UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant
☒
Filed by a Party other than the Registrant
☐
Check the appropriate box:
|
|
☐ |
Preliminary Proxy Statement
|
|
|
☐ |
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|
|
|
☒ |
Definitive Proxy Statement
|
|
|
☐ |
Definitive Additional Materials
|
|
|
☐ |
Soliciting Material Pursuant to §240.14a-12
|
JAPAN SMALLER CAPITALIZATION FUND, INC.
|
|
|
|
Payment of Filing Fee (Check the appropriate box):
|
|
☒ |
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:
|
JAPAN SMALLER CAPITALIZATION FUND, INC.
Worldwide Plaza, 309 West 49
th
Street
New York, New York 10019-7316
New York, New York 10019-7316
___________
NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS
November 26, 2019
November 26, 2019
___________
T
O THE SHAREHOLDERS
OF JAPAN SMALLER CAPITALIZATION FUND, INC.:
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on Tuesday, November 26, 2019: The Notice of Annual
Meeting of Shareholders and Proxy Statement are available at
www.proxy-direct.com/jof-30946
.
Notice is hereby given that the 2019 Annual Meeting of Shareholders (the “Meeting”) of Japan Smaller Capitalization Fund, Inc., a Maryland corporation
(the “Fund”), will be held at the offices of Nomura Asset Management U.S.A. Inc., Worldwide Plaza, 309 West 49
th
Street, 28
th
Floor, New York, New York 10019-7316, on Tuesday, November 26, 2019, at 10:30 a.m. to consider and
vote on the following matters:
|
(1)
|
the election of two Directors, to serve for a term of one year and until their successors are duly elected and qualify; and
|
|
(2)
|
the transaction of such other business as may properly come before the Meeting or any adjournment or postponement thereof.
|
The Board of Directors has fixed the close of business on September 20, 2019 as the Record Date for the determination of shareholders entitled to
notice of and to vote at the Meeting or any adjournment or postponement thereof.
Shareholders 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 proxy card 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 11, 2019
Dated: October 11, 2019
[This page intentionally left blank]
PROXY STATEMENT
JAPAN SMALLER CAPITALIZATION FUND, INC.
___________
___________
2019 ANNUAL MEETING OF SHAREHOLDERS
November 26, 2019
November 26, 2019
___________
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board”) of Japan Smaller Capitalization Fund, Inc.,
a Maryland corporation (the “Fund”), to be voted at the 2019 Annual Meeting of Shareholders of the Fund (the “Meeting”) to be held at the offices of Nomura Asset Management U.S.A. Inc. (“NAM-U.S.A.”), Worldwide Plaza, 309 West 49
th
Street,
28
th
Floor, New York, New York 10019-7316, on Tuesday, November 26, 2019, at 10:30 a.m. The approximate mailing date of this Proxy Statement is October 15, 2019.
All properly executed proxies received prior to the Meeting will be voted at the Meeting in accordance with the instructions marked on the proxy card or otherwise as
provided. Unless instructions to the contrary are marked, proxies will be voted
FOR
the election of two Directors (Proposal 1).
Any proxy may be revoked at any time prior to the Meeting by giving written notice of the revocation to the Secretary of the Fund at the Fund’s address indicated above,
by submitting a subsequently executed proxy or by voting in person at the Meeting.
Only shareholders can attend the Meeting and any adjournment or postponement thereof. To gain admittance, if you are a shareholder of record, you must bring a form of
personal identification to the Meeting, where your name will be verified against the shareholders of record. If a broker or other nominee holds your shares and you plan to attend the Meeting, you should bring a recent brokerage statement
showing your ownership of the shares, as well as a form of personal identification. Only shareholders of record present in person or by proxy will be able to vote, or otherwise exercise the powers of a shareholder, at the Meeting.
The Board of Directors has fixed the close of business on September 20, 2019 as the Record Date for the determination of shareholders entitled to notice of and to vote at the Meeting and at
any adjournment or postponement thereof. Shareholders of record on the Record Date will be entitled to one vote for each share held, with no shares having cumulative voting rights. As of September 20, 2019, the Fund had 28,333,893 outstanding
shares of Common Stock, par value $0.10 per share.
The Board knows of no business other than the proposal described in this Proxy Statement to be presented 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 discretion.
The Fund sends annual and semi-annual reports to shareholders. The Fund will furnish, without charge, a copy of its most recent annual report and
semi-annual report succeeding such annual report to shareholders upon request to the Fund at Worldwide Plaza, 309 West 49
th
Street, New York, New York 10019-7316 (or call 1-800-833-0018). Shareholders may call the number above to
obtain directions to the Meeting if they plan to vote in person.
PROPOSAL 1: ELECTION OF DIRECTORS
The Fund’s Board of Directors is currently divided into three classes of Directors serving staggered three-year terms and until their successors are elected and qualify.
Under a classified Board structure, each year the term of office of one class expires. The Board of Directors has approved the declassification of the Fund’s Board pursuant to a process that will be implemented over a three-year period and
will result in all Directors being elected to serve one-year terms and until their successors are elected and qualified.
The Director nominees proposed in this Proxy Statement are currently Class I Directors of the Fund. As a result of the declassification process discussed above, the two
Directors nominated for election will serve for a term expiring in 2020 and until their successors are elected and qualified. The other current Directors consist of one Class II Director and two Class III Directors, who serve until the annual
meetings of shareholders in 2020 and 2021, respectively, and until their successors are duly elected and qualify. It is expected that at the annual meetings of shareholders in each of 2020 and 2021, these individuals will be nominated for
election as Directors for one-year terms and until their successors are elected and qualified.
Should any vacancy occur on the Board of Directors, the remaining Directors would be able to fill such vacancy by the affirmative vote of a majority of the remaining
Directors in office, even if the remaining Directors do not constitute a quorum, subject to any applicable requirements of the Investment Company Act of 1940, as amended (the “Investment Company Act”). Any Director elected by the Board to fill
a vacancy would hold office until the remainder of the full term of the class of Directors in which the vacancy occurred and until a successor is elected and qualifies. If the size of the Board is increased, additional Directors will be
elected for one-year terms.
2
N
ominees Proposed for Election as Directors
E. Han Kim and Marcia L. MacHarg have been nominated by the Board to serve as Directors for a term expiring at the Annual Meeting of Shareholders to
be held in 2020 and until their successors are duly elected and qualify. Mr. Kim has served as a Director of the Fund since 2010 and Ms. MacHarg has served as a Director of the Fund since 2013. The nominees have indicated an intention to
continue to serve if elected and have consented to being named in this Proxy Statement.
Unless authority is withheld in the proxy or properly revoked, it is the intention of the persons named in the accompanying proxy card to cast each
vote FOR the election of Mr. Kim and Ms. MacHarg as Directors.
The Board of Directors knows of no reason why the Director nominees would be unable to serve, but in the event of any such unavailability, the
proxies received will be voted for such substitute nominee as the Board of Directors may recommend. Mr. Kim and Ms. MacHarg are not “interested persons” of the Fund within the meaning of the Investment Company Act. It is currently expected
that any such substitute nominee(s) for Mr. Kim and Ms. MacHarg will similarly not be “interested persons” of the Fund.
The following table contains biographical and other information relating to the nominees for election as Directors of the Fund.
Independent Director Nominees
|
Name, Address
and Age
|
Position(s)
Held with
the Fund
|
Since**
|
Principal Occupation(s) During
Past Five Years
|
Number of
Funds in
the Fund
Complex
Overseen
by the
Director
|
Other Public
Directorships
Held by the
Director
|
|||||
|
E. Han Kim
(73)*
Worldwide Plaza
309 West 49
th
Street
New York, New York 10019-7316
|
Director
|
2010
|
Everett E. Berg Professor of Business Administration and Director of Mitsui Financial Research Center at Ross Business School, University of Michigan since 1980; Advisor to CEO of Taubman Asia from 2009-2016; Non-executive Chair of
the Board of Korea Telecom (KT) from 2009-2014.
|
One registered investment company consisting of one portfolio
|
None
|
|||||
3
|
Name, Address
and Age
|
Position(s)
Held with
the Fund
|
Since**
|
Principal Occupation(s) During
Past Five Years
|
Number of
Funds in
the Fund
Complex
Overseen
by the
Director
|
Other Public
Directorships
Held by the
Director
|
|||||
|
Marcia L. MacHarg
(70)*
Worldwide Plaza
309 West 49th Street
New York, New York
10019-7316
|
Director
|
2013
|
Partner, Debevoise & Plimpton LLP from 1987-2012; Of Counsel, Debevoise & Plimpton LLP since 2013; Trustee, Board of Trustees of Smith College since 2014 and Chair of the Audit Committee of the Board of Trustees since
2016; Member of the Executive Committee of the Friends of Smith College Libraries from 2013-2015; Trustee and Chair of the Audit Committee of the American University in Bulgaria since 2019.
|
One registered investment company consisting of one portfolio
|
None
|
| * |
Each Director is a member of the Audit, Nominating, and Governance and Compliance Committees of the Fund. Ms. MacHarg is the Chairperson of the Nominating Committee.
|
| ** |
If each Director nominee is elected by the shareholders and qualifies, he or she will serve as a Director for a one‑year term expiring at the Annual Meeting of Shareholders to be held in 2020 and until his
or her successor is elected and qualifies or until his or her earlier resignation or removal.
|
Information Regarding Other Directors
The following tables contain information about current Class II and Class III Directors, whose terms will continue after the Meeting.
Class II Interested Director
|
Name, Address
and Age
|
Position(s)
Held with
the Fund
|
Since**
|
Principal Occupation(s) During
Past Five Years
|
Number of
Funds in
the Fund
Complex
Overseen
by the
Director
|
Other Public
Directorships
Held by the
Director
|
|||||
|
Yuichi Nomoto
(47)*
Nomura Asset
Management U.S.A.
Inc.
Worldwide Plaza
309 West 49
th
Street
New York, New York
10019‑7316
|
President and Director
|
April 2019
|
President and Chief Executive Officer of NAM-U.S.A. and President of Nomura Global Alpha LLC (“NGA”) since April 2019; Managing Director of NAM-U.S.A. since April 2018; Head of Client Services and Marketing of NAM-U.S.A. since 2016;
Executive Director of NAM-U.S.A. from 2016 to April 2018; Senior Manager and Head of the Marketing Planning Team, NISA Project Team in Retail Client Strategy, and the Investment Trust Marketing Team of Nomura Asset Management Co., Ltd.
(“NAM”) from 2010 to 2016.
|
One registered investment company consisting of one portfolio
|
None
|
| * |
Mr. Nomoto is an “interested person,” as defined in the Investment Company Act, of the Fund based on his positions with NAM-U.S.A. and NAM.
|
| ** |
The Class II Director serves as a Director for a term ending in 2020 and until his successor is elected and qualifies or until his earlier resignation or removal.
|
4
Class III Independent Directors
|
Name, Address
and Age
|
Position(s)
Held with
the Fund
|
Since**
|
Principal Occupation(s) During
Past Five Years
|
Number of
Funds in
the Fund
Complex
Overseen
by the
Director
|
Other Public
Directorships
Held by the
Director
|
|||||
|
Rodney A. Buck
(71)*
Worldwide Plaza
309 West 49th Street
New York, New York 10019-7316
|
Director and Chairman of the Board
|
2006
2010
|
Owner, Buck Capital Management (private investment management firm) since 2005; Chairman of the Dartmouth-Hitchcock Health Care Investment Committee since 2011.
|
One registered investment company consisting of one portfolio
|
None
|
|||||
|
David B. Chemidlin
(62)*
Worldwide Plaza
309 West 49th Street
New York, New York
10019-7316
|
Director and Chairman of the Audit Committee
|
2006
|
Owner and President of AbideWorks LLC (accounting and business support services) since 2016; Corporate Controller, Advance Magazine Publishers, Inc. (d/b/a Conde Nast) from 1995-2016.
|
One registered investment company consisting of one portfolio
|
None
|
| * |
Each Director is a member of the Audit, Nominating, and Governance and Compliance Committees of the Fund. Mr. Buck is the Chairman of the Board and the Chairman of the Governance and Compliance
Committee. Mr. Chemidlin is the Chairman of the Audit Committee.
|
| ** |
Each Class III Director serves as a Director for a term ending in 2021 and until his successor is elected and qualifies or until his earlier resignation or removal.
|
5
Information About the Directors’ Experience, Qualifications, Attributes and Skills
The Board believes that each of the Directors (including each nominee) has the experience, qualifications, attributes and skills on an individual
basis and in combination with those of the other Directors to serve in such capacity in light of the Fund’s business and structure. Each Director has a substantial business and professional background and/or board experience that indicate the
Director’s ability to critically review, evaluate, inquire, discuss and respond appropriately to information provided to him or her. A Director’s ability to perform his or her duties effectively may have been attained through the Director’s
business, professional, consulting, public service and/or academic positions; experience from service as a board member of or in a substantial advisory capacity for the Fund and a former fund in the Fund Complex; educational background or
professional training; and/or other life experiences. In addition to these shared characteristics, set forth below is a brief discussion of the specific experience, qualifications, attributes or skills of each Director that support the
conclusion that each person should serve as a Director.
When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of
Directors to satisfy its oversight responsibilities effectively in light of the Fund’s business and structure, the Nominating Committee and the Board of Directors focused primarily on the information discussed in each of the Directors’
individual biographies set forth above. In particular, with regard to Mr. Kim, the Board of Directors considered his substantial academic and professional background, including his leadership position at the graduate business school at the
University of Michigan, his strong background and experience in Asia and his experience in corporate governance matters as a director and consultant for major Korean corporations. With regard to Ms. MacHarg, the Board of Directors considered
her
6
substantial knowledge, expertise and judgment obtained through serving as a partner at a major international law firm for 25 years, her professional accomplishments in
a wide variety of complex international legal representations, including her deep experience in investment management matters, and her experience serving on the board of trustees and Chair of the Audit Committee of a major private college.
With regard to Mr. Buck, the Board of Directors considered his strong background in the investment management industry, believing in particular that Mr. Buck’s experience as the chief executive officer of an investment advisory firm and chief
investment officer of a life insurance holding company is very valuable to the Fund. Mr. Buck is also currently Chairman of the Dartmouth-Hitchcock Investment Committee, which is responsible for the investment management of sizable endowments
and pension funds. With regard to Mr. Chemidlin, the Board of Directors considered his significant experience, expertise and background with regard to finance, accounting and auditing matters, having been a certified public accountant for the
past 25 years. Mr. Chemidlin is the Owner and President of AbideWorks LLC, an accounting and business support services firm, and served as Corporate Controller for Advance Magazine Publishers, Inc. (d/b/a Conde Nast) from 1995-2016 and
Corporate Controller for the Sony Music U.S. Group from 1991-1995, working closely with Sony Japan. With regard to Mr. Nomoto, the Board of Directors considered his investment management background, financial skills and Asian investment
expertise.
References to the experience, qualifications, attributes and skills of each Director are provided pursuant to requirements of the U.S. Securities and
Exchange Commission (“SEC”), do not constitute holding out of the Board or any Director as having any special expertise or experience, and do not impose any greater duty or liability on any such Director or on the Board.
Leadership Structure and Oversight Responsibilities of the Board of Directors
The Board is responsible for the oversight of the Fund’s operations. The Board has established a Nominating Committee, a Governance and Compliance
Committee and an Audit Committee to assist the Board in the oversight of the management and affairs of the Fund. Each of the Board committees is chaired by an Independent Director. The Directors have designated Mr. Buck, an Independent
Director, to serve as the Chairman of the Board (the “Chairman”). Mr. Buck has been active in investment management for over 30 years and, as indicated above, previously served as the chief executive officer of an investment advisory
subsidiary of a life insurance complex and chief investment officer of the insurance holding company.
The Chairman presides at each Board meeting, establishes the agenda for Board meetings, coordinates with management between Board meetings and acts
as the primary liaison between the Independent Directors and Fund management. The Independent Directors believe that the utilization of an Independent Chairman provides an efficient structure for them to coordinate with
7
Fund management in carrying out their responsibilities. The Independent Directors regularly meet as a group and the Chairman plays an important role in communicating
with Fund management and in identifying matters of special interest to be addressed by Fund management with the Board. The Chairman may also perform such other functions as may be requested by the Directors from time to time. Designation as
Chairman does not impose on such Director any duties or standards greater than or different from other Directors.
The Board of Directors’ risk management role within the Fund is one of informed oversight. The Board has emphasized to Fund management the
importance of maintaining vigorous risk management policies and procedures. Oversight of the risk management process is part of the Board’s general oversight of the Fund and its service providers. The Governance and Compliance Committee
reviews and makes recommendations to the Board with respect to issues that pertain to the effectiveness of the Board in carrying out its responsibilities in overseeing Fund management.
The Fund’s operations entail a variety of risks including investment risk, counterparty risk, valuation risk, risk of operational failure or lack of
business continuity, cybersecurity risk and legal, compliance and regulatory risks. Through processes and procedures implemented by the Fund, Fund management identifies key risks that may affect the Fund and brings these risks to the attention
of the Board of Directors at Board meetings, as needed. The Board’s oversight function is facilitated by management reporting processes that are designed to provide transparency to the Board about the identification, assessment and management
of critical risks and the controls and policies and procedures used to mitigate those risks. The Chief Compliance Officer of the Fund and NAM-U.S.A. as well as various personnel of the manager and other service providers such as the
Fund’s independent accountants, make periodic reports to the Board and appropriate committees with respect to various aspects of risk management, including results of the implementation and testing of the Fund’s and such providers’ compliance
programs. For example, the Board reviews annually the Fund’s and service providers’ internal controls with respect to cybersecurity and privacy matters. In addition, the Audit Committee discusses the Fund’s risk management and controls over
financial reporting with the independent registered public accounting firm engaged by the Fund. The Board reviews valuation policies and procedures. As a result of the foregoing and other factors, the function of the Board with respect to
risk management is one of oversight and not of active involvement in the day-to-day risk management activities of the Fund. The Board reviews its role in overseeing the Fund’s risk management from time to time and may make changes in its
discretion at any time.
Additional Information Concerning Directors
Committees and Directors Meetings.
The Board of Directors
has a standing
Audit Committee,
a standing Governance and Compliance Committee
and a standing Nominating
8
Committee, each of which consists of all of the Directors who are not “interested persons” of the Fund within the
meaning of the Investment Company Act and are “independent” as defined in the New York Stock Exchange listing standards. The principal responsibilities of the Audit Committee, the Governance and Compliance Committee and the Nominating
Committee are described below. The Fund has no standing Compensation Committee.
During the fiscal year ended February 28, 2019, the Board of Directors held six meetings, the Audit Committee held four meetings and the Nominating
Committee held one meeting. The Governance and Compliance Committee met as part of each quarterly meeting of the Board of Directors. The current Directors attended at least 75% of the aggregate number of meetings of the Board of Directors
held during the period for which they served. The Independent Directors attended at least 75% of the aggregate number of meetings of each Committee held during the fiscal year. The Independent Directors retain independent legal counsel to
assist them in connection with their duties in considering the Fund’s management and investment advisory contracts between NAM-U.S.A. and its affiliates and for such other legal matters as the Independent Directors request.
Report of the Audit Committee.
The following is a report by the Fund’s Audit Committee issued as of the date of this Proxy Statement regarding the responsibilities and functions of the Audit Committee.
Pursuant to the Audit Committee Charter, as updated, the Audit Committee’s principal responsibilities are to: (i) oversee the Fund’s independent
accountants and the annual audits of the Fund’s financial statements; (ii) approve all audit engagements, fees and terms for the Fund; (iii) meet with the independent accountants at least annually (in a confidential meeting to the extent
determined by the Audit Committee Chairman) to review the conduct and results of each audit and discuss the audited and unaudited financial statements, including those matters required to be discussed by the Statement on Auditing Standards
No. 114, as amended, and any other communications required to be discussed with the Audit Committee pursuant to applicable laws and regulations; (iv) evaluate the independence and objectivity of the independent accountants, including obtaining
a formal written statement delineating all relationships between the independent accountants and the Fund and any service providers consistent with the rules of the Public Company Accounting Oversight Board; and (v) oversee and receive reports
on the Fund’s financial reporting process and resolve any disagreements between Fund management and the independent accountants regarding financial reporting. A copy of the Audit Committee Charter can be found in the “Literature” section of
NAM-U.S.A.’s website at http://funds.nomura-asset.com/japan-smaller-capitalization.
The Fund’s Board of Directors has determined that David B. Chemidlin is an “audit committee financial expert” and “independent,” as such terms are
defined in Item 3 of Form N-CSR.
9
This designation will not increase the designee’s duties, obligations or liability as compared to his duties, obligations and liability as a member of the Audit
Committee and of the Board of Directors; nor will it reduce the responsibility of the other Audit Committee members.
In connection with the audit of the Fund’s financial statements for its fiscal year ended February 28, 2019, the Audit Committee received written
disclosures and the letter required by Rule 3526 of the Public Company Accounting Oversight Board from RSM US LLP (“RSM”), the Fund’s independent accountants, and discussed with RSM certain matters required to be discussed by Statement on
Auditing Standards No. 114. At a meeting held on April 25, 2019, the Audit Committee reviewed and discussed the audit of the Fund’s financial statements with Fund management and RSM. The Audit Committee also discussed with RSM their
independence. Based upon these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Fund’s audited financial statements be included in the Fund’s Annual Report to shareholders for the fiscal year ended
February 28, 2019.
Activities carried out under the Audit Committee Charter include the pre-approval of (a) all auditing services to be provided to the Fund by the
Fund’s independent accountants; (b) 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 pre-approval 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;
and (c) non-audit services to be provided to the Fund’s manager (and any entity controlling, controlled by or under common control with the manager that provides ongoing services to the Fund) if the engagement relates directly to the operations
and financial reporting of the Fund.
Submitted by the Audit Committee of the
Board of Directors of the Fund
Board of Directors of the Fund
David B. Chemidlin, Chairman
Rodney A. Buck
E. Han Kim
Rodney A. Buck
E. Han Kim
Marcia L. MacHarg
Nominating Committee; Consideration of Potential Director Nominees.
The principal purpose of the Nominating Committee is to identify, evaluate, select, appoint or nominate candidates to fill vacancies among the Independent (i.e., non-interested) Directors of the
Fund. The Committee is also responsible for nominating those Independent Directors to be included as nominees
of the Board in the Fund’s proxy materials. It evaluates
candidates’ qualifications for
10
Board membership and, with respect to nominees for positions as Independent Directors, their independence from the
Fund’s manager and its affiliates and other principal service providers. The Committee periodically reviews director compensation and will recommend any appropriate changes to the Board as a group.
The Nominating Committee may consider potential director candidates recommended by Fund shareholders taking into account the same criteria applied to
candidates identified by the Nominating Committee. Candidates must not be “interested persons” of the Fund or the Fund’s investment adviser within the meaning of the Investment Company Act and must qualify as “independent” as defined in the
New York Stock Exchange listing standards. In considering candidates recommended by Fund shareholders, the Committee will take into account the provisions of the Committee’s charter and the objectives of the shareholders in submitting the
candidate’s name for consideration and whether or not such objectives are consistent with the interests of all shareholders. The Committee has determined that potential director candidates recommended by Fund shareholders must satisfy the
SEC’s nominee information requirements found in Regulation 14A of the 1934 Act, as amended from time to time. A copy of the Nominating Committee Charter can be found in the “Literature” section of NAM-U.S.A.’s website at
http://funds.nomura-asset.com/japan-smaller-capitalization.
Shareholders recommending potential director candidates to the Nominating Committee must substantiate compliance with these requirements at the time
of submitting their proposed director candidate to the attention of the Nominating Committee’s Chairperson. Notice to the Nominating Committee’s Chairperson should be provided in accordance with the deadline specified in the Fund’s Bylaws and
include the information required by the Fund’s Bylaws.
The Nominating Committee identifies prospective candidates from any reasonable source and has the ability to engage third-party services for the
identification and evaluation of potential nominees. Generally, the Committee meets at least annually to identify and evaluate nominees for Director and to make its recommendations to the Board. The Committee may meet more frequently if
vacancies on the Board occur during a given year.
The Nominating Committee has adopted the following criteria for selecting, and appointing or nominating Independent Directors:
(1)
The candidate must not be an “interested person” of the Fund and shall be “disinterested” in terms of both the letter and spirit of the Investment Company Act.
11
(2)
The candidate must have the integrity, independence of mind and personal qualities to fulfill the fiduciary duties of an Independent Director of the Fund and to protect
the interests of Fund shareholders.
(3)
The candidate must have substantial expertise, experience or relationships relevant to the business of the Fund, and/or knowledge of investments and finance. Knowledge
of and experience in the Asia Pacific region are desirable attributes.
(4)
The candidate should add to the balance of knowledge, experience, skills, expertise and diversity of the Board of Directors as a whole.
(5)
At least one Independent Director must qualify as an “audit committee financial expert,” as such term is defined in Item 401 of Regulation S-K and as further specified
in the Audit Committee Charter of the Fund.
(6)
The candidate should have the ability to attend at least four in-person regular meetings per year and be available to participate by teleconference in meetings of the
Committee and periodic special meetings of the Fund which may be called upon short notice. The candidate should also be willing and able to travel to Asia to meet with portfolio management teams and investment officers employed by the
investment managers for the Fund.
(7)
The Independent Directors have adopted a policy that Independent Directors may serve up to age 74. An Independent Director may continue to serve if, in the judgment of
the Nominating Committee, he or she continues to meet all of the criteria specified above and is able to participate in meetings of the Board of Directors and carry out his or her responsibilities as an Independent Director of the Fund.
The standard of the Nominating Committee is to treat all equally qualified nominees in the same manner. The Nominating Committee takes the overall
diversity of the Board into account when considering and evaluating potential director candidates. Although the Nominating Committee has no specific policy regarding diversity, when considering nominees, the Nominating Committee generally
evaluates the manner in which each nominee’s professional experience, background, skills in matters that are relevant to the oversight of the Fund and leadership experience are complementary to the existing Directors’ qualities.
The Nominating Committee met and, after discussion, recommended the re-election of Mr. Kim and Ms. MacHarg as Directors by the Board and the
shareholders of the Fund. The Nominating Committee may modify its policies and procedures for Director nominees and
12
recommendations from time to time in response to changes in the Fund’s needs and circumstances, and as applicable legal or listing standards change.
Governance and Compliance Committee.
The principal purpose of the Governance and Compliance Committee is to monitor the procedures of the Board and its Committees and make recommendations for any changes, including the creation or elimination of standing or ad
hoc Board Committees. This Committee also reviews and may make recommendations to the Board relating to those issues that pertain to the effectiveness of the Board in carrying out its responsibilities in governing the Fund and overseeing the
management of the Fund. The Committee also oversees the Fund’s compliance policies and procedures and those of its service providers adopted pursuant to Rule 38a-1 under the Investment Company Act, including recommending to the Board of
Directors the designation of the person to serve as the Fund’s Chief Compliance Officer. The Committee oversees the annual self-evaluation of the Independent Directors of the Fund and will address matters that the Committee considers
relevant to the Independent Directors’ performance. The Chairman of the Governance and Compliance Committee will also serve as the Chairman of the Board. A copy of the Governance and Compliance Committee Charter can be found in the
“Literature” section of NAM-U.S.A.’s website at http://funds.nomura-asset.com/japan-smaller-capitalization.
Communications with the Board of Directors.
Shareholders may send written communications to the Fund’s Board of Directors or to an individual Director by mailing such correspondence to the Secretary of the Fund (addressed to Japan Smaller Capitalization Fund,
Inc., Worldwide Plaza, 309 West 49
th
Street, New York, New York 10019-7316). Such communications must be signed by the shareholder and identify the class and number of shares held by the shareholder. Properly submitted
shareholder communications will, as appropriate, be forwarded to the entire Board or to the individual Director. Any shareholder proposal submitted pursuant to Rule 14a-8 under the 1934 Act must continue to meet all the requirements of
Rule 14a-8, as amended from time to time. See “Additional Information—Proposals of Shareholders” below.
Director Attendance at Shareholder Meetings.
The Fund has no formal policy regarding director attendance at shareholder meetings. All of the members of the Board of Directors then in office were present at the Fund’s 2018 Annual Meeting of Shareholders.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the 1934 Act requires the officers and directors of the Fund and beneficial owners who own more than 10% of a registered class of the Fund’s equity securities to file reports of
beneficial ownership and changes in beneficial ownership on Forms 3, 4 and 5 with the SEC and the New York Stock Exchange. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Fund with copies
of all Forms 3, 4 and 5 that they file.
13
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 representations from certain 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 and other persons subject to Section 16 of the
1934 Act due to the requirements of Section 30 of the Investment Company Act (i.e., any investment adviser or affiliated person of the Fund’s investment adviser) have complied with all filing requirements applicable to them with respect to
transactions during the Fund’s most recent fiscal year.
Compensation of Directors.
The Fund pays each Independent Director an annual fee of $30,000 plus $3,000 per in-person meeting attended, together with such Director’s actual expenses related to attendance at meetings. In addition, the Fund pays each Independent
Director $2,000 per telephone meeting attended. The Chairman of the Board is paid an additional annual fee of $8,000 and the Chairman of the Audit Committee is paid an additional annual fee of $4,000. Such fees and expenses for Independent
Directors for the fiscal year ended February 28, 2019 totaled $212,972.
The following table sets forth for the periods indicated compensation (not including expense reimbursements) 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:
|
Name of Director
|
Aggregate Compensation
Accrued as Part of Fund
Expenses for its Fiscal Year
Ended February 28, 2019
|
Pension or Retirement
Benefits Accrued as
Part of Fund Expenses
for its Fiscal Year
Ended February 28, 2019
|
Aggregate Compensation
from Fund Complex Paid to
Directors During the
Calendar Year Ended
December 31, 2018
|
|||
|
Rodney A. Buck
|
$
52,000
|
None
|
$
52,000
|
|||
|
David B. Chemidlin
|
49,000
|
None
|
48,000
|
|||
|
E. Han Kim
|
45,000
|
None
|
43,000
|
|||
|
Marcia L. MacHarg
|
44,000
|
None
|
43,000
|
|||
|
Yuichi Nomoto
|
0
|
None
|
0
|
Officers of the Fund.
Officers of the Fund are
annually elected and appointed by the Directors and hold office during each annual term until they resign, are removed or are otherwise disqualified to serve. Certain biographical and other information relating to the officers of the Fund is
set out below:
|
Name, Address* and
Age of Officers
|
Position(s) Held with the Fund,
Term of Office** and Length of
Time Served
|
Principal Occupation(s) During Past Five Years
|
||
|
Yuichi Nomoto (47)
|
President and Director since April 2019
|
President and Chief Executive Officer of NAM-U.S.A. and President of NGA since April 2019; Managing Director of NAM-U.S.A. since April 2018; Head of Client Services and Marketing of NAM-U.S.A. since 2016; Executive Director of
NAM-U.S.A. from 2016 to April 2018; Senior Manager and Head of the Marketing Planning Team, NISA Project Team in Retail Client Strategy, and the Investment Trust Marketing Team of NAM from 2010 to 2016.
|
||
|
Zheng Liu (40)
|
Vice President since November 2018
|
Chief Administrative Officer of NAM-U.S.A. since September 2018; Senior Manager of the Corporate Planning Department of NAM from 2012-2018; Quantitative Analyst for Quantitative Research and Development Department of NAM from
2007-2012.
|
||
|
Maria R. Premole (57)
|
Vice President since 2013
|
Vice President of NAM-U.S.A. Business Strategy and Development since July 2019; Vice President of NAM-U.S.A. Client Relationship Management from 2017-July 2019; Vice President and Head of Retail Product Management of NAM-U.S.A. from
2013-2017.
|
||
|
Neil Daniele (59)
|
Secretary since 2002; Chief Compliance Officer since 2005
|
Chief Compliance Officer of NAM‑U.S.A. since 2005 and Managing Director of NAM‑U.S.A. since 2007; Chief Compliance Officer of NGA since 2008; Chief Compliance Officer of Nomura Corporate Research and Asset Management Inc. and Nomura
Funds Research and Technologies America, Inc. since 2009; Corporate Secretary of NAM‑U.S.A. and NGA since 2013.
|
||
|
Amy J. Robles (42)
|
Treasurer since 2013; Assistant Treasurer from 2011-2013
|
Executive Director of NAM-U.S.A. since 2015; Controller and Treasurer of NAM‑U.S.A. and Treasurer of NGA since 2013; Vice President of NAM‑U.S.A. from 2009-2015.
|
||
|
Kelly S. Lee (37)
|
Assistant Treasurer since 2015
|
Vice President of NAM-U.S.A. since 2015; Fund Controller at JP Morgan Chase & Co. from 2014-2015; Financial Services Senior at Ernst & Young LLP from 2010-2014.
|
| * |
The address of each officer listed above is Worldwide Plaza, 309 West 49
th
Street, New York, New York 10019-7316.
|
| ** |
Elected and appointed by the Board of Directors and hold office until they resign, are removed or are otherwise disqualified to serve.
|
14
Stock Ownership.
Information
relating to the share ownership by each Director and each Director nominee as of September 30, 2019 is as follows:
|
Name of Continuing Directors and
Nominees
|
Dollar Range of Equity Securities
in the Fund |
Aggregate Dollar Range of
Securities in All Registered Funds
in the Fund Complex Overseen by
Directors and Nominee
|
||
|
Continuing Directors
|
||||
|
Rodney A. Buck
|
$50,001‑$100,000
|
$50,001-$100,000
|
||
|
David B. Chemidlin
|
$0‑$10,000
|
$0‑$10,000
|
||
|
Yuichi Nomoto
|
None
|
None
|
||
|
Nominees
|
||||
|
E. Han Kim
|
$50,001-$100,000
|
$50,001-$100,000
|
||
|
Marcia L. MacHarg
|
$10,001-$50,000
|
$10,001-$50,000
|
As of September 30, 2019, the current Directors and officers of the Fund as a group (ten persons) owned an aggregate of less than 1% of the
outstanding shares of the Fund. Additionally, the Fund’s investment manager, NAM-U.S.A., owned an aggregate of less than 1% of the outstanding shares of the Fund. At such date, all of the officers of the Fund as a group (six persons) owned an
aggregate of less than 1% of the outstanding shares of Nomura Holdings, Inc., the parent company of each of NAM‑U.S.A. and NAM.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Wells Fargo & Company (“Wells Fargo”), Wells Capital Management Incorporated (“Wells Capital”) and Wells Fargo Clearing Services, LLC (“Wells
Clearing”) have reported aggregate beneficial ownership of 5,918,424 shares of Common Stock of the Fund as of December 31, 2018. Wells Fargo is located at 420 Montgomery Street, San Francisco, CA 94163. Wells Capital is located at 525 Market
Street, 10
th
Floor, San Francisco, CA 94105. Wells Clearing is located at One North Jefferson Avenue, St. Louis, MO 63103.
1607 Capital Partners, LLC (“1607 Capital”) has reported beneficial ownership of 5,074,975 shares of Common Stock of the Fund as of December 31,
2018. 1607 Capital is located at 13 S. 13th Street, Suite 400, Richmond, VA 23219.
Lazard Asset Management LLC (“Lazard”) has reported beneficial ownership of 3,621,001 shares of Common Stock of the Fund as of December 31, 2018.
Lazard is located at 30 Rockefeller Plaza, New York, NY 10112.
City of London Investment Group PLC (“CLIG”) and City of London Investment Management Company Limited (together with CLIG, “City of London”) has
reported beneficial
15
ownership of 1,695,681 shares of Common Stock of the Fund as of December 31, 2018. City of London is located at 77 Gracechurch Street, London EC3V 0AS, England.
To the knowledge of the management of the Fund, based on SEC filings as of January 22, 2019, February 14, 2019, February 13, 2019 and February 8,
2019, respectively, the investors named above are the only beneficial owners of more than 5% of the Fund’s outstanding shares as of that date. No filings on Schedule 13D or 13G have been made with respect to any period subsequent to the last
such date, and the share ownership information does not reflect any transactions that may have occurred after such date.
|
Name of Beneficial Owner
|
Shares of Common Stock of
the Fund Beneficially Owned
|
Percent of Common Stock of the
Fund Beneficially Owned
|
||
|
Wells Fargo & Company, Wells Capital Management Incorporated and Wells Fargo Clearing Services, LLC
|
5,918,424*
|
20.89%*
|
||
|
1607 Capital Partners, LLC
|
5,074,975*
|
17.91%*
|
||
|
Lazard Asset Management LLC
|
3,621,001*
|
12.78%*
|
||
|
City of London Investment Group PLC and City of London Investment Management Company Limited
|
1,695,681*
|
6.0%*
|
| * |
As of December 31, 2018.
|
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 AST Fund Solutions, LLC (“AST”), a firm that specializes in proxy solicitation services, to assist in the solicitation of proxies for the Meeting for an estimated
fee of $7,500, together with reimbursement of such firm’s expenses. AST 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.
Independent Accountants’ Fees
The SEC’s auditor independence rules require the Fund’s Audit Committee to pre-approve: (a) all audit and permissible non-audit services provided by
the Fund’s independent accountants
16
directly to the Fund and (b) those permissible non-audit services provided by the Fund’s independent accountants to NAM-U.S.A. and entities controlling, controlled by
or under common control with NAM-U.S.A., if the services relate directly to the operations and financial reporting of the Fund.
The following table sets forth the aggregate fees paid to RSM for the Fund’s fiscal years ended February 28, 2019 and February 28, 2018 for
professional services rendered for: (i) the audit of the Fund’s annual financial statements and the review of financial statements included in the Fund’s reports to shareholders; and (ii) all 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.
|
Fiscal Year End
|
Audit Fees
Charged to
the Fund
|
Audit Related
Fees
|
Tax Fees
|
All Other
Fees
|
||||
|
February 28, 2019
|
$51,755
|
$0
|
None
|
None
|
||||
|
February 28, 2018
|
$49,764
|
$0
|
None
|
None
|
A representative from RSM is expected to be present in person or by telephonic conference call at the Meeting and will have the opportunity to make a
statement and to respond to appropriate questions.
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 chairman of the Meeting may propose one or more adjournments of the Meeting to permit further solicitation of proxies from shareholders. No additional notice, other than announcement at the Meeting, will be provided
to shareholders 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 of the proxies; if no direction is indicated, the shares will be voted FOR the election of two Director nominees (Proposal 1). Approval of the election of two Directors to the Board (Proposal 1) requires the affirmative
vote of a majority of the shares outstanding and entitled to vote thereon, in person or by proxy, and any routine matter which may properly come before the Meeting requires approval of a majority of the votes cast at the Meeting, in person or
by proxy.
17
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 and clients on how to cast their votes on the proposals to be presented to the Meeting. The Fund understands that under applicable rules, broker-dealers may, without instructions from such customers or clients,
grant authority to the proxies designated by the Fund to vote on certain matters to be considered if no instructions have been received prior to the date specified in the broker-dealer firm’s request for voting instructions. Certain
broker-dealer firms may exercise discretion over shares held in their name for which no instructions are received by voting such shares in the same proportion as they have voted shares for which they have received instructions.
The shares as to which the proxies are designated and granted authority by broker‑dealer firms to vote on the proposals to be considered at the
Meeting, 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 proposal 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. Abstentions and broker non‑votes will not be counted as votes cast. Therefore, abstentions and broker
non-votes will have the same effect as a vote against the election of Director nominees (Proposal 1).
Other Matters
With regard to any other business matters that may properly come before the Meeting, it is the intention of the persons named in the enclosed proxy
to vote in accordance with their discretion.
Address of the Manager and the Investment Adviser
The address of NAM-U.S.A. is Worldwide Plaza, 309 West 49
th
Street, New York, New York 10019-7316. The address of NAM is 1-12-1,
Nihonbashi, Chuo-ku, Tokyo 103-8260, Japan.
Proposals of Shareholders
Proposals of shareholders intended to be presented at the next Annual Meeting of Shareholders of the Fund, which is expected to be held in November
2020, must be received by the Fund for inclusion in its Proxy Statement and form of proxy relating to that meeting by June 8, 2020. Written proposals with regard to the Fund should be sent to the Secretary of the Fund, Worldwide Plaza, 309
West 49
th
Street, New York, New York 10019-7316.
Shareholders wishing to present proposals at the next annual meeting of shareholders of the Fund that they do not wish to be included in the Fund’s
proxy statement and form of proxy must send written notice of such proposals to the Secretary of the Fund, Worldwide Plaza, 309 West 49
th
Street, New York, New York 10019-7316, and such notice must be received by the Secretary no
sooner than June 8, 2020 and no later than July 8, 2020 in the form and containing the information prescribed from time to time in the Fund’s Bylaws.
By Order of the Board of Directors
Neil A. Daniele, Secretary
New York, New York
Dated: October 11, 2019
Dated: October 11, 2019
18
TABLE OF CONTENTS