<PAGE>
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 Section240.14a-11(c) or
Section240.14a-12
THE JAPAN 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 statement 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:
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<PAGE>
THE JAPAN EQUITY FUND, INC.
C/O DAIWA SECURITIES TRUST COMPANY
ONE EVERTRUST PLAZA
JERSEY CITY, NEW JERSEY 07302
(800) 933-3440
April 10, 1997
Dear Stockholders:
The Annual Meeting of Stockholders of The Japan Equity Fund, Inc. (the
"Fund") will be held at 11:30 A.M., New York time, on Thursday, June 5, 1997, at
the offices of Daiwa Securities America Inc., Financial Square, 32 Old Slip,
14th Floor, New York, New York 10005. A Notice and Proxy Statement regarding the
meeting, a proxy card for your vote at the meeting, and a postage prepaid
envelope in which to return your proxy are enclosed.
At the Annual Meeting, the stockholders will (i) elect two Class I
directors, (ii) consider the ratification of the selection of Price Waterhouse
LLP as independent accountants [and (iii) consider whether to approve a change
in the Fund's investment restrictions to allow the Fund to lend portfolio
securities.] In addition, the stockholders who will be present at the Annual
Meeting will hear an investment report on the Fund and will have an opportunity
to discuss matters of interest to them.
If you will not be able to attend the Annual Meeting in person, please take
the time now to review the enclosed materials and vote your shares by proxy.
YOUR VOTE IS IMPORTANT.
The Board has recommended that the stockholders vote in favor of each of the
foregoing matters.
Respectfully,
[SIGNATURE]
Katsunari Rembutsu
CHAIRMAN OF THE BOARD
STOCKHOLDERS ARE STRONGLY URGED TO PROMPTLY SIGN AND MAIL THE ACCOMPANYING PROXY
IN THE ENCLOSED RETURN ENVELOPE TO INSURE A QUORUM AT THE MEETING. YOUR VOTE IS
IMPORTANT.
<PAGE>
THE JAPAN EQUITY FUND, INC.
EXTREMELY URGENT
YOUR IMMEDIATE RESPONSE IS REQUIRED
April 10, 1997
DEAR SHAREHOLDER:
With this letter, you should be receiving from your broker, bank or other
nominee an accompanying proxy statement and a proxy voting card relating to
the Annual Meeting of Stockholders of THE JAPAN EQUITY FUND, INC. (the
"Fund"), which is to be held in New York City on June 5, 1997.
Proposal 1 concerns the election of directors, while Proposal 2 seeks
your approval of the Board of Directors' selection of Price Waterhouse LLP as
the Fund's independent auditors for this fiscal year.
Proposals 1 and 2 are considered to be routine matters and, if you do
not indicate your vote, your broker, bank or other nominee is generally
authorized to vote on your behalf on such routine matters as the election of
directors and the selection of independent auditors.
Proposal 3, however, involves a change in your Fund's investment
restrictions to permit the Fund to lend its portfolio securities. As such,
this proposal is considered to be non-routine. Consequently, your broker,
bank or other nominee is NOT AUTHORIZED to vote on your behalf for Proposal
3. ONLY YOU CAN VOTE ON PROPOSAL 3.
- - WHAT IS SECURITIES LENDING?
IF PROPOSAL 3 IS APPROVED, THE FUND WILL BE ABLE TO LEND CERTAIN
SECURITIES FROM ITS PORTFOLIO TO BROKERS AND, IN RETURN, RECEIVE FROM THE
BROKER COLLATERAL OF THE SAME VALUE AS THE SECURITIES ON LOAN. THE FUND WOULD
RETAIN THE RIGHT TO RECEIVE ANY DIVIDENDS OR STOCK SPLITS THAT MAY OCCUR ON
THE LOANED SECURITIES DURING THE TERM OF THE LOAN. ANY CASH COLLATERAL
RECEIVED BY THE FUND WOULD BE INVESTED IN SHORT TERM, HIGH QUALITY DEBT
SECURITIES, THE INCOME FROM WHICH WOULD INCREASE THE RETURN TO THE FUND.
THE FUND NOW URGENTLY REQUIRES YOUR VOTE ON PROPOSALS 1, 2 AND 3.
THE FUND MUST EMPHASIZE THE IMPORTANCE OF YOUR VOTE. If you do not vote
by completing and returning the enclosed proxy voting card, it is not likely
that your Fund will receive the required number of votes to adopt Proposal 3.
If Proposal 3 is consequently rejected, your Fund will not be able to
generate potential income from its proposed securities lending program, the
income from which may increase your return from your investment in the Fund.
The Fund is appealing now to you to cast your vote on this important proposal.
YOUR VOTE IS IMPORTANT AND IS NOW URGENTLY NEEDED. Your Fund's Board of
Directors believes that the proposed change described in Proposal 3 is in the
best interests of your Fund because it will enhance the Fund's ability to
increase its returns through a stock lending program. The Board recommends
that you vote to approve the Proposal 1 nominees and vote to approve both
Proposal 2 and Proposal 3.
PLEASE REGISTER YOUR VOTE FOR PROPOSALS 1, 2 AND 3 ON THE ENCLOSED PROXY
VOTING CARD AND RETURN IT TO YOUR BROKER, BANK OR OTHER NOMINEE IMMEDIATELY.
THANK YOU FOR YOUR PROMPT ATTENTION AND IMMEDIATE ACTION ON THESE
EXTREMELY IMPORTANT MATTERS.
<PAGE>
THE JAPAN EQUITY FUND, INC.
----------
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
JUNE 5, 1997
------------------------
To the Stockholders of
The Japan Equity Fund, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The Japan
Equity Fund, Inc. (the "Fund") will be held at the offices of Daiwa Securities
America Inc., Financial Square, 32 Old Slip, 14th Floor, New York, New York
10005, on Thursday, June 5, 1997, at 11:30 A.M., New York time, for the
following purposes:
1. To elect two Class I directors to serve for a term expiring on the date
on which the Annual Meeting of Stockholders is held in the year 2000.
2. To ratify or reject the selection of Price Waterhouse LLP as independent
accountants of the Fund for its fiscal year ending October 31, 1997.
3. To approve or disapprove a change in the Fund's investment restrictions
to permit the Fund to lend portfolio securities.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on March 17, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting or any adjournments thereof.
You are cordially invited to attend the meeting. Stockholders 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. You may nevertheless vote in person at the meeting if you choose
to attend. Your vote is important. The enclosed proxy is being solicited by the
Board of Directors of the Fund.
By order of the Board of Directors,
Lawrence Jacob
SECRETARY
April 10, 1997
<PAGE>
THE JAPAN EQUITY FUND, INC.
----------
PROXY STATEMENT
------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of THE JAPAN EQUITY FUND, INC. (the "Fund")
for use at the Annual Meeting of Stockholders, to be held at the offices of
Daiwa Securities America Inc., Financial Square, 32 Old Slip, 14th Floor, New
York, New York 10005, on Thursday, June 5, 1997, at 11:30 A.M., New York time,
and at any adjournments thereof.
This Proxy Statement and the form of proxy are being mailed to stockholders
on or about April 11, 1997. Any stockholder giving a proxy in advance of the
Annual Meeting has the power to revoke it by mail (addressed to the Secretary,
The Japan Equity Fund, Inc., c/o Daiwa Securities Trust Company, One Evertrust
Plaza, 9th Floor, Jersey City, New Jersey 07302) or in person at the meeting, by
executing a superseding proxy or by submitting a notice of revocation to the
Fund. All properly executed proxies received in time for the meeting will be
voted as specified in the proxy or, if no specification is made, for each
proposal referred to in this Proxy Statement. Abstentions and broker non-votes
are each included in the determination of the number of shares present at the
meeting.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR ITS
FISCAL YEAR ENDED OCTOBER 31, 1996 TO ANY STOCKHOLDER REQUESTING SUCH REPORT.
REQUESTS FOR THE ANNUAL REPORT SHOULD BE MADE BY WRITING TO THE JAPAN EQUITY
FUND, INC., C/O DAIWA SECURITIES TRUST COMPANY, ONE EVERTRUST PLAZA, 9TH FLOOR,
JERSEY CITY, NEW JERSEY 07302, ATTENTION: SHAREHOLDER RELATIONS OR BY CALLING
(800) 933-3440 OR (201) 915-3020.
The Board of Directors has fixed the close of business on March 17, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting and at any adjournments thereof. Stockholders on the
record date will be entitled to one vote for each share held, with no shares
having cumulative voting rights. As of the record date, the Fund had outstanding
10,815,688 shares of common stock. To the knowledge of the Fund's management, no
person owned beneficially more than 5% of the Fund's outstanding shares as of
March 17, 1997.
Management of the Fund knows of no business other than that mentioned in
Items 1, 2 [and 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.
1
<PAGE>
The Board recommends that the stockholders vote in favor of each of the
matters mentioned in Items 1, 2 and 3 of the Notice of Meeting.
(1) ELECTION OF DIRECTORS
Persons named in the accompanying form of proxy intend in the absence of
contrary instructions to vote all proxies for the election of the two nominees
listed below as directors of the Fund:
CLASS I
- -------------------------
Katsunari Rembutsu
Martin J. Gruber
to serve for terms expiring on the date of subsequent Annual Meetings of
Stockholders in the year 2000 or until their successors are elected and
qualified. If any such nominee should be unable to serve, an event that is not
now anticipated, the proxies will be voted for such person, if any, as shall be
designated by the Board of Directors to replace any such nominee. The election
of each director will require the affirmative vote of a majority of the votes
cast at the meeting. For this purpose, abstentions and broker non-votes will not
be counted as votes cast at the meeting.
INFORMATION CONCERNING NOMINEES AND DIRECTORS
The following table sets forth information concerning each of the nominees
as a director of the Fund, as well as the other current directors of the Fund.
Each of the nominees is now a director of the Fund and has consented to be named
in this Proxy Statement and to serve as a director of the Fund if elected.
NOMINEES
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR FEBRUARY 28,
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 1997(+)
- --------------------------------------------- ---------------------------------------------- ----------- ------------
<S> <C> <C> <C> <C>
* Katsunari Rembutsu (52) Chairman of the Board of the Fund; Chairman 1994 None
One Evertrust Plaza and President, Daiwa Securities Trust Company,
Jersey City, New Jersey since 1994; Chief Executive, Daiwa Europe Bank
07302 plc, from 1991 to 1994.
Martin J. Gruber (59) Chairman of Finance Department and Professor 1992 5,321
229 South Irving Street of Finance, Leonard N. Stern School of
Ridgewood, New Jersey Business, New York University; Director, Cowen
07450 Income & Growth Fund Inc.; Director, Cowen
Opportunity Fund; Director, Standby Reserve
Fund Inc.; Director, Standby Tax Exempt
Reserve Fund Inc.; Trustee, BT Pyramid Fund,
since 1992; Trustee, BT Leadership Trust,
since 1993; Director, The Taiwan Equity Fund,
Inc., since 1994.
<CAPTION>
PERCENT
OF
CLASS
- --------- ------------
<S> <C>
* --
**
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR FEBRUARY 28,
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 1997(+)
- --------------------------------------------- ---------------------------------------------- ----------- ------------
<S> <C> <C> <C> <C>
OTHER CURRENT DIRECTORS
Austin C. Dowling (65) Director, Office of Finance, 1992 2,046
1002E Long Beach Boulevard Federal Home Loan Bank System, from 1984 to
North Beach, New Jersey 1991; President,
08008 The Financing Corporation (U.S. government
agency), from 1987 to 1991; President, the
Resolution Funding Corporation, from 1989 to
1991; Director, The Thai Capital Fund, Inc.,
since 1990.
Robert F. Gurnee (69) Chairman and Chief Executive Officer, 1992 1,156
3801 Kennett Pike Financial Integrity Group Inc. (bank and
Building C, Suite 201 financial services consulting firm), since
Greenville, Delaware 1990; Director, Vestaur Securities Co., since
19807 1991; Director, The Thai Capital Fund, Inc.,
since 1990; Director, Cross Country Bank
(Wilmington, DE), since 1996.
* Harry M. Markowitz (69) President of the Fund; Director of Research, 1992 1,779
1010 Turquoise Street Global Portfolio Research Department, Daiwa
Suite 245 Securities Trust Company, since 1990;
San Diego, California President of Harry Markowitz Company since
92109 1984; Marvin Speiser Distinguished Professor
of Finance and Economics, Baruch College, City
University of New York, from 1982 to 1993;
Director, Health Chem Corporation from 1993 to
1994.
<CAPTION>
PERCENT
OF
CLASS
- --------- ------------
<S> <C>
OTHER CUR
**
**
* **
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR FEBRUARY 28,
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 1997(+)
- --------------------------------------------- ---------------------------------------------- ----------- ------------
<S> <C> <C> <C> <C>
Frederick W. Zuckerman (62) Private Investor and Financial Consultant; 1992 None
605 Park Avenue Vice President and Treasurer, IBM Corp., from
Apartment 20-A 1993 to 1995; Senior Vice President and
New York, New York Treasurer, RJR Nabisco, Inc., from 1991 to
10021 1993; Financial Consultant, from 1990 to 1991;
Director, Olympic Financial, Ltd., since 1995;
Director, Northeast Savings Bank, from 1989 to
1995; Director, The Singapore Fund, Inc.,
since 1990; Trustee, Meditrust, since 1990;
Director, Northeast Federal Corp., from 1990
to 1995; Director, Anacomp, Inc., since 1990;
Director, System Industries, Inc., from 1983
to 1992; Director, Drexel Burnham Lambert
Group, Inc., from 1990 to 1992; Director, The
Turner Corporation, since 1992; Director, NVR,
Inc., since 1993; Director, Caere Corporation,
since 1995.
<CAPTION>
PERCENT
OF
CLASS
- --------- ------------
<S> <C>
--
</TABLE>
- ------------------------
(+) The information as to beneficial ownership is based on statements furnished
to the Fund by the nominees and directors.
* Directors so noted are deemed by the Fund's counsel to be "interested
persons" (as defined in the U.S. Investment Company Act of 1940, as amended
(the "1940 Act")) of the Fund or of the Fund's investment manager, Daiwa
International Capital Management Corp. (the "Investment Manager"), or the
Fund's investment adviser, Daiwa Securities Trust Company (the "Investment
Adviser"). Both Mr. Rembutsu and Dr. Markowitz are interested persons
because of their affiliation with the Fund's Investment Adviser, or because
they are officers of the Fund, or both.
** Represented less than 1% of the outstanding shares at February 28, 1997.
The Fund's Board of Directors held four regular meetings and one special
meeting during the fiscal year ended October 31, 1996. Each incumbent director
attended at least seventy-five percent of the aggregate number of meetings of
the Board of Directors.
The Fund's Board of Directors has an Audit Committee which is responsible
for reviewing financial and accounting matters. The current members of the Audit
Committee are Messrs. Dowling,
4
<PAGE>
Gruber, Gurnee and Zuckerman. The Audit Committee met twice during the fiscal
year ended October 31, 1996. Mr. Gruber attended one meeting of the Audit
Committee. The Fund has neither a compensation nor a nominating committee.
Section 16(a) of the U.S. Securities Exchange Act of 1934, as amended,
requires the Fund's officers and directors, and persons who own more than ten
percent of a registered class of the Fund's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission and the New York Stock Exchange, Inc. The Fund believes that its
officers and directors have complied with all applicable filing requirements.
OFFICERS OF THE FUND
Mr. Rembutsu (age 52) has been Chairman of the Board of the Fund since
December 1994 (see information provided above).
Dr. Markowitz (age 69) has been President of the Fund since July 1992 (see
information provided above).
Daniel F. Barry (age 50), Vice President of the Fund since July 1992, was
also Treasurer of the Fund from July 1992 to September 1994 and has been Senior
Vice President of Daiwa Securities Trust Company ("DSTC"), the Fund's Investment
Adviser, Administrator and Custodian, since June 1993. From June 1990 to June
1993, he was Vice President, Mutual Fund Administration of DSTC.
Lawrence Jacob (age 52), Secretary of the Fund since July 1992, has been
Senior Vice President since November 1985, and Assistant Secretary since
February 1986, of Daiwa Securities America Inc.
Edward J. Grace (age 50), Treasurer of the Fund since September 1994, was
Assistant Treasurer of the Fund from July 1992 to September 1994 and has been a
Vice President of DSTC since December 1992 and Assistant Vice President of DSTC
from 1989 to December 1992.
John J. O'Keefe (age 38), Assistant Treasurer of the Fund since September
1994, has been an Assistant Vice President of DSTC since January 1994 and was a
Senior Accountant of DSTC from July 1990 to January 1994.
Laurence E. Cranch (age 50), Assistant Secretary of the Fund since July
1992, has been a partner in the law firm of Rogers & Wells since 1980.
TRANSACTIONS WITH AND REMUNERATION OF OFFICERS AND DIRECTORS
The aggregate fee remuneration for directors not affiliated with the
Investment Manager or the Investment Adviser was U.S. $41,383 during the fiscal
year ended October 31, 1996. Each such non-affiliated director currently
receives fees, paid by the Fund, of U.S. $750 for each directors' meeting
attended in person or by telephone, U.S. $600 for each audit committee meeting
attended in person or by telephone and an annual fee of U.S. $5,000. The
officers and interested directors of the Fund received no compensation from the
Fund.
DSTC, which pays the compensation and certain expenses of the officers of
DSTC who serve as officers of the Fund, receives administration, custodian and
advisory fees.
Set forth below is a chart showing the aggregate fee compensation paid by
the Fund (in U.S. dollars) to each of its directors during the fiscal year ended
October 31, 1996, as well as the total fee compensation paid to each incumbent
director of the Fund by the Fund and by other investment
5
<PAGE>
companies advised by the Investment Manager, the Investment Adviser or their
respective affiliates (collectively, the "Fund Complex") for their services as
directors of such investment companies during their respective fiscal years:
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM FUND AND
AGGREGATE BENEFITS ACCRUED FUND COMPLEX
COMPENSATION AS PART OF PAID TO
NAME OF DIRECTOR FROM FUND FUND EXPENSES DIRECTORS
- ------------------------------ ------------- ----------------- --------------
<S> <C> <C> <C>
Katsunari Rembutsu+ $ 0 None $ 0
Harry M. Markowitz+ 0 None 0
Austin C. Dowling* 9,950 None 20,500
Martin J. Gruber* 9,350 None 18,550
Robert F. Gurnee* 9,950 None 19,750
K.S. Wu* 2,183 None 4,366
Frederick W. Zuckerman* 9,950 None 19,900
</TABLE>
- ------------------------
* Also serves or served as a director of one other investment company for which
an affiliate of Daiwa International Capital Management Corp. and Daiwa
Securities Trust Company, the Fund's investment manager and investment
adviser, respectively, serves as investment manager or investment adviser.
+ Mr. Rembutsu and Mr. Markowitz, who are affiliated with the Investment
Manager and Investment Adviser and are therefore "interested persons" of the
Fund, do not receive any fee compensation from the Fund for their services as
directors.
(2) RATIFICATION OR REJECTION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
At a meeting to be held on June 5, 1997, the Board of Directors of the Fund,
including a majority of the directors who are not "interested persons" of the
Fund (as defined in the 1940 Act), will consider the selection of Price
Waterhouse LLP to act as independent accountants for the Fund for the fiscal
year ending October 31, 1997. The Fund knows of no direct financial interest or
material indirect financial interest of that firm in the Fund. One or more
representatives of Price Waterhouse LLP are expected to be present at the
meeting and will have an opportunity to make a statement if they so desire. Such
representatives are expected to be available at the meeting to respond to
appropriate questions from stockholders.
This selection of independent accountants is subject to the ratification or
rejection of the Fund's stockholders at the meeting. Ratification of the
selection of the independent accountants will require the affirmative vote of a
majority of the votes cast at the meeting. For this purpose, abstentions and
broker non-votes will not be counted as votes cast at the meeting.
6
<PAGE>
(3) APPROVAL OF AN AMENDMENT TO THE FUND'S INVESTMENT RESTRICTIONS TO PERMIT
THE FUND TO ENGAGE IN THE LENDING OF PORTFOLIO SECURITIES
The Board of Directors of the Fund has unanimously approved and directed
that there be submitted to the stockholders for their approval an amendment to
the Fund's investment restrictions to permit the Fund to engage in the lending
of portfolio securities. If approved by the stockholders, the Fund would be
able, from time to time, to lend securities (but not in excess of 33 1/3% of its
total assets) from its portfolio of investments to brokers, dealers and
financial institutions and, in turn, receive collateral in cash or securities
believed by the Investment Manager to be equivalent to securities rated
investment grade by Standard & Poor's Rating Group ("S&P") or Moody's Investors
Services, Inc. ("Moody's"). While the loan is outstanding, the Fund will be
required to maintain collateral at all times in an amount equal to at least 100%
of the current market value of the securities loaned by the Fund, including any
accrued interest or dividends receivable from those securities. Any cash
collateral received by the Fund would be invested in short-term, high quality
debt securities, the income from which would increase the return to the Fund.
The Fund would retain all rights of beneficial ownership as to the loaned
portfolio securities, including voting rights and rights to interest or other
distributions, and would have the right to regain record ownership of loaned
securities to exercise such beneficial rights. Such loans would be terminable at
any time by either the Fund or the borrower. The Fund may be required to pay
finders', administrative and custodial fees to persons unaffiliated with the
Fund in connection with the arranging of such loans and, if permitted under the
1940 Act or pursuant to an exemptive order thereunder, such fees may be paid to
persons affiliated with the Fund. In the event of a default by the borrower, the
Fund might suffer time delays and incur costs or possible losses in connection
with the Fund's disposition of the collateral.
The Board of Directors believes that the proposed change is in the best
interests of the Fund. Accordingly, the directors recommend that the
stockholders vote to approve the proposed amendment to the Fund's investment
restrictions.
Currently, the Fund's investment restrictions state:
"The Fund is not permitted to: . . .
(5) Make loans, except through the purchase of debt securities
consistent with its investment objective and policies."
The text of the proposed amendment is as follows:
"The Fund is not permitted to: . . .
(5) Make loans, except through the purchase of debt securities AND
THE LENDING OF PORTFOLIO SECURITIES consistent with its investment
objectives and policies."
Approval of the proposed amendment to the Fund's investment restrictions
will require the affirmative vote of a majority of the Fund's outstanding shares
of Common Stock. As defined in the 1940 Act, a "majority of outstanding shares"
means the lesser of 67% of the voting securities present at the Annual Meeting
of Stockholders, if a quorum is present, or 50% of the outstanding voting
securities. For this purpose, both the abstentions and broker non-votes will
have the effect of a vote to disapprove the proposed amendment. The Fund will
continue under its current investment restrictions without change if this
proposal is not approved by the stockholders.
7
<PAGE>
MISCELLANEOUS
Proxies will be solicited by mail and may be solicited in person or by
telephone or telegraph by officers of the Fund or personnel of DSTC. The Fund
has retained Corporate Investor Communications, Inc. to assist in the proxy
solicitation. The fee for such services is estimated at U.S.$4,000, plus
reimbursement of expenses. The expenses connected with the solicitation of these
proxies and with any further proxies which may be solicited by the Fund's
officers or agents in person, by telephone or by telegraph will be borne by the
Fund. The Fund will reimburse banks, brokers and other persons holding the
Fund's shares registered in their names or in the names of their nominees for
their expenses incurred in sending proxy material to and obtaining proxies from
the beneficial owners of such shares.
It is important that you promptly submit your vote as a stockholder of the
Fund. In the event that sufficient votes in favor of any proposal set forth in
the Notice of this meeting are not received by June 5, 1997, the persons named
as attorneys in the enclosed proxy may propose one or more adjournments of the
meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of the holders of a majority of the shares present
in person or by proxy at the session of the meeting to be adjourned. The persons
named as attorneys in the enclosed proxy will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of the proposal for which
further solicitation of proxies is to be made. They will vote against any such
adjournment those proxies required to be voted against such proposal. The costs
of any such additional solicitation and of any adjourned session will be borne
by the Fund.
STOCKHOLDER PROPOSALS
Any proposal by a stockholder of the Fund intended to be presented at the
1998 meeting of stockholders of the Fund must be received by the Fund, c/o Daiwa
Securities Trust Company, One Evertrust Plaza, 9th Floor, Jersey City, New
Jersey 07302, not later than December 10, 1997.
By order of the Board of Directors,
Lawrence Jacob
SECRETARY
One Evertrust Plaza
Jersey City, New Jersey 07302
April 10, 1997
8
<PAGE>
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