<DOCUMENT>
<TYPE>EX-99.2(H)
<SEQUENCE>6
<FILENAME>efc5-2324_exhibit992h.txt
<TEXT>

                                                             CC DRAFT 11/11/05


                                                                   Exhibit (h)



                       5,282,128 Shares of Common Stock
                 Issuable Upon Exercise of Transferable Rights
                         to Subscribe for such Shares

                           DEALER MANAGER AGREEMENT


                                              New York, New York
                                              November 14, 2005


UBS Securities LLC
299 Park Avenue
New York, New York 10171-0026

Ladies and Gentlemen:

     Each of Japan Smaller Capitalization Fund, Inc., a Maryland corporation
(the "Fund"), and Nomura Asset Management U.S.A. Inc., a New York corporation
(the "Manager"), hereby confirms the agreement with and appointment of UBS
Securities LLC to act as dealer manager (the "Dealer Manager") in connection
with the issuance by the Fund to the holders of record (the "Record Date
Stockholders") at the close of business on the record date set forth in the
Prospectus (as defined herein) (the "Record Date") transferable rights
entitling such Record Date Stockholders to subscribe for up to 5,282,128
shares (each a "Share" and, collectively, the "Shares") of common stock, par
value $0.10 per share (the "Common Shares"), of the Fund (the "Offer").
Pursuant to the terms of the Offer, the Fund is issuing each Record Date
Stockholders one transferable right (each a "Right" and, collectively, the
"Rights") for each Common Share held by such Record Date Stockholder on the
Record Date. Such Rights entitle their holders to acquire during the
subscription period set forth in the Prospectus (the "Subscription Period"),
at the price set forth in such Prospectus (the "Subscription Price"), one
Share for each three Rights exercised, on the terms and conditions set forth
in such Prospectus. No fractional shares will be issued. Any Record Date
Stockholder who fully exercises all Rights initially issued to such Record
Date Stockholder (other than those Rights that cannot be exercised because
they represent the right to acquire less than one Share) will be entitled to
subscribe for, subject to allocation, additional Shares (the
"Over-Subscription Privilege") on the terms and conditions set forth in the
Prospectus. The Rights are transferable and are expected to be listed on the
New York Stock Exchange, Inc. under the symbol "JOF.RT".

     The Fund has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (Nos. 333-128763 and
811-05992) and a related preliminary prospectus under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations of the
Commission under the Investment Company Act (the "Investment Company Act Rules
and Regulations") and the rules and regulations of the Commission under the
Securities Act (the "Securities Act Rules and Regulations" and, together with
the Investment Company Act Rules and Regulations, the "Rules and
Regulations"), and has filed such amendments to such registration statement on
Form N-2, if any, and such amended preliminary prospectuses as may have been
required to the date hereof. If the registration statement has not become
effective, a further amendment to such registration statement, including forms
of a final prospectus necessary to permit such registration statement to
become effective, will promptly be filed by the Fund with the Commission. If
the registration statement has become effective and any prospectus contained
therein omits certain information at the time of effectiveness pursuant to
Rule 430A


<PAGE>


of the Rules and Regulations, a final prospectus containing such omitted
information will promptly be filed by the Fund with the Commission in
accordance with Rule 497(h) of the Rules and Regulations. The term
"Registration Statement" means the registration statement, as amended, at the
time it becomes or became effective, including financial statements and all
exhibits and all documents, if any, incorporated therein by reference, and any
information deemed to be included by Rule 430A. The term "Prospectus" means
(except as otherwise specified herein) the final prospectus in the form filed
with the Commission pursuant to Rule 497(c), (e), (h) or (j) of the Rules and
Regulations, as the case may be, as from time to time amended or supplemented
pursuant to the Securities Act.

     The Prospectus and letters to owners of Common Shares of the Fund,
subscription certificates and other forms used to exercise rights, brochures,
wrappers, any letters from the Fund to securities dealers, commercial banks
and other nominees and any newspaper announcements, press releases and other
offering materials and information that the Fund may use, approve, prepare or
authorize for use in connection with the Offer are collectively referred to
hereinafter as the "Offering Materials".

1.   Representations and Warranties.
     -------------------------------

     (a)  The Fund and the Manager jointly and severally represent and warrant
          to, and agree with, the Dealer Manager as of the date hereof, as of
          the date of the commencement of the Offer (such date being
          hereinafter referred to as the "Representation Date") and as of the
          Expiration Date (as defined below) that:

          (i)  The Fund meets the requirements for use of Form N-2 under the
               Securities Act and the Investment Company Act and the Rules and
               Regulations. At the time the Registration Statement became or
               becomes effective, the Registration Statement did or will
               contain all statements required to be stated therein in
               accordance with, and did or will comply in all material
               respects with, the requirements of the Securities Act, the
               Investment Company Act and the Rules and Regulations and did
               not or will not contain an untrue statement of a material fact
               or omit to state any material fact required to be stated
               therein or necessary to make the statements therein not
               misleading. From the time the Registration Statement became or
               becomes effective through the expiration date of the Offer set
               forth in the Prospectus, as it may be extended as provided in
               the Prospectus (the "Expiration Date"), the Prospectus and the
               Offering Materials will not contain an untrue statement of a
               material fact or omit to state any material fact required to be
               stated therein or necessary in order to make the statements
               therein, in the light of the circumstances under which they
               were made, not misleading; provided, however, that the
               representations and warranties in this subsection shall not
               apply to statements in or omissions from the Registration
               Statement, Prospectus or Offering Materials made in reliance
               upon and in conformity with information relating to the Dealer
               Manager furnished to the Fund in writing by the Dealer Manager
               expressly for use in the Registration Statement, Prospectus or
               Offering Materials.

          (ii) The Fund (i) has been duly incorporated and is validly existing
               as a corporation in good standing under the laws of the State
               of Maryland, (ii) has full corporate power and authority to
               own, lease and operate its properties and conduct its business
               as described in the Registration Statement and the Prospectus,
               (iii) currently maintains all necessary licenses, permits,
               consents, orders, approvals, and other authorizations
               (collectively, the "Licenses and Permits") necessary to carry
               on its business as contemplated in the Prospectus, (iv) is duly
               qualified to


                                      2
<PAGE>


               do business as a foreign corporation, (v) has made all
               necessary filings required under any federal, state, local or
               foreign law, regulation or rule, and (vi) is in good standing
               in each jurisdiction wherein it owns or leases real property or
               in which the conduct of its business requires such
               qualification, except where the failure to obtain or maintain
               such Licenses and Permits, to be qualified as a foreign
               corporation, to make such filings or be in good standing would
               not have a material adverse effect upon the Fund's business,
               properties, management, prospects, financial condition or
               results of operations. The Fund has no subsidiaries.

         (iii) The Fund is duly registered with the Commission under the
               Investment Company Act as a closed-end, non-diversified
               management investment company, no order of suspension or
               revocation of such registration has been issued or proceedings
               therefor initiated or, to the best of the Fund's and the
               Manager's knowledge, threatened by the Commission, all required
               action has been taken by the Fund under the Securities Act and
               the Investment Company Act to make the public offering and to
               consummate the issuance of the Rights and the issuance and sale
               of the Shares by the Fund upon exercise of the Rights, and the
               provisions of the Fund's articles of incorporation and by-laws
               comply as to form in all material respects with the
               requirements of the Investment Company Act and the Investment
               Company Act Rules and Regulations.

          (iv) Ernst & Young LLP, the independent registered public accounting
               firm that certified the financial statements of the Fund set
               forth or incorporated by reference in the Registration
               Statement and the Prospectus, is an independent registered
               public accounting firm as required by the Investment Company
               Act, the Securities Act, the Rules and Regulations and by the
               rules of the Public Company Accounting Oversight Board.

          (v)  The financial statements of the Fund, together with the related
               notes and schedules thereto, set forth or incorporated by
               reference in the Registration Statement and the Prospectus
               present fairly in all material respects the financial condition
               of the Fund as of the dates or for the periods indicated in
               conformity with U.S. generally accepted accounting principles
               applied on a consistent basis; and the information set forth in
               the Prospectus under the headings "Fund expenses" and
               "Financial highlights" presents fairly in all material respects
               the information stated therein.

          (vi) The Fund has an authorized and outstanding capitalization as
               set forth in the Prospectus; the issued and outstanding Common
               Shares have been duly authorized and are validly issued, fully
               paid and non-assessable and conform in all material respects to
               the description thereof in the Prospectus under the heading
               "Capital stock"; the Rights have been duly authorized by all
               requisite action on the part of the Fund for issuance pursuant
               to the Offer; the certificates for the Shares are in due and
               proper form; the Shares have been duly authorized by all
               requisite action on the part of the Fund for issuance and sale
               pursuant to the terms of the Offer and, when issued and
               delivered by the Fund pursuant to the terms of the Offer
               against payment of the consideration set forth in the
               Prospectus, will be validly issued, fully paid and
               non-assessable; the Shares and the Rights conform in all
               material respects to all statements relating thereto contained
               in the Registration Statement, the Prospectus and the other
               Offering


                                      3
<PAGE>


               Materials; and the issuance of each of the Rights and the
               Shares has been done in compliance with all applicable federal
               and state securities laws and is not subject to any preemptive
               rights.

         (vii) Except as set forth in the Prospectus, subsequent to the
               respective dates as of which information is given in the
               Registration Statement and the Prospectus, (A) the Fund has not
               incurred any liabilities or obligations, direct or contingent,
               or entered into any transactions, other than in the ordinary
               course of business, that are material to the Fund and (B) there
               has not been any material change in the Common Shares or
               long-term debt of the Fund, or any material adverse change, or,
               to the Fund's or the Manager's knowledge, any development
               involving a prospective material adverse change, in the
               condition (financial or other), business, prospects, net worth
               or results of operations of the Fund, (C) there has been no
               dividend or distribution declared in respect of the Fund's
               capital stock and (D) the Fund has not incurred any long-term
               debt.

        (viii) Each of this agreement (the "Agreement"); the Subscription
               Agency Agreement (the "Subscription Agency Agreement") dated as
               of November [  ], 2005 between the Fund and EquiServe Trust
               Company, N.A. (the "Subscription Agent"); the Information Agent
               Letter Agreement (the "Information Agent Agreement") dated as
               of November 7, 2005 between the Fund and The Altman Group, Inc.
               (the "Information Agent"); the Management Agreement dated as of
               November 13, 2001 between the Fund and the Manager (the
               "Management Agreement"); the Custodian Agreement dated as of
               April 26, 2002 between the Fund and Brown Brothers Harriman &
               Co. (the "Custodian Agreement"); and the Registrar, Transfer
               Agency and Service Agreement dated as of [    ], 200[ ] between
               the Fund and EquiServe Trust Company, N.A. (the "Transfer
               Agency Agreement") (collectively, all the foregoing are
               referred to herein as the "Fund Agreements"), has been duly
               authorized, executed and delivered by the Fund; each of the
               Fund Agreements complies with all applicable provisions of the
               Investment Company Act, the Investment Advisers Act of 1940, as
               amended (the "Advisers Act"), and the rules and regulations
               under such Acts; and, assuming due authorization, execution and
               delivery by the other parties thereto, each of the Fund
               Agreements constitutes a legal, valid, binding and enforceable
               obligation of the Fund, subject to the qualification that the
               enforceability of the Fund's obligations thereunder may be
               limited by U.S. bankruptcy, insolvency, reorganization,
               moratorium and similar laws of general applicability relating
               to or affecting creditors' rights and to general principles of
               equity (regardless of whether enforceability is considered in a
               proceeding in equity or at law), except as enforcement of
               rights to indemnity and contribution hereunder may be limited
               by federal or state securities laws or principles of public
               policy.

          (ix) Neither the issuance of the Rights, nor the issuance and sale
               of the Shares upon the exercise of the Rights, nor the
               execution, delivery, performance and consummation by the Fund
               of any other of the transactions contemplated in this
               Agreement, or to the extent applicable to the Rights or the
               Shares in the Fund Agreements, nor the consummation of the
               transactions contemplated in this Agreement or in the
               Registration Statement nor the fulfillment of the terms thereof
               will conflict with or violate the articles of incorporation,
               by-laws or similar organizational documents of the Fund, or
               conflict with, result in a breach or violation of, or
               constitute a default or an event of default under, or result in
               the


                                      4
<PAGE>


               creation or imposition of any lien, charge or encumbrance upon
               any properties or assets of the Fund under the charter, by-laws
               or similar organizational documents of the Fund, or the terms
               and provisions of any agreement, indenture, mortgage, loan
               agreement, note, insurance or surety agreement, lease or other
               instrument to which the Fund is a party or by which it may be
               bound or to which any of the property or assets of the Fund is
               subject, nor will such action by the Fund result in any
               violation of any order, law, rule or regulation of any court or
               governmental agency or body having jurisdiction over the Fund
               or any of its properties.

          (x)  Except as set forth in the Registration Statement, there is no
               pending or, to the Fund's or the Manager's knowledge,
               threatened action, suit, claim, investigation or proceeding
               affecting the Fund or to which the Fund is a party before or by
               any court or governmental agency, authority or body or any
               arbitrator which would result in any material adverse change in
               the condition (financial or other), business prospects, net
               worth or operations of the Fund, or which would materially and
               adversely affect the properties or assets thereof of a
               character required to be disclosed in the Registration
               Statement or the Prospectus or the consummation of the
               transactions contemplated hereby.

          (xi) There are no franchises, contracts or other documents of the
               Fund required to be described in the Registration Statement or
               the Prospectus, or to be filed or incorporated by reference as
               exhibits to the Registration Statement which are not described
               or filed or incorporated by reference therein as required by
               the Securities Act, the Investment Company Act or the Rules and
               Regulations.

         (xii) No consent, approval, authorization, notification or order of,
               or filing with, any federal, state, local or foreign court or
               governmental or regulatory agency, commission, board, authority
               or body or with any self-regulatory organization or other
               non-governmental regulatory authority is required for the
               consummation by the Fund of the transactions contemplated by
               the Fund Agreements or the Registration Statement, except such
               as have been obtained, or if the Registration Statement filed
               with respect to the Shares is not effective under the
               Securities Act as of the time of execution hereof, such as may
               be required (and shall be obtained prior to commencement of the
               Offer) under the Investment Company Act, the Securities Act and
               the Securities Exchange Act of 1934, as amended (the "Exchange
               Act").

        (xiii) The Common Shares have been duly listed on the New York Stock
               Exchange, Inc. and prior to their issuance the Shares and the
               Rights will have been duly approved for listing, subject to
               official notice of issuance, on the New York Stock Exchange,
               Inc.

         (xiv) The Fund (A) has not taken, directly or indirectly, any action
               designed to cause or to result in, or that has constituted or
               which might reasonably be expected to constitute, the
               stabilization or manipulation of the price of any security of
               the Fund to facilitate the issuance of the Rights or the sale
               or resale of the Rights and the Shares, (B) has not since the
               filing of the Registration Statement sold, bid for or
               purchased, or paid anyone any compensation for soliciting
               purchases of, Common Shares of the Fund (except for the
               solicitation of exercises of the Rights pursuant to this
               Agreement) and (C) will not, until the later of the expiration
               of the Rights or the completion of the distribution (within the
               meaning of the anti-


                                      5
<PAGE>


               manipulation rules under the Exchange Act) of the Shares, sell,
               bid for or purchase, pay or agree to pay to any person any
               compensation for soliciting another to purchase any other
               securities of the Fund (except for the solicitation of
               exercises of the Rights pursuant to this Agreement); provided
               that any action in connection with the Fund's Dividend
               Reinvestment Plan will not be deemed to be within the terms of
               this Section 1.a.xiv.

          (xv) The Fund has complied in all previous tax years and intends to
               direct the investment of the proceeds of the Offer described in
               the Registration Statement and the Prospectus in such a manner
               as to continue to comply, with the requirements of Subchapter M
               of the Internal Revenue Code of 1986, as amended ("Subchapter M
               of the Code"), and is qualified and intends to continue to
               qualify as a regulated investment company under Subchapter M of
               the Code.

         (xvi) The Fund has complied in the last five years, and intends to
               direct the investment of the proceeds of the Offer described in
               the Registration Statement and the Prospectus in such a manner
               as to continue to comply, with the asset coverage requirements
               of the Investment Company Act.

        (xvii) The Fund has (a) appointed a Chief Compliance Officer and (b)
               adopted and implemented written policies and procedures which
               the Board of Directors of the Fund has determined are
               reasonably designed to prevent violations of the federal
               securities laws in a manner required by and consistent with
               Rule 38a-1 of the Rules and Regulations under the Investment
               Company Act and is in compliance in all material respects with
               such Rule.

       (xviii) The Prospectus and the Offering Materials complied and
               comply with the requirements of the Securities Act and the
               Securities Act Rules and Regulations. Other than the Prospectus
               and the Offering Materials, the Fund has not, without the
               written permission of the Dealer Manager, used, approved,
               prepared or authorized any letters to beneficial owners of the
               shares of Common Stock of the Fund, forms used to exercise
               rights, any letters from the Fund to securities dealers,
               commercial banks and other nominees or any newspaper
               announcements or other offering materials and information in
               connection with the Offer; provided, however, that any use of
               transmittal documentation and subscription documentation
               independently prepared by the Dealer Manager, broker-dealers,
               trustees, nominees or other financial intermediaries shall not
               cause a violation of this section (xviii).

         (xix) The Fund maintains a system of internal accounting controls
               sufficient to provide reasonable assurance that (A)
               transactions are executed in accordance with management's
               general or specific authorization; (B) transactions are
               recorded as necessary to permit preparation of financial
               statements in conformity with U.S. generally accepted
               accounting principles and to maintain accountability for
               assets; (C) access to assets is permitted only in accordance
               with management's general or specific authorization; and (D)
               the recorded accountability for assets is compared with
               existing assets at reasonable intervals and appropriate action
               is taken with respect to any differences.

          (xx) The Fund has established and maintains disclosure controls and
               procedures; such disclosure controls and procedures (as such
               term is defined in Rule 30a-3 under


                                      6
<PAGE>


               the Investment Company Act) are designed to ensure that
               material information relating to the Fund is made known to the
               Fund's Chief Executive Officer and its Chief Financial Officer
               by others within the Fund, and such disclosure controls and
               procedures are effective to perform the functions for which
               they were established; the Fund's independent registered public
               accounting firm and the Audit Committee of the Board of
               Directors of the Fund have been advised of: (A) any significant
               deficiencies in the design or operation of internal controls
               over financial reporting which could adversely affect the
               Fund's ability to record, process, summarize, and report
               financial data; and (B) any fraud, whether or not material,
               that involves management or other employees who have a role in
               the Fund's internal controls over financial reporting; any
               material weaknesses in the Fund's internal controls over
               financial reporting have been identified for the Fund's
               independent registered public accounting firm; and since the
               date of the most recent evaluation of such disclosure controls
               and procedures, there have been no significant changes in
               internal controls over financial reporting or in other factors
               that could materially affect internal controls over financial
               reporting, including any corrective actions with regard to
               significant deficiencies and material weaknesses.

         (xxi) The Fund and its officers and directors, in their capacities
               as such, are in compliance in all material respects with the
               applicable provisions of the Sarbanes-Oxley Act of 2002 and the
               rules and regulations promulgated thereunder.

     (b)  The Manager represents and warrants to, and agrees with, the Dealer
          Manager as of the date hereof, as of the Representation Date and as
          of the Expiration Date that:

          (i)  Each of the Manager and Nomura Asset Management Co., Ltd., a
               Japanese corporation (the "Investment Adviser"), and together
               with the Manager, the "Advisers") has been duly incorporated
               and is validly existing as a corporation under the laws of the
               State of New York, with respect to the Manager, and as a
               corporation under the laws of Japan, with respect to the
               Investment Adviser, has full power and authority (corporate and
               other) to own its properties and conduct its business as
               described in the Registration Statement and the Prospectus,
               currently maintains all Licenses and Permits material to the
               conduct of its business and necessary to enable such Adviser to
               continue to supervise investments in securities as contemplated
               in the Prospectus.

          (ii) Each Adviser is duly registered as an investment adviser under
               the Advisers Act, and is not prohibited by the Advisers Act or
               the Investment Company Act, or the rules and regulations under
               such Acts, from acting as investment adviser for the Fund as
               contemplated in the Prospectus and the Management Agreement and
               the Investment Advisory Agreement, to which it is a party.

         (iii) Each of this Agreement, the Management Agreement and the
               Investment Advisory Agreement dated as of November 13, 2001
               between the Manager and the Investment Adviser (the "Investment
               Advisory Agreement" and, together with this Agreement and the
               Management Agreement, the "Adviser Agreements") has been duly
               authorized, executed and delivered by each Adviser that is a
               party to such Agreement, and complies with all applicable
               provisions of the Investment Company Act, the Advisers Act and
               the rules and regulations


                                      7
<PAGE>


               under such Acts, and is, assuming due authorization, execution
               and delivery by the other parties thereto, a legal, valid,
               binding and enforceable obligation of each Adviser that is a
               party to such Agreement, subject to the qualification that the
               enforceability of the Manager's and/or Investment Adviser's
               obligations thereunder may be limited by U.S. bankruptcy,
               insolvency, reorganization, moratorium and similar laws of
               general applicability relating to or affecting creditors'
               rights and to general principles of equity (regardless of
               whether enforceability is considered in a proceeding in equity
               or at law), except as enforcement of rights to indemnity and
               contribution hereunder may be limited by federal or state
               securities laws or principles of public policy.

          (iv) Neither the execution, delivery, performance and consummation
               by an Adviser of its obligations under this Agreement or any
               other Adviser Agreement, to which it is a party, nor the
               consummation of the transactions contemplated therein or in the
               Registration Statement nor the fulfillment of the terms thereof
               will conflict with or violate the articles of incorporation,
               by-laws or similar organizational documents of such Adviser, or
               conflict with, result in a breach or violation of, or
               constitute a default or an event of default under, or result in
               the creation or imposition of any lien, charge or encumbrance
               upon any properties or assets of such Adviser under the
               articles of incorporation, bylaws or similar organizational
               document, the terms and provisions of any indenture, mortgage,
               loan agreement, note, insurance or surety agreement, or any
               other material lease, instrument or agreement to which such
               Adviser is a party or by which it may be bound or to which any
               of the property or assets of such Adviser is subject, nor will
               such action result in any violation of any order, law, rule or
               regulation of any court or governmental agency or body having
               jurisdiction over such Adviser or any of its properties.

          (v)  Except as set forth in the Registration Statement, there is no
               pending or, to the best of the Manager's knowledge, threatened
               action, suit or proceeding affecting either Adviser or to which
               either Adviser is a party before or by any court or
               governmental agency, authority or body or any arbitrator which
               would result in any material adverse change in either Adviser's
               condition (financial or other), business prospects, net worth
               or operations, or which would materially and adversely affect
               the properties or assets thereof of a character required to be
               disclosed in the Registration Statement or Prospectus.

          (vi) No consent, approval, authorization, notification or order of,
               or filing with, any court or governmental agency or body is
               required for the consummation by an Adviser of the transactions
               contemplated by this Agreement or any other Adviser Agreement,
               to which such Adviser is a party, except where the failure to
               obtain such consent, approval, authorization, notification or
               order, or make such filing would have a material adverse effect
               on such Adviser's business, properties, management, prospects,
               financial condition or results of operations.

         (vii) Each Adviser (A) has not taken, directly or indirectly, any
               action designed to cause or to result in, or that has
               constituted or which might reasonably be expected to
               constitute, the stabilization or manipulation of the price of
               any security of the Fund to facilitate the issuance of the
               Rights or the sale or resale of the Rights and the Shares, (B)
               has not since the filing of the Registration Statement sold,
               bid for or purchased, or paid anyone any compensation for


                                      8
<PAGE>


               soliciting purchases of, Common Shares of the Fund (except for
               the solicitation of exercises of the Rights pursuant to this
               Agreement) and (C) will not, until the later of the expiration
               of the Rights or the completion of the distribution (within the
               meaning of the anti-manipulation rules under the Exchange Act)
               of the Shares, sell, bid for or purchase, pay or agree to pay
               any person any compensation for soliciting another to purchase
               any other securities of the Fund (except for the solicitation
               of exercises of the Rights pursuant to this Agreement);
               provided that any action in connection with the Fund's Dividend
               Reinvestment Plan will not be deemed to be within the terms of
               this Section 1.b.vii.

        (viii) The Manager intends to direct the Investment Adviser with
               respect to the investment of the proceeds of the Offer
               described in the Registration Statement and the Prospectus in
               such a manner as to cause the Fund to comply with the
               requirements of Subchapter M of the Code. The Investment
               Adviser intends to direct the investment of the proceeds of the
               Offer described in the Registration Statement and the
               Prospectus in such a manner as to cause the Fund to comply with
               the requirements of Subchapter M of the Code.

     (c)  Any certificate required by this Agreement that is signed by any
          officer of the Fund or the Manager and delivered to the Dealer
          Manager or counsel for the Dealer Manager shall be deemed a
          representation and warranty by the Fund or the Manager, as the case
          may be, to the Dealer Manager, as to the matters covered thereby.

2.   Agreement to Act as Dealer Manager.
     -----------------------------------

     (a)  On the basis of the representations and warranties contained herein,
          and subject to the terms and conditions of the Offer:

          (i)  The Fund hereby appoints the Dealer Manager to solicit the
               exercise of Rights and authorizes the Dealer Manager to sell
               Shares purchased by the Dealer Manager from the Fund through
               the exercise of Rights as described herein in accordance with
               the Securities Act, the Investment Company Act and the Exchange
               Act; the Fund hereby authorizes the Dealer Manager to form and
               manage a group of selling broker-dealers (each a "Selling Group
               Member" and collectively the "Selling Group") that enter into a
               Selling Group Agreement with the Dealer Manager in the form
               attached hereto as Exhibit A to solicit the exercise of Rights
               and to sell Shares purchased by the Selling Group Member from
               the Dealer Manager as described herein; and the Fund hereby
               authorizes other soliciting broker-dealers (each a "Soliciting
               Dealer" and collectively the "Soliciting Dealers") that enter
               into a Soliciting Dealer Agreement with the Dealer Manager in
               the form attached hereto as Exhibit B to solicit the exercise
               of Rights. The Dealer Manager hereby agrees to solicit the
               exercise of Rights in accordance with its customary practice
               subject to the terms and conditions of this Agreement, the
               procedures described in the Registration Statement, the
               Prospectus and, where applicable, the terms and conditions of
               such Selling Group Agreement or Soliciting Dealer Agreement;
               and the Dealer Manager hereby agrees to form and manage the
               Selling Group to solicit the exercise of Rights and to sell
               Shares to the Selling Group purchased by the Dealer Manager
               from the Fund through the exercise of Rights as described
               herein in accordance with its customary practice subject to the
               terms and conditions of this Agreement, the


                                      9
<PAGE>


               procedures described in the Registration Statement, the
               Prospectus and, where applicable, the terms and conditions of
               the Selling Group Agreement.

          (ii) The Fund hereby authorizes the Dealer Manager to buy and
               exercise Rights, including unexercised Rights delivered to the
               Subscription Agent for resale and Rights of Record Date
               Shareholders whose record addresses are outside the United
               States held by the Subscription Agent for which no instructions
               are received, on the terms and conditions set forth in such
               Prospectus, and to sell Shares to the public or to Selling
               Group Members at the offering price set by the Dealer Manager
               from time to time. Sales of Shares by the Dealer Manager or
               Selling Group Members shall not be at a price higher than the
               offering price set by the Dealer Manager from time to time.

     (b)  To the extent permitted by applicable law, the Fund agrees to
          furnish, or cause to be furnished, to the Dealer Manager, lists, or
          copies of those lists, showing the names and addresses of, and
          number of Common Shares held by, Record Date Stockholders as of the
          Record Date, and the Dealer Manager agrees to use such information
          only in connection with the Offer, and not to furnish the
          information to any other person except for securities brokers and
          dealers that have been requested by the Dealer Manager to solicit
          exercises of Rights.

     (c)  The Dealer Manager agrees to provide to the Fund, in addition to the
          services described in paragraph 2(a), financial advisory and
          marketing services in connection with the Offer. No advisory fee,
          other than the fees provided for in Section 3 of this Agreement and
          the reimbursement of the Dealer Manager's out-of-pocket expenses as
          described in Section 5 of this Agreement, will be payable by the
          Fund, or any other party hereto, to the Dealer Manager in connection
          with the financial advisory and marketing services provided by the
          Dealer Manager pursuant to this Section 2(c).

     (d)  The Fund and the Dealer Manager agree that the Dealer Manager is an
          independent contractor with respect to the solicitation of the
          exercise of the Rights, and that the Dealer Manager's performance of
          financial advisory and marketing services for the Fund is pursuant
          to a contractual relationship created solely by this Agreement
          entered into on an arm's length basis, and in no event do the
          parties intend that the Dealer Manager act or be responsible as a
          fiduciary to the Fund, its management, stockholders, creditors or
          any other person, including Selling Group Members and Soliciting
          Dealers, in connection with any activity that the Dealer Manager may
          undertake or has undertaken in furtherance of its engagement
          pursuant to this Agreement, either before or after the date hereof.
          The Dealer Manager, Selling Group Members and Soliciting Dealers
          hereby expressly disclaim any fiduciary or similar obligations to
          the Fund, either in connection with the transactions contemplated by
          this Agreement or any matters leading up to such transactions, and
          the Fund hereby confirms its understanding and agreement to that
          effect. The Fund, Dealer Manager, Selling Group Members and
          Soliciting Dealers agree that they are each responsible for making
          their own independent judgments with respect to any such
          transactions, and that any opinions or views expressed by the Dealer
          Manager, Selling Group Members or Soliciting Dealers to the Fund
          regarding such transactions, including but not limited to any
          opinions or views with respect to the subscription price or market
          for the Fund's Shares, do not constitute advice or recommendations
          to the Fund. The Fund hereby waives and releases, to the fullest
          extent permitted by law, any claims that the Fund may have against
          the Dealer Manager, Selling Group Members and Soliciting Dealers
          with respect to any breach or alleged breach of


                                      10
<PAGE>


          any fiduciary or similar duty to the Fund in connection with the
          transactions contemplated by this Agreement or any matters leading
          up to such transactions; provided that this release shall not
          protect or purport to protect the Dealer Manager, Selling Group
          Members and Soliciting Dealers against any liability to which they
          would otherwise be subject by reason of willful misfeasance, bad
          faith or gross negligence, in the performance of their duties, or by
          reason of their reckless disregard of their obligations and duties
          under this Agreement.

     (e)  In rendering the services contemplated by this Agreement, the Dealer
          Manager will not be subject to any liability to the Fund or the
          Manager or any of their affiliates, for any act or omission on the
          part of any soliciting broker or dealer (except with respect to the
          Dealer Manager acting in such capacity) or any other person, and the
          Dealer Manager will not be liable for acts or omissions in
          performing its obligations under this Agreement, except for any
          losses, claims, damages, liabilities and expenses that are finally
          judicially determined to have resulted primarily from the bad faith,
          willful misconduct or gross negligence or reckless disregard of the
          Dealer Manager or by reason of the reckless disregard of the
          obligations and duties of the Dealer Manager under this Agreement.

3.   Dealer Manager Fees. In full payment for the financial advisory,
     marketing and soliciting services rendered and to be rendered hereunder
     by the Dealer Manager, the Fund agrees to pay the Dealer Manager a fee
     (the "Dealer Manager Fee") equal to 3.75% of the aggregate Subscription
     Price for the Shares issued pursuant to the exercise of Rights and the
     Over-Subscription Privilege. In full payment for the soliciting efforts
     to be rendered, the Dealer Manager agrees to reallow selling fees (the
     "Selling Fees") to Selling Group Members equal to 2.50% of the
     Subscription Price per Share for each Share issued pursuant to either (a)
     the exercise of Rights and the Over-Subscription Privilege where such
     Selling Group Member is so designated on the subscription form or (b) the
     purchase for resale from the Dealer Manager in accordance with the
     Selling Group Agreement. In full payment for the soliciting efforts to be
     rendered, the Dealer Manager agrees to reallow soliciting fees (the
     "Soliciting Fees") to Soliciting Dealers equal to 0.50% of the
     Subscription Price per Share for each Share issued pursuant to the
     exercise of Rights and the Over-Subscription Privilege where such
     Soliciting Dealer is so designated on the subscription form, subject to a
     maximum fee based on the number of Common Shares held by such Soliciting
     Dealer through The Depository Trust Company ("DTC") on the Record Date.
     The Dealer Manager agrees to pay the Selling Fees or Soliciting Fees, as
     the case may be, to the broker-dealer designated on the applicable
     portion of the form used by the holder to exercise Rights and the
     Over-Subscription Privilege, and if no broker-dealer is so designated or
     a broker-dealer is otherwise not entitled to receive compensation
     pursuant to the terms of the Selling Group Agreement or Soliciting Dealer
     Agreement, then the Dealer Manager shall retain such Selling Fee or
     Solicitation Fee for Shares issued pursuant to the exercise of Rights and
     the Over-Subscription Privilege. Payment to the Dealer Manager by the
     Fund will be in the form of a wire transfer of same day funds to an
     account or accounts identified by the Dealer Manager. Such payment will
     be made on each date on which the Fund issues Shares after the Expiration
     Date. Payment to a Selling Group Member or Soliciting Dealer will be made
     by the Dealer Manager directly to such Selling Group Member or Soliciting
     Dealer by check to an address identified by such broker-dealer. Such
     payments shall be made on or before the tenth business day following the
     day the Fund issues Shares after the Expiration Date.


                                      11
<PAGE>


4.   Other Agreements.
     -----------------

     (a)  The Fund covenants with the Dealer Manager as follows:

          (i)  The Fund will use its best efforts to cause the Registration
               Statement to become effective and maintain its effectiveness
               under the Securities Act, and will advise the Dealer Manager
               promptly as to the time at which the Registration Statement and
               any amendments thereto (including any post-effective amendment)
               becomes so effective.

          (ii) The Fund will notify, and confirm the notice in writing to, the
               Dealer Manager immediately (A) of the effectiveness of the
               Registration Statement and any amendment thereto (including any
               post-effective amendment), (B) of the receipt of any comments
               from the Commission, (C) of any request by the Commission for
               any amendment to the Registration Statement or any amendment or
               supplement to the Prospectus or for additional information, (D)
               of the issuance by the Commission of any stop order suspending
               the effectiveness of the Registration Statement or the
               initiation of any proceedings for that purpose and (E) of the
               receipt of any written notice regarding the suspension of the
               qualification of the Shares or the Rights for offering or sale
               in any jurisdiction. The Fund will make every reasonable effort
               to prevent the issuance of any stop order described in
               subsection (D) hereunder and, if any such stop order is issued,
               to obtain the lifting thereof at the earliest possible moment.

         (iii) The Fund will give the Dealer Manager notice of its intention
               to file any amendment to the Registration Statement (including
               any post-effective amendment) or any amendment or supplement to
               the Prospectus (including any revised prospectus which the Fund
               proposes for use by the Dealer Manager in connection with the
               Offer, which differs from the prospectus on file at the
               Commission at the time the Registration Statement becomes
               effective, whether or not such revised prospectus is required
               to be filed pursuant to Rule 497(c), (e) or (h) of the Rules
               and Regulations), whether pursuant to the Investment Company
               Act, the Securities Act, or otherwise, and will furnish the
               Dealer Manager with copies of any such amendment or supplement
               a reasonable amount of time prior to such proposed filing or
               use, as the case may be, and will not file any such amendment
               or supplement to which the Dealer Manager or counsel for the
               Dealer Manager shall reasonably object.

          (iv) The Fund will, without charge, deliver to the Dealer Manager,
               as soon as practicable, the number of copies (one of which is
               manually executed) of the Registration Statement as originally
               filed and of each amendment thereto as it may reasonably
               request, in each case with the exhibits filed therewith.

          (v)  The Fund will, without charge, furnish to the Dealer Manager,
               from time to time during the period when the Prospectus is
               required to be delivered under the Securities Act, such number
               of copies of the Prospectus (as amended or supplemented) as the
               Dealer Manager may reasonably request for the purposes
               contemplated by the Securities Act or the Securities Act Rules
               and Regulations.

          (vi) If any event shall occur as a result of which it is necessary,
               in the reasonable opinion of counsel for the Dealer Manager, to
               amend or supplement the


                                      12
<PAGE>


               Registration Statement or the Prospectus (or the other Offering
               Materials) to make the Prospectus (or such other Offering
               Materials) not contain an untrue statement of material fact or
               omit to state a material fact required to be stated therein or
               necessary in order to make the statements therein not
               misleading in the light of the circumstances existing at the
               time it is delivered to a Record Date Stockholder, the Fund
               will forthwith amend or supplement the Prospectus by preparing
               and filing with the Commission (and furnishing to the Dealer
               Manager a reasonable number of copies of) an amendment or
               amendments of the Registration Statement or an amendment or
               amendments of or a supplement or supplements to the Prospectus
               (in form and substance reasonably satisfactory to counsel for
               the Dealer Manager), at the Fund's expense, which will amend or
               supplement the Registration Statement or the Prospectus (or
               otherwise will amend or supplement such other Offering
               Materials) so that the Prospectus (or such other Offering
               Materials) will not contain an untrue statement of a material
               fact or omit to state a material fact required to be stated
               therein or necessary in order to make the statements therein,
               in the light of the circumstances existing at the time the
               Prospectus (or such other Offering Materials) is delivered to a
               Record Date Stockholder, not misleading.

         (vii) The Fund will endeavor, in cooperation with the Dealer Manager
               and its counsel, to qualify the Rights and the Shares for
               offering and sale under the applicable securities laws of such
               states and other jurisdictions of the United States as the
               Dealer Manager may designate and maintain such qualifications
               in effect for the duration of the Offer; provided, however,
               that the Fund will not be obligated to file any general consent
               to service of process, or to qualify as a foreign corporation
               or as a dealer in securities in any jurisdiction in which it is
               not now so qualified. The Fund will file such statements and
               reports as may be required by the laws of each jurisdiction in
               which the Rights and the Shares have been qualified as above
               provided.

        (viii) The Fund will make generally available to its security
               holders as soon as practicable, but no later than April 30,
               2007, an earnings statement (which need not be audited) (in
               form complying with the provisions of Rule 158 of the
               Securities Act Rules and Regulations) covering a twelve-month
               period beginning not later than the first day of the Fund's
               fiscal semi-annual period next following the "effective" date
               (as defined in said Rule 158) of the Registration Statement.

          (ix) For a period of 180 days from the date of this Agreement, the
               Fund will not, without the prior consent of the Dealer Manager,
               offer or sell, or enter into any agreement to sell, any equity
               or equity related securities of the Fund or securities
               convertible into such securities, other than the Rights and the
               Shares and the Common Shares issued in reinvestment of
               dividends or distributions.

          (x)  The Fund will use the net proceeds from the Offer to acquire
               portfolio securities as set forth under "Use of proceeds" in
               the Prospectus.

          (xi) The Fund will use its best efforts to cause the Rights and the
               Shares to be duly authorized for listing by the New York Stock
               Exchange, Inc. prior to the time the Rights and the Shares are
               issued, respectively.


                                      13
<PAGE>


         (xii) The Fund will use its best efforts to maintain its
               qualification as a regulated investment company under
               Subchapter M of the Code.

        (xiii) The Fund will apply the net proceeds from the Offer in such a
               manner as to continue to comply with the requirements of the
               Prospectus and the Investment Company Act.

         (xiv) The Fund will advise or cause the Subscription Agent (A) to
               advise the Dealer Manager and, only where specifically noted,
               each Selling Group Member who specifically requests, from day
               to day during the period of, and promptly after the termination
               of, the Offer, as to the names and addresses of all Record Date
               Stockholders exercising Rights, the total number of Rights
               exercised by each Record Date Stockholder during the
               immediately preceding day, indicating the total number of
               Rights verified to be in proper form for exercise, rejected for
               exercise and being processed and, for the Dealer Manager and
               each Selling Group Member, the number of Rights exercised on
               subscription certificates indicating the Dealer Manager or such
               Selling Group Member, as the case may be, as the broker-dealer
               with respect to such exercise, and as to such other information
               as the Dealer Manager may reasonably request; and will notify
               the Dealer Manager and each Selling Group Member, not later
               than 5:00 P.M., New York City time, on the first business day
               following the Expiration Date, of the total number of Rights
               exercised and Shares related thereto, the total number of
               Rights verified to be in proper form for exercise, rejected for
               exercise and being processed and, for the Dealer Manager and
               each Selling Group Member, the number of Rights exercised on
               subscription certificates indicating the Dealer Manager or such
               Selling Group Member, as the case may be, as the broker-dealer
               with respect to such exercise, and as to such other information
               as the Dealer Manager may reasonably request; (B) to sell any
               Rights received for resale from Record Date Stockholders
               exclusively to or through the Dealer Manager, which may, at its
               election, purchase such Rights as principal or act as agent for
               the resale thereof; and (C) to issue Shares upon the Dealer
               Manager's exercise of Rights no later than the close of
               business on the business day following the day that full
               payment for such Shares has been received by the Subscription
               Agent.

     (b)  Neither the Fund nor the Manager will take, directly or indirectly,
          any action designed to cause or to result in, or that has
          constituted or which might reasonably be expected to constitute, the
          stabilization or manipulation of the price of any security of the
          Fund to facilitate the issuance of the Rights or the sale or resale
          of the Rights or the Shares; provided that any action in connection
          with the Fund's Dividend Reinvestment Plan will not be deemed to be
          within the meaning of this Section 4.b.

     (c)  Except as required by applicable law, the use of any reference to
          the Dealer Manager in any Offering Materials or any other document
          or communication prepared, approved or authorized by the Fund or the
          Manager in connection with the Offer is subject to the prior
          approval of the Dealer Manager, provided that if such reference to
          the Dealer Manager is required by applicable law, the Fund and the
          Manager agree to notify the Dealer Manager within a reasonable time
          prior to such use but the Fund and the Manager are nonetheless
          permitted to use such reference.

5.   Payment of Expenses.
     --------------------


                                      14
<PAGE>


     (a)  The Fund will pay all expenses incident to the performance of its
          obligations under this Agreement and in connection with the Offer,
          including, but not limited to, (i) expenses relating to the printing
          and filing of the Registration Statement as originally filed and of
          each amendment thereto, (ii) expenses relating to the preparation,
          issuance and delivery of the certificates for the Shares and
          subscription certificates relating to the Rights, (iii) the fees and
          disbursements of the Fund's counsel (including the fees and
          disbursements of local counsel) and accountants, (iv) expenses
          relating to the qualification of the Rights and the Shares under
          securities laws in accordance with the provisions of Section
          4.a.vii. of this Agreement, including filing fees, (v) expenses
          relating to the printing or other production and delivery to the
          Dealer Manager of copies of the Registration Statement as originally
          filed and of each amendment thereto and of the Prospectus and any
          amendments or supplements thereto, (vi) the fees and expenses
          incurred with respect to filing with the NASD, Inc., including the
          fees and disbursements of the Dealer Manager's counsel with respect
          thereto, (vii) the fees and expenses incurred in connection with the
          listing of the Rights and the Shares on the New York Stock Exchange,
          Inc., (viii) expenses relating to the printing or other production,
          mailing and delivery expenses incurred in connection with Offering
          Materials, including all reasonable out-of-pocket fees and expenses,
          if any, incurred by the Dealer Manager, Selling Group Members,
          Soliciting Dealers and other brokers, dealers and financial
          institutions in connection with their customary mailing and handling
          of materials related to the Offer to their customers, (ix) the fees
          and expenses incurred with respect to the Subscription Agent and the
          Information Agent and (x) all other fees and expenses (excluding the
          announcement, if any, of the Offer in The Wall Street Journal)
          incurred in connection with or relating to the Offer.

     (b)  In addition to any fees that may be payable to the Dealer Manager
          under this Agreement, the Fund agrees to reimburse the Dealer
          Manager upon request made from time to time for a portion of its
          reasonable expenses incurred in connection with its activities under
          this Agreement, including the reasonable fees and disbursements of
          its legal counsel (excluding fees and expenses pursuant to Section
          5.a.iv which are to be paid directly by the Fund), upon proper
          presentation of documentation therefor, in an amount not to exceed
          $100,000.

     (c)  If this Agreement is terminated by the Dealer Manager in accordance
          with the provisions of Section 6 or Section 9.a., the Fund agrees to
          reimburse the Dealer Manager for all of its reasonable out-of-pocket
          expenses incurred in connection with its performance hereunder,
          including the reasonable fees and disbursements of counsel for the
          Dealer Manager. In the event the transactions contemplated hereunder
          are not consummated, the Fund agrees to pay all of the costs and
          expenses set forth in paragraphs 5.a. and 5.b. which the Fund would
          have paid if such transactions had been consummated.

6.   Conditions of the Dealer Manager's Obligations. The obligations of the
     Dealer Manager hereunder (including any obligation to pay for Shares
     issuable upon exercise of Rights by the Dealer Manager) are subject to
     the accuracy of the respective representations and warranties of the Fund
     and the Manager contained herein, to the performance by the Fund and the
     Manager of their respective obligations hereunder, and to the following
     further conditions:

     (a)  The Registration Statement shall have become effective not later
          than 5:30 P.M., New York City time, on the Record Date, or at such
          later time and date as may be approved by the Dealer Manager; the
          Prospectus and any amendment or supplement thereto shall have been
          filed with the Commission in the manner and within the time period
          required by


                                      15
<PAGE>


          Rule 497(c), (e), (h) or (j), as the case may be, under the
          Securities Act; no stop order suspending the effectiveness of the
          Registration Statement or any amendment thereto shall have been
          issued, and no proceedings for that purpose shall have been
          instituted or threatened or, to the knowledge of the Fund, the
          Manager or the Dealer Manager, shall be contemplated by the
          Commission; and the Fund shall have complied with any request of the
          Commission for additional information (to be included in the
          Registration Statement, the Prospectus or otherwise).



                                      16
<PAGE>

     (b)  On the Representation Date and the Expiration Date, the Dealer
          Manager shall have received:

          (i)  The favorable opinion, dated the Representation Date and the
               Expiration Date, of Sidley Austin Brown & Wood LLP, counsel for
               the Fund, in form and substance satisfactory to counsel for the
               Dealer Manager, to the effect that:

               (1)  The Fund is a corporation duly incorporated and existing
                    under and by virtue of the laws of the State of Maryland
                    and is in good standing with the State Department of
                    Assessments and Taxation, and the Fund has corporate power
                    to own its properties and assets and to conduct its
                    business as described in the Registration Statement and
                    the Prospectus. The Fund is duly qualified to do business
                    as a foreign corporation in each jurisdiction wherein it
                    owns or leases material properties or conducts material
                    business, except where the failure to be so qualified,
                    considering all such cases in the aggregate would have a
                    material adverse effect on the Fund.

               (2)  The Fund is registered with the Commission under the
                    Investment Company Act as a closed-end, non-diversified
                    management investment company; to the best of such
                    counsel's knowledge, no order of suspension or revocation
                    of such registration has been issued or proceedings
                    therefor initiated or threatened by the Commission; all
                    required action has been taken by the Fund under the
                    Securities Act and the Investment Company Act to make the
                    Offer and consummate the issuance of the Rights and the
                    issuance and sale of the Shares upon exercise of the
                    Rights; and the provisions of the Fund's articles of
                    incorporation and Bylaws comply as to form in all material
                    respects with the requirements of the Investment Company
                    Act and the Investment Company Act Rules and Regulations.

               (3)  The Fund has the authority to issue the number of Common
                    Shares set forth in the Prospectus under the caption
                    "Capital Stock" and the Fund has the number of authorized
                    shares of stock set forth in the Prospectus under the
                    caption "Capital Stock;" the authorized stock of the
                    Company conforms in all material respects as to legal
                    matters to the description thereof contained in the
                    Prospectus under the heading "Capital Stock;" the Common
                    Shares issued and outstanding as of the date hereof
                    (immediately prior to the issuance of the Rights, as of
                    the Representation Date and the Shares, as of the
                    Expiration Date) have been duly authorized and validly
                    issued and are fully paid and nonassessable; the issuance
                    of the Rights has been duly authorized and the sale and
                    issuance of the Shares has been duly authorized and, when
                    issued and delivered to and paid for by the Dealer Manager
                    in accordance with the terms of the Offer and the
                    resolutions of the Board of Directors of the Fund, the
                    Shares will be validly issued, fully paid and
                    nonassessable; the form of certificate representing the
                    Shares complies in all material respects with the
                    applicable statutory requirements of the Maryland General
                    Corporation Law (the "MGCL") and with any applicable
                    requirements of the Certificate of Incorporation (the
                    "Charter") of the Fund and the Bylaws (the "Bylaws") of
                    the Fund; and, the Shares are not subject to


                                      17
<PAGE>

                    preemptive or other similar rights under the MGCL, the
                    Charter or the Bylaws; the Rights and the Shares conform
                    as to legal matters in all material respects to all
                    statements relating thereto contained in the Registration
                    Statement, the Prospectus and the other Offering
                    Materials.

               (4)  Each of the Fund Agreements has been duly authorized,
                    executed and delivered by the Fund; each of the Fund
                    Agreements complies in all material respects with all
                    applicable provisions of the Investment Company Act and
                    the Investment Company Act Rules and Regulations, the
                    Advisers Act and the rules and regulations under such Act;
                    and, assuming due authorization, execution and delivery by
                    the other parties thereto, each of the Fund Agreements
                    constitutes a legal, valid and legally binding obligation
                    of the Fund enforceable in accordance with its terms,
                    subject to the qualification that the enforceability of
                    the Fund's obligations thereunder may be limited by U.S.
                    bankruptcy, insolvency, reorganization, moratorium and
                    similar laws of general applicability relating to or
                    affecting creditors' rights and to general principles of
                    equity (regardless of whether enforceability is considered
                    in a proceeding in equity or at law) and, with respect to
                    this Agreement, subject to the qualification that the
                    right to indemnity and contribution hereunder may be
                    limited by federal or state laws.

               (5)  Neither the issuance of the Rights, nor the issuance and
                    sale of the Shares upon exercise of the Rights, nor the
                    execution, delivery, performance and consummation by the
                    Fund of any other of the transactions contemplated in this
                    Agreement, or to the extent relevant to the Rights or the
                    Shares, in the Fund Agreements, nor the consummation of
                    the transactions contemplated herein or therein or in the
                    Registration Statement nor the fulfillment of the terms
                    thereof will conflict with or violate the charter, bylaws
                    or similar organizational documents of the Fund, or will
                    result in a breach or violation of, or constitute a
                    default or an event of default under, or result in the
                    creation or imposition of any lien, charge or encumbrance
                    upon any properties or assets of the Fund under the
                    charter, bylaws or similar organizational documents of the
                    Fund, the terms and provisions of any agreement,
                    indenture, mortgage, loan agreement, note, insurance or
                    surety agreement, lease or other instrument, known to such
                    counsel after reasonable inquiry, to which the Fund is a
                    party or by which it may be bound or to which any of the
                    property or assets of the Fund is subject, nor, to the
                    best of such counsel's knowledge, will such action by the
                    Fund result in any material violation of any order, law,
                    rule or regulation of any U.S. federal, New York or
                    Maryland state court or governmental agency or body having
                    jurisdiction over the Fund or any of its properties or
                    published rule or regulation of the Maryland General
                    Corporation Law; provided, however, that solely for
                    purposes of this paragraph (5) and not for purposes of the
                    opinions expressed in other paragraphs, such counsel need
                    express no opinion with respect to the antifraud
                    provisions of Federal securities laws, state securities
                    laws, laws governing fiduciary relationships, fraudulent
                    transfer laws, antitrust laws, the Employee Retirement
                    Income Security Act of 1974 or laws governing the
                    solicitation of deposits and provided, further, that
                    insofar as performance by the Fund of its obligations
                    under this Agreement and


                                      18
<PAGE>

                    the Fund Agreements is concerned, such counsel need
                    express no opinion as to U.S. bankruptcy, insolvency,
                    reorganization, moratorium, and similar laws of general
                    applicability relating to or affecting creditors' rights.

               (6)  To the best knowledge of such counsel, there is no pending
                    or threatened action, suit or proceeding to which the Fund
                    is a party before or by any court or governmental agency,
                    authority or body or any arbitrator which might result in
                    any material adverse change in the condition (financial or
                    other), business prospects, net worth or operations of the
                    Fund, or which might materially and adversely affect the
                    properties or assets thereof of a character required to be
                    disclosed in the Registration Statement or the Prospectus
                    which is not adequately disclosed therein and there is no
                    contract or other document of the Fund of a character
                    required to be described in the Registration Statement or
                    the Prospectus, or to be filed or incorporated by
                    reference as exhibits to the Registration Statement which
                    are not described or filed or incorporated by reference
                    therein as required by the Securities Act, the Investment
                    Company Act or the Rules and Regulations.

               (7)  No consent, approval, authorization, notification or order
                    of, or filing with, any court or governmental agency or
                    body under the laws of New York or U.S. Federal law that
                    would be normally applicable to transactions of the type
                    contemplated by this Agreement or the Fund Agreements is
                    required for the consummation by the Fund of the
                    transactions contemplated by this Agreement or the Fund
                    Agreements, except (A) such as have been obtained under
                    the Securities Act, the Exchange Act, the Investment
                    Company Act or from the New York Stock Exchange, (B) such
                    as may be required under the blue sky laws of any
                    jurisdiction in connection with the transactions
                    contemplated hereby and (C) such other approvals as have
                    been obtained or the failure to have obtained will not
                    have a material adverse effect on the Fund or its ability
                    to perform its obligations under this Agreement or the
                    Fund Agreements.

               (8)  The outstanding Common Shares have been duly listed on the
                    New York Stock Exchange, Inc. and the Shares and the
                    Rights have been duly approved for listing, subject to
                    official notice of issuance, on the New York Stock
                    Exchange, Inc.

               (9)  The Registration Statement has become effective under the
                    Securities Act; any required filing of the Prospectus or
                    any supplement thereto pursuant to Rule 497(c), (e), (h)
                    or (j) required to be made prior to the date hereof has
                    been made in the manner and within the time period
                    required by Rule 497(c), (e), (h) or (j), as the case may
                    be; to the best knowledge of such counsel, no stop order
                    suspending the effectiveness of the Registration Statement
                    has been issued, and no proceedings for that purpose have
                    been instituted or threatened; and the Registration
                    Statement, the Prospectus and each amendment thereof or
                    supplement thereto (other than the financial statements,
                    schedules, the notes thereto and the schedules and other
                    financial data contained or incorporated by reference
                    therein or omitted therefrom, as to which such counsel
                    need


                                      19
<PAGE>

                    express no opinion) as of their respective effective or
                    issue dates complied as to form in all material respects
                    with the applicable requirements of the Securities Act and
                    the Investment Company Act and the Rules and Regulations.

               (10) The statements in the Prospectus under the headings "The
                    Offer--Federal income tax consequences of the Offer" and
                    "Taxation," insofar as such statements describe or
                    summarize United States tax laws, treaties, doctrines or
                    practices, provide an accurate description thereof as of
                    the date of the Prospectus.

               In rendering such opinion, such counsel may rely as to matters
               of Maryland law on the opinion of Venable LLP and as to matters
               of fact, to the extent they deem proper, on certificates of
               responsible officers of the Fund and public officials.

               Such counsel shall also have stated that, while they have not
               themselves checked the accuracy and completeness of or
               otherwise verified, and are not passing upon and assume no
               responsibility for the accuracy or completeness of, the
               statements contained in the Registration Statement or the
               Prospectus, in the course of their review and discussion of the
               contents of the Registration Statement and Prospectus with
               certain officers and employees of the Fund and its independent
               registered public accounting firm, no facts have come to their
               attention which cause them to believe that the Registration
               Statement, on the date it became effective, contained any
               untrue statement of a material fact or omitted to state any
               material fact required to be stated therein or necessary to
               make the statements contained therein not misleading or that
               the Prospectus, as of its date and on the Representation Date
               or the Expiration Date, as the case may be, contained any
               untrue statement of a material fact or omitted to state any
               material fact required to be stated therein or necessary to
               make the statements therein, in the light of the circumstances
               under which they were made, not misleading (except that such
               counsel need not express any statement or belief with respect
               to the financial statements, schedules or other financial data
               included or incorporated by reference in the Registration
               Statement or Prospectus or omitted therefrom).

          (ii) The favorable opinions, dated the Representation Date and the
               Expiration Date, of Sidley Austin Brown & Wood LLP, counsel for
               the Manager and the Investment Adviser, in form and substance
               satisfactory to counsel for the Dealer Manager to the effect
               that:

               (1)  The Manager is a corporation duly incorporated and validly
                    existing under the laws of State of New York and, based
                    solely on a good standing certificate from the Secretary
                    of State of the State of New York, the Manager is in good
                    standing under the laws of the State of New York, and the
                    Manager has the corporate power to own its properties and
                    assets and conduct its business as described in the
                    Registration Statement and the Prospectus. To the best
                    knowledge of such counsel, each Adviser currently
                    maintains all governmental licenses, permits, consents,
                    orders, approvals, and other authorizations under New York
                    or United States law material to the conduct of its
                    business and necessary to enable such Adviser to continue
                    to supervise investment in securities as contemplated in
                    the Adviser Agreements to which such Adviser is a party.


                                      20
<PAGE>


                    The Manager is duly qualified to do business as a foreign
                    corporation in each jurisdiction wherein it owns or leases
                    material properties or conducts material business, except
                    where the failure to be so qualified, considering all such
                    cases in the aggregate would not have a material adverse
                    effect on the Manager.

               (2)  Each Adviser is registered as an investment adviser under
                    the Advisers Act, and is not prohibited by the Advisers
                    Act or the Investment Company Act, or the rules and
                    regulations under such Acts, from acting as a manager or
                    an investment adviser, as the case may be, for the Fund as
                    contemplated in the Management Agreement and the
                    Investment Advisory Agreement, to which such Adviser is a
                    party.

               (3)  Each of this Agreement and the Management Agreement has
                    been duly authorized, executed and delivered by the
                    Manager and complies in all material respects with all
                    applicable provisions of the Investment Company Act, the
                    Advisers Act and the rules and regulations under such
                    Acts, and is, assuming due authorization, execution and
                    delivery by the other parties thereto, a legal, valid and
                    legally binding obligation of the Manager enforceable in
                    accordance with its terms, subject to the qualification
                    that the enforceability of the Manager's obligations
                    thereunder may be limited by U.S. bankruptcy, insolvency,
                    reorganization, moratorium and similar laws of general
                    applicability relating to or affecting creditors' rights
                    and to general principles of equity (regardless of whether
                    enforceability is considered in a proceeding in equity or
                    at law) and, with respect to this Agreement, subject to
                    the qualification that the right to indemnity and
                    contribution hereunder may be limited by federal and state
                    laws.

               (4)  The Investment Advisory Agreement complies in all material
                    respects with all applicable provisions of the Investment
                    Company Act, the Advisers Act and the rules and
                    regulations under such Acts. The Investment Advisory
                    Agreement has been duly authorized, executed and delivered
                    by the Manager, and, assuming due authorization, execution
                    and delivery by the other parties thereto and assuming
                    that the Investment Advisory Agreement is enforceable
                    under Japanese law, the Investment Advisory Agreement is a
                    legal, valid, binding and enforceable obligation of the
                    Manager and the Investment Adviser in accordance with its
                    terms, subject to the qualification that the
                    enforceability of the obligations of the Manager and the
                    Investment Adviser thereunder may be limited by U.S.
                    bankruptcy, insolvency, reorganization, moratorium and
                    similar laws of general applicability relating to or
                    affecting creditors' rights and to general principles of
                    equity (regardless of whether enforceability is considered
                    in a proceeding in equity or at law).

               (5)  The execution, delivery, performance and consummation by
                    the Manager of its obligations under this Agreement or any
                    of the Adviser Agreements will not materially conflict
                    with or materially violate the charter, by-laws or similar
                    organizational documents of the Manager, or materially
                    conflict with, result in a material breach or violation
                    of, or


                                      21
<PAGE>

                    constitute a material default under, or result in the
                    creation or imposition of any material lien, charge or
                    encumbrance upon any properties or assets of the Manager
                    under the charter, by-laws or similar organizational
                    documents of the Manager, the terms and provisions of any
                    material agreement, indenture, mortgage, loan agreement,
                    note, insurance or surety agreement, lease or other
                    instrument, known to such counsel after reasonable
                    inquiry, to which the Manager is a party or by which it
                    may be bound or to which any of the property or assets of
                    the Manager is subject, nor will such action result in any
                    material violation of any U.S. federal law; provided,
                    however, that solely for purposes of this paragraph (4)
                    and not for purposes of the opinions expressed in other
                    paragraphs, such counsel need express no opinion with
                    respect to the antifraud provisions of the Federal
                    securities laws, state securities laws, laws governing
                    fiduciary relationships, fraudulent transfer laws,
                    antitrust laws, the Employee Retirement Income Security
                    Act of 1974 or laws governing the solicitation of
                    deposits; and provided, further, that in so far as
                    performance by the Manager of its obligations under the
                    Adviser Agreements is concerned, such counsel need express
                    no opinion as to U.S. bankruptcy, insolvency,
                    reorganization, moratorium and similar laws of general
                    applicability relating to or affecting creditors' rights.

               (6)  To the best of such counsel's knowledge, the consummation
                    by the Investment Adviser of its obligations under the
                    Investment Advisory Agreement will not materially conflict
                    with or materially violate any law, rule or regulation
                    applicable to the Investment Adviser of any United States
                    court, regulatory body, administrative agency,
                    governmental body or arbitrator having jurisdiction over
                    the Investment Adviser or any its properties.

               (7)  To the best knowledge of such counsel, there is no pending
                    or threatened action, suit or proceeding to which the
                    Manager is a party before or by any court or governmental
                    agency, authority or body or any arbitrator which would
                    result in a material adverse effect upon the Fund or upon
                    the ability of the Manager to perform its obligations
                    under this Agreement or the Adviser Agreements.

               In rendering such opinion, such counsel has relied as to
               matters of Maryland law, with the Dealer Manager's consent and
               without making any investigation with respect thereto, on the
               opinion of Venable LLP and as to matters of the Investment
               Company Act, the Investment Advisers Act, the Securities Act of
               1933 and the rules and regulations under such Acts, on the
               opinion of Sidley Austin Brown & Wood LLP pursuant to Section
               6.b.i. of this Agreement, and as to matters of fact, to the
               extent they deem proper, on certificates of responsible
               officers of the Investment Adviser and public officials.

               Such counsel shall also have stated that, while they have not
               themselves checked the accuracy and completeness of or
               otherwise verified, and are not passing upon and assume no
               responsibility for the accuracy or completeness of, the
               statements contained in the Registration Statement or the
               Prospectus, in the course of their review and discussion of the
               contents of the Registration Statement and Prospectus with
               certain officers and employees of the Manager, no facts have


                                      22
<PAGE>

               come to their attention which cause them to believe that the
               Registration Statement, on the date it became effective,
               contained any untrue statement of a material fact or omitted to
               state any material fact required to be stated therein or
               necessary to make the statements contained therein not
               misleading or that the Prospectus, as of its date and on the
               Representation Date or the Expiration Date, as the case may be,
               contained any untrue statement of a material fact or omitted to
               state any material fact required to be stated therein or
               necessary to make the statements therein, in the light of the
               circumstances under which they were made, not misleading
               (except that such counsel need not express any statement or
               belief with respect to the financial statements, schedules or
               other financial data included or incorporated by reference in
               the Registration Statement or Prospectus or omitted therefrom).

         (iii) The favorable opinions, dated the Representation Date and the
               Expiration Date, of Keiko Tani, internal counsel for the
               Manager, in form and substance satisfactory to counsel for the
               Dealer Manager to the effect that:

               (1)  To the best knowledge of such counsel, there is no pending
                    or threatened action, suit or proceeding to which the
                    Investment Adviser is a party before or by any court or
                    governmental agency, authority or body or any arbitrator
                    which would result in a material adverse effect upon the
                    Fund or upon the ability of the Investment Adviser to
                    perform its obligations under the Investment Advisory
                    Agreement.

          (iv) The favorable opinion, dated the Representation Date and the
               Expiration Date, of Mori, Hamada & Matsumoto, Japanese counsel
               for the Fund, in form and substance satisfactory to counsel for
               the Dealer Manager, to the effect that, under existing Japanese
               laws and regulations:

               (1)  the Investment Adviser has been duly organized and is
                    validly existing as a corporation under the laws of Japan,
                    and has full corporate power and authority to own its
                    properties and conduct its business as described in the
                    Prospectus;

               (2)  no consent, approval, authorization or order of any court
                    or governmental agency or body is required under the laws
                    of Japan for the issuance of the Rights, the issuance and
                    sale of the Shares by the Fund outside Japan or for the
                    consummation by the Fund of the transactions contemplated
                    in the Fund Agreements based on the representations and
                    warranties contained herein;

               (3)  such counsel does not know of any Japanese statutes,
                    regulations or legal or governmental proceedings
                    materially affecting the operation of the Fund as
                    contemplated in the Prospectus and which would be material
                    to an investor considering an investment in the Fund,
                    except as are described in the Prospectus;

               (4)  the statements in the Prospectus, insofar as such
                    statements describe or summarize Japanese laws, treaties,
                    legal doctrines or legal practices, provide an accurate
                    description thereof in all material respects as of the
                    date of the Prospectus;


                                      23
<PAGE>

               (5)  no taxes or charges of any kind are or will be payable in
                    or to Japan, or any political subdivision thereof, by the
                    Dealer Manager with respect to the Fund Agreements or for
                    the issuance of the Rights and the issuance and sale of
                    the Shares by the Fund assuming all such agreements are
                    signed outside of Japan and such issuance of Rights and
                    the issuance and sale of the Shares are made outside of
                    Japan;

               (6)  except as set forth in the Prospectus, to the best
                    knowledge of such counsel, there is no pending or
                    threatened action, suit or proceeding in Japan before any
                    court or governmental agency, authority or body or any
                    arbitrator involving the Fund, which questions the
                    validity of the Fund Agreements;

               (7)  the Investment Advisory Agreement has been duly
                    authorized, executed and delivered by the Investment
                    Adviser;

               (8)  neither the performance by the Investment Adviser of its
                    obligations under the Investment Advisory Agreement nor
                    the consummation of the transactions contemplated herein
                    or therein nor the fulfillment of the terms hereof or
                    thereof will conflict with, or result in a breach of, or
                    constitute a default under, or result in the creation or
                    imposition of any lien, charge or encumbrance upon any
                    property or assets of the Investment Adviser pursuant to
                    the constitutive documents of the Investment Adviser or,
                    to the knowledge of such counsel, the terms of any
                    material agreement, indenture, mortgage, lease or other
                    instrument to which the Investment Adviser is a party or
                    is bound or to which any of its property or assets is
                    subject, which conflict, breach or default would have a
                    material adverse effect on the ability of the Investment
                    Adviser to carry out its obligations under such
                    agreements, or any Japanese law, order of which such
                    counsel has knowledge, rule or regulation applicable to
                    the Investment Adviser of any Japanese court, regulatory
                    body, administrative agency, governmental body, stock
                    exchange or securities association having jurisdiction
                    over the Investment Adviser or its properties or
                    operations; no consent, approval, authorization or order
                    of any court or governmental agency or body is required
                    under the laws of Japan in connection with the execution,
                    performance and delivery of the Investment Advisory
                    Agreement by the Investment Adviser; and

               (9)  the Investment Adviser owns, possesses or has obtained and
                    currently maintains all material authorizations under
                    Japanese law as are necessary for the Investment Adviser
                    to perform its obligation under the Investment Advisory
                    Agreement as set forth in and contemplated by the
                    Prospectus.

               Such counsel shall also have stated that, while they have not
               themselves checked the accuracy and completeness of or
               otherwise verified, and are not passing upon and assume no
               responsibility for the accuracy or completeness of, the
               statements contained in the Registration Statement or the
               Prospectus, in the course of their review and discussion of the
               contents of the Registration Statement and Prospectus with
               certain officers and employees of the Investment Adviser, no
               facts relating to Japanese laws, treaties, legal doctrines or
               legal practices have come to their attention which cause them
               to believe that the Registration


                                      24
<PAGE>


               Statement, on the date it became effective, contained any
               untrue statement of a material fact or omitted to state any
               material fact required to be stated therein or necessary to
               make the statements contained therein not misleading or that
               the Prospectus, as of its date and on the Representation Date
               or the Expiration Date, as the case may be, contained any
               untrue statement of a material fact or omitted to state any
               material fact required to be stated therein or necessary to
               make the statements therein, in the light of the circumstances
               under which they were made, not misleading (except that such
               counsel need not express any statement or belief with respect
               to the financial statements, schedules or other financial data
               included or incorporated by reference in the Registration
               Statement or Prospectus).

     (c)  The Dealer Manager shall have received from Clifford Chance US LLP,
          counsel for the Dealer Manager, such opinion or opinions, dated the
          Representation Date and the Expiration Date, with respect to the
          Offer, the Registration Statement, the Prospectus and other related
          matters as the Dealer Manager may reasonably require, and the Fund
          shall have furnished to such counsel such documents as they
          reasonably request for the purpose of enabling them to pass upon
          such matters.

     (d)  The Fund shall have furnished to the Dealer Manager certificates of
          the Fund, signed on behalf of the Fund by the President of the Fund,
          dated the Representation Date and the Expiration Date, to the effect
          that the signer(s) of such certificate carefully examined the
          Registration Statement, the Prospectus, any supplement to the
          Prospectus and this Agreement and that, to the best of their
          knowledge:

          (i)  the representations and warranties of the Fund in this
               Agreement are true and correct in all material respects on and
               as of the Representation Date or the Expiration Date, as the
               case may be, with the same effect as if made on the
               Representation Date or the Expiration Date, as the case may be,
               and the Fund has complied with all the agreements and satisfied
               all the conditions on its part to be performed or satisfied at
               or prior to the Representation Date or the Expiration Date, as
               the case may be;

          (ii) no stop order suspending the effectiveness of the Registration
               Statement has been issued and no proceedings for that purpose
               have been instituted or threatened; and

         (iii) since the date of the most recent balance sheet included or
               incorporated by reference in the Prospectus, there has been no
               material adverse change, or any development involving a
               prospective material adverse change, in the condition
               (financial or other), business, prospects, net worth or results
               of operations of the Fund (excluding fluctuations in the Fund's
               net asset value due to investment activities in the ordinary
               course of business), except as set forth in or contemplated in
               the Prospectus.

     (e)  Each Adviser shall have furnished to the Dealer Manager certificates
          of such Adviser, signed on behalf of the Adviser by the Chairman or
          other senior official, dated the Representation Date and the
          Expiration Date, to the effect that the signer(s) of such
          certificate carefully examined the Registration Statement, the
          Prospectus, any supplement to the Prospectus and this Agreement and,
          to the best of their knowledge, that the representations and
          warranties with respect to such Adviser in this Agreement are true
          and correct in all material respects on and as of the Representation
          Date or the Expiration


                                      25
<PAGE>


          Date, as the case may be, with the same effect as if made on the
          Representation Date or the Expiration Date, as the case may be.

     (f)  Ernst & Young LLP shall have furnished to the Dealer Manager
          letters, dated the Representation Date and the Expiration Date, in
          form and substance satisfactory to the Dealer Manager and Ernst &
          Young LLP, stating in effect that:

          (i)  it is an independent registered public accounting firm with
               respect to the Fund within the meaning of the Securities Act
               and the applicable Securities Act Rules and Regulations, and
               the rules and regulations adopted by the Commission and the
               Public Accounting Oversight Board (United States);

          (ii) in its opinion, the audited financial statements examined by it
               and included or incorporated by reference in the Registration
               Statement comply as to form in all material respects with the
               applicable accounting requirements of the Securities Act and
               the Investment Company Act and the respective Rules and
               Regulations with respect to registration statements on Form
               N-2;

         (iii) it has performed procedures specified by the Public Accounting
               Oversight Board for a review of the interim financial
               information for the period ended June 30, 2005;

          (iv) it has performed specified procedures, not constituting an
               audit in accordance with generally accepted auditing standards,
               including a reading of the latest available unaudited financial
               information of the Fund, a reading of the minute books of the
               Fund, and inquiries of officials of the Fund responsible for
               financial and accounting matters, and on the basis of such
               inquiries and procedures nothing came to its attention that
               caused it to believe that at a specified date prior to the
               Representation Date or the Expiration Date, as the case may be,
               there was any change in the Common Shares, any decrease in net
               assets or any increase in long-term debt of the Fund as
               compared with amounts shown in the most recent statement of
               assets and liabilities included or incorporated by reference in
               the Registration Statement, except as the Registration
               Statement discloses has occurred or may occur, or they shall
               state any specific changes, increases or decreases; and

          (v)  in addition to the procedures referred to in clause (iii)
               above, it has compared certain dollar amounts (or percentages
               as derived from such dollar amounts) and other financial
               information regarding the operations of the Fund appearing in
               the Registration Statement, which have previously been
               specified by the Dealer Manager and which shall be specified in
               such letter, and have found such items to be in agreement with
               the accounting and financial records of the Fund.

     (g)  Subsequent to the respective dates as of which information is given
          in the Registration Statement and the Prospectus (excluding an
          amendment or supplement subsequent to the Representation Date), (i)
          there shall not have been any change, increase or decrease specified
          in the letter or letters referred to in paragraph 6(f), (ii) no
          material adverse change, or any development involving a prospective
          material adverse change, in the business, properties, management,
          financial condition or results of operations of the Fund shall have
          occurred or become known and (iii) no transaction which is material
          and adverse to the Fund shall have been entered into by the Fund.


                                      26
<PAGE>

     (h)  Prior to the Representation Date, the Fund shall have furnished to
          the Dealer Manager such further information, certificates and
          documents as the Dealer Manager may reasonably request.

     (i)  If any of the conditions specified in this Section 6 shall not have
          been fulfilled in all material respects when and as provided in this
          Agreement, or if any of the opinions and certificates mentioned
          above or elsewhere in this Agreement shall not be reasonably
          satisfactory in form and substance to the Dealer Manager and its
          counsel, this Agreement and all obligations of the Dealer Manager
          hereunder may be canceled at, or at any time prior to, the
          Expiration Date by the Dealer Manager. Notice of such cancellation
          shall be given to the Fund in writing or by telephone confirmed in
          writing.

7.   Indemnity and Contribution.
     --------------------------

     (a)  Each of the Fund and the Manager, jointly and severally, agrees to
          indemnify, defend and hold harmless the Dealer Manager, each Selling
          Group Member and each Soliciting Dealer, and their respective
          partners, directors and officers, and any person who controls the
          Dealer Manager, a Selling Group Member and or a Soliciting Dealer
          within the meaning of Section 15 of the Securities Act or Section 20
          of the Exchange Act, and the successors and assigns of all of the
          foregoing persons from and against any loss, damage, expense,
          liability or claim (including the reasonable cost of investigation)
          which, jointly or severally, the Dealer Manager, a Selling Group
          Member, a Soliciting Dealer or any such person may incur under the
          Securities Act, the Exchange Act, the Investment Company Act, the
          Advisers Act, common law or otherwise, insofar as such loss, damage,
          expense, liability or claim arises out of or is based upon any
          untrue statement or alleged untrue statement of a material fact
          contained in the Registration Statement (or in the Registration
          Statement as amended by any post-effective amendment thereof by the
          Fund) or in a Prospectus (the term "Prospectus" for the purpose of
          this Section 7 being deemed to include any preliminary prospectus,
          the Offering Materials, the Prospectus and the Prospectus as amended
          or supplemented by the Fund), or arises out of or is based upon any
          omission or alleged omission to state a material fact required to be
          stated in either such Registration Statement or Prospectus or
          necessary to make the statements made therein not misleading, except
          insofar as any such loss, damage, expense, liability or claim arises
          out of or is based upon any untrue statement or omission or alleged
          untrue statement or omission of a material fact contained in and in
          conformity with information furnished in writing by or on behalf of
          the Dealer Manager to the Fund or the Manager expressly for use with
          reference to the Dealer Manager, Selling Group Members or Soliciting
          Dealers in such Registration Statement or such Prospectus.

          If any action, suit or proceeding (together, a "Proceeding") is
          brought against the Dealer Manager, a Selling Group Member, a
          Soliciting Dealer or any such person in respect of which indemnity
          may be sought against the Fund pursuant to the foregoing paragraph,
          the Dealer Manager, a Selling Group Member, a Soliciting Dealer or
          such person shall promptly notify the Fund and the Manager in
          writing of the institution of such Proceeding and the Fund shall
          assume the defense of such Proceeding, including the employment of
          counsel reasonably satisfactory to such indemnified party and
          payment of all reasonable fees and expenses; provided, however, that
          the failure to so notify the Fund and the Manager shall not relieve
          the Fund from any liability which the Fund or the Manager may have
          to the Dealer Manager, a Selling Group Member, a Soliciting Dealer
          or any such person or otherwise, unless such omission results in the
          forfeiture of substantive rights or defenses by the indemnifying
          party. The Dealer Manager, a Selling Group


                                      27
<PAGE>

          Member, a Soliciting Dealer or such person shall have the right to
          employ its or their own counsel in any such case, but the fees and
          expenses of such counsel shall be at the expense of the Dealer
          Manager, a Selling Group Member, a Soliciting Dealer or of such
          person unless the employment of such counsel shall have been
          authorized in writing by the Fund in connection with the defense of
          such Proceeding or the Fund shall not have, within a reasonable
          period of time in light of the circumstances, employed counsel to
          have charge of the defense of such Proceeding or such indemnified
          party or parties shall have reasonably concluded (based on advice
          from counsel) that there may be defenses available to it or them
          which are different from, additional to or in conflict with those
          available to the Fund (in which case the Fund shall not have the
          right to direct the defense of such Proceeding on behalf of the
          indemnified party or parties, but the Fund may employ counsel and
          participate in the defense thereof, but the fees and expenses of
          such counsel shall be at the expense of the Fund), in any of which
          events the reasonable fees and expenses shall be borne by the Fund
          and paid as incurred (it being understood, however, that the Fund
          shall not be liable for the expenses of more than one separate
          counsel (in addition to any local counsel) in any one Proceeding or
          series of related Proceedings in the same jurisdiction representing
          the indemnified parties who are parties to such Proceeding). The
          Fund and the Manager shall not be liable for any settlement of any
          Proceeding effected without the Fund's written consent, but if
          settled with the written consent of the Fund, the Fund and the
          Manager agree to indemnify and hold harmless the Dealer Manager, a
          Selling Group Member, a Soliciting Dealer and any such person from
          and against any loss or liability by reason of such settlement.
          Notwithstanding the foregoing sentence, if at any time an
          indemnified party shall have requested an indemnifying party to
          reimburse the indemnified party for fees and expenses of counsel as
          contemplated by the second sentence of this paragraph, then the
          indemnifying party agrees that it shall be liable for any settlement
          of any Proceeding effected without its written consent if (i) such
          settlement is entered into more than 60 business days after receipt
          by such indemnifying party of the aforesaid request, (ii) such
          indemnifying party shall not have reimbursed the indemnified party
          in accordance with such request prior to the date of such settlement
          and (iii) such indemnified party shall have given the indemnifying
          party at least 30 days' prior notice of its intention to settle. No
          indemnifying party shall, without the prior written consent of the
          indemnified party, effect any settlement of any pending or
          threatened Proceeding in respect of which any indemnified party is
          or could have been a party and indemnity could have been sought
          hereunder by such indemnified party, unless such settlement includes
          an unconditional release of such indemnified party from all
          liability on claims that are the subject matter of such Proceeding
          and does not include an admission of fault, culpability or a failure
          to act, by or on behalf of such indemnified party unless such
          indemnified party gives written consent to such admission of fault,
          culpability or a failure to act.

     (b)  The Dealer Manager agrees to indemnify, defend and hold harmless the
          Fund and the Manager, and their directors and officers, and any
          person who controls the Fund or the Manager, within the meaning of
          Section 15 of the Securities Act or Section 20 of the Exchange Act,
          and the successors and assigns of all of the foregoing persons to
          the same extent as the foregoing indemnity from the Fund or the
          Manager to the Dealer Manager, from and against any loss, damage,
          expense, liability or claim (including the reasonable cost of
          investigation) which, jointly or severally, the Fund, the Manager or
          any such person may incur under the Securities Act, the Exchange
          Act, the Investment Company Act, the Advisers Act, the common law or
          otherwise, insofar as such loss, damage, expense, liability or claim
          arises out of or is based upon any untrue statement or alleged
          untrue statement of a material fact contained in and in conformity
          with information


                                      28
<PAGE>

          furnished in writing by or on behalf of the Dealer Manager to the
          Fund expressly for use with reference to the Dealer Manager in the
          Registration Statement (or in the Registration Statement as amended
          by any post-effective amendment thereof by the Fund) or in a
          Prospectus, or arises out of or is based upon any omission or
          alleged omission to state a material fact in connection with such
          information required to be stated in such Registration Statement or
          such Prospectus or necessary to make such information not misleading
          (with respect to the Prospectus, in light of the circumstances under
          which they were made).

          If any Proceeding is brought against the Fund, the Manager or any
          such person in respect of which indemnity may be sought against the
          Dealer Manager pursuant to the foregoing paragraph, the Fund, the
          Manager or such person shall promptly notify the Dealer Manager in
          writing of the institution of such Proceeding and the Dealer Manager
          shall assume the defense of such Proceeding, including the
          employment of counsel reasonably satisfactory to such indemnified
          party and payment of all reasonable fees and expenses; provided,
          however, that the omission to so notify the Dealer Manager shall not
          relieve the Dealer Manager from any liability which the Dealer
          Manager may have to the Fund or any such person or otherwise, unless
          such omission results in the forfeiture of substantive rights or
          defenses by the indemnifying party. The Fund, the Manager or such
          person shall have the right to employ its own counsel in any such
          case, but the fees and expenses of such counsel shall be at the
          expense of the Fund, the Manager or such person, as the case may be,
          unless the employment of such counsel shall have been authorized in
          writing by the Dealer Manager in connection with the defense of such
          Proceeding or such Dealer Manager shall not have, within a
          reasonable period of time in light of the circumstances, employed
          counsel to have charge of the defense of such Proceeding or such
          indemnified party or parties shall have reasonably concluded (based
          on advice from counsel) that there may be defenses available to it
          or them which are different from or additional to or in conflict
          with those available to the Dealer Manager (in which case the Dealer
          Manager shall not have the right to direct the defense of such
          Proceeding on behalf of the indemnified party or parties, but the
          Dealer Manager may employ counsel and participate in the defense
          thereof but the fees and expenses of such counsel shall be at the
          expense of the Dealer Manager), in any of which events the
          reasonable fees and expenses shall be borne by the Dealer Manager
          and paid as incurred (it being understood, however, that the Dealer
          Manager shall not be liable for the expenses of more than one
          separate counsel (in addition to any local counsel) in any one
          Proceeding or series of related Proceedings in the same jurisdiction
          representing the indemnified parties who are parties to such
          Proceeding). The Dealer Manager shall not be liable for any
          settlement of any such Proceeding effected without the written
          consent of the Dealer Manager but if settled with the written
          consent of the Dealer Manager, the Dealer Manager agrees to
          indemnify and hold harmless the Fund, the Manager and any such
          person from and against any loss or liability by reason of such
          settlement. Notwithstanding the foregoing sentence, if at any time
          an indemnified party shall have requested an indemnifying party to
          reimburse the indemnified party for fees and expenses of counsel as
          contemplated by the second sentence of this paragraph, then the
          indemnifying party agrees that it shall be liable for any settlement
          of any Proceeding effected without its written consent if (i) such
          settlement is entered into more than 60 business days after receipt
          by such indemnifying party of the aforesaid request, (ii) such
          indemnifying party shall not have reimbursed the indemnified party
          in accordance with such request prior to the date of such settlement
          and (iii) such indemnified party shall have given the indemnifying
          party at least 30 days' prior notice of its intention to settle. No
          indemnifying party shall, without the prior written consent of the
          indemnified party, effect any settlement of any pending or


                                      29
<PAGE>

          threatened Proceeding in respect of which any indemnified party is
          or could have been a party and indemnity could have been sought
          hereunder by such indemnified party, unless such settlement includes
          an unconditional release of such indemnified party from all
          liability on claims that are the subject matter of such Proceeding
          and does not include an admission of fault, culpability or a failure
          to act, by or on behalf of such indemnified party unless such
          indemnified party gives written consent to such admission of fault,
          culpability or a failure to act.

     (c)  If the indemnification provided for in this Section 7 is unavailable
          to an indemnified party under subsections (a) and (b) of this
          Section 7 in respect of any losses, damages, expenses, liabilities
          or claims referred to therein, then each applicable indemnifying
          party, in lieu of indemnifying such indemnified party, shall
          contribute to the amount paid or payable by such indemnified party
          as a result of such losses, damages, expenses, liabilities or claims
          (i) in such proportion as is appropriate to reflect the relative
          benefits received by the Fund or the Manager on the one hand and the
          Dealer Manager, Selling Group Member(s) or Soliciting Dealer(s) on
          the other hand from the offering of the Shares or (ii) if the
          allocation provided by clause (i) above is not permitted by
          applicable law, in such proportion as is appropriate to reflect not
          only the relative benefits referred to in clause (i) above but also
          the relative fault of the Fund or the Manager on the one hand and of
          the Dealer Manager on the other in connection with the statements or
          omissions which resulted in such losses, damages, expenses,
          liabilities or claims, as well as any other relevant equitable
          considerations with respect to the Offer. The relative benefits
          received by the Fund or the Manager on the one hand and the Dealer
          Manager, Selling Group Member(s) or Soliciting Dealer(s) on the
          other shall be deemed to be in the same respective proportions as
          the total proceeds from the Offer (net of the Dealer Manager Fee but
          before deducting expenses) received by the Fund or the Manager and
          the total Dealer Manager Fee received by the Dealer Manager, bear to
          the aggregate public offering price of the Shares. The relative
          fault of the Fund or the Manager on the one hand and of the Dealer
          Manager, Selling Group Member(s) or Soliciting Dealer(s) on the
          other shall be determined by reference to, among other things,
          whether the untrue statement or alleged untrue statement of a
          material fact or omission or alleged omission relates to information
          supplied by the Fund or the Manager or the Dealer Manager and the
          parties' relative intent, knowledge, access to information and
          opportunity to correct or prevent such statement or omission. The
          amount paid or payable by a party as a result of the losses,
          damages, expenses, liabilities and claims referred to in this
          subsection shall be deemed to include any legal or other fees or
          expenses reasonably incurred by such party in connection with
          investigating, preparing to defend or defending any Proceeding.

     (d)  The Fund, the Manager and the Dealer Manager agree that it would not
          be just and equitable if contribution pursuant to this Section 7
          were determined by pro rata allocation or by any other method of
          allocation that does not take account of the equitable
          considerations referred to in subsection (c) above. Notwithstanding
          the provisions of this Section 7, neither the Dealer Manager nor any
          Selling Group Member or Soliciting Dealer shall be required to
          contribute any amount in excess of the fees received by it. No
          person guilty of fraudulent misrepresentation (within the meaning of
          Section 11(f) of the Securities Act) shall be entitled to
          contribution from any person who was not guilty of such fraudulent
          misrepresentation.

     (e)  Notwithstanding any other provisions in this Section 7, no party
          shall be entitled to indemnification or contribution under this
          Dealer Manager Agreement against any loss, claim, liability, expense
          or damage arising by reason of such person's willful


                                      30
<PAGE>

          misfeasance, or gross negligence in the performance of its duties
          hereunder or by reason of such person's reckless disregard of such
          person's obligations and duties thereunder. The parties hereto
          acknowledge that the foregoing provision shall not be construed to
          impose upon any such parties any duties under this Agreement other
          than as specifically set forth herein (it being understood that the
          Dealer Manager, Selling Group Members and Soliciting Dealers have no
          duty hereunder to the Fund, the Manager or the Investment Adviser to
          perform any due diligence investigation).

     (f)  The indemnity and contribution agreements contained in this Section
          7 and the covenants, warranties and representations of the Fund and
          the Manager contained in this Agreement shall remain in full force
          and effect regardless of any investigation made by or on behalf of
          the Dealer Manager, a Selling Group Member, a Soliciting Dealer, and
          their respective partners, directors or officers or any person
          (including each partner, officer or director of such person) who
          controls the Dealer Manager, a Selling Group Member or a Soliciting
          Dealer within the meaning of Section 15 of the Securities Act or
          Section 20 of the Exchange Act, or by or on behalf of the Fund, the
          Manager or the Investment Adviser, its directors or officers or any
          person who controls the Fund or the Manager within the meaning of
          Section 15 of the Securities Act or Section 20 of the Exchange Act,
          and shall survive any termination of this Agreement or the issuance
          and delivery of the Rights. The Fund and the Manager and the Dealer
          Manager agree promptly to notify each other of the commencement of
          any Proceeding against it and, in the case of the Fund or the
          Manager against any of their officers or directors in connection
          with the issuance of the Rights, or in connection with the
          Registration Statement or Prospectus.

     (g)  The Fund and the Manager acknowledges that the statements under the
          caption "Distribution arrangements" in the Prospectus constitute the
          only information furnished in writing to the Fund by the Dealer
          Manager expressly for use in such document, and the Dealer Manager
          confirms that such statements are correct in all material respects.

8.   Representations, Warranties and Agreements to Survive Delivery. The
     respective agreements, representations, warranties, indemnities and other
     statements of the Fund or its officers, of the Manager and of the Dealer
     Manager set forth in or made pursuant to this Agreement shall survive the
     Expiration Date and will remain in full force and effect, regardless of
     any investigation made by or on behalf of Dealer Manager or the Fund or
     the Manager or any of their officers, directors or controlling persons
     referred to in Section 7 hereof, and will survive delivery of and payment
     for the Shares pursuant to the Offer. The provisions of Sections 5 and 7
     hereof shall survive the termination or cancellation of this Agreement.

9.   Termination of Agreement.
     -------------------------

     (a)  The obligations of the Dealer Manager hereunder shall be subject to
          termination in the absolute discretion of the Dealer Manager, by
          notice given to the Fund prior to 5:00 p.m., New York time on the
          Expiration Date, if (x) since the time of execution of this
          Agreement or the earlier respective dates as of which information is
          given in the Registration Statement and the Prospectus, there has
          been any material adverse change or any development involving a
          material adverse change in the business, properties, management,
          financial condition or results of operations of the Fund, which
          would, in the Dealer Manager's judgment, make it impracticable or
          inadvisable to proceed with the Offer on the terms and in the manner
          contemplated in the Registration Statement and the Prospectus, or
          (y) since the time of execution of this Agreement, there shall have


                                      31
<PAGE>

          occurred: (i) a suspension or material limitation in trading in
          securities generally on the New York Stock Exchange, Inc. ("NYSE"),
          the American Stock Exchange or the NASDAQ; (ii) a suspension or
          material limitation in trading in the Fund's Common Shares or in the
          Rights on the NYSE; (iii) a general moratorium on commercial banking
          activities declared by either federal or New York State authorities
          or a material disruption in commercial banking or securities
          settlement or clearance services in the United States; (iv) an
          outbreak or escalation of hostilities or acts of terrorism involving
          the United States or Japan or a declaration by the United States or
          Japan of a national emergency or war; or (v) any other calamity or
          crisis or any change in financial, political, economic, currency,
          banking or social conditions in the United States or Japan, if the
          effect of any such event specified in clause (iv) or (v) in the
          Dealer Manager's judgment makes it impracticable or inadvisable to
          proceed with the Offer on the terms and in the manner contemplated
          in the Registration Statement and the Prospectus.

     (b)  If this Agreement is terminated pursuant to this Section, such
          termination shall be without liability of any party to any other
          party except as provided in Section 5 and the Dealer Manager shall
          not have any obligation to purchase any Shares upon exercise of
          Rights.

10.  Notices. All communications hereunder will be in writing and effective
     only on receipt, and, if sent to the Dealer Manager, will be mailed,
     delivered or telegraphed and confirmed to UBS Securities LLC, 299 Park
     Avenue, New York, New York 10171-0026, Attn: Syndicate Department and, if
     to the Fund or the Manager, shall be sufficient in all respects if
     delivered or sent to the Fund or the Manager at Two World Financial
     Center, Building B, New York, New York 10281, Attention: Keiko Tani.

11.  Successors. This Agreement will inure to the benefit of and be binding
     upon the parties hereto and their respective successors and will inure to
     the benefit of the officers and directors and controlling persons
     referred to in Section 7 hereof, and no other person will have any right
     or obligation hereunder.

12.  Applicable Law. This Agreement will be governed by and construed in
     accordance with the laws of the State of New York.

13.  Submission to Jurisdiction. Except as set forth below, no claim (a
     "Claim") which relates to the terms of this Agreement or the transactions
     contemplated hereby may be commenced, prosecuted or continued in any
     court other than the courts of the State of New York located in the City
     and County of New York or in the United States District Court for the
     Southern District of New York, which courts shall have jurisdiction over
     the adjudication of such matters, and each of the Fund and the Manager
     consents to the jurisdiction of such courts and personal service with
     respect thereto. Each of the Fund and the Manager hereby consents to
     personal jurisdiction, service and venue in any court in which any Claim
     arising out of or in any way relating to this Agreement is brought by any
     third party against the Dealer Manager or any indemnified party. Each of
     the Dealer Manager, the Fund (on its behalf and, to the extent permitted
     by applicable law, on behalf of its stockholders and affiliates) and the
     Manager (on its behalf and, to the extent permitted by applicable law, on
     behalf of its stockholders and affiliates) waives all right to trial by
     jury in any action, proceeding or counterclaim (whether based upon
     contract, tort or otherwise) in any way arising out of or relating to
     this Agreement. Each of the Fund and the Manager agrees that a final
     judgment in any such action, proceeding or counterclaim brought in any
     such court shall be conclusive and binding upon the Fund or the Manager,
     as the case may be, and may be enforced in any other courts in the
     jurisdiction of which the Fund or the Manager is or may be subject, by
     suit upon such judgment.


                                      32
<PAGE>

14.  Counterparts. This Agreement may be executed in one or more counterparts,
     each of which shall be deemed to be an original, but all of which
     together shall constitute one and the same instrument.


                                      33
<PAGE>


     If the foregoing is in accordance with your understanding of our
agreement, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Fund, the
Manager and the Dealer Manager.

                                     Very truly yours,

                                     JAPAN SMALLER CAPITALIZATION FUND, INC.


                                     By:
                                        -----------------------
                                        Name:
                                        Title:


                                     NOMURA ASSET MANAGEMENT U.S.A. INC.


                                     By:
                                        -----------------------
                                        Name:
                                        Title:





                                      34
<PAGE>



The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.

UBS SECURITIES LLC


By:
   --------------------------------------------
   Name:
   Title:


By:
   ---------------------------------------------
   Name:
   Title:




                                      35
<PAGE>


                                                                     Exhibit A

                    JAPAN SMALLER CAPITALIZATION FUND, INC.

                       5,282,128 Shares of Common Stock
                 Issuable Upon Exercise of Transferable Rights
                         to Subscribe for Such Shares

                            SELLING GROUP AGREEMENT

                                                     New York, New York
                                                     November [   ], 2005

UBS Securities LLC
299 Park Avenue
New York, New York 10171-0026

Ladies and Gentlemen:

     We understand that Japan Smaller Capitalization Fund, Inc., a Maryland
corporation (the "Fund"), proposes to issue to holders of record (the "Record
Date Stockholders") as of the close of business on the record date set forth
in the Prospectus (as defined herein) (the "Record Date") transferable rights
entitling such Record Date Stockholders to subscribe for up to 5,282,128
shares (each a "Share" and, collectively, the "Shares") of common stock, par
value $0.10 per share (the "Common Shares"), of the Fund (the "Offer").
Pursuant to the terms of the Offer, the Fund is issuing each Record Date
Stockholder one transferable right (each a "Right" and, collectively, the
"Rights") for each Common Share held by such Record Date Stockholder on the
Record Date. Such Rights entitle their holders to acquire during the
subscription period set forth in the Prospectus (the "Subscription Period"),
at the price set forth in such Prospectus (the "Subscription Price"), one
Share for each three Rights, on the terms and conditions set forth in such
Prospectus. No fractional shares will be issued. Any Record Date Stockholder
who fully exercises all Rights initially issued to such Record Date
Stockholder (other than those Rights that cannot be exercised because they
represent the right to acquire less than one Share) will be entitled to
subscribe for, subject to allocation, additional Shares (the
"Over-Subscription Privilege") on the terms and conditions set forth in such
Prospectus. The Rights are transferable and are listed on the New York Stock
Exchange, Inc. under the symbol "JOF.RT".

     We further understand that the Fund has appointed UBS Securities LLC to
act as the dealer manager (the "Dealer Manager") in connection with the Offer
and has authorized the Dealer Manager to form and manage a group of
broker-dealers (each a "Selling Group Member" and collectively the "Selling
Group") to solicit the exercise of Rights and to sell Shares purchased by the
Dealer Manager from the Fund through the exercise of Rights.

     We hereby express our interest in participating in the Offer as a Selling
Group Member.

     We hereby agree with you as follows:

     1.   We have received and reviewed the Fund's prospectus dated November
          14, 2005 (the "Prospectus") relating to the Offer and we understand
          that additional copies of the Prospectus (or of the Prospectus as it
          may be subsequently supplemented or amended, if applicable) and any
          other solicitation materials authorized by the Fund relating to the
          Offer ("Offering Materials") will be supplied to us in reasonable
          quantities upon our


                                     A-1
<PAGE>

          request therefor to you. We agree that we will not use any
          solicitation material other than the Prospectus (as supplemented or
          amended, if applicable) and such Offering Materials and we agree not
          to make any representation, oral or written, to any shareholders or
          prospective shareholders of the Fund that are not contained in the
          Prospectus, unless previously authorized to do so in writing by the
          Fund.

     2.   From time to time during the Subscription Period commencing on
          November 21, 2005 and ending at 5:00 p.m., New York City time, on
          the Expiration Date (the term "Expiration Date" means December 16,
          2005, unless and until the Fund shall, in its sole discretion, have
          extended the period for which the Offer is open, in which event the
          term "Expiration Date" with respect to the Offer will mean the
          latest time and date on which the Offer, as so extended by the Fund,
          will expire), we may solicit the exercise of Rights in connection
          with the Offer. We will be entitled to receive fees in the amounts
          and at the times described in Section 4 of this Selling Group
          Agreement with respect to Shares purchased pursuant to the exercise
          of Rights and with respect to which Computershares Shareholder
          Services, Inc. (the "Subscription Agent") has received, no later
          than 5:00 p.m., New York City time, on the Expiration Date, either
          (i) a properly completed and executed Subscription Certificate
          identifying us as the broker-dealer having been instrumental in the
          exercise of such Rights, and full payment for such Shares, or (ii) a
          Notice of Guaranteed Delivery guaranteeing to the Subscription Agent
          by the close of business of the third business day after the
          Expiration Date a properly completed and duly executed Subscription
          Certificate, similarly identifying us, and full payment for such
          Shares. We understand that we will not be paid these fees with
          respect to Shares purchased pursuant to an exercise of Rights for
          our own account or for the account of any of our affiliates. We also
          understand and agree that we are not entitled to receive any fees in
          connection with the solicitation of the exercise of Rights other
          than pursuant to the terms of this Selling Group Agreement and, in
          particular, that we will not be entitled to receive any fees under
          the Fund's Soliciting Dealer Agreement. We agree to solicit the
          exercise of Rights in accordance with the Securities Act of 1933, as
          amended, the Securities Exchange Act of 1934, as amended, the
          Investment Company Act of 1940, as amended, and the rules and
          regulations under each such Act, any applicable securities laws of
          any state or jurisdiction where such solicitations may be lawfully
          made, the applicable rules and regulations of any self-regulatory
          organization or registered national securities exchange and
          customary practice and subject to the terms of the Subscription
          Agent Agreement between the Fund and the Subscription Agent and the
          procedures described in the Fund's registration statement on Form
          N-2 (File Nos. 333-128763 and 811-05992), as amended (the
          "Registration Statement").

     3.   From time to time during the Subscription Period, we may indicate
          interest in purchasing Shares from the Dealer Manager. We understand
          that from time to time the Dealer Manager intends to offer Shares
          obtained or to be obtained by the Dealer Manager through the
          exercise of Rights to Selling Group Members who have so indicated
          interest at prices which shall be determined by the Dealer Manager
          (the "Offering Price"). We agree that, with respect to any such
          Shares purchased by us from the Dealer Manager, the sale of such
          Shares to us shall be irrevocable, and we will offer them to the
          public at the Offering Price at which we purchase them from the
          Dealer Manager. Shares not sold by us at such Offering Price may be
          offered by us after the next succeeding Offering Price is set at the
          latest Offering Price set by the Dealer Manager. The Dealer Manager
          agrees that, if requested by any Selling Group Member, and subject
          to applicable law, the Dealer Manager will set a new Offering Price
          prior to 4:00 p.m., New York City time, on any business day. We
          agree to advise the Dealer Manager from time to time upon request,


                                     A-2
<PAGE>


          prior to the termination of this Selling Group Agreement, of the
          number of Shares remaining unsold which were purchased by us from
          the Dealer Manager and, upon the Dealer Manager's request, we will
          resell to the Dealer Manager any of such Shares remaining unsold at
          the purchase price thereof if in the Dealer Manager's opinion such
          Shares are needed to make delivery against sales made to other
          Selling Group Members. Any shares purchased hereunder from the
          Dealer Manager shall be subject to regular way settlement through
          the facilities of The Depository Trust Company.

     4.   We understand that you will remit to us on or before the tenth
          business day following the day the Fund issues Shares after the
          Expiration Date, following receipt by you from the Fund of the
          Dealer Manager Fee (as defined in the Dealer Manager Agreement,
          dated November 14, 2005, among the Fund, the Manager and UBS
          Securities LLC as the dealer manager (the "Dealer Manager
          Agreement"), a fee (the "Selling Fee") equal to 2.50% of the
          Subscription Price per Share for (A) each Share issued pursuant to
          the exercise of Rights or the Over-Subscription Privilege pursuant
          to each Subscription Certificate upon which we are designated, as
          certified to you by the Subscription Agent, as a result of our
          solicitation efforts in accordance with Section 2 and (B) each Share
          sold by the Dealer Manager to us in accordance with Section 3 less
          any Shares resold to the Dealer Manager in accordance with Section
          3. Your only obligation with respect to payment of the Selling Fee
          to us is to remit to us amounts owing to us and actually received by
          you from the Fund. Except as aforesaid, you shall be under no
          liability to make any payments to us pursuant to this Selling Group
          Agreement. We also understand that the Fund and the Manager have
          agreed to indemnify us pursuant to the terms set forth in the Dealer
          Manager Agreement.

     5.   We agree that you, as Dealer Manager, have full authority to take
          such action as may seem advisable to you in respect of all matters
          pertaining to the Offer. You are authorized to approve on our behalf
          any amendments or supplements to the Registration Statement or the
          Prospectus.

     6.   We represent that we are a member in good standing of the NASD and,
          in making sales of Shares, agree to comply with all applicable rules
          of the NASD including, without limitation, Rule 2740 and Rule 2790
          of the NASD's Conduct Rules. We understand that no action has been
          taken by you or the Fund to permit the solicitation of the exercise
          of Rights or the sale of Shares in any jurisdiction (other than the
          United States) where action would be required for such purpose. We
          agree that we will not, without your approval in advance, buy, sell,
          deal or trade in, on a when-issued basis or otherwise, the Rights or
          the Shares or any other option to acquire or sell Shares for our own
          account or for the accounts of customers, except as provided in
          Sections 2 and 3 hereof and except that we may buy or sell Rights or
          Shares in brokerage transactions on unsolicited orders which have
          not resulted from activities on our part in connection with the
          solicitation of the exercise of Rights and which are executed by us
          in the ordinary course of our brokerage business. We will keep an
          accurate record of the names and addresses of all persons to whom we
          give copies of the Registration Statement, the Prospectus, any
          preliminary prospectus (or any amendment or supplement thereto) or
          any Offering Materials and, when furnished with any subsequent
          amendment to the Registration Statement and any subsequent
          prospectus, we will, upon your request, promptly forward copies
          thereof to such persons.

     7.   Nothing contained in this Selling Group Agreement will constitute
          the Selling Group Members partners with the Dealer Manager or with
          one another or create any association


                                     A-3
<PAGE>

          between those parties, or will render the Dealer Manager or the Fund
          liable for the obligations of any Selling Group Member. The Dealer
          Manager will be under no liability to make any payment to any
          Selling Group Member other than as provided in Section 4 of this
          Selling Group Agreement, and will be subject to no other liabilities
          to any Selling Group Member, and no obligations of any sort will be
          implied. We agree to indemnify and hold harmless the Fund, the
          Manager, you and each other Selling Group Member and each person, if
          any, who controls you and any such Selling Group Member within the
          meaning of either Section 15 of the Securities Act or Section 20 of
          the Exchange Act, against loss or liability caused by any breach by
          us of the terms of this Selling Group Agreement.

     8.   We agree to pay any transfer taxes which may be assessed and paid on
          account of any sales or transfers for our account.

     9.   All communications to you relating to the Offer will be addressed
          to: UBS Securities LLC, 299 Park Avenue, New York, New York
          10171-0026, Attn: Syndicate Department.

     10.  This Selling Group Agreement will be governed by the internal laws
          of the State of New York.


                                     A-4
<PAGE>


     A signed copy of this Selling Group Agreement will be promptly returned
to the Selling Group Member at the address set forth below.

                               Very truly yours,

                               UBS SECURITIES LLC

                               By:  _______________________________________
                                    Name:
                                    Title:


                               By:  _______________________________________
                                    Name:
                                    Title:


PLEASE COMPLETE THE INFORMATION BELOW


Printed Firm Name                                      Address


Contact at Selling Group Member


Authorized Signature                                   Area Code and Telephone


Number


Name and Title                                         Facsimile Number

Dated:

Payment of the Selling Fee shall be mailed
by check to the following address:


                                     A-5
<PAGE>



                                                                     Exhibit B

                    JAPAN SMALLER CAPITALIZATION FUND, INC.

                       5,282,128 Shares of Common Stock
                 Issuable Upon Exercise of Transferable Rights
                         to Subscribe for Such Shares

                          SOLICITING DEALER AGREEMENT

            THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,

                      DECEMBER 16, 2005, UNLESS EXTENDED

                                                         New York, New York
                                                          November [ ], 2005

To Securities Dealers and Brokers:

     Japan Smaller Capitalization Fund, Inc., a Maryland corporation (the
"Fund"), is issuing to its shareholders of record ("Record Date Stockholders")
as of the close of business on November 21, 2005 (the "Record Date")
transferable rights ("Rights") to subscribe for an aggregate of up to
5,282,128 shares (the "Shares") of common stock, par value $0.10 per share
(the "Common Shares"), of the Fund upon the terms and subject to the
conditions set forth in the Fund's prospectus (the "Prospectus") dated
November 14, 2005 (the "Offer"). Each such Record Date Stockholder is being
issued one Right for each full Common Share owned on the Record Date. Such
Rights entitle their holders to acquire during the Subscription Period (as
hereinafter defined) at the Subscription Price (as hereinafter defined) one
Share for each three Rights, on the terms and conditions set forth in such
Prospectus. No fractional shares will be issued. Any Record Date Stockholder
who fully exercises all Rights initially issued to such Record Date
Stockholder (other than those Rights that cannot be exercised because they
represent the right to acquire less than one Share) will be entitled to
subscribe for, subject to allocation, additional Shares (the
"Over-Subscription Privilege") on the terms and conditions set forth in such
Prospectus. The Rights are transferable and are listed on the New York Stock
Exchange, Inc. (the "NYSE") under the symbol "JOF.RT."

     The Subscription Price will be 90% of the average of the last reported
sale prices of a share of the Fund's Common Stock on the NYSE on the
Expiration Date (as hereinafter defined) and the four preceding trading days.
The Subscription Period will commence on November 21, 2005 and end at 5:00
p.m., New York City time on the Expiration Date (the term "Expiration Date"
means December 16, 2005, unless and until the Fund shall, in its sole
discretion, have extended the period for which the Offer is open, in which
event the term "Expiration Date" with respect to the Offer will mean the
latest time and date on which the Offer, as so extended by the Fund, will
expire).

     For the duration of the Offer, the Fund has authorized and the Dealer
Manager (as hereinafter defined) has agreed to reallow a fee to any qualified
broker or dealer executing a Soliciting Dealer Agreement who solicits the
exercise of Rights and the Over-Subscription Privilege in connection with the
Offer and who complies with the procedures described below (a "Soliciting
Dealer"). Upon timely delivery to ComputerShares, the Fund's Subscription
Agent for the Offer, of payment for Shares purchased pursuant to the exercise
of Rights and the Over-Subscription Privilege and of properly completed and
executed documentation as set forth in this Soliciting Dealer Agreement, a
Soliciting Dealer will be entitled to receive a fee (the "Soliciting Fee")
equal to 0.50% of the Subscription Price per


                                     B-1
<PAGE>

Share so purchased subject to a maximum fee based on the number of Common
Shares held by such Soliciting Dealer through The Depository Trust Company on
the Record Date; provided, however, that no payment shall be due with respect
to the issuance of any Shares until payment therefor is actually received. A
qualified broker or dealer is a broker or dealer which is a member of a
registered national securities exchange in the United States or the NASD or
any foreign broker or dealer not eligible for membership who agrees to conform
to the Rules of Fair Practice of the NASD, including Sections 2730, 2740, 2420
and 2750 thereof, in making solicitations in the United States to the same
extent as if it were a member thereof.

     The Fund has authorized and the Dealer Manager has agreed to pay the
Soliciting Fees payable to the undersigned Soliciting Dealer, and the Fund and
the Manager have agreed to indemnify such Soliciting Dealer on the terms set
forth in the Dealer Manager Agreement, dated November 14, 2005, among the
Fund, the Manager and UBS Securities LLC as the dealer manager (the "Dealer
Manager"). Solicitation and other activities by Soliciting Dealers may be
undertaken only in accordance with the applicable rules and regulations of the
Securities and Exchange Commission and only in those states and other
jurisdictions where such solicitations and other activities may lawfully be
undertaken and in accordance with the laws thereof. Compensation will not be
paid for solicitations in any state or other jurisdiction in which, in the
opinion of counsel to the Fund or counsel to the Dealer Manager, such
compensation may not lawfully be paid. No Soliciting Dealer shall be paid
Soliciting Fees with respect to Shares purchased pursuant to an exercise of
Rights and the Over-Subscription Privilege for its own account or for the
account of any affiliate of the Soliciting Dealer. No Soliciting Dealer or any
other person is authorized by the Fund or the Dealer Manager to give any
information or make any representations in connection with the Offer other
than those contained in the Prospectus and other authorized solicitation
material furnished by the Fund through the Dealer Manager. No Soliciting
Dealer is authorized to act as agent of the Fund or the Dealer Manager in any
connection or transaction. In addition, nothing herein contained shall
constitute the Soliciting Dealers partners with the Dealer Manager or with one
another, or agents of the Dealer Manager or of the Fund, or create any
association between such parties, or shall render the Dealer Manager or the
Fund liable for the obligations of any Soliciting Dealer. The Dealer Manager
shall be under no liability to make any payment to any Soliciting Dealer, and
shall be subject to no other liabilities to any Soliciting Dealer, and no
obligations of any sort shall be implied.

     In order for a Soliciting Dealer to receive Soliciting Fees, the
Subscription Agent must have received from such Soliciting Dealer no later
than 5:00 p.m., New York City time, on the Expiration Date, either (i) a
properly completed and duly executed Subscription Certificate with respect to
Shares purchased pursuant to the exercise of Rights and the Over-Subscription
Privilege and full payment for such Shares or (ii) a Notice of Guaranteed
Delivery guaranteeing delivery to the Subscription Agent by close of business
on the third business day after the Expiration Date of (a) a properly
completed and duly executed Subscription Certificate with respect to Shares
purchased pursuant to the exercise of Rights and the Over-Subscription
Privilege and (b) full payment for such Shares. Soliciting Fees will only be
paid after receipt by the Subscription Agent of a properly completed and duly
executed Soliciting Dealer Agreement and a Subscription Certificate
designating the Soliciting Dealer in the applicable portion hereof. In the
case of a Notice of Guaranteed Delivery, Soliciting Fees will only be paid
after delivery in accordance with such Notice of Guaranteed Delivery has been
effected. Soliciting Fees will be paid by the Fund (through the Subscription
Agent) to the Soliciting Dealer by check to an address designated by the
Soliciting Dealer below by the tenth business day following the day the Fund
issues Shares after the Expiration Date.

     All questions as to the form, validity and eligibility (including time of
receipt) of this Soliciting Dealer Agreement will be determined by the Fund,
in its sole discretion, which determination shall be final and binding. Unless
waived, any irregularities in connection with a Soliciting Dealer Agreement or


                                     B-2
<PAGE>

delivery thereof must be cured within such time as the Fund shall determine.
None of the Fund, the Dealer Manager, the Subscription Agent, the Information
Agent for the Offer or any other person will be under any duty to give
notification of any defects or irregularities in any Soliciting Dealer
Agreement or incur any liability for failure to give such notification.

     The acceptance of Soliciting Fees from the Fund by the undersigned
Soliciting Dealer shall constitute a representation by such Soliciting Dealer
to the Fund that: (i) it has received and reviewed the Prospectus; (ii) in
soliciting purchases of Shares pursuant to the exercise of the Rights and the
Over-Subscription Privilege, it has complied with the applicable requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
applicable rules and regulations thereunder, any applicable securities laws of
any state or jurisdiction where such solicitations were made, and the
applicable rules and regulations of any self-regulatory organization or
registered national securities exchange; (iii) in soliciting purchases of
Shares pursuant to the exercise of the Rights and the Over-Subscription
Privilege, it has not published, circulated or used any soliciting materials
other than the Prospectus and any other authorized solicitation material
furnished by the Fund through the Dealer Manager; (iv) it has not purported to
act as agent of the Fund or the Dealer Manager in any connection or
transaction relating to the Offer; (v) the information contained in this
Soliciting Dealer Agreement is, to its best knowledge, true and complete; (vi)
it is not affiliated with the Fund; (vii) it will not accept Soliciting Fees
paid by the Fund pursuant to the terms hereof with respect to Shares purchased
by the Soliciting Dealer pursuant to an exercise of Rights and the
Over-Subscription Privilege for its own account or the account of any
affiliates; (viii) it will not remit, directly or indirectly, any part of
Soliciting Fees paid by the Fund pursuant to the terms hereof to any
beneficial owner of Shares purchased pursuant to the Offer; and (ix) it has
agreed to the amount of the Soliciting Fees and the terms and conditions set
forth herein with respect to receiving such Soliciting Fees. By returning a
Soliciting Dealer Agreement and accepting Soliciting Fees, a Soliciting Dealer
will be deemed to have agreed to indemnify the Fund, the Manager and the
Dealer Manager against losses, claims, damages and liabilities to which the
Fund may become subject as a result of the breach of such Soliciting Dealer's
representations made herein and described above. In making the foregoing
representations, Soliciting Dealers are reminded of the possible applicability
of the anti-manipulation rules under the Exchange Act if they have bought,
sold, dealt in or traded in any Shares for their own account since the
commencement of the Offer.

     Upon expiration of the Offer, no Soliciting Fees will be payable to
Soliciting Dealers with respect to Shares purchased thereafter.

     Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Dealer Manager Agreement or, if not defined therein,
in the Prospectus.

     This Soliciting Dealer Agreement will be governed by the laws of the
State of New York.

     Please execute this Soliciting Dealer Agreement below accepting the terms
and conditions hereof and confirming that you are a member firm of the NASD or
a foreign broker or dealer not eligible for membership who has conformed to
the Rules of Fair Practice of the NASD, including Sections 2730, 2740, 2420
and 2750 thereof, in making solicitations of the type being undertaken
pursuant to the Offer in the United States to the same extent as if you were a
member thereof, and certifying that you have solicited the purchase of the
Shares pursuant to exercise of the Rights and the Over-Subscription Privilege,
all as described above, in accordance with the terms and conditions set forth
in this Soliciting Dealer Agreement. Please forward two executed copies of
this Soliciting Dealer Agreement to: UBS Securities LLC, 299 Park Avenue, New
York, New York 10171-0026, Attn: Syndicate Department.

     A signed copy of this Soliciting Dealer Agreement will be promptly
returned to the Soliciting Dealer at the address set forth below.


                                     B-3
<PAGE>

                                    Very truly yours,

                                    UBS SECURITIES LLC

                                    By:
                                       ---------------------------------------
                                       Name:
                                       Title:


                                    By:
                                       ---------------------------------------
                                       Name:
                                       Title:


PLEASE COMPLETE THE INFORMATION BELOW


Printed Firm Name                                      Address


Contact at Soliciting Dealer


Authorized Signature                                   Area Code and Telephone


Number


Name and Title                                         Facsimile Number

Dated:

Payment of the Soliciting Fee shall be mailed by check to
the following address:



                                     B-4

</TEXT>
</DOCUMENT>
