<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.:
---------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------
<PAGE>
THE JAPAN EQUITY FUND, INC.
C/O DAIWA SECURITIES TRUST COMPANY
ONE EVERTRUST PLAZA
JERSEY CITY, NEW JERSEY 07302
(201) 333-7300
[ ], 2000
Dear Stockholders:
The Annual Meeting of Stockholders of The Japan Equity Fund, Inc. (the
"Fund") will be held at 10:00 a.m., New York time, on Thursday, March 16, 2000,
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
PricewaterhouseCoopers LLP as independent accountants; (iii) consider whether to
approve a change in the Fund's investment objective to outperform over the long
term, on a total return basis (including appreciation and dividends), the Tokyo
Stock Price Index ("TOPIX"); and (iv) consider the approval of a new Investment
Advisory Agreement between Daiwa SB Investments (USA) Ltd. and Daiwa SB
Investments Ltd. 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
MARCH 16, 2000
-------------------
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, March 16, 2000, at 10:00 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 2003.
2. To ratify or reject the selection of PricewaterhouseCoopers LLP
as independent accountants of the Fund for its fiscal year ending
October 31, 2000.
3. To approve or disapprove a change in the Fund's investment
objective to outperform over the long term, on a total return
basis (including appreciation and dividends), the TOPIX.
4. To approve or reject a new Investment Advisory Agreement between
Daiwa SB Investments (USA) Ltd., as investment manager of the
Fund, and Daiwa SB Investments Ltd., 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 January 10,
2000 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,
Judy Runrun Tu
ASSISTANT SECRETARY
[ ], 2000
<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, March 16, 2000, at 10:00 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 [ ], 2000. Any stockholder giving a proxy in
advance of the Annual Meeting has the power to revoke it by mail (addressed to
the Assistant 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, 1999 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 (201) 333-7300.
The Board of Directors has fixed the close of business on January 10,
2000 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
January 10, 2000.
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.
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
<PAGE>
(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
---------------------------
Martin J. Gruber
Hideaki Matsuura
to serve for terms expiring on the date of subsequent Annual Meetings of
Stockholders in the year 2003, 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 nonvotes 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 JANUARY 10, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 2000(+) CLASS
- ----------------------------- --------------------------------------- -------------- ----------------- ----------
<S> <C> <C> <C> <C>
NOMINEES
Martin J. Gruber (61) Professor of Finance, Leonard N. 1992 5,321 **
229 South Irving Street Stern School of Business, New York
Ridgewood, NJ University, since 1965; Director,
07450 SG Cowen Income & Growth Fund,
Inc., since 1986; Director, SG Cowen
Opportunity Fund, since 1987; Director,
SG Cowen Standby Reserve Fund Inc.,
since 1985; Director, SG Cowen 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.
* Hideaki Matsuura (51) Chairman of the Board and Acting 1997 None --
One Evertrust Plaza President of the Fund; President
Jersey City, NJ and Chairman, Daiwa Securities
07302 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.
2
<PAGE>
<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 JANUARY 10, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 2000(+) CLASS
- ----------------------------- --------------------------------------- -------------- ----------------- ----------
<S> <C> <C> <C> <C>
OTHER CURRENT DIRECTORS
Austin C. Dowling (67) Director, The Thai Capital 1992 2,046 **
1002 E Long Beach Boulevard Fund, Inc., since 1990.
North Beach, NJ
08008
*Harry M. Markowitz (72) President of Harry Markowitz 1992 1,779 **
1010 Turquoise Street Company since 1984; President of
Suite 245 the Fund, from 1992 to 1999;
San Diego, CA Director of Research, Global
92109 Portfolio Research Department,
Daiwa Securities Trust Company,
from 1990 to 1999; 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.
Robert F. Gurnee (72) Chairman and Chief Executive 1992 1,156 **
102 Santomera Lane Officer, Financial Integrity Group
Greenville, DE Inc. (bank and financial services
19807 consulting 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 1997 1,000 **
1805 West - 2550 South division of FMC Corporation, since
Ogden, UT January 1997; Vice President and
84401 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.
</TABLE>
3
<PAGE>
- ----------
+ 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 SB Investments (USA) Ltd. (the "Investment Manager"), or the Fund's
investment adviser, Daiwa SB Investments Ltd. (the "Investment Adviser").
Mr. Matsuura and Dr. Markowitz are interested persons because of their
present or past affiliation with the Fund's former investment adviser
(Daiwa Securities Trust Company), or because they are officers of the
Fund, or both. The former investment adviser is an affiliate of the Fund's
Investment Manager and Investment Adviser.
** Represented less than 1% of the outstanding shares at January 10, 2000.
The Fund's Board of Directors held four regular meetings during the
fiscal year ended October 31, 1999. 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, 1999. 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 51) has been Chairman of the Board of the Fund since
September 1997 and Acting President of the Fund since January 2000 (see
information provided above).
Sean J. Peters (age 38) has been Treasurer of the Fund since June 1998;
Vice President of Daiwa Securities Trust Company ("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.
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.
Laurence E. Cranch (age 53), has been Assistant Secretary of the Fund
since July 1992 and has been a partner in the law firm of Clifford Chance 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, 1999. Each such non-affiliated director currently
receives fees, paid by the Fund, of U.S. $750 for each directors' meeting
4
<PAGE>
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 and custodian
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, 1999, 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 AS FUND COMPLEX
COMPENSATION 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 17,020
Martin J. Gruber* 9,200 None 18,400
Robert F. Gurnee* 9,200 None 17,020
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 SB
Investments Ltd., the Fund's investment manager and investment adviser,
respectively, serves as investment manager or investment adviser.
+ Mr. Matsuura, who is affiliated with the Investment Manager and
Investment Adviser and is considered an "interested person" of the Fund, did
not receive any fee compensation from the Fund for his service as director.
Dr. Markowitz, who was affiliated with the Investment Manager and the
Investment Adviser and is considered an "interested person" of the Fund, did
not receive any fee compensation from the Fund for his service as director.
(2) RATIFICATION OR REJECTION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
At a meeting held on December 2, 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, 2000. The Fund knows of no direct financial interest or material indirect
financial interest of that firm in the Fund. One or more representatives of
PricewaterhouseCoopers 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
5
<PAGE>
affirmative vote of a majority of the votes cast at the Meeting. For this
purpose, abstentions and broker nonvotes will not be counted as votes cast at
the Meeting.
(3) APPROVAL OF A CHANGE IN THE FUND'S INVESTMENT OBJECTIVE
The Board of Directors of the Fund has unanimously approved and directed
that there be submitted to the stockholders for their approval a change to the
Fund's investment objective. The proposed new investment objective would be to
outperform over the long term, on a total return basis (including appreciation
and dividends) the TOPIX, a composite market-capitalization weighted index of
all common stocks listed on the First Section of the Tokyo Stock Exchange
("TSE").
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
objective.
Currently, the Fund's investment objective states that:
"The investment objective of the Fund is to outperform over the
long term, on a total return basis (including appreciation and
dividends), the non-financial services sectors of the TOPIX, a
composite index of all common stocks listed on the First Section
of the TSE."
The text of the proposed amendment is as follows:
"The investment objective of the Fund is to outperform over the
long term, on a total return basis (including appreciation and
dividends), the TOPIX, a composite index of all common stocks
listed on the First Section of the TSE."
As a result of this change in the Fund's investment objective, the Fund
would be permitted to invest in companies in the financial services sector of
the TOPIX.
Approval of the proposed amendment to the Fund's investment objective
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 objective without change if this proposal
is not approved by the stockholders.
Also, it is anticipated that the Board of Directors will vote to amend
the Fund's investment policy at the next meeting of the Board of Directors
scheduled for February 28, 2000. Currently, the Fund seeks to achieve its
investment objective by investing substantially all of its assets in equity
securities of non-financial services companies listed on the First Section of
the TSE. If the Board of Directors votes to amend the Fund's investment policy,
the amended investment policy will be for the Fund to seek to achieve its
investment objective by investing substantially all of its assets in equity
securities of non-financial services companies listed on the First or Second
Section of the TSE or listed on the over-the-counter market in Japan or listed
on other stock exchanges in Japan.
There are several reasons for the above changes in the Fund's investment
objective and investment policy. The prior investment adviser provided the
Investment Manager with investment recommendations based on a statistical and
optimization selection process known as the Daiwa Portfolio Optimization System
("DPOS"), and DPOS was designed to invest only in companies in the non-financial
services sectors of the TOPIX. The new investment adviser will provide
investment recommendations to the Investment Manager based on an "active"
management style of securities selection based on analysis
6
<PAGE>
of various factors that may affect the value of securities. The new investment
adviser believes it will be able to manage the Fund more effectively and achieve
a greater return for the Fund with the ability to invest in all sectors of the
First and Second Sections of the TSE or in the over-the-counter market in Japan
or other stock exchanges in Japan.
(4) APPROVAL OF A NEW ADVISORY AGREEMENT
THE INVESTMENT ADVISER
Daiwa SB Investments Ltd. (the "Investment Adviser"), a corporation
incorporated in Tokyo under the laws of Japan, acts as investment adviser to
Daiwa SB Investments (USA) Ltd. (the "Investment Manager") with respect to the
Fund's investments. The Investment Adviser was formed in 1973 as an investment
advisory firm specializing in Asian equity management. The Investment Adviser is
registered under the U.S. Investment Advisers Act of 1940, as amended. The
Investment Adviser currently provides investment advisory services, with respect
to securities traded principally in Japan, other Asian countries, the United
States and other European countries. As a member of Daiwa Securities Group,
Inc., the Investment Adviser has access to the Group's resources, including
those of the Daiwa Institute of Research and the Japanese Institute of Research.
The Investment Adviser manages approximately $30 billion for clients
worldwide, over $10 billion of which is invested on behalf of institutional
clients outside of Japan. The Investment Adviser currently is a subsidiary of
Daiwa Securities Group, Inc., which owns 44% of the outstanding shares. The
address of the Investment Adviser is 7-9, Nihonbashi, 2-chome, Chuo-ku, Tokyo
103-0027 Japan.
Certain information regarding the directors and the principal executive
officers of the Investment Adviser is set forth below:
PRINCIPAL OCCUPATION
AND POSITION WITH THE
NAME INVESTMENT ADVISER
------------- -----------------------------
Ichiro Yamanaka Chairman of the Board
Minoru Mori President and Chief Executive
Officer
Katsuhiko Tamaki Deputy President
Nobumas Wakabayashi Senior Managing Director
Norio Imai Senior Managing Director
Isao Takemura Managing Director
Katsumi Ando Managing Director
David Michael Testa Director
7
<PAGE>
THE TERMINATION OF PRIOR ADVISORY AGREEMENT
As a result of the vote of the Board of Directors on December 2, 1999,
the prior Investment Advisory Agreement dated April 1, 1999 between the
Investment Manager and Daiwa Securities Trust Company (the "Prior Advisory
Agreement") terminated on December 31, 1999. The Prior Advisory Agreement is
being terminated because of the resignation of Dr. Harry M. Markowitz as the
Fund's President and Portfolio Manager, effective December 31, 1999.
THE ADVISORY AGREEMENTS
As a result of the termination of the Prior Advisory Agreement, a
majority of the Directors of the Fund who are not officers of the Fund or
affiliated with the Investment Adviser or the Investment Manager (the
"Disinterested Directors"), voting in person, approved a new investment advisory
agreement (the "New Advisory Agreement") between the Investment Manager and the
Investment Adviser. The New Advisory Agreement is substantially the same as the
Prior Advisory Agreement, except for certain provisions that are discussed
below. See "The New Advisory Agreement." 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. See "The New Advisory
Agreement" below.
The following is a summary of the Prior Advisory Agreement and the New
Advisory Agreement. The description of the New Advisory Agreement is qualified
by reference to Annex A.
THE PRIOR ADVISORY AGREEMENT
The prior Investment Advisory Agreement, dated as of April 1, 1999, was
last submitted to a vote by the Fund's stockholders at the September 16, 1999
Annual Meeting of Stockholders to approve the Investment Advisory Agreement.
Under the terms of the Prior Advisory Agreement, DSTC was required to
provide the Investment Manager with investment recommendations based on a
statistical and optimization selection process known as DPOS and also to prepare
and make available research and statistical data and to provide specific advice
to the Investment Manager regarding Japanese equities. The information and
investment advice received by the Investment Manager from DSTC was used for the
purpose of managing the Fund's investment portfolio and was evaluated by the
Investment Manager's staff in light of their own expertise and information from
other sources.
DSTC was responsible for 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
affiliated persons, except that the Fund would 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.
The Prior Advisory Agreement provided that DSTC 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 Prior Advisory
Agreement related, except for a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of DSTC in the performance of its duties,
or from reckless disregard by DSTC of its obligations and duties under the Prior
Advisory Agreement.
For the fiscal year ended October 31, 1999, the Fund paid a gross
investment management fee and expenses of U.S. $307,100 to the Investment
Manager. Of this amount, a total of U.S. $210,116 was paid by the Investment
Manager to DSTC as its advisory fee.
8
<PAGE>
DSTC also acts as U.S. custodian and administrator to the Fund. For its
services as U.S. custodian and administrator, DSTC received from the Fund fees
and expenses of U.S. $41,697 and U.S. $150,300, respectively, for the fiscal
year ended October 31, 1999. Brokerage commissions of $108,254 were paid by the
Fund to Daiwa Securities Co. Ltd. (acting as agent for Daiwa Securities America,
Inc.), which is an affiliate of the Investment Manager and DSTC for the fiscal
year ended October 31, 1999, in connection with the Fund's portfolio
transactions. DSTC 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 Prior Advisory Agreement also had a provision for termination
without penalty at any time by DSTC or the Investment Manager 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 December 2, 1999, the form of
which is attached as Annex A and recommended the New Advisory Agreement for
approval by the stockholders of the Fund. The New Advisory Agreement is
substantially the same as the Prior Advisory Agreement except for certain
provisions that are described below. The New Advisory Agreement took effect on
January 1, 2000 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.
There are a few differences between the New Advisory Agreement and the
Prior Advisory Agreement. Under the New Advisory Agreement, instead of using the
DPOS model, the Investment Adviser intends to adopt an approach that involves
quantitative valuation of securities to identify an appropriate universe of
securities from which to select investments, with judgmental analysis then
applied to this universe to determine the actual investments to be made by the
Fund. In addition, the investment advisory fee as a percentage of net assets
payable by the Investment Manager to the Investment Adviser will be lower under
the New Advisory Agreement than under the Prior Advisory Agreement. Under the
Prior Advisory Agreement, the prior investment adviser was paid an advisory fee
equal to 70% of the fee which the Investment Manager receives from the Fund. For
services rendered under the New Advisory Agreement, the Investment Adviser will
be paid an advisory fee equal to 60% of the fee which the Investment Manager
receives from the Fund. Such fee will accrue and be payable in arrears promptly
after the close of each quarter of the Fund's fiscal year. Although the
advisory fee paid to the Investment Adviser will be lower under the New
Advisory Agreement, the fee paid by the Fund to the Investment Manager will
remain the same.
In evaluating the New Advisory Agreement, the Board took into account
that the Fund's Prior Advisory Agreement and the New Advisory Agreement,
including that their terms relating to the services to be provided thereunder by
the Investment Adviser are identical, except for the above exceptions. The Board
also considered the skills and capabilities of the Investment Adviser.
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
9
<PAGE>
of the Fund are present in person or represented by proxy, or (ii) more than
50% of such outstanding sharesof 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.
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. $4,500, 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 March 16, 2000, 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 2001 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, 2000.
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,
Judy Runrun Tu
ASSISTANT SECRETARY
One Evertrust Plaza
Jersey City, New Jersey 07302
[ ], 2000
10
<PAGE>
ANNEX A
INVESTMENT ADVISORY AGREEMENT
The INVESTMENT ADVISORY AGREEMENT, dated as of January 1, 2000, is
between DAIWA SB INVESTMENTS (USA) LTD. (hereinafter called "DSBI (USA)"), a
Delaware corporation, located at 380 Madison Avenue, 23rd Floor, New York, New
York 10017, and DAIWA SB INVESTMENTS LTD. (hereinafter called "DSBI"), a
Japanese corporation, located at 7-9, Nihonbashi 2-chome, Chuo-ku, Tokyo
103-0027.
WHEREAS, DSBI (USA) acts as investment manager to THE JAPAN EQUITY FUND,
INC. (hereinafter called the "Fund"), and wishes to appoint DSBI 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 (USA) hereby appoints DSBI as its investment adviser for the Fund
and DSBI hereby agrees to accept such appointment, subject to the terms and
conditions set forth herein.
2. ADVISORY SERVICES TO BE RENDERED:
DSBI'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 DSBI by DSBI
(USA). DSBI will provide to DSBI (USA) the following investment advisory
services:
(a) DSBI will review, analyze and appraise portfolio securities
of the Fund as often as DSBI (USA) reasonably deems advisable, and submit to
DSBI (USA) written recommendations for investment and reinvestment. DSBI intends
to adopt an approach that involves quantitative valuation of securities to
identify an appropriate universe of securities from which to select investments,
with judgmental analysis then applied to this universe to determine the actual
investments to be made by the Fund.
(b) Upon DSBI (USA)'s request, DSBI will confer with DSBI (USA)
regarding such recommendations.
(c) DSBI will render periodic reports, analyses, and appraisals
of the Fund or individual items thereof, as DSBI (USA) may reasonably deem
advisable.
(d) DSBI will prepare and make available research and
statistical data and provide specific advice to DSBI (USA) regarding Japanese
equity securities.
At all times DSBI (USA) 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 the Fund's
prospectus. It shall be DSBI (USA)'s responsibility to communicate promptly with
DSBI as to its decision regarding DSBI's advice or recommendations.
Until further notice, DSBI (USA) delegates to DSBI the authority to
place all orders for the purchase or sale of portfolio securities for the
Fund with brokers or dealers selected by DSBI, and in connection therewith,
DSBI is authorized as agent of the Fund to give instructions to the
custodians 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, DSBI is directed at all
times to seek to obtain the best results for the Fund as determined by the
Board of Directors of the Fund and as set forth in the Fund's prospectus.
3. COMPENSATION:
DSBI's fee for providing this service shall be in accordance with the
schedule set forth as Exhibit A hereto.
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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, DSBI may continue to serve 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 (USA)'s management agreement with the Fund, or (ii)
without payment or penalty by either party or the Fund, upon 60 days' notice or
(iii) in the event of its assignment (as defined in the 1940 Act).
5. REPRESENTATIONS AND WARRANTIES:
(a) DSBI (USA) 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
(USA) is a party or which is otherwise known to DSBI (USA); (iv) it does not
require the consent or approval of any governmental agency or instrumentality,
except any such consents and approvals which DSBI (USA) has obtained prior to
the execution of this Agreement; (v) the execution and delivery of this
Agreement by DSBI (USA) will not violate any law, regulation, charter, by law,
order of any court or other government agency or judgment applicable to DSBI
(USA); and (vi) all persons executing this Agreement on behalf of DSBI (USA) are
duly authorized to do so.
(b) DSBI represents and warrants that it is duly registered and
authorized as an investment adviser under the Investment Advisers Act of 1940,
as amended, and that it will use all reasonable efforts to maintain effective
its registration and authorization until the termination of this Agreement.
6. STANDARD OF CARE; INDEMNIFICATION:
(a) DSBI will exercise its best judgment in rendering the
services to be provided by it hereunder. DSBI shall not be liable for any error
of judgment or of law or for any loss suffered by DSBI (USA) 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
DSBI 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 (USA) agrees to indemnify and hold harmless DSBI, 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 nonperformance 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.
12
<PAGE>
7. EXPENSES:
DSBI 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 DSBI 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 DSBI 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, DSBI 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 (USA) agrees that DSBI shall have no responsibilities or duties
with respect to the subject matter of this Agreement other than those expressly
set forth herein. DSBI (USA) also agrees to execute such documents as DSBI may
reasonably request of DSBI (USA) to assist DSBI 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 DSBI to DSBI (USA) under this Agreement are not to be
deemed exclusive, and DSBI 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.
13
<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 SB INVESTMENTS LTD.
By: By:
--------------------------- ---------------------------
Name: Name:
Title: Title:
Acknowledged:
THE JAPAN EQUITY FUND, INC.
By:
---------------------------
Name:
Title:
14
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
FEE SCHEDULE
DSBI's advisory fee shall be 60% of the fee which DSBI (USA) 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.
15
<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
MARCH 16, 2000
The undersigned stockholder of The Japan Equity Fund, Inc. (the "Fund")
hereby appoints Hideaki Matsuura, Sean J. Peters 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
March 16, 2000, at 10:00 a.m., 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 Martin J. Gruber and Hideaki Matsuura as Class I
directors to serve for a term expiring on the date on which the Annual
Meeting of Stockholders is held in the year 2003.
2) The ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund for the fiscal year ending October
31, 2000.
3) The approval of a change in the Fund's investment objective to: to
outperform over the long term, on a total return basis (including
appreciation and dividends) the Tokyo Stock Price Index.
4) The approval of a new Investment Advisory Agreement between Daiwa SB
Investments (USA) Ltd., as investment manager of the Fund, and Daiwa SB
Investments Ltd., as investment adviser of the Fund.
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 [ ], 2000.
(over)
<PAGE>
PROPOSALS (PLEASE CHECK ONE BOX FOR EACH PROPOSAL.)
1) / / FOR ALL nominees listed below / / WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY BELOW) (TO VOTE FOR ALL NOMINEES
LISTED BELOW)
Nominees: Class I - Martin J. Gruber, Hideaki Matsuura
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
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2) / / FOR / / AGAINST / / ABSTAIN
3) / / FOR / / AGAINST / / ABSTAIN
4) / / FOR / / AGAINST / / ABSTAIN
Dated: , 2000
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- --------------------------------------------------------------------------------
Signature(s) of Stockholder(s)
Please sign, date and return promptly. Signature(s) should be exactly as name or
names appear 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 stockholder 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."
