<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
<TABLE>
<S><C>
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
/ / Definitive Proxy Statement the Commission Only (as
/ / Definitive Additional Materials permitted by Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
THE TAIWAN 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:
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
THE TAIWAN EQUITY FUND, INC.
C/O DAIWA SECURITIES TRUST COMPANY
ONE EVERTRUST PLAZA
JERSEY CITY, NEW JERSEY 07302
---------------------
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 15, 2000
-------------------
To the Stockholders of
The Taiwan Equity Fund, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of The Taiwan 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 Tuesday, February 15, 2000, at 10:00 a.m.,
New York time, for the following purposes:
(1) To elect two Class II 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 December 31, 2000.
(3) To consider and act upon a proposal to liquidate and dissolve
the Fund, as set forth in the Plan of Liquidation and
Dissolution (the "Plan") adopted by the Board of Directors of
the Fund; and
(4) To transact such other business as may properly come before
the Meeting or any adjournment thereof.
The Board of Directors has unanimously determined that a complete
liquidation of the Fund in accordance with the terms of the Plan is in the best
interests of the Fund and its stockholders. The Board of Directors has
recommended that the stockholders approve the Plan. Subject to receipt of the
requisite stockholder approval and the satisfactory resolution of any and all
claims pending against the Fund and its Board of Directors, stockholders
remaining in the Fund can expect to receive a liquidation distribution, in cash,
as soon as reasonably practicable. However, there is no minimum distribution to
stockholders. The Fund will not liquidate until all claims are resolved.
The Board of Directors has fixed the close of business on December 15,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the Meeting or any adjournment 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. The enclosed proxy is being solicited on behalf of the Board
of Directors of the Fund.
When the Plan becomes effective, the stockholders' respective interests
in the Fund's assets shall not be transferable by negotiation of the share
certificates and the Fund's shares will cease to be traded on the New York Stock
Exchange, Inc. Stockholders holding stock certificates should consider arranging
2
<PAGE>
with the Fund's transfer agent a return of their certificates in advance of
any liquidating distributions in order to facilitate payments to them. The
transfer agent is State Street Bank and Trust Company, located at P.O. Box
8200, Boston, MA 02266-8200. They can be reached at (800) 426-5523 or
(781) 575-2000.
Respectfully,
Masayasu Ohi
CHAIRMAN OF THE BOARD
Dated: [January 3, 2000]
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.
-----------------------
3
<PAGE>
THE TAIWAN EQUITY FUND, INC.
---------------------
PROXY STATEMENT
---------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of The Taiwan Equity Fund, Inc.,
a Maryland corporation (the "Fund"), to be voted at the Annual Meeting of
Stockholders of the Fund and at any adjournments thereof (the "Meeting") to be
held at the offices of Daiwa Securities America Inc., Financial Square, 32 Old
Slip, 14th Floor, New York, New York 10005, on Tuesday, February 15, 2000, at
10:00 a.m., New York time. The approximate mailing date of this Proxy Statement
is [January 3, 2000].
The purpose of the Meeting is to: elect two Class II Directors;
consider the ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants; and to consider a proposal to liquidate and dissolve
the Fund as set forth in the Plan of Liquidation and Dissolution (the "Plan")
adopted by the Board of Directors of the Fund on December 2, 1999. All properly
executed proxies received prior to the Meeting will be voted at the Meeting in
accordance with the instructions marked thereon or otherwise as provided
therein. Unless instructions to the contrary are marked, proxies will be voted
FOR approval of the Plan. Any proxy may be revoked at any time prior to the
exercise thereof by giving written notice to the Secretary of the Fund at: c/o
Daiwa Securities Trust Company, One Evertrust Plaza, 9th Floor, Jersey City, NJ
07302, or by voting in person at the Meeting.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR
ITS FISCAL YEAR ENDED DECEMBER 31, 1998 AND ITS SEMI-ANNUAL REPORT, DATED JUNE
30, 1999, TO ANY STOCKHOLDER REQUESTING SUCH REPORTS. REQUESTS FOR SUCH REPORTS
SHOULD BE MADE BY WRITING TO THE TAIWAN 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) 426-5523 OR
(781) 575-2000.
The Board of Directors has fixed the close of business on December 15,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the Meeting and at any adjournment 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 December 15, 1999, the Fund had
outstanding 3,606,729 shares of Common Stock. Persons who, to the knowledge
of the Fund, beneficially own more than five percent of its outstanding shares
are listed herein under "Stock Ownership of Certain Beneficial Owners."
The Fund is a non-diversified, closed-end management investment company
whose shares trade on the New York Stock Exchange, Inc. (the "NYSE") under the
symbol "TYW." The Fund commenced operations on July 25, 1994, with the objective
of seeking long-term capital appreciation through investments primarily in
equity securities issued by companies located in, or deriving revenue from, the
Republic of China. The Fund's investments have been managed by Daiwa Asset
Management (H.K.) Ltd. (the "Investment Adviser"), located at 25F, One Pacific
Place, 88 Queensway, Hong Kong, since the Fund's inception in 1994. As of
[November 30, 1999], the Investment Adviser and its affiliates had over $[ ]
million in assets under management. National Capital Management Corporation,
located at 7th Floor, 57 Po Ai Road, Taipei, Taiwan, R.O.C., the Fund's
sub-adviser, provides investment advisory services to the Fund relating to the
Republic of China domestic securities market as well as to overseas mutual
funds. The Fund's administrator is Daiwa Securities Trust Company, located at
One Evertrust Plaza, Jersey City, New Jersey 07302.
4
<PAGE>
The Board of Directors of the Fund knows of no business other than that
mentioned in Items 1, 2 and 3 of the Notice of Meeting which will be presented
for consideration at the Meeting. If any other matter is properly presented, it
is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR
OF EACH OF THE MATTERS MENTIONED IN ITEMS 1 THROUGH 3 OF THE NOTICE OF MEETING.
5
<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 II
--------
Masayasu Ohi
Martin J. Gruber
to serve for terms expiring on the date of the Annual Meeting 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 a meeting
at which a quorum is present. Under the Fund's By-Laws, the presence in person
or by proxy of stockholders entitled to cast a majority of the votes entitled to
be cast thereat constitutes a quorum. For this purpose, abstentions and broker
non-votes will be counted in determining whether a quorum is present at the
Meeting, but will not be counted as votes cast at the Meeting.
INFORMATION CONCERNING NOMINEES AND DIRECTORS
The following table sets forth information concerning each of the
nominees as a director of the Fund, as well as the other current directors of
the Fund. Each of the nominees is now a director of the Fund and has consented
to be named in this Proxy Statement and to serve as a director of the Fund if
elected.
NOMINEES
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION OR
EMPLOYMENT DURING PAST SHARES
FIVE YEARS AND BENEFICIALLY
DIRECTORSHIPS IN OWNED AS OF PERCENT
NAME (AGE) AND ADDRESS PUBLICLY HELD DIRECTOR [NOVEMBER 30], OF
OF NOMINEES/DIRECTORS COMPANIES SINCE 1999+ CLASS
---------------------- ------------------------------------- -------- --------------- -------
<S> <C> <C> <C> <C>
NOMINEES
- --------
* Masayasu Ohi ([51]) Chairman of the Board of the Fund, since 1998 [None] --
Financial Square 1998; Chairman, since 1998, The Thai
32 Old Slip, 14th Floor Capital Fund, Inc.; Chairman, since 1998,
New York, NY 10005 The Singapore Fund, Inc.; Chairman and
Chief Executive Officer, Daiwa Securities
America Inc., since 1998; Executive
Officer, Daiwa Securities Group Inc., since
1999; Director, Daiwa Securities Co. Ltd.,
from 1998 to 1999; Joint Chief Executive of
Daiwa Europe Limited, from 1997 to 1998;
President of Daiwa Europe Limited, London,
from 1994 to 1997.
6
<PAGE>
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION OR
EMPLOYMENT DURING PAST SHARES
FIVE YEARS AND BENEFICIALLY
DIRECTORSHIPS IN OWNED AS OF PERCENT
NAME (AGE) AND ADDRESS PUBLICLY HELD DIRECTOR [NOVEMBER 30], OF
OF NOMINEES/DIRECTORS COMPANIES SINCE 1999+ CLASS
---------------------- ------------------------------------- -------- -------------- -------
Martin J. Gruber ([61]) Professor of Finance, Leonard N. Stern 1994 [1,737] **
229 South Irving Street School of Business, New York University,
Ridgewood, NJ 07450 since 1965; Director, 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 Japan Equity
Fund, Inc., since 1992; Trustee, T.I.A.A.,
since 1996.
OTHER CURRENT DIRECTORS
- -----------------------
Christina Y. Liu ([44]) Professor, Department of Finance, National 1994 [None] --
16F-6, No. 410, Section 5, Taiwan University, since 1993;
Chung-Hsiao East Road Taipei, Chairperson, Department of Finance,
Taiwan, ROC National Taiwan University, from 1994 to
1996; Associate Professor, Department of
Economics and Finance, City University of
New York, from 1992 to 1993.
Oren G. Shaffer ([56]) Executive Vice President and Chief 1994 [5,000] **
42 E. Schiller Financial Officer of Ameritech
Chicago, IL 60610 Corporation, since 1994; President and of
Virgocap Inc., from 1992 to 1994;
Executive Vice President, Chief Financial
Officer and Director, The Goodyear Tire
and Rubber Company, from 1984 to 1992;
Director, Sunshine Mining Company, since
1992; Director, Hygenic Corporation, since
1993; Director, The Singapore Fund, Inc.,
since 1997.
7
<PAGE>
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION OR
EMPLOYMENT DURING PAST SHARES
FIVE YEARS AND BENEFICIALLY
DIRECTORSHIPS IN OWNED AS OF PERCENT
NAME (AGE) AND ADDRESS PUBLICLY HELD DIRECTOR [NOVEMBER 30], OF
OF NOMINEES/DIRECTORS COMPANIES SINCE 1999+ CLASS
---------------------- ------------------------------------- -------- -------------- -------
*Sadamu Tsuneishi ([51]) President and Director of the Fund; 1997 [None] --
2-10-5 Nihonbashi Kayabacho, General Manager, Accounting Section,
Chuo-ku, Tokyo, Japan General Affairs Department, Daiwa Asset
Management Co. Ltd., since February 1999;
Managing Director, Daiwa Asset Management
(H.K.) Limited, from October 1997 to
February 1999; General Manager, Accounting
Section, General Affairs Department, Daiwa
Asset Management Co. Ltd., from May 1995 to
July 1997; Fund Manager, Overseas
Investment Ltd., from July 1988 to May
1995.
</TABLE>
- ----------
+ The information as to beneficial ownership is based on statements
furnished to the Fund by the nominees and directors.
* Directors so noted are deemed by the Fund's counsel to be "interested
persons" (as defined in the U.S. Investment Company Act of 1940, as
amended (the "1940 Act")) of the Fund or of the Fund's investment
manager or investment adviser. Mr. Ohi is deemed an interested person
because of his affiliation with Daiwa Securities America Inc., an
affiliate of the Fund's investment adviser, Daiwa Asset Management
(H.K.) Ltd., or because he is an officer of the Fund, or both. Mr.
Tsuneishi is an interested person because of his affiliation with the
Fund's Investment Adviser, or because he is an officer of the Fund,
or both.
** Represented less than 1% of the outstanding shares at [November 30],
1999.
The Fund's Board of Directors held four regular meetings and two
special meetings during the fiscal year ended December 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 Dr. Gruber, Mr. Shaffer and Dr. Liu. The Audit
Committee met twice during the fiscal year ended December 31, 1999. Dr. Gruber
and Mr. Shaffer attended all of the Audit Committee meetings held during the
fiscal year. Dr. Liu attended fewer than seventy-five percent of the aggregate
of the total number of the meetings of the Audit Committee and the Board of
Directors 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 for
the fiscal year ended December 31, 1999, except that, inadvertently, such
reports were not filed on a timely basis for Dr. Gruber.]
8
<PAGE>
OFFICERS OF THE FUND
Mr. Ohi (age [51]) has been Chairman of the Board of the Fund since
September 1998 (see information provided above).
Mr. Tsuneishi (age [51]) has been President of the Fund since December
1997 (see information provided above).
Daniel F. Barry (age [53]) has been Vice President of the Fund since
July 1994 and Secretary of the Fund since March 1999 and has been Director and
Senior Vice President of Daiwa Securities Trust Company ("DSTC"), the Fund's
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 1996 to 1998.
Judy Runrun Tu (age [34]) has been Assistant Secretary of the Fund
since March 1999; Assistant Vice President of DSTC since March 1999; 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 [52]) has been Assistant Secretary of the Fund
since December 1994 and a partner in the law firm of Rogers & Wells LLP since
1980.
TRANSACTIONS WITH AND REMUNERATION OF OFFICERS AND DIRECTORS
The estimated aggregate fee remuneration for directors not affiliated
with the Investment Adviser or National Capital Management Corp. (the Fund's
sub-adviser) is U.S. $30,750 during the fiscal year ended December 31, 1999.
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 an administration and
custodian fee.
Set forth below is a chart showing the estimated aggregate fee
compensation paid by the Fund (in U.S. dollars) to each of its directors during
the fiscal year ended December 31, 1999, as well as the estimated total fee
compensation paid to each director of the Fund by the Fund and by other
investment companies advised by the Investment Adviser, National Capital
Management Corp. or their respective affiliates (collectively, the "Fund
Complex") for their services as directors of such investment companies during
their respective fiscal years:
9
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM FUND AND
ESTIMATED AGGREGATE BENEFITS ACCRUED FUND COMPLEX
COMPENSATION AS PART OF PAID TO
NAME OF DIRECTOR FROM FUND FUND EXPENSES DIRECTORS
---------------- --------- ------------- ---------
<S> <C> <C> <C>
Masayasu Ohi*+ $ 0 None $ 0
Sadamu Tsuneishi+ 0 None 0
Martin J. Gruber* 10,700 None 19,900
Christina Y. Liu 9,350 None 9,350
Oren G. Shaffer* 10,700 None 19,900
</TABLE>
- ----------
* Also serves as a director of other investment companies for which an
affiliate of Daiwa Asset Management (H.K.) Limited, the Fund's
investment manager, serves as investment adviser.
+ Mr. Tsuneishi and Mr. Ohi, who are affiliated with the Investment
Manager 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 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 December
31, 2000, subject to stockholder approval. 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 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 a meeting at which a quorum
is present. For this purpose, abstentions and broker non-votes will be counted
in determining whether a quorum is present at the Meeting, but will not be
counted as votes cast at the Meeting.
(3) PROPOSAL TO LIQUIDATE AND DISSOLVE THE FUND
BACKGROUND
Shares of closed-end equity funds typically trade in the marketplace at
a discount to their net asset value (the "discount"). This has been true in the
case of the Fund as well as many other Asia-Pacific closed-end single country
equity funds. Thus, the market price paid for the Fund's shares generally has
been less than the underlying value of the Fund's portfolio. For example, during
1998 the average discount of the Fund's shares was approximately [22.29]%, while
in 1999 the average discount through December [15], 1999 was [ ]%. These
discounts do not always prevail, however, since at times in 1995 and 1996 the
Fund's shares traded at a premium to their net asset value.
The Board of Directors over the years has discussed the significance of
the existence of the discount and the impact on stockholders. The Board of
Directors has discussed and considered various alternative strategies to address
the discount, including instituting share repurchases, making tender offers for
outstanding shares, instituting a managed dividend, utilizing leverage,
combining with other funds, converting to an open-end fund, and liquidating the
Fund's assets. The Board of Directors in the past, however, has consistently
concluded that it was in the best interests of the Fund and its stockholders to
maintain the current closed-end format, because, in the view of the Board of
Directors and the Investment
10
<PAGE>
Adviser, the closed-end format was the best structure for a fund investing in
the Republic of China with the Fund's investment strategies. In the Investment
Adviser's view, many attractive equity investment opportunities in the Republic
of China could be found in the small- and mid-capitalization and less liquid
sectors of the Republic of China equity market. An open-end structure would
severely disrupt this portfolio strategy and would force the sale of securities
in a relatively illiquid market at times when it would hurt the Fund and its
stockholders.
In an attempt to address the discount, on June 3, 1999, the Board of
Directors authorized an open market repurchase program (the "Program") of
outstanding shares of the Fund's common stock. Since the inception of the
Program, 901,600 shares, representing 20% of the Fund's outstanding
shares when the Program commenced, have been repurchased through December 6,
1999. The amount of shares repurchased represents the total amount of shares
authorized by the Board of Directors to be repurchased at this time.
As of December 15, 1999, the discount was 9.66%. It is currently
anticipated that the Fund will continue to purchase shares pursuant to the
Program until the Plan is adopted unless the Board of Directors otherwise
determines to terminate the Program earlier.
Additionally, in response to stockholder concerns about the Fund's
discount, the Investment Adviser made a proposal which was included in the proxy
statement for the Fund's 1999 Annual Meeting of Stockholders held September 17,
1999. The Investment Adviser proposed to the Board of Directors that, if during
any four-week time period commencing on or after September 17, 1999, the average
discount rate of the Fund's share price to net asset value was greater or equal
to 10%, a special meeting of the Board of Directors would be called promptly
thereafter to determine measures to be taken to enable stockholders to realize
net asset value. The Investment Adviser also committed to provide the Board of
Directors at the time of such special meeting a proposal to enable stockholders
to realize net asset value as soon as practicable thereafter.
Because the Fund's average discount rate was greater than 10% for a
four-week time period after September 17, 1999, a special meeting of the Board
of Directors was called for November 22, 1999. Before the special meeting, the
Board of Directors and the Investment Adviser were actively engaged in
discussions regarding the feasibility of converting the Fund into an open-end
mutual fund, merging the Fund with another fund, or liquidating the Fund. Also,
the Board of Directors discussed various alternatives with outside advisers.
Based on its findings, the Board of Directors determined that open-ending is not
a viable option because: (a) demand for an open-end fund investing only in
Republic of China equities is very limited, (b) distributors in the mutual fund
industry have shown little or no interest in selling such a vehicle, and (c) to
open-end the Fund would be very costly to its remaining stockholders since the
anticipated resulting heavy redemptions would likely increase the Fund's
operating expense ratio to an unacceptable level. The Board of Directors also
considered merging or combining the Fund with another fund.
Based upon the foregoing considerations and other relevant factors, on
November 22, 1999, the Board of Directors approved and authorized the orderly
liquidation of the Fund based on its determination that such action is in the
best interests of the Fund and all of its existing stockholders. On December 2,
1999, the Board of Directors, including all of the Directors who are not
"interested persons" of the Fund (as that term is defined in the 1940 Act) who
were present at the meeting, adopted the Plan and directed that the Plan be
submitted for consideration by the Fund's stockholders. A copy of the Plan is
attached hereto as Exhibit A.
If (a) the Plan is approved by the requisite stockholder vote and (b)
any possible claims that might be pending against the Fund prior to the
effective date of the Plan are satisfactorily resolved in the sole discretion of
the Board of Directors, the Fund's assets will be liquidated at market prices
and on such terms and conditions as determined to be reasonable and in the best
interests of the Fund and its stockholders in light of the circumstances in
which they are sold and the Fund will file Articles of Dissolution with the
State of Maryland. Prior to stockholder approval of the Plan, the Fund will
continue
11
<PAGE>
to invest its assets in accordance with its current investment strategies.
Stockholders will receive their proportionate cash interest of the net
distributable assets of the Fund upon liquidation.
Under Maryland law and pursuant to the Fund's Articles of
Incorporation, as amended, and Amended and Restated By-Laws, the affirmative
vote of the holders of at least a majority of the outstanding shares of capital
stock of the Fund entitled to vote thereon is needed to approve the liquidation
of the Fund. For purposes of the vote on the Plan, abstentions and broker
non-votes will have the same effect as a vote against the Plan, but will be
counted toward the presence of a quorum. In the event that a majority of the
outstanding shares of capital stock of the Fund are not voted in favor of the
Plan, with the result that the Plan is not approved, the Fund will continue to
exist as a registered investment company in accordance with its stated
investment objective and policies. In the event the Plan is not approved, the
Board of Directors presently intends to meet to consider what, if any, steps to
take in the best interests of the Fund and its stockholders including the
possibility of resubmitting the Plan or another plan of liquidation and
dissolution to stockholders for future consideration. Also, if the Plan is not
approved by stockholders, the Fund will take all reasonable steps to reduce the
discount.
Notwithstanding the approval of a majority of the outstanding shares of
capital stock of the Fund, any claims pending against the Fund and/or the Board
of Directors must be satisfactorily resolved prior to the liquidation of the
Fund's assets. While the Board of Directors is not currently aware of any such
claims, should any such claim arise the Fund is currently unable to estimate
with precision the costs of resolving such claim and exactly when such claims
would be resolved. Consequently, the amounts set forth under "Distribution
Amounts" below are for illustrative purposes only. If any such claim should
arise, the Fund will not liquidate until such claims are satisfactorily resolved
in the sole discretion of the Board of Directors.
SUMMARY OF PLAN OF LIQUIDATION AND DISSOLUTION
The following summary does not purport to be complete and is subject in
all respects to the provisions of, and is qualified in its entirety by reference
to, the Plan which is attached hereto as Exhibit A. Stockholders are urged to
read the Plan in its entirety.
EFFECTIVE DATE OF THE PLAN AND CESSATION OF THE FUND'S ACTIVITIES AS AN
INVESTMENT COMPANY. The Plan will become effective only upon (a) its adoption
and approval by the holders of a majority of the outstanding shares of the Fund
and (b) the satisfactory resolution in the sole discretion of the Board of
Directors of any and all possible claims pending against the Fund and its Board
of Directors (the "Effective Date"). Following these two events, the Fund (i)
will cease to invest its assets in accordance with its investment objective and,
to the extent necessary, will, as soon as reasonable and practicable after the
Effective Date, complete the sale of the portfolio securities it holds in order
to convert its assets to cash or cash equivalents, provided, however, that after
the event in clause (a) the Board of Directors may authorize the commencement of
the sale of portfolio securities and the investment of the proceeds of such sale
in investment grade short-term debt securities denominated in U.S. dollars, (ii)
will not engage in any business activities except for the purpose of paying,
satisfying, and discharging any existing debts and obligations, collecting and
distributing its assets, and doing all other acts required to liquidate and wind
up its business and affairs and (iii) will dissolve in accordance with the Plan
and the Fund will file Articles of Dissolution with the State of Maryland (Plan,
Sections 1-2, 5 and 12). The Fund will, nonetheless, continue to meet the source
of income, asset diversification and distribution requirements applicable to
regulated investment companies through the last day of its final taxable year
ending on liquidation.
CLOSING OF BOOKS AND RESTRICTION ON TRANSFER OF SHARES. The
proportionate interests of stockholders in the assets of the Fund will be fixed
on the basis of their holdings on the Effective Date. On such date, the books of
the Fund will be closed. Thereafter, unless the books of the Fund are reopened
because the Plan cannot be carried into effect under the laws of the State of
Maryland or otherwise, the
12
<PAGE>
stockholders' respective interests in the Fund's assets will not be transferable
by the negotiation of share certificates and the Fund's shares will cease to be
traded on the NYSE (Plan, Section 3).
LIQUIDATION DISTRIBUTIONS. The distribution of the Fund's assets will
be made in up to two cash payments in complete cancellation of all the
outstanding shares of capital stock of the Fund. The first distribution of the
Fund's assets (the "First Distribution") is expected to consist of cash
representing substantially all the assets of the Fund, less an estimated amount
necessary to discharge any (a) unpaid liabilities and obligations of the Fund on
the Fund's books on the First Distribution date, and (b) liabilities as the
Board of Directors reasonably deem to exist against the assets of the Fund on
the Fund's books. However, there can be no assurance that the Fund will be able
to declare and pay the First Distribution. If the First Distribution is declared
and paid, the amount of the First Distribution currently is uncertain. A second
distribution (the "Second Distribution"), if necessary, is anticipated to be
made within 90 days after the First Distribution and will consist of cash from
any assets remaining after payment of expenses, the proceeds of any sale of
assets of the Fund under the Plan not sold prior to the First Distribution and
any other miscellaneous income of the Fund.
Each stockholder not holding stock certificates of the Fund will
receive liquidating distributions equal to the stockholder's proportionate
interest in the net assets of the Fund. Each stockholder holding stock
certificates of the Fund will receive a confirmation showing such stockholder's
proportionate interest in the net assets of the Fund with an advice that such
stockholder will be paid in cash upon return of the stock certificate.
Stockholders holding stock certificates should consider arranging with the
Fund's transfer agent a return of their certificates in advance of any
liquidating distributions in order to facilitate payments to them. The transfer
agent is State Street Bank and Trust Company, located at P.O. Box 8200, Boston,
MA 02266-8200. They can be reached at (800) 426-5523 or (781) 575-2000. All
stockholders will receive information concerning the sources of the liquidating
distribution (Plan, Section 7).
EXPENSES OF LIQUIDATION AND DISSOLUTION. All of the expenses incurred
by the Fund in carrying out the Plan will be borne by the Fund (Plan, Section
8).
CONTINUED OPERATION OF THE FUND. The Plan provides that the Board of
Directors has the authority to authorize such non-material variations from or
non-material amendments of the provisions of the Plan (other than the terms of
the liquidating distributions) at any time without stockholder approval, if the
Board of Directors determines that such action would be advisable and in the
best interests of the Fund and its stockholders, as may be necessary or
appropriate to effect the marshalling of Fund assets and the dissolution,
complete liquidation and termination of existence of the Fund, and the
distribution of its net assets to stockholders in accordance with the laws of
the State of Maryland and the purposes to be accomplished by the Plan. In
addition, the Board of Directors may abandon the Plan, with stockholder
approval, prior to the filing of Articles of Dissolution with the State
Department of Assessments and Taxation of Maryland if the Board of Directors
determines that such abandonment would be advisable and in the best interests of
the Fund and its stockholders (Plan, Sections 9 and 10). However, it is the
Board of Directors' current intention to liquidate and dissolve the Fund as soon
as practicable following the settlement of all possible claims pending against
the Fund and/or the Board of Directors.
DISTRIBUTION AMOUNTS
The Fund's net asset value on November 30, 1999 was $58,900,000. At
such date, the Fund had 3,647,329 shares outstanding. Accordingly, on
November 30, 1999, the net asset value per share of the Fund was $16.16. The
amounts to be distributed to stockholders of the Fund upon liquidation will
be reduced by the expenses of the Fund in connection with the liquidation and
portfolio transaction costs as well as any costs incurred in resolving any
claims that may arise against the Fund. Liquidation expenses are estimated to
be approximately $600,000 (or 17 cents per share outstanding on November 30,
1999). Portfolio transaction costs (including amounts allocated for dealer
markup on securities traded over the counter) are estimated to be
approximately $210,000, although
13
<PAGE>
actual portfolio transaction costs will depend upon the composition of the
portfolio and the timing of the sale of portfolio securities. Actual liquidation
expenses and portfolio transaction costs may vary. Any increase in such costs
will be funded from the cash assets of the Fund and will reduce the amount
available for distribution to stockholders.
GENERAL INCOME TAX CONSEQUENCES
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The following is only a
general summary of the United States Federal income tax consequences of the Plan
and is limited in scope. This summary is based on the tax laws and regulations
in effect on the date of this Proxy Statement, all of which are subject to
change by legislative or administrative action, possibly with retroactive
effect. While this summary discusses the effect of federal income tax provisions
on the Fund resulting from its liquidation and dissolution, the Fund has not
sought a ruling from the Internal Revenue Service (the "IRS") with respect to
the liquidation and dissolution of the Fund. The statements below are,
therefore, not binding upon the IRS, and there can be no assurance that the IRS
will concur with this summary or that the tax consequences to any stockholder
upon receipt of a liquidating distribution will be as set forth below.
While this summary addresses some of the United States Federal income
tax consequences of the Plan, neither state nor local tax consequences of the
Plan are discussed. Implementing the Plan may impose unanticipated tax
consequences on stockholders and affect stockholders differently, depending on
their particular tax situations independent from the Plan.. Stockholders should
consult with their own tax advisers for advice regarding the application of
current United States Federal income tax law to their particular situation and
with respect to state, local and other tax consequences of the Plan.
The liquidating distributions received by a stockholder may consist of
three elements: (i) a capital gain dividend to the extent of any long-term
capital gains recognized by the Fund during the final tax year; (ii) an ordinary
income dividend to the extent of the Fund's interest income and short-term
capital gains earned during the final tax year (over and above expenses) that
have not previously been distributed; and (iii) a distribution treated as
payment for the stockholder's shares. [As of November 30, 1999, the Fund had
accumulated net realized [losses][gains] and, additionally, currently expects to
realize net [losses][gains] on the sale of assets in connection with the
liquidation.] [The Fund currently expects that stockholders will [not] receive
[any/a] capital gain dividend in the distribution resulting from the net effect
of the Fund's: 1) accumulated net realized [losses/gains], and 2) the net
[gains/losses] that the Fund currently expects to realize on the sale of assets
relating to the liquidations.] [Therefore, it is [not] currently expected that
stockholders will receive [any/a] capital gain dividend in the distribution.]
[Also, the Fund does not currently expect to have any undistributed ordinary
income when its assets are liquidated.] The composition of the actual
liquidating distributions may vary due to changes in market conditions
(including the local securities market in Taiwan, the market for specific
securities held by the Fund and relevant currency markets) and the composition
of the Fund's portfolio at the time its assets are sold. Prior to the last day
of the Fund's final taxable year, the Fund's Board of Directors will authorize
any capital gain dividend and ordinary income dividend to be distributed as part
of the liquidating distribution. Within 60 days after the close of the Fund's
final taxable year, the Fund will notify stockholders as to the portion, if any,
of the liquidating distribution which constitutes a capital gain dividend and
that which constitutes an ordinary income dividend (as well as any amounts
qualifying for a credit or deduction against foreign taxes paid by the Fund).
The Fund expects to retain its qualification as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended (the
"Code"), during the liquidation period and, therefore, expects to not be taxed
on any of its net capital gains realized from the sale of its assets. In the
unlikely event that the Fund should lose its status as a RIC during the
liquidation process, the Fund would be subject to taxes which could reduce any
or all of the three types of liquidating distributions.
14
<PAGE>
Any portion of a liquidating distribution paid under the Plan out of
investment income or realized capital gains (i.e., a distribution described in
(i) or (ii), above) will be taxed under the Code, in the same manner as any
other distribution of the Fund. Accordingly, such amounts will be treated as
ordinary income or capital gains, if so designated.
The balance of any amount received upon liquidation (i.e., a
distribution described in (iii), above) will be treated for Federal income tax
purposes as full payment in exchange for the stockholder's shares and will thus
be treated as a taxable sale. Thus, a stockholder who is a United States
resident or otherwise subject to United States income taxes will be taxed only
to the extent the amount of the balance of the distribution exceeds his or her
adjusted tax basis in such shares; if the amount received is less than his or
her adjusted tax basis, the stockholder will realize a loss. The stockholder's
gain or loss will generally be a capital gain or capital loss if such shares are
held as capital assets. If such shares, which are held as a capital asset, are
held for more than one year, then any gain or loss will generally constitute a
long-term capital gain or long-term capital loss, as the case may be, taxable to
individual stockholders at a maximum rate of 20%. To the extent the individual
taxpayer has taxable income below the 28% tax bracket threshold, such
individual's effective capital gains tax rate is only 10%. Such 10% capital gain
tax rate will be reduced to 8% on capital assets that will have been held for
more than five years and sold after December 31, 2000. If the stockholder will
have held the shares for not more than one year, any gain or loss will be a
short-term capital gain or loss and will be taxed at ordinary income tax rates.
Corporate stockholders should note that there is no preferential
Federal income tax rate applicable to capital gains for corporations under the
Code. Accordingly, all income recognized by a corporate stockholder pursuant to
the liquidation of the Fund, regardless of its character as capital gains or
ordinary income, will be subject to tax at the same Federal income tax rate.
Under certain provisions of the Code, some stockholders may be subject
to a 31% withholding tax ("backup withholding") on the liquidating distribution
(including (i) the capital gain dividend, (ii) the ordinary income dividend, and
(iii) the distribution treated as payment for shares, as described above).
Generally, stockholders subject to backup withholding will be those for whom no
taxpayer identification number is on file with the Fund, those who, to the
Fund's knowledge, have furnished an incorrect number, and those who underreport
their tax liability. An individual's taxpayer identification number is his or
her social security number. Certain stockholders specified in the Code may be
exempt from backup withholding. The backup withholding tax is not an additional
tax and may be credited against a taxpayer's federal income tax liability.
Stockholders will be notified of their respective shares of ordinary
and capital gains dividends for the Fund's final fiscal year as has been
reported.
IMPACT OF THE PLAN ON THE FUND'S STATUS UNDER THE 1940 ACT
On the Effective Date, the Fund will cease doing business as a
registered investment company and, as soon as practicable, will apply for
deregistration under the 1940 Act. It is expected that the Securities and
Exchange Commission will issue an order approving the deregistration of the Fund
if the Fund is no longer doing business as an investment company. Accordingly,
the Plan provides for the eventual cessation of the Fund's activities as an
investment company and its deregistration under the 1940 Act, and a vote in
favor of the Plan will constitute a vote in favor of such a course of action
(Plan, Sections 1, 2 and 9).
Until the Fund's withdrawal as an investment company becomes effective,
the Fund, as a registered investment company, will continue to be subject to and
will comply with the 1940 Act.
15
<PAGE>
PROCEDURE FOR DISSOLUTION UNDER MARYLAND LAW
After the Effective Date, pursuant to the Maryland General Corporation
Law and the Fund's Articles of Incorporation, as amended, and Amended and
Restated By-Laws, if at least a majority of the Fund's aggregate outstanding
shares of capital stock are voted for the proposed liquidation and dissolution
of the Fund, Articles of Dissolution stating that the dissolution has been
authorized will in due course be executed, acknowledged and filed with the
Maryland State Department of Assessments and Taxation, and will become effective
in accordance with such law. Upon the effective date of such Articles of
Dissolution, the Fund will be legally dissolved, but thereafter the Fund will
continue to exist for the purpose of paying, satisfying, and discharging any
existing debts or obligations, collecting and distributing its assets, and doing
all other acts required to liquidate and wind up its business and affairs, but
not for the purpose of continuing the business for which the Fund was organized.
The Fund's Board of Directors will be the trustees of its assets for purposes of
liquidation after the acceptance of the Articles of Dissolution, unless and
until a court appoints a receiver. The Director-trustees will be vested in their
capacity as trustees with full title to all the assets of the Fund (Plan,
Sections 2 and 12).
APPRAISAL RIGHTS
Shareholders will not be entitled to appraisal rights under Maryland
law in connection with the Plan (Plan, Section 14).
VOTING INFORMATION
Approval of the Plan requires the affirmative vote of the holders of at
least a majority of the outstanding shares of capital stock of the Fund entitled
to vote at the Meeting. Unless a contrary specification is made, the
accompanying proxy will be voted FOR approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
PROPOSED PLAN OF LIQUIDATION AND DISSOLUTION.
16
<PAGE>
ADDITIONAL INFORMATION
The expense of preparation, printing and mailing of the enclosed form
of proxy and accompanying Notice and Proxy Statement will be borne by the Fund.
The Fund will reimburse banks, brokers and others for their reasonable expenses
in forwarding proxy solicitation material to the beneficial owners of the shares
of the Fund. The Fund has retained Corporate Investor Communications, Inc., a
proxy solicitation firm, to assist in the solicitation of proxies for the
Meeting, for a fee of approximately $4,000, which excludes the reimbursement of
such firm's expenses.
In order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, telegraph, or personal interview.
It is anticipated that the cost of such supplementary solicitation, if any, will
be nominal.
Approval of proposals 1, 2 and 3 listed in the Notice of Meeting
requires the affirmative vote of at least a majority of the outstanding shares
of capital stock of the Fund cast, in person or by proxy, at a meeting at which
a quorum is present. The holders of a majority of the Fund's outstanding common
stock entitled to vote at the Meeting, present in person or by proxy,
constitutes a quorum for the transaction of business at the Meeting. In the
event that the necessary quorum to transact business or the vote required to
approve the Plan is not obtained at the Meeting, the persons named as proxies
may propose one or more adjournments of the Meeting in accordance with
applicable law, to permit further solicitation of proxies with respect to such
proposal. Any such adjournment will require the affirmative vote of the holders
of a majority of the Fund's shares present in person or by proxy at the Meeting.
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 Fund expects that broker-dealer firms holding shares of the Fund in
"street name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on the
proposal before the Meeting. The Fund understands that, under the rules of the
NYSE, such broker-dealers may not, without instructions from such customers and
clients, grant authority to the proxies designated by the Fund to vote on
proposal 3 if no instructions have been received prior to the date specified in
the broker-dealer firm's request for voting instructions.
The shares as to which the proxies so designated are granted authority
by broker-dealer firms to vote on proposal 3, the shares as to which
broker-dealer firms have declined to vote ("broker non-votes"), as well as the
shares as to which proxies are returned by record stockholders but which are
marked "abstain" on any item will be included in the Fund's tabulation of the
total number of votes present for purposes of determining whether the necessary
quorum of stockholders exists. However, abstentions and broker non-votes will
not be counted as votes cast. Therefore, abstentions and broker non-votes will
have the same effect as votes against proposal 3, although they will count
toward the presence of a quorum.
Management knows of no business other than that mentioned in Items 1, 2
and 3 of the Notice of Meeting which will be presented for consideration at the
Meeting. However, if other matters are presented for a vote at the Meeting or
any adjournments thereof, the proxy holders will vote the shares represented by
properly executed proxies according to their judgment on those matters.
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
At November 30, 1999, the Directors and officers of the Fund as a group
(10 persons) owned an aggregate of less than 1% of the outstanding shares of
the Fund.
17
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of the Fund's
common stock for each person known to be the beneficial owner of more than five
percent of the common stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY
OWNED(1) AS OF DECEMBER 15, 1999
----------------------------
NAME AND ADDRESS
OF BENEFICIAL OWNER NUMBER PERCENT OF TOTAL(2)
- ------------------- ------ -------------------
<S> <C> <C>
City of London Investment Group PLC 729,482(3) 20.23%
10 Eastcheap
London EC3M ILX
England
</TABLE>
- ------------------------
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934. Accordingly, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares the power to
vote such security or the power to dispose of such security.
(2) Based on 3,606,729 shares outstanding on December 15, 1999.
(3) The above information is based on copies of a statement on Schedule 13G
filed with the SEC on July 10, 1999, which indicates that City of London
Investment Group PLC has sole voting and dispositive power with respect to all
729,482 shares.
PROPOSALS OF STOCKHOLDERS
It is expected that if the Fund holds an annual meeting of stockholders
in 2001, it will be held in the month of June 2001. Proposals of stockholders
intended to be presented at the 2001 annual meeting of stockholders of the Fund
must have been received by the Fund for inclusion in its proxy statement and
form of proxy relating to that meeting by December 10, 2000, c/o Daiwa
Securities Trust Company, One Evertrust Plaza, 9th Floor, Jersey City, New
Jersey 07302.
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
Dated: [January 3, 2000]
18
<PAGE>
EXHIBIT A
THE TAIWAN EQUITY FUND, INC.
PLAN OF LIQUIDATION AND DISSOLUTION
The following Plan of Liquidation and Dissolution (the "Plan") of The
Taiwan Equity Fund, Inc. (the "Fund"), a corporation organized and existing
under the laws of the State of Maryland, which has operated as a closed-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), is intended to accomplish the complete
liquidation and dissolution of the Fund in conformity with the provisions of the
Fund's Articles of Incorporation.
WHEREAS, the Fund's Board of Directors, at a special meeting of the
Board of Directors held on November 22, 1999, has deemed that in its judgment it
is advisable and in the best interests of the Fund and its stockholders to
liquidate and dissolve the Fund, and at a quarterly meeting of the Board of
Directors held on December 2, 1999, has considered and adopted this Plan as the
method of liquidating and dissolving the Fund and has directed that this Plan be
submitted to stockholders of the Fund for approval;
NOW, THEREFORE, the liquidation and dissolution of the Fund shall be
carried out in the manner hereinafter set forth:
1. EFFECTIVE DATE OF PLAN. The Plan shall be and become effective only
upon (a) the adoption and approval of the Plan by the affirmative vote of the
holders of a majority of the outstanding shares of capital stock of the Fund at
a meeting of stockholders called for the purpose of voting upon the Plan and
(b) the satisfactory resolution in the sole discretion of the Board of Directors
ofany and all claims pending against the Fund and its Board of Directors. The
date of such adoption and approval of the Plan by stockholders and resolution of
all pending claims is hereinafter called the "Effective Date."
2. CESSATION OF BUSINESS. After the Effective Date of the Plan, the
Fund shall cease its business as an investment company and shall not engage in
any business activities except for the purpose of paying, satisfying, and
discharging any existing debts and obligations, collecting and distributing its
assets, and doing all other acts required to liquidate and wind up its business
and affairs and will dissolve in accordance with the Plan.
3. RESTRICTION OF TRANSFER AND REDEMPTION OF SHARES. The proportionate
interests of stockholders in the assets of the Fund shall be fixed on the basis
of their respective stockholdings at the close of business on the Effective
Date. On the Effective Date, the books of the Fund shall be closed. Thereafter,
unless the books of the Fund are reopened because the Plan cannot be carried
into effect under the laws of the State of Maryland or otherwise, the
stockholders' respective interests in the Fund's assets shall not be
transferable by the negotiation of share certificates and the Fund's shares will
cease to be traded on the New York Stock Exchange, Inc.
4. NOTICE OF LIQUIDATION. As soon as practicable after the Effective
Date, the Fund shall mail notice to the appropriate parties that this Plan has
been approved by the Board of Directors and the stockholders and that the Fund
will be liquidating its assets, to the extent such notice is required under the
Maryland General Corporation Law (the "MGCL"). Specifically, upon approval of
the Plan, the Fund shall mail notice to its known creditors at their addresses
as shown on the Fund's records.
5. LIQUIDATION OF ASSETS. After the event in clause (a) in Section 1
hereof, the Board of Directors may authorize the commencement of the sale of
portfolio securities and the investment of the
A-1
<PAGE>
proceeds of such sale in investment grade short-term debt securities denominated
in U.S. dollars. As soon as is reasonable and practicable after the Effective
Date of the Plan, or as soon thereafter as practicable depending on market
conditions and consistent with the terms of the Plan, all portfolio securities
of the Fund not already converted to U.S. cash or U.S. cash equivalents shall be
converted to U.S. cash or U.S. cash equivalents.
6. PAYMENTS OF DEBTS. As soon as practicable after the Effective Date
of the Plan, the Fund shall determine and shall pay, or set aside in U.S. cash
or U.S. cash equivalents, the amount of all known or reasonably ascertainable
liabilities of the Fund incurred or expected to be incurred prior to the date of
the liquidating distribution provided for in Section 7, below.
7. LIQUIDATING DISTRIBUTIONS. In accordance with Section 331 of the
Internal Revenue Code of 1986, as amended, the Fund's assets are expected to be
distributed by up to two cash payments in complete cancellation of all the
outstanding shares of capital stock of the Fund. The first distribution of the
Fund's assets (the "First Distribution") is expected to consist of cash
representing substantially all the assets of the Fund, less an estimated amount
necessary to (a) discharge any unpaid liabilities and obligations of the Fund on
the Fund's books on the First Distribution date, and (b) liabilities as the
Board of Directors shall reasonably deem to exist against the assets of the Fund
on the Fund's books. A second distribution (the "Second Distribution"), if
necessary, is anticipated to be made within 90 days after the First Distribution
and will consist of cash from any assets remaining after payment of expenses,
the proceeds of any sale of assets of the Fund under the Plan not sold prior to
the First Distribution and any other miscellaneous income to the Fund.
Each stockholder not holding stock certificates of the Fund will
receive liquidating distributions equal to the stockholder's proportionate
interest in the net assets of the Fund. Each stockholder holding stock
certificates of the Fund will receive a confirmation showing such stockholder's
proportionate interest in the net assets of the Fund with an advice that such
stockholder will be paid in cash upon return of the stock certificate. All
stockholders will receive information concerning the sources of the liquidating
distribution.
8. EXPENSES OF THE LIQUIDATION AND DISSOLUTION. The Fund shall bear all
of the expenses incurred by it in carrying out this Plan including, but not
limited to, all printing, legal, accounting, custodian and transfer agency fees,
and the expenses of any reports to or meeting of stockholders whether or not the
liquidation contemplated by this Plan is effected.
9. POWER OF BOARD OF DIRECTORS. The Board of Directors and, subject to
the direction of the Board of Directors, the Fund's officers shall have
authority to do or authorize any or all acts and things as provided for in the
Plan and any and all such further acts and things as they may consider necessary
or desirable to carry out the purposes of the Plan, including, without
limitation, the execution and filing of all certificates, documents, information
returns, tax returns, forms, and other papers which may be necessary or
appropriate to implement the Plan or which may be required by the provisions of
the 1940 Act or any other applicable laws.
The death, resignation or other disability of any director or any
officer of the Fund shall not impair the authority of the surviving or remaining
directors or officers to exercise any of the powers provided for in the Plan.
10. AMENDMENT OR ABANDONMENT OF PLAN. The Board of Directors shall have
the authority to authorize such non-material variations from or non-material
amendments of the provisions of the Plan (other than the terms of the
liquidating distributions) at any time without stockholder approval, if the
Board of Directors determines that such action would be advisable and in the
best interests of the Fund
A-2
<PAGE>
and its stockholders, as may be necessary or appropriate to effect the
marshalling of Fund assets and the dissolution, complete liquidation and
termination of existence of the Fund, and the distribution of its net assets to
stockholders in accordance with the laws of the State of Maryland and the
purposes to be accomplished by the Plan. If any variation or amendment appears
necessary and, in the judgment of the Board of Directors, will materially and
adversely affect the interests of the Fund's stockholders, such variation or
amendment will be submitted to the Fund's stockholders for approval. In
addition, the Board of Directors may abandon this Plan, with stockholder
approval, prior to the filing of the Articles of Dissolution if it determines
that abandonment would be advisable and in the best interests of the Fund and
its stockholders.
11. DE-REGISTRATION UNDER THE 1940 ACT. As soon as practicable after
the liquidation and distribution of the Fund's assets, the Fund shall prepare
and file a Form N-8F with the Securities and Exchange Commission in order to
de-register the Fund under the 1940 Act. The Fund shall also file, if required,
a final Form N-SAR (a semi-annual report) with the SEC.
12. ARTICLES OF DISSOLUTION. Consistent with the provisions of the
Plan, the Fund shall be dissolved in accordance with the laws of the State of
Maryland and the Fund's Articles of Incorporation. As soon as practicable after
the Effective Date and pursuant to the MGCL, the Fund shall prepare and file
Articles of Dissolution with and for acceptance by the Maryland State Department
of Assessments and Taxation.
(a) The Fund's Board of Directors shall be the trustees of its assets
for purposes of liquidation after the acceptance of the Articles
of Dissolution, unless and until a court appoints a receiver. The
Director-trustees will be vested in their capacity as trustees
with full title to all the assets of the Fund.
(b) The Director-trustees shall (i) collect and distribute any
remaining assets, applying them to the payment, satisfaction and
discharge of existing debts and obligations of the Fund,
including necessary expenses of liquidation; and (ii) distribute
the remaining assets among the stockholders.
(c) The Director-trustees may (i) carry out the contracts of the
Fund; (ii) sell all or any part of the assets of the Fund at
public or private sale; (iii) sue or be sued in their own names
as trustees or in the name of the Fund; and (iv) do all other
acts consistent with law and the Articles of Incorporation of the
Fund necessary or proper to liquidate the Fund and wind up its
affairs.
13. POWER OF THE DIRECTORS. Implementation of this Plan shall be under
the direction of the Board of Directors, who shall have full authority to carry
out the provisions of this Plan or such other actions as they deem appropriate
without further stockholder action.
14. APPRAISAL RIGHTS. Stockholders will not be entitled to appraisal
rights under Maryland law in connection with the Plan.
A-3
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THE TAIWAN EQUITY FUND, INC.
c/o Daiwa Securities Trust Company, One Evertrust Plaza, Jersey City,
New Jersey 07302
Proxy Solicited on Behalf of the Board of Directors for the
Annual Meeting of Stockholders on
February 15, 2000
The undersigned stockholder of The Taiwan 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 February 15, 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.
The shares represented by this proxy will be voted in accordance with the
instructions given by the undersigned stockholder, [but if no instructions are
given, this proxy will be voted in favor of proposals 1, 2 and 3 as 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
adjournments thereof. The undersigned hereby revokes any and all proxies
heretofore given by the undersigned with respect to such shares. The undersigned
acknowledges receipt of the Proxy Statement dated [January 3, 2000].
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND PROMPTLY RETURN THIS PROXY IN THE
ENCLOSED ENVELOPE.
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Please sign exactly as your name(s) appear(s) on the books of the Fund. Joint
owners should each sign. Trustees and other fiduciaries should indicate the
capacity in which they sign, and where more than one name appears, a majority
must sign. If a corporation, this signature should be that of an authorized
officer who should indicate his or her title.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
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THE TAIWAN EQUITY FUND, INC.
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1. Election of two Class II Directors to serve for a term expiring on the
date on which the Annual Meeting is held in 2003.
Class II: Masayasu Ohi and Martin J. Gruber
[ ] For All Nominees [ ] Withhold [ ] For All Except
NOTE: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the name of the
nominee in the list above.
2. The ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund for its fiscal year ending
December 31, 2000.
[ ] For [ ] Against [ ] Abstain
3. To approve the liquidation and dissolution of the Fund, as set forth in
the Plan of Liquidation and Dissolution adopted by the Board of
Directors of the Fund.
[ ] For [ ] Against [ ] Abstain
CONTROL NUMBER:
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Please be sure to sign and date this Proxy. Date
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Mark box at right if an address change
or comment has been noted on the
reverse side of this card. / /
- ----Stockholder sign here-----Co-owner sign here---- RECORD DATE SHARES:
