UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X| Filed by a Party other than the Registrant | |
Check the appropriate box:
|X| Preliminary Proxy Statement
| | Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
| | Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to ss.240.14a-12
KOREA EQUITY FUND, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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.
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(2) Aggregate number of securities to which transaction applies:
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(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
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| | Fee paid previously with preliminary materials.
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Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
KOREA EQUITY FUND, INC.
Two World Financial Center, Building B
New York, New York 10281
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NOTICE OF 2005 ANNUAL MEETING OF SHAREHOLDERS
August 10, 2005
--------------------
TO THE SHAREHOLDERS OF
KOREA EQUITY FUND, INC.:
Notice is hereby given that the 2005 Annual Meeting of Shareholders (the
"Meeting") of Korea Equity Fund, Inc. (the "Fund") will be held at the offices
of Nomura Securities International, Inc., Two World Financial Center -
Building B, New York, New York, on Wednesday, August 10, 2005, at 9:00 A.M.
for the following purposes:
(1) To elect two Directors to serve as Class II Directors, each to serve
for a term to expire in 2008; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
The Fund understands that one shareholder has filed a preliminary proxy
statement in which it states its intention to solicit proxies for the
following proposals: (i) the termination of the Management Agreement between
the Fund and Nomura Asset Management U.S.A. Inc. and (ii) a recommendation
that the Board of Directors of the Fund take all necessary steps to liquidate
the Fund. The Board of Directors opposes these initiatives.
The Board of Directors has fixed the close of business on July 1, 2005 as
the Record Date for the determination of shareholders entitled to notice of
and to vote at the Meeting or any adjournment or postponement thereof.
You are cordially invited to attend the Meeting. Shareholders who do not
expect to attend the Meeting in person are requested to complete, date and
sign the enclosed GREEN form of proxy and return it promptly in the envelope
provided for that purpose. The enclosed proxy is being solicited on behalf of
the Board of Directors of the Fund.
By Order of the Board of Directors
NEIL A. DANIELE
Secretary
New York, New York
Dated: July [o], 2005
The enclosed GREEN proxy card may be executed by holders of record as of the
Record Date. You are urged to sign and date the enclosed GREEN proxy card and
return it in the enclosed envelope whether or not you plan to attend the
Meeting. PLEASE DISCARD ANY WHITE PROXY CARD YOU RECEIVE. Even if you have
already sent in a white proxy card, please use the enclosed GREEN PROXY CARD to
vote for management's nominees and against the shareholder propsals. YOUR LAST
DATED PROXY IS THE ONLY ONE THAT COUNTS.
[This page intentionally left blank]
PROXY STATEMENT
KOREA EQUITY FUND, INC.
Two World Financial Center, Building B
New York, New York 10281
-----------------
2005 ANNUAL MEETING OF SHAREHOLDERS
August 10, 2005
------------------
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 2005 Annual Meeting of
Shareholders of the Fund (the "Meeting") to be held at the offices of Nomura
Securities International, Inc., Two World Financial Center - Building B, New
York, New York, on Wednesday, August 10, 2005, at 9:00 A.M. The approximate
mailing date of this Proxy Statement is July [o], 2005.
All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, proxies
will be voted FOR the election of two Class II Directors (Proposal 1), and
AGAINST any shareholder proposal to terminate the Management Agreement between
the Fund and Nomura Asset Management U.S.A. Inc. ("NAM-U.S.A.") or to
recommend that the Board of Directors of the Fund take all necessary steps to
liquidate the Fund.
Any proxy may be revoked at any time prior to the exercise thereof by
giving written notice to the Secretary of the Fund at the Fund's address
indicated above, by submitting a subsequently executed proxy or by voting in
person at the Meeting.
Only shareholders can attend the Meeting and any adjournment or
postponement thereof. To gain admittance, if you are a shareholder of record,
you must bring a form of personal identification to the Meeting, where your
name will be verified against our shareholder list. If a broker or other
nominee holds your shares and you plan to attend the Meeting, you should bring
a recent brokerage statement showing your ownership of the shares, as well as
a form of personal identification.
The Board of Directors has fixed the close of business on July 1, 2005,
as the Record Date for the determination of shareholders entitled to notice of
and to vote at the Meeting and at any adjournment or postponement thereof.
Shareholders on the Record Date will be entitled to one vote for each share
held, with no shares having cumulative voting rights. As of July 1, 2005, 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 the
election of two Class II Directors and the two proposals of one shareholder
discussed below. If any other matter
is properly presented, it is the intention of the persons named in the enclosed
proxy to vote in accordance with their best judgment.
The Fund sends annual and semi-annual reports to shareholders. The Fund
will furnish, without charge, a copy of its most recent annual and semi-annual
report succeeding such annual report, if any, to shareholders upon request to
the Fund at Two World Financial Center, Building B, New York, New York 10281
(or call 1-800-833-0018).
PROPOSAL 1. ELECTION OF DIRECTORS
The Fund's Board of Directors is divided into three classes of Directors
serving staggered three-year terms and until their successors are elected and
qualify. The term of office for Directors in Class I expires at the Annual
Meeting of Shareholders to be held in 2007, Class II at the Meeting and Class
III at the Annual Meeting of Shareholders to be held in 2006. Each year the
term of office of one class will expire. Each of the two Class II Director
nominees proposed in this Proxy Statement for election to the Board of
Directors is currently a Director of the Fund. The balance of the current
Directors consists of two Class I Directors and two Class III Directors, none
of whom is a nominee for election at the Meeting and all of whom will continue
in office after the Meeting.
Should any vacancy occur on the Board of Directors, the remaining
Directors would be able to fill such vacancy by the affirmative vote of a
majority of the remaining Directors in office, even if the remaining Directors
do not constitute a quorum. Any Director elected by the Board to fill a
vacancy would hold office until the remainder of the full term of the class of
Directors in which the vacancy occurred and until a successor is elected and
qualified. If the size of the Board is increased, additional Directors will be
apportioned among the three classes to make all classes as nearly equal as
possible.
NOMINEES PROPOSED FOR ELECTION
Messrs. Chor Weng Tan and Hiroshi Terasaki have been nominated to serve
as Class II Directors for a three-year term to expire at the Annual Meeting of
Shareholders to be held in 2008 and until their successors are duly elected
and qualified. The nominees have indicated an intention to serve if elected
and have consented to be named in this Proxy Statement.
Unless authority is withheld in the proxy or properly revoked, it is the
intention of the persons named in the accompanying form of proxy to vote each
proxy for the election of the following Class II Director nominees: Chor Weng
Tan and Hiroshi Terasaki.
The Board of Directors knows of no reason why either of the Class II
Director nominees will be unable to serve, but in the event of any such
unavailability, the proxies received will be voted for such substitute
nominee(s) as the Board of Directors may recommend. Mr. Tan is not an
"interested person" of the Fund within the meaning of the Investment Company
Act of 1940, as amended (the "Investment Company Act"). It is currently
expected that any such substitute nominee for Mr. Tan will not be an
"interested person." Mr. Terasaki is an "interested person" of the Fund
(within the meaning of the Investment Company Act as a result of his service
with Nomura Asset Management Co., Ltd. ("NAM") and its affiliates.
2
The following tables contain information about the nominees for election
as Class II Directors and about Directors whose terms will continue after the
Meeting. Each Director has served as a Director of the Fund since the Fund's
inception in December 1993, except for Mr. Terasaki, who was elected to fill a
vacancy on the Board effective June 20, 2005 and Dr. Grollman, who was elected
to the Board to fill a vacancy on the Board effective January 1, 2004.
Interested Director
Biographical and other information relating to the Class II Director
nominee, who is an "interested person," as defined in the Investment Company
Act, of the Fund is set out below.
Term of Number of Other Public
Position(s) Office and Funds in the Directorships
Held with Length of Principal Occupation(s) Fund Complex Held by the
Name, Address and Age the Fund Time Served* During Past Five Years Overseen*** Director
- ----------------------- ----------- -------------- --------------------------------- ---------------- --------------
Class II (Nominee for a Term Expiring at the Annual Meeting of Shareholders to be held in 2008)
Hiroshi Terasaki (49)** Class II Director Managing Director and Chief 2 registered None
c/o Nomura Asset Director since June Executive Officer, Nomura investment
Management U.S.A. Inc. 2005 Asset Management U.K. Limted companies
Two World Financial from 2003 to 2005; General consisting of
Center, Building B Manager, Fixed Income 2 portfolios
New York Investment Department of NAM
New York 10281 from 2000 to 2003.
- -----------------------
* Mr. Terasaki, if elected, will serve as a Class II Director for a
three-year term expiring at the Annual Meeting of Shareholders to be
held in 2008 and until his successor is elected and qualified or until
his earlier resignation or removal.
** Mr. Terasaki is a director of Japan Smaller Capitalization Fund, Inc.
for which NAM-U.S.A. acts as manager and for which NAM acts as
investment adviser. Mr. Terasaki is an "interested person," as defined
in the Investment Company Act, of the Fund based on his positions with
NAM and its affiliates.
*** In addition to the Fund, the "Fund Complex" includes Japan Smaller
Capitalization Fund, Inc.
Non-Interested Director
Biographical and other information relating to the Class II Director
nominee, who is not an "interested person," as defined in the Investment
Company Act, of the Fund is set out below.
Term of Number of Other Public
Position(s) Office and Funds in the Directorships
Held with Length of Principal Occupation(s) Fund Complex Held by the
Name, Address and Age the Fund Time Served* During Past Five Years Overseen*** Director
- ----------------------- ----------- -------------- --------------------------------- ---------------- --------------
Class II (Nominee for a Term Expiring at the Annual Meeting of Shareholders to be held in 2008)
Chor Weng Tan (69)** Class II Director Retired since 2004; Managing 2 registered None
76 Echo Bay Drive Director since 1993 Director for Education, The investment
New +ochelle American Society of Mechanical companies
New York 10805 Engineers from 1991 to 2004. consisting of
2 portfolios
- -----------------------
* Mr. Tan, if elected, will serve as a Class II Director for a three-year
term expiring at the Annual Meeting of Shareholders to be held in 2008
and until his successor is elected and qualified or until his earlier
resignation or removal.
3
** Mr. Tan is also a director of Japan Smaller Capitalization Fund, Inc.
for which NAM-U.S.A. acts as manager and NAM acts as investment adviser,
and is a member of the Audit and Nominating Committees of Japan Smaller
Capitalization Fund, Inc. and a member of the Audit and Nominating
Committees of the Fund.
*** In addition to the Fund, the "Fund Complex" includes Japan Smaller
Capitalization Fund, Inc.
INFORMATION REGARDING OTHER DIRECTORS
Class I Directors
Non-Interested Directors
Each of the Class I Directors is not an "interested person," as defined
in the Investment Company Act, of the Fund. Biographical and other information
relating to the Class I Directors is set out below.
Term of Number of Other Public
Position(s) Office and Funds in the Directorships
Held with Length of Principal Occupation(s) Fund Complex Held by the
Name, Address and Age the Fund Time Served* During Past Five Years Overseen*** Director
- ----------------------- ----------- -------------- --------------------------------- ---------------- --------------
Class I (Term Expiring at the Annual Meeting of Shareholders to be held in 2007)
William G. Barker, Class I Director Retired. 2 registered None
Jr.** (72) Director since 1993 investment
111 Parsonage Road companies
Greenwich consisting of
Connecticut 06830 2 portfolios
John F. Wallace (76)** Class I Director Retired since 2000; Vice 2 registered None
17 Rhoda Street Director since 1993 President of the Fund from investment
West Hempstead 1997 to 2000 and Secretary and companies
New York 11552 Treasurer of the Fund from consisting of
1993 to 1997; Senior Vice 2 portfolios
President of NAM-U.S.A.
from 1981 to 2000, Secretary
from 1976 to 2000, Treasurer
from 1984 to 2000 and Director
from 1986 to 2000.
- -----------------------
* Each Class I Director serves for a three year term expiring at the
Annual Meeting of Shareholders to be held in 2007 and until his
successor is elected and qualified or until his earlier resignation or
removal.
** Each Class I Director is also a director of Japan Smaller Capitalization
Fund, Inc. for which NAM-U.S.A. acts as manager and NAM acts as
investment adviser, and is a member of the Audit and Nominating
Committees of Japan Smaller Capitalization Fund, Inc. and a member of
the Audit and Nominating Committees of the Fund.
*** In addition to the Fund, the "Fund Complex" includes Japan Smaller
Capitalization Fund, Inc.
Class III Directors
Non-Interested Directors
Each of the Class III Directors is not an "interested person," as defined
in the Investment Company Act, of the Fund. Biographical and other information
relating to the Class III Directors is set out below.
4
Term of Number of Other Public
Position(s) Office and Funds in the Directorships
Held with Length of Principal Occupation(s) Fund Complex Held by the
Name, Address and Age the Fund Time Served* During Past Five Years Overseen*** Director
- ----------------------- ----------- -------------- --------------------------------- ---------------- --------------
Class III (Term Expiring at the Annual Meeting of Shareholders to be held in 2006)
Arthur R. Taylor (69) Class III Director Retired since 2002; President 2 registered None
** Director since 1993 of Muhlenberg College from investment
3731 Devonshire Street 1992 to 2002. companies
Allentown consisting of
Pennsylvania 18103 2 portfolios
William K. Grollman Class III Director President and co-founder since 2 registered SmartPros Ltd.
since 1981
(63)** Director January 2004 and director of SmartPros Ltd. investment
SmartPros Ltd. (continuing education for the companies
12 Skyline Drive professions), listed on American consisting of
Hawthorne Stock Exchange; 2 portfolios
New York 10532 former Partner and National Director
of BDO Seidman accounting firm.
- -----------------------
* Each Class III Director serves for a three year term expiring at the
Annual Meeting of Shareholders to be held in 2006 and until his
successor is elected and qualified or until his earlier resignation or
removal.
** Each Class III Director is also a director of Japan Smaller
Capitalization Fund, Inc. for which NAM-U.S.A. acts as manager and NAM
acts as investment adviser, and each is a member of the Audit and
Nominating Committees of Japan Smaller Capitalization Fund, Inc. and a
member of the Audit and Nominating Committees of the Fund.
*** In addition to the Fund, the "Fund Complex" includes Japan Smaller
Capitalization Fund, Inc.
Committees and Directors' Meetings. The Board of Directors has a standing
Audit Committee and a standing Nominating Committee, each of which consists of
the Directors who are not "interested persons" of the Fund within the meaning
of the Investment Company Act and are "independent" as defined in the New York
Stock Exchange listing standards. Currently, Messrs. Barker, Grollman, Tan,
Taylor and Wallace are members of these Committees. The principal
responsibilities of the Audit Committee and the Nominating Committee are
described below. The Fund has no standing Compensation Committee. The
non-interested Directors have retained independent legal counsel to assist
them in connection with their duties.
During the fiscal year ended October 31, 2004, the Board of Directors
held seven meetings, the Audit Committee held five meetings and the Nominating
Committee held one meeting. Each incumbent Director attended at least 75% of
the aggregate number of meetings of the Board of Directors held during the
fiscal year and, if a member, of the aggregate number of meetings of the Audit
and Nominating Committees held during the period for which he served.
Report of the Audit Committee. The following is a report by the Fund's
Audit Committee regarding the responsibilities and functions of the Audit
Committee.
Pursuant to the Audit Committee Charter adopted by the Fund's Board of
Directors on August 6, 2003, the Audit Committee's principal responsibilities
are to: (i) select and oversee the Fund's independent accountants; (ii) review
with the independent accountants the scope, performance and anticipated cost
of their audit; (iii) discuss with the independent accountants certain matters
relating to the Fund's financial statements, including any adjustment to such
financial statements recommended by such independent accountants, or any other
results of any audit; (iv) ensure that the independent accountants submit on a
periodic basis a formal written
5
statement as to their independence, discuss with the independent accountants
any relationships or services disclosed in the statement that may impact the
objectivity and independence of the Fund's independent accountants and
recommend that the Board take appropriate action in response to this statement
to satisfy itself of the independent accountants' independence; and (v)
consider the comments of the independent accountants and management's
responses thereto with respect to the quality and adequacy of the Fund's
accounting and financial reporting policies and practices and internal
controls. A copy of the Audit Committee Charter was attached as Exhibit I to
the Fund's 2004 Proxy Statement.
The Audit Committee has received written disclosures and the letter
required by Independence Standards Board Standard No. 1 from Ernst & Young LLP
("Ernst &Young"), the Fund's independent accountants, and discussed with Ernst
& Young certain matters required to be discussed by Statement on Auditing
Standards No. 61. The Audit Committee has considered whether the provision of
non-audit services by Ernst & Young is compatible with maintaining the
independence of those accountants. At its meeting held December 16, 2004, the
Audit Committee reviewed and discussed the audit of the Fund's financial
statements with Fund management and Ernst & Young. The Audit Committee
discussed with Ernst & Young their independence and considered whether the
provision of services by Ernst & Young to the Fund and to NAM-U.S.A. and its
affiliates was compatible with maintaining Ernst & Young's independence. Based
upon these reviews and discussions, the Audit Committee recommended to the
Board of Directors that the Fund's audited financial statements be included in
the Fund's 2004 Annual Report to shareholders for the fiscal year ended
October 31, 2004.
The Audit Committee's Charter for the Fund requires the Audit Committee
(a) to pre-approve all auditing services to be provided to the Fund by the
Fund's independent accountants; (b) to pre-approve all non-audit services,
including tax services, to be provided to the Fund by the Fund's independent
accountants in accordance with the Securities Exchange Act of 1934, as amended
(the "1934 Act"); provided, however, that the pre-approval requirement with
respect to the provision of non-audit services to the Fund by the Fund's
independent accountants may be waived by the Audit Committee under the
circumstances described in the 1934 Act and (c) to pre-approve non-audit
services to be provided to the Fund's investment adviser (and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the Fund) if the engagement relates directly
to the operations and financial reporting of the Fund.
Submitted by the Audit Committee of the
Board of Directors of the Fund
William G. Barker, Jr.
William K. Grollman
Chor Weng Tan
Arthur R. Taylor
John F. Wallace
Nominating Committee; Consideration of Potential Director Nominees. The
principal purpose of the Nominating Committee is to select and nominate the
independent (i.e., non-interested) Directors of the Fund. It evaluates
candidates' qualifications for Board membership
6
and, with respect to nominees for positions as independent directors, their
independence from the Fund's manager and its affiliates and other principal
service providers. The Committee periodically reviews director compensation
and will recommend any appropriate changes to the Board as a group. This
Committee also reviews and may make recommendations to the Board relating to
those issues that pertain to the effectiveness of the Board in carrying out
its responsibilities in governing the Fund and overseeing the management of
the Fund.
The Nominating Committee will consider potential director candidates
recommended by Fund shareholders provided that the proposed candidates satisfy
the director qualification requirements provided in the Nominating Committee's
Charter; are not "interested persons" of the Fund or the Fund's investment
adviser within the meaning of the Investment Company Act; and are
"independent" as defined in the New York Stock Exchange listing standards. The
Committee has determined that potential director candidates recommended by
Fund shareholders must satisfy the Securities and Exchange Commission's
("SEC") nominee requirements found in Regulation 14A of the 1934 Act. A copy
of the Nominating Committee Charter was attached as Exhibit II to the Fund's
2004 Proxy Statement.
Shareholders recommending potential director candidates must substantiate
compliance with these requirements at the time of submitting their proposed
director candidate to the attention of the Fund's Secretary. Notice to the
Fund's Secretary should be provided in accordance with the deadline specified
in the Fund's Bylaws and include the information required by the Fund's
Bylaws.
The Nominating Committee identifies prospective candidates from any
reasonable source and has the ability to engage third-party services for the
identification and evaluation of potential nominees. Generally, the Committee
meets annually to identify and evaluate nominees for Director and make its
recommendations to the Board. The Committee may meet more frequently if
vacancies on the Board occur during a given year. In identifying and
evaluating a potential nominee to serve as an independent Director of the
Fund, the Nominating Committee will consider, among other factors: (i) whether
the individual has any material relationships that could create any appearance
of impropriety with respect to or a lack of independence from NAM-U.S.A. or
any of its affiliates; (ii) whether the individual has the integrity,
independence of mind and personal qualities to fulfill the fiduciary duties of
an independent Director of the Fund and to protect the interests of Fund
shareholders; (iii) the individual's corporate or other business experience in
significant positions which demonstrate sound business judgment; (iv) whether
the individual has financial and accounting experience; (v) the individual's
ability to attend at least four regular meetings a year and (vi) whether the
individual can add to the balance of experience of the present independent
Directors. The standard of the Nominating Committee is to treat all equally
qualified nominees in the same manner.
No nominee recommendations have been received from shareholders. The
Nominating Committee may modify its policies and procedures for director
nominees and recommendations from time to time in response to changes in the
Fund's needs and circumstances, and as applicable legal or listing standards
change.
Communications with the Board of Directors. Shareholders may send written
communications to the Fund's Board of Directors or to an individual Director
by mailing such
7
correspondence to the Secretary of the Fund (addressed to Two World Financial
Center, Building B, New York, New York 10281). Such communications must be
signed by the shareholder and identify the class and number of shares held by
the shareholder. Properly submitted shareholder communications will, as
appropriate, be forwarded to the entire Board or to the individual Director.
Any shareholder proposal submitted pursuant to Rule 14a-8 under the 1934 Act,
must continue to meet all the requirements of Rule 14a-8. See "Additional
Information -- Proposals of Shareholders" below.
Director Attendance at Shareholder Meetings. The Fund has no formal
policy regarding director attendance at shareholder meetings. Each member of
the Board of Directors then in office was present at the Fund's 2004 annual
meeting of shareholders.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the 1934 Act requires the officers and directors of the Fund
and persons who own more than 10% of a registered class of the Fund's equity
securities to file reports of ownership and changes in ownership on Forms 3, 4
and 5 with the SEC, the New York Stock Exchange and the Boston Stock Exchange.
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Fund with copies of all Forms 3, 4 and 5 that they
file.
Based solely on the Fund's review of the copies of such forms, and
amendments thereto, furnished to it during or with respect to its most recent
fiscal year, and written representations from certain reporting persons that
they were not required to file Form 5 with respect to the most recent fiscal
year, the Fund believes that all of its officers, directors, greater than 10%
beneficial owners and other persons subject to Section 16 of the 1934 Act due
to the requirements of Section 30 of the Investment Company Act (i.e., any
advisory board member, investment adviser or affiliated person of the Fund's
investment adviser), have complied with all filing requirements applicable to
them with respect to transactions during the Fund's most recent fiscal year.
Interested Persons. The Fund currently treats one Class II Director
nominee, Mr. Terasaki, as an "interested person" of the Fund within the
meaning of Section 2(a)(19) of the Investment Company Act based on his
positions with NAM and its affiliates.
Compensation of Directors. NAM-U.S.A. pays all compensation of all
Directors of the Fund who are affiliated with NAM-U.S.A. or any of its
affiliates. The Fund pays to each Director not affiliated with NAM-U.S.A. or
any of its affiliates an annual fee of $5,000 plus $500 per Board or
committee meeting attended, together with such Director's actual out-of-pocket
expenses relating to attendance at meetings. Mr. Barker, who has been
designated by the Directors not affiliated with the Fund to serve as Lead
Director, is paid an additional $5,000, effective June 2005. Such fees and
expenses aggregated $61,965 for the fiscal year ended October 31, 2004.
The following table sets forth for the periods indicated compensation
paid by the Fund to its Directors and the aggregate compensation paid to the
Directors by all U.S. registered investment companies managed by NAM-U.S.A. or
advised by NAM:
8
Aggregate Compensation
Pension or Retirement from Fund Complex Paid to
Aggregate Compensation Benefit Accrued as Part of Directors
from Fund For Fund Expenses for its During the Calendar Year
its Fiscal Year Ended Fiscal Year Ended Ended
Name of Director October 31, 2004 October 31, 2004 December 31, 2004*
---------------- ---------------- ---------------- ------------------
William G. Barker, Jr........ $13,000 None $30,500
William K. Grollman**........ 11,000 None 29,500
Chor Weng Tan................ 13,000 None 30,500
Arthur R. Taylor............. 12,500 None 29,000
Hiroshi Terasaki***.......... -- None --
John F. Wallace.............. 12,500 None 30,500
- -----------------------
* In addition to the Fund, the "Fund Complex" includes Japan Smaller
Capitalization Fund, Inc. Because the funds in the Fund Complex do not
share a common fiscal year, the information relating to compensation
from the Fund Complex paid to the Directors is provided as of December
31, 2004.
** Dr. Grollman was appointed a Director of the Fund effective January 1,
2004.
*** Mr. Terasaki was appointed a Director of the Fund effective June 20,
2005.
Officers of the Fund. Officers of the Fund are elected and appointed by
the Directors and hold office until they resign, are removed or are otherwise
disqualified to serve. Certain biographical and other information relating to
the officers of the Fund is set out below:
Name, Address* and Position(s) Held Term of Office** and Principal Occupation(s)
Age of Officers with the Fund Length of Time Served During Past Five Years
--------------- ------------- --------------------- ----------------------
Yasushi Suzuki (51) President President since 2003 President of the Fund since May 2003;
President and Director of NAM-U.S.A.
since May 2003; Management Executive of
NAM from 1999 to April 2003.
Kenneth L. Munt (58) Vice President Vice President since Senior Vice President and Secretary of
2001 NAM-U.S.A. since 1999; Senior Vice
President of Human Resources for
Middlesex Mutual Assurance Company (insurance
company) from 1996 to 1999.
Keiko Tani (42) Vice President Vice President since Senior Vice President and General Counsel
2005 of NAM-U.S.A. since 2005; Leader, Legal
Team, Product Documentation & Legal
Department of NAM from 2003 to 2005, General
Manager of Legal Department from 1999 to
2003.
Rita Chopra-Brathwaite Treasurer Treasurer since 2002 Vice President of NAM-U.S.A. since 2001;
(36) Assistant Vice President of NAM-U.S.A.;
from 1999 to 2000.
Neil Daniele (44) Secretary Secretary since 2002 Senior Vice President of NAM-U.S.A. Inc.
since 2002; Vice President and Compliance
Officer of Munich Re Capital Management
Corp. (asset management firm) from 2001
to 2002; Vice President of AIG Global
Investment Group, Inc. (asset management
firm) from 2000 to 2001; Compliance
Officer of AIG Global Investment Corp.
from 1996 to 2000.
9
- -----------------------
* The address of each officer listed above is Two World Financial Center,
Building B, New York, New York 10281.
** Elected by and serves at the pleasure of the Board of Directors.
Stock Ownership. Information relating to the share ownership by each
Director nominee and each current Director at June 15, 2005 is set out below:
Aggregate Dollar Range of
Shares of Common Aggregate Dollar Range of Securities in All Registered
Name of Director Nominee/ Stock of the Fund Equity Securities Funds in the Fund Complex
Current Directors Beneficially Owned in the Fund Overseen by Director Nominee
----------------- ------------------ ----------- ----------------------------
Nominees
Chor Weng Tan 2,500 $10,001-$50,000 $10,001-$50,000
Hiroshi Terasaki -0- None None
Current Directors
William G. Barker, Jr. -0- None None
William K. Grollman -0- None None
Arthur R. Taylor -0- None None
John F. Wallace 1,000 $1-$10,000 $10,001-$50,000
As of June 15, 2005, the Directors and officers of the Fund as a group
(eleven persons) owned an aggregate of less than 1% of the outstanding shares
of the Fund. At such date, all of the officers of the Fund as a group (five
persons) owned an aggregate of less than 1% of the outstanding shares of
Nomura Holdings, Inc., the parent company of each of NAM-U.S.A., NAM, Nomura
Asset Management Hong Kong Limited ("NAM-Hong Kong") and Nomura Asset
Management Singapore Limited ("NAM-Singapore").
CONSIDERATION OF SHAREHOLDER PROPOSAL
TO TERMINATE THE MANAGEMENT AGREEMENT
BETWEEN THE FUND AND NOMURA ASSET
MANAGEMENT U.S.A. INC.
Shareholder Proposal
The Fund understands that one shareholder intends to solicit proxies for
a proposal to terminate the Management Agreement between the Fund and Nomura
Asset Management U.S.A. Inc. ("NAM- U.S.A.").
Independent Directors' Response to the Shareholder Proposal
The Fund's independent Directors unanimously oppose, and strongly urge
you to vote AGAINST, the shareholder proposal to terminate the Management
Agreement between the Fund and NAM-U.S.A. The independent Directors believe
that the Fund is a viable long-term investment vehicle. The independent
Directors further believe that the Fund has had strong performance under
NAM-U.S.A. and NAM. The independent Directors believe that the skill and
experience of NAM-U.S.A. and NAM should be retained and strongly oppose the
shareholder propsal to terminate the arrangements. NAM is a global financial
services firm and, together with its advisory affiliates, has assets under
management of approximately $146 billion
10
as of March 31, 2005. NAM specializes in managing investments in Asian
securities and has acted as investment adviser to the Fund since the Fund's
inception in 1993.
Pursuant to the terms of the Fund's Management Agreement with NAM-U.S.A.,
NAM-U.S.A. has delegated (with the prior authorization of the Fund's Board of
Directors) investment advisory responsibilities for the Fund's portfolio to
NAM, and NAM has delegated (with the prior authorization of the Fund's Board
of Directors) this investment advisory discretion to separate subsidiaries of
NAM. This shareholder proposal would terminate the Management Agreement
between the Fund and NAM-U.S.A. If that agreement is terminated, the
investment advisory agreement and the sub-advisory agreements between NAM and
NAM-Singapore and NAM and NAM-Hong Kong will terminate automatically.
Independent Directors' Deliberations
The independent Directors have held numerous meetings among themselves as
well as with NAM-U.S.A. and NAM, and have had extensive discussions with their
counsel, as part of their review of the Fund and its management arrangements.
In the course of their deliberations, the independent Directors considered
fundamental alternatives regarding the Fund. In particular, the independent
Directors requested and reviewed information they deemed relevant to the
concerns expressed by the proposing shareholder, and considered, among other
things, whether it would be in the best interest of the Fund to liquidate and
dissolve the Fund, to change the structure of the Fund to an open-end fund, to
convert the Fund to an interval fund making periodic repurchases, to conduct a
partial tender offer or to replace the Fund's current management and/or
investment advisory arrangements. The independent Directors and NAM also
considered the long-term investment potential of the Fund's investments in
Korean equity securities and the likelihood that such investment potential
could be reached by NAM or another investment adviser. After completing their
review, the independent Directors have concluded that, in their judgment:
o the Fund is a viable long-term investment vehicle for Korean equity
securities; and
o it is in the best interest of the Fund, under the circumstances and
considering the independent Directors' review discussed above, that
the Fund continue to operate under its current management and
investment advisory arrangements as a stand alone closed-end fund.
The independent Directors considered numerous factors in making their
determinations, including, in particular:
1. The Fund's Investment Performance
The Fund's Board of Directors regularly reviews the Fund's
investment performance and holds discussions with NAM and the
portfolio managers for the Fund. Although the Korean equity
securities markets continue to be volatile, NAM, based on
recommendations by the Board of Directors and its own internal
review, has improved the Fund's investment performance over the past
several years, and introduced a new expanded portfolio management
team. For the two-
11
year period ended May 31, 2005, the Fund's net asset value and
stock price increased 79.0% and 87.2%, respectively.
The graph below shows the performance of a hypothetical $10,000
investment in the Fund's shares for the five-year period ended May
31, 2005. The graph reflects the change in net asset value (NAV)
(assuming an investment at the Fund's NAV on June 1, 2000) and the
change in market value assuming a $10,000 investment in shares of
the Fund based on their market value on June 1, 2000 (when the
Fund's shares traded at a discount of 12.5% from NAV). The Fund's
stock price and NAV performance are compared to the performance of
the KOSPI (the Korea Composite Stock Price Index) during the same
five-year period. The KOSPI is a composite index, calculated on a
market value method, that is the major measure of changes in market
value of stocks listed on the Korea Stock Exchange and against which
the Fund's performance is tracked.
Source: NAM-U.S.A. and Bloomberg L.P.
===============================================================================
Performance Comparison of a Hypothetical $10,000 Investment
In this space there appears a line graph titled "Performance Comparison of a
Hypothetical $10,000 Investment. The vertical axis of the graph plots amounts
in dollars ranging from $0 to $25,000. The horizontal axis of the graph plots
dates from September 2000 to May 2005. There are three lines plotted on the
graph. The first, in dots, is the KOSPI, the second, in dashes, is the KEF
monthly NAV charge in US dollars and the third is the KEF monthly NYSE charge
in US dollars. The exact points as plotted appear below.
Period KOSPI KEF Monthly NAV Change (USD) KEF Monthly NYSE Change (USD)
- ------ ----- ---------------------------- -----------------------------
Beginning $ 10,000.00 $ 10,000.00 $ 10,000.00
Jun-00 $ 11,365.74 $ 11,275.30 $ 11,320.75
Jul-00 $ 9,755.25 $ 9,595.13 $ 11,132.07
Aug-00 $ 9,600.46 $ 9,453.43 $ 10,754.71
Sep-00 $ 8,486.11 $ 8,421.04 $ 9,433.96
Oct-00 $ 6,979.78 $ 7,125.50 $ 7,924.53
Nov-00 $ 6,465.27 $ 6,447.73 $ 7,547.17
Dec-00 $ 6,218.67 $ 6,336.03 $ 7,358.49
Jan-01 $ 7,586.10 $ 7,712.54 $ 9,449.06
Feb-01 $ 7,111.41 $ 7,246.96 $ 8,905.66
Mar-01 $ 6,065.88 $ 6,214.57 $ 7,557.35
Apr-01 $ 6,757.55 $ 6,902.83 $ 8,452.83
May-01 $ 7,380.38 $ 7,327.93 $ 8,845.28
Jun-01 $ 7,062.02 $ 7,004.04 $ 9,237.74
Jul-01 $ 6,428.69 $ 6,497.97 $ 8,090.57
Aug-01 $ 6,574.53 $ 6,680.16 $ 8,060.38
Sep-01 $ 5,684.10 $ 5,789.47 $ 7,154.72
Oct-01 $ 6,431.32 $ 6,538.48 $ 7,909.43
Nov-01 $ 7,836.41 $ 7,955.47 $ 9,841.51
Dec-01 $ 8,091.66 $ 8,340.08 $ 10,113.21
Jan-02 $ 8,802.31 $ 8,744.94 $ 10,988.68
Feb-02 $ 9,601.07 $ 9,554.66 $ 11,803.77
Mar-02 $ 10,414.97 $ 10,344.13 $ 12,981.13
Apr-02 $ 10,057.25 $ 10,526.33 $ 13,313.20
May-02 $ 10,121.15 $ 10,445.36 $ 13,313.20
Jun-02 $ 9,539.52 $ 10,040.49 $ 12,618.86
Jul-02 $ 9,326.71 $ 10,000.01 $ 12,377.35
Aug-02 $ 9,450.47 $ 9,757.10 $ 12,407.54
Sep-02 $ 8,160.04 $ 8,562.76 $ 11,109.42
Oct-02 $ 8,334.89 $ 8,663.98 $ 11,260.37
Nov-02 $ 9,263.12 $ 9,635.64 $ 12,347.16
Dec-02 $ 8,110.96 $ 8,502.04 $ 10,928.30
Jan-03 $ 7,786.58 $ 8,198.39 $ 10,656.60
Feb-03 $ 7,439.51 $ 7,773.29 $ 9,962.26
Mar-03 $ 6,590.12 $ 7,024.30 $ 9,720.75
Apr-03 $ 7,610.96 $ 7,935.24 $ 10,475.47
May-03 $ 8,105.25 $ 8,279.36 $ 10,807.54
Jun-03 $ 8,665.59 $ 8,805.68 $ 11,833.96
Jul-03 $ 9,331.49 $ 9,534.43 $ 12,347.16
Aug-03 $ 9,948.01 $ 10,323.91 $ 12,799.99
Sep-03 $ 9,368.37 $ 9,615.41 $ 12,075.46
Oct-03 $ 10,201.86 $ 10,890.72 $ 14,037.73
Nov-03 $ 10,221.46 $ 11,133.64 $ 13,796.22
Dec-03 $ 10,449.70 $ 11,578.99 $ 15,033.96
Jan-04 $ 11,158.19 $ 12,186.28 $ 16,181.13
Feb-04 $ 11,592.76 $ 12,348.23 $ 16,241.50
Mar-04 $ 11,852.17 $ 12,732.85 $ 16,392.45
Apr-04 $ 11,348.16 $ 11,882.64 $ 15,728.29
May-04 $ 10,693.53 $ 11,417.05 $ 14,913.21
Jun-04 $ 10,494.46 $ 11,133.65 $ 14,400.00
Jul-04 $ 9,703.10 $ 10,202.47 $ 12,981.14
Aug-04 $ 10,765.91 $ 11,295.60 $ 14,792.46
Sep-04 $ 11,191.68 $ 11,579.00 $ 16,392.46
Oct-04 $ 11,497.85 $ 11,740.95 $ 16,120.75
Nov-04 $ 12,923.47 $ 12,935.28 $ 17,509.43
Dec-04 $ 13,275.02 $ 13,279.41 $ 18,566.03
Jan-05 $ 14,015.14 $ 14,230.83 $ 20,075.47
Feb-05 $ 15,591.38 $ 15,647.84 $ 22,188.67
Mar-05 $ 14,675.03 $ 14,777.40 $ 20,075.47
Apr-05 $ 14,104.20 $ 14,210.59 $ 19,683.01
May-05 $ 14,853.58 $ 14,817.88 $ 20,226.40
12
Set out below is additional information concerning the Fund's stock
price and net asset value performance for the past five years.
Stock Price Performance
The Fund's stock price outperformed the KOSPI for four of the
past five years.
-----------------------------------------------------------
Year Ended May 31*
-----------------------------------------------------------
Over (Under)
Fund** KOSPI*** Performance
----------------------------------------------------------------------
2005 35.6% 38.9% -3.3%
----------------------------------------------------------------------
2004 38.0% 31.8% 6.2%
----------------------------------------------------------------------
2003 -18.8% -19.9% 1.1%
----------------------------------------------------------------------
2002 50.5% 37.1% 13.4%
----------------------------------------------------------------------
2001 -11.6% -26.2% 14.6%
----------------------------------------------------------------------
--------
* Sources: NAM-U.S.A. and Bloomberg L.P.
** Based on New York Stock Exchange's closing market
price, adjusted for reinvestment of income dividends
and capital gain distributions. The Fund's stock
price performance does not reflect sales
commissions.
*** Korea Composite Stock Price Index in U.S. dollars.
Net Asset Value Performance
The Fund's net asset value performance for the past five years is
set out below.
------------------------------------------------------------
Year Ended May 31*
------------------------------------------------------------
Over (Under)
Fund KOSPI** Performance
----------------------------------------------------------------------
2005 29.8% 38.9% -9.1%
----------------------------------------------------------------------
2004 37.9% 31.8% 6.1%
----------------------------------------------------------------------
2003 -20.7% -19.9% -0.8%
----------------------------------------------------------------------
2002 42.5% 37.1% 5.4%
----------------------------------------------------------------------
2001 -26.7% -26.2% -0.5%
----------------------------------------------------------------------
---------------
* Sources: NAM-U.S.A. and Bloomberg L.P.
** Korea Composite Stock Price Index in U.S. dollars.
2. Prospects for Investment in Korean Equity Securities
The Fund provides one of a very limited number of U.S.-registered
investment funds available to U.S. investors who wish to invest in a
diversified portfolio of Korean equity securities. The Board of
Directors and NAM recognize the potential volatility of the Korean
securities market as well as unpredictable factors impacting such
market, including Korea's political situation and its relationship
13
with North Korea. However, the Board of Directors, including the
independent Directors, and NAM believe that the Fund offers the
opportunity for shareholders to realize long-term capital
appreciation. After deliberation and consideration of the feasibility
of various options, the independent Directors do not believe that it
is in the best interest of the Fund for the Fund to liquidate and
dissolve, change its structure to an open-end fund, convert to
interval fund status, conduct a partial tender offer or change its
current management and/or investment advisory arrangements.
NAM has advised the Fund that it remains very positive regarding the
Korean equity market in the medium to long term. NAM points to the
following positive developments over the last several years:
o The extremely strong financial position of the Korean
government, reflecting both the accumulation of foreign
reserves and a healthy current account surplus
o The restructuring and emergence of strong global companies
after the 1997 Asian financial crisis, many of which have
brands that are becoming global household names (for example,
Samsung mobile phones, LG refrigerators and Hyundai autos)
o Increased foreign fund flows to the Korean equity market
o Security valuations that continue to remain attractive to
investors, particularly in light of the potential earnings
growth that may be achieved by Korean companies
o The continued narrowing of the equity market valuation gap
between Korea and other markets in region
3. Improvement in the Market Discount of the Fund's Shares
The discount in the market price of the Fund's shares to its net
asset value has declined significantly over the past five years.
Shares of closed-end funds frequently trade at a discount from their
net asset value, although the shares may also trade at a price in
excess of net asset value per share. Since the Fund's inception in
1993, its shares have traded at a discount as large as 29% and at a
premium in excess of 30%. The reduction in the discount to net asset
value at which the Fund's shares have traded on the NYSE is
illustrated by the graph below.
14
[Trading Discount [Trading Discount
at May 1, 2000 at May 1, 2005
- -29.2%] -7.1%]
In this space there appears a graph showing the discount of NAV to traded
price. The vertical axis shows plots percentages from -35%to 0%, and the
horizontal axis plots the Months of April and October of each 2000, 2001, 2002,
2003 and 2004.
4. The Fund's Capital Loss Carryforward
The Fund had a capital loss carryforward of approximately $45
million as of October 31, 2004, which is available to offset future
gains in the Fund's investment portfolio. Given the Fund's current
assets of approximately $62 million, the carryforward can offset
gains representing a substantial percentage of the Fund's entire
portfolio. In the event of a liquidation and dissolution, the Fund's
shareholders would lose the ability to use its capital loss
carryforward. In addition, if the Fund merged into another fund with
similar investment objectives and policies, the successor fund's
ability to use the Fund's capital loss carryforward would be
reduced. The Fund's Board of Directors and management believe that
the tax-exempt institutional shareholder which is recommending
dissolution of the Fund has a conflict of interest with shareholders
that are subject to U.S. income taxes who can benefit from this
carryforward.
5. Objectives of Future Growth and Reduction of Operating Expenses
Both the Fund's Board of Directors and its management support growth
of the Fund's assets. They believe growth will (i) position the Fund
for future investment opportunities and (ii) work to reduce the
Fund's operating expense ratio, which reflects in part the Fund's
fixed expenses. In terms of operating expense, the Board of
Directors has noted in particular the significant increase in
expense during the past two years attributable to responding to
shareholder proposals that the Board believes conflict with
the Fund's long-term interests. Apart from these expenses incurred
due to shareholder proposals, the Board of Directors believes that
the Fund's operating expense structure is consistent with other
investment companies and can be expected to decline as the Fund grows.
If the Fund's current Management Agreement were to be terminated, the
Fund's Board of Directors would consider all alternatives available under the
circumstances.
15
When you return the GREEN proxy card you will be voting AGAINST the above
proposal to terminate the Management Agreement between the Fund and
NAM-U.S.A., unless you appropriately mark your card otherwise.
THE INDEPENDENT DIRECTORS UNANIMOUSLY RECOMMEND A VOTE "AGAINST" THE
ABOVE PROPOSAL.
CONSIDERATION OF SHAREHOLDER PROPOSAL
TO RECOMMEND THAT THE BOARD OF
DIRECTORS OF THE FUND TAKE ALL NECESSARY STEPS TO
LIQUIDATE THE FUND
Shareholder Proposal
The Fund understands that one shareholder intends to solicit proxies for
a proposal to recommend that the Board of Directors take all necessary steps
to liquidate the Fund.
Independent Directors' Response to the Shareholder Proposal
The Fund's independent Directors unanimously oppose and strongly urge you
to Vote AGAINST, the shareholder proposal to recommend that the Board of
Directors of the Fund take all necessary steps to liquidate the Fund. The
independent Directors believe that the proposal is contrary to the best
interests of the Fund. As discussed above, the Fund's independent Directors
believe that the Fund continues to be a viable long-term investment vehicle
and that it is not in the best interests of the Fund to liquidate. As
discussed aove, the Directors believe their view is supported by the
following:
o The Fund's improved investment performance over the past five
years
o NAM's view of the prospects for investment in Korean equity
securities
o The reduction in the market discount of the Fund's shares over
the past five years
o The Fund's capital loss carryforward, which would be lost to
the shareholders if the Fund were to liquidate
The Board of Directors strongly supports the continued operation of the
Fund. As discussed above, both the Board of Directors and NAM would like to
increase the Fund's assets to position it for future investments. Further, the
Board is committed to reducing the Fund's operating expense ratio, which has
increased significantly during the past two years as a result of the
costs of responding to shareholder proposals that the Board believes are
inconsistent with the Fund's long-term interests.
When you return the GREEN proxy card you will be voting AGAINST the above
proposal to liquidate the Fund, unless you appropriately mark your card
otherwise.
16
THE INDEPENDENT DIRECTORS UNANIMOUSLY RECOMMEND A VOTE "AGAINST" THE
ABOVE PROPOSAL.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The President and Fellows of Harvard College ("Harvard") have reported
beneficial ownership of approximately 29.0% of the Fund's Common Stock as of
March 21, 2005. Harvard is located at 600 Atlantic Avenue, Boston,
Massachusetts 02210. David Nierenberg and the D3 Family Funds which Mr.
Nierenberg serves as the president of the general partner ("Nierenberg") have
reported beneficial ownership of approximately 5.7% of the Fund's
Common Stock as of March 23, 2005. Nierenberg is located at 19605 NE 8th
Street, Camas, Washington 98607. To the knowledge of the management of the
Fund, Harvard and Nierenberg are the only beneficial owners of more than 5% of
the Fund's outstanding shares.
Shares of Common Stock Percentage of the Fund's
the Fund Beneficially Common Stock Owned at
Name of Beneficial Owner Owned at March 31, 2005 March 31, 2005
- ------------------------ ----------------------- ---------------------
The President and Fellows of Harvard College 2,441,200 29.0%
David Nierenberg and the D3 Family Funds 484,800 5.7%
ADDITIONAL INFORMATION
Expenses and Methods of Proxy Solicitation
The expense of preparation, printing and mailing of the enclosed form of
proxy, this Proxy Statement and the accompanying Notice of Meeting will be
borne by the Fund. The Fund will reimburse banks, brokers and others for their
reasonable expenses in forwarding proxy solicitation material to the
beneficial owners of the shares of the Fund. In addition to the solicitation
of proxies by mail, proxies may be solicited in person or by telephone. The
Fund has retained The Altman Group ("Altman"), a firm that specializes in
proxy solicitation services, to assist in the solicitation of proxies for the
Meeting for a fee of approximately $35,000, together with reimbursement of
such firm's expenses. Altman is obligated to provide proxy solicitation
services including, but not limited to, distribution of proxies to
broker-dealers, telephonic communication with shareholders and broker-dealers,
and monitoring of voting results.
Independent Accountants' Fees
The SEC's auditor independence rules require the Fund's Audit Committee
to pre-approve: (a) all audit and permissible non-audit services provided by
the Fund's independent accountants directly to the Fund and (b) those
permissible non-audit services provided by the Fund's independent accountants
to NAM-U.S.A. and entities controlling, controlled by or under common control
with NAM-U.S.A., if the services relate directly to the operations and
financial reporting of the Fund.
The following table sets forth the aggregate fees paid to Ernst & Young,
independent accountants for the Fund, for the Fund's fiscal year ended October
31, 2004 for professional services rendered for: (i) the audit of the Fund's
annual financial statements and the review of financial statements included in
the Fund's reports to shareholders; (ii) financial information
17
systems design and implementation services provided to the Fund, NAM-U.S.A.
and entities controlling, controlled by or under common control with
NAM-U.S.A. that provide services to the Fund; and (iii) all other non-audit
services provided to the Fund, NAM-U.S.A. and entities controlling, controlled
by or under common control with NAM-U.S.A. that provide services to the Fund.
For the Fund's fiscal year ended October 31, 2004, the independent accountants
did not render any other audit-related services to the Fund, except as
described under clauses (i) above. The Fund's Audit Committee has determined
that the provision of non-audit services under clause (iii) is compatible with
maintaining the independence of the independent accountants from the Fund.
Financial
Information
Systems Design
Audit Fees Audit and
Fund Charged to Related Tax Implementation All Other
---- the Fund Fees Fees Fees* Fees* Fiscal Year End
------------ --------- ---- --------------- ---------- ---------------
Korea Equity Fund, Inc.. $54,000 $9.00 $7,500 None $8,000 October 31, 2004
- --------------
* These fees relate to tax advisory services for NAM, NAM-U.S.A., NAM-Hong
Kong and NAM-Singapore; audit and audit-related services for NAM-Hong
Kong; and non-audit services for the Fund.
Voting Procedures and Revocation of Proxies
If you wish to vote in accordance with independent Directors'
recommendations, you must submit the enclosed GREEN proxy card and must NOT
subsequently submit any other proxy card. If you have already returned another
proxy card, you have the right to revoke it as to all matters covered thereby
and may do so by subsequently signing, dating, and mailing enclosed GREEN
proxy card. ONLY YOUR LATEST DATED PROXY WILL COUNT AT THE MEETING. PLEASE DO
NOT RETURN THE WHITE PROXY CARD, EVEN TO VOTE AGAINST THE SHAREHOLDER
PROPOSALS. DOING SO MAY HAVE THE EFFECT OF CANCELING OUT YOUR VOTE ON THE
GREEN PROXY CARD.
Any proxy may be revoked as to all matters covered thereby at any time
prior to the time a vote is taken by (i) submitting to us a later dated
written revocation or duly executed proxy; or (ii) attending and voting at the
Meeting in person (attendance at the Meeting will not in and of itself
constitute a revocation).
Shares of Common Stock represented by a valid, unrevoked GREEN proxy card
will be voted as specified. Shares represented by a GREEN proxy card where no
specification has been made will be voted:
18
o FOR each of the nominees for election to the Board of
Directors;
o AGAINST a proposal to terminate the Management
Agreement between the Fund and Nomura Asset Management
U.S.A. Inc; and
o AGAINST a proposal to recommend that the Board of Directors of
the Fund take all necessary steps to liquidate the Fund.
If any of your shares were held in the name of a brokerage firm, bank,
bank nominee, or other institution on the Record Date, only that institution
can vote your shares and only upon its receipt of your specific instructions.
Accordingly, please promptly contact the person responsible for your account
at such institution and instruct that person to execute and return the GREEN
proxy card on your behalf. You should also promptly sign, date, and mail the
voting instruction form (or GREEN proxy card) that your broker or banker sends
you. Please do this for each account you maintain to ensure that all of your
shares are voted. If any of your shares were held in the name of a brokerage
firm, bank, bank nominee, or other institution on the Record Date, to revoke
your proxy you will need to give appropriate instructions to such institution.
IF YOU DO NOT GIVE INSTRUCTIONS TO YOUR BROKER OR OTHER NOMINEE, YOUR SHARES
WILL NOT BE VOTED.
Voting Requirements
The holders of a majority of the shares of stock of the Fund entitled to
vote at the Meeting, present in person or by proxy, shall constitute a quorum
for the transaction of business at the Meeting. If, by the time scheduled for
the Meeting, a quorum of the Fund's shareholders is not present, or if a
quorum is present but sufficient votes to act upon the proposals are not
received from the shareholders, the chairman of the meeting may propose one or
more adjournments of the Meeting to permit further solicitation of proxies
from shareholders. No additional notice will be provided to you in the event
the Meeting is adjourned unless otherwise required by Maryland law.
All shares represented by properly executed proxies, unless such proxies
have previously been revoked, will be voted at the Meeting in accordance with
the directions on the proxies; if no direction is indicated, the shares will
be voted FOR the election of two Class II Director nominees (Proposal 1) and
AGAINST the shareholder proposal to terminate the management agreement between
the Fund and NAM-U.S.A. Provided that a quorum has been established at the
Meeting, approval of the election of two Class II Directors to the Board of
Directors (Proposal 1) requires the affirmative vote of a majority of the
shares outstanding and entitled to vote thereon, in person or by proxy.
Approval of the shareholder proposal to terminate the Management
Agreement between the Fund and NAM-U.S.A. requires the affirmative vote of a
majority of the outstanding voting securities of the Fund, as defined in the
Investment Company Act, which 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. Approval of any other
routine matter which may properly come before the Meeting for consideration
requires the affirmative vote of a majority of the votes cast.
19
Broker Non-Votes and Abstentions
The Fund expects that broker-dealer firms holding shares of the Fund in
"street name" for the benefit of their customers and clients, as well as the
Japan Securities Settlement & Custody, Inc. ("JSSC") holding shares of the
Fund on behalf of its beneficial shareholders, will request the instructions
of such customers, clients and beneficial shareholders, on how to vote their
shares on each proposal before the Meeting. The Fund understands that under
the rules of the New York Stock Exchange, the Boston Stock Exchange and the
Osaka Securities Exchange, broker-dealers and the JSSC may, without
instructions from such customers, clients and beneficial shareholders, grant
authority to the proxies designated by the Fund to vote on certain matters to
be considered if no instructions have been received prior to the date
specified in the broker-dealer firm's or the JSSC's request for voting
instructions. Certain broker-dealer firms or the JSSC may exercise discretion
over shares held in their name for which no instructions are received by
voting such shares in the same proportion as they have voted shares for which
they have received instructions.
The shares as to which the proxies so designated are granted authority by
broker-dealer firms and the JSSC to vote on the proposals 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 proposal 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 have the same effect as a
vote against the election of Director nominees and the shareholder proposals.
Other Matters
As described in this Proxy Statement, the Fund is aware that a
shareholder has filed a preliminary proxy statement in which it states its
intention to solicit proxies for the following proposals: (i) the termination
of the Management Agreement between the Fund and Nomura Asset Management
U.S.A. Inc. and (ii) a recommendation that the Board of Directors of the Fund
take all necessary steps to liquidate the Fund.
With regard to any other business matters that may properly come before
the Meeting for consideration, it is the intention of the persons named in the
enclosed proxy to use their discretionary voting authority and to vote in
accordance with their best judgment.
Address of Manager, Investment Adviser and Investment Sub-Advisers
The address of NAM-U.S.A. is Two World Financial Center, Building B, New
York, New York 10281. The address of NAM is 1-12-1, Nihombashi, Chuo-ku, Tokyo
103-8260, Japan. The address of Nomura Asset Management Hong Kong Limited is
30th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong
Kong. The address of Nomura Asset Management Singapore Limited is 6 Battery
Road, #40-02 Singapore 049909.
20
Proposals of Shareholders
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders of the Fund, which is expected to be held in August
2006, must be received by the Fund for inclusion in its Proxy Statement and
form of proxy relating to that meeting by [o], 2006. The persons named as
proxies in future proxy materials of the Fund may exercise discretionary
authority with respect to any shareholder proposal presented at any subsequent
shareholder meeting if written notice of such proposal has not been received
by the Fund by [o], 2006. Written proposals with regard to the Fund should be
sent to the Secretary of the Fund, Two World Financial Center, Building B, New
York, New York 10281.
Shareholders wishing to present proposals at the next annual meeting of
shareholders of the Fund that they do not wish to be included in the Fund's
proxy statement and form of proxy, must send written notice of such proposals
to the Secretary of the Fund, Two World Financial Center, Building B, New
York, New York 10281, and such notice must be received by the Secretary no
sooner than [o], 2006 and no later than [o], 2006 in the form prescribed from
time to time in the Fund's Bylaws.
By Order of the Board of Directors
Neil A. Daniele
Secretary
New York, New York
Dated: July [o], 2005
21
KOREA EQUITY FUND, INC.
Two World Financial Center, Building B
New York, New York 10281
PROXY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Yasushi Suzuki and Neil A. Daniele as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse hereof, all the
common stock of Korea Equity Fund, Inc. (the "Fund") held of record by the
undersigned on July 1, 2005 at the Annual Meeting of the Shareholders of the
Fund to be held on August 10, 2005, or any adjournment thereof.
------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY USING
THE ENCLOSED ENVELOPE
------------------
Please sign exactly as name(s) appear(s) hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized persons.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------ ----------------------------------
- ------------------------------ ----------------------------------
- ------------------------------ ----------------------------------
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
-----------------
KOREA EQUITY FUND, INC.
------------------
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted FOR Proposal 1 and AGAINST Proposals 2 and 3.
Mark box at right if an address change or comment has been noted on the
reverse side of this card. | |
CONTROL NUMBER:
Please be sure to sign and date this Proxy
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE For For All
"FOR" ALL CLASS II DIRECTOR All With- Nominees
NOMINEES Nominees hold Except
| | | | | |
1. Election of two Class II Directors for a three-year term:
Chor Weng Tan
Hiroshi Terasaki
NOTE: If you do not wish your shares voted "For" a particular nominee, mark
the "For All Nominees Except" box and strike a line through the nominee's
name. Your shares will be voted for the remaining nominee.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS 2 AND 3.
2. A shareholder proposal to terminate the Management Agreement
between the Fund and Nomura Asset Management U.S.A. Inc.
| | FOR | | AGAINST | | ABSTAIN
3. A shareholder proposal recommend that the Board of Directors of the Fund
take all necessary steps to liquidate the Fund.
| | FOR | | AGAINST | | ABSTAIN
4. In the discretion of such proxies, upon such other business as may properly
come before the meeting or any adjournments thereof.
Date ________________
______________ Shareholder sign here ______________ Co-owner sign here ________