<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE KOREA FUND, INC.
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Declaration of Trust)
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
PRELIMINARY COPY
August 15, 1997
THE KOREA FUND, INC.
IMPORTANT NEWS
FOR THE KOREA FUND, INC. STOCKHOLDERS
While we encourage you to read the full text of the enclosed proxy
statement, here's a brief overview of some changes affecting your Fund which
require a stockholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Scudder, Stevens & Clark, Inc. ("Scudder"), your Fund's investment manager,
has agreed to form an alliance with Zurich Insurance Company ("Zurich").
Zurich is a leading international insurance and financial services
organization. As a result of the proposed alliance, there will be a change
in ownership of Scudder. In order for Scudder to continue to serve as
investment manager of your Fund, it is necessary for the Fund's stockholders
to approve a new investment management, advisory and administration
agreement. The following pages give you additional information on Zurich,
the proposed new investment management, advisory and administration
agreement and certain other matters. The most important matter to be voted
upon by you is approval of the new investment management, advisory and
administration agreement. THE BOARD MEMBERS OF YOUR FUND, INCLUDING THOSE
WHO ARE NOT AFFILIATED WITH THE FUND OR SCUDDER, RECOMMEND THAT YOU VOTE FOR
THESE PROPOSALS.
Q. WHY AM I BEING ASKED TO VOTE ON THE PROPOSED NEW INVESTMENT MANAGEMENT,
ADVISORY AND ADMINISTRATION AGREEMENT?
A. The Investment Company Act of 1940, which regulates investment companies
such as the Fund, requires a vote whenever there is a change in control of a
fund's investment manager. Zurich's alliance with Scudder will result in
such a change of control and requires stockholder approval of a new
investment management, advisory and administration agreement with the Fund.
Q. HOW WILL THE SCUDDER-ZURICH ALLIANCE AFFECT ME AS A FUND STOCKHOLDER?
A. Your Fund and your Fund's investment objective will not change. You will
still own the same shares in the same Fund. The terms of the new investment
management, advisory and administration agreement are the
<PAGE> 3
same in all material respects as the investment management, advisory and
administration agreement that will be in effect immediately prior to the
consummation of the alliance. Similarly, the other service arrangements
between you and Scudder will not be affected. You should continue to receive
the same level of services that you have come to expect from Scudder over
the years. If stockholders do not approve the new investment management,
advisory and administration agreement, the current investment management,
advisory and administration agreement will terminate upon the closing of the
transaction and the Board of Directors will take such action as it deems to
be in the best interests of your Fund and its stockholders.
Q. WHY HAS SCUDDER DECIDED TO ENTER INTO THIS ALLIANCE?
A. Scudder believes that the Scudder-Zurich alliance will enable Scudder to
enhance its capabilities as a global asset manager. Scudder further believes
that the alliance will enable it to enhance its ability to deliver the level
of services currently provided to you and your Fund and to fulfill its
obligations under the new investment management, advisory and administration
agreement consistent with current practices.
Q. WILL THE INVESTMENT MANAGEMENT FEES BE THE SAME?
A. The investment management fees paid by your Fund will remain the same.
Q. WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A. You are also being asked to vote for the approval of a new research and
advisory agreement.
Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?
A. After careful consideration, the Board members of your Fund, including those
who are not affiliated with the Fund or Scudder, recommend that you vote in
favor of all of the proposals on the enclosed proxy card.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Communications Corporation, your Fund's information
agent, at 1-800-733-8481.
Q. WILL THE FUND PAY FOR THE PROXY SOLICITATION AND LEGAL COSTS ASSOCIATED WITH
THIS TRANSACTION?
A. No, Scudder will bear these costs.
<PAGE> 4
ABOUT THE PROXY CARD
If you have more than one account in the Fund in your name at the same
address, you will receive separate proxy cards for each account, but only one
proxy statement for the Fund. Please vote all issues on EACH proxy card that you
receive.
THANK YOU FOR MAILING YOUR PROXY CARD(S) PROMPTLY.
<PAGE> 5
345 Park Avenue
New York, New York 10154
THE KOREA FUND, INC.
August 15, 1997
Dear Stockholder:
Scudder, Stevens & Clark, Inc. ("Scudder") entered into an agreement with
Zurich Insurance Company ("Zurich") pursuant to which Scudder and Zurich have
agreed to form an alliance. Under the terms of the agreement, Zurich will
acquire a majority interest in Scudder, and Zurich Kemper Investments, Inc., a
Zurich subsidiary, will become part of Scudder. Scudder's name will be changed
to Scudder Kemper Investments, Inc. As a result of this transaction, it is
necessary for the stockholders of each of the funds for which Scudder acts as
investment manager, including your Fund, to approve a new investment management
agreement.
The following important facts about the transaction are outlined below:
- The transaction has no effect on the number of shares you own or the
value of those shares.
- The advisory fees and expenses paid by your Fund will not increase as a
result of this transaction.
- The investment objective of your Fund will remain the same.
- The non-interested Directors of your Fund have carefully reviewed the
proposed transaction, and have concluded that the transaction should
cause no reduction in the quality of services provided to your Fund and
should enhance Scudder's ability to provide such services.
Stockholders are also being asked to approve certain other matters that
have been set forth in the Fund's Notice of Meeting. THE BOARD MEMBERS OF YOUR
FUND BELIEVE THAT EACH OF THE PROPOSALS SET FORTH IN THE NOTICE OF MEETING FOR
YOUR FUND IS IMPORTANT AND RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS
CAREFULLY AND THEN VOTE FOR ALL PROPOSALS.
Since all of the funds for which Scudder acts as investment manager are
required to conduct stockholder meetings, if you own shares of more than one
fund, you will receive more than one proxy card. Please sign and return each
proxy card you receive.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card(s) after a reasonable amount of time you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote your shares.
<PAGE> 6
Thank you for your cooperation and continued support.
Respectfully,
Nicholas Bratt Juris Padegs
President Chairman of the Board
STOCKHOLDERS ARE URGED TO SIGN THE PROXY CARD AND RETURN IT IN THE POSTAGE PAID
ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE> 7
THE KOREA FUND, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of
The Korea Fund, Inc.:
Please take notice that a Special Meeting of Stockholders of The Korea Fund,
Inc. (the "Fund") will be held at the offices of Scudder, Stevens & Clark, Inc.,
25th Floor, 345 Park Avenue (at 51st Street), New York, New York 10154, on
October 21, 1997, at 2:15 p.m., Eastern time, for the following purposes:
(1)(A) To approve or disapprove a new investment management,
advisory and administration agreement between the Fund and
its investment manager; and
(B) To approve or disapprove a new research and advisory
agreement between the Fund's investment manager and its
Korean adviser.
The appointed proxies will vote on any other business as may properly come
before the meeting or any adjournments thereof.
Holders of record of shares of common stock of the Fund at the close of business
on August 8, 1997 are entitled to vote at the meeting and at any adjournments
thereof.
In the event that the necessary quorum to transact business or the vote required
to approve or reject any proposal is not obtained at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law, to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of the holders of a majority
of the Fund's shares present in person or by proxy at the Meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are entitled to vote in favor and will vote against any such adjournment those
proxies to be voted against that proposal.
By Order of the Board of Directors,
Thomas F. McDonough, Secretary
August 15, 1997
<PAGE> 8
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE SPECIAL
MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN PERSON AT
THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE> 9
THE KOREA FUND, INC.
345 PARK AVENUE, NEW YORK, NEW YORK 10154
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of The Korea Fund, Inc. (the
"Fund") for use at the Special Meeting of Stockholders, to be held at the
offices of Scudder, Stevens & Clark, Inc. ("Scudder"), 25th Floor, 345 Park
Avenue (at 51st Street), New York, New York 10154, on October 21, 1997 at 2:15
p.m., Eastern time, and at any and all adjournments thereof (the "Meeting"). (In
the descriptions of the various proposals below, the word "fund" is sometimes
used to mean investment companies or series thereof in general, and not the Fund
whose proxy statement this is.)
This Proxy Statement, the Notice of Special Meeting and the proxy card are
first being mailed to stockholders on or about August 15, 1997 or as soon as
practicable thereafter. Any stockholder giving a proxy has the power to revoke
it by mail (addressed to the Secretary at the principal executive office of the
Fund, c/o Scudder, Stevens & Clark, Inc., 345 Park Avenue, New York, New York
10154) or in person at the Meeting, by executing a superseding proxy or by
submitting a notice of revocation to the Fund. All properly executed proxies
received in time for the Meeting will be voted as specified in the proxy or, if
no specification is made, in favor of each proposal referred to in the Proxy
Statement.
The presence at any stockholders' meeting, in person or by proxy, of the
holders of a majority of the votes entitled to be cast shall be necessary and
sufficient to constitute a quorum for the transaction of business. In the event
that the necessary quorum to transact business or the vote required to approve
or disapprove any proposal is not obtained at the Meeting, the persons named as
proxies may propose one or more adjournments of the Meeting in accordance with
applicable law, to permit further solicitation of proxies with respect to any
proposal which did not receive the vote necessary for its passage or to obtain a
quorum. With respect to those proposals for which there is represented a
sufficient number of votes in favor, actions taken at the Meeting will be
effective irrespective of any adjournments with respect to any other proposals.
Any such adjournment will require the affirmative vote of the holders of a
majority of the Fund's shares present in person or by proxy at the Meeting. The
persons named as proxies will vote in favor of such adjournment those proxies
which they are entitled to vote in favor and will vote against any such
adjournment those proxies to be voted against that proposal. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" will be treated as shares that are present
but which have not been voted. Broker non-votes are proxies received by the Fund
from brokers or
<PAGE> 10
nominees when the broker or nominee has neither received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter. Accordingly, stockholders are urged to forward
their voting instructions promptly.
Proposals 1(A) and 1(B) require the affirmative vote of a "majority of the
outstanding voting securities" of the Fund. The term "majority of the
outstanding voting securities," as defined in the Investment Company Act of 1940
as amended (the "1940 Act"), and as used in this proxy statement, means: the
affirmative vote of the lesser of (1) 67% of the voting securities of the Fund
present at the meeting if more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding shares
of the Fund.
Abstentions will have the effect of a "no" vote on all proposals. Broker
non-votes will have the effect of a "no" vote for Proposals 1(A) and 1(B) if
such vote is determined on the basis of obtaining the affirmative vote of more
than 50% of the outstanding shares of the Fund. Broker non-votes will not
constitute "yes" or "no" votes and will be disregarded in determining the voting
securities "present" if such vote is determined on the basis of the affirmative
vote of 67% of the voting securities of the Fund present at the Meeting with
respect to Proposals 1(A) and 1(B).
Holders of record of the shares of the common stock of the Fund at the
close of business on August 8, 1997 (the "Record Date"), will be entitled to one
vote per share on all business of the Meeting. The number of shares outstanding
as of June 30, 1997 was 49,999,999.
The Fund provides periodic reports to all of its stockholders which
highlight relevant information including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for the Fund, and a copy of any more recent semi-annual report, without
charge, by calling 1-800-349-4281 or writing the Fund, c/o Scudder, Stevens &
Clark, Inc., 345 Park Avenue, New York, New York 10154.
PROPOSAL 1(A): APPROVAL OF NEW
INVESTMENT MANAGEMENT, ADVISORY
AND ADMINISTRATION AGREEMENT
INTRODUCTION
Scudder acts as the investment adviser to and manager and administrator for
the Fund pursuant to an Investment Advisory, Management and Administration
Agreement dated October 14, 1994 (the "Current Investment Management
Agreement"). (Scudder is sometimes referred to in this proxy statement as the
"Investment Manager.")
2
<PAGE> 11
On June 26, 1997, Scudder entered into a Transaction Agreement (the
"Transaction Agreement") with Zurich Insurance Company ("Zurich") pursuant to
which Scudder and Zurich have agreed to form an alliance. Under the terms of the
Transaction Agreement, Zurich will acquire a majority interest in Scudder, and
Zurich Kemper Investments, Inc. ("ZKI"), a Zurich subsidiary, will become part
of Scudder. Scudder's name will be changed to Scudder Kemper Investments, Inc.
("Scudder Kemper"). The foregoing are referred to as the "Transactions." ZKI, a
Chicago-based investment adviser and the adviser to the Kemper funds, has
approximately $80 billion under management. The headquarters of Scudder Kemper
will be in New York. Edmond D. Villani, Scudder's Chief Executive Officer, will
continue as Chief Executive Officer of Scudder Kemper and will become a member
of Zurich's Corporate Executive Board.
Consummation of the Transactions would constitute an "assignment," as that
term is defined in the 1940 Act, of the Fund's Current Investment Management
Agreement with Scudder. As required by the 1940 Act, the Current Investment
Management Agreement provides for its automatic termination in the event of its
assignment. In anticipation of the Transactions, a new investment management,
advisory and administration agreement (the "New Investment Management
Agreement," together with the Current Investment Management Agreement, the
"Investment Management Agreement") between the Fund and Scudder Kemper is being
proposed for approval by stockholders of the Fund. A copy of the form of the New
Investment Management Agreement is attached hereto as Exhibit A. THE NEW
INVESTMENT MANAGEMENT AGREEMENT FOR THE FUND IS IN ALL MATERIAL RESPECTS ON THE
SAME TERMS AS THE CURRENT INVESTMENT MANAGEMENT AGREEMENT. Conforming changes
are being recommended to the New Investment Management Agreement in order to
promote consistency among all of the funds advised by Scudder and to permit ease
of administration. The material terms of the Current Investment Management
Agreement are described under "Description of the Current Investment Management
Agreement" below.
BOARD OF DIRECTORS RECOMMENDATION
On August 6, 1997 the Board of the Fund, including Directors who are not
parties to such agreement or "interested persons" (as defined under the 1940
Act) ("Non-interested Directors") of any such party, voted to approve the New
Investment Management Agreement and to recommend its approval to stockholders.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Directors Evaluation" below.
The Board of the Fund recommends that stockholders vote in favor of the
approval of the New Investment Management Agreement.
3
<PAGE> 12
BOARD OF DIRECTORS EVALUATION
On July 16, 1997, representatives of Scudder advised the Non-interested
Directors of the Fund, by means of a telephone conference call, that Scudder had
entered into the Transaction Agreement. At that time, Scudder representatives
described the general terms of the proposed Transactions and the perceived
benefits for the Scudder organization and for its investment advisory clients.
Scudder subsequently furnished the Non-interested Directors additional
information regarding the proposed Transactions, including information regarding
the terms of the proposed Transactions, and information regarding the Zurich and
ZKI organizations. In a series of subsequent telephone conference calls and
in-person meetings, the interested Directors discussed this information among
themselves and with representatives of Scudder and Zurich. They were assisted in
their review of this information by their independent legal counsel.
In the course of these discussions, Scudder advised the Non-interested
Directors that it did not expect that the proposed Transactions would have a
material effect on the operations of the Fund or its stockholders. Scudder has
advised the Non-interested Directors that the Transaction Agreement, by its
terms, does not contemplate any changes in the structure or operations of the
Fund. Scudder representatives have informed the Directors that Scudder intends
to maintain the separate existence of the funds that Scudder and ZKI manage in
their respective distribution channels. Scudder has also advised the Non-
interested Directors that, although it expects that various portions of the ZKI
organization would be combined with Scudder's operations, the senior executives
of Scudder overseeing those operations will remain largely unchanged. It is
possible, however, that changes in certain personnel currently involved in
providing services to the Fund may result from future efforts to combine the
strengths and efficiencies of both firms. In their discussions with the
Directors, Scudder representatives also emphasized the strengths of the Zurich
organization and its commitment to provide the new Scudder Kemper organization
with the resources necessary to continue to provide high quality services to the
Fund and the other investment advisory clients of the new Scudder Kemper
organization.
The Board was advised that Scudder intends to rely on Section 15(f) of the
1940 Act, which provides a nonexclusive safe harbor for an investment adviser to
an investment company or any of the investment adviser's affiliated persons (as
defined under the 1940 Act) to receive any amount or benefit in connection with
a change in control of the investment adviser so long as two conditions are met.
First, for a period of three years after the transaction, at least 75% of the
board members of the investment company must not be "interested persons" of the
investment company's investment adviser or its predecessor adviser. On or prior
to the consummation of the Transactions, the Board, assuming the election of the
nominees that you are being asked to elect in "Proposal 2: Election of
Directors," would be in compliance with this provision of Section 15(f). (See
4
<PAGE> 13
"Proposal 2: Election of Directors.") Second, an "unfair burden" must not be
imposed upon the investment company as a result of such transaction or any
express or implied terms, conditions or understandings applicable thereto. The
term "unfair burden" is defined in Section 15(f) to include any arrangement
during the two-year period after the transaction whereby the investment adviser,
or any interested person of any such adviser, receives or is entitled to receive
any compensation, directly or indirectly, from the investment company or its
stockholders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for such
investment company). No such compensation agreements are contemplated in
connection with the Transactions. Scudder has undertaken to pay the costs of
preparing and distributing proxy materials to, and of holding the meeting of,
the Fund's stockholders as well as other fees and expenses in connection with
the Transactions, including the fees and expenses of legal counsel and
consultants to the Fund and the Non-interested Directors.
During the course of their deliberations, the Non-interested Directors
considered a variety of factors, including the nature, quality and extent of the
services furnished by Scudder to the Fund; the necessity of Scudder maintaining
and enhancing its ability to retain and attract capable personnel to serve the
Fund; the investment record of Scudder in managing the Fund; the increased
complexity of the domestic and international securities markets; Scudder's
profitability from advising the Fund; possible economies of scale; comparative
data as to investment performance, advisory fees and other fees, including
administrative fees, and expense ratios; the risks assumed by Scudder; the
advantages and possible disadvantages to the Fund of having an adviser of the
Fund which also serves other investment companies as well as other accounts;
possible benefits to Scudder from serving as manager to the Fund and from
affiliates of Scudder serving the Fund in various other capacities; current and
developing conditions in the financial services industry, including the entry
into the industry of large and well-capitalized companies which are spending,
and appear to be prepared to continue to spend, substantial sums to engage
personnel and to provide services to competing investment companies; and the
financial resources of Scudder and the continuance of appropriate incentives to
assure that Scudder will continue to furnish high quality services to the Fund.
In addition to the foregoing factors, the Non-interested Directors gave
careful consideration to the likely impact of the Transactions on the Scudder
organization. In this regard, the Non-interested Directors considered, among
other things, the structure of the Transactions which affords Scudder executives
substantial autonomy over Scudder's operations and provides substantial equity
participation and incentives for many Scudder employees; Scudder's and Zurich's
commitment to Scudder's paying compensation adequate to attract and retain top
quality personnel; Zurich's strategy for the development of its asset management
business through Scudder; information regarding the financial
5
<PAGE> 14
resources and business reputation of Zurich; and the complementary nature of
various aspects of the business of Scudder and ZKI and the intention to maintain
separate Scudder and ZKI brands in the mutual fund business. Based on the
foregoing, the Non-interested Directors concluded that the Transactions should
cause no reduction in the quality of services provided to the Fund and believe
that the Transactions should enhance Scudder's ability to provide such services.
The Non-interested Directors considered the foregoing factors with respect to
the Fund.
On August 6, 1997, the Directors of the Fund, including the Non-interested
Directors of the Fund, approved the New Investment Management Agreement.
INFORMATION CONCERNING THE TRANSACTIONS AND ZURICH
Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a 79.1% fully
diluted equity interest in the combined business. Zurich will then transfer a
9.6% fully diluted equity interest in Scudder Kemper to a compensation pool for
the benefit of Scudder and ZKI employees, as well as cash and warrants on Zurich
shares for award to Scudder employees, in each case subject to five-year vesting
schedules. After giving effect to the Transactions, current Scudder stockholders
will have a 29.6% fully diluted equity interest in Scudder Kemper and Zurich
will have a 69.5% fully diluted interest in Scudder Kemper. Scudder's name will
be changed to Scudder Kemper Investments, Inc.
The purchase price for Scudder or for ZKI in the Transactions is subject to
adjustment based on the impact to revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of June
30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of Scudder Kemper will
enter into a Second Amended and Restated Security Holders Agreement (the "New
SHA"). Under the New SHA, Scudder stockholders will be entitled to designate
three of the seven members of the Scudder Kemper board and two of the four
members of an Executive Committee, which will be the primary management-level
committee of Scudder Kemper. Zurich will be entitled to designate the other four
members of the Scudder Kemper board and other two members of the Executive
Committee.
The names, addresses and principal occupations of the initial Scudder-
designated directors of Scudder Kemper are as follows: Lynn S. Birdsong, 345
Park Avenue, New York, New York, Managing Director of Scudder; Cornelia M.
Small, 345 Park Avenue, New York, New York, Managing Director of Scudder; and
Edmond D. Villani, 345 Park Avenue, New York, New York, President, Chief
Executive and Managing Director Officer of Scudder.
6
<PAGE> 15
The names, addresses and principal occupations of the initial Zurich-
designated directors of Scudder Kemper are as follows: Lawrence W. Cheng,
Mythenquai 2, Zurich, Switzerland, Chief Investment Officer for Investments and
Institutional Asset Management and the corporate functions of Securities and
Real Estate for Zurich; Steven M. Gluckstern, Mythenquai 2, Zurich, Switzerland,
responsible for Reinsurance, Structured Finance, Capital Market Products and
Strategic Investments, and a member of the Corporate Executive Board of Zurich;
Rolf Hueppi, Mythenquai 2, Zurich, Switzerland, Chairman of the Board and Chief
Executive Officer of Zurich; and Markus Rohrbasser, Mythenquai 2, Zurich,
Switzerland, Chief Financial Officer and member of the Corporate Executive Board
of Zurich.
The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of Scudder Kemper,
effecting a public offering before April 15, 2005, causing Scudder Kemper to
engage substantially in non-investment management and related business, making
material acquisitions or divestitures, making material changes in Scudder
Kemper's capital structure, dissolving or liquidating Scudder Kemper, or
entering into certain affiliated transactions with Zurich. The New SHA also
provides for various put and call rights with respect to Scudder Kemper stock
held by current Scudder employees, limitations on Zurich's ability to purchase
other asset management companies outside of Scudder Kemper, rights of Zurich to
repurchase Scudder Kemper stock upon termination of employment of Scudder Kemper
personnel, and registration rights for stock held by continuing Scudder
stockholders.
The Transactions are subject to a number of conditions, including approval
by Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI
being at least 75%; Scudder and ZKI having obtained director and stockholder
approvals from U.S.-registered funds representing 90% of assets of such funds
under management as of June 30, 1997; the absence of any restraining order or
injunction preventing the Transactions, or any litigation challenging the
Transactions that is reasonably likely to result in an injunction or
invalidation of the Transactions; and the continued accuracy of the
representations and warranties contained in the Transaction Agreement. The
Transactions are expected to close during the fourth quarter of 1997.
The information set forth above concerning the Transactions has been
provided to the Fund by Scudder, and the information set forth below concerning
Zurich has been provided to the Fund by Zurich.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
opera-
7
<PAGE> 16
tions as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services,
and have branch offices and subsidiaries in more than 40 countries throughout
the world. The Zurich Insurance Group is particularly strong in the insurance of
international companies and organizations. Over the past few years, Zurich's
global presence, particularly in the United States, has been strengthened by
means of selective acquisitions.
DESCRIPTION OF THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
Under the Current Investment Management Agreement, Scudder provides the
Fund with continuing investment management services. The Investment Manager
makes investment decisions, prepares and makes available research and
statistical data and supervises the acquisition and disposition of securities by
the Fund, all in accordance with the Fund's investment objectives and policies
and in accordance with guidelines and directions from the Fund's Board of
Directors. The Investment Manager assists the Fund as it may reasonably request
in the conduct of the Fund's business, subject to the direction and control of
the Fund's Board of Directors. The Investment Manager is required to maintain or
cause to be maintained for the Fund all books and records required to be
maintained under the 1940 Act to the extent such books and records are not
maintained or furnished by the Fund's custodian or other agents, and is required
to furnish or cause to be furnished all required reports or other information
under Korean securities laws. The Investment Manager also supplies the Fund with
office space in New York and furnishes clerical services in the United States
related to research, statistical and investment work. The Investment Manager
renders to the Fund administrative services such as preparing reports to, and
meeting materials for, the Fund's Board of Directors and reports and notices to
Fund stockholders, preparing and making filings with the Securities and Exchange
Commission and other regulatory and self-regulatory organizations, including
preliminary and definitive proxy materials and post-effective amendments to the
Fund's registration statement, providing assistance in certain accounting and
tax matters and investor public relations, monitoring the valuation of portfolio
securities, calculation of net asset value and calculation and payment of
distributions to stockholders, and overseeing arrangements with the Fund's
Custodian. The Investment Manager agrees to pay reasonable salaries, fees and
expenses of the Fund's officers and employees and any fees and expenses of the
Fund's directors who are directors, officers or employees of the Investment
Manager, except that the Fund bears travel expenses (or an appropriate portion
of those expenses) of directors and officers of the Fund who are directors,
officers or employees of the Investment Manager to the extent that such expenses
relate to attendance at meetings of the Board of Directors or any committees of
or advisors to the Board. During the Fund's most recent fiscal year, no
compensation, direct or otherwise (other than through fees paid to the
8
<PAGE> 17
Investment Manager), was paid or became payable by the Fund to any of its
officers or Directors who were affiliated with the Investment Manager.
Under the Current Investment Management Agreement the Fund pays or causes
to be paid all of its other expenses, including, among others, the following:
organization and certain offering expenses (including out-of-pocket expenses,
but not overhead or employee costs of the Investment Manager or of any one or
more organizations retained by the Fund or by the Investment Manager as a Korean
adviser of the Fund); legal expenses; auditing and accounting expenses;
telephone, facsimile, postage and other communication expenses; taxes and
governmental fees; stock exchange listing fees; fees, dues and expenses incurred
in connection with membership in investment company trade organizations; fees
and expenses of the Fund's custodians, subcustodians, transfer agents and
registrars; payment for portfolio pricing or valuation services to pricing
agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and other expenses in connection with the issuance,
offering, distribution, sale or underwriting of securities issued by the Fund;
expenses of registering or qualifying securities of the Fund for sale; expenses
related to investor and public relations; freight, insurance and other charges
in connection with the shipment of the Fund's portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of preparing and distributing reports, notices and
dividends to stockholders; expenses of the dividend reinvestment and cash
purchase plan; costs of stationery; any litigation expenses; and costs of
stockholders' and other meetings.
In return for the services provided by the Investment Manager as investment
manager, and the expenses it assumes under the Current Investment Management
Agreement, the Fund pays the Investment Manager a monthly fee, which, on an
annual basis, is equal to 1.15% of the Fund's month-end net assets up to and
including $50 million, 1.10% of such net assets on the next $50 million, 1.00%
of such net assets on the next $250 million, 0.95% of such net assets on the
next $400 million, and 0.90% of such net assets in excess of $750 million. This
fee is higher than advisory fees paid by most other investment companies,
primarily because of the Fund's objective of investing in Korean securities, the
additional time and expense required of the Investment Manager in pursuing such
objective and the need to enable the Investment Manager to compensate the Fund's
Korean adviser, Daewoo Capital Management Co., Ltd. ("Daewoo" or the "Korean
Adviser"). Under the Current Investment Management Agreement, the Investment
Manager may retain the services of others, in addition to the Korean Adviser,
but at no additional cost to the Fund in connection with its services to the
Fund. During the fiscal year ended June 30, 1997, the fees paid to the
Investment Manager amounted to $5,914,297.
Under the Current Investment Management Agreement, the Investment Manager
is permitted to provide investment advisory services to other clients, including
clients which may invest in Korean securities and, in providing such
9
<PAGE> 18
services, may use information furnished by the Korean Adviser and others.
Conversely, information furnished by others to the Investment Manager in
providing services to other clients may be useful to the Investment Manager in
providing services to the Fund.
The Current Investment Management Agreement may be terminated at any time
without payment of penalty by the Board of Directors, by vote of holders of a
majority of the outstanding voting securities of the Fund, or by the Investment
Manager on 60 days' written notice. The Current Investment Management Agreement
automatically terminates in the event of its assignment (as defined under the
1940 Act), but does not terminate upon assignment to a corporate successor to
all or substantially all of the Investment Manager's business, or a wholly owned
subsidiary of such corporate successor, provided that such assignment does not
result in a change of actual control or management of the Investment Manager's
business.
The Fund's license to invest in Korean securities provides that, should the
Investment Manager's services be terminated for any reason, the Fund must
appoint a successor manager, subject to approval by the Korean Minister of
Finance and Economy, within 120 days following such termination. The license
provides that such approval will not unreasonably be withheld, but that the
Minister of Finance and Economy will revoke the license if the Minister shall
have determined that the Fund has not sought in good faith to appoint a
successor manager reasonably acceptable to the Minister. In the event such
license is terminated, the Board of Directors will consider appropriate actions,
including termination of the Fund and liquidation of its assets.
The Current Investment Management Agreement provides that the Investment
Manager is not liable for any act or omission, error of judgment or mistake of
law or for any loss suffered by the Fund, in connection with matters to which
the Current Investment Management Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Investment Manager in the performance of its duties or from reckless disregard
by the Investment Manager of its obligations and duties under the Current
Investment Management Agreement.
Scudder has acted as the Investment Manager for the Fund since the Fund
commenced operations on August 17, 1984. The Current Investment Management
Agreement is dated October 14, 1994, and was last approved by the Directors on
July 22, 1997 and by the stockholders of the Fund on October 11, 1995 and
continues until October 14, 1998. The purpose of the last submission to
stockholders of the Current Investment Management Agreement was to approve or
disapprove the continuance of such agreement.
THE NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement for the Fund will be dated as of
the date of the consummation of the Transactions, which is expected to occur
10
<PAGE> 19
in the fourth quarter of 1997, but in no event later than February 28, 1998. The
New Investment Management Agreement will be in effect for an initial term ending
on the date which is one year from the date of its execution, and may continue
thereafter from year to year only if specifically approved at least annually by
the vote of "a majority of the outstanding voting securities" of the Fund, or by
the Board and, in either event, the vote of a majority of the Non-interested
Directors, cast in person at a meeting called for such purpose. In the event
that stockholders of the Fund do not approve the New Investment Management
Agreement, the Current Investment Management Agreement will remain in effect
until the closing of the Transactions, at which time it would terminate. In such
event, the Board of the Fund will take such action, if any, as it deems to be in
the best interest of the Fund and its stockholders. In the event the
Transactions are not consummated, Scudder will continue to provide services to
the Fund in accordance with the terms of the Current Investment Management
Agreement for such periods as may be approved at least annually by the Board,
including a majority of the Non-interested Directors.
DIFFERENCES BETWEEN THE CURRENT AND NEW INVESTMENT MANAGEMENT AGREEMENTS
The New Investment Management Agreement is substantially the same as the
Current Investment Management Agreement in all material respects. The principal
changes that have been made are summarized below. The New Investment Management
Agreement reflects conforming changes that have been made in order to promote
consistency among all the funds advised by Scudder and to permit ease of
administration. For example, it is proposed that the New Investment Management
Agreement contain provisions that provide that Scudder Kemper shall use its best
efforts to seek the best overall terms available in executing transactions for
the Fund and selecting brokers and dealers and shall consider on a continuing
basis all factors it deems relevant, including the consideration of the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Fund and/or other accounts
over which Scudder Kemper or an affiliate exercises investment discretion. In
addition, with respect to the allocation of investment and sale opportunities
among the Fund and other accounts or funds managed by Scudder Kemper, it is
proposed that the New Investment Management Agreement provide that Scudder
Kemper shall allocate such opportunities in accordance with procedures believed
by Scudder Kemper to be equitable to each entity. It is proposed that the New
Investment Management Agreement will also clarify that such agreement supersedes
all prior agreements.
INVESTMENT MANAGER
Scudder is one of the most experienced investment counsel firms in the
United States. It was established in 1919 as a partnership and was restructured
as a Delaware corporation in 1985. The principal source of Scudder's income is
professional fees received from providing continuing investment advice. Scud-
11
<PAGE> 20
der provides investment counsel for many individuals and institutions, including
insurance companies, endowments, industrial corporations and financial and
banking organizations.
Scudder is a Delaware corporation. Daniel Pierce* is the chairman of the
Board of Scudder, Edmond D. Villani# is President and Chief Executive Officer of
Scudder, Stephen R. Beckwith#, Lynn S. Birdsong#, Nicholas Bratt#, E. Michael
Brown*, Mark S. Casady*, Linda C. Coughlin*, Margaret D. Hadzima*, Jerard K.
Hartman#, Richard A. Holt@, John T. Packard+, Kathryn L. Quirk#, Cornelia M.
Small# and Stephen A. Wohler* are the other members of the Board of Directors of
Scudder (see footnote for symbol key). The principal occupation of each of the
above named individuals is serving as a Managing Director of Scudder.
All of the outstanding voting and nonvoting securities of Scudder are held
of record by Stephen R. Beckwith, Juris Padegs#, Daniel Pierce, and Edmond D.
Villani in their capacity as the representatives of the beneficial owners of
such securities (the "Representatives"), pursuant to a Security Holders'
Agreement among Scudder, the beneficial owners of securities of Scudder and such
Representatives. Pursuant to the Security Holders' Agreement, the
Representatives have the right to reallocate shares among the beneficial owners
from time to time. Such reallocations will be at net book value in cash
transactions. All Managing Directors of Scudder own voting and nonvoting stock
and all Principals of Scudder own nonvoting stock.
Directors, officers and employees of Scudder from time to time may enter
into transactions with various banks, including the Fund's custodian bank. It is
Scudder's opinion that the terms and conditions of those transactions will not
be influenced by existing or potential custodial or other Fund relationships.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder,
computes net asset value and provides fund accounting services for the Fund.
Scudder Service Corporation ("SSC"), also a subsidiary of Scudder, is the
shareholding agent for the Fund. For the fiscal year ended June 30, 1997, the
fees paid to SFAC and SSC by the Fund were $310,882 and $15,000, respectively.
SFAC and SSC will continue to provide fund accounting and shareholding services
to the Fund under the current arrangements if the New Investment Management
Agreement is approved.
Exhibit B sets forth the fees and other information regarding other
investment companies advised by Scudder.
- - - ------------------------------
* Two International Place, Boston, Massachusetts
# 345 Park Avenue, New York, New York
+ 101 California Street, San Francisco, California
@ Two Prudential Plaza, 180 North Stetson, Suite 5400, Chicago, Illinois
12
<PAGE> 21
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder places orders for portfolio
transactions through Scudder Investor Services, Inc., Two International Place,
Boston, Massachusetts 02110 (the "Distributor") (a corporation registered as a
broker/dealer and a subsidiary of Scudder), which in turn places orders on
behalf of the Fund with issuers, underwriters or other brokers and dealers. In
selecting brokers and dealers with which to place portfolio transactions for the
Fund, Scudder will not consider sales of shares of funds currently advised by
ZKI, although it may place such transactions with brokers and dealers that sell
shares of funds currently advised by ZKI. The Distributor receives no
commissions, fees or other remuneration from the Fund for this service.
Allocation of portfolio transactions is supervised by Scudder.
REQUIRED VOTE
Approval of this Proposal requires the affirmative vote of a "majority of
the outstanding voting securities" of the Fund. The Directors recommend that the
stockholders vote in favor of this Proposal 1(A).
PROPOSAL 1(B): APPROVAL OF
NEW RESEARCH AND ADVISORY AGREEMENT
Scudder has entered into a Research and Advisory Agreement, the ("Current
Sub-Advisory Agreement") with Daewoo pursuant to which, Daewoo furnishes
information, investment recommendations, advice and assistance to Scudder.
The Current Sub-Advisory Agreement provides that such agreement shall
automatically terminate in the event of the termination (due to assignment or
otherwise) of the Current Investment Management Agreement. As discussed in
Proposal 1(A), consummation of the Transactions will constitute an assignment of
the Current Investment Management Agreement and will therefore cause a
termination of the Current Sub-Advisory Agreement. (See Proposal 1(A) for more
information regarding the Current Investment Management Agreement.) In
anticipation of the Transactions, a new research and advisory agreement ("New
Sub-Advisory Agreement," which together with the Current Sub-Advisory Agreement,
the "Sub-Advisory Agreement") between Scudder Kemper and Daewoo is being
proposed for approval by stockholders of the Fund. THE NEW SUB-ADVISORY
AGREEMENT IS IN ALL MATERIAL RESPECTS ON THE SAME TERMS AS THE CURRENT
SUB-ADVISORY AGREEMENT. The material terms of the Sub-Advisory Agreement are
fully described under "The Sub-Advisory Agreement" below. A form of the New
Sub-Advisory Agreement is attached hereto as Exhibit C.
At a special, in-person meeting held on August 6, 1997, the Board of the
Fund, including a majority of the Non-interested Directors, voted to approve the
New Sub-Advisory Agreement. In considering whether to approve the New Sub-
13
<PAGE> 22
Advisory Agreement, the Board considered similar factors to those it considered
in approving the New Investment Management Agreement, to the extent applicable.
(See Proposal 1(A) for more information regarding the Board of Directors'
Evaluation.) In addition to the foregoing factors, the Board also considered the
requirement of the Fund's license to invest in Korean securities that there be a
Korean adviser for the Fund approved by the Korean Minister of Finance and
Economy; the Korean Adviser's position as a leading firm in Korea in developing
investment research capabilities; information submitted by the Korean Adviser as
to revenues and expenses; information relating to the execution of portfolio
transactions for the Fund by an affiliate of the Korean Adviser; and various
other factors.
THE SUB-ADVISORY AGREEMENT
The Sub-Advisory Agreement provides that the Korean Adviser shall furnish
Scudder with information, investment recommendations, advice and assistance, as
Scudder from time to time reasonably requests. In addition, the Sub-Advisory
Agreement provides that the Korean Adviser shall maintain a separate staff
within its organization to furnish such services exclusively to Scudder. For the
benefit of the Fund, the Korean Adviser has agreed to pay the fees and expenses
of any directors or officers of the Fund who are directors, officers or
employees of the Korean Adviser or its affiliates, except that the Fund has
agreed to bear certain travel expenses of such director, officer or employee to
the extent such expenses relate to the attendance as a director at a Board
meeting of the Fund.
In return for the services it renders under the Sub-Advisory Agreement, the
Korean Adviser will be paid by Scudder monthly compensation which, on an annual
basis, is equal to 0.2875% of the value of the Fund's net assets up to and
including $50 million; 0.2750% of such assets on the next $50 million; 0.2500%
of such assets on the next $250 million; 0.2375% of such assets on the next $400
million; and 0.2250% of such assets in excess of $750 million. During the fiscal
year ended June 30, 1997, the fees paid by Scudder to the Korean Adviser,
pursuant to the research and advisory agreement amounted to $1,483,785.70.
The Sub-Advisory Agreement further provides that the Korean Adviser shall
not be liable for any act or omission in the course of, connected with or
arising out of any services to be rendered under the Sub-Advisory Agreement,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of the Korean Adviser in the performance of its duties or from reckless
disregard by the Korean Adviser of its obligations and duties under the
Sub-Advisory Agreement.
The Sub-Advisory Agreement may be terminated without penalty upon sixty
(60) days' written notice by either party, or by a majority vote of the
outstanding voting securities of the Fund, and, as stated above, automatically
terminates in the event of the termination of the Investment Management
Agreement or in the event of its assignment.
14
<PAGE> 23
The Current Sub-Advisory Agreement is dated October 14, 1994, and was last
approved by the Board on July 22, 1997 and by the stockholders of the Fund on
October 11, 1995 and continues until October 14, 1998. The purpose of the last
submission to stockholders of the current Sub-Advisory Agreement was to approve
or disapprove the continuance of such agreement.
The New Sub-Advisory Agreement will be dated as of the date of the
consummation of the Transactions, which is expected to occur in the fourth
quarter of 1997, but in no event later than February 28, 1998. The New Sub-
Advisory Agreement will be in effect for an initial term ending on the date
which is one year from the date of its execution, and may continue thereafter
from year to year if specifically approved at least annually by the vote of "a
majority of the outstanding voting securities" of the Fund, or by the Board and,
in either event, the vote of a majority of the Directors who are not parties to
the agreement or interested persons of any such party, cast in person at a
meeting called for such purpose. In the event that stockholders of the Fund do
not approve the New Sub-Advisory Agreement, the Current SubAdvisory Agreement
will remain in effect until the closing of the Transactions and the Board will
take such action, if any, as it deems to be in the best interests of the Fund
and its stockholders. In the event the Transactions are not consummated, the
Korean Adviser will continue to provide services to Scudder in accordance with
the terms of the Current Sub-Advisory Agreement for such periods as may be
approved at least annually by the Board, including a majority of the
Non-interested Directors. The New Sub-Advisory Agreement will not be implemented
unless Proposal 1(A) is also approved by the stockholders of the Fund.
KOREAN ADVISER
The Korean Adviser, Daewoo Capital Management Co., Ltd., an investment
adviser registered under the United States Investment Advisors Act of 1940, was
organized in February 1988 under the laws of the Republic of Korea. The Korean
Adviser is wholly-owned by Daewoo Securities Co., Ltd. ("Daewoo Securities"),
Daewoo Securities Building, 34-3 Youido-dong, Yongdungpo-gu, Seoul, Korea, the
largest Korean securities firm in terms of paid-in-capital and revenues in 1996
and an underwriter in the Fund's first four public offerings. Daewoo Securities
is affiliated with Daewoo Corporation, a conglomerate headquartered in Seoul,
Korea. Daewoo Corporation and certain affiliates of Daewoo Corporation own
approximately 12.98% of Daewoo Securities. The table below sets forth the name,
principal occupation and address of the principal executive officer and each
director of the Korean Adviser.
15
<PAGE> 24
<TABLE>
<CAPTION>
NAME AND POSITION
WITH THE KOREAN ADVISER PRINCIPAL OCCUPATION ADDRESS
- - - ----------------------- ----------------------- -----------------------
<S> <C> <C>
Jay-Hee Chun President, Daewoo Kangsun Apt. 604-107
President Capital Management Co., Juyup-dong 50,
Ltd. Koyang City
Seoul, Korea
Hee Kang Director, Daewoo Jamsil-dong
Capital Management Co., 72-307 Songpa-gu
Ltd. Seoul, Korea
Choon Kuk Lee Director, Daewoo Jinju Apartment C401
Capital Management Co., Yoido-dong
Ltd. Yungdungpo-gu
Seoul, Korea
Segeun Lee Executive Vice 34-3 Yoido-dong
Executive Vice President, Yungdungpo-ku
President Daewoo Capital Seoul, Korea
Management Co., Ltd.
Choong Nam Myung Director, Daewoo Kalhyun-dong
Executive Director Capital Management Co., 521-30 Eunpyung-gu
Ltd. Seoul, Korea
Ki-Ho Ohm Auditor, Daewoo Capital Sinsigagi APT 327-301
Auditor Management Co., Ltd. Mok-Dong Yangchon-Gu
Seoul, Korea
</TABLE>
During the fiscal year ended June 30, 1997, Daewoo Securities, with respect
to portfolio transactions for the Fund, was paid $54,358, which amounted to 6%
of total brokerage commissions paid. The Fund's Korean Adviser is a subsidiary
of Daewoo Securities.
REQUIRED VOTE
Approval of this Proposal requires the affirmative vote of a "majority of
the outstanding voting securities" of the Fund. The Directors recommend that the
stockholders vote in favor of this Proposal 1(B).
16
<PAGE> 25
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs incurred in
connection with the solicitation of proxies, including any additional
solicitation made by letter, telephone or telegraph, will be paid by Scudder. In
addition to solicitation by mail, certain officers and representatives of the
Fund, officers and employees of Scudder and certain financial services firms and
their representatives, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Meeting date approaches, certain
stockholders of the Fund may receive a telephone call from a representative of
SCC if their vote has not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from stockholders of the Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. These procedures have been reasonably designed to ensure that the
identity of the stockholder casting the vote is accurately determined and that
the voting instructions of the stockholder are accurately determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each stockholder's full name, address, social security or
employer identification number, title (if the stockholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned
and to confirm that the stockholder has received the proxy statement and card in
the mail. If the information solicited agrees with the information provided to
SCC, then the SCC representative has the responsibility to explain the process,
read the proposals listed on the proxy card, and ask for the stockholder's
instructions on each proposal. The SCC representative, although he or she is
permitted to answer questions about the process, is not permitted to recommend
to the stockholder how to vote, other than to read any recommendation set forth
in the proxy statement. SCC will record the stockholder's instructions on the
card. Within 72 hours, the stockholder will be sent a letter or mailgram to
confirm his or her vote and asking the stockholder to call SCC immediately if
his or her instructions are not correctly reflected in the confirmation.
If the stockholder wishes to participate in the Meeting, but does not wish
to give his or her proxy by telephone, the stockholder may still submit the
proxy card originally sent with the proxy statement or attend in person. Should
stockholders require additional information regarding the proxy or replacement
proxy cards, they may contact SCC toll-free at 1-800-733-8481. Any proxy given
by a stockholder, whether in writing or by telephone, is revocable.
17
<PAGE> 26
PROPOSALS OF STOCKHOLDERS
Stockholders wishing to submit proposals to be presented at the 1998
meeting of stockholders of the Fund should send their written proposals to the
Secretary of the Fund, c/o Scudder, Stevens & Clark, Inc. 345 Park Avenue, New
York, New York 10154, within a reasonable time before the solicitation of
proxies for such meeting.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors of the Fund is not aware of any matters that will be
presented for action at the Meeting other than the matters set forth herein.
Should any other matters requiring a vote of stockholders arise, the proxy in
the accompanying form will confer upon the person or persons entitled to vote
the shares represented by such proxy the discretionary authority to vote the
shares as to any such other matters in accordance with their best judgment in
the interest of the Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Directors,
Thomas F. McDonough
Secretary
18
<PAGE> 27
EXHIBIT A
FORM OF NEW
INVESTMENT ADVISORY, MANAGEMENT AND
ADMINISTRATION AGREEMENT
AGREEMENT, dated and effective as of between THE KOREA FUND,
INC., a Maryland corporation (herein referred to as the "Fund"), and SCUDDER
KEMPER INVESTMENTS, INC., a Delaware corporation (herein referred to as the
"Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed by the parties as follows:
1. The Manager hereby undertakes and agrees, upon the terms and
conditions herein set forth, (i) to make investment decisions for the Fund,
to prepare and make available to the Fund research and statistical data in
connection therewith and to supervise the acquisition and disposition of
securities by the Fund, including the selection of brokers or dealers to
carry out the transactions, all in accordance with the Fund's investment
objectives and policies and in accordance with guidelines and directions
from the Fund's Board of Directors; (ii) to assist the Fund as it may
reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Fund's Board of Directors; (iii) to maintain
or cause to be maintained for the Fund all books, records, reports and any
other information required under the Investment Company Act of 1940, as
amended (the "1940 Act"), and to furnish or cause to be furnished all
required reports or other information under Korean securities laws, to the
extent that such books, records and reports and other information are not
maintained or furnished by the custodian or other agents of the Fund; (iv)
to furnish at the Manager's expense for the use of the Fund such office
space and facilities as the Fund may require for its reasonable needs in
the City of New York and to furnish at the Manager's expense clerical
services in the United States related to research, statistical and
investment work; (v) to render to the Fund administrative services such as
preparing reports to and meeting materials for the Fund's Board of
Directors and reports and notices to stockholders, preparing and making
filings with the Securities and Exchange Commission (the "SEC") and other
regulatory and self -- regulatory organizations, including preliminary and
definitive proxy materials and post -- effective amendments to the Fund's
registration statement on Form N-2 under the Securities Act of 1933, as
amended, and 1940 Act, as amended from time to time, providing assistance
in certain accounting and tax matters and investor and public relations,
monitoring the valuation of portfolio securities, assisting in the
calculation of net asset value and calculation and
<PAGE> 28
payment of distributions to stockholders, and overseeing arrangements with
the Fund's custodian, including the maintenance of books and records of the
Fund; and (vi) to pay the reasonable salaries, fees and expenses of such of
the Fund's officers and employees (including the Fund's shares of payroll
taxes) and any fees and expenses of such of the Fund's directors as are
directors, officers or employees of the Manager; provided, however, that
the Fund, and not the Manager, shall bear travel expenses (or an
appropriate portion thereof) of directors and officers of the Fund who are
directors, officers or employees of the Manager to the extent that such
expenses relate to attendance at meetings of the Board of Directors of the
Fund or any committees thereof or advisers thereto. The Manager shall bear
all expenses arising out of its duties hereunder but shall not be
responsible for any expenses of the Fund other than those specifically
allocated to the Manager in this paragraph 1. In particular, but without
limiting the generality of the foregoing, the Manager shall not be
responsible, except to the extent of the reasonable compensation of such of
the Fund's employees as are directors, officers or employees of the Manager
whose services may be involved, for the following expenses of the Fund:
organization and certain offering expenses of the Fund (including
out-of-pocket expenses, but not including overhead or employee costs of the
Manager or of any one or more organizations retained by the Fund or by the
Manager as Korean adviser of the Fund); fees payable to the Manager and to
any advisor or consultants, including an advisory board, if applicable;
legal expenses; auditing and accounting expenses; telephone, telex,
facsimile, postage and other communication expenses; taxes and governmental
fees; stock exchange listing fees; fees, dues and expenses incurred by the
Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's custodians, subcustodians,
transfer agents and registrars; payment for portfolio pricing or valuation
services to pricing agents, accountants, bankers and other specialists, if
any; expenses of preparing share certificates and other expenses in
connection with the issuance, offering, distribution, sale or underwriting
of securities issued by the Fund; expenses of registering or qualifying
securities of the Fund for sale; expenses relating to investor and public
relations; freight, insurance and other charges in connection with the
shipment of the Fund's portfolio securities; brokerage commissions or other
costs of acquiring or disposing of any portfolio securities of the Fund;
expenses of preparing and distributing reports, notices and dividends to
stockholders; costs of stationery; costs of stockholders' and other
meetings; litigation expenses; or expenses relating to the Fund's dividend
reinvestment and cash purchase plan (except for brokerage expenses paid by
participants in such plan).
2. In connection with the rendering of the services required under
paragraph 1, the Fund and the Manager have entered into an agreement dated
the date hereof with Daewoo Capital Management Co., Ltd. to furnish
investment advisory services to the Manager pursuant to such
A-2
<PAGE> 29
agreement. The Manager may also contract with or consult with such banks,
other securities firms or other parties in Korea or elsewhere as it may
deem appropriate to obtain information and advice, including investment
recommendations, advice regarding economic factors and trends, advice as to
currency exchange matters, and clerical and accounting services and other
assistance, but any fee, compensation or expenses to be paid to any such
parties shall be paid by the Manager, and no obligation shall be incurred
on the Fund's behalf in any such respect.
3. The Fund agrees to pay to the Manager in United States dollars, as
full compensation for the services to be rendered and expenses to be borne
by the Manager hereunder, a monthly fee which, on an annual basis, is equal
to 1.15 % per annum of the value of the Fund's net assets up to and
including $50 million; 1.10% per annum of the value of the Fund's net
assets on the next $50 million of assets; 1.00% per annum of the value of
the Fund's net assets on the next $250 million of assets; 0.95% per annum
of the value of the Fund's net assets on the next $400 million of assets;
and 0.90% per annum of the value of the Fund's net assets in excess of $750
million. Each payment of a monthly fee to the Manager shall be made within
the ten days next following the day as of which such payment is so
computed. For purposes of computing the monthly fee, the value of the net
assets of the Fund shall be determined as of the close of business on the
last business day of each month; provided, however, that the fee for the
period from the end of the last month ending prior to termination of this
Agreement, for whatever reason, to date of the termination shall be based
on the value of the net assets of the Fund determined as of the close of
business on the date of termination and the fee for such period through the
end of the month in which such proceeds are received shall be prorated
according to the proportion which such period bears to a full monthly
period.
The value of the net assets of the Fund shall be determined pursuant
to the applicable provisions of the Articles of Incorporation and By-laws
of the Fund, as amended from time to time.
4. The Manager agrees that it will not make a short sale of any
capital stock of the Fund or purchase any share of the capital stock of the
Fund otherwise than for investment.
5. In executing transactions for the Fund and selecting brokers or
dealers, the Manager shall use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Fund
transaction, the Manager shall consider on a continuing basis all factors
it deems relevant, including, but not limited to, breadth of the market in
the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, the Manager may consider the brokerage and research services (as
those terms are
A-3
<PAGE> 30
defined in Section 28(e) of the Securities Exchange Act of 1934) provided
to the Fund and/or other accounts over which the Manager or an affiliate
exercises investment discretion.
6. Nothing herein shall be construed as prohibiting the Manager from
providing investment advisory services to, or entering into investment
advisory agreements with, other clients (including other registered
investment companies), including clients which may invest in securities of
Korean issuers, or from utilizing (in providing such services) information
furnished to the Manager by Daewoo Capital Management Co., Ltd. and others
as contemplated by sections 1 and 2 of this Agreement by advisors and
consultants to the Fund and others; nor shall anything herein be construed
as constituting the Manager as an agent of the Fund.
Whenever the Fund and one or more other accounts or investment
companies advised by the Manager have available funds for investment,
investments suitable and appropriate for each shall be allocated in
accordance with procedures believed by the Manager to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by the Manager to be equitable. The Fund recognizes that in
some cases this procedure may adversely affect the size of the position
that may be acquired or disposed of for the Fund. In addition, the Fund
acknowledges that the persons employed by the Manager to assist in the
performance of the Manager's duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit
or restrict the right of the Manager or any affiliate of the Manager to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
7. The Manager may rely on information reasonably believed by it to be
accurate and reliable. Neither the Manager nor its officers, directors,
employees or agents shall be subject to any liability for any act or
omission, error of judgment or mistake of law, or for any loss suffered by
the Fund, in the course of, connected with or arising out of any services
to be rendered hereunder, except by reason of willful misfeasance, bad
faith, or gross negligence on the part of the Manager in the performance of
its duties or by reason of reckless disregard on the part of the Manager of
its obligations and duties under this Agreement. Any person, even though
also employed by the Manager, who may be or become an employee of the Fund
and paid by the Fund shall be deemed, when acting within the scope of his
employment by the Fund, to be acting in such employment solely for the Fund
and not as an employee or agent of the Manager.
8. This Agreement shall remain in effect for a period of one year from
the day and date first written above, and shall continue in effect
thereafter, but only so long as such continuance is specifically approved
at least annually by the affirmative vote of (i) a majority of the members
of the Fund's Board of Directors who are not parties to this agreement or
inter-
A-4
<PAGE> 31
ested persons of any party to this agreement, or of any entity regularly
furnishing investment advisory services with respect to the Fund pursuant
to an agreement with any party to this agreement, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) a
majority of the Fund's Board of Directors or the holders of a majority of
the outstanding voting securities of the Fund. This Agreement may
nevertheless be terminated at any time without penalty, on 60 days' written
notice, by the Fund's Board of Directors, by vote of holders of a majority
of the outstanding voting securities of the Fund, or by the Manager.
This Agreement shall automatically be terminated in the event of its
assignment, provided that an assignment to a corporate successor to all or
substantially all of the Manager's business or to a wholly-owned subsidiary
of such corporate successor which does not result in a change of actual
control or management of the Manager's business shall not be deemed to be
an assignment for the purposes of this Agreement. Any notice to the Fund or
the Manager shall be deemed given when received by the addressee.
9. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by either party hereto, except as permitted
under the 1940 Act or rules and regulations adopted thereunder. It may be
amended by mutual agreement, but only after authorization of such amendment
by the affirmative vote of (i) the holders of a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the members of the
Fund's Board of Directors who are not parties to this agreement or
interested persons of any party to this agreement, or of any entity
regularly furnishing investment advisory services with respect to the Fund
pursuant to an agreement with any party to this agreement, cast in person
at a meeting called for the purpose of voting on such approval.
10. This Agreement shall be construed in accordance with the laws of
the State of New York, without giving effect to the conflicts of laws
principles thereof, provided, however, that nothing herein shall be
construed as being inconsistent with the 1940 Act. As used herein, the
terms "interested person," "assignment," and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the
1940 Act.
11. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this agreement to produce or account for
more than one such counterpart.
12. This Agreement supersedes all prior investment advisory,
management, and/or administration agreements in effect between the Fund and
the Manager.
A-5
<PAGE> 32
IN WITNESS WHEREOF, the parties have executed this Agreement by their
officers thereunto duly authorized as of the day and year first written above.
KOREA FUND, INC.
By:
-----------------------------------------
Title: President
SCUDDER KEMPER INVESTMENTS, INC.
By:
-----------------------------------------
Title:
A-6
<PAGE> 33
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS ADVISED BY SCUDDER, STEVENS & CLARK, INC.
EXHIBIT B
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
MONEY MARKET
Scudder U.S. Treasury Money Fund Safety, liquidity, and stability of capital and, consistent 0.500% of net assets
therewith, current income.
Scudder Cash Investment Trust Stability of capital while maintaining liquidity of capital 0.500% to $250 million
and providing current income from money market securities. 0.450% next $250 million
0.400% next $500 million
0.350% thereafter
Scudder Money Market Series High level of current income consistent with preservation of 0.250% of net assets
capital and liquidity by investing in a broad range of
short-term money market instruments.
Scudder Government Money Market High level of current income consistent with preservation of 0.250% of net assets
Series capital and liquidity by investing exclusively in
obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities and in certain repurchase
agreements.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund Income exempt from regular federal income taxes and 0.500% to $500 million
stability of principal through investments in municipal 0.480% thereafter
securities.
Scudder Tax Free Money Market High level of current income consistent with preservation of 0.250% of net assets
Series capital and liquidity exempt from federal income tax by
investing primarily in high quality municipal obligations.
Scudder California Tax Free Money Stability of capital and the maintenance of a constant net 0.500% of net assets
Fund asset value of $1.00 per share while providing California
tax payers income exempt from both California personal and
regular federal income tax through investment in high
quality, short-term tax-exempt California municipal
securities.
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
Scudder New York Tax Free Money Stability of capital and income exempt from New York state 0.500% of net assets
Fund and New York City personal income taxes and regular federal
income tax through investment in high quality, short-term
municipal securities in New York.
TAX FREE
Scudder Limited Term Tax Free Fund High level of income exempt from regular federal income tax 0.600% of net assets
consistent with a high degree of principal stability.
Scudder Medium Term Tax Free Fund High level of income exempt from regular federal income tax 0.600% to $500 million
and limited principal fluctuation through investment 0.500% thereafter
primarily in high grade intermediate term municipal
securities.
Scudder Managed Municipal Bonds Income exempt from regular federal income tax primarily 0.550% to $200 million
through investments in high-grade long-term municipal 0.500% next $500 million
securities. 0.475% thereafter
Scudder High Yield Tax Free Fund High level of income, exempt from regular federal income 0.650% to $300 million
tax, from an actively managed portfolio consisting primarily 0.600% thereafter
of investment grade municipal securities.
Scudder California Tax Free Fund Income exempt from both California state personal income tax 0.625% to $200 million
and regular federal income tax primarily through investment 0.600% thereafter
grade municipal securities.
Scudder Massachusetts Limited Term A high level of income exempt from both Massachusetts 0.600% of net assets
Tax Free Fund personal income tax and regular federal income tax as is
consistent with a high degree of price stability.
Scudder Massachusetts Tax Free A high level of income exempt from both Massachusetts 0.600% of net assets
Fund personal income tax and regular federal income tax through
investment primarily in long-term investment-grade municipal
securities in Massachusetts.
</TABLE>
B-2
<PAGE> 35
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
Scudder New York Tax Free Fund Income exempt from New York state and New York City personal 0.625% to $200 million
income taxes and regular federal income tax through 0.600% thereafter
investment primarily in long-term investment-grade municipal
securities in New York.
Scudder Ohio Tax Free Fund Income exempt from Ohio personal income tax and regular 0.600% of net assets
federal income tax through investment primarily in
investment-grade municipal securities in Ohio.
Scudder Pennsylvania Tax Free Fund Income exempt from Pennsylvania personal income tax and 0.600% of net assets
regular federal income tax through investment primarily in
investment-grade municipal securities in Pennsylvania.
U.S. INCOME
Scudder Short Term Bond Fund High level of income consistent with a high degree of 0.600% to $500 million
principal stability through investments primarily in high 0.500% next $500 million
quality short-term bonds. 0.450% next $500 million
0.400% next $500 million
0.375% next $1 billion
0.350% thereafter
Scudder Zero Coupon 2000 Fund High investment returns over a selected period as is 0.600% of net assets
consistent with investment in U.S. Government securities and
the minimization of reinvestment risk.
Scudder GNMA Fund High current income and safety of principal primarily from 0.650% to $200 million
investment in U.S. Government mortgage-backed GNMA 0.600% next $300 million
securities. 0.550% thereafter
Scudder Income Fund A high level of income, consistent with the prudent 0.650% to $200 million
investment of capital, through a flexible investment program 0.600% next $300 million
emphasizing high-grade bonds. 0.550% thereafter
Scudder High Yield Bond Fund A high level of current income and capital appreciation 0.700% of net assets
through investment primarily in below investment-grade
domestic debt securities.
</TABLE>
B-3
<PAGE> 36
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
GLOBAL INCOME
Scudder Global Bond Fund Total return with an emphasis on current income by investing 0.750% to $1 billion
primarily in high-grade bonds denominated in foreign 0.700% thereafter
currencies and the U.S. dollar.
Scudder International Bond Fund Income primarily by investing in high-grade international 0.850% to $1 billion
bonds and protection and possible enhancement of principal 0.800% thereafter
value by actively managing currency, bond market and
maturity exposure and by security selection.
Scudder Emerging Markets Income High current income and, secondarily, long-term capital 1.000% of net assets
Fund appreciation by investing primarily in high-yielding debt
securities issued in emerging markets.
ASSET ALLOCATION
Scudder Pathway Conservative Current income and, secondarily, long-term growth of capital 0.000%
Portfolio by investing substantially in bond mutual funds, but will
have some exposure to equity mutual funds.
Scudder Pathway Balanced Portfolio Balance of growth and income by investing in a mix of money 0.000%
market, bond and equity mutual funds.
Scudder Pathway Growth Portfolio Long-term growth of capital by investing predominantly in 0.000%
equity mutual funds designed to provide long-term growth.
Scudder Pathway International Maximize total return by investing in a select mix of 0.000%
Portfolio established international and global Scudder Funds.
U.S. GROWTH AND INCOME
Scudder Balanced Fund A balance of growth and income from a diversified portfolio 0.700% of net assets
of equity and fixed income securities and long-term
preservation of capital through a quality oriented
investment approach designed to reduce risk.
</TABLE>
B-4
<PAGE> 37
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
Scudder Growth and Income Fund Long-term growth of capital, current income and growth of 0.600% to $500 million
income primarily from common stocks, preferred stocks and 0.550% next $500 million
securities convertible into common stocks. 0.500% next $500 million
0.475% next $500 million
0.450% next $1 billion
0.425% next $1 billion
0.405% thereafter
U.S. GROWTH
Scudder Large Company Value Fund Maximize long-term capital appreciation through a value 0.750% to $500 million
(formerly Scudder Capital Growth driven investment program emphasizing common stocks and 0.650% next $500 million
Fund) preferred stocks.
Scudder Value Fund Long-term growth of capital through investment in 0.700% of net assets
undervalued equity securities.
Scudder Small Company Value Fund Long-term growth of capital by investing primarily in 0.750% of net assets
undervalued equity securities of small U.S. companies.
Scudder Micro Cap Fund Long-term growth of capital by investing primarily in a 0.750% of net assets
diversified portfolio of U.S. micro-cap common stocks.
Scudder Classic Growth Fund Long-term growth of capital while keeping the value of its 0.700% of net assets
shares more stable than other growth mutual funds.
Scudder Large Company Growth Fund Long-term growth of capital through investment primarily in 0.700% of net assets
(formerly Scudder Quality Growth the equity securities of seasoned, financially strong U.S.
Fund) growth companies.
Scudder Development Fund Long-term growth of capital by investing primarily in equity 1.000% to $500 million
securities of emerging growth companies. 0.950% next $500 million
0.900% thereafter
</TABLE>
B-5
<PAGE> 38
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
Scudder 21st Century Growth Fund Long-term growth of capital by investing primarily in the 1.000% of net assets
securities of emerging growth companies poised to be leaders
in the 21st century.
GLOBAL GROWTH
Scudder Global Fund Long-term growth of capital through investment in a Effective 9/11/97
diversified portfolio of marketable foreign and domestic 1.000% to $500 million
securities, primarily equity securities. 0.950% next $500 million
0.900% next $500 million
0.850% thereafter
Institutional International Equity Long-term growth of capital primarily through a diversified 0.900% of net assets
Portfolio portfolio of marketable foreign equity securities.
Scudder International Growth and Long-term growth of capital and current income primarily 1.000% of net assets
Income Fund from foreign equity securities
Scudder International Fund Long-term growth of capital primarily through a diversified 0.900% to $500 million
portfolio of marketable foreign equity securities. 0.850% next $500 million
0.800% next $1 billion
0.750% next $1 billion
0.700% thereafter
Scudder Global Discovery Fund Above-average capital appreciation over the long-term by 1.100% of net assets
investing primarily in the equity securities of small
companies located throughout the world.
Scudder Emerging Markets Growth Long-term growth of capital primarily through equity 1.25% of net assets
Fund investments in emerging markets around the globe.
Scudder Gold Fund Maximum return consistent with investing in a portfolio of 1.000% of net assets
gold-related equity securities and gold.
Scudder Greater Europe Growth Fund Long-term growth of capital through investment primarily in 1.000% of net assets
the equity securities of European companies.
</TABLE>
B-6
<PAGE> 39
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
Scudder Pacific Opportunities Fund Long-term growth of capital primarily through investment in 1.100% of net assets
the equity securities of Pacific Basin companies, excluding
Japan.
Scudder Latin America Fund Long-term capital appreciation through investment primarily Effective 9/11/97:
in the securities of Latin American issuers. 1.250% to $1 billion
1.150% thereafter
The Japan Fund, Inc. Long-term capital appreciation through investment primarily 0.850% to $100 million
in equity securities of Japanese companies. 0.750% next $200 million
0.700% next $300 million
0.650% thereafter
CLOSED-END FUNDS
The Argentina Fund, Inc. Long-term capital appreciation through investment primarily Adviser:
in equity securities of Argentine issuers. Effective 11/1/97:
1.100% of net assets
Sub-Advisor:
Paid by Adviser.
0.160% of net assets
The Brazil Fund, Inc. Long-term capital appreciation through investment primarily 1.200% to $150 million
in equity securities of Brazilian issuers. 1.050% next $150 million
1.000% thereafter
Effective 10/29/97:
1.200% to $150 million
1.050% next $150 million
1.000% next $200 million
0.900% thereafter
Administrator:
Receives an annual
fee of $50,000
</TABLE>
B-7
<PAGE> 40
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
The Korea Fund, Inc. Long-term capital appreciation through investment primarily
in equity securities of Korean issuers. Adviser: to $50 million
1.150% next $50 million
1.100% next $250 million
1.000% next $400 million
0.950% thereafter
0.900%
Sub-Adviser - Daewoo:
Paid by Adviser.
0.2875% to $50 million
0.275% next $50 million
0.250% next $250 million
0.2375% next $400 million
0.225% thereafter
The Latin America Dollar Income High level of current income and, secondarily, capital 1.200% of net assets
Fund, Inc. appreciation through investment principally in dollar-
denominated Latin American debt instruments.
Montgomery Street Income High level of current income consistent with prudent 0.500% to $150 million
Securities, Inc. investment risks through a diversified portfolio primarily 0.450% next $50 million
of debt securities. 0.400% thereafter
Scudder New Asia Fund, Inc. Long-term capital appreciation through investment primarily 1.250% to $75 million
in equity securities of Asian companies. 1.150% next $125 million
1.100% thereafter
Scudder New Europe Fund, Inc. Long-term capital appreciation through investment primarily 1.250% to $75 million
in equity securities of companies traded on smaller or 1.150% next $125 million
emerging European markets and companies that are viewed as 1.100% thereafter
likely to benefit from changes and developments throughout
Europe.
Scudder Spain and Portugal Fund, Long-term capital appreciation through investment primarily
Inc. in equity securities of Spanish & Portuguese issuers. Adviser: of net assets
1.000%
Administrator:
0.200% of net assets
</TABLE>
B-8
<PAGE> 41
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
Scudder World Income Opportunities High income and, consistent therewith, capital appreciation. 1.200% of net assets
Fund, Inc.
INSURANCE PRODUCTS
Balanced Portfolio Balance of growth and income consistent with long-term 0.475% of net assets
preservation of capital through a diversified portfolio of
equity and fixed income securities.
Bond Portfolio High level of income consistent with a high quality 0.475% of net assets
portfolio of debt securities.
Capital Growth Portfolio Long-term capital growth from a portfolio consisting 0.475% to $500 million
primarily of equity securities. 0.450% thereafter
Global Discovery Portfolio Above-average capital appreciation over the long-term by 0.975% of net assets
investing primarily in the equity securities of small
companies located throughout the world.
Growth and Income Portfolio Long-term growth of capital, current income and growth of 0.475% of net assets
income.
International Portfolio Long-term growth of capital primarily through diversified 0.875% to $500 million
holdings of marketable foreign equity investments. 0.775% thereafter
Money Market Portfolio Stability of capital and, consistent therewith, liquidity of 0.370% of net assets
capital and current income.
</TABLE>
B-9
<PAGE> 42
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
AARP FUNDS
AARP High Quality Money Fund Current income and liquidity, consistent with maintaining 0.350% to $2 billion
stability and safety of principal, through investment in 0.330% next $2 billion
high quality securities. 0.300% next $2 billion
0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.100% of net assets
FEE RATE PROGRAM ASSETS
-------- -----------------
AARP Balanced Stock and Bond Fund Long-term growth of capital and income, consistent with a 0.350% to $2 billion
stable share price, through investment in a combination of 0.330% next $2 billion
stocks, bonds and cash reserves. 0.300% next $2 billion
0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of net assets
<CAPTION>
FEE RATE PROGRAM ASSETS
-------- -----------------
<S> <C> <C> <C>
AARP Capital Growth Fund Long-term capital growth, consistent with a stable share 0.350% to $2 billion
price, through investment primarily in common stocks and 0.330% next $2 billion
securities convertible into common stocks. 0.300% next $2 billion
0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.320% of net assets
</TABLE>
B-10
<PAGE> 43
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
AARP Global Growth Fund Long-term growth of capital, consistent with a stable share 0.350% to $2 billion
price, through investment primarily in a diversified 0.330% next $2 billion
portfolio of equity securities of corporations worldwide. 0.300% next $2 billion
0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
----------------------------
0.550% of net assets
FEE RATE PROGRAM ASSETS
-------- -----------------
AARP Growth and Income Fund Long-term growth of capital and income, consistent with a 0.350% to $2 billion
stable share price, through investment primarily in common 0.330% next $2 billion
stocks and securities convertible into common stocks. 0.300% next $2 billion
0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
----------------------------
0.190% of net assets
<CAPTION>
FEE RATE PROGRAM ASSETS
-------- -----------------
<S> <C> <C> <C>
AARP International Stock Fund Long-term growth of capital, consistent with a stable share 0.350% to $2 billion
price, through investment primarily in foreign equity 0.330% next $2 billion
securities. 0.300% next $2 billion
0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
----------------------------
0.600% of net assets
</TABLE>
B-11
<PAGE> 44
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
AARP Small Company Stock Fund Long-term growth of capital, consistent with a stable share 0.350% to $2 billion
price, through investment primarily in stocks of small U.S. 0.330% next $2 billion
companies. 0.300% next $2 billion
0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
----------------------------
0.550% of net assets
FEE RATE PROGRAM ASSETS
-------- -----------------
AARP U.S. Stock Index Fund Long-term growth of capital, consistent with greater share 0.350% to $2 billion
price stability than a S&P 500 index fund, by taking an 0.330% next $2 billion
indexing approach to investing in common stocks, emphasizing 0.300% next $2 billion
higher dividend stocks while maintaining investment 0.280% next $2 billion
characteristics otherwise similar to the S&P 500 index. 0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
----------------------------
0.000% of net assets
<CAPTION>
FEE RATE PROGRAM ASSETS
-------- -----------------
<S> <C> <C> <C>
AARP Bond Fund for Income High level of current income, consistent with greater share 0.350% to $2 billion
price stability than a long term bond, through investment 0.330% next $2 billion
primarily in investment-grade debt securities. 0.300% next $2 billion
0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
----------------------------
0.280% of net assets
</TABLE>
B-12
<PAGE> 45
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
AARP GNMA and U.S. Treasury Fund High level of current income, consistent with greater share 0.350% to $2 billion
price stability than a long-term bond, through investment 0.330% next $2 billion
principally in U.S. Government-guaranteed GNMA securities 0.300% next $2 billion
and U.S. Treasury obligations. 0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
----------------------------
0.120% of net assets
FEE RATE PROGRAM ASSETS
-------- -----------------
AARP High Quality Bond Fund High level of income, consistent with greater share price 0.350% to $2 billion
stability than a long-term bond, through investment 0.330% next $2 billion
primarily in a portfolio of high quality securities 0.300% next $2 billion
0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
----------------------------
0.190% of net assets
AARP Diversified Growth Portfolio Long-term growth of capital through investment primarily in There will be no fee as the
AARP stock mutual funds. manager will receive a fee
from the underlying funds.
AARP Diversified Income Portfolio Current income with modest capital appreciation through There will be no fee as the
investment primarily in AARP bond mutual funds. manager will receive a fee
from the underlying funds.
</TABLE>
B-13
<PAGE> 46
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE PROGRAM ASSETS
- - - ------------------------------------ ------------------------------------------------------------ -------- -----------------
<S> <C> <C> <C>
AARP High Quality Tax Free Money Current income exempt from federal income taxes and 0.350% to $2 billion
Fund liquidity, consistent with maintaining stability and safety 0.330% next $2 billion
of principal, through investment in high-quality municipal 0.300% next $2 billion
securities. 0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.100% of net assets
FEE RATE PROGRAM ASSETS
-------- -----------------
AARP Insured Tax Free General Bond High level of income free from federal income taxes, 0.350% to $2 billion
Fund consistent with greater share price stability than a 0.330% next $2 billion
long-term municipal bond, through investment primarily in 0.300% next $2 billion
municipal securities covered by insurance. 0.280% next $2 billion
0.260% next $3 billion
0.250% next $3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of net assets
</TABLE>
B-14
<PAGE> 47
EXHIBIT C
FORM OF NEW
RESEARCH AND ADVISORY AGREEMENT
Scudder Kemper Investment, Inc.
345 Park Avenue
New York, New York 10154
, 1997
Daewoo Capital Management Co., Ltd.
34-3, Youido-dong
Yongdungpo-gu
Seoul, Korea
Dear Sirs:
We have entered into an Investment Advisory, Management and Administration
Agreement (the "Management Agreement") dated as of, , 1997 with The
Korea Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which we act
as investment adviser to and manager of the Fund. A copy of the Management
Agreement has been previously furnished to you. In furtherance of such duties to
the Fund, and with the approval of the Fund, we wish to avail ourselves of your
investment advisory services. Accordingly, with the acceptance of the Fund, we
hereby agree with you as follows for the duration of this Agreement:
1. You agree to furnish to us such information, investment
recommendations, advice and assistance, as we shall from time to time
reasonably request. In that connection, you agree to continue to maintain a
separate staff within your organization to furnish such services
exclusively to us. In addition, for the benefit of the Fund, you agree to
pay the fees and expenses of any directors or officers of the Fund who are
directors, officers or employees of you or of any of your affiliates,
except that the Fund shall bear travel expenses of one (but not more than
one) director, officer or employee of you or any of your affiliates who is
not a resident in the United States to the extent such expenses relate to
his attendance as a director at meetings of the Board of Directors of the
Fund in the United States and shall also bear the travel expenses of any
other director, officer or employee of you or of any of your affiliates who
is resident in the United States to the extent such expenses relate to his
attendance as a director at meetings of the Board of Directors outside of
the United States.
2. We agree to pay in United States dollars to you, as compensation
for services to be rendered by you hereunder, a monthly fee which, on an
annual basis, is equal to 0.2875% per annum of the value of the Fund's net
assets up to an including $50 million, 0.2750% per annum of the value of
<PAGE> 48
the Fund's net assets on the next $50 million of assets; 0.2500% per annum
of the value of the Fund's net assets on the next $250 million of assets;
0.2375% per annum of the value of the Fund's net assets on the next $400
million of assets; and 0.2250% per annum of the value of the Fund's net
assets in excess of $750 million. For purposes of computing the monthly
fee, the value of the net assets of the Fund shall be determined as of the
close of business on the last business day of each month; provided,
however, that the fee for the period from the end of the last month ending
prior to termination of this Agreement, for whatever reason, to date of
termination shall be based on the value of the net assets of the Fund
determined as of the close of business on the date of termination and the
fee for such period through the end of the month in which such proceeds are
received shall be prorated according to the proportion which such period
bears to a full monthly period. Each payment of a monthly fee shall be made
by us to you within the fifteen days next following the day as of which
such payment is so computed.
The value of the net assets of the Fund shall be determined pursuant
to applicable provision of the Certificate of Incorporation and By-laws of
the Fund.
We agree to work with you, in order to make our relationship as
productive as possible for the benefit of the Fund, to further the
development of your ability to provide the services contemplated by Section
1. To this end we agree to work with you to assist you in developing your
research techniques, procedures and analysis. We have furnished you with
informal memoranda, copies of which are attached to this Agreement,
reflecting our understanding of our working procedures with you, which may
be revised as you work with us pursuant to this Agreement. We agree not to
furnish, without your consent, to any person other than our personnel and
directors and representatives of the Fund any tangible research material
that is prepared by you, that is not publicly available, and that has been
stamped or otherwise clearly indicated by you as being confidential.
3. You agree that you will not make a short sale of any capital stock
of the Fund, or purchase any share of the capital stock of the Fund
otherwise than for investment.
4. Your services to us are not to be deemed exclusive and you are free
to render similar services to others, except as otherwise provided in
Section 1 hereof.
5. Nothing herein shall be construed as constituting you an agent of
us or of the Fund.
6. You represent and warrant that you are registered as an investment
adviser under the U.S. Investment Advisers Act of 1940, as amended. You
agree to maintain such registration in effect during the term of this
Agreement.
C-2
<PAGE> 49
7. Neither you nor any affiliate of yours shall receive any
compensation in connection with the placement or execution of any
transaction for the purchase or sale of securities or for the investment of
funds on behalf of the Fund, except that you or your affiliates may receive
a commission, fee or other remuneration for acting as broker in connection
with the sale of securities to or by the Fund, if permitted under the U.S.
Investment Company Act of 1940, as amended.
8. We and the Fund agree that you may rely on information reasonably
believed by you to be accurate and reliable. We and the Fund further agree
that neither you nor your officers, directors, employees or agents shall be
subject to any liability for any act or omission in the course of,
connected with or arising out of any services to be rendered hereunder
except by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties or by reason of reckless disregard of your
obligations and duties under this Agreement.
9. This Agreement shall remain in effect for a period of one year from
the day and date first written above and shall continue in effect
thereafter, but only so long as such continuance is specifically approved
at least annually by the affirmative vote of (i) a majority of the members
of the Fund's Board of Directors who are not interested persons of the
Fund, you or us, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) majority of the Fund's Board of Directors
or the holders of a majority of the outstanding voting securities of the
Fund. This Agreement may nevertheless be terminated at any time, without
penalty, by the Fund's Board of Directors or by vote of holders of a
majority of the outstanding voting securities of the Fund, upon 60 days'
written notice delivered or sent by registered mail, postage prepaid, to
you, at your address given above or at any other address of which you shall
have notified us in writing, or by you upon 60 days' written notice to us
and to the Fund, and shall automatically be terminated in the event of its
assignment or of the termination (due to assignment or otherwise) of the
Management Agreement, provided that an assignment to a corporate successor
to all or substantially all of your business or to a wholly-owned
subsidiary of such corporate successor which does not result in a change of
actual control or management of your business shall not be deemed to be an
assignment for purposes of this Agreement. Any such notice shall be deemed
given when received by the addressee.
10. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by either party hereto. It may be amended by
mutual agreement, but only after authorization of such amendment by the
affirmative vote of (i) the holders of a majority of the outstanding voting
securities of the Fund; and (ii) a majority of the members of the Fund's
Board of Directors who are not interested persons of
C-3
<PAGE> 50
the Fund, you or us, cast in person at a meeting called for the purpose of
voting on such approval.
11. Any notice hereunder shall be in writing and shall be delivered in
person or by facsimile (followed by mailing such notice, air mail postage
paid, the day on which such facsimile is sent).
Addressed
If to Scudder Kemper Investments, Inc. to:
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, NY 10154
Attention: President
(Facsimile No. 212-319-7813)
If to Daewoo Capital Management Co., Ltd., to:
34-3, Youido-dong
Yongdungpo-gu
Seoul, Korea
Attention: Chairman
(Facsimile No. 011-822-784-0826)
or to such other address as to which the recipient shall have informed the
other party.
Notice given as provided above shall be deemed to have been given, if
by personal delivery, on the day of such delivery, and if by facsimile and
mail, the date on which such facsimile and confirmatory letter are sent.
12. This Agreement shall be construed in accordance with the laws of
the State of New York, provided, however, that nothing herein shall be
construed as being inconsistent with the U.S. Investment Company Act of
1940, as amended. As used herein the terms "interested person,"
"assignment," and "vote of a majority of the outstanding voting securities"
shall have the meanings set forth in the U.S. Investment Company Act of
1940, as amended.
C-4
<PAGE> 51
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart hereof and return the same to us.
Very truly yours,
SCUDDER KEMPER INVESTMENTS, INC.
By
---------------------------------------------
President
The foregoing agreement is hereby accepted as of the date first above
written.
DAEWOO CAPITAL
MANAGEMENT CO., LTD.
By
-------------------------------------
Chairman
Accepted:
THE KOREA FUND, INC.
By
-------------------------------------
President
C-5
<PAGE> 52
THE KOREA FUND, INC.
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS -- OCTOBER 21, 1997
The undersigned hereby appoints Juris Padegs, Chang-Hee Kim and Hugh T.
Patrick and each of them, the proxies of the undersigned, with the power of
substitution to each of them, to vote all shares of The Korea Fund, Inc. (the
"Fund") which the undersigned is entitled to vote at the Special Meeting of
Stockholders of the Fund to be held at the offices of Scudder, Stevens & Clark,
Inc., 25th Floor, 345 Park Avenue (at 51st Street), New York, New York 10154, on
Tuesday, October 21, 1997 at 2:15 p.m., eastern time, and at any adjournments
thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder, recommend that you vote FOR each item.
1(A). To approve the new Investment Management, Advisory and Administration
Agreement between the Fund and Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
1(B). To approve the new Research and Advisory Agreement between the Fund's
investment manager and Daewoo Capital Management Co., Ltd.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
------------------------------------------------------------
(continued on other side)
<PAGE> 53
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name or names
appear. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such.
------------------------------------------
(Signature of Stockholder)
------------------------------------------
(Signature of joint owner, if any)
Dated, 1997
---------------------------------------
PLEASE SIGN AND
RETURN PROMPTLY IN ENCLOSED ENVELOPE
