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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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SIGNATURE ERIC M. BANHAZL
TITLE ASSISTANT TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<RESTATED>
<CIK> 0000884342
<NAME> KOREA CAPITAL TRUST
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<NUMBER> 1
<NAME> KOREA CAPITAL FUND
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<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
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</TABLE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Korea Capital Trust
In planning and performing our audit of the financial statements of Korea
Capital Fund (the "Fund"), a series of Korea Capital Trust, for the year
ended August 31, 1996, we considered the Fund's internal control structure,
including procedures for safeguarding securities, in order to determine our
auditing procedures for the purpose of expressing our opinion on the
financial statements and financial highlights and to comply with the
requirements of Form N-SAR, not to provide assurance on the internal
control structure.
The management of the Fund is responsible for establishing and maintaining an
internal control structure. In fulfilling this responsibility, estimates
and judgments by management are required to assess the expected benefits and
related costs of internal control structure policies and procedures.
Two of the objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design
or operation of the specific internal control structure elements does not
reduce to a relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial statements and
financial highlights being audited may occur and not be detected within a
timely period by employees in the normal course of performing their assigned
functions. However, we noted no matters involving the internal control
structure, including procedures for safeguarding securities, that we consider
to be material weaknesses as defined above as of August 31, 1996.
This report is in intended solely for the information and use of management and
the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Los Angeles, California
October 15, 1996
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:
[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 240.14a-11(c) or
240.14a-12
KOREA CAPITAL TRUST
[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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(I)(1),
14a-6(I)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(I)(3).
[ ] 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:_______________________
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11:
____________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________
(5) Total fee paid:_____________________________
[ ] 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:___________________________________
KOREA CAPITAL TRUST
PROXY SOLICITED BY MANAGEMENT
The undersigned hereby appoints Indong Oh and Jai Young Sohn as proxies
of the undersigned, with full power of substitution, to vote at the Special
Meeting of Shareholders of Korea Capital Fund (the "Fund"), a series of Korea
Capital Trust, to be held on_________, 1996 at 1:00 p.m. P.S.T., and any
adjournment thereof, all the shares of the Fund standing in the name of the
undersigned as follows:
(1) For [ ] Against [ ] Abstain [ ]
With respect to approval of the new Advisory/Administration Agreement with
Daehan Securities, Inc., as more fully described in the proxy statement (the
Board of Trustees recommend a vote FOR);
(2) Election of Trustees
[ ] For All Nominees [ ] Withhold
Listed Below (ex- Authority To
cept as marked to Vote For All
the contrary) Nominees
Listed Below
Nominees: Indong Oh
Hyung Joo Park
Chung Soo Han
James H. Yu
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
____________________________
(3) For [ ] Against [ ] Abstain [ ]
With respect to ratification of the selection of Ernst & Young LLP as
auditors of the Fund for the fiscal year ending August 31, 1997 (the Board
of Trustees recommends a vote FOR);
(2) For [ ] Against [ ] Abstain [ ]
In their discretion on all other business that may properly come before
the meeting and any adjournment thereof.
This proxy will be voted as specified. If no specification is made and/or
other matters, this proxy will be vote FOR the adoption of Proposals 1 and 3,
and FOR the election of the four nominated trustees, and on other matters as
said proxies may determine.
Dated:______________1996
(L.S.)
(L.S.)
Signature(s) should be exactly as name or names appear on this proxy.
If stock is held jointly, each holder should sign. If signing as attorney,
executor, administrator, trustee or guardian, please give us full name and
capacity in which signing.
KOREA CAPITAL TRUST
3360 W. Olympic Blvd., Suite 201
Los Angeles, California 90019
Notice of Special Meeting of Shareholders
Meeting Date: __________, 1996
To the Shareholders:
A Special Meeting of Shareholders of Korea Capital Fund (the "Fund"), a
series of Korea Capital Trust (the "Trust"), will be held on________, 1996 at
1:00 P.M. at the offices of the Trust located at 3360 W. Olympic Blvd., Suite
201, Los Angeles, California 90019, for the following purposes:
1. To approve a new Advisory/Administration Agreement between the Trust
and Daehan Securities, Inc. ("Daehan") with respect to the Fund, as more
fully described in the proxy statement;
2. To elect Trustees of the Fund;
3. To ratify the selection of Ernst & Young LLP as auditors of the Fund
for the fiscal year ending August 31 1996; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THE TRUSTEES UNANIMOUSLY RECOMMEND APPROVAL OF ALL PROPOSALS.
Shareholders of record at the close of business on August 30, 1996 are
entitled to vote at the meeting or any adjournment thereof. It is important
that you return your signed proxy promptly, regardless of the size of your
holdings, so that a quorum may be assured.
By Order of the Board of Trustees
Jai Young Son
Secretary
__________, 1996
Your vote is important! Please indicate your voting instructions on the
enclosed proxy, date and sign it, and return it in the accompanying postage
prepaid envelope. If you sign, date and return the proxy but give no voting
instructions, your shares will be voted to authorize the election of all of
the nominees named in the proxy statement and in favor of all other proposals
noticed above.
KOREA CAPITAL TRUST
3360 W. Olympic Blvd., Suite 201
Los Angeles, California 90019
PROXY STATEMENT
Special Meeting of Shareholders
________, 1996
This proxy statement is furnished in connection with the solicitation by
the Board of Trustees of Korea Capital Fund (the "Fund"), a series of Korea
Capital Trust (the "Trust"), of proxies to be voted at a Special Meeting of
Shareholders (the "Meeting") to be held on _________, 1996, and any
adjournment thereof. The purposes of the meeting are set forth in the
accompanying Notice of Special Meeting of Shareholders dated _______, 1996.
This proxy solicitation will be made primarily by mailing this proxy
statement and the accompanying proxy card to shareholders commencing on or
about ___________ , 1996. Supplementary solicitations may be made by
telephone or telegram or by personal interview. Officers and Trustees of the
Trust and Daehan Securities, Inc. ("Daehan") who participate in such
solicitations will receive no compensation for their services other than
their regular salaries, if any. The expenses of preparing and mailing this
proxy statement and its enclosures and all other solicitation expenses will be
paid by Daehan. Daehan may also solicit proxies at its own expense, and will
reimburse brokerage firms, banks and other custodians and fiduciaries for
their expenses in forwarding solicitation materials to the beneficial owners
of shares.
The Trust will furnish without charge a copy of the Fund's most recent
annual report and semi-annual report to any shareholder upon request. Such
request may be made by calling the Trust during business hours at
1-213-734-5000, or by writing to the Trust at the address set forth above.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on August 30,
1996 as the record date for the Meeting and any adjournments thereof. As of
August 30, 1996, there were 1,052,078 shares of the Fund issued and
outstanding. Only shareholders of record at the close of business on that date
are entitled to notice of and to vote at the meeting. Each such shareholder
is entitled to one vote for each full share, and a proportionate vote for
each fractional share, of the Fund held on the record date.
The holders of 40% of the outstanding shares of the Fund must be present
in person or represented by proxy at the Meeting in order to constitute a
quorum for the transaction of any business. If a quorum is present at the
Meeting but sufficient votes to approve one or more of the items on the
agenda are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies with
respect to those items. In so doing, the persons named as proxies will
attempt to determine if an adjournment and additional shareholder
solicitation are reasonable and in the best interest of shareholders, and
will vote for or against adjournment accordingly. Any such adjournment will
require the affirmative vote of a majority of the shares present at the
Meeting or represented by proxy. If the adjournment is for more than 60 days
from _______, 1996, the Board of Trustees will set a new record date for the
Meeting.
If the enclosed proxy card is executed properly and returned in time to
be voted at the Meeting, and is not revoked, the shares represented thereby
will be voted according to the instructions marked on the card. The persons
voted as proxies will use their best judgment in voting in connection with
the transaction of such other business as may properly come before the Meeting
or any adjournment thereof. A shareholder giving a proxy may revoke it at
any time before it is exercised by giving written notice of its revocation to
the Secretary of the Trust at the address indicated on the Notice of Special
Meeting, by executing and delivering to the Trust another proxy dated
subsequent to the proxy to be revoked, or by attending the Meeting and
voting in person.
Abstentions and broker "non-votes" (proxies from brokers or nominees
indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular
matter with respect to which the broker or nominee does not have
discretionary power) will not be counted for or against any proposal to
which they relate, but will be counted for purposes of determining the
shares present at the Meeting. Abstentions and broker non-votes will
therefore have the effect of a "no" vote for purposes of obtaining the
requisite approvals of the proposals before the Meeting.
PROPOSAL 1
APPROVAL OF A NEW
ADVISORY/ADMINISTRATION AGREEMENT
At the Meeting, the shareholders will be asked to approve a new
Advisory and Administration Agreement (the "New Advisory/Administration
Agreement") between the Trust and Daehan Securities, Inc. ("Daehan") with
respect to the Fund, effective as of January 3, 1994. A copy of the New
Advisory/Administration Agreement is set forth as Exhibit A to this Proxy
Statement. The material provisions of the New Advisory/Administration
Agreement are the same as those of the Trust's current Advisory and
Administration Agreement with respect to the Fund dated September 11, 1992
(the "Current Advisory/Administration Agreement").
Daehan has provided investment advice and supervisory management
services to the Fund since its inception, pursuant to the Current
Advisory/Administration Agreement. The Current Advisory/Administration
Agreement was last approved by the Board of Trustees of the Fund on June 13,
1996 and was last approved by the shareholders of the Fund on September 1, 1992.
On January 3, 1994, Indong Oh, the principal shareholder of Daehan, sold
all of the shares of Daehan's common stock held by him to Han Huskey and
Tong S. Suhr. As such shares comprised 97.9% of the outstanding shares of
Daehan, this change of control of Daehan constituted an "assignment" of the
Current Advisory/Administration Agreement, as that term is defined in the
Investment Company Act of 1940 (the "1940 Act"), and resulted in the
termination of the Current Advisory/Administration Agreement. Neither Dr.
Oh nor the two individual purchasers were aware of the impact of the sale on
the Current Advisory/Administration Agreement, and the Board of Trustees did
not become aware of the transfer of such shares and its impact on the Current
Advisory /Administration Agreement until May 1996. In order to ensure that
Daehan is and will be deemed to have been at all times providing services to
the Fund under an appropriate written agreement, shareholders are now being
asked to approve the New Advisory/Administration Agreement with Daehan,
effective as of January 3, 1994.
Pursuant to the New Advisory/Administration Agreement, Daehan will
continue to provide the sames services to the Fund as it has provided under
the Current Advisory/Administration Agreement. These services consist of
reviewing investment decisions of Korea Investment Management Ltd. ("KIM"),
the Fund's investment manager, and consulting with KIM; providing investment
research regarding U.S. companies and recommending securities of U.S.
issuers to KIM for purchase by the Fund; reviewing and overseeing the
operations of Investment Company Administration Corporation, the
sub-administrator of the Fund; furnishing corporate officers and clerical
staff; providing office space, services and equipment to the Fund; and
supervising all matters related to the Fund's operation.
Except as described below, the Fund will continue to pay all of its
other expenses, including commissions, interest, taxes, legal and accounting
fees, fees of custodians, transfer agents, registrars and dividend
disbursing agents, registration and filing fees, the cost of stock certificates,
costs in connection with annual or special meetings of shareholders,
including the preparation and distribution of proxy soliciting materials,
fees and expenses of Fund directors who are not "interested persons" of the
Fund, office space, office furnishings, office supplies and office equipment,
including telephone service, insurance premiums, printing costs (which do
include the costs of printed material sent to persons who are not
shareholders), travel expenses, salaries and related compensation of all
non-officer employees, postage, association dues and extraordinary and
non-recurring expenses.
Daehan and the Investment Manager have agreed that they will limit the
Fund's operating expenses (other than interest, taxes, brokerage commissions
and other portfolio transaction expenses, capital expenditures and
extraordinary expenses) to 2.40% of the Fund's average annual net assets.
In addition, Daehan and the Investment Manager will continue to be obligated to
reimburse the Fund if Fund expenses exceed those expenses set forth in any
statutory or regulatory formula prescribed by any state in which Fund shares
are registered at such time.
Like the Current Advisory/Administration Agreement, the New
Advisory/Administration Agreement will provide that neither Daehan nor any of
its officers, directors or employees will be liable for any error of judgment
or mistake of law, or for any loss suffered by the Fund in connection with
the matters to which the New Advisory/Administration Agreement relates,
except for losses resulting from Daehan's willful misfeasance, bad faith or
gross negligence in the performance of its duties on behalf of the Fund or
from its reckless disregard of its duties under the New
Advisory/Administration Agreement.
For its services, Daehan will continue to be compensated at a rate of
0.30% of the value of the Fund's average daily net assets, payable monthly.
The rate of compensation will continue to remain constant whether or not
there are fluctuations in the Fund's net assets. Such annual rate is the
same as the rate received under the Current Advisory/Administration Agreement
and is similar to the rate contracted for by other mutual funds with
comparable investment policies. During the period January 3, 1994 through
August 31, 1996, Daehan earned fees of $34,753 net of its share of expense
reimbursements pursuant to the contract. Of that amount, the Fund has paid
$11,152 and, as of August 31, 1996, owed Daehan $3,781 for services
pursuant to the contract. No payments have been made to Daehan since May
1996, at which time the Board of Trustees were informed about Daehan's change
of ownership.
If executed, the New Advisory/Administration Agreement will have an
initial term of one year, and will continue thereafter from year to year
subject to the annual approval of its renewal by vote of a majority of the
Board of Trustees or of a majority of the outstanding voting shares of the Fund,
and by vote of a majority of the Trustees who are not parties to the New
Advisory/Administration Agreement or "interested persons" of the Fund or
Daehan (as that term is defined in the 1940 Act). Like the Current
Advisory/Administration Agreement, the New Advisory/Administration Agreement
will be terminable at any time on sixty days' notice, without penalty, by
vote of the Board of Trustees or of the holders of the majority of the
outstanding voting shares of the Fund, and by Daehan on the same notice to
the Fund. The New Advisory/Administration Agreement will automatically
terminate on assignment (as defined in the 1994 Act).
Information Regarding Daehan
Daehan is a Colorado corporation organized in 1991 which is registered
as an investment adviser and a broker-dealer. It provides full-service
brokerage services primarily to Korean-American individual, institutional and
corporate investors.
Daehan is controlled by Messrs. Han Huskey and Tong S. Suhr, who own 98%
of its outstanding shares.
Daehan's principal executive officers are as follows:
Name Address Position
Kim, Yong Soo 2028 Glencore Avenue President
Venice, CA 90291
Son, Jai Young 420 Pilgrim Place Executive Vice President
San Marino, CA 91108
Lee, Young Jin 1115 Huntington Drive, #Z Vice President
South Pasadena, CA 91030
In addition, the following other individuals are officers, directors,
employees or shareholders of both the Fund and Daehan: Indong Oh and Jai
Young Son.
Consideration of New Agreement by the Board
The Board of Trustees of the Fund, including all of the Trustees who are
not "interested persons" of the Fund within the meaning of the 1940 Act, has
concluded that it will be in the best interests of the Fund and its
shareholders if the New Advisory/Administration Agreement with Daehan is
approved. The Board, therefore, recommends shareholder approval of the New
Advisory/Administration Agreement.
In making this recommendation, the Trustees carefully evaluated the
following factors, among others: (1) the level of the advisory fees
currently paid to Daehan will be unchanged under the New
Advisory/Administration Agreement; (2) the other terms of the New
Advisory/Administration Agreement will be substantially the same as those of
the Current Advisory/Administration Agreement; (3) the fact that, in the
judgment of the Board of Trustees, Daehan has provided satisfactory services
to the Trust, and the change in control of Daehan has not had an adverse impact
on such services; and (4) the fact in the judgement of the Board of Trustees,
Dr. Oh, Daehan, and the purchasers proceeded with the sales transaction in
good faith, and that termination of the Current Advisory/Administration
Agreement was the inadvertent result of the definition of the term "assignment"
in the 1940 Act, the impact of which was not appreciated by Dr. Oh, Daehan,
or the purchasers at the time of the transaction.
Required Vote
The affirmative vote of the holders of a majority of the outstanding
shares of record of the Fund is required to approve the New
Advisory/Administration Agreement. For this purpose, the term "majority"
means the lesser of (i) 67% of the shares represented at the Meeting if more
than 50% of such outstanding shares are represented, or (ii) more than 50%
of such outstanding shares.
If for any reason the New Advisory/Administration Agreement is not
approved by the shareholders, the Board of Trustees will determine what
action to take, which may include reproposal of the Agreement to the
shareholders, retention of a new investment adviser/administrator, action to
obtain reimbursement of fees paid to Daehan since the termination of the
Current Advisory/Administration Agreement, or dissolution of the Trust.
PROPOSAL 2
ELECTION OF TRUSTEES
The Board of Trustees proposes that each of the four nominees listed
below be elected to the Board of Trustees, to hold office until the next
meeting of shareholders and until his successor is elected and qualified.
Each of the nominees has indicated his willingness to serve if elected. If
any of the nominees should withdraw or otherwise become unavailable for
election for unanticipated reasons, the proxy holders will exercise their
voting power in favor of such substitute nominees, if any, as the Board of
Trustees may designate. The Trust has no reason to believe that it will be
necessary to designate substitute nominees.
Dr. Oh, Mr. Park and Mr. Han have served on the Board of Trustees since
the inception of the Fund in 1992. Information on the business experience
during the past five years of each nominee is set forth below:
Shares of the
Fund Owned
Principal Beneficially as
Name Occupation of August 31, 1996
Indong Oh Director, Joint --
(56 years old) Implant Orthopedic
Surgery, since 1980
Hyung Joo Park Partner, Park & --
(49 years old) Kirwan, Law Office,
since 1980
Chung Soo Han Executive Officer, --
(__ years old) Korea Investment
Trust Corp., since 1985
James H. Yu President, Cosmo Corp., --
(55 years old) a Import/Export of Textiles,
since 1987
As of August 31, 1996, the current Trustees and officers of the Fund as
a group owned none of the Fund's outstanding securities.
For the year ended August 31, 1996, the Board of Trustees held four
meetings, and each of the current Trustees, except Mr. Han, attended at
least 75% of such meetings. Mr. Han attended no meetings. Attendance fees
of $300 per meeting have been authorized for those Trustees who are not
"interested persons" (as such term is defined in the 1940 Act) of the
investment advisor or the principal underwriter of the Fund. The following
table sets forth the compensation paid by the Fund to such Trustees for the
fiscal year ended August 31, 1996:
Pension or Estimated
Aggregate Retirement Annual
Compensation Benefits Accrued Total Compensation
from the as Part of Fund Benefits Upon from the
Name Trust Expenses Retirement Trust
Indong Oh $ 0 None None $ 0
Hyung Joo Park $ 1,200 None None $ 1,200
Chung Soo Han1 $ 0 None None $ 0
Name and Age of Executive Officers of the Fund Principal Occupation
Indong Oh (56 years old) Director of Joint Implant Orthopedic Surgery
Jai Young Son (39 years old) Executive Vice President, Daehan
Required Vote
The affirmative vote of the holders of a plurality of the shares
voting at the Meeting is required to approve the nominated Trustees.
PROPOSAL 3
RATIFICATION OF SELECTION OF AUDITORS
Ernst & Young LLP has served as independent accountants to the Fund
since 1995. A majority of the Board of Trustees of the Trust, including a
majority of Trustees who are not "interested persons" of the Trust, has
selected Ernst & Young LLP to serve as independent public accountants for
the Fund for the fiscal year ending August 31, 1997, subject to the right of
the Fund, by vote of a majority of shares at any meeting called for the
purpose, to terminate such employment immediately without penalty. Ernst
& Young LLP has advised the Trust that it has no direct or material indirect
ownership interest in the Fund.
A representative of Ernst & Young LLP is expected to attend the
meeting. The representative will be given an opportunity to make a
statement and will be expected to respond to any appropriate questions
from shareholders.
Required Vote
The affirmative vote of the holders of a majority of the shares
voting at the meeting is required to approve the nominated Trustees.
OTHER MATTERS
The Board of Trustees does not intend to present for action at the
Meeting any business other than the matters described in the Notice of
Special Meeting, and at the date of this Proxy Statement is not aware of any
other matters that properly may be presented for action at the Meeting. If
any other business not described herein should properly be brought before the
Meeting, or if any procedural matters requiring a vote of shareholders
should arise at the Meeting, the persons named as proxies or their
substitutes will vote the shares represented by them in accordance with their
best judgment.
NEXT MEETING OF SHAREHOLDERS
The Trust is not required, and does not intend, to hold annual or
other periodic meetings of shareholders except as required by the 1940 Act.
The next meeting of shareholders of the Fund will be held at such time as
the Board of Trustees may determine or at such time as may be legally required.
A proposal which a shareholder wishes to have included in the Trust's proxy
materials for such meeting must be received by the Trust at its principal
office within a reasonable time before the release of the Trust's proxy
soliciting materials with respect to such meeting, as determined by the Board
of Trustees. Any such proposal must comply with the requirements of
applicable law and regulations governing both
the eligibility of the proponent and the form and substance of the proposal.
EXHIBIT A
KOREA CAPITAL TRUST
ADVISORY AND ADMINISTRATION AGREEMENT
THIS ADVISORY AND ADMINISTRATION AGREEMENT, dated as of
January 3, 1994 is made between KOREA CAPITAL TRUST, a
Massachusetts business trust, hereinafter called the "Trust,"
on behalf of itself and KOREA CAPITAL FUND, a series of the
Trust, hereinafter called the "Fund," and DAEHAN SECURITIES,
INC., a Colorado Corporation, hereinafter called the
"Adviser/Administrator."
WHEREAS, the Trust has been organized and intends to
operate as an investment company registered under the
Investment Company Act of 1940, as amended (the "Act") for
the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of
Trust, its By-Laws and its Registration Statement under the
Act and the Securities Act of 1933, all as heretofore amended
and supplemented; and the Trust desires to avail itself of
the services, information, advice, assistance and facilities
of an administrator and to have an adviser perform various
advisory, statistical, research, administrative, supervisory
and other services for the Fund; and,
WHEREAS, the Adviser/Administrator is registered as an
investment adviser under the Investment Advisers Act of 1940,
is engaged in the business of rendering advisory,
administrative and supervisory services to investment
companies and others, and desires to provide these services
to the Trust and the Fund.
NOW THEREFORE, in consideration of the terms and
conditions hereinafter set forth, it is mutually agreed as
follows:
1. Employment of the Adviser/Administrator. The Trust
hereby employs the Adviser/Administrator to administer its
affairs, subject to the direction of the Board of Trustees
and the officers of the Trust, and to administer the affairs
of the Fund for the period and on the terms hereinafter set
forth. The Adviser/Administrator hereby accepts such
employment and agrees during such period to render the
services and to assume the obligations herein set forth for
the compensation herein provided. The Adviser/Administrator
shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority
to act for or represent the Fund or the Trust in any way or
otherwise be deemed an agent of the Fund or the Trust.
2. Obligations of and Services to be Provided by the
Adviser/Administrator. This Adviser/Administrator undertakes
to provide the services hereinafter set forth and to assume
the following obligations:
A. Without limiting the generality of the
foregoing, the Adviser/Administrator will provide office
facilities (which may be in the Adviser/Administrator's own
offices), statistical and research data, internal executive
and administrative services, stationery and office supplies,
and clerical support services to the Trust. The
Adviser/Administrator also will provide personnel to serve as
Trust officers and will bear responsibility for the
scheduling and preparation of Trustees meetings. The
Adviser/Administrator will be responsible for consulting with
the Trust with respect to the selection and review of the
performance of the Trust's investment manager (the "Manager")
for the Trust and the Fund, as well as consulting with the
Manager with respect to the duties of the manager under the
Investment Management Agreement between the manager and the
trust on behalf of the Fund (the "Investment Management
Agreement"). The Adviser/Administrator, subject to the
supervision of the Trustees of the Trust, and, where
applicable, with the assistance of the Trust's outside
auditing and legal personnel, will supervise and coordinate
the activities of the Manager as well as all other entities
which deal with the Trust or the Fund, including, without
limitation, the Trust's custodian, any sub-custodians,
transfer agent (and any sub-transfer agents, if appointed),
depository, disbursing agent and underwriter or distributor.
B. The Adviser/Administrator shall be responsible
with the assistance of the Trust's outside auditing and legal
personnel, for monitoring legal and regulatory compliance,
including, without limitation, preparing and filing all forms
and reports with the Securities and Exchange Commission,
including registration statements and amendments thereto,
proxy materials and marketing materials, preparing and
distributing reports to the shareholders of the Fund,
including semi-annual and annual reports, and obtaining and
maintaining adequate fidelity bond coverage at the Trust's
expense.
C. The Adviser/Administrator shall provide to the
Board of Trustees, on a periodic basis, but not less than
quarterly, with a copy to the Manager, a detailed summary of
assets, income and expenses of the Trust determined on the
accrual basis of accounting for the preceding quarter, other
than in connection with the purchase of portfolio securities
or the redemption of shares of the Fund. Such summary and
supporting schedules shall be in such form as the Trustees or
the Manager may request.
D. The Adviser/Administrator shall make its
officers and employees available to the Board of Trustees and
officers of the Trust for consultation and discussion
regarding the administration and management of the Fund and
its investment activities.
E. The Adviser/Administrator shall consult with
the Manager of the Fund from time to time regarding general
investment strategies and specific portfolio purchases on
behalf of the Fund. The Adviser/Administrator shall advise a
portion of, or in its own discretion, all of the assets of
the Fund and shall have primary responsibility in advising
that portion of the Fund's assets to be invested in the
securities of U.S. issuers.
F. The Adviser/Administrator under the direct
supervision of the Board of Trustees shall be responsible for
review and monitoring the activities of third party service
vendors (e.g. custodians, fund accountants, transfer agents
and sub-administrators).
3. Expenses of the Fund. It is understood that the
Fund will pay all of its own expenses other than those
expressly assumed by the Adviser/Administrator herein or by
the Manager under the Investment Management Agreement.
Expenses payable by the Fund shall include:
A. Fees to the Adviser/Administrator and Manager;
B. Expenses of all audits by independent public
accountants;
C. Fees and expenses of transfer agent,
registrar, custodian, depository, disbursing agent, sub-administrator and
shareholder record keeping services,
including the expenses of issue, repurchase or redemption of
Fund shares, and any out-of-pocket costs relating to
communication between the Fund, the Adviser/Administrator or
the Manager and the transfer agent, custodian, or Fund
accounting agent;
D. Costs attributable to investor services
(including without limitation, telephone and personnel
expenses);
E. Costs and expenses of calculating its net
asset value, and all accounting, bookkeeping and record
keeping required under the Act;
F. Taxes, if any, levied against the Fund;
G. Brokerage fees and commissions, if any, in
connection with the purchase and sales of securities for the
Fund;
H. Costs, including the interest expense, of
borrowing money;
I. Costs incident to meetings of the Board of
Trustees and shareholders of the Fund, reports to the Fund's
shareholders, the filing of reports with regulatory bodies
and the maintenance of the legal existence of the Trust and
the Fund;
J. Legal fees, including the legal fees related
to the registration and continued qualification of the shares
of the Fund for sale;
K. Trustees' fees and expenses to Trustees who
are not directors, officers, employees or stockholders of the
Adviser/Administrator, the Manager, the Distributor, or any
of their affiliates;
L. Costs and expenses of registering and
maintaining the registration of the Trust and shares of the
Fund under Federal and any applicable state laws, including
the printing and mailing of prospectuses to its existing
shareholders;
M. Trade association dues;
N. A pro rata portion of fidelity bond, errors
and omission, and trustees and officers liability insurance
premiums; and
O. Any extraordinary expenses.
4. Compensation of the Advisor/Administrator. The
Fund shall pay a quarterly management fee to the
Advisor/Administrator, calculated at an annual rate of 0.30
of 1% of the average daily net assets of the Fund, as
compensation for the services rendered and obligations
assumed by the Adviser/Administrator, payable in cash, at the
request of the Adviser/ Administrator, but not later than the
fifteenth day of the month following the end of the quarter
for which the fee is due.
A. For purposes of calculating such fee, the
value of the net assets of the Fund shall be determined in
the same manner as the Fund uses to compute the value of its
net assets in connection with the determination of the net
asset value of its shares, all as set forth more fully in the
Fund's then current Prospectus and Statement of Additional
Information.
B. The fee for the period from the date of the
commencement of this Agreement to the end of the quarter
during which such Agreement commenced shall be prorated
according to the proportion which such period bears to the
full quarterly period, and upon any termination of this
Agreement before the end of any quarter, the fee for such
part of a quarter shall be prorated according to the
proportion which such period bears to the full quarterly
period and shall be payable upon the date of termination of
this Agreement. In addition to the reductions set forth in
Subparagraph 4C, the Adviser/Administrator may, from time to
time, voluntarily reduce or waive any management fee due to
it hereunder, provided such waiver or reduction does not
jeopardize the ability of the Fund to meet any requirements
of Subchapter M of the Internal Revenue Code of 1986, as
amended.
C. If the aggregate annual expenses of the Fund
for any fiscal year of the Fund (including fees pursuant to
this Agreement and the Fund's Investment Management
Agreement, but excluding interest on any borrowings, taxes,
brokerage commissions and transaction costs, and any
extraordinary expenses, such as litigation) exceed 2.40% of
the average net assets of the Fund for such year, the
Adviser/Administrator will reduce the fees to be paid to it
hereunder to the extent of such excess. The
Adviser/Administrator will reimburse excess fees to the Fund
along with the Investment Manager in proportion to the amount
of fees received by each such party. The obligation of the
Adviser/Administrator is limited to the amount of its fees
hereunder. Such fee reduction, if any, will be estimated
daily, and reconciled and effected, as the case may be, on a
monthly basis.
5. Activities of the Adviser/Administrator. The
services of the Adviser/ Administrator to the Fund hereunder
are not to be deemed exclusive, and the Adviser/
Administrator and any of its affiliates shall be free to
render similar services to others. Subject to and in
accordance with the Agreement and Declaration of Trust and
By-Laws of the Trust and Section 10 (a) of the Act, it is
understood that Trustees, officers, agents and shareholders
of the Trust are or may be interested in the
Adviser/Administrator or its affiliates as directors,
officers, agents or stockholders of the Adviser/Administrator
or its affiliates or otherwise; that the
Adviser/Administrator or its affiliates may be interested in
the Fund as shareholders or otherwise; and that the effect of
any such interests shall be governed by said Agreement and
Declaration of Trust, By-Laws and the Act.
6. Liabilities of the Adviser/Administrator.
A. In the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations
or duties hereunder on the part of the Adviser/Administrator,
the Adviser/Administrator shall not be subject to liability
to the Trust of the Fund or to any shareholder of the Fund
for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security by
the Fund.
B. Notwithstanding the foregoing, the
Adviser/Administrator agrees to reimburse the Trust and the
Fund for any and all costs, expenses, and counsel and
Trustees fees reasonably incurred by the Trust and the Fund
in the preparation, printing and distribution of proxy
statements, amendments to its Registration Statement,
holdings of meetings of its shareholders or trustees, the
conduct of factual investigations, and any legal or
administrative proceedings (including any applications for
exemptions or determinations by the Securities and Exchange
Commission) which the Trust or the Fund incurs as the result
of action or inaction of the Adviser/Administrator or any of
its affiliates or any of their officers, directors, employees
or stockholders where the action or inaction necessitating
such expenditures (I) is directly or indirectly related to
any transactions or proposed transaction in the stock or
control of the Adviser/Administrator or its affiliates (or
litigation related to any pending or proposed or future
transaction in such shares or control) which shall have been
undertaken on behalf of the Fund or the Trust without the
prior express approval of the Trust's Board of Trustees; or,
(ii) is within the control of the Adviser/Administrator or
any of its affiliates or any of their officers, directors,
employees or stockholders on behalf of the Fund or the Trust.
So long as this Agreement is in effect, the
Adviser/Administrator shall pay to the Trust or the Fund the
amount due for expenses subject to this Subparagraph 6B
within 30 days after a bill or statement has been received by
the Adviser/Administrator therefor. This provision shall not
be deemed to be a waiver of any claim the Trust or the Fund
may have or may assert against the Adviser/ Administrator or
others for costs, expenses or damages heretofore incurred by
the Trust or that the Fund may hereafter incur which are not
reimbursable to it hereunder.
C. No provision of this Agreement shall be
construed to protect any Trustee or officer of the Trust, or
director or officer of the Adviser/Administrator, from
liability in violation of Sections 17(h) and (I) of the Act.
7. Effective Date, Renewal and Termination.
A. This Agreement shall become effective as of
the date written above and shall continue in effect for a
period of one year after approved by the shareholders of the
Trust. This Agreement is renewable annually thereafter for
successive periods not to exceed one (1) year (I) by a vote
of a majority of the Trustees of the Trust who are not
parties to the Agreement (other than as Trustees of the
Trust), cast in person at a meeting for the purpose of voting
on the Agreement.
B. This Agreement:
(I) may at any time be terminated without the
payment of any penalty either by vote of the Board of
Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund on 60 days' written
notice to the Adviser/Administrator;
(ii) shall immediately terminate in the event
of its assignment; and
(iii) may be terminated by the
Adviser/Administrator on 60 days' written notice to the
Trust.
C. As used in this Paragraph and other Paragraphs
of this Agreement the terms "assignment", "interested person"
and "vote of a majority of the outstanding voting securities"
shall have the meanings set forth for any such terms in the
Act.
D. Any notice under this Agreement shall be given
in writing addressed and delivered, or mailed post-paid, to
the other party at any office of such party.
8. Severability. If any provision of this Agreement
shall be held or made invalid by a court decision, statute,
rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
9. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California, without regard to principles of conflicts of
laws.
10. Limitation of Liability. The Adviser/Administrator
acknowledges that it has received notice of and accepts the
limitations of the Trust's liability as set forth in its
Agreement and Declaration of Trust. The
Adviser/Administrator agrees that the Trust's obligations
hereunder shall be limited to the assets of the Fund, and
that the Adviser/Administrator shall not seek satisfaction of
any such obligation from any shareholders of the Fund or the
Trust nor from any such Trustee, officer, employee or agent
of the Trust.
IN WITNESS WHEREOF, each of the parties hereto has
caused this instrument to be executed on its behalf as of the
day and year first above written.
KOREA CAPITAL TRUST
By:____________________________
(President)
DAEHAN SECURITIES, INC.
By:____________________________
(Executive Vice President)
