<DOCUMENT>
<TYPE>DEFS14A
<SEQUENCE>1
<FILENAME>y51559defs14a.txt
<DESCRIPTION>THE TAIWAN FUND INC.
<TEXT>

<PAGE>   1

                            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:


<TABLE>
<S>                                            <C>
[ ]  Preliminary Proxy Statement               [ ]  Confidential, For Use of the Commission
                                               Only (as permitted by Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2
</TABLE>


                             THE TAIWAN FUND, INC.
--------------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)

--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]  No fee required.

[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

     (1)  Title of each class of securities to which transaction applies:

        ------------------------------------------------------------------------

     (2)  Aggregate number of securities to which transaction applies:

        ------------------------------------------------------------------------

     (3)  Per unit price or other underlying value of transaction computed
          pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
          filing fee is calculated and state how it was determined):

        ------------------------------------------------------------------------

     (4)  Proposed maximum aggregate value of transaction:

        ------------------------------------------------------------------------

     (5)  Total fee paid:

        ------------------------------------------------------------------------

[ ]  Fee paid previously with preliminary materials.

[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing.

     (1)  Amount Previously Paid:

        ------------------------------------------------------------------------

     (2)  Form, Schedule or Registration Statement No.:

        ------------------------------------------------------------------------

     (3)  Filing Party:

        ------------------------------------------------------------------------

     (4)  Date Filed:

        ------------------------------------------------------------------------
<PAGE>   2

                             THE TAIWAN FUND, INC.
                225 FRANKLIN STREET, BOSTON, MASSACHUSETTS 02110
      FOR QUESTIONS ABOUT THE PROXY STATEMENT, PLEASE CALL (888) 848-1806

                                                                   July 24, 2001

Dear Stockholder:

     Enclosed you will find a Notice and Proxy Statement for the Special Meeting
of Stockholders of The Taiwan Fund, Inc. (the "Fund") to be held on Wednesday,
August 22, 2001.


     The matters on which you, as a stockholder of the Fund, are being asked to
vote are: (i) the approval of a new Securities Investment Trust -- Investment
Management and Custodian Contract (the "Management Contract") among the Fund,
China Securities Investment Trust Corporation ("CSITC") and the Fund's
custodian, pursuant to which CSITC will continue to serve as the investment
advisor with respect to the assets of the Fund and (ii) the approval of a new
U.S. Asset Advisory Agreement between the Fund and CSITC (the "U.S. Asset
Advisory Agreement") pursuant to which CSITC will continue to serve as the
investment advisor with respect to the assets of the Fund held in the United
States. After reviewing each matter carefully, the Board of Directors recommends
that you vote FOR the proposals.


     YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
TAKE A FEW MINUTES TO REVIEW THIS MATERIAL, CAST YOUR VOTE ON THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.

     Thank you very much for your assistance.

                                                      Sincerely,

                                                      BENNY T. HU
                                                      President


                                                                    TWNCM2-PS-01

<PAGE>   3


                             THE TAIWAN FUND, INC.

                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                                AUGUST 22, 2001

To the Stockholders of THE TAIWAN FUND, INC.:

     NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders of The
Taiwan Fund, Inc. (the "Fund") will be held at the offices of Clifford Chance
Rogers & Wells LLP, 200 Park Avenue, 52nd Floor, New York, New York 10166, on
Wednesday, August 22, 2001 at 11:00 A.M., New York time, for the following
purpose:


          (1) To approve the new Management Contracts between the Fund and
     CSITC.



          (2) To approve the new U.S. Asset Advisory Agreement between the Fund
     and CSITC.



          (3) To transact such other business as may properly come before the
     meeting or any adjournments thereof.


     The Board of Directors has fixed the close of business on July 13, 2001 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting or any adjournments thereof.

     You are cordially invited to attend the meeting. Stockholders who do not
expect to attend the meeting in person are requested to complete, date and sign
the enclosed form of proxy and return it promptly in the envelope provided for
that purpose. The enclosed proxy is being solicited by the Board of Directors of
the Fund.

                                                      By order of the Board of
                                                      Directors,

                                                      HAICHI VICKI HAU
                                                      Secretary

July 24, 2001
<PAGE>   4

                             THE TAIWAN FUND, INC.
                              225 FRANKLIN STREET
                          BOSTON, MASSACHUSETTS 02110

                              QUESTIONS & ANSWERS

WE RECOMMEND THAT YOU READ ALL OF THIS PROXY STATEMENT. FOR YOUR CONVENIENCE, WE
HAVE PROVIDED A BRIEF OVERVIEW OF THE ISSUES TO BE VOTED UPON AT THE SPECIAL
MEETING OF SHAREHOLDERS.

Q:  WHAT IS HAPPENING?

A:  On May 16, 2001, China Development Industrial Bank ("CDIB") entered into an
    agreement with HSBC Asset Management (Europe) Limited ("HSBC Asset
    Management") to sell its controlling interest in China Securities Investment
    Trust Corporation ("CSITC") to HSBC Asset Management. CSITC is the
    investment advisor for the Taiwan Fund, Inc. (the "Fund"). The closing of
    the sale by CDIB of its interest in CSITC is scheduled to take place in
    August 2001, subject to the receipt of necessary regulatory approvals. This
    transfer of interest will automatically terminate the Fund's existing
    advisory contracts with CSITC. The reason that the advisory contracts will
    terminate is because Section 15(a) of the Investment Company Act of 1940
    (the "Investment Company Act") requires that any assignment of an advisory
    contract automatically result in its termination, and the sale of a
    controlling interest in CSITC is deemed by the Securities and Exchange
    Commission (the "SEC") to be an assignment. We are convening a Special
    Meeting of Shareholders to give the Fund's shareholders the opportunity to
    approve new advisory contracts for the Fund.

Q:  WHY AM I BEING ASKED TO VOTE?

A:  The Investment Company Act, which regulates investment companies in the
    United States such as the Fund, requires a shareholder vote to approve a new
    investment advisory contract whenever there is a change in control of a
    fund's investment advisor.

Q:  HOW WILL THE NEW AGREEMENTS AFFECT MY SHARES?

A:  The Fund and its investment objectives will remain the same. CSITC's fee
    structure, and underlying expenses will not change as a result of the
    transfer of controlling interest by CDIB to HSBC Asset Management. The
    primary consequence of the transaction is that CSITC will become a
    subsidiary of HSBC Asset Management. The new investment advisory contracts
    between the Fund and CSITC would be virtually identical to the old advisory
    contracts and call for CSITC to operate as it has done in the past. You will
    continue to receive the same level of services that you have come to expect
    over the years.
<PAGE>   5

Q:  WILL THE INVESTMENT ADVISORY FEES BE THE SAME?

A:  Yes, the investment advisory fees paid by the Fund to CSITC will remain the
    same.

Q:  WILL MY VOTE MAKE A DIFFERENCE?

A:  Yes, your vote is needed to ensure that the new advisory contracts are
    approved. It is important that as many shareholders as possible be
    represented in the voting process.

Q:  HOW DOES THE BOARD SUGGEST THAT I VOTE?

A:  The Board of Directors for the Fund recommends that you vote "FOR" the
    proposed new advisory contracts between the Fund and CSITC.

Q:  WHO IS PAYING FOR EXPENSES RELATED TO THE SPECIAL MEETING OF SHAREHOLDERS?

A:  All costs of the proxy solicitation and the Special Meeting of Shareholders
    will be paid by CSITC. None of the costs associated with the transaction or
    this shareholder vote will be borne by the Fund.

Q:  WHO DO I CALL IF I HAVE QUESTIONS?

A:  We will be happy to answer your questions about the proxy solicitation.
    Please call us at (888) 848-1806.

Q:  WHERE DO I MAIL MY PROXY CARD?

A:  You may mail your proxy card using the enclosed postage paid envelope.
<PAGE>   6

                                PROXY STATEMENT
                             THE TAIWAN FUND, INC.
                                  INTRODUCTION


     This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of THE TAIWAN FUND, INC. (the "Fund") for use
at the Special Meeting of Stockholders (the "Meeting"), to be held at the
offices of Clifford Chance Rogers & Wells LLP, 200 Park Avenue, 52nd Floor, New
York, New York 10166, on Wednesday, August 22, 2001 at 11:00 A.M., New York
time, and at any adjournments thereof to consider and act upon proposals to
approve new advisory contracts between the Fund and China Securities Investment
Trust Corporation ("CSITC") pursuant to which CSITC will continue to serve as
the investment advisor with respect to the assets of the Fund.



     The approximate date on which this Proxy Statement and the form of proxy
will be mailed to stockholders is July 24, 2001. Any stockholder giving a proxy
has the power to revoke it by mail (addressed to the Secretary of the Fund c/o
the Fund's administrator, State Street Bank and Trust Company, at the Fund's
address at 225 Franklin Street, Boston, Massachusetts 02110) or in person at the
meeting, by executing a superseding proxy or by submitting a notice of
revocation to the Fund. All properly executed proxies received in time for the
meeting will be voted as specified in the proxy or, if no specification is made,
for each proposal referred to in this Proxy Statement. Abstentions and broker
non-votes are each included in the determination of the number of shares present
at the meeting for purposes of determining the presence of a quorum but will be
counted as votes cast against the proposals to approve the new advisory
contracts.


     The Board of Directors has fixed the close of business on July 13, 2001 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting and at any adjournment thereof. Stockholders on the
record date will be entitled to one vote for each share held, with no shares
having cumulative voting rights. As of the record date, the Fund had outstanding
16,365,572 shares of common stock.

     The required majority for approval of the new advisory contracts is the
lesser of:

          (1) 67% of the outstanding shares of the Fund present at the Meeting;
     or

          (2) More than 50% of the outstanding shares of the Fund.


     Management of the Fund knows of no business other than that mentioned in
Proposals (1) and (2) of the Notice of Meeting which will be presented for
consideration at the meeting. If any other matter is properly presented, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment.


     THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR ITS
FISCAL YEAR ENDED AUGUST 31, 2000 AND A COPY OF ITS SEMI-ANNUAL REPORT FOR THE
SIX-MONTH PERIOD ENDED FEBRUARY 28, 2001 TO ANY STOCKHOLDER REQUESTING SUCH
REPORTS. REQUESTS FOR THESE REPORTS SHOULD BE MADE BY WRITING TO THE TAIWAN
FUND, INC., 225 FRANKLIN STREET, BOSTON, MASSACHUSETTS 02110, ATTENTION: ANN
CASEY, OR BY CALLING 1-800-636-9242.
<PAGE>   7

                     BACKGROUND AND TRANSFER OF INTEREST IN
                 CHINA SECURITIES INVESTMENT TRUST CORPORATION
                      BY CHINA DEVELOPMENT INDUSTRIAL BANK

     China Securities Investment Trust Corporation ("CSITC"), incorporated in
Taipei, Taiwan in 1986 and registered as an investment adviser under the
Investment Advisers Act of 1940, currently serves as the investment advisor to
the Fund. China Development Industrial Bank ("CDIB") currently holds a
controlling interest in CSITC. On May 16, 2001, CDIB entered into an agreement
to sell its 52.87% interest in CSITC to HSBC Asset Management Europe (Limited)
("HSBC Asset Management"), subject to the receipt of necessary regulatory
approvals. It is also expected that, following this sale, all or most of the
remaining 47.13% interest in CSITC (which is held by a number of shareholders,
including Merrill Lynch (which owns 12.71% of the shares of CSITC) and
individual employees of CSITC), will also be sold eventually to HSBC Asset
Management. The closing for this sale is expected to take place in August 2001
(the "Closing Date").

     This sale of a controlling interest in CSITC will be deemed by the
Securities and Exchange Commission (the "SEC") to be an assignment of the
Securities Investment Trust -- Investment Management and Custodian Contract and
the U.S. Asset Advisory Agreement each between CSITC and the Fund, and each
dated as of December 16, 1986 (together and as subsequently amended, the "Prior
Agreements"). Due to this assignment, the Prior Agreements will automatically
terminate on the Closing Date. The Prior Agreements originally became effective
on December 16, 1986 in connection with the establishment of the Fund. The
original Securities Investment Trust -- Investment Management and Custodian
Contract has been amended twice, once in June 1997 and later in February 1998,
and both of these amendments were approved by the Fund's shareholders. The U.S.
Asset Advisory Agreement was last approved by the Fund's shareholders on
February 8, 1995.

     On June 13, 2001, the Board of Directors of the Fund (the "Board") approved
the new advisory agreements for the Fund which are being submitted for
shareholder approval at this stockholders meeting. The Board also approved
temporary advisory agreements (the "Interim Agreements") which will become
effective on the Closing Date if the new advisory agreements have not been
approved by the Fund's stockholders by that date. If the Interim Agreements do
become effective, they will terminate automatically on the 150th day following
the Closing Date. The purpose of the Interim Agreements is to allow additional
time for shareholders to vote on the new advisory contracts.

                                        2
<PAGE>   8

                  INFORMATION CONCERNING HSBC ASSET MANAGEMENT

     HSBC Asset Management is a wholly-owned subsidiary of HSBC Holdings plc,
one of the largest banks and financial services companies in the world with
assets of US$674 billion as of December 31, 2000. HSBC Asset Management is one
of the leading global asset management companies in the world. As of March 31,
2001, HSBC Asset Management had US$133.6 billion of assets under management
globally, including US$14.6 billion in the Asia Pacific region. HSBC Asset
Management has over 1,300 employees and maintains offices in ten different
locations in key financial centers around the world. The principal address of
HSBC Asset Management is 6 Bevis Marks, London, England EC3A 7JQ.

              SECTION 15(F) OF THE INVESTMENT COMPANY ACT OF 1940

     The sale by CDIB of its interest in CSITC is subject to Section 15(f) of
the Investment Company Act. Section 15(f) provides in substance that, when a
sale of a controlling interest in an investment advisor, which manages an
investment company registered under the Investment Company Act, occurs, the
investment advisor or any of its affiliated persons, as defined in the
Investment Company Act, may receive any amount or benefit in connection with the
sale as long as two conditions are satisfied.

     First, an "unfair burden" must not be imposed on the investment company as
a result of the transaction relating to the sale of such interest, or any
express or implied terms, conditions or understandings applicable to the sale.
The term "unfair burden" (as defined in the Investment Company Act) includes any
arrangement during the two-year period after the transaction whereby the
investment advisor (or predecessor or successor advisor), or any "interested
person" (as defined in the Investment Company Act) of any such advisor, receives
or is entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from or on behalf of the
investment company. The Board is not aware of any circumstances arising from the
sale that might result in an unfair burden being imposed on the Fund. CSITC and
HSBC Asset Management have represented to the Board that no unfair burden will
be placed on the Fund as a result of the acquisition.

     The second condition of Section 15(f) is that during the three-year period
following the completion of a sale transaction, at least 75% of the investment
company's directors must not be "interested persons" (as defined in the
Investment Company Act) of the investment advisor or predecessor advisor or its
affiliates. The Fund's current Board complies with this requirement and the Fund
intends to maintain a Board similarly comprised for at least the three years
required by Section 15(f).

                                        3
<PAGE>   9

                             THE INTERIM AGREEMENTS

     Pursuant to Section 15(a)(4) of the Investment Company Act, upon the
consummation of the sale by CDIB on the Closing Date, the Prior Agreements will
be immediately terminated. If, as of the Closing Date, shareholders of the Fund
have not yet approved new advisory contracts for the Fund, the Interim
Agreements authorized by the Board pursuant to Rule 15a-4 under the Investment
Company Act on June 13, 2001 will take effect and will continue to operate for
up to 150 days following the Closing Date. The Interim Agreements operate
exactly as the Prior Agreements did with the following exception: all
compensation earned by CSITC during the term of the Agreement will be held in an
interest-bearing escrow account with the Fund's custodian or a bank. If the new
advisory contracts are approved by a majority of the Fund's shares (see below)
then the entire amount in the escrow account, including the earned interest,
will be paid to CSITC. If, however, the new advisory contracts are not approved
by a majority of the Fund's shares, then CSITC will be paid out of the escrow
account the lesser of (i) any costs incurred by CSITC in performing under the
Interim Agreements (plus interest earned on that amount while in escrow), or
(ii) the entire amount in the escrow account (including interest earned). In
addition, the Interim Agreements provide that they may be terminated at any
time, without penalty, by either the Fund's Board of Directors or a majority of
the Fund's outstanding voting securities on not more than 10 days' written
notice to CSITC.

             THE NEW MANAGEMENT AND U.S. ASSET ADVISORY AGREEMENTS

     On June 13, 2001 the Board, and all of the Independent Directors, voted to
approve and recommend to shareholders a new Investment Management and Custodian
Contract (the "Management Contract") and a new U.S. Asset Advisory Agreement
(the "U.S. Asset Advisory Agreement" and together with the Management Contract,
the "New Agreements") which will, if approved by the Fund's shareholders,
replace the Prior Agreements (and the Interim Agreements if they became
effective as described above). Shareholders will vote on the New Agreements at
the Special Meeting of Shareholders. The New Agreements are in substance
identical to the Prior Agreements except for the effective date.

     The fees will likewise remain unchanged. Under the Prior Agreements, CSITC
is entitled to receive from the Fund an annual fee equal to 1.30% of the value
of the average daily assets of the Fund, subject to a performance adjustment of
up to a maximum of plus or minus 0.30%. The performance adjustment is calculated
based on a rolling 36-month performance period (i.e. the most recent month plus
the previous 35 months). One-twelfth of the 1.30% annual basic fee rate is
applied to the Fund's net assets averaged over the most recent month, giving a
dollar amount which is the basic fee for that month. The performance adjustment
is added to or subtracted from the basic fee. The Fund's performance is compared
with the record of the Taiwan Stock Exchange Index (the "TSE Index") over the
36-month
                                        4
<PAGE>   10


performance period. The maximum annualized performance adjustment rate is plus
or minus 0.30%. The percentage difference (up to a maximum of 10) in performance
between the Fund and the TSE Index during the period is multiplied by 0.03%.
One-twelfth of this rate is then applied to the Fund's net assets averaged over
the performance period, giving the dollar amount which will be added to or
subtracted from the basic fee for that month. The performance adjustments are
calculated in compliance with Rule 205-1 under the Investment Advisers Act of
1940. For the fiscal year ended August 31, 2000, CSITC received aggregate
management fees for the Fund equal to $5,926,355, approximately 1.54% of the
Fund's average net assets.


     Under both the New Agreements and the Interim Agreements, the performance
adjustment will continue to be calculated as if these agreements were extensions
of the Prior Agreements, rather than new advisory agreements, and thus the
existing 36-month rolling performance period will continue uninterrupted. This
is being done in order to avoid a termination of the existing 36-month rolling
performance period which would occur if new performance periods were commenced
under the New Agreements and the Interim Agreements. Such a termination could
result in the Fund paying a greater or lesser aggregate fee to CSITC than would
be the case if the Prior Agreements were not terminated. The Board believes that
this approach is appropriate and most fair to the Fund's shareholders since it
will result in the Fund paying exactly the same level of advisory fees as it
would if the Prior Agreements were not terminated.

     The Fund entered into the U.S. Asset Advisory Agreement because Taiwan
regulations do not permit the Fund's U.S. dollar denominated assets to be held
in the trust fund arrangement established under the Management Contract. As a
result, these U.S. dollar-denominated assets are managed separately by CSITC
under the U.S. Asset Advisory Agreement, although CSITC receives asset
management fees on all of the Fund's net assets under the Management Contract,
and thus no additional fees are paid under the U.S. Asset Advisory Agreement.
The approvals of the Management Contract and the U.S. Asset Advisory Agreement
are contingent upon each other and stockholders should consider them effectively
as a single contractual arrangement with CSITC for the management of the Fund's
assets.

     Under the New Agreements, CSITC will continue to provide the same
investment advisory services to the Fund that it provided under the Prior
Agreements, including deciding what securities will be purchased and sold by the
Fund, when purchases and sales are to be made, and arranging for such purchases
and sales, all in accordance with the provisions of the Investment Company Act
and any rules thereunder, the governing documents of Fund and any policies and
determinations of the Board.

     As compensation for its services to the Fund under the New Agreements,
CSITC will be entitled to receive from the Fund fees calculated at the same rate
as those charged under the Prior Agreements, as described above. If approved by

                                        5
<PAGE>   11

shareholders, the New Agreements will become effective either immediately (if
the Interim Agreements have become effective) or on the Closing Date (if they
have not), and will remain in effect for an initial term of two years and shall
continue thereafter provided their continuance is specifically approved by:

          1. A majority vote of the Board, cast in person at a meeting called
     for that purpose; or

          2. A vote of the holders of a majority of the outstanding voting
     securities of the Fund; and

          3. In either event, by a majority of the Board who are not parties to
     the New Agreements or interested persons of the Board or of any such party
     ("Independent Directors").

     The New Agreements provide that they may be terminated at any time, without
penalty, by either party upon 60 days' written notice, provided that termination
by the Fund shall be directed or approved by a vote of the Board or by a vote of
holders of a majority of the shares of the Fund.

     Forms of the Management Contract and the U.S. Asset Advisory Agreement are
attached hereto as Appendices A and B respectively.

                           THE BOARD'S CONSIDERATION

     On June 13, 2001, the Board, including all of the Independent Directors,
met and unanimously voted (i) to approve the New Agreements and recommend them
to shareholders, and (ii) to approve the Interim Agreements (which do not
require shareholder approval). In making its decision to approve the New
Agreements, the Board considered a number of factors, including the fact that
the Fund's portfolio would continue to be managed by the current CSITC portfolio
management team, that over a number of years this portfolio management team had
achieved what the Board considers to be excellent investment results for the
Fund and the good reputation of CSITC as an investment manager in Taiwan. In
addition, the Board considered the fact that HSBC, as a major global asset
management company with extensive resources and expertise in Asia, could add
additional support and resources to CSITC in connection with its asset
management business. The Board also considered that over the many years that
CSITC has acted as an investment manager for the Fund's assets, it as provided
high quality service to the Fund and has been attentive and responsive to Board
requests for information. In view of these factors, and in an effort to maximize
continuity in the management of the Fund, the Board in approving and
recommending the New Agreements and approving the Interim Agreements decided to
maintain the same management relationship with CSITC. The Board expressed its
desire that the Fund continue to be managed by the current portfolio management
team, based on the Fund's performance record and CSITC's highly regarded
investment capability in Taiwan. The Board also determined that the current fee
level is appropriate and fair to the Fund.

                                        6
<PAGE>   12


     The Board recommends that the shareholders vote "FOR" the proposals to
approve the Management Contract and the U.S. Asset Advisory Agreement between
the Fund and CSITC.


BOARD OF DIRECTORS

     The following table presents information concerning the current Board of
Directors. The information includes their positions and principal occupations
during the last five years. Each director who is an "interested person" of the
Fund (within the meaning of Section 2(a)(19) of the Investment Company Act) is
indicated by an asterisk ("*") preceding his or her name.


<TABLE>
<CAPTION>
                          PRESENT OFFICE WITH THE FUND,
                             PRINCIPAL OCCUPATION OR                       SHARES
                           EMPLOYMENT DURING PAST FIVE                  BENEFICIALLY     PERCENT
   NAME AND ADDRESS         YEARS AND DIRECTORSHIPS IN     DIRECTOR        OWNED           OF
   OF NOMINEE (AGE)          PUBLICLY-HELD COMPANIES        SINCE     JULY 13, 2001(1)    CLASS
   ----------------       -----------------------------    --------   ----------------   -------
<S>                      <C>                               <C>        <C>                <C>
Shao-Yu Wang (77)        Chairman of the Board of            1986           None            --
Apt. 5H                  Trustees, Soochow University
No. 56 Tun Hwa South     (1987-present); Chairman of the
Road, Section 2nd        Board of Trustees, Min Chuan
Taipei, Taiwan, ROC      University, (1986-present);
                         Chairman of the Board of
                         Trustees, Fu-Dan High School
                         (1986-present); Chairman, China
                         American Petrochemical Co., Ltd.
                         (1997-2000); Executive Director,
                         China American Petrochemical
                         Co., Ltd. (1976-present).

*Benny T. Hu (52)        President, China Development In-    1993           None            --
125 Nanking E. Road      dustrial Bank (1993-2001);
Section 5                Ambassador-at-Large, Republic of
Taipei, Taiwan, ROC      China (May 2001-present);
                         Chairman, Far Eastern Air
                         Transport Corp. (1995-present);
                         Chairman, China Securities
                         Investment Trust Corporation
                         (1992-1993); President, China
                         Securities Investment Trust
                         Corporation (1986-1992);
                         Director, China Steel
                         Corporation (1993-present).

David Dean (75)          Senior Advisor of the Chiang-       1991            540            --
8361 B. Greensboro       Ching-Kuo Foundation (1990-pre-
Drive                    sent).
McLean, Virginia 22102

Lawrence J. Lau (56)     Kwoh-Ting Li Professor of Eco-      1998           None            --
Stanford University      nomic Development, Stanford Uni-
Landau Economics         versity (1992-present);
Building,                Director, Stanford Institute for
Room 340 579 Serra Mall  Economic Policy Research at
Stanford, CA 94305-6072  Stanford University (1997-1999).
</TABLE>


                                        7
<PAGE>   13

<TABLE>
<CAPTION>
                          PRESENT OFFICE WITH THE FUND,
                             PRINCIPAL OCCUPATION OR                       SHARES
                           EMPLOYMENT DURING PAST FIVE                  BENEFICIALLY     PERCENT
   NAME AND ADDRESS         YEARS AND DIRECTORSHIPS IN     DIRECTOR        OWNED           OF
   OF NOMINEE (AGE)          PUBLICLY-HELD COMPANIES        SINCE     JULY 13, 2001(1)    CLASS
   ----------------       -----------------------------    --------   ----------------   -------
<S>                      <C>                               <C>        <C>                <C>
Joe O. Rogers (52)       Vice President, Business            1986          2,000            --
2477 Foxwood Drive       Development, PlanetPortal.com
Chapel Hill, NC 27514    (September 1999-present);
                         President, Rogers In-
                         ternational, Inc.
                         (1986-present); Director, The
                         China Fund, Inc. (1992-
                         present); Vice President,
                         Business Development, Thomson
                         Consulting (1998-1999); Partner,
                         PHH Fantus Consulting
                         (1993-1996); Vice President, PHH
                         Asia Corporation (1993-1996).

Jack C. Tang (73)        Co-Chairman (May 1999-present),     1989           None            --
5737 Baja Way            Chairman & CEO (June 1998-May
La Jolla, CA 92037       1999), Chairman Emeritus
                         (January 1997-June 1998),
                         Chairman & CEO (1987-December
                         1996), Tristate Holdings Ltd.;
                         Director, Mid Pacific Air
                         Corporation (1986-present); Di-
                         rector (1991-1999), Pacific Rim
                         Investments Ltd.

*Gloria Wang (46)        Secretary and Treasurer of the      1998           None            --
99 Tunhwa South Road,    Fund (1994-October 1998);
Section 2                Executive Vice President, China
Taipei, Taiwan, ROC      Securities Investment Trust
                         Corporation (1996-present).

Lawrence F. Weber (68)   Independent Consultant              1995           None            --
156 Ide Rd               (1993-present)
Williamstown, MA 01267
</TABLE>

---------------
(1) The information as to beneficial ownership is based on statements furnished
    to the Fund by the nominees.

 +  Less than 1% of the outstanding shares.

  * Directors or nominees considered to be "interested persons" (as defined in
    the Investment Company Act) of the Fund or of the Fund's investment advisor.
    Mr. Hu is deemed to be an interested person because of his affiliation with
    China Development Industrial Bank, the principal shareholder of the Fund's
    investment advisor, China Securities Investment Trust Corporation (99 Tunhwa
    S. Road, Section 2, 24th Floor, Taipei, Taiwan ROC). Ms. Wang is deemed to
    be an interested person because of her affiliation with the Fund's
    investment advisor.

     The Fund's Board of Directors has an Executive Committee which may exercise
the powers of the Board to conduct the current and ordinary business of the Fund
while the Board is not in session. The current members of the Executive
Committee are Messrs. Rogers and Wang.

                                        8
<PAGE>   14

     The Fund's Board of Directors has an Audit Committee which is responsible
for reviewing financial and accounting matters. The Fund's Audit Committee is
composed of directors who are not interested persons of the Fund and its actions
are governed by the Fund's Audit Committee Charter. The current members of the
Audit Committee are Messrs. Dean, Lau, Rogers, Tang, Wang and Weber. The Audit
Committee convened four times during the fiscal year ended August 31, 2000.

     The Board of Directors of the Fund held two regular meetings and one
special meeting during the fiscal year ended August 31, 2000. Mr. Hu attended
fewer than 75% of the aggregate number of Board meetings.

     Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Fund's officers and directors, and persons who own
more than ten percent of a registered class of the Fund's equity securities, to
file reports of ownership and changes in ownership with the U.S. Securities and
Exchange Commission (the "Commission") and the New York Stock Exchange, Inc. The
Fund believes that its officers and directors have complied with all applicable
filing requirements under Section 16(a) of the Exchange Act.

OFFICERS OF THE FUND

     Mr. Benny T. Hu (age 52), a director of the Fund, has served as President
of the Fund since 1986.

     Ms. Haichi Vicki Hau (age 38), Secretary and Treasurer of the Fund since
October 1998, also serves as a Senior Analyst of CSITC.

     Both Mr. Hu and Ms. Hau are considered to be "interested persons" (as
defined in the Investment Company Act) of the Fund and CSITC.

TRANSACTIONS WITH AND REMUNERATION OF OFFICERS AND DIRECTORS

     The aggregate remuneration, including expenses relating to attendance at
board meetings reimbursed by the Fund, paid in cash to directors not affiliated
with CSITC was US$154,188 during the fiscal year ended August 31, 2000. The Fund
currently pays each director that is not affiliated with CSITC an annual fee of
US$10,000 plus US$1,000 for each directors' meeting and committee meeting
attended.

                                        9
<PAGE>   15

     CSITC pays the compensation and certain expenses of Ms. Gloria Wang, a
director of the Fund, and of Ms. Haichi Vicki Hau, an employee of CSITC who
serves as Secretary and Treasurer of the Fund. Ms. Wang and Ms. Hau may
participate in the advisory fees paid by the Fund to CSITC, although the Fund
makes no direct payments to either of them.

     Mr. Lawrence J. Lau serves as a consultant to CSITC and receives a monthly
fee of approximately US$2,500 for his consulting services. Mr. Lau's status as a
consultant to CSITC does not render him an "interested person" of the Fund or
CSITC under the Investment Company Act.

     The following table sets forth the aggregate compensation from the Fund
paid to each director during the fiscal year ended August 31, 2000. CSITC and
its affiliates do not advise any other U.S. registered investment companies and
therefore the Fund is not considered part of a Fund Complex.

<TABLE>
<CAPTION>
                                                             AGGREGATE
                                                            COMPENSATION
NAME OF DIRECTOR                                            FROM FUND(1)
----------------                                            ------------
<S>                                                         <C>
Shao-Yu Wang..............................................    $17,000
Benny T. Hu*..............................................         --
David Dean................................................    $17,000
Lawrence J. Lau...........................................    $17,000
Joe O. Rogers.............................................    $17,000
Jack C. Tang..............................................    $16,000
Lawrence Weber............................................    $17,000
Gloria Wang*..............................................         --
</TABLE>

---------------
(1) Includes all compensation paid to directors by the Fund. The Fund's
    directors do not receive any pension or retirement benefits as compensation
    for their service as directors of the Fund.

 *  Mr. Hu and Ms. Wang, who are affiliated with CSITC and are therefore
    "interested persons" of the Fund, do not receive any compensation from the
    Fund for their service as directors.

THE INVESTMENT ADVISOR

     CSITC, the Fund's investment advisor, was incorporated in Taipei, Taiwan in
1986 and is registered as an investment advisor under the Investment Advisers
Act of 1940. CSITC's principal address is 99 Tunhwa South Road, Section 2,
Taipei, Taiwan ROC.

                                        10
<PAGE>   16

     The following table contains information concerning the principal executive
officers and directors of CSITC. The address of each, as it relates to his
duties at CSITC, is the same as that of CSITC (unless otherwise indicated):


<TABLE>
<CAPTION>
                                         POSITION WITH CSITC AND
NAME                                       PRINCIPAL OCCUPATION
----                                     -----------------------
<S>                                 <C>
I-Ming Lin........................  Chairman and Director of CSITC
Albert King.......................  President and Director of CSITC
Gloria Wang.......................  Executive Vice President and
                                    Director of CSITC
Debra Wang........................  Vice President and Director of
                                    CSITC
Hui-ming Cheng....................  Director of CSITC; CFO, Winbond
4 Yenshin Road                      Electronic
Section 3,
Shinchu Industrial Science Park
Shinchu, Taiwan, ROC
Chris Hsu.........................  Director of CSITC; Deputy Manager,
11th Floor                          CDIB
125 Nankin E. Road
Section 5
Taipei, Taiwan, ROC
Kathy Young.......................  Director of CSITC; Deputy Manager,
11th Floor                          CDIB
125 Nankin E. Road
Section 5
Taipei, Taiwan, ROC
Winnie Wang.......................  Director of CSITC; Assistant
                                    Manager,
11th Floor                          CDIB
125 Nankin E. Road
Section 5
Taipei, Taiwan, ROC
Shih-yi Huang.....................  Director of CSITC; Assistant
                                    Manager,
11th Floor                          CDIB
125 Nankin E. Road
Section 5
Taipei, Taiwan, ROC
Jennifer Shao.....................  Director of CSITC; Assistant
                                    Manager,
11th Floor                          CDIB
125 Nankin E. Road
Section 5
Taipei, Taiwan, ROC
David Kao.........................  Director of CSITC; Director,
19th Floor                          Merrill Lynch Capital Markets
207 Tunhwa South Road               (Taiwan) Ltd.
Section 2
Taipei, Taiwan, ROC
Wanlop Wthitabha..................  Director of CSITC; General
2nd Floor                           Manager, Bangkok Bank Public Co.,
121 Sungchain Road                  Ltd.
Taipei, Taiwan, ROC
</TABLE>


                                        11
<PAGE>   17

     CSITC manages five funds with a similar investment objective as the Fund.
CSITC has never waived or reduced compensation for any of these funds and their
details are as follows:

                            ANNUAL ADVISORY FEE RATE

<TABLE>
<CAPTION>
                                                                     ANNUAL COMPENSATION
                                              NET ASSETS AS OF     (AS A PERCENTAGE OF THE
NAME OF FUND                                  DECEMBER 31, 2000   AVERAGE DAILY NET ASSETS)
------------                                  -----------------   -------------------------
<S>                                           <C>                 <C>
China Securities Investment Trust Fund.......    20,279,298                 1.51%
China Growth Securities Investment Fund......    36,165,536                 1.50%
China Success Securities Investment Trust
  Fund.......................................    32,756,430                 0.70%
China Phoenix Securities Investment Trust
  Fund.......................................    43,039,773                 1.21%
Taiwan Blue Chips Securities Investment Trust Fund..    26,623,663           1.53%
</TABLE>

THE ADMINISTRATOR

     The Fund's Administrator is State Street Bank and Trust Company, whose
address is 2 Avenue de Lafayette, Boston, Massachusetts 02111.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     Set forth below is information with respect to persons who, to the
knowledge of the management of the Fund, owned beneficially more than 5% of the
Fund's outstanding shares as of July 13, 2001. The information is based on
publicly available Schedule 13D and 13G disclosures filed with the Securities
and Exchange Commission.

<TABLE>
<CAPTION>
                           NAME AND ADDRESS      AMOUNT AND NATURE OF   PERCENT
    TITLE OR CLASS       OF BENEFICIAL OWNER     BENEFICIAL OWNERSHIP   OF CLASS
    --------------       -------------------     --------------------   --------
<S>                     <C>                     <C>                     <C>
Common Stock             Lazard Freres & Co.    Has sole power to vote    8.82%
                                 LLC            and dispose of 994,300
                         30 Rockefeller Plaza          shares.
                          New York, NY 10020

Common Stock                    UBS AG          Has the sole power to      5.5%
                        Bahnhofstrasse 45 8021   vote and dispose of
                         Zurich, Switzerland       893,225 shares.
</TABLE>

MISCELLANEOUS

     The cost of soliciting the proxies and preparing the proxy materials will
be borne by CSITC. Proxies will be solicited by mail and may be solicited in
person or by telephone by officers of the Fund or personnel of CSITC. The Fund's
brokers, custodians, nominees, and fiduciaries are to forward solicitation
material to the beneficial owners of stock held of record and CSITC will
reimburse them for their reasonable out-of-pocket expenses in forwarding such
solicitation material. In addition, the Fund has retained Georgeson Shareholder
Communications Corporation to assist in the proxy solicitation. The cost of
their services is estimated at US$10,000, plus out-of-pocket expenses.

                                        12
<PAGE>   18

     No business other than as set forth herein is expected to come before the
meeting, but should any other matter requiring a vote of stockholders arise, the
persons named in the enclosed proxy will vote thereon according to their best
judgment in the interests of the Fund.

STOCKHOLDER PROPOSALS

     In order to submit a stockholder proposal to be considered for inclusion in
the Fund's proxy statement for the Fund's 2002 Annual Meeting of Stockholders
(expected to be held in February 2002), stockholder proposals must be received
by the Fund (addressed to The Taiwan Fund Inc., 225 Franklin Street, Boston,
Massachusetts 02110) not later than August 24, 2001. Any stockholder who desires
to bring a proposal at the Fund's 2002 Annual Meeting of Stockholders without
including such proposal in the Fund's proxy statement, must deliver written
notice thereof to the Secretary of the Fund (addressed to The Taiwan Fund, Inc.,
225 Franklin Street, Boston, Massachusetts 02110), not before November 8, 2001
and not later than December 8, 2001.

                                                      By order of the Board of
                                                      Directors,

                                                      Haichi Vicki Hau
                                                      Secretary
                                                      225 Franklin Street
                                                      Boston, Massachusetts
                                                      02110

July 24, 2001

                                        13
<PAGE>   19

                                                                      APPENDIX A

                                                                 ENGLISH VERSION

                             THE TAIWAN TRUST FUND

                         SECURITIES INVESTMENT TRUST --

                  INVESTMENT MANAGEMENT AND CUSTODIAN CONTRACT

                            [               ], 2001

                                       A-1
<PAGE>   20

                             THE TAIWAN TRUST FUND
                         SECURITIES INVESTMENT TRUST --
                  INVESTMENT MANAGEMENT AND CUSTODIAN CONTRACT

                                     INDEX

<TABLE>
<CAPTION>
ARTICLE                                                       PAGE
-------                                                       ----
<S>                                                           <C>
                                                              A-3
 1.  INTRODUCTION AND POLICY................................
                                                              A-3
 2.  BASIC OBLIGATIONS AND RIGHTS...........................
                                                              A-5
 3.  ASSETS HELD IN THE TRUST FUND..........................
                                                              A-6
 4.  UNITS..................................................
                                                              A-7
 5.  CALCULATION OF NET ASSET VALUE.........................
                                                              A-8
 6.  REDEMPTION OF UNITS....................................
                                                              A-8
 7.  SUSPENSION OF VALUATION, ISSUES, REDEMPTIONS AND
  PAYMENTS..................................................
                                                              A-8
 8.  EXPENSES...............................................
                                                              A-9
 9.  MANAGEMENT AND CUSTODIAN FEES..........................
                                                              A-11
10.  INVESTMENT OBJECTIVES AND POLICIES AND RESTRICTIONS....
                                                              A-12
11.  DURATION, CHANGES IN MANAGER AND CUSTODIAN, AND
  TERMINATION...............................................
                                                              A-13
12.  ACCOUNTS AND STATEMENTS................................
                                                              A-14
13.  DISTRIBUTIONS..........................................
                                                              A-14
14.  CURRENCY...............................................
                                                              A-14
15.  INFORMATION AND NOTICES................................
                                                              A-15
16.  AMENDMENTS.............................................
                                                              A-15
17.  CONNECTED PERSONS......................................
                                                              A-15
18.  ATTACHMENT.............................................
                                                              A-15
19.  GOVERNING LAW, JURISDICTION AND LANGUAGE...............
                                                              A-16
20.  EFFECTIVE DATE.........................................
                                                              A-17
EXHIBIT A...................................................
</TABLE>

                                       A-2
<PAGE>   21

                   SECURITIES INVESTMENT TRUST -- INVESTMENT
                       MANAGEMENT AND CUSTODIAN CONTRACT

1. INTRODUCTION AND POLICY

     1.1 The Taiwan Trust Fund (the "Trust Fund") is a securities investment
trust fund established under the laws of the Republic of China for the exclusive
benefit of The Taiwan Fund, Inc. (the "Unitholder") of 225 Franklin Street,
Boston, Massachusetts on the basis of this Securities Investment
Trust -- Investment Management and Custodian Contract (the "Investment
Contract") among, China Securities Investment Trust Corporation ("CSITC" or the
"Manager"), of 99 Tunhwa South Rd., Section 2, Taipei, Taiwan, Republic of
China, The International Commercial Bank of China (the "Custodian") of 100
Chilin Road, Taipei, Taiwan, Republic of China and the Unitholder. This
Investment Contract, together with relevant provisions of the laws and
regulations of the Republic of China, alone shall govern the relationship, which
is a contractual relationship (the Trust Fund is not a separate legal entity)
among the Manager, the Custodian and the Unitholder. This Investment Contract
supersedes and replaces the Securities Investment Trust -- Investment Management
and Custodian Contract dated December 16, 1986, as amended (the "Original
Investment Contract"), [as well as the Interim Securities Investment
Trust -- Investment Management and Custodian Contract dated             , 2001
(the "Interim Investment Contract"), each of]* which contain[s] substantially
the same terms and conditions as this Investment Contract. This Investment
Contract was made necessary by a change in control of CSITC which automatically
terminated the Original Investment Contract on             , 2001. [The Interim
Investment Contract became effective on             , 2001 pursuant to Rule
15a-4 under the United States Investment Company Act of 1940, as amended, to
permit additional time for the shareholders of the Unitholder to approve this
Investment Contract. Where the context requires, references to "this Investment
Contract" herein include the Original Investment Contract [and/or the Interim
Investment Contract].

     1.2 The investment objective of establishing the Trust Fund is to achieve
for the benefit of the Unitholder capital growth through investment in
securities listed on the Taiwan Stock Exchange, and other debentures, government
bonds and money market instruments.

2. BASIC OBLIGATIONS AND RIGHTS

     2.1 The obligation and duties of the Manager are as follows:

          (a) The Manager shall be obligated to manage the investment of the
     assets held by the Custodian in the Trust Fund for the exclusive, full
     benefit of

---------------

* The bracketed language here and elsewhere will be included only if the Interim
  Investment Contract becomes effective.
                                       A-3
<PAGE>   22

     the Unitholder (including making investment decisions, supervising the
     acquisition and disposition of investments, instructing the Custodian with
     respect thereto and otherwise with respect to the assets held in the Trust
     Fund, and selecting brokers or dealers to carry out portfolio transactions)
     in good faith and to the best of its ability and without gaining any
     advantage for itself or any of its Connected Persons (as defined in Article
     17 below) thereby except as expressly provided in this Investment Contract,
     all in accordance with the Trust Fund's investment objectives and policies
     and in accordance with guidelines and directions from the Unitholder's
     Board of Directors;

          (b) The Manager shall be obligated to account to the Unitholder for
     any loss in value of assets of the Trust Fund where such loss has been
     caused by its willful or negligent default, reckless disregard of its
     duties hereunder or bad faith;

          (c) The Manager shall be responsible to the Unitholder for the acts
     and omissions of all persons to whom it may delegate any of its functions
     as Manager as if they were its own acts and omissions;

          (d) The Manager shall promptly report to the Securities and Exchange
     Commission of the Ministry of Finance of the Republic of China (the "SEC")
     and to the Unitholder any matter which, in the opinion of the Manager, is
     an actual or anticipated breach by the Custodian of any of the provisions
     of this Investment Contract or of any relevant provisions of the laws and
     regulations of the Republic of China;

          (e) The Manager shall, to the extent permitted by the laws of the
     Republic of China, take such action to enforce on behalf, and for the
     benefit, of the Unitholder the obligations of the Custodian under this
     Investment Contract as it shall think fit or as shall from time to time be
     required by the SEC or the Unitholder;

          (f) Notwithstanding and without prejudice to any other provisions of
     this Investment Contract, the Manager shall, and shall instruct all brokers
     used by the Manager in relation to the sale or purchase of assets for the
     account of the Trust Fund to, act in accordance with the best practice then
     applicable in the ROC for the settlement of sales and purchases of
     securities and other investments;

          (g) The proper costs incurred by the Manager in enforcing the
     obligations of the Custodian shall be borne out of the assets of the Trust
     Fund. To the extent that they are not borne by a person other than the
     Manager, the Manager shall be entitled to an indemnity out of the assets of
     the Trust Fund against all claims (and against all costs and expenses in
     relation to such claims) incurred or suffered by it as a result of its
     acting as the Manager under this Investment Contract which claims are not
     attributable to its own willful or negligent default, reckless disregard of
     its duties hereunder or bad faith ("disabling conduct"); provided that the
     Manager shall not receive any
                                       A-4
<PAGE>   23

     indemnification out of the assets held in the Trust Fund against any
     liability to the Unitholder or its shareholders to which the Manager would
     otherwise be subject unless there has been (1) a final decision on the
     merits by a court or other body before whom the proceeding alleging
     liability of the Manager was brought that the Manager was not liable by
     reason of disabling conduct, or (2) a reasonable determination, based upon
     a review of the facts, that the Manager was not liable by reason of
     disabling conduct, by (i) the vote of a majority of a quorum of the
     Unitholder's directors who are neither "interested directors" as defined in
     the United States Investment Company Act of 1940 nor parties to the
     proceeding ("disinterested, non-party directors"), or (ii) an independent
     legal counsel in a written opinion; and provided further that, the Manager
     shall not receive out of the assets held in the Trust Fund an advance of
     attorneys' fees or other expenses incurred by it in defending a proceeding
     alleging such liability except upon the undertaking of the Manager to repay
     the advance unless it is ultimately determined that it is entitled to
     indemnification, but only if at least one of the following is also required
     as a condition to the advance: (1) the Manager shall provide a security for
     its undertaking, (2) the Unitholder shall be insured against losses arising
     by reason of any lawful advances, or (3) a majority of a quorum of the
     disinterested, non-party directors of the Unitholder, or an independent
     legal counsel in a written opinion, shall determine, based on a review of
     readily available facts (as opposed to a full trial-type inquiry), that
     there is reason to believe that the Manager ultimately will be found
     entitled to indemnification; and

          (h) The Manager shall perform its obligations under this Investment
     Contract so as to (i) comply with all laws and regulations of the Republic
     of China and of the United States applicable to the Manager and the
     Unitholder, and (ii) permit the Unitholder to qualify as a regulated
     investment company under applicable United States tax law.

     2.2 The obligations and duties of the Custodian are as follows:

          (a) The Custodian shall be responsible absolutely and without
     qualification as a fiduciary to the Unitholder for the safekeeping of all
     assets held in the Trust Fund for the time being, and of all amounts from
     time to time set aside and held for the purpose of distribution to the
     Unitholder in accordance with this Investment Contract (see relevant
     provisions under Article 3 below), and shall indemnify the Unitholder in
     the event of any loss of such assets and amounts resulting from a breach of
     its duties hereunder; such assets and amounts shall be adequately insured
     against loss; and the Custodian shall not be responsible for the willful or
     negligent default (including non-payment or failure to deliver securities)
     by securities brokers or other persons selected by the Manager and dealt
     with by the Custodian, unless such default is contributed to by the
     Custodian;

          (b) The Custodian shall comply with the instructions of the Manager
     given from time to time on behalf of the Unitholder pursuant to this
     Invest-
                                       A-5
<PAGE>   24

     ment Contract in relation to the disposition of the assets held in the
     Trust Fund from time to time and the exercise of rights and obligations
     attaching thereto except where, in the opinion of the Custodian, to do so
     would or might involve a breach of this Investment Contract or of any
     relevant provisions of the laws and regulations of the Republic of China;

          (c) The Custodian shall report to the SEC and the Unitholder any
     matter which in the opinion of the Custodian is an actual or anticipated
     breach by the Manager of any of the provisions of this Investment Contract
     or of any relevant provisions of the laws and regulations of the Republic
     of China; and

          (d) To the extent that they are not borne by a person other than the
     Custodian, the Custodian shall be entitled to indemnity out of the assets
     held in the Trust Fund against all claims incurred or suffered by it which
     are not attributable to its own willful or negligent default, reckless
     disregard of its duties hereunder or bad faith.

          (e) The assets held in the Trust Fund will not be subject to any
     right, charge, security interest, lien or claim of any kind in favor of the
     Custodian or its creditors; beneficial ownership of the assets held in the
     Trust Fund will be freely transferable without payment of money or value to
     the Custodian; the Custodian will maintain adequate records identifying the
     assets held in the Trust Fund as being held for the benefit of the
     Unitholder; the Unitholder's independent public accountants will be given
     access to such records during normal business hours upon request; and the
     Manager (acting on behalf of the Unitholder) will receive periodic reports
     from the Custodian with respect to the safekeeping of the assets held in
     the Trust Fund, including, but not limited to, notification of any transfer
     of assets to or from the Trust Fund.

          The Custodian shall not be responsible for any investment loss of
     assets held in the Trust Fund and shall have no responsibility to the
     Manager or the Unitholder other than as provided in Articles 2.2 and 3.5
     hereof and as otherwise expressly set forth in this Investment Contract.

     2.3 The Unitholder shall have the right at all times to enforce against the
Manager the obligations of the Manager and against the Custodian the obligations
of the Custodian under this Investment Contract.

3. ASSETS HELD IN THE TRUST FUND

     3.1 All assets held in the Trust Fund shall at all times be held by the
Custodian and, where in registered form, shall be registered in the name of
"Special Account for the Taiwan Trust Fund under the Custody of the
International Commercial Bank of China."

     3.2 The Trust Fund is established for an unspecified period.

     3.3 No offering of the shares of the Unitholder ("Shares") can be made
without prior approval of the SEC. The Unitholder will deliver the proceeds of
any
                                       A-6
<PAGE>   25

offering (after deduction of offering expenses and amounts not intended to be
held in the Trust Fund) to the Custodian under this Investment Contract. As
evidence of its exclusive interest in the assets held by the Custodian in the
Trust Fund, the Unitholder has been issued Units, and shall receive additional
Units to the extent that the proceeds of any additional offering of its shares
are delivered to the Custodian under this Investment Contract.

     3.4 The provisions of Article 18-2 of the Securities and Exchange Law of
the Republic of China (the "Securities Law") shall apply to the assets held in
the Trust Fund and such assets shall not form part of the assets of the
Custodian or of the Manager. To the extent that legitimate claims made by third
parties against the assets held in the Trust Fund exceed the value of those
assets, the satisfaction of such claims shall be the responsibility of the
Unitholder and not the Manager or Custodian.

     3.5 The Custodian shall not dispose of assets held in the Trust Fund
except:

          (a) in accordance with instructions received by it from the Manager in
     relation to:

             (1) the investment of or realization on assets for the account of
        the Trust Fund; or

             (2) the payment or discharge of other amounts of liabilities
        properly payable or dischargeable out of the assets held in the Trust
        Fund in accordance with the provisions of this Investment Contract; or

             (3) the payment of amounts to the Unitholder as distributions of
        income as provided in this Investment Contract; or

             (4) the payment of amounts to the Unitholder upon redemption of
        Units; or

          (b) to the Unitholder on final liquidation of the Trust Fund; or

          (c) as otherwise required by any mandatory provision of law.

4. UNITS

     4.1 The Manager and the Custodian shall each maintain a record of the
number of Units held from time to time by the Unitholder. A Unit shall not
represent any right in respect of any particular assets but a pro rata
entitlement to all of the net assets held in the Trust Fund, and a contractual
right against the Manager and the Custodian accordingly.

     4.2 A beneficial certificate (the "Certificate") in a form approved by the
Manager and the SEC, and in substantially the form of Exhibit A attached hereto,
has been issued to the Unitholder in respect of all Units acquired by it. The
Certificate has been signed on behalf of the Manager and the Custodian and
indicates thereon the amount of funds delivered to the Custodian under this

                                       A-7
<PAGE>   26

Investment Contract. If any additional Units are issued, a replacement or
additional Certificate shall be issued reflecting such issuance, and the amount
of funds delivered to the Custodian with respect to such issuance.

     4.3 The issue of Units shall be subject to the prior approval of and to any
conditions imposed by the SEC.

     4.4 Each Unit issued in the initial issue of Units which took place in
December 1986 represented US$1 or its equivalent in NT Dollars delivered to the
Custodian under the Original Investment Contract.

     4.5 Each Unit issued after the initial issue of Units has represented, and
(if additional Units are issued) shall represent, that amount (delivered to the
Custodian hereunder) obtained by dividing (a) the amount equal to the net asset
value (as defined in the following sentence) of the previously outstanding Units
calculated as at the date (or, if that date is not a Valuation Date as defined
in Article 5 below, on the next following Valuation Date) immediately following
the date of receipt by the Manager of the application for issuance of the Units
in question by (b) the number of Units outstanding (including Units scheduled to
be redeemed on that Valuation Date but excluding Units scheduled to be issued on
that Valuation Date). "Net asset value" shall mean the value of the assets held
in the Trust Fund less the liabilities of the Trust Fund (including such
provisions and allowances for contingencies as the Manager may think appropriate
in respect of the costs and expenses payable out of the assets of the Trust Fund
as set forth in Article 8 below), as calculated pursuant to Article 5.

     4.6 Payment for each Unit shall be made in cash in advance of issue. Once
the relevant amount to be delivered to the Custodian in respect of a Unit has
been paid, no further amount shall be payable by the Unitholder in respect of
that Unit.

     4.7 No fractions of Units may be issued.

5. CALCULATION OF NET ASSET VALUE

     5.1 The net asset value of the assets held in the Trust Fund and the net
asset value per Unit shall be calculated by the Manager as at each business day
in Taipei (a "Valuation Date") by reference to (inter alia) the following
criteria:

     5.2 The value of assets held in the Trust Fund, other than cash, or assets
not specified in (a) to (d) below which are considered by the Manager to be the
effective equivalent of cash ("cash equivalents"), shall be determined as
follows:

          (a) where the assets are listed and traded on the Taiwan Stock
     Exchange, by reference to the last dealt price on such exchange on the
     applicable Valuation Date or, if there is no last dealt price on such
     exchange on that date, the last dealt price on such exchange on or before
     the relevant Valuation Date;

          (b) where the assets are bonds, debentures or notes not listed and
     traded on the Taiwan Stock Exchange, by reference to the valuation thereof
     on the

                                       A-8
<PAGE>   27

     applicable Valuation Date by the Stock Brokers' Association of Taipei, or,
     if there is no such valuation, at their par value plus interest accrued but
     unpaid to the relevant Valuation Date;

          (c) where the assets are money market instruments, at cost plus
     interest accrued but unpaid from the date of purchase to the applicable
     Valuation Date; and

          (d) in any other case by reference to valuation procedures consistent
     with guidelines from time to time laid down by the SEC.

     5.3 In the case of any interest-bearing investment, or other investment on
which income is accruing, not included within (b) or (c) above there shall be
included in the value thereof all interest or other income accruing up to the
applicable Valuation Date.

     5.4 Cash and cash equivalents and amounts receivable and prepaid shall be
included at the full face or market value thereof.

     5.5 There shall be made such allowance (if any) as the Manager may consider
appropriate in the case of any asset which the Manager considers may not be
fully recoverable.

     5.6 Unperformed or partially performed agreements for the acquisition or
disposal of assets shall be treated as if they had been completely performed.

     5.7 Liabilities shall include the amount of any fee payable to the
Custodian or the Manager as contemplated by Article 9 below and accrued at or
accruing to the applicable Valuation Date but remaining unpaid.

     5.8 The number of Units outstanding at any time shall include Units
scheduled to be redeemed on or as of the applicable Valuation Date but shall
exclude Units scheduled to be issued on or as of the applicable Valuation Date
but shall exclude Units scheduled to be issued on or as of that Valuation Date.

     5.9 With respect to acquisition or disposition transactions initiated but
not fully consummated, there may be excluded from the value of any assets in
respect of the acquisition or disposition of which brokerage, duties and other
similar costs would fail to be paid out of the assets held in the Trust Fund if
they had been acquired or disposed of, as the case may be, on the applicable
Valuation Date an amount not exceeding the Manager's bona fide estimate of the
amount of such costs which would have been so payable.

     5.10 Any currency transaction shall be made at the rate which is the
average of the rates of exchange quoted on the applicable Valuation Date by the
Foreign Exchange Trading Centre in Taipei as the rates for buying and selling
the one currency for the other.

     5.11 If in any respect extraordinary circumstances render it impracticable
or inappropriate to conduct a valuation on the basis of the foregoing provisions
of this

                                       A-9
<PAGE>   28

Article 5, the Manager shall to the extent necessary follow other valuation
procedures consistent with guidelines from time to time laid down by the SEC.

6. REDEMPTION OF UNITS

     6.1 Subject to Article 6.2 and relevant laws and regulations of the
Republic of China governing foreign investment and foreign exchange control, the
Unitholder may redeem all or any of its Units by delivering the Certificate in
respect of the Units to be redeemed together with an appropriate request for
redemption to the Manager at its principal office in Taipei. The amount to be
paid to the Unitholder upon any redemption of Units shall be the net asset value
per Unit as at the Valuation Date next following the date of receipt by the
Manager of the applicable redemption request and the accompanying Certificate
(such Valuation Date being a "Redemption Date") multiplied by the number of
Units being redeemed.

     6.2 Such net asset value per Unit shall be calculated in accordance with
Article 4 and Article 5 above except that: if the number of Units which, but for
this provision, would be subject to redemption on any Redemption Date exceeds
ten (10) percent of the number of Units issued and outstanding immediately
before such Redemption Date, the Manager may limit the number of Units which are
redeemed on such Redemption Date to ten (10) percent of the number of Units
issued and outstanding immediately before such Redemption Date. In such case,
the Manager shall as reasonably practicable dispose of such assets as required
to redeem those Units subject to redemption but not redeemed on such Redemption
Date.

     6.3 The Manager shall, no later than 5 days after the Redemption Date,
cause the Custodian to pay the redemption proceeds to the Unitholder.

     6.4 When the Unitholder requests the redemption of less than all of the
Units represented by the Certificate, the Manager shall, in addition to making
redemption payments in accordance with Article 6.3 above, within fourteen days
after the applicable Redemption Date, issue free of charge therefor a new
Certificate to represent the Units not requested to be redeemed.

7. SUSPENSION OF VALUATION, ISSUES, REDEMPTIONS AND PAYMENTS

     7.1 The Manager may temporarily suspend valuation of the assets held in the
Trust Fund in the following events:

          (a) when the Taiwan Stock Exchange is closed otherwise than for
     ordinary holidays or if dealings thereon are restricted or suspended; or

          (b) in the case of breakdown of the means of communication normally
     used for the valuation of any material part of the assets held in the Trust
     Fund, or if for any reason the value of any material part of the assets
     held in the Trust Fund may not be determined as rapidly and accurately as
     required; or

                                       A-10
<PAGE>   29

          (c) when, as a result of political, economic, military or monetary
     reasons or of any circumstance beyond the control of the Manager, disposal
     of assets held in the Trust Fund or determination of the value of assets
     held in the Trust Fund and/or liabilities of the Trust Fund are to any
     material extent not reasonably or normally practicable.

     7.2 During such time as valuation is suspended as specified in Article 7.1,
no issue or redemption of Units shall be made and no payment shall be made of
any redemption moneys payable but unpaid in respect of any Units already
redeemed.

8. EXPENSES

     8.1 The following items shall be the only costs and expenses payable out of
the assets held in the Trust Fund:

          (a) the acquisition price and brokerage, stamp duty and similar direct
     acquisition costs of assets acquired for the account of the Trust Fund;

          (b) brokerage, stock transfer tax, stamp duty and similar direct
     disposal costs arising on the disposal of assets held in the Trust Fund;

          (c) all stamp and similar duties and charges payable from time to time
     in respect of the Trust Fund;

          (d) all expenses incurred in relation to the registration of any
     assets in the name of the Custodian for the benefit of the Trust Fund;

          (e) all expenses properly incurred in the collection and distribution
     of income derived from assets held in the Trust Fund;

          (f) all fees and expenses of any auditors or legal advisers in
     connection with the assets held in the Trust Fund;

          (g) all taxation payable in respect of income of (including stock
     dividends), or the holding of or dealings with assets held in, the Trust
     Fund;

          (h) all proper expenses including postage and telex and telephone
     costs incurred by the Custodian in connection with the acquisition or
     disposal of any assets held in the Trust Fund;

          (i) any compensation payable to the Manager or the Custodian as
     contemplated by Article 9 below;

          (j) legal fees and expenses incurred in connection with the
     interpretation or amendment for the benefit of the Unitholder of this
     Investment Contract; and all such proper costs as are provided for in
     Articles 2.1(g) and 2.2(d);

          (k) the cost relating to the publication of Unit prices and/or the net
     asset value, and the printing, mailing and similar costs for any regular
     report sent to the Unitholder;

                                       A-11
<PAGE>   30

          (l) all attestation fees incurred in connection with the issuance of
     Certificates;

          (m) all ordinary and necessary expenses incurred by the Unitholder in
     connection with its organization, the public offering of its Shares to
     investors in the United States and elsewhere, its registration and
     operation as a regulated investment company under the Investment Company
     Act of 1940 and its qualification as a regulated investment company under
     the United States Internal Revenue Code, all as described in the Prospectus
     of the Unitholder dated December 16, 1986 used for the public offering and
     sale of the Unitholder's shares (together with, and as supplemented or
     updated by, each subsequent Prospectus used for subsequent offerings and
     sales of such shares, the "Prospectus"); and

          (n) all other necessary and appropriate costs, fees and expenses
     incurred by the Manager or the Custodian on behalf of the Trust Fund or the
     Unitholder in the course of performing their respective duties; provided
     that, the Manager and the Custodian shall each bear all expenses associated
     with the performance of its duties hereunder (including employee salaries
     and overhead) other than expenses to be paid out of the assets held in the
     Trust Fund as specifically provided in this Article 8 and the Manager shall
     bear the fees and expenses of the Unitholder's officers and directors who
     are interested persons of the Manager.

9. MANAGEMENT AND CUSTODIAN FEES

     9.1 As compensation for the investment management services and expenses
borne by the Manager pursuant to this Investment Contract, the Manager shall be
entitled to receive out of the assets held in the Trust Fund a monthly fee
payable in NT Dollars. Such fee shall consist of a basic fee (the "Basic Fee")
and performance adjustments (the "Performance Adjustments"), which may serve
either to increase or decrease the Basic Fee.

          (a) The Basic Fee shall be computed promptly after the end of each
     month by multiplying (i) the average daily Net Fund Value (as defined
     below) for such month by (ii) an annual rate of 1.30%. For any period of
     less than a full month during which this Investment Contract is in effect
     with respect to the Trust Fund, the Basic Fee shall be calculated by
     multiplying (i) the average daily Net Fund Value for such period prorated
     according to the proportion that the number of business days in such period
     bears to the number of business days in such month times (ii) an annual
     rate of 1.30%. As used herein, "Net Fund Value" shall mean the value of the
     net assets of the Unitholder (including the assets held in the Trust Fund)
     calculated as described under "Net Asset Value" in the Prospectus.

                                       A-12
<PAGE>   31

          (b) The Basic Fee shall be subject to upward or downward Performance
     Adjustments on the basis of investment performance, as follows:

     The Performance Adjustment shall be made by multiplying (x) the Applicable
Performance Adjustment Rate times (y) the average Net Fund Value over the
performance period. The resulting Performance Adjustments shall then be added to
or subtracted from the Basic Fee. The performance periods and the Applicable
Performance Adjustment Rates shall be calculated as follows:

             (1) First, the performance period shall commence with the first
        business day of the first full month following the date upon which 75%
        or more of the assets constituting the Net Fund Value are invested in
        equity securities. During the first eleven (11) months thereafter there
        shall be no Performance Adjustment. Starting with the twelfth month of
        operation, the Performance Adjustment shall take effect. Following the
        twelfth month a new month shall be added to the performance period until
        the performance period equals 36 months. Thereafter the performance
        period shall consist of the current month plus the previous 35 months.
        Notwithstanding the provisions of this Article 9.1(b)(1), Performance
        Adjustments under this Investment Contract shall be made as if this
        Investment Contract were a continuation of the Original Investment
        Contract [and the Interim Investment Contract], rather than a new
        Investment Contract. In addition, the termination of the Original
        Investment Contract [and the Interim Investment Contract] shall not, for
        purposes of the last paragraph of Article 9.1(b) of the Original
        Investment Contract [or the Interim Investment Contract] be deemed a
        termination thereof and thereby result in any prorated fee calculation.

             (2) Second, compute the percentage difference between (a) the
        opening Net Fund Value per Share of the Unitholder on the first business
        day of the performance period and (b) the sum of (1) the closing Net
        Fund Value per Share on the last business day of such period plus (ii)
        the value of the Unitholder's cash distributions to its shareholders per
        Share made during the performance period plus (iii) the value of capital
        gains taxes per Share paid or payable by or on behalf of the Unitholder
        on undistributed realized long-term capital gains during the performance
        period.

             (3) Third, compute the percentage change in Taiwan Stock Exchange
        Index (the "Index") during such period. In making such computation the
        value of cash distributions made during the performance period by
        companies whose securities comprise the Index shall be accumulated to
        the end of such period and added to the closing value of the Index, with
        cash distributions of the securities comprising the Index being treated
        as reinvested in the Index as of the end of each calendar quarter
        following the payment of the cash distribution. (In both such
        computations of percentages, the percentage rate shall be rounded to the
        nearest full basis
                                       A-13
<PAGE>   32

        point (0.01%) (rounding up if a computation produces a result of exactly
        one-half basis point (0.005%))).

             (4) Fourth, the Applicable Performance Adjustment Rate shall be the
        Applicable Adjustment Percentage (as defined in (5) below) times the
        number (whether positive or negative) obtained by subtracting the
        percentage change in the Index during the performance period from the
        percentage change in the Net Fund Value of a Share during that period,
        provided that if the number thus obtained is greater than ten (either
        positive of negative) the Applicable Performance Adjustment Rate shall
        be the Applicable Performance Adjustment Percentage times ten (positive
        or negative, as appropriate).

             (5) The Applicable Adjustment Percentage shall be an annual rate of
        0.03%.

     In computing the investment performance of the Net Fund Value and the
investment record of the Index, distributions of realized capital gains,
dividends paid out of investment income, the value of capital gains' taxes per
share paid or payable on undistributed realized long-term capital gains, and all
cash distributions of the companies whose stocks comprise the Index shall be
treated as reinvested in accordance with Rule 205-1 or any other applicable
rules under the United States Investment Advisers Act of 1940.

     In the case of termination of the Trust Fund, the transfer of the Trust
Fund to another securities investment trust enterprise, or the termination of
this Investment Contract during any month, the fee for that month shall be
reduced proportionately on the basis of the number of business days during which
this Investment Contract is in effect during that month. The Basic Fee rate in
that month shall be computed on the basis of and applied to the Net Fund Value,
averaged over that month and ending on the last business day on which this
Investment Contract is in effect. The amount of the Performance Adjustment (or
Adjustments) shall be computed on the basis of and applied to the Net Fund
Value, averaged over the 36-month period ending on the last business day on
which this Investment Contract is in effect, provided that if this Investment
Contract has been in effect for lass than 36 months, the computation shall be
made on the basis of the period of time during which this Investment Contract
has been in effect.

     9.2 As compensation for the custodial services and expenses borne by the
Custodian pursuant to this Investment Contract, the Custodian shall be entitled
to receive out of the assets held in the Trust Fund a fee which shall be
computed and paid promptly after the end of each month by multiplying (i) the
average daily net asset value of the assets held in the Trust Fund for such
month by (ii) an annual rate of 0.2%, provided that the Custodian shall be
entitled to receive a minimum annual fee of 2.0 million NT Dollars.

                                       A-14
<PAGE>   33

10. INVESTMENT OBJECTIVES AND POLICIES AND RESTRICTIONS

     10.1 The Unitholder's investment objective in placing proceeds of its
offering in the Trust Fund is to seek long-term capital appreciation through
investment primarily in equity securities of Republic of China companies listed
on the Taiwan stock Exchange, as more fully described in the Prospectus.
Investment may also be made in debt securities listed on the Taiwan Stock
Exchange and in debt securities traded on the over-the-counter market.

     10.2 The assets held in the Trust Fund, after having been remitted into the
Republic of China and delivered to the Custodian, shall be invested only in
securities and money market instruments denominated in NT Dollars and in NT
Dollars cash and banking and similar accounts, except to the extent otherwise
permitted by Republic of China law and regulations.

     10.3 The Manager agrees that it will not, using the assets held in the
Trust Fund:

          (a) Purchase any security (other than obligations of the U.S.
     Government, its agencies or instrumentalities, subject to Article 10.2), if
     as a result: (i) as to 75% of the assets held in the Trust Fund, more than
     5% of the total assets held in the Trust Fund (taken at their current
     value) would then be invested in securities of a single issuer, (ii) as to
     the remaining 25% of the assets held in the Trust Fund, more than 10% of
     the total assets held in the Trust Fund (taken at their current value)
     would then be invested in the securities of a single issuer (except that
     the Manager may invest not more than 25% of the assets held in the Trust
     Fund in obligations of the Republic of China Government or its agencies or
     instrumentalities), (iii) more than 10% of the voting equity securities (at
     the time of such purchase) of any one issuer would be held in the Trust
     Fund, and (iv) more than 25% of the total assets held in the Trust Fund
     (taken at current value) would be invested in a single industry; or

          (b) purchase any equity securities which, at the time the purchase is
     made, are not (i) listed and traded on the Taiwan Stock Exchange, (ii)
     purchased in initial public offerings and secondary public offerings but
     only if such securities will be listed on the Taiwan Stock Exchange
     immediately following such offering, or (iii) traded in the
     over-the-counter market in Taiwan; or

          (c) purchase partnership interests; or

          (d) borrow money or pledge the assets in the Trust Fund; or

          (e) purchase securities on margin, except for short-term credits as
     may be necessary for clearance of transactions; or

          (f) make short sales of securities or maintain a short position; or

                                       A-15
<PAGE>   34

          (g) buy or sell commodities or commodity contracts or real estate or
     interests in real estate, except that it may enter into foreign currency
     exchange contracts, foreign currency futures contracts, and options on
     foreign currencies and foreign currency futures contracts for bona fide
     hedging purposes; or

          (h) act as an underwriter of securities of other issuers; or

          (i) make loans, including loans of cash or portfolio securities, to
     any person; for purposes of this investment restriction, the term "loans"
     shall not include the purchase of a portion of an issue of publicly
     distributed bonds, debentures of other securities; or

          (j) purchase securities issued by any issuer which owns, whether
     directly or indirectly or in concert with another person, more than 5% of
     the equity securities (whether voting or non-voting) of the Adviser or
     which takes a significant role in the management of the Adviser; or

          (k) issue senior securities; or

          (l) purchase beneficiary certificates representing interests in other
     ROC securities investment trust funds or effect any transaction in
     securities with another ROC securities investment trust fund managed by the
     Manager.

     10.4 Nothing in Article 10.3 above shall require the sale or disposition of
any relevant assets held in the Trust Fund where any of the restrictions there
set out is breached as a result of any event outside the control of the Manager
and occurring after the investment in the relevant assets is made (including but
not limited to redemptions of Units or securities, any reorganization or
amalgamation of any company and the suspension of any listing), but no further
relevant assets shall be acquired until the relevant limitation can again be
complied with, except pursuant to the exercise of subscription rights to
purchase securities of an ROC issuer at a time when the Fund's portfolio
holdings of securities of that issuer (or that issuer's industry) would
otherwise exceed the limits set forth in clause (i), (ii), (iii) or (iv) of
Article 10.3(a), where prior to such exercise and after the announcement of such
rights, the Manager sells at least the number of securities which it
subsequently purchases through the exercise of the rights.

     10.5 To not less than the extent (if any) from time to time required by the
SEC a proportion of the assets held in the Trust Fund shall be retained at all
times in liquid form in assets of a type specified by the SEC.

     10.6 The Manager shall not hold or have an interest in securities issued by
the Unitholder or securities issued by any investment fund investing in Republic
of China securities in the management of which the Manager participates or has
an interest.

     10.7 To the maximum possible extent all transactions in assets in the Trust
Fund shall be carried out through stock exchanges and other officially
designated markets. Subject to any limitations which may be imposed under the

                                       A-16
<PAGE>   35

U.S. Investment Company Act of 1940 and any rules and regulations adopted
thereunder, such transactions may be carried out through a broker who is a
connected person of the Manager to such extent as the Manager may think fit
provided that the cost thereof is not greater than it would have been had the
transactions been carried out through a broker who was not a connected person.

11. DURATION, CHANGES IN MANAGER AND CUSTODIAN, AND TERMINATION

     11.1 The Trust Fund is established for an unspecified period. This
Investment Contract shall become effective on [          ] and shall continue in
effect until [          ], 2003. If not sooner terminated, this Investment
Contract shall continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be specifically approved
annually by the vote of a majority of the Unitholder's Board of Directors who
are not parties to this Investment Contract or interested persons (as such term
is defined in the U.S. Investment Company Act of 1940) of any such party, cast
in person at a meeting called for the purpose of voting on such approval and (a)
either the vote of a majority of the outstanding voting securities of the
Unitholder, or (b) a majority of the Unitholder's Board of Directors as a whole.
Notwithstanding the foregoing, this Investment Contract may be terminated at any
time by the Unitholder, without the payment of any penalty, upon a vote of a
majority of the Unitholder's Board of Directors or a majority of the outstanding
voting securities of the Unitholder, or by the Manager or the Custodian, on
sixty (60) days' written notice to the other parties. This Investment Contract
shall automatically terminate in the event of its assignment (as such term is
defined in the U.S. Investment Company Act of 1940). Any transfer, assignment or
other disposition of any of the Units by the Unitholder shall constitute an
assignment of this Investment Contract. As used herein the phrase "majority of
the outstanding voting securities" shall have the meaning set forth in the U.S.
Investment Company Act of 1940. In addition, this Investment Contract shall
automatically terminate if either the Manager or the Custodian is removed as
provided in this Article 11.

     11.2 The Investment Contract shall also terminate if

          (a) the SEC by notice in writing to the Manager and/or the Custodian
     so requires; or

          (b) the Manager notifies the Unitholder, the Custodian and the SEC
     that in its opinion further operation of the Trust Fund in accordance with
     this Investment Contract is illegal, impracticable or inadvisable having
     regard solely to the interests of the Unitholder.

     11.3 Upon termination of this Investment Contract, unless a new Investment
Contract is entered into (as provided in Article 11.7), the Manager shall,
within three (3) months after the effective date of termination, promptly
dispose of assets held in the Trust Fund at reasonable prices, satisfy any
liabilities relating to the Trust Fund, and distribute the available balance to
the Unitholder.

                                       A-17
<PAGE>   36

     11.4 The SEC may order that the Manager or Custodian be removed and that a
new Manager or Custodian be appointed within six months if the SEC considers
that the Manager or (as the case may be) the Custodian is incapable of carrying
out its functions properly.

     11.5 The Manager and/or the Custodian may be removed by the Unitholder by
60 days' written notice to the other parties hereto.

     11.6 If either the Manager or the Custodian goes into liquidation or
bankruptcy or if its permit to act as Manager or Custodian has been revoked, it
shall be deemed to have been forthwith removed as Manager or (as the case may
be) Custodian.

     11.7 If the Manager and/or Custodian is removed or resigns, the Unitholder
may appoint a new Manager and/or Custodian and enter into a new Investment
Contract containing substantially the same terms and conditions as this
Investment Contract. The appointment of a new Manager shall be approved by the
Custodian and by the SEC and the appointment of a new Custodian shall be
approved by the Manager and by the SEC, provided that if the SEC has, in the
circumstances specified in the Regulations Governing the Administrating of
Securities Investment Trust Funds (effective August 10, 1983), as from time to
time amended, required the appointment of a new Manager or a new Custodian and
the Unitholder has not appointed a new Manager or a new Custodian within three
months after the SEC has so required, the SEC may require the liquidation and
distribution of the assets held in the Trust Fund as provided in Article 11.3.

12. ACCOUNTS AND STATEMENTS

     12.1 The Manager shall maintain in its principal office in Taipei
sufficient accounts and records to enable a complete and accurate view to be
formed of the assets and liabilities and the income and expenditure of the Trust
Fund, all transactions for the account of the Trust Fund and amounts received in
the Trust Fund in respect of issues of Units and paid out on redemptions of
Units and by way of distributions.

     12.2 The Manager shall prepare financial statements of the Trust Fund for
successive accounting periods, each accounting period commencing immediately
after the end of the last preceding such accounting period (as in the case of
the first such period from the date of establishment of the Trust Fund) and
ending on December 31 in each year (the "final statements") and shall also
prepare such financial statements as at and for the monthly periods ending on
the last day of each calendar month (which monthly reports shall be prepared
within ten days after the end of each month), in each case in the respective
forms and containing the information for the time being required by the SEC.

                                       A-18
<PAGE>   37

     12.3 The Manager shall:

          (a) cause the final statements to be audited by a person or firm
     authorized under the laws of the Republic of China and the regulations of
     the SEC ("Auditors");

          (b) submit the final statements, together with such report as the
     Manager may intend to make to the Unitholder in relation thereto and the
     Auditors' report thereon, to the SEC for comment and approval within two
     months after the end of the relevant accounting period;

          (c) comply with such requirements as the SEC may make in relation to
     such statements and report within two weeks after the date on which such
     requirements are made; and

          (d) send to the Unitholder and to the SEC, copies of all such final
     statements within twelve weeks after the end of the relevant accounting
     period.

     12.4 The Manager shall sign and the Custodian shall countersign all final
and monthly statements which shall then be published in Taipei.

     12.5 The Auditors' report on the final statements of the Trust Fund shall
be in the form required by the SEC and where relevant shall indicate the extent
to which such a report cannot be given and the reasons therefor.

13. DISTRIBUTIONS

     13.1 Distributions of income in respect of each accounting period ended
December 31, will be made not later than March 31 in the next following year to
the Unitholder. Distributions may not be made out of capital. The Manager in
conjunction with the Auditors shall determine what is income and what is
capital, except that stock dividends and gains (realized or unrealized) on
investments shall not be regarded as income and realized discounts on debt
securities and money market instruments may be regarded as income. Costs and
expenses payable out of the assets held in the Trust Fund may be charged against
income or capital as the Manager in conjunction with the Auditors may determine,
provided that the allocation of such costs and expenses as to income or to
capital shall be consistent from year to year. When expenses are charged against
capital, they may be amortized on a straight line basis over a period not
exceeding five years.

     13.2 The aggregate amount of each distribution shall be credited to a
separate account in the name of the Custodian and such amount shall thereupon
cease to form part of the assets of the Trust Fund accordingly, but interest
earned on such amount pending payment shall be paid into and form part of the
assets of the Trust Fund.

                                       A-19
<PAGE>   38

14. CURRENCY

     14.1 The accounts and records of the Trust Fund shall be maintained in NT
Dollars, payments into the Trust Fund on the issue of Units and payments out of
the Trust Fund on the redemption of Units and by way of distributions shall be
made in NT Dollars, the net asset value of the assets held in the. Trust Fund
shall be calculated in NT Dollars, and the financial statements of the Trust
Fund shall be prepared in NT Dollars.

15. INFORMATION AND NOTICES

     15.1 There shall be held available for inspection by any person without
charge at the principal office of the Manager in Taipei at all reasonable
business hours copies of:

          (a) this Investment Contract as from time to time amended;

          (b) the current sales prospectus (if any) in relation to Shares of the
     Unitholder;

          (c) all interim and final statements, together with any relevant
     Auditors' reports and reports of the Manager relative thereto, for the two
     latest accounting periods of the Trust Fund or (if less) for all periods
     since the establishment of the Trust Fund, and all interim and final
     statements for such periods.

     15.2 All notices to the Unitholder shall be sent to it by hand or by
airmail at its registered address.

     15.3 The Manager shall at all times maintain an office or offices in Taipei
and shall notify the Unitholder of any change in the address of its principal
office in Taipei for the time being.

16. AMENDMENTS

     This Investment Contract shall be amended only with the prior written
agreement of the Manager, the Custodian and the Unitholder, subject to the
approval of the SEC, and subject to approval in accordance with applicable U.S.
law.

     Notwithstanding the foregoing, if any of the parties to this Agreement
changes its name, such changed name shall be automatically substituted therefore
hereunder.

17. CONNECTED PERSONS

     For the purposes of this Investment Contract, a person is a connected
person of another if:

          (a) together with any person acting in concert with it in this
     connection, it owns or otherwise controls for its own account, and directly
     or indirectly, an

                                       A-20
<PAGE>   39

     interest of more than five percent (5%) (or, in the case of an interest of
     the Custodian, ten percent (10%)) of that other, whether or not a voting
     interest; or

          (b) it is a director or supervisor of or takes any significant active
     role in the management of that other.

18. ATTACHMENT

     The Attachment I hereto (a list of the Board of Directors of the
Unitholder) shall be regarded as part of this Investment Contract. Any directors
listed therein can be replaced from time to time in accordance with the
procedures applicable to a Delaware corporation.

19. GOVERNING LAW, JURISDICTION AND LANGUAGE

     19.1 The Trust Fund, this Investment Contract and the Certificate shall be
governed by, and this Investment Contract and the Certificate construed in
accordance with, the laws of the Republic of China.

     19.2 Any dispute arising out of or in respect of the Trust Fund, this
Investment Contract or the Certificate shall be subject to the nonexclusive
jurisdiction of the courts of the Republic of China having original jurisdiction
and, in the case of any action against the Manager or the Custodian, any court
having original jurisdiction in the place in which the Manager of the Custodian
has its principal office.

     19.3 The governing language of this Investment Contract shall be Chinese,
but documents issued in relation to the Trust Fund may be in either the Chinese
or the English language.

                                       A-21
<PAGE>   40

20. EFFECTIVE DATE

     This Investment Contract shall become effective on the date hereof.

Dated: [            ], 2001

                                         CHINA SECURITIES

                                           INVESTMENT TRUST


                                           CORPORATION, AS MANAGER


                                         By:
                                            ------------------------------------

                                         THE INTERNATIONAL

                                           COMMERCIAL BANK OF CHINA,

                                           AS CUSTODIAN

                                         By:
                                            ------------------------------------

                                         THE TAIWAN FUND, INC.
                                           (The Unitholder)

                                         By:
                                             -----------------------------------

                                       A-22
<PAGE>   41

                                                                       EXHIBIT A

                                                                    (Front page)

                           (BENEFICIARY CERTIFICATE)
                 CHINA SECURITIES INVESTMENT TRUST CORPORATION
                               TAIWAN TRUST FUND

Date of Issue:


<TABLE>
<CAPTION>
MANAGER                            CUSTODIAN
<S>                                <C>
China Securities Investment Trust  International Commercial Bank of
  Corporation                      China
99 Tunhwa South Rd.                100 Chilin Road
Section 2                          Taipei, Taiwan, ROC
Taipei, Taiwan ROC

Name of the Holder of this         Total Number of Units Comprised by
Beneficiary Certificate:           this Beneficiary Certificate:
The Taiwan Fund, Inc.
225 Franklin St.                   ----------------------------------
Boston, Massachusetts USA          (There is no charge for the
                                   issuance of this certificate)
</TABLE>


OTHER NOTES:

     1. This Certificate acknowledges receipt by the Manager and the Custodian
        of the funds constituting the Units referred to herein, and is issued in
        accordance with the provisions of the Regulations Governing the
        Administration of Securities Investments Trust Funds of the Republic of
        China and the Securities Investment Trust-Investment Management and
        Custodian Contract dated December 16, 1986, as superseded (the
        "Investment Contract"). The Unitholder will be entitled to repatriate
        the earnings and principal in respect of Units in accordance with the
        provisions of the Regulations Governing Securities Investment by
        Overseas Chinese and Foreign Investors and Procedures for Remittance.

     2. Reference should be made to the relevant ROC regulations relating to
        securities investment trusts, the Investment Contract and the Prospectus
        dated December 16, 1986 (as superseded by later Prospectuses) published
        by The Taiwan Fund, Inc.

                                       A-23
<PAGE>   42

(Reverse page)

                           (BENEFICIARY CERTIFICATE)

1. INVESTMENT POLICY AND SCOPE

     The investment objective of the Taiwan Trust Fund (the "Trust Fund") is to
achieve capital appreciation through investment in securities listed on the
Taiwan Stock Exchange, money market instruments, government bonds, and
debentures.

2. DURATION OF THE TRUST FUND

     The duration of the Trust Fund shall be determined in accordance with the
provisions of the Investment Contract.

3. CALCULATION AND ANNOUNCEMENT OF THE NET ASSET VALUE PER UNIT

     The net asset value per Unit of the Trust Fund is calculated in NT$ by
dividing the value of the assets of the Trust Fund less its liabilities by the
number of Units in issue and rounding any fraction of NT$l up or down to the
nearest NT Dollar (NT$0.5 being rounded up). The net asset value per Unit is
calculated and published on a daily basis.

4. REDEMPTION

     After one year from the date of issue, the Holder of the Units comprised in
this Certificate may apply for redemption by submitting this Certificate to the
Manager or its agent together with a written application. The redemption price
will be the net asset value per Unit as calculated in accordance with the method
specified in the preceding paragraph on the next valuation date following the
receipt of the redemption application by the Manager or its agent less the
Manager's assessment of the cost of realizing an appropriate amount of the Trust
Fund's assets. Redemption proceeds will normally be paid out within five days
after the valuation date.

5. FEES PAYABLE TO THE MANAGER AND THE CUSTODIAN

     The Manager shall be entitled to receive out of the assets held in the
Trust Fund a monthly fee payable in NT Dollars. Such fee shall consist of a
basic fee and performance adjustments, as more fully described in the Investment
Contract. The Custodian shall be entitled to receive out of the assets held in
the Trust Fund an annual fee (payable monthly) equal to 0.2% of the average
daily net asset value of the assets held in the Trust Fund, subject to a minimum
annual fee of 2.0 million NT Dollars.

                                       A-24
<PAGE>   43

6. DISTRIBUTION

     Distributions of income will be made within three months after the close of
each fiscal year to the Unitholder. Capital gains and stock dividends will not
be considered as income.

7. LIQUIDATION

     Upon expiration of the term of this Trust Fund or termination of the
Investment Contract, the Manager shall, within three months, liquidate the Trust
Fund and distribute the available balance to the Unitholder according to its
entitlements.

8. AMENDMENT AND TERMINATION OF THE INVESTMENT CONTRACT

     The Investment Contract may be amended with the prior approval of the
Securities and Exchange Commission, by the Manager and the Custodian with the
approval of the Unitholder. The Investment Contract may be terminated in
accordance with provisions of the relevant Republic of China Securities
Investment Trust Fund regulations and provisions of the Investment Contract.

                                       A-25
<PAGE>   44

                                  ATTACHMENT I

Board of Directors of The Taiwan Fund, Inc.:

David Dean

Benny T. Hu

Lawrence J. Lau

Joe O. Rogers

Jack C. Tang

Gloria Wang

Shao-Yu Wang

Lawrence F. Weber

                                       A-26
<PAGE>   45

                                                                      APPENDIX B

                              INVESTMENT ADVISORY
                            AND MANAGEMENT AGREEMENT

     THIS AGREEMENT dated as of [       ], 2001 between THE TAIWAN FUND, INC., a
Delaware corporation (the "Fund"), and CHINA SECURITIES INVESTMENT TRUST
CORPORATION, a Republic of China ("ROC") corporation ("CSITC" or the "Adviser")
having its principal office in Taipei, Taiwan, ROC.

     WHEREAS, the Fund is a diversified, closed-end management investment
company registered under the Investment Company Act of 1940 (the "1940 Act"),
and the Adviser is an investment adviser registered under the Investment
Advisers Act of 1940 (the "Advisers Act"), and is authorized by the ROC
Securities and Exchange Commission (the "CSEC") to conduct business in the ROC;

     WHEREAS, the Fund, the Adviser and the International Commercial Bank of
China ("ICBC") have entered into a Securities Investment Trust-Investment
Management and Custodian Contract dated of even date herewith (as the same may
be amended or modified, the "Management Contract") providing for management by
the Adviser of assets of the Fund held in the ROC;

     WHEREAS, certain of the assets of the Fund may be held in the United
States, either pending remittance to the ROC of the net proceeds of any offering
of the Common Stock of the Fund, or after distribution to the Fund under the
Management Contract (whether as investment income or unit redemption proceeds),
or upon borrowing by the Fund from a bank in the United States for temporary or
emergency purposes, or otherwise as permitted under applicable ROC law and
regulations (such assets of the Fund being referred to herein as the "U.S.
Assets"); and

     WHEREAS, the Fund desires to retain the Adviser to furnish investment
advisory and management services for the Fund's assets in the United States, and
the Adviser is willing to furnish such services;

     NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties as follows:

     (1) Appointment of the Adviser.  The Fund appoints the Adviser to act as
investment adviser to the Fund with respect to the U.S. Assets for the period
and on the terms set forth in this Agreement. The Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation provided.

     (2) Custodian.  The State Street Bank and Trust (the "U.S. Custodian") has
been retained by the Fund to act as custodian for the U.S. Assets. The Fund will
deliver to the U.S. Custodian a photocopy of this Agreement executed by the Fund
and the Adviser.

                                       B-1
<PAGE>   46

     (3) Investment Advisory and Management Services.  The Adviser undertakes
and agrees:

          (a) To manage the investment of the U.S. Assets for the exclusive,
     full benefit of the Fund (including making investment decisions,
     supervising the acquisition and disposition of investments, instructing the
     U.S. Custodian with respect thereto and otherwise with respect to the U.S.
     Assets held by the U.S. Custodian, and selecting brokers or dealers to
     carry out portfolio transactions) in good faith and to the best of its
     ability and without gaining any advantage for itself or any of its
     Connected Persons (as defined in Article 17 of the Management Contract)
     thereby except as expressly provided in this Agreement or the Management
     Contract, all in accordance with the investment objectives and policies set
     forth in the Management Contract and in accordance with guidelines and
     directions from the Fund's Board of Directors;

          (b) To account to the Fund for any loss in value of the U.S. Assets
     where such loss has been caused by its willful or negligent default or
     reckless disregard of its duties hereunder;

          (c) To be responsible to the Fund for the acts and omissions of all
     persons to whom it may delegate any of its functions as the Adviser as if
     they were its own acts and omissions;

          (d) Notwithstanding and without prejudice to any other provisions of
     this Agreement, to, and to instruct all brokers used by the Adviser in
     relation to the sale or purchase of assets for the account of the Fund to,
     act in accordance with the best practice then applicable for the settlement
     of sales and purchases of securities and other investments; and

          (e) To perform its obligations under this Agreement so as to (i)
     comply with all laws and regulations of the United States and the ROC
     applicable to the Adviser and (ii) permit the Fund to qualify as a
     regulated investment company under applicable United States tax law.

     (4) Compensation.  The Adviser acknowledges that the compensation to be
paid to it pursuant to Article 9 of the Management Contract shall constitute
full and sufficient compensation for performance by it of its obligations under
this Agreement.

     (5) Expenses.  Expenses shall be borne by the Adviser in accordance with,
and to the extent provided under, Article 8 of the Management Contract.

     (6) Duration and Termination.  (a) This Agreement shall become effective on
the date first above written, and shall continue in effect until [          ],
2003. If not sooner terminated, this Agreement shall continue in effect for
successive periods of 12 months each thereafter; provided that each such
continuance shall be specifically approved annually by the vote of a majority of
the Fund's Board of Directors who are not parties to this Agreement or
interested persons (as such term is defined in the 1940 Act) of any such party,
cast in person at a meeting called for
                                       B-2
<PAGE>   47

the purpose of voting on such approval and (i) either the vote of a majority of
the outstanding voting securities of the Fund, or (ii) a majority of the Fund's
Board of Directors as a whole. Notwithstanding the foregoing, this Agreement may
be terminated at any time by the Fund, without the payment of any penalty, upon
vote of a majority of the Fund's Board of Directors or a majority of the
outstanding voting securities of the Fund, or by the Adviser, on sixty (60)
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment (as such term is defined in the 1940
Act). As used herein the phrase "majority of the outstanding voting securities"
shall have the meaning set forth in the 1940 Act. In addition, this Agreement
shall automatically terminate if the Adviser is removed as provided in Article
11 of the Management Contract.

          (b) Without limitation of the provisions of clause (a), this Agreement
     shall also terminate upon the termination of the Management Contract in
     accordance with the provisions thereof.

          (c) Upon termination of this Agreement, unless a new Agreement is
     entered into (as provided in clause (f)), the Adviser shall, within three
     months after the effective date of termination, promptly dispose of U.S.
     Assets at reasonable prices, satisfy any liabilities relating to the Fund,
     and distribute the available balance to the Fund.

          (d) The Adviser may be removed by the Fund by 60 days' written notice.

          (e) If the Adviser goes into liquidation or bankruptcy, or if it
     ceases to be registered as an investment adviser under the Advisers Act, or
     if its ROC permit to act as Manager under the Management Contract has been
     revoked, it shall be deemed to have been forthwith removed as Adviser.

          (f) If the Adviser is removed or resigns, the Fund may appoint a new
     Adviser and enter into a new Agreement containing substantially the same
     terms and conditions as this Agreement, subject to satisfaction of the
     requirements set forth in, and subject to the provisions of Article 11.7 of
     the Management Contract.

          (g) This Agreement shall continue in full force and effect
     notwithstanding the resignation or removal of ICBC, or any successor, as
     Custodian under the Management Contract.

     (7) Liability of the Adviser.  The Adviser may rely on information
reasonably believed by it to be accurate and reliable. Except as may otherwise
be provided by the 1940 Act, neither the Adviser nor its stockholders, officers,
directors, employees or agents shall be subject to, and the Fund shall indemnify
and hold such persons harmless from and against, any liability for and any
damages, expenses or losses incurred in connection with any act or omission in
the course of, connected with or arising out of any services to be rendered
hereunder, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Adviser's duties or by reason of reckless
disregard of the Adviser's obligations and duties under this

                                       B-3
<PAGE>   48

Agreement ("disabling conduct"); provided that the Adviser shall not receive any
indemnification from the Fund against any liability to the Fund or its
shareholders to which the Adviser would otherwise be subject unless there has
been (1) a final decision on the merits by a court or other body before whom the
proceeding alleging liability of the Adviser was brought that the Adviser was
not liable by reason of disabling conduct, or (2) a reasonable determination,
based upon a review of the facts, that the Adviser was not liable by reason of
disabling conduct, by (i) the vote of a majority of a quorum of the Fund's
directors who are neither "interested directors" as defined in the United States
Investment Company Act of 1940 nor parties to the proceeding ("disinterested,
non-party directors"), or (ii) an independent legal counsel in a written
opinion; and provided further that, the Adviser shall not receive an advance of
attorneys' fees or other expenses incurred by it in defending a proceeding
alleging such liability except upon the undertaking of the Adviser to repay the
advance unless it is ultimately determined that it is entitled to
indemnification, but only if at least one of the following is also required as a
condition to the advance: (1) the Adviser shall provide a security for its
undertaking, (2) the Fund shall be insured against losses arising by reason of
any lawful advances, or (3) a majority of a quorum of the disinterested,
non-party directors of the Fund, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to believe that the
Adviser ultimately will be found entitled to indemnification.

     (8) Services Not Exclusive.  It is understood that the services of the
Adviser are not deemed to be exclusive, and nothing in this Agreement shall
prevent the Adviser, or any affiliate thereof, from providing similar services
to other investment companies and other clients (whether or not their investment
objectives and policies are similar to those of the Fund) or from engaging in
other activities. When other clients of the Adviser desire to purchase or sell a
security at the same time such security is purchased for the Fund, it is
understood that such purchases and sales and will be made as nearly as
practicable on a pro rata basis in proportion to the amounts desired to be
purchased or sold by each client.

     (9) Miscellaneous.

          (a) This Agreement shall be governed by and constructed in accordance
     with the laws of the State of Delaware; provided that nothing herein shall
     be construed as being inconsistent with (i) the 1940 Act or the Advisers
     Act or regulations issued under such statutes, or (ii) applicable ROC law
     and regulations.

          (b) The captions in this Agreement are included for convenience only
     and in no way define or delimit any of the provisions hereof or otherwise
     affect their instruction or effect.

          (c) If any provision of this Agreement shall be held or made invalid
     by a court decision, statute, rule or otherwise, the remainder of this
     Agreement shall

                                       B-4
<PAGE>   49

     not be affected thereby and, to this extent, the provisions of this
     Agreement shall be deemed to be severable.

          (d) Nothing herein shall be construed as constituting the Adviser an
     agent of the Fund.

          (e) If any of the parties to this Agreement changes its name, such
     changed name shall be automatically substituted therefore hereunder.

     IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.

                                         CHINA SECURITIES INVESTMENT

                                           TRUST CORPORATION


                                         By:

  ------------------------------------------------------------------------------
                                             Title:

                                         THE TAIWAN FUND, INC.

                                         By:

  ------------------------------------------------------------------------------
                                             Title:

                                       B-5
<PAGE>   50


                                                                    TWNCM2-PS-01

<PAGE>   51
                                   PROXY CARD

                              THE TAIWAN FUND, INC.
           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
                SPECIAL MEETING OF STOCKHOLDERS - AUGUST 22, 2001


         The undersigned hereby appoints Lawrence F. Weber, Haichi Vicki Hau and
Laurence E. Cranch, and each of them, the proxies of the undersigned with full
power of substitution to each of them, to vote all shares of The Taiwan Fund,
Inc. which the undersigned is entitled to vote at the Special Meeting of
Stockholders of The Taiwan Fund, Inc. to be held at the offices of Clifford
Chance Rogers & Wells LLP, 200 Park Avenue, 52nd Floor, New York, New York
10166, on Wednesday, August 22, 2001 at 11:00 A.M., New York time, and at any
adjournments thereof. The undersigned hereby revokes all proxies with respect to
such shares heretofore given. The undersigned acknowledges receipt of the Proxy
Statement dated July 24, 2001.


         UNLESS OTHERWISE SPECIFIED IN THE BOXES PROVIDED, THE UNDERSIGNED'S
VOTE WILL BE CAST FOR ITEMS (1) and (2).

--------------------------------------------------------------------------------

                    PLEASE VOTE, DATE AND SIGN ON OTHER SIDE
                   AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.

--------------------------------------------------------------------------------

Please sign exactly as your name(s) appear(s). When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such.

--------------------------------------------------------------------------------

HAS YOUR ADDRESS CHANGED?                  DO YOU HAVE ANY COMMENTS?

------------------------------------       -------------------------------------

------------------------------------       -------------------------------------

------------------------------------       -------------------------------------


                               FRONT OF PROXY CARD
<PAGE>   52
[X]      PLEASE MARK VOTES AS IN THIS EXAMPLE

1.       The approval of a new Securities Investment Trust -- Investment
         Management and Custodian Contract.

                   For  [ ]      Against  [ ]       Abstain   [ ]


2.       The approval of a new U.S. Asset Advisory Agreement.

                   For  [ ]      Against  [ ]       Abstain   [ ]


3.       In their discretion on any other business which may properly come
         before the meeting or at any adjournments thereof.

                   For  [ ]      Against  [ ]       Abstain   [ ]





         Mark box at right if an address change or comment [ ]
         has been noted on the reverse side of this card.

Please be sure to sign and date this Proxy.   Date:
                                                   -----------------------------


------------------------------------       -------------------------------------
Stockholder sign here                      Co-owner sign here


RECORD DATE SHARES:


                                  BACK OF CARD
</TEXT>
</DOCUMENT>
