REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors
The Taiwan Fund, Inc.
Boston, Massachusetts
In planning and performing our
audit of the financial statements of the Taiwan Fund, Inc. (the “Fund”), as of
and for the year ended August 31, 2023, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), we considered their
internal control over financial reporting, including control activities for
safeguarding securities, as a basis for designing our auditing procedures for
the purpose of expressing our opinion on the financial statements and to comply
with the requirements of Form N-CEN, but not for the purpose of expressing an
opinion on the effectiveness of the Fund’s internal control over financial
reporting. Accordingly, we express no such opinion.
The management of the Fund is
responsible for establishing and maintaining effective internal control over
financial reporting. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and
related costs of controls. A company’s internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of a company’s assets that could have a
material effect on the financial statements.
Because of inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
A deficiency in internal control
over financial reporting exists when the design or operation of a control does
not allow management or employees, in the normal course of performing their
assigned functions, to prevent or detect misstatements on a timely basis. A
material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
To the Board of Directors
The Taiwan Fund, Inc.
Page Two
Our consideration of the Fund’s
internal control over financial reporting was for the limited purpose described
in the first paragraph and would not necessarily disclose all deficiencies in
internal control that might be material weaknesses under standards established
by the Public Company Accounting Oversight Board (United States). However, we
noted no deficiencies in the Fund’s internal control over financial reporting
and its operation, including controls for safeguarding securities, which we
consider to be material weaknesses, as defined above, as of August 31, 2023.
This report is intended solely
for the information and use of management, Shareholders and Board of Directors
of the Taiwan Fund, Inc. and the Securities and Exchange Commission, and is not
intended to be and should not be used by anyone other than these specified
parties.
/S/
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
October 26, 2023
INVESTMENT
ADVISORY AGREEMENT
AGREEMENT,
dated and effective as of 12:00 A.M. EST (New York time) September 17, 2022
(the “Agreement”), between THE TAIWAN FUND, INC., a Maryland corporation of One
Lincoln Street, PO Box 5049 (02206-5049), Boston MA 02111 (herein referred to
as the “Fund”), and Nomura Asset Management U.S.A. Inc., a company organized in
New York with its principal place of business at 309 West 49th Street,
New York, New York 10019
(herein referred to as the
“Adviser”).
NOW THEREFORE, in consideration
of the mutual covenants hereinafter contained, it is hereby agreed by and
between the parties hereto as follows:
1. The Adviser hereby undertakes and agrees, upon the
terms and conditions herein set forth, (i) to make investment decisions for the
Fund, to prepare and make available to the Fund research and statistical data
in connection therewith and to supervise the acquisition and disposition of
securities by the Fund, including the selection of
brokers or dealers to carry out
the transactions, all in accordance with the Fund’s investment objectives and
policies and in accordance with guidelines and directions from the Fund’s Board
of Directors; (ii) to assist the Fund as it may reasonably request in the
conduct of the Fund’s business, subject to the direction and control of the
Fund’s Board of Directors; (iii) to maintain or cause to be maintained for the
Fund all books, records, reports and any other
information required under the
Investment Company Act of 1940, as amended (the “1940 Act”) and to furnish or
cause to be furnished all required reports or other information under Taiwan
securities laws, to the extent that such books, records and reports and other
information are not maintained or furnished by the custodian or other agents of
the Fund; (iv) to report regularly to the Fund’s Board of Directors on the
investment program for the Fund and to furnish the Fund’s Board of Directors
such periodic and special reports as the Fund’s Board of Directors may
reasonably request, including, but not limited to, reports concerning
investment transactions and performance of the Fund; (v) to provide reasonable
assistance to the Fund’s administrator as needed in the preparation of reports
and notices by the Fund to stockholders, in the preparation of filings with the
Securities and Exchange Commission (the “SEC”) and other regulatory and
self-regulatory organizations, including preliminary and definitive proxy
materials and post-effective amendments to the Fund’s registration statement on
Form N-2 under the Securities Act of 1933, as amended, and the 1940 Act, as
amended from time to time, (vi) to pay the salaries and expenses of such of the
Fund’s officers and directors as are directors, officers or employees of the
Adviser (and to permit its directors,
officers or employees to so
serve if elected to such positions by the Fund’s Board of Directors); provided,
however, that the Fund, and not the Adviser, shall bear travel expenses (or an
appropriate portion thereof) of directors and officers of the Fund who are
directors, officers or employees of the Adviser to the extent that such
expenses relate to attendance at meetings of the Board of Directors of the Fund
or any committees thereof or advisers thereto and provided further that such
expenses are incurred in accordance with the Fund’s travel policy in effect at
the time,
(vii) to assist the Fund’s
Treasurer in identifying passive foreign investment companies (PFICs) in the
Fund’s portfolio, (viii) to provide sub-certifications to support
certifications made by officers of the Fund in documents filed by the Fund with
the SEC, (viii) to identify securities in the Fund’s portfolio that constitute
holdings of 5% or more of the voting shares of a portfolio company, (ix) to
assist in identifying securities that are restricted or illiquid securities,
(x) to provide the Fund with information on brokerage commissions incurred by
the Fund, (xi) to assist in the implementation of the Fund’s Discount
Management Program, (xii) to provide reasonable assistance to the Fund’s Board
of Directors or the Fund’s administrator to determine or confirm the value of
any portfolio security for which the Fund’s administrator seeks assistance from
the Adviser or identifies for review by the Adviser, (xiii) to the extent
permitted, to assist in such marketing and investor relations activities with
respect to the Fund as the Fund may reasonably request, (xiv) to host and
maintain the Fund’s website, (xv) to prepare the Fund’s monthly “Insight”
report to investors, (xvi) to provide certain stockholder services, (xvii) to
permit one of its or its affiliate’s directors, officers or employees to serve
without compensation as an officer of the Fund if elected to such positions and
to assume the obligations herein for the compensation herein provided, and
(xviii) to vote the Fund’s proxies only in
accordance with the Adviser’s
proxy voting policies in effect from time to time, provided that the Fund’s
Board of Directors has approved the Adviser’s proxy voting guidelines including
any amendments from time to time. The Adviser shall bear all expenses arising
out of its duties hereunder but shall not be responsible for any expenses of
the Fund other than those specifically allocated to the Adviser in this
paragraph 1. In particular, but without limiting the generality of the
foregoing, the Adviser shall not be responsible for the following expenses of
the Fund: organization and certain offering expenses of the Fund (including
out-of-pocket expenses, but not including overhead or
employee
costs of the Adviser or of any one or more organizations acting as
“participating affiliate” of the Adviser); fees payable to any consultants,
including an advisory board, if applicable; legal expenses; auditing and
accounting expenses; telephone, telex, facsimile, postage and other
communication expenses; taxes and governmental fees; stock exchange listing
fees; fees, dues and expenses incurred by the Fund in connection with
membership in
investment company trade
organizations; fees and expenses of the Fund’s custodians, subcustodians,
transfer agents and registrars; payment for portfolio pricing or valuation
services to pricing agents, accountants, bankers and other specialists, if any;
expenses of preparing share certificates and other expenses in connection with
the issuance, offering, distribution, sale or underwriting of securities issued
by the Fund; expenses of registering or qualifying securities of the Fund for sale;
expenses relating to investor and public relations; freight, insurance and other charges in connection with the shipment of
the Fund’s portfolio securities; brokerage commissions or other costs of
acquiring or disposing of any portfolio securities of the Fund; expenses of
preparing and distributing reports, notices and dividends to stockholders;
costs of stationery; costs of stockholders’ and other meetings; litigation
expenses; or expenses relating to the Fund’s dividend reinvestment and cash
purchase plan (except for brokerage expenses paid by participants in such plan).
2. The Fund acknowledges that in rendering investment
advisory services to the Fund under this Agreement, the Adviser may use the
resources of its affiliate, Nomura Asset Management Taiwan Ltd. (“Taiwan
Affiliate”) that is not registered
under the U.S. Investment Advisers Act of 1940 (the “Advisers Act”) to provide discretionary
investment advice to the Adviser and execute portfolio
trades for the Fund. Taiwan
Affiliate is a “participating
affiliate” of the Adviser as that term is used
in relief granted
by the staff of the SEC allowing
U.S. registered
advisers to use investment
advisory and trading resources of unregistered non-U.S. advisory affiliates
subject to the regulatory supervision of the registered adviser. Taiwan
Affiliate and its employees who provide services to the Fund are considered
under the Participating Affiliate Agreement between the Adviser and Taiwan
Affiliate to be “associated persons” of the Adviser as that term is defined in
the Advisers Act for purposes of the Adviser’s required supervision.
3. In the selection of brokers or dealers and the placing
of orders for the purchase and sale
of portfolio investments for the Fund, the Adviser shall seek to obtain for the
Fund the most favorable price and execution available, except to the extent it
may be permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain for the Fund
the most favorable price and execution available, the Adviser, bearing in mind
the Fund’s best interests at all times, shall consider all factors it deems
relevant, including by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or dealer involved
and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Fund’s
Board of Directors
may determine, the Adviser shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused
the Fund to pay a broker or dealer that provides brokerage and research services
to the Adviser an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Adviser determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research
services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Adviser’s overall responsibilities with respect to the Fund and to other
clients of the Adviser as to which the Adviser exercises investment discretion.
In selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Adviser may consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Fund and/or other accounts
over which the Adviser or an affiliate exercises investment discretion. The
Fund hereby agrees with the Adviser that any entity or person associated with
the Adviser which is a member of a national securities exchange is authorized
to effect any transaction on such exchange for the account of the Fund which is
permitted by Section 11(a) of the Securities
Exchange Act of 1934 (the “1934
Act”), subject to compliance with the 1940 Act and the rules thereunder.
4. The Fund agrees to pay to the Adviser in United States
dollars, as full compensation for the services to be rendered and expenses to
be borne by the Adviser hereunder, the fee based on the average net assets of
the Fund set forth in Schedule A hereto, which will include
a performance fee adjustment. The fee payable
to the Adviser shall be computed, accrued and paid as provided
in Schedule A. The Fund shall provide the Adviser with a monthly accounting of
the performance adjusted fee. The value of the net assets of the Fund shall be
determined pursuant to the applicable provisions of the valuation policies of
the Fund, as amended from time to time.
5.
The Adviser agrees that it will
not make a short sale of any capital stock of the Fund or purchase any share of
the capital stock of the Fund otherwise than for investment. Where the Adviser
provides services to the Fund in relation to derivative products, including
futures contracts and options, the Adviser shall provide to the Fund, upon
request, product specifications and prospectus or offering documents (if any).
6. Nothing herein shall be construed as prohibiting the
Adviser from providing investment advisory services to, or entering into investment advisory
agreements with, other clients (including other registered investment companies), including clients which may invest in securities of
Taiwan issuers, except that the Adviser shall notify the Fund where it acts as
the investment adviser or investment manager to any other investment company
that is listed on the New York Stock Exchange and has a policy to invest
primarily in Taiwan securities. In addition, the Adviser may not utilize
information furnished to the Adviser by advisers and consultants to the Fund in
providing investment management services to another New York Stock Exchange
listed investment company with a policy to invest primarily in Taiwan
securities. Nothing contained herein shall be construed as constituting the
Adviser as an agent of the Fund.
Whenever the Fund and one or more other accounts or investment
companies advised by the Adviser have available funds for investment, investments suitable and appropriate for each shall be allocated in accordance with procedures believed by the Adviser to be
equitable to each entity, which procedures and any amendments thereto shall be
provided to the Fund’s Board
for review. Similarly, opportunities to sell securities shall be allocated in a
manner believed by the Adviser to be equitable. The Fund recognizes that in
some cases this procedure may adversely affect the size of the position that may
be acquired or disposed of for the Fund. In addition, the Fund acknowledges that the persons
employed by the Adviser to assist in the performance of the Adviser’s duties
hereunder will not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict the right of the Adviser or any
affiliate of the Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
7. (a) The Adviser does not guarantee the future
performance of the Fund or any specific level of performance, the success of
any investment decision or strategy that the Adviser may use, or the success of
the Adviser’s overall management of the Fund. The Fund understands that
investment decisions made for the Fund by the Adviser are subject to various market,
currency, economic, political and business risks, and that those investment decisions
will not always be profitable.
(b) The Adviser may rely on information reasonably
believed by it to be accurate and reliable. Neither the Adviser nor its
officers, directors, employees or agents 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 Fund, 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 on the part of the Adviser
in the performance of its duties or by reason
of reckless disregard on the part of the Adviser of its obligations and duties under this Agreement. Any person,
even though also employed by the Adviser, who may be or become an employee of
the Fund and paid by the Fund shall be deemed, when acting within the scope of
his employment by the Fund, to be acting in such employment solely for the Fund
and not as an employee or agent of the Adviser.
(c) Neither party shall be liable to the other for any
indirect, consequential, punitive or special loss or damages under this Agreement.
8. (a) The Adviser agrees to indemnify the Fund for, and
hold it harmless against, any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Adviser)
or litigation
(including reasonable legal and
other expenses) to which the Fund may become subject (“Losses”) as a direct
result of Adviser’s willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement; provided, however, that nothing contained
herein shall require that the Fund be indemnified for Losses that resulted from
the Fund’s or its agent’s willful misfeasance, bad faith or gross negligence in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement; further provided that the Adviser
shall have been given written notice concerning any matter for which
indemnification is claimed under this Section.
(b) The
Fund agrees to indemnify the Adviser for, and hold it harmless against, any and
all Losses to which the Adviser may become subject as a direct result of this
Agreement or the Adviser’s performance of its duties
hereunder; provided, however,
that nothing contained herein shall require that the Adviser be indemnified for
Losses that resulted from the Adviser’s willful misfeasance, bad faith or gross
negligence in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement; provided that the Fund shall
have been given written notice concerning any matter for which indemnification
is claimed under this Section.
9. This Agreement shall be in effect for an initial term
of two years from the date of this Agreement and shall continue in effect from
year to year thereafter, but only so long as such continuance is specifically
approved at least annually by the affirmative vote of (i) a majority of the
members of the Fund’s Board of Directors who
are not parties to this Agreement or interested persons of any party to
this Agreement, or of any entity regularly furnishing investment advisory
services with respect to the Fund pursuant to an agreement with any party to
this Agreement, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) a majority of the Fund’s Board of Directors or the holders
of a majority of the outstanding voting securities of the Fund. This Agreement
may nevertheless be terminated at any time without penalty, on 60 days’ written
notice, by the Fund’s Board of Directors,
by vote of holders of a majority of the outstanding voting securities of the
Fund, or by the Adviser.
This Agreement shall
automatically be terminated in the event of its assignment. Any notice to the
Fund or the Adviser shall be deemed given when received by the addressee.
10. This Agreement may not be transferred, assigned, sold
or in any manner hypothecated or pledged by either party hereto, except as permitted under the 1940 Act or rules
and regulations adopted thereunder. It may be amended by mutual agreement of
the parties, but only after authorization of such amendment by the affirmative
vote of (i) a
majority of the members of the
Fund’s Board of Directors who are not parties to this Agreement or interested
persons of any party to this Agreement, or of any entity regularly furnishing
investment advisory services with respect to the Fund pursuant to an agreement
with any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval and (ii) if required by applicable SEC
rules, regulations or orders, a vote of the holders of a majority of the
outstanding voting securities of the Fund.
11. The Adviser may, without cost to the Fund, employ an
affiliate or a third party to perform any accounting, administrative, reporting
and ancillary services required to enable the Adviser to perform its functions
under this Agreement. Notwithstanding any other provision of the Agreement, the
Adviser may provide information about the
Fund to any such affiliate or other third party for the purpose of providing
the services contemplated under this clause. The Adviser will act in good faith
in the selection, use and monitoring of affiliates and other third parties, and
any delegation or appointment hereunder shall not relieve the Adviser of any of
its obligations under this Agreement.
12. This Agreement
shall be construed in accordance with the laws of the State of New York, without giving effect to the
conflicts of laws principles thereof, provided, however, that nothing herein
shall be construed as being
inconsistent with the 1940 Act.
As used herein, the terms “interested person,” “assignment,” and “vote of a
majority of the outstanding voting securities” shall have the meanings set
forth in the 1940 Act, the rules and regulations thereunder and interpretations
thereof by the SEC or its staff.
13. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
14. Each party hereto
irrevocably agrees that any suit, action or proceeding against
either of the Adviser
or the Fund arising out of or relating to this Agreement shall be
subject to the jurisdiction of the United States District Court for the
Southern District of New York or the Supreme Court of the State of New York,
New York County, and each party hereto irrevocably submits to the jurisdiction
of each such court in connection with any such suit, action or proceeding. Each
party hereto waives any objection to the laying of venue of any such suit,
action or proceeding in either such court, and waives any claim that such suit,
action or proceeding has been brought in an inconvenient forum. Each party
hereto irrevocably consents to service of process in connection with any such
suit, action or proceeding by mailing a copy thereof by registered or certified
mail, postage prepaid, to its address as set forth in this Agreement.
15.
The Adviser represents and warrants that it is duly registered as an investment adviser under the U.S. Investment
Advisers Act of 1940. Taiwan Affiliate has received a license from the
Financial Supervisory Commission in the Republic of China to provide services
under the Participating Affiliate Agreement. The Adviser will use its reasonable
efforts to, and to cause Taiwan Affiliate to, maintain in effect such
registration and license during the term of
this Agreement. The Participating Affiliate Agreement complies with the
laws and regulations of the United States and the Republic of China.
The Fund acknowledges that the
Fund may have provided and may, from time to time, provide certain personal
information on individuals relating to the Fund and/or a third party (“Data”)
to the Adviser. The Fund acknowledges that the Adviser has informed the Fund of
its right to request access to and/or correction of the Data which the Adviser
may hold and that request may be made to the Compliance Officer of the Adviser
at its principal place of business in the State of New York as stated at the
beginning of this Agreement. The Fund further acknowledges that the Adviser has
informed the Fund and the Fund hereby consents that Data may be collected,
held, processed, disclosed or used by the Adviser and transferred to any office
of the Adviser, any of Adviser’s affiliates or Associates, any of the Adviser’s
agents and any other third party which provides services to the Adviser, within
or outside the State of New York, for the purposes of the Adviser or any such
other entity providing the services contemplated under this Agreement and to
facilitate the provision by an affiliate to the Fund of potential additional
products and services. The Fund represents and warrants that appropriate
consent has been obtained from the relevant individuals for such collection, storage,
processing, disclosure, usage and transfer of Data.
16. The Fund represents and warrants that it has full
legal right to enter into this Agreement and to perform the obligations hereunder
and that it has obtained
all necessary consents
and approvals to enter into this Agreement.
17. The parties will inform each other in writing within a
reasonable time of material changes to the information provided to each other
under this Agreement.
IN WITNESS WHEREOF, the
parties have executed this Agreement by their officers thereunto duly
authorized as of the day and year first written above.
THE TAIWAN FUND, INC
By:
/s/ William Kirby
Name: William Kirby Title:
Chairman
NOMURA ASSET MANAGEMENT U.S.A. INC.
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By:
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Name:
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Title:
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15.
The Adviser represents and warrants that it is duly registered as an investment adviser under the U.S. Investment Advisers Act of 1940. Taiwan
Affiliate has received a license from the Financial Supervisory Commission in
the Republic of China to provide services under the Participating Affiliate
Agreement. The Adviser will use its reasonable efforts to, and to cause Taiwan
Affiliate to, maintain in effect such registration and license during the term
of this Agreement. The Participating Affiliate Agreement complies with the laws
and regulations of the United States and the Republic of China.
The Fund acknowledges that the
Fund may have provided and may, from time to time, provide certain personal
information on individuals relating to the Fund and/or a third party (“Data”)
to the Adviser. The Fund acknowledges that the Adviser has informed the Fund of
its right to request access to and/or correction of the Data which the Adviser
may hold and that request may be made to the Compliance Officer of the Adviser
at its principal place of business in the State of New York as stated at the
beginning of this Agreement. The Fund further acknowledges that the Adviser has
informed the Fund and the Fund hereby consents that Data may be collected,
held, processed,
disclosed or used by the Adviser and transferred to any
office of the Adviser, any of Adviser’s affiliates or
Associates, any of the
Adviser’s agents and any other third party which provides services to the
Adviser, within or outside the State of New York, for the purposes of the
Adviser or any such other entity providing the services contemplated under this
Agreement and to facilitate the provision by an affiliate to the Fund of
potential additional products and services. The Fund represents and warrants
that appropriate consent has been obtained from the relevant individuals for
such collection, storage, processing, disclosure, usage and transfer of Data.
16. The Fund represents and warrants that it has full
legal right to enter into this Agreement and to perform the obligations
hereunder and that it has obtained all necessary consents and approvals to
enter into this Agreement.
17. The parties will inform each other in writing within a
reasonable time of material changes to the information provided to each other
under this Agreement.
IN WITNESS WHEREOF, the
parties have executed this Agreement by their officers thereunto duly
authorized as of the day and year first written above.
THE TAIWAN FUND, INC
By:
Name: William Kirby Title:
Chairman
NOMURA ASSET MANAGEMENT U.S.A. INC.
/s/ Yuichi Nomato
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By:
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Name:
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Yuichi Nomoto
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Title:
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President
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SCHEDULE A MANAGEMENT FEE
In consideration of the services described in the agreement,
the Fund will pay the Adviser a fee (“Management Fee”) that will be composed of
a Base Fee (defined below) and a Performance Adjustment (defined below) to the
Base Fee based upon the investment performance of the Fund’s shares in relation
to the investment record of a securities
index determined by our Board of Directors to be appropriate
(“Index”) over the same performance period.
Base Fee. The base fee is
calculated and accrued daily at the annual rate of 0.60% of the Fund’s average
daily net assets (“Base Fee”).
Performance Adjustment. The Adviser’s compensation is
increased or decreased from the Base Fee by a
performance adjustment
(“Performance Adjustment”) that depends on whether, and to what extent, the
investment performance of the Fund’s shares exceeds, or is exceeded by, the
performance of the TAIEX Total Return Index, expressed in US dollars (the
”Index”).
The Performance Adjustment is
calculated and accrued, according to a schedule that adds or subtracts an
amount at a rate of 0.0005% (0.05 basis points) of the Fund’s average daily net
assets for the current Performance Period through the prior business day for
each 0.01% (1 basis point) of absolute performance by which the total return
performance of the Fund’s shares
exceeds or lags the performance of the Index for the period from the beginning
of the current Performance Period through the prior business day. The maximum
Performance Adjustment (positive or negative) will not exceed an annualized
rate of +/-0.25% (25 basis points) of the Fund’s average daily net assets,
which would occur when the performance of the Fund’s shares exceeds, or is
exceeded by, the performance of the Index by 5 percentage points (500 basis
points) for the Performance Period. For purposes of calculating the Performance
Adjustment, the NAV of the Fund and the level of the Index will be determined
as of the close of trading on the Taiwan Stock Exchange on each business day;
the exchange rate to be used for purposes of converting the TAIEX Total Return
Index into the Index on each business day shall be the same exchange rate as used
to determine the NAV on that business day; and “business day” shall mean any
day that on which trading occurs on the New York Stock Exchange. The
Performance Adjustment will be calculated and accrued pursuant to a process
agreed to by the Adviser and the Fund.
For purposes of calculating
the Performance Adjustment, the total return performance of the Fund’s shares
will be the sum of:
1) the change in the
net asset net asset value per share (“NAV”) during
the Performance Period,
after deducting any accretion in the NAV resulting from the repurchase
of shares by the Fund; plus
2) the value of the cash distributions per share paid by
the Fund during the Performance Period; plus
3) the value of capital gains taxes per share paid or
payable on undistributed realized long-term capital gains accumulated during
the Performance Period;
expressed as a percentage of the NAV per share at the beginning of the
Performance Period.
For this purpose, the value of
distributions per share of realized capital gains, of dividends per share paid
from investment income and of capital gains taxes per share paid or payable on
undistributed realized long-term capital gains shall be treated as reinvested
in shares of the Fund at the NAV per share in effect at the close of business
on the ex-dividend date for the payment of such distributions and dividends and the date on which
provision is made for such taxes, after giving effect to
such distributions, dividends and taxes.
The investment record of the Index will be the sum of:
1) the change in the level of the Index during the
Performance Period, as expressed in US dollars; plus
2) if not reflected in the Index, the value, computed consistently with the Index,
of cash distributions made by
companies whose securities comprise the Index during the Performance Period,
expressed as a percentage of the
Index
level at the beginning of the Performance Period. For this purpose, cash
distributions on the securities which comprise the Index shall be treated as
reinvested in the Index at least as frequently as the end of each calendar
quarter following the payment of the dividend.
To the extent an event occurs
that impacts the Fund’s NAV per share or the investment record of the Index and
results from circumstances out of the ordinary course of business including,
but not limited to, the receipt of litigation proceeds, an NAV error
correction, a change in the Index performance resulting from market news, or
some other event that is outside of the ordinary course of business, the Board
of Directors will consult with Adviser to determine whether such impact should
be excluded from the performance adjustment calculation.
Notwithstanding any other
provision in this Schedule A, any calculations of the investment performance of
the Fund’s shares and the investment performance of the Index will be made in
accordance with the Investment Advisers Act of 1940, as amended, and any
applicable rules thereunder.
Performance Period. The
period over which performance is measured (“Performance Period”) is initially
from October 1, 2022 to August 31, 2023 and thereafter each 12-month period
beginning on September 1 immediately following the prior Performance Period
through August 31 of the following year.
Payment of Fees. The Fund will
pay the Adviser, on a monthly basis, a fee at the annual rate of the Base Fee
applied to the average daily net assets of the Fund for the month. At the end
of each Performance Period, the Fund will pay the Adviser, or the Adviser will
pay the Fund, the positive or negative amount, as the case may be, of the
Performance Adjustment for the Performance Period
Index. The initial Index for
the Performance Fee is set forth above. If the Fund’s Board of Directors
determines, based on consultation with the Adviser, that another appropriate
Index should be substituted as the Index, the Board may determine to use such
other appropriate Index for purposes of the Performance Adjustment (the
“Replacement Index”) without stockholder approval, unless stockholder approval
of the change is otherwise required by applicable law. Any Replacement Index
will be applied prospectively to determine the amount of the Performance
Adjustment. The Index will continue to be used to determine the amount of the
Performance Adjustment for that part of the Performance Period prior to the
effective date of the Replacement Index.
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