Exhhibit (g)(2)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 13th day of November 2001, by and between NOMURA
ASSET MANAGEMENT U.S.A. INC., a New York corporation (hereinafter referred to
as the "Manager"), and NOMURA ASSET MANAGEMENT CO., LTD., a Japanese
corporation (hereinafter referred to as the "Investment Adviser").
W I T N E S S E T H :
WHEREAS, Japan OTC Equity Fund, Inc. (the "Fund") is engaged in
business as a non-diversified, closed-end, management investment company
registered under the Investment Company Act of 1940, as amended (hereinafter
referred to as the "Investment Company Act"); and
WHEREAS, the Manager and the Investment Adviser are engaged in
business as registered investment advisers under the Investment Advisers Act
of 1940, as amended; and
WHEREAS, the Manager has entered into a Management Agreement with the
Fund of even date herewith (the "Management Agreement"); and
WHEREAS, the Investment Adviser is willing to provide investment
advisory services to the Manager in connection with the Fund's operations on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties hereto as herein set forth, the parties covenant and
agree as follows:
ARTICLE I
DUTIES OF THE INVESTMENT ADVISER
The Manager hereby retains the Investment Adviser to act as the
investment adviser of the Fund and to furnish the Fund with the investment
advisory services described below, subject to the policies of, review by and
overall control of the Board of Directors of the Fund, for the period and on
the terms and conditions set forth in this Agreement. In addition, the Manager
may delegate to the Investment Adviser investment discretion over all or a
portion of the Fund's assets. The Investment Adviser hereby accepts such
employment and agrees during such period, at its own expense, to render, or
arrange for the rendering of, such services and to assume the obligations
herein set forth for the compensation provided for herein.
(a) Research Services. Subject to the broad supervision of the
Manager and the Fund, the Investment Adviser shall provide the Manager with
such economic research and securities analysis as the latter may from time to
time consider necessary for the proper supervision of the Fund's assets.
(b) Investment Discretionary Services. To the extent that the
Manager, with the prior authorization of the Fund's Board of Directors,
delegates investment discretion in writing to the Investment Adviser, the
Investment Adviser shall provide the Fund with such investment advice and
supervision as the Fund may from time to time consider necessary for the
proper supervision of those assets of the Fund for which the Investment
Adviser has been delegated investment discretion. The Investment Adviser shall
furnish continuously an investment program for such assets of the Fund and
shall determine from time to time which securities shall be purchased, sold or
exchanged and what portion of such assets of the Fund shall be held in the
various securities in which the Fund invests, options, futures, options on
futures or in cash, subject always to the restrictions of the Articles of
Incorporation and By-Laws of the Fund, as amended from time to time, the
provisions of the Investment Company Act and the statements relating to the
Fund's investment objective, investment policies and investment restrictions
as the same are set forth in filings made by the Fund under Federal securities
laws. The Investment Adviser shall make decisions for the Fund as to foreign
currency matters and make determinations as to foreign exchange contracts. The
Investment Adviser shall make recommendations as to the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining
to such portfolio securities shall be exercised. Should the Board of Directors
of the Fund at any time, however, make any definite determination as to
investment policy and notify the Investment Adviser thereof in writing, the
Investment Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination has been revoked. The Investment Adviser shall take, on behalf
of the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above.
To the extent that the Manager delegates such authority in writing
to the Investment Adviser, the Investment Adviser shall place all orders for
the purchase or sale of portfolio securities for the Fund's account with
brokers or dealers selected by it, and to that end, the Investment Adviser is
authorized as the agent of the Fund to give instructions to the Custodian of
the Fund as to deliveries of securities and payments of cash for the account
of the Fund. In connection with the selection of such brokers or dealers and
the placing of such orders, the Investment Adviser is directed at all times to
seek to obtain execution and price within the policy guidelines determined by
the Board of Directors of the Fund and set forth in the filings made by the
Fund under Federal securities laws. Subject to this requirements and the
provisions of the Investment Company Act, the Securities Exchange Act of 1934,
as amended, and other applicable provisions of law, the Investment Adviser may
select brokers or dealers with which it, or the Fund, is affiliated.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Investment Adviser shall furnish, at its own expense, all
administrative services, office space, equipment and facilities, investment
advisory, statistical and research services, and executive, supervisory and
clerical personnel necessary to carry out its obligations under this
Agreement.
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ARTICLE III
COMPENSATION OF THE INVESTMENT ADVISER
For the services to be rendered as provided herein, the Manager shall
pay to the Investment Adviser at the end of each calendar month a fee at the
annual rate of 0.50% of the Fund's average weekly net assets (i.e., the
average weekly value of the total assets of the Fund minus the sum of accrued
liabilities of the Fund), not in excess of $50 million, 0.45% of the Fund's
average weekly net assets in excess of $50 million but not in excess of $100
million, 0.40% of the Fund's average weekly net assets in excess of $100
million but not in excess of $175 million and 0.35% of the Fund's average
weekly net assets in excess of $175 million, commencing on the day following
effectiveness hereof.
For purposes of this calculation, average weekly net assets is
determined at the end of each month on the basis of the average net assets of
the Fund for each week during the month. The assets for each weekly period are
determined by averaging the net assets at the last business day of the prior
week. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for that
part of the month that this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fee as set forth above. During
any period when the determination of net asset value is suspended by the Board
of Directors of the Fund, the average net asset value of a share for the last
week prior to such suspension shall for this purpose be deemed to be the net
asset value at the close of each succeeding week until it is again determined.
ARTICLE IV
LIMITATION OF LIABILITY OF THE INVESTMENT ADVISER
The Investment Adviser shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties hereunder. As
used in this Article IV, the term "Investment Adviser" shall include any
affiliates of the Investment Adviser performing services for the Fund
contemplated hereby and directors, officers, partners and employees of the
Investment Adviser as well as that corporation itself.
ARTICLE V
ACTIVITIES OF THE INVESTMENT ADVISER
The services of the Investment Adviser to the Fund are not to be
deemed to be exclusive, the Investment Adviser and any person controlled by or
under common control with the Investment Adviser (for the purpose of this
Article V referred to as "affiliates") being free to render services to
others. It is understood that directors, officers, employees and shareholders
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of the Manager are or may become interested in the Investment Adviser and its
affiliates, as directors, officers, employees, partners and shareholders or
otherwise and that directors, officers, employees, partners and shareholders
of the Investment Adviser and its affiliates are or may become similarly
interested in the Manager or the Fund, and that the Investment Adviser is or
may become interested in the Manager or the Fund as shareholder or otherwise.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date first above
written and shall remain in force until November 1, 2003 and thereafter, but
only so long as the Management Agreement remains in force and provided that
such continuance is specifically approved at least annually by (i) the Board
of Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund and (ii) a majority of those directors who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Manager, by the Board of Directors of the Fund, by vote of
a majority of the outstanding voting securities of the Fund or by the
Investment Adviser, on sixty days' written notice to the parties. This
Agreement shall automatically terminate in the event of its assignment or upon
the termination of the Management Agreement.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
This Agreement may be amended by the parties only if such amendment
is specifically approved in accordance with applicable requirements under the
Investment Company Act.
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act of 1940 and the Rules and Regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission under said Act.
ARTICLE IX
GOVERNING LAW
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This Agreement shall be construed in accordance with laws of the
State of New York and the applicable provisions of the Investment Company Act.
To the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
NOMURA ASSET MANAGEMENT U.S.A. INC.
By /s/ Xxxxxxxx Xxxx
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NOMURA ASSET MANAGEMENT CO., LTD.
By /s/ Hisaaki Hino
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