SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Soliciting Material Under Rule
|_| Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
Japan Smaller Capitalization 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)(4) 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):
________________________________________________________________________________
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________________________________________________________________________________
5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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4) Date Filed:
________________________________________________________________________________
JAPAN SMALLER CAPITALIZATION FUND, INC.
180 Maiden Lane
New York, New York 10038-4936
---------------
NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS
November 12, 2003
---------------
TO THE SHAREHOLDERS OF
JAPAN SMALLER CAPITALIZATION FUND, INC.:
Notice is hereby given that the 2003 Annual Meeting of Shareholders (the
"Meeting") of Japan Smaller Capitalization Fund, Inc. (the "Fund") will be held
at the offices of Nomura Asset Management U.S.A. Inc., 180 Maiden Lane, 26th
Floor, New York, New York, on Wednesday, November 12, 2003, at 10:30 A.M. for
the following purposes:
(1) To elect five Directors to serve for the ensuing year; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on September 19,
2003 as the record date for the determination of shareholders entitled to notice
of and to vote at the Meeting or any adjournment thereof.
A complete list of the shareholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any shareholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after October 29, 2003, at the offices of the Fund, 180 Maiden Lane, 26th
Floor, New York, New York.
You are cordially invited to attend the Meeting. Shareholders who do not
expect to attend the Meeting in person are requested to complete, date and sign
the enclosed form of proxy and return it promptly in the envelope provided for
that purpose. The enclosed proxy is being solicited on behalf of the Board of
Directors of the Fund.
By Order of the Board of Directors
NEIL A. DANIELE
Secretary
New York, New York
Dated: October 1, 2003
PROXY STATEMENT
JAPAN SMALLER CAPITALIZATION FUND, INC.
180 Maiden Lane
New York, New York 10038-4936
---------------
2003 ANNUAL MEETING OF SHAREHOLDERS
November 12, 2003
---------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Japan Smaller Capitalization
Fund, Inc., a Maryland corporation (the "Fund"), to be voted at the 2003 Annual
Meeting of Shareholders of the Fund (the "Meeting") to be held at the offices of
Nomura Asset Management U.S.A. Inc., 180 Maiden Lane, 26th Floor, New York, New
York, on Wednesday, November 12, 2003, at 10:30 A.M. The approximate mailing
date of this Proxy Statement is October 2, 2003.
All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, proxies
will be voted FOR the election of five Directors.
Any proxy may be revoked at any time prior to the exercise thereof by
giving written notice to the Secretary of the Fund at the Fund's address
indicated above or by voting in person at the Meeting.
The Board of Directors has fixed the close of business on September 19,
2003, as the record date for the determination of shareholders entitled to
notice of and to vote at the Meeting and at any adjournment thereof.
Shareholders on the record date will be entitled to one vote for each share
held, with no shares having cumulative voting rights. As of September 19, 2003,
the Fund had outstanding 15,846,384 shares of Common Stock, par value $0.10 per
share.
The Board of Directors of the Fund knows of no business other than the
election of five Directors 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.
PROPOSAL 1. ELECTION OF DIRECTORS
At the Meeting the five Board of Directors nominees will be elected to
serve until the next Annual Meeting of Shareholders and until their successors
are elected and qualified or until their earlier resignation or removal. It is
the intention of the persons named in the enclosed proxy to nominate and vote
(unless such authority has been withheld in the proxy or properly revoked) in
favor of the election of the following Board of Directors nominees: William G.
Barker, Jr., Yasushi Suzuki, Chor Weng Tan, Arthur R. Taylor and John F.
Wallace. The Board of Directors has one vacant seat owing to the death of George
H. Chittenden in September 2000. Shareholders cannot vote for a greater number
of persons for Director than the five nominees named. Certain biographical and
other information pertaining to the Board of Directors nominees is set forth in
Exhibit I to this Proxy Statement.
The Board of Directors knows of no reason why any of the nominees will be
unable to serve, but in the event of any such inability, the proxies received
will be voted for such substitute nominees as the Board of Directors may
recommend. It is currently expected that any substitute nominee for Director who
is not an "interested person" of the Fund (within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act")) also will be a
non-interested person.
Committees and Directors' Meetings. The Board of Directors has a standing
Audit Committee and a standing Nominating Committee, each of which consists of
the Directors who are not "interested persons" of the Fund within the meaning of
the Investment Company Act and who are "independent" as defined in the listing
standards of the New York Stock Exchange. Currently, Messrs. Barker, Tan and
Taylor are members of these Committees. The principal purpose of the Audit
Committee is described below. The principal purpose of the Nominating Committee
is to select and nominate the Directors of the Fund. The Nominating Committee
will consider qualified nominees recommended by shareholders of the Fund.
Shareholders should submit nominees to the Secretary of the Fund. The Fund has
no standing Compensation Committee. The non-interested Directors have retained
independent legal counsel to assist them in connection with their duties.
During the fiscal year ended February 28, 2003, the Board of Directors held
six meetings, the Audit Committee held two meetings and the Nominating Committee
held one meeting. Each Director then in office attended at least 75% of the
meetings of the Board of Directors held during the fiscal year and, if a member,
of the total number of meetings of the Audit and Nominating Committees held
during the period for which he served.
Audit Committee Report. Pursuant to the revised Audit Committee Charter
adopted by the Fund's Board of Directors on August 6, 2003, the Audit
Committee's principal responsibilities are the appointment, compensation and
oversight of the Fund's independent accountants, including resolution of
disagreements regarding financial reporting between Fund management and such
independent accountants, for the purpose of preparing or issuing an audit report
or related work. A copy of the written Audit Committee Charter is attached as
Exhibit IV to this proxy statement. As set forth in the Audit Committee Charter,
Fund management is responsible for maintaining appropriate systems for
accounting, including the preparation, presentation and integrity of the Fund's
financial statements and the procedures designed to assure compliance with
accounting standards and applicable laws and regulations. The Fund's independent
accountants are responsible for conducting a proper audit of the Fund's
financial statements and expressing an opinion as to their conformity with
generally accepted accounting principles.
In performing its oversight function, the Audit Committee has received
written disclosures and the letter required by Independence Standards Board
Standard No. 1, as may be modified or supplemented, from Price-waterhouseCoopers
LLP ("PWC"), the Fund's independent accountants, and discussed certain matters
required to be discussed by the Statement on Auditing Standards No. 61 with PWC.
The Audit Committee has considered whether the provision of non-audit services
by PWC is compatible with maintaining the independence of those accountants. At
its meeting held April 23, 2003, the Audit Committee reviewed and discussed the
audited financial statements of the Fund and the audit of such financial
statements with Fund management and PWC. In accordance with the Audit Committee
Charter, Fund management or the independent accoutants are required to notify
the Audit Committee of any material concerns that arise during the course of the
audit and the preparation of the audit financial statements mailed to
shareholders and included in the Fund's Annual Report. The Audit Committee
discussed with PWC their independence and considered whether the provision of
services by PWC to the Fund and to Nomura Asset Man-
2
agement U.S.A. Inc. ("NAM-U.S.A.") and its affiliates was compatible with
maintaining PWC's independence.
The members of the Audit Committee are not full-time employees of the Fund.
As such, it is not the duty or responsibility of the Audit Committee or its
members to conduct "field work" or other types of auditing or accounting reviews
or procedures or to set auditor independence standards. Furthermore, the Audit
Committee's considerations and discussions referred to above do not provide
assurance that the audit of the Fund's financial statements has been carried out
in accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that the Fund's independent accountants are in fact "independent."
Based upon the reviews and discussions refered to above with Fund
management and PWC and subject to the limitations on the responsibilities and
role of the Audit Committee set forth in the Audit Committee Charter and those
discussed above, the Audit Committee recommended to the Board of Directors that
the Fund's audited financial statements be included in the Fund's 2003 Annual
Report to shareholders for the fiscal year ended February 28, 2003.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the officers and directors of the Fund 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 on Forms 3, 4 and 5 with the
Securities and Exchange Commission ("SEC"), and the New York Stock Exchange.
Officers, directors and greater than ten percent stockholders are required by
SEC regulations to furnish the Fund with copies of all Forms 3, 4 and 5 they
file.
Based solely on the Fund's review of the copies of such forms, and
amendments thereto, furnished to it during or with respect to its most recent
fiscal year, and written representations from certain reporting persons that
they were not required to file Form 5 with respect to the most recent fiscal
year, the Fund believes that all of its officers, directors, greater than ten
percent beneficial owners and other persons subject to Section 16 of the
Exchange Act due to the requirements of Section 30 of the Investment Company Act
(i.e., and advisory board member, investment advisor or affiliated person of the
Fund's investment advisor), have complied with all filling requirements
applicable to them with respect to transactions during the Fund's most recent
fiscal year.
Interested Persons. The Fund considers two nominees, Messrs. Suzuki and
Wallace, to be "interested persons" of the Fund within the meaning of Section
2(19)(a) of the Investment Company Act because of the positions they hold or
have held with the Fund, NAM-U.S.A. and Nomura Asset Management Co., Ltd.
("NAM"), as applicable. Mr. Suzuki is President of the Fund, President and a
Director of NAM-U.S.A. and a former Management Executive, Senior Officer and
Director of NAM. Mr. Wallace is a former Vice President, Treasurer and Secretary
of the Fund and a former Senior Vice President, Secretary, Treasurer and
Director of NAM-U.S.A.
Compensation of Directors. NAM-U.S.A. pays all compensation of all
Directors of the Fund who are affiliated with NAM-U.S.A. or any of its
affiliates. The Fund pays to each Director not affiliated with NAM-U.S.A. or any
of its affiliates an annual fee of $5,000 plus $500 per meeting attended,
together with such Director's actual out-of-pocket expenses relating to
attendance at meetings. Such fees and expenses aggregated $34,150 for the fiscal
year ended February 28, 2003.
The following table sets forth for the periods indicated compensation paid
by the Fund to its Directors and the aggregate compensation paid to the
Directors by all U.S. registered investment companies managed by NAM-U.S.A. or
advised by NAM:
3
Aggregate Pension or Retirement Estimated Aggregate Compensation from
Compensation Benefit Accrued as Part of Annual Fund Complex Paid to
from Fund for Fund Expenses for its Benefits Directors During the
its Fiscal Year Ended Fiscal Year Ended upon Calendar Year Ended
Name of Director February 28, 2003 February 28, 2003 Retirement December 31, 2002*
---------------- ----------------- ----------------- ---------- ------------------
William G. Barker, Jr. ...... $8,000 None None $16,000
Kazuhiko Hama** ............. -- None None --
Chor Weng Tan ............... $8,000 None None $16,000
Arthur R. Taylor ............ $8,000 None None $16,000
John F. Wallace ............. $7,500 None None $14,500
----------
* In addition to the Fund, the "Fund Complex" includes Korea Equity Fund,
Inc. Because the funds in the Fund Complex do not share a common fiscal
year, the information relating to compensation from the Fund Complex paid
to the Directors is provided as of December 31, 2002.
** Mr. Hama was formerly the President of Japan Smaller Capitalization Fund,
Inc. during these periods. Mr. Suzuki was elected President effective May
8, 2003.
Officers of the Fund. Information pertaining to the officers of the Fund is
set forth in Exhibit II to this Proxy Statement. Officers of the Fund are
elected and appointed by the Directors and hold office until they resign, are
removed or are otherwise disqualified to serve.
Stock Ownership. Set forth in Exhibit III to this Proxy Statement is the
following information for each Board of Directors nominee: (i) the number of
shares of common stock of the Fund owned; (ii) the aggregate dollar range of
equity securities in the Fund; and (iii) the aggregate dollar range of
securities in all registered funds in the Fund Complex overseen by the Board of
Directors nominee. Also set forth in Exhibit III is information for each Board
of Directors nominee and immediate family members relating to securities owned
beneficially or of record in NAM-U.S.A. and NAM. At September 19, 2003, the
Directors and officers of the Fund as a group (nine persons) owned an aggregate
of 1,700 shares of the Fund, representing less than 1% of the outstanding shares
of the Fund. Mr. Suzuki, President of the Fund, and Mr. Haruguchi, a Vice
President of the Fund, together own less than 1% of the shares of Nomura
Holdings, Inc., the parent company of each of NAM-U.S.A. and NAM.
ADDITIONAL INFORMATION
Expenses and Methods of Proxy Solicitation
The expense of preparation, printing and mailing of the enclosed form of
proxy, this Proxy Statement and the accompanying Notice of Meeting will be borne
by the Fund. The Fund will reimburse banks, brokers and others for their
reasonable expenses in forwarding proxy solicitation material to the beneficial
owners of the shares of the Fund. In addition to the solicitation of proxies by
mail, proxies may be solicited in person or by telephone. The Fund has retained
The Altman Group ("Altman"), a firm that specializes in proxy solicitation
services, to assist in the solicitation of proxies for the Meeting for a fee of
approximately $4,000, together with reimbursement of such firm's expenses.
Altman is obligated to provide proxy solicitation services including, but not
limited to, distribution of proxies to broker-dealers, telephonic communication
with shareholders and broker dealers and monitoring of voting results.
4
Independent Accountant's Fees
The following table sets forth the aggregate fees paid to PWC, independent
accountants for the Fund, for the Fund's fiscal year ended February 28, 2003 for
professional services rendered for: (i) the audit of the Fund's annual financial
statements; (ii) financial information systems design and implementation
services provided to the Fund, NAM-U.S.A. and entities controlling, controlled
by or under common control with NAM-U.S.A. that provide services to the Fund;
and (iii) all other non-audit services provided to the Fund, NAM-U.S.A. and
entities controlling, controlled by or under common control with NAM-U.S.A. that
provide services to the Fund. The Fund's Audit Committee has considered whether
the provision of non-audit services under clause (iii) is compatible with
maintaining the independence of PWC from the Fund.
Audit Fees Financial Information
Charged to Systems Design and All
Fund the Fund Implementation Fees Other Fees* Fiscal Year End
---- -------- ------------------- ----------- ---------------
Japan Smaller Capitalization Fund, Inc. $56,000 None $87,475 February 28, 2003
----------
* Fees for tax services of which $7,500 relates to services for the Fund.
Voting Requirements
The holders of a majority of the shares of stock of the Fund entitled to
vote at the Meeting, present in person or by proxy, shall constitute a quorum
for the transaction of business at the Meeting. If, by the time scheduled for
the Meeting, a quorum of the Fund's shareholders is not present, or if a quorum
is present but sufficient votes to act upon the proposals are not received from
the shareholders, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies from
shareholders. Any such adjournment will require the affirmative vote of a
majority of the shares of the Fund present in person or by proxy and entitled to
vote at the session of the Meeting to be adjourned. The persons named as proxies
will vote in favor of any such adjournment if they determine that adjournment
and additional solicitation are reasonable and in the best interests of the
Fund's shareholders. No additional notice will be provided to you in the event
the Meeting is adjourned unless otherwise required by Maryland law.
All shares represented by properly executed proxies, unless such proxies
have previously been revoked, will be voted at the Meeting in accordance with
the directions on the proxies; if no direction is indicated, the shares will be
voted FOR the election of the five Board of Directors nominees. The election of
Directors (Proposal 1) requires a plurality of the votes cast, in person or by
proxy, at a meeting at which a quorum is duly constituted.
Broker Non-Votes and Abstentions
The Fund expects that broker-dealer firms holding shares of the Fund in
"street name" for the benefit of their customers and clients will request the
instructions of such customers, clients and beneficial shareholders, on how to
vote their shares on each proposal before the Meeting. Under the rules of the
New York Stock Exchange, broker-dealers may, without instructions from such
customers, clients and beneficial shareholders, grant authority to the proxies
designated by the Fund to vote on the election of Directors (Proposal 1) if no
instructions have been received prior to the date specified in the broker-dealer
firm's request for voting instructions.
5
The shares as to which proxies so designated are granted authority by
broker-dealer firms to vote on the election of Directors (Proposal 1), the
shares as to which broker-dealer firms have declined to vote ("broker
non-votes"), as well as the shares as to which proxies are returned by record
shareholders but which are marked "abstain" on any item will be included in the
Fund's tabulation of the total number of votes present for purposes of
determining whether the necessary quorum of shareholders exists. However,
abstentions and broker non-votes will not be counted as votes cast. Therefore,
abstentions and broker non-votes will not have an effect on the election of
Directors (Proposal 1).
Address of Manager and Investment Adviser
The address of NAM-U.S.A. is 180 Maiden Lane, New York, New York
10038-4936. The address of NAM is 1-12-1-Chome, Nihonbashi, Chuo-ku, Tokyo
103-8260, Japan.
Annual Report Delivery
The Fund sends annual and semi-annual reports to shareholders. The Fund
will furnish, without charge, a copy of its most recent annual and semi-annual
reports succeeding such annual report, if any, to shareholders upon request to
the Fund at 180 Maiden Lane, New York, New York 10038-4936 (or call
1-800-833-0018).
Proposals of Shareholders
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders of the Fund must be received by the Fund for inclusion
in its proxy statement and form of proxy relating to that meeting by May 28,
2004.
By Order of the Board of Directors
NEIL A. DANIELE
Secretary
New York, New York
Dated: October 1, 2003
6
Exhibit I
INFORMATION PERTAINING TO BOARD OF DIRECTORS NOMINEES
Certain biographical and other information relating to each Director nominee who
is an "interested person," as defined in the Investment Company Act, of the Fund
is set forth below:
Other
Term of Number of Public
Office and Funds in the Directorships
Name, Address and Age of Position(s) Held Length of Principal Occupation(s) Fund Complex Held by the
Director Nominee* with the Fund Time Served* During Past Five Years Overseen** Director
------------------------ ---------------- ------------ ----------------------------------- ------------ --------
Yasushi Suzuki (49)*** President President President of the Fund since May 2 registered None
180 Maiden Lane and Director and Director 2003; President and Director of investment
New York, New York since May NAM-U.S.A. since May 2003; companies con-
10038 2003 Management Executive of NAM sisting of 2
from 1999 to April 2003. portfolios
John F. Wallace (75)**** Director Director Vice President of the Fund from 2 registered None
17 Rhoda Street since 1990 1997 to 2000 and Secretary and investment
West Hempstead, Treasurer of the Fund from 1990 to companies con-
New York 11552 1997; Senior Vice President of sisting of 2
NAM-U.S.A. from 1981 to 2000, portfolios
Secretary from 1976 to 2000, Trea-
surer from 1984 to 2000 and Direc-
tor from 1986 to 2000.
----------
* Each nominee, if elected, will serve as a Director until the next Annual
Meeting of Shareholders and until his successors are elected and qualified
or until their earlier resignation or removal.
** In addition to the Fund, the "Fund Complex" includes Korea Equity Fund,
Inc.
*** Mr. Suzuki is a director and President of Korea Equity Fund, Inc. for which
NAM-U.S.A. acts as manager and for which NAM acts as investment adviser.
Mr. Suzuki is an "interested person," as defined in the Investment Company
Act, of the Fund, based on his positions as President of the Fund, and as
President and Director of NAM-U.S.A. and former Management Executive of
NAM.
**** Mr. Wallace is a director of Korea Equity Fund, Inc. for which NAM-U.S.A.
acts as manager and for which NAM acts as investment adviser. Mr. Wallace
may be considered an "interested person," as defined in the Investment
Company Act, of the Fund based on the positions he has previously held with
the Fund and NAM-U.S.A.
I-1
Certain biographical and other information relating to the nominees for Director
who are not "interested persons," as defined in the Investment Company Act, of
the Fund is set forth below:
Other
Term of Number of Public
Office and Funds in the Directorships
Name, Address and Age of Position(s) Held Length of Principal Occupation(s) Fund Complex Held by the
Director Nominee* with the Fund Time Served* During Past Five Years Overseen** Director
------------------------ ---------------- ------------ ----------------------------------- ------------ --------
William G. Barker, Jr. (70) Director Director Consultant to the television industry 2 registered None
111 Parsonage Road since 1993 since 1991. investment
Greenwich, Connecticut companies
06830 consisting of
2 portfolios
Chor Weng Tan (67) Director Director Managing Director for Education, 2 registered None
3 Park Avenue since 1990 The American Society of Mechani- investment
New York, New York cal Engineers since 1991; Director, companies
10016 U.S.-China Education Foundation consisting of
since 1992. 2 portfolios
Arthur R. Taylor (68) Director Director President of Muhlenberg College 2 registered None
3731 Devonshire Road since 1990 from 1992 to 2002; Chairman of investment
Allentown, Pennsylvania Arthur R. Taylor & Co. (investment companies
18103 firm) since 1980. consisting of
2 portfolios
----------
* Each nominee is a director of Korea Equity Fund, Inc. for which NAM-U.S.A.
acts as manager and NAM acts as investment adviser, and each is a member of
the Audit and Nominating Committees of Korea Equity Fund, Inc. and a member
of the Audit and Nominating Committees of the Fund.
** Each nominee, if elected will serve as Director until the next Annual
Meeting of Shareholders and until his successor is elected and qualified or
until his earlier resignation or removal.
*** In addition to the Fund, the "Fund Complex" includes Korea Equity Fund,
Inc.
I-2
Exhibit II
INFORMATION PERTAINING TO THE OFFICERS OF THE FUND
Certain biographical and other information relating to the officers of the Fund
is set forth below:
Term of Number of Funds
Office** and in the Fund
Name, Address* and Position(s) Held Length of Principal Occupation(s) Complex***
Age of Officers with the Fund Time Served During Past Five Years Overseen
---------------------- ---------------- ----------- ------------------------------------ --------------------
Yasushi Suzuki (49) President and President President and Director of NAM-U.S.A. 2 registered invest-
Director since 2003 since May 2003; Management Execu- ment companies
tive of NAM from 1998 to April 2003. consisting of 2
portfolios
Keisuke Haruguchi (52) Vice President Vice Senior Vice President and Director of 2 registered invest-
President NAM-U.S.A. since 1999; Senior Man- ment companies
since 1999 ager of NAM from 1997 to 1998. consisting of 2
portfolios
Kenneth L. Munt (56) Vice President Vice Senior Vice President and Secretary of 2 registered invest-
President NAM-U.S.A. since 1999; Senior Vice ment companies
since 2001 President of Human Resources for consisting of 2
and Secretary Middlesex Mutual Assurance Company portfolios
during 2002 from 1996 to 1999.
Rita Chopra-Brathwaite Treasurer Treasurer Vice President of NAM-U.S.A. since 2 registered invest-
(34) since 2002 2001: Assistant Vice President of ment companies
NAM-U.S.A. from 1999 to 2000. consisting of 2
Senior Accounting Manager from 1997 portfolios
to 1998.
Neil Daniele (43) Secretary Secretary Senior Vice President since 2002; Vice 2 registered invest-
since 2002 President and Compliance Officer of ment companies
Munich Re Capital Management Corp. consisting of 2
from 2001 to 2002; Vice President of portfolios
AIG Global Investment Group, Inc.
from 2000 to 2001; Compliance Officer
of AIG Global Investment Corp. from
1996 to 2000.
Shares of
Common
Stock of the
Fund Benefi-
Name, Address* and Public cially Owned at
Age of Officers Directorships Record Date
---------------------- ------------- -----------
Yasushi Suzuki (49) None -0-
Keisuke Haruguchi (52) None -0-
Kenneth L. Munt (56) None -0-
Rita Chopra-Brathwaite None -0-
(34)
Neil Daniele (43) None -0-
----------
* The address of each officer listed above is 180 Maiden Lane, New York, New
York 10038.
** Elected by and serves at the pleasure of the Board of Directors.
*** In addition to the Fund, the "Fund Complex" includes Korea Equity Fund,
Inc.
II-1
Exhibit III
INFORMATION PERTAINING TO STOCK OWNERSHIP
BY BOARD OF DIRECTORS NOMINEES
Information relating to the share ownership by each Director nominee at
September 19, 2003 is set forth below:
Aggregate Dollar Range of
Shares of Common Aggregate Dollar Range Securities in All Registered
Stock of the Fund of Equity Securities Funds in the Fund Complex
Name of Director Nominee Beneficially Owned in the Fund Overseen by Director Nominee
------------------------ ------------------ ----------- ----------------------------
William G Barker, Jr -0- None None
Yasushi Suzuki -0- None None
Chor Weng Tan 1,000 $1-$10,000 $10,001-$50,000
Arthur R Taylor -0- None None
John F Wallace 700 $1-$10,000 $10,001-$50,000
No non-interested Director or nominee his immediate family members owned
beneficially or of record any class of securities of any of NAM-U.S.A., NAM or
Nomura Holdings, Inc., the parent company of each of NAM-U.S.A. and NAM, at
September 19, 2003.
III-1
Exhibit IV
JAPAN SMALLER CAPITALIZATION FUND, INC.
KOREA EQUITY FUND, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
For the purpose of this Audit Committee Charter, the Audit Committee of
each of Japan Smaller Capitalization Fund, Inc. and Korea Equity Fund, Inc.
(each a "Fund") will be referred to as the "Audit Committee".
I. Composition of the Audit Committee
The Audit Committee shall be composed of all of the Directors who satisfy
the following criteria:
(a) each of whom shall not be an "interested person" of the Fund, as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended;
(b) each of whom shall not accept directly or indirectly any consulting,
advisory, or other compensatory fee from the Fund (other than in his
or her capacity as a member of the Board of Directors or any committee
thereof) or have any other relationship to the Fund or Nomura Asset
Management U.S.A. Inc. or its affiliates that may interfere with the
exercise of such person's independence from the Fund and Fund
management;
(c) each of whom shall otherwise satisfy the applicable independence
requirements for any stock exchange on which Fund shares are listed;
(d) each of whom shall be financially literate, as such qualification is
interpreted by the Board of Directors in its business judgment, or
shall become financially literate within a reasonable period of time
after his or her appointment to the Audit Committee; and
(e) atleast one of whom shall have accounting or related financial
management expertise, as the Board of Directors interprets such
qualification in its business judgment.
The Audit Committee shall make a determination from time to time whether at
least one member of the Audit Committee is a "financial expert" as defined in
rules promulgated by the U.S. Securities and Exchange Commission (the "SEC")
under the Sarbanes-Oxley Act of 2002 and shall consider whether any member
thereof serves on the audit committee of any other public companies.
II. Purposes of the Audit Committee
The Audit Committee, in its capacity as a committee of the Board of
Directors, is directly responsible for the appointment, compensation, and
oversight of the Fund's independent accountants (including the resolution of
disagreements between Fund management and such independent accountants regarding
financial reporting) for the purpose of preparing or issuing an audit report or
related work. The Audit Committee shall report regularly to the Board of
Directors with respect to the matters described in Section III of this Audit
Committee Charter. The Fund's independent accountants report directly to the
Audit Committee.
III. Responsibilities and Duties of the Audit Committee
The policies and procedures of the Audit Committee shall remain flexible to
facilitate its ability to react to changing conditions and to generally
discharge its functions. The following listed responsibilities describe areas of
attention in broad terms.
IV-1
To carry out its purposes, the Audit Committee shall have the following
responsibilities and duties:
(a) upon submission of an application form by the Fund's independent
public accountants to the Public Company Accounting Oversight Board,
to request (i) a copy of such application form; (ii) any material
amendments to such application form; and (iii) the written findings of
the Public Company Accounting Oversight Board in connection with that
Board's inspection of the Fund's independent accountants;
(b) to preapprove all auditing services to be provided to the Fund by the
Fund's independent accountants*;
(c) to preapprove all non-audit services, including tax services, to be
provided to the Fund by the Fund's independent accountants in
accordance with the Securities Exchange Act of 1934, as amended (the
"1934 Act"); provided, however, that the preapproval requirement with
respect to the provision of non-audit services to the Fund by the
Fund's independent accountants may be waived by the Audit Committee
under the circumstances described in the 1934 Act**;
(d) to preapprove non-audit services to be provided to the Fund's
investment adviser (and any entity controlling, controlled by or under
common control with the investment adviser that provides ongoing
services to the Fund) if the engagement relates directly to the
operations and financial reporting of the Fund;
(e) to ensure that the Fund's independent accountants submit on a periodic
basis to the Audit Committee a formal written statement delineating
all relationships between such independent accountants and the Fund,
consistent with Independence Standards Board Standard No. 1, to
actively engage in a dialogue with the Fund's independent accountants
with respect to any disclosed relationships or services that affect
the objectivity and independence of such independent accountants and,
if deemed appropriate by the Audit Committee, to recommend that the
Board of Directors take appropriate action in response to the report
of such independent accountants to satisfy itself of the independence
of such independent accountants;
(f) to receive and consider specific written representations from the
Fund's independent public accountants with respect to the independence
of such accountants, audit partner rotation, and conflicts of interest
described in Section 10A(l) of the 1934 Act, and to consider whether
the provision of any non-audit services to the Fund by the Fund's
independent accountants as described in Section III(c) of this Audit
Committee Charter is compatible with maintaining the independence of
those accountants;
(g) to review arrangements for annual and special audits and the scope of
such audits with the Fund's independent accountants;
(h) to review and discuss the Fund's audited financial statements with
Fund management;
(i) to discuss with the independent accountants those matters required to
be discussed by Statement of Accounting Standards Nos. 61 and 90, as
may be modified or supplemented, relating to the Fund's financial
statements, including, without limitation, any adjustment to such
financial statements recommended by such independent accountants, or
any other results of any audit;
(j) to cause to be prepared and to review and submit any report, including
any recommendation of the Audit Committee, required to be prepared by
the Audit Committee by rules or regulations promulgated by the SEC
("SEC Rules") to be included in the Fund's annual proxy statement;
(k) to review and discuss any report required to be reviewed by the Audit
Committee pursuant to SEC Rules, as well as any reports prepared by
the independent accountants of the Fund with respect to all
IV-2
services provided by the independent accountants to the Fund and the
Fund's investment adviser and the fees related to such services;
(l) to review legal and regulatory matters presented by counsel and the
Fund's independent accountants that may have a material impact on the
Fund's financial statements;
(m) to establish and administer policies and procedures relating to (i)
the hiring of employees and former employees of the Fund's independent
accountants and (ii) the resolution of any disagreements between Fund
management and the Fund's independent accountants regarding accounting
and/or financial reporting policies and procedures;
(n) to consider with the Fund's independent accountants their comments
with respect to the quality and adequacy of the Fund's accounting and
financial reporting policies, practices and internal controls and
management's responses thereto, including, without limitation, the
effect on the Fund of any recommendation of changes in accounting
principles or practices by management or the independent public
accountants;
(o) to receive and consider reports from the Fund's independent
accountants regarding (i) all critical accounting policies and
practices to be used; (ii) all alternative treatments of financial
information within generally accepted accounting principles that have
been discussed with Fund management, including the ramifications of
the use of such alternative disclosures and treatments, and the
treatment preferred by the independent accountants; (iii) other
material written communications between the independent accountants
and Fund management, such as any management letter or schedule of
unadjusted differences; and (iv) all non-audit services provided to
any entity in the Fund's investment company complex that were not
pre-approved by the Fund's Audit Committee;
(p) to receive reports from the principal executive officer and the
principal financial officer, or persons performing similar functions,
regarding: (i) all significant deficiencies in the design or operation
of Fund internal controls that could adversely affect the Fund's
ability to record, process, summarize, and report financial data and
the identification for the Fund's independent accountants of any
material weaknesses in internal controls; (ii) any fraud, whether or
not material, that involves Fund management or other employees who
have a significant role in the Fund's internal controls; and (iii)
whether or not there have been significant changes in the Fund's
internal controls or in other factors that could significantly affect
the Fund's internal controls subsequent to the date of their most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses;
(q) to establish procedures for (i) the receipt, retention and treatment
of complaints received by the Fund regarding accounting, internal
accounting controls, or auditing matters; and (ii) the confidential,
anonymous submission of concerns regarding questionable accounting or
auditing matters;
(r) to discuss with Fund management and the Fund's independent accountants
policies with respect to risk assessment and risk management and the
quality and adequacy of the Fund's internal controls and processes
that could materially affect the Fund's financial statements and
financial reporting;
(s) to assist the Fund, if necessary, in preparing any written affirmation
or written certification required to be filed with any stock exchange
on which Fund shares are listed;
(t) to review and assess the adequacy of this Audit Committee Charter on
an annual basis and recommend any changes to the Board of Directors;
and
(u) to perform such other functions consistent with this Audit Committee
Charter, the Fund's Articles of Incorporation, as applicable, the
Fund's By-laws and applicable law, as the Audit Committee or the Board
of Directors deems necessary or appropriate.
IV-3
In fulfilling their responsibilities under this Audit Committee Charter, it
is recognized that members of the Audit Committee are not full-time employees of
the Fund. As such, it is not the duty or responsibility of the Audit Committee
or its members to conduct "field work" or other types of auditing or accounting
reviews or procedures. Each member of the Audit Committee shall be entitled to
rely on (i) the integrity of those persons and organizations within and outside
the Fund from which the Audit Committee receives information and (ii) the
accuracy of the financial and other information provided to the Audit Committee
by such persons or organizations absent actual knowledge to the contrary (which
actual knowledge shall be promptly reported to the Board of Directors).
Fund management is responsible for maintaining appropriate systems for
accounting. The Fund's independent public accountants are responsible for
conducting a proper audit of the Fund's financial statements and are directly
accountable to the Audit Committee. The Audit Committee has the ultimate
authority and responsibility to select (subject, if applicable, to shareholder
approval) and evaluate the Fund's independent accountants, to determine the
compensation of the Fund's independent accountants and, where appropriate, to
replace the Fund's independent public accountants (or to nominate the
independent accountants to be proposed for shareholder approval in the proxy
statement).
IV. Meetings
The Audit Committee shall meet at least annually with the Fund's
independent accountants (outside the presence of Fund management) and at least
annually with the representatives of Fund management responsible for the
financial and accounting operations of the Fund. The Audit Committee shall hold
special meetings when and if circumstances require. Members of the Audit
Committee may participate in a meeting of the Audit Committee by means of
conference call or similar communications equipment by means of which all
persons participating in such meeting can hear each other.
V. Assistance from Fund Management; Authority to Engage Advisers; Funding
The appropriate officers of the Fund shall provide or arrange to provide
such information, data and services as the Audit Committee may request. The
Audit Committee shall have the authority to discharge its responsibility,
including the power and authority to retain its own independent counsel and
other advisers. The Fund shall provide for appropriate funding, as determined by
the Audit Committee as a committee of the Board of Directors, for payment of
compensation to: (i) the Fund's independent accountants, (ii) any advisers
employed by the Audit Committee under this Section V and (iii) any ordinary
administrative expenses of the Audit Committee that are necessary or appropriate
in carrying out its duties.
Dated August 6, 2003
----------
* The Audit Committee may delegate to one or more designated members of the
Audit Committee the authority to grant such preapprovals; provided,
however, that the Audit Committee shall not delegate preapproval of the
audit required by the 1934 Act. The decisions of any member or members of
the Audit Committee to whom such authority has been given shall be reported
to the full Audit Committee at each of its scheduled meetings.
** The Audit Committee may delegate to one or more designated members of the
Audit Committee the authority to grant such preapprovals. The decisions of
any member or members of the Audit Committee to whom such authority has
been granted shall be reported to the full Audit Committee at each of its
scheduled meetings.
IV-4
JAPAN SMALLER CAPITALIZATION FUND, INC.
180 Maiden Lane
New York, New York 10038-4936
PROXY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Yasushi Suzuki and Neil A. Daniele as proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse hereof, all the common stock
of Japan Smaller Capitalization Fund, Inc. (the Fund) held of record by the
undersigned on September 19, 2003 at the Annual Meeting of the Shareholders of
the Fund to be held on November 12, 2003 or any adjournment thereof.
--------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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Please sign exactly as name(s) appear(s) hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized persons.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
---------------------------------- -----------------------------------
---------------------------------- -----------------------------------
---------------------------------- -----------------------------------
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
--------------------------------------- FOR ALL NOMINEES.
JAPAN SMALLER CAPITALIZATION FUND, INC.
--------------------------------------- 1. Election of Directors.
Nominees: (01) William G. Barker, Jr. (04) Arthur R. Taylor
(02) Yasushi Suzuki (05) John F. Wallace
(03) Chor Weng Tan
Mark box at right if an address change or comment has been
noted on the reverse side of this card. |_|
WITHHOLD
FOR ALL FROM ALL
NOMINEES NOMINEES
|_| |_|
|_| _____________________________________
For all nominees except as noted above
2. In the discretion of such proxies, upon such other
business as may properly come before the meeting or any
adjournment thereof.
This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned shareholder. If no
direction is made, this proxy will be voted FOR Proposal 1.
Signature:___________________ Date:________________________ Signature:________________________________ Date:_____________________