|
|
|
|
|
Senior Term Loans
(continued)
|
|
Preferred Stocks 0.88%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount ($)
|
|
Interest
Rate (%)
|
|
|
Maturity
Date
|
|
Value ($)
|
|
|
Services
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
(continued)
|
|
|
78,947
|
|
|
3.75
|
|
|
10/25/20
|
|
|
79,671
|
|
|
|
|
|
Support Services 0.60%
|
|
|
|
|
|
Sabre, Inc.
|
|
|
|
|
|
50,000
|
|
|
4.50
|
|
|
02/19/19
|
|
|
50,117
|
|
|
Travelport, LLC
|
|
|
|
|
|
267,200
|
|
|
9.50
|
|
|
01/31/16
|
|
|
277,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327,226
|
|
|
|
|
|
Transportation Excluding Air & Rail 0.81%
|
|
|
|
|
|
Commercial Barge Line Co.
|
|
|
|
|
|
125,000
|
|
|
10.75
|
|
|
03/22/20
|
|
|
122,812
|
|
|
Syncreon Holdings Ltd.
|
|
|
|
|
|
325,000
|
|
|
5.25
|
|
|
10/28/20(b)
|
|
|
324,594
|
|
|
|
|
|
|
|
|
|
|
|
447,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Services
|
|
|
981,367
|
|
|
|
|
|
Utility 0.18%
|
|
|
|
|
|
|
|
|
Electric Generation 0.18%
|
|
|
|
|
|
Calpine Corp.
|
|
|
|
|
|
100,000
|
|
|
4.00
|
|
|
10/30/20(b)
|
|
|
100,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Utility
|
|
|
100,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Senior Term Loans
(Cost $2,568,973)
|
|
|
2,604,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Bond 0.13%
|
|
|
|
|
|
|
|
|
Automotive 0.13%
|
|
|
|
|
|
Meritor, Inc.
|
|
|
|
|
|
75,000
|
|
|
4.00
|
|
|
02/15/27
|
|
|
72,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Automotive
|
|
|
72,141
|
|
|
|
|
|
Total Convertible Bond
(Cost $72,068)
|
|
|
72,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate (%)
|
|
|
Shares
|
|
|
Value ($)
|
|
|
Banking 0.76%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking 0.76%
|
|
|
Ally Financial, Inc. (a)
|
|
|
7.00
|
|
|
|
329
|
|
|
|
315,871
|
|
|
Ally Financial, Inc.
|
|
|
8.50
|
|
|
|
3,243
|
|
|
|
87,075
|
|
|
GMAC Capital Trust I
|
|
|
8.13
|
|
|
|
550
|
|
|
|
14,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Banking
|
|
|
|
417,653
|
|
|
|
|
Financials 0.12%
|
|
|
|
|
Diversified Financial Services 0.12%
|
|
|
Citigroup, Inc.
|
|
|
6.88
|
|
|
|
2,701
|
|
|
|
68,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financials
|
|
|
|
68,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Preferred Stocks
(Cost $492,036)
|
|
|
|
486,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock 0.15%
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Value ($)
|
|
|
Insurance 0.15%
|
|
|
Ambac Financial Group, Inc. *
|
|
|
|
3,265
|
|
|
|
80,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Insurance
|
|
|
|
80,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common Stocks
(Cost $44,694)
|
|
|
|
80,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Investment 5.35%
|
|
|
State Street Institutional Liquid Reserve, 0.05% (d)
|
|
|
|
2,941,429
|
|
|
|
2,941,429
|
|
|
|
|
|
|
|
|
|
Total Short-Term Investment
(Cost $2,941,429)
|
|
|
|
2,941,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments 98.26%
(Cost $52,903,058)
|
|
|
|
54,062,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets Less Liabilities 1.74%
|
|
|
|
955,604
|
|
|
|
|
|
|
|
|
|
Net Assets 100.00%
|
|
|
|
55,018,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Non income-producing security.
|
Schedule of Investments
(Unaudited)- High Yield Fund
as of December 31, 2013
|
(a)
|
Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 2013, the value of these securities amounted to $27,370,707 or 49.75% of net assets. Exempt securities that are also illiquid are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Acquisition Date
|
|
Cost
|
|
|
Market
Value
|
|
|
Alcatel-Lucent USA, Inc., 4.63%, maturing 07/01/17
|
|
12/05/13
|
|
|
149,398
|
|
|
|
150,938
|
|
|
Alliant Techsystems, Inc., 5.25%, maturing 10/01/21
|
|
10/22/13
|
|
|
25,000
|
|
|
|
25,188
|
|
|
Antero Resources Finance Corp., 5.38%, maturing 11/01/21
|
|
10/24/13 & 10/25/13
|
|
|
75,000
|
|
|
|
75,797
|
|
|
APX Group, Inc., 8.75%, maturing 12/01/20
|
|
12/10/13
|
|
|
126,864
|
|
|
|
127,813
|
|
|
Arch Coal, Inc., 8%, maturing 01/15/19
|
|
12/12/13
|
|
|
75,000
|
|
|
|
75,000
|
|
|
Ashtead Capital, Inc., 6.5%, maturing 07/15/22
|
|
12/11/13
|
|
|
211,955
|
|
|
|
214,250
|
|
|
Audatex North America, Inc., 6%, maturing 06/15/21
|
|
06/27/13
|
|
|
50,860
|
|
|
|
52,625
|
|
|
Audatex North America, Inc., 6.13%, maturing 11/01/23
|
|
10/17/13
|
|
|
50,000
|
|
|
|
51,750
|
|
|
Avaya, Inc., 10.5%, maturing 03/01/21
|
|
12/05/13
|
|
|
93,878
|
|
|
|
96,000
|
|
|
Beverage Packaging Holdings Luxembourg II SA / Beverage Packaging Holdings II Is, 6%, maturing 06/15/17
|
|
12/04/13
|
|
|
100,000
|
|
|
|
101,500
|
|
|
Calpine Corp., 6%, maturing 01/15/22
|
|
10/17/13 & 10/18/13
|
|
|
24,802
|
|
|
|
25,750
|
|
|
CBC Ammo LLC / CBC FinCo, Inc., 7.25%, maturing 11/15/21
|
|
11/08/13
|
|
|
24,633
|
|
|
|
24,750
|
|
|
Chassix Holdings, Inc., 10%, maturing 12/15/18
|
|
12/10/13
|
|
|
73,512
|
|
|
|
75,000
|
|
|
Crestwood Midstream Partners LP / Crestwood Midstream Finance Corp., 6.13%, maturing 03/01/22
|
|
10/22/13
|
|
|
50,000
|
|
|
|
51,500
|
|
|
CTP Transportation Products, LLC / CTP Finance, Inc., 8.25%, maturing 12/15/19
|
|
12/13/13
|
|
|
25,000
|
|
|
|
26,188
|
|
|
Darling Escrow Corp., 5.38%, maturing 01/15/22
|
|
12/18/13
|
|
|
50,000
|
|
|
|
50,438
|
|
|
Endo Finance Co., 5.75%, maturing 01/15/22
|
|
12/11/13
|
|
|
100,000
|
|
|
|
100,750
|
|
|
Ferrellgas LP / Ferrellgas Finance Corp., 6.75%, maturing 01/15/22
|
|
10/21/13
|
|
|
25,000
|
|
|
|
25,500
|
|
|
First Data Corp., 11.75%, maturing 08/15/21
|
|
12/16/13
|
|
|
155,250
|
|
|
|
159,000
|
|
|
Forest Laboratories, Inc., 5%, maturing 12/15/21
|
|
12/05/13
|
|
|
50,000
|
|
|
|
50,313
|
|
|
Freescale Semiconductor, Inc., 6%, maturing 01/15/22
|
|
12/04/13
|
|
|
50,559
|
|
|
|
50,750
|
|
|
General Motors Co., 6.25%, maturing 10/02/43
|
|
09/24/13
|
|
|
25,343
|
|
|
|
26,094
|
|
|
GLP Capital LP / GLP Financing II, Inc., 4.88%, maturing 11/01/20
|
|
10/23/13 & 11/21/13
|
|
|
25,000
|
|
|
|
25,063
|
|
|
Halcon Resources Corp., 9.75%, maturing 07/15/20
|
|
12/16/13
|
|
|
77,054
|
|
|
|
78,469
|
|
|
Headwaters, Inc., 7.25%, maturing 01/15/19
|
|
12/05/13
|
|
|
50,000
|
|
|
|
51,625
|
|
|
Jack Cooper Finance Co., 9.25%, maturing 06/01/20
|
|
10/24/13
|
|
|
52,578
|
|
|
|
54,063
|
|
|
JBS Investments GmbH, 7.75%, maturing 10/28/20
|
|
10/23/13
|
|
|
200,000
|
|
|
|
203,000
|
|
|
The Kenan Advantage Group, Inc., 8.38%, maturing 12/15/18
|
|
12/12/13
|
|
|
26,242
|
|
|
|
26,438
|
|
|
LifePoint Hospitals, Inc., 5.5%, maturing 12/01/21
|
|
11/21/13
|
|
|
75,000
|
|
|
|
75,469
|
|
|
Michaels Stores, Inc., 5.88%, maturing 12/15/20
|
|
12/16/13
|
|
|
200,000
|
|
|
|
201,500
|
|
|
Navios Maritime Acquisition Corp. / Navios Acquisition Finance US, Inc., 8.13%, maturing 11/15/21
|
|
10/29/13
|
|
|
100,000
|
|
|
|
102,500
|
|
Schedule of Investments
(Unaudited)- High Yield Fund
as of December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
NCR Escrow Corp., 5.88%, maturing 12/15/21
|
|
12/05/13
|
|
|
25,000
|
|
|
|
25,594
|
|
|
NCR Escrow Corp., 6.38%, maturing 12/15/23
|
|
12/05/13
|
|
|
176,870
|
|
|
|
179,594
|
|
|
Neiman Marcus Group Ltd., Inc., 8%, maturing 10/15/21
|
|
12/11/13
|
|
|
126,514
|
|
|
|
131,250
|
|
|
Neiman Marcus Group Ltd., Inc., 8.75%, maturing 10/15/21
|
|
10/16/13
|
|
|
50,000
|
|
|
|
52,625
|
|
|
Opal Acquisition, Inc., 8.88%, maturing 12/15/21
|
|
12/10/13
|
|
|
225,156
|
|
|
|
224,719
|
|
|
Pacnet Ltd., 9%, maturing 12/12/18
|
|
12/05/13
|
|
|
200,000
|
|
|
|
204,250
|
|
|
Palace Entertainment Holdings LLC / Palace Entertainment Holdings Corp., 8.88%, maturing 04/15/17
|
|
12/19/13
|
|
|
50,000
|
|
|
|
50,250
|
|
|
Penn National Gaming, Inc., 5.88%, maturing 11/01/21
|
|
10/21/13 & 10/22/13
|
|
|
50,000
|
|
|
|
49,500
|
|
|
Prospect Holding Co. LLC / Prospect Holding Finance Co., 10.25%, maturing 10/01/18
|
|
09/18/13
|
|
|
72,960
|
|
|
|
70,875
|
|
|
Roundy’s Supermarkets, Inc., 10.25%, maturing 12/15/20
|
|
12/13/13
|
|
|
72,757
|
|
|
|
76,875
|
|
|
rue21, Inc., 9%, maturing 10/15/21
|
|
10/25/13, 11/07/13, &
12/05/13
|
|
|
18,331
|
|
|
|
18,375
|
|
|
Salix Pharmaceuticals Ltd., 6%, maturing 01/15/21
|
|
12/12/13
|
|
|
50,000
|
|
|
|
51,375
|
|
|
Spectrum Brands Escrow Corp., 6.63%, maturing 11/15/22
|
|
12/11/13
|
|
|
53,300
|
|
|
|
53,313
|
|
|
Sprint Corp., 7.13%, maturing 06/15/24
|
|
12/09/13
|
|
|
175,000
|
|
|
|
178,063
|
|
|
William Lyon Homes, Inc., 8.5%, maturing 11/15/20
|
|
10/21/13
|
|
|
26,591
|
|
|
|
27,188
|
|
|
(d)
|
Yield as of December 31, 2013.
|
EUR —
Euro Currency.
PIK — Paid in Kind.
For reporting purposes, industry classifications are combined in this sector diversification chart. For industry classifications, please see the Schedule of Investments.
|
|
|
|
|
|
|
Credit Quality Breakdown*
December 31, 2013
S&P
Ratings
|
|
|
BBB
|
|
|
0.70
|
%
|
|
BBB-
|
|
|
1.01
|
%
|
|
BB+
|
|
|
4.31
|
%
|
|
BB
|
|
|
10.91
|
%
|
|
BB-
|
|
|
10.82
|
%
|
|
B+
|
|
|
10.02
|
%
|
|
B
|
|
|
14.08
|
%
|
|
B-
|
|
|
10.72
|
%
|
|
CCC+
|
|
|
19.38
|
%
|
|
|
|
|
|
|
|
S&P Ratings (continued)
|
|
|
|
|
CCC
|
|
|
2.10
|
%
|
|
CCC-
|
|
|
1.92
|
%
|
|
CC
|
|
|
0.27
|
%
|
|
D
|
|
|
0.28
|
%
|
|
NR
|
|
|
8.04
|
%
|
|
Short-Term Investment
|
|
|
5.44
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
*
|
Expressed as a percentage of total investments (excluding securities lending collateral if applicable) and may vary over time.
|
NR — Not rated.
Security ratings
disclosed, if any, are obtained from Standard & Poor’s/Moody’s Investors Service.
Schedule of Investments
(Unaudited)- High Yield Fund
as of December 31, 2013
VALUATION INPUTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Corporate Obligations
|
|
$
|
—
|
|
|
$
|
47,878,577
|
|
|
$
|
—
|
|
|
$
|
47,878,577
|
|
|
Senior Term Loans
|
|
|
—
|
|
|
|
2,604,304
|
|
|
|
—
|
|
|
|
2,604,304
|
|
|
Convertible Bond
|
|
|
—
|
|
|
|
72,141
|
|
|
|
—
|
|
|
|
72,141
|
|
|
Preferred Stocks
|
|
|
170,225
|
|
|
|
315,871
|
|
|
|
—
|
|
|
|
486,096
|
|
|
Common Stock
|
|
|
80,188
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80,188
|
|
|
Short-Term Investments
|
|
|
—
|
|
|
|
2,941,429
|
|
|
|
—
|
|
|
|
2,941,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
250,413
|
|
|
$
|
53,812,322
|
|
|
$
|
—
|
|
|
$
|
54,062,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no transfers between Level 1, 2, or 3 as of December 31, 2013, based upon the valuation input levels
assigned to securities on September 30, 2013.
Notes to Schedule of Investments (Unaudited)
A. Organization
Nomura Partners Funds, Inc. (originally incorporated as The Japan Fund,
Inc.) (the “Corporation”) was incorporated under the laws of the State of Maryland in 1961. Effective December 1, 2008, the Corporation changed its name from The Japan Fund, Inc. to Nomura Partners Funds, Inc. The Corporation is
registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Corporation currently consists of the following five series: The Japan Fund, Asia Pacific ex Japan Fund,
Global Equity Income Fund, Global Emerging Markets Fund, and High Yield Fund (each individually a “Fund” and collectively, the “Funds”). Each Fund is classified as a diversified series of the Corporation under the 1940 Act.
Effective October 16, 2013, all of the Funds were closed to purchases and exchanges. Nomura Asset Management U.S.A. Inc. (“NAM
USA”) advised the Board that it planned to exit the U.S.A. retail mutual fund business. Consequently, the Board has decided to close the Funds to purchases and exchanges while it considers the best course of action for each of the Funds.
B. Summary of Significant Accounting Policies
The Funds’ schedule of investments have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which requires management to make
certain estimates and assumptions at the date of the financial statements that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. Management has evaluated the impact of all events or transactions
occurring after period end through the date these schedule of investments were issued, and has determined that, except as set forth in Note E, there were no subsequent events requiring recognition or disclosure. The following summarizes the
significant accounting policies:
Security Valuation.
Securities listed or otherwise traded on a securities exchange, market or
automated quotation system for which quotations are readily available, including securities traded over the counter (“OTC”), are valued at their most recent sale price as of the close of regular trading on the primary exchange or market
(foreign or domestic) on which they are traded, or if there is no such reported sale on the valuation date, at the most recent quoted bid price. If such prices are not available, the security will be valued in accordance with fair value methods (the
“Fair Value Procedures”) approved by the Board of Directors (the “Board”). In the case of certain foreign exchanges, the closing price reported by the exchange (which may sometimes be referred to by the exchange or one or more
pricing agents as the “official close” or the “official closing price” or other similar term) will be considered the most recent sale price. If a security is traded on more than one exchange, or upon one or more exchanges and in
the OTC market, quotations are taken from the security’s primary exchange or market.
Debt securities are priced based upon valuations
provided by independent, third party pricing agents, if available. Such values generally reflect the last reported sales price if the security is actively traded. The third-party pricing agents may also value debt securities at an evaluated bid
price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed to identify the market value for such securities. Such methodologies generally
consider such factors as security prices, yields, maturities, call features, ratings and developments relating to specific securities in arriving at valuations. On the first day a new debt
security purchase is recorded, if a price is not available on the automated pricing feeds from the Funds’ primary and secondary pricing vendors nor is it available from an independent broker, the security may be valued at its purchase price.
Each day thereafter, the debt security will be valued according to the Funds’ Fair Value Procedures until an independent source can be secured. Debt securities with remaining maturities of sixty days or less may be valued at their amortized
cost, which approximates market value.
Participatory notes are valued based on the current day’s price of the underlying securities if a
quoted price is not available.
Following the valuations of securities or other portfolio assets in terms of the currency in which the market
quotation used is expressed (“Local Currency”), the value of these portfolio assets in terms of U.S. Dollars is calculated by converting the Local Currency into U.S. Dollars at the prevailing currency exchange rate on the valuation date.
Redeemable securities issued by open-end investment companies are valued at the investment company’s applicable net asset value
(“NAV”), with the exception of exchange-traded open-end investment companies which are priced as equity securities as described above.
If market quotations, official closing prices, or information furnished by a pricing service are not readily available or do not accurately reflect fair value, or if a security’s value has been
materially affected by events occurring after the close of the exchange or market on which the security is principally traded, including, but not limited to, when (i) the security’s trading has been halted or suspended; (ii) the
security has been de-listed from a national exchange; (iii) the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; (iv) the security has not been traded for an extended
period of time; (v) the security’s primary pricing source is not able or willing to provide a price; (vi) trading of the security is subject to local government-imposed restrictions; and (vii) a significant event with respect to
a security or securities has occurred after the close of the market or exchange on which the security or securities principally trades and before the time the Funds calculate NAVs, that security will be valued by another method that the Board
believes accurately reflects fair value in accordance with the Funds’ Fair Value Procedures.
These events may create arbitrage
opportunities that may enable short-term traders to dilute the NAV of long-term investors. Securities trading in overseas markets present time zone arbitrage opportunities when events affecting portfolio security values occur after the close of
overseas markets but prior to the close of U.S. market. The Fair Value Procedures, therefore, include a procedure whereby foreign securities’ prices may be “fair valued” by an independent pricing service, in accordance with a
valuation policy approved by the Board to take those factors into account. At December 31, 2013, foreign securities representing the following percentages of net assets of the Funds were valued using fair value prices based on those adjustments
and are classified as using Level 2 inputs within the valuation inputs disclosure on each Fund’s Schedule of Investments:
|
|
|
|
|
|
|
Funds
|
|
|
|
|
The Japan Fund
|
|
|
97.6
|
%
|
|
Asia Pacific ex Japan Fund
|
|
|
94.5
|
%
|
|
Global Equity Income Fund
|
|
|
46.7
|
%
|
|
Global Emerging Markets Fund
|
|
|
63.2
|
%
|
|
High Yield Fund
|
|
|
N/A
|
|
Pursuant to the Fair Value Procedures for the Funds, the Board has delegated day-to-day responsibility for
fair value determinations to the Corporation’s Pricing and Fair Valuation Committee. Fair value determinations are subject to review, approval or ratification by the Board.
At December 31, 2013, the total value of securities held that were fair valued using methods determined in good faith by the Corporation’s Pricing and Fair Valuation Committee represented
approximately 3.6%, 10.8%, and 0.1% of the net assets for Asia Pacific ex Japan Fund, Global Emerging Markets Fund and High Yield Fund, respectively.
These securities are classified as using Level 2 inputs within the valuation inputs disclosure on the Funds’ Schedule of Investments. At December 31, 2013, no other Funds had fair value
determinations other than noted above.
There can be no assurance that a fair value used by the Funds on any given day will more accurately
reflect the market value of a security or securities than the market price of such security or securities. A security’s valuation may differ depending on the method used for determining value. Fair valuation of a Fund’s portfolio
securities can serve to reduce arbitrage opportunities available to short-term traders, but there is no assurance that the Fair Value Procedures will prevent dilution of a Fund’s NAV by short-term traders.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Funds disclose the fair value of their
investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. These inputs are summarized into the three broad levels listed below. Each Fund’s hierarchy can be found on the Fund’s Schedule
of Investments.
Level 1 – quoted unadjusted prices for identical instruments in active markets to which a Fund has access at the date of
measurement.
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not
current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
Level 3 – model-derived valuations in which one or more significant inputs or significant value drivers
are unobservable. Unobservable inputs are those inputs that reflect a Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The Funds’ policy is to disclose transfers between Levels based on valuations at the end of the reporting period. Each Fund may hold
securities which are periodically fair valued in accordance with the Funds’ Fair Value Procedures. This may result in movements between Level 1 and Level 2 throughout the period. There were no additional transfers between Level 1, 2, or 3 as of
December 31, 2013, based on the valuation input Levels on September 30, 2013 for the Funds, other than what was disclosed following each Fund’s Schedule of Investments.
Real Estate Investment Trust.
Each Fund is permitted to invest in real estate investment trusts (“REIT“s). If a Fund invests in a REIT, such Fund will be subject to the risks associated
with owning real estate and with the real estate industry generally. These risks include difficulties in valuing and disposing of real estate, the possibility of declines in the value of real estate, risks related to general and local economic
conditions, the possibility of adverse changes in real estate markets, environmental liability risks, the risk of increases in property taxes and operating expenses, possible adverse changes in zoning laws, the risk of casualty or condemnation
losses, limitations on rents, and the possibility of adverse changes in interest rates. To the extent a Fund invests in REITs, it will also be subject to the risk that a REIT will default on its obligations or go bankrupt. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his or her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs.
Restricted Securities.
Each Fund is permitted to invest in restricted securities. Restricted securities are subject to legal restrictions on their sale. Difficulty in selling securities may result
in a loss or be costly to the Funds. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, as amended, or in a registered public offering. Where
registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to
sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the holder might obtain a less favorable price than prevailed when it decided to seek registration of the security.
Participatory Notes.
Each Fund may invest in participatory notes. Participatory notes, which may be issued in various structures and
may be designated by different terms, including, but not limited to, P-Notes and warrants, are instruments that derive their value from an underlying or referenced financial instrument, such as an equity share. Generally, non-U.S.-based brokerages
buy locally-based securities and then issue participatory notes to investors. Participatory notes are subject to both investment risk relating to the underlying or referenced financial instrument and credit risk based on the uncertainty of the
counterparty’s (i.e., the non-U.S.-based broker’s) ability to meet its obligations.
Foreign Currency.
The books and records of the Funds are maintained in U.S. Dollars. The valuation of
investment securities and other assets and liabilities that are denominated in a foreign currency are translated into U.S. Dollars at the prevailing exchange rates each business day. Purchases and sales of investment securities, income and expenses
are translated into U.S. Dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and
unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the disposition of forward foreign currency exchange contracts and foreign currencies, and the
difference between the amount of net investment income accrued and the U.S. Dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency
exchange rates are not separately disclosed but are included with net realized and unrealized gains and losses on investment securities.
Security Transactions.
Security Transactions are accounted for on the trade date.
C. Tax Basis of Investments
Cost of investments for Federal income tax purposes is
substantially the same as for financial reporting purposes and net unrealized appreciation (depreciation) on investments at December 31, 2013 consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds
|
|
Gross
Unrealized
Appreciation
|
|
|
Gross
Unrealized
Depreciation
|
|
|
Net Unrealized
Appreciation
(Depreciation)*
|
|
|
Tax Cost
|
|
|
The Japan Fund
|
|
$
|
52,677,915
|
|
|
$
|
1,299,329
|
|
|
$
|
51,378,586
|
|
|
$
|
125,069,377
|
|
|
Asia Pacific ex Japan Fund
|
|
|
1,126,482
|
|
|
|
173,642
|
|
|
|
952,840
|
|
|
|
3,697,909
|
|
|
Global Equity Income Fund
|
|
|
2,025,888
|
|
|
|
63,426
|
|
|
|
1,962,462
|
|
|
|
5,796,179
|
|
|
Global Emerging Markets Fund
|
|
|
1,730,435
|
|
|
|
91,192
|
|
|
|
1,639,243
|
|
|
|
3,936,258
|
|
|
High Yield Fund
|
|
|
1,696,858
|
|
|
|
537,181
|
|
|
|
1,159,677
|
|
|
|
52,903,058
|
|
|
*
|
Does not include unrealized appreciation/depreciation on currency.
|
D. Principal Risks of Investing in the Funds
Investment Risks.
The Funds’
investments in foreign companies involve certain risks not typically associated with investments in securities of U.S. companies or the U.S. Government, including risks relating to (i) social, economic and political stability; (ii) price
volatility, lesser liquidity and smaller market capitalization of securities markets in which securities of foreign companies trade; (iii) currency exchange fluctuations, currency blockage and higher levels of inflation; (iv) controls on
foreign
investment and limitations on repatriation of invested capital and on the Funds’ ability to exchange local currencies for U.S. Dollars; (v) governmental involvement in and control over
the economy; (vi) risk of nationalization or expropriation of assets; (vii) the nature of the smaller, less seasoned and newly organized foreign companies; and (viii) the absence of uniform accounting, auditing and financial reporting
standards, practices and disclosure requirements and less government supervision and regulation.
Concentration of Market Risk.
Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers
located in the U.S. In addition, investments in foreign countries are denominated in foreign currencies. As a result, changes in the value of the foreign currencies compared to the U.S. Dollar may affect (positively or negatively) the value of
the Funds’ investments. These currency movements may happen separately from, and in response to, events that do not otherwise affect the value of the security in the issuer’s home country.
Emerging Markets Risk.
The risks of foreign investments are typically greater in less developed countries, which are sometimes referred to as
emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability and greater risk of loss. These countries are also more likely to experience higher levels of inflation,
deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative.
High Yield Bonds Risk.
The Fund’s investment in high yield bonds (also known as junk bonds) will subject the Fund to greater levels of credit and liquidity risks than funds that invest in
higher rated securities. While offering greater opportunity for higher yields and capital growth, high yield bonds usually are subject to greater price volatility and may be less liquid than higher rated securities. An economic downturn or period of
rising interest rates may adversely affect the market for these securities (see “Inflation Risk” below) and reduce the Fund’s ability to sell these securities (see “Liquidity Risk” below). These securities are considered to
be high-risk investments, are speculative with respect to the capacity to pay interest and repay principal (see “Credit/ Default Risk” below) and may be issued by companies that are highly leveraged, less creditworthy or financially
distressed (see “Distressed Securities Risk” below). These securities are subject to greater risk of loss, greater sensitivity to interest rate and economic changes, valuation difficulties, and a potential lack of a secondary or public
market for the securities. The market price of these securities can change suddenly and unexpectedly. You should not invest in the Fund unless you are willing to assume the greater risk associated with high yield bonds.
Bank Loan Risk.
These investments expose a Fund to the credit risk of both the financial institution and the underlying borrower. The market for
loans may not be highly liquid and a Fund may have difficulty selling them. Typically a Fund will acquire loans through assignments. In assignments, a Fund has no recourse against the selling institution, and the selling institution generally makes
no representations about the underlying loan, the borrowers, the documentation or the collateral. In assignments, the
rights against the borrower that are acquired by a Fund may be more limited than those held by the assigning lender. The Fund’s bank loan investments will usually be senior loans. Senior
Loans are loans that have a right to payment senior to most other debts of the borrower. Senior Loans generally are arranged through private negotiations between a borrower and several financial institutions (the “Lenders”) represented in
each case by one or more such Lenders acting as agent (the “Agent”) of the several Lenders. On behalf of the Lenders, the Agent is primarily responsible for negotiating the loan agreement (“Loan Agreement”) that establishes the
relative terms and conditions of the Senior Loan and rights of the borrower and the Lenders.
Inflation (Interest Rate) Risk.
Generally, high yield bonds will decrease in value when interest rates rise and increase in value when interest rates decline. Interest rate risk is the risk that the high yield bonds will decline in value because of increases in interest rates.
Interest rate changes normally have a greater effect on the prices of longer-term high yield bonds than shorter-term high yield bonds. In addition, during periods of declining interest rates, the issuers of high yield bonds held by the Fund may
prepay principal earlier than scheduled, forcing the Fund to reinvest in lower yielding debt securities. This is known as “Prepayment Risk” and may reduce the Fund’s income. Variable and floating rate securities are less sensitive to
market interest rate changes, but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities generally will not increase in value if interest rates decline. A
decrease in market interest rates may adversely affect the income the Fund receives from such securities and the net asset value of the Fund’s shares.
Liquidity Risk.
Certain securities that are thinly traded or that otherwise might not be easily disposed in the course of regular trading may be deemed to be illiquid securities. Illiquid
securities may trade at a discount from comparable, more liquid investments, and may be subject to wider fluctuations in market value. Also, the Fund may not be able to dispose of illiquid securities when that would be beneficial at a favorable time
or price. The Fund may invest up to 15% of its assets in illiquid securities.
Credit/Default Risk.
Credit risk refers to the
possibility that the issuer of a security will not be able to make payments of interest and principal when due. If an issuer fails to pay interest or repay principal, the Fund’s income or share value may be reduced. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer.
Distressed Securities Risk.
Investing in distressed securities is speculative and involves significant risks. Distressed securities may be the subject of bankruptcy proceedings or in default as to
the repayment of principal and/or interest or rated in the lower rating categories (Ca or lower by Moody’s and CC or lower by S&P or Fitch. Distressed securities frequently do not produce income and may require the Fund to bear certain
extraordinary expenses in order to protect and recover its investment.
Please refer to the prospectus for a complete description of risks
associated with the Funds.
E. Subsequent Event
Upon the recommendation of NAM USA and after reviewing available options, the Board has approved the liquidation and dissolution of the Asia Pacific ex Japan Fund, the Global Emerging Markets Fund and the
Global Equity Income Fund, to be effective on or about March 19, 2014.
|
Item 2.
|
Controls and Procedures
|
(a) The
Registrant’s President/Principal Executive Officer and Treasurer/Principal Financial Officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule
30a-3(b) under the 1940 Act and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended.
(b) There were no
significant changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the Registrant’s last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Registrant’s internal control over financial reporting.
(a) Separate certifications for
each principal executive officer and principal financial officer of the Registrant, as required by
Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)), are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
|
|
|
|
|
(Registrant)
|
|
|
|
Nomura Partners Funds, Inc.
|
|
|
|
|
|
By (Signature and Title)*
|
|
|
|
/s/ Richard J. Berthy
|
|
|
|
|
|
Richard J. Berthy
|
|
|
|
|
|
President and Principal Executive Officer
|
|
|
|
|
|
Date: February 28, 2014
|
|
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report
has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
|
|
|
|
|
|
By (Signature and Title)*
|
|
|
|
/s/ Richard J. Berthy
|
|
|
|
|
|
Richard J. Berthy
|
|
|
|
|
|
President and Principal Executive Officer
|
|
Date: February 28, 2014
|
|
|
|
|
|
|
|
|
|
By (Signature and Title)*
|
|
|
|
/s/ William C. Cox
|
|
|
|
|
|
William C. Cox
|
|
|
|
|
|
Treasurer and
|
|
|
|
|
|
Principal Financial Officer
|
|
|
|
|
|
Date: February 28, 2014
|
|
|
|
|
|
*
|
Print the name and title of each signing officer under his or her signature.
|
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