non-Ferrous Metals ........................ 730,955 452,634 3.6
--------- ------- ----
See notes to financial statements
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*-(Continued)
MARCH 31,1999
% of
Market Net
Shares Cost Value Assets
------ ------ ----- ------
<S> <C> <C> <C> <C>
OIL AND GAS
Australian Gas & Light Co., Ltd. ................ 24,329 $ 137,114 $ 173,568 1.4
--------- -------- ----
Distribution of natural gas and oil
PUBLISHING AND PRINTING
News Corporation, Ltd. .......................... 28,000 192,848 207,250 1.6
--------- --------- ----
International media
RETAIL
Coles Myer, Ltd. ................................ 20,209 98,187 109,663 0.9
--------- --------- ----
Operates diversified retail stores
TELECOMMUNICATIONS
Telstra Corporation, Ltd. ....................... 79,000 270,602 413,558 3.2
--------- --------- ----
Domestic and international telecommunications
TRANSPORTATION
Brambles Industries, Ltd. ....................... 4,000 70,413 101,680 0.8
--------- --------- ----
Railroad car rentals
TOTAL INVESTMENTS IN AUSTRALIAN EQUITY SECURITIES 2,454,725 2,911,661 22.9
--------- --------- ----
HONG KONG EQUITY SECURITIES
BANKING
Hong Kong & Shanghai Banking Corp................ 8,400 110,751 263,398 2.1
--------- --------- ----
International bank
CONGLOMERATE
Hutchison Whampoa, Ltd. ......................... 71,000 383,504 558,875 4.4
--------- --------- ----
Property and shipping related services
ELECTRICAL AND ELECTRONICS
Johnson Electric Holdings, Ltd. ................. 20,000 47,290 56,391 0.4
--------- --------- ----
Micromotors used in automobile components
REAL ESTATE
New World Development Co., Ltd. ................. 20,000 100,342 39,357 0.3
Property development
Sun Hung Kai Properties, Ltd. ................... 36,000 262,543 269,437 2.1
--------- ---------- ----
Property development
Total Real Estate ............................... 362,885 308,794 2.4
--------- ---------- ----
TELECOMMUNICATIONS
Hong Kong Telecommunications, Ltd. .............. 117,800 235,989 232,575 1.8
--------- ---------- ----
Telecommunications
UTILITIES
CLP Holdings, Ltd. .............................. 20,000 102,513 96,006 0.8
Generates and supplies electricity
See notes to financial statements
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*-(Continued)
MARCH 31,1999
% of
Market Net
Shares Cost Value Assets
------ ------ ----- ------
<S> <C> <C> <C> <C>
Hong Kong & China Gas Co., Ltd. ................. 65,000 $ 95,492 $ 91,845 0.7
Distribution of gas and gas appliances
Hong Kong Electric Holdings, Ltd. ............... 50,000 167,491 151,300 1.2
--------- --------- ----
Generates and supplies electricity
Total Utilities ................................. 365,496 339,151 2.7
--------- --------- ----
TOTAL INVESTMENTS IN HONG KONG EQUITY SECURITIES 1,505,915 1,759,184 13.8
--------- --------- ----
MALAYSIAN EQUITY SECURITIES
BANKING
Malayan Banking Berhad .......................... 42,000 142,418 62,779 0.5
--------- --------- ----
Banking and financial services
CONGLOMERATE
IOI Corporation Berhad .......................... 70,000 52,430 27,705 0.2
Oil palm, rubber, and cocoa
Sime Darby Berhad ............................... 10,000 23,946 7,284 0.1
Manufacturing, trading, banking, property,
and heavy equipment
UMW Holdings Berhad ............................. 45,000 76,422 38,274 0.3
--------- --------- ----
Investment holding company
Total Conglomerate .............................. 152,798 73,263 0.6
--------- --------- ----
CONSTRUCTION
IJM Corporation Berhad .......................... 70,000 37,672 27,853 0.2
--------- --------- ----
Civil engineering contracts
GAMING
Berjaya Sports Toto Berhad ...................... 11,000 30,560 11,023 0.1
--------- --------- ----
Forecast games
TELECOMMUNICATIONS
Telekom Malaysia Berhad ......................... 37,000 158,856 59,589 0.4
--------- --------- ----
Telecommunications
UTILITIES
Tenaga Nasional Berhad .......................... 42,000 129,926 49,516 0.4
--------- --------- ----
Power supplier
TOTAL INVESTMENTS IN MALAYSIAN EQUITY SECURITIES 652,230 284,023 2.2
--------- --------- ----
NEW ZEALAND EQUITY SECURITIES
FOREST PRODUCTS AND PAPER
Carter Holt Harvey .............................. 31,000 58,019 29,181 0.2
--------- --------- ----
Paper and wood products
TELECOMMUNICATIONS
Telecommunications Corp. of New Zealand.......... 29,000 82,546 141,457 1.1
--------- --------- ----
Telecommunications
TOTAL INVESTMENTS IN NEW ZEALAND EQUITY SECURITIES 140,565 170,638 1.3
--------- --------- ----
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*-(Continued)
MARCH 31,1999
% of
Market Net
Shares Cost Value Assets
------ ------ ----- ------
<S> <C> <C> <C> <C>
SINGAPORE EQUITY SECURITIES
AIRLINES
Singapore Airlines .............................. 8,000 $ 71,164 $ 57,921 0.5
---------- ------------- ------
International airline
BANKING
Development Bank Singapore, Ltd. ................ 18,600 139,036 141,129 1.1
---------- ------------- ------
International bank
CONGLOMERATE
Keppel Corp., Ltd. .............................. 24,750 90,400 66,803 0.5
---------- ------------- ------
Shipyards, properties, financial
services and engineering
Sembcorp Industries, Ltd. ....................... 59,025 69,134 64,615 0.5
---------- ------------- ------
Infrastructure, marine engineering, information
technology and lifestyle
Total Conglomerate .............................. 159,534 131,418 1.0
---------- ------------- ------
ELECTRICAL AND ELECTRONICS
Elec & Eltek International Co., Ltd . ........... 8,000 50,217 29,440 0.3
---------- ------------- ------
Printed circuit boards
MISCELLANEOUS MANUFACTURING
Venture Manufacturing (Singapore), Ltd. ......... 12,000 45,949 54,214 0.4
---------- ------------- ------
Contract manufacturing for electronics companies
PUBLISHING AND PRINTING
Singapore Press Holdings, Ltd. .................. 3,600 44,851 39,826 0.3
---------- ------------- ------
Newspapers and magazines
REAL ESTATE
City Development, Ltd. .......................... 7,000 64,313 36,490 0.3
---------- ------------- ------
Property development
DBS Land, Ltd. .................................. 30,000 53,102 44,309 0.3
---------- ------------- ------
Property investment and development
Total Real Estate ............................... 117,415 80,799 0.6
---------- ------------- ------
TELECOMMUNICATIONS
Singapore Telecommunications, Ltd. .............. 60,000 103,051 85,491 0.7
---------- ------------- ------
Basic telecommunications and postal services
TOTAL INVESTMENTS IN SINGAPORE EQUITY SECURITIES 731,217 620,238 4.9
---------- ------------- ------
TOTAL INVESTMENTS IN EQUITY SECURITIES .......... $ 10,485,671 $ 11,864,012 93.2
---------- ------------- ------
See notes to financial statements
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
SCHEDULE OF INVESTMENTS*-(Continued)
MARCH 31,1999
% of
Principal Market Net
Amount Cost Value Assets
------ ------ ----- ------
<S> <C> <C> <C> <C>
INVESTMENTS IN FOREIGN CURRENCIES
Australian Dollar
Westpac Banking Corporation, non-interest
bearing call account ......................... AUD2,100 $ 1,332 $ 1,332 0.0
Japanese Yen
The Daiwa Bank, Ltd.,Tokyo non-interest
bearing call account .......................... JPY137,274 1,159 1,159 0.0
------ ----- ----
TOTAL INVESTMENTS IN FOREIGN CURRENCIES.......... 2,491 2,491 0.0
------ ----- ----
INVESTMENTS IN SHORT-TERM SECURITIES
State Street Bank and Trust Company, interest bearing
call account 4.50% due 4/l/99 ................ 816,801 816,801 816,801 6.4
------- ------- -----
TOTAL INVESTMENTS IN SHORT-TERM SECURITIES....... 816,801 816,801 6.4
------- ------- -----
TOTAL INVESTMENTS ............................... 11,304,963 12,683,304 99.6
OTHER ASSETS LESS LIABILITIES, NET .............. 41,484 41,770 0.4
---------- --------- -----
NET ASSETS ...................................... $ 11,346,447 $ 12,725,074 100.0
============ =========== =====
- -------------------
* The description following each investment is unaudited and not covered by
the Report of Independent Accountants.
</TABLE>
Portfolio securities and foreign currency holdings were translated at
the following exchange rates as of March 31, 1999.
Australian Dollar AUD. 1.577=$1.00
Hong Kong Dollar HKD. 7.75=$1.00
Japanese Yen JPY. 118.415=$1.00
Malaysian Ringgit MYR. 4.750=$1.00
New Zealand Dollar NZD. 1.870=$1.00
Singapore Dollar SGD. 1.727=$1.00
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31,1999
<S> <C>
ASSETS:
Investments in securities, at market value (cost-$10,485,671) .............. $ 11,864,012
Investments in short-term securities, at market value (cost-$816,801) ...... 816,801
Investments in foreign currency, at market value (cost-$2,491) ............. 2,491
Receivable for capital stock sold .......................................... 119,092
Receivable for dividends and interest, net of withholding taxes 39,561
-----------
Total Assets ........................................................... 12,841,957
-----------
LIABILITIES:
Payable for capital stock redeemed ......................................... 10,927
Other accrued expenses ..................................................... 105,956
-----------
Total Liabilities ...................................................... 116,883
-----------
NET ASSETS:
Capital stock (par value of 1,093,799 shares of capital stock
outstanding, authorized 200,000,000, par value $0.10 each) ............... 109,379
Paid-in capital ............................................................ 16,047,744
Accumulated net realized loss on investments and foreign currency
transactions ............................................................. (4,764,526)
Unrealized net appreciation on investments and foreign exchange 1,378,627
Accumulated net investment loss ............................................ (46,150)
-----------
Net Assets ............................................................. $ 12,725,074
=============
Net assets value, redemption price and offering price per share $11.63
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31,1999
<S> <C> <C>
INCOME:
Dividend income (less $14,388 withholding taxes) $211,113
Interest income ........................................... 40,022
Total Income ......................................... $ 251,135
EXPENSES:
Management fee ............................................ 87,968
Custodian fee ............................................. 70,188
Legal fees ................................................ 52,961
Transfer agency fee ....................................... 50,005
Auditing and tax reporting fees ........................... 49,196
Directors'fees and expenses ............................... 33,226
Shareholder reports ....................................... 31,204
Registration fees ......................................... 10,908
Insurance ................................................. 1,500
Miscellaneous ............................................. 1,410
-------
Total Expenses ........................................ 388,566
Expense reimbursement ................................. (98,715)
Net Expenses .......................................... -------- 289,851
---------
INVESTMENT INCOME (LOSS)-NET ................................... ($38,716)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Realized loss on investments and foreign currency transactions:
Net realized loss on investments ........................... (406,874)
Net realized loss on foreign exchange ...................... (821,426)
---------
Net realized loss on investments and foreign exchange ...... (1,228,300)
Change in unrealized appreciation on translation of investments,
foreign currencies, other assets and liabilities denominated
in foreign currencies..................................... 1,155,342
Change in net unrealized appreciation on investments ....... 1,101,344
-----------
Net realized and unrealized gain on investments and foreign
exchange transactions ..................................... 1,028,386
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ 989,670
==========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment loss $ ( 38,716) $ (101,642)
Net realized loss on investments (406,874) (1,189,233)
Net realized loss on foreign currencies (821,426) (1,479,215)
Change in unrealized appreciation (depreciation)
on investments and foreign currencies 2,256,686 (1,691,156)
----------- ------------
Increase (decrease) in net assets derived
from investment activities 989,670 (4,461,246)
---------- ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from continuous offering 819,459 1,592,510
Net asset value of shares issued to shareholders
on reinvestment of dividends and distributions -- 76,483
Cost of shares redeemed (2,819,804) (5,499,073)
---------- ------------
Decrease in net assets derived from capital share
transactions (2,000,345) (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 (1,010,675) (8,391,841)
------------
NET ASSETS:
Beginning of year 13,735,749 22,127,590
------------ ------------
End of year $ 12,725,074 $ 13,735,749
============ =============
SHARE ACTIVITY:
Shares offered on continuous offering 80,343 117,523
Shares issued to shareholders on reinvestment
of net investment income and realized
gain on investments .................................... 7,155
Shares redeemed during the year ............................. (280,750) (438,381)
------------ ------------
Net shares redeemed during the year ......................... (200,407) (313,703)
Shares outstanding at beginning of year ..................... 1,294,206 1,607,909
------------ ------------
Shares outstanding at end of year ........................... 1,093,799 1,294,206
============ ===========
See notes to financial statements
</TABLE>
<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,
1999 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
income 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, 1999,
the Fund's accumulated net investment loss and paid-in-capital were
decreased by $78,567 and $37,882, respectively, with an offsetting increase
in accumulated net realized loss of $40,685. This adjustment was primarily the
result of the reclassification of net foreign currency gains and losses, a net
operating loss, and the sale of 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 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 re
flected 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 TRANSACTIONS 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
$87,968 for the year ended March 31, 1999 (see voluntary expense reimbursement
arrangement as described below). For the year ended March 31, 1999, the
Manager informed the Fund that no payments were made to NAM, NAM-Singapore and
NSI, due to the voluntary expense reimbursement arrangement. At March 31,
1999, no fee was paid 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. Under the voluntary
reimbursement arrangement, the Fund has recorded expense reimbursement of
$98,715 for the year ended March 31, 1999. 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 year
ended March 31, 1999. 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
$33,226 for the year ended March 31, 1999.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments for the year ended March 31, 1999,
exclusive of investments in foreign currencies and short-term securities,
were $6,613,607 and $5,193,071 respectively.
As of March 31, 1999, net unrealized appreciation on investments,
exclusive of investments in foreign currencies and short-term securities,
for Federal income tax purposes was $1,264,063 of which $2,313,944 related to
appreciated securities and $1,049,881 related to depreciated securities. The
aggregate cost of investments, exclusive of investments in foreign
currencies and short-term securities, at March 31, 1999 for Federal income tax
purposes was $10,599,949. The Fund has a capital loss carryforward as of
March 31, 1999 of $4,682,269 of which $1,907,538 expires March 31, 2006 and
$2,774,731 expires March 31, 2007.
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 $14,129 and currency losses of $0 to the taxable year ending March
31, 2000.
<TABLE>
<CAPTION>
NOMURA PACIFIC BASIN FUND, INC.
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share of common stock outstanding
throughout each period:
For the Year Ended March 31,
----------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year:........... $10.61 $13.76 $16.52 $15.07 $18.07
------- ------ ------- ------ ------
Income from investment operations:
Net Investment income (loss)................ (0.03)+ (0.07)+ (0.14)+ (0.04)+ (0.01)
Net realized and unrealized gain (loss).....
on investments and foreign currencies..... 1.05+ (3.01)+ (0.87)+ 2.07+ (0.74)
-------- -------- ------- ------- ------
Total from investment operations............ 1.02+ (3.08)+ (1.01)+ 2.03+ (0.75)
Distributions to shareholders from:
Net investment income .......... -- (0.04) (0.28) -- --
Net realized capital gains ..... -- (0.03) (1.47) (0.58) (2.25)
------- ------- ------- ------- --------
Total distributions ............ -- (0.07) (1.75) (0.58) (2.25)
------- ------- ------- ------- --------
Net asset value, end of year.................. $11.63 $10.61 $13.76 $16.52 $15.07
======= ======= ======= ======= ========
Total investment return ..... 9.6% (22.4%) (6.9%) 13.7% (4.2%)
Ratio to average net assets/supplemental data:
Net assets, end of year (000)............... $12,725 $13,736 $22,128 $34,022 $42,684
Operating expenses, net of
reimbursement .............. 2.50% 2.49% 2.21% 1.78% 1.38%
Total expenses ............. 3.35% 2.91% 2.21% 1.78% 1.38%
Net investment income (loss)................ (0.33%) (0.55%) (0.87%) (0.28%) (0.07%)
Portfolio turnover ........... 48% 45% 62% 45% 49%
- -----------
+ based on average shares outstanding.
</TABLE>
BOARD OF DIRECTORS
William G. Barker, Jr.
George H. Chittenden
Haruo Sawada
Chor Weng Tan
Arthur R. Taylor
John F. Wallace
OFFICERS NOMURA
Haruo Sawada, President
Mitsutoyo Kohno, Vice President
John F. Wallace, Vice President Pacific Basin
John J. Boretti, Secretary and Treasurer
Terence P. Brennan, Assistant Secretary and
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 ANNUAL REPORT
Singapore 049909
DISTRIBUTOR MARCH 31, 1999
Nomura Securities International, Inc.
2 World Financial Center
New York, New York 10281-1198
CUSTODIAN AND SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company
P.O. Box 8500
North Quincy, Massachusetts 02171-8500
COUNSEL
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557 [LOGO OMITTED]
INDEPENDENT ACCOUNTANTS
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.
