DISTRIBUTION AND SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT is made as of this __ day of _____________, 2005
between The Japan Fund, Inc. (the "FUND"), a Maryland corporation and SEI
Investments Distribution Co. (the "DISTRIBUTOR"), a Pennsylvania
corporation.
WHEREAS, the Fund is registered as an open-end management investment
company with the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940, as amended (the "1940 ACT"), and its shares are
registered with the SEC under the Securities Act of 1933, as amended (the "1933
ACT");
WHEREAS, the Distributor is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended; and
WHEREAS, the Board of Directors of the Fund (the "BOARD") has
adopted a Rule 12b-1 Distribution and Shareholder Servicing Plan (the "PLAN")
pursuant to Rule 12b-1 under the 1940 Act that, among other things, authorizes
the Fund to enter into this Agreement with Distributor, as principal underwriter
of the shares of the Fund, so that Distributor may provide distribution and
shareholder services (collectively, "SERVICES") for the benefit of the Fund and
its shareholders.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Fund and Distributor hereby agree as follows:
ARTICLE 1. SALE OF SHARES. The Fund grants to the Distributor the
exclusive right to sell shares of the Fund (the "SHARES") at the net asset value
per Share, plus any applicable sales charges in accordance with the current
prospectus, as agent and on behalf of the Fund, during the term of this
Agreement and subject to the registration requirements of the 1933 Act, the
rules and regulations of the SEC and the laws governing the sale of securities
in the various states ("BLUE SKY LAWS").
ARTICLE 2. SOLICITATION OF SALES. In consideration of these rights
granted to the Distributor, the Distributor agrees to use all reasonable efforts
in connection with the distribution of Shares of the Fund; PROVIDED that the
Distributor shall not be prevented from entering into like arrangements with
other issuers. The provisions of this paragraph do not obligate the Distributor
to register as a broker or dealer under the Blue Sky Laws of any jurisdiction
when it determines it would be uneconomical for it to do so or to maintain its
registration in any jurisdiction in which it is now registered or obligate the
Distributor to sell any particular number of Shares.
ARTICLE 3. AUTHORIZED REPRESENTATIONS. The Distributor is not
authorized by the Fund to give any information or to make any representations
other than those contained in the current registration statements and
prospectuses of the Fund filed with the SEC or contained in shareholder reports
or other material that may be prepared by or on behalf of the Fund for the
Distributor's use. The Distributor may prepare and distribute sales literature
and other material as it may deem
appropriate, PROVIDED that such literature and materials have been prepared in
accordance with applicable rules and regulations.
ARTICLE 4. REGISTRATION OF SHARES. The Fund agrees that it will take
all action necessary to register Shares under the federal and state securities
laws so that there will be available for sale the number of Shares the
Distributor may reasonably be expected to sell and to pay all fees associated
with said registration. The Fund shall make available to the Distributor such
number of copies of its currently effective prospectus and statement of
additional information as the Distributor may reasonably request. The Fund shall
furnish to the Distributor copies of all information, financial statements and
other papers which the Distributor may reasonably request for use in connection
with the distribution of Shares of the Fund.
ARTICLE 5. SHAREHOLDER SERVICING. The Distributor shall provide, or
shall arrange for the provision of, shareholder services and/or account
maintenance services to Fund shareholders who may from time to time directly or
indirectly beneficially own shares of the Fund.
ARTICLE 6. SERVICES. In fulfilling the Distributor's obligations
under Article 2 and Article 5 of this Agreement, it is contemplated that the
Services provided by the Distributor, whether provided directly by the
Distributor or through arrangement by the Distributor with a third party, may
include, but shall not necessarily be limited to:
(a) receiving, aggregating and processing purchase, exchange and redemption
orders of shareholders;
(b) communicating periodically with shareholders concerning administrative
issues relating to their accounts, and answering questions and handling
correspondence from shareholders about their accounts;
(c) maintaining account records and providing beneficial owners with
account statements;
(d) processing dividend payments for Shares held beneficially;
(e) providing sub-accounting services for Shares held beneficially;
(f) disseminating tax information and issuing and mailing shareholder
reports, other Fund information, and transaction confirmations to
beneficial owners of Shares;
(g) forwarding shareholder communications to beneficial owners of Shares;
(h) receiving, tabulating and transmitting proxies executed by beneficial
owners of Shares;
(i) general account administration activities, including crediting
distributions from the Fund to shareholder accounts and determining
amounts to be reinvested in the Fund;
(j) advertising, preparing sales literature and other promotional
materials, undertaking related printing and distribution services, and,
as necessary, making payments (including incentive compensation) to
third parties, including, wholesalers and consultants, that provide
distribution, marketing, advertising or shareholder related services;
(k) paying employees or agents of the Distributor, other securities
broker-dealers, sales personnel, or "associated persons" of the Fund
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who engage in or support the provision of services to investors and/or
distribution of the Shares, including salary, commissions, telephone,
travel and related overhead expenses;
(l) training sales personnel regarding the Fund;
(m) preparing, printing and distributing prospectuses, statements of
additional information and reports to prospective investors;
(n) organizing and conducting sales seminars and meetings;
(o) paying fees to one or more sub-distributors in respect of the average
daily value of Shares beneficially owned by investors for whom the
sub-distributor is the dealer of record or holder of record, or
beneficially owned by shareholders with whom the Distributor has a
servicing relationship;
(p) incurring costs and expenses in implementing and operating the Plan,
including capital or other expenses of associated equipment, rent,
salaries, bonuses, interest, and other overhead or financing charges;
and
(q) providing such other administrative and personal services as may be
reasonably requested and which are deemed necessary and beneficial to
the holders of the Shares.
ARTICLE 7. REIMBURSEMENT FOR SERVICES. (a) The Fund shall, subject to
the terms of this Agreement, reimburse the Distributor on a monthly basis for
its expenses incurred in providing the Services under this Agreement. The
parties agree that, except as otherwise provided in section 7(l) hereof, the
term "expense," as used in this Article 7, may include an element of reasonable
profit to the Distributor.
(b) Regardless of the amount of expenses incurred by the Distributor, the
maximum annual amount of expenses reimbursable by the Fund pursuant to this
Agreement and the Plan shall not exceed the lesser of (i) the expenses incurred
by the Distributor for that period that would be reimbursable under the terms of
the Plan and this Agreement if this section 7(b) were not given effect and (ii)
the Maximum Reimbursable Amount. The term "MAXIMUM REIMBURSABLE AMOUNT" means:
(i) for the twelve month period following the date that this Agreement becomes
effective in accordance with Article 13 hereof, 0.15% of the Fund's average
daily net assets on an annual basis; and (ii) for any period following such
twelve month period, such amount as is agreed to from time to time by the Board
and the Distributor in accordance with this Agreement and subject to the Plan.
(c) At least a reasonable amount of time prior to the first quarterly
meeting of the Board following (i) approval of the Plan by the shareholders and
the Board and approval of this Agreement by the Board, (ii) the end of the
second quarter of each fiscal year of the Fund in which this Agreement is in
effect, and (iii) the end of the fourth quarter of each fiscal year of the Fund
in which this Agreement is in effect (each such meeting described in clauses
(i), (ii), and (iii), a "BUDGET MEETING"), the Distributor shall submit to the
Board a proposed budget describing (as provided in section 7(d) hereof) the
expenses that the Distributor proposes to incur under this Agreement during the
period of time between (A) the Budget Meeting for which the proposed budget is
being submitted and (B) the next succeeding Budget Meeting (such period of time,
a "BUDGET PERIOD").
(d) Each proposed budget shall describe in detail the identity of the
recipient (if known) of any payments proposed to be made under this Agreement,
the purpose
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for which the expenses are proposed to be incurred, the Distributor's estimated
cost in providing the services to which the proposed expenses relate, and such
other information as the Board may reasonably request.
(e) At the Budget Meeting for which a proposed budget is submitted, the
Board shall either (X) approve the proposed budget in whole or in part with such
modifications as the Board and the Distributor shall agree (any such proposed
budget as approved in whole or in part, an "APPROVED BUDGET") or (Y) disapprove
the proposed budget.
(f) During the period between (A) approval of the Plan by the shareholders
and the Board and approval of this Agreement by the Board and (B) the date the
first Approved Budget is approved (the "INITIAL PERIOD"), the Distributor shall
incur under this Agreement only those expenses that are reasonable and incurred
in good faith. During any Budget Period for which an Approved Budget is in
effect, the Distributor shall incur expenses under this Agreement only in
accordance with such Approved Budget. During any period for which an Approved
Budget is not in effect (other than the Initial Period), the Distributor shall
incur expenses under this Agreement as if the Approved Budget most recently in
effect had been reapproved for such period. The expenses (i) that the
Distributor is permitted to incur under this section 7(f) and (ii) that do not
exceed either the Maximum Reimbursable Amount or the maximum amount of expenses
reimbursable under the Plan are referred to herein as "ALLOWED EXPENSES."
(g) The Distributor shall be reimbursed (subject to sections 7(b) and 7(l)
hereof) at the end of each month for the expenses it has incurred under this
Agreement during such month, PROVIDED that such reimbursements are subject to
repayment to the Fund in accordance with sections 7(h) and 7(i) hereof.
(h) At least a reasonable amount of time prior to each quarterly meeting of
the Board, the Distributor shall submit to the Board (and the Board shall
review) a written report (a "REPORT") of all expenses for which the Distributor
has been reimbursed under this Agreement since the immediately preceding Report,
if any, was submitted to the Board (such expenses with respect to any Report,
the "REIMBURSED EXPENSES"). Each Report shall include:
(i) such information as is necessary for the Board to determine whether
the Reimbursed Expenses are Allowed Expenses;
(ii) the identity of the recipient of any payment made by the Distributor
for which the Distributor was reimbursed;
(iii) the purpose for which the Reimbursed Expenses were incurred;
(iv) the Distributor's cost in providing the services to which the
Reimbursed Expenses relate; and
(v) such other information as the Board may reasonably request.
(i) At each quarterly meeting of the Board following the submission of a
Report, the Board shall review the Report and shall determine in good faith
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whether the Reimbursed Expenses described in the Report are Allowed Expenses. A
decision by the Board that an expense is an Allowed Expense is binding and final
to the extent that the information provided about the expense by the Distributor
was accurate and complete. Any Reimbursed Expenses that the Board determines are
not Allowed Expenses are referred to herein as "DISALLOWED EXPENSES."
(j) When the Distributor submits a proposed budget to the Board, the
Distributor may condition the proposed budget on the Board's agreement that the
President of the Fund have the authority to approve expenses during the relevant
Budget Period that were not contemplated when the proposed budget was submitted.
To the extent the Board agrees to this condition, expenses approved by the
President shall be deemed to be Allowed Expenses unless reimbursement of such
expenses would cause the Fund to exceed the fee limit under the 12b-1 Plan.
(k) Within 30 days of the date of the Board's determination that a
Reimbursed Expense is a Disallowed Expense, the Distributor shall repay the
Fund, without interest, the total amount of reimbursement payments it has
received from the Fund with respect to such Disallowed Expense; PROVIDED that
during such 30-day period, the Distributor may submit to the Chairman of the
Board such materials as the Distributor deems appropriate to demonstrate that
the Disallowed Expense was incorrectly determined by the Board to be a
Disallowed Expense. In the event of a submission to the Chairman, the Chairman
may either (i) refer to the full Board for consideration at the next meeting of
the Board the question of whether the Disallowed Expense was incorrectly
determined to be a Disallowed Expense or (ii) affirm the Board's determination
that the expense is a Disallowed Expense, in which case the Distributor shall
have 10 days from the date of the Chairman's affirmation to repay the Fund for
such expense. If the Chairman refers the question to the Board in accordance
with clause (i) of the preceding sentence, the Board, in its discretion, shall
either (X) deem the expense to be an Allowed Expense (and therefore not subject
to repayment by the Distributor), PROVIDED that the expense may be deemed an
Allowed Expense only if doing so would not cause either the Maximum Reimbursable
Amount or the maximum amount of expenses reimbursable under the Plan to be
exceeded; or (Y) affirm its earlier determination that the expense is a
Disallowed Expense, in which case the Distributor shall have 10 days from the
date of the Board's affirmation to repay the Fund for such expense.
(l) Any expense incurred by the Distributor that is not reimbursable
pursuant to this Article 7 at the time such expense is incurred (including
expenses not reimbursable due to the Maximum Reimbursable Amount limit or the
limitations imposed by the Plan) and any Disallowed Expense may not be carried
forward for future payment. All such expenses shall be the sole responsibility
of the Distributor. Nothing in this Agreement shall be construed to require the
Distributor to make an expenditure for which it cannot be reimbursed.
(m) Expenses shall be deemed incurred by the Distributor whether paid
directly by the Distributor or by a third party to the extent reimbursable by
the Distributor.
(n) For any expense incurred by the Distributor due to a payment to a third
party, the Distributor shall be reimbursed only to the extent of the
Distributor's payment to the third party.
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ARTICLE 8. OTHER PAYMENTS. For providing the Services under this
Agreement, the Distributor shall also:
(a) receive from the Fund all front-end sales charges, if any, on purchases
of Shares of the Fund sold subject to such charges as described in the Fund's
Registration Statement and current prospectuses, as amended from time to time.
The Distributor, or brokers, dealers and other financial institutions and
intermediaries that have entered into sub-distribution agreements with the
Distributor, may collect the gross proceeds derived from the sale of such
Shares, remit the net asset value thereof to the Fund upon receipt of the
proceeds and retain the applicable sales charge; and
(b) receive from the Fund all contingent deferred sales charges ("CDSCS"),
if any, applied on redemptions of Shares subject to such charges on the terms
and subject to such waivers as are described in the Fund's Registration
Statement and current prospectuses, as amended from time to time, or as
otherwise required pursuant to applicable law.
ARTICLE 9. REALLOWANCE. The Distributor may reallow any or all of the
distribution or service fees, front-end sales charges and contingent deferred
sales charges which it is paid by the Fund to such brokers, dealers and other
financial institutions and intermediaries as the Distributor may from time to
time determine.
ARTICLE 10. INDEMNIFICATION OF DISTRIBUTOR. The Fund agrees to
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages, or expense and reasonable counsel
fees and disbursements incurred in connection therewith), arising by reason of
any person acquiring any Shares, based upon the ground that the registration
statement, prospectus, shareholder reports or other information filed or made
public by the Fund (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements made not misleading. However, the Fund
does not agree to indemnify the Distributor or hold it harmless to the extent
that the statements or omission was made in reliance upon, and in conformity
with, information furnished to the Fund by or on behalf of the Distributor.
In no case (i) is the indemnity of the Fund to be deemed to protect the
Distributor against any liability to the Fund or its shareholders to which the
Distributor or such person otherwise would be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Fund to be liable to the Distributor under the
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
other person shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or such other person (or after the Distributor or the person shall
have received notice of service on any designated agent). However, failure to
notify the Fund of any claim shall not relieve the Fund from any liability which
it may have to the Distributor or any person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph.
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The Fund shall be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any claims subject to this indemnity provision. If the Fund elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Fund and satisfactory to the indemnified defendants in the suit
whose approval shall not be unreasonably withheld. In the event that the Fund
elects to assume the defense of any suit and retain counsel, the indemnified
defendants shall bear the fees and expenses of any additional counsel retained
by them. If the Fund does not elect to assume the defense of a suit, it will
reimburse the indemnified defendants for the reasonable fees and expenses of any
counsel retained by the indemnified defendants.
The Fund agrees to notify the Distributor promptly of the commencement
of any litigation or proceedings against it or any of its officers or directors
in connection with the issuance or sale of any of its Shares.
ARTICLE 11. INDEMNIFICATION OF FUND. The Distributor covenants and
agrees that it will indemnify and hold harmless the Fund and each of its
directors and officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act, against any loss, liability, damages,
claim or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, damages, claim or expense and reasonable counsel
fees incurred in connection therewith) based upon the 1933 Act or any other
statute or common law and arising by reason of any person acquiring any Shares,
and alleging a wrongful act of the Distributor or any of its employees or
alleging that the registration statement, prospectus, shareholder reports or
other information filed or made public by the Fund (as from time to time
amended) included an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make the statements
not misleading, insofar as the statement or omission was made in reliance upon
and in conformity with information furnished to the Fund by or on behalf of the
Distributor.
In no case (i) is the indemnity of the Distributor in favor of the Fund
or any other person indemnified to be deemed to protect the Fund or any other
person against any liability to which the Fund or such other person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Fund or upon any person (or after the
Fund or such person shall have received notice of service on any designated
agent). However, failure to notify the Distributor of any claim shall not
relieve the Distributor from any liability which it may have to the Fund or any
person against whom the action is brought otherwise than on account of its
indemnity agreement contained in this paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if the Distributor elects to assume the defense, the
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defense shall be conducted by counsel chosen by the Distributor and satisfactory
to the indemnified defendants whose approval shall not be unreasonably withheld.
In the event that the Distributor elects to assume the defense of any suit and
retain counsel, the defendants in the suit shall bear the fees and expenses of
any additional counsel retained by them. If the Distributor does not elect to
assume the defense of any suit, it will reimburse the indemnified defendants in
the suit for the reasonable fees and expenses of any counsel retained by them.
The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it or any of its officers in connection
with the issue and sale of any of the Fund's Shares.
ARTICLE 12. CONSEQUENTIAL DAMAGES. In no event and under no
circumstances shall either party to this Agreement be liable to anyone,
including, without limitation, the other party, for consequential damages for
any act or failure to act under any provision of this Agreement.
ARTICLE 13. EFFECTIVE DATE AND TERM. This Agreement shall become
effective upon the later of (i) its approval by the Board in accordance with
Rule 12b-1 and its execution and (ii) the approval of the Plan by both the Board
and shareholders in accordance with Rule 12b-1. Unless terminated as provided,
this Agreement shall continue in force for one year from the date of its
execution and thereafter from year to year, PROVIDED that such annual
continuance is approved by a vote of the Board, and of the directors of the Fund
who are not interested persons of the Fund and have no direct or indirect
financial interest in the operation of the Plan or any agreements related to the
Plan ("QUALIFIED DIRECTORS"), cast in person at a meeting called for the purpose
of voting on the approval.
ARTICLE 14. TERMINATION. This Agreement shall automatically terminate
in the event of its assignment. In addition, this Agreement may at any time be
terminated without penalty by the Distributor, by a vote of a majority of
Qualified Directors or by vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to the other party.
ARTICLE 15. NOTICES. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Fund, 000 Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxx, XX 00000,
Attn.: Xxxx XxXxxxxx; and if to the Distributor, Xxx Xxxxxxx Xxxxxx Xxxxx, Xxxx,
Xxxxxxxxxxxx 00000.
ARTICLE 16. LIMITATION OF LIABILITY. A copy of the charter of the Fund
is on file with the Secretary of State of the State of Maryland, and notice is
hereby given that this Agreement is executed on behalf of the Directors of the
Fund as Directors and not individually and that the obligations of this
instrument are not binding upon any of the Directors, officers or shareholders
of the Fund individually but binding only upon the assets and property of the
Fund.
ARTICLE 17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement between the parties hereto and supersedes any prior
agreement, draft or agreement or proposal with respect to the subject matter
hereof, including (i) that certain Shareholder Services Agreement, dated as of
October 4, 2002, between the Fund and Distributor, (ii) that certain
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Distribution Agreement, dated as of October 4, 2002, between the Fund and
Distributor and (iii) that certain Distribution Agreement dated as of July 28,
2004 between the Fund and Distributor. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by the party against
which enforcement of such change or waiver is sought.
ARTICLE 18. ANTI-MONEY LAUNDERING. The Distributor represents that it
is in compliance and will continue to be in compliance with all applicable
anti-money laundering laws and regulations, including the Bank Secrecy Act
("BSA") and applicable guidance issued by the SEC and the guidance and rules of
the National Association of Securities Dealers, Inc. (the "NASD").
The Distributor represents that it has in place an anti-laundering
program that complies with the law in jurisdictions in which Shares are
distributed, including applicable provisions of the BSA, the USA PATRIOT Act of
2001 and programs administered by the U.S. Department of the Treasury's Office
of Foreign Assets Control.
ARTICLE 19. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Delaware and the applicable provisions
of the 1940 Act. To the extent that the applicable laws of the State of
Delaware, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
ARTICLE 20. MULTIPLE ORIGINALS. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 21. SEVERABILITY. If any part, term or provision of this
Agreement is held to be illegal, in conflict with any law or otherwise invalid,
the remaining portion or portions shall be considered severable and not be
affected, and the rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
ARTICLE 22. MEANING OF CERTAIN TERMS. As used in this Agreement, the
terms "assignment," "interested person," and "the vote of a majority of the
outstanding voting securities" shall have the respective meanings specified in
the 1940 Act and the rules and regulations thereunder, subject to such
exemptions as may be granted by the Securities and Exchange Commission.
IN WITNESS WHEREOF, the Fund and Distributor have each duly executed
this Agreement, as of the day and year above written.
THE JAPAN FUND, INC.
By:
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Attest:
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SEI INVESTMENTS DISTRIBUTION CO.
By:
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Attest:
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