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:
| | Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule
| | 14a-6(e)(2))
|X| 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)
----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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|X| No fee required.
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(2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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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.
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(4) Date Filed:
KOREA EQUITY FUND, INC.
Two World Financial Center, Building B
New York, New York 10281
-------------------
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 definitive 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 proxy card 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 7, 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 proposals. 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 8, 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
nom-inee(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.
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.
2
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.
Other
Term of Number of 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 Asset investment
Management U.S.A. Inc. 2005 Management U.K. Limited from companies
Two World Financial 2003 to 2005; General Manager, consisting of 2
Center, Building B Fixed Income Investment Depart- portfolios
New York ment of NAM from 2000 to 2003.
New York 10281
- ----------------
* Mr. Terasaki, if elected, will serve as a Class II Director for a
three-year term expiring at the Annual Meeting of Shareholders to be
held in 2008 and until his successor is elected and qualified or until
his earlier resignation or removal.
** Mr. Terasaki is an "interested person," as defined in the Investment
Company Act, of the Fund based on his positions with NAM and its
affiliates. Mr. Terasaki is a director of Japan Smaller Capitalization
Fund, Inc. for which NAM-U.S.A. acts as manager and for which NAM acts
as investment adviser.
*** 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.
Other
Term of Number of 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 Rochelle 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.
Other
Term of Number of 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 (Nominee for a Term Expiring at the Annual Meeting of Shareholders to be held in 2007)
William G. Barker, Jr.** Class I Director Retired. 2 registered None
(72) Director since 1993 investment
111 Parsonage Road companies
Greenwich consisting of 2
Connecticut 06830 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 1997 investment
West Hempstead to 2000 and Secretary and companies
New York 11552 Treasurer of the Fund from 1993 consisting of 2
to 1997; Senior Vice President portfolios
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.
4
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.
Other
Term of Number of 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 of 2 registered None
3731 Devonshire Street Director since 1993 Muhlenberg College from 1992 to investment
Allentown 2002. companies
Pennsylvania 18103 consisting of 2
portfolios
William K. Grollman Class III Director President and co-founder since 2 registered SmartPros
(63)** Director since 1981 and director of SmartPros investment Ltd.
SmartPros Ltd. January Ltd. (continuing education for companies
12 Skyline Drive 2004 the professions), listed on consisting of 2
Hawthorne American Stock Exchange; former portfolios
New York 10532 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.
5
Report of the Audit Committee. The following is a report by the Fund's
Audit Committee regarding the responsibilities and functions of the Audit
Committee.
Pursuant to the Audit Committee Charter adopted by the Fund's Board of
Directors on August 6, 2003, the Audit Committee's principal responsibilities
are to: (i) select and oversee the Fund's independent accountants; (ii) review
with the independent accountants the scope, performance and anticipated cost
of their audit; (iii) discuss with the independent accountants certain matters
relating to the Fund's financial statements, including any adjustment to such
financial statements recommended by such independent accountants, or any other
results of any audit; (iv) ensure that the independent accountants submit on a
periodic basis a formal written statement as to their independence, discuss
with the independent accountants any relationships or services disclosed in
the statement that may impact the objectivity and independence of the Fund's
independent accountants and recommend that the Board take appropriate action
in response to this statement to satisfy itself of the independent
accountants' independence; and (v) consider the comments of the independent
accountants and management's responses thereto with respect to the quality and
adequacy of the Fund's accounting and financial reporting policies and
practices and internal controls. A copy of the Audit Committee Charter was
attached as Exhibit I to the Fund's 2004 Proxy Statement.
The Audit Committee has received written disclosures and the letter
required by Independence Standards Board Standard No. 1 from Ernst & Young LLP
("Ernst &Young"), the Fund's independent accountants, and discussed with Ernst
& Young certain matters required to be discussed by Statement on Auditing
Standards No. 61. The Audit Committee has considered whether the provision of
non-audit services by Ernst & Young is compatible with maintaining the
independence of those accountants. At its meeting held 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
6
Nominating Committee; Consideration of Potential Director Nominees. The
principal purpose of the Nominating Committee is to select and nominate the
independent (i.e., non-interested) Directors of the Fund. It evaluates
candidates' qualifications for Board membership and, with respect to nominees
for positions as independent directors, their independence from the Fund's
manager and its affiliates and other principal service providers. The
Committee periodically reviews director compensation and will recommend any
appropriate changes to the Board as a group. This Committee also reviews and
may make recommendations to the Board relating to those issues that pertain to
the effectiveness of the Board in carrying out its responsibilities in
governing the Fund and overseeing the management of the Fund.
The Nominating Committee will consider potential director candidates
recommended by Fund shareholders provided that the proposed candidates satisfy
the director qualification requirements provided in the Nominating Committee's
Charter; are not "interested persons" of the Fund or the Fund's investment
adviser within the meaning of the Investment Company Act; and are
"independent" as defined in the New York Stock Exchange listing standards. The
Committee has determined that potential director candidates recommended by
Fund shareholders must satisfy the Securities and Exchange Commission's
("SEC") nominee requirements found in Regulation 14A of the 1934 Act. A copy
of the Nominating Committee Charter was attached as Exhibit II to the Fund's
2004 Proxy Statement.
Shareholders recommending potential director candidates must
substantiate compliance with these requirements at the time of submitting
their proposed director candidate to the attention of the Fund's Secretary.
Notice to the Fund's Secretary should be provided in accordance with the
deadline specified in the Fund's Bylaws and include the information required
by the Fund's Bylaws.
The Nominating Committee identifies prospective candidates from any
reasonable source and has the ability to engage third-party services for the
identification and evaluation of potential nominees. Generally, the Committee
meets annually to identify and evaluate nominees for Director and make its
recommendations to the Board. The Committee may meet more frequently if
vacancies on the Board occur during a given year. In identifying and
evaluating a potential nominee to serve as an independent Director of the
Fund, the Nominating Committee will consider, among other factors: (i) whether
the individual has any material relationships that could create any appearance
of impropriety with respect to or a lack of independence from NAM-U.S.A. or
any of its affiliates; (ii) whether the individual has the integrity,
independence of mind and personal qualities to fulfill the fiduciary duties of
an independent Director of the Fund and to protect the interests of Fund
shareholders; (iii) the individual's corporate or other business experience in
significant positions which demonstrate sound business judgment; (iv) whether
the individual has financial and accounting experience; (v) the individ-ual's
ability to attend at least four regular meetings a year and (vi) whether the
individual can add to the balance of experience of the present independent
Directors. The standard of the Nominating Committee is to treat all equally
qualified nominees in the same manner.
No nominee recommendations have been received from shareholders. The
Nominating Committee may modify its policies and procedures for director
nominees and recommendations from time to time in response to changes in the
Fund's needs and circumstances, and as applicable legal or listing standards
change.
Communications with the Board of Directors. Shareholders may send
written communications to the Fund's Board of Directors or to an individual
Director by mailing such correspondence to the Secretary of the Fund
(addressed to Two World Financial Center, Building B, New York, New York
10281). Such communications must be signed by the shareholder and identify the
class and number of shares held by the shareholder. Properly submitted
shareholder communications will, as appropriate, be forwarded to the entire
Board or to the individual Director. Any shareholder proposal submitted
pursuant to Rule 14a-8 under the 1934 Act, must con-
7
tinue 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:
Aggregate Pension or Retirement Aggregate Compensation from
Compensation Benefit 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, 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
8
- ---------
* 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 2001 Senior Vice President and Secretary of NAM-
U.S.A. since 1999.
Keiko Tani (42) Vice President Vice President since 2005 Senior Vice President and General Counsel of
NAM-U.S.A. since 2005; Leader, Legal Team,
Product Documentation & Legal Department of NAM
from 2003 to 2005, General Manager of Legal
Department from 1999 to 2003.
Rita Chopra-Brathwaite Treasurer Treasurer since 2002 Vice President of NAM-U.S.A. since 2001; Assis-
(36) tant 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 man
agement firm) from 2001 to 2002; Vice President
of AIG Global Investment Group, Inc. (asset man
agement firm) from 2000 to 2001; Compliance
Officer of AIG Global Investment Corp. from 1996
to 2000.
- ---------------
* 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.
9
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 Securities in All Registered
Name of Director Nominee/ Stock of the Fund of 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.").
Directors' Response to the Shareholder Proposal
The Fund's 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 Directors believe that the Fund is a
viable long-term investment vehicle. The Directors further believe that the
Fund has had strong performance under NAM-U.S.A. and NAM. The Directors
believe that the skill and experience of NAM-U.S.A. and NAM should be retained
and strongly oppose the shareholder proposal 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 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.
10
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-Singa-pore 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 and its
shareholders 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 and its shareholders, 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-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 (the price on the New York Stock Exchange)
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 33.0% 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
11
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
measured. Since the KOSPI is an index of stock prices, its
performance is not affected by the types of operating expenses
that are incurred by an investment fund and reflected in the
Fund's performance shown below.
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.
Korea Equity Fund, Inc.
Monthly Performance
NAV per share after initial offering December 3, 1993: 11.6
Period KOSPI NAV Change (USD) NYSE Change (USD)
--------- ----------- ---------------- -----------------
Beginning $ 10,000.00 $ 10,000.00 $ 10,000.00
Jun-00 $ 11,365.85 $ 11,275.30 $ 11,320.75
Jul-00 $ 9,755.20 $ 9,595.13 $ 11,132.07
Aug-00 $ 9,600.45 $ 9,453.43 $ 10,754.71
Sep-00 $ 8,486.12 $ 8,421.04 $ 9,433.96
Oct-00 $ 6,979.84 $ 7,125.50 $ 7,924.53
Nov-00 $ 6,465.28 $ 6,447.73 $ 7,547.17
Dec-00 $ 6,218.73 $ 6,336.03 $ 7,358.49
Jan-01 $ 7,586.94 $ 7,712.54 $ 9,449.06
Feb-01 $ 7,112.29 $ 7,246.96 $ 8,905.66
Mar-01 $ 6,066.78 $ 6,214.57 $ 7,557.35
Apr-01 $ 6,768.10 $ 6,902.83 $ 8,452.83
May-01 $ 7,391.89 $ 7,327.93 $ 8,845.28
Jun-01 $ 7,072.97 $ 7,004.04 $ 9,237.74
Jul-01 $ 6,438.66 $ 6,497.97 $ 8,090.57
Aug-01 $ 6,584.82 $ 6,680.16 $ 8,060.38
Sep-01 $ 5,693.50 $ 5,789.47 $ 7,154.72
Oct-01 $ 6,441.84 $ 6,538.48 $ 7,909.43
Nov-01 $ 7,849.38 $ 7,955.47 $ 9,841.51
Dec-01 $ 8,106.34 $ 8,340.08 $ 10,113.21
Jan-02 $ 8,818.34 $ 8,744.94 $ 10,988.68
Feb-02 $ 9,618.47 $ 9,554.66 $ 11,803.77
Mar-02 $ 10,449.26 $ 10,344.13 $ 12,981.13
Apr-02 $ 10,090.41 $ 10,526.33 $ 13,313.20
May-02 $ 10,154.46 $ 10,445.36 $ 13,313.20
Jun-02 $ 9,577.70 $ 10,040.49 $ 12,618.86
Jul-02 $ 9,791.39 $ 10,000.01 $ 12,377.35
Aug-02 $ 9,921.36 $ 9,757.10 $ 12,407.54
Sep-02 $ 8,567.09 $ 8,562.76 $ 11,109.42
Oct-02 $ 8,750.65 $ 8,663.98 $ 11,260.37
Nov-02 $ 9,725.27 $ 9,635.64 $ 12,347.16
Dec-02 $ 8,694.97 $ 8,502.04 $ 10,928.30
Jan-03 $ 8,347.29 $ 8,198.39 $ 10,656.60
Feb-03 $ 7,975.17 $ 7,773.29 $ 9,962.26
Mar-03 $ 7,064.65 $ 7,024.30 $ 9,720.75
Apr-03 $ 8,159.00 $ 7,935.24 $ 10,475.47
May-03 $ 8,688.57 $ 8,279.36 $ 10,807.54
Jun-03 $ 9,289.12 $ 8,805.68 $ 11,833.96
Jul-03 $ 10,002.95 $ 9,534.43 $ 12,347.16
Aug-03 $ 10,663.84 $ 10,323.91 $ 12,799.99
Sep-03 $ 10,042.46 $ 9,615.41 $ 12,075.46
Oct-03 $ 10,936.05 $ 10,890.72 $ 14,037.73
Nov-03 $ 10,957.02 $ 11,133.64 $ 13,796.22
Dec-03 $ 11,247.63 $ 11,578.99 $ 15,033.96
Jan-04 $ 12,013.27 $ 12,186.28 $ 16,181.13
Feb-04 $ 12,481.09 $ 12,348.23 $ 16,241.50
Mar-04 $ 12,761.20 $ 12,732.85 $ 16,392.45
Apr-04 $ 12,218.55 $ 11,882.64 $ 15,728.29
May-04 $ 11,513.57 $ 11,417.05 $ 14,913.21
Jun-04 $ 11,302.13 $ 11,133.65 $ 14,400.00
Jul-04 $ 10,449.89 $ 10,202.47 $ 12,981.14
Aug-04 $ 11,594.49 $ 11,295.60 $ 14,792.46
Sep-04 $ 12,052.95 $ 11,579.00 $ 16,392.46
Oct-04 $ 12,382.71 $ 11,740.95 $ 16,120.75
Nov-04 $ 13,918.10 $ 12,935.28 $ 17,509.43
Dec-04 $ 14,297.94 $ 13,279.41 $ 18,566.03
Jan-05 $ 15,095.06 $ 14,230.83 $ 20,075.47
Feb-05 $ 16,792.85 $ 15,647.84 $ 22,188.67
Mar-05 $ 15,805.82 $ 14,777.40 $ 20,075.47
Apr-05 $ 15,191.00 $ 14,210.59 $ 19,683.01
May-05 $ 15,998.11 $ 14,817.88 $ 20,226.40
Source: NAM-U.S.A. and Bloomberg L.P. The KOSPI is calculated
showing reinvestment of company dividends and without any investment
expenses. During the period shown, the Korea Equity Fund, Inc. ("KEF")
Monthly NAV is calculated net of expenses; there were no dividends
reinvested.
Set out below is additional information concerning the Fund's
stock price and net asset value performance for the past five
years.
12
Stock Price Performance
The Fund's stock price outperformed the KOSPI for three of the past five
years.
----------------------------------------------------------------
Year Ended May 31*
----------------------------------------------------------------
Over (Under)
Fund** KOSPI*** Performance
--------------------------------------------------------------------------------------
2005 35.6% 39.0% -3.4%
--------------------------------------------------------------------------------------
2004 38.0% 32.5% 5.52%
--------------------------------------------------------------------------------------
2003 -18.8% -18.2% -0.6%
--------------------------------------------------------------------------------------
2002 50.5% 37.4% 13.1%
--------------------------------------------------------------------------------------
2001 -11.6% -26.1% 14.5%
--------------------------------------------------------------------------------------
- ---------
* 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% 39.0% -9.2%
--------------------------------------------------------------------------------------
2004 37.9% 32.5% 5.4%
--------------------------------------------------------------------------------------
2003 -20.7% -18.2% -2.5%
--------------------------------------------------------------------------------------
2002 42.5% 37.4% 5.1%
--------------------------------------------------------------------------------------
2001 -26.7% -26.1% -0.6%
--------------------------------------------------------------------------------------
- ---------
* 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
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 and its
shareholders 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.
13
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 33% 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.
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.
Discount
Month End from NAV
--------- --------
May, 2000 -32.95%
Nov, 2000 -21.88%
May, 2001 -19.06%
Nov, 2001 -17.05%
May, 2002 -14.53%
Nov, 2002 -14.08%
May, 2003 -12.47%
Nov, 2003 -16.91%
May, 2004 -12.41%
Nov, 2004 -9.23%
May, 2005 -8.47%
Source: Nomura Asset Management Co., Ltd. The graph is based on
the month-end discounts for the five years shown in the graph.
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
14
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
The Fund's Board of Directors, NAM-U.S.A. and NAM fully
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 overall per share expense ratio, which
reflects in part the Fund's fixed expenses. Options, depending on
market conditions, include a potential rights offering, among
others. In terms of operating expenses, the Board of Directors has
closely examined the significant increase in expenses 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, 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.
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 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.
Directors' Response to the Shareholder Proposal
The Fund's 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 Directors believe
that the proposal is contrary to the best interests of the Fund. As discussed
above, the Fund's 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 above, the Directors believe their view is
supported by the following:
15
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.
THE 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 in a filing made with the Securities and Exchange Commission
("SEC"). Harvard is located at 600 Atlantic Avenue, Boston, Massachusetts
02210. David Nierenberg and the D3 Family Funds, of which Mr. Nierenberg
serves as the president of the general partner ("Nierenberg"), have reported
beneficial ownership of approximately 6.9% of the Fund's Common Stock, in a
filing made with the SEC on June 30, 2005. Nierenberg is located at 19605 N.E.
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. Based upon the filings described above,
information concerning these two owners is as follows:
Shares of Common Stock Percentage of the Fund's
of the Fund Beneficially Common Stock Beneficially
Name of Beneficial Owner Owned Owned
- ------------------------ ----- -----
The President and Fellows of Harvard College 2,441,200 29.0%*
David Nierenberg and the D3 Family Funds 582,800 6.9%
The Nierenberg entities stated in the SEC filing cited above that they
intend to support the continued independent existence of the Fund and do not
intend to support the shareholder proposals to terminate the Fund's Management
Agreement and to recommend the liquidation of the Fund.
16
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 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
clause (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 for the Fund.
Financial
Information
Audit Fees Audit Systems Design and
Charged to Related Tax Implementation All Other
Fund the Fund Fees Fees Fees Fees* Fiscal Year End
----- -------- ---- ---- ---- ----- ---------------
Korea Equity Fund, Inc. $54,000 $9,000 $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.
17
Voting Procedures and Revocation of Proxies
If you wish to vote in accordance with the 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 the 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:
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. 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.
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 share-
18
holder 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.
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 definitive 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.
19
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, Nihonbashi, 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.
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 March 10, 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 April 12, 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 March 13, 2006 and no later than April 12, 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 7, 2005
20
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY
OR HOW FEW SHARES YOU OWN.
Please sign, date and mail the GREEN proxy card below in the postage-paid
envelope provided.
Even if you have already voted a white proxy card, you can still vote
support your board by signing and returning a later dated GREEN proxy
card. Only your latest dated proxy card will count.
If you have any question or need help voting your shares, please call
our proxy solicitor, The Altman Group, toll free at (800) 317-8025.
\/ FOLD AND DETACH HERE \/
- ------------------------------------------------------------------------------
/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. / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL CLASS II DIRECTOR NOMINEES
1. Election of two Class II Directors For All Nominees
for a three-year term: For All Nominees Withhold Except
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.
/ / AGAINST / / FOR / / ABSTAIN
3. A shareholder proposal to recommend that the Board of Directors of the Fund
take all necessary steps to liquidate the Fund.
/ / AGAINST / / FOR / / ABSTAIN
4. In the discretion of such proxies, upon such other business as may properly
come before the meeting or any adjournments thereof.
Date ________________, 2005
Shareholder sign here _________________
Co-owner sign here _____________________
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.
\/ FOLD AND DETACH HERE \/
- ------------------------------------------------------------------------------
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
-------------------
- ------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
KOSPI w/Gross Dividends Reinvested
$ 10,000.00
$ 11,365.85
$ 9,755.20
$ 9,600.45
$ 8,486.12
$ 6,979.84
$ 6,465.28
$ 6,218.73
$ 7,586.94
$ 7,112.29
$ 6,066.78
$ 6,768.10
$ 7,391.89
$ 7,072.97
$ 6,438.66
$ 6,584.82
$ 5,693.50
$ 6,441.84
$ 7,849.38
$ 8,106.34
$ 8,818.34
$ 9,618.47
$ 10,449.26
$ 10,090.41
$ 10,154.46
$ 9,577.70
$ 9,791.39
$ 9,921.36
$ 8,567.09
$ 8,750.65
$ 9,725.27
$ 8,694.97
$ 8,347.29
$ 7,975.17
$ 7,064.65
$ 8,159.00
$ 8,688.57
$ 9,289.12
$ 10,002.95
$ 10,663.84
$ 10,042.46
$ 10,936.05
$ 10,957.02
$ 11,247.63
$ 12,013.27
$ 12,481.09
$ 12,761.20
$ 12,218.55
$ 11,513.57
$ 11,302.13
$ 10,449.89
$ 11,594.49
$ 12,052.95
$ 12,382.71
$ 13,918.10
$ 14,297.94
$ 15,095.06
$ 16,792.85
$ 15,805.82
$ 15,191.00
$ 15,998.11