<PAGE> 1
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>
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use Of Commission Only (as permitted by Rule 14a-6(e)(1))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
</TABLE>
THE KOREA FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[SCUDDER LOGO]
THE KOREA FUND, INC. March 10, 2000
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 Kemper Investments, Inc., your Fund's investment adviser, has agreed
with Daewoo Securities Co., Ltd. to launch a new Korean investment management
and advisory firm, Scudder Investments Korea, Ltd. Scudder Korea will be
owned 80% by Scudder Kemper and 20% by Daewoo Securities. As part of this
transaction, it is proposed that Scudder Korea would replace Daewoo Capital
Management as the Korean sub-adviser to your Fund. Consequently, it is
necessary for the stockholders of your Fund to approve a new research and
advisory agreement. The following pages give you additional information
regarding this transaction, the proposed new research and advisory agreement
and certain other matters. THE BOARD MEMBERS OF YOUR FUND, INCLUDING THOSE
WHO ARE NOT AFFILIATED WITH THE FUND OR SCUDDER, RECOMMEND THAT YOU VOTE FOR
THIS PROPOSAL.
Q. WHY AM I BEING ASKED TO VOTE ON THE PROPOSED NEW RESEARCH AND ADVISORY
AGREEMENT?
A. The Investment Company Act of 1940, which regulates investment companies such
as the Fund, requires stockholder approval of a new research and advisory
agreement with an investment adviser.
Korea
<PAGE> 3
Q. HOW WILL THE PROPOSED TRANSACTION 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 research and
advisory agreement are the same in all material respects as the research and
advisory agreement that will be in effect immediately prior to the
consummation of the proposed transaction. The Fund expects to receive at
least the same level of services from Scudder Korea that it has come to
expect from Daewoo Capital Management over the years. In fact, substantially
the same Daewoo Capital Management team that now provides services to the
Fund is expected to join Scudder Korea. Similarly, the service arrangements
between you and Scudder Kemper will not be affected. The current research and
advisory agreement will terminate upon the closing of the transaction. If
stockholders do not approve the new research and advisory agreement, 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 KEMPER DECIDED TO ENTER INTO THIS TRANSACTION?
A. Scudder Kemper believes that the proposed transaction will enable Scudder
Kemper to enhance its capabilities as a global asset manager by increasing
its participation in the Korean market. Scudder Kemper also believes that the
creation of Scudder Korea will enhance the level of services currently
provided to your Fund.
Q. WILL THE INVESTMENT MANAGEMENT FEE RATE BE THE SAME?
A. The investment management fee rate paid by your Fund will remain the same.
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, Daewoo Capital Management or Scudder
Korea, recommend that you vote in favor of the proposal 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 1-800-606-9639.
<PAGE> 4
[SCUDDER LOGO]
THE KOREA FUND, INC.
For more information please call Shareholder Communications Corporation,
your Fund's information agent, at 1-800-606-9639.
Korea
<PAGE> 5
[SCUDDER LOGO]
345 Park Avenue (at 51st Street)
New York, New York 10154
(800) 349-4281)
THE KOREA FUND, INC.
March 10, 2000
Dear Stockholder:
Scudder Kemper Investments, Inc. and Daewoo Securities Co., Ltd. have
agreed to launch a new Korean investment management and advisory firm, Scudder
Investments Korea, Ltd. Scudder Korea will be owned 80% by Scudder Kemper and
20% by Daewoo Securities. Scudder Kemper has agreed that Scudder Korea with
selected assets from Daewoo Capital Management Co., Ltd., the Korean sub-adviser
to your Fund. As part of this transaction, it is proposed that Scudder Korea
would replace Daewoo Capital Management as the Korean sub-adviser to your Fund.
Consequently, it is necessary for the stockholders of your Fund to approve a new
Research and Advisory Agreement.
The following important facts about the transaction are outlined below:
- Local Expertise. Your Fund would continue to benefit from the advice of
seasoned investment professionals resident in Korea. Substantially the
same Daewoo Capital Management team that now provides services to your
Fund is expected to join Scudder Korea.
- No Change in Fee Rate. The new sub-advisory arrangements would not cause
any increase in fees or other costs to your Fund, despite what we expect
to be an improved level of service.
- Director Approval. 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.
Scudder Kemper believes the greater reach of Scudder Korea will enable the
Fund to take increased advantage of its ability to invest in securities that are
not listed for trading on the Korea Stock Exchange. The Fund is permitted under
its investment guidelines to invest up to 35% of its assets in non-KSE listed
securities. Such investments, while
<PAGE> 6
typically involving greater risks and costs than investments in KSE-listed
securities, may also provide the opportunity for improved returns. Scudder
Kemper believes it would be in the best interests of the Fund and its
stockholders to increase the Fund's exposure to these investments. Therefore, as
an area of special focus, Scudder Korea will be expected to identify and
research opportunities for Fund investments in Korean companies that are not
listed on the KSE, while also providing advice about more traditional investment
opportunities.
THE BOARD MEMBERS OF YOUR FUND BELIEVE THAT THE PROPOSAL 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 THE PROPOSAL.
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.
Thank you for your cooperation and continued support.
Respectfully,
/s/ Nicholas Bratt /s/ Juris Padegs
Nicholas Bratt Juris Padegs
President Chairman of the
Board
STOCKHOLDERS ARE URGED TO SIGN AND RETURN THE PROXY CARD(S) 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 Kemper
Investments, Inc. ("Scudder Kemper"), 25th Floor, 345 Park Avenue (at 51st
Street), New York, New York 10154, on Wednesday, April 12, 2000, at 3:15 p.m.,
Eastern time, for the following purpose:
To approve or disapprove a new Research and Advisory Agreement between
Scudder Kemper and Scudder Investments Korea, Ltd. 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 March 3, 2000 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,
John Millette, Secretary
March 10, 2000
IMPORTANT -- WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S)
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> 8
PROXY STATEMENT
THE KOREA FUND, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
SPECIAL MEETING OF STOCKHOLDERS
APRIL 12, 2000
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 Kemper Investments, Inc. ("Scudder Kemper"), 25th Floor, 345
Park Avenue (at 51st Street), New York, New York 10154, on April 12, 2000 at
3:15 p.m., Eastern time, and at any and all adjournments thereof (the
"Meeting"). (In the descriptions of the proposal 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 March 13, 2000 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 Kemper Investments, 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 the 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 shares 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 the proposal to be considered at the Meeting 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 such proposal or to obtain a quorum. 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
<PAGE> 9
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 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.
The proposal to be considered at the Meeting requires 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 the proposal to be
considered at the Meeting. Broker non-votes will have the effect of a "no" vote
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.
Holders of record of the shares of the common stock of the Fund at the
close of business on March 3, 2000 (the "Record Date"), will be entitled to one
vote per share on all business of the Meeting. The number of shares outstanding
as of March 3, 2000 was 49,999,999.
2
<PAGE> 10
According to filings with the Securities and Exchange Commission on
Schedule 13G made in February 2000 (i) the President and Fellows of Harvard
College, care of Harvard Management Company, Inc., 600 Atlantic Avenue, Boston,
MA 02210, reported beneficial ownership of 3,515,500 shares, or 7.0% of the
Fund's outstanding shares and (ii) City of London Investment Group plc, 10
Eastcheap, London EC3M ILX, England, reported beneficial ownership of 3,246,700
shares, or 6.49% of the Fund's outstanding shares.
Except as noted above, to the best of the Fund's knowledge, as of February
22, 2000, no other persons beneficially owned more than 5% of the Fund's
outstanding stock. The table below sets forth the number of shares of the Fund
owned directly or beneficially by the Directors of the Fund as of February 22,
2000. Directors who do not own any shares have been omitted from the table.
<TABLE>
<CAPTION>
DIRECTOR SHARES OWNED(1)
-------- ---------------
<S> <C>
Nicholas Bratt................................... 9,220(2)
Robert J. Callander.............................. 2,500
Wilson Nolen..................................... 35,956(3)
Juris Padegs..................................... 2,140
Hugh T. Patrick.................................. 17,541
------
All Directors and Officers as a group............ 67,357(4)
</TABLE>
- ---------------
(1) The information as to beneficial ownership is based on statements furnished
to the Fund by each Director. Unless otherwise noted, beneficial ownership
is based on sole voting and investment power. Each Director's individual
shareholdings of the Fund constitutes less than 1/4 of 1% of the shares
outstanding of the Fund. As a group, the Directors and Officers own less
than 1/4 of 1% of the shares of the Fund.
(2) Mr. Bratt's total includes 1,809 shares held by members of his family as to
which he shares voting and investment power.
(3) Dr. Nolen's total includes 9,016 shares held in trust for his benefit.
(4) Of which 56,527 shares are held with sole investment and voting power and
10,825 shares are held with shared investment and voting power.
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 Kemper
Investments, Inc., 345 Park Avenue, New York, New York 10154.
3
<PAGE> 11
PROPOSAL: APPROVAL OF A NEW
RESEARCH AND ADVISORY AGREEMENT
INTRODUCTION
Daewoo Capital Management Co., Ltd. ("DCM"), a subsidiary of Daewoo
Securities Co., Ltd. ("Daewoo Securities"), is the Korean sub-adviser to the
Fund. As more fully described below, Scudder Kemper has entered into an
agreement with Daewoo Securities pursuant to which Scudder Kemper and Daewoo
Securities have agreed to launch a new Korean investment management and advisory
firm, Scudder Investments Korea, Inc. ("Scudder Korea"). Scudder Korea will be
owned 80% by Scudder Kemper and 20% by Daewoo Securities. Scudder Kemper has
agreed that Scudder Korea will acquire selected assets from DCM. As part of this
transaction (the "Transaction"), it is proposed that Scudder Korea would replace
DCM as the Korean sub-adviser to your Fund.
The current Research and Advisory Agreement, dated as of September 23,
1999, between Scudder Kemper and DCM (the "Current Sub-Advisory Agreement") was
submitted to stockholders and approved at a special meeting of the Fund held on
October 20, 1999. As DCM has informed the Fund that it does not plan to continue
to offer investment advisory services following the Transaction, the Board of
Directors has voted to terminate the Current Sub-Advisory Agreement, effective
on the consummation of the Transaction.
The Board of Directors believes that it is important for the Fund to
continue to have access to Korean advisory services. Accordingly, a new Research
and Advisory Agreement (the "New Sub-Advisory Agreement" and, together with the
Current Sub-Advisory Agreement, the "Sub-Advisory Agreements") between Scudder
Kemper and Scudder Korea was approved by the Board of Directors of the Fund,
including the Directors who are not parties to such agreement or "interested
persons" (as defined under the 1940 Act) of any such party ("Non-Interested
Directors"), on February 22, 2000 and is now being proposed for approval by the
stockholders of the Fund.
4
<PAGE> 12
THE NEW SUB-ADVISORY AGREEMENT IS SUBSTANTIALLY IDENTICAL TO THE CURRENT
SUB-ADVISORY AGREEMENT, EXCEPT FOR THE IDENTITY OF THE SUB-ADVISER AND THE DATES
OF EXECUTION AND TERMINATION. The material terms of the Sub-Advisory Agreements
are described under "Description of the Sub-Advisory Agreements" below. A form
of the New Sub-Advisory Agreement is attached hereto as Exhibit A.
DESCRIPTION OF SCUDDER KOREA
Scudder Korea was organized in January 2000 under the laws of the Republic
of Korea. Scudder Korea is currently in the process of registering with the U.S.
Securities and Exchange Commission as an investment adviser under the Investment
Advisers Act of 1940, as amended, and will not serve as Korean sub-adviser to
the Fund until it is so registered. The address of Scudder Korea is c/o Shin &
Kim, Samdo Bldg., 4th Floor, 1-170, Soonhwa-Dong, Chung-Ku, Seoul 100-130,
Korea. Scudder Korea currently is 100% owned by Scudder Kemper. As a result of
the Transaction, Scudder Korea will be owned 80% by Scudder Kemper and 20% by
Daewoo Securities. The address of Scudder Kemper is 345 Park Avenue, New York,
New York 10154. The address of Daewoo Securities is Daewoo Securities Building,
34-3 Youido-dong, Yongdungpo-gu, Seoul, Korea.
The table below sets forth the name, principal occupation and address of
the principal executive officer and directors of Scudder Korea, as of the date
hereof.
<TABLE>
<CAPTION>
NAME AND POSITION
WITH SCUDDER KOREA PRINCIPAL OCCUPATION ADDRESS
- ------------------ -------------------- -------
<S> <C> <C>
Jun-Ki Hong President and c/o Shin & Kim
President and Representative Samdo Bldg., 4th Floor
Representative Director, Scudder 1-170, Soonhwa- Dong,
Director Investments Chung-Ku
Korea, Ltd. Seoul 100-130, Korea
Bruce H. Goldfarb Senior Vice 345 Park Avenue
Director President, Scudder New York, NY 10154
Kemper Investments, U.S.A.
Inc.
Stephen R. Langlois Senior Vice 60 St. Mary Axe
Director President, Scudder London EC3A 8JQ,
Kemper Investments, England
Inc.
</TABLE>
5
<PAGE> 13
The table below sets forth the name, principal occupation and address of
the persons whom Scudder Korea plans to engage as its principal executive
officer and directors immediately after the consummation of the Transaction.
<TABLE>
<CAPTION>
NAME AND POSITION
WITH SCUDDER KOREA PRINCIPAL OCCUPATION ADDRESS
- ------------------ -------------------- -------
<S> <C> <C>
Won-Ik Lee Chairman, Scudder c/o Shin & Kim
Chairman Investments Samdo Bldg., 4th Floor
Korea, Ltd. 1-170, Soonhwa-Dong,
Chung-Ku
Seoul 100-130, Korea
Jun-Ki Hong President and c/o Shin & Kim
President and Representative Samdo Bldg., 4th Floor
Representative Director, Scudder 1-170, Soonhwa- Dong,
Director Investments Korea, Chung-Ku
Ltd. Seoul 100-130, Korea
D.W. Park Chief Investment c/o Shin & Kim
Director Officer, Scudder Samdo Bldg., 4th Floor
Investments Korea, 1-170, Soonhwa- Dong,
Ltd. Chung-Ku
Seoul 100-130, Korea
</TABLE>
As discussed below under "The Transaction -- The Shareholders Agreement,"
the Board of Directors is to consist of seven directors, four of whom will be
"outside directors" as defined under Korean law. Scudder Kemper and Daewoo
Securities are in the process of identifying candidates to serve as outside
directors of Scudder Korea, but these directors have not yet been named.
It is expected that Nicholas Bratt, Director and President of the Fund,
will become a member of the Board of Directors of Scudder Korea at or prior to
the closing of the Transaction.
THE TRANSACTION
The following is a description of the Transaction.
Capital Contributions
Scudder Korea currently is a wholly owned subsidiary of Scudder Kemper.
Scudder Korea will be capitalized with approximately $8.75 million,
approximately $7 million to be contributed by Scudder
6
<PAGE> 14
Kemper and approximately $1.75 million to be contributed by Daewoo Securities.
Scudder Kemper and Daewoo Securities will receive common stock of Scudder Korea
in proportion to the capital contributed. The contribution of this capital will
occur prior to Scudder Korea's acquisition of assets from DCM and prior to
Scudder Korea's entering into a sub-advisory agreement with the Fund.
The Shareholders Agreement
At or prior to the contribution of capital described above, Scudder Korea,
Scudder Kemper and Daewoo Securities will enter into a shareholders agreement.
Pursuant to the shareholders agreement, Scudder Korea will have seven directors,
four of whom will be "outside directors," defined under Korean law to exclude,
among others, affiliates of Daewoo Securities, DCM or Scudder Kemper. Five
directors (two of whom must be outside directors) will be appointed by Scudder
Kemper, one outside director will be appointed by Daewoo Securities, and another
outside director will be jointly designated by Scudder Kemper and Daewoo
Securities.
Unless Scudder Kemper consents, Daewoo Securities may not transfer its
shares in Scudder Korea until January 31, 2005, after which its shares are
subject to a right of first refusal by Scudder Kemper. The shares owned by
Daewoo Securities are subject to a "tag-along" provision allowing Daewoo
Securities to participate in a sale of shares by Scudder Kemper to a person who
would then own more than 40% of Scudder Korea's shares, and a "drag-along"
provision allowing Scudder Kemper to require Daewoo Securities to participate in
such a sale. The shares owned by Daewoo Securities also are subject to put and
call arrangements. In addition, Scudder Kemper has the right to put its Scudder
Korea shares to Daewoo Securities if (i) Daewoo Securities fails to meet certain
sales targets set forth in the distribution agreement to be entered into with
respect to Korean-registered funds sponsored by Scudder Korea, or (ii) Daewoo
Securities undergoes a change in control and thereafter breaches any of its
agreements with Scudder Kemper.
Acquisition of Assets
After Scudder Korea has received the licenses required under Korean law to
operate its planned businesses (which we expect to occur by mid-year of 2000),
Scudder Korea will acquire selected assets from DCM. Generally, Scudder Korea
will purchase operating assets that it deems necessary for Scudder Korea to
carry on its business in
7
<PAGE> 15
accordance with its business plan. The purchase price of the acquired assets
will be the book value of the acquired assets minus the book value, if any, of
the liabilities that Scudder Korea chooses to assume. While the purchase price
will be determined by the assets selected, Scudder Kemper currently anticipates
that the purchase price will be no more than $2.7 million.
While Scudder Korea will not acquire DCM's interest in any existing
investment advisory, management or sub-advisory agreements, Scudder Kemper's
asset purchase agreement with Daewoo Securities contemplates that Scudder Korea
will enter into new agreements with current DCM clients (including the Fund) if
mutually agreeable to Scudder Kemper and such clients.
The obligation of Scudder Kemper to complete this transaction is subject to
a number of conditions, including the receipt of the required Korean licenses
and approval by the stockholders of the Fund.
The Distribution Agreements
Prior to the transfer of assets described above, Daewoo Securities and
Scudder Korea will enter into an agreement pursuant to which Daewoo Securities
will provide distribution services with respect to Korean-registered funds
advised by Scudder Korea. In exchange for its distribution services, Daewoo
Securities will receive, among other things, the right to receive management
fees paid by such Korean funds, to the extent such fees exceed set minimum
percentages to be retained by Scudder Korea. This distribution agreement
contains certain distribution volume and fund performance thresholds which, if
not met, trigger the put and call provisions in the shareholders agreement. In
addition, in connection with the asset purchase agreement, Daewoo Securities has
entered into a sales agency agreement with Scudder Global Opportunities Funds
and Scudder, Stevens & Clark Limited, pursuant to which Daewoo Securities will
perform certain services as a sales agent in Korea for certain offshore funds
that are distributed by Scudder, Stevens & Clark Limited.
DESCRIPTION OF THE SUB-ADVISORY AGREEMENTS
Scudder Kemper acts as the investment adviser to and manager and
administrator of the Fund pursuant to an Investment Advisory, Management and
Administration Agreement, dated as of September 7, 1998. Each of the
Sub-Advisory Agreements provides that, in the case of the Current Sub-Advisory
Agreement, DCM and, in the case of the New Sub-Advisory Agreement, Scudder Korea
(in each case, such applicable party, the "Korean Adviser") shall furnish
Scudder Kemper
8
<PAGE> 16
with information, investment recommendations, advice and assistance as Scudder
Kemper from time to time reasonably requests. In addition, each of the
Sub-Advisory Agreements provides that the Korean Adviser shall maintain a
separate staff within its organization to furnish such services exclusively to
Scudder Kemper. For the benefit of the Fund, the Korean Adviser has agreed to
pay the fees and expenses of any directors or officers of such 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 meeting of the Board of Directors of the Fund.
A form of the New Sub-Advisory Agreement is attached hereto as Exhibit A.
THE NEW SUB-ADVISORY AGREEMENT FOR THE FUND IS SUBSTANTIALLY IDENTICAL TO THE
CURRENT SUB-ADVISORY AGREEMENT, EXCEPT FOR THE IDENTITY OF THE SUB-ADVISER AND
THE DATES OF EXECUTION AND TERMINATION.
In return for the services it renders under the Sub-Advisory Agreements,
the Korean Adviser is paid by Scudder Kemper 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, 1999, the fees paid by Scudder Kemper to DCM
pursuant to the predecessor to the Current Sub-Advisory Agreement (which
contained compensation provisions identical to those described above) amounted
to $1,234,267.10.
Each of the Sub-Advisory Agreements further provides that the Korean
Adviser shall not be liable for any act or omission in the course of, in
connection with or arising out of any services to be rendered under such
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 reckless disregard by the Korean Adviser of its obligations and
duties under such Sub-Advisory Agreement.
Each of the Sub-Advisory Agreements may be terminated without penalty upon
sixty (60) days' written notice by either the Fund's Board of Directors or
Scudder Korea, or by vote of a "majority of the outstanding voting securities of
the Fund," and automatically terminates in the event of the termination of the
Fund's currently effective
9
<PAGE> 17
investment advisory, management and administration agreement with Scudder Kemper
or in the event of its assignment.
The Current Sub-Advisory Agreement, dated September 23, 1999, was submitted
to stockholders and approved at a special meeting of the Fund held on October
20, 1999. The purpose of the last submission to stockholders of the Current
Sub-Advisory Agreement was to approve or disapprove the Current Sub-Advisory
Agreement in light of the termination of the predecessor sub-advisory agreement
due to a change of control of Daewoo Securities on September 22, 1999. As DCM
has informed the Fund that it does not plan to continue to offer investment
advisory services following the Transaction, the Board of Directors has voted to
terminate the Current Sub-Advisory Agreement, effective on the consummation of
the Transaction.
The New Sub-Advisory Agreement will be dated as of the date of the
consummation of the Transaction, which is expected to occur by mid-year of 2000.
The New Sub-Advisory Agreement will be in effect for an initial term ending on
September 30, 2000, 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 Fund's Board of Directors
and, in either event, the vote of a majority of the Fund's Non-Interested
Directors cast in person at a meeting called for that purpose. If the
stockholders of the Fund do not approve the New Sub-Advisory Agreement, the
Board of Directors will take such action as it deems to be in the best interests
of the Fund and its stockholders.
The Fund's license to invest in Korean securities provides that, should the
Fund appoint a successor manager or Korean adviser or terminate the services of
Scudder Kemper or the Korean Adviser, approval by the Korean Minister of Finance
and Economy would be required. The license provides that such approval will not
be unreasonably withheld. The Fund is in the process of obtaining this approval.
During the fiscal year ended June 30, 1999, there were no brokerage
commissions on investment transactions paid by the Fund to Daewoo Securities.
BOARD OF DIRECTORS' EVALUATION
At an in-person special meeting held on February 22, 2000, the Board of
Directors, including a majority of the Non-Interested Directors, voted to
approve the New Sub-Advisory Agreement. The Board of Directors of the Fund
considered the continuity provided by Scudder
10
<PAGE> 18
Korea's intention to maintain substantially the same team that has been
providing Korean advisory services to the Fund under DCM and the strengthened
management with the addition of Won-Ik Lee as Chairman and Jun-Ki Hong as
President and Representative Director. In addition, the Board of Directors
considered information provided by Scudder Kemper with respect to the
Transaction.
During the course of their deliberations, the Non-Interested Directors
considered a variety of factors, including: the nature, quality and extent of
the services that can expected to be furnished by Scudder Korea; the ability of
Scudder Korea to retain and attract capable personnel to serve the Fund; the
investment advisory record of the staff expected to be retained by Scudder Korea
in providing assistance to the Fund; the license held by the Fund to invest in
Korea; the experience of the personnel expected to constitute the staff and
management of Scudder Korea in the field of investing in Korea; the risks
assumed by Scudder Korea; the advantages and possible disadvantages to the Fund
of having a Korean adviser of the Fund that also provides advisory services to
other clients and engages in other financial service businesses in Korea; the
possibility that Scudder Korea's increased resources may enable the Fund to take
greater advantage of its ability to invest in Korean securities not listed on
the Korea Stock Exchange; the financial resources of Scudder Korea and the use
of appropriate incentives to assure that Scudder Korea will furnish high-
quality services to the Fund; and various other factors.
In addition to the foregoing factors, the Non-Interested Directors gave
careful consideration to the likely impact of the Transaction on the provision
of Korean advisory services to the Fund. In this regard, the Non-Interested
Directors considered, among other things, the fact that the Transaction does not
appear to alter in any material respect the quality of services provided to the
Fund. Scudder Korea and Scudder Kemper expect that the Transaction would have no
material effect on the personnel assigned to the Fund and no material effect on
the Fund or its stockholders. Based on the foregoing, the Non-Interested
Directors concluded that the Transaction should cause no reduction in the
quality of services provided to the Fund and that the Transaction is in the best
interests of the stockholders of the Fund.
DIFFERENCES BETWEEN THE CURRENT AND NEW SUB-ADVISORY AGREEMENTS
The New Sub-Advisory Agreement is substantially identical to the Current
Sub-Advisory Agreement, except for the identity of the sub-advisor and the dates
of execution and termination.
11
<PAGE> 19
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE STOCKHOLDERS OF THE
FUND VOTE IN FAVOR OF THIS PROPOSAL.
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
Kemper or its affiliates. In addition to solicitation by mail, certain officers
and representatives of the Fund, officers and employees of Scudder Kemper 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"), 17 State Street, New York,
New York 10004, has been engaged to assist in the solicitation of proxies. The
cost of SCC's services is estimated at $3,000 plus expenses. As the Meeting date
approaches, certain stockholders of the Fund may receive a telephone call from a
representative of SCC if his or her 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. The Directors believe that these procedures are
reasonably designed to ensure that the identity and 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 proposal listed on the proxy card, and ask for the stockholder's
instructions on such 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.
12
<PAGE> 20
SCC will record the stockholder's instructions on the card. Within 72 hours, the
stockholder will be sent a letter or mailgram confirming 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 1-800-606-9639. Registered
stockholders may also use this telephone number to vote telephonically. Any
proxy given by a stockholder, whether in writing or by telephone, is revocable
until voted at the Meeting.
PROPOSALS OF STOCKHOLDERS
Stockholders wishing to submit proposals for inclusion in a proxy statement
for the 2000 meeting of stockholders of the Fund should send their written
proposals to John Millette, Secretary of the Fund, c/o Scudder Kemper
Investments, Inc. at 345 Park Avenue, New York, New York 10154, by May 3, 2000.
The timely submission of a proposal does not guarantee its inclusion.
The Fund may exercise discretionary voting authority with respect to
stockholder proposals for the 2000 meeting of stockholders which are not
included in the proxy statement and form of proxy, if notice of such proposals
is not received by the Fund at the above address on or before July 18, 2000.
Even if timely notice is received, the Fund may exercise discretionary voting
authority in certain other circumstances. Discretionary voting authority is the
ability to vote proxies that stockholders have executed and returned to the Fund
on matters not specifically reflected on the form of proxy.
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 proposal to approve a new
investment sub-advisory agreement. 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 interests of the Fund.
13
<PAGE> 21
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,
/s/ JOHN MILLETTE
- -----------------------------------------
John Millette
Secretary
March 10, 2000
14
<PAGE> 22
EXHIBIT A
FORM OF NEW
RESEARCH AND ADVISORY AGREEMENT
SCUDDER KEMPER INVESTMENTS, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
, 2000
Scudder Investments Korea, Ltd.
[Address]
Seoul, Korea
Dear Sirs:
We have entered into an Investment Advisory, Management and Administration
Agreement (the "Management Agreement") dated as of September 7, 1998 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 of 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 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
outside of the United States.
<PAGE> 23
2. We agree to pay in United States dollars to you, as compensation
for the 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 and including $50 million; 0.2750% per annum of the value
of 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 the 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.
<PAGE> 24
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.
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 (the "1940 Act").
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 until September 30, 2000 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) 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, by the Fund's Board of
<PAGE> 25
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 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
<PAGE> 26
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 Scudder Investments Korea, Ltd., to:
Scudder Investments Korea, Ltd.
[Address]
Seoul, Korea
Attention: Chairman
(Facsimile No. 011-822- )
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, on 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 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.
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:
--------------------------------------------------------
Title:
<PAGE> 27
The foregoing agreement is hereby accepted as of the date first above written.
SCUDDER INVESTMENTS KOREA, LTD.
By:
--------------------------------------------------------
Title:
THE KOREA FUND, INC.
By:
--------------------------------------------------------
Title:
<PAGE> 28
THE KOREA FUND, INC.
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS -- APRIL 12, 2000
The undersigned hereby appoints Kathryn L. Quirk, Juris Padegs and Bruce H.
Goldfarb 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 Kemper
Investments, Inc. ("Scudder Kemper"), 25th Floor, 345 Park Avenue (at 51st
Street), New York, New York 10154, on Wednesday, April 12, 2000 at 3:15 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 ON THE REVERSE SIDE.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder Kemper, recommend that you vote FOR the item set forth on
the reverse side.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
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.
<TABLE>
<S> <C>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------------------------------ ------------------------------------------------------------
- ------------------------------------------------------------ ------------------------------------------------------------
- ------------------------------------------------------------ ------------------------------------------------------------
</TABLE>
------------------------------------------------------------
(continued on other side)
<PAGE> 29
THE KOREA FUND, INC.
CONTROL NUMBER:
1. To approve the new Research and Advisory Agreement between Scudder Kemper and
Scudder Investments Korea, Ltd.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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 Be sure to sign and date this proxy
exactly as your names appear.
------------------------------------------
(Stockholder sign here)
------------------------------------------
(Co-owner sign here, if any)
Dated , 2000
---------------------------------------
Mark box at right if an address change or comment has been
noted on the reverse side of this card: [ ]
RECORD DATE SHARES:
