<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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.:
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(3) Filing Party:
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(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) 852-4750 OR
(302) 791-2748
August , 1999
Dear Stockholders:
The Annual Meeting of Stockholders of The Japan Equity Fund, Inc. (the
"Fund") will be held at 12:00 Noon, New York time, on Thursday, September 16,
1999, 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 III
directors; (ii) consider the ratification of the selection of
PricewaterhouseCoopers LLP as independent accountants; (iii) consider the
approval of a new Investment Management Agreement between the Fund and Daiwa SB
Investments (USA) Ltd., and (iv) consider the approval of a new Investment
Advisory Agreement between Daiwa SB Investments (USA) Ltd. and Daiwa Securities
Trust Company. 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,
/s/ HIDEAKI MATSUURA
--------------------
Hideaki Matsuura
CHAIRMAN OF THE BOARD
STOCKHOLDERS ARE STRONGLY URGED TO PROMPTLY SIGN AND MAIL THE ACCOMPANYING PROXY
IN THE ENCLOSED RETURN ENVELOPE TO ENSURE A QUORUM AT THE MEETING.
YOUR VOTE IS IMPORTANT.
<PAGE>
THE JAPAN EQUITY FUND, INC.
----------
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 16, 1999
------------------------
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, September 16, 1999, at 12:00 Noon, New York time, for the
following purposes:
1. To elect two Class III directors to serve for a term expiring on the
date on which the Annual Meeting of Stockholders is held in the year
2002.
2. To ratify or reject the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund for its fiscal year ending October
31, 1999.
3. To approve or reject a new Investment Management Agreement between the
Fund and Daiwa SB Investments (USA) Ltd.
4. To approve or reject a new Investment Advisory Agreement between Daiwa
SB Investments (USA) Ltd. and Daiwa Securities Trust Company, as
investment adviser of the Fund.
5. 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 July 16, 1999 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,
Daniel F. Barry
SECRETARY
August , 1999
<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, September 16, 1999, at 12:00 Noon, New York
time, and at any adjournments thereof.
This Proxy Statement and the form of proxy are being mailed to stockholders
on or about August , 1999. 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, 1998 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) 852-4750 OR (302) 791-2748.
The Board of Directors has fixed the close of business on July 16, 1999 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
July 16, 1999.
Management of the Fund knows of no business other than that mentioned in
Items 1 through 4 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 THROUGH 4 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 three nominees
listed below as directors of the Fund:
CLASS III
---------------------------
Austin C. Dowling
Harry M. Markowitz
to serve for terms expiring on the date of subsequent Annual Meetings of
Stockholders in the year 2002, 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.
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED PERCENT
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR JULY 16, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 1999(+) CLASS
- -------------------------------- -------------------------------------- -------- ------------ -------
<S> <C> <C> <C> <C> <C>
NOMINEES
Austin C. Dowling (67) Director, The Thai Capital Fund, Inc., 1992 2,046 **
1002E Long Beach Boulevard since 1990.
North Beach, NJ
08008
* Harry M. Markowitz (71) President of the Fund; Director of 1992 1,779 **
1010 Turquoise Street Research, Global Portfolio Research
Suite 245 Department, Daiwa Securities Trust
San Diego, CA Company, since 1990; President of
92109 Harry Markowitz Company since 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.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED PERCENT
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR JULY 16, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 1999(+) CLASS
- -------------------------------- -------------------------------------- -------- ------------ -------
<S> <C> <C> <C> <C> <C>
OTHER CURRENT DIRECTORS
Martin J. Gruber (61) Professor of Finance, Leonard N. Stern 1992 5,321 **
229 South Irving Street School of Business, New York
Ridgewood, NJ University, since 1965; Director,
07450 Cowen Income & Growth Fund Inc., since
1986; Director, Cowen Opportunity
Fund, since 1987; Director, Standby
Reserve Fund Inc., since 1985;
Director, Standby Tax Exempt Reserve
Fund Inc., since 1986; Trustee, BT
Pyramid Fund, since 1992; Trustee, BT
Leadership Trust, since 1993;
Director, The Taiwan Equity Fund,
Inc., since 1994; Trustee, T.I.A.A.,
since 1996.
Robert F. Gurnee (71) Chairman and Chief Executive Officer, 1992 1,156 **
102 Santomera Lane Financial Integrity Group Inc. (bank
Greenville, DE and financial services consulting
19807 firm), since 1990; Director, Vestaur
Securities Co., since 1991; Director,
The Thai Capital Fund, Inc., since
1990.
David G. Harmer (55) President, Jetway Systems, a division 1997 1,000 **
1805 West - 2550 South of FMC Corporation, since January
Ogden, UT 84401 1997; Vice President and Chief
Financial Officer, Armco Inc., from
April 1993 to December 1996; Vice
President and Corporate Controller,
FMC Corporation, from 1987 to 1993;
Director, The Singapore Fund, Inc.,
since 1996.
* Hideaki Matsuura (50) Chairman of the Board of the Fund; 1997 None --
One Evertrust Plaza President and Chairman, Daiwa
Jersey City, NJ 07302 Securities Trust Company, since July
1997; Director, Daiwa Securities
(H.K.) Ltd., from September 1995 to
June 1997; General Manager, Daiwa
Securities Co. Ltd., from August 1994
to August 1995; Executive Vice
President, Daiwa Securities America,
Inc., from April 1988 to August 1994.
</TABLE>
- ------------------------
(+) The information as to beneficial ownership is based on statements furnished
to the Fund by the nominees and directors.
3
<PAGE>
* 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 SB
Investments (USA) Ltd. (the "Investment Manager"), or the Fund's investment
adviser, Daiwa Securities Trust Company (the "Investment Adviser"). Both Mr.
Matsuura 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 July 16, 1999.
The Fund's Board of Directors held four regular meetings during the fiscal
year ended October 31, 1998. 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, Gurnee and Harmer and Dr. Gruber. The Audit
Committee met twice during the fiscal year ended October 31, 1998. All of the
incumbent members of the Audit Committee attended the meetings held during the
fiscal year. 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. Matsuura (age 50) has been Chairman of the Board of the Fund since
September 1997 (see information provided above).
Dr. Markowitz (age 71) has been President of the Fund since July 1992 (see
information provided above).
Daniel F. Barry (age 52) has been Vice President of the Fund since July 1992
and Secretary of the Fund since 1999, was also Treasurer of the Fund from July
1992 to September 1994 and has been Director and Senior Vice President of Daiwa
Securities Trust Company ("DSTC"), the Fund's Investment Adviser, Administrator
and Custodian, since December 1998 and June 1993, respectively. From June 1990
to June 1993, he was Vice President, Mutual Fund Administration of DSTC.
Sean J. Peters (age 38) has been Treasurer of the Fund since June 1998; Vice
President of DSTC since June 1998; Assistant Controller of Reserve Management
Corporation from 1994 to 1998; Assistant Vice President of Bankers Trust Company
from 1992 to 1994.
John A. Koopman (age 29) has been Assistant Treasurer of the Fund since June
1998; Assistant Vice President of DSTC since June 1998; Assistant Treasurer of
Chase Manhattan Bank NA from 1992 to 1998.
Judy Runrun Tu (age 34) has been Assistant Secretary of the Fund since March
1999; Assistant Vice President of DSTC since March 1998; Financial Analyst of
Canon USA from 1997 to 1998; Marketing Coordinator of TotalTel USA from 1995 to
1997; Assistant Controller of Daniel Caron Ltd. from 1990 to 1995.
4
<PAGE>
Laurence E. Cranch (age 52), Assistant Secretary of the Fund since July
1992; a partner in the law firm of Rogers & Wells LLP 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. $36,800 during the fiscal
year ended October 31, 1998. 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, 1998, as well as the total fee compensation paid to each incumbent
director of the Fund by the Fund and by other investment 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>
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM FUND AND
AGGREGATE ACCRUED FUND COMPLEX
COMPENSATION AS PART OF PAID TO
NAME OF DIRECTOR FROM FUND FUND EXPENSES DIRECTORS
- ------------------------------- ------------- --------------- --------------
<S> <C> <C> <C>
Hideaki Matsuura+ $ 0 None $ 0
Harry M. Markowitz+ 0 None 0
Austin C. Dowling* 9,200 None 17,658
Martin J. Gruber* 9,200 None 18,400
Robert F. Gurnee* 9,200 None 17,658
David G. Harmer* 9,200 None 18,400
</TABLE>
- ------------------------
* Also serves or served as a director of one other investment company for
which an affiliate of Daiwa SB Investments (USA) Ltd. or Daiwa Securities
Trust Company, the Fund's investment manager and investment adviser,
respectively, serves as investment manager or investment adviser.
+ Mr. Matsuura and Dr. Markowitz, who are affiliated with the Investment
Manager and Investment Adviser and are considered "interested persons" of
the Fund, did 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 held on March 4, 1999, 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), selected PricewaterhouseCoopers LLP to act as
independent accountants for the Fund for the fiscal year ending October 31,
1999. The Fund knows of no direct financial interest or material indirect
financial
5
<PAGE>
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.
(3) APPROVAL OF A NEW MANAGEMENT AGREEMENT
THE MANAGER
Daiwa SB Investments (USA) Ltd. (formerly, Daiwa International Capital
Management Corp.) (the "Manager") a corporation formed in 1981 under the laws of
Delaware, acts as the Fund's investment manager. The Manager is registered as an
investment adviser under the U.S. Investment Advisers Act of 1940.
The Manager is a direct subsidiary of Daiwa SB Investments, Ltd. (formerly,
Daiwa International Capital Management Co., Ltd.) ("DSBI") which maintains sole
ownership of investment advisory subsidiaries in the United States, London, Hong
Kong and Singapore to provide investment advisory services to a global
clientele. DSBI is a leading investment management organization in Japan,
managing net assets of US $29 billion worldwide, as of April 1999. DSBI's
clients include European, Asian and North American pension funds, mutual funds
and financial institutions.
The principal address of the Manager is 380 Madison Avenue, 23rd Floor, New
York, NY 10017. The principal business address of Daiwa SB Investments, Ltd. is
7-9 Nihonbashi 2-chome, Chuo-ku, Tokyo 103-0027, Japan.
Certain information regarding the directors and the principal executive
officers of the Manager Adviser is set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS AND POSITION WITH THE MANAGER
- ------------------------------- ----------------------------------
<S> <C>
Kiyotaka Hoshino* President
Nobumasa Wakabayashi** Senior Managing Director
Hirofumi Matsuura** Executive Officer
</TABLE>
- ------------------------
* Business Address: 380 Madison Avenue, 23rd Floor, New York, New York, 10017
** Business Address: 7-9 Nihonbashi 2-chome, Chuo-ku, Tokyo 103-0027, Japan
THE MERGER
On April 1, 1999, Daiwa International Capital Management Co., Ltd. merged
with two investment management subsidiaries of The Sumitomo Bank Limited (the
"Sumitomo Bank"), SB Investment Management Co., Ltd. and SBIM Investment Trust
Management Co., Ltd. (the "Merger"). The surviving corporation is named Daiwa SB
Investments Ltd. and is the direct parent company of the Manager owning 100% of
its outstanding capital stock.
6
<PAGE>
As of [July 30], 1999, The Sumitomo Bank, Daiwa Securities Group Inc. and
TRPH Corporation each held [44.0%], [30.4%] and [10.0%] of the outstanding stock
of Daiwa SB Investments Ltd., respectively. TRPH Corporation is a wholly owned
subsidiary of T. Rowe Price Associates, Inc. The principal address of Sumitomo
Bank is 4-6-5 Kitahama, Chuo-ku, Osaka, Japan 541-0041. The principal address of
Daiwa Institute of Research Ltd. is 15-6, Fuyuki, Kohto-ku, Tokyo, Japan
135-8460. The principal address of TRPH Corporation and T. Rowe Price
Associates, Inc. is 100 East Pratt Street, Baltimore, Maryland 21202.
In connection with the Merger, Sumitomo Bank and Daiwa Securities Group Inc.
have become holders of a controlling block of securities (25% or more) in Daiwa
SB Investments Ltd., the parent company of the Manager, thereby possibly
resulting in the assignment of the Investment Management Agreement dated July
17, 1992 between the Fund and Daiwa International Management Corp. (the
"Original Management Agreement") for purposes of Section 15 (a)(4) of the 1940
Act. Pursuant to the requirements of Section 15(a)(4) of the 1940 Act, the
Original Management Agreement automatically terminates upon its assignment.
The Manager does not anticipate any reduction in the quality of services now
provided to the Fund, and the Manager does not expect that the Merger will
result in any material changes in the business of the Manager or in the manner
in which the Manager renders services to the Fund. In addition, the Manager does
not anticipate that the Merger or any ancillary transactions will have any
adverse effect on its ability to fulfill its obligations under the New Advisory
Agreement (as defined below) with the Fund or to operate its business in a
manner consistent with past business practice.
THE MANAGEMENT AGREEMENT
As a result of the termination of the Original Advisory Agreement, a
majority of the Directors of the Fund who are not officers of the Fund or
affiliated with the Manager or Daiwa Securities Trust Company, the Fund's
investment adviser, (the "Disinterested Directors"), voting in person, approved
a new investment management agreement (the "New Management Agreement") between
the Fund and the Manager. The New Management Agreement is substantially the same
as the Fund's Original Advisory Agreement, except for the date of execution and
the provisions that the Manager will not be entitled to receive fees for
services or reimbursements for expenses unless and until the payment of fees and
expenses are approved by the stockholders of the Fund. The holders of a majority
of the outstanding voting securities (within the meaning of the 1940 Act) of the
Fund are being asked to approve the New Advisory Agreement, including the
payment of fees and expenses of the Adviser from April 1, 1999 to the date the
New Advisory Agreement is approved by the Fund's stockholders. See "The New
Management Agreement" below.
The following is a summary of the original Management Agreement and the New
Advisory Agreement. The description of the New Management Agreement is qualified
by reference to Annex A.
THE ORIGINAL MANAGEMENT AGREEMENT
The original Investment Management Agreement was last submitted to a vote by
the Fund's stockholders at the June 4, 1994 Annual Meeting of Stockholders to
approve the continuance of the Investment Management Agreement.
Under the terms of the Original Management Agreement, the Manager made
investment decisions, prepared research and statistical data and supervised the
purchase and sale of securities on behalf of the Fund based upon the
recommendations of the Adviser through the application of the D-POS model. The
7
<PAGE>
Manager also supervised the selection of brokers and dealers to carry out the
transactions and prepared and made available research and statistical data, all
in accordance with the Fund's investment objective and policies under the
direction and control of the Fund's Board of Directors. The Manager also
exercised investment discretion with respect to the Fund's temporary
investments. The Manager maintained records and furnished or caused to be
furnished all required records or other information for the Fund to the extent
such records, reports and other information were not maintained or furnished by
the Fund's administrator or other agents. The Manager or one of its affiliates
is responsible for the compensation and expenses of those of the Fund's
Directors, officers and employees who were directors, officers or employees of
the Manager or any of its affiliated persons, except that the Fund bore travel
expenses or an appropriate fraction thereof of officers and directors of the
Fund who were managing directors, officers or employees of the Manager to the
extent such expenses related to attendance at meetings of the Fund's Board of
Directors or any committee thereof.
Under the terms of the Original Management Agreement, the Manager and its
affiliates were permitted to provide investment management services to other
clients, including clients who may invest in securities of Japanese companies
and, in providing such services, could use non-confidential information
furnished by the Adviser. Conversely, information furnished by others to the
Manager in the course of providing services to clients other than the Fund may
have been useful to, and used by, the Manager in providing services to the Fund.
The Original Management Agreement provided that the Manager was not liable
for any act or omission, error of judgment or mistake of law, or for any loss
suffered by the Fund in connection with matters to which the Original Management
Agreement related, except for a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Manager in the performance of its
duties, or from reckless disregard by the Manager of its obligations and duties
under the Original Management Agreement.
As compensation for the services of the Manager and the investment adviser,
the Fund paid the Manager an aggregate monthly fee in U.S. dollars at an annual
rate of 0.60% of the first $20 million, 0.40% of the next $30 million and 0.20%
of the excess over $50 million of the value of the Fund's average weekly net
assets, of which total fee 70% is paid by the Manager to Daiwa Securities Trust
Company, the Fund's investment adviser, and 30% is retained by the Manager. For
purposes of calculating compensation, average weekly net assets were determined
at the end of each month based upon the average of the net assets as calculated
on each valuation date, generally each Friday, during the month. In addition,
the Original Management Agreement provided for the Fund's reimbursement to the
Manager for costs relating to the attendance by the Manager's employees (other
than employees serving on the Fund's Board of Directors) at a meeting of the
Fund's Board of Directors.
For the fiscal year ended October 31, 1998, the Fund paid a gross investment
management fee and expenses of U.S. $278,305 to the Manager. Of this amount, a
total of U.S. $197,669 was paid by the Manager to the Fund's investment adviser
as its advisory fee; the Manager retained U.S. $80,636 in management fees and
expenses.
Daiwa Securities Trust Company, the Fund's investment adviser and an
affiliate of the Manager, also acts as U.S. custodian and administrator for the
Fund. For its services as U.S. custodian and administrator, Daiwa Securities
Trust Company received from the Fund fees and expenses of U.S. $34,344 and U.S.
$125,459, respectively, for the fiscal year ended October 31, 1998. Daiwa
Securities Trust Company will continue to act as the Fund's U.S. custodian and
administrator after
8
<PAGE>
approval of the New Management Agreement. Brokerage commissions of $72,205 and
$37,636 were paid by the Fund to Universal Securities Ltd. (Tokyo) and Daiwa
Securities Co. Ltd. (acting as agent for Daiwa Securities America, Inc.),
respectively, both of which are affiliates of the Manager and the investment
adviser for the fiscal year ended October 31, 1998, in connection with the
Fund's portfolio transactions.
The Original Management Agreement also had a provision for termination
without penalty at any time by the Fund or by the Manager upon 60 days' written
notice.
THE NEW MANAGEMENT AGREEMENT
The Board of Directors of the Fund (the "Board"), including the
Disinterested Directors, approved the New Management Agreement between the Fund
and the Manager on March 4, 1999, the form of which is attached as Annex A and
recommended the New Management Agreement for approval by the stockholders of the
Fund. The New Advisory Agreement is substantially the same as the Original
Management Agreement. The New Management Agreement took effect on April 1, 1999
subject to obtaining stockholder approval. The New Management Agreement will
continue in effect for an initial two-year term and thereafter for successive
annual periods as long as such continuance is approved in accordance with the
1940 Act.
The investment advisory fee as a percentage of net assets payable by the
Fund to the Manager will be the same under the New Management Agreement as under
the Original Management Agreement.
In evaluating the New Management Agreement, the Board took into account that
the Fund's Original Management Agreement and its New Management Agreement,
including that their terms relating to the services to be provided thereunder by
the Manager and the fees and expenses payable by the Fund, are identical, except
for the date of execution and the provision relating to the payment of fees and
expenses as described above.
The Board also examined the terms of the Merger and the possible effects of
the Merger upon the Manager's organization and upon the ability of the Manager
to provide advisory services to the Fund. The Board also considered the skills
and capabilities of the Manager.
The Board also weighed the effect on the Fund of the Manager becoming an
affiliated person of Sumitomo Bank. Following the Merger, the Investment Company
Act will prohibit or impose certain conditions on the ability of the Fund to
engage in certain transactions with Sumitomo Bank and its affiliates.
After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Directors, and the Disinterested
Directors voting separately, unanimously approved the New Management Agreement
and voted to recommend its approval to the stockholders of the Fund.
In the event that stockholders of the Fund do not approve the New Management
Agreement, the Board will take such action as it deems in the best interest of
the Fund and its stockholders, which may include proposing that stockholders
approve an agreement in lieu of the New Management Agreement.
STOCKHOLDER APPROVAL
To become effective, the New Management Agreement must be approved by a vote
of a majority of the outstanding voting securities of the Fund. The "vote of a
majority of the outstanding voting
9
<PAGE>
securities" is defined under the 1940 Act as the lesser of the vote of (i) 67%
or more of the shares of the Fund entitled to vote thereon present at the
Meeting if the holders of more than 50% of such outstanding shares of the Fund
are present in person or represented by proxy, or (ii) more than 50% of such
outstanding shares of the Fund entitled to vote thereon. The New Management
Agreement was approved by the Board after consideration of all factors which
they determined to be relevant to their deliberations, including those discussed
above. The Board also determined to submit the New Management Agreement for
consideration by the stockholders of the Fund.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE NEW MANAGEMENT AGREEMENT INCLUDING THE PAYMENT OF FEES AND EXPENSES OF
THE ADVISER FROM APRIL 1, 1999 TO THE DATE THE NEW ADVISORY AGREEMENT IS
APPROVED BY THE FUND'S STOCKHOLDERS.
(4) APPROVAL OF A NEW ADVISORY AGREEMENT
THE ADVISER
Daiwa Securities Trust Company (the "Adviser"), a trust company chartered in
January 1986 under the laws of the State of New Jersey, acts as investment
adviser to the Manager with respect to the Fund's investments. The Adviser is
principally owned by Daiwa America Corporation, a Delaware corporation which is,
in turn, a wholly-owned subsidiary of Daiwa Securities Group, Inc. As a trust
company, the Adviser is not required to be registered with the SEC as an
investment adviser under the Advisers Act. The Adviser has been engaged in
investment advisory activities since January 1991, and has served as an
investment adviser to The Japan Equity Fund, Inc. since inception (July 1992).
The Adviser currently provides investment advisory services, with respect to
securities traded principally in Japan, the United States and the United
Kingdom, to clients in the United States, South America and Japan. As a member
of the Daiwa Group, the Adviser has access to the Group's resources, including
those of the Daiwa Institute of Research.
The Adviser currently is a subsidiary of Daiwa Securities Group, Inc. which
owns 93% of the outstanding shares of the Adviser through a holding company,
Daiwa America Corporation.
The address of the Adviser is One Evertrust Plaza, Jersey City, New Jersey
07302. The principal address of Daiwa America Corporation is [ ].
The principal address of Daiwa Securities Group, Inc. is 6-4 Otemachi 2-chome,
Chiyoda-ku, Tokyo, Japan.
10
<PAGE>
Certain information regarding the directors and the principal executive
officers of the Adviser is set forth below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS AND POSITION WITH THE ADVISER
- ------------------------- -----------------------------------------
<S> <C>
Hideaki Matsuura* Chairman of the Board, President and
Chief Executive Officer
Daniel F. Barry* Director, Senior Vice President and
Corporate Secretary
Masayasi Ohi* Director
Kiyotaka Hoshino* Director
Hiroshi Kimura* Director, Senior Vice President and Chief
Administrative Officer
Honorio Tolentino* Vice President, Chief Financial Officer
and Treasurer
Masaya Kashioka* Senior Vice President
</TABLE>
- ------------------------
*Business Address: One Evertrust Plaza, Jersey City, New Jersey 07302
Mr. Matsuura is a Director and Chairman of the Board of the Fund. Mr. Barry
is Vice President and Secretary of the Fund. Mr. Peters is Treasurer of the
Fund. Mr. Harry M. Markowitz, Director of Research of the Adviser's Global
Portfolio Research Department is a Director and President of the Fund.
THE TERMINATION OF ORIGINAL ADVISORY AGREEMENT
As a result of the Merger described in Proposal 3, the original Investment
Advisory Agreement dated July 17, 1992 between the Manager and the Adviser (the
"Original Advisory Agreement") automatically terminated upon the termination of
the Original Management Agreement.
THE ADVISORY AGREEMENTS
As a result of the termination of the Original Advisory Agreement, a
majority of the Directors of the Fund who are not officers of the Fund or
affiliated with the Adviser or Daiwa SB Investments (USA) Ltd., the Fund's
investment manager (the "Disinterested Directors"), voting in person, approved a
new investment advisory agreement (the "New Advisory Agreement") between the
Fund and the Advisor. The New Advisory Agreement is substantially the same as
the Fund's Original Advisory Agreement, except for the date of execution and
provisions that the Adviser will not be entitled to receive fees for services or
reimbursements for expenses unless and until the payment of fees and expenses
are approved by the stockholders of the Fund. The holders of a majority of the
outstanding voting securities (within the meaning of the 1940 Act) of the Fund
are being asked to approve the New Advisory Agreement including the payment of
fees and expenses of the Adviser from April 1, 1999 to the date the New Advisory
Agreement is approved by the Fund's stockholders. See "The New Advisory
Agreement" below.
The following is a summary of the Original Advisory Agreement and the New
Advisory Agreement. The description of the New Advisory Agreement is qualified
by reference to Annex B.
11
<PAGE>
THE ORIGINAL ADVISORY AGREEMENT
The original Investment Advisory Agreement, dated as of July 17, 1992, was
last submitted to a vote by the Fund's stockholders at the June 4, 1994 Annual
Meeting of Stockholders to approve the continuance of the Investment Advisory
Agreement.
Under the terms of the Original Advisory Agreement, the Adviser was required
to provide the Manager with investment recommendations based on the D-POS model
and also to prepare and make available research and statistical data and to
provide specific advice to the Manager regarding Japanese equities. The
information and investment advice received by the Manager from the Adviser was
used for the purpose of managing the Fund's investment portfolio and was
evaluated by the Manager's staff in light of their own expertise and information
from other sources.
The Adviser or one of its affiliates was responsible for the compensation
and expenses of the Fund's Directors, officers and employees who are directors,
officers or employees of the Adviser or any of its affiliated persons, except
that the Fund bore travel expenses of officers and directors of the Fund who
were managing directors, officers or employees of the Adviser to the extent such
expenses related to attendance at meetings of the Fund's Board of Directors or
any committee thereof.
The Original Advisory Agreement provided that the Adviser would not be
liable for any act or omission, error of judgment or mistake of law, or for any
loss suffered by the Fund in connection with matters to which the Original
Advisory Agreement related, except for a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its duties, or from reckless disregard by the Adviser of its
obligations and duties under the Original Advisory Agreement.
For the fiscal year ended October 31, 1998, the Fund paid a gross investment
management fee and expenses of U.S. $278,305 to the investment manager. Of this
amount, a total of U.S. $197,669 was paid by the investment manager to the
Adviser as its advisory fee.
The Adviser also acts as U.S. custodian and administrator to the Fund. For
its services as U.S. custodian and administrator, the Adviser received from the
Fund fees and expenses of U.S. $34,344 and U.S. $125,459, respectively, for the
fiscal year ended October 31, 1998. Brokerage commissions of $72,205 and $37,636
were paid by the Fund to Universal Securities Ltd. (Tokyo) and Daiwa Securities
Co. Ltd. (acting as agent for Daiwa Securities America, Inc.), respectively,
both of which are affiliates of the Manager and the Adviser for the fiscal year
ended October 31, 1998, in connection with the Fund's portfolio transactions.
The Adviser will continue to act as the Fund's U.S. custodian and administrator
to the Fund after the approval of the New Advisory Agreement.
The Original Advisory Agreement also had a provision for termination without
penalty at any time by the Adviser upon 60 days' written notice.
THE NEW ADVISORY AGREEMENT
The Board of Directors of the Fund, including the Disinterested Directors,
approved The New Advisory Agreement on March 4, 1999, the form of which is
attached as Annex B and recommended the New Advisory Agreement for approved by
the Stockholders of the Fund. The New Advisory Agreement is substantially the
same as the Original Advisory Agreement. The New Advisory Agreement took effect
on April 1, 1999 subject to stockholder approval. The New Advisory Agreement
will continue in effect for an initial two-year term and thereafter for
successive annual periods as long as such continuance is approved in accordance
with the 1940 Act.
12
<PAGE>
The investment advisory fee as a percentage of net assets payable by the
Manager to the Adviser will be the same under the New Advisory Agreement as
under the Original Advisory Agreement.
In evaluating the New Advisory Agreement, the Board took into account that
the Fund's Original Advisory Agreement and the New Advisory Agreement, including
that their terms relating to the services to be provided thereunder by the
Adviser and the fees and expenses payable to the Adviser, are identical, except
for the date of execution and the provision relating to the payment of fees and
expenses as described above.
The Board also examined the terms of the Merger and the possible effects of
the Merger upon the Adviser's organization and upon the ability of the Adviser
to provide advisory services to the Fund. The Board also considered the skills
and capabilities of the Adviser.
The Board also weighed the effect on the Fund of the Adviser's becoming an
affiliated person of Sumitomo Bank. Following the Merger, the 1940 Act will
prohibit or impose certain conditions on the ability of the Fund to engage in
certain transactions with Sumitomo Bank and its affiliates.
After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Directors, and the Disinterested
Directors voting separately, unanimously approved the New Advisory Agreement and
voted to recommend its approval to the stockholders of the Fund.
In the event that stockholders of the Fund do not approve the New Advisory
Agreement, the Board will take such action as it deems in the best interest of
the Fund and its stockholders, which may include proposing that stockholders
approve an agreement in lieu of the New Advisory Agreement.
STOCKHOLDER APPROVAL
To become effective, the New Advisory Agreement must be approved by a vote
of a majority of the outstanding voting securities of the Fund. The "vote of a
majority of the outstanding voting securities" is defined under the 1940 Act as
the lesser of the vote of (i) 67% or more of the shares of the Fund entitled to
vote thereon present at the Meeting if the holders of more than 50% of such
outstanding shares of the Fund are present in person or represented by proxy, or
(ii) more than 50% of such outstanding shares of the Fund entitled to vote
thereon. The New Advisory Agreement was approved by the Board after
consideration of all factors which they determined to be relevant to their
deliberations, including those discussed above. The Board also determined to
submit the New Advisory Agreement for consideration by the stockholders of the
Fund.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE NEW ADVISORY AGREEMENT INCLUDING THE PAYMENT OF FEES AND EXPENSES OF THE
ADVISER FROM APRIL 1, 1999 TO THE DATE THE NEW ADVISORY AGREEMENT IS APPROVED BY
THE FUND'S STOCKHOLDERS.
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.[$ ], 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
13
<PAGE>
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 September 16, 1999, 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 included in the
proxy materials for the year 2000 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, 1999.
The Fund's By-laws require that any proposal by a stockholder of the Fund
intended to be presented at a meeting of stockholders must be received by the
Fund, c/o Daiwa Securities Trust Company, One Evertrust Plaza, 9th Floor, Jersey
City, New Jersey 07302, not earlier than 90 days prior and not later than 60
days prior to such meeting of stockholders.
By order of the Board of Directors,
Daniel F. Barry
SECRETARY
One Evertrust Plaza
Jersey City, New Jersey 07302
August , 1999
14
<PAGE>
ANNEX A
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of April 1, 1999, by and between THE JAPAN EQUITY FUND,
INC., a Maryland corporation (the "Fund"), and DAIWA SB INVESTMENTS (USA) LTD.,
a Delaware corporation (the "Manager").
WHEREAS, the Fund is a closed-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the"1940 Act");
and
WHEREAS, the Fund's investment objective is to outperform over the long
term, on a total return basis (including appreciation and dividends), the non-
financial services sectors of the Tokyo Stock Price Index, a composite index of
all common stocks listed on the First Section (the "First Section"), of the
Tokyo Stock Exchange (the "TSE"); and
WHEREAS, the Fund desires to retain the Manager to render investment
management services to the Fund with respect to its assets; and
WHEREAS, the Manager is willing to render such services.
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) The Fund hereby employs the Manager for the period and on the terms and
conditions set forth herein, subject at all times to the supervision of the
Board of Directors of the Fund, to:
(i) Act as the investment manager and to manage the investment and
reinvestment of the assets of the Fund in accordance with the investment
objectives and policies of the Fund, as set forth in the Fund's Prospectus
(as defined below). In acting as investment manager for the Fund's assets,
the Manager shall regularly supervise the purchase and sale of securities on
behalf of the Fund based on the recommendations of Daiwa Securities Trust
Company, a bank chartered under the laws of the State of New Jersey (the
"Investment Adviser"), pursuant to an Investment Advisory Agreement dated of
even date herewith between the Manager and the Investment Adviser (the
"Investment Advisory Agreement") through the Investment Adviser's
application of the Daiwa Portfolio Optimization System ("D-POS") model. The
Manager shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the Fund's assets shall be
held in cash, U.S. dollars and Japanese yen-denominated short-term debt
instruments ("Temporary Investments") in which the Fund may invest, subject
always to the restrictions of the Fund's Amended and Restated Articles of
Incorporation and Amended and Restated By-Laws, as further amended and
restated from time to time, the provisions of the 1940 Act and the Fund's
investments objectives, investment policies and investment limitations, as
the same are set forth in the prospectus (the "Prospectus") of the Fund
contained in its registration statement on Form N-2 (the "Registration
Statement") filed with the Securities and Exchange Commission(the "SEC")
under the Securities Act of 1933, as amended, and the 1940 Act. Should the
Board of Directors of the Fund at any time make any definite determination
as to investment policy and notify the Manager thereof, 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
15
<PAGE>
revoked. The Manager shall take, on behalf of the Fund, all actions which it
deems necessary to implement the investment policies of the Fund applicable
to the Fund's assets, including the Fund's Temporary Investments, and with
respect to the Fund's assets, including the Fund's Temporary Investments, to
place all orders for the purchase or sale of portfolio securities for the
Fund with brokers or dealers selected by it, and in connection therewith,
the Manager is authorized as agent of the Fund to give instructions to the
custodians from time to time of the Fund's assets 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 the best
results for the Fund as determined by the Board of Directors and set forth
in the Prospectus. Subject to this requirement and the provisions of the
1940 Act, the Securities Exchange Act of 1934, and any other applicable
provisions of law, nothing shall prohibit the Manager from selecting brokers
or dealers with which it or the Fund is affiliated;
(ii) Maintain for the Fund records and furnish or cause to be furnished
all required records or other information of the Fund to the extent that
such records, reports and other information are not maintained or furnished
by the Fund's administrators, custodians or other agents; and
(iii) Advise the Fund as to the amounts and types of cash and securities
held in Temporary Investments.
(b) The Manager accepts such employment and agrees during the term of this
Agreement to render such services, to permit any of its officers or employees to
serve without compensation as directors or officers of the Fund if elected to
such position and to assume the obligations herein set forth for the
compensation herein provided. The Manager shall for all purposes herein provided
be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the Fund
in any way or otherwise be deemed an agent of the Fund.
2. COMPENSATION. For the services and facilities described in Section 1,
the Fund will pay to the Manager at the end of each calendar month (as accrued
weekly), an investment management fee in U.S. dollars computed at an annual rate
of 0.60% of the first U.S. $20,000,000, 0.40% of the next U.S. $30,000,000 and
0.20% of the excess over U.S. $50,000,000 of the Fund's average weekly net
assets. The Fund acknowledges that a portion of such fee shall be paid by the
Manager to the Investment Adviser for its services under the Investment Advisory
Agreement. For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during such month and year,
respectively. Notwithstanding anything to the contrary in this Section 2,
neither the Manager nor the Investment Adviser shall not be entitled to receive
fees for services provided pursuant to this Agreement for the period from the
date of this Agreement to the date on which this Agreement is approved by the
stockholders of the Fund unless and until the payment of fees and expenses under
this Agreement are approved by the stockholders of the Fund.
3. NON-EXCLUSIVITY OF SERVICES. The services of the Manager to the Fund
under this Agreement are not to be deemed exclusive, and the Manager shall be
free to render similar services or other services to others so long as its
services are not impaired thereby.
16
<PAGE>
4. ALLOCATION OF CHARGES AND EXPENSES.
(a) The Manager shall assume and pay for maintaining its staff and
personnel, and shall at its own expense provide the equipment, office space and
facilities, necessary to perform its obligations hereunder. The Manager shall
pay the salaries and expenses of such of the Fund's officers and employees and
any fees and expenses of such of the Fund's Directors who are directors,
officers or employees of the Manager or any of its affiliates, PROVIDED,
HOWEVER, that the Fund, and not the Manager, shall bear travel expenses or an
appropriate fraction thereof of officers and Directors of the Fund who are
directors, officers or employees of the Manager to the extent that such expenses
relate to attendance at meetings held in connection with the Fund's operation,
including meetings of the Fund's Board of Directors or any committee thereof.
Notwithstanding anything to the contrary in this Section 4(a), the Manager shall
not be entitled to receive reimbursement for its expenses from the Fund pursuant
to this Agreement for the period from the date of this Agreement to the date on
which this Agreement is approved by the stockholders of the Fund unless and
until the payment of fees and expenses under this Agreement are approved by the
stockholders of the Fund.
(b) In addition to the fee of the Manager, the Fund shall assume and pay any
expenses for services rendered by any custodian for the safekeeping of the
Fund's securities or other property, for keeping its books of account, for any
other charges of any such custodian, and for calculating the net asset value of
the Fund as provided in the Prospectus. The Fund shall also assume any pay all
other charges and expenses of its operations, including compensation of the
Fund's directors (other than those affiliated with the Manager or the Investment
Adviser), the fees and expenses of its independent auditors, legal counsel and
administrator, any transfer or dividend disbursing agent, any registrar and any
administrator for its dividend reinvestment and cash purchase plan, the costs of
acquiring and disposing of portfolio securities (including freight, insurance
and other charges in connection with the shipment of portfolio securities),
interest, if any, on any obligations incurred by the Fund, the cost of share
certificates ad of reports, membership dues in the Investment Company Institute
or any similar trade organization, insurance, reports and notices to
shareholders, New York Stock Exchange or other securities exchange listing fees,
any litigation expenses, costs of stockholder and other meetings, costs of
stationery, other like miscellaneous expenses and all taxes and fees payable to
federal, state or other governmental agencies on account of the registration of
securities issued by the Fund, filing of corporate documents or otherwise.
5. POTENTIAL CONFLICTS OF INTEREST. Subject to applicable statutes and
regulations, it is understood that directors, officers or agents of the Fund are
or may be interested in the Manager as directors, officers, employees, agents,
shareholders or otherwise, and that the directors, officers, employees, agents
and shareholders of the Manager may be interested in the Fund as a director,
officer agent or otherwise.
6. STANDARD OF CARE; INDEMNIFICATION.
(a) The Manager will exercise its best judgment in rendering the services to
be provided by it hereunder. The Manager shall not be liable for any error of
judgment or of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Manager in the
performance of its obligations and duties or by reason of its reckless disregard
of its obligations and duties under this Agreement.
17
<PAGE>
(b) The Fund agrees to indemnify and hold harmless the Manager for any
losses, costs and expenses incurred or suffered by the Manager arising from any
action, proceeding or claims which may be brought against the Manager in
connection with the performance or non-performance in good faith of its
functions under this Agreement, except losses, costs and expenses resulting from
willful misfeasance, bad faith or gross negligence in the performance of the
Manager's duties or from reckless disregard on the part of the Manager of the
Manager's obligations and duties under this Agreement.
7. DURATION AND TERMINATION. This Agreement shall become effective on the
date hereof and shall remain in full force for a period of two years from the
date hereof, unless sooner terminated as hereinafter provided. This Agreement
shall continue in force from year to year thereafter, but only as long as such
continuance is specifically approved at lease annually in the manner required by
the 1940 Act and the rules and regulations of the SEC thereunder; provided,
however, that if the continuation of this Agreement is not approved, the Manager
may continue to serve in such capacity in the manner and to the extent permitted
by the 1940 Act and the rules and regulations of the SEC thereunder.
This Agreement shall automatically terminate in the event of its assignment
and may be terminated at any time without the payment of any penalty by the Fund
or by the Manager on 60 days' written notice to the other party. The Fund may
effect termination by action of the Board of Directors or by vote of the holders
of a majority of the outstanding voting securities of the Fund.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Directors or by vote of the holders of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that the Manager or any
officer or director of the Manager has taken any action which results in a
breach of the covenants of the Manager set forth herein.
The terms "assignment" and "vote of the holders of a majority of the
outstanding voting securities" shall have the meaning set forth in the 1940 Act
and the rules and regulations of the SEC thereunder.
8. SURVIVAL. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
be thereby affected.
9. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice
10. GOVERNING LAW. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of New York.
11. MISCELLANEOUS.
(a) The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
(b) Terms not defined herein shall have the means seta forth in the
Prospectus.
(c) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) This Agreement may be amended, changed, modified or altered only by a
written agreement singed by the parties heret
18
<PAGE>
IN WITNESS WHEREOF, the Fund and the Manager have caused this Agreement to
be executed as of the day and year first above written.
THE JAPAN EQUITY FUND, INC.
By:
--------------------------------------
Name:
Title:
DAIWA SB INVESTMENTS (USA) LTD.
By:
--------------------------------------
Name:
Title:
19
<PAGE>
ANNEX B
INVESTMENT ADVISORY AGREEMENT
The INVESTMENT ADVISORY AGREEMENT, dated as of April 1, 1999, is between
DAIWA SB INVESTMENTS (USA) LTD. (hereinafter called "DSBI"), a Delaware
corporation, located at 380 Madison Avenue, 23rd Floor, New York, New York
10017, and DAIWA SECURITIES TRUST COMPANY (hereinafter called "DSTC"), a New
Jersey trust company, located at One Evertrust Plaza, Jersey City, New Jersey
07302.
WHEREAS, DSBI acts as investment manager to THE JAPAN EQUITY FUND, INC.
(hereinafter called the "Fund"), and wishes to appoint DSTC as its Investment
Adviser in respect to the Fund's investment portfolio, the parties to this
Agreement agree as follows:
1. ACCEPTANCE OF APPOINTMENT:
DSBI hereby appoints DSTC as its Investment Adviser for the Fund and DSTC
hereby agrees to accept such appointment, subject to the terms and conditions
set forth herein.
2. ADVISORY SERVICES TO BE RENDERED:
DSTC's investment advice shall be limited to the specific types of
securities permitted by the Fund's investment objective and policies and subject
to the Fund's investment restrictions, which will be furnished to DSTC by DSBI.
DSTC will provide to DSBI the following investment advisory services:
(a) DSTC will utilize its Daiwa Portfolio Optimization System (D-POS) to
review, analyze and appraise portfolio securities of the Fund as often as DSBI
reasonably deems advisable, and submit to DSBI written recommendations for
investment and reinvestment.
(b) Upon DSBI's request, DSTC will confer with DSBI regarding such
recommendations.
(c) DSTC will render periodic reports, analyses, and appraisals of the Fund
or individual items thereof, as DSBI may reasonably deem advisable.
(d) DSTC will prepare and make available research and statistical data and
provide specific advice to DSBI regarding Japanese equity securities.
At all times DSBI shall be at liberty either to follow or disregard either
wholly or partially any information, advice, or recommendation as to the
investment and reinvestment of the Fund's portfolio securities in accordance
with the Fund's investment objective and policies, as set forth in Fund's
prospectus dated of even date herewith. It shall be DSBI's responsibility to
communicate promptly with DSTC as to its decision regarding DSTC's advice or
recommendations.
3. COMPENSATION:
DSTC's fee for providing this service shall be in accordance with the
schedule set forth as Exhibit A hereto. Notwithstanding anything to the contrary
in this Section 3, DSTC shall not be entitled to receive fees for services
provided pursuant to this Agreement for the period from the date of this
Agreement to the date on which this Agreement is approved by the stockholders of
the Fund unless and until the payment of fees and expenses under this Agreement
are approved by the stockholders of the Fund.
20
<PAGE>
4. DURATION AND TERMINATION:
(a) This Agreement shall become effective on the date hereof and shall
remain in full force for a period of two years from the date hereof, unless
sooner terminated as hereinafter provided. This Agreement shall continue in
force from year to year thereafter, but only as long as such continuance is
specifically approved at least annually in the manner required by the Investment
Company Act of 1940, as amended (the "1940 Act") and the rules and regulations
of the SEC thereunder; provided, however, that if the continuation of this
Agreement is not approved, the Manager may continue to serve in such capacity in
the manner and to the extent permitted by the 1940 Act and the rules and
regulations of the SEC thereunder.
(b) This Agreement shall terminate automatically (i) in the event of
termination of DSBI's management agreement with the Fund, or (ii) without
payment or penalty by either party, upon 60 days' notice or (iii) in the event
of its assignment (as defined in the 1940 Act).
5. REPRESENTATIONS AND WARRANTIES:
(a) DSBI represents and warrants that: (i) it has the legal right, power and
authority to execute, deliver and perform this Agreement and to carry out all of
the transactions contemplated hereby; (ii) it has obtained all necessary
authorizations; (iii) the execution, delivery and performance of this Agreement
and the carrying out of any of the transactions contemplated hereby will not be
in conflict with, result in a breach of, or constitute a default under, any
agreement or other instrument to which DSBI is a party or which is otherwise
known to DSBI; (iv) it does not require the consent or approval of any
governmental agency or instrumentality, except any such consents and approvals
which DSBI has obtained prior to the execution of this Agreement; (v) the
execution and delivery of this Agreement by DSBI will not violate any law,
regulation, charter, by law, order of any court or other government agency or
judgment applicable to DSBI; and (vi) all persons executing this Agreement on
behalf of DSBI are duly authorized to do so.
(b) DSTC represents and warrants that it is a trust company organized under
the laws of the State of New Jersey and, as such, need not register as an
investment adviser under the Investment Advisers Act of 1940, as amended.
6. STANDARD OF CARE: INDEMNIFICATION:
(a) DSTC will exercise its best judgment in rendering the services to be
provided by it hereunder. DSTC shall not be liable for any error of judgment or
of law or for any loss suffered by DSBI or by the Fund in connection with the
matters to which this Agreement relates, except loss resulting from willful
misfeasance, bad faith or gross negligence on the part of DSTC in the
performance of its obligations and duties or by reason of its reckless disregard
of its obligations and duties under this Agreement.
(b) DSBI agrees to indemnify and hold harmless DSTC, its officers,
directors, employees, agents, shareholders, or other affiliates (each an
"Indemnified Party"), for any losses, costs and expenses proceeding or claims
which may be brought against such Indemnified Party in connection with the
performance or non performance in good faith of its functions under this
Agreement, except losses, costs and expenses resulting from willful misfeasance,
bad faith or gross negligence in the performance of such Indemnified Party's
duties or from reckless disregard on the part of such Indemnified Party of such
Indemnified Party's obligations and duties under this Agreement.
21
<PAGE>
7. EXPENSES:
DSTC will pay the salaries and reasonable expenses of the Fund's officers
and employees, as well as reasonable fees and expenses of the Fund's Directors,
who are directors, officers or employees of DSTC or any of its affiliation
persons, except that the Fund will bear travel expenses or an appropriate
fraction thereof of officers and Directors of the Fund who are directors,
officers or employees of DSTC to the extent such expenses relate to attendance
at meetings held in connection with the Fund's operation, including meetings of
the Fund's Board of Directors or any committee thereof. Notwithstanding anything
to the contrary in this Section 7, DSTC shall not be entitled to receive
reimbursement for its expenses from the Fund pursuant to this Agreement for the
period from the date of this Agreement to the date on which this Agreement is
approved by the stockholders of the Fund unless and until the payment of fees
and expenses under this Agreement are approved by the stockholders of the Fund.
8. GENERAL:
DSBI agrees that DSTC shall have no responsibilities or duties with respect
to the subject matter of this Agreement other than those expressly set forth
herein. DSBI also agrees to execute such documents as DSTC may reasonably
request of DSBI to assist DSTC in carrying out its responsibilities and duties
hereunder.
9. SEVERABILITY:
In case any one or more of the provisions contained in this Agreement should
be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
in no way be affected, prejudiced or disturbed thereby.
10. NON-EXCLUSIVITY OF SERVICES:
The services of DSTC to DSBI under this Agreement are not to be deemed
exclusive, and DSTC shall be free to render similar services or other services
to others so long as its services hereunder are not impaired thereby.
11. NOTICES:
Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
12. GOVERNING LAW:
The provisions of and the validity and construction of this Agreement shall
be governed by and construed in accordance with the laws of the State of New
Jersey.
22
<PAGE>
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
by their authorized representatives as of the date and year first above written.
DAIWA SB INVESTMENTS (USA) LTD. DAIWA SECURITIES TRUST COMPANY
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
Acknowledged:
THE JAPAN EQUITY FUND, INC.
By:
------------------------------
Name:
Title:
23
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
FEE SCHEDULE
DSTC's advisory fee shall be 70% of the fee which DSBI receives from The
Japan Equity Fund, Inc. (the "Fund"). Such fee shall accrue and be payable in
arrears promptly after the close of each quarter of the Fund's fiscal year.
24
<PAGE>
THE JAPAN EQUITY FUND, INC.
C/O DAIWA SECURITIES TRUST COMPANY
ONE EVERTRUST PLAZA
JERSEY CITY, NEW JERSEY 07302
----------------------
THE JAPAN EQUITY FUND, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON
SEPTEMBER 16, 1999
The undersigned stockholder of The Japan Equity Fund, Inc. (the "Fund") hereby
appoints Daniel F. Barry, Sean J. Peters, John A. Koopman and Judy Runrun Tu, or
any of them, proxies of the undersigned, with full power of substitution, to
vote and act for and in the name and stead of the undersigned at the Annual
Meeting of Stockholders of the Fund, to be held at the offices of Daiwa
Securities America Inc., Financial Square, 32 Old Slip, 14th Floor, New York,
New York 10005, on September 16, 1999, at 12:00 Noon, New York time, and at any
and all adjournments thereof, according to the number of votes the undersigned
would be entitled to cast if personally present.
PROPOSALS
1) The election of Harry M. Markowitz and Austin C. Dowling as Class III
directors to serve for a term expiring on the date on which the Annual
Meeting of Stockholders is held in 2002.
2) The ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund for the fiscal year ending October 31,
1999.
3) The approval of a new Investment Management Agreement between the Fund and
Daiwa SB Investments (USA) Ltd. ("DSBI USA"), including the payment of fees
and expenses of DSBI USA from April 1, 1999 to the date the new Investment
Management Agreement is approved by the Fund's stockholders.
4) The approval of a new Investment Advisory Agreement between the DSBI USA and
Daiwa Securities Trust Company ("DSTC"), including the payment of fees and
expenses of DSTC from April 1, 1999 to the date the new Investment Advisory
Agreement is approved by the Fund's stockholders.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
INSTRUCTIONS GIVEN BY THE STOCKHOLDERS, BUT IF NO INSTRUCTIONS ARE GIVEN, THIS
PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1 THROUGH 4 SET FORTH IN THIS PROXY.
IN ADDITION, THIS PROXY WILL BE VOTED, IN THE DISCRETION OF SUCH PROXIES, UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF. THE UNDERSIGNED HEREBY REVOKES ANY AND ALL PROXIES WITH RESPECT TO SUCH
SHARES HERETOFORE GIVEN BY THE UNDERSIGNED. THE UNDERSIGNED ACKNOWLEDGES RECEIPT
OF THE PROXY STATEMENT DATED AUGUST , 1999.
(OVER)
<PAGE>
PROPOSALS (PLEASE CHECK ONE BOX FOR EACH PROPOSAL.)
<TABLE>
<S> <C> <C>
1) / / FOR ALL nominees listed below / / WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE TO VOTE FOR ALL NOMINEES LISTED BELOW
CONTRARY BELOW)
</TABLE>
<TABLE>
<S> <C> <C>
Nominees: Class III - Harry M. Markowitz, Austin C. Dowling
</TABLE>
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2) / / FOR / / AGAINST / / ABSTAIN
3) / / FOR / / AGAINST / / ABSTAIN
4) / / FOR / / AGAINST / / ABSTAIN
Dated: __________________________________________________________________ , 1999
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of Stockholder(s)
Please sign, date and return promptly. Signature(s) should be exactly as name or
names appearing on this proxy. If shares are held jointly, each holder should
sign. If signing is by attorney, administrator, trustee or guardian, please give
full title. If the shareholder is a corporation, the President or a Vice
President should sign in his or her own name, indicating title. If the
shareholder is a partnership, a partner should sign in his or her own name,
indicating that he or she is a "Partner".
