DEF 14A
Annual Meeting of Shareholders
As filed with the Securities and Exchange Commission on June 14, 2001
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.)
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|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
KOREA EQUITY FUND, INC.
- --------------------------------------------------------------------------------
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2
KOREA EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038-4936
---------------
NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
July 24, 2001
---------------
TO THE SHAREHOLDERS OF
KOREA EQUITY FUND, INC.:
Notice is hereby given that the 2001 Annual Meeting of Shareholders (the
"Meeting") of Korea Equity Fund, Inc. (the "Fund") will be held at the offices
of Nomura Asset Management U.S.A. Inc., 180 Maiden Lane, 26th Floor, New York,
New York, on Tuesday, July 24, 2001, at 10:30 A.M. for the following purposes:
(1) To elect five Directors to serve for the ensuing year;
(2) To consider and act upon a proposal to approve a new Management
Agreement between the Fund and Nomura Asset Management U.S.A. Inc.;
(3) To consider and act upon a proposal to approve a new Investment
Advisory Agreement between Nomura Asset Management U.S.A. Inc. and Nomura Asset
Management Co., Ltd.;
(4) To consider and act upon a proposal to approve a new Investment
Sub-Advisory Agreement between Nomura Asset Management Co., Ltd. and Nomura
Asset Management Hong Kong Limited;
(5) To consider and act upon a proposal to approve a new Investment
Sub-Advisory Agreement between Nomura Asset Management Co., Ltd. and Nomura
Asset Management Singapore Limited; and
(6) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 25, 2001 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting or any adjournment thereof.
A complete list of the shareholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any shareholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after July 10, 2001, at the offices of the Fund, 180 Maiden Lane, 26th
Floor, New York, New York.
You are cordially invited to attend the Meeting. Shareholders who do not
expect to attend the Meeting in person are requested to complete, date and sign
the enclosed form of proxy and return it promptly in the envelope provided for
that purpose. The enclosed proxy is being solicited on behalf of the Board of
Directors of the Fund.
By Order of the Board of Directors
JOHN J. BORETTI
Secretary
New York, New York
Dated: June 19, 2001
[This Page intentionally left blank]
PROXY STATEMENT
KOREA EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038-4936
---------------
2001 ANNUAL MEETING OF SHAREHOLDERS
July 24, 2001
---------------
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 2001 Annual Meeting of
Shareholders of the Fund (the "Meeting") to be held at the offices of Nomura
Asset Management U.S.A. Inc., 180 Maiden Lane, 26th Floor, New York, New York,
on Tuesday, July 24, 2001, at 10:30 A.M. The approximate mailing date of this
Proxy Statement is June 19, 2001.
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:
(1) FOR the election of five Directors;
(2) FOR approval of a new Management Agreement between the Fund and
Nomura Asset Management U.S.A. Inc. ("NAM-U.S.A.");
(3) FOR approval of a new Investment Advisory Agreement between
NAM-U.S.A. and Nomura Asset Management Co., Ltd. ("NAM");
(4) FOR approval of a new Investment Sub-Advisory Agreement between NAM
and Nomura Asset Management Hong Kong Limited ("NAM-Hong Kong"); and
(5) FOR approval of a new Investment Sub-Advisory Agreement between NAM
and Nomura Asset Management Singapore Limited ("NAM-Singapore").
Any proxy may be revoked at any time prior to the exercise thereof by
giving written notice to the Secretary of the Fund at the Fund's address
indicated above or by voting in person at the Meeting.
The Board of Directors has fixed the close of business on May 25, 2001, as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting and at any adjournment thereof. Shareholders on the
record date will be entitled to one vote for each
share held, with no shares having cumulative voting rights. As of May 25, 2001,
the Fund had outstanding 8,409,000 shares of Common Stock, par value $0.10 per
share.
The Board of Directors of the Fund knows of no business other than that
mentioned in Items 1, 2, 3, 4 and 5 of the Notice of Meeting which will be
presented for consideration at the Meeting. If any other matter is properly
presented, it is the intention of the persons named in the enclosed proxy to
vote in accordance with their best judgment.
PROPOSAL 1. ELECTION OF DIRECTORS
At the Meeting the five Board of Directors nominees will be elected to
serve until the next Annual Meeting of Shareholders and until their successors
are elected and qualified or until their earlier resignation or removal. It is
the intention of the persons named in the enclosed proxy to nominate and vote
(unless such authority has been withheld in the proxy or properly revoked) in
favor of the election of the persons listed below.
The Board of Directors knows of no reason why any of these nominees will
be unable to serve, but in the event of any such unavailability, the proxies
received will be voted for such substitute nominees as the Board of Directors
may recommend. It is currently expected that any substitute nominee for Director
who is not an "interested person" of the Fund (within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act")) also
will be a non-interested person.
Certain information concerning the nominees is set forth as follows:
Shares of
Common Stock of
the Fund
Principal Occupations During Beneficially
Name and Address of Past Five Years Director Owned at
Nominee and Public Directorships(1) Age Since May 25, 2001
------------------- ----------------------------- --- ----- ---------------
William G. Barker, Jr.(2).......... Consultant to the television industry since 1991. 68 1993 -0-
111 Parsonage Road
Greenwich, Connecticut 06830
Kazuhiko Hama(3)(4)................ President of the Fund since June 2001; President and 55 2001 -0-
180 Maiden Lane Director of NAM-U.S.A. since June 2001;
New York, New York 10038 Management Executive of NAM from 2000 to June 2001;
Senior Officer of NAM from 1999 to 2000; Director of
NAM (formerly The Nomura Securities Investment
Trust Management Co., Ltd.) from 1996 to 1998.
2
Shares of
Common Stock of
the Fund
Principal Occupations During Beneficially
Name and Address of Past Five Years Director Owned at
Nominee and Public Directorships(1) Age Since May 25, 2001
------------------- ----------------------------- --- ----- ---------------
Chor Weng Tan(2)................... Managing Director for Education, The American 64 1993 2,500
3 Park Avenue Society of Mechanical Engineering since 1991;
New York, New York 10016 Director of Tround International, Inc. from
1984 to 1997.
Arthur R. Taylor(2)................ President of Muhlenberg College since 1992; Dean of 65 1993 -0-
2400 Chew Street the Faculty of Business of Fordham University
Allentown, Pennsylvania 18104 from 1985 to 1992; Chairman of Arthur R. Taylor
& Co. (Investment firm); and Director of
Louisiana Land & Exploration Company and Pitney
Bowes, Inc. from 1982 to 1997.
John F. Wallace(3)................. Vice President of the Fund from 1997 to 2000 and 72 1993 1,000
17 Rhoda Street Secretary and Treasurer of the Fund from 1993
West Hempstead, New York 11552 to 1997; Senior Vice 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.
<FN>
- ----------
(1) Each of the nominees is also a director of Japan OTC Equity Fund, Inc. and
Nomura Pacific Basin Fund, Inc., investment companies for which NAM-U.S.A.
acts as manager and NAM acts as investment adviser. NAM-Singapore also
acts as investment adviser to Nomura Pacific Basin Fund, Inc.
(2) Member of Audit Committee and Nominating Committee of the Board of
Directors.
(3) "Interested person" of the Fund as defined in the Investment Company Act.
(4) Effective mid-June 2001, Mr. Kuzuhiko Hama was elected as a Director of
the Fund to fill the vacancy created by the resignation of Mr. Nobuo
Katayama.
</FN>
3
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. Currently, Messrs. Barker, Tan and Taylor are
members of these Committees. The principal purpose of the Audit Committee is to
review the scope of the annual audit conducted by the Fund's independent
accountants and the evaluation by such accountants of the accounting procedures
followed by the Fund. The principal purpose of the Nominating Committee is to
select and nominate the Directors of the Fund. The Nominating Committee will
consider nominees recommended by shareholders of the Fund. Shareholders should
submit nominees to the Secretary of the Fund. The Fund has no standing
Compensation Committee. The non-interested Directors have retained independent
legal counsel to assist them in connection with their duties.
During the fiscal year ended October 31, 2000, the Board of Directors held
eight meetings, and the Audit Committee held two meetings and the Nominating
Committee held one meeting. Each Director then in office attended at least 75%
of the meetings of the Board of Directors held during the fiscal year and, if a
member, of the total number of meetings of the Audit and Nominating Committees
held during the period for which he served.
Audit Committee Report. Pursuant to the Audit Committee Charter adopted by
the Fund's Board of Directors on May 18, 2000, the Audit Committee's principal
responsibilities are to: (i) recommend to the Board the selection, retention or
termination of the Fund's independent auditors; (ii) review with the independent
auditors the scope, performance and anticipated cost of their audit; (iii)
discuss with the independent auditors certain matters relating to the Fund's
financial statements, including any adjustment to such financial statements
recommended by such independent auditors, or any other results of any audit;
(iv) ensure that the independent auditors submit on a periodic basis a formal
written statement as to their independence, discuss with the independent
auditors any relationships or services disclosed in the statement that may
impact the objectivity and independence of the Fund's independent auditors and
recommend that the Board take appropriate action in response to this statement
to satisfy itself of the independent auditors' independence; and (v) consider
the comments of the independent auditors 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 Fund's
Audit Committee Charter is attached to this Proxy Statement as Exhibit E.
The Audit Committee has (a) received written disclosures and the letter
required by Independence Standards Board Standard No. 1 from
PricewaterhouseCoopers LLP ("PWC"), the Fund's independent auditors and (b)
discussed certain matters required to be discussed by Statements on Auditing
Standards No. 61 with PWC. The Audit Committee has considered whether the
provision of non-audit services by the PWC is compatible with maintaining the
independence of those auditors. At its meeting held on November 29, 2000, the
Audit Committee reviewed and discussed the audit of the Fund's financial
statements with Fund management and PWC. The Audit Committee discussed with PWC
their independence and considered whether the provision of services by PWC to
the Fund and to NAM-USA and its affiliates was compatible with maintaining PWC'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 2000 Annual Report to shareholders for the
fiscal year ended October 31, 2000.
Interested Persons. The Fund considers two nominees, Messrs. Hama and
Wallace, to be "interested persons" of the Fund within the meaning of Section
2(a) (19) of the Investment Company Act because of the positions they hold or
have held with the Fund, NAM-U.S.A. and NAM, as applicable. Mr. Hama is
President of the Fund, and the President and a Director of NAM-U.S.A. Mr.
Wallace is a former Vice President of the Fund and a former Senior Vice
President, Secretary, Treasurer and Director of NAM-U.S.A.
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. an
annual fee of $5,000 plus $500 per meeting attended, together with such
Director's actual out-of-pocket expenses relating to attendance at meetings.
Such fees and expenses aggregated $44,504 for the fiscal year ended October 31,
2000.
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 Total Compensation
Compensation Pension or Retirement from Fund Complex
from Fund For its Benefit Accrued as Part Paid to Directors
Fiscal Year of Fund Expenses for its During the Calendar
Ended Fiscal Year Ended Year Ended
Name of Director* October 31, 2000 October 31, 2000 December 31, 2000**
- ----------------- ----------------- ------------------------ --------------------
William G. Barker ..... $9,000 None $38,500
Kazuhiko Hama ......... -- None --
Chor Weng Tan ......... $9,000 None $38,500
4
Aggregate Total Compensation
Compensation Pension or Retirement from Fund Complex
from Fund For its Benefit Accrued as Part Paid to Directors
Fiscal Year of Fund Expenses for its During the Calendar
Ended Fiscal Year Ended Year Ended
Name of Director* October 31, 2000 October 31, 2000 December 31, 2000**
- ----------------- ----------------- ------------------------ --------------------
Arthur R. Taylor ...... $9,000 None $38,500
John F. Wallace ....... $5,917 None $30,917
- ----------
* Mr. George H. Chittenden, a former Director of the Fund, passed away in
September 2000. For the fiscal year ended October 30, 2000, Mr. Chittenden
had received aggregate compensation from the Fund and the Fund Complex of
$7,000 and $30,500, respectively.
** In addition to the Fund, the "Fund Complex" includes Jakarta Growth Fund,
Inc., Japan OTC Equity Fund, Inc. and Nomura Pacific Basin 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, 2000. Effective June 11, 2001,
Jakarta Growth Fund, Inc. has merged into The Indonesia Fund, Inc.
Officers of the Fund. The following table sets forth information
concerning the officers of the Fund. Officers of the Fund are elected and
appointed by the Directors and hold office until they resign, are removed or are
otherwise disqualified to serve.
Shares of
Common Stock
of the Fund
Beneficially
Name and Principal Occupation Owned at
During Past Five Years Office Age Officer Since May 25, 2001
- ---------------------------------------------------------------------------- ------ --- ------------- ------------
Kazuhiko Hama ................................................ President 55 2001 -0-
President of the Fund since June 2001; President and Director of
NAM-U.S.A. from 2000 to June 2001; Management Executive of NAM since
2000; Senior Officer of NAM from 1999 to 2000; Director of NAM
(formerly The Nomura Securities Investment Trust Management
Co., Ltd.) from 1996 to 1998.
5
Shares of
Common Stock
of the Fund
Beneficially
Name and Principal Occupation Owned at
During Past Five Years Office Age Officer Since May 25, 2001
- ---------------------------------------------------------------------------- ------ --- ------------- ------------
Keisuke Haruguchi ............................................ Vice 50 1999 -0-
Senior Vice President and Director of NAM-U.S.A. since 1999; Senior President
Manager of NAM from 1997 to 1998; Manager of The Nomura
Securities Co., Ltd. from 1994 to 1996.
Kenneth L. Munt............................................... Vice 54 2001 -0-
Senior Vice President and Secretary of NAM-U.S.A. since 1999; Senior President
Vice President of Human Resources for Middlesex Mutual Assurance
Company from 1996 to 1999; Vice President of Human Resources for
Mutual of Omaha from 1995 to 1996.
David G. Stoeffel ............................................ Vice 42 1999 -0-
Senior Vice President of NAM-U.S.A. since 1999, Vice President since President
1998; Eastern Division Manager of Brinson Funds from 1997 to 1998;
Northeast Region Funds Coordinator of Prudential Investments from
1994 to 1997.
John J. Boretti .............................................. Secretary 49 1997 -0-
Senior Vice President of NAM-U.S.A. since 1996; Compliance Officer of and
NAM-U.S.A. since 1997; Vice President and Chief Financial Treasurer
Officer of Kidder Peabody Asset Management, Inc. and Kidder,
Peabody Mutual Funds and Vice President of Kidder, Peabody &
Co. Inc. from 1993 to 1995.
6
Stock Ownership. At May 25, 2001, the Directors and officers of the Fund
as a group (nine persons) owned an aggregate of 3,500 shares of the Fund,
representing less than 1% of the outstanding shares of the Fund. Mr. Hama,
President of the Fund, and Mr. Haruguchi, a Vice President of the Fund, together
own less than 1% of the shares of The Nomura Securities Co., Ltd. ("Nomura"), an
affiliate of both NAM-U.S.A. and NAM.
PROPOSAL 2. APPROVAL OR DISAPPROVAL OF A NEW
MANAGEMENT AGREEMENT
General
NAM-U.S.A. has served as the management company for the Fund since the
Fund commenced operations in 1993. NAM-U.S.A. provides management and
administrative services, including administering shareholder accounts and
handling shareholder relations, to the Fund. NAM-U.S.A. is an affiliate of each
of Nomura, NAM, NAM-Hong Kong and NAM-Singapore. The existing management
agreement between the Fund and NAM-U.S.A. is referred to below as the Current
Management Agreement.
Proposed Management Arrangements
The Fund's Board of Directors has approved a proposal by NAM-U.S.A. and
NAM for new management, investment advisory and investment sub-advisory
arrangements for the Fund. Under these arrangements, NAM-Hong Kong and
NAM-Singapore will become investment sub-advisers to the Fund and will
supplement the role of NAM as investment adviser to the Fund. In addition,
pursuant to the terms of the proposed arrangements NAM-U.S.A. has the authority,
subject to prior authorization by the Fund's Board of Directors, to delegate
investment discretion over all or a portion of the Fund's portfolio to NAM, and
NAM has the authority, subject to prior authorization of the Fund's Board of
Directors, to delegate investment discretion to NAM-Hong Kong and/or
NAM-Singapore. Under the terms of the proposed arrangements, investment
discretion includes both stock selection responsibilities and order placement
responsibilities, each of which may be delegated separately. None of the Board
of Directors, the Fund, NAM-U.S.A. or NAM is required to notify the Fund's
shareholders of any such delegation. It is presently contemplated that, upon
shareholder approval of the management, investment advisory and investment
sub-advisory arrangements, NAM-U.S.A. will delegate investment discretion to NAM
and NAM will further delegate stock selection responsibilities to NAM-Hong Kong
and NAM-Singapore and order placement responsibilities to NAM-Singapore.
NAM-U.S.A. is based in the U.S., while NAM, NAM-Hong Kong and
NAM-Singapore are located in the Pacific Basin region. The proposed management,
investment advisory and investment sub-advisory arrangements enable NAM,
NAM-Hong Kong and NAM-Singapore (a) to trade portfolio securities currently in
the local market, (b) to provide the Fund with immediate decision-making and
portfolio transaction execution in the event of a crisis during which the U.S.
markets are closed, and (c) to provide other services, such as daily monitoring
of trading activity, to the Fund during Asian trading hours.
NAM-U.S.A. will continue to be responsible for the settlement of trades
and also will maintain a significant compliance role, including maintaining
responsibility for reviewing all
7
transactions executed by NAM, NAM-Hong Kong and NAM-Singapore, as applicable.
The new management agreement between the Fund and NAM-U.S.A. (the "New
Management Agreement") is proposed to be approved by a majority of the Fund's
shareholders.
The New Management Agreement is substantially identical to the Current
Management Agreement, except that the New Management Agreement authorizes the
delegation of investment discretion over all or a portion of the Fund's
portfolio by NAM-U.S.A. to NAM, subject to the prior authorization of the Fund's
Board of Directors. The management services to be provided to the Fund by
NAM-U.S.A. under the New Management Agreement are identical to the management
services currently provided to the Fund by NAM-U.S.A. NAM-U.S.A. has advised the
Board of Directors that it believes that there will be no reduction in the
quality of any of the services presently furnished to the Fund by NAM-U.S.A. As
described below, the proposed New Management Agreement does not alter the rate
of management compensation presently payable by the Fund to NAM-U.S.A.
In their consideration of the New Management Agreement, the Board of
Directors received information relating to, among other things, alternatives to
the present arrangement, the nature, quality and extent of the management and
other services to be provided to the Fund by NAM-U.S.A., and other comparative
data with respect to the management fees paid by other international funds, the
operating expenses and expense ratio of the Fund as compared to such funds and
the performance of the Fund as compared to such funds. The independent Directors
also considered NAM-U.S.A.'s representations that there will be no material
adverse change in the services provided to the Fund after the approval of this
proposal, the relative profitability of the present arrangement to NAM-U.S.A.,
and information about the services to be performed and the personnel performing
such services under the proposed New Management Agreement. The independent
Directors were advised by separate counsel in connection with their review of
the Fund's management arrangements. After considering the factors stated above,
the Board of Directors approved the New Management Agreement.
If approved by the Fund's shareholders at the Meeting, the New Management
Agreement will remain in effect until July 1, 2003, unless terminated as
described below.
The Fund's shareholders approved the Current Management Agreement on June
20, 2000. The Current Management Agreement was submitted for shareholder
approval due to an increase in Nomura's ownership in NAM, NAM-U.S.A.'s parent
company.
Although the management, investment advisory and investment sub-advisory
agreements consist of four separate contracts, none of the agreements will
become effective unless each agreement is approved by shareholders.
Information Concerning NAM-U.S.A.
NAM-U.S.A. provides global investment advisory services, primarily with
respect to Japanese and other Pacific Basin securities, for U.S. institutional
clients. NAM-U.S.A. acts as one of the investment advisers to four other
investment companies, two of which are U.S. registered investment companies.
NAM-U.S.A. is a wholly-owned subsidiary of NAM.
8
The following table sets forth the name, title and principal occupations
of the principal executive officers and directors of NAM-U.S.A. effective
mid-June 2001.
Present Principal
Name* Title with NAM-U.S.A. Occupation
----- --------------------- ----------
Kazuhiko Hama................. Director and President Director and President of
NAM-U.S.A.
Keisuke Haruguchi............. Director, Senior Vice Director, Senior Vice
President and Treasurer President and Treasurer of
NAM-U.S.A.
Marti G. Subramanyam.......... Director Professor of Finance and
Economics, New York
University, Leonard N.
Stern School of Business
Administration
John J. Boretti............... Senior Vice President and Senior Vice President and
Compliance Officer Compliance Officer of
NAM-U.S.A.
Michael A. Morrongiello....... Senior Vice President Senior Vice President of
NAM-U.S.A.
Kenneth L. Munt............... Senior Vice President and Senior Vice President and
Secretary Secretary of NAM-U.S.A.
David G. Stoeffel............. Senior Vice President Senior Vice President of
NAM-U.S.A.
- ----------
* The address of each director and officer of NAM-U.S.A. is 180 Maiden Lane,
New York, New York 10038, except that the address for Mr. Subramanyam is
Leonard N. Stern School of Business, New York University, 44 West Fourth
Street, New York, New York 10012.
Terms of the New Management Agreement
A copy of the form of the New Management Agreement is set forth as Exhibit
A. The terms of that agreement are summarized below. As discussed above, the
proposed agreement is substantively identical to the agreement under which the
Fund currently operates, except that the New Management Agreement authorizes the
delegation of investment discretion over all or a portion of the Fund's
portfolio by NAM-U.S.A. to NAM, subject to the prior authorization of the Fund's
Board of Directors. The proposed New Management Agreement does not change the
amount of management fees payable by the Fund to NAM-U.S.A.
Under the New Management Agreement, NAM-U.S.A. agrees to provide, or
arrange for the provision of, investment advisory and management services to the
Fund, subject to the oversight and supervision of the Fund's Board of Directors.
In addition to the management of
9
the Fund's portfolio in accordance with the Fund's investment objective and
policies, NAM-U.S.A. is obligated to perform, or arrange for the performance of,
the making decisions to buy, sell or hold particular securities, the trading of
portfolio securities, and the administrative and management services necessary
for the operation of the Fund. NAM-U.S.A. also is obligated to provide all the
office space, facilities, equipment and personnel necessary to perform its
duties thereunder. Under the agreement, NAM-U.S.A. is authorized to retain NAM
to act as an investment adviser for the Fund and to delegate investment
discretion over all or a portion of the Fund's portfolio to NAM, subject to the
prior authorization of the Fund's Board of Directors.
Compensation and Expenses
As described above, the management compensation presently payable by the
Fund to NAM-U.S.A. will remain the same under the proposed New Management
Agreement. As compensation for its services to the Fund, NAM-U.S.A. will receive
a monthly fee, computed daily, at the annual rate of 1.10% of the value of the
Fund's average weekly net assets. Effective June 30, 2000, NAM-U.S.A.
voluntarily reduced its management fee from 1.10% to .95% of the Fund's average
weekly net assets. In connection with the approval of the New Management
Agreement, NAM-U.S.A. will maintain the voluntary fee reduction described above,
until such time as NAM-U.S.A. and the Board of Directors mutually agree to
reinstate the full management fee. The fee payable to NAM-U.S.A. is higher than
that paid by most management investment companies, but NAM-U.S.A. believes it is
comparable to fees paid by other international funds. For the services rendered
during the fiscal year ended October 31, 2000, the Fund accrued, under generally
accepted accounting principles, fees of $492,340, after a voluntary fee waiver
of $19,311, and paid NAM-U.S.A. fees of $510,079 on a cash basis. At May 25,
2001, the net assets of the Fund aggregated approximately $30.8 million. At this
net asset level, the annual management fee, after the voluntary fee reduction
described above, would aggregate approximately $292,600.
The New Management Agreement obligates NAM-U.S.A. to pay all compensation
of and furnish office space for officers of the Fund, as well as the fees of all
Directors of the Fund who are affiliated persons of NAM-U.S.A. or any of its
affiliates. The Fund pays all other expenses incurred in the operation of the
Fund, including, among other things, taxes, expenses for legal, tax and auditing
services, costs of printing proxies, listing fees, stock certificates,
shareholder reports, prospectuses, charges of the custodian, sub-custodians and
transfer agent, Securities and Exchange Commission (the "Commission") fees,
expenses of registering the shares under Federal, state and foreign laws, fees
and expenses of unaffiliated Directors, accounting and pricing costs (including
the daily/weekly calculation of net asset value), insurance, interest, brokerage
costs, litigation and other extraordinary or non-recurring expenses, and other
expenses properly payable by the Fund.
For the fiscal year ended October 31, 2000, the Fund paid brokerage
commissions of $175,948. Nomura earned $8,714 (4.9% of total brokerage
commissions) in commissions from the Fund on the execution of such portfolio
security transactions.
10
The following table sets forth information relating to the U.S. registered
investment companies which invest primarily in securities of companies domiciled
in Pacific Basin countries with the investment objective of long-term capital
appreciation for which NAM-U.S.A. and its affiliates act as manager:
Approximate Net Assets
at May 25, 2001
Investment Company Annual Management Fees (Millions)
------------------ ---------------------- ---------
Japan OTC Equity Fund, Inc. $130.3
Manager: Management Fee:
NAM-U.S.A. 1.10% of net assets not in
excess of $50 million, 1.00%
of net assets in excess of $50
million, but not exceeding
$100 million, .90% of net
assets in excess of $100
million but not exceeding
$175 million, and .80% of net
assets in excess of $175
million.
Nomura Pacific Basin Fund, Inc. $10.4
Manager: Management Fee:
NAM-U.S.A. .75% of net assets.(1)
- ----------
(1) NAM-U.S.A. has agreed to limit Nomura Pacific Basin Fund Inc.'s annualized
expenses for each class of shares. As a result, NAM-U.S.A. may waive all
or a portion of its management fee and/or bear additional expenses.
Duration and Termination
As indicated above, the New Management Agreement will remain in effect
until July 1, 2003 and thereafter, but only so long as such continuance is
specifically approved at least annually by (i) the Board of Directors of the
Fund, or by the vote of a majority of the outstanding voting securities of the
Fund, and (ii) a majority of the Directors who are not parties to such contract
or interested persons (as defined in the Investment Company Act) of any such
party. The contract is not assignable and may be terminated without penalty on
60 days' written notice at option of either party thereto or by the vote of the
Fund's shareholders.
PROPOSAL 3. APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT
ADVISORY AGREEMENT
General
NAM, the parent company of NAM-U.S.A., has served as the Fund's investment
adviser since the Fund commenced operations in 1993. NAM is a subsidiary of
Nomura, which is the largest securities company in Japan. NAM currently provides
economic research, securities analysis and investment recommendations to the
Fund. The existing agreement between NAM-U.S.A. and NAM is referred to below as
the Current Advisory Agreement.
11
Proposed Investment Advisory Arrangements
As described above, the Fund's Board of Directors has approved a proposal
by NAM-U.S.A. and NAM for new management, investment advisory and investment
sub-advisory arrangements for the Fund. Under these arrangements, NAM-U.S.A. has
the authority, subject to prior authorization by the Fund's Board of Directors,
to delegate investment discretion over all or a portion of the Fund's portfolio
to NAM, NAM-Hong Kong and/or NAM-Singapore. Additionally, NAM is authorized to
enter into investment sub-advisory agreements with NAM-Hong Kong and
NAM-Singapore, and NAM has the authority, subject to prior authorization by the
Fund's Board of Directors, to delegate investment discretion for the Fund to
NAM-Hong Kong and/or NAM-Singapore. None of the Board of Directors, the Fund,
NAM-U.S.A. or NAM is required to notify the Fund's shareholders of any such
delegation. It is presently contemplated that, upon shareholder approval of the
management, investment advisory and investment sub-advisory arrangements,
NAM-U.S.A. will delegate investment discretion to NAM and NAM, with the prior
authorization of the Fund's Board of Directors, will further delegate stock
selection responsibilities to NAM-Hong Kong and NAM-Singapore and order
placement responsibilities to NAM-Singapore. The new investment advisory
agreement between NAM-U.S.A. and NAM (the "New Advisory Agreement") is proposed
to be approved by a majority of the Fund's shareholders.
The New Advisory Agreement is substantially identical to the Current
Advisory Agreement, except that the New Advisory Agreement (a) authorizes the
delegation of investment discretion over all or a portion of the Fund's
portfolio by NAM-U.S.A. to NAM, (b) authorizes NAM to enter into investment
sub-advisory agreements with NAM-Hong Kong and NAM-Singapore, and (c) authorizes
the delegation of investment discretion by NAM to NAM-Hong Kong and/or
NAM-Singapore, subject to the prior authorization of the Fund's Board of
Directors. The services to be provided by NAM under the New Advisory Agreement
are identical to the services currently provided to the Fund by NAM, except with
respect to the use of investment sub-advisers and the delegation of investment
discretion. NAM has advised the Board of Directors that it believes that there
will be no reduction in the quality of any of the services presently furnished
to the Fund by NAM. As described below, the proposed New Advisory Agreement does
not alter the rate of investment advisory compensation presently payable by
NAM-U.S.A. to NAM. The Fund does not compensate NAM for its investment advisory
services under the Current or New Advisory Agreements.
In their consideration of the New Advisory Agreement, the Board of
Directors received information relating to, among other things, alternatives to
the present arrangement, the nature, quality and extent of the advisory and
other services to be provided to the Fund by NAM, and other comparative data
with respect to the advisory fees paid by other international funds, the
operating expenses and expense ratio of the Fund as compared to such funds and
the performance of the Fund as compared to such funds. The independent Directors
also considered NAM's representations that there will be no material adverse
change in the services provided to the Fund after the approval of this proposal,
the relative profitability of the present arrangement to NAM, and information
about the services to be performed and the personnel performing such services
under the proposed New Advisory Agreement. The independent Directors were
advised by separate counsel in connection with their review of the Fund's
investment advisory
12
arrangements. After considering the factors stated above, the Board of Directors
approved the New Advisory Agreement.
If approved by the Fund's shareholders at the Meeting, the New Advisory
Agreement will remain in effect until July 1, 2003, unless terminated as
described below.
The Fund's shareholders approved the Current Advisory Agreement on June
20, 2000. The Current Advisory Agreement was submitted for shareholder approval
due to an increase in Nomura's ownership in NAM.
Although the management, investment advisory and investment sub-advisory
agreements consist of four separate contracts, none of the agreements will
become effective unless each agreement is approved by shareholders.
Information Concerning NAM
NAM provides investment advisory services for Japanese and international
clients. In addition to the Fund, NAM acts as an investment adviser with respect
to the following U.S. registered investment companies: Japan OTC Equity Fund,
Inc. and Nomura Pacific Basin Fund, Inc.
The following table sets forth the name, title and principal occupation of
the principal executive officers of NAM.
Present Principal
Name* Title with NAM Occupation
----- -------------- ----------
Akira Kiyokawa................. President and CEO President and CEO of NAM
Atsushi Kinebuchi.............. Executive Vice President Executive Vice President of NAM
Takanori Tanabe................ Director and Principal Executive Officer Director and Principal Executive Officer of NAM
Hisaaki Hino................... Director and Principal Executive Officer Director and Principal Executive Officer of NAM
Takanori Shimiziu.............. Director and Senior Executive Officer Director and Senior Executive Officer of NAM
Akio Nakaniwa.................. Director and Senior Executive Officer Director and Senior Executive Officer of NAM
Masato Tanaka.................. Director and Senior Executive Officer Director and Senior Executive Officer of NAM
Yukio Suzuki................... Senior Executive Officer Senior Executive Officer of NAM
Yasunobu Watase................ Senior Executive Officer Senior Executive Officer of NAM
13
Present Principal
Name* Title with NAM Occupation
----- -------------- ----------
Takahide Mizuno................ Senior Executive Officer Senior Executive Officer of NAM
Mitsunori Minamio.............. Executive Officer Executive Officer of NAM
Takashi Harino................. Executive Officer Executive Officer of NAM
Yuji Miyachi................... Executive Officer Executive Officer of NAM
Masami Kitaoka................. Executive Officer Executive Officer of NAM
Norio Kinoshita................ Executive Officer Executive Officer of NAM
Toshiki Sada................... Executive Officer Executive Officer of NAM
Kazuhiro Yamashita............. Executive Officer Executive Officer of NAM
Shigeru Fujinuma............... Executive Officer Executive Officer of NAM
Hirokatsu Ogawa Executive Officer Executive Officer of NAM
- ----------
* The address of each director and the principal executive officers is 1-14,
2-chome, Nihonbashi, Chuo-ku, Tokyo 103-8260, Japan.
Terms of the New Advisory Agreement
A copy of the form of the New Advisory Agreement is set forth as Exhibit
B. The terms of that agreement are summarized below. As discussed above, the
proposed agreement is substantively identical to the Current Advisory Agreement,
except that the New Investment Advisory Agreement (a) authorizes the delegation
of investment discretion over all or a portion of the Fund's portfolio by
NAM-U.S.A. to NAM, (b) authorizes NAM to enter into investment sub-advisory
agreements with NAM-Hong Kong and NAM-Singapore, and (c) authorizes the
delegation of investment discretion by NAM to NAM-Hong Kong and NAM-Singapore,
subject to the prior authorization of the Fund's Board of Directors. The
proposed New Advisory Agreement does not change the amount of investment
advisory fees payable by NAM-U.S.A. to NAM.
Under the New Advisory Agreement, NAM agrees to furnish NAM-U.S.A. with
economic research, securities analysis and investment recommendations, to review
and render investment advice with respect to the Fund and, if authorized by the
Fund's Board of Directors, to make decisions to buy, sell or hold particular
securities and to execute portfolio transactions. NAM is obligated to provide
all the office space, facilities, equipment and personnel necessary to perform
its duties thereunder. Under the agreement, NAM is authorized to retain NAM-Hong
Kong and NAM-Singapore to act as investment sub-advisers for the Fund and to
delegate investment discretion over all or a portion of the Fund's portfolio to
NAM-Hong Kong and/or NAM-Singapore, subject to the prior authorization of the
Fund's Board of Directors.
14
Compensation and Expenses
As described above, the investment advisory compensation presently payable
by NAM-U.S.A. to NAM will remain the same under the proposed New Advisory
Agreement. As compensation for its services to the Fund, NAM-U.S.A. will pay NAM
monthly fees at the annual rate of .55% of the Fund's average weekly net assets.
For the services rendered during the fiscal year ended October 31, 2000,
NAM-U.S.A. accrued, under generally accepted accounting principles, fees of
$255,616 and paid NAM fees of $262,729 on a cash basis. At May 25, 2001, the net
assets of the Fund aggregated approximately $30.8 million. At this net asset
level, the fee received by NAM from NAM-U.S.A. would aggregate approximately
$169,400.
The New Advisory Agreement obligates NAM to pay all of the costs, charges
and expenses incurred by NAM in carrying out its obligations under the
Agreement.
The following table sets forth information relating to the U.S. registered
investment companies which invest primarily in securities of companies domiciled
in Pacific Basin countries with the investment objective of long-term capital
appreciation for which NAM and its affiliates act as investment adviser:
Approximate Net
Assets at
May 25, 2001
Investment Company Annual Advisory Fees (Millions)
------------------ -------------------- ----------
Japan OTC Equity Fund, Inc. $130.3
Investment Adviser: Investment Advisory Fee:
NAM .50% of net assets not in excess of $50 million,
.45% of net assets in excess of $50 million but
not exceeding $100 million, .40% of net assets in
excess of $100 million, but not exceeding $175
million, and .35% of net assets in excess of $175
million paid by NAM-U.S.A.
Nomura Pacific Basin Fund, Inc. $10.4
Investment Advisers: Investment Advisory Fee:
NAM .26125% of net assets; paid by
NAM-U.S.A. to NAM(1)
NAM-Singapore .0275% of net assets; paid by
NAM-U.S.A. to NAM-Singapore(1)
- ----------
(1) NAM and NAM-Singapore have agreed to limit Nomura Pacific Basin Fund,
Inc.'s annualized expenses for each class of shares. As a result, NAM and
NAM-Singapore may waive all or a portion of their investment advisory fee
and/or bear additional expenses.
15
Duration and Termination
As indicated above, the New Investment Advisory Agreement will remain in
effect until July 1, 2003 and thereafter, but only so long as the New Management
Agreement remains in force and provided that such continuance is specifically
approved at least annually by (i) the Board of Directors of the Fund or by the
vote of a majority of the outstanding voting securities of the Fund and (ii) a
majority of those Directors who are not parties to such contract or interested
persons (as defined in the Investment Company Act) of any such party. The
contract is not assignable and may be terminated without penalty on 60 days'
written notice at option of either party thereto or by the vote of the Fund's
shareholders.
PROPOSAL 4. APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT SUB-
ADVISORY AGREEMENT BETWEEN NAM AND NAM-HONG KONG
Proposed Investment Sub-Advisory Arrangements
As described above, the Fund's Board of Directors has approved a proposal
by NAM-U.S.A. and NAM for new management, investment advisory and investment
sub-advisory arrangements for the Fund. Under these arrangements, NAM is
authorized to enter into an investment sub-advisory agreement with NAM-Hong Kong
and has the authority, subject to prior authorization by the Fund's Board of
Directors, to delegate investment discretion over all or a portion of the Fund's
portfolio to NAM-Hong Kong.
NAM-Hong Kong is a wholly-owned subsidiary of NAM that provides investment
advisory services relating to Pacific Basin securities other than Japanese
securities. In recommending the proposed investment sub-advisory arrangement,
NAM advised the Fund's Board of Directors that NAM believed that it would be
appropriate in managing the Fund's assets to include NAM-Hong Kong as part of
the formal management group of the Fund and for NAM-Hong Kong to be compensated
by NAM. NAM expects that NAM-Hong Kong will supplement the investment advice
provided to the Fund by NAM and NAM-Singapore. It is currently expected that NAM
will delegate investment discretion over all or a portion of the Fund's
portfolio to NAM-Hong Kong upon shareholder approval of the new management,
investment advisory and investment sub-advisory arrangements. None of the Board
of Directors, the Fund, NAM-U.S.A. or NAM is required to notify the Fund's
shareholders of any such delegation. Shareholder approval of the new investment
sub-advisory agreement between NAM and NAM-Hong Kong (the "Hong Kong
Sub-Advisory Agreement") includes approval of any future delegation of
investment discretion to NAM-Hong Kong. It is proposed that the Hong Kong
Sub-Advisory Agreement be approved by a majority of the Fund's shareholders.
In their consideration of the Hong Kong Sub-Advisory Agreement, the
Board of Directors received information relating to, among other things,
alternatives to the Hong Kong Sub-Advisory Agreement, the nature, quality and
extent of the advisory and other services to be provided to the Fund by NAM-Hong
Kong, other comparative data with respect to the advisory fees paid by other
international funds, the operating expenses and expense ratio of the Fund as
compared to such funds and the performance of the Fund as compared to such
funds. The independent Directors also considered NAM's representations that
there will be no material adverse change in the services provided to the Fund
after the approval of this proposal, the
16
relative profitability of the present arrangements to NAM, and information about
the services to be performed and the personnel performing such services under
the Hong Kong Sub-Advisory Agreement. The independent Directors were advised by
separate counsel in connection with their review of the Fund's sub-advisory
arrangements. After considering the factors stated above, the Board of Directors
approved the Hong Kong Sub-Advisory Agreement.
If approved by the Fund's shareholders at the Meeting, the Hong Kong
Investment Advisory Agreement will remain in effect until July 1, 2003, unless
terminated as described below. The Fund's management and investment advisory
arrangements were last approved by its stockholders on June 20, 2000.
Although the management, investment advisory and investment sub-advisory
agreements consist of four separate contracts, none of the agreements will
become effective unless each agreement is approved by shareholders.
Information Concerning NAM-Hong Kong
NAM-Hong Kong provides investment advisory services for Japanese and
International clients. Presently, NAM-Hong Kong does not act as investment
adviser with respect to any U.S. registered investment companies.
The following table sets forth the name, title and principal occupation of
the principal executive officers of NAM-Hong Kong. NAM-Hong Kong does not have a
Board of Directors.
Name* Title with NAM-Hong Kong Present Principal Occupation
---- ------------------------ ----------------------------
Shigeru Fujinuma Co-President and Managing Director Co-President and Managing
Director of NAM-Hong Kong
Noritada Ishikawa Co-President and Managing Director Co-President and Managing
Director of NAM-Hong Kong
- ------------
* The address of the principal executive officers is 32nd Floor, Citibank
Tower, Citibank Plaza, Hong Kong.
Terms of the Hong Kong Sub-Advisory Agreement
A copy of the form of the Hong Kong Sub-Advisory Agreement is set forth as
Exhibit C. The terms of that agreement are summarized below. The Hong Kong
Sub-Advisory Agreement does not alter the rate of investment advisory
compensation presently payable by NAM-U.S.A. to NAM.
Under the Hong Kong Sub-Advisory Agreement, NAM-Hong Kong agrees to
furnish NAM with economic research, securities analysis and investment
recommendations, to review and render investment advice with respect to the Fund
and, if authorized by NAM and the Fund's Board of Directors, to make decisions
to buy, sell or hold particular securities and to execute portfolio
transactions. NAM-Hong Kong is obligated to provide all the office space,
facilities, equipment and personnel necessary to perform its duties thereunder.
17
Compensation and Expenses
As described above, the investment advisory compensation presently payable
by NAM-U.S.A. to NAM will remain the same despite the new Hong Kong Sub-Advisory
Agreement. The Fund will not compensate NAM-Hong Kong for its investment
sub-advisory services. As compensation for its services to the Fund, NAM will
pay to NAM-Hong Kong monthly fees at the annual rate of .05% of the Fund's
average weekly net assets out of its compensation received pursuant to its
investment advisory agreement with NAM-U.S.A.
The Hong Kong Sub-Advisory Agreement obligates NAM-Hong Kong to pay all of
the costs, charges and expenses incurred by NAM-Hong Kong in carrying out its
obligations under the Agreement.
Duration and Termination
As indicated above, the Hong Kong Sub-Advisory Agreement will remain in
effect until July 1, 2003, and thereafter, but only so long as such continuance
is specifically approved at least annually by (i) the Board of Directors of the
Fund or by the vote of a majority of the outstanding voting securities of the
Fund and (ii) a majority of those Directors who are not parties to such contract
or interested persons (as defined in the Investment Company Act) of any such
party. The contract is not assignable and may be terminated without penalty on
60 days' written notice at option of either party thereto or by the vote of the
Fund's shareholders.
PROPOSAL 5. APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT
SUB-ADVISORY AGREEMENT BETWEEN NAM AND NAM-SINGAPORE
Proposed Investment Sub-Advisory Arrangements
As described above, the Fund's Board of Directors has approved a proposal
by NAM-U.S.A. and NAM for new management, investment advisory and investment
sub-advisory arrangements for the Fund. Under these arrangements, NAM is
authorized to enter into an investment sub-advisory agreement with NAM-Singapore
and has the authority, subject to prior authorization by the Fund's Board of
Directors, to delegate investment discretion over all or a portion of the Fund's
portfolio to NAM-Singapore.
NAM-Singapore is a wholly-owned subsidiary of NAM that provides investment
advisory services relating to Pacific Basin securities other than Japanese
securities. In recommending the proposed investment sub-advisory arrangement,
NAM advised the Fund's Board of Directors that NAM believed that it would be
appropriate in managing the Fund's assets to include NAM-Singapore as part of
the formal management group of the Fund and for NAM-Singapore to be compensated
by NAM. NAM expects that NAM-Singapore will supplement the investment advice
provided to the Fund by NAM and NAM-Hong Kong. It is currently expected that NAM
will delegate investment discretion over all or a portion of the Fund's
portfolio to NAM-Singapore upon shareholder approval of the new management,
investment advisory and investment sub-advisory arrangements. None of the Board
of Directors, the
18
Fund, NAM-U.S.A. or NAM is required to notify the Fund's shareholders of any
such changes in delegation. Under the new investment sub-advisory agreement
between NAM and NAM-Singapore (the "Singapore Sub-Advisory Agreement"), it is
expected that NAM-Singapore will trade portfolio securities in the local market,
provide immediate decision-making and portfolio execution capabilities in the
event of a crisis during which the U.S. markets are closed and daily monitoring
of trading activity during Asian trading hours. It is proposed that the
Singapore Sub-Advisory Agreement be approved by a majority of the Fund's
shareholders.
In their consideration of the Singapore Sub-Advisory Agreement, the Board
of Directors received information relating to, among other things, alternatives
to the Singapore Sub-Advisory Agreement, the nature, quality and extent of the
advisory and other services to be provided to the Fund by NAM-Singapore, other
comparative data with respect to the advisory fees paid by other international
funds, the operating expenses and expense ratio of the Fund as compared to such
funds and the performance of the Fund as compared to such funds. The independent
Directors also considered NAM's representations that there will be no material
adverse change in the services provided to the Fund after the approval of this
proposal, the relative profitability of the present arrangements to NAM, and
information about the services to be performed and the personnel performing such
services under the Singapore Sub-Advisory Agreement. The independent Directors
were advised by separate counsel in connection with their review of the Fund's
sub-advisory arrangements. After considering the factors stated above, the Board
of Directors approved the Singapore Sub-Advisory Agreement.
If approved by the Fund's shareholders at the Meeting, the Singapore
Sub-Advisory Agreement will remain in effect until July 1, 2003, unless
terminated as described below. The Fund's management and investment advisory
arrangements were last approved by its stockholders on June 20, 2000.
Although the management, investment advisory and investment sub-advisory
agreements consist of four separate contracts, none of the agreements will
become effective unless each agreement is approved by shareholders.
Information Concerning NAM-Singapore
NAM-Singapore provides investment advisory services for Japanese and
International clients. Presently, NAM-Singapore acts as investment adviser with
respect to the following U.S. registered investment companies: Nomura Pacific
Basin Fund, Inc.
The following table sets forth the name, title and principal occupation of
the principal executive officers of NAM-Singapore. NAM-Singapore does not have a
Board of Directors.
Name* Title with NAM-Singapore Present Principal Occupation
----- ------------------------ ----------------------------
Yoshimitsu Matsuki Managing Director Managing Director of NAM-Singapore
Hirokazu Maki Director Director of NAM-Singapore
- -------------
*The address of the principal executive officers is 6 Battery Road, #40-02
Singapore 049909.
19
Terms of the Singapore Sub-Advisory Agreement
A copy of the form of the Singapore Sub-Advisory Agreement is set forth as
Exhibit D. The terms of that agreement are summarized below. The Singapore
Sub-Advisory Agreement does not alter the rate of investment advisory
compensation payable by NAM-U.S.A. to NAM.
Under the Singapore Sub-Advisory Agreement, NAM-Singapore agrees to
furnish NAM with economic research, securities analysis and investment
recommendations, to review and render investment advice with respect to the Fund
and, if authorized by NAM and the Fund's Board of Directors, to make decisions
to buy, sell or hold particular securities and to execute portfolio
transactions. It is currently expected that NAM will delegate investment
discretion over all or a portion of the Fund's portfolio to NAM-Singapore upon
shareholder approval of the new management, investment advisory and investment
sub-advisory arrangements. NAM-Singapore is obligated to provide all the office
space, facilities, equipment and personnel necessary to perform its duties
thereunder.
Compensation and Expenses
As described above, the investment advisory compensation presently payable
by NAM-U.S.A. to NAM will remain the same despite the new Singapore Sub-Advisory
Agreement. The Fund will not compensate NAM-Singapore for its investment
sub-advisory services.
As compensation for its investment advisory services to the Fund, NAM will
pay NAM-Singapore monthly fees at the annual rate of .05% of the Fund's average
weekly net assets out of its compensation received pursuant to its investment
advisory agreement with NAM-U.S.A. If NAM, with prior authorization of the
Fund's Board of Directors, delegates investment discretion over a portion or all
of the Fund's assets to NAM-Singapore, NAM will pay NAM-Singapore a total fee of
.25% of the Fund's average weekly net assets out of its compensation received
pursuant to its investment advisory agreement with NAM-U.S.A. It is currently
expected that NAM will delegate investment discretion over all or a portion of
the Fund's portfolio to NAM-Singapore upon shareholder approval of the new
management, investment advisory and investment sub-advisory arrangements.
The Singapore-Advisory Agreement obligates NAM-Singapore to, if authorized
by NAM and the Fund's Board of Directors, make decisions to buy, sell or hold
particular securities and trade portfolio securities. NAM-Singapore is obligated
to provide all the office space, facilities, equipment and personnel necessary
to perform its duties thereunder.
The following table sets forth information relating to the U.S. registered
investment companies which invest primarily in securities of companies domiciled
in Pacific Basin countries with the investment objective of long-term capital
appreciation for which NAM-Singapore acts as investment adviser:
20
Approximate Net
Assets at
May 25, 2001
Investment Company Annual Advisory Fees (Millions)
------------------ -------------------- ----------
Nomura Pacific Basin Fund, Inc. $10.4
Investment Advisers: Investment Advisory Fee:
NAM .26125% of net assets; paid by
NAM-U.S.A. to NAM (1)
NAM-Singapore .0275% of net assets; paid by
NAM-U.S.A. to NAM-Singapore(1)
- ----------
(1) NAM and NAM-Singapore have agreed to limit Nomura Pacific Basin Fund,
Inc.'s annualized expenses for each class of shares. As a result, NAM and
NAM-Singapore may waive all or a portion of their investment advisory fee
and/or bear additional expenses.
Duration and Termination
As indicated above, the Singapore Sub-Advisory Agreement will remain in
effect until July 1, 2003, and thereafter, but only so long as such continuance
is specifically approved at least annually by (i) the Board of Directors of the
Fund or by the vote of a majority of the outstanding voting securities of the
Fund and (ii) a majority of those Directors who are not parties to such contract
or interested persons (as defined in the Investment Company Act) of any such
party. The contract is not assignable and may be terminated without penalty on
60 days' written notice at option of either party thereto or by the vote of the
Fund's shareholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The City of London Investment Group PLC, an English Corporation, ("COL")
has reported a 9.25% beneficial ownership of the Fund's Common Stock as of
February 12, 2001. COL is located at 10 Eastcheap, London EC3M1LX England.
To the knowledge of the management of the Fund, COL is the only beneficial
owner 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 May 25, 2001 May 25, 2001
------------------------ --------------------- ------------
City of London Investment Group PLC......... 778,200 9.25%
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 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
21
solicitation of proxies by mail, proxies may be solicited in person or by
telephone. The Fund has retained Georgeson Shareholder ("Georgeson"), a firm
that specializes in proxy solicitation services, to assist in the solicitation
of proxies for the Meeting, for a fee of approximately $4,000, together with
reimbursement of such firm's expenses. Georgeson 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 Auditor's Fees
The following table sets forth the aggregate fees paid to PWC, independent
accountants for the Fund, for the Fund's fiscal year ended October 31, 2000 for
professional services rendered for: (i) the audit of the Fund's annual financial
statements; (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. The Fund's Audit Committee has considered whether
the provision of non-audit services under clause (iii) is compatible with
maintaining the independence of the independent accountants with the Fund.
Audit Fees Financial Information
Charged to Systems Design and All
Fund the Fund Implementation Fees Other Fees* Fiscal Year End
---- -------- ------------------ ----------- ---------------
Korea Equity Fund............. $36,000 None $51,500 October 31, 2000
<FN>
- ----------
* $15,500 of these other non-audit services relate to the Fund.
</FN>
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 persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies from
shareholders. Any such adjournment will require the affirmative vote of a
majority of the shares of the Fund present in person or by proxy and entitled to
vote at the session of the Meeting to be adjourned. The persons named as proxies
will vote in favor of any such adjournment if they determine that adjournment
and additional solicitation are reasonable and in the best interests of the
Fund's 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:
(1) FOR the election of the five Board of Directors nominees;
22
(2) FOR approval of a new Management Agreement between the Fund and
NAM-U.S.A.;
(3) FOR approval of a new Investment Advisory Agreement between NAM-U.S.A.
and NAM;
(4) FOR approval of a new Investment Sub-Advisory Agreement between NAM
and NAM-Hong Kong; and
(5) FOR approval of a new Investment Sub-Advisory Agreement between NAM
and NAM-Singapore.
The election of Directors (Item 1) requires a plurality of the votes cast,
in person or by proxy, at a meeting at which a quorum is duly constituted.
Approval of each of the New Management Agreement (Item 2), the New Investment
Advisory Agreement (Item 3), the Hong Kong Sub-Advisory Agreement (Item 4) and
the Singapore Sub-Advisory Agreement (Item 5) requires the vote of a majority of
the outstanding voting securities of the Fund which, under the Investment
Company Act, is the vote (a) 67% or more of the shares of the Fund present at
the meeting of its shareholders if more than 50% of the outstanding shares are
present or represented by proxy, or (b) of more than 50% of the outstanding
shares whichever is less. If any of the New Management Agreement, the New
Investment Advisory Agreement, the Hong Kong Sub-Advisory Agreement or the
Singapore Sub-Advisory Agreement is not approved by shareholders at the Meeting,
the Board of Directors will reconsider the Fund's management, investment
advisory and sub-advisory arrangements.
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 Clearing Corporation ("JSCC") 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. Under the rules of the New York Stock
Exchange, the Boston Stock Exchange and the Osaka Securities Exchange,
broker-dealers and the JSCC may, without instructions from such customers,
clients and beneficial shareholders, grant authority to the proxies designated
by the Fund to vote on the election of Directors (Item 1) if no instructions
have been received prior to the date specified in the broker-dealer firm's or
the JSCC's request for voting instructions. Broker-dealer firms, including the
JSCC, will not be permitted to grant voting authority without instructions with
respect to Items 2-5. Certain broker-dealer firms may exercise discretion over
shares held in their name for which no instructions are received by voting such
shares in the same proportion as they have voted shares for which they have
received instructions.
The shares as to which the proxies so designated are granted authority by
broker-dealer firms and the JSCC to vote on the items to be considered at the
Meeting, the shares as to which broker-dealer firms have declined to vote
("broker non-votes"), as well as the shares as to which proxies are returned by
record shareholders but which are marked "abstain" on any item will be included
in the Fund's tabulation of the total number of votes present for purposes of
determining whether the necessary quorum of shareholders exists. However,
abstentions and broker non-votes will not be counted as votes cast. Therefore,
abstentions and broker non-votes will not have an effect on the election of
Directors (Item 1). Abstentions and broker non-votes
23
will have the same effect as a vote against the approval of each of the New
Management Agreement (Item 2), the New Investment Advisory Agreement (Item 3),
the Hong Kong Sub-Advisory Agreement (Item 4) and the Singapore Sub-Advisory
Agreement (Item 5).
Address of Manager, Investment Adviser and Investment Sub-Advisers
The address of NAM-U.S.A. is 180 Maiden Lane, New York, New York
10038-4936. The address of NAM is 1-14, 2-chome, Nihonbashi, Chuo-ku, Tokyo
103-8260, Japan. The address of NAM-Hong Kong is 32nd Floor, Citibank Tower,
Citibank Plaza, Hong Kong. The address of NAM-Singapore is 6 Battery Road,
#40-02 Singapore 049909.
Annual Report Delivery
The Fund sends annual, semi-annual and quarterly reports to shareholders.
The Fund will furnish, without charge, a copy of its most recent annual and any
semi-annual and quarterly reports succeeding such annual report, if any, to
shareholders upon request to the Fund at 180 Maiden Lane, New York, New York
10038-4936 (or call 1-800-833-0018).
Proposals of Shareholders
Proposals of shareholders intended to be presented at the next annual
meeting of shareholders of the Fund must be received by the Fund for inclusion
in its proxy statement and form of proxy relating to that meeting by February
11, 2002. By Order of the Board of Directors
JOHN J. BORETTI
Secretary
New York, New York
Dated: June 19, 2001
24
Exhibit A
MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of ____, 2001, by and between KOREA EQUITY
FUND, INC., a Maryland corporation (hereinafter referred to as the "Fund"), and
NOMURA ASSET MANAGEMENT U.S.A. INC., a New York corporation (hereinafter
referred to as the "Manager").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a non-diversified, closed-end,
management investment company registered under the Investment Company Act of
1940, as amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Manager is willing to provide management and investment
advisory services to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE I
Duties of the Manager
The Fund hereby retains the Manager to act as the manager of the Fund and
to furnish the Fund with the management and investment advisory services
described below, subject to the policies of, review by and overall control of
the Board of Directors of the Fund, for the period and on the terms and
conditions set forth in this Agreement. The Manager hereby accepts such
employment and agrees during such period, at its own expense, to render, or
arrange for the rendering of, such services and to assume the obligations herein
set forth for the compensation provided for herein.
(a) Management and Administrative Services. The Manager shall perform, or
supervise the performance of, the management and administrative services
necessary for the operation of the Fund including administering shareholder
accounts and handling shareholder relations. The Manager shall provide the Fund
with office space, equipment and facilities and such other services as the
Manager, subject to review by the Board of Directors of the Fund, shall from
time to time determine to be necessary or useful to perform its obligations
under this Agreement. The Manager shall also, on behalf of the Fund, conduct
relations with custodians, depositories, transfer agents, dividend disbursing
agents, other shareholder servicing agents, accountants, attorneys,
underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and
such other persons in any such other capacity deemed to be necessary or
desirable. The Manager shall generally monitor the Fund's compliance with
investment policies and restrictions as set forth in filings made by the Fund
under Federal securities laws. The Manager shall make reports to the Board of
Directors of the Fund of the performance of its obligations hereunder and
furnish advice and recommendations with respect to such other aspects of the
business and affairs of the Fund as it shall determine to be desirable. The
Manager and each of its affiliates shall for all
A-1
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
(b) Investment Advisory Services. The Manager shall provide the Fund with
such investment research, advice and supervision as the latter may from time to
time consider necessary for the proper supervision of the assets of the Fund.
The Manager shall act as investment adviser to the Fund and as such shall
furnish continuously an investment program for the Fund and shall determine from
time to time which securities shall be purchased, sold or exchanged and what
portion of the assets of the Fund shall be held in the various securities in
which the Fund invests, options, futures, options on futures or in cash, subject
always to the restrictions of the Articles of Incorporation and By-Laws of the
Fund, as amended from time to time, the provisions of the Investment Company Act
and the statements relating to the Fund's investment objective, investment
policies and investment restrictions as the same are set forth in filings made
by the Fund under Federal securities laws. The Manager shall make decisions for
the Fund as to foreign currency matters and make determinations as to foreign
exchange contracts. The Manager shall make recommendations as to the manner in
which voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's portfolio securities shall be exercised. Should the
Board of Directors of the Fund at any time, however, make any definite
determination as to investment policy and notify the Manager thereof in writing,
the Manager shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked. The Manager shall take, on behalf of the Fund, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or dealers selected by
it, and to that end, the Manager is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers and dealers and the placing of such orders, the Manager is
directed at all times to seek to obtain execution and price within the policy
guidelines determined by the Board of Directors of the Fund and set forth in the
filings made by the Fund under Federal securities laws. Subject to this
requirement and the provisions of the Investment Company Act, the Securities
Exchange Act of 1934, as amended, and other applicable provisions of law, the
Manager may select brokers or dealers with which it, or the Fund, is affiliated.
ARTICLE II
Allocation of Charges and Expenses
(a) The Manager. The Manager assumes and shall pay for maintaining the
staff and personnel necessary to perform its obligations under this Agreement
and shall, at its own expense, provide the office space, equipment and
facilities which it is obligated to provide under Article I hereof, and shall
pay all compensation of officers of the Fund and all directors of the Fund who
are "affiliated persons" (as defined in the Investment Company Act) of the
Manager.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: organization costs,
taxes, expenses for legal and
A-2
auditing services, costs of printing proxies, stock certificates, shareholder
reports, prospectuses, charges of the Custodian, any Sub-Custodian and Transfer
and Dividend Disbursing Agent, expenses of portfolio transactions, Securities
and Exchange Commission and stock exchange fees, expenses of registering the
Fund's shares under Federal, state and foreign laws, expenses of administering
any dividend reinvestment plan (except to the extent set forth in such plan),
fees and actual out-of-pocket expenses of directors who are not affiliated
persons of the Manager, accounting and pricing costs (including the daily
calculation of the net asset value), insurance, interest, brokerage costs,
litigation and other extraordinary or non-recurring expenses, and other like
expenses properly payable by the Fund.
ARTICLE III
Compensation of the Manager
For the services rendered, the equipment and facilities furnished and
expenses assumed by the Manager, the Fund shall pay to the Manager at the end of
each calendar month a fee at the annual rate of 1.10% of the Fund's average
weekly net assets (i.e., the average weekly value of the total assets of the
Fund, minus the sum of liabilities of the Fund), commencing on the day following
effectiveness hereof. For purposes of this calculation, average weekly net
assets is determined at the end of each month on the basis of the average net
assets of the Fund for each week during the month. The assets for each weekly
period are determined by averaging the net assets at the last business day of
the prior week. If this Agreement becomes effective subsequent to the first day
of a month or shall terminate before the last day of a month, compensation for
that part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fee as set forth above. During any period
when the determination of net asset value is suspended by the Board of Directors
of the Fund, the average net asset value of a share for the last week prior to
such suspension shall for this purpose be deemed to be the net asset value at
the close of each succeeding week until it is again determined.
ARTICLE IV
Retention of Investment Adviser
This Agreement is entered into with the understanding that the Manager
will enter into a separate Investment Advisory Agreement with Nomura Asset
Management Co., Ltd. in the form attached hereto as Exhibit A, in which the
Manager will contract for advisory services and pay the Investment Adviser
compensation for its services out of the compensation received hereunder
pursuant to Article III at the rates set forth therein. Such Investment Advisory
Agreement will be coterminous with this Management Agreement. The Fund
acknowledges that the Manager, with the prior authorization of the Fund's Board
of Directors, may delegate its investment discretion set forth in Article I(b)
hereof to the Investment Adviser.
A-3
ARTICLE V
Limitation of Liability of the Manager
The Manager shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the execution and management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article V, the term "Manager" shall include any affiliates of the Manager
performing services for the Fund contemplated hereby and directors, officers and
employees of the Manager as well as that corporation itself.
ARTICLE VI
Activities of the Manager
The services of the Manager to the Fund are not to be deemed to be
exclusive, the Manager and any person controlled by or under common control with
the Manager (for purposes of this Article VI referred to as "affiliates") being
free to render services to others. It is understood that directors, officers,
employees and shareholders of the Fund are or may become interested in the
Manager and its affiliates, as directors, officers, employees, partners, and
shareholders or otherwise and that directors, officers, employees, partners, and
shareholders of the Manager and its affiliates are or may become similarly
interested in the Fund, and that the Manager is or may become interested in the
Fund as shareholder or otherwise.
ARTICLE VII
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force until [o], 2003 and thereafter, but only so long as
such continuance is specifically approved at least annually by (i) the Board of
Directors of the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of those directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Fund, or by the Manager, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
ARTICLE VIII
Amendments of the Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved in accordance with applicable requirements under the
Investment Company Act.
A-4
ARTICLE IX
Definitions of Certain Terms
The terms "vote of a majority of outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE X
Governing Law
This Agreement shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
A-5
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
KOREA EQUITY FUND, INC.
By_________________________
NOMURA ASSET MANAGEMENT U.S.A. INC.
By__________________________
A-6
Exhibit B
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this [o] day of [o] 2001, by and between NOMURA ASSET
MANAGEMENT U.S.A. INC., a New York corporation (hereinafter referred to as the
"Manager"), and NOMURA ASSET MANAGEMENT CO., LTD., a Japanese corporation
(hereinafter referred to as the "Investment Adviser").
W I T N E S S E T H :
WHEREAS, Korea Equity Fund, Inc. (the "Fund") is engaged in business as a
non-diversified, closed-end, management investment company registered under the
Investment Company Act of 1940, as amended (hereinafter referred to as the
"Investment Company Act"); and
WHEREAS, the Manager and the Investment Adviser are engaged in business as
registered investment advisers under the Investment Advisers Act of 1940, as
amended; and
WHEREAS, the Manager has entered into a Management Agreement with the Fund
of even date herewith (the "Management Agreement"); and
WHEREAS, the Investment Adviser is willing to provide investment advisory
services to the Manager in connection with the Fund's operations on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE I
Duties of the Investment Adviser
The Manager hereby retains the Investment Adviser to act as the investment
adviser of the Fund and to furnish the Fund with the investment advisory
services described below, subject to the policies of, review by and overall
control of the Board of Directors of the Fund, for the period and on the terms
and conditions set forth in this Agreement. In addition, the Manager may
delegate to the Investment Adviser investment discretion over all or a portion
of the Fund's assets. The Investment Adviser hereby accepts such employment and
agrees during such period, at its own expense, to render, or arrange for the
rendering of, such services and to assume the obligations herein set forth for
the compensation provided for herein.
(a) Research Services. Subject to the broad supervision of the Manager and
the Fund, the Investment Adviser shall provide the Manager with such economic
research and securities analysis as the latter may from time to time consider
necessary for the proper supervision of the Fund's assets.
B-1
(b) Investment Discretionary Services. To the extent that the Manager,
with the prior authorization of the Fund's Board of Directors, delegates
investment discretion in writing to the Investment Adviser, the Investment
Adviser shall provide the Fund with such investment advice and supervision as
the Fund may from time to time consider necessary for the proper supervision of
those assets of the Fund for which the Investment Adviser has been delegated
investment discretion. The Investment Adviser shall furnish continuously an
investment program for such assets of the Fund and shall determine from time to
time which securities shall be purchased, sold or exchanged and what portion of
such assets of the Fund shall be held in the various securities in which the
Fund invests, options, futures, options on futures or in cash, subject always to
the restrictions of the Articles of Incorporation and By-Laws of the Fund, as
amended from time to time, the provisions of the Investment Company Act and the
statements relating to the Fund's investment objective, investment policies and
investment restrictions as the same are set forth in filings made by the Fund
under Federal securities laws. The Investment Adviser shall make decisions for
the Fund as to foreign currency matters and make determinations as to foreign
exchange contracts. The Investment Adviser shall make recommendations as to the
manner in which voting rights, rights to consent to corporate action and any
other rights pertaining to such portfolio securities shall be exercised. Should
the Board of Directors of the Fund at any time, however, make any definite
determination as to investment policy and notify the Investment Adviser thereof
in writing, the Investment Adviser shall be bound by such determination for the
period, if any, specified in such notice or until similarly notified that such
determination has been revoked. The Investment Adviser shall take, on behalf of
the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above.
To the extent that the Manager delegates such authority in writing to the
Investment Adviser, the Investment Adviser shall place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Investment Adviser is authorized as
the agent of the Fund to give instructions to the Custodian of the Fund as to
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers and dealers and the placing of
such orders, the Investment Adviser is directed at all times to seek to obtain
execution and price within the policy guidelines determined by the Board of
Directors of the Fund and set forth in the filings made by the Fund under
Federal securities laws. Subject to this requirement and the provisions of the
Investment Company Act, the Securities Exchange Act of 1934, as amended, and
other applicable provisions of law, the Investment Adviser may select brokers or
dealers with which it, or the Fund, is affiliated.
ARTICLE II
Allocation of Charges and Expenses
The Investment Adviser shall furnish, at its own expense, all
administrative services, office space, equipment and facilities, investment
advisory, statistical and research services, and executive, supervisory and
clerical personnel necessary to carry out its obligations under this Agreement.
B-2
ARTICLE III
Compensation of the Investment Adviser
For the services to be rendered as provided herein, the Manager shall pay
to the Investment Adviser at the end of each calendar month a fee at the annual
rate of .55% of the Fund's average weekly net assets (i.e., the average weekly
value of the total assets of the Fund minus the sum of accrued liabilities of
the Fund), commencing on the day following effectiveness hereof. To the extent
that the Manager, with the prior authorization of the Fund's Board of Directors,
delegates investment discretion over a portion or all of the Fund's assets to
the Investment Adviser, and the Investment Adviser further delegates such
investment discretion to Nomura Asset Management Hong Kong Limited and/or Nomura
Asset Management Singapore Limited, it is understood that a portion of such
compensation is being paid by the Manager to the Investment Adviser as agent for
the Investment Sub-advisers referenced in Article IV hereof, and that the
Investment Adviser will remit such compensation to the Investment Sub-advisers
pursuant to the Investment Sub-Advisory Agreements referenced in such Article
IV.
For purposes of this calculation, average weekly net assets is determined
at the end of each month on the basis of the average net assets of the Fund for
each week during the month. The assets for each weekly period are determined by
averaging the net assets at the last business day of the prior week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month that this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fee as set forth above. During any period when the
determination of net asset value is suspended by the Board of Directors of the
Fund, the average net asset value of a share for the last week prior to such
suspension shall for this purpose be deemed to be the net asset value at the
close of each succeeding week until it is again determined.
ARTICLE IV
Investment Sub-Advisory Agreements
This Agreement is entered into with the understanding that the Investment
Adviser will enter into Investment Sub-Advisory Agreements with each of Nomura
Asset Management Singapore Limited and Nomura Asset Management Hong Kong
Limited, substantially in the forms attached hereto as Exhibits, in which the
Investment Adviser will contract for advisory services and pay each Investment
Sub-Adviser compensation for its services out of the compensation received
hereunder pursuant to Article III at the rates set forth therein. Such
Investment Sub-Advisory Agreements will be coterminous with this Agreement. The
Manager acknowledges that the Investment Adviser, with the prior authorization
of the Fund's Board of Directors, may delegate its investment discretion set
forth in Article I(b) hereof to the Investment Sub-Advisers.
B-3
ARTICLE V
Limitation of Liability of the Investment Adviser
The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As used
in this Article V, the term "Investment Adviser" shall include any affiliates of
the Investment Adviser performing services for the Fund contemplated hereby and
directors, officers, partners and employees of the Investment Adviser as well as
that corporation itself.
ARTICLE VI
Activities of the Investment Adviser
The services of the Investment Adviser to the Fund are not to be deemed to
be exclusive, the Investment Adviser and any person controlled by or under
common control with the Investment Adviser (for the purpose of this Article VI
referred to as "affiliates") being free to render services to others. It is
understood that directors, officers, employees and shareholders of the Manager
are or may become interested in the Investment Adviser and its affiliates, as
directors, officers, employees, partners and shareholders or otherwise and that
directors, officers, employees, partners and shareholders of the Investment
Adviser and its affiliates are or may become similarly interested in the Manager
or the Fund, and that the Investment Adviser is or may become interested in the
Manager or the Fund as shareholder or otherwise.
ARTICLE VII
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force until [o], 2003 and thereafter, but only so long as
the Management Agreement remains in force and provided that such continuance is
specifically approved at least annually by (i) the Board of Directors of the
Fund or by the vote of a majority of the outstanding voting securities of the
Fund and (ii) a majority of those directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Manager, by the Board of Directors of the Fund, by vote of a
majority of the outstanding voting securities of the Fund or by the Investment
Adviser, on sixty days' written notice to the parties. This Agreement shall
automatically terminate in the event of its assignment or upon the termination
of the Management Agreement.
B-4
ARTICLE VIII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved in accordance with applicable requirements under the
Investment Company Act.
ARTICLE IX
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE X
Governing Law
This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
B-5
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
NOMURA ASSET MANAGEMENT U.S.A. INC.
By_____________________________________
NOMURA ASSET MANAGEMENT CO., LTD.
By_____________________________________
B-6
Exhibit C
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this [o] day of [o] 2001, by and between NOMURA ASSET
MANAGEMENT CO., LTD., a Japanese corporation (hereinafter referred to as the
"Investment Adviser"), and NOMURA ASSET MANAGEMENT HONG KONG LIMITED, a
Singapore corporation (hereinafter referred to as the "Investment Sub-adviser").
W I T N E S S E T H :
WHEREAS, Korea Equity Fund, Inc. (the "Fund") is engaged in business as a
non-diversified, closed-end, management investment company registered under the
Investment Company Act of 1940, as amended (hereinafter referred to as the
"Investment Company Act"); and
WHEREAS, Nomura Asset Management U.S.A. Inc., a New York corporation
(hereinafter referred to as the "Manager"), has entered into a management
agreement with the Fund dated as of ____________, 2001 (the "Management
Agreement") and an investment advisory agreement relating to the Fund with the
Investment Adviser dated as of ____________, 2001 (the "Investment Advisory
Agreement"); and
WHEREAS, the Manager, the Investment Adviser and the Investment
Sub-Adviser are engaged in business as registered investment advisers under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Investment Sub-adviser is willing to provide investment
advisory services in connection with the Fund's operations on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE I
Duties of the Investment Sub-Adviser
(a) Research Services. Subject to the broad supervision of the Investment
Adviser and the Fund, the Investment Sub-adviser shall provide the Manager and
the Investment Adviser with such economic research and securities analysis as
the Manager and the Investment Adviser may from time to time consider necessary
for the proper supervision of the Fund's assets.
(b) Investment Discretionary Services. To the extent that the Investment
Adviser, with the prior authorization of the Fund's Board of Directors,
delegates investment discretion in writing to the Investment Sub-adviser, the
Investment Sub-adviser shall provide the Fund with such investment advice and
supervision as the Fund may from time to time consider necessary for the proper
supervision of those assets of the Fund for which the Investment Sub-adviser has
C-1
been delegated investment discretion. The Investment Sub-adviser shall furnish
continuously an investment program for such assets of the Fund and shall
determine from time to time which securities shall be purchased, sold or
exchanged and what portion of such assets of the Fund shall be held in the
various securities in which the Fund invests, options, futures, options on
futures or in cash, subject always to the restrictions of the Articles of
Incorporation and By-Laws of the Fund, as amended from time to time, the
provisions of the Investment Company Act and the statements relating to the
Fund's investment objective, investment policies and investment restrictions as
the same are set forth in filings made by the Fund under Federal securities
laws. The Investment Sub-adviser shall make decisions for the Fund as to foreign
currency matters and make determinations as to foreign exchange contracts. The
Investment Sub-adviser shall make recommendations as to the manner in which
voting rights, rights to consent to corporate action and any other rights
pertaining to such portfolio securities shall be exercised. Should the Board of
Directors of the Fund at any time, however, make any definite determination as
to investment policy and notify the Investment Sub-adviser thereof in writing,
the Investment Sub-adviser shall be bound by such determination for the period,
if any, specified in such notice or until similarly notified that such
determination has been revoked. The Investment Sub-adviser shall take, on behalf
of the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above.
To the extent that the Investment Adviser delegates such authority in
writing to the Investment Sub-adviser, the Investment Sub-adviser shall place
all orders for the purchase or sale of portfolio securities for the Fund's
account with brokers or dealers selected by it, and to that end, the Investment
Sub-adviser is authorized as the agent of the Fund to give instructions to the
Custodian of the Fund as to deliveries of securities and payments of cash for
the account of the Fund. In connection with the selection of such brokers and
dealers and the placing of such orders, the Investment Sub-adviser is directed
at all times to seek to obtain execution and price within the policy guidelines
determined by the Board of Directors of the Fund and set forth in the filings
made by the Fund under Federal securities laws. Subject to this requirement and
the provisions of the Investment Company Act, the Securities Exchange Act of
1934, as amended, and other applicable provisions of law, the Investment
Sub-adviser may select brokers or dealers with which it, or the Fund, is
affiliated.
ARTICLE II
Allocation of Charges and Expenses
The Investment Sub-adviser shall furnish, at its own expense, all
administrative services, office space, equipment and facilities, investment
advisory, statistical and research services, and executive, supervisory and
clerical personnel necessary to carry out its obligations under this Agreement.
ARTICLE III
Compensation of the Investment Sub-Adviser
For the services described in Article I hereof, the Investment Adviser
shall pay to the Investment Sub-adviser at the end of each calendar month a fee
at the annual rate of .05% of the
C-2
Fund's average weekly net assets (i.e., the average weekly value of the total
assets of the Fund minus the sum of accrued liabilities of the Fund), commencing
on the day following effectiveness hereof.
For purposes of this calculation, average weekly net assets is determined
at the end of each month on the basis of the average net assets of the Fund for
each week during the month. The assets for each weekly period are determined by
averaging the net assets at the last business day of the prior week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month that this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fee as set forth above. During any period when the
determination of net asset value is suspended by the Board of Directors of the
Fund, the average net asset value of a share for the last week prior to such
suspension shall for this purpose be deemed to be the net asset value at the
close of each succeeding week until it is again determined.
ARTICLE IV
Limitation of Liability of the Investment Sub-Adviser
The Investment Sub-adviser shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As used
in this Article IV, the term "Investment Sub-adviser" shall include any
affiliates of the Investment Sub-adviser performing services for the Fund
contemplated hereby and directors, officers, partners and employees of the
Investment Sub-adviser as well as that corporation itself.
ARTICLE V
Activities of the Investment Sub-Adviser
The services of the Investment Sub-adviser to the Fund are not to be
deemed to be exclusive, the Investment Sub-adviser and any person controlled by
or under common control with the Investment Sub-adviser (for the purpose of this
Article V referred to as "affiliates") being free to render services to others.
It is understood that directors, officers, employees and shareholders of the
Manager and the Investment Adviser are or may become interested in the
Investment Sub-adviser and its affiliates, as directors, officers, employees,
partners and shareholders or otherwise and that directors, officers, employees,
partners and shareholders of the Investment Sub-adviser and its affiliates are
or may become similarly interested in the Manager, the Investment Adviser or the
Fund, and that the Investment Sub-adviser is or may become interested in the
Manager, the Investment Adviser or the Fund as shareholder or otherwise.
C-3
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force until [o], 2003 and thereafter, but only so long as
such continuance is specifically approved at least annually by (i) the Board of
Directors of the Fund or by the vote of a majority of the outstanding voting
securities of the Fund and (ii) a majority of those directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Investment Adviser, by the Board of Directors of the Fund, by
vote of a majority of the outstanding voting securities of the Fund or by the
Investment Sub-adviser, on sixty days' written notice to the parties. This
Agreement shall automatically terminate in the event of its assignment or upon
the termination of the Management Agreement or the Investment Advisory
Agreement.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved in accordance with applicable requirements under the
Investment Company Act.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
C-4
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
NOMURA ASSET MANAGEMENT CO., LTD.
By_____________________________________
NOMURA ASSET MANAGEMENT HONG KONG
LIMITED
By_____________________________________
C-5
Exhibit D
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this [o] day of [o] 2001, by and between NOMURA ASSET
MANAGEMENT CO., LTD., a Japanese corporation (hereinafter referred to as the
"Investment Adviser"), and NOMURA ASSET MANAGEMENT SINGAPORE LIMITED, a
Singapore corporation (hereinafter referred to as the "Investment Sub-adviser").
W I T N E S S E T H :
WHEREAS, Korea Equity Fund, Inc. (the "Fund") is engaged in business as a
non-diversified, closed-end, management investment company registered under the
Investment Company Act of 1940, as amended (hereinafter referred to as the
"Investment Company Act"); and
WHEREAS, Nomura Asset Management U.S.A. Inc., a New York corporation
(hereinafter referred to as the "Manager"), has entered into a management
agreement with the Fund dated as of ____________, 2001 (the "Management
Agreement") and an investment advisory agreement relating to the Fund with the
Investment Adviser dated as of ____________, 2001 (the "Investment Advisory
Agreement"); and
WHEREAS, the Manager, the Investment Adviser and the Investment
Sub-Adviser are engaged in business as registered investment advisers under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Investment Sub-adviser is willing to provide investment
advisory services in connection with the Fund's operations on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE I
Duties of the Investment Sub-Adviser
(a) Research Services. Subject to the broad supervision of the Investment
Adviser and the Fund, the Investment Sub-adviser shall provide the Manager and
the Investment Adviser with such economic research and securities analysis as
the Manager and the Investment Adviser may from time to time consider necessary
for the proper supervision of the Fund's assets.
(b) Investment Discretionary Services. To the extent that the Investment
Adviser, with the prior authorization of the Fund's Board of Directors,
delegates investment discretion in writing to the Investment Sub-adviser, the
Investment Sub-adviser shall provide the Fund with such investment advice and
supervision as the Fund may from time to time consider necessary for the proper
supervision of those assets of the Fund for which the Investment Sub-adviser has
D-1
been delegated investment discretion. The Investment Sub-adviser shall furnish
continuously an investment program for such assets of the Fund and shall
determine from time to time which securities shall be purchased, sold or
exchanged and what portion of such assets of the Fund shall be held in the
various securities in which the Fund invests, options, futures, options on
futures or in cash, subject always to the restrictions of the Articles of
Incorporation and By-Laws of the Fund, as amended from time to time, the
provisions of the Investment Company Act and the statements relating to the
Fund's investment objective, investment policies and investment restrictions as
the same are set forth in filings made by the Fund under Federal securities
laws. The Investment Sub-adviser shall make decisions for the Fund as to foreign
currency matters and make determinations as to foreign exchange contracts. The
Investment Sub-adviser shall make recommendations as to the manner in which
voting rights, rights to consent to corporate action and any other rights
pertaining to such portfolio securities shall be exercised. Should the Board of
Directors of the Fund at any time, however, make any definite determination as
to investment policy and notify the Investment Sub-adviser thereof in writing,
the Investment Sub-adviser shall be bound by such determination for the period,
if any, specified in such notice or until similarly notified that such
determination has been revoked. The Investment Sub-adviser shall take, on behalf
of the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above.
To the extent that the Investment Adviser delegates such authority in
writing to the Investment Sub-adviser, the Investment Sub-adviser shall place
all orders for the purchase or sale of portfolio securities for the Fund's
account with brokers or dealers selected by it, and to that end, the Investment
Sub-adviser is authorized as the agent of the Fund to give instructions to the
Custodian of the Fund as to deliveries of securities and payments of cash for
the account of the Fund. In connection with the selection of such brokers and
dealers and the placing of such orders, the Investment Sub-adviser is directed
at all times to seek to obtain execution and price within the policy guidelines
determined by the Board of Directors of the Fund and set forth in the filings
made by the Fund under Federal securities laws. Subject to this requirement and
the provisions of the Investment Company Act, the Securities Exchange Act of
1934, as amended, and other applicable provisions of law, the Investment
Sub-adviser may select brokers or dealers with which it, or the Fund, is
affiliated.
ARTICLE II
Allocation of Charges and Expenses
The Investment Sub-adviser shall furnish, at its own expense, all
administrative services, office space, equipment and facilities, investment
advisory, statistical and research services, and executive, supervisory and
clerical personnel necessary to carry out its obligations under this Agreement.
ARTICLE III
Compensation of the Investment Sub-Adviser
For the services described in Article I hereof, the Investment Adviser
shall pay to the Investment Sub-adviser compensation as follows. To the extent
that the Manager does not
D-2
delegate investment discretion over any portion of the Fund's assets to the
Investment Adviser, the Investment Sub-adviser will receive no compensation for
its services hereunder. To the extent that the Manager, with the prior
authorization of the Fund's Board of Directors, delegates investment discretion
over a portion or all of the Fund's assets to the Investment Adviser but not to
the Investment Sub-adviser, the Investment Adviser shall pay to the Investment
Sub-adviser at the end of each calendar month a fee at the annual rate of .05%
of the Fund's average weekly net assets (i.e., the average weekly value of the
total assets of the Fund minus the sum of accrued liabilities of the Fund),
commencing on the day following effectiveness hereof. To the extent that the
Manager, with the prior authorization of the Fund's Board of Directors,
delegates investment discretion over a portion or all of the Fund's assets to
the Investment Adviser and the Investment Adviser further delegates such
investment discretion to the Investment Sub-adviser, the Investment Adviser
shall pay to the Investment Sub-adviser at the end of each calendar month a fee
at the annual rate of .25% of the Fund's average weekly net assets.
For purposes of this calculation, average weekly net assets is determined
at the end of each month on the basis of the average net assets of the Fund for
each week during the month. The assets for each weekly period are determined by
averaging the net assets at the last business day of the prior week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month that this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fee as set forth above. During any period when the
determination of net asset value is suspended by the Board of Directors of the
Fund, the average net asset value of a share for the last week prior to such
suspension shall for this purpose be deemed to be the net asset value at the
close of each succeeding week until it is again determined.
ARTICLE IV
Limitation of liability of the Investment Sub-Adviser
The Investment Sub-adviser shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As used
in this Article IV, the term "Investment Sub-adviser" shall include any
affiliates of the Investment Sub-adviser performing services for the Fund
contemplated hereby and directors, officers, partners and employees of the
Investment Sub-adviser as well as that corporation itself.
ARTICLE V
Activities of the Investment Sub-Adviser
The services of the Investment Sub-adviser to the Fund are not to be
deemed to be exclusive, the Investment Sub-adviser and any person controlled by
or under common control with the Investment Sub-adviser (for the purpose of this
Article V referred to as "affiliates") being free to render services to others.
It is understood that directors, officers, employees and shareholders of the
Manager and the Investment Adviser are or may become interested in the
D-3
Investment Sub-adviser and its affiliates, as directors, officers, employees,
partners and shareholders or otherwise and that directors, officers, employees,
partners and shareholders of the Investment Sub-adviser and its affiliates are
or may become similarly interested in the Manager, the Investment Adviser or the
Fund, and that the Investment Sub-adviser is or may become interested in the
Manager, the Investment Adviser or the Fund as shareholder or otherwise.
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force until [o], 2003 and thereafter, but only so long as
such continuance is specifically approved at least annually by (i) the Board of
Directors of the Fund or by the vote of a majority of the outstanding voting
securities of the Fund and (ii) a majority of those directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Investment Adviser, by the Board of Directors of the Fund, by
vote of a majority of the outstanding voting securities of the Fund or by the
Investment Sub-adviser, on sixty days' written notice to the parties. This
Agreement shall automatically terminate in the event of its assignment or upon
the termination of the Management Agreement or the Investment Advisory
Agreement.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved in accordance with applicable requirements under the
Investment Company Act.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws
D-4
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the Investment Company Act, the latter shall control.
D-5
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
NOMURA ASSET MANAGEMENT CO., LTD.
By_____________________________________
NOMURA ASSET MANAGEMENT SINGAPORE LIMITED
By_____________________________________
D-6
Exhibit E
NOMURA PACIFIC BASIN FUND, INC.
JAPAN OTC EQUITY FUND, INC.
KOREA EQUITY FUND, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. Composition of the Audit Committee
The Audit Committee shall be composed of all of the Directors who satisfy
the following criteria:
(a) each of whom shall not be an "interested person" of the Fund, as
defined in Section 2(a)(19) of the Investment Company Act of 1940,
as amended;
(b) each of whom shall not have any relationship to the Fund or Nomura
Asset Management U.S.A. Inc. or its affiliates that may interfere
with the exercise of their independence from Fund management and the
Fund;
(c) each of whom shall otherwise satisfy the applicable independence
requirements for any stock exchange on which Fund shares are listed;
(d) each of whom shall be financially literate, as such qualification is
interpreted by the Board of Directors in its business judgment, or
shall become financially literate within a reasonable period of time
after his or her appointment to the Audit Committee; and
(e) at least one of whom shall have accounting or related financial
management expertise, as the Board of Directors interprets such
qualification in its business judgment.
II. Purposes of the Audit Committee
The purposes of the Audit Committee are to assist the Board of Directors:
(a) in its oversight of the Fund's accounting and financial reporting
policies and practices, its internal audit controls and procedures
and, as appropriate, the internal audit controls and procedures of
certain of its service providers;
(b) in its oversight of the Fund's financial statements and the
independent audit thereof; and
(c) in acting as a liaison between the Fund's independent public
accountants and the Board of Directors.
The function of the Audit Committee is oversight. Fund management is
responsible for maintaining appropriate systems for accounting and internal
controls. The independent public accountants of the Fund are responsible for
conducting a proper audit of the Fund's financial statements.
III. Responsibilities and Duties of the Audit Committee
The policies and procedures of the Audit Committee shall remain flexible
to facilitate its ability to react to changing conditions and to generally
discharge its functions. The following listed responsibilities describe areas of
attention in broad terms.
To carry out its purposes, the Audit Committee shall have the following
responsibilities and duties:
(a) to recommend the selection, retention or termination of the Fund's
independent public accountants based on an evaluation of their
independence and the nature and performance of audit services and
other services;
(b) to receive specific written representations from the independent
public accountants with respect to their independence and to discuss
with them their independence;
(c) to review the fees charged by the independent public accountants for
audit and other services;
(d) to review with the independent public accountants arrangements for
and the scope of annual audits and special audits;
(e) to review with Fund management and the independent public
accountants the results of the annual audits of the Fund;
(f) to discuss with the independent accountants the matters required to
be discussed by SAS 61, as may be modified or supplemented;
(g) to discuss with the independent public accountants any matters of
concern relating to the Fund's financial statements, including,
without limitation, any adjustment to such financial statements
recommended by such independent public accountants, or any other
results of any audit;
(h) to consider with the independent public accountants their comments
with respect to the Fund's accounting and financial reporting
policies, practices and internal controls and management's responses
thereto, including, without limitation, the effect on the Fund of
any recommendation of changes in accounting principles or practices
by management or the independent public accountants;
(i) to review with the independent public accountants the form of
opinion proposed to be rendered to the Board of Directors and the
stockholders;
(j) to investigate, when the Audit Committee deems it necessary or
appropriate, any improprieties or suspected improprieties in Fund
financial and accounting operations;
(k) to report to the Board of Directors regularly with respect to the
Audit Committee's activities and to make any necessary or
appropriate recommendations with respect
E-2
to the Fund's accounting and financial reporting policies, practices
and the Fund's internal controls;
(l) to review and reassess the adequacy of this Charter on an annual
basis and recommend any changes to the Board of Directors;
(m) to review with counsel and the independent public accountants for
the Fund legal and regulatory matters that may have a material
impact on the Fund's financial statements;
(n) to prepare any report, including any recommendation of the Audit
Committee, required to be included in the Fund's annual proxy
statement by the rules of the Securities and Exchange Commission;
(o) to assist the Fund, if necessary, in preparing any written
affirmation or written certification required to be filed with any
stock exchange on which Fund shares are listed; and
(p) to perform such other functions consistent with this Charter, the
Fund's By-laws and governing law, as the Audit Committee or the
Board of Directors deems necessary or appropriate.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Audit Committee are not full-time employees of the Fund and are
not, and do not represent themselves to be, accountants or auditors by
profession or experts in the field of accounting or auditing. As such, it is not
the duty or responsibility of the Audit Committee or its members to conduct
"field work" or other types of auditing or accounting reviews or procedures, and
each member of the Audit Committee shall be entitled to rely on (i) the
integrity of those persons and organizations within and outside the Fund from
which the Audit Committee receives information and (ii) the accuracy of the
financial and other information provided to the Audit Committee by such persons
or organizations absent actual knowledge to the contrary (which actual knowledge
shall be promptly reported to the Board of Directors).
The independent public accountants for the Fund are ultimately accountable
to the Board of Directors and the Audit Committee. The Board of Directors and
the Audit Committee have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent public accountants for
the Fund (or to nominate the independent public accountants to be proposed for
shareholder approval in the proxy statement).
The Audit Committee is responsible for ensuring that the independent
public accountants for the Fund submit on a periodic basis to the Audit
Committee a formal written statement delineating all relationships between such
independent public accountants and the Fund, consistent with Independence
Standards Board Standard 1. The Audit Committee is responsible for actively
engaging in a dialogue with the independent public accountants for the Fund with
respect to any disclosed relationships or services that may impact the
objectivity and independence of such independent public accountants and for
recommending that the Board of Directors take appropriate action in response to
the report of such independent public accountants to satisfy itself of the
independence of such independent public accountants.
E-3
IV. Meetings
The Audit Committee shall meet at least once annually with the independent
public accountants (outside the presence of Fund management) and at least once
annually with the representatives of Fund management responsible for the
financial and accounting operations of the Fund. The Audit Committee shall hold
special meetings when and if circumstances require. Members of the Audit
Committee may participate in a meeting of the Audit Committee by means of
conference call or similar communications equipment by means of which all
persons participating in such meeting can hear each other.
V. Outside Resources and Assistance from Fund Management
The appropriate officers of the Fund shall provide or arrange to provide
such information, data and services as the Audit Committee may request. The
Audit Committee shall have the authority to discharge its responsibility,
including the authority to retain at the expense of the Fund their own counsel
and other experts and consultants, whose expertise would be considered helpful
to the Audit Committee.
Dated May 18, 2000
E-4
KOREA EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038-4936
PROXY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Kazuhiko Hama and John J. Boretti 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 May
25, 2001 at the Annual Meeting of the Shareholders of the Fund to be held on
July 24, 2001 or any adjournment thereof.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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- --------------------------------------------------------------------------------
Please sign exactly as name(s) appear(s) hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized persons.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
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1
|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 Proposals 1, 2, 3, 4 and 5.
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. | Date |
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| |
| |
| |
| |
| |
|Shareholder sign here Co-owner sign here |
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ALL PROPOSALS
1. Election of Directors
(01) William G. Barker, Jr. (04) Arthur R. Taylor
(02) Kazuhiko Hama (05) John F. Wallace
(03) Chor Weng Tan
For For All
All With- Nominees
Nominees Held Except
|_| |_| |_|
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name(s) of the nominee(s).
Your shares will be voted for the remaining nominee(s). For Against Abstain
2. Proposal to approve a new Management Agreement
between the Fund and Nomura Asset Management U.S.A. Inc. |_| |_| |_|
3. Proposal to approve a new Investment Advisory |_| |_| |_|
Agreement between Nomura Asset Management
U.S.A. Inc. and Nomura Asset Management Co., Ltd.
4. Proposal to approve new Investment Sub-Advisory |_| |_| |_|
Agreement between Nomura Asset Management Co.,
Ltd. and Nomura Asset Management Singapore Limited.
5. Proposal to approve a new investment Sub-Advisory |_| |_| |_|
Agreement between Nomura Asset Management Co.,
Ltd. and Nomura Asset Management Hong Kong Limited.
6. In the discretion of such proxies, upon such other
business as may properly come before the meeting or
any adjournment thereof.
RECORD DATE SHARES:
1