<PAGE>
As filed with the Securities and Exchange Commission on August 1, 1997
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement / / Confidential, for Use of
the Commission Only
/ / Definitive Proxy Statement (as permitted by Rule
14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
JAPAN OTC EQUITY FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration state-
<PAGE>
ment number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
2
<PAGE>
JAPAN OTC EQUITY FUND, INC.
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
-----------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 24, 1997
-----------------
TO THE SHAREHOLDERS OF
JAPAN OTC EQUITY FUND, INC.:
Notice is hereby given that the 1997 Annual Meeting of Shareholders
(the "Meeting") of Japan OTC Equity Fund, Inc. (the "Fund") will be held at the
offices of Nomura Capital Management, Inc., 180 Maiden Lane, New York, New York
on Wednesday, September 24, 1997 at 10:00 A.M. for the following purposes:
(1) To elect six Directors to serve for the ensuing year;
(2) To consider and act upon a proposal to ratify the
selection of Price Waterhouse LLP as independent accountants of the
Fund for its fiscal year ending February 28, 1998;
(3) To consider and act upon a proposal to approve a new
Management Agreement between the Fund and Nomura Asset Management
U.S.A. Inc., and a new Investment Advisory Agreement between Nomura
Asset Management U.S.A. Inc. and Nomura Asset Management Co., Ltd.; and
(4) To transact such other business as may properly come
before the Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on August 4,
1997, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting or any adjournment thereof.
A complete list of the shareholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any shareholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after September 10, 1997, at the offices of the Fund, 180 Maiden Lane, New
York, New York.
You are cordially invited to attend the Meeting. Shareholders who do
not expect to attend the Meeting in person are requested to complete, date and
sign the enclosed form of proxy and return it promptly in the envelope provided
for that purpose. The enclosed proxy is being solicited on behalf of the Board
of Directors of the Fund.
By Order of the Board of Directors
JOHN F. WALLACE
Secretary
New York, New York
Dated: August , 1997
<PAGE>
PROXY STATEMENT
JAPAN OTC EQUITY FUND, INC.
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
-----------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 24, 1997
-----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Japan OTC Equity Fund, Inc., a
Maryland corporation (the "Fund"), to be voted at the 1997 Annual Meeting of
Shareholders of the Fund (the "Meeting") to be held at the offices of Nomura
Capital Management, Inc. ("NCM"), 180 Maiden Lane, New York, New York, on
Wednesday, September 24, 1997, at 10:00 A.M. The approximate mailing date of
this Proxy Statement is August , 1997.
All properly executed proxies received prior to the Meeting will be
voted at the Meeting in accordance with the instructions marked thereon or
otherwise as provided therein. Unless instructions to the contrary are marked,
proxies will be voted (a) FOR the election of six Directors, (b) FOR the
ratification of the selection of independent accountants, and (c) FOR the
approval of a new Management Agreement between the Fund and Nomura Asset
Management U.S.A. Inc. ("NAM-U.S.A."), and a new Investment Advisory Agreement
between NAM-U.S.A. and Nomura Asset Management Co., Ltd. ("NAM"). Any proxy may
be revoked at any time prior to the exercise thereof by giving written notice to
the Secretary of the Fund at the Fund's address indicated above or by voting in
person at the Meeting.
The Board of Directors has fixed the close of business on August 4,
1997, as the record date for the determination of shareholders entitled to
notice of and to vote at the Meeting and at any adjournment thereof.
Shareholders on the record date will be entitled to one vote for each share
held, with no shares having cumulative voting rights. As of August 4, 1997, the
Fund had outstanding 11,384,000 shares of Common Stock, par value $0.10 per
share.
The Board of Directors of the Fund knows of no business other than that
mentioned in Items 1 through 3 of the Notice of Meeting which will be presented
for consideration at the Meeting. If any other matter is properly presented, it
is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment.
<PAGE>
ITEM 1. ELECTION OF DIRECTORS
At the Meeting six Directors will be elected to serve until the next
Annual Meeting of Shareholders and until their successors are duly elected and
qualified. It is the intention of the persons named in the enclosed proxy to
nominate and vote in favor of the election of the persons listed below.
The Board of Directors of the Fund knows of no reason why any of these
nominees will be unable to serve, but in the event of any such unavailability,
the proxies received will be voted for such substitute nominees as the Board of
Directors may recommend.
Certain information concerning the nominees is set forth as follows:
<TABLE>
<CAPTION>
Shares of
Common Stock
of the Fund
Principal Occupations Beneficially
NAME AND ADDRESS During Past Five Years Director Owned at
OF NOMINEE and Public Directorships(1) Age Since August 4, 1997
------------ --------------------------- --- ------- --------------
<S> <C> <C> <C> <C>
William G. Barker, Jr. (2)...... Consultant to the television industry 64 1993 -0-
111 Parsonage Road since 1991; Senior Vice President and
Greenwich, Connecticut 06830 Chief Financial Officer of The
CBS/Fox Company from 1982 to 1991.
George H. Chittenden (2)........ Director of Bank Audi (US). 80 1990 500
155 Buffalo Bay, Neck Road
Madison, Connecticut 06443
Haruo Sawada (3)................ President of the Fund since 1997; 47 1997 -0-
180 Maiden Lane President and Director of NCM since
New York, New York 10038 1997; General Manager of Nomura
Investment Management Co., Ltd.
("NIMCO") from 1994 to 1996;
Senior Vice President of NCM from
1990 to 1994.
Chor Weng Tan (2)............... Managing Director for Education, The 61 1990 -0-
345 East 47th Street American Society of Mechanical
New York, New York 10017 Engineering since 1991; Professor,
School of Engineering, The Cooper
Union from 1963 to 1991; Dean,
School of Engineering, The Cooper
Union from 1975 to 1987; Executive
Officer, The Cooper Union Research
Foundation from 1976 to 1987;
Program Director, Presidential Young
Investigator Awards of National
Science Foundation from 1987 to
1989; and Director, Tround
International, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Shares of
Common Stock
of the Fund
Principal Occupations Beneficially
NAME AND ADDRESS During Past Five Years Director Owned at
OF NOMINEE and Public Directorships(1) Age Since August 4, 1997
------------ --------------------------- --- ------- --------------
<S> <C> <C> <C> <C>
Arthur R. Taylor (2)............ President of Muhlenberg College since 62 1990 -0-
2400 Chew Street 1992; Dean of the Faculty of Business
Allentown, Pennsylvania 18104 of Fordham University from 1985 to
1992; Chairman of Arthur R. Taylor
& Co. (investment firm); and Director
of Pitney Bowes, Inc. and Louisiana
Land & Exploration Company.
John F. Wallace (3)............. Secretary and Treasurer of the Fund 68 1990 500
180 Maiden Lane since 1990; Senior Vice President of
New York, New York 10038 NCM since 1981, Secretary since
1976, Treasurer since 1984 and
Director since 1986; Senior Vice
President of Nomura Securities
International, Inc. ("NSI") since 1978,
Secretary from 1977 to 1991, and
Director from 1983 to 1991.
<FN>
- -------------------
(1) Each of the nominees is also a director of Jakarta Growth Fund, Inc.,
Korea Equity Fund, Inc. and Nomura Pacific Basin Fund, Inc., investment
companies for which NCM acts as manager.
(2) Member of Audit Committee and Nominating Committee of the Board of
Directors.
(3) "Interested person," as defined in the Investment Company Act of 1940,
as amended (the "Investment Company Act"), of the Fund.
</TABLE>
Committees and Directors' Meetings. The Board of Directors has a
standing Audit Committee and Nominating Committee, each of which consists of the
Directors who are not "interested persons" of the Fund within the meaning of the
Investment Company Act. The principal purpose of the Audit Committee is to
review the scope of the annual audit conducted by the Fund's independent
accountants and the evaluation by such accountants of the accounting procedures
followed by the Fund. The principal purpose of the Nominating Committee is to
select and nominate the Directors who are not "interested persons" of the Fund
as defined in the Investment Company Act. The Nominating Committee will consider
nominees recommended by shareholders of the Fund. Shareholders should submit
nominees to the Secretary of the Fund. The Fund has no standing Compensation
Committee.
During the fiscal year ended February 28, 1997, the Board of Directors
held six meetings; the Audit Committee held one meeting; and the Nominating
Committee held one meeting. Each Director attended at least 75% of the meetings
of the Board of Directors, and each Director who is a member of the Audit and
Nominating Committees attended at least 75% of the meetings of such Committees
held during such period.
Interested Persons. The Fund considers two nominees, Messrs. Sawada
and Wallace, to be "interested persons" of the Fund within the meaning of
Section 2(a)(19) of the Investment Company Act. Mr. Sawada is President of the
Fund and the President and a director of NCM. Mr. Wallace is Secretary and
Treasurer of the Fund, Senior Vice President, Secretary, Treasurer and a
director of NCM and Senior Vice President of NSI, which is an affiliate of NCM.
Compensation of Directors. The Manager pays all compensation of all
Directors of the Fund who are affiliated with the Manager or any of its
affiliates. The Fund pays to each Director not affiliated with the
3
<PAGE>
Manager an annual fee of $5,000 plus $500 per meeting attended, together with a
Director's actual out-of-pocket expenses related to attendance at meetings. Such
fees and expenses aggregated $40,437 for the fiscal year ended February 28,
1997. The Fund has paid affiliated Directors' out-of-pocket expenses in
connection with attendance at meetings of the Board of Directors; such expenses
aggregated $5,163 for the fiscal year ended February 28, 1997.
The following table sets forth for the periods indicated compensation
paid by the Fund to its Directors and the aggregate compensation paid by all
investment companies managed by NCM or advised by NIMCO to the Directors:
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Total Compensation from
Compensation Benefits Accrued as Part of Fund Complex Paid to
from Fund for Fund Expenses for its Directors During the
its Fiscal Year Ended Fiscal Year Ended Calendar Year Ended
NAME OF DIRECTOR February 28, 1997 February 28, 1997 December 31, 1996*
---------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
William G. Barker, Jr.......... $8,000 None $33,000
George H. Chittenden........... $8,000 None $33,000
Haruo Sawada................... - None -
Chor Weng Tan.................. $8,000 None $33,000
Arthur R. Taylor............... $8,000 None $33,000
John F. Wallace................ - None -
<FN>
- ----------------
* In addition to the Fund, the "Fund Complex" includes Jakarta Growth Fund,
Inc., Korea Equity Fund, Inc. and Nomura Pacific Basin Fund, Inc.
</TABLE>
Officers of the Fund. The following table sets forth information
concerning the officers of the Fund. Officers of the Fund are elected and
appointed by the Directors and hold office until they resign, are removed or are
otherwise disqualified to serve.
<TABLE>
<CAPTION>
Shares of Common
Stock of the Fund
Beneficially
Officer Owned at
NAME AND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS Office Age Since August 4, 1997
---------------------------------------------------- ------ --- ------- --------------
<S> <C> <C> <C> <C>
Haruo Sawada............................................... President 47 1997 -0-
President and Director of NCM since 1997,
General Manager of NIMCO from 1994 to 1996,
Senior Vice President of NCM from 1990 to 1994.
Mitsutoyo Kohno............................................ Vice 48 1990 -0-
Senior Vice President of NCM since 1991 and Director President
since 1994, Vice President from 1989 to 1991.
John F. Wallace............................................ Secretary and 68 1990 500
Senior Vice President of NCM since 1981, Secretary Treasurer
since 1976, Treasurer since 1984 and Director since
1986. Senior Vice President of NSI since 1978, Secretary
from 1977 to 1991, and Director from 1983 to 1991.
</TABLE>
Stock Ownership. At August 4, 1997, the Directors and officers of the
Fund as a group (7 persons)
4
<PAGE>
owned an aggregate of 1,000 shares, less than 1% of the outstanding shares of
the Fund. Mr. Sawada, President of the Fund, and Mr. Mitsutoyo Kohno, Vice
President of the Fund, together own less than 1% of the shares of The Nomura
Securities Co., Ltd., an affiliate of both NCM and NIMCO.
ITEM 2. SELECTION OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors of
the Fund, including a majority of the Directors who are not interested persons
of the Fund, has selected the firm of Price Waterhouse LLP ("Price Waterhouse"),
as independent accountants, to audit the financial statements of the Fund for
the fiscal year ending February 28, 1998. Price Waterhouse has acted as the
Fund's independent accountants since the inception of the Fund. The Fund knows
of no direct or indirect financial interest of such firm in the Fund. Such
appointment is subject to ratification or rejection by the shareholders of the
Fund. Unless a contrary specification is made, the accompanying proxy will be
voted in favor of ratifying the selection of such accountants.
Price Waterhouse also acts as independent accountants for The Nomura
Securities Co., Ltd. and certain of its affiliated entities, including NCM, and
for three other investment companies for which NCM acts as manager. The Board of
Directors of the Fund considered the fact that Price Waterhouse has been
retained as the independent accountants for these other entities in its
evaluation of the ability of Price Waterhouse to also function in that capacity
for the Fund.
A representative of Price Waterhouse is expected to be present at the
Meeting and will have the opportunity to respond to questions from shareholders
and to make a statement if such person so desires.
ITEM 3. APPROVAL OR DISAPPROVAL OF THE MANAGEMENT
AND INVESTMENT ADVISORY ARRANGEMENTS
Nomura Capital Management, Inc. ("NCM") has served as the management
company for the Fund since the Fund commenced operations in 1990. Nomura
Investment Management Co., Ltd. ("NIMCO"), the parent of NCM, has served as the
investment adviser for the Fund since that time. NCM and NIMCO are each
affiliates of The Nomura Securities Co., Ltd. ("Nomura"), which is the largest
securities company in Japan. The existing agreements between the Fund and NCM,
and NCM and NIMCO are referred to below as the Current Management Agreement and
the Current Investment Advisory Agreement, respectively.
NIMCO has announced a proposed merger pursuant to which it and The
Nomura Securities Investment Trust Management Co., Ltd. ("NSITM"), another
investment advisory company affiliated with Nomura, will consolidate their
organizations. The merger of the two affiliated companies is permitted by recent
changes in Japanese law. NIMCO is the largest investment advisory company in
Japan in terms of total assets under management. NSITM is the largest investment
trust management company in Japan. At June 30, 1997, NIMCO and NSITM together
managed approximately $127.9 billion of investments.
It is presently contemplated that the corporate restructuring of NIMCO
and NSITM (the "NAM Restructuring") will take place on or about October 1, 1997.
As part of the NAM Restructuring, it is anticipated that a subsidiary of NSITM
based in New York will merge into NCM. After the restructuring, the advisory
firms will operate under the following names: the Japanese firm will be Nomura
Asset Management Co., Ltd. ("NAM") and the United States firm will be Nomura
Asset Management U.S.A. Inc. ("NAM-U.S.A.").
NCM has advised the Board of Directors and the Fund that the changes
in the corporate structure of the
5
<PAGE>
advisers in the United States and Japan are not expected to affect the portfolio
management or day-to-day operations of the Fund. However, these changes may
constitute an "assignment" of the relevant contracts under the Investment
Company Act, which would result in a termination of the Current Management
Agreement and the Current Investment Advisory Agreement. Accordingly, in
anticipation of the consummation of the NAM Restructuring and in order to ensure
the continuity of management and investment advisory services provided to the
Fund by NCM and NIMCO, respectively, a new management agreement between the Fund
and NAM- U.S.A. (the "New Management Agreement") and a new investment advisory
agreement between NAM-U.S.A. and NAM (the "New Investment Advisory Agreement")
are proposed to be approved prior to such date by a majority of the Fund's
shareholders.
The proposed new agreements under which the Fund will operate after the
NAM Restructuring are substantively identical to the agreements under which the
Fund currently operates. The services to be provided by NAM-U.S.A. and NAM after
the NAM Restructuring will be identical to the services currently provided by
NCM and NIMCO, respectively. NCM has advised the Board of Directors of the Fund
that the NAM Restructuring will provide the Fund with access to an investment
adviser with a larger capital base and increased investment research staff. NCM
has further advised the Board of Directors that it believes that there will be
no reduction in the quality of any of the services presently furnished by NCM
and NIMCO, respectively. AS DESCRIBED BELOW, THE PROPOSED NEW AGREEMENTS DO NOT
ALTER THE RATE OF MANAGEMENT COMPENSATION PRESENTLY PAYABLE BY THE FUND.
In their consideration of the above agreements, the Board of Directors
received information relating to, among other things, alternatives to the
present arrangements, the nature, quality and extent of the advisory and other
services to be provided to the Fund by NAM-U.S.A. and NAM, and comparative data
with respect to the advisory fees paid by other international funds, the
operating expenses and expense ratio of the Fund as compared to such funds and
the performance of the Fund as compared to such funds. The Independent Directors
also considered the quality of the personnel providing management and investment
advisory services to the Fund, NCM's representations that there will be no
material adverse change in the services provided to the Fund after the NAM
Restructuring is completed, the relative profitability of the present
arrangements to NCM and NIMCO, and information about the services to be
performed and the personnel performing such services under the proposed
agreements. The Independent Directors were advised by separate counsel in
connection with their review of the management and investment advisory
arrangements of the Fund.
If approved by the Fund's shareholders at the Meeting, each of the New
Management Agreement and the New Investment Advisory Agreement will remain in
effect until September 30, 1999, unless terminated as described below. The
Current Management Agreement and the Current Investment Advisory Agreement were
each last approved by the Fund's shareholders on July 9, 1991. Although the
management and investment advisory arrangements consist of two separate
contracts, shareholders can only vote on the two agreements together and not
individually.
As indicated above, NIMCO and NSITM are affiliates of Nomura, the
largest securities company in Japan. The Tokyo Prosecutor's Office indicted
Nomura and certain of its former officers in June and July, 1997 for loss
compensation in violation of the Securities and Exchange Law of Japan. In
addition, on July 30, 1997, the Ministry of Finance of Japan announced
administrative penalties, each for certain specified time periods, against
Nomura as follows: suspension of Nomura's own-account stock-related dealing;
suspension of stock-related business at all Nomura branch offices; suspension of
all securities transactions at certain divisions of Nomura's headquarters;
suspension of all securities transactions at Nomura's headquarters; and ban from
participation in the auction and underwriting of public bonds in Japan. NCM has
advised the Board of Directors of the Fund that neither NCM nor NIMCO had any
involvement in any of the activities that were the subject of the indictments
and the administrative penalties, and that NCM has been advised by NSITM that
neither it nor any of its subsidiaries had any such involvement.
6
<PAGE>
INFORMATION CONCERNING NAM-U.S.A. AND NAM
NAM-U.S.A. will provide global investment advisory services, primarily
with respect to Japanese and other Pacific Basin securities, for U.S.
institutional clients. NAM-U.S.A. also will act as one of the investment
advisers to six other investment companies, three of which are U.S. registered
investment companies. NAM-U.S.A. will be a subsidiary of NAM and Nomura
Research Institute ("NRI").
Under the New Management Agreement, NAM-U.S.A. agrees to provide, or
arrange for the provision of, investment advisory and management services to the
Fund, subject to the oversight and supervision of the Board of Directors of the
Fund. In addition to the management of the Fund's portfolio in accordance with
the Fund's investment policies and the responsibility for making decisions to
buy, sell or hold particular securities, NAM-U.S.A. is obligated to perform, or
arrange for the performance of, the administrative and management services
necessary for the operation of the Fund. NAM-U.S.A. also is obligated to provide
all the office space, facilities, equipment and personnel necessary to perform
its duties thereunder.
The following table sets forth the name, title and principal
occupations of the proposed principal executive officer and each director of
NAM-U.S.A. upon the completion of the NAM Restructuring:
<TABLE>
<CAPTION>
TITLE WITH NAM-U.S.A. PRESENT
NAME* AFTER NAM RESTRUCTURING PRINCIPAL OCCUPATION
- ----- ----------------------- --------------------
<S> <C> <C>
Haruo Sawada........................ Director and President Director and President of NCM
Brian X. Fitzgibbon................. Director Director and Senior Vice President of NCM
Takashi Harino...................... Director Director of NSITM
Shigenobu Hayakawa.................. Director Director of NSITM
Shigehito Hayashi................... Director Director and President of Nomura Asset
Management (U.S.A.) Inc.
Naotake Hirasawa.................... Director Director of NIMCO
Mitsutoyo Kohno..................... Director Director and Senior Vice President of NCM
Takahide Mizuno..................... Director Director of NIMCO
Takeo Nakamura...................... Director Managing Director of NIMCO
Marti G. Subrahmanyam............... Director Professor of Finance and Economics, New
York University, Leonard N. Stern School
of Business Administration
John F. Wallace..................... Director Director, Senior Vice President, Secretary
and Treasurer of NCM
<FN>
- -------------------
* The address of Messrs. Sawada, Fitzgibbon, Hayashi, Kohno, Subrahmanyam, and
Wallace is 180 Maiden Lane, New York, New York 10038. The address of
Messrs. Harino, Hayakawa, Hirasawa, Mizuno, and Nakamura is 1-12-11,
Nihonbashi, Chuo-Ku, Tokyo 103, Japan.
</TABLE>
NAM will provide investment advisory services for Japanese and
international clients. In addition to the Fund, NAM will act as an investment
adviser with respect to the following registered investment companies: Jakarta
Growth Fund, Inc., Korea Equity Fund, Inc., and Nomura Pacific Basin Fund, Inc.
NRI, whose address is 1-10-1, Nihonbashi, Chuo-ku, Tokyo 103, Japan, will own
12.44% of NAM.
7
<PAGE>
The following table sets forth the name and proposed title of the
principal executive officer and each director of NAM upon the completion of the
NAM Restructuring:
<TABLE>
<CAPTION>
TITLE WITH NAM AFTER PRESENT
NAME* NAM RESTRUCTURING PRINCIPAL OCCUPATION
- ----- --------------------- ---------------------
<S> <C> <C>
Hitoshi Tonomura...................... Chairman of the Board President of NSITM
Tadashi Takubo........................ President President of NIMCO
Tadashi Akimoto....................... Director Director of NIMCO
Kazuhiko Hama ........................ Director Director of NSITM
Takashi Harino........................ Director Director of NSITM
Naotake Hirasawa...................... Director Director of NIMCO
Toshio Ikawa.......................... Director Director of NSITM
Hideaki Ishii......................... Director Managing Director of NSITM
Shinzo Katada......................... Director Managing Director of NIMCO
Atsushi Kinebuchi..................... Director Executive Managing Director of NSITM
Norio Kinoshita....................... Director Director of NSITM
Masami Kitaoka........................ Director Director of NSITM
Mitsunori Minamio..................... Director Director of NIMCO
Haruo Miyako.......................... Director Managing Director of NSITM
Takahide Mizuno....................... Director Director of NIMCO
Takeo Nakamura........................ Director Managing Director of NIMCO
Naoki Santo........................... Director Executive Managing Director of NIMCO
Takanori Shimizu...................... Director Managing Director of NSITM
Teruo Shimizu......................... Director Director of NSITM
Hiromichi Tabata...................... Director Director of NSITM
Katsuya Takanashi..................... Director Executive Vice President of NSITM
Yasuo Takebayashi..................... Director Managing Director of NSITM
Takanori Tanabe....................... Director Executive Managing Director of NSITM
Isao Teranishi........................ Director Executive Managing Director of NIMCO
<FN>
- --------------------
* The address of the principal executive officer and each director is
1-12-11, Nihonbashi, Chuo-ku, Tokyo 103, Japan.
</TABLE>
TERMS OF THE NEW MANAGEMENT AGREEMENT AND THE NEW INVESTMENT ADVISORY AGREEMENT
Copies of the forms of the New Management Agreement and the New
Investment Advisory Agreement are set forth as Exhibits A and B, respectively.
Set forth below is a summary of the terms of such agreements. As discussed
above, the proposed agreements are substantively identical to the agreements
under which the Fund
8
<PAGE>
currently operates. THE PROPOSED AGREEMENTS DO NOT CHANGE THE AMOUNT OF
MANAGEMENT FEES PAYABLE BY THE FUND.
Under the New Management Agreement, NAM-U.S.A. agrees to provide, or
arrange for the provision of, investment advisory and management services to the
Fund, subject to the oversight and supervision of the Board of Directors of the
Fund. In addition to the management of the Fund's portfolio in accordance with
the Fund's investment policies and the responsibility for making decisions to
buy, sell or hold particular securities, NAM-U.S.A. is obligated to perform, or
arrange for the performance of, the administrative and management services
necessary for the operation of the Fund. NAM-U.S.A. is also obligated to provide
all the office space, facilities, equipment and personnel necessary to perform
its duties thereunder. Pursuant to such Agreement, NAM-U.S.A. is authorized to
retain NAM to act as an investment adviser for the Fund.
Pursuant to the New Investment Advisory Agreement between NAM-U.S.A.
and NAM, NAM will agree to furnish NAM-U.S.A. with economic research, securities
analysis and investment recommendations and to review and render investment
advice with respect to the Fund. NAM will not be responsible for the actual
portfolio decisions of the Fund.
COMPENSATION AND EXPENSES
AS DESCRIBED ABOVE, THE MANAGEMENT COMPENSATION PRESENTLY PAYABLE BY
THE FUND WILL REMAIN THE SAME UNDER THE PROPOSED CONTRACTUAL ARRANGEMENTS. As
compensation for its services to the Fund, NAM-U.S.A. will receive a monthly
fee, computed daily, at the annual rate of 1.10% of the value of the Fund's
average weekly net assets not in excess of $50 million, 1.00% of the Fund's
average weekly net assets in excess of $50 million but not exceeding $100
million, and .90% of the Fund's average weekly net assets in excess of $100
million. NAM-U.S.A. will pay NAM monthly fees at the annual rate of .50% of the
Fund's average weekly net assets not in excess of $50 million, .45% of the
Fund's average weekly net assets in excess of $50 million but not exceeding $100
million, and .40% of the Fund's average weekly net assets in excess of $100
million. The fee payable to NAM-U.S.A. is higher than that paid by most
management investment companies, but NAM-U.S.A. believes it is justified by the
types of portfolio securities held by the Fund and that it is comparable to fees
paid by other international funds. For the fiscal year ended February 28, 1997,
the Fund paid or accrued fees to NCM of $979,956. At July 31, 1997, the net
assets of the Fund aggregated approximately $77.5 million. At this net asset
level, the annual management fee would aggregate $825,353.
The New Management Agreement obligates NAM-U.S.A. to provide, or
arrange for the provision of, investment advisory services and to pay all
compensation of and furnish office space for officers and employees of the Fund,
as well as the fees of all Directors of the Fund who are affiliated persons of
NAM-U.S.A. or any of its affiliates. The Fund pays all other expenses incurred
in the operation of the Fund, including, among other things, taxes, expenses for
legal, tax and auditing services, costs of printing proxies, listing fees, stock
certificates, shareholder reports, prospectuses, charges of the custodian,
sub-custodians and transfer agent, Securities and Exchange Commission fees,
expenses of registering the shares under Federal, state and foreign laws, fees
and expenses of unaffiliated Directors, accounting and pricing costs (including
the weekly calculation of net asset value), insurance, interest, brokerage
costs, litigation and other extraordinary or non-recurring expenses, and other
expenses properly payable by the Fund.
9
<PAGE>
For the fiscal year ended February 28, 1997, the Fund paid brokerage
commissions of $516,769. Nomura and its affiliates earned commissions of $17,696
on execution of such portfolio security transactions. As of the date of this
Proxy Statement, NCM and NIMCO have determined not to place any brokerage
transactions with Nomura in light of the conduct that led to the administrative
penalties discussed above imposed on Nomura by the Ministry of Finance of Japan.
NCM and NIMCO reserve the right to change this determination in the future at
their discretion.
The following table sets forth information relating to the registered
investment companies which invest primarily in securities of companies domiciled
in Pacific Basin countries with the investment objective of long-term capital
appreciation for which NAM-U.S.A., NAM, and their affiliates will act as manager
or investment adviser:
<TABLE>
<CAPTION>
APPROXIMATE
NET ASSETS AT
JULY 31, 1997
INVESTMENT COMPANY ANNUAL ADVISORY FEES (MILLIONS)
------------------ -------------------- -------------
<S> <C> <C>
JAKARTA GROWTH FUND, INC.(1) $52.1
Manager: Management Fee:
- ------- --------------
NAM-U.S.A. 1.10% of net assets.
Investment Adviser: Investment Advisory Fee:
- ------------------- ------------------------
NAM .50% of net assets; paid by NAM-U.S.A.
KOREA EQUITY FUND, INC.(2) $50.5
Manager: Management Fee:
- ------- --------------
NAM-U.S.A. 1.10% of net assets.
Investment Adviser: Investment Advisory Fee:
- ------------------- ------------------------
NAM .55% of net assets; paid by NAM-U.S.A.
NOMURA PACIFIC BASIN FUND, INC.(3) $23.8
Manager: Management Fee:
- ------- --------------
NAM-U.S.A. .75% of net assets.
Investment Adviser: Investment Advisory Fee:
- ------------------- ------------------------
NAM .26125% of net assets; paid by NAM-U.S.A.
<FN>
- -------------------
(1) Nomura Asset Management Singapore Ltd. ("NAM-Singapore"), which will be an
affiliate of NAM-U.S.A. and NAM, will act as investment sub-adviser to
Jakarta Growth Fund, Inc. for which it will receive compensation of .25%
of net assets paid by NAM.
(2) LG Investment Trust Management Co., Ltd. acts as investment sub-adviser to
Korea Equity Fund, Inc. for which it receives compensation of .10% of net
assets paid by NAM-U.S.A.
(3) NAM-Singapore will act as investment sub-adviser to Nomura Pacific Basin
Fund, Inc. for which it will receive compensation of .0275% of net assets
paid by NAM-U.S.A.
</TABLE>
Duration and Termination. As indicated above, each of the New
Management Agreement and the New Investment Advisory Agreement will remain in
effect until September 30, 1999, and from year to year thereafter if approved
annually (a) by the Board of Directors of the Fund or by a majority of the
outstanding shares of the Fund and (b) by a majority of the Directors who are
not parties to such contract or interested persons (as defined in the Investment
Company Act) of any such party. Such contracts are not assignable and may be
terminated without penalty on 60 days' written notice at option of either party
thereto or by the vote of the shareholders of the Fund.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form
of proxy and accompanying Notice and Proxy Statement will be borne by the Fund,
except to the extent such expenses are attributable to the
10
<PAGE>
NAM Restructuring, in which case they will be borne by NCM. The Fund will
reimburse banks, brokers and others for their reasonable expenses in forwarding
proxy solicitation material to the beneficial owners of the shares of the Fund.
In addition to the solicitation of proxies by mail, proxies may be solicited in
person or by telephone. The Fund has retained Corporate Investor Communications,
Inc., a proxy solicitation firm, to assist in the solicitation of proxies for
the Meeting, for a fee of approximately $10,000, together with reimbursement of
such firm's expenses.
The election of Directors requires a plurality of the votes cast, in
person or by proxy, at a meeting at which a quorum is duly constituted.
Ratification of the selection of independent accountants requires the
affirmative vote of a majority of the shares present and voting on the proposal
at a meeting at which a quorum is present. Approval of each of the Management
Agreement and the Investment Advisory Agreement requires the vote of a majority
of the outstanding voting securities of the Fund which, under the Investment
Company Act, is the vote (a) of 67% or more of the shares of the Fund present at
the meeting of the holders if more than 50% of the outstanding shares are
present or represented by proxy, or (b) of more than 50% of the outstanding
shares, whichever is less. If the Management and the Investment Advisory
Agreements are not approved by shareholders at the Meeting, the Board of
Directors will reconsider the Fund's management and investment advisory
arrangements. The holders of a majority of the shares of stock of the Fund
entitled to vote at the Meeting, present in person or by proxy, shall constitute
a quorum for the transaction of business at the Meeting.
The Fund expects that broker-dealer firms holding shares of the Fund in
"street name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on each
proposal before the Meeting. The Fund understands that, under the rules of the
New York Stock Exchange, such broker-dealers may, without instructions from such
customers and clients, grant authority to the proxies designated by the Fund to
vote on certain items to be considered at the Meeting if no instructions have
been received prior to the date specified in the broker-dealer firm's request
for voting instructions. Certain broker-dealer firms may exercise discretion
over shares held in their name for which no instructions are received by voting
such shares in the same proportion as they have voted shares for which they have
received instructions.
The shares as to which the proxies so designated are granted authority
by broker-dealer firms to vote on the items to be considered at the Meeting, the
shares as to which broker-dealer firms have declined to vote ("broker
non-votes"), as well as the shares as to which proxies are returned by record
shareholders but which are marked "abstain" on any item will be included in the
Fund's tabulation of the total number of votes present for purposes of
determining whether the necessary quorum of shareholders exists. However,
abstentions and broker non-votes will not be counted as votes cast. Therefore,
abstentions and broker non-votes will not have an effect on the election of
Directors or the ratification of the selection of independent accountants.
Abstentions and broker non-votes will have the same effect as a vote against the
approval of each of the Management Agreement and the Investment Advisory
Agreement.
The Fund sends quarterly reports to shareholders. The Fund will
furnish, without charge, a copy of its most recent annual and semi-annual report
succeeding such annual report, if any, to shareholders upon request to the Fund
at 180 Maiden Lane, New York, New York 10038 (or call 1-800-833-0018).
11
<PAGE>
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the next annual
meeting of shareholders of the Fund must be received by the Fund for inclusion
in its proxy statement and form of proxy relating to that meeting by June 1,
1998.
By Order of the Board of Directors
JOHN F. WALLACE
Secretary
Dated: August , 1997
12
<PAGE>
Exhibit A
MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of ______________ 1997, by and between
JAPAN OTC EQUITY FUND, INC., a Maryland corporation (hereinafter referred to as
the "Fund"), and NOMURA ASSET MANAGEMENT U.S.A. INC., a New York corporation
(hereinafter referred to as the "Manager").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a non-diversified,
closed-end, management investment company registered under the Investment
Company Act of 1940, as amended (hereinafter referred to as the "Investment
Company Act"); and
WHEREAS, the Manager is willing to provide management and investment
advisory services to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE I
Duties of the Manager
The Fund hereby retains the Manager to act as the manager of the Fund
and to furnish the Fund with the management and investment advisory services
described below, subject to the policies of, review by and overall control of
the Board of Directors of the Fund, for the period and on the terms and
conditions set forth in this Agreement. The Manager hereby accepts such
employment and agrees during such period, at its own expense, to render, or
arrange for the rendering of, such services and to assume the obligations herein
set forth for the compensation provided for herein.
(a) Management and Administrative Services. The Manager shall perform,
or supervise the performance of, the management and administrative services
necessary for the operation of the Fund including administering shareholder
accounts and handling shareholder relations. The Manager shall provide the Fund
with office space, equipment and facilities and such other services as the
Manager, subject to review by the Board of Directors of the Fund, shall from
time to time determine to be necessary or useful to perform its obligations
under this Agreement. The Manager shall also, on behalf of the Fund, conduct
relations with custodians, depositories, transfer agents, dividend disbursing
agents, other shareholder servicing agents, accountants, attorneys,
underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and
such other persons in any such other capacity deemed to be necessary or
desirable. The Manager shall generally monitor the Fund's compliance with
investment policies and restrictions as set forth in filings made by the Fund
under Federal securities laws. The Manager shall make reports to the Board of
Directors of the Fund of the performance of its obligations hereunder and
furnish advice and recommendations with respect to such other aspects of the
business and affairs of the Fund as it shall determine to be desirable. The
Manager and each of its affiliates shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
(b) Investment Advisory Services. The Manager shall provide the Fund
with such investment research, advice and supervision as the latter may from
time to time consider necessary for the proper supervision of the
A-1
<PAGE>
assets of the Fund. The Manager shall act as investment adviser to the Fund and
as such shall furnish continuously an investment program for the Fund and shall
determine from time to time which securities shall be purchased, sold or
exchanged and what portion of the assets of the Fund shall be held in the
various securities in which the Fund invests, options, futures, options on
futures or in cash, subject always to the restrictions of the Articles of
Incorporation and By-Laws of the Fund, as amended from time to time, the
provisions of the Investment Company Act and the statements relating to the
Fund's investment objective, investment policies and investment restrictions as
the same are set forth in filings made by the Fund under Federal securities
laws. The Manager shall make decisions for the Fund as to foreign currency
matters and make determinations as to foreign exchange contracts. The Manager
shall make recommendations as to the manner in which voting rights, rights to
consent to corporate action and any other rights pertaining to the Fund's
portfolio securities shall be exercised. Should the Board of Directors of the
Fund at any time, however, make any definite determination as to investment
policy and notify the Manager thereof in writing, the Manager shall be bound by
such determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Manager shall
take, on behalf of the Fund, all actions which it deems necessary to implement
the investment policies determined as provided above, and in particular to place
all orders for the purchase or sale of portfolio securities for the Fund's
account with brokers or dealers selected by it, and to that end, the Manager is
authorized as the agent of the Fund to give instructions to the Custodian of the
Fund as to deliveries of securities and payments of cash for the account of the
Fund. In connection with the selection of such brokers or dealers and the
placing of such orders, the Manager is directed at all times to seek to obtain
executions and price within the policy guidelines determined by the Board of
Directors of the Fund and set forth in the filings made by the Fund under
Federal securities laws. Subject to this requirement and the provisions of the
Investment Company Act, the Securities Exchange Act of 1934, as amended, and
other applicable provisions of law, the Manager may select brokers or dealers
with which it, or the Fund, is affiliated.
ARTICLE II
Allocation of Charges and Expenses
(a) The Manager. The Manager assumes and shall pay for maintaining the
staff and personnel necessary to perform its obligations under this Agreement
and shall, at its own expense, provide the office space, equipment and
facilities which it is obligated to provide under Article I hereof, and shall
pay all compensation of officers of the Fund and all directors of the Fund who
are "affiliated persons" (as defined in the Investment Company Act) of the
Manager.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: organization costs,
taxes, expenses for legal and auditing services, costs of printing proxies,
stock certificates, shareholder reports, prospectuses, charges of the Custodian,
any Sub- Custodian and Transfer and Dividend Disbursing Agent, expenses of
portfolio transactions, Securities and Exchange Commission and stock exchange
fees, expenses of registering the Fund's shares under Federal, state and foreign
laws, expenses of administering any dividend reinvestment plan (except to the
extent set forth in such plan), fees and actual out-of-pocket expenses of
directors who are not affiliated persons of the Manager, accounting and pricing
costs (including the calculation of the net asset value), insurance, interest,
brokerage costs, litigation and other extraordinary or non-recurring expenses,
and other like expenses properly payable by the Fund.
A-2
<PAGE>
ARTICLE III
Compensation of the Manager
For the services rendered, the equipment and facilities furnished and
expenses assumed by the Manager, the Fund shall pay to the Manager at the end of
each calendar month a fee based upon the average daily value of the net assets
of the Fund, at the annual rate of 1.10% of the Fund's average weekly net assets
(i.e., the average weekly value of the total assets of the Fund, minus the sum
of liabilities of the Fund), not in excess of $50 million, 1.00% of the Fund's
average weekly net assets in excess of $50 million but not in excess of $100
million and .90% of the Fund's average weekly net assets in excess of $100
million, commencing on the day following effectiveness hereof. For purposes of
this calculation, average weekly net assets is determined at the end of each
month on the basis of the average net assets of the Fund for each week during
the month. The assets for each weekly period are determined by averaging the net
assets at the last business day of the prior week. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before the
last day of a month, compensation for that part of the month this Agreement is
in effect shall be prorated in a manner consistent with the calculation of the
fee as set forth above. During any period when the determination of net asset
value is suspended by the Board of Directors of the Fund, the average net asset
value of a share for the last week prior to such suspension shall for this
purpose be deemed to be the net asset value at the close of each succeeding week
until it is again determined.
ARTICLE IV
Investment Advisory Agreement
This Agreement is entered into with the understanding that the Manager
will enter into an Investment Advisory Agreement with Nomura Asset Management
Co., Ltd., in the form attached hereto as Exhibit A, in which the Manager will
contract for advisory services and pay the Investment Adviser compensation for
its services out of the compensation received hereunder pursuant to Article III
at the rates set forth therein. Such Investment Advisory Agreement will be
coterminous with this Management Agreement.
ARTICLE V
Limitation of Liability of the Manager
The Manager shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the execution and management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article V, the term "Manager" shall include any affiliates of the Manager
performing services for the Fund contemplated hereby and directors, officers and
employees of the Manager as well as the corporation itself.
ARTICLE VI
Activities of the Manager
The services of the Manager to the Fund are not to be deemed to be
exclusive, the Manager and any person controlled by or under common control with
the Manager (for purposes of this Article VI referred to as "affiliates") being
free to render services to others. It is understood that directors, officers,
employees and
A-3
<PAGE>
shareholders of the Fund are or may become interested in the Manager and its
affiliates, as directors, officers, employees, partners, and shareholders or
otherwise and that directors, officers, employees, partners, and shareholders of
the Manager and its affiliates are or may become similarly interested in the
Fund, and that the Manager is or may become interested in the Fund as
shareholder or otherwise.
ARTICLE VII
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above
written and shall remain in force until _____________ __, 1999 and thereafter,
but only so long as such continuance is specifically approved at least annually
by (i) the Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) a majority of those
directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Directors of the Fund or by vote of a majority of
the outstanding voting securities of the Fund, or by the Manager, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
ARTICLE VIII
Amendments of the Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
ARTICLE IX
Definitions of Certain Terms
The terms "vote of a majority of outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE X
Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Investment Company Act.
To the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
A-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
JAPAN OTC EQUITY FUND, INC.
By________________________________
NOMURA ASSET MANAGEMENT U.S.A. INC.
By________________________________
A-5
<PAGE>
Exhibit B
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of ______________ 1997, by and between
NOMURA ASSET MANAGEMENT U.S.A. INC., a New York corporation (hereinafter
referred to as the "Manager"), and NOMURA ASSET MANAGEMENT CO., LTD., a Japanese
corporation (hereinafter referred to as the "Investment Adviser").
W I T N E S S E T H :
WHEREAS, Japan OTC Equity Fund, Inc. (the "Fund") is engaged in
business as a non-diversified, closed-end, management investment company
registered under the Investment Company Act of 1940, as amended (hereinafter
referred to as the "Investment Company Act"); and
WHEREAS, the Manager and the Investment Adviser are engaged in business
as registered investment advisers under the Investment Advisers Act of 1940, as
amended; and
WHEREAS, the Manager has entered into a management agreement with the
Fund of even date herewith (the "Management Agreement"); and
WHEREAS, the Investment Adviser is willing to provide investment
advisory services to the Manager in connection with the Fund's operations on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE I
Duties of the Investment Adviser
Subject to the broad supervision of the Manager and the Fund, the
Investment Adviser shall provide the Manager with such economic research,
securities analysis and investment recommendations as the latter may from time
to time consider necessary for the proper supervision of the Fund's assets. The
Investment Adviser shall continuously review the Fund's holdings and shall make
recommendations as to which securities shall be purchased, sold or exchanged and
what portion of the assets of the Fund shall be held in the various securities
in which the Fund invests, subject always to the restrictions of the Articles of
Incorporation and By-Laws of the Fund, as amended from time to time, the
provisions of the Investment Company Act and the statements relating to the
Fund's investment objective, investment policies and investment restrictions as
the same are set forth in filings made by the Fund under Federal securities
laws. The Investment Adviser shall make recommendations as to foreign currency
matters and the advisability of entering into foreign exchange contracts. The
Investment Adviser shall also make recommendations as to the manner in which
voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's portfolio securities shall be exercised.
B-1
<PAGE>
ARTICLE II
Allocation of Charges and Expenses
The Investment Adviser shall furnish, at its own expense, all
administrative services, office space, equipment and facilities, investment
advisory, statistical and research services, and executive, supervisory and
clerical personnel necessary to carry out its obligations under this Agreement.
ARTICLE III
Compensation of the Investment Adviser
For the services to be rendered as provided herein, the Manager shall
pay to the Investment Adviser at the end of each calendar month a fee based upon
the average weekly value of the net assets of the Fund at the annual rate of
0.50% of the Fund's average weekly net assets (i.e., the average weekly value of
the total assets of the Fund minus the sum of accrued liabilities of the Fund),
not in excess of $50 million, .45% of the Fund's average weekly net assets in
excess of $50 million but not in excess of $100 million and .40% of the Fund's
average weekly net assets in excess of $100 million, commencing on the day
following effectiveness hereof. For purposes of this calculation, average weekly
net assets is determined at the end of each month on the basis of the average
net assets of the Fund for each week during the month. The assets for each
weekly period are determined by averaging the net assets at the last business
day of the prior week. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month that this Agreement is in effect shall
be prorated in a manner consistent with the calculation of the fee as set forth
above. During any period when the determination of net asset value is suspended
by the Board of Directors of the Fund, the average net asset value of a share
for the last week prior to such suspension shall for this purpose be deemed to
be the net asset value at the close of each succeeding week until it is again
determined.
ARTICLE IV
Limitation of Liability of the Investment Adviser
The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As
used in this Article IV, the term "Investment Adviser" shall include any
affiliates of the Investment Adviser performing services for the Fund
contemplated hereby and directors, officers, partners and employees of the
Investment Adviser and such affiliates.
ARTICLE V
Activities of the Investment Adviser
The services of the Investment Adviser to the Fund are not to be deemed
to be exclusive, the Investment Adviser and any person controlled by or under
common control with the Investment Adviser (for the purpose of this Article V
referred to as "affiliates") being free to render services to others. It is
understood that
B-2
<PAGE>
directors, officers, employees and shareholders of the Manager are or may become
interested in the Investment Adviser and its affiliates, as directors, officers,
employees, partners and shareholders or otherwise and that directors, officers,
employees, partners and shareholders of the Investment Adviser and its
affiliates are or may become similarly interested in the Manager or the Fund,
and that the Investment Adviser is or may become interested in the Manager or
the Fund as shareholder or otherwise.
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above
written and shall remain in force until _____________ __, 1999 and thereafter,
but only so long as the Management Agreement remains in force and provided that
such continuance is specifically approved at least annually by (i) the Board of
Directors of the Fund or by the vote of a majority of the outstanding voting
securities of the Fund and (ii) a majority of those directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Manager, by vote of a majority of the outstanding voting
securities of the Fund or by the Investment Adviser, on sixty days' written
notice to the parties. This Agreement shall automatically terminate in the event
of its assignment.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting for the purpose of voting on such approval.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting
securities," "assignment," "affiliated person" and "interested person," when
used in this Agreement, shall have the respective meanings specified in the
Investment Company Act of 1940 and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act.
B-3
<PAGE>
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with laws of the State
of New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
NOMURA ASSET MANAGEMENT U.S.A. INC.
By_______________________________
NOMURA ASSET MANAGEMENT CO., LTD.
By_______________________________
B-4
<PAGE>
JAPAN OTC EQUITY FUND, INC.
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Haruo Sawada and John F. Wallace as proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse hereof, all the common stock
of Japan OTC Equity Fund, Inc. (the "Fund") held of record by the undersigned on
August 4, 1997 at the Annual Meeting of the shareholders of the Fund to be held
on September 24, 1997 or any adjournment thereof.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME(S) APPEAR(S) HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSONS.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ----------------------------------- ----------------------------------
- ----------------------------------- ----------------------------------
- ----------------------------------- ----------------------------------
<PAGE>
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
JAPAN OTC EQUITY FUND, INC.
Mark box at right if an address change or comment has |_| been noted on the
reverse side of this card.
Please be sure to sign and date this Proxy. Date ______________________
Shareholder sign here ___________________ Co-owner sign here __________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES.
1. Election of Directors:
William G. Barker, Jr. Chor Weng Tan
George H. Chittenden Arthur R. Taylor
Haruo Sawada John F. Wallace
For All Nominees |_| Withhold |_| For All Except |_|
If you do not wish your shares voted "For" a particular nominee, mark the "For
All Except" box and strike a line through that nominee's(s') name(s). Your
shares will be voted for the remaining nominee(s).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
2. Proposal to ratify the selection of Price Waterhouse LLP
as the independent accountants of the Fund.
For |_| Against |_| Abstain |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3.
3. Proposal to approve new Management and Investment Advisory Agreements.
For |_| Against |_| Abstain |_|
4. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
RECORD DATE SHARES:
