SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |_|
Filed by a party other than the Registrant |X|
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-12
THE KOREA FUND, INC.
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(Name of Registrant as Specified In its Charter)
CITY OF LONDON INVESTMENT GROUP PLC
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CITY OF LONDON INVESTMENT GROUP PLC
o 10 Eastcheap, London, England, EC3M ILX o
o 1125 Airport Road, Coatesville, PA, United States, 19320 o
o 30 Cecil Street, Singapore 049712 o
September 2, 2004
VOTE THE GOLD PROXY
TO ELECT OUR INDEPENDENT NOMINEES
TO THE BOARD OF THE KOREA FUND, INC.
Dear Fellow Stockholder of The Korea Fund, Inc. (the "Fund"):
City of London Investment Group PLC ("City of London") is seeking your
support in electing Julian Reid and Chris Russell to the Board of Directors of
the Fund (the "Board") at the Annual Meeting of Stockholders of the Fund
scheduled for October 6, 2004 (the "Annual Meeting"). Messrs. Reid and Russell
have no current or prior relationship to the Fund, its management or Deutsche
Investment Management Americas Inc. ("DeIM"), the Fund's investment manager, and
are, therefore, herein collectively referred to as the "Independent Nominees."
City of London has been a Stockholder in the Fund for more than three
years and believes it currently is the second largest holder of outstanding
shares of the Fund's Common Stock (the "Shares"). As of the date of this letter,
City of London beneficially owns approximately 9.81% of the outstanding Shares.
The Fund's current officers and directors, as a group, own approximately 0.02%
of the outstanding Shares. City of London believes that both the size and the
duration of its holdings, as well as its intention to remain a Stockholder of
the Fund, closely align its interests with the other Stockholders of the Fund.
We Believe the Election of the Independent Nominees
Will Benefit the Fund and its Stockholders
City of London believes that a truly independent Board, one that is free
from any ties to DeIM, is the only way to ensure that the Board will:
o be committed to good corporate governance; and
o take meaningful actions designed to narrow the persistent
discount to net asset value ("NAV") at which the Shares trade
and cause the Fund to seek to maximize value on behalf of all
of the Fund's Stockholders.
Neither of the Independent Nominees has any relationship with DeIM nor
does either of such nominees have a relationship with City of London which, in
any way, could compromise his independence. In contrast, City of London believes
that the Fund's current directors have far too many ties to DeIM to be truly
independent or objective and that, perhaps as a result, the Board consistently
has failed to adequately address Stockholders' needs.
According to the Fund's proxy statement, six of the seven directors on the
Board are "independent" notwithstanding the fact that each "independent"
director on the Board (a) serves on the board of directors of, and receives fees
from, three other closed-end funds managed by DeIM,(1) and (b) has received fees
directly from DeIM, in connection with his/her service as a director of such
closed-end funds.
The seventh director, who is a managing director of an affiliate of DeIM
and is one of the Board's nominees at the Annual Meeting, is an "interested
person" (as defined in the Investment Company Act of 1940, as amended) according
to the Fund's proxy statement because of his affiliation with DeIM and because
he is an officer of the Fund. City of London believes that individuals who are
"interested persons" by virtue of their relationship with the investment manager
should not serve on the Board and you--as a Stockholder of the Fund--can help
take a major step in improving corporate governance and reducing DeIM's direct
influence on the Board by NOT electing this "interested" director. Instead, vote
for the Independent Nominees on the GOLD proxy card. Even if you have already
sent in a proxy to the Fund, you may revoke your vote and support the
Independent Nominees by signing and returning a later-dated GOLD proxy card.
City of London believes the Board's relationships with DeIM create
potential conflicts of interest when, for example, the Board evaluates the
performance of DeIM or when the Board considers steps which could be taken to
narrow the discount to NAV at which the Shares trade (please see discussion
under the heading "Providing Effective Measures to Deal With The Substantial and
Persistent Discount to NAV").
The Independent Nominees have indicated to City of London that, unlike the
current members of the Board, they will not serve on the board of directors of
any other closed-end fund currently managed by DeIM or accept fees directly from
DeIM while serving as a director of the Fund.
Improving Corporate Governance and Respecting Stockholder Rights
City of London believes that the Board should be dedicated to the highest
standards of good corporate governance and to enhancing Stockholder rights. In
the view of City of London, the Board has not met this standard and appears to
be insensitive to real Stockholder democracy. For example, when an amendment was
adopted to Maryland General Corporation Law in 1996 that permitted the Fund to
increase the percentage of Shares necessary for Stockholders to call a special
meeting, the Fund promptly seized on this opportunity to limit the Stockholders'
ability to exercise their franchise and--without Stockholder approval--amended
its bylaws to increase the required percentage from 25% to 50%. Mr. Robert J.
Callander, the Fund's Chairman and the Chairman of The Brazil Fund Inc., another
fund managed by DeIM, stated at The Brazil Fund Inc.'s 2004 annual meeting that
a similar amendment was adopted to The Brazil Fund Inc.'s bylaws so that fund
would not incur the cost of a special meeting of stockholders unless the holders
of 50% of the shares wanted such a meeting. Is the cost of a Stockholder meeting
an adequate justification for limiting the Stockholders' right to be heard? City
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(1) Each of the "independent" directors serves on the board of the following
funds managed by DeIM: The Brazil Fund, Inc., the Scudder New Asia Fund, Inc.
and the Scudder Global High Income Fund, Inc.
2
of London and the Independent Nominees do not think so, particularly when
weighed against the approximately $10 million in annual fees paid to DeIM. City
of London believes that a Board which was truly committed to good corporate
governance and Stockholder democracy would not allow this amendment to remain in
place. Each of the Independent Nominees has indicated that he intends, if
elected, to urge the other directors on the Board to repeal this amendment.
Providing Effective Measures to Deal With The Substantial and Persistent
Discount to NAV
The Shares have traded at an average discount to NAV in excess of 19% over
the past five years. When Shares trade at a significant discount for a
substantial period of time, City of London believes that the Board is obligated
to take meaningful actions to address the problem. City of London believes that
the current directors on the Board have failed the Stockholders in this regard.
While it is true that over the years the Fund has taken several different
measures purportedly designed to address the discount, City of London believes
that such measures have been ineffectual at best. For example, in the first
quarter of 2004, the Fund conducted a cash tender offer for 10% of the
outstanding Shares at a price equal to 95% of NAV. City of London does not
believe that this tender offer resulted in a meaningful reduction to the
discount because the Shares continued to trade at a substantial and persistent
discount after the consummation of the offer. Additionally, more than 61% of the
outstanding Shares were tendered into the Fund's cash tender offer. City of
London believes that the magnitude of the Stockholders' response to the cash
tender offer clearly demonstrates the Stockholders' desire an offer for a
percentage of the Shares that is significantly higher than 10%.
The Board also has approved two additional tender offers, one in the first
quarter of 2005 and one in the first quarter of 2006. Each of the proposed
tender offers would be for 10% of the outstanding Shares at a price equal to 95%
of NAV and would be made only if the Shares have traded at an average weekly
discount from NAV greater than 15% during a 13-week measuring period ending the
preceding December 31. The Fund has filed an application with the Securities and
Exchange Commission seeking approval to make the proposed offers in-kind. City
of London believes that it is unlikely the Board would have gone to the expense
of seeking regulatory approval for an in-kind tender offer if it did not believe
that such approval would be granted. The Fund has indicated that it has the
option to make such tender offers in cash if regulatory approval is not
obtained.
City of London believes that the Board's proposed tender offers, if made,
will not result in a meaningful reduction in the discount and fall far short of
meeting the desire of many Stockholders to sell their Shares for cash at or near
NAV. In addition, City of London believes that the trigger for the proposed
tender offers, a 15% discount during a 13-week period, is far too high and
suggests the Board is comfortable with any discount that is 15% or less. City of
London believes that any tender offer made by the Fund should be a cash
offer--even if regulatory approval for an in-kind offer is obtained--should be
for at least 50% of the outstanding Shares at not less than NAV (less
transactional fees and expenses) and should not be tied to a 15% trigger.
3
City of London believes that the Fund should explore a variety of
strategic alternatives designed to provide all Stockholders, regardless of size,
with regular opportunities to realize NAV for their Shares (less transactional
fees and expenses). Among the strategic alternatives that City of London
believes should be considered are: meaningful share repurchase plans, a regular
cash tender, and conversion to interval status, as well as other actions that
would increase Stockholders' ability to realize NAV for their Shares (less
transactional fees and expenses) on a regular basis. City of London recognizes
that certain of the alternatives would shrink the size of the Fund and, thereby,
reduce the approximately $10 million in management fees payable to DeIM per
year. In the view of City of London, it is imperative, therefore, that critical
decisions regarding the Fund's response to the discount be made by a truly
independent Board.
We Believe the Independent Nominees
Are Better Qualified Than the Fund's Nominees
The Independent Nominees, Julian Reid and Chris Russell, have extensive
experience in the Asian markets (including the Korean markets) and the
closed-end fund industry. In City of London's view, the Independent Nominees are
far more qualified to serve on the Board than the Fund's nominees.
Mr. Reid has more than 20 years of U.S. and other closed-end fund
experience, including serving as the head of the closed-end fund business for
Jardine Fleming Investment Management (at the time one of the leading investment
management companies in Asia). During this time, Mr. Reid spent time focusing
on, among others, the Korean stock markets. Mr. Russell has nearly 30 years of
institutional investment experience globally and in Asia on behalf of U.S. and
international institutions, including more than 10 years of experience as an
institutional fund manager responsible for investment in Asia, including Korea.
Both Mr. Reid and Mr. Russell were based in Asia for many years.
The qualifications of the Fund's nominees, in City of London's view, pale
in comparison to those of Mr. Reid and Mr. Russell. The information provided by
the Fund in its proxy materials indicates that the Fund's nominees have
experience in Europe and Central America but does not disclose any relevant
closed-end fund or Asian experience beyond their service as a director of
multiple funds managed by DeIM. In addition, as noted above, one of the Fund's
nominees is not independent because of his affiliation with DeIM and because he
is an officer of the Fund.
City of London Is Not the Only Stockholder Dissatisfied with
the Way the Fund Has Been Managed.
City of London is aware of one other matter that is scheduled to be voted
upon at the Annual Meeting. The President and Fellows of Harvard College
("Harvard"), a Stockholder unaffiliated with City of London that holds
approximately 22% of the outstanding Shares, has proposed that Stockholders vote
to terminate the investment management agreement (the "Investment Management
Agreement") between the Fund and DeIM. The Fund's proxy materials set forth
4
Harvard's proposal and statement in favor of its proposal. We urge you to review
Harvard's proposal and statement carefully. City of London agrees with Harvard's
statement concerning "the severe conflicts that exist between Fund
[Stock]holders and DeIM" and believes that the Board will not become more
attuned to good corporate governance, Stockholder democracy and narrowing the
persistent discount to NAV at which the Shares trade unless DeIM is removed as
the Fund's manager. Accordingly, City of London supports the Stockholder
proposal to terminate the Investment Management Agreement. The proposal to
terminate the Investment Management Agreement is included on the GOLD proxy
card. You may vote on this matter by using the GOLD proxy card.
Remember: You Can Vote for the Independent Nominees Only on the GOLD Proxy Card
PLEASE SIGN, DATE AND RETURN THE ENCLOSED GOLD PROXY CARD IN THE
POSTAGE-PREPAID ENVELOPE THAT HAS BEEN PROVIDED. You should not return any proxy
card sent to you by the Fund if you wish to vote FOR the election of the
Independent Nominees to the Board. If you have already returned the proxy card
sent to you by the Fund, you have the right to REVOKE that proxy by signing,
dating and mailing a later-dated GOLD proxy card in the envelope provided.
A protest vote of "Withhold Authority" on the Fund's proxy card may revoke
an earlier vote FOR the Independent Nominees on the GOLD proxy card. Please make
certain that the latest dated proxy you return is the GOLD proxy card. Only your
latest dated proxy counts.
A GOLD proxy card that is returned to us will be voted as you indicate on
it. If a GOLD proxy card is returned without a vote indicated thereon, the
Shares represented thereby will be voted FOR the election of the Independent
Nominees and FOR the termination of the Investment Management Agreement. In
addition, a GOLD proxy card will be voted in the proxy holders' discretion on
all other matters as may properly come before the Annual Meeting of which City
of London is not made aware within a reasonable amount of time prior to the
Annual Meeting.
Thank you for your cooperation in helping to cause the Fund to: be
committed to good corporate governance; and take meaningful actions designed to
narrow the discount to NAV at which the Shares trade and seek to maximize value
on behalf of all of the Stockholders.
Sincerely yours,
/s/ Barry M. Olliff
Barry M. Olliff
Director
City of London Investment Group PLC
5
IMPORTANT INFORMATION FOR STREET-NAME HOLDERS
If you hold your Shares in the name of a bank or brokerage firm, your bank
or broker must receive your specific instructions before they can vote your
Shares. Please make certain that your vote is counted for the Independent
Nominees by signing, dating and returning the GOLD proxy card in the envelope
provided.
Internet and Telephone Voting
Holders in many banks and brokerage firms will be able to vote by internet
or by toll-free telephone. Instructions for internet and telephone voting in
most cases will be included on the enclosed GOLD voting form that has been
provided by your broker or bank. We urge you to take advantage of the
opportunity to vote your GOLD proxy card today by following the instructions on
the GOLD voting form for using the internet or toll-free telephone.
If you have any questions, please contact:
Morrow & Co., Inc.
445 Park Avenue
New York, New York 10022
Call toll free: 800-607-0088
Bankers and Brokers Call Collect: 212-754-8000
6
CITY OF LONDON INVESTMENT GROUP PLC
PROXY STATEMENT
IN OPPOSITION TO THE
BOARD OF DIRECTORS OF
THE KOREA FUND, INC.
-------------------------------------
2004 ANNUAL MEETING OF STOCKHOLDERS
OF
THE KOREA FUND, INC.
-------------------------------------
PLEASE SIGN, DATE AND RETURN THE ENCLOSED GOLD PROXY CARD
This proxy statement and the enclosed GOLD proxy card are being furnished
to the stockholders (the "Stockholders") of The Korea Fund, Inc., a Maryland
corporation (the "Fund"), by City of London Investment Group PLC, a company
incorporated under the laws of England and Wales ("City of London"), on behalf
of itself, its wholly-owned subsidiary, City of London Investment Management
Company Limited, a company incorporated under the laws of England and Wales
("CLIM"), and the City of London Funds,(1) in connection with the solicitation
of proxies from the Stockholders to be used at the 2004 Annual Meeting of
Stockholders of the Fund (the "Annual Meeting"), including any adjournments or
postponements thereof and any special meeting which may be called in lieu
thereof, to vote FOR the election of each of Julian Reid and Chris Russell to
the Board of Directors of the Fund (the "Board"). Messrs. Reid and Russell have
no current or prior relationship to the Fund, its management or Deutsche
Investment Management Americas Inc. ("DeIM"), the Fund's investment manager, and
are, therefore, herein collectively referred to as the "Independent Nominees."
(2)
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(1) The term "City of London Funds" as used herein means each of: (a) The
Emerging World Fund, a Dublin, Ireland-listed investment company managed by CLIM
and organized under the laws of Ireland ("EWF"), (b) Emerging Markets Country
Fund, a private investment fund managed by CLIM and organized as a Delaware
business trust ("GEM"), (c) Investable Emerging Markets Country Fund, a private
investment fund managed by CLIM and organized as a Delaware business trust
("IEM"), (d) Emerging Free Markets Country Fund, a private investment fund
managed by CLIM and organized as a Delaware business trust ("FREE"), (e) GFM
(Institutional) Emerging Markets Country Fund, a fund managed by CLIM and
organized under the laws of the Province of Ontario ("GFM"), and (f) Global
Optimization Fondo de Inversion Internacional, a closed-end fund managed by a
company controlled by City of London, City of London Quantitative Management
Ltd., and organized under the laws of Chile ("Global").
(2) The Fund has advised City of London that it objects to City of London's use
of the term "Independent Nominees" because in the Fund's view such usage
unfairly implies that the Fund's nominees are not independent. City of London
does not believe the Fund's objection is valid and, additionally, believes the
Fund's nominees are not truly independent for the reasons set forth in this
proxy statement. In any event, the Fund's nominees clearly are not "Independent
Nominees" as such term is used herein with respect to Messrs. Reid and Russell.
City of London is not suggesting that, for purposes of the Investment Company
Act of 1940, the Fund's current directors are "interested persons" with the
exception of Vincent J. Esposito, who is an affiliate of DeIM. The Independent
Nominees were nominated by Mellon Trust of Delaware NA TTEE, Emerging Markets
Country Fund ("Mellon") at the request of GEM's investment manager, CLIM. Mellon
is the trustee of GEM and is the record holder of certain of the Shares
beneficially owned by GEM. Mellon is not a participant in this solicitation.
The Fund's principal executive office is located at 345 Park Avenue, New
York, New York 10154. This proxy statement and the enclosed GOLD proxy card are
first being furnished to the Stockholders on or about September 7, 2004.
The Fund has established a record date of July 19, 2004 for determining
Stockholders entitled to notice of and to vote at the Annual Meeting (the
"Record Date") and October 6, 2004 as the date of the Annual Meeting.
The Annual Meeting will be held at 10:45 a.m., Eastern Time, at the
offices of Deutsche Investment Management Americas Inc. 280 Park Avenue, 29th
Floor, New York, New York 10017. Each Stockholder of record at the close of
business on the Record Date will be entitled to one vote at the Annual Meeting
for each share of the Fund's common stock, $0.01 par value per share ("Share"),
held by such Stockholder on the Record Date. City of London, together with all
of the participants in this solicitation, beneficially owns an aggregate of
4,386,082 Shares, which represents approximately 9.81% of the Shares outstanding
(based on the most recent Share information publicly disclosed by the Fund).
City of London and all of the participants intend to vote all of their Shares
held on the Record Date FOR the election of the Independent Nominees to the
Board and FOR the Stockholder proposal discussed below to terminate the
investment management agreement (the "Investment Management Agreement") between
the Fund and DeIM.(3)
This solicitation is being made by City of London and not on behalf of the
Board or management of the Fund.
SUMMARY:
Election of Directors
City of London is soliciting proxies FOR the election of the Independent
Nominees to the Board because it believes that the election of the Independent
Nominees represents the best means for the Stockholders to obtain
representatives on the Board who will:
o be committed to good corporate governance; and
o take meaningful actions designed to narrow the persistent
discount to net asset value ("NAV") at which the Shares trade
and cause the Fund to seek to maximize value on behalf of all
of the Stockholders.
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(3) On the Record Date, City of London, together with all of the participants in
this solicitation, beneficially owned an aggregate of 4,250,282 Shares, which
represents approximately 9.51% of the Shares outstanding.
2
Termination of Investment Management Agreement
City of London is aware of one other matter that is scheduled to be voted
upon at the Annual Meeting. The President and Fellows of Harvard College
("Harvard"), a Stockholder unaffiliated with City of London that holds
approximately 22% of the outstanding Shares, has proposed that Stockholders vote
to terminate the Investment Management Agreement. The Fund's proxy materials set
forth Harvard's proposal and statement in favor of its proposal. We urge you to
review Harvard's proposal and statement carefully. City of London agrees with
Harvard's statement concerning "the severe conflicts that exist between Fund
[Stock]holders and DeIM" and believes that the Board will not become more
attuned to good corporate governance, Stockholder democracy and narrowing the
persistent discount to NAV at which the Shares trade unless DeIM is removed as
the Fund's manager. Accordingly, City of London supports the Stockholder
proposal to terminate the Investment Management Agreement. The proposal to
terminate the Investment Management Agreement is included on the GOLD proxy
card. You may vote on this matter by using the GOLD proxy card.
Other Matters
To City of London's knowledge, there are no other matters scheduled to be
voted upon at the Annual Meeting. In the event other proposals are brought
before the Annual Meeting of which City of London is not made aware within a
reasonable amount of time prior to the Annual Meeting, the persons named as
proxies in the enclosed GOLD proxy card will vote on such matters in their
discretion.
IMPORTANT!
Your vote is important, no matter how many or how few Shares you own. City
of London urges you to sign, date and return the enclosed GOLD proxy card today
to vote FOR the election of the Independent Nominees to the Board. Remember, you
can vote for the Independent Nominees only on the GOLD proxy card.
We urge you not to return any proxy card to the Fund. A protest vote of
"Withhold Authority" on the Fund's proxy card may revoke an earlier vote FOR the
Independent Nominees on the GOLD proxy card. Please make certain that the latest
dated proxy you return is the GOLD proxy card. Only your latest dated proxy
counts.
If you intend to vote on the Stockholder proposal to terminate the
Investment Management Agreement, please do so on the GOLD proxy card. City of
London supports the Stockholder proposal to terminate the Investment Management
Agreement.
If any of your Shares are held in the name of a brokerage firm, bank, bank
nominee or other institution on the Record Date, only it can vote such Shares
and only upon receipt of your specific instructions. Accordingly, please sign,
date and return your GOLD proxy card in the envelope provided by your brokerage
firm, bank, bank nominee or other institution.
3
If you have any questions regarding your proxy, or need assistance in
voting your Shares, please call:
Morrow & Co., Inc.
445 Park Avenue
New York, New York 10022
Call toll free: 800-607-0088
Bankers and Brokers Call Collect: 212-754-8000
A more detailed discussion of the proposals to be presented before the
Annual Meeting of which City of London is aware, and City of London's
recommendations with respect to such proposals, follows.
4
PROPOSAL 1
ELECTION OF DIRECTORS
As indicated in the Fund's proxy statement, the Board is divided into
three classes of directors and each class serves for three years with one class
being elected each year. At the Annual Meeting, the Stockholders will be asked
to elect two Class I directors to hold office until the 2007 Annual Meeting of
Stockholders (or thereafter until their respective successors are elected and
qualified). The Board has nominated Vincent J. Esposito and Susan Kaufman
Purcell for election to the Board. Mellon has nominated the Independent
Nominees, Julian Reid and Chris Russell, for election to the Board. City of
London is soliciting your proxy in support of the election of the Independent
Nominees. If you wish to vote FOR the Independent Nominees, you can only do so
by completing and returning a GOLD proxy card.
Why You Should Vote For the Independent Nominees
City of London believes that the election of the Independent Nominees
represents the best means for Stockholders to obtain representatives on the
Board who will:
o be committed to good corporate governance; and
o take meaningful actions designed to narrow the persistent
discount to NAV at which the Shares trade and cause the Fund
to seek to maximize value on behalf of all of the Fund's
Stockholders.
Neither of the Independent Nominees has any relationship with DeIM nor
does either of such nominees have a relationship with City of London which, in
any way, could compromise his independence. In contrast, City of London believes
that the Fund's current directors have far too many ties to DeIM to be truly
independent or objective and that, perhaps as a result, the Board consistently
has failed to adequately address Stockholders' needs.
According to the Fund's proxy statement, six of the seven directors on the
Board are "independent" notwithstanding the fact that each "independent"
director on the Board (a) serves on the board of directors of, and receives fees
from, three other closed-end funds managed by DeIM,(4) and (b) has received fees
directly from DeIM in connection with his/her service as a director of such
closed-end funds.
The seventh director, who is a managing director of an affiliate of DeIM
and is one of the Board's nominees at the Annual Meeting, is an "interested
person" (as defined in the Investment Company Act of 1940, as amended) according
to the Fund's proxy statement because of his affiliation with DeIM and because
he is an officer of the Fund. City of London believes that individuals who are
"interested persons" by virtue of their relationship with the investment manager
should not serve on the Board and you--as a Stockholder of the Fund--can help
take a major step in improving corporate governance and reducing DeIM's direct
influence on the Board by NOT electing this "interested" director. Instead, vote
FOR the Independent Nominees on the GOLD proxy card. Even if you have already
sent in a proxy to the Fund, you may revoke your vote and support the
Independent Nominees by signing and returning a later-dated GOLD proxy card.
----------
(4) Each of the "independent" directors serves on the board of the following
funds managed by DeIM: The Brazil Fund, Inc., the Scudder New Asia Fund, Inc.
and the Scudder Global High Income Fund, Inc.
5
City of London believes the Board's relationships with DeIM create
potential conflicts of interest when, for example, the Board evaluates the
performance of DeIM or when the Board considers steps which could be taken to
narrow the discount to NAV at which the Shares trade (please see discussion
under the heading "Providing Effective Measures to Deal With The Substantial and
Persistent Discount to NAV").(5)
The Independent Nominees have indicated to City of London that, unlike the
current members of the Board, they will not serve on the board of directors of
any other closed-end fund currently managed by DeIM or accept fees directly from
DeIM while serving as a director of the Fund.
Improving Corporate Governance and Respecting Stockholder Rights
City of London believes that the Board should be dedicated to the highest
standards of good corporate governance and to enhancing Stockholder rights. In
the view of City of London, the Board has not met this standard and appears to
be insensitive to real Stockholder democracy. For example, when an amendment was
adopted to Maryland General Corporation Law in 1996 that permitted the Fund to
increase the percentage of Shares necessary for Stockholders to call a special
meeting, the Fund promptly seized on this opportunity to limit the Stockholders'
ability to exercise their franchise and--without Stockholder approval--amended
its bylaws to increase the required percentage from 25% to 50%. Mr. Robert J.
Callander, the Fund's Chairman and the Chairman of The Brazil Fund Inc., another
fund managed by DeIM, stated at The Brazil Fund Inc.'s 2004 annual meeting that
a similar amendment was adopted to The Brazil Fund Inc.'s bylaws so that fund
would not incur the cost of a special meeting of stockholders unless the holders
of 50% of the shares wanted such a meeting. Is the cost of a Stockholder meeting
an adequate justification for limiting the Stockholders' right to be heard? City
of London and the Independent Nominees do not think so, particularly when
weighed against the approximately $10 million in annual fees paid to DeIM. City
of London believes that a Board which was truly committed to good corporate
governance and Stockholder democracy would not allow this amendment to remain in
place. Each of the Independent Nominees has indicated that he intends, if
elected, to urge the other directors on the Board to repeal this amendment.
Providing Effective Measures to Deal With The Substantial and Persistent
Discount to NAV
The Shares have traded at an average discount to NAV in excess of 19% over
the past five years. When Shares trade at a significant discount for a
substantial period of time, City of London believes that the Board is obligated
to take meaningful actions to address the problem. City of London believes that
----------
(5) Mr. Reid is not affiliated with the investment manager of any closed-end
fund on whose board he serves and he has advised City of London that he does not
intend to serve in the future on the board of any fund if he is affiliated with
the fund's investment manager. Mr. Reid did serve, more than six years ago, on
the board of directors of two closed-end funds at a time when he was director of
the investment manager of such funds. Mr. Reid is an unpaid officer of one fund
on whose board he serves. He receives no compensation from either the fund or
the fund's investment manager for serving as an officer of the fund and he has
no affiliation with the fund's investment manager.
6
the current directors on the Board have failed the Stockholders in this
regard. While it is true that over the years the Fund has taken several
different measures purportedly designed to address the discount, City of London
believes that such measures have been ineffectual at best. For example, in the
first quarter of 2004, the Fund conducted a cash tender offer for 10% of the
outstanding Shares at a price equal to 95% of NAV. City of London does not
believe that this tender offer resulted in a meaningful reduction to the
discount because the Shares continued to trade at a substantial and persistent
discount after the consummation of the offer. Additionally, more than 61% of the
outstanding Shares were tendered into the Fund's cash tender offer. City of
London believes that the magnitude of the Stockholders' response to the cash
tender offer clearly demonstrates the Stockholders' desire an offer for a
percentage of the Shares that is significantly higher than 10%.
The Board also has approved two additional tender offers, one in the first
quarter of 2005 and one in the first quarter of 2006. Each of the proposed
tender offers would be for 10% of the outstanding Shares at a price equal to 95%
of NAV and would be made only if the Shares have traded at an average weekly
discount from NAV greater than 15% during a 13-week measuring period ending the
preceding December 31. The Fund has filed an application with the Securities and
Exchange Commission seeking approval to make the proposed offers in-kind. City
of London believes that it is unlikely the Board would have gone to the expense
of seeking regulatory approval for an in-kind tender offer if it did not believe
that such approval would be granted. The Fund has indicated that it has the
option to make such tender offers in cash if regulatory approval is not
obtained.
City of London believes that the Board's proposed tender offers, if made,
will not result in a meaningful reduction in the discount and fall far short of
meeting the desire of many Stockholders to sell their Shares for cash at or near
NAV. In addition, City of London believes that the trigger for the proposed
tender offers, a 15% discount during a 13-week period, is far too high and
suggests the Board is comfortable with any discount that is 15% or less. City of
London believes that any tender offer made by the Fund should be a cash
offer--even if regulatory approval for an in-kind offer is obtained--should be
for at least 50% or more of the outstanding Shares at not less than NAV (less
transactional fees and expenses) and should not be tied to a 15% trigger. The
Fund asserts that the Fund and its Stockholders may suffer certain material
adverse consequences if the Fund makes a large self-tender. City of London
believes the adverse consequences described by the Fund in its proxy materials
are speculative and in any event might not be material. Moreover, City of London
believes that the benefits to the Stockholders of a tender offer far outweigh
the potential adverse consequences cited by the Fund.
City of London believes that the Fund should explore a variety of
strategic alternatives designed to provide all Stockholders, regardless of size,
with regular opportunities to realize NAV for their Shares (less transactional
fees and expenses). Among the strategic alternatives that City of London
believes should be considered are: meaningful share repurchase plans, a regular
cash tender, and conversion to interval status, as well as other actions that
would increase Stockholders' ability to realize NAV for their Shares (less
transactional fees and expenses) on a regular basis. City of London recognizes
that certain of the alternatives would shrink the size of the Fund and, thereby,
reduce the approximately $10 million in management fees payable to DeIM per
year. In the view of City of London, it is imperative, therefore, that critical
decisions regarding the Fund's response to the discount be made by a truly
independent Board.
7
City of London's Interests Are Aligned With Yours.
City of London has been a Stockholder for more than three years and fully
expects to remain a Stockholder in the Fund. As of the date of this proxy
statement, City of London beneficially owns approximately 9.81% of the
outstanding Shares. As a group, the Fund's current officers and directors own
approximately 0.02% of the outstanding Shares. City of London intends to vote
FOR the election of each of the Independent Nominees to the Board.
The Fund asserts in its proxy materials that City of London "appears to be
more interested in arbitrage opportunities than achieving long term capital
appreciation." Nothing could be further from the truth. City of London has been
a long term Stockholder of the Fund and intends to remain a Stockholder of the
Fund. Given our substantial interest, City of London wants to ensure that the
Fund is managed for the benefit of all Stockholders and not in the best interest
of DeIM. Don't be fooled by the Board's rhetoric or its attempts to deflect
attention from the conflicts of interest inherent in its relationship with DeIM.
The Independent Nominees
The Independent Nominees, Julian Reid and Chris Russell, have extensive
experience in the Asian markets (including the Korean markets) and the
closed-end fund industry. In City of London's view, the Independent Nominees are
far more qualified to serve on the Board than the Fund's nominees.
Mr. Reid has more than 20 years of U.S. and other closed-end fund
experience, including serving as the head of the closed-end fund business for
Jardine Fleming Investment Management (at the time one of the leading investment
management companies in Asia). During this time, Mr. Reid spent time focusing
on, among others, the Korean stock markets. Mr. Russell has nearly 30 years of
institutional investment experience globally and in Asia on behalf of U.S. and
international institutions, including more than 10 years of experience as an
institutional fund manager responsible for investment in Asia, including Korea.
Both Mr. Reid and Mr. Russell were based in Asia for many years.
The qualifications of the Fund's nominees, in City of London's view, pale
in comparison to those of Mr. Reid and Mr. Russell. The information provided by
the Fund in its proxy materials indicates that the Fund's nominees have
experience in Europe and Central America but does not disclose any relevant
closed-end fund or Asian experience beyond their service as a director of
multiple funds managed by DeIM. In addition, as noted above, one of the Fund's
nominees is not independent because of his affiliation with DeIM and because he
is an officer of the Fund
8
The following table sets forth certain information regarding the
Independent Nominees. This information has been furnished to City of London by
the Independent Nominees.
Name, (Age) and Principal Principal Occupation and Business Directorships in Publicly Held
Business Address Experience During the Last Five Years; Companies
Julian Reid (60) Chief Executive Officer of 3a Asset Chairman of the Board of Directors
1 Queen Anne's Gate, Management Limited (since 1998); President of the Saffron Fund, Inc.(since
London SW 1 H 9 BT of the Saffron Fund, Inc. (1994-1998, since 1998); and Director of JF China
2004); and Chairman of Morgan's Walk Region Fund, Inc. (since 1997).
Properties Ltd. (since 2002).
Chris Russell (55) Consultant of Gavekal Research (since None.
39 De Vere Gardens, 2001); and Director of each of: Candover
London W8 5AW plc (since 2004); LIM Japan Fund (since
2002); Enhanced Index Funds (since 2002);
Investec High Income Trust (since 2001);
and Gartmore Investment Management plc
(1997-2001).
The Independent Nominees (a) are completely independent from City of
London, (b) will not receive any compensation from City of London for their
services as a director of the Fund, (c) do not have an equity interest in City
of London, and (d) have been nominated to serve the interests of all of the
Stockholders (not just the interests of City of London).
Each of the Independent Nominees has executed a written consent agreeing
to be a nominee for election to the Board and to serve as a director if so
elected. None of the Independent Nominees has been convicted in any criminal
proceedings (excluding traffic violations or similar misdemeanors) over the past
ten years. Additional information about the Independent Nominees and the other
participants in this solicitation is set forth in Schedule I hereto and is
incorporated herein by reference.
None of the Independent Nominees beneficially owns any Shares of the Fund
and none of the Independent Nominees is an "interested person" of the Fund
within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as
amended.
Neither City of London nor any of the Independent Nominees is adverse to
the Fund or any of its subsidiaries in any material pending legal proceedings.
9
The following table sets forth the dollar range of equity securities
beneficially owned by each Independent Nominee in the Fund and in all registered
investment companies to be overseen by the Independent Nominees within the
Fund's family of investment companies as of August 10, 2004:
-----------------------------------------------------------------------------------------------------------------
Aggregate dollar range of equity securities in all
registered investment companies to be overseen by the
Dollar range of equity Independent Nominees within the Fund's family of investment
Name securities in the Fund companies.
-----------------------------------------------------------------------------------------------------------------
Julian Reid None None
-----------------------------------------------------------------------------------------------------------------
Chris Russell None None
-----------------------------------------------------------------------------------------------------------------
City of London does not expect that the Independent Nominees will be
unable to stand for election but, in the event that any such person is unable to
do so or for good cause will not serve, and City of London does not learn of
this circumstance a reasonable time before the Annual Meeting, the Shares
represented by the enclosed GOLD proxy card will be voted for substitute
Independent Nominees (who would be named after the solicitation of proxies). We
have been informed by the Fund that it may not accept substitute Independent
Nominees under the circumstances described above. City of London believes that
this another example of anti-Stockholder bias by the Board.
The Independent Nominees Will Constitute Only a Minority of the Directors on the
Board.
Even if the Independent Nominees are elected to the Board, they will
constitute only two of the seven members of the Board. Accordingly, the
Independent Nominees would not be in a position, without the support of at least
two or more of the incumbent members of the Board, to cause any action to be
taken. There can be no assurance that the incumbent members of the Board will
vote with the Independent Nominees on matters that the Independent Nominees
propose. City of London believes, however, that the election of the Independent
Nominees will send a strong message to the other members of the Board that the
Stockholders want representatives on the Board who will:
o be committed to good corporate governance; and
o take meaningful actions designed to narrow the persistent
discount to NAV at which the Shares trade and cause the Fund
to seek to maximize value on behalf of all of the Fund's
Stockholders.
Other Information
The Fund's proxy statement contains information regarding: (a) ownership
of Shares by directors and executive officers of the Fund and by other persons
who own more than 5% of the outstanding Shares, (b) meetings of the Board and
certain committees thereof, (c) background of the Fund's directors (including
the nominees for election to the Board) and executive officers, (d) compensation
paid and payable to the Fund's directors and executive officers, and (e)
committees of the Board and their responsibilities. We urge you to review the
Fund's proxy materials concerning these matters.
10
PROPOSAL 2
TERMINATION OF THE INVESTMENT MANAGEMENT AGREEMENT
As indicated in the Fund's proxy statement, Harvard, a Stockholder
unaffiliated with City of London that holds approximately 22% of the outstanding
Shares, has submitted a proposal to terminate the Investment Management
Agreement, as currently in effect, immediately. The Fund's proxy materials set
forth Harvard's proposal and statement in favor of its proposal. We urge you to
review Harvard's proposal and statement carefully. City of London agrees with
Harvard's statement concerning "the severe conflicts that exist between Fund
[Stock]holders and DeIM" and believes that the Board will not become more
attuned to good corporate governance, Stockholder democracy and narrowing the
persistent discount to NAV at which the Shares trade unless DeIM is removed as
the Fund's manager. Accordingly, City of London supports the Stockholder
proposal to terminate the Investment Management Agreement. The proposal to
terminate the Investment Management Agreement is included on the GOLD proxy
card. You may vote on this matter by using the GOLD proxy card.
Effect of Termination
Under the Investment Company Act of 1940, as amended, in the event that
the Investment Management Agreement is terminated and no successor is
immediately selected, the Board may select an interim investment manager for a
period not to exceed 150 days following the date on which the Investment
Management Agreement was terminated. A new investment management agreement would
require votes of the Board and the Stockholders of the Fund.
Information Regarding Investment Management Agreement
Because this proposal relates to the termination of the Investment
Management Agreement, included in Schedule III to this proxy statement is
information that Stockholders may wish to consider concerning the Investment
Management Agreement. As City of London has no independent knowledge regarding
this information, its presentation is based entirely on disclosures contained in
the Fund's proxy statement.
CITY OF LONDON'S RECOMMENDATIONS
City of London is soliciting proxies FOR the election of the Independent
Nominees and supports the Stockholder proposal to terminate the Investment
Management Agreement. To City of London's knowledge, there are no other matters
scheduled to be voted upon at the Annual Meeting. In the event other proposals
are brought before the Annual Meeting of which City of London is not made aware
within a reasonable amount of time prior to the Annual Meeting, the persons
named as proxies in the enclosed GOLD proxy card will vote on such matters in
their discretion.
YOU ARE URGED TO VOTE FOR THE ELECTION OF THE INDEPENDENT NOMINEES TO THE
BOARD ON THE ENCLOSED GOLD PROXY CARD. REMEMBER, YOU CAN VOTE FOR THE
INDEPENDENT NOMINEES ONLY ON THE GOLD PROXY CARD.
11
WE URGE YOU NOT TO RETURN ANY PROXY CARD TO THE FUND. A PROTEST VOTE OF
"WITHHOLD AUTHORITY" ON THE FUND'S PROXY CARD MAY REVOKE AN EARLIER VOTE FOR THE
INDEPENDENT NOMINEES ON THE GOLD PROXY CARD. PLEASE MAKE CERTAIN THAT THE LATEST
DATED PROXY YOU RETURN IS THE GOLD PROXY CARD. ONLY YOUR LATEST DATED PROXY
COUNTS
IF YOU INTEND TO VOTE ON THE STOCKHOLDER PROPOSAL TO TERMINATE THE
INVESTMENT MANAGEMENT AGREEMENT, PLEASE DO SO ON THE GOLD PROXY CARD. CITY OF
LONDON SUPPORTS THE STOCKHOLDER PROPOSAL TO TERMINATE THE INVESTMENT MANAGEMENT
AGREEMENT.
VOTING AND PROXY PROCEDURES
Only Stockholders of record on the Record Date will be entitled to notice
of and to vote at the Annual Meeting. Based on publicly available information,
City of London believes that the only outstanding class of securities of the
Fund entitled to vote at the Annual Meeting is the Shares. Each Share is
entitled to one vote on each matter as may properly be brought before the Annual
Meeting. According to the Fund's proxy statement, there were 44,701,497 Shares
issued and outstanding as of the Record Date.
The presence at the Annual Meeting, in person or by proxy, of Stockholders
holding a majority of the votes entitled to be cast will constitute a quorum for
the transaction of business. If a quorum is present at the Annual Meeting, the
election of each nominee requires the affirmative vote of a majority of the
Shares present in person or by proxy and entitled to vote at the Annual Meeting.
Approval of the proposal to terminate the Investment Management Agreement will
require the affirmative vote of a "majority of the outstanding voting
securities" of the Fund, which means the affirmative vote of the lesser of (a)
67% or more of the Shares entitled to vote thereon present or represented by
proxy at the Annual Meeting, if the holders of more than 50% of the outstanding
Shares entitled to vote thereon are present or represented by proxy, or (b) more
than 50% of the total outstanding Shares entitled to vote thereon. Abstentions
will be counted as Shares present at the Annual Meeting for quorum purposes but
not voting and will have the same effect as votes cast against the nominees and
the proposal to terminate the Investment Management Agreement.
Shares represented by properly executed GOLD proxy cards will be voted at
the Annual Meeting as marked and, in the absence of specific instructions, will
be voted:
o FOR the election of the Independent Nominees to the Board;
o FOR the termination of the Investment Management Agreement;
and
o in the discretion of the persons named as proxies, on all
other matters as may properly come before the Annual Meeting
of which City of London is not made aware within a reasonable
amount of time prior to the Annual Meeting.
12
City of London recommends that Stockholders vote FOR the election of the
Independent Nominees and supports the Stockholder proposal to terminate the
Investment Management Agreement.
Stockholders may revoke their proxies at any time prior to its exercise by
attending the Annual Meeting and voting in person (although attendance at the
Annual Meeting will not in and of itself constitute revocation of a proxy) or by
delivering a written notice of revocation. The delivery of a subsequently dated
proxy that is properly completed will constitute a revocation of any earlier
proxy. The revocation may be delivered either to City of London, in care of
Barry M. Olliff, at 1125 Airport Road, Coatesville, PA 19320 or to the Fund at
345 Park Avenue, New York, New York 10154 or any other address provided by the
Fund. Although a revocation is effective if delivered to the Fund, City of
London requests that either the original or photostatic copies of all
revocations be mailed to City of London, in care of Barry Olliff, at the address
set forth above so that City of London will be aware of all revocations.
CITY OF LONDON RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
INDEPENDENT NOMINEES TO THE BOARD ON THE ENCLOSED GOLD PROXY CARD.
CITY OF LONDON SUPPORTS THE STOCKHOLDER PROPOSAL TO TERMINATE THE
INVESTMENT MANAGEMENT AGREEMENT AND URGES YOU TO VOTE FOR THIS PROPOSAL ON THE
GOLD PROXY CARD.
IF YOU WISH TO VOTE, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED
GOLD PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. A GOLD PROXY CARD THAT IS
RETURNED TO CITY OF LONDON WILL BE VOTED AS THE STOCKHOLDER INDICATES THEREON.
IF A GOLD PROXY CARD IS RETURNED WITHOUT A VOTE INDICATED THEREON, IT WILL BE
VOTED FOR THE ELECTION OF THE INDEPENDENT NOMINEES TO THE BOARD AND FOR THE
TERMINATION OF THE INVESTMENT MANAGEMENT AGREEMENT.
SOLICITATION OF PROXIES
City of London is making the solicitation of proxies pursuant to this
proxy statement. Proxies may be solicited by mail, facsimile, telephone,
telegraph, internet, e-mail, in person and by advertisements. It is anticipated
that City of London will employ approximately three persons, each of whom will
be a director, officer and/or employee of City of London and none of whom will
receive additional compensation for such solicitation, to solicit Stockholders
for the Annual Meeting. It is anticipated that Messrs. Reid and Russell will
solicit Stockholders. Messrs. Reid and Russell will not receive compensation
from City of London in connection with their solicitation.
City of London has retained Morrow & Co., Inc. for solicitation and
advisory services in connection with this solicitation, for which Morrow & Co.,
Inc. will receive a fee not to exceed $45,000, together with reimbursement for
its reasonable out-of-pocket expenses, and will be indemnified against certain
liabilities and expenses, including certain liabilities under the federal
securities laws. Morrow & Co., Inc. will solicit proxies from individuals,
13
brokers, banks, bank nominees and other institutional holders. City of London
has requested banks, brokerage houses and other custodians, nominees and
fiduciaries to forward all solicitation materials to the beneficial owners of
the Shares they hold of record. City of London will reimburse these record
holders for their reasonable out-of-pocket expenses in so doing. It is
anticipated that Morrow & Co., Inc. will employ approximately 25 persons to
solicit Stockholders for the Annual Meeting.
City of London does not intend to seek reimbursement of the costs of this
solicitation from the Fund. Costs of this solicitation of proxies are currently
estimated to be approximately $300,000. City of London estimates that, through
the date hereof, its expenses in connection with this solicitation are
approximately $150,000.
14
OTHER INFORMATION
According to the Fund's proxy statement, if a Stockholder intends to
present a proposal at the 2005 Annual Meeting of Stockholders of the Fund and
desires to have the proposal included in the Fund's Proxy Statement and form of
proxy for that meeting, the Stockholder must deliver the proposal to John
Millette, Secretary of the Fund, c/o Deutsche Investment Management Americas
Inc., at 345 Park Avenue, New York, New York 10154 by April 22, 2005 for
consideration by the Fund.
In addition, according to the Fund's proxy statement, any Stockholder
wishing to nominate candidates for election to the Board or present a proposal
at the 2005 Annual Meeting of Stockholders of the Fund, which is not to be
included in the Fund's proxy materials, must comply with the Fund's bylaws,
which, among other things, require that (a) such Stockholder give timely notice
of such nomination and/or proposal in writing to the Secretary of the Fund, (b)
such Stockholder be a Stockholder of record, and (c) the Stockholder's notice
contains the information required in the Fund's bylaws regarding nominations
and/or proposals. According to the Fund's proxy statement, any such notice, to
be timely, must be delivered to or mailed by certified mail, return receipt
requested, and received at the principal executive offices of the Fund not later
than 90 days nor more than 120 days prior to the date of the meeting; provided,
however, that if less than 100 days' notice or prior public disclosure is given
or made to Stockholders, any such notice by a Stockholder to be timely must be
so received not later than the close of business on the 10th day following the
earlier of the day on which such notice of the date of the annual or special
meeting was given or such public disclosure was made.
CERTAIN INFORMATION ABOUT THE FUND
The Korea Fund, Inc. is a Maryland corporation with its principal
executive office located at 345 Park Avenue, New York, New York 10154. The Fund
is subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith is required to file reports, proxy
statements and other information with the Commission. Reports, registration
statements, proxy statements and other information filed by the Fund with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W. Room
1024, Washington, DC 20549. Documents filed electronically by the Fund are also
available at the SEC's Web site (http://www.sec.gov).
In addition to the information contained in the Fund's proxy statement as
discussed under the caption "Election of Directors" and "Stockholder Proposal",
the Fund's proxy statement contains information regarding:
o number of Shares outstanding as of the record date;
o establishment of a quorum;
o vote required for approval of each of the proposals;
o treatment of abstentions and "broker non-votes;"
15
o admission requirements for the Annual Meeting;
o identity of the Fund's investment advisers, managers, distributors and/or
administrators;
o revocability of proxies; and
o requirements regarding the submission of Stockholder proposals to be
considered for inclusion in the Fund's proxy statement for the 2005 Annual
Meeting of Stockholders.
City of London assumes no responsibility for the accuracy or completeness
of any such information.
OTHER MATTERS AND ADDITIONAL INFORMATION
City of London is unaware of any other matters to be considered at the
Annual Meeting. Should other proposals be brought before the Annual Meeting of
which City of London is not made aware within a reasonable amount of time prior
to the Annual Meeting, the persons named as proxies on the enclosed GOLD proxy
card will vote on such matters in their discretion.
September 2, 2004 CITY OF LONDON INVESTMENT GROUP PLC
(on behalf of itself and as attorney-in-fact
for the participants in this solicitation)
By: /s/ Barry Olliff
----------------------------------------
Barry Olliff, Director
16
SCHEDULE I
INFORMATION ABOUT PARTICIPANTS
City of London is soliciting proxies on behalf of itself, CLIM and the
City of London Funds. By virtue of their roles as the Independent Nominees,
Messrs. Reid and Russell may be deemed participants in this solicitation.
Similar information for the Independent Nominees is located under the caption
"The Independent Nominees" of this proxy statement, which information is
incorporated by reference into this Schedule I.
City of London
The principal business of City of London is serving as the parent holding
company for the City of London group of companies, including CLIM. The business
address of City of London is 10 Eastcheap, London EC3M ILX, England. As of the
date of the mailing of this proxy statement, City of London, through its control
of CLIM and City of London Quantitative Management Ltd., is the beneficial owner
of 4,386,082 Shares (representing 132,036 Shares owned directly by EWF,
1,157,847 Shares owned directly by GEM, 1,142,436 Shares owned directly by IEM,
328,994 Shares owned directly by FREE, 113,436 Shares owned directly by GFM,
1,483,122 Shares owned directly by the four segregated accounts to which CLIM
provides investment advisory services (the "Accounts"), and 28,020 Shares owned
directly by Global).
CLIM
CLIM is an emerging markets fund manager which specializes in investing in
closed-end investment companies and is a registered investment adviser under
Section 203 of the Investment Advisers Act of 1940. CLIM is principally engaged
in the business of providing investment advisory services to segregated accounts
and various investment funds, including EWF, GEM, IEM, FREE and GFM. The
business address of CLIM is 10 Eastcheap, London EC3M ILX, England. As of the
date of the mailing of this proxy statement, CLIM, through EWF, GEM, IEM, FREE,
GFM and the Accounts, is the beneficial owner of 4,358,062 Shares (representing
132,036 Shares owned directly by EWF, 1,157,847 Shares owned directly by GEM,
1,142,627 Shares owned directly by IEM, 328,994 Shares owned directly by FREE,
113,436 Shares owned directly by GFM, and 1,483,122 Shares owned directly by the
Accounts).
EWF
EWF is a Dublin, Ireland-listed investment company organized under the
laws of Ireland. The business address of EWF is IFSC House, International
Financial Services Centre, Dublin 1, Ireland. As of the date of the mailing of
this proxy statement, EWF owns directly and beneficially 132,036 Shares.
GEM
GEM is a private investment fund organized as a Delaware business trust.
The business address of GEM is 10 Eastcheap, London EC3M ILX, England. As of the
date of the mailing of this proxy statement, GEM owns directly and beneficially
1,157,847 Shares.
IEM
IEM is a private investment fund organized as a Delaware business trust.
The business address of IEM is 10 Eastcheap, London EC3M ILX, England. As of the
date of the mailing of this proxy statement, IEM owns directly and beneficially
1,142,627 Shares.
FREE
FREE is a private investment fund organized as a Delaware business trust.
The business address of FREE is 10 Eastcheap, London EC3M ILX, England. As of
the date of the mailing of this proxy statement, FREE owns directly and
beneficially 328,994 Shares.
GFM
GFM is a fund organized under the laws of the Province of Ontario. The
business address of GFM is 20 Queen Street, West Suite 3206, Toronto, Ontario,
MSH 3R3, Canada. As of the date of the mailing of this proxy statement, GFM owns
directly and beneficially 113,436 Shares.
Global
Global is a closed-end fund organized under the laws of Chile. The
business address of Global is 510 Thornall Street, Suite 220, Edison, NJ 08837,
United States. As of the date of the mailing of this proxy statement, Global
owns directly and beneficially 28,020 Shares.
Attached hereto is Schedule II which sets forth information concerning
purchases and sales of Shares by the participants in this solicitation during
the last two years.
Neither the soliciting participants nor any associate of the soliciting
participants have any arrangement or understanding with any person with respect
to any future employment by the Fund or its affiliates or with respect to any
future transactions to which the Fund or any of its affiliates will or may be a
party.
During the past five years, none of the participants in this solicitation
has been convicted in a criminal proceeding (excluding traffic violations and
similar misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and, as a result of such
proceeding, was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, Federal
or state securities laws or finding any violation with respect to such laws.
None of the participants in this solicitation is, or was within the past
year, a party to any contract, arrangement or understanding with any person with
respect to any securities of the Fund, including, but not limited to, joint
ventures, loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies.
SCHEDULE II
TRANSACTIONS IN THE SECURITIES OF THE FUND
Except as disclosed in this proxy statement, none of the participants in
this solicitation has, or had, any interest, direct or indirect, by security
holdings or otherwise, in the Fund. The following table sets forth certain
information with respect to purchases and sales of Shares by the participants in
this solicitation within the past two years.
The following open market purchases and sales of Shares have been made by
EWF:
Date of Purchase Number of Shares Purchased Price Paid/Share
08/11/2004 11,250 $17.6961
08/04/2004 1,000 $17.0100
03/22/2004 4,560 $19.9000
11/13/2003 17,500 $17.6600
09/22/2003 3,130 $15.9210
09/05/2003 3,000 $16.8000
09/04/2003 10,000 $16.9100
04/24/2003 15,000 $12.2959
04/15/2003 3,600 $12.9000
04/14/2003 9,700 $12.3968
02/14/2003 3,700 $12.3800
02/12/2003 14,000 $12.6300
02/07/2003 5,000 $12.7000
02/06/2003 7,600 $12.8768
02/05/2003 800 $13.1199
01/24/2003 5,000 $13.2500
01/15/2003 5,000 $13.9600
01/14/2003 6,580 $14.0037
10/11/2002 12,000 $12.5998
10/09/2002 2,800 $12.8400
10/08/2002 5,200 $13.0292
09/09/2002 7,500 $15.0000
08/02/2002 2,500 $15.4400
Date of Sale Number of Shares Sold Price Received/Share
05/27/2004 4,100 $19.4200
02/27/2004 164 $21.7875
02/24/2004 22,540 $21.7875
02/04/2004 2,580 $19.5800
02/04/2004 15,000 $19.5800
02/04/2004 17,420 $19.5800
01/30/2004 5,000 $19.9500
01/29/2004 7,900 $19.8791
01/28/2004 20,000 $20.1569
01/22/2004 2,880 $20.0000
01/21/2004 6,800 $20.0387
01/21/2004 15,400 $20.0387
08/22/2003 7,400 $17.2100
08/22/2003 8,000 $17.2100
08/22/2003 9,600 $17.2100
06/06/2003 14,000 $14.7163
06/05/2003 15,000 $14.6503
01/09/2003 8,600 $13.9737
11/15/2002 1,000 $14.7508
11/15/2002 20,000 $14.7508
The following open market purchases and sales of Shares have been made by
GEM:
Date of Purchase Number of Shares Purchased Price Paid/Share
07/27/2004 5,400 $17.1732
07/06/2004 25,000 $18.0862
05/07/2004 12,100 $18.5913
05/06/2004 10,000 $19.1441
05/03/2004 900 $19.6000
04/30/2004 15,200 $19.6027
04/29/2004 73,900 $19.9555
04/19/2004 22,400 $21.2413
04/16/2004 7,000 $21.0803
04/15/2004 40,615 $21.6300
04/14/2004 9,300 $21.4968
02/09/2004 1,200 $20.6200
11/13/2003 43,072 $17.6300
11/11/2003 26,400 $16.9050
11/10/2003 2,000 $17.1500
11/03/2003 7,600 $17.3325
09/24/2003 17,500 $15.9250
09/23/2003 15,000 $16.1093
09/22/2003 14,220 $15.9210
09/18/2003 4,000 $16.6000
09/17/2003 10,000 $16.8000
09/16/2003 4,800 $16.8109
09/05/2003 9,000 $16.8000
09/04/2003 30,000 $16.9100
08/06/2003 20,000 $15.4000
08/05/2003 26,800 $15.6933
08/04/2003 41,500 $15.7183
08/01/2003 11,400 $15.9000
07/17/2003 8,975 $15.5488
07/16/2003 7,750 $15.7958
07/14/2003 5,000 $16.1861
04/25/2003 1,000 $11.7500
04/24/2003 10,000 $12.2959
04/10/2003 17,500 $11.8000
02/18/2003 75,000 $13.0442
02/14/2003 3,700 $12.3800
02/13/2003 46,400 $12.4040
02/12/2003 17,600 $12.6287
02/12/2003 43,000 $12.6300
01/29/2003 900 $12.9800
01/28/2003 3,800 $13.0563
01/24/2003 5,000 $13.2500
01/15/2003 10,000 $13.9600
01/14/2003 13,160 $14.0037
10/11/2002 62,000 $12.5998
10/02/2002 20,000 $13.5378
09/23/2002 10,000 $13.6550
08/29/2002 10,000 $15.4150
08/28/2002 10,000 $15.6250
08/21/2002 2,200 $16.2000
08/13/2002 7,500 $15.3067
08/05/2002 20,000 $14.6750
08/02/2002 27,500 $15.4400
Date of Sale Number of Shares Sold Price Received/Share
02/27/2004 1,287 $21.7875
02/24/2004 176,813 $21.7875
02/02/2004 382,977 $20.0750
08/22/2003 25,000 $17.2100
08/21/2003 5,600 $17.1600
08/20/2003 2,000 $16.6500
06/12/2003 7,600 $14.9900
06/11/2003 20,000 $14.8405
06/10/2003 15,000 $14.7359
06/06/2003 56,200 $14.7163
06/05/2003 7,500 $14.6503
11/22/2002 7,500 $15.7500
11/06/2002 15,200 $14.6937
The following open market purchases and sales of Shares have been made by
IEM:
Date of Purchase Number of Shares Purchased Price Paid/Share
08/11/2004 7,500 $17.6961
08/05/2004 15,000 $17.3068
08/04/2004 3,500 $17.0100
07/26/2004 10,900 $17.1474
04/15/2004 7,385 $21.6300
12/15/2003 25,000 $17.5600
12/10/2003 19,000 $16.9103
11/17/2003 5,100 $17.0748
11/13/2003 33,500 $17.6300
10/22/2003 8,600 $16.7800
09/22/2003 5,500 $15.9210
09/18/2003 4,000 $16.6000
09/16/2003 16,000 $16.8109
09/05/2003 7,000 $16.8000
09/04/2003 10,000 $16.9100
08/14/2003 3,000 $15.9000
07/29/2003 10,000 $15.8500
07/17/2003 22,437 $15.5488
07/16/2003 7,750 $15.7958
07/14/2003 5,000 $16.1861
04/10/2003 14,000 $11.8000
04/04/2003 34,200 $11.8638
02/13/2003 30,000 $12.4040
02/12/2003 17,600 $12.6287
02/12/2003 43,000 $12.6300
02/06/2003 7,700 $12.8768
02/05/2003 7,100 $13.1199
02/03/2003 25,000 $13.3000
01/31/2003 25,500 $13.2176
01/15/2003 10,000 $13.9600
01/14/2003 13,160 $14.0037
10/11/2002 52,000 $12.5998
10/02/2002 22,650 $13.5378
Date of Sale Number of Shares Sold Price Received/Share
02/27/2004 1,510 $21.7875
02/24/2004 207,472 $21.7875
01/26/2004 10,300 $20.2506
01/23/2004 22,200 $20.0343
01/22/2004 6,720 $20.0000
01/21/2004 51,800 $20.0387
01/12/2004 10,100 $19.9057
06/11/2003 20,000 $14.8405
06/10/2003 25,000 $14.7359
06/06/2003 56,200 $14.7163
06/05/2003 3,300 $14.6503
11/22/2002 7,500 $15.7500
The following open market purchases and sales of Shares have been made by
FREE:
Date of Purchase Number of Shares Purchased Price Paid/Share
08/11/2004 7,500 $17.6961
08/05/2004 5,000 $17.3068
05/05/2004 10,000 $19.8788
04/05/2004 146,000 $21.9900
03/19/2004 10,000 $20.6800
12/30/2003 22,700 $17.9972
11/17/2003 5,000 $17.0748
11/13/2003 33,428 $17.6300
11/07/2003 2,800 $17.2400
11/06/2003 6,500 $17.0000
11/04/2003 71,100 $17.2767
11/03/2003 11,500 $17.3325
10/31/2003 26,100 $17.1383
Date of Sale Number of Shares Sold Price Received/Share
02/27/2004 207 $21.7875
02/24/2004 28,428 $21.7875
The following open market purchases and sales of Shares have been made by
GFM:
Date of Purchase Number of Shares Purchased Price Paid/Share
08/11/2004 3,750 $17.6961
06/17/2004 2,200 $18.1900
12/10/2003 6,000 $16.9103
11/13/2003 2,500 $17.6600
10/22/2003 1,200 $16.7800
09/24/2003 2,500 $15.9250
09/22/2003 850 $15.9210
09/18/2003 2,000 $16.6000
09/16/2003 3,000 $16.8109
09/05/2003 1,000 $16.8000
07/17/2003 4,488 $15.5488
04/10/2003 3,500 $11.8000
02/11/2003 800 $12.4000
02/07/2003 5,000 $12.7000
02/06/2003 7,600 $12.8768
10/11/2002 2,900 $12.5998
10/08/2002 5,200 $13.0292
10/02/2002 2,000 $13.5378
09/09/2002 6,000 $15.0000
Date of Sale Number of Shares Sold Price Received/Share
02/27/2004 148 $21.7875
02/24/2004 20,304 $21.7875
01/30/2004 5,000 $19.9500
06/06/2003 14,000 $14.7163
The following open market purchases and sales of Shares have been made by
Global:
Date of Purchase Number of Shares Purchased Price Paid/Share
02/24/2004 5,000 $19.9500
11/19/2003 4,000 $16.7500
11/11/2003 13,800 $16.9305
11/06/2003 6,500 $17.0155
10/24/2003 4,000 $16.1875
10/23/2003 5,500 $16.2545
04/25/2003 10,000 $11.8789
04/24/2003 18,000 $12.3575
04/23/2003 22,000 $12.7036
04/22/2003 2,000 $12.8190
Date of Sale Number of Shares Sold Price Received/Share
03/02/2004 4,380 $21.9100
01/29/2004 2,000 $19.8700
01/28/2004 600 $20.1500
01/23/2004 1,500 $20.1000
01/22/2004 1,300 $19.9838
12/16/2003 1,000 $17.5033
12/16/2003 4,000 $17.5033
12/16/2003 10,000 $17.5033
12/15/2003 6,300 $17.6070
12/01/2003 5,900 $17.3500
10/28/2003 2,500 $16.8500
06/09/2003 2,700 $14.7800
05/28/2003 10,000 $14.1500
05/27/2003 10,600 $13.7500
The following open market purchases and sales of Shares have been made by
the Accounts:
Date of Purchase Number of Shares Purchased Price Paid/Share
08/06/2004 20,000 $16.7398
07/28/2004 20,000 $17.3156
06/25/2004 4,000 $18.5500
06/24/2004 96,200 $18.3916
06/03/2004 13,100 $18.1612
06/01/2004 88,200 $19.3500
04/30/2004 84,000 $19.6027
04/28/2004 74,300 $20.7771
04/27/2004 135,000 $21.3565
04/26/2004 23,400 $21.4934
04/23/2004 40,400 $21.8056
04/21/2004 29,000 $21.6723
04/20/2004 29,000 $21.5429
04/13/2004 12,600 $22.0232
04/12/2004 1,300 $21.9700
04/08/2004 25,300 $21.9910
04/05/2004 114,500 $21.9900
04/02/2004 84,300 $21.7458
04/01/2004 66,700 $21.4849
03/31/2004 157,200 $21.1758
03/22/2004 5,040 $19.9000
03/11/2004 49,000 $19.8751
02/06/2004 140,000 $20.0286
02/04/2004 35,000 $19.5800
02/02/2004 382,977 $20.0750
Date of Sale Number of Shares Sold Price Received/Share
06/01/2004 88,200 $19.3500
04/30/2004 70,000 $19.5500
02/27/2004 644 $21.7875
02/24/2004 88,551 $21.7875
As of the date of mailing of this proxy statement, City of London
beneficially owns: (a) 132,036 Shares together with EWF, which represents
approximately 0.30% of the issued and outstanding Shares, (b) 1,157,847 Shares
together with GEM, which represents approximately 2.59% of the issued and
outstanding Shares, (c) 1,142,627 Shares together with IEM, which represents
approximately 2.56% of the issued and outstanding Shares, (d) 328,994 Shares
together with FREE, which represents approximately 0.74% of the issued and
outstanding Shares, (e) 113,436 Shares together with GFM, which represents
approximately 0.25% of the issued and outstanding Shares, (f) 28,020 Shares
together with Global, which represents approximately 0.06% of the issued and
outstanding Shares, and (g) 1,483,122 Shares together with the Accounts, which
represents approximately 3.32% of the issued and outstanding Shares.
Accordingly, City of London is the beneficial owner of an aggregate of 4,386,082
Shares, constituting approximately 9.81% of the Shares.
SCHEDULE III
INFORMATION CONCERNING THE FUND'S INVESTMENT MANAGER, THE
INVESTMENT MANAGEMENT AGREEMENT AND CERTAIN OTHER MATTERS
The following information relating to DeIM and the Investment Management
Agreement and certain other matters is included herein because it may be
required by the rules of the Commission in a proxy statement that contains
proposals relating to the continuation or termination of the Investment
Management Agreement. This information is based entirely upon the disclosure in
the Fund's proxy statement and certain of the Fund's periodic reports filed with
the Commission and City of London has no independent knowledge concerning its
accuracy.
DeIM's headquarters are located at 345 Park Avenue, New York, New York.
DeIM is a Delaware corporation. The names and addresses of its officers and
directors are as follows: Evelyn Tresset, 280 Park Avenue, New York, NY 10017,
Director and Chief Operating Officer; William N. Shiebler, 280 Park Avenue, New
York, NY 10017, Director, President and Chief Executive Officer; Jeffrey S.
Wallace, 280 Park Avenue, New York, NY 10017, Director, Chief Financial Officer
and Treasurer; William G. Butterly, II, 1251 Avenue of the Americas, New York,
NY 10020, Secretary, Chief Legal Officer and General Counsel; Stephen R.
Burke,1325 Avenue of the Americas, New York, NY 10019, Executive Vice President;
Thomas F. Eggers, 1325 Avenue of the Americas, New York, NY 10019, Executive
Vice President; Leo P. Grohowski, 345 Park Avenue, New York, NY 10154, Executive
Vice President; Gloria S. Nelund, 300 South Grand Avenue, Los Angeles, CA 90071,
Executive Vice President; and Philip W. Gallo, 1251 Avenue of the Americas, New
York, NY 10020, Chief Compliance Officer.
Under the Investment Management Agreement, DeIM directs the investments of
the Fund in accordance with its investment objectives, policies and
restrictions. DeIM determines the securities, instruments and other contracts
relating to investments to be purchased, sold or entered into by the Fund. In
addition to portfolio management services, DeIM provides certain administrative
services in accordance with the Investment Management Agreement. The management
fee payable monthly under the Investment Management Agreement is equal to an
annual rate of 1.15% of the first $50,000,000 of the Fund's month-end net
assets, 1.10% of the next $50,000,000 of such net assets, 1% of the next
$250,000,000 of such net assets, 0.95% of the next $400,000,000 of such net
assets, 0.90% of the next $300,000,000 of such net assets, and 0.85% of such net
assets in excess of $1,050,000,000 of the Fund's month-end net assets. For the
six (6) months ended December 31, 2003, DeIM received a management fee of
$4,761,268.
The Investment Management Agreement was last approved by the Stockholders
in March 2002.
IMPORTANT!
Your vote is important. No matter how many Shares you own, please give
City of London your proxy FOR the election of the Independent Nominees to the
Board by:
1. SIGNING the enclosed GOLD proxy card,
2. DATING the enclosed GOLD proxy card, and
3. MAILING the enclosed GOLD proxy card TODAY in the envelope provided (no
postage is required if mailed in the United States).
If you intend to vote on the Stockholder proposal to terminate the
Investment Management Agreement, please do so on the GOLD proxy card. City of
London supports the Stockholder proposal to terminate the Investment Management
Agreement.
If any of your Shares are held in the name of a brokerage firm, bank
nominee or other institution, only it can vote such Shares and only upon receipt
of your specific instructions. Accordingly, please sign, date and return your
GOLD proxy in the envelope and contact the person responsible for your account
and instruct that person to execute the GOLD proxy card representing your
Shares. City of London urges you to confirm in writing your instructions to City
of London at the address provided below so that City of London will be aware of
all instructions given and can attempt to ensure that such instructions are
followed.
PLEASE DO NOT RETURN ANY PROXY CARD SUPPLIED TO YOU BY THE FUND, AS IT MAY
REVOKE YOUR PREVIOUS PROXY. REMEMBER, ONLY YOUR LATEST-DATED PROXY COUNTS.
If you have any questions or require any additional information concerning
this proxy statement, please contact City of London's proxy solicitor, Morrow &
Co., Inc., at the address set forth below.
Morrow & Co., Inc.
445 Park Avenue
New York, New York 10022
Call toll free: 800-607-0088
Bankers and Brokers Call Collect: 212-754-8000
THE KOREA FUND, INC.
2004 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF CITY OF LONDON
AND NOT ON BEHALF OF THE BOARD OF DIRECTORS
OR MANAGEMENT OF THE KOREA FUND, INC.
The undersigned appoints Jeffry S. Hoffman and Adam M. Fox, each of them,
attorneys and agents with full power of substitution to vote, as designated
below, all shares of Common Stock of The Korea Fund, Inc. (the "Fund") which the
undersigned would be entitled to vote if personally present at the 2004 Annual
Meeting of Stockholders of the Fund, and at any adjournments or postponements
thereof and at any special meeting called in lieu thereof.
The undersigned hereby revokes any other proxy or proxies heretofore given
to vote or act with respect to the shares of Common Stock of the Fund held by
the undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof.
(Continued and to be signed on the reverse side)
CITY OF LONDON RECOMMENDS A VOTE FOR THE ELECTION OF ITS INDEPENDENT NOMINEES TO
THE BOARD AND FOR THE STOCKHOLDER PROPOSAL TO TERMINATE THE INVESTMENT
MANAGEMENT AGREEMENT.
1. Election of Directors.
Nominees (Class I) to serve until the year 2007 Annual Meeting:
ELECTION OF JULIAN REID (AN INDEPENDENT NOMINEE): To elect Julian Reid as
a Class I director of the Fund
FOR |_| TO WITHHOLD AUTHORITY |_|
ELECTION OF CHRIS RUSSELL (AN INDEPENDENT NOMINEE): To elect Chris Russell
as a Class I director of the Fund
FOR |_| TO WITHHOLD AUTHORITY |_|
2. To vote on a stockholder's proposal that the investment management
agreement, between the Fund and Deutsche Investment Management Americas
Inc., as currently in effect as of the date hereof, be terminated
immediately.
FOR |_| AGAINST |_| ABSTAIN |_|
3. In their discretion, the herein named attorneys and proxies are authorized
to vote upon such other matters as may properly come before the Annual
Meeting, of which such persons are not made aware within a reasonable
period of time prior to the Annual Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. IF YOU SIGN AND RETURN THE ENCLOSED PROXY CARD, AND DO
NOT DIRECT HOW THE PROXY IS TO BE VOTED, THE PROXY WILL BE VOTED FOR THE
ELECTION OF THE INDEPENDENT NOMINEES TO THE BOARD AND FOR THE TERMINATION
OF THE INVESTMENT MANAGEMENT AGREEMENT.
DATED: __________________________________________________
Please Sign Exactly As Name Appears On This Proxy.
_________________________________________________________
(signature)
_________________________________________________________
(signature, if held jointly)
_________________________________________________________
(title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC., SHOULD INDICATE THE CAPACITY IN WHICH SIGNING.
IMPORTANT:
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE!
IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL MORROW & CO., INC. TOLL
FREE AT 800-607-0088.