Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE R.O.C. TAIWAN FUND
..................................................................
(Name of Registrant as Specified In Its Charter)
..................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
--------------------------------------------------------------------------------
THE R.O.C. TAIWAN FUND April 29, 2002
c/o Citigate Dewe Rogerson, 1440 Broadway, 16th Floor, New York, New York 10018,
Telephone: 1-800-343-9567
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders (the
'Meeting') of The R.O.C. Taiwan Fund (the 'Trust'), which will be held at the
offices of Paul, Weiss, Rifkind, Wharton & Garrison, 25th Floor, 1285 Avenue of
the Americas, New York, New York on Thursday, June 20, 2002, at 9:30 a.m., New
York City time. A formal notice and a Proxy Statement regarding the Meeting, a
proxy card for your vote at the Meeting and a postage prepaid envelope in which
to return your proxy are enclosed.
At the Meeting, shareholders will:
(i) Elect three trustees: one to serve for a term expiring on the date of
the 2003 Annual Meeting of Shareholders or the special meeting in lieu
thereof; and two to serve for a term expiring on the date of the 2005
Annual Meeting of Shareholders or the special meeting in lieu thereof;
and
(ii) Consider whether to approve the conversion of the Trust from a
closed-end investment company into an open-end investment company and
certain related matters.
The Board of Trustees recommends that you vote for the nominees for trustee
named in the accompanying Proxy Statement and against proposal (ii).
Whether or not you plan to attend the Meeting in person, it is important
that your shares be represented and voted. After reading the enclosed notice and
Proxy Statement, please complete, date, sign and return the enclosed proxy card
at your earliest convenience. Your return of the proxy card will not prevent you
from voting in person at the Meeting should you later decide to do so.
If you are a beneficial owner holding shares through a broker-dealer, please
note that, under the rules of the New York Stock Exchange, broker-dealers may
not vote your shares on the proposal described in paragraph (ii) above without
your instructions. In addition, if you are a beneficial owner holding shares
through a bank or trust company nominee, you may find that such nominee will not
vote your shares in respect of some or all of the matters to be considered at
the Meeting without your instructions. Accordingly, the Board of Trustees of the
Trust urges all beneficial owners of shares who are not also record owners of
such shares to contact the institutions through which their shares are held and
give appropriate instructions, if necessary, to vote their shares. The Trust
will also be pleased to cooperate with any appropriate arrangement pursuant to
which beneficial owners desiring to attend the Meeting may be identified as such
and admitted to the Meeting as shareholders.
Time will be provided during the Meeting for discussion, and shareholders
present will have an opportunity to ask questions about matters of interest to
them.
Respectfully,
Theodore S.S. Cheng Michael Ding
Theodore S.S. Cheng Michael Ding
Chairman President
--------------------------------------------------------------------------------
IMPORTANT MATTERS WILL BE CONSIDERED, AND YOUR VOTE MAY BE NECESSARY TO INSURE
THE PRESENCE OF A QUORUM, AT THE MEETING. ACCORDINGLY, ALL SHAREHOLDERS,
REGARDLESS OF THE SIZE OF THEIR HOLDINGS, ARE URGED TO SIGN AND MAIL THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, OR TO GIVE APPROPRIATE INSTRUCTIONS TO
PERSONS HOLDING SHARES OF RECORD ON THEIR BEHALF, PROMPTLY.
--------------------------------------------------------------------------------
THE R.O.C. TAIWAN FUND
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 2002
To the Shareholders of
The R.O.C. Taiwan Fund:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
'Meeting') of The R.O.C. Taiwan Fund (the 'Trust') will be held at the offices
of Paul, Weiss, Rifkind, Wharton & Garrison, 25th Floor, 1285 Avenue of the
Americas, New York, New York on Thursday, June 20, 2002 at 9:30 a.m., New York
City time, for the following purposes:
1. To elect three trustees: one to serve for a term expiring on the date of
the 2003 Annual Meeting of Shareholders or the special meeting in lieu
thereof; and two to serve for a term expiring on the date of the 2005
Annual Meeting of Shareholders or the special meeting in lieu thereof.
2. To consider whether to approve the conversion of the Trust from a
closed-end investment company into an open-end investment company and
certain related matters.
3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Trustees has fixed the close of business on Monday, April 15,
2002 as the record date for the determination of shareholders entitled to notice
of and to vote at the Meeting and at any adjournment thereof. Shareholders are
entitled to one vote for each share of beneficial interest of the Trust held of
record on the record date with respect to each matter to be voted upon at the
Meeting.
You are cordially invited to attend the Meeting. All shareholders are
requested to complete, date and sign the enclosed proxy card and return it
promptly in the envelope provided for that purpose, which does not require any
postage if mailed in the United States. If you are able to attend the Meeting,
you may, if you wish, revoke the proxy and vote personally on all matters
brought before the Meeting. The enclosed proxy is being solicited by the Board
of Trustees of the Trust.
BY ORDER OF THE BOARD OF TRUSTEES
Peggy Chen, Secretary
April 29, 2002
THE R.O.C. TAIWAN FUND
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the 'Board of Trustees' or the 'Board') of The
R.O.C. Taiwan Fund (the 'Trust') for use at the Annual Meeting (the 'Meeting')
of holders (the 'Shareholders') of shares of beneficial interest of the Trust
(the 'Shares') to be held at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison, 25th Floor, 1285 Avenue of the Americas, New York, New York on
Thursday, June 20, 2002 at 9:30 a.m., New York City time, and at any adjournment
thereof.
This Proxy Statement and the accompanying proxy are first being mailed to
Shareholders on or about May 3, 2002. Any Shareholder giving a proxy has the
power to revoke it by mail (addressed to Marc E. Perlmutter, Assistant Secretary
of the Trust, at the Trust's address at c/o Citigate Dewe Rogerson, Inc., 1440
Broadway, 16th Floor, New York, New York 10018) or in person at the Meeting, by
executing a superseding proxy or by submitting a notice of revocation to the
Trust. All properly executed proxies received by mail on or before the close of
business on June 19, 2002 or delivered personally at the Meeting will be voted
as specified in such proxies or, if no specification is made, for the nominees
for election named and against proposal II described below in this Proxy
Statement.
The Board of Trustees has fixed the close of business on Monday, April 15,
2002 as the record date for the determination of Shareholders entitled to notice
of and to vote at the Meeting and at any adjournment thereof. Shareholders of
record will be entitled to one vote for each Share. No Shares have cumulative
voting rights for the election of trustees.
As of the record date, the Trust had outstanding 32,698,976 Shares.
Abstentions and 'non-votes' will be counted as present for all purposes in
determining the existence of a quorum. (A 'non-vote' occurs when a nominee
(typically, a broker-dealer) holding shares for a beneficial owner attends a
meeting with respect to such shares (in person or by proxy) but does not vote on
one or more proposals because the nominee does not have discretionary voting
power with respect to that matter and has not received instructions from the
beneficial owner.) One third of the Trust's outstanding Shares, present in
person or represented by proxy at the Meeting, will constitute a quorum for the
transaction of business at the Meeting. The affirmative vote of a plurality of
the Shares present or represented by proxy and voting on the matter in question
at the Meeting will be required at the Meeting to elect the nominees for
election as trustees. Proposal II below would require for its adoption the
affirmative vote of a majority of all outstanding Shares.
Abstentions and 'non-votes' will not have the effect of votes in opposition
to the election of a trustee. However, because proposal II below would require
for its adoption the affirmative vote of a majority of all outstanding Shares,
abstentions and 'non-votes' will have the effect of votes in opposition to the
adoption of proposal II.
International Investment Trust Company Limited, the investment adviser and
manager of the Trust (the 'Adviser'), knows of no business other than that
mentioned in proposals I and II below that will be presented for consideration
at the Meeting. If any other matter is properly presented, the persons named in
the enclosed proxy will vote in accordance with their discretion.
The Adviser's address is 17th Floor, 167 Fu Hsing North Road, Taipei,
Taiwan, Republic of China. The address of Citigate Dewe Rogerson, Inc., which
provides certain administrative services for the Trust, is 1440 Broadway, 16th
Floor, New York, New York 10018.
BENEFICIAL OWNERSHIP OF SHARES
The following table provides information, as of April 29, 2002, except as
noted, regarding the beneficial ownership of Shares by (i) each person or group
known to the Adviser to be the beneficial owner of more than 5% of the Shares
outstanding, (ii) each of the Trust's trustees or trustee nominees, (iii) each
executive officer of the Trust and (iv) all trustees and executive officers of
the Trust as a group. Except as noted, each of the named owners has sole voting
and dispositive power over the Shares listed.
----------------------------------------------------------------------------------------
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
----------------------------------------------------------------------------------------
Lazard Freres & Co. LLC ('Lazard') 2,481,800(1) 8.9%
30 Rockefeller Plaza
New York, New York 10020
U.S.A.
UBS AG ('UBS') 2,048,080(2) 6.3%
Bahnhofstrasse 45
8021, Zurich, Switzerland
Brinson Partners, Inc. ('BPI') 1,939,580(2) 5.9%
209 South LaSalle
Chicago, Illinois 60604-1295
U.S.A.
(1) Based upon information provided by Lazard in a Statement on Schedule 13G
filed on February 15, 2002 with respect to ownership as of December 31,
2001. In that statement Lazard reported that it held its Shares as
investment adviser to clients whose portfolios were managed by it. Lazard
stated that it had sole voting and sole dispositive power over such Shares.
(2) Based upon information provided by BPI and UBS in a Statement on Schedule
13G jointly filed on February 19, 2002 with respect to ownership as of
December 31, 2001. In that statement BPI reported that it held its Shares as
investment adviser to clients whose portfolios were managed by it. UBS
reported that its ownership included the Shares held by BPI as a result of
UBS's status as parent of UBS (USA) Inc., which is a parent holding company
of BPI. In addition, UBS held Shares in its status as investment adviser for
UBS (CH) Equity Fund Emerging Markets. BPI and UBS stated that they had sole
voting and shared dispositive power over their Shares. BPI and UBS
disclaimed beneficial ownership of such Shares.
I. ELECTION OF TRUSTEES
Since the inception of the Trust in 1989, the trustees of the Trust have
been divided into three classes, each having a term of three years, with the
term of one class expiring each year. The size of the Board was increased from
eight to nine trustees prior to the 2001 Annual Meeting of Shareholders (the
'2001 Annual Meeting'), which resulted in each of the Board's three classes
consisting of three trustees following the 2001 Annual Meeting.
Subsequent to the 2001 Annual Meeting, three of the trustees on the Board
resigned. Mr. Pedro-Pablo Kuczynski, who had served as a trustee since the
inception of the Trust, resigned in June 2001 in connection with his appointment
as the Minister of Finance and Economic Affairs of Peru. Mr. Daniel Chiang, who
had been a trustee since 1994 and is also a former President of the Adviser,
resigned in December 2001 in order to devote full attention to his other
business activities. Mr. Yung-San Lee, who was elected to the Board for the
first time at the 2001 Annual Meeting, resigned in January 2002 in connection
with his appointment as the Finance Minister of the Republic of China. As a
result of the foregoing, there were three vacancies on the Board at the end of
January 2002.
At a meeting in February 2002, the Board of Trustees exercised its power to
appoint new trustees to fill vacancies occurring on the Board and appointed Mr.
Cheng-Cheng Tung as a trustee, subject to
2
his also standing for election as a trustee at the Meeting. Because each of the
Board's three classes in these circumstances must consist of at least two
trustees, Mr. Tung was appointed to the Board position vacated by Mr. Lee and
will, if elected at the Meeting, serve for a term expiring on the date of the
2003 Annual Meeting of Shareholders or the special meeting in lieu thereof (when
the term of Mr. Lee otherwise would have expired). Mr. Tung currently serves as
a Director and as the President of United World Chinese Commercial Bank
('UWCCB'), an affiliated shareholder of the Adviser, where he has worked in
various capacities for more than 25 years.
The other two nominees for election to the Board at the Meeting are Mr.
Michael Ding and Mr. Robert Parker. Each of Messrs. Ding and Parker currently is
a trustee of the Trust and, if reelected, will serve for a term expiring on the
date of the 2005 Annual Meeting of Shareholders or the special meeting in lieu
thereof.
The Board of Trustees does not intend to reduce the size of the Board from
nine trustees. Accordingly, the Nominating Committee of the Board of Trustees is
considering appropriate candidates to fill the vacancies on the Board created by
the resignations of Messrs. Kuczynski and Chiang. The Board anticipates that it
will fill such vacancies after the Meeting, and prior to the end of 2002, by
exercising its power to appoint new trustees to fill vacancies occurring on the
Board and that a majority of the Board will at all times continue to consist of
persons who are not 'interested persons' of the Trust, as that term is defined
in the Investment Company Act of 1940, as amended (the 'Investment Company
Act').
The persons named in the accompanying proxy will, in the absence of contrary
instructions, vote all proxies FOR the election of the three nominees listed
below as trustees of the Trust. If any nominee should be unable to serve (an
event not now anticipated), the proxies will be voted for such person, if any,
as is designated by the Board of Trustees to replace such nominee. Proxies may
not be voted for a greater number of persons than the number of nominees listed
below under 'Information Concerning Nominees.'
INFORMATION CONCERNING NOMINEES
The following table sets forth certain information concerning each of the
nominees for election as a trustee of the Trust.
-----------------------------------------------------------------------------------------------------------------------------
Other Business Experience,
Other Positions with
Affiliated Persons of the
Name (Age) and Principal Trust and Other
Address Position(s) Held Term of Office and Occupation(s) Directorships Held by
of Nominee with the Trust Length of Time Served During the Past Five Years Nominee
-----------------------------------------------------------------------------------------------------------------------------
Interested Nominees*
Michael Ding (44) Trustee and Trustee since 2001 and President of the Adviser Portfolio Manager of the
167 Fu Hsing North Road President until the 2002 Annual since February 2001; Senior Trust at the Adviser since
Taipei, Taiwan, R.O.C. Meeting of Shareholders Vice President of the July 1999; Deputy Portfolio
or the special meeting Adviser from March 1999 to Manager of the Trust at the
in lieu thereof; and February 2001; Chief Adviser from March 1999 to
President since Economist and Head of July 1999; Head of Research
September 1999 Research, Citicorp and Information for the
International Securities Greater China Region,
Ltd., Taipei, Taiwan, McKinsey & Co., Ltd.,
1996-99 Taipei, Taiwan, 1994-96;
Associate Professor,
Graduate School of
Management at the National
Taiwan University of
Science and Technology,
1991-94
3
------------------------------------------------------------------------------------------------------------------------------
Other Business Experience,
Other Positions with
Affiliated Persons of the
Name (Age) and Principal Trust and Other
Address Position(s) Held Term of Office and Occupation(s) Directorships
of Nominee with the Trust Length of Time Served During the Past Five Years Held by Nominee
-----------------------------------------------------------------------------------------------------------------------------
Cheng-Cheng Tung (62) Trustee Trustee since February President, UWCCB, since Director, UWCCB, since May
167 Fu Hsing North Road 2002 and until the 2002 November 2000; General 2001; Director, Taipei
Taipei, Taiwan, R.O.C. Annual Meeting of Manager, UWCCB, since 1998; Smart Card Corp., since
Shareholders or the Executive Vice President, February 2001; Director,
special meeting in lieu UWCCB, 1989-2000 Financial Information
thereof Service Co., Ltd., since
January 2002
Non-Interested Nominee
----------------------
Robert P. Parker (60) Trustee Trustee since 1998 and Chairman, Parker Price Partner, McCutchen, Doyle,
44 Montgomery Street until the 2002 Annual Venture Capital, Inc. Brown & Enersen, 1988-97
Suite 3800 Meeting of Shareholders (formerly known as Allegro
San Francisco, or the special meeting Capital, Inc.), since 1997
California 94104 in lieu thereof
U.S.A.
* These nominees are considered by the Trust's counsel to be 'interested
persons' (as defined in the Investment Company Act) of the Trust. Mr. Tung is
deemed to be an interested person because of his affiliation with UWCCB, a
shareholder of the Adviser. Mr. Ding is deemed to be an interested person
because of his affiliation with the Adviser and his position as President of
the Trust.
Mr. Ding and Mr. Tung, who are citizens and residents of the Republic of
China (the 'R.O.C.'), are neither citizens nor residents of the United States.
There can be no assurance that Mr. Ding and Mr. Tung will have any assets in the
United States that could be attached in connection with any action, suit or
proceeding to enforce the provisions of U.S. securities laws. The Trust has been
advised by its R.O.C. counsel that an R.O.C. court will enforce liabilities
predicated solely upon U.S. securities laws if (i) the court properly obtained
jurisdiction, (ii) there was proper service of process, (iii) the judgment does
not contravene public order or good morals and (iv) the judgments of R.O.C.
courts are reciprocally recognized by U.S. courts.
INFORMATION CONCERNING OTHER TRUSTEES
The following table sets forth certain information concerning the trustees
of the Trust (other than the trustees who are also nominees referred to above).
------------------------------------------------------------------------------------------------------------------------------
Other Business
Experience, Other
Positions with Affiliated
Name (Age) and Principal Persons of the Trust and
Address Position(s) Held Term of Office and Occupation(s) Other Directorships
of Trustee with the Trust Length of Time Served During the Past Five Years Held by Trustee
------------------------------------------------------------------------------------------------------------------------------
Interested Trustee*
-------------------
Theodore S.S. Cheng (71) Trustee and Trustee since 1989 and Chairman of the Adviser Director of the Adviser
167 Fu Hsing North Road Chairman until the 2004 Annual since 1999; Chairman, China since 1999 and 1987-93;
Taipei, Taiwan, R.O.C. Meeting of Shareholders United Trust & Investment Consultant to the Adviser,
or the special meeting Corporation, 1997-99; 1993-99; Chairman of the
in lieu thereof; and Chairman, Taipei Financial Adviser, 1987-93; President,
Chairman since 1989 Center Corp., 1997-99 The International Commercial
Bank of China, 1987-97;
Director, Grand Cathay
Securities Co., Ltd.,
1988-97: Director,
Manufacturers Hanover
Central Leasing Co. Ltd,
since 1987
4
------------------------------------------------------------------------------------------------------------------------------
Other Business
Experience, Other
Principal Positions with Affiliated
Name (Age) and Occupation(s) Persons of the Trust and
Address Position(s) Held Term of Office and During the Past Five Other Directorships
of Trustee with the Trust Length of Time Served Years Held by Trustee
------------------------------------------------------------------------------------------------------------------------------
Non-Interested Trustees
-----------------------
Edward B. Collins (59) Trustee Trustee since 2000 and Managing Director, China Director, Mediostream, Inc.,
China Vest LLC until the 2003 Annual Vest Group, since 1995 since 2000; Director, Metro
160 Sansome Street Meeting of Shareholders 3D, since 1998; Director,
18th Floor or the special meeting Halcyon Software
San Francisco, California in lieu thereof Corporation, 1999-2001
94104
U.S.A.
David N. Laux (74) Trustee Trustee since 1992 and President, US-Taiwan Chairman and Managing
2400 North Clarendon until the 2004 Annual Business Forum, since 2000; Director, American Institute
Boulevard Meeting of Shareholders President, US-ROC (Taiwan) in Taiwan, 1987-90; Director
PH-3 or the special meeting Business Council, 1990-2000 of Asian Affairs, National
Arlington, Virginia 22201 in lieu thereof Security Council, The White
U.S.A. House, 1982-86
Alfred F. Miossi (79) Trustee Trustee since 1992 and Retired since 1987 Executive Vice President,
2511 Kenilworth Avenue until the 2004 Annual Continental Illinois
Wilmette, Illinois 60091 Meeting of Shareholders National Bank & Trust
U.S.A. or the special meeting Company of Chicago
in lieu thereof ('Continental'), 1971-87;
Head of International
Financial Services at
Continental, 1985-87;
Director of International
Affairs at Continental,
1980-85
* This trustee is considered by the Trust's counsel to be an 'interested person'
(as defined in the Investment Company Act) of the Trust. Mr. Cheng is deemed
to be an interested person of the Trust because of his affiliation with the
Adviser.
The Board of Trustees of the Trust held four regularly scheduled meetings,
and the Audit Committee held two regularly scheduled meetings, during the fiscal
year ended December 31, 2001.
The Trust's Board of Trustees has an Executive Committee, which, subject to
certain restrictions, may exercise all powers and authority of the Board between
meetings of the Board. The current members of the Executive Committee are
Messrs. Theodore S.S. Cheng, Alfred F. Miossi and Robert P. Parker. The
Executive Committee did not meet during the fiscal year ended December 31, 2001.
The Board of Trustees has a Nominating Committee, the current members of
which are Messrs. Edward B. Collins, David N. Laux, Alfred F. Miossi and Robert
P. Parker. Mr. Pedro-Pablo Kuczynski was a member of the Nominating Committee
until June 2001. The Nominating Committee exercises such responsibilities as may
be charged to it by the Board of Trustees of the Trust from time to time and
will consider, when appropriate, recommendations for trustees submitted by
Shareholders. Any such recommendations should be sent to the Trust's Nominating
Committee at c/o Citigate Dewe Rogerson, 1440 Broadway, 16th Floor, New York,
New York 10018. The Nominating Committee held one meeting during the fiscal year
ended December 31, 2001 and also met in February 2002. At both meetings, the
Committee considered candidates to fill one or more of the vacancies on the
Board that had occurred since June 2001. The Committee recommended at its
meeting in February that Mr. Cheng-Cheng Tung be appointed to the Board, subject
to his also standing for election as a trustee at the Meeting. See 'Information
Concerning Nominees' above.
5
AUDIT COMMITTEE AND INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Trustees has an Audit Committee, the current and former members
of which have been and are disinterested trustees of the Trust, as defined in
the Investment Company Act, and independent trustees of the Trust, as defined in
the rules of the New York Stock Exchange. The responsibilities of the Audit
Committee include, among other things, review and recommendation of the
selection of the independent public accountants of the Trust, review of
financial statements of the Trust prior to their submission to the Board of
Trustees and of other accounting matters of the Trust, monitoring the
relationship of the Trust with the Adviser and review of the administration of
the Adviser's and the Trust's respective Codes of Ethics and the Adviser's
Policy and Procedures to Prevent Insider Trading. The Audit Committee held two
meetings during the fiscal year ended December 31, 2001 and also met on
February 18, 2002. At those meetings the Audit Committee, among other things:
(i) approved the selection of KPMG LLP ('KPMG') as the Trust's
independent public accountants for its 2001 and 2002 fiscal years;
(ii) reviewed the audited financial statements of the Trust for its 2000
and 2001 fiscal years and discussed those statements with the Trust's
management and KPMG;
(iii) discussed with the Trust's management and KPMG those matters
requiring discussion by the Accounting Standards Board's Statement of
Auditing Standards No. 61 as currently in effect, including the independence
of KPMG;
(iv) received the written disclosures and the letters from KPMG required
by the Independence Standards Board's Standard No. 1 as currently in effect;
(v) reviewed the charter of the Audit Committee;
(vi) reviewed the investment management arrangements between the Trust
and the Adviser, including the management fee payable by the Trust to the
Adviser; and
(vii) considered the compatibility of KPMG's independence as the Trust's
principal accountants with KPMG's provision of services for the matters in
relation to which fees billed by KPMG to the Trust and the Adviser are
described in items 2 and 3 under 'Audit Fees' below.
Based upon the reviews, discussions and consideration described above, the
Audit Committee recommended to the Board of Trustees that the Trust's audited
financial statements be included in its Annual Report to Shareholders for the
Trust's fiscal year ended December 31, 2001.
Members of the Audit Committee:
Alfred F. Miossi, Chair
Edward B. Collins
David N. Laux
Robert P. Parker
Representatives of KPMG are expected to be present at the Meeting, will have
an opportunity to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions from Shareholders.
6
AUDIT FEES
1. Audit Fees. The fees billed by KPMG for the audit of the Trust's
financial statements for the year 2001 and the review of the financial
statements that appeared in the Trust's semiannual report to Shareholders were
$58,500.
2. Financial Information Systems Design and Implementation Fees. No fees
were billed by KPMG to either the Trust or the Adviser for the year 2001 for
services relating to the design and implementation of the Adviser's hardware and
software that aggregate source data underlying the Trust's financial statements
or generate information that is significant to the Trust's financial statements
taken as a whole.
3. All Other Fees. The fees billed by KPMG to the Trust and the Adviser with
respect to all other services to them for the year 2001 were $54,800.
OFFICERS OF THE TRUST
The following table sets forth certain information concerning the officers
of the Trust (other than Messrs. Cheng and Ding, who are also trustees). The
Chairman and the President (Messrs. Cheng and Ding, respectively) each holds
office until his successor is duly elected and qualified, and all other officers
hold office at the direction of the trustees.
---------------------------------------------------------------------------------------------------------------------
Name (Age) and Address Position(s) Held with Principal Occupation(s)
of Officer the Trust Length of Time Served During the Past Five Years
---------------------------------------------------------------------------------------------------------------------
Peggy Chen (39) Secretary, Treasurer and Since 2000 Vice President (Finance) of the
167 Fu Hsing North Road Chief Financial Officer Adviser since 2000; Manager of
Taipei, Taiwan, R.O.C. Finance, Shin Fu Life Insurance Co.,
Ltd., from prior to 1997 to 2000
Dirk Bennett (55) Assistant Vice President Since prior to 1997 Manager of Research Department of
167 Fu Hsing North Road and Assistant Secretary the Adviser since prior to 1997
Taipei, Taiwan, R.O.C.
Marc E. Perlmutter (49) Assistant Vice President Since prior to 1997 Partner of the law firm of Paul,
Paul, Weiss, Rifkind, and Assistant Secretary Weiss, Rifkind, Wharton & Garrison,
Wharton & Garrison U.S. legal counsel to the Trust,
1285 Avenue of the since prior to 1997
Americas
New York, New York
10019-6064
U.S.A.
7
---------------------------------------------------------------------------------------------------------------------
Name (Age) and Address Position(s) Held with Principal Occupation(s)
of Officer the Trust Length of Time Served During the Past Five Years
---------------------------------------------------------------------------------------------------------------------
Edwin C. Laurenson (53) Assistant Vice President Since prior to 1997 Partner of the law firm of Baker &
Baker & McKenzie and Assistant Secretary McKenzie since March 2000;
805 Third Avenue Securities Counsel to the law firm
New York, New York 10022 of Paul, Weiss, Rifkind, Wharton &
U.S.A. Garrison, U.S. legal counsel to the
Trust, from prior to 1997 to March
2000
---------------------------------------------------------------------------------------------------------------------
TRUSTEE AND OFFICER COMPENSATION
The compensation received by each trustee of the Trust for the last fiscal
year is set forth below. Officers of the Trust receive no renumeration from the
Trust.
----------------------------------------------------------------------
Total Compensation
from the Trust
Name Position Paid to Trustees(1)(2)
----------------------------------------------------------------------
Theodore S.S. Cheng(3) Trustee --
Daniel K.L. Chiang(3)(4) Trustee --
Edward B. Collins Trustee $19,565
Michael Ding(3) Trustee --
Pedro-Pablo Kuczynski(5) Trustee $12,000
David N. Laux Trustee $14,000
Yung San Lee(3) Trustee --
Alfred F. Miossi Trustee $16,000
Robert P. Parker Trustee $23,392
----------------------------------------------------------------------
(1) The trustees of the Trust do not receive any pension or retirement benefits
from the Trust or the Adviser.
(2) With respect to service in 2001, each trustee of the Trust who was not
affiliated with the Adviser was entitled to recieve fees, paid by the Trust,
of $1,000 for each Board of Trustees meeting or committee meeting attended
and an annual trustee's fee of $10,000, as well as reimbursement for spousal
travel expenses in connection with Trustees' meeting attendance. The
Adviser, which supervises the Trust's investments and pays the compensation
and certain expenses of the personnel and certain other interested persons
of the Adviser who serve as trustees and/or officers of the Trust, receives
an investment advisory fee.
(3) The trustees of the Trust who are officers of the Adviser, or who are
otherwise deemed to be interested persons (as defined in the Investment
Company Act) of the Adviser, receive no remuneration from the Trust.
(4) Mr. Chiang resigned from the Board of Trustees in December 2001.
(5) Mr. Kuczynski resigned from the Board of Trustees in June 2001.
II. CONVERSION OF THE TRUST FROM A CLOSED-END INVESTMENT COMPANY
TO AN OPEN-END INVESTMENT COMPANY
BACKGROUND AND SUMMARY
The Trust is registered as a closed-end investment company under the
Investment Company Act and has operated as a closed-end fund since the
reorganization of The Taiwan (R.O.C.) Fund (which was an open-end fund not
registered in the United States) into the Trust on May 19, 1989. The Trust's
Amended and Restated Declaration of Trust (the 'Declaration of Trust') and
By-Laws provide that the Board of Trustees is required to submit to the
Shareholders at their next annual meeting a binding resolution to convert the
Trust into an open-end investment company if the Shares trade on the New York
Stock Exchange (the 'NYSE') at an average discount from their net asset value
('NAV') of
8
more than 10% during any twelve-week period beginning after the most recent such
vote (which in the current case occurred at last year's annual meeting). For
these purposes the average variation of the trading price of the Shares from
their NAV is determined on the basis of such variances as of the last trading
day in each week. The affirmative vote of a majority of the outstanding Shares
is required for the adoption of such a resolution.
By the terms of the Declaration of Trust, this requirement became effective
on June 1, 1992, and since then the Shareholders have voted on such a resolution
six times, in 1995 and each of the years from 1997 through 2001. In each
instance the Board recommended that Shareholders vote against the resolution to
convert the Trust into an open-end investment company, and such resolution was
not adopted by the Shareholders. In the most recent vote, on June 21, 2001,
12.80% of the outstanding Shares were voted in favor of the proposal, 16.29%
were voted against, and 70.91% were either not present at the meeting or were
not voted on that particular matter.
After last year's vote, the Shares, like those of most other country funds,
continued to trade at a discount. During each of the twelve-week periods
beginning June 25, 2001 and ended April 26, 2002, the Shares traded at an
average discount of greater than 10%. Such average discount ranged from 12.73%
for the twelve weeks ended September 10, 2001 to 15.12% for the twelve weeks
ended December 28, 2001. Thus, the Board of Trustees is required to submit to
the Shareholders the proposal described herein.
On April 26, 2002, the most recent trading date before the printing of this
Proxy Statement, the Shares' trading price on the NYSE closed at a discount to
NAV of 13.61%. Conversion would eliminate the trading market in the Shares and
provide each Shareholder with a continuing opportunity to redeem his Shares at
their NAV. However, for the reasons described below, the Board of Trustees
recommends, as it has in the past, that Shareholders vote against this proposal,
which will be adopted, as provided in the Declaration of Trust, only if approved
by holders of a majority of the outstanding Shares.
At meetings on December 4, 2001 and February 19, 2002, the Board of Trustees
of the Trust reviewed, as it has in the past, information concerning the legal,
operational and practical differences between closed-end and open-end investment
companies, the Trust's performance to date as a closed-end fund, the historical
relationship between the market price of the Shares and their NAV, the possible
effects of conversion on the Trust, and alternatives to conversion, including
liquidation of the Trust. At its meeting on February 19, 2002, the Board,
including a majority of the trustees who are not interested persons (as defined
in the Investment Company Act) of the Trust, unanimously concluded that it is in
the best interests of the Trust and the Shareholders that the Trust remain a
closed-end investment company.
The Board of Trustees and the Adviser continue to believe that conversion to
an open-end investment company could adversely affect the functioning of the
Trust's investment operations and its investment performance, as described below
under 'Effect of Conversion on the Trust -- Portfolio Management.' They also
believe that conversion could expose the Trust to the risk of a substantial
reduction in its size and a corresponding loss of economies of scale and
increase in its expenses as a percentage of NAV, as described below under
'Effect of Conversion on the Trust -- Potential Increase in Expense Ratio and
Decrease in Size.'
In deciding how to recommend that the Shareholders vote on this matter, the
Board of Trustees took note of the fact that, since the inception of the Trust
in 1989 (although not in recent years), the Shares periodically have traded at a
premium above NAV. (See below under 'Differences Between
9
Open-end and Closed-end Investment Companies -- Fluctuation of Capital;
Redeemability of Shares; Elimination of Discount and Premium.') The Shares'
average annual discount/premium (determined by comparing the Shares' NAV to
their closing price on the NYSE on each trading day) by year is as follows:
DISCOUNT(-)/
YEAR PREMIUM
---- ----------------
1989 (May 12 to December 31).................... 2.71%
1990............................................ -9.47%
1991............................................ -3.28%
1992............................................ 4.40%
1993............................................ 3.46%
1994............................................ 0.75%
1995............................................ 1.66%
1996............................................ 2.95%
1997............................................ -17.17%
1998............................................ -17.54%
1999............................................ -13.87%
2000............................................ -18.87%
2001............................................ -14.62%
2002 (January 1 to April 26).................... -13.56%
The Board of Trustees believes that eliminating the possibility of a
discount would not justify the fundamental changes that conversion would entail
to the Trust's portfolio management and operations, the risk of reduced size and
the potential adverse effect on the Trust's investment performance. In order to
reduce or eliminate the discount without impairing the Trust's closed-end format
and the benefits it derives from that format, the Adviser has sought to increase
awareness about the Trust through Shareholder and market communications and
meetings with securities analysts and market professionals in the investment
community specializing in the closed-end funds sector. While the Adviser's
efforts in this respect have not eliminated the Shares' tendency in recent years
to trade at a discount to NAV, the Board of Trustees believes that such efforts
have had a favorable effect on Shareholder relations by keeping major
Shareholders informed concerning the Trust's investment strategies and policies
and impressing those Shareholders with the Board's and the Adviser's
attentiveness to their concerns, as well as by informing the Board and the
Adviser of those Shareholders' views concerning the Trust's management,
strategies and policies.
In addition, in 1991 the Board of Trustees authorized a periodic share
repurchase program under Rule 10b-18 under the Securities Exchange Act of 1934,
pursuant to which purchases of Shares may be made by the Trust when the Shares
trade at a discount to their NAV. Purchases under that program were made during
the second half of 1991 and during May through July of 1997, and such purchases
could be recommenced at any time after appropriate notice to Shareholders.
However, the trustees believe, based upon both the Trust's own experience and
information that the trustees have reviewed from time to time with respect to
share repurchase programs implemented by other closed-end funds, that additional
purchases of Shares by the Trust are unlikely to affect the discount to NAV at
which the Shares may otherwise trade. In addition, any such purchases by the
Trust would have the effect of reducing the funds available to the Trust for
investment in the Taiwan market. Accordingly, the Board of Trustees currently
has no plan or intention of causing the Trust to make further such purchases.
10
Shareholders also have the opportunity to purchase additional Shares in the
market at the discounted price when the Shares trade below their NAV.
Shareholders who make such purchases could benefit in circumstances in which the
gap between the NAV and the market price of the Shares shrinks after they make
their purchases, especially when the NAV is also increasing as a result of
increases in the value of the Trust's investments. The Shares' NAV at the end of
each week is published in compilations of such information for all closed-end
funds in publications such as The Wall Street Journal, The New York Times and
Barron's; the daily NAV at the close of the preceding trading day in Taiwan can
be obtained by calling the Trust at 1-800-343-9567 or by accessing the Trust's
website at www.roctaiwanfund.com.
If this proposal is not approved, the Shares continue to trade at a discount
and the average discount is again greater than 10% during a twelve-week period
beginning after the date of the Meeting, the Board of Trustees and the
Shareholders will have an opportunity to consider again converting the Trust
into an open-end investment company. (The Board of Trustees may also decide at
any time to present to the Shareholders the question of whether the Trust should
be converted to an open-end investment company; however, under the Declaration
of Trust such a voluntary submission would require the approval of two-thirds of
the outstanding Shares for its adoption.)
As described below under 'Measures to be Adopted if the Trust Becomes an
Open-end Fund -- Redemption Fee,' if the Shareholders vote to convert the Trust
into an open-end fund, the Board of Trustees may cause the Trust to impose a fee
payable to the Trust on all redemptions of up to 0.50% of redemption proceeds
for a period of up to nine months from conversion.
DIFFERENCES BETWEEN OPEN-END AND CLOSED-END INVESTMENT COMPANIES
1. Fluctuation of Capital; Redeemability of Shares; Elimination of Discount
and Premium. Closed-end investment companies generally do not redeem their
outstanding shares or engage in the continuous sale of new securities, and thus
operate with a relatively fixed capitalization. The shares of closed-end
investment companies are normally bought and sold in the securities market at
prevailing market prices, which may be equal to, less than or more than NAV.
From May 12, 1989 to April 26, 2002 the Shares traded on the NYSE at prices
ranging from 31.55% below NAV (on April 27, 1990) to 35.36% above NAV (on
December 31, 1993). The Shares most recently traded at a premium to their NAV on
January 30, 1998. On April 26, 2002, the most recent trading date before the
printing of this Proxy Statement, the closing price of a Share on the NYSE was
13.61% below its NAV. Although it is now possible, subject to certain
restrictions, for both institutions and individuals outside Taiwan to invest
directly in R.O.C. stocks, the Board of Trustees believes that many foreign
investors, and particularly foreign individuals, continue to invest in the
R.O.C. market through a managed intermediary like the Trust. The full
liberalization of the right of foreign investors to invest in Taiwan has been in
effect since 1996; however, additional alternatives to the Trust can be expected
to develop as vehicles for investment in R.O.C. securities by investors outside
the R.O.C., which could have the effect of reducing or eliminating (or changing
to a discount) any premium, or increasing any discount, at which the Shares
trade in relation to their NAV.
By contrast, open-end investment companies in the United States, commonly
referred to as mutual funds, issue redeemable securities with respect to which,
traditionally, no secondary trading market has been permitted to develop.
(Although this has changed in recent years with the establishment of
exchange-traded open-end index funds, it remains true that the vast majority of
open-end funds, both in number and total assets, do not offer secondary market
trading in their shares.) Except during periods when the NYSE is closed or
trading thereon is restricted, or when
11
redemptions may otherwise be suspended in an emergency as permitted by the
Investment Company Act, the holders of these redeemable securities have the
right to surrender them to the mutual fund and obtain in return their
proportionate share of the mutual fund's NAV at the time of the redemption (less
any redemption fee charged by the fund or contingent deferred sales charge
imposed by the fund's distributor).
Most mutual funds also continuously issue new shares to investors at a price
based upon their shares' NAV at the time of issuance. Accordingly, an open-end
fund experiences continuing inflows and outflows of cash and may experience net
sales or net redemptions of its shares.
Upon conversion of the Trust into an open-end investment company,
Shareholders who wished to realize the value of their Shares would be able to do
so by redeeming their shares at NAV (less the possible temporary redemption fee
discussed below under 'Measures to be Adopted if the Trust Becomes an Open-end
Fund -- Redemption Fee'), which would rise or fall based upon the performance of
the Trust's investment portfolio. The trading market for the Shares would be
eliminated, and with it the discount from NAV at which the Shares have
periodically tended to trade on the NYSE. Conversion would also eliminate,
however, any possibility that the Shares could trade at a premium over NAV. (See
the chart on page 10 for information with regard to the periods during which the
Shares have, on the average, traded at a premium to their NAV.)
2. Cash Reserves. Because closed-end investment companies are not required
to meet redemptions, their cash reserves can be substantial or minimal,
depending on the investment manager's investment strategy. The managers of many
open-end investment companies, on the other hand, believe it desirable to
maintain cash reserves adequate to meet anticipated redemptions without
prematurely liquidating their portfolio securities. Although many open-end funds
operate successfully in this environment, the maintenance of larger cash
reserves required to operate prudently as an open-end investment company when
net redemptions are anticipated may reduce an open-end investment company's
ability to achieve its investment objective by limiting its investment
flexibility and the scope of its investment opportunities. In addition, open-end
investment companies are subject to a requirement that no more than 15% of their
net assets may be invested in securities that are not readily marketable or are
otherwise considered to be illiquid. However, the Trust currently does not
invest in, nor does it anticipate investing in, illiquid securities to any
material extent.
3. Raising Capital. Closed-end investment companies may not issue new shares
at a price below NAV except in rights offerings to existing shareholders, in
payment of distributions and in certain other limited circumstances.
Accordingly, the ability of closed-end funds to raise new capital is restricted,
particularly at times when their shares are not trading at a premium to NAV. The
shares of open-end investment companies, on the other hand, are offered by such
companies (in most cases continuously) at NAV, or at NAV plus a sales charge,
and the absence of a secondary trading market generally makes it impossible to
acquire such shares in any other way. The Trust most recently raised additional
capital in 1995, when it obtained net offering proceeds of approximately
$64,000,000 upon the completion of a public offering of additional Shares at a
small premium to NAV.
4. NYSE Delisting; State and Federal Fees on Sales of Shares. If the Trust
converted to an open-end fund, the Shares would immediately be delisted from the
NYSE. Some investment managers believe that the listing of an investment company
on a U.S. stock exchange, particularly the NYSE, represents a valuable asset,
especially in terms of attracting non-U.S. investors. Delisting would save the
Trust annual NYSE fees of approximately $32,000; but the absence of a stock
exchange listing, combined with the need to issue new Shares when investors wish
to increase their holdings, would have the effect of requiring the Trust to pay
federal and state fees on sales of Shares, except to the extent that
12
the underwriter of such sales paid some or all of such fees. Any net savings or
increased cost to the Trust because of the different expenses would not,
however, be expected to materially affect the Trust's expense ratio.
5. Underwriting; Brokerage Commissions or Sales Charges on Purchases and
Sales. Open-end investment companies typically seek to sell new shares on a
continuous basis in order to offset redemptions and avoid shrinkage in size.
Shares of 'load' open-end investment companies are normally offered and sold
through a principal underwriter, which deducts a sales charge from the purchase
price at the time of purchase or from the redemption proceeds at the time of
redemption, or receives a distribution fee from the fund, or both, to compensate
it and securities dealers for sales and marketing services (see 'Measures to be
Adopted if the Trust Becomes an Open-end Fund -- Underwriting and Distribution'
below). Shares of 'no-load' open-end investment companies are sold at NAV,
without a sales charge, with the fund's investment adviser or an affiliate
normally bearing the cost of sales and marketing from its own resources. Shares
of closed-end investment companies, on the other hand, are bought and sold in
secondary market transactions at prevailing market prices subject to the
brokerage commissions charged by the broker-dealer firms executing such
transactions. Except in the case of shares sold pursuant to a dividend
reinvestment plan, when a closed-end fund sells newly issued shares, it
typically does so in an underwritten public offering in which an underwriting
fee of 5% or more is imposed. Except in the case of a rights offering, such
sales can be made only at or above the shares' then applicable NAV after the
deduction of such an underwriting fee.
6. Shareholder Services. Open-end investment companies typically provide
more services to shareholders and may incur correspondingly higher shareholder
servicing expenses. One service that is generally offered by open-end funds is
enabling shareholders to transfer their investment from one fund into another
fund that is part of the same 'family' of open-end funds at little or no cost to
the shareholders. The Trust has engaged in no discussions with any family of
funds to become a part of such family, and there can be no assurance that the
Trust would be able to make such an arrangement if the Shareholders voted to
convert the Trust to an open-end fund. If the requisite majority of the
Shareholders approve this proposal, the Board of Trustees would weigh the cost
of any particular service against the anticipated benefit of such service. The
Board of Trustees has no current view as to which, if any, Shareholder services
it would seek to make available to Shareholders and implement as part of the
Trust's joining a family of funds or otherwise.
7. Leverage. Open-end investment companies are prohibited by the Investment
Company Act from issuing 'senior securities' representing indebtedness (i.e.,
bonds, debentures, notes and other similar securities), other than indebtedness
to banks with respect to which there is asset coverage of at least 300% for all
borrowings, and may not issue preferred stock. Closed-end investment companies,
on the other hand, are permitted to issue senior securities representing
indebtedness when the 300% asset coverage test is met, may issue preferred stock
subject to a 200% asset coverage test and are not limited to borrowings solely
from banks. This greater ability to issue senior securities gives closed-end
investment companies more flexibility in 'leveraging' their shareholders'
investments than is available to open-end investment companies. This difference
is not likely to be of importance with respect to the Trust, however, because
the Trust's fundamental investment policies (which may be changed only with
Shareholder consent) forbid it to borrow more than 5% of its NAV (a restriction
that would continue to apply if the Trust were an open-end fund). Although the
Declaration of Trust permits the Board of Trustees to create and issue preferred
stock, the trustees have no intention of doing so.
13
8. Annual Shareholders Meetings. The Trust is organized as a Massachusetts
business trust under the terms of the Declaration of Trust. As a closed-end
investment company listed on the NYSE, the Trust is required by the rules of the
NYSE to hold annual meetings of its Shareholders. This requirement would cease
upon a delisting of the Shares from the NYSE. A provision in the Declaration of
Trust provides that, if the Trust were converted to an open-end investment
company, the Declaration of Trust could be amended to provide that the Trust
would no longer be required to hold annual meetings. However, no vote is being
sought on such a proposal at this time. If the Trust were no longer required to
hold annual meetings of Shareholders, it would still be required by the
Investment Company Act to have periodic meetings to approve certain matters and,
under certain circumstances, to elect trustees. (See the discussion below under
'Measures to be Adopted if the Trust Becomes an Open-end Fund -- Effect on the
Trust's Declaration of Trust.') The Trust would save the cost of annual
meetings, which management estimates to be approximately $50,000 per year;
however, these savings would not be expected to materially affect the Trust's
expense ratio.
9. Reinvestment of Dividends and Distributions. Like the plans of many other
closed-end funds, the Trust's Dividend Reinvestment Plan (the 'Plan') permits
Shareholders to elect to reinvest their dividends and distributions on a
different basis than would be the case if the Trust converted to an open-end
investment company. Currently, if the Shares are trading at a discount, the
agent for the Plan will attempt to buy as many of the Shares as are needed for
this purpose on the NYSE or elsewhere. This permits a reinvesting Shareholder to
benefit by purchasing additional Shares at a discount, and this buying activity
may tend to lessen any discount. If Shares are trading at a premium, reinvesting
Shareholders are issued Shares at the higher of NAV and 95% of the market price.
As an open-end investment company, all dividends and distributions would be
reinvested at NAV.
10. Capital Gains. The treatment of capital gains required under the
Internal Revenue Code (the 'Code') may be disadvantageous to non-redeeming
stockholders of an open-end fund. Although the fund's manager may be able to
sell portfolio securities at a price that does not reflect a taxable gain in
order to raise cash to satisfy redeeming stockholders, a mutual fund that is
required to sell portfolio securities may realize a net capital gain if the
fund's basis in the portfolio securities sold is less than the sale price
obtained. The Code imposes both an income tax and an excise tax on a regulated
investment company's net capital gain (regardless of whether the fund is
open-end or closed-end) unless the gain is distributed to all stockholders,
including non-redeeming stockholders. Furthermore, in order to make a capital
gain distribution, a fund may need to sell additional portfolio securities,
thereby reducing further its size and, possibly, creating additional capital
gain. While, as noted, taxes on such gains are also imposed on closed-end funds,
a closed-end fund does not face the possible need to sell appreciated securities
in order to raise funds to meet redemption requests.
EFFECT OF CONVERSION ON THE TRUST
In addition to the inherent characteristics of open-end investment companies
described above, the Trust's conversion to an open-end investment company would
potentially have the consequences described below.
1. Portfolio Management. As noted above, a closed-end investment company
operates with a relatively fixed capitalization while the capitalization of an
open-end investment company fluctuates depending upon whether it experiences net
sales or net redemptions of its shares. Although the data on the subject are
unclear, some observers believe that open-end funds tend to have larger net
sales near market highs and larger net redemptions near market lows. To the
extent that this is true, if the
14
Trust were to convert to an open-end investment company, the Adviser might be
faced with a need to invest new monies near market highs and to sell portfolio
securities in a falling market when it might otherwise wish to invest. Because
the Trust is a closed-end fund, however, the Adviser currently is not required
to invest new monies or liquidate portfolio holdings at what may be inopportune
times, and can manage the Trust's portfolio with a greater emphasis on long-term
considerations.
The Board of Trustees also believes that the closed-end format is better
suited than the open-end format to the Trust's investment objective of achieving
long-term capital appreciation through investment primarily in publicly traded
equity securities of R.O.C. issuers. The Board of Trustees believes that,
notwithstanding developments in Taiwan that have had the effect of liberalizing
restrictions on investment by foreign investors in the Taiwan securities market,
investor psychology towards Taiwan remains susceptible of rapid and extreme
swings that would be likely to have a material and unpredictable impact on
inflows and outflows from the Trust if it were to become an open-end fund. The
Board of Trustees believes that the Adviser can better pursue the Trust's long-
term investment objective without short-term pressures to invest new monies or
liquidate portfolio holdings at times when the Adviser's investment style would
dictate doing otherwise. Furthermore, the Board of Trustees believes that a need
for the Trust to maintain some level of cash reserves to fund redemptions could
restrict the Trust's ability to remain fully invested in equity securities in
circumstances in which the Adviser otherwise thought it advantageous to be so
invested.
2. Potential Increase in Expense Ratio and Decrease in Size. Conversion to
an open-end investment company would raise the possibility of the Trust
suffering substantial redemptions of Shares, particularly in the period
immediately following the conversion, although the potential temporary
redemption fee of up to 0.50% described below under 'Measures to be Adopted if
the Trust Becomes an Open-end Fund' might reduce the number of initial
redemptions that would otherwise occur. Unless the Trust's principal
underwriter, if any, were able to generate sales of new Shares sufficient to
offset these redemptions or the performance of the Trust's investments was
sufficiently favorable to offset net redemptions, the size of the Trust would be
expected to shrink. (See 'Measures to be Adopted if the Trust Becomes an
Open-end Fund -- Underwriting and Distribution.') Because certain of the Trust's
operating expenses are fixed and others (including the fees paid by the Trust to
the Adviser) decline as a percentage of the Trust's NAV as the NAV increases, a
decrease in the Trust's asset size would likely increase the ratio of its
operating expenses to its income and net assets and, as a result, decrease the
Trust's net income per Share. Such a decrease in size would also result in a
reduction in the amount of fees paid by the Trust to the Adviser and could
result in a decision by the Board of Trustees to terminate and liquidate the
Trust (or by the Adviser not to continue to act as such) if the amount of the
Trust's assets were reduced such that it was no longer considered economically
feasible for the Trust to continue to carry on business.
3. Possible Sales of Portfolio Securities. If the Trust were to experience
substantial redemptions of Shares following its conversion to an open-end
investment company, it would probably not have sufficient cash reserves to fund
such redemptions and therefore could be required to sell portfolio securities
and incur increased transaction costs in order to raise cash to meet such
redemptions. Any net gains resulting from sales of portfolio securities effected
to fund cash redemption obligations would normally be distributed to all
Shareholders, thereby further reducing the size of the Trust, and would be
taxable to them. See 'Differences Between Open-end and Closed-end Investment
Companies -- Capital Gains' above.
4. Conversion Costs. The process of converting the Trust to an open-end
investment company would involve legal and other expenses to the Trust,
including the preparation of a registration
15
statement under the Securities Act of 1933 (see 'Measures to be Adopted if the
Trust Becomes an Open-end Fund -- Timing' below) and the payment of necessary
fees with respect to such registration statement and the sale of Shares in
various states. The Board of Trustees has been advised that these conversion
expenses, which would be paid by the Trust and would result in a one-time
increase in the Trust's current expense ratio, could be expected to total at
least $150,000. Because the Trust is unable to determine at this time the actual
costs that would be involved, it is possible that the conversion expenses would
be substantially higher.
MEASURES TO BE ADOPTED IF THE TRUST BECOMES AN OPEN-END FUND
If the Shareholders voted to convert the Trust to an open-end fund, the
Board of Trustees may take the following actions.
1. Redemption Fee. In order to reduce the number of redemptions of the
Shares immediately following conversion (thereby reducing any disruption of the
Trust's normal portfolio management), and to offset the brokerage and other
costs of such redemptions, for a period of up to nine months following the
Trust's conversion to an open-end investment company, the Board of Trustees may
decide that the Trust should impose a fee, to be retained by the Trust, of up to
0.50% of the redemption proceeds payable by the Trust on all redemptions. While
not required, such a fee would be similar to fees that have been proposed by
other funds considering a conversion from closed-end to open-end status.
2. Underwriting and Distribution. If the Shareholders voted to convert the
Trust to an open-end investment company, the Board would consider whether to
select a principal underwriter of the Shares. The Shares could be offered and
sold directly by the Trust itself, and by any other broker-dealers who enter
into selling agreements with the principal underwriter. The Trust has engaged in
no discussions with prospective principal underwriters, and there can be no
assurance regarding whether satisfactory arrangements with a principal
underwriter would be achieved. The Board of Trustees reserves the right to cause
the Trust to enter into an underwriting agreement with a principal underwriter
in such form and subject to such conditions as the Board of Trustees deems
desirable. If a principal underwriter were selected, there could be no assurance
that any such broker-dealer firms would be able to generate sufficient sales of
Shares to offset redemptions, particularly in the initial months following
conversion.
3. Effect on the Trust's Declaration of Trust. The Declaration of Trust
provides that, if the Shareholders voted to change the Trust's subclassification
under the Investment Company Act from a closed-end investment company to an
open-end investment company, provisions in the Declaration of Trust (set forth
in Exhibit A to this Proxy Statement) would become effective that authorize the
issuance of redeemable securities at NAV and provide that the outstanding Shares
will be redeemable at the option of the Shareholders. In addition, the
Declaration of Trust provides that if the Trust becomes an open-end fund and is
no longer required by stock exchange rules to hold annual meetings for the
election of trustees, the Board of Trustees may submit a proposal, which may be
adopted by vote of a majority of the Trust's outstanding Shares, that the Trust
cease to hold annual meetings of its Shareholders and that it eliminate its
staggered Board of Trustees. These actions would have the consequence of
requiring Shareholders' meetings to be held only when required by the Investment
Company Act, either for the election of trustees (if a majority of the trustees
in office were not elected by the Shareholders) or to approve specific matters
in accordance with the Investment Company Act's requirements.
16
4. Timing. If the Shareholders voted to convert the Trust to an open-end
investment company, a number of steps would be required to implement such
conversion, including the preparation, filing and effectiveness of a
registration statement under the Securities Act of 1933 covering the offering of
the Shares and the negotiation and execution of a new or amended agreement with
the Trust's transfer agent. It is anticipated that such conversion would become
effective no later than December 31, 2002 and that the discount, if any, at
which the Shares trade in relation to their NAV would be reduced in anticipation
of the ability to redeem Shares at NAV upon the completion of the conversion.
The provisions of the Declaration of Trust set forth in Exhibit A would become
effective simultaneously with the effectiveness of the registration statement
referred to above under the Securities Act of 1933. If, as noted immediately
above in 'Effect on the Trust's Declaration of Trust,' the Board of Trustees
submitted, and Shareholders approved, a proposal that the Trust no longer hold
annual meetings of Shareholders after becoming an open-end fund, the attendant
savings in the cost of holding such meetings (see 'Differences Between Open-end
and Closed-end Investment Companies -- Annual Shareholders Meetings') would
accrue in the years following such approval.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST CONVERSION
OF THE TRUST FROM A CLOSED-END INVESTMENT COMPANY INTO AN OPEN-END INVESTMENT
COMPANY. THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL, IN THE ABSENCE OF
CONTRARY INSTRUCTIONS, VOTE ALL PROXIES AGAINST THIS PROPOSAL.
MISCELLANEOUS
Proxies will be solicited by mail and may be solicited in person or by
telephone or facsimile by officers or employees of the Adviser. The Trust has
also retained MacKenzie Partners, Inc. to assist in the solicitation of proxies
from Shareholders at an anticipated cost of $8,000 plus reimbursement of
out-of-pocket expenses. The expenses connected with the solicitation of these
proxies and with any further proxies that may be solicited by such officers or
employees or by MacKenzie Partners, Inc. in person, by telephone or by facsimile
will be borne by the Trust. The Trust will reimburse banks, brokers and other
persons holding 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.
THE TRUST'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2001, INCLUDING
FINANCIAL STATEMENTS, WAS MAILED ON OR ABOUT FEBRUARY 28, 2002 TO SHAREHOLDERS
OF RECORD ON FEBRUARY 28, 2002. HOWEVER, A COPY OF THIS REPORT WILL BE PROVIDED,
WITHOUT CHARGE, TO ANY SHAREHOLDER UPON REQUEST. PLEASE CALL 1-800-343-9567 OR
WRITE TO THE TRUST AT C/O CITIGATE DEWE ROGERSON, 1440 BROADWAY, 16TH FLOOR, NEW
YORK, NEW YORK 10018 TO REQUEST THE REPORT.
In the event that a quorum is not obtained for the transaction of business
at the Meeting by June 20, 2002, the persons named as attorneys in the enclosed
proxy may propose one or more adjournments of the Meeting to permit further
solicitation of proxies in order to obtain such a quorum. Any such adjournment
would require the affirmative vote of the holders of a majority of the Shares
voting that are present in person or by proxy at the session of the Meeting to
be adjourned. The persons named as attorneys in the enclosed proxy will vote in
favor of such adjournment if it is required. The costs of any such additional
solicitation and of any adjourned session will be borne by the Trust.
17
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the knowledge of the Trust, certain individuals or organizations reported
below, which during 2001 were affiliated persons (as defined in the Investment
Company Act) of the Adviser, did not make timely filings, or failed to make
filings, required during or with respect to 2001 by rules of the United States
Securities and Exchange Commission pursuant to Section 30(h) of the Investment
Company Act, with respect to holdings of, or transactions during 2001 or prior
years in, Shares of the Trust. The Kuomintang, which controls Central Investment
Holding Co., Ltd. ('CIHC') and Asia Pacific Holdings Corp. ('Asia Pacific'),
affiliated persons of the Adviser, indirectly controls 24.24% of the Adviser's
outstanding voting securities, but has failed to make any filings of Forms 3, 4
or 5. However, CIHC and Asia Pacific did make timely filings (or have provided
statements in lieu of required filings). In addition, if CIHC, Asia Pacific and
the Kuomintang are deemed to be controlling persons of the Adviser, then persons
controlled by CIHC, Asia Pacific or the Kuomintang would be required to file
statements on Forms 3, 4 and 5 with respect to ownership of, or transactions in,
Shares of the Trust. No such persons have made any such filings. Pedro-Pablo
Kuczynski, then a trustee of the Trust, failed to make a timely filing in 2001
on Form 4 with respect to a purchase of Shares of the Trust. Mr. Kuczynski
subsequently made the required filing later in 2001. Finally, during 2001
Messrs. Gow Liang Chou, Cheng Hsien Lin, Terfung Tsao and Kun Chen Liao,
directors of the Adviser, failed to make timely filings on Form 3 upon their
assumption of such positions with the Adviser. Messrs. Chou, Lin, Tsao and Liao
subsequently made the required filings; however, they have not engaged in any
transactions concerning the Trust's Shares since their appointments and,
therefore, were not required to make any filings on Form 4.
SHAREHOLDER PROPOSALS
Any proposal by a Shareholder intended to be presented at the 2003 Annual
Meeting of Shareholders must be received by the Trust at c/o Citigate Dewe
Rogerson, 1440 Broadway, 16th Floor, New York, New York 10018 not later than
January 3, 2003. The Board of Trustees will consider whether any such proposal
should be submitted to a Shareholder vote in light of applicable rules and
interpretations promulgated by the U.S. Securities and Exchange Commission; but
a Shareholder's timely submission of a proposal will not automatically confer a
right to have that proposal presented for a vote at the Trust's 2003 Annual
Meeting.
BY ORDER OF THE BOARD OF TRUSTEES
Peggy Chen
Secretary
c/o Citigate Dewe Rogerson
1440 Broadway
16th Floor
New York, New York 10018
April 29, 2002
18
EXHIBIT A
ARTICLE X OF THE TRUST'S DECLARATION OF TRUST
REDEMPTIONS
In the event that the Shareholders of the Trust vote to convert the Trust
from a 'Closed-end company' to an 'Open-end company'. . . , the following
provisions shall, upon the effectiveness of such conversion, become effective:
SECTION 10.1. REDEMPTIONS. All outstanding Shares may be redeemed at the
option of the holders thereof, upon and subject to the terms and conditions
provided in this Article X. The Trust shall, upon application of any
Shareholder or pursuant to authorization from any Shareholder, redeem or
repurchase from such Shareholder outstanding Shares for an amount per Share
determined by the Trustees in accordance with any applicable laws and
regulations; provided that (a) such amount per Share shall not exceed the
cash equivalent of the proportionate interest of each Share in the assets of
the Trust attributable thereto at the time of the redemption or repurchase
and (b) if so authorized by the Trustees, the Trust may, at any time and
from time to time, charge fees for effecting such redemption or repurchase,
at such rates as the Trustees may establish, as and to the extent permitted
under the 1940 Act, and may, at any time and from time to time, pursuant to
the 1940 Act, suspend such right of redemption. The procedures for and fees,
if any, chargeable in connection with the effecting and suspending
redemption of Shares shall be as set forth in the prospectus filed as part
of the Trust's effective Registration Statement with the Commission from
time to time. Payment will be made in such manner as described in such
prospectus.
SECTION 10.2. REDEMPTIONS OF ACCOUNTS. The Trustees may redeem Shares of
any Shareholder at a redemption price determined in accordance with Section
10.1 if, immediately following a redemption of Shares for any reason, the
aggregate net asset value of the Shares in such Shareholder's account is
less than an amount determined by the Trustees. If the Trustees redeem
Shares pursuant to this Section 10.2, a Shareholder will be notified that
the value of his account is less than such amount and be allowed sixty (60)
days to make an additional investment before the redemption is processed.
A-1
Appendix I
DETACH HERE ZRTAI2
THE R.O.C. TAIWAN FUND
This Proxy is Solicited on Behalf of the Board of Trustees
Annual Meeting of Shareholders
June 20, 2002
The undersigned hereby appoints Michael Ding and Peggy Chen, or each or either
of them, as Proxies of the undersigned, with full power of substitution to each
of them, to vote all shares of The R.O.C. Taiwan Fund (the "Trust") which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Trust (the "Meeting") to be held at the offices of Paul, Weiss, Rifkind, Wharton
& Garrison, 25th Floor, 1285 Avenue of the Americas, New York, New York on
Thursday, June 20, 2002 at 9:30 a.m., New York City time, and at any adjournment
thereof, in the manner indicated on the reverse side and, in their discretion,
on any other business that may properly come before the Meeting or any such
adjournment.
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PLEASE VOTE, DATE, AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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Please sign exactly as your name(s) appear(s) on the books of the Trust. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
--------------------------------------- ---------------------------------------
--------------------------------------- ---------------------------------------
--------------------------------------- ---------------------------------------
THE R.O.C. TAIWAN FUND
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940
DETACH HERE ZRTAI1
----- Please mark
X votes as in
----- this example.
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THE R.O.C. TAIWAN FUND
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1. The election of three Trustees, Mr. Tung, to serve for a term expiring on
the date of the 2003 Annual Meeting of Shareholders or the special meeting
in lieu thereof; and Messrs. Ding and Parker, to serve for a term expiring
on the date of the 2005 Annual Meeting of Shareholders or the special
meeting in lieu thereof.
Nominees: (01) Cheng-Cheng Tung, (02) Michael Ding and (03) Robert P. Parker.
FOR ------ ----- WITHHELD ALL
ALL FROM ALL
NOMINEES ------ ----- NOMINEES
-----
----- _______________________________________________
For all nominees EXCEPT the nominee(s) written above
2. Conversion of the Trust from a closed-end FOR AGAINST ABSTAIN
investment company into an open-end investment ----- ----- -----
company and certain related matters.
----- ----- -----
Properly executed proxies will be voted in the manner directed herein by the
undersigned. If no such directions are given, such proxies will be voted FOR
all nominees referred to in Item 1 and AGAINST the proposition referred to in
Item 2.
Please sign and return promptly in the enclosed envelope.
No postage is required if mailed in the United States.
Mark box at right if you have noted an address change or comments on -----
the reverse side of this card.
-----
Please be sure to sign and date this Proxy.
Signature: ______________ Date:_________ Signature: _____________ Date:_________