Edgar Filing: JAPAN SMALLER CAPITALIZATION FUND INC

Draft
9/30/05

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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
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|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12

JAPAN SMALLER CAPITALIZATION FUND, INC.
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(Name of Registrant as Specified In Its Charter)

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

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JAPAN SMALLER CAPITALIZATION FUND, INC.
Two World Financial Center, Building B
New York, New York 10281

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NOTICE OF 2005 ANNUAL MEETING OF SHAREHOLDERS
November 9, 2005

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TO THE SHAREHOLDERS OF
JAPAN SMALLER CAPITALIZATION FUND, INC.:

Notice is hereby given that the 2005 Annual Meeting of Shareholders (the
"Meeting") of Japan Smaller Capitalization Fund, Inc. (the "Fund") will be held
at the offices of Nomura Securities International, Inc., Two World Financial
Center, Building B, New York, New York, on Wednesday, November 9, 2005, at 9:00
A.M. for the following purposes:

(1) To elect two Directors to serve as Class II Directors, each to serve
for a term to expire in 2008; and

(2) To transact 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 26,
2005 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.

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 7, 2005

[This page intentionally left blank]

PROXY STATEMENT

JAPAN SMALLER CAPITALIZATION FUND, INC.
Two World Financial Center, Building B
New York, New York 10281

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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 2005 Annual
Meeting of Shareholders of the Fund (the "Meeting") to be held at the offices of
Nomura Securities International, Inc., Two World Financial Center, Building B,
New York, New York, on Wednesday, November 9, 2005, at 9:00 A.M. The approximate
mailing date of this Proxy Statement is October 11, 2005.

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 two Class II 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, 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 our shareholder list. 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.

The Board of Directors has fixed the close of business on September 26,
2005, 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 on the Record Date will be entitled to one vote for each
share held, with no shares having cumulative voting rights. As of September 26,
2005, 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 two Class II Directors. If any other matter is properly presented,
it is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment.

The Fund sends annual and semi-annual reports to shareholders. The Fund
will furnish, without charge, a copy of its most recent annual report any any
subsequent semi-

annual report to shareholders upon request to the Fund at Two World Financial
Center, Building B, New York, New York 10281 (or by calling 1-800-833-0018).

PROPOSAL 1. ELECTION OF DIRECTORS

The Fund's Board of Directors is divided into three classes of Directors
serving staggered three-year terms and until their successors are elected and
qualify. Each year the term of office of one class of Directors will expire. The
term of office for Class I Directors expires at the Annual Meeting of
Shareholders to be held in 2007, for Class II Directors at this Meeting and for
Class III Directors at the Annual Meeting of Shareholders to be held in 2006.
Each of the two Class II Director nominees proposed in this Proxy Statement for
election to the Board of Directors is currently a Director of the Fund. The
balance of the current Directors consists of two Class I Directors and two Class
III Directors, none of whom is a nominee for election at the Meeting and all of
whom will continue in office after the Meeting.

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. Any Director elected by the Board to fill a vacancy
would hold office for the remainder of the full term of the class of Directors
to which he or she was elected and until a successor is elected and qualified.
If the size of the Board is increased, additional Directors will be apportioned
among the three classes to make all classes as nearly equal as possible.

NOMINEES PROPOSED FOR ELECTION

Messrs. Chor Weng Tan and Hiroshi Terasaki have been nominated to serve as
Class II Directors for a three-year term to expire at the Annual Meeting of
Shareholders to be held in 2008 and until their successors are duly elected and
qualified. The nominees have indicated an intention to serve if elected and have
consented to be 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 form of proxy to vote each
proxy for the election of the following Class II Director nominees: Chor Weng
Tan and Hiroshi Terasaki.

The Board of Directors knows of no reason why either of the Class II
Director nominees will be unable to serve, but in the event of any such
unavailability, the proxies received will be voted for such substitute
nominee(s) as the Board of Directors may recommend. Mr. Tan is not an
"interested person" of the Fund within the meaning of the Investment Company Act
of 1940, as amended (the "Investment Company Act"). It is currently expected
that any such substitute nominee for Mr. Tan will also not be an "interested
person." Mr. Terasaki is an "interested person" of the Fund within the meaning
of the Investment Company Act as a result of his service with Nomura Asset
Management Co., Ltd. ("NAM") and its affiliates.

The following tables contain information about the nominees for election
as Class II Directors and about Directors whose terms will continue after the
Meeting. Each Director has served as a Director of the Fund since the Fund's
inception in March 1990, except for Mr. Terasaki, who was elected to fill a
vacancy on the Board effective June 20, 2005 and Dr. Grollman, who was elected
to the Board to fill a vacancy on the Board effective January 1, 2004.

Interested Director

Biographical and other information relating to the Class II Director
nominee who is an "interested person," as defined in the Investment Company Act,
of the Fund is set out below.

Term of Number of Other Public
Position(s) Office and Funds in the Directorships
Held with Length of Principal Occupation(s) Fund Complex Held by the
Name, Address and Age the Fund Time Served* During Past Five Years Overseen*** Director
--------------------- ----------- ------------ ----------------------- ------------ -------------
Class II (Nominee for a Term Expiring at the Annual Meeting of Shareholders to be held in 2008)

Hiroshi Terasaki (50)** Class II Director Managing Director and Chief 2 registered None
Two World Financial Director since June Executive Officer, Nomura investment
Center, Building B 2005 Asset Management U.K. companies
New York Limited from 2003 to 2005; consisting of
New York 10281 General Manager, Fixed 2 portfolios
Income Investment Department
of NAM from 2000 to 2003.

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* Mr. Terasaki, if elected, will serve as a Class II Director for a
three-year term expiring at the Annual Meeting of Shareholders to be held
in 2008 and until his successor is elected and qualified or until his
earlier resignation or removal.

** Mr. Terasaki is an "interested person," as defined in the Investment
Company Act, of the Fund based on his positions with NAM and its
affiliates. Mr. Terasaki is a director of Korea Equity Fund, Inc. for
which Nomura Asset Management U.S.A. Inc. ("NAM-U.S.A.") acts as manager
and NAM acts as investment adviser.

*** In addition to the Fund, the "Fund Complex" includes Korea Equity Fund,
Inc.

Non-Interested Director

Biographical and other information relating to the Class II Director
nominee who is not an "interested person," as defined in the Investment Company
Act, of the Fund is set out below.

Chor Weng Tan (69)** Class II Director Retired since 2004; Managing 2 registered None
76 Echo Bay Drive Director since 1993 Director for Education, The investment
New Rochelle American Society of companies
New York 10805 Mechanical Engineers from consisting of
1991 to 2004. 2 portfolios

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* Mr. Tan, if elected, will serve as a Class II Director for a three-year
term expiring at the Annual Meeting of Shareholders to be held in 2008 and
until his successor is elected and qualified or until his earlier
resignation or removal.

** Mr. Tan is also a director of Korea Equity Fund, Inc. for which NAM-U.S.A.
acts as manager and NAM acts as investment adviser, and 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.

*** In addition to the Fund, the "Fund Complex" includes Korea Equity Fund,
Inc.

INFORMATION REGARDING OTHER DIRECTORS

Class I Directors

Non-Interested Directors

Each of the Class I Directors is not an "interested person," as defined in
the Investment Company Act, of the Fund. Biographical and other information
relating to the Class I Directors is set out below.

Term of Number of Other Public
Position(s) Office and Funds in the Directorships
Held with Length of Principal Occupation(s) Fund Complex Held by the
Name, Address and Age the Fund Time Served* During Past Five Years Overseen*** Director
--------------------- ----------- ------------ ----------------------- ------------ -------------
Class I (Term Expiring at the Annual Meeting of Shareholders to be held in 2007)

William G. Barker, Jr.** Class I Director Retired. 2 registered None
(72) Director since 1993 investment
111 Parsonage Road companies
Greenwich consisting of
Connecticut 06830 2 portfolios

John F. Wallace (76)** Class I Director Retired since 2000; Vice 2 registered None
17 Rhoda Street Director since 1993 President of the Fund from investment
West Hempstead 1997 to 2000 and Secretary companies
New York 11552 and Treasurer of the Fund consisting of
from 1993 to 1997; Senior 2 portfolios
Vice President of NAM-U.S.A.
from 1981 to 2000, Secretary
from 1976 to 2000, Treasurer
from 1984 to 2000 and
Director from 1986 to 2000.

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* Each Class I Director serves for a three year term expiring at the Annual
Meeting of Shareholders to be held in 2007 and until his successor is
elected and qualified or until his earlier resignation or removal.

** Each Class I Director is also a director of Korea Equity Fund, Inc. for
which NAM-U.S.A. acts as manager and NAM acts as investment adviser, and
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.

*** In addition to the Fund, the "Fund Complex" includes Korea Equity Fund,
Inc.

Class III Directors

Non-Interested Directors

Each of the Class III Directors is not an "interested person," as defined
in the Investment Company Act, of the Fund. Biographical and other information
relating to the Class III Directors is set out below.

Term of Number of Other Public
Position(s) Office and Funds in the Directorships
Held with Length of Principal Occupation(s) Fund Complex Held by the
Name, Address and Age the Fund Time Served* During Past Five Years Overseen*** Director
--------------------- ----------- ------------ ----------------------- ------------ -------------
Class III (Term Expiring at the Annual Meeting of Shareholders to be held in 2006)

Arthur R. Taylor (69)** Class III Director Retired since 2002; 2 registered None
3731 Devonshire Director since 1993 President of Muhlenberg investment
Street Allentown College from 1992 to 2002. companies
Pennsylvania 18103 consisting of
2 portfolios

William K. Grollman Class III Director President and co-founder 2 registered SmartPros Ltd.
(63)** Director since 2004 since 1981 and director of investment
SmartPros Ltd. SmartPros Ltd. (continuing companies
12 Skyline Drive education for the consisting of
Hawthorne professions), listed on 2 portfolios
New York 10532 American Stock Exchange;
former Partner and National
Director of BDO Seidman
(accounting firm.)

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* Each Class III Director serves for a three year term expiring at the
Annual Meeting of Shareholders to be held in 2006 and until his successor
is elected and qualified or until his earlier resignation or removal.

** Each Class III Director is also a director of Korea Equity Fund, Inc. for
which NAM-U.S.A. acts as manager and NAM acts as investment adviser, and
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.

*** In addition to the Fund, the "Fund Complex" includes Korea Equity Fund,
Inc.

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 are "independent" as defined in the New York
Stock Exchange listing standards. Currently, Messrs. Barker, Grollman, Tan,
Taylor and Wallace are members of these Committees. The principal
responsibilities of the Audit Committee and the Nominating Committee are
described below. 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, 2005, the Board of Directors
held six meetings, the Audit Committee held two meetings and the Nominating
Committee held one meeting. Each incumbent Director attended at least 75% of the
aggregate number of meetings of the Board of Directors held during the period
for which he served and, if a member, of the aggregate number of meetings of the
Audit and Nominating Committees held during the period for which he served.

Report of the Audit Committee. The following is a report by the Fund's
Audit Committee regarding the responsibilities and functions of the Audit
Committee.

Pursuant to the Audit Committee Charter adopted by the Fund's Board of
Directors on August 6, 2003, the Audit Committee's principal responsibilities
are to: (i) select and oversee the Fund's independent accountants; (ii) review
with the independent accountants the scope, performance and anticipated cost of
their audit; (iii) discuss with the independent accountants certain matters
relating to the Fund's financial statements, including any adjustment to such
financial statements recommended by such independent accountants, or any other
results of any audit; (iv) ensure that the independent accountants submit on a
periodic basis a formal written

statement as to their independence, discuss with the independent accountants any
relationships or services disclosed in the statement that may impact the
objectivity and independence of the Fund's independent accountants and recommend
that the Board take appropriate action in response to this statement to satisfy
itself of the independent accountants' independence; and (v) consider the
comments of the independent accountants and management's responses thereto with
respect to the quality and adequacy of the Fund's accounting and financial
reporting policies and practices and internal controls. A copy of the Audit
Committee Charter was attached as Exhibit I to the Fund's 2004 Proxy Statement.

The Audit Committee has received written disclosures and the letter
required by Independence Standards Board Standard No. 1 from Ernst & Young LLP
("Ernst &Young"), the Fund's independent accountants, and discussed with Ernst &
Young certain matters required to be discussed by Statement on Auditing
Standards No. 61. The Audit Committee has considered whether the provision of
non-audit services by Ernst & Young is compatible with maintaining the
independence of those accountants. At its meeting held on April 14, 2005, the
Audit Committee reviewed and discussed the audit of the Fund's financial
statements with Fund management and Ernst & Young. The Audit Committee discussed
with Ernst & Young their independence and considered whether the provision of
services by Ernst & Young to the Fund and to NAM-U.S.A. and its affiliates was
compatible with maintaining Ernst & Young's 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, 2005.

The Audit Committee's Charter for the Fund requires the Audit Committee
(a) to pre-approve all auditing services to be provided to the Fund by the
Fund's independent accountants; (b) to pre-approve 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) to pre-approve 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.

Submitted by the Audit Committee of the
Board of Directors of the Fund

William G. Barker, Jr.
William K. Grollman
Chor Weng Tan
Arthur R. Taylor
John F. Wallace

Nominating Committee; Consideration of Potential Director Nominees. The
principal purpose of the Nominating Committee is to select and nominate the
independent (i.e., non-interested) Directors of the Fund. It evaluates
candidates' qualifications for 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. 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 Nominating Committee will consider potential director candidates
recommended by Fund shareholders provided that the proposed candidates satisfy
the director qualification requirements provided in the Nominating Committee's
Charter; are not "interested persons" of the Fund or the Fund's investment
adviser within the meaning of the Investment Company Act; and are "independent"
as defined in the New York Stock Exchange listing standards. The Committee has
determined that potential director candidates recommended by Fund shareholders
must satisfy the Securities and Exchange Commission's ("SEC") nominee
requirements found in Regulation 14A of the 1934 Act. A copy of the Nominating
Committee Charter was attached as Exhibit II to the Fund's 2004 Proxy Statement.

Shareholders recommending potential director candidates must substantiate
compliance with these requirements at the time of submitting their proposed
director candidate to the attention of the Fund's Secretary. Notice to the
Fund's Secretary 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 annually to identify and evaluate nominees for Director and make its
recommendations to the Board. The Committee may meet more frequently if
vacancies on the Board occur during a given year. In identifying and evaluating
a potential nominee to serve as an independent Director of the Fund, the
Nominating Committee will consider, among other factors: (i) whether the
individual has any material relationships that could create any appearance of
impropriety with respect to or a lack of independence from NAM-U.S.A. or any of
its affiliates; (ii) whether the individual has 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; (iii)
the individual's corporate or other business experience in significant positions
which demonstrate sound business judgment; (iv) whether the individual has
financial and accounting experience; (v) the individual's ability to attend at
least four regular meetings a year and (vi) whether the individual can add to
the balance of experience of the present independent Directors. The standard of
the Nominating Committee is to treat all equally qualified nominees in the same
manner.

No nominee recommendations have been received from shareholders. The
Nominating Committee may modify its policies and procedures for director
nominees and recommendations from time to time in response to changes in the
Fund's needs and circumstances, and as applicable legal or listing standards
change.

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 Two World
Financial Center, Building B, New York, New York 10281). 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. See "Additional Information -- Proposals of
Shareholders" below.

Director Attendance at Shareholder Meetings. The Fund has no formal policy
regarding director attendance at shareholder meetings. Each member of the Board
of Directors then in office was present at the Fund's 2004 annual meeting of
shareholders.

Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the 1934 Act requires the officers and directors of the Fund
and persons who own more than 10% 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 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.

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 10%
beneficial owners 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 advisory
board member, 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, except that
Mr. Kiyoharu Ikeda, a former officer of the Fund and NAM-U.S.A., inadvertently
made a late Form 3 filing with respect to the Fund.

Interested Persons. The Fund currently treats one Class II Director
nominee, Mr. Terasaki, as an "interested person" of the Fund within the meaning
of Section 2(a)(19) of the Investment Company Act based on his positions with
NAM and its affiliates.

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 $10,000 plus $1,000 per Board or committee
meeting attended, together with such Director's actual out-of-pocket expenses
relating to attendance at meetings. Mr. Barker, who has been designated by the
Directors not affiliated with the Fund to serve as Lead Director, is paid an
additional annual fee of $5,000, effective June 2005. Such fees and expenses
aggregated $90,400 for the fiscal year ended February 28, 2005.

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:

Pension or Retirement Aggregate Compensation
Aggregate Compensation Benefit Accrued as Part of from Fund Complex Paid to
from Fund For Fund Expenses for its Directors During the Calendar
its Fiscal Year Ended Fiscal Year Ended Year Ended
Name of Director February 28, 2005 February 28, 2005 December 31, 2004*
---------------- ----------------- ----------------- ------------------

William G. Barker, Jr........ $17,500 None $30,500
William K. Grollman.......... 17,500 None 29,500
Chor Weng Tan................ 17,500 None 30,500
Arthur R. Taylor............. 16,500 None 29,000
Hiroshi Terasaki**........... -- None --
John F. Wallace.............. 17,500 None 30,500

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* 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, 2004.

** Mr. Terasaki was elected a Director of the Fund effective June 20, 2005.
Mr. Terasaki is an "interested person" of the Fund.

Officers of the Fund. 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. Certain biographical and other information relating to
the officers of the Fund is set out below:

Name, Address* and Position(s) Held Term of Office** and Principal Occupation(s)
Age of Officers with the Fund Length of Time Served During Past Five Years
--------------- ------------- --------------------- ----------------------

Hiroshi Terasaki (50) President President since 2005 Managing Director and Chief Executive
Officer, Nomura Asset Management U.K.
Limited from 2003 to 2005; General
Manager, Fixed Income Investment
Department of the NAM from 2000 to 2003.

Kenneth L. Munt (58) Vice President Vice President since 2001 Senior Vice President and Secretary of
NAM-U.S.A. since 1999.

Keiko Tani (42) Vice President Vice President since 2005 Senior Vice President and General Counsel
of NAM-U.S.A. since 2005; Leader, Legal
Team, Product Documentation & Legal
Department of NAM from 2003 to 2005,
General Manager of Legal Department from
1999 to 2003.

Rita Chopra-Brathwaite (36) Treasurer Treasurer since 2002 Vice President of NAM-U.S.A. since 2001;
Assistant Vice President of NAM-U.S.A.;
from 1999 to 2000.

Neil Daniele (45) Secretary Secretary since 2002 Senior Vice President of NAM-U.S.A. since
2002; Vice President and Compliance
Officer of Munich Re Capital Management
Corp. (asset management firm) from 2001 to
2002; Vice President of AIG Global
Investment Group, Inc. (asset management
firm) from 2000 to 2001; Compliance
Officer of AIG Global Investment Corp.
from 1996 to 2000.

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* The address of each officer listed above is Two World Financial Center,
Building B, New York, New York 10281.

** Elected by and serves at the pleasure of the Board of Directors.

Stock Ownership. Information relating to the share ownership by each
Director nominee and each current Director at October 3, 2005 is set out below:

Aggregate Dollar Range of
Shares of Common Aggregate Dollar Range of Securities in All Registered
Name of Director Nominee/ Stock of the Fund Equity Securities Funds in the Fund Complex
Current Directors Beneficially Owned in the Fund Overseen by Director Nominee
----------------- ------------------ ----------- ----------------------------

Nominees
Chor Weng Tan -0- None $10,001-$50,000
Hiroshi Terasaki -0- None None

Current Directors
William G. Barker, Jr. -0- None None
William K. Grollman -0- None None
Arthur R. Taylor -0- None None
John F. Wallace 1,400 $10,001-$50,000 $10,001-$50,000

As of October 3, 2005, the Directors and officers of the Fund as a group
(eleven persons) 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 (five
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

Van Den Berg Management Inc. has reported beneficial ownership of
approximately 9.3% of the Fund's Common Stock as of January 5, 2005. Van Den
Berg Management Inc. is located at 805 Las Cimas Parkway Suite 430, Austin,
Texas 78746. Dudley & Shanley, LLC ("Dudley") has reported beneficial ownership
of approximately 5.7% of the Fund's Common Stock as of August 29, 2005. Dudley
is located at 130 Maple Avenue, Red Bank, New Jersey 07701. To the knowledge of
the management of the Fund, Van Den Berg Management Inc. and Dudley are the only
beneficial owners of more than 5% of the Fund's outstanding shares.

Shares of Common Stock Percentage of the Fund's
of the Fund Reported Common Stock
Name of Beneficial Owner Beneficially Owned Beneficially Owned
------------------------ ------------------ ------------------

Dudley & Shanley, LLC 899,000 5.7%
Van Den Berg Management Inc. 1,473,297 9.3%

----------

ADDITIONAL INFORMATION

Expenses and Methods of Proxy Solicitation

The expense of preparing, printing and mailing 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.

Change in Accountants

During November 2004, PricewaterhouseCoopers LLP ("PwC") resigned as the
independent registered public accountant of the Fund because PwC has been
appointed to provide non-audit services to certain affiliates of NAM-U.S.A.,
which could be viewed as inconsistent with auditor independence with respect to
the Fund. The resignation of PwC was not the result of any disagreement with
management. Based on the recommendation of the Audit Committee of the Fund, the
Board of Directors voted to appoint Ernst & Young as the independent registered
public accountant for the Fund's fiscal year ended February 28, 2005. During the
two most recent fiscal years, PwC's audit reports contained no adverse opinion
or disclaimer of opinion; nor were the reports qualified or modified as to
uncertainty, audit scope, or accounting principles. Further, there were no
disagreements between the Fund and PwC on accounting principles, financial
statement disclosure, or audit scope, which if not resolved to the satisfaction
of PwC would have caused it to make reference to the disagreements in connection
with their reports.

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 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 PwC and Ernst &
Young, independent accountants for the Fund, for the Fund's fiscal years ended
February 29, 2004 and February 28, 2005 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; (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.
For the Fund's two fiscal years, the independent accountants did not render any
other audit-related services to the Fund, except as described under clauses (i)
above. The Fund's Audit Committee has determined that the provision of non-audit
services under clause (iii) is compatible with maintaining the independence of
the independent accountants from the Fund.

Financial
Information
Systems
Audit Fees Audit Design and
Charged to Related Tax Implementation All
Fiscal Year End Accountant the Fund Fees Fees Fees Other Fees*
--------------- ---------- ---------- ------- ---- -------------- -----------

February 29, 2004 PwC $47,000 $ 9,000 $7,500 $0 $371,375

February 28, 2005 PwC $0 $15,000 $5,400 $0 $0
Ernst &
Young $64,000 $0 $2,000 $0 $34,500

----------
* These fees relate to tax advisory services for NAM and NAM-U.S.A., and
non-audit 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 proposal 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 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 two Class II Director nominees (Proposal 1). Provided
that a quorum has been established at the Meeting, approval of the election of
two Class II Directors to the Board of Directors (Proposal 1) requires the
affirmative vote of a majority of the shares outstanding and entitled to vote
thereon, in person or by proxy. Approval of any other routine matter which may
properly come before the Meeting for consideration requires the affirmative vote
of a majority of the votes cast.

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 vote their shares on each
proposal before the Meeting. The Fund understands that under the rules of the
New York Stock Exchange and broker-dealers may, without instructions from such
customers and 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 so designated are granted authority by
broker-dealer firms to vote on the proposal 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 "withhold authority to vote for all nominees"
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, broker non-votes and proxies marked "withhold authority to vote for all
nominees" 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.

Other Matters

With regard to any other business matters that may properly come before
the Meeting for consideration, it is the intention of the persons named in the
enclosed proxy to use their discretionary voting authority and to vote in
accordance with their best judgment.

Address of Manager and Investment Adviser

The address of NAM-U.S.A. is Two World Financial Center, Building B, New
York, New York 10281. The address of NAM is 1-12-1, Nihombashi, 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
2006, must be received by the Fund for inclusion in its Proxy Statement and form
of proxy relating to that meeting by June

10, 2006. Written proposals with regard to the Fund should be sent to the
Secretary of the Fund, Two World Financial Center, Building B, New York, New
York 10281.

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, Two World Financial Center, Building B, New York, New
York 10281, and such notice must be received by the Secretary no sooner than
June 10, 2006 and no later than July 10, 2006 in the form 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 7, 2005

JAPAN SMALLER CAPITALIZATION FUND, INC.
Two World Financial Center, Building B
New York, New York 10281

PROXY

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby appoints Hiroshi Terasaki 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 of the
shares of common stock of Japan Smaller Capitalization Fund, Inc. (the "Fund")
held of record by the undersigned on September 26, 2005 at the Annual Meeting of
the Shareholders of the Fund to be held on November 9, 2005, or any adjournment
thereof.

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

PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY USING
THE ENCLOSED ENVELOPE

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

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.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

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

|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE

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

JAPAN SMALLER CAPITALIZATION FUND, INC.

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

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.

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

CONTROL NUMBER:

Please be sure to sign and date this Proxy

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

Withhold
THE BOARD OF DIRECTORS For Authority to For All
RECOMMENDS A VOTE All vote for all Nominees
"FOR" ALL CLASS II DIRECTOR Nominees Nominees Except*
NOMINEES |_| |_| |_|

1. Election of two Class II Directors for a three-year term:

Chor Weng Tan

Hiroshi Terasaki

*NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Nominees Except" box and strike a line through the nominee's name. Your
shares will be voted for the remaining nominee.

2. In the discretion of such proxies, upon such other business as may properly
come before the meeting or any adjournments thereof.

Date ____________

_______________ Shareholder sign here _______________ Co-owner sign here _______