<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:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
</TABLE>
<TABLE>
<S> <C>
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)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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
<PAGE>
traded on the New York Stock Exchange, Inc. 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.
Respectfully,
/s/ Masayasu Ohi
Masayasu Ohi
CHAIRMAN OF THE BOARD
Dated: January 7, 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.
<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 7, 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
$13.7 billion in assets under management. National Capital Management
Corporation,
1
<PAGE>
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.
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.
(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:
<TABLE>
<CAPTION>
CLASS II
- ----------------
<C> <S>
Masayasu Ohi
Martin J. Gruber
</TABLE>
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.
2
<PAGE>
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE
FUND, IF ANY, PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED AS OF PERCENT
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR NOVEMBER 30, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 1999(+) CLASS
- ---------------------------------- ---------------------------------- -------- ----------------------- ---------
<S> <C> <C> <C> <C> <C>
NOMINEES
* Masayasu Ohi (52) Chairman of the Board of the Fund, 1998 None --
Financial Square since 1998; Chairman, since 1998,
32 Old Slip, 14th Floor The Thai Capital Fund, Inc.;
New York, NY 10005 Chairman, since 1998, 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.
Martin J. Gruber (61) Professor of Finance, Leonard N. 1994 1,737 **
229 South Irving Street Stern School of Business, New York
Ridgewood, NJ 07450 University, 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.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE
FUND, IF ANY, PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED AS OF PERCENT
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR NOVEMBER 30, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 1999(+) CLASS
- ---------------------------------- ---------------------------------- -------- ----------------------- ---------
<S> <C> <C> <C> <C> <C>
OTHER CURRENT DIRECTORS
Christina Y. Liu (44) Professor, Department of Finance, 1994 None --
16F-6, No. 410, Section 5, National Taiwan University, since
Chung-Hsiao East Road Taipei, 1993; Chairperson, Department of
Taiwan, ROC Finance, 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 (57) 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.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE
FUND, IF ANY, PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED AS OF PERCENT
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR NOVEMBER 30, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 1999(+) CLASS
- ---------------------------------- ---------------------------------- -------- ----------------------- ---------
<S> <C> <C> <C> <C> <C>
* Sadamu Tsuneishi (52) President and Director of the 1997 None --
2-10-5 Nihonbashi Kayabacho, Fund; General Manager, Accounting
Chuo-ku, Tokyo, Japan Section, 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.
5
<PAGE>
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. Ohi (age 52) has been Chairman of the Board of the Fund since September
1998 (see information provided above).
Mr. Tsuneishi (age 52) 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 53) 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
6
<PAGE>
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:
<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
7
<PAGE>
the average discount of the Fund's shares was approximately 22.41%, while in
1999 the average discount through December 15, 1999 was 15.47%. 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 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%.
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
8
<PAGE>
operating expense ratio to an unacceptable level. The Board of Directors also
considered merging or combining the Fund with another fund. In this regard, the
Directors observed that there is no open-end fund investing only in Taiwan and
that an open-end fund would likely not desire to merge with the Fund since many
of the Fund's shareholders would be likely to redeem their shares shortly after
a merger. The Directors also observed that a merger with a closed-end fund would
be unlikely to address the discount since most other closed-end funds, including
the two other closed-end funds investing in Taiwan, trade at discounts.
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 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. In the event that a quorum is not
present, the Meeting may be adjourned as described below under "Additional
Information."
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.
9
<PAGE>
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 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
10
<PAGE>
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 $58,941,885. 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
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
11
<PAGE>
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 gains and, additionally, currently expects to realize net gains on the
sale of assets in connection with the liquidation. The Fund currently expects
that stockholders will receive a capital gain dividend in the distribution
resulting from the net effect of the Fund's: 1) accumulated net realized gains,
and 2) the net gains that the Fund currently expects to realize on the sale of
assets relating to the liquidations. Therefore, it is currently expected that
stockholders will receive 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.
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
12
<PAGE>
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.
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
13
<PAGE>
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.
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
14
<PAGE>
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.
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.
15
<PAGE>
(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 7, 2000
16
<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
of any 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.
A-1
<PAGE>
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 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.
A-2
<PAGE>
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 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
<PAGE>
SKU# TWCFD-PS-00
<PAGE>
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 7, 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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<PAGE>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
--------------------------------------------------------------
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 of Stockholders is held in the
year 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
- -------------------------------------------------------------------
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:
