SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE JAPAN EQUITY FUND, INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THE THAI CAPITAL FUND, INC.
THE SINGAPORE FUND, INC.
THE JAPAN EQUITY FUND, INC.
C/O DAIWA SECURITIES TRUST COMPANY
ONE EVERTRUST PLAZA
JERSEY CITY, NEW JERSEY 07302
(201) 915-3650
May 4, 2001
Dear Stockholders:
The Annual Meetings of Stockholders of The Thai Capital Fund, Inc., The
Singapore Fund, Inc. and The Japan Equity Fund, Inc. (each a "Fund," and
collectively, the "Funds") will be held on Wednesday, June 6, 2001, at the
offices of Daiwa Securities America Inc., Financial Square, 32 Old Slip, 14th
Floor, New York, New York 10005, at 10:30 a.m., New York time, for The Thai
Capital Fund, at 11:15 a.m., New York time, for The Singapore Fund, and at
12:00 p.m., New York time, for The Japan Equity Fund. A Notice and Joint Proxy
Statement regarding the Meetings, proxy card(s) for your vote at the Meetings,
and a postage prepaid envelope in which to return your proxy(s) are enclosed.
At the Annual Meetings, each Fund's stockholders will elect Directors of the
Funds. Also, the stockholders of The Thai Capital Fund will consider the
approval of a new Investment Contract between The Thai Capital Fund and SCB
Asset Management Co., Ltd. In addition, the stockholders who will be present at
the Annual Meeting of a Fund will hear an investment report on the Fund and will
have an opportunity to discuss matters of interest to them.
If you will not be able to attend the Annual Meetings in person, please take
the time now to review the enclosed materials and vote your shares by proxy.
YOUR VOTE IS IMPORTANT.
The Board has recommended that the stockholders vote in favor of each of the
foregoing matters.
Respectfully,
/s/ MASAYASU OHI
Masayasu Ohi
CHAIRMAN OF THE BOARD OF THE THAI CAPITAL FUND
AND
THE SINGAPORE FUND
/s/ HIDEAKI MATSUURA
Hideaki Matsuura
CHAIRMAN OF THE BOARD OF THE JAPAN EQUITY FUND
STOCKHOLDERS ARE STRONGLY URGED TO PROMPTLY SIGN AND MAIL THE ACCOMPANYING
PROXY(S) IN THE ENCLOSED RETURN ENVELOPE TO ENSURE A QUORUM AT THE MEETING.
YOUR VOTE IS IMPORTANT.
THE THAI CAPITAL FUND, INC.
THE SINGAPORE FUND, INC.
THE JAPAN EQUITY FUND, INC.
------------------------
NOTICE OF THE ANNUAL MEETINGS OF STOCKHOLDERS
JUNE 6, 2001
------------------------
To the Stockholders of
The Thai Capital Fund, Inc.,
The Singapore Fund, Inc. and
The Japan Equity Fund, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meetings of Stockholders of The Thai
Capital Fund, Inc., The Singapore Fund, Inc. and The Japan Equity Fund, Inc.
(each a Fund, and collectively, the "Funds") will be held at the offices of
Daiwa Securities America Inc., Financial Square, 32 Old Slip, 14th Floor, New
York, New York 10005, on Wednesday, June 6, 2001, at 10:30 a.m., New York time,
for The Thai Capital Fund, at 11:15 a.m., New York time, for The Singapore Fund,
and at 12:00 p.m., New York time, for The Japan Equity Fund, for the following
purposes:
1. To elect Directors of each Fund.
2. With respect to The Thai Capital Fund only, to approve or reject a new
Investment Contract between The Thai Capital Fund and SCB Asset
Management Co., Ltd., as investment manager of The Thai Capital Fund.
3. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
Each Fund's Board of Directors has fixed the close of business on March 16,
2001 as the record date for the determination of stockholders entitled to notice
of and to vote at the Meeting or any adjournments thereof.
You are cordially invited to attend the Meetings. Stockholders who do not
expect to attend the Meetings in person are requested to complete, date and sign
the enclosed proxy card(s) and return it promptly in the envelope provided for
that purpose. You may nevertheless vote in person at the Meetings if you choose
to attend. Your vote is important. The enclosed proxy card for each Fund is
being solicited by the Board of Directors of the Fund.
By order of the Board of Directors,
Judy Runrun Tu
SECRETARY
May 4, 2001
THE THAI CAPITAL FUND, INC.
THE SINGAPORE FUND, INC.
THE JAPAN EQUITY FUND, INC.
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JOINT PROXY STATEMENT
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INTRODUCTION
This Joint Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of THE THAI CAPITAL FUND, INC., THE
SINGAPORE FUND, INC. and THE JAPAN EQUITY FUND, INC. (each a "Fund," and
collectively, the "Funds") for use at the Annual Meetings of Stockholders, to be
held at the offices of Daiwa Securities America Inc., Financial Square, 32 Old
Slip, 14th Floor, New York, New York 10005, on Wednesday, June 6, 2001, at
10:30 a.m., New York time, for The Thai Capital Fund, at 11:15 a.m., New York
Time, for The Singapore Fund, and at 12:00 p.m., New York time, for The Japan
Equity Fund, and at any adjournments thereof.
This Joint Proxy Statement and enclosed proxy card(s) are being mailed to
stockholders on or about May 4, 2001. Any stockholder giving a proxy in advance
of the Annual Meeting of a Fund has the power to revoke it by mail (addressed to
the Secretary of such Fund, c/o Daiwa Securities Trust Company, One Evertrust
Plaza, 9th Floor, Jersey City, New Jersey 07302) or in person at the Meeting of
such Fund, by executing a superseding proxy or by submitting a notice of
revocation to the Fund. All properly executed proxies received in time for a
Meeting will be voted as specified in the proxy or, if no specification is made,
for each proposal referred to in this Joint Proxy Statement. Abstentions and
broker non-votes are each included in the determination of the number of shares
present at each Meeting.
EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR ITS
MOST RECENT FISCAL YEAR TO ANY STOCKHOLDER REQUESTING SUCH REPORT. REQUESTS FOR
THE ANNUAL REPORT SHOULD BE MADE BY WRITING TO THE RESPECTIVE FUND, C/O DAIWA
SECURITIES TRUST COMPANY, ONE EVERTRUST PLAZA, 9TH FLOOR, JERSEY CITY, NEW
JERSEY 07302, ATTENTION: SHAREHOLDER RELATIONS OR BY CALLING (201) 915-3650.
The Board of Directors of each Fund has fixed the close of business on
March 16, 2001 as the record date for the determination of stockholders entitled
to notice of and to vote at the Meetings and at any adjournments thereof.
Stockholders on the record date will be entitled to one vote for each share
held, with no shares having cumulative voting rights. As of the record date, The
Thai Capital Fund had outstanding 6,278,588 shares of common stock, The
Singapore Fund had outstanding 9,200,840 shares of common stock and The Japan
Equity Fund had outstanding 10,815,688 shares of common stock.
Management of each Fund knows of no business other than that mentioned in
Item 1 and, in the case of The Thai Capital Fund only, Item 2 of the Notice of
Meetings which will be presented for consideration at the Meetings. 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.
EACH FUND'S BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF EACH OF
THE MATTERS MENTIONED IN ITEM 1 AND, IN THE CASE OF THE THAI CAPITAL FUND ONLY,
ITEM 2 OF THE NOTICE OF MEETINGS.
1
(1) ELECTION OF DIRECTORS
Persons named in the accompanying proxy card(s) intend in the absence of
contrary instructions to vote all proxies for the election of the nominees
listed below as directors of such Fund listed below:
FOR THE THAI CAPITAL FUND
CLASS I
---------------------
David G. Harmer
Martin J. Gruber
FOR THE SINGAPORE FUND
CLASS I
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David G. Harmer
Oren G. Shaffer
CLASS II
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Martin J. Gruber
FOR THE JAPAN EQUITY FUND
CLASS II
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David G. Harmer
Oren G. Shaffer
CLASS III
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Alfred C. Morley
to serve for terms expiring on the date of subsequent Annual Meetings of
Stockholders in the year 2004 for Class I Directors of The Thai Capital Fund, in
the year 2004 for Class I Directors and 2002 for Class II Directors of The
Singapore Fund, and in the year 2004 for Class II Directors and 2002 for
Class III Directors of The Japan Equity Fund, 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 each Fund's Board of Directors to replace any such
nominee. The election of each nominee as a director of a Fund will require the
affirmative vote of a majority of the votes cast at the Fund's Meeting. For this
purpose, abstentions and broker nonvotes will not be counted as votes cast at
the Meetings.
INFORMATION CONCERNING NOMINEES AND DIRECTORS
The following table sets forth information concerning each of the nominees
as a director of one or more of the Funds, as well as the other current
directors of the Funds. Each of the nominees has consented to be named in this
Joint Proxy Statement and to serve as a director of each of the Funds if
elected. In the table, The Thai Capital Fund is sometimes abbreviated with the
initials "TC", The Singapore Fund is sometimes abbreviated with the initials
"SGF" and The Japan Equity Fund is sometimes abbreviated with the initials
"JEQ."
2
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED ON PERCENT
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR MARCH 16, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 2001(+) CLASS
---------------------------------- ------------------------------------------------------------ -------- ------------ ---------
NOMINEES
Martin J. Gruber (63) Professor of Finance, Leonard N. Stern School of Business, TC: TC: **
229 South Irving Street New York University, since 1965; Director, SG Cowen 2000 3,000
Ridgewood, NJ 07450 Income & Growth Fund, Inc., since 1986; Director, SG Cowen SGF: SGF:
Opportunity Fund, since 1987; Director, SG Cowen Standby 2000 2,000
Reserve Fund Inc., since 1985; Director, SG Cowen Standby JEQ: JEQ:
Tax Exempt Reserve Fund Inc., since 1986; Trustee, Deutsche 1992 5,321
Asset Management BT Family of Funds, since 1992; Trustee,
C.R.E.F., since 2001; Trustee, T.I.A.A., from 1996 to 2000.
David G. Harmer (58) President, Jetway Systems, a division of FMC Corporation, TC: TC: **
1805 West -- 2550 South since January 1997; Vice President and Chief Financial 2000 None
Ogden, UT 84401 Officer, Armco Inc., from April 1993 to December 1996; Vice SGF: SGF:
President and Corporate Controller, FMC Corporation, from 1996 1,000
1987 to 1993. JEQ: JEQ:
1997 1,000
Alfred C. Morley (74) Member of Council of Advisors of Aegis Portfolio Managers, TC: TC: **
1129 Marion Drive since 2000; Financial Consultant, since 1991; Senior 1990 4,673
Charlottesville, VA 22903 Director, Old Dominion Capital Management, since 1991; SGF: SGF:
President, Institute of Chartered Financial Analysts, from 1990 5,103
1984 to 1990; Senior Adviser, Institute of Chartered JEQ: JEQ:
Financial Analysts, 1991; President, Association for 2000 800
Investment Management and Research, 1990; Senior Adviser,
Association for Investment Management and Research, 1991.
Oren G. Shaffer (57) Executive Vice President and Chief Financial Officer of TC: TC: **
30 S. Wacker Drive Ameritech Corporation, from 1994 to 2000; President and 2000 None
38(th) Floor Director of Virgocap Inc., from 1992 to 1994; Executive Vice SGF: SGF:
Chicago, IL 60606 President, Chief Financial Officer and Director, The 1997 3,000
Goodyear Tire and Rubber Company, from 1984 to 1992: JEQ: JEQ:
Director, Sunshine Mining since 1992; Director, Hygenic 2000 None
Corporation since 1993.
3
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED ON PERCENT
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR MARCH 16, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 2001(+) CLASS
---------------------------------- ------------------------------------------------------------ -------- ------------ ---------
OTHER CURRENT DIRECTORS
Austin C. Dowling (69) Retired. TC: TC: **
1002 E Long Beach Boulevard 1990 1,250
North Beach, NJ 08008 SGF: SGF:
2000 500
JEQ: JEQ:
1992 3,000
* Harry M. Markowitz (72) President of Harry Markowitz Company since 1984; President JEQ: JEQ: **
1010 Turquoise Street of JEQ, from 1992 to 1999; Director of Research, Global 1992 1,779
Suite 245 Portfolio Research Department, Daiwa Securities Trust
San Diego, CA 92109 Company, from 1992 to 1999; Marvin Speiser Distinguished
Professor of Finance and Economics, Baruch College, City
University of New York, from 1982 to 1993.
* Hideaki Matsuura (52) Chairman of the Board of JEQ; President and Chairman, Daiwa JEQ: JEQ: **
One Evertrust Plaza Securities Trust Company, since July 1997; Director, Daiwa 1997 1,000
Jersey City, NJ 07302 Securities (H.K.) Ltd., from September 1995 to June 1997;
General Manager, Daiwa Securities Co. Ltd., from August 1994
to August 1995; Executive Vice President, Daiwa Securities
America, Inc., from April 1988 to August 1994.
* Masayasu Ohi (52) Chairman of the Board of SGF and TC, since 1998; Chairman TC: TC: --
Financial Square and Chief Executive Officer, Daiwa Securities America Inc., 1998 None
32 Old Slip, 14(th) Floor since 1998; Executive Officer, Daiwa Securities Group Inc., SGF: SGF:
New York, NY 10005 since 1999; Director, Daiwa Securities Co. Ltd., from 1998 1998 None
to 1999; Joint Chief Executive of Daiwa Europe Limited, from
1997 to 1998; President of Daiwa Europe Limited, London,
from 1994 to 1997.
Virabongsa Ramangkura (58) Chairman, Bangkok Expressway Public Co., Ltd., since 1993; TC: TC: --
122 Soon Hua Seng Building Chairman of the Executive Board, Advance Agro Public Co., 1992 None
M Floor, North Sathorn Road Ltd., since 1994; Director, Preccha Group Public Co., Ltd.;
Bangrak, Bangkok, 10500 Member, The
Thailand
4
PRESENT OFFICE WITH THE FUND, IF ANY,
PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT DURING PAST BENEFICIALLY
FIVE YEARS AND OWNED ON PERCENT
NAME (AGE) AND ADDRESS DIRECTORSHIPS IN DIRECTOR MARCH 16, OF
OF NOMINEES/DIRECTORS PUBLICLY HELD COMPANIES SINCE 2001(+) CLASS
---------------------------------- ------------------------------------------------------------ -------- ------------ ---------
Thailand Development Research Institute and The Council of
Trustees; Ex-chairman, Economic Board, National Research
Bureau from 1996 to 1997; Director, from 1996 to 1997,
Bangkok Airways Co., Ltd.; Formerly: Member of the Thai
Senate; Advisor, Orach (Thailand); Advisor, GE Capital
(Thailand); Director, Country Property, Plc.; Director,
Assets Insurance Co. Ltd.; Director, Imperial Hotel Family
Plc.
--------------------------
+ The information as to beneficial ownership is based on statements furnished
to the Funds by the directors.
* Directors so noted are deemed by the Funds' counsel to be "interested
persons" (as defined in the U.S. Investment Company Act of 1940, as amended
(the "1940 Act")). Mr. Ohi is deemed an interested person of each Fund
because of his affiliation with Daiwa Securities America Inc., an affiliate
of each Fund's investment adviser, Daiwa SB Investments (HK) Ltd. for Thai
Capital Fund and Daiwa SB Investments (Singapore) Ltd. for The Singapore
Fund. Mr. Matsuura and Dr. Markowitz are interested persons because of their
present or past affiliation with The Japan Equity Fund's former investment
adviser (Daiwa Securities Trust Company). The former investment adviser is
an affiliate of The Japan Equity Fund's current investment manager and
investment adviser.
** Represented less than 1% of the outstanding shares at March 16, 2001.
The Singapore Fund's Board of Directors held four regular meetings during
its fiscal year ended October 31, 2000, The Thai Capital Fund held four regular
meetings and one special meeting during its fiscal year ended December 31, 2000
and The Japan Equity Fund held four regular meetings during its fiscal year
ended October 31, 2000. All current Directors attended at least seventy-five
percent of the aggregate number of meetings of their respective Board of
Directors, except for Dr. Virabongsa and Mr. Shaffer.
Each Fund's Board of Directors has an Audit Committee which is responsible
for reviewing financial and accounting matters. Each Fund has adopted a formal,
written Audit Committee Charter, which is attached hereto as Annex A. The
current members of The Singapore Fund's, The Thai Capital Fund's and The Japan
Equity Fund's Audit Committee are Messrs. Shaffer, Harmer, Morley, Dowling and
Gruber. Each Fund's Audit Committee met twice during its respective fiscal year.
All of the incumbent members of the Audit Committees attended all of the
meetings held during the fiscal year, except for Mr. Shaffer. The report of the
Funds' Audit Committees, along with certain disclosures regarding fees paid to
the Fund's auditors, is set forth on pages 10-11 of this Joint Proxy Statement.
None of the Funds has a compensation or a nominating committee.
Section 16(a) of the U.S. Securities Exchange Act of 1934, as amended,
requires each Fund's officers and directors, and persons who own more than ten
percent of a registered class of such Fund's equity
5
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the New York Stock
Exchange, Inc. Each Fund believes that its officers and directors have complied
with all applicable filing requirements.
OFFICERS OF THE FUNDS
Shunsuke Ichijo (age 49) has been President of The Japan Equity Fund since
February 2000.
John J. O'Keefe (age 42) has been Vice President and Treasurer of the Funds
since June 2000; Vice President of the Fund Accounting Department of Daiwa
Securities Trust Company since June 2000; Assistant Controller for Reserve
Management Corporation from September 1999 to June 2000; Accounting Manager for
Prudential Investments from January 1998 to September 1999; and Assistant Vice
President of Daiwa Securities Trust Company from July 1990 to January 1998.
Judy Runrun Tu (age 35) has been Secretary of the Funds since April 2000;
Vice President of DSTC since March 2000; Assistant Vice President of DSTC since
March 1998; Assistant Secretary of the Funds from 1999 to 2000; Financial
Analyst of Canon USA from 1997 to 1998; Marketing Coordinator of TotalTel USA
from 1995 to 1997; and Assistant Controller of Daniel Caron Ltd. from 1990 to
1995.
Laurence E. Cranch (age 54), has been Assistant Secretary of the Funds since
July 1992 and has been a partner in the law firm of Clifford Chance Rogers &
Wells LLP since 1980.
TRANSACTIONS WITH AND REMUNERATION OF OFFICERS AND DIRECTORS
The aggregate fee remuneration for directors of each Fund not affiliated
with such Fund's investment manager or the investment adviser was $33,306 during
the fiscal year ended October 31, 2000 for The Singapore Fund, $33,469 for the
fiscal year ended December 31, 2000 for The Thai Capital Fund and $38,967 for
the fiscal year ended October 31, 2000 for The Japan Equity Fund. Each such
non-affiliated director currently receives fees, paid by each Fund, of $448 for
The Thai Capital Fund, $526 for The Singapore Fund and $526 for The Japan Equity
Fund for each directors' meeting attended in person or by telephone, $358 for
The Thai Capital Fund, $421 for The Singapore Fund and $421 for The Japan Equity
Fund for each audit committee meeting attended in person or by telephone and an
annual fee of $2,985 for The Thai Capital Fund, $3,508 for The Singapore Fund
and $3,508 for The Japan Equity Fund. The officers and interested directors of
each Fund received no compensation from the Funds.
Daiwa Securities Trust Company ("DSTC"), which pays the compensation and
certain expenses of the officers of DSTC who serve as officers of the Funds,
receives administration and custodian fees from the Funds.
Set forth below is a chart showing the aggregate fee compensation paid by
the Funds (in U.S. dollars) to each of its directors during each Fund's fiscal
year ended, as well as the total fee compensation paid to each incumbent
director of the Funds by such Fund and by other investment companies advised by
DBS Asset Management (United States) Pte. Ltd., Daiwa SB Investments (Singapore)
Ltd., Daiwa SB Investments (HK) Ltd., Thai Farmers Asset Management Co., Ltd.,
Daiwa SB Investments (USA) Ltd., Daiwa SB Investments Ltd. or their respective
affiliates (collectively, the "Fund Complex") for their services as directors of
such investment companies during their respective fiscal years. In all cases,
there were no pension or retirement benefits accrued as part of any Fund's
expenses.
6
TOTAL
AGGREGATE COMPENSATION
AGGREGATE COMPENSATION AGGREGATE FROM FUND AND
COMPENSATION FROM THE COMPENSATION FUND COMPLEX
FROM THE THAI SINGAPORE FROM THE JAPAN PAID TO
NAME OF DIRECTOR CAPITAL FUND FUND EQUITY FUND DIRECTORS
------------------------------ --------------- --------------- -------------- ----------------
Austin C. Dowling 6,279 4,981 7,081 18,341
Martin J. Gruber 5,131 4,981 7,081 25,193
Robert F. Gurnee* 3,336 2,572 4,672 10,580
David G. Harmer 4,684 7,081 7,081 18,846
Harry M. Markowitz+ 0 0 4,560 4,560
Hideaki Matsuura+ 0 0 0 0
Alfred C. Morley 6,279 7,081 4,981 18,341
Masayasu Ohi+ 0 0 0 0
Virabongsa Ramangkura+ 4,327 0 0 4,327
Oren G. Shaffer 3,431 5,608 3,508 20,547
--------------------------
* Robert F. Gurnee served as a Director of the Funds until he passed away in
July 2000.
+ "Interested person" of the Funds within the meaning of the 1940 Act.
(2)APPROVAL OF A NEW INVESTMENT CONTRACT --
FOR THE THAI CAPITAL FUND ONLY
TERMINATION OF ORIGINAL INVESTMENT CONTRACT; APPROVAL OF NEW INVESTMENT CONTRACT
Commencing in the fall of 2000, the Board of Directors of the Thai Capital
Fund conducted a review of the Fund's investment management arrangements
following notification of the Fund by its current investment manager, Thai
Farmers Asset Management Co., Ltd. ("TFAM"), that TFAM no longer desired to be
in the business of advising U.S. registered investment companies, such as the
Fund. In this connection, the Board solicited proposals from a number of
investment managers in Thailand. In response, the Board received proposals from
two managers, including SCB Asset Management Co., Ltd. ("SCBAM" or the "Proposed
Manager"). The Board gathered further information from these investment managers
and, in November 2000, representatives of the Board met with each of the
investment managers under consideration. The information reviewed by the Board
included information regarding the number and types of clients advised by the
investment managers, including other investment funds; the amount of assets
under management by the investment manager; the number of persons employed by
the investment manager and information regarding the education and employment
experience of the principal investment officers of the investment manager; the
compliance systems and personnel of the investment manager; the affiliations of
the investment manager; the performance of the investment manager; and the fees
proposed to be charged by the investment manager. Based on its review of this
information, at its quarterly meeting held on March 14, 2001, the Board of
Directors of the Fund, including a majority of the Directors of the Fund who are
not officers of the Fund or affiliated with TFAM, SCBAM or Daiwa SB Investments
(HK) Ltd., the Fund's investment adviser (the "Disinterested Directors"), voting
in person, approved the appointment of SCBAM as the Fund's investment manager to
take effect as soon after SCBAM registers under the U.S. Investment Advisers Act
of 1940, as amended, as is practicable, and that the Investment Contract, dated
May 21, 1990 (the "Original Investment Contract") between the Fund and TFAM be
7
terminated. Among other things, the Board chose SCBAM as the Fund's new
investment manager because the Board believed that SCBAM has an experienced and
qualified investment management team and has a compliance department that seems
capable of properly handling compliance issues. By means of a written notice to
TFAM, dated April 2, 2001, the Fund provided TFAM with written notice of the
termination as investment manager of the Fund under the Original Investment
Contract. It is anticipated that SCBAM will commence serving as investment
manager of the Fund sometime between May 1, 2001 and June 30, 2001.
THE PROPOSED MANAGER
SCB Asset Management Co., Ltd. is the fourth largest investment manager in
Thailand, managing twenty-seven mutual funds with approximately US$250 million
in assets as of December 31, 2000. SCBAM manages open-end and closed-end equity
funds, fixed-income funds and balanced funds.
SCBAM was established as a mutual fund manager in March 1992 pursuant to the
Finance Business, Securities Business and Credit Foncier Business Act of
Thailand. As of December 31, 2000, SCBAM's principal shareholders were as
follows:
NAME OF SHAREHOLDERS PERCENTAGE OWNERSHIP
------------------------------------------------------------ --------------------
Siam Commercial Bank PCL. 32%
Siam Commercial New York Life Insurance PCL. 23%
American International Assurance Co., Ltd. 20%
National Finance PCL. 7%
Bank Thai PCL. 7%
Siam Industrial Credit PCL. 7%
The principal address of SCBAM is Sindhorn Building, Tower 3, 23rd Floor,
130-132 Wireless Road, Pathumvan, Bangkok, 10330 Thailand.
Certain information regarding the directors and the principal executive
officers of the Manager is set forth below:
PRINCIPAL OCCUPATION AND
NAME AND ADDRESS POSITION WITH THE MANAGER
--------------------------------------------------- ------------------------------------
1. Mr. Chalit Satidthong* Chairman
2. Mr. Akamol Manasvanich* Director
3. Mr. Ekachai Chongvisal* Director
4. Mr. Sinchai Chaisiripoomkere* Director
5. Mr. Terra Phutrakul* President & CEO
6. Mr. Kengkla Ruckphaopunt* Senior Vice President
(Marketing & Business Development)
7. Mr. Worathep Tantineeranat* Senior Vice President; Chief
Operating Officer
8. Mr. Chukiat Titihirunjaroen* Deputy Chief Information Officer
9. Mr. Sakda Manavapat* Vice President (Compliance)
10. Mr. Kriangsak Lokitthajariya* Vice President
(Information Technology)
11. Ms. Suratana Techapoolphol* Vice President (Accounting
& Fund Operations)
--------------------------
* Business Address: Sindhorn Bldg., Tower 3, 23rd Floor, 130-132 Wireless Rd.,
Pathumwan, Bangkok, Thailand.
8
THE INVESTMENT CONTRACT
The terms of the new Investment Contract between the Fund and SCBAM (the
"New Investment Contract") are identical to the Fund's Original Investment
Contract (the form of which is attached as Annex B), except for the replacement
of TFAM as investment manager with the Proposed Manager and except for a few
minor changes to the way the Investment Plan (as defined below) operates. The
holders of a majority of the outstanding voting securities (within the meaning
of the 1940 Act) of the Fund are being asked to approve the New Investment
Contract. See "The New Investment Contract" below.
The following is a summary of the Original Investment Contract and the New
Investment Contract. The descriptions of the Original and New Investment
Contracts are qualified by reference to Annex B.
THE ORIGINAL INVESTMENT CONTRACT
The Original Investment Contract, dated as of May 21, 1990, was last
submitted to a vote by the Fund's stockholders at the June 10, 1994 Annual
Meeting of Stockholders to approve the continuance of the Investment Contract.
Subsequently, on September 17, 1999, the Fund's stockholders approved TFAM as
the investment manager of the Fund under the terms of the Original Investment
Contract. The Fund makes its investments in Thailand indirectly through an
investment plan (the "Investment Plan") established in conformity with Thai law
pursuant to the Original Investment Contract.
Under the terms of the Original Investment Contract, TFAM makes investment
decisions relating to the Fund's assets held through the Investment Plan,
prepares research and statistical data and supervises the purchase and sale of
securities on behalf of the Fund. TFAM also supervises the selection of brokers
and dealers to carry out the transactions, all in accordance with the Fund's
investment objective and policies under the direction and control of the Fund's
Board of Directors. TFAM maintains records and furnishes or causes to be
furnished all required records or other information for the Fund to the extent
such records, reports and other information are not maintained or furnished by
the Fund's administrator or other agents. TFAM or one of its affiliates is
responsible for the compensation and expenses of those of the Fund's Directors,
officers and employees who are Directors, officers or employees of TFAM or any
of its affiliates, except that the Fund bears the travel expenses or an
appropriate fraction thereof of officers and Directors on the Fund who are
directors, officers or employees of TFAM to the extent such expenses related to
attendance at meetings of the Fund's Board of Directors or any committee
thereof.
Under the terms of the Original Investment Contract, TFAM and its affiliates
are permitted to provide investment advisory services to other clients,
including clients who may invest in securities of Thai companies and, in
providing such services, may use non-confidential information furnished by TFAM.
Conversely, information furnished by others to TFAM in the course of providing
services to clients other than the Fund may be useful to, and used by, TFAM in
providing services to the Fund.
The Original Investment Contract provides that TFAM is not liable for any
act or omission, error of judgment or mistake of law, or for any loss suffered
by the Fund in connection with matters to which the Original Investment Contract
related, except for losses resulting from willful misfeasance, bad faith or
gross negligence on the part of TFAM in the performance if its duties, or from
reckless disregard by TFAM of its obligations and duties under the Original
Investment Contract.
For its services, TFAM receives a monthly fee, payable in Thai Baht, at an
annual rate of 0.60% of the Fund's assets held under the Investment Contract.
For the fiscal year ended December 31, 2000, TFAM earned a fee for management
and certain administrative services, including expenses, of US$90,252.
THE NEW INVESTMENT CONTRACT
The Board of Directors of the Fund, including the Disinterested Directors,
approved the succession of TFAM by SCBAM as the Fund's investment manager on
March 14, 2001, subject to SCBAM's registration under the U.S. Investment
Advisers Act of 1940 and recommended the New Investment Contract for
9
approval by the stockholders of the Fund. The New Investment Contract was
approved by the Board after consideration of all factors which they determined
to be relevant to their deliberations, including those discussed above. The
Board also determined to submit the New Investment Contract for consideration by
the stockholders of the Fund. The New Investment Contract is identical to the
Original Investment Contract except for the few minor changes described above.
The New Investment Contract will take effect upon SCBAM's commencing to provide
services under the contract, which, as described above, is expected to occur
between May 1, 2001 and June 30, 2001. Continuance of the New Investment
Contract for a period beyond 120 days from its effective date is subject to
stockholder approval. If so approved, the New Investment Contract will continue
in effect for an initial two-year term and thereafter for successive annual
periods as long as such continuance is approved in accordance with the 1940 Act.
The investment management fee as a percentage of new assets payable by the
Fund to SCBAM will be the same under the New Investment Contract as under the
Original Investment Contract.
STOCKHOLDER APPROVAL
To become effective, the New Investment Contract must be approved by a vote
of a majority of the outstanding voting securities of the Fund. The "vote of a
majority of the outstanding voting securities" is defined under the 1940 Act as
the lesser of the vote of (i) 67% or more of the shares of the Fund entitled to
vote thereon present at the Meeting if the holders of more than 50% of such
outstanding shares of the Fund are present in person or represented by proxy, or
(ii) more than 50% of such outstanding shares of the Fund entitled to vote
thereon.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE NEW INVESTMENT CONTRACT.
REPORTS OF THE AUDIT COMMITTEES
At a meeting held on March 14, 2001, the Board of Directors of each Fund,
including a majority of the directors who are not "interested persons," as
defined under the 1940 Act, acting on the recommendation of the Audit Committee
of each Fund, selected PricewaterhouseCoopers LLP to act as independent
accountants for each Fund for the fiscal year ending October 31, 2001
(December 31, 2001 for The Thai Capital Fund). The Audit Committee of each Fund
has received the written disclosures and the letter from PricewaterhouseCoopers
LLP required by Independence Standards Board Standard No. 1 and have discussed
with PricewaterhouseCoopers LLP their independence with respect to each Fund.
Each Fund knows of no direct financial or material indirect financial interest
of PricewaterhouseCoopers LLP in the Fund. Although it is not expected that a
representative of PricewaterhouseCoopers LLP will attend the Meetings, a
representative will be available by telephone to respond to stockholder
questions, if any.
Each Fund's financial statements for the fiscal year ended October 31, 2000
(December 31, 2000 for The Thai Capital Fund) were audited by
PricewaterhouseCoopers LLP. The Audit Committee of each Fund has reviewed and
discussed the audited financial statements of the Fund with management of the
Fund. The Audit Committee of each Fund has further discussed with
PricewaterhouseCoopers LLP the matters required to be discussed by Statement on
Auditing Standards No. 61. Based on the foregoing review and discussions, the
Audit Committee of each Fund has recommended to the Board of Directors of the
Fund that the audited financial statements of the Fund for the fiscal year ended
October 31, 2000 (December 31, 2000 for The Thai Capital Fund) be included in
the Fund's most recent annual report.
Alfred C. Morley, Chairman of the Audit
Committees
Austin C. Dowling, Member of the Audit
Committees
Martin J. Gruber, Member of the Audit
Committees
David G. Harmer, Member of the Audit
Committees
Oren G. Shaffer, Member of the Audit
Committees
10
AUDIT FEES
The aggregate fees paid to PricewaterhouseCoopers LLP in connection with the
annual audit of each Fund's financial statements for the fiscal year ended
October 31, 2000 (December 31, 2000 for The Thai Capital Fund) is set forth
below:
The Thai Capital Fund $ 42,000
The Singapore Fund $ 50,500
The Japan Equity Fund $ 47,000
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees billed for financial information systems design and
implementation services rendered by PricewaterhouseCoopers LLP to the investment
manager or investment adviser for each Fund, and entities controlling,
controlled by or under common control with the investment manager or investment
adviser for each Fund for the fiscal year ended October 31, 2000 (December 31,
2000 for The Thai Capital Fund) was $0. No such services were performed for any
of the Funds.
ALL OTHER FEES
The aggregate fees billed for all other non-audit services, including fees
for tax-related services, rendered by PricewaterhouseCoopers LLP to the
investment manager or investment adviser for each Fund, and entities
controlling, controlled by or under common control with the investment manager
or investment adviser for each Fund for the fiscal year ended October 31, 2000
(December 31, 2000 for The Thai Capital Fund) was $0. No such services were
performed for any of the Funds. The Audit Committees have considered whether the
provision of non-audit services is compatible with maintaining the independence
of PricewaterhouseCoopers LLP.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the knowledge of the management of each Fund, the following persons owned
beneficially more than 5% of the noted Fund's outstanding shares at March 16,
2001:
AMOUNT OF
BENEFICIAL PERCENT OF
FUND NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------- ------------------------------------- ---------- -------------
The Singapore Fund First Union Corporation 1,036,993(1) 11.27%
One First Union Center
Charlotte, NC 28288-0137
The Japan Equity Fund First Union Corporation 1,217,384(2) 11.26%
One First Union Center
Charlotte, NC 28288-0137
--------------------------
(1) The above information is based on a Schedule 13G filed with the Commission
on February 14, 2001, which indicates that First Union Corporation has sole
voting and dispositive power with respect to all 1,036,993 shares.
(2) The above information is based on a Schedule 13G filed with the Commission
on February 14, 2001, which indicates that First Union Corporation has sole
voting and dispositive power with respect to all 1,217,384 shares.
11
To the knowledge of The Thai Capital Fund's management, no person owned
beneficially more than 5% of such Fund's outstanding shares as of March 16,
2001.
MISCELLANEOUS
Proxies will be solicited by mail and may be solicited in person or by
telephone or telegraph by officers of the Funds or personnel of DSTC. Each Fund
has retained Corporate Investor Communications, Inc. to assist in the proxy
solicitation. The fee for such services is estimated at $4,500 per Fund, plus
reimbursement of expenses. The expenses connected with the solicitation of these
proxies and with any further proxies which may be solicited by the Funds'
officers or agents in person, by telephone or by telegraph will be borne by each
Fund. Each Fund will reimburse banks, brokers and other persons holding such
Fund's shares registered in their names or in the names of their nominees for
their expenses incurred in sending proxy material to and obtaining proxies from
the beneficial owners of such shares.
It is important that you promptly submit your vote as a stockholder of the
Fund(s). In the event that sufficient votes in favor of any proposal set forth
in the Notice of the Meeting for a Fund are not received by June 6, 2001, the
persons named as attorneys in the enclosed proxy may propose one or more
adjournments of such Fund's Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of the holders of a
majority of the shares present in person or by proxy at the session of such
Fund's Meeting to be adjourned. The persons named as attorneys in the enclosed
proxy will vote in favor of such adjournment those proxies which they are
entitled to vote in favor of the proposal for which further solicitation of
proxies is to be made. They will vote against any such adjournment those proxies
required to be voted against such proposal. The costs of any such additional
solicitation and of any adjourned session will be borne by the Fund that
adjourns its Meeting.
STOCKHOLDER PROPOSALS
Any proposal by a stockholder of a Fund intended to be included in the proxy
materials for the year 2002 annual meeting of stockholders of the Fund must be
received by the Fund, c/o Daiwa Securities Trust Company, One Evertrust Plaza,
9th Floor, Jersey City, New Jersey 07302, not later than January 4, 2002.
Each Fund's By-laws require that any proposal by a stockholder of such Fund
intended to be presented at a meeting of stockholders must be received by such
Fund, c/o Daiwa Securities Trust Company, One Evertrust Plaza, 9th Floor, Jersey
City, New Jersey 07302, not earlier than 90 days prior and not later than 60
days prior to such meeting of stockholders.
By order of the Board of Directors,
Judy Runrun Tu
SECRETARY
One Evertrust Plaza
Jersey City, New Jersey 07302
May 4, 2001
12
ANNEX A
THE JAPAN EQUITY FUND, INC.
THE SINGAPORE FUND, INC.
THE THAI CAPITAL FUND, INC.
(EACH, A "FUND" AND COLLECTIVELY, THE "FUNDS")
AUDIT COMMITTEE CHARTER
OBJECTIVES:
I. The Board of Directors of each Fund has established a committee of certain
independent directors (the "Audit Committee"). The objectives of the Audit
Committee are:
(a) to oversee each Fund's accounting and financial reporting policies and
practices, its internal controls and, as appropriate, the internal
controls of certain service providers;
(b) to oversee the quality and objectivity of each Fund's financial
statements and the independent audit thereof; and
(c) to act as a liaison between the Funds' independent auditors and the full
Board of Directors.
II. The function of the Audit Committee is oversight; it is management's
responsibility to maintain appropriate systems for accounting and internal
control, and the auditor's responsibility to plan and carry out a proper
audit.
RESPONSIBILITIES:
I. To carry out its objectives, the Audit Committee shall have the following
responsibilities:
(a) to recommend the selection, retention or termination of auditors and, in
connection therewith, to evaluate the independence of the auditors,
including whether the auditors provide any consulting services to the
investment manager(s), and to receive the auditors' specific
representations as to their independence;
(b) to meet with the Funds' independent auditors, including private
meetings, as necessary, (i) to review the arrangements for and scope of
the annual audit and any special audits; (ii) to discuss any matters of
concern relating to the Funds' financial statements, including any
adjustments to such statements recommended by the auditors, or other
results of said audit(s); (iii) to consider the auditors' comments with
respect to the Funds' financial policies, procedures and internal
accounting controls and management responses thereto; and (iv) to review
the form of opinion the auditors render to the Board and shareholders;
(c) to review significant current financial reporting issues and practices
with management and auditors and to consider the effect upon each Fund of
any changes in accounting principles or practices proposed by management
or the auditors;
(d) to review the fees charged by the auditors for audit and non-audit
services;
(e) to investigate improprieties or suspected improprieties in fund
operations;
A-1
(f) to review each Fund's process for monitoring compliance with investment
restrictions, applicable laws and regulations, and with the code of
ethics;
(g) to report its activities to the full Board on a regular basis and to
make such recommendations with respect to the above and other matters as
the Audit Committee may deem necessary or appropriate; and
(h) to review this Charter at least annually and recommend any changes to
the full Board of Directors.
II. The Audit Committee shall meet on a regular basis, generally twice per year,
and is empowered to hold special meetings as circumstances require. The
Audit Committee shall regularly meet with the Treasurer of the Fund and, as
appropriate, with representatives of the investment management company,
administrator and other service providers responsible for financial
reporting and controls.
III. The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants at the expense of each Fund.
A-2
ANNEX B
THE THAI CAPITAL FUND, INC.
INVESTMENT CONTRACT
MAY 21, 1990
TABLE OF CONTENTS
PAGE
1. DEFINITIONS................................................. B-1
2. ESTABLISHMENT OF THE INVESTMENT PLAN........................ B-2
3. BASIC OBLIGATIONS AND RIGHTS OF THE THAI MANAGER............ B-3
4. ENFORCEMENT BY UNITHOLDER AND THE THAI MANAGER.............. B-5
5. UNITS....................................................... B-5
6. CALCULATION OF NET ASSET VALUE.............................. B-5
7. INVESTMENT OBJECTIVE, POLICIES AND LIMITATIONS.............. B-6
DURATION, CHANGES IN MANAGER OR CUSTODIAN, AND
8. TERMINATION............................................... B-6
9. ACCOUNTS AND STATEMENTS..................................... B-8
10. DISTRIBUTIONS............................................... B-9
11. PAYMENTS.................................................... B-9
12. CURRENCY.................................................... B-9
13. INFORMATION AND NOTICES..................................... B-10
14. AMENDMENTS.................................................. B-10
15. GOVERNING LAW, JURISDICTION; LANGUAGE AND MISCELLANEOUS..... B-11
EXHIBIT A........................................................................... B-13
EXHIBIT B........................................................................... B-14
EXHIBIT C........................................................................... B-15
Investment Contract (the "INVESTMENT CONTRACT") dated as of May 21, 1990 by
and among THE MUTUAL FUND COMPANY LIMITED ("MFC"), a Thai limited company, with
its principal place of business located at IFCT building, 1770 New Petchburi
Road, Bangkok 10310, Thailand, and THE THAI CAPITAL FUND, INC. (the
"UNITHOLDER"), a Maryland corporation, with its principal place of business
located at 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
1. DEFINITIONS
In this Investment Contract, the following terms have the following
meanings:
"ADVISORY SECTIONS" means Sections 3.1; 3.3; 3.4; 3.8; Article 8 (other than
Section 8.2(b)(Y)) and Section 8.5, insofar as such Section relates to
appointment of liquidators under Thai law; and Article 14 (other than
Section 14.1(b)(Y));
"ASSETS" means all assets and rights held by the Investment Plan during its
life, including but not limited to Thai Securities;
"AUDITORS" has the meaning ascribed thereto in Section 9.4(a);
"BENEFICIAL CERTIFICATE" has the meaning ascribed thereto in Section 5.2;
"BOARD OF DIRECTORS" means the Board of Directors of the Unitholder;
"BOT" means the Bank of Thailand or any successor agency or institution of
the Royal Thai Government from time to time authorized by law to supervise
mutual funds in Thailand;
"BUSINESS DAY" means a day on which the SET and the New York Stock Exchange
are both open for business;
"CUSTODIAN" means The Bangkok Bank Limited or its successors or permitted
assigns under the Thai Custody Contract;
"DISTRICT COURT" has the meaning ascribed thereto in Section 15.3;
"DOLLARS" or "$" or "US $" means U.S. dollars;
"EFFECTIVE DATE" means the date on which the Registration Statement is first
declared effective by the SEC under the United States Securities Act of 1933, as
amended;
"FINANCIAL STATEMENTS" has the meaning ascribed thereto in Section 9.2;
"FUNDS" means the Investment Plan and the Unitholder, jointly and severally,
as if such entities were one entity;
"INVESTMENT PLAN" means the investment project or Krongkarn known in
Thailand as the Thai Capital Fund and established by this Agreement;
"INVESTMENT COMPANY ACT" means the United States Investment Company Act of
1940, as amended;
"REGISTRATION STATEMENT" means the Unitholder's registration statement on
Form N-2 filed with the SW;
"SEC" means the United States Securities and Exchange Commission;
B-1
"SECURITIES" means all securities, instruments and rights held by the
Investment Plan pursuant to this Investment Contract;
"SET" has the meaning ascribed thereto in Section 6.2(a);
"SUPREME COURT" has the meaning ascribed thereto in Section 15.3;
"THAI CUSTODY CONTRACT" means the Custody Contract among the Unitholder, the
Manager and the Custodian in respect of the Investment Plan;
"THAI MANAGER" means MFC or any successor thereto permitted under Thai law
and the U.S. Law;
"THAI NAV" has the meaning ascribed thereto in Section 6.1;
"THAI SECURITIES" means all Baht denominated securities and instruments held
by the Investment Plan pursuant to this Agreement;
"UNDERWRITING AGREEMENT" means collectively the Underwriting Agreements in
respect of the Unitholder's shares of common stock ($0.01 par value) to be
offered in the United States and elsewhere executed on or after the date hereof;
"UNITED STATES" means the United States of America (including the States and
the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction;
"UNITHOLDER" means the Thai Capital Fund, Inc., a Maryland corporation;
"U.S. GAAP" has the meaning ascribed thereto in Section 6.5;
"U.S. LAW" means applicable United States federal law (including the
Internal Revenue Code, Securities Act of 1933, Securities Exchange Act of 1934,
Investment Company Act of 1940 and the Investment Advisers Act of 1940, each as
from time to time amended) and New York law;
"U.S. SECTIONS" shall mean the Advisory Sections and Sections 2.1 (with
respect to U.S. Law); 2.2; 3.6 (except 3.6(b)); 3.7; Article 4 (with respect to
U.S. Law); Section 5.3; Article 6 (with respect to U.S. GAAP and U.S. Law);
Article 7 (except 7(2)); Article 9 (other than Sections 9.1(b) (ii) and 9.3);
Article 10; Section 11.1; Article 12; Section 13.B; and Article 15;
"VALUATION DATE" has the meaning ascribed thereto in Section 6.1.
2. ESTABLISHMENT OF THE INVESTMENT PLAN
2.1 The Investment Plan is hereby established as a securities investment
fund with effect on and from the Effective Date under the laws of the Kingdom of
Thailand for the exclusive benefit of the Unitholder. This Investment Contract,
together with the exhibits hereto and the relevant provisions of the laws and
regulations of the Kingdom of Thailand, and, with respect to the U.S. Sections,
U.S. Law alone, shall govern the relationships, which are contractual
relationships, between the Thai Manager and the Unitholder.
2.2 The Unitholder shall be liable for all liabilities incurred by or on
behalf of the Investment Plan in accordance with the terms of this Investment
Contract, provided, however, that this Section 2.2 shall not operate to enlarge
in any way any liabilities incurred by or on behalf of the Investment Plan.
B-2
3. BASIC OBLIGATIONS AND RIGHTS OF THE THAI MANAGER
3.1(a) The Thai Manager, as investment manager to the Investment Plan hereby
undertakes and agrees, upon the terms and conditions herein set forth in this
Investment Contract, to manage the acquisition, holding and disposition of
Assets, in accordance with the investment objectives and policies as set forth
in or contemplated by this Investment Contract and in accordance with such
directions and instructions, if any as are given by the Board of Directors and
mutually agreed to by the Thai Manager and the Board of Directors, to pay the
permitted expenses of the Investment Plan set forth in Exhibit B hereto and to
prepare and make available to the Unitholder information and statistical data in
connection therewith.
(b) The Thai Manager, at its own expense, undertakes and agrees (i) to
assist the Funds as they may reasonably request in the conduct of the Funds'
business to the extent the conduct of such business involves matters of or
relates to Thai law, operation of the Investment Plan or investment of assets of
the Investment Plan; (ii) to maintain or cause to be maintained for the Funds
all books and records required under Thai law and regulations to the extent that
such books and records are not maintained furnished by the Thai Custodian or
other agents of the Funds; (iii) to furnish at the Thai Manager's expense for
the use of the Funds such office space and facilities the Funds may require for
their reasonable needs in Thailand and to furnish at the Thai Manager's expense
clerical services in Thailand related to information, statistical and investment
work for the benefit of the Funds; and (iv) to pay the reasonable salaries, fees
and expenses of such of the Funds' officers and employees (include the Funds'
share of Thai payroll taxes) and any fees and expenses of such of the Funds'
directors as are directors, officers or employees of the Thai Manager.
(c) (i) Notwithstanding the foregoing, the Thai Manager shall in
discharging its duties under this Section, be entitled to rely on information
provided by the Unitholder's administrator and on advice from counsel or
accountants for the Unitholder as to compliance with the Unitholder's investment
policies or vestment limitations, compliance with the requirements of the
Investment Company Act, in compliance with the requirements of Subchapter M of
the United States Internal Revenue Code of 1986, as amended, or compliance with
any requirement under the rules of the New York Stock Exchange. The Thai Manager
shall have access to the Unitholder's counsel and accountants.
(ii) The Thai Manager shall not be responsible for maintaining the
Unitholder's books and records except to the extent it is required under the
Investment Advisers Act of 1940 to maintain such records. The Thai Manager
will provide the Unitholder's administrator all information in the Thai
Manager's possession about or relating to the Fund and necessary for the
administrator to comply with the Unitholder's recordkeeping requirements
under the Investment Company Act.
3.2 The Thai Manager agrees to act hereunder in such capacity or capacities
as are necessary or appropriate under Thai law, including with respect to the
establishment of the Investment Plan pursuant to Section 2.1 hereof. It is
expressly agreed that the Thai Manager shall hold legal title to all Assets
solely for the account of the Investment Plan for the benefit of the Unitholder
and that nothing herein shall constitute the Thai Manager or require it to act
as agent, nominee or trustee of the Unitholder with respect to legal title to
Thai Securities. The Thai Manager shall hold legal title of Assets separate from
its own assets, free and clear of all liens, claims and encumbrances of any
party except as provided by this Investment Contract.
B-3
3.3 The Thai Manager shall be entitled to be paid in Baht from the Assets of
the Investment Plan, as full compensation for the services rendered and expenses
borne by the Thai Manager under the Advisory Sections hereunder, a monthly fee,
which accrues weekly and is payable, except as provided below, within five
(5) Bangkok business days of the first day of each month following the day on
which such payment is computed, at an annual rate equal to 0.60 percent of the
net assets of the Investment Plan. Of the 0.60 percent per annum management fee
payable to the Thai Manager, 0.50 percent per annum is for the Thai Manager's
investment advisory and asset management services, and 0.10 percent per annum is
for the Thai Manager's administrative services. The value of the accrued weekly
net assets of the Investment Plan for a month shall be determined as of the
close of business in Bangkok on the last SET business day of each week where
such last business day falls within one month. Such fee shall be payable from
the Investment Plan and shall be computed beginning on the "Closing Date" (as
defined in the Underwriting Agreement) until the termination of this Investment
Contract for whatever reason. For the purposes of this Investment Contract the
net assets of the Investment Plan shall be computed as herein provided.
3.4 The Thai Manager's services hereunder are not to be deemed exclusive and
the Thai Manager is free to render similar services to others.
3.5 The Thai Manager represents and warrants that it is duly (a) registered
and authorized as an investment adviser under the U.S. Investment Advisers Act
of 1940, as amended, and (b) licensed as an investment manager under the Act on
the Undertaking of Finance Business, Securities Business and Credit Foncier
Business, B.E. 2522 (1979) of Thailand, as amended, and it agrees to use all
reasonable efforts to maintain effective its registration, authorization and
license, as the case may be, until the termination of this Investment Contract.
3.6 Neither the Thai Manager nor any affiliate of the Thai Manager shall
receive any compensation in connection with the placement or execution of any
transaction for the purchase or sale of securities or for the investment of
funds for the account of the Investment Plan, except that the Thai Manager or
the Thai Manager's affiliates may receive a commission, fee or other
remuneration in connection with the sale of securities to or by the Investment
Plan, but only to the extent permitted under the Investment Company Act.
3.7 The Thai Manager may rely on information reasonably believed by the Thai
Manager to be accurate and reliable, including without limitation directions or
instructions of the Board of Directors pursuant to Section 3.1(a), the
information provided by the Unitholder's administrator and advice of the
Unitholder's counsel and accountants. Neither the Thai Manager, the Thai
Manager's officers, directors, employees, agents or any controlling persons as
defined in the Securities Act of 1933 shall be subject to any liability for any
act or omission, error of judgment or mistake of law or for any loss suffered by
the Funds in the course of connected with or arising out of any services to be
rendered hereunder except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Thai Manager's duties or by reason of
reckless disregard on the part of the Thai Manager of the Thai Manager's
obligations and duties under this Investment Contract.
3.8 The Thai Manager shall consult with and review information and advice
provided to it by Daiwa International Capital Management (H.K.) Limited, and, in
the discretion of the Thai Manager, may or may not follow any such advice.
B-4
4. ENFORCEMENT BY UNITHOLDER AND THE THAI MANAGER
4.1 The Unitholder shall have the right at all times to enforce against the
Thai Manager the obligations of the Thai Manager under this Investment Contract,
including but not limited to, the obligation to act for the benefit of the
Unitholder.
4.2 The Thai Manager shall have the right at all times to enforce against
the Unitholder the obligations of the Unitholder under this Investment Contract.
5. UNITS
5.1 Units shall be issued to the Unitholder against payment therefor with
respect to all transfers of any assets to the Investment Plan. The value of
Units shall, upon the initial transfer of any monies to the Investment Plan be
$10.00 each, provided, however, that the value of Units shall thereafter be
determined in accordance with Article 6 of this Investment Contract.
5.2 A beneficial certificate (the "Beneficial Certificate") representing one
or more Units, in substantially the form of Exhibit A attached hereto, shall be
issued to the Unitholder in respect of all Units issued to the Unitholder. The
Beneficial Certificate shall be signed and sealed by the authorised
representative(s) of the Thai Manager.
5.3 Units are not transferable. The Thai Manager shall not issue or deliver
a Unit or a Beneficial Certificate to any person other than the Unitholder. The
Unitholder may not transfer or assign Units or Beneficial Certificate.
6. CALCULATION OF NET ASSET VALUE
6.1 The net asset value of the Assets (the "Thai NAV") at any time shall be
the value of the Assets less the liabilities of the Investment Plan at such
time. The net asset value of Units at any time following the initial issuance
thereof as described in Section 5.1 shall be the Thai NAV divided by the number
of Units issued and outstanding as of such time. The Thai NAV shall be
calculated by the Thai Manager with the concurrence of the Unitholder's designee
at last business day at the close of each week in Bangkok (a "Valuation Date")
as well as when required for the issue of Units pursuant to Article 5 hereof.
The Thai NAV shall be calculated by reference to the criteria set forth below
(and such other criteria as maybe necessary to implement the provisions of the
Investment Company Act).
6.2 The value of Assets held in the Investment Plan shall be determined as
follows:
(a) where the Assets are equity securities listed and traded on the
Securities Exchange of Thailand (the "SET") and SET market quotations are
readily available, at the last sales price on such exchange on the
applicable Valuation Date or, if there is no sale on such exchange on that
date, the mean between the last current bid and the asked prices;
(b) where the Assets are unlisted equity securities, at the mean between
current bid and asked prices, if any, or if the same are not available, as
determined by the Board of Directors;
(c) short-term investments having a maturity of 60 days at cost with
accrued interest, or discount carried thereon, included in interest
receivable;
(d) other securities as to which market quotations are readily available
shall be valued at their market values; and
B-5
(e) all other securities and assets will be taken at fair value in
accordance with procedures determined by the Board of Directors.
6.3 In instances where price cannot be determined in accordance with the
above procedures, or in instances in which the Board of Directors determines
that it is impracticable or inappropriate to determine price in accordance with
the above procedures, the price will be determined in such manner as the Board
of Directors may prescribe.
6.4 There shall be made such allowance (if any) as the Board of Directors
may consider appropriate in the case of any asset which the Board of Directors
considers may not be fully recoverable.
6.5 For purposes of determining the Thai NAV, liabilities shall include the
amount of any fee payable to the Thai Manager hereunder or to the Custodian
under the Thai Custody Contract or other fees and expenses payable hereunder
from the Assets of the Investment Plan. Other liabilities shall be determined in
accordance with United States generally accepted accounting principles ("U.S.
GAAP").
6.6 Notwithstanding anything in this Investment Contract, (a) for purposes
of all reporting required under U.S. Law, the "Unitholder's designee" as used in
this Article 6 shall be Princeton Administrators,Inc., which shall determine the
Thai NAV in Dollars based upon information supplied by the Thai Manager and/or
the Custodian, and (b) for purposes of all reporting required under Thai law,
the Thai Manager shall determine the Thai NAV in Baht.
7. INVESTMENT OBJECTIVE, POLICIES AND LIMITATIONS
The investment objective, policies and limitations of the Funds will be as
described in Exhibit C subject to revision in accordance with (1) U.S. Law and
(2) Thai law.
8. DURATION, CHANGES IN MANAGER OR CUSTODIAN, AND TERMINATION
8.1 This Investment Contract shall become effective on the Effective Date
hereof. This Investment Contract, other than the Advisory Sections hereof, shall
continue in effect, if not continued in accordance with applicable U.S. Law and
Thai law, until the twenty-fifth anniversary of the Effective Date or until
terminated in accordance with Section 8.4. The Advisory Sections shall continue
in effect, if not continued in accordance with applicable U.S. Law as further
provided below, until two years from the date hereof. If not sooner terminated,
the Advisory Sections shall continue in effect for successive periods of 12
months each thereafter; provided that each such continuance shall be
specifically approved annually by the vote of a majority of the Board of
Directors who are not parties to this Investment Contract or interested persons
(as such term is defined in the Investment Company Act) of any such party, cast
in person at a meeting called for the purpose of voting on such approval and
(a) either the vote of a majority of the outstanding voting securities of the
Unitholder, or (b) a majority of the Board of Directors as a whole.
8.2 Notwithstanding anything in this Agreement to the contrary, the Advisory
Sections may be terminated at any time by the Unitholder without the payment of
any penalty upon a vote of a majority of the Board of Directors or a majority of
the outstanding voting securities of the Unitholder on 60 days' written notice
to the Investment Manager. The Advisory Sections shall automatically terminate
(a) in the event of assignment of this Investment Contract (as such term is
defined in the Investment Company Act); (b) the suspension or revocation of the
Thai Manager's license or status to
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act as Thai Manager to the Investment Plan or investment adviser to the
Unitholder, under (X) Thai law, or (Y) U.S. Law, as the case may be. Any notice
shall be deemed given when received by the addressee.
8.3 Upon termination of the Advisory Sections, except as provided by
Section 8.4 hereof, the Unitholder shall, in accordance with (a) U.S. Law, and
(b) Thai law, provide for a successor manager approved by the Bank of Thailand
within three months to execute, as investment manager under an agreement in
substance similar to the Advisory Sections of this Investment Contract (which
may be evidenced by an agreement to become party to all provisions of this
Investment Contract) with all such changes, however, as the parties thereto
shall agree upon.
8.4 This Investment Contract, including the Advisory Sections, shall
terminate if:
(a) There is any transfer, assignment or other disposition of any of the
Unitholder's interest in the Investment Plan, or any delivery of a Unit or
Beneficial Certificate to any person other than the Unitholder;
(b) The Thai Manager notifies the Unitholder in writing that due to a
change in Thai law, in its opinion further operation of the Investment Plan
in accordance with this Investment Contract is illegal or infeasible having
regard solely to the interests of the Unitholder;
(c) There has been a suspension of trading for more than 1 day on the
Securities Exchange of Thailand; the declaration by Thailand authorities of
a banking moratorium; or any war, blockade, embargo, insurrection or armed
conflict or escalation of any thereof involving Thailand or the United
States, if in any such case the Board of Directors determines that
termination is in the best interests of Unitholder;
(d) Termination of the Custodian's appointment pursuant to the Thai
Custody Contract if no successor custodian approved by the Bank of Thailand
is appointed thereunder or otherwise;
(e) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Unitholder or the Thai Manager in any
involuntary case under any applicable bankruptcy; insolvency or other
similar law now or hereafter in effect, or appoint a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Unitholder or the Thai Manager, as the case may be or for any substantial
part of the property thereof or order the winding-up or liquidation of the
affairs thereof;
(f) The Unitholder or the Thai Manager shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in
an involuntary case under any such law, or shall consent to the appointment
of or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Unitholder or the Thai
Manager, as the case may be, or for any substantial part of the property
thereof, or shall make any general assignment for the property thereof, or
shall make any general assignment for the benefit of creditors thereof, or
shall fail generally to pay its debts as they become due; or
(g) Upon the termination of the Advisory Sections if no successor
investment manager is appointed pursuant to Section 8.3; or
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(h) At the discretion of the Unitholder, the Thai Manager and the Board
of Directors are unable to reach an agreement regarding any instructions or
directions given by the Board of Directors to the Thai Manager as provided
in Section 3.1(a).
8.5 Upon termination of this Investment Contract pursuant to Section 8.4,
the Investment Plan will be liquidated by a liquidator appointed by the Thai
Manager and agreed to by the Board of Directors, which appointment will be
subject to the approval of the BOT. Such liquidation will in an orderly manner
dispose of Thai Securities which are restricted as to foreign ownership or which
otherwise are not capable of transfer to the Unitholder and remit the proceeds
thereof to the Unitholder and, unless directed by the Board of Directors
otherwise, cause all other Assets of the Investment Plan to be registered in the
name of Unitholder, subject to compliance with Thai law. To the extent that the
Unitholder does not take action in respect of Sections 5.3 and 8.4(a), (e) and
(f) hereof, the Thai Manager will take all actions necessary to effectuate such
Sections and this Section 8.5.
8.6 This Investment Contract may not be transferred, assigned, sold or in
any matter hypothecated or pledged by any party hereto other than as permitted
by Article 8 hereof.
8.7 As used in this Investment Contract, the phrase "majority of the
outstanding voting securities of the Unitholder" shall mean the affirmative vote
of the holders of a majority of the outstanding voting securities of the
Unitholder.
9. ACCOUNTS AND STATEMENTS
9.1 The Thai Manager shall maintain in its principal office in Bangkok
sufficient accounts and records to enable a complete and accurate view to be
formed by the Unitholder or its designee of the Assets and liabilities and the
income and expenditures of the Investment Plan. Such accounts shall be kept in
form necessary in order to prepare financial statements (i) pursuant to U.S.
GAAP and, (ii) in addition may be kept in such form and language required by the
BOT.
9.2 The Unitholder or its designee shall prepare Financial Statements of the
Funds for successive accounting periods, each accounting period commencing
immediately after the end of the last preceding such accounting period (or in
the case of the first such period from the date of establishment of the Funds)
and ending on December 31 in each year (the first such date being December 31,
1990) (the "Financial Statements") and shall also prepare such Financial
Statements as of and for the monthly periods ending on the last day of each
calendar month (which monthly reports shall be prepared within ten business days
after the end of each month), in each case in U.S. dollars on the basis of U.S.
GAAP on the respective forms and containing the information for the time being
required by the SEC and the New York Stock Exchange.
9.3 The Thai Manager shall prepare Financial Statements of the Investment
Plan in the manner required by Thai law and shall make or cause to be made all
reports, publications, notices and filings with respect to the Investment Plan
required by Thai law.
9.4 The Thai Manager and the Unitholder shall:
(a) cause the Financial Statements to be audited in accordance with U.S.
GAAP by an internationally recognized accountancy firm authorized under the
laws of the Kingdom of Thailand and the regulations of the BOT (the
"Auditors"). The initial Auditors shall be Price Waterhouse. The Thai
Manager shall be entitled, with the prior written approval of the Board of
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Directors or the shareholders of the Unitholder, to remove any person or
firm of Auditors and appoint another internationally recognized accountancy
firm to be the Auditors. The Thai Manager shall ensure that at all times
there are such Auditors for the Investment Plan;
(b) submit the Financial Statements together with the Auditors' report
and such report as the Thai Manager may intend to make to the Unitholder
thereon to the Unitholder and the BOT; and
(c) comply with such requirements as the SEC or BOT may make with
respect to such statements and report.
9.5 FORM OF AUDITOR'S REPORTS. The Auditors' report on the Financial
Statements of the Investment Plan shall be in the form required under Thai law
and the SEC and the New York Stock Exchange and prepared in accordance with U.S.
GAAP, The Thai Manager shall sign all Financial Statements of the Investment
Plan, if requested to do so by the Board of Directors.
10. DISTRIBUTIONS
10.1 The Investment Plan will distribute to the Unitholder, at least once
each year (on such dates as is determined by the Board of Directors), all or
part of the net profit of the Investment Plan for such year. For this purpose,
the net profits of the Investment Plan will be calculated in Baht and will
include dividends and interest paid with respect to securities, interest on bank
deposits, net capital gains from the sale of securities and any other income
arising from the Investment Plan's operations, less all expenses of the
Investment Plan. Except with respect to payment of expenses as may be further
provided in Section 10.2, the Investment Plan shall not make any distribution to
Unitholder except out of current net profits or accumulated prior years' net
profits not previously distributed, or otherwise as may be declared in
accordance with the direction of the Board of Directors.
10.2 Costs and expenses are payable and distributable out of the assets of
the Investment Plan when and as provided in this Investment Contract.
11. PAYMENTS
11.1 Any expenses payable to the Thai Manager or others by the Investment
Plan shall be paid, upon order of the Unitholder in the manner as instructed by
the Unitholder or a person designated by the Unitholder, provided that the
payment by the Thai Manager of expenses directly incurred in connection with the
purchase and sale of Securities (i.e., brokerage fees and commissions, transfer
and stamp taxes) shall not require the prior order of the Unitholder.
11.2 All payments from the Investment Plan to be made in currencies other
than Baht are subject to Thai law including the Exchange Control law and
regulations thereunder.
12. CURRENCY
Except as otherwise provided in this Investment Contract, the accounts and
records of the Investment Plan, payments into the Investment Plan and payments
out of the Investment Plan shall be made in Baht. Distributions from the
Investment Plan shall be calculated in Baht and then converted into Dollars on
the date of the making of the distribution. The Financial Statements of the
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Funds shall be prepared in Dollars, provided, however, that Financial Statements
may also be prepared as provided in Section 9.3 hereof. Currency exchange rates
between Baht and Dollars for purposes of the Investment Plan's accounts and
records shall be determined by the Unitholder or its designee.
13. INFORMATION AND NOTICES
13.1 DOCUMENTS TO BE MADE AVAILABLE; OFFICES
There shall be held available by the Thai Manager for inspection by any
person without charge at the principal office of the Thai Manager in Bangkok at
all reasonable business hours copies of:
(a) this Investment Contract as from time to time amended;
(b) the most current sales prospectus related to shares of the
Unitholder;
(c) all filings made by the Unitholder with the SEC (including financial
statements) for the two latest fiscal years of the Unitholder or (if less)
for all periods since the establishment of the Unitholder; and
(d) The Thai Manager shall at all times maintain an office or offices in
Bangkok and shall notify the Unitholder in the manner prescribed by
Section 13.B below of any change in the address of its principal office in
Bangkok.
13.2 NOTICES
Except as otherwise provided herein, all notices or other communications to
the respective parties hereto shall be deemed to have been duly made when
delivered by airmail, fax, telex or personal delivery at its address specified
below or to such other address as any of the parties hereto may hereafter
specify to the other in writing.
For the Manager:
The Mutual Fund Company Limited
IFCT Building
1770 New Petchburi Road
Bangkok 10310, Thailand
For the Unitholder:
The Thai Capital Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
14. AMENDMENTS
14.1 This Investment Contract shall be capable of amendment only (a) with
the prior mutual agreement of the Unitholder (which, in the case of the Advisory
Sections, shall be obtained in accordance with U.S. Law) and the Thai Manager,
and (b) subject to (X) applicable U.S. Law and (Y) applicable Thai law,
including approval of the BOT.
14.2 Sections 5.3 and 8.4(a), (e) and (f) hereof, in addition to the
requirements of Section 15.1, may not be amended without the consent of
two-thirds of the outstanding voting securities of the Unitholder.
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15. GOVERNING LAW, JURISDICTION; LANGUAGE AND MISCELLANEOUS
15.1 This Investment Contract and the Beneficial Certificate shall be
governed by and construed in accordance with the laws of the Kingdom of
Thailand, provided, however, that all U.S. Sections and all matters arising out
of or relating thereto, or as to whether a provision is part of U.S. Sections,
shall be governed by U.S. Law.
15.2 The parties irrevocably agree that any suit, action or proceeding
against the Unitholder arising out of or relating to this Investment Contract
shall be subject to the non-exclusive jurisdictions of the United States
District Court for the Southern District of New York and the Supreme Court of
the State of New York, New York County, and irrevocably submit to the
jurisdiction of each such Court in connection with any such suit, action or
proceeding. The parties waive any objection to the laying of venue of any such
suit, action or proceeding in either such Court, and waive any claim that such
suit, action or proceeding has been brought in an inconvenient forum. The
parties irrevocably consent to service of process in connection with any such
suit, action or proceeding by prepaid mail at their respective addresses as set
forth in this Investment Contract.
15.3 The parties further agree that any suit, action or proceeding against
the Thai Manager arising out of or relating to this Investment Contract may, at
the sole and unreviewable option of the Unitholder, be commenced in the
jurisdictions either (i) of the courts of the Kingdom of Thailand or (ii) of the
United States District Court for the Southern District of New York (the
"District Court") or the Supreme Court of the State of New York, New York County
(the "Supreme Court"). In the event the Unitholder exercises its option to
commence a suit, action or proceeding in either the District Court or the
Supreme Court, the Thai Manager irrevocably submits to the jurisdiction of each
such court in connection with any such suit, action or proceeding, and the Thai
Manager further agrees that, in the event the District Court, for whatever
reason, declines to exercise or is determined not to have jurisdiction in
connection with any such suit, action or proceeding, the Unitholder may commence
a subsequent such suit, action or proceeding in the Supreme Court, and the Thai
Manager irrevocably submits to the jurisdiction of the Supreme Court in
connection with, any such subsequent suit, action or proceeding. The Thai
Manager waives any object to the laying of venue of any such suit, action or
proceeding in the District Court or the Supreme Court, and waives any claim that
such suit, action or proceeding has been brought in an inconvenient forum. The
Thai Manager irrevocably consents to service of process in connection with any
such suit, action or proceeding by prepaid mail at its address as set forth in
this Investment Contract.
15.4 To the extent that the Thai Manager or Unitholder may now or hereafter
be entitled, in any jurisdiction in which judicial proceedings may at any time
be commenced with respect to this Investment Contract, to claim for itself or
its revenues or properties any immunity from suit, court jurisdiction,
attachment prior to judgment, attachment in aid of execution of a judgment,
execution of a judgment or from set-off, banker's lien, counterclaim or any
other legal process or remedy with respect to its obligations under this
Investment Contract and/or to the extent that in such jurisdiction there may be
attributed to the Thai Manager or the Unitholder such an immunity (whether or
not claimed), the Thai Manager and the Unitholder, as the case may be, hereby to
the fullest extent permitted by applicable law irrevocably agrees not to claim,
and hereby to the fullest extent permitted by applicable law expressly waives,
any such immunity, including, without limitation, a complete waiver of immunity
pursuant to the United States Foreign Sovereign Immunities Act.
15.5 The governing language of this Investment Contract shall be English.
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15.6 The headings contained in this Investment Contract are for reference
only and shall not be deemed to limit or affect any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or representatives thereunto duly
authorized, all as of the date first above written.
THE MUTUAL FUND COMPANY LIMITED
By:
--------------------------------------
Name:
Title:
THE THAI CAPITAL FUND, INC.
By:
--------------------------------------
Name:
Title:
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EXHIBIT A
FORM OF CERTIFICATE
BENEFICIAL CERTIFICATE OF
THE THAI CAPITAL FUND PURSUANT TO
INVESTMENT CONTRACT
dated as of , 1990 (the "Investment Contract")
Unitholder: The Thai Capital Fund, Inc., a Maryland Corporation.
Issue Date of Units:
Issue Date of Certificate:
Total Number of Units represented hereby:
Per Unit Value:
Time and Place of Payment: As described in the Investment Contract.
Remuneration and other fees: As described in the Investment Contract.
Redemption: Only as specifically permitted in the Investment Contract.
Calculation of Net Asset Value: As described in the Investment Contract
Duration of the Investment Plan: As described in the Investment Contract.
Notices: As described in the Investment Contract.
Pursuant to the Investment Contract which establishes the Investment Plan,
The Mutual Fund Company Limited, as Thai Manager, issues this Beneficial
Certificate subject to all of the terms of the Investment Contract.
THE MUTUAL FUND COMPANY LIMITED
By:
------------------------------
Name:
Title:
Seal of The Mutual Fund
Company Limited (SEAL)
This Certificate and the
interests represented hereby
are nontransferable and may
not be held by persons other
than The Thai Capital
Fund, Inc. This Certificate
and the interests represent-
ed hereby are in all respects
governed by, and subject to,
the Investment Contract.
* * * * * * *
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EXHIBIT B
PERMITTED EXPENSES OF THE INVESTMENT PLAN
The expenses which the Thai Manager is required and authorized to pay out of
the Assets of the Investment Plan in accordance with Section 3.1 of Article 3
are required to be properly vouched and verified by the auditor of the
Investment Plan and consist of (only):
1. Any expenses properly incurred in the publication of the prospectus of the
Investment Plan;
2. The reasonable costs of printing beneficial certificates representing units
in the Investment Plan;
3. All expenses properly incurred in preparing for the publication in
newspapers of notices required by Thai and other laws;
4. All stamp duties, brokerage fees and other expenses properly incurred in
acquiring and disposing of Assets;
5. All expenses properly incurred in making distributions of income and/or
capital to the Unitholder;
6. Audit fees for the Investment Plan;
7. The fees of the Custodian;
8. Taxes properly payable in relation to income, profits or gains of the
Investment Plan (but not other taxation suffered by the Thai Manager);
9. Interest and other bank charges properly incurred for the account of the
Investment Plan;
10. The fees of any adviser to the Investment Plan whose appointment and
remuneration have been approved in accordance with applicable law;
11. Travelling and out-of-pocket expenses reasonably incurred by the Thai
Manager's representatives attending meetings outside Thailand, which
meetings have been authorized by the Board of Directors or its designee;
12. International communication costs reasonably incurred by the Thai Manager;
13. Expenses incurred in preparing and distributing reports contemplated by this
Investment Contract;
14. Such other expenses as the Board of Directors may approve; and
15. Any amount necessary to indemnify the Thai Manager against any action,
proceeding, claims costs, demands and expenses which may be brought against,
suffered or incurred by the Thai Manager (other than with respect to any
action, proceeding, claim or demand or on behalf of the Unitholder) in
connection with the performance or non-performance in good faith of its
functions under this Agreement except by reason of willful misfeasance, bad
faith or gross negligence in the performance of the Thai Manager's duties or
by reckless disregard on the part of the Thai Manager of the Thai Manager's
obligation and duties under the Investment Contract as shall arise by reason
of the fraud, negligence or willful default of the Thai Manager or its
officers, servants or delegates.
* * * * * * *
B-14
EXHIBIT C
INVESTMENT OBJECTIVE AND POLICIES
AND
INVESTMENT LIMITATIONS
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term capital appreciation which
it seeks through investment primarily in equity securities of Thai companies.
"Equity securities of Thai companies" is defined as ordinary shares, preferred
shares, warrants and convertible debentures or other convertible debt securities
of companies: (i) traded principally on a stock exchange in Thailand or in the
over-the-counter market in Thailand; (ii) that derive 50% or more of their total
revenue from goods produced, sales made or services performed in Thailand; or
(iii) that are organized under the laws of Thailand but not listed or traded on
a stock exchange (provided that any such company is not a startup and intends to
seek a listing on the SET or other organized stock exchange within a reasonable
period (i.e., one to three years) of the date of such investment). This
objective may not be changed without the approval of the BOT and without the
approval of a majority of the Fund's outstanding voting securities. A "majority
of the Fund's outstanding voting securities" means the lesser of either (i) 67%
of the shares represented at a meeting at which more than 50% of the outstanding
shares are represented, or (ii) more than 50% of the outstanding shares. There
is no assurance that the Fund will achieve its investment objective.
It is anticipated that under normal circumstances, after the net proceeds of
this offering have been invested under the Investment Plan, at least 75% of the
Fund's total assets will be invested in equity securities of Thai companies. The
remainder of the Fund's assets, under normal circumstances, generally will be
invested, to the extent held under the Investment Plan, in Baht bank deposits,
short-term debt obligations issued or guaranteed by the Thai government and
other short-term Bahtdenominated securities, including short- term money market
instruments, and, to the extent held outside the Investment Plan, in U.S. Dollar
bank deposits or U.S. Dollar short-term money market instruments held outside of
Thailand. The purposes of these investments are to provide the Fund with
appropriate liquidity to take advantage of market opportunities and meet cash
needs. After its initial investment period, the Fund intends to be substantially
invested through the Investment Plan in equity securities of Thai companies, but
it may hold up to ten percent of its assets outside the Investment Plan to pay
expenses incurred by the Fund in the United States and as a reserve for
dividends and other distributions to shareholders. Investments in Thai money
market instruments may include short-term Thai government obligations and
Baht-denominated commercial paper, bankers' acceptances, negotiable certificates
of deposit and non-negotiable time deposits. Investments in U.S. Dollar money
market instruments may include U.S. Treasury bills and notes, commercial paper,
bankers' acceptances, negotiable certificates of deposit and non-negotiable time
deposits. Thai government approval of the Investment Plan is subject to the
requirement that, except during the first year of operation of the Investment
Plan and except with special permission thereafter, none of the Investment
Plan's net assets be invested in non-Thai and non-Baht securities and
instruments.
There is currently no rating system for debt securities in Thailand.
However, the Fund intends to invest only in debt securities of companies that
the Thai Manager believes to be of high quality.
Of that portion of the Fund's assets invested in equity securities of Thai
companies, it is anticipated that at least 75% will be in securities listed on
the SET. The Fund does not intend to emphasize the larger capitalization issues
when investing in securities listed on the SET. The balance of its equity
investments will be in unlisted securities, including securities that are traded
in the Thai over-the-
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counter market and securities of companies that have applied to be listed on the
SET. The Fund may also invest in securities of unlisted companies in the later
stages of development that have indicated that they intend to seek (and have
reasonable prospects of obtaining) a listing on the set or other organized
exchange, generally within one to three years. The Fund will not invest in
start-up companies. The Fund intends to invest its assets over a broad spectrum
of industries comprising the Thai economy, including, as conditions warrant from
time to time, cement, chemicals and plastics, construction,
electrical/electronics, finance, food, textiles, glass, rubber, pulp and paper,
metal products and machinery; retailing and tourism. In selecting industries and
companies for investment, the Thai Manager will consider overall growth
prospects, competitive position in export markets, technology, research and
development, productivity, labor costs, raw material costs and sources, profit
margins, return on investment, capital resources, government regulation,
management and other factors.
For temporary defensive purposes, e.g., during periods in which changes in
the Thai securities markets, other economic conditions or political conditions
in Thailand warrant, the Fund may invest, without limit, in high quality debt
instruments, such as Thai government securities, or hold cash. The Fund may also
at any time invest its assets held outside of the Investment Plan in U.S. Dollar
money market instruments to pay Fund expenses in the United States and as
reserves for dividends and other distributions to shareholders and in response
to unforeseen circumstances.
The Fund's policy is to purchase and hold securities for long-term capital
appreciation and not to trade in securities for short-term gain, although
volatility of the Thai securities market may make it necessary to engage in some
short-term trading in order to preserve investment gains. The Fund's annual
portfolio turnover rate is not expected to exceed 50%, although in any
particular year market conditions could result in portfolio activity at a
greater or lesser rate than anticipated. The rate of portfolio turnover will not
be a limiting factor when management of the Fund deems it appropriate to
purchase or sell securities for the Fund. The portfolio turnover rate is
calculated by dividing the lesser of sales or purchases of portfolio securities
by the average monthly value of the Fund's portfolio securities, excluding money
market instruments.
INVESTMENT LIMITATIONS
The following investment limitations are fundamental policies of the Fund
and may not be changed without the express approval of the BOT and without the
approval of the holders of a majority of the Fund's outstanding voting
securities as defined above under "Investment Objective and Policies." If a
percentage restriction on investment or use of assets set forth below is adhered
to at the time a transaction is effected, later changes in the percentage
resulting from changing values will not be considered a violation of the
restriction. Also, if the Fund receives from an issuer of Thai securities held
by the Fund subscription rights to purchase securities of that Thai issuer, and
if the Fund exercises such subscription rights at a time when the Fund's
portfolio holdings of securities of that issuer (or that issuer's industry)
would otherwise exceed the limits set forth below (or would, as result of such
exercise, exceed those limits), it will not constitute a violation if, prior to
receipt of securities upon exercise of such rights, and after announcement of
such rights, the Fund has sold at least as many shares of the same class and
value as it would receive on exercise of such rights.
The Fund, through the Investment Plan or otherwise, is not permitted to:
(1) Purchase securities on margin, except as set forth in paragraph (3) below.
(2) Make short sales of securities or maintain a short position in any security.
(3) Issue senior securities, borrow money or pledge its assets, except that the
Fund may borrow money in an amount not to exceed 10% (calculated at the
lower of cost or current market value) of its total assets (not including
the amount borrowed) (i) to pay any dividends required to be
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distributed in order for the Fund to maintain its qualification as a
regulated investment company under the Code or otherwise to avoid having the
Fund be subject to U.S. taxes, (ii) from a bank for temporary or emergency
purposes, (iii) for such short-term credits as may be necessary for the
clearance or settlement of transactions, and (iv) for repurchases of its
common stock. The Fund may pledge its assets to secure such borrowings.
Notwithstanding the above, initial and variation margin in respect of
futures contracts and options thereon and any collateral arrangements in
respect of options on securities or indexes will not be prohibited by this
paragraph (3) or any other investment restrictions.
(4) Buy and sell any commodities or commodity futures contracts or commodity
options, or real estate or interests in real estate or real estate
mortgages, except that (i) the Fund may buy or sell securities of companies
which invest or deal in commodities or real estate, and (ii) the Fund may
enter into foreign currency and stock index futures contracts and options
thereon and may buy or sell forward currency contracts.
(5) Make loans, except through the purchase of debt securities consistent with
its investment objective and policies.
(6) Act as underwriter of securities of other issuers except, in connection with
the purchase of securities for the Fund's own portfolio or the disposition
of portfolio securities or of subscription rights thereto, to the extent
that it may be deemed to be an underwriter under applicable U.S. securities
laws.
(7) Make any investment for the purpose of exercising control or management.
(8) Be operated in breach of Thai laws or the provisions of the Investment
Contract.
Additional Restrictions Imposed by U.S. and Thai Law.
The Fund is not subject to diversification requirements under the 1940 Act.
However, the Fund, and the Investment Plan, are subject to the following
requirements. The Fund and the Investment Plan are not permitted to:
(1) Invest 25% or more of its assets in a single industry. (For this purpose,
the Thai Government and its agencies or instrumentalities will be considered
an industry).
(2) Purchase or hold (i) more than 15% of the total number of shares outstanding
of any Thai limited company, or (ii) more than 15% of all of the outstanding
debentures of any Thai limited company, or (iii) invest more than 15% of the
value of the Investment Plan in the securities of any single Thai limited
company.
(3) Purchase or hold promissory notes issued by a Thai credit foncier company if
the value thereof would exceed 5% of the Investment Plan's assets.
(4) Purchase or hold promissory notes issued by a Thai credit foncier company if
the total value of promissory notes issued by all Thai finance companies
would exceed 10% of the Investment Plan's assets.
The Fund is also subject to certain requirements under the U.S. Internal
Revenue Code of 1986 (as amended with respect to its qualification as a
regulated investment company requirements). Pursuant to the 1940 Act, the Fund
may not invest in securities of Thai companies engaged in the securities
business. The Fund intends to file with the Commission a request for an
exemptive order permitting the Fund to invest in securities of certain Thai
securities companies; however, there is no assurance that such relief will be
granted. The Fund believes that securities of Thai companies engaged in the
securities business represent a significant industry group within the Thai
securities
B-17
market. If the requested exemptive relief is not granted, the Fund may be
adversely affected. To the extent that requirements under Thai law or U.S. law
or other investment limitations described in this paragraph are changed by
applicable law, the Fund may make investments, directly or through the
Investment Plan, in accordance with such changed law.
* * * * * * *
B-18
SKU# TCFCM-PS-01
SKU# SGFCM-PS-01
THE JAPAN 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
JUNE 6, 2001
The undersigned stockholder of The Japan Equity Fund, Inc. (the "Fund") hereby
appoints John J. O'Keefe 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 June 6, 2001 at
12:00 p.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 card will be voted in accordance with the
instructions given by the undersigned stockholder, but if no instructions are
given, this proxy card will be voted in favor of proposal 1 as set forth in this
proxy card. In addition, this proxy card will be voted, in the discretion of
such proxies, upon such other business as may properly come before the Meeting
or any adjournment thereof. The undersigned hereby revokes any and all proxies
with respect to such Shares heretofore given by the undersigned. The undersigned
acknowledges receipt of the Joint Proxy Statement dated May 4, 2001.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE
(SEE REVERSE SIDE)
-------
PLEASE MARK VOTES
/X/ AS IN THIS EXAMPLE
-------
----------------------------------------------
THE JAPAN EQUITY FUND, INC. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
----------------------------------------------
1. To elect Directors of the Fund. NOMINEES:
For All With- For All
Nominees hold Except
Class II: (01) Oren G. Shaffer / / / / / /
(02) David G. Harmer
Class III: (03) Alfred C. Morley
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided above.)
Mark here for address change and note at left. / /
Please sign exactly as your name(s) appears hereon. All holders must sign.
When signing in a fiduciary capacity, please indicate full title as such.
If a corporation or partnership, please sign in full corporate or patnership
name by authorized person.
Signature:____________ Date:_______ Signature:____________ Date:_______