As filed with the Securities and Exchange Commission on August 5, 1997
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement / / Confidential, for Use of
the Commission Only
/ / Definitive Proxy Statement (as permitted by Rule
14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
KOREA EQUITY FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration state-
ment number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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2
KOREA EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038
-----------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 24, 1997
-----------------
TO THE SHAREHOLDERS OF
KOREA EQUITY FUND, INC.:
Notice is hereby given that the 1997 Annual Meeting of
Shareholders (the "Meeting") of Korea Equity Fund, Inc. (the "Fund") will
be held at the offices of Nomura Capital Management, Inc., 180 Maiden Lane,
New York, New York on Wednesday, September 24, 1997 at 10:30 A.M. for the
following purposes:
(1) To elect six Directors to serve for the ensuing year;
(2) To consider and act upon a proposal to ratify
the selection of Price Waterhouse LLP as independent accountants of the
Fund for its fiscal year ending October 31, 1997;
(3) To consider and act upon a proposal to approve a new
Management Agreement between the Fund and Nomura Asset Management U.S.A. Inc.,
a new Investment Advisory Agreement between Nomura Asset Management U.S.A. Inc.
and Nomura Asset Management Co., Ltd., and a new Investment Sub-Advisory
Agreement between Nomura Asset Management U.S.A. Inc. and LG Investment Trust
Management Co., Ltd.; and
(4) To transact such other business as may properly
come before the Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on August
4, 1997, as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting or any adjournment thereof.
A complete list of the shareholders of the Fund entitled to vote at
the Meeting will be available and open to the examination of any shareholder
of the Fund for any purpose germane to the Meeting during ordinary business
hours from and after September 10, 1997, at the offices of the Fund, 180
Maiden Lane, New York, New York.
You are cordially invited to attend the Meeting. Shareholders who
do not expect to attend the Meeting in person are requested to complete, date
and sign the enclosed form of proxy and return it promptly in the envelope
provided for that purpose. The enclosed proxy is being solicited on behalf of
the Board of Directors of the Fund.
By Order of the Board of Directors
JOHN F. WALLACE
Secretary
New York, New York
Dated: August , 1997
PROXY STATEMENT
KOREA EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038
-----------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 24, 1997
-----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Korea Equity
Fund, Inc., a Maryland corporation (the "Fund"), to be voted at the 1997
Annual Meeting of Shareholders of the Fund (the "Meeting") to be held at
the offices of Nomura Capital Management, Inc. ("NCM"), 180 Maiden Lane,
New York, New York, on Wednesday, September 24, 1997, at 10:30 A.M. The
approximate mailing date of this Proxy Statement is August , 1997.
All properly executed proxies received prior to the Meeting will
be voted at the Meeting in accordance with the instructions marked
thereon or otherwise as provided therein. Unless instructions to the contrary
are marked, proxies will be voted (a) FOR the election of six Directors,
(b) FOR the ratification of the selection of independent accountants, and
(c) FOR the approval of a new Management Agreement between the Fund and
Nomura Asset Management U.S.A. Inc. ("NAM-U.S.A."), a new Investment
Advisory Agreement between NAM-U.S.A. and Nomura Asset Management Co., Ltd.
("NAM"), and a new Investment Sub-Advisory Agreement between NAM-U.S.A.
and LG Investment Trust Management Co., Ltd. Any proxy may be revoked at any
time prior to the exercise thereof by giving written notice to the
Secretary of the Fund at the Fund's address indicated above or by voting in
person at the Meeting.
The Board of Directors has fixed the close of business on August
4, 1997, as the record date for the determination of shareholders
entitled to notice of and to vote at the Meeting and at any
adjournment thereof. Shareholders on the record date will be entitled to
one vote for each share held, with no shares having cumulative voting rights.
As of August 4, 1997, the Fund had outstanding 8,409,000 shares of Common
Stock, par value $0.10 per share.
The Board of Directors of the Fund knows of no business other than
that mentioned in Items 1 through 3 of the Notice of Meeting which will be
presented for consideration at the Meeting. If any other matter is properly
presented, it is the intention of the persons named in the enclosed
proxy to vote in accordance with their best judgment.
ITEM 1. ELECTION OF DIRECTORS
At the Meeting six Directors will be elected to serve until the
next Annual Meeting of Shareholders and until their successors are duly
elected and qualified. It is the intention of the persons named in the
enclosed proxy to nominate and vote in favor of the election of the persons
listed below.
The Board of Directors of the Fund knows of no reason why any of
these nominees will be unable to serve, but in the event of any such
unavailability, the proxies received will be voted for such substitute
nominees as the Board of Directors may recommend.
Certain information concerning the nominees is set forth as follows:
Shares of
Common Stock
of the Fund
Principal Occupations Beneficially
Name and Address During Past Five Years Director Owned at
of Nominee and Public Directorships(1) Age Since August 4, 1997
- ------------ --------------------------- --- ------- --------------
William G. Barker, Jr. (2) Consultant to the television industry 64 1993 -0-
111 Parsonage Road since 1991; Senior Vice
Greenwich, Connecticut 06830 President and Chief Financial
Officer of The CBS/Fox Company
from 1982 to 1991.
George H. Chittenden (2) Director of Bank Audi (US). 80 1993 1,000
155 Buffalo Bay, Neck Road
Madison, Connecticut 06443
Haruo Sawada (3).... President of the Fund since 1997; 47 1997 -0-
180 Maiden Lane President and Director of NCM
New York, New York 10038 since 1997; General Manager of
Nomura Investment Management
Co., Ltd. ("NIMCO") from 1994
to 1996; Senior Vice President of
NCM from 1990 to 1994.
Chor Weng Tan (2)... The Managing Director for 61 1993 -0-
345 East 47th Street Education, American Society of
New York, New York 10017 Mechanical Engineering since
1991; Professor, School of
Engineering, The Cooper Union
from 1963 to 1991; Dean,
School of Engineering, The
Cooper Union from 1975 to
1987; Executive Officer, The
Cooper Union Research
Foundation from 1976 to 1987;
Program Director, Presidential
Young Investigator Awards of
National Science Foundation
from 1987 to 1989; and Director,
Tround International, Inc.
2
Shares of
Common Stock
of the Fund
Principal Occupations Beneficially
Name and Address During Past Five Years Director Owned at
of Nominee and Public Directorships(1) Age Since August 4, 1997
- ------------ --------------------------- --- ------- --------------
Arthur R. Taylor (2) President of Muhlenberg College 62 1993 -0-
2400 Chew Street since 1992; Dean of the Faculty
Allentown, Pennsylvania 18104 of Business of Fordham
University from 1985 to 1992;
Chairman of Arthur R. Taylor &
Co. (investment firm); and
Director of Pitney Bowes, Inc.
and Louisiana Land &
Exploration Company.
John F. Wallace (3). Secretary and Treasurer of the Fund 68 1993 1,000
180 Maiden Lane since 1990; Senior Vice
New York, New York 10038 President of NCM since 1981,
Secretary since 1976, Treasurer
since 1984 and Director since
1986; Senior Vice President of
Nomura Securities International,
Inc. ("NSI") since 1978,
Secretary from 1977 to 1991,
and Director from 1983 to 1991.
<FN>
- ---------------
(1) Each of the nominees is also a director of Jakarta Growth Fund, Inc.,
Japan OTC Equity Fund, Inc., and Nomura Pacific Basin Fund, Inc.,
investment companies for which NCM acts as manager.
(2) Member of Audit Committee and Nominating Committee of the Board of
Directors.
(3) "Interested person," as defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"), of the Fund.
Committees and Directors' Meetings. The Board of Directors has
a standing Audit Committee and Nominating Committee, each of which consists of
the Directors who are not "interested persons" of the Fund within the meaning
of the Investment Company Act. The principal purpose of the Audit
Committee is to review the scope of the annual audit conducted by the
Fund's independent accountants and the evaluation by such accountants of the
accounting procedures followed by the Fund. The principal purpose of the
Nominating Committee is to select and nominate the Directors who are not
"interested persons" of the Fund as defined in the Investment Company Act. The
Nominating Committee will consider nominees recommended by shareholders of
the Fund. Shareholders should submit nominees to the Secretary of the Fund.
The Fund has no standing Compensation Committee.
During the fiscal year ended October 31, 1996, the Board of
Directors held six meetings; the Audit Committee held one meeting; and the
Nominating Committee held one meeting. Each Director attended at least 75% of
the meetings of the Board of Directors, and each Director who is a member of
the Audit and Nominating Committees attended at least 75% of the meetings of
such Committees held during such period.
Interested Persons. The Fund considers two nominees, Messrs. Sawada
and Wallace, to be "interested persons" of the Fund within the meaning of
Section 2(a)(19) of the Investment Company Act. Mr. Sawada is President of the
Fund and the President and a director of NCM. Mr. Wallace is Secretary and
Treasurer of the Fund, Senior Vice President, Secretary, Treasurer and a
director of NCM and Senior Vice President of NSI, which is an affiliate of NCM.
3
Compensation of Directors. The Manager pays all compensation of
all Directors of the Fund who are affiliated with the Manager or any
of its affiliates. The Fund pays to each Director not affiliated with the
Manager an annual fee of $5,000 plus $500 per meeting attended, together with
a Director's actual out-of-pocket expenses related to attendance at meetings.
Such fees and expenses aggregated $46,340 for the fiscal year ended October 31,
1996. The Fund has paid affiliated Directors' out-of-pocket expenses in
connection with attendance at meetings of the Board of Directors; such
expenses aggregated $1,154 for the fiscal year ended October 31, 1996.
The following table sets forth for the periods indicated
compensation paid by the Fund to its Directors and the aggregate
compensation paid by all investment companies managed by NCM or advised by
NIMCO to the Directors:
Aggregate Pension or Retirement Total Compensation from
Compensation Benefits Accrued as Part of Fund Complex Paid to
from Fund for Fund Expenses for its Directors During the
its Fiscal Year Ended Fiscal Year Ended Calendar Year Ended
Name of Director October 31, 1996 October 31, 1996 December 31, 1996*
- ---------------- ------------------ ------------------ -------------------
William G. Barker, Jr..... $8,000 None $33,000
George H. Chittenden...... $8,000 None $33,000
Haruo Sawada.............. - None -
Chor Weng Tan............. $8,000 None $33,000
Arthur R. Taylor.......... $8,000 None $33,000
John F. Wallace........... - None -
<FN>
- -----------
* In addition to the Fund, the "Fund Complex" includes Jakarta Growth
Fund, Inc., Japan OTC Equity Fund, Inc., and Nomura Pacific Basin Fund,
Inc.
Officers of the Fund. The following table sets forth
information concerning the officers of the Fund. Officers of the Fund are
elected and appointed by the Directors and hold office until they resign, are
removed or are otherwise disqualified to serve.
Shares of Common
Stock of the Fund
Beneficially
Officer Owned at
Name and Principal Occupation During Past Five Years Office Age Since August 4, 1997
---------------------------------------------------- ------ --- ------- --------------
Haruo Sawada............................................... President 47 1997 -0-
President and Director of NCM since 1997,
General Manager of NIMCO from 1994 to 1996,
Senior Vice President of NCM from 1990 to 1994.
Mitsutoyo Kohno............................................ Vice 48 1993 -0-
Senior Vice President of NCM since 1991 and Director President
since 1994, Vice President from 1989 to 1991.
John F. Wallace............................................ Secretary and 68 1993 1,000
Senior Vice President of NCM since 1981, Secretary Treasurer
since 1976, Treasurer since 1984 and Director since
1986. Senior Vice President of NSI since 1978,
Secretary from 1977 to 1991, and Director from 1983
to 1991.
4
Stock Ownership. At August 4, 1997, the Directors and officers of the
Fund as a group (7 persons) owned an aggregate of 2,000 shares, less than 1%
of the outstanding shares of the Fund. Mr. Sawada, President of the Fund,
and Mr. Mitsutoyo Kohno, Vice President of the Fund, together own less than
1% of the shares of The Nomura Securities Co., Ltd., an affiliate of both NCM
and NIMCO.
ITEM 2. SELECTION OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors
of the Fund, including a majority of the Directors who are not interested
persons of the Fund, has selected the firm of Price Waterhouse LLP ("Price
Waterhouse"), as independent accountants, to audit the financial statements
of the Fund for the fiscal year ending October 31, 1997. Price Waterhouse
has acted as the Fund's independent accountants since the inception of the
Fund. The Fund knows of no direct or indirect financial interest of such
firm in the Fund. Such appointment is subject to ratification or rejection by
the shareholders of the Fund. Unless a contrary specification is made, the
accompanying proxy will be voted in favor of ratifying the selection of such
accountants.
Price Waterhouse also acts as independent accountants for The
Nomura Securities Co., Ltd. and certain of its affiliated entities, including
NCM, and for three other investment companies for which NCM acts as manager.
The Board of Directors of the Fund considered the fact that Price
Waterhouse has been retained as the independent accountants for these
other entities in its evaluation of the ability of Price Waterhouse to also
function in that capacity for the Fund.
A representative of Price Waterhouse is expected to be present at
the Meeting and will have the opportunity to respond to questions from
shareholders and to make a statement if such person so desires.
ITEM 3. APPROVAL OR DISAPPROVAL OF THE MANAGEMENT, INVESTMENT
ADVISORY AND INVESTMENT SUB-ADVISORY ARRANGEMENTS
Nomura Capital Management, Inc. ("NCM") has served as the
management company for the Fund since the Fund commenced operations in
1993. Nomura Investment Management Co., Ltd. ("NIMCO"), the parent of NCM,
has served as the investment adviser for the Fund since that time. During 1993,
following approval by the Fund's initial shareholder, NCM entered into an
investment sub-advisory agreement with LG Investment Trust Management Co.,
Ltd. ("LGITM"). NCM and NIMCO are each affiliates of The Nomura Securities Co.,
Ltd. ("Nomura"), which is the largest securities company in Japan. LGITM,
which is not affiliated with Nomura, is a Korean company that provides
investment advisory services for Korean and international clients. The
existing agreements between the Fund and NCM, NCM and NIMCO, and NCM and LGITM
are referred to below as the Current Management Agreement, the Current
Investment Advisory Agreement, and the Current Investment Sub-Advisory
Agreement, respectively.
NIMCO has announced a proposed merger pursuant to which it and The
Nomura Securities Investment Trust Management Co., Ltd. ("NSITM"), another
investment advisory company affiliated with Nomura, will consolidate their
organizations. The merger of the two affiliated companies is permitted by
recent changes in Japanese law. NIMCO is the largest investment advisory
company in Japan in terms of total assets under management. NSITM is the
largest investment trust management company in Japan. At June 30, 1997,
NIMCO and NSITM together managed approximately $127.9 billion of investments.
It is presently contemplated that the corporate restructuring of NIMCO
and NSITM (the "NAM Restructuring") will take place on or about October 1,
1997. As part of the NAM Restructuring, it is anticipated that a subsidiary
of NSITM based in New York will merge into NCM. After the restructuring, the
advisory firms will operate under the following names: the Japanese firm will
be Nomura Asset Management Co., Ltd. ("NAM") and the United States
5
firm will be Nomura Asset Management U.S.A. Inc. ("NAM-U.S.A.").
NCM has advised the Board of Directors and the Fund that the changes
in the corporate structure of the Nomura-affiliated advisers in the United
States and Japan are not expected to affect the portfolio management or
day-to-day operations of the Fund. However, these changes may constitute an
"assignment" of the relevant contracts under the Investment Company Act, which
would result in a termination of the Current Management Agreement, the Current
Investment Advisory Agreement and the Current Investment Sub-Advisory
Agreement. Accordingly, in anticipation of the consummation of the NAM
Restructuring and in order to ensure the continuity of management, investment
advisory and investment sub-advisory services provided to the Fund by NCM,
NIMCO and LGITM, respectively, a new management agreement between the
Fund and NAM-U.S.A. (the "New Management Agreement"), a new investment
advisory agreement between NAM-U.S.A. and NAM (the "New Investment Advisory
Agreement"), and a new investment sub-advisory agreement between
NAM-U.S.A and LGITM (the "New Investment Sub-Advisory Agreement") are
proposed to be approved prior to such date by a majority of the Fund's
shareholders.
The proposed new agreements under which the Fund will operate after
the NAM Restructuring are substantively identical to the agreements under
which the Fund currently operates. The services to be provided by NAM-U.S.A.
and NAM after the NAM Restructuring will be identical to the services
currently provided by NCM and NIMCO, respectively. NCM has advised the Board
of Directors of the Fund that the NAM Restructuring will provide the Fund
with access to an investment adviser with a larger capital base and increased
investment research staff. NCM has further advised the Board of Directors
that it believes that there will be no reduction in the quality of any of the
services presently furnished by NCM and NIMCO, respectively. LGITM will be
unaffected by the NAM restructuring and its services provided to the Fund will
not be changed. AS DESCRIBED BELOW, THE PROPOSED NEW AGREEMENTS DO NOT
ALTER THE RATE OF MANAGEMENT COMPENSATION PRESENTLY PAYABLE BY THE FUND.
In their consideration of the above agreements, the Board of
Directors received information relating to, among other things,
alternatives to the present arrangements, the nature, quality and extent of
the advisory and other services to be provided to the Fund by
NAM-U.S.A., NAM and LGITM, and comparative data with respect to the
advisory fees paid by other international funds, the operating expenses and
expense ratio of the Fund as compared to such funds and the performance of the
Fund as compared to such funds. The Independent Directors also considered the
quality of the personnel providing management and investment advisory services
to the Fund, NCM's representations that there will be no material adverse
change in the services provided to the Fund after the NAM Restructuring is
completed, the relative profitability of the present arrangements to
NCM, NIMCO and LGITM, and information about the services to be performed and
the personnel performing such services under the proposed agreements.
The Independent Directors were advised by separate counsel in connection
with their review of the management, investment advisory and investment
sub-advisory arrangements of the Fund.
If approved by the Fund's shareholders at the Meeting, each of the
New Management Agreement, the New Investment Advisory Agreement and the
New Investment Sub-Advisory Agreement will remain in effect until September
30, 1999, unless terminated as described below. The Current Management
Agreement, the Current Investment Advisory Agreement, and the Current
Investment Sub-Advisory Agreement were each last approved by the Fund's initial
shareholder on November 23, 1993. Although the management, investment advisory
and investment sub-advisory arrangements consist of three separate contracts,
shareholders can only vote on the three agreements together and not
individually.
As indicated above, NIMCO and NSITM are affiliates of Nomura, the
largest securities company in Japan. The Tokyo Prosecutor's Office indicted
Nomura and certain of its former officers in June and July, 1997 for loss
compensation in violation of the Securities and Exchange Law of Japan. In
addition, on July 30, 1997, the Ministry of Finance of Japan announced
administrative penalties, each for certain specified time periods, against
Nomura as follows: suspension of Nomura's own-account stock-related dealing;
suspension of stock-related business at all Nomura branch offices; suspension
of all securities transactions at certain divisions of Nomura's
headquarters;
6
suspension of all securities transactions at Nomura's headquarters; and ban
from participation in the auction and underwriting of public bonds in Japan.
NCM has advised the Board of Directors of the Fund that neither NCM nor
NIMCO had any involvement in any of the activities that were the subject of
the indictments and the administrative penalties, and that NCM has been
advised by NSITM that neither it nor any of its subsidiaries had any such
involvement.
Information Concerning NAM-U.S.A., NAM, and LGITM
NAM-U.S.A. will provide global investment advisory services, primarily
with respect to Japanese and other Pacific Basin securities, for U.S.
institutional clients. NAM-U.S.A. also will act as one of the investment
advisers to six other investment companies, three of which are U.S. registered
investment companies. NAM-U.S.A. will be a subsidiary of NAM and Nomura
Research Institute ("NRI").
Under the New Management Agreement, NAM-U.S.A. agrees to provide,
or arrange for the provision of, investment advisory and management services to
the Fund, subject to the oversight and supervision of the Board of Directors
of the Fund. In addition to the management of the Fund's portfolio in
accordance with the Fund's investment policies and the responsibility for
making decisions to buy, sell or hold particular securities, NAM-U.S.A. is
obligated to perform, or arrange for the performance of, the administrative
and management services necessary for the operation of the Fund. NAM-U.S.A.
also is obligated to provide all the office space, facilities, equipment and
personnel necessary to perform its duties thereunder.
The following table sets forth the name, proposed title and principal
occupations of the proposed principal executive officer and each director of
NAM-U.S.A. upon the completion of the NAM Restructuring:
Title with NAM-U.S.A. Present
Name* after NAM Restructuring Principal Occupation
- ----- ----------------------- --------------------
Haruo Sawada........................ Director and President Director and President of NCM
Brian X. Fitzgibbon................. Director Director and Senior Vice President of NCM
Takashi Harino...................... Director Director of NSITM
Shigenobu Hayakawa.................. Director Director of NSITM
Shigehito Hayashi................... Director Director and President of Nomura Asset
Management (U.S.A.) Inc.
Naotake Hirasawa.................... Director Director of NIMCO
Mitsutoyo Kohno..................... Director Director and Senior Vice President of NCM
Takahide Mizuno..................... Director Director of NIMCO
Takeo Nakamura...................... Director Managing Director of NIMCO
Marti G. Subrahmanyam............... Director Professor of Finance and Economics,
New York University, Leonard N. Stern
School of Business Administration
John F. Wallace..................... Director Director, Senior Vice President, Secretary
and Treasurer of NCM
<FN>
- ---------
* The address of Messrs. Sawada, Fitzgibbon, Hayashi, Kohno, Subrahmanyam, and
Wallace is 180 Maiden Lane, New York, New York 10038. The address of
Messrs. Harino, Hayakawa, Hirasawa, Mizuno, and Nakamura is 1-12-11,
Nihonbashi, Chuo-Ku, Tokyo 103, Japan.
7
NAM will provide investment advisory services for Japanese
and international clients. In addition to the Fund, NAM will act as an
investment adviser with respect to the following registered investment
companies: Jakarta Growth Fund, Inc., Japan OTC Equity Fund, Inc., and
Nomura Pacific Basin Fund, Inc. NRI, whose address is 1- 10-1, Nihonbashi,
Chuo-ku, Tokyo 103, Japan, will own 12.44% of NAM.
The following table sets forth the name and proposed title of
the proposed principal executive officers and each director of NAM upon the
completion of the NAM Restructuring:
Title with NAM after Present
Name* NAM Restructuring Principal Occupation
----- ----------------- --------------------
Hitoshi Tonomura............. Chairman of the Board President of NSITM
Tadashi Takubo............... President President of NIMCO
Tadashi Akimoto.............. Director Director of NIMCO
Kazuhiko Hama ............... Director Director of NSITM
Takashi Harino............... Director Director of NSITM
Naotake Hirasawa............. Director Director of NIMCO
Toshio Ikawa................. Director Director of NSITM
Hideaki Ishii................ Director Managing Director of NSITM
Shinzo Katada................ Director Managing Director of NIMCO
Atsushi Kinebuchi............ Director Executive Managing Director of NSITM
Norio Kinoshita.............. Director Director of NSITM
Masami Kitaoka............... Director Director of NSITM
Mitsunori Minamio............ Director Director of NIMCO
Haruo Miyako................. Director Managing Director of NSITM
Takahide Mizuno.............. Director Director of NIMCO
Takeo Nakamura............... Director Managing Director of NIMCO
Naoki Santo.................. Director Executive Managing Director of NIMCO
Takanori Shimizu............. Director Managing Director of NSITM
Teruo Shimizu................ Director Director of NSITM
Hiromichi Tabata............. Director Director of NSITM
Katsuya Takanashi............ Director Executive Vice President of NSITM
Yasuo Takebayashi............ Director Managing Director of NSITM
Takanori Tanabe.............. Director Executive Managing Director of NSITM
Isao Teranishi............... Director Executive Managing Director of NIMCO
<FN>
- ---------------
* The address of the principal executive officers and each director is 1-12-11,
Nihonbashi, Chuo-ku, Tokyo 103, Japan.
LGITM provides investment advisory services for Korean and
international clients. LGITM is a wholly-owned subsidiary of LG Securities
Co., Ltd., one of the largest securities firms in Korea, and a member of the LG
Group.
8
The following table sets forth the name, title and principal
occupation of the principal executive officers and each director of LGITM.
Name* Title and Principal Occupation
- ----- ------------------------------
Kyung-Suk Suh President and Director
Yoon-Shik Yim Executive Director
Se-Won Um Auditor
<FN>
- ---------------
* The address of Messrs. Suh, Yim and Um is 34-6, Yoido-Dong, Youngdunpo-ku,
Seoul 150-010, Korea.
TERMS OF THE NEW MANAGEMENT AGREEMENT, THE NEW INVESTMENT ADVISORY AGREEMENT,
AND THE NEW INVESTMENT SUB-ADVISORY AGREEMENT
Copies of the forms of the New Management Agreement, the New
Investment Advisory Agreement, and the New Investment Sub-Advisory Agreement
are set forth as Exhibits A, B, and C, respectively. Set forth below is a
summary of the terms of such agreements. As discussed above, the
proposed agreements are substantively identical to the agreements under
which the Fund currently operates. THE PROPOSED AGREEMENTS DO NOT CHANGE
THE AMOUNT OF MANAGEMENT FEES PAYABLE BY THE FUND.
Under the New Management Agreement, NAM-U.S.A. agrees to provide,
or arrange for the provision of, investment advisory and management services to
the Fund, subject to the oversight and supervision of the Board of Directors
of the Fund. In addition to the management of the Fund's portfolio in
accordance with the Fund's investment policies and the responsibility for
making decisions to buy, sell or hold particular securities, NAM-U.S.A. is
obligated to perform, or arrange for the performance of, the administrative
and management services necessary for the operation of the Fund. NAM-U.S.A.
is also obligated to provide all the office space, facilities, equipment and
personnel necessary to perform its duties thereunder. Pursuant to such
Agreement, NAM-U.S.A. is authorized to retain NAM to act as an investment
adviser for the Fund and LGITM to act as an investment sub-adviser for the
Fund.
Pursuant to the New Investment Advisory Agreement between NAM-U.S.A.
and NAM, NAM will agree to furnish NAM-U.S.A. with economic research,
securities analysis and investment recommendations and to review and render
investment advice with respect to the Fund. NAM will not be responsible
for the actual portfolio decisions of the Fund.
Pursuant to the New Investment Sub-Advisory Agreement between
NAM-U.S.A. and LGITM, LGITM will agree to continue to furnish NAM-U.S.A.
and NAM with information concerning the Korean securities market and
recommendations as to specific securities. Under the terms of the New
Investment Sub-Advisory Agreement, LGITM will not be responsible for the
actual portfolio decisions of the Fund.
COMPENSATION AND EXPENSES
AS DESCRIBED ABOVE, THE MANAGEMENT COMPENSATION PRESENTLY PAYABLE BY
THE FUND WILL REMAIN THE SAME UNDER THE PROPOSED CONTRACTUAL
ARRANGEMENTS. As compensation for its services to the Fund, NAM-U.S.A.
will receive a monthly fee,
9
computed daily, at the annual rate of 1.10% of the value of the Fund's
average weekly net assets. NAM-U.S.A. will pay NAM monthly fees at the
annual rate of .55% of the Fund's average weekly net assets, and NAM-U.S.A.
will pay LGITM monthly fees at the annual rate of .10% of the Fund's average
weekly net assets. The fee payable to NAM-U.S.A. is higher than that paid
by most management investment companies, but NAM-U.S.A. believes it is
justified by the types of portfolio securities held by the Fund and that it is
comparable to fees paid by other international funds. For the fiscal year
ended October 31, 1996, the Fund paid or accrued fees to NCM of $818,581. At
July 31, 1997, the net assets of the Fund aggregated approximately $50.5
million. At this net asset level, the annual management fee would aggregate
$555,983.
The New Management Agreement obligates NAM-U.S.A. to provide, or
arrange for the provision of, investment advisory services and to pay all
compensation of and furnish office space for officers and employees of the
Fund, as well as the fees of all Directors of the Fund who are affiliated
persons of NAM-U.S.A. or any of its affiliates. The Fund pays all other
expenses incurred in the operation of the Fund, including, among other
things, taxes, expenses for legal, tax and auditing services, costs of
printing proxies, listing fees, stock certificates, shareholder reports,
prospectuses, charges of the custodian, sub-custodians and transfer agent,
Securities and Exchange Commission (the "Commission") fees, expenses of
registering the shares under Federal, state and foreign laws, fees and
expenses of unaffiliated Directors, accounting and pricing costs (including
the weekly calculation of net asset value), insurance, interest, brokerage
costs, litigation and other extraordinary or non-recurring expenses, and other
expenses properly payable by the Fund.
For the fiscal year ended October 31, 1996, the Fund paid
brokerage commissions of $370,890. Nomura and its affiliates earned no
commissions on the execution of such portfolio security transactions. LG
Securities Co., Ltd., the parent company of LGITM, earned commissions on the
execution of such portfolio security transactions in the amount of $28,301.
The following table sets forth information relating to the
registered investment companies which invest primarily in securities of
companies domiciled in Pacific Basin countries with the investment objective
of long-term capital appreciation for which NAM-U.S.A., NAM, and their
affiliates will act as manager or investment adviser:
APPROXIMATE
NET ASSETS AT
JULY 31, 1997
INVESTMENT COMPANY ANNUAL ADVISORY FEES (MILLIONS)
------------------ -------------------- -------------
JAKARTA GROWTH FUND, INC.(1) $52.1
Manager: Management Fee:
- ------- --------------
NAM-U.S.A. 1.10% of net assets.
Investment Adviser: Investment Advisory Fee:
- ------------------- ------------------------
NAM .50% of net assets; paid by NAM-U.S.A.
JAPAN OTC EQUITY FUND, INC. $77.5
Manager: Management Fee:
- ------- --------------
NAM-U.S.A. 1.10% of net assets not in excess of $50 million,
Investment Adviser: 1.00% of net assets in excess of $50 million but
- ------------------
NAM not exceeding $100 million, and .90% of net
assets in excess of $100 million
Investment Advisory Fee:
--------------------------
.50% of net assets not in excess of $50 million,
.45% of net assets in excess of $50 million but
not exceeding $100 million, and .40% of net
assets in excess of $100 million; paid by NAM-U.S.A.
10
NOMURA PACIFIC BASIN FUND, INC.(2) $23.8
Manager: Management Fee:
- ------- --------------
NAM-U.S.A. .75% of net assets.
Investment Adviser: Investment Advisory Fee:
- ------------------- ------------------------
NAM .26125% of net assets; paid by NAM-U.S.A.
<FN>
- ---------------
(1) Nomura Asset Management Singapore Ltd. ("NAM-Singapore"), which will be an
affiliate of NAM-U.S.A. and NAM, will act as investment sub-adviser to
Jakarta Growth Fund, Inc. for which it will receive compensation of .25%
of net assets paid by NAM.
(2) NAM-Singapore will act as investment sub-adviser to Nomura Pacific Basin
Fund, Inc. for which it will receive compensation of .0275% of net assets
paid by NAM-U.S.A.
Duration and Termination. As indicated above, each of the New
Management Agreement, the New Investment Advisory Agreement and the New
Investment Sub-Advisory Agreement will remain in effect until September 30,
1999, and from year to year thereafter if approved annually (a) by the Board
of Directors of the Fund or by a majority of the outstanding shares of the
Fund and (b) by a majority of the Directors who are not parties to such
contract or interested persons (as defined in the Investment Company Act)
of any such party. Such contracts are not assignable and may be terminated
without penalty on 60 days' written notice at option of either party
thereto or by the vote of the shareholders of the Fund.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form
of proxy and accompanying Notice and Proxy Statement will be borne by the
Fund, except to the extent such expenses are attributable to the NAM
Restructuring, in which case they will be borne by NCM. The Fund will reimburse
banks, brokers and others for their reasonable expenses in forwarding proxy
solicitation material to the beneficial owners of the shares of the
Fund. In addition to the solicitation of proxies by mail, proxies may
be solicited in person or by telephone. The Fund has retained Corporate
Investor Communications, Inc., a proxy solicitation firm, to assist in the
solicitation of proxies for the Meeting, for a fee of approximately $10,000,
together with reimbursement of such firm's expenses.
The election of Directors requires a plurality of the votes cast,
in person or by proxy, at a meeting at which a quorum is duly
constituted. Ratification of the selection of independent accountants
requires the affirmative vote of a majority of the shares present and voting
on the proposal at a meeting at which a quorum is present. Approval of each
of the Management Agreement, Investment Advisory Agreement and Investment
Sub-Advisory Agreement requires the vote of a majority of the outstanding
voting securities of the Fund which, under the Investment Company Act, is the
vote (a) of 67% or more of the shares of the Fund present at the meeting of the
holders if more than 50% of the outstanding shares are present or represented
by proxy, or (b) of more than 50% of the outstanding shares, whichever is
less. If the Management, Investment Advisory and Investment Sub-Advisory
Agreements are not approved by shareholders at the Meeting, the Board of
Directors will reconsider the Fund's management, investment advisory and
investment sub-advisory arrangements. The holders of a majority of the
shares of stock of the Fund entitled to vote at the Meeting, present in
person or by proxy, shall constitute a quorum for the transaction of business
at the Meeting.
The holders of a majority of the shares of stock of the Fund entitled to
vote at the Meeting, present in person or by proxy, shall constitute a quorum
for the transaction of business at the Meeting. The Fund expects that
broker-dealer firms holding shares of the Fund in "street name" for the benefit
of their customers and clients, as well as the Japan Securities Clearing
Corporation ("JSCC") holding shares of the Fund on behalf of its beneficial
stockholders, will request the instructions of such customers, clients and
beneficial stockholders, on how to vote their shares on each proposal before
the Meeting. The Fund understands that the New York Stock Exchange and the
Osaka Securities Exchange permit such broker-dealers and the JSCC, without
instructions from such customers, clients, and beneficial stockholders, to
grant authority to the proxies designated by the Fund to vote on the items to
be considered at the Meeting if no instructions have been received prior to the
date specified in the broker-dealer firm's or the JSCC's request for voting
instructions. Certain broker-dealer firms may exercise discretion over shares
held in their name for which no instructions are received by voting such shares
in the same proportion as they have voted shares for which they have received
instructions.
11
The shares as to which the proxies so designated are granted authority
by broker-dealer firms and the JSCC to vote on the items to be considered at the
Meeting, the shares as to which broker-dealer firms have declined to vote
("broker non-votes"), as well as the shares as to which proxies are returned by
record shareholders but which are marked "abstain" on any item will be
included in the Fund's tabulation of the total number of votes present
for purposes of determining whether the necessary quorum of shareholders
exists. However, abstentions and broker non-votes will not be counted as
votes cast. Therefore, abstentions and broker non-votes will not have an
effect on the election of Directors or the ratification of the selection
of independent accountants. Abstentions and broker non-votes will have the
same effect as a vote against the approval of each of the Management Agreement,
Investment Advisory Agreement and Investment Sub-Advisory Agreement.
The Fund sends quarterly reports to shareholders. The Fund will
furnish, without charge, a copy of its most recent annual and
semi-annual report succeeding such annual report, if any, to shareholders
upon request to the Fund at 180 Maiden Lane, New York, New York 10038 (or call
1-800-833-0018).
Proposals of Shareholders
Proposals of shareholders intended to be presented at the next
annual meeting of shareholders of the Fund must be received by the Fund for
inclusion in its proxy statement and form of proxy relating to that meeting
by June 1, 1998.
By Order of the Board of Directors
JOHN F. WALLACE
Secretary
Dated: August , 1997
12
Exhibit A
MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of ___________ 1997, by and between KOREA
EQUITY FUND, INC., a Maryland corporation (hereinafter referred to as the
"Fund"), and NOMURA ASSET MANAGEMENT U.S.A. INC., a New York corporation
(hereinafter referred to as the "Manager").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a non-diversified,
closed-end, management investment company registered under the Investment
Company Act of 1940, as amended (hereinafter referred to as the "Investment
Company Act"); and
WHEREAS, the Manager is willing to provide management and
investment advisory services to the Fund on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and
agree as follows:
ARTICLE I
Duties of the Manager
The Fund hereby retains the Manager to act as the manager of the Fund
and to furnish the Fund with the management and investment advisory
services described below, subject to the policies of, review by and overall
control of the Board of Directors of the Fund, for the period and on the
terms and conditions set forth in this Agreement. The Manager hereby
accepts such employment and agrees during such period, at its own expense,
to render, or arrange for the rendering of, such services and to assume the
obligations herein set forth for the compensation provided for herein.
(a) Management and Administrative Services. The Manager shall perform,
or supervise the performance of, the management and administrative
services necessary for the operation of the Fund including administering
shareholder accounts and handling shareholder relations. The Manager shall
provide the Fund with office space, equipment and facilities and such
other services as the Manager, subject to review by the Board of Directors
of the Fund, shall from time to time determine to be necessary or useful
to perform its obligations under this Agreement. The Manager shall also, on
behalf of the Fund, conduct relations with custodians, depositories,
transfer agents, dividend disbursing agents, other shareholder servicing
agents, accountants, attorneys, underwriters, brokers and dealers,
corporate fiduciaries, insurers, banks and such other persons in any such
other capacity deemed to be necessary or desirable. The Manager shall
generally monitor the Fund's compliance with investment policies and
restrictions as set forth in filings made by the Fund under Federal
securities laws. The Manager shall make reports to the Board of Directors of
the Fund of the performance of its obligations hereunder and furnish
advice and recommendations with respect to such other aspects of the
business and affairs of the Fund as it shall determine to be desirable.
The Manager and each of its affiliates shall for all purposes herein be deemed
to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Fund
in any way or otherwise be deemed an agent of the Fund.
(b) Investment Advisory Services. The Manager shall provide the Fund
with such investment research, advice and supervision as the latter may from
time to time consider necessary for the proper supervision of the assets of
the Fund. The Manager shall act as investment adviser to the Fund and as
such shall furnish continuously an investment program for the Fund and shall
determine from time to time which securities shall be purchased, sold or
exchanged
A-1
and what portion of the assets of the Fund shall be held in the
various securities in which the Fund invests, options, futures, options on
futures or in cash, subject always to the restrictions of the Articles of
Incorporation and By-Laws of the Fund, as amended from time to time, the
provisions of the Investment Company Act and the statements relating to
the Fund's investment objective, investment policies and investment
restrictions as the same are set forth in filings made by the Fund under
Federal securities laws. The Manager shall make decisions for the Fund as
to foreign currency matters and make determinations as to foreign
exchange contracts. The Manager shall make recommendations as to the
manner in which voting rights, rights to consent to corporate action and
any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Board of Directors of the Fund at any time, however,
make any definite determination as to investment policy and notify the
Manager thereof in writing, the Manager shall be bound by such
determination for the period, if any, specified in such notice or
until similarly notified that such determination has been revoked. The
Manager shall take, on behalf of the Fund, all actions which it deems
necessary to implement the investment policies determined as provided above,
and in particular to place all orders for the purchase or sale of portfolio
securities for the Fund's account with brokers or dealers selected by it, and
to that end, the Manager is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the
selection of such brokers and dealers and the placing of such orders, the
Manager is directed at all times to seek to obtain executions and price within
the policy guidelines determined by the Board of Directors of the Fund
and set forth in the filings made by the Fund under Federal securities
laws. Subject to this requirement and the provisions of the Investment
Company act, the Securities Exchange Act of 1934, as amended, and other
applicable provisions of law, the Manager may select brokers or dealers with
which it, or the Fund, is affiliated.
ARTICLE II
Allocation of Charges and Expenses
(a) The Manager. The Manager assumes and shall pay for maintaining
the staff and personnel necessary to perform its obligations under this
Agreement and shall, at its own expense, provide the office space,
equipment and facilities which it is obligated to provide under Article I
hereof, and shall pay all compensation of officers of the Fund and all
directors of the Fund who are "affiliated persons" (as defined in the
Investment Company Act) of the Manager.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: organization costs,
taxes, expenses for legal and auditing services, costs of printing
proxies, stock certificates, shareholder reports, prospectuses, charges of
the Custodian, any Sub-Custodian and Transfer and Dividend Disbursing Agent,
expenses of portfolio transactions, Securities and Exchange Commission and
stock exchange fees, expenses of registering the Fund's shares under Federal,
state and foreign laws, expenses of administering any dividend reinvestment
plan (except to the extent set forth in such plan), fees and actual
out-of-pocket expenses of directors who are not affiliated persons of the
Manager, accounting and pricing costs (including the daily calculation of
the net asset value), insurance, interest, brokerage costs, litigation and
other extraordinary or non-recurring expenses, and other like expenses
properly payable by the Fund.
ARTICLE III
Compensation of the Manager
For the services rendered, the equipment and facilities furnished
and expenses assumed by the Manager, the Fund shall pay to the Manager at the
end of each calendar month a fee based upon the average daily value of the
net assets of the Fund, at the annual rate of 1.10% of the Fund's average
weekly net assets (i.e., the average weekly value of the total assets of the
Fund, minus the sum of liabilities of the Fund), commencing on the day
following effectiveness hereof. For purposes of this calculation,
average weekly net assets is determined at the end of each
A-2
month on the basis of the average net assets of the Fund for each week
during the month. The assets for each weekly period are determined by averaging
the net assets at the last business day of the prior week. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fee as set forth above. During any period when the
determination of net asset value is suspended by the Board of Directors of the
Fund, the average net asset value of a share for the last week prior to
such suspension shall for this purpose be deemed to be the net asset value
at the close of each succeeding week until it is again determined. It is
understood that one-half of such compensation is being paid by the
Fund to the Manager, as agent for the Investment Adviser referenced in
Article IV hereof, and that the Manager will remit such compensation to the
Investment Adviser pursuant to the Investment Advisory Agreement referenced
in such Article IV.
ARTICLE IV
Investment Advisory Agreement
This Agreement is entered into with the understanding that the
Manager will enter into an Investment Advisory Agreement with Nomura Asset
Management Co., Ltd., in the form attached hereto as Exhibit A, in which the
Manager will contract for advisory services and pay the Investment Adviser
compensation for its services out of the compensation received hereunder
pursuant to Article III at the rates set forth therein. The Fund also
understands that the Manager may enter into an Investment Sub-Advisory
Agreement in the form attached hereto as Exhibit B.
ARTICLE V
Limitation of Liability of the Manager
The Manager shall not be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or
omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Article V, the term "Manager" shall include any
affiliates of the Manager performing services for the Fund contemplated
hereby and directors, officers and employees of the Manager as well as that
corporation itself.
ARTICLE VI
Activities of the Manager
The services of the Manager to the Fund are not to be deemed to
be exclusive, the Manager and any person controlled by or under common control
with the Manager (for purposes of this Article VII referred to as "affiliates")
being free to render services to others. It is understood that directors,
officers, employees and shareholders of the Fund are or may become
interested in the Manager and its affiliates, as directors, officers,
employees, partners, and shareholders or otherwise and that directors,
officers, employees, partners, and shareholders of the Manager and its
affiliates are or may become similarly interested in the Fund, and that the
Manager is or may become interested in the Fund as shareholder or otherwise.
A-3
ARTICLE VII
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above
written and shall remain in force until ___________ __, 1999 and thereafter,
but only so long as such continuance is specifically approved at least
annually by (i) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Fund, and (ii) a
majority of those directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Directors of the Fund or by vote of a majority
of the outstanding voting securities of the Fund, or by the Manager, on
sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
ARTICLE VIII
Amendments of the Agreement
This Agreement may be amended by the parties only if such amendment
is specifically approved in accordance with applicable requirements under
the Investment Company Act.
ARTICLE IX
Definitions of Certain Terms
The terms "vote of a majority of outstanding voting
securities," "assignment," "affiliated person" and "interested person,"
when used in this Agreement, shall have the respective meanings specified
in the Investment Company Act and the rules and regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act.
ARTICLE X
Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Investment Company Act.
To the extent that the applicable laws of the State of New York, or
any of the provisions herein, conflict with the applicable provisions of
the Investment Company Act, the latter shall control.
A-4
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
KOREA EQUITY FUND, INC.
By_______________________________
NOMURA ASSET MANAGEMENT U.S.A. INC.
By_______________________________
A-5
Exhibit B
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of _______________ 1997, by and between
NOMURA ASSET MANAGEMENT U.S.A. INC., a New York corporation
(hereinafter referred to as the "Manager"), and NOMURA ASSET MANAGEMENT CO.,
LTD., a Japanese corporation (hereinafter referred to as the "Investment
Adviser").
W I T N E S S E T H :
WHEREAS, Korea Equity Fund, Inc. (the "Fund") is engaged in business as
a non-diversified, closed-end, management investment company registered under
the Investment Company Act of 1940, as amended (hereinafter referred to
as the "Investment Company Act"); and
WHEREAS, the Manager and the Investment Adviser are engaged in business
as registered investment advisers under the Investment Advisers Act of
1940, as amended; and
WHEREAS, the Manager has entered into a management agreement with the Fund
of even date herewith (the "Management Agreement"); and
WHEREAS, the Investment Adviser is willing to provide investment
advisory services to the Manager in connection with the Fund's operations on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and
agree as follows:
ARTICLE I
Duties of the Investment Adviser
Subject to the broad supervision of the Manager and the Fund,
the Investment Adviser shall provide the Manager with such economic
research, securities analysis and investment recommendations as the latter
may from time to time consider necessary for the proper supervision of the
Fund's assets. The Investment Adviser shall continuously review the Fund's
holdings and shall make recommendations as to which securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall
be held in the various securities in which the Fund invests, subject always to
the restrictions of the Articles of Incorporation and By-Laws of the Fund,
as amended from time to time, the provisions of the Investment Company
Act and the statements relating to the Fund's investment objective,
investment policies and investment restrictions as the same are set forth in
filings made by the Fund under Federal securities laws. The Investment
Adviser shall make recommendations as to foreign currency matters and the
advisability of entering into foreign exchange contracts. The Investment
Adviser shall also make recommendations as to the manner in which voting
rights, rights to consent to corporate action and any other rights
pertaining to the Fund's portfolio securities shall be exercised.
B-1
ARTICLE II
Allocation of Charges and Expenses
The Investment Adviser shall furnish, at its own expense,
all administrative services, office space, equipment and facilities,
investment advisory, statistical and research services, and executive,
supervisory and clerical personnel necessary to carry out its obligations under
this Agreement.
ARTICLE III
Compensation of the Investment Adviser
For the services to be rendered as provided herein, the Manager shall
pay to the Investment Adviser at the end of each calendar month a fee based
upon the average weekly value of the net assets of the Fund at the annual
rate of 0.55% of the Fund's average weekly net assets (i.e., the average
weekly value of the total assets of the Fund minus the sum of accrued
liabilities of the Fund), commencing on the day following effectiveness
hereof. For purposes of this calculation, average weekly net assets is
determined at the end of each month on the basis of the average net assets of
the Fund for each week during the month. The assets for each weekly period are
determined by averaging the net assets at the last business day of the prior
week. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for
that part of the month that this Agreement is in effect shall be prorated
in a manner consistent with the calculation of the fee as set forth above.
During any period when the determination of net asset value is suspended by the
Board of Directors of the Fund, the average net asset value of a share for the
last week prior to such suspension shall for this purpose be deemed to be the
net asset value at the close of each succeeding week until it is again
determined.
ARTICLE IV
Limitation of Liability of the Investment Adviser
The Investment Adviser shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any
act or omission in the execution and management of the Fund, except for
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Article IV, the term "Investment Adviser" shall
include any affiliates of the Investment Adviser performing services for the
Fund contemplated hereby and directors, officers, partners and employees of
the Investment Adviser and such affiliates.
ARTICLE V
Activities of the Investment Adviser
The services of the Investment Adviser to the Fund are not to be deemed
to be exclusive, the Investment Adviser and any person controlled by or
under common control with the Investment Adviser (for the purpose of this
Article V referred to as "affiliates") being free to render services to
others. It is understood that directors, officers, employees and
shareholders of the Manager are or may become interested in the Investment
Adviser and its affiliates, as directors, officers, employees, partners and
shareholders or otherwise and that directors, officers, employees, partners
and shareholders of the Investment Adviser and its affiliates are or may
become similarly interested in the Manager or the Fund, and that the Investment
Adviser is or may become interested in the Manager or the Fund as shareholder
or otherwise.
B-2
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above
written and shall remain in force until ______________ __, 1999 and thereafter,
but only so long as the Management Agreement remains in force and provided
that such continuance is specifically approved at least annually by (i)
the Board of Directors of the Fund or by the vote of a majority of the
outstanding voting securities of the Fund and (ii) a majority of those
directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Manager, by the Board of Directors of the Fund, by vote
of a majority of the outstanding voting securities of the Fund or by the
Investment Adviser, on sixty days' written notice to the parties. This
Agreement shall automatically terminate in the event of its assignment or
upon the termination of the Management Agreement.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment
is specifically approved in accordance with applicable requirements under
the Investment Company Act.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding
voting securities," "assignment," "affiliated person" and "interested
person," when used in this Agreement, shall have the respective meanings
specified in the Investment Company Act and the Rules and Regulations
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with laws of the State
of New York and the applicable provisions of the Investment Company Act. To
the extent that the applicable laws of the State of New York, or any
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
B-3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
NOMURA ASSET MANAGEMENT U.S.A. INC.
By______________________________
NOMURA ASSET MANAGEMENT CO., LTD.
By______________________________
B-4
Exhibit C
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this ____ day of ______________ 1997, by and between
NOMURA ASSET MANAGEMENT U.S.A. INC., a New York corporation (hereinafter
referred to as the "Manager"), and LG INVESTMENT TRUST MANAGEMENT CO.,
LTD., a Korean corporation (hereinafter referred to as the "Investment
Sub-adviser").
W I T N E S S E T H :
WHEREAS, Korea Equity Fund, Inc. (the "Fund") is engaged in business as
a non-diversified, closed-end, management investment company registered under
the Investment Company Act of 1940, as amended (hereinafter referred to
as the "Investment Company Act"); and
WHEREAS, the Manager has entered into a management agreement with the
Fund of even date herewith (the "Management Agreement") and an investment
advisory agreement relating to the Fund with Nomura Asset Management Co.,
Ltd. (the "Investment Adviser") of even date herewith (the
"Investment Advisory Agreement"); and
WHEREAS, the Manager and the Investment Sub-adviser are engaged
in business as registered investment advisers under the Investment Advisers
Act of 1940, as amended (hereinafter referred to as the "Investment Advisers
Act"); and
WHEREAS, the Investment Sub-adviser is willing to provide
investment advisory services to the Manager and the Investment Adviser in
connection with the Fund's operations on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and
agree as follows:
ARTICLE I
Duties of the Investment Sub-adviser
The Investment Sub-adviser hereby agrees to provide the following
analyses and reports to the Manager and the Investment Adviser: (i)
quarterly Korean market strategy reports focusing primarily on sector
weighting; (ii) recommendations as to purchases and sales of equity
securities eligible for purchase by the Fund and the exercise of related
voting rights; (iii) general advice related to the Korean securities market
and political and macro-economic developments in Korea; and (iv) such other
matters as to which the Manager and the Investment Sub-adviser may agree.
It is understood that the Investment Sub-adviser shall for all purposes
herein be deemed to be an independent contractor and shall, unless
otherwise provided or authorized, have no authority to act for or represent the
Fund, the Manager or the Investment Adviser in any way or otherwise be deemed
an agent of any of such entities.
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ARTICLE II
Allocation of Charges and Expenses
The Investment Sub-adviser shall furnish, at its own expense,
all administrative services, office space, equipment and facilities,
investment advisory, statistical and research services, and executive,
supervisory and clerical personnel necessary to carry out its obligations under
this Agreement.
ARTICLE III
Compensation of the Investment Sub-adviser
For the services to be rendered as provided herein, the Manager shall
pay to the Investment Sub-adviser at the end of each calendar month a fee based
upon the average weekly value of the net assets of the Fund at the annual
rate of 0.10% of the Fund's average weekly net assets (i.e., the average weekly
value of the total assets of the Fund minus the sum of accrued liabilities of
the Fund), commencing on the day following effectiveness hereof. For
purposes of this calculation, average weekly net assets is determined at the
end of each month on the basis of the average net assets of the Fund for each
week during the month. The assets for each weekly period are determined by
averaging the net assets at the last business day of the prior week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month that this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fee as set forth above. During any
period when the determination of net asset value is suspended by the Board of
Directors of the Fund, the average net asset value of a share for the last
week prior to such suspension shall for this purpose be deemed to be the net
asset value at the close of each succeeding week until it is again
determined.
ARTICLE IV
Representations and Covenants of the
Investment Sub-adviser
The Investment Sub-adviser represents and agrees that (i) it has
full authority to enter into this Agreement and to provide the services
contemplated hereby and (ii) it will maintain all regulatory approvals and
qualifications necessary for it to perform its obligations under this
Agreement, including registration under the Investment Advisers Act.
ARTICLE V
Limitation of Liability of the Investment Sub-adviser
The Investment Sub-adviser shall not be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or
for any act or omission in the execution and management of the Fund,
except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder. As used in this Article V, the term
"Investment Sub-adviser" shall include any affiliates of the Investment
Sub-adviser performing services for the Fund contemplated hereby and
directors, officers, partners and employees of the Investment Sub-adviser
and such affiliates.
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ARTICLE VI
Activities of the Investment Sub-adviser
The services of the Investment Sub-adviser to the Fund are not to
be deemed to be exclusive, the Investment Sub-adviser and any person
controlled by or under common control with the Investment Sub-adviser (for the
purpose of this Article VI referred to as "affiliates") being free to render
services to others. It is understood that directors, officers, employees and
shareholders of the Manager are or may become interested in the Investment
Sub-adviser and its affiliates, as directors, officers, employees,
partners and shareholders or otherwise and that directors, officers,
employees, partners and shareholders of the Investment Sub-adviser and its
affiliates are or may become similarly interested in the Manager or the
Fund, and that the Investment Sub-adviser is or may become interested in the
Manager or the Fund as shareholder or otherwise.
ARTICLE VII
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above
written and shall remain in force until ______________ __, 1999 and thereafter,
but only so long as the Management Agreement remains in force and provided
that such continuance is specifically approved at least annually by (i)
the Board of Directors of the Fund or by the vote of a majority of the
outstanding voting securities of the Fund and (ii) a majority of those
directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Manager, by the Board of Directors of the Fund, by vote
of a majority of the outstanding voting securities of the Fund or by the
Investment Sub-adviser, on sixty days' written notice to the parties hereto.
This Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Management Agreement.
ARTICLE VIII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment
is specifically approved in accordance with applicable requirements under
the Investment Company Act.
ARTICLE IX
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting
securities," "assignment," "affiliated person" and "interested person,"
when used in this Agreement, shall have the respective meanings specified
in the Investment Company Act and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act.
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ARTICLE X
Governing Law
This Agreement shall be construed in accordance with laws of the State
of New York and the applicable provisions of the Investment Company Act. To
the extent that the applicable laws of the State of New York, or any
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
NOMURA ASSET MANAGEMENT U.S.A. INC.
By_________________________________
LG INVESTMENT TRUST MANAGEMENT CO., LTD.
By_________________________________
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KOREA EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038
P R O X Y
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Haruo Sawada and John F. Wallace as
proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse hereof,
all the common stock of Korea Equity Fund, Inc. (the "Fund") held of record
by the undersigned on August 4, 1997 at the Annual Meeting of the
shareholders of the Fund to be held on September 24, 1997 or any adjournment
thereof.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name(s) appear(s) hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized persons.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
KOREA EQUITY FUND, INC.
Mark box at right if an address change or comment has |_| been noted on the
reverse side of this card.
Please be sure to sign and date this Proxy. Date
Shareholder sign here ________ Co-owner sign here ________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ALL NOMINEES.
1. Election of Directors.
William G. Barker, Jr. Chor Weng Tan
George H. Chittenden Arthur R. Taylor
Haruo Sawada John F. Wallace
For All Nominees |_| Withhold |_| For All Nominees Except |_|
If you do not wish your shares voted "For" a particular nominee, mark the "For
All Nominees Except" box and strike a line through that nominee's(s') name(s).
Your shares will be voted for the remaining nominee(s).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 2.
2. Proposal to ratify the selection of Price Waterhouse LLP
as the independent accountants of the Fund.
For |_| Against |_| Abstain |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 3.
3. Proposal to approve new Management, Investment Advisory and
Investment Sub-Advisory Agreements.
For |_| Against |_| Abstain |_|
4. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR Items 1, 2 and 3.
RECORD DATE SHARES: