JAPAN OTC EQUITY FUND INC, PRE 14A, 2000-06-23

JAPAN OTC EQUITY FUND INC
PRE 14A, 2000-06-23

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As Filed with the Securities and Exchange Commission on June 23, 2000

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

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
(as permitted by Rule 14a-6(e)(2)
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12

JAPAN OTC EQUITY FUND, INC.

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(Name of Registrant as Specified In Its Charter)

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(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)(4) and 0-11.

1. Title of each class of securities to which transaction applies:

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2. Aggregate number of securities to which transaction applies:

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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):

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4. Proposed maximum aggregate value transaction:

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5. Total fee paid:

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[_] 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 number, or the Form or Schedule and the date of its
filing.

1. Amount previously paid:

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2. Form, Schedule or Registration Statement No.:

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3. Filing Party:

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4. Date Filed:

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<PAGE>

JAPAN OTC EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038-4936

---------------

NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
August 15, 2000

---------------

To the Shareholders of
Japan OTC Equity Fund, Inc.:

Notice is hereby given that the 2000 Annual Meeting of Shareholders
(the "Meeting") of Japan OTC Equity Fund, Inc. (the "Fund") will be held at
the offices of Nomura Asset Management U.S.A. Inc., 180 Maiden Lane, New York,
New York, on Tuesday, August 15, 2000, at 11:00 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
PricewaterhouseCoopers LLP as independent accountants of the Fund for its
fiscal year ending February 28, 2001;

(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.;

(4) To consider and act upon a proposal to approve a new Investment
Advisory Agreement between Nomura Asset Management U.S.A. Inc. and Nomura Asset
Management Co., Ltd.;

(5) To amend the Fund's principal investment strategy concerning
investment in the Japanese over-the-counter market; and

(6) 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 June 30,
2000 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 July 24, 2000, 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 J. Boretti
Secretary

New York, New York
Dated: July ___, 2000

<PAGE>

[This Page intentionally left blank]

<PAGE>

Preliminary Proxy Statement

PROXY STATEMENT

JAPAN OTC EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038-4936

---------------

2000 ANNUAL MEETING OF SHAREHOLDERS
August 15, 2000

---------------

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 2000 Annual Meeting of
Shareholders of the Fund (the "Meeting") to be held at the offices of Nomura
Asset Management U.S.A. Inc., 180 Maiden Lane, New York, New York, on Tuesday,
August 15, 2000, at 11:00 A.M. The approximate mailing date of this Proxy
Statement is July ___, 2000.

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, (c) FOR approval of
a new Management Agreement between the Fund and Nomura Asset Management U.S.A.
Inc. ("NAM-U.S.A."), (d) FOR approval of a new Investment Advisory Agreement
between NAM-U.S.A. and Nomura Asset Management Co., Ltd. ("NAM") and (e) FOR
the amendment of the Fund's principal investment strategy concerning
investment in the Japanese over-the-counter market. 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 June 30,
2000, 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 June 30, 2000, the
Fund had outstanding 15,846,384 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 Proposals 1, 2, 3, 4 and 5 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 judgement.

PROPOSAL 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 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 unless
otherwise indicated.

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. It is currently expected
that any substitute nominee for Director who is not an "interested person" of
the Fund (within the meaning of the Investment Company Act of 1940) also will
be a non-interested person.

Certain information concerning the nominees is set forth as follows:
<TABLE>
<CAPTION>

Principal Occupations Shares of Common
During Past Five Years Stock of the Fund
and Public Director Beneficially Owned at
Name and Address of Nominee Directorships(l) Age Since June 30, 2000
------------------------------- ----------------------- --- --------- ----------------------
<S> <C> <C> <C> <C>
William G. Barker, Jr.(2)...... Consultant to the 67 1990 -0-
111 Parsonage Road television industry since
Greenwich, Connecticut 06830 1991.

George R. Chittenden(2)........ Director of Bank Audi 83 1990 750
155 Buffalo Bay, Neck Road (USA).
Madison, Connecticut 06443

Nobuo Katayama(3).............. President of the Fund 53 1999 -0-
180 Maiden Lane since 1999; President and
New York, New York 10038 Director of NAM-U.S.A.
since 1999; Marketing Officer
of NAM from 1997 to 1999;
Director and Chief Portfolio
Manager of NAM from 1993 to
1997.

Chor Weng Tan(2)............... Managing Director for 64 1990 1,000
3 Park Avenue Education, The American
New York, New York 10016 Society of Mechanical
Engineering since 1991;
Director of Tround
International, Inc. from
1984 to 1997.

Arthur R. Taylor(2)............ President of Muhlenberg 64 1990 -0-
2400 Chew Street College since 1992; Dean
Allentown, Pennsylvania 18104 of the Faculty of
Business of Fordham
University from 1985 to
1992; Chairman of Arthur
R. Taylor & Co.
(Investment firm); and
Director of Louisiana
Land & Exploration
Company and Pitney Bowes,
Inc. from 1982 to 1997.

John F. Wallace(3)............. Vice President of the 71 1990 700
17 Rhoda Street Fund from 1997 to 2000
West Hempstead, New York 11552 and Secretary and
Treasurer of the Fund from
1993 to 1997;
Senior Vice President of
NAM-U.S.A. from 1981 to 2000,
Secretary from 1976 to
2000, Treasurer from 1984
to 2000 and Director from
1986 to 2000.

</TABLE>

---------------
(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 NAM-U.S.A. acts as manager and NAM acts
as investment adviser.

(2) Member of Audit Committee and Nominating Committee of the Board of
Directors.

(3) "Interested person" of the Fund, as defined in the Investment Company
Act of 1940, as amended (the "Investment Company Act").

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 assist the Board of Directors in its oversight of the Fund's accounting and
financial reporting policies, its internal controls and the preparation of its
financial statements and also to act as a liaison between the Fund and its
independent public accountants. 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 29, 2000, the Board of
Directors held nine meetings, and the Audit Committee held two meetings 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. Katayama
and Wallace, to be "interested persons" of the Fund within the meaning of
Section 2(a) (19) of the Investment Company Act. Mr. Katayama is President of
the Fund, the President and a director of NAM-U.S.A. Mr. Wallace is a former
Vice President of the Fund and a former Senior Vice President, Secretary,
Treasurer and director of NAM-U.S.A.

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 Manager an
annual fee of $5,000 plus $500 per meeting attended, together with such
Director's actual out-of-pocket expenses relating to attendance at meetings.
Such fees and expenses aggregated $57,825 for the fiscal year ended February
29, 2000. The Fund has paid affiliated Directors' out-of-pocket expenses in
connection with attendance at meetings of the Board of Directors; such
expenses aggregated $4,071 for this fiscal year ended February 29, 2000.

The following table sets forth for the periods indicated compensation
paid by the Fund to its Directors and the aggregate compensation paid to the
Directors by all investment companies managed by NAM-U.S.A. or advised by NAM:

Aggregate Pension or Retirement Total Compensation from
Compensation from Benefit Accrued as Part of Fund Complex Paid to
Fund for its Fiscal Fund Expenses for its Directors During the
Year Ended February Fiscal Year Ended February Calendar Year Ended
Name of Director 29, 2000 29, 2000 December 31, 1999*
<S> <C> <C> <C>
William G. Barker............. $9,500 None $32,500
George H. Chittenden.......... $9,000 None $32,500
Nobuo Katayama................ -- None --
Chor Weng Tan................. $9,000 None $30,500
Arthur R. Taylor.............. $9,500 None $32,500
John F. Wallace............... -- None --

</TABLE>

-------------
* In addition to the Fund, the "Fund Complex" includes Jakarta Growth Fund,
Inc., Korea Equity Fund, Inc., and Nomura Pacific Basin Fund, Inc. Because the
Funds in the Fund Complex do not share a common fiscal year, the information
relating to compensation from the Fund Complex paid to the directors is
provided as of December 31, 1999.

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 June 30, 2000

Nobuo Katayama...................................... President 53 1999 -0-
President and Director of NAM-U.S.A. since 1999;
Marketing Officer of NAM from 1997 to 1999;
Director and Chief Portfolio Manager of NAM from
1993 to 1997.

Keisuke Haruguchi................................... Vice President 49 1999 -0-
Senior Vice President and Director of NAM-U.S.A. since
1999; Senior Manager of NAM from 1997 to 1998; Manager
of The Nomura Securities Co., Ltd. from 1994 to 1996.

David G. Stoeffel................................... Vice President 41 1999 100
Senior Vice President of NAM-U.S.A. since 1999 and Vice
President of NAM-U.S.A. since 1998; Eastern Division
Manager of Brinson Funds from 1997 to 1998; Northeast
Region Funds Coordinator of Prudential Investments from
1994 to 1997.

John J. Boretti..................................... Secretary and 48 1997 -0-
Senior Vice President of NAM-U.S.A. since 1996 and Treasurer
Compliance Officer of NAM-U.S.A. since 1997; Vice
President and Chief Financial Officer of Kidder Peabody
Asset Management, Inc. and Kidder, Peabody Mutual Funds
and Vice President of Kidder, Peabody & Co. Inc. from
1993 to 1995.

</TABLE>

Stock Ownership. At June 30, 2000, the Directors and officers of the
Fund as a group (9 persons) owned an aggregate of 2,550 shares of the Fund,
representing less than 1% of the outstanding shares of the Fund. The officers
of the Fund, together own less than 1% of the shares of The Nomura Securities
Co., Ltd. ("Nomura"), an affiliate of both NAM-U.S.A. and NAM.

PROPOSAL 2. SELECTION OF INDEPENDENT ACCOUNTANTS

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
PricewaterhouseCoopers LLP ("PWC"), as independent accountants, to audit the
financial statements of the Fund for the fiscal year ending February 28, 2001.
PWC 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.

PWC also acts as independent accountants for Nomura and certain of
its affiliated entities, including NAM-U.S.A., and for three other investment
companies for which NAM-U.S.A. acts as manager. The Board of Directors of the
Fund considered the fact that PWC has been retained as the independent
accountants for these other entities in its evaluation of the ability of PWC
to also function in that capacity for the Fund.

A representative of PWC 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.

PROPOSAL 3. APPROVAL OR DISAPPROVAL OF THE MANAGEMENT AGREEMENT

NAM-U.S.A. has served as the management company for the Fund since
the Fund commenced operations in 1990. NAM-U.S.A. provides management and
administrative services, including administering shareholder accounts and
handling shareholder relations, to the Fund. NAM-U.S.A. is an affiliate of
both Nomura and NAM.

Following changes in Japanese regulations, Nomura has announced that
it intends to reorganize into a holding company. As part of the process toward
the holding company concept, Nomura has increased its share ownership in NAM
from 4.99% to a majority shareholder positioning with an ultimate goal of
acquiring 100% of NAM. At May 31, 2000, Nomura had acquired 74.5% of the
outstanding voting shares of NAM and NAM-U.S.A. had become a wholly-owned
subsidiary of NAM.

NAM-U.S.A. has advised the Board of Directors that the changes in the
ownership structure of NAM-U.S.A. and NAM have not affected the Fund's
day-to-day operations or portfolio management. However, these changes may have
constituted an "assignment" of the relevant contracts under the Investment
Company Act, which may have resulted in a termination of the Fund's management
agreement. Accordingly, in light of the ownership changes in NAM-U.S.A. and
NAM and in order to ensure the continuity of management services provided to
the Fund by NAM-U.S.A., on March 24, 2000 the Board of Directors of the Fund
approved, pursuant to Rule 15a-4 under the Investment Company Act, an interim
Management Agreement (the "Interim Management Agreement") for up to 150 days
after the termination of the former agreement while the Fund seeks shareholder
approval of a new agreement. A new management agreement between the Fund and
NAM-U.S.A. (the "New Management Agreement") is proposed to be approved by a
majority of the Fund's outstanding voting securities (as defined in the
Investment Company Act).

The Interim Management Agreement under which the Fund is operating is
substantially identical to the agreement under which the Fund previously
operated. The services provided by NAM-U.S.A. since the ownership change have
been identical to the services previously provided by NAM-U.S.A. NAM-U.S.A.
has 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
NAM-U.S.A. As described below, the proposed new agreement does not alter the
rate of management compensation presently payable by the Fund.

In their consideration of the New Management Agreement, the Board of
Directors received information relating to, among other things, alternatives
to the Fund's present agreement, the nature, quality and extent of the
management and other services to be provided to the Fund by NAM-U.S.A., other
comparative data with respect to the management 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 NAM-U.S.A.'s representations
that there will be no material adverse change in the services provided to the
Fund after the ownership change, the relative profitability of the present
agreement to NAM-U.S.A., and information about the services to be performed
and the personnel performing such services under the proposed agreement. The
independent Directors were advised by separate counsel in connection with
their review of the management agreement of the Fund. After considering the
factors stated above, the Board of Directors approved the New Management
Agreement of the Fund.

If approved by the Fund's shareholders at the Meeting, the New
Management Agreement will remain in effect until August 1, 2002, unless
terminated as described below. The former Management Agreement was last
approved by the Fund's shareholders on September 24, 1997. Although the
management and investment advisory agreements consist of two separate
contracts, neither of the agreements will become effective unless both are
approved by shareholders.

Information Concerning NAM-U.S.A.

NAM-U.S.A. provides global investment advisory services, primarily
with respect to Japanese and other Pacific Basin securities, for U.S.
institutional clients. NAM-U.S.A. acts as one of the investment advisors to
five other investment companies, three of which are U.S. registered investment
companies. Effective March 31, 2000, NAM-U.S.A. became a wholly owned
subsidiary of NAM.

The following table sets forth the name, title and principal
occupations of the principal executive officer and each director of NAM-U.S.A.
at June 1, 2000.

<PAGE>
<TABLE>
<CAPTION>
Name* Title with NAM-U.S.A. Present Principal Occupation
<S> <C> <C>
Nobuo Katayama Director and President Director and President of NAM-U.S.A.

Marti G. Subrahmanyam Director Professor of Finance and Economics,
New York University, Leonard N.
Stern School of Business
Administration

Keisuke Haruguchi Director, Senior Vice President and Director, Senior Vice President and
Treasurer Treasurer of NAM-U.S.A.

John J. Boretti Senior Vice President and Compliance Senior Vice President and Compliance
Officer Officer of NAM-U.S.A.

Michael A. Morrongiello Senior Vice President Senior Vice President of NAM-U.S.A.

Kenneth L. Munt Senior Vice President and Secretary Senior Vice President and Secretary
of NAM-U.S.A.

David G. Stoeffel Senior Vice President Senior Vice President of NAM-U.S.A.

</TABLE>

----------------
* The address of Messrs. Katayama, Haruguchi, Boretti, Morrongiello, Munt and
Stoeffel is 180 Maiden Lane, New York, New York 10038. The address of Messr.
Subrahmanyam is New York University, Leonard N. Stern School of Business,
Henry Kaufman Management Center, 44 West Fourth Street, New York, New York
10012.

Terms of the New Management Agreement

A copy of the form of the New Management Agreement is set forth as
Exhibit A. Set forth below is a summary of the terms of that Agreement. As
discussed above, the proposed Agreement is substantively identical to the
agreement under which the Fund currently operates. The proposed agreement does
not change the amount of management fees payable by the Fund.

Under the New Management Agreement between the Fund and NAM-U.S.A.,
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 advisor for the Fund.

Compensation and Expenses

As described above, the management compensation presently payable by
the Fund will remain the same under the proposed Agreement. As compensation
for its services to the Fund, NAM-U.S.A. will receive a monthly fee, computed
daily, as set below.

Annual Rate of Compensation Based on Average Weekly
Net Assets of

1.10% not in excess of $50 million
1.00% in excess of $50 but not exceeding $100 million
.90% in excess of $100 but not exceeding $175 million
.80% in excess of $175 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 comparable to
fees paid by other international funds. For the services it rendered during
the fiscal year ended February 29, 2000, the Fund accrued, under generally
accepted accounting principles, fees of $1,491,104 and paid NAM-U.S.A. fees of
$1,371,135 on a cash basis. At June 1, 2000, the net assets of the Fund
aggregated approximately $200.1 million. At this net asset level, the annual
management fee would aggregate approximately $1,926,000.

The New Management Agreement obligates NAM-U.S.A. 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 (the "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
daily/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.

For the fiscal year ended February 29, 2000, the Fund paid brokerage
commissions of $449,051. Nomura earned $94,259 (21%) in commissions from the
Fund on the execution of such portfolio security transactions.

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. and its affiliates act as
manager:
<TABLE>
<CAPTION>
Approximate
Net Assets at
June 1, 2000
Investment Company Annual Advisory Fees (Millions)
<S> <C> <C>
Jakarta Growth Fund, Inc.
Manager: Management Fee: $7.6
NAM-U.S.A. 1.10% of net assets

Korea Equity Fund, Inc.
Manager: Management Fee: $41.8
NAM-U.S.A. 1.10% of net assets

Nomura Pacific Basin Fund, Inc. $16.2
Manager: Management Fee:
NAM-U.S.A. .75% of net assets(1)

</TABLE>

------------------

(1) For the fiscal year ended March 31, 2000 NAM-U.S.A. waived its entire
management fee.

Duration and Termination. As indicated above, the New Management
Agreement will remain in effect until August 1, 2002, 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 contract is 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.

PROPOSAL 4. APPROVAL OR DISAPPROVAL OF THE INVESTMENT ADVISORY AGREEMENT

NAM, the parent company of NAM-U.S.A., has served as the investment
advisor for the Fund since the Fund commenced operations in 1990. NAM is a
subsidiary of Nomura, which is the largest securities company in Japan. NAM
provides economic research, securities analysis and investment recommendations
to the Fund.

As described above, following changes in Japanese regulations, Nomura
announced its intention to reorganize into a holding company. As part of the
process toward the holding company concept, Nomura has increased its share
ownership in NAM from 4.99% to a majority shareholder positioning with the
ultimate goal of acquiring 100% of NAM. At May 31, 2000, Nomura had acquired
74.5% of the outstanding voting shares of NAM.

NAM-U.S.A. has advised the Board of Directors that the changes in the
ownership structure of NAM-U.S.A. and NAM have not affected the Fund's
day-to-day operations or portfolio management. However, these changes may have
constituted an "assignment" of the relevant contracts under the Investment
Company Act, which may have resulted in a termination of the Fund's investment
advisory agreement. Accordingly, in light of the ownership changes in
NAM-U.S.A. and NAM and in order to ensure the continuity of investment
advisory services provided to the Fund by NAM, on March 24, 2000 the Board of
Directors of the Fund approved, pursuant to Rule 15a-4 under the Investment
Company Act an interim Investment Advisory Agreement (the "Interim Investment
Advisory Agreement") for up to 150 days after the termination of the former
agreement while the Fund seeks shareholder approval of a new agreement. A new
investment advisory agreement between NAM-U.S.A. and NAM (the "New Investment
Advisory Agreement") is proposed to be approved by a majority of the Fund's
outstanding voting securities (as defined in the Investment Company Act).

The Interim Investment Advisory Agreement under which the Fund is
operating is substantially identical to the agreement under which the Fund
previously operated. The services provided by NAM since the ownership change
have been identical to the services previously provided by NAM. NAM-U.S.A. 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 NAM. As
described below, the proposed new agreement does not alter the rate of
investment advisory compensation presently payable by NAM-U.S.A. to NAM. The
Fund does not compensate NAM for its investment advisory services.

In their consideration of the New Investment Advisory Agreement, the
Board of Directors received information relating to, among other things,
alternatives to the Fund's present agreement, the nature, quality and extent
of the advisory and other services to be provided to the Fund by NAM, other
comparative data with respect to the management 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 NAM-U.S.A.'s and NAM's
representations that there will be no material adverse change in the services
provided to the Fund after the ownership change, the relative profitability of
the present agreement to NAM, 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 investment advisory agreement of the Fund.
After considering the factors stated above, the Board of Directors approved
the investment advisory agreement of the Fund.

If approved by the Fund's shareholders at the Meeting, the New
Investment Advisory Agreement will remain in effect until August 1, 2002,
unless terminated as described below. The former Investment Advisory Agreement
was last approved by the Fund's shareholders on September 24, 1997. Although
the management and investment advisory agreements consist of two separate
contracts, neither of the agreements will become effective unless both are
approved by shareholders.

Information Concerning NAM

NAM provides investment advisory services for Japanese and
international clients. In addition to the Fund, NAM acts as an investment
advisor with respect to the following registered investment companies: Jakarta
Growth Fund, Inc., Korea Equity Fund, Inc., and Nomura Pacific Basin Fund,
Inc.

The following table sets forth the name, title and principal
occupation of the principal executive officers of NAM at June 1, 2000.
<TABLE>
<CAPTION>

Name* Title with NAM Present Principal Occupation
<S> <C> <C>
Hitoshi Tonomura Chairman Chairman of NAM

Akira Kiyokawa President and CEO President and CEO of NAM

Atsushi Kinebuchi Executive Vice President Executive Vice President of NAM

Takanori Tanabe Director and Principal Executive Director and Principal Executive Officer of
Officer NAM

Hisaaki Hino Director and Principal Executive Director and Principal Executive Officer of
Officer NAM

Kenjiro Hayashi Director Executive Vice President of Nomura Research
Institute Ltd.

Haruo Miyako Senior Executive Officer Senior Executive Officer of NAM

Takahide Mizuno Senior Executive Officer Senior Executive Officer of NAM

Akio Nakaniwa Senior Executive Officer Senior Executive Officer of NAM

Takanori Shimiziu Senior Executive Officer Senior Executive Officer of NAM

Yukio Suzuki Senior Executive Officer Senior Executive Officer of NAM

Masato Tanaka Senior Executive Officer Senior Executive Officer of NAM

Yasunobu Watase Senior Executive Officer Senior Executive Officer of NAM

Shigeru Fujinuma Executive Officer Executive Officer of NAM

Takashi Harino Executive Officer Executive Officer of NAM

Masami Kitaoka Executive Officer Executive Officer of NAM

Norio Kinoshita Executive Officer Executive Officer of NAM

Takahisa Matsuura Executive Officer Executive Officer of NAM

Mitsunori Minamio Executive Officer Executive Officer of NAM

Yuji Miyachi Executive Officer Executive Officer of NAM

Hirokatsu Ogawa Executive Officer Executive Officer of NAM

Hideyuki Suzuki Executive Officer Executive Officer of NAM

Toshiki Sada Executive Officer Executive Officer of NAM

Hiroshi Tsujimura Executive Officer Executive Officer of NAM

Kazuhiro Yamashita Executive Officer Executive Officer of NAM

</TABLE>

----------

* The address of the principal executive officer and each director is 1-14,
2-chome, Nihonbashi, Chuo-ku, Tokyo 103-8260, Japan.

Terms of the New Investment Advisory Agreement

A copy of the form of the New Investment Advisory Agreement is set
forth as Exhibit B. Set forth below is a summary of the terms of that
Agreement. As discussed above, the proposed Agreement is substantively
identical to the agreement under which the Fund currently operates. The
proposed agreement does not change the amount of investment advisory fees
payable by NAM-U.S.A. to NAM.

Pursuant to the New Investment Advisory Agreement between NAM-U.S.A.
and NAM, NAM agrees 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 investment advisory compensation presently
payable by NAM-U.S.A. to NAM will remain the same under the proposed
Agreement. As compensation for its services to the Fund, NAM-U.S.A. will pay
NAM monthly fees as set forth below.

Annual Rate of Compensation Based on Average Weekly
Net Assets of

.50% not in excess of $50 million
.45% in excess of $50 but not exceeding $100 million
.40% in excess of $100 but not exceeding $175 million
.35% in excess of $175 million

For the services rendered during the fiscal year ended February 29,
2000, NAM-U.S.A. accrued, under generally accepted accounting principles, fees
of $669,370 and paid NAM fees of $65,500 on a cash basis. At June 1, 2000, the
net assets of the Fund aggregated approximately $200.1 million. At this net
asset level, the fee received by NAM from NAM-U.S.A. would aggregate
approximately $863,000.

The New Investment Advisory Agreement obligates NAM to provide
economic research, securities analysis and investment recommendations to the
Fund.

Approximate Net
Assets at
June 1, 2000
Investment Company Annual Advisory Fees (Millions)
<S> <C> <C>
Jakarta Growth Fund, Inc. Investment Advisory Fee: $7.6
Investment Advisor:
NAM .50% of net assets; paid by NAM-U.S.A.
to NAM(1)

Nomura Asset Management Singapore Ltd. .25% of net assets; paid by NAM-U.S.A.
to NAM

Korea Equity Fund, Inc. Investment Advisory Fee: $41.8
Investment Advisor:
NAM .55% of net assets.

Nomura Pacific Basin Fund, Inc. Investment Advisory Fee: $16.2
Investment Advisors:
NAM .26125% of net assets: paid by NAM-U.S.A.
to NAM(2)

NAM-Singapore .0275% of net assets; paid by NAM-U.S.A.
to NAM-Singapore(2)

</TABLE>

---------------
(1) Nomura Asset Management Singapore Ltd.("NAM-Singapore"), which is an
affiliate of NAM-U.S.A. and NAM acts as investment sub-advisor to
Jakarta Growth Fund, Inc. for which it receives compensation of 0.25%
of net assets paid by NAM.

(2) For the fiscal year ended March 31, 2000, NAM and NAM-Singapore waived
their entire investment advisory fee.

Duration and Termination. As indicated above, the New Investment
Advisory Agreement will remain in effect until August 1, 2002, 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
contract is 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.

PROPOSAL 5. TO AMEND THE PRINCIPAL INVESTMENT STRATEGY
CONCERNING INVESTMENT IN THE JAPANESE OVER-THE COUNTER MARKET.

At its inception, the Fund was organized to invest primarily in the
equity securities of emerging companies in Japan. At the Fund's inception,
these emerging companies were primarily traded on the Japanese
over-the-counter market, the principal trading market for small capitalization
growth companies in Japan. However, recent developments have led to the
formation of other markets in Japan designed for the listing of equity
securities of emerging companies and further developments are expected to
provide an increased opportunity for emerging companies in Japan to list their
equity securities in a wider range of markets.

The Board of Directors has approved, and recommends that the
shareholders of the Fund approve, a proposal that would modify the Fund's
principal investment strategy concerning investment in the Japanese
over-the-counter market. The Fund's current principal investment strategy
provides that the Fund will, under normal circumstances,"invest at least 80%
of its total assets in equity securities traded in the Japan OTC market."

If the proposal is approved by stockholders, the Fund will adopt the
following principal investment strategy whereby the Fund will, under normal
circumstances:

invest at least 80% of its total assets in equity securities of
emerging companies traded in the over-the-counter market and other
markets determined by NAM-U.S.A. to be appropriate markets for
emerging companies in Japan (collectively, "OTC Market").

Under the proposed investment strategy, the Fund will invest at least
80% of its total assets in equity securities of emerging companies traded in
Japanese markets such as the over-the-counter market, Market for the
High-Growth and Emerging Stocks ("Mothers"), Nasdaq-Japan and markets
determined by NAM-U.S.A. to be appropriate markets for emerging companies in
Japan.

The Fund's Investment Objective Will Remain the Same. The Fund's
fundamental investment objective is, and will remain, to provide shareholders
with long-term capital appreciation primarily through investments in equity
securities traded in the Japanese over-the-counter market. Since its
inception, the Fund has established itself as a vehicle for investment in new
and emerging companies in the Japanese market.

New Markets for Emerging Companies have Developed. When the Fund
commenced operations, the over-the-counter market was the only significant
capital market in Japan for new and emerging businesses. Recent competition
among stock exchange and off-exchange markets, including the relaxation of
listing requirements, and the development of new markets such as Mothers and
Nasdaq-Japan, have provided newly established companies with additional forums
on which to list or to register their shares at earlier stages of their
development. The proposed investment strategy will allow the Fund to provide a
more effective vehicle for investment in emerging companies in Japan by
increasing the Fund's ability to invest in companies listed on these new stock
exchange and off-exchange markets.

Mothers. On November 11, 2000, the Tokyo Stock Exchange ("TSE"), the
primary market in Japan, formally launched Mothers; a new market designed
specifically for the public trading of start-up companies, emerging
high-technology companies and new technology firms. The goal of Mothers is to
help companies whose core business is in an expanding industry sector or
companies whose core business is run based upon new technology and innovations
raise funds in a flexible manner using the well established market facilities
of the TSE. Mothers will allow investors the opportunity to invest in such
companies from an earlier stage in their development.

Nasdaq-Japan. Nasdaq-Japan is a private, for-profit organization
owned equally by the National Association of Securities Dealers, Inc. and
Softbank Corp., a Japanese provider of information and distribution services
for the digital information industry. Nasdaq-Japan is structured as a hybrid
stock exchange-part market maker/part central driven order book system
designed to support the trading of securities of new issuers. The goal of
Nasdaq-Japan is to offer Japanese investors the opportunity to invest in the
world's leading high-technology and high-growth stocks and to provide access
to capital for emerging Japanese companies, especially high-tech,
growth-oriented companies. Nasdaq-Japan commenced operations on June 19, 2000.

The New Investment Strategy Will Provide the Fund with Investment
Flexibility. By amending its principal investment strategy, the Fund may
direct a larger percentage of its total assets to investments in companies
listed on newly established and future financial markets and stock exchanges.
Providing the Fund with the ability to invest up to 80% of its total assets in
equity securities listed on newly created financial markets such as Mothers
and Nasdaq Japan would allow the Fund to invest in a broader range of emerging
companies in Japan and maintain its position as an effective vehicle for
investment in newly established companies in Japan.

Possible Risks Associated With New Investment Strategy. The amended
investment strategy may expose the Fund to greater risks. Trading on newly
organized stock exchanges may be more sensitive to adverse changes in economic
or political conditions than the well-established stock exchanges. Such new
financial markets also will be subject to governmental regulation and may be
adversely affected by government policies. There can be no assurance that such
new markets will be successful in attracting new listings of companies or
survive for any particular period of time. In addition, companies traded in
other markets may have short operating histories and may not yet be
profitable. The securities of such companies may be less financially secure
than larger, more established companies listed on other stock exchanges, may
depend on a small number of key personnel, and may trade in lower volumes than
larger, more established companies on other markets. Emerging and newly
established companies often face the challenge of maintaining personnel and
systems adequate to respond to market demands and as a result, may be subject
to more abrupt and erratic price movements than other more established
companies.

Your Board's Recommendation. The Board has concluded that the revised
investment strategy will benefit the Fund and its shareholders. The Directors
recommend voting FOR the proposal. Upon shareholder approval, the proposed
principal investment strategy will become effective immediately. If the
proposal is not approved by the shareholders of the Fund, the Fund's current
principal investment strategy will remain in effect.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

To the knowledge of the management of the Fund, there are no persons
that are beneficial owners of more than 5% of the Fund's outstanding shares.

ADDITIONAL INFORMATION

The expense 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 proposed new
management and investment advisory agreements in which case they will be borne
by NAM-U.S.A. The Fund's cost in connection with the printing, mailing and
solicitation of proxies relating to the Meeting will not exceed $ . Any costs
relating to the above services in excess of $ will be borne by NAM-U.S.A. 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. ("CIC"), a firm that specializes in proxy
solicitation services, to assist in the solicitation of proxies for the
Meeting, for a fee of approximately $4,000, together with reimbursement of
such firm's expenses. CIC is obligated to provide proxy solicitation services
including, but not limited to, distribution of proxies to broker dealers,
telephonic communication with shareholders and broker dealers and monitoring
of voting results.

The election of Directors (Proposal 1) 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
(Proposal 2) requires the affirmative vote of a majority of shares present and
voting on the proposal at a meeting at which a quorum is present.

Approval of each of the Management Agreement (Proposal 3), the
Investment Advisory Agreement (Proposal 4) and the amendment of the Fund's
principal investment strategy concerning investment in the Japanese
over-the-counter market (Proposal 5) requires the vote of a majority of the
outstanding voting securities of the Fund which, under the Investment Company
Act, is the vote (a) 67% or more of the shares of the Fund present at the
meeting of its shareholders 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 Investment Advisory agreements
are not approved by shareholders at the Meeting, the Board of Directors will
reconsider the Fund's management and investment advisory agreements. If the
proposal to amend the principal investment strategy concerning investment in
the Japanese over-the-counter market is not approved by the shareholders of
the Fund, the Fund's principal investment strategy will remain in effect.

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, clients and beneficial shareholders, on how to vote their shares on
each proposal before the Meeting. Under the rules of the New York Stock
Exchange, broker-dealers, without instructions from such customers, clients
and beneficial shareholders, grant authority to the proxies designated by the
Fund to vote on the election of Directors (Proposal 1), the ratification of
the selection of the independent accountants (Proposal 2) and the approval of
each of the Management Agreement (Proposal 3) and the Investment Advisory
Agreement (Proposal 4) if no instructions have been received prior to the date
specified in the broker-dealer firm's request for voting instructions.
Broker-dealer firms will not be permitted to grant voting authority without
instructions with respect to Proposal 5. 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 (Proposal 1), the ratification of independent
accountants (Proposal 2), and the approval of each of the Management Agreement
(Proposal 3) and Investment Advisory Agreement (Proposal 4). Abstentions and
broker non-votes will have the same effect as a vote against the amendment of
the principal investment strategy concerning investment in the Japanese
over-the-counter market (Proposal 5).

Address of Manager and Investment Advisor

The address of NAM-U.S.A. is 180 Maiden Lane, New York, New York
10038-4936. The address of NAM is 1-14, 2-chome, Nihonbashi, Chuo-ku, Tokyo
103-8260, Japan.

Annual Report Delivery

The Fund sends annual, semi-annual and quarterly reports to
shareholders. The Fund will furnish, without charge, a copy of its most recent
annual and any semi-annual and quarterly reports succeeding such annual
report, if any, to shareholders upon request to the Fund at 180 Maiden Lane,
New York, New York 10038-4936 (or call 1-800-833-0018).

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 March 2,
2001.

<PAGE>

By Order of the Board of Directors

John J. Boretti
Secretary
New York, New York
Dated: July ____, 2000

<PAGE>

Exhibit A

AMENDED AND RESTATED MANAGEMENT AGREEMENT

AGREEMENT made this __ day of ________, 2000, 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;

WHEREAS, the Manager has been providing management and investment
advisory services to the Fund pursuant to an amended and restated management
agreement dated October 13, 1999;

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 Amended and Restated 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 Amended and Restated 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 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
Amended and Restated 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.

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, .90% of the Fund's average weekly net assets in excess
of $100 million but not in excess of $175 million and .80% of the Fund's
average weekly not assets in excess of $175 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 Amended and Restated 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 Amended and
Restated 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 Amended and Restated 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. The Fund and the Manager agree that, upon approval by the Board of
Directors of the Fund, including a separate majority of the non-interested
directors, the Manager may delegate investment discretion for portfolio
transactions to Nomura Asset Management Co., Ltd. as set forth in the
Investment Advisory Agreement in the form attached hereto as Exhibit A.

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 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 Amended and Restated Agreement

This Amended and Restated Agreement shall become effective as of the
date first above written and shall remain in force until _______ __, 2002 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 Amended and Restated Agreement
or interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.

This Amended and Restated 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 Amended
and Restated Agreement shall automatically terminate in the event of its
assignment.

ARTICLE VIII

Amendments of this Amended and Restated Agreement

This Amended and Restated 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 Amended and Restated 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
Amended and Restated 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 Amended and Restated 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.

IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amended and Restated Agreement as of the date first above written.

JAPAN OTC EQUITY FUND, INC.

By____________________________

NOMURA ASSET MANAGEMENT U.S.A. INC.

By____________________________

<PAGE>

EXHIBIT B

AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this __ day of _________, 2000, 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 an amended and restated
management agreement with the Fund of even date herewith (the "Amended and
Restated 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;

WHEREAS, the Investment Adviser has been providing investment
advisory services to the Manager in connection with the Fund's operations
pursuant to an amended and restated investment advisory agreement dated
October 13, 1999;

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

(a) 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) The Investment Adviser understands that upon approval by the
Board of Directors of the Fund, including a separate majority of the
Non-Interested Directors, the Manager may delegate investment discretion for
portfolio transactions to the Investment Adviser as set forth in this
Agreement. To the extent that such discretion is delegated to the Investment
Adviser, the Investment Adviser, subject to the broad supervision of the
Manager and the Fund, shall take, on behalf of the Fund, all actions which it
deems necessary to implement the Fund's investment policies, 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
Investment Adviser 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 Investment Adviser 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 U.S. Federal securities laws. Subject to
this requirement and the provisions of the U.S. Investment Company Act of
1940, as amended, the U.S. Securities Exchange Act of 1934, as amended, and
other applicable provisions of law, the Investment Adviser may select brokers
or dealers with which it, or the Fund, is affiliated.

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 Amended
and Restated 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, .40% of the
Fund's average weekly net assets in excess of $100 million but not in excess
of $175 million and .35% of the Fund's average weekly net assets in excess of
$175 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
Amended and Restated 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 it's 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 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 Amended and Restated Agreement

This Amended and Restated Agreement shall become effective as of the
date first above written and shall remain in force until ________ __, 2002 and
thereafter, but only so long as the Amended and Restated 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 Amended and Restated Agreement
or interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.

This Amended and Restated 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 Amended and Restated Agreement
shall automatically terminate in the event of its assignment.

ARTICLE VII

Amendments of this Amended and Restated Agreement

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
Amended and Restated 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.

ARTICLE IX

Governing Law

This Amended and Restated 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 Amended and Restated Agreement as of the date first above written.

NOMURA ASSET MANAGEMENT U.S.A. INC.

By_________________________________

NOMURA ASSET MANAGEMENT CO., LTD.

By_________________________________

<PAGE>

JAPAN OTC EQUITY FUND, INC.

180 Maiden Lane

New York, New York 10038-4936

PROXY

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby appoints Nobuo Katayama and John J. Boretti 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 June 30, 2000 at the Annual Meeting of the Shareholders of the
Fund to be held on August 15, 2000 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 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

KOREA EQUITY FUND, INC.

Please be sure to sign and date this Proxy Date

Mark box at right if an address change or comment has been noted on the
reverse side of this card. [ ]

Shareholder sign here _______________________________________________

Co-owner sign here ________________________________________________

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL PROPOSALS

1. Election of Directors.
<TABLE>
<CAPTION>

<S> <C> <C> <C> <C>
For For All
All Nominees
William G. Barker, Jr. Chor Weng Tan Nominees Withhold Except
George H. Chittenden Arthur R. Taylor
Nobuo Katayama John F. Wallace [ ] [ ] [ ]
</TABLE>

NOTE: If you do not wish your shares voted "For" a particular nominee, mark
the "For All Nominees Except" box and strike a line through the nominee(s)'
name(s). Your shares will be voted for the remaining nominee(s).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>

2. Proposal to ratify the selection of PricewaterhouseCoopers LLP as the For Against Abstain
independent accountants of the Fund. [ ] [ ] [ ]

3. Proposal to approve a new Management Agreement between the Fund and For Against Abstain
Nomura Asset Management U.S.A. Inc. [ ] [ ] [ ]

4. Proposal to approve a new Investment Advisory Agreement between Nomura For Against Abstain
Asset Management U.S.A. Inc. and Nomura Asset Management Co., Ltd.
[ ] [ ] [ ]

5. Proposal to amend the Fund's principal investment strategy concerning For Against Abstain
investment in the Japanese over-the-counter market.

[ ] [ ] [ ]

6. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any adjournment thereof.

</TABLE>

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 Proposals 1, 2, 3, 4 and 5.

RECORD DATE SHARES: