Exhibit (g)(2)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of ______________ 1997, 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
Subject to the broad supervision of the Manager and the Fund, the
Investment Adviser shall provide the Manager with such economic research,
securities analysis and investment recommendations as the latter may from time
to time consider necessary for the proper supervision of the Fund's assets.
The Investment Adviser shall continuously review the Fund's holdings and shall
make recommendations as to which securities shall be purchased, sold or
exchanged and what portion of the assets of the Fund shall be held in the
various securities in which the Fund invests, 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
recommendations as to foreign currency matters and the advisability of
entering into foreign exchange contracts. The Investment Adviser shall also
make recommendations as to the manner in which voting rights, rights to
consent to corporate action and any other rights pertaining to the Fund's
portfolio securities shall be exercised.
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.
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 based
upon the average weekly value of the net assets of the Fund 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, .45% of the Fund's average weekly net
assets in excess of $50 million but not in excess of $100 million and .40% of
the Fund's average weekly net assets in excess of $100 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 it's 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 and such affiliates.
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
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 _______________, 1999 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 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.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment
is specifically approved by (i) the vote of a majority of 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 for the purpose of voting on such approval.
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
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.
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_______________________________
NOMURA ASSET MANAGEMENT CO., LTD.
By_______________________________
