SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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 ss.240.14a-11(c) or ss.240.14a-12
KOREA EQUITY FUND, INC.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value transaction:
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5. Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
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<PAGE>
KOREA EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038-4936
------------------------
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
June 19, 2000
------------------------
To the Shareholders of
Korea Equity Fund, Inc.:
Notice is hereby given that the 2000 Annual Meeting of Shareholders (the
"Meeting") of Korea Equity Fund, Inc. (the "Fund") will be held at The Down Town
Association, 60 Pine Street, New York, New York, 10005, on Monday, June 19,
2000, at 10:30 A.M. for the following purposes:
(1) To elect six Directors to serve for the ensuing year;
(2) To consider and act upon a proposal to ratify the selection of
PricewaterhouseCoopers LLP as independent accountants of the Fund for its fiscal
year ending October 31, 2000; and
(3) To consider and act upon a proposal to approve a new Management
Agreement between the Fund and Nomura Asset Management U.S.A. Inc.;
(4) To consider and act upon a proposal to approve a new Investment
Advisory Agreement between Nomura Asset Management U.S.A. Inc. and Nomura Asset
Management Co., Ltd.;
(5) To amend the Fund's fundamental investment limitation concerning
industry concentration to permit the Fund to invest up to 35% of its total
assets in certain industries; and
(6) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 31, 2000
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting or any adjournment thereof.
A complete list of the shareholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any shareholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after June 1, 2000, at the offices of the Fund, 180 Maiden Lane, New York,
New York.
You are cordially invited to attend the Meeting. Shareholders who do not
expect to attend the Meeting in person are requested to complete, date and sign
the enclosed form of proxy and return it promptly in the envelope provided for
that purpose. The enclosed proxy is being solicited on behalf of the Board of
Directors of the Fund.
By Order of the Board of Directors
John J. Boretti
Secretary
New York, New York
Dated: May , 2000
<PAGE>
[This Page intentionally left blank]
<PAGE>
PROXY STATEMENT
KOREA EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038-4936
------------------------
2000 ANNUAL MEETING OF SHAREHOLDERS
June 19, 2000
------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Korea Equity Fund, Inc., a
Maryland corporation (the "Fund"), to be voted at the 2000 Annual Meeting of
Shareholders of the Fund (the "Meeting") to be held at The Down Town
Association, 60 Pine Street, New York, New York, 10005, on Monday, June 19,
2000, at 10:30 A.M. The approximate mailing date of this Proxy Statement is
May , 2000.
All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, proxies
will be voted (a) FOR the election of six Directors, (b) FOR the ratification of
the selection of independent accountants, (c) FOR approval of a new Management
Agreement between the Fund and Nomura Asset Management U.S.A. Inc.; (d) FOR
approval of a new Investment Advisory Agreement between Nomura Asset Management
U.S.A. Inc. and Nomura Asset Management Co., Ltd. and (e) FOR the amendment of
the Fund's fundamental investment limitation concerning industry concentration
to permit the Fund to invest up to 35% of its total assets in certain
industries. Any proxy may be revoked at any time prior to the exercise thereof
by giving written notice to the Secretary of the Fund at the Fund's address
indicated above or by voting in person at the Meeting.
The Board of Directors has fixed the close of business on March 31, 2000,
as the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting and at any adjournment thereof. Shareholders on the
record date will be entitled to one vote for each share held, with no shares
having cumulative voting rights. As of March 31, 2000, the Fund had outstanding
8,409,000 shares of Common Stock, par value $0.10 per share.
The Board of Directors of the Fund knows of no business other than that
mentioned in Items 1, 2, 3, 4 and 5 of the Notice of meeting which will be
presented for consideration at the Meeting. If any other matter is properly
presented, it is the intention of the persons named in the enclosed proxy to
vote in accordance with their best judgement.
<PAGE>
ITEM 1. ELECTION OF DIRECTORS
At the Meeting six Directors will be elected to serve until the next
Annual Meeting of Shareholders and until their successors are elected and
qualified. It is the intention of the persons named in the enclosed proxy to
nominate and vote in favor of the election of the persons listed below.
The Board of Directors of the Fund knows of no reason why any of these
nominees will be unable to serve, but in the event of any such unavailability,
the proxies received will be voted for such substitute nominees as the Board of
Directors may recommend.
Certain information concerning the nominees is set forth as follows:
<TABLE>
<CAPTION>
Shares of
Common Stock
of the Fund
Principal Occupations Beneficially
Name and Address During Past Five Years Director Owned at
of Nominee and Public Directorships(1) Age Since March 31, 2000
---------- --------------------------- --- ----- --------------
<S> <C> <C> <C> <C>
William G. Barker, Jr.(2) ...... Consultant to the television industry 67 1993 -0-
111 Parsonage Road since 1991.
Greenwich, Connecticut 06830
George H. Chittenden(2) ........ Director of Bank Audi (USA). 82 1993 1,000
155 Buffalo Bay, Neck Road
Madison, Connecticut 06443
Nobuo Katayama(3)(4)............ President of the Fund since 1999; 52 1999 -0-
180 Maiden Lane President and Director of NAM-U.S.A.
New York, New York 10038 since 1999; Marketing Officer of Nomura
Asset Management Co., Ltd. ("NAM") from
1997 to 1999; Director and Chief
Portfolio Manager of NAM from 1993 to
1997.
Chor Weng Tan(2) ............... Managing Director for Education, The 63 1993 2,500
3 Park Avenue American Society of Mechanical
New York, New York 10016 Engineering since 1991. Director of
Tround International, Inc. from 1984 to
1997.
Arthur R. Taylor(2) ............ President of Muhlenberg College since 64 1993 -0-
2400 Chew Street 1992; Dean of the Faculty of Business of
Allentown, Pennsylvania 18104 Fordham University from 1985 to
1992; Chairman of Arthur R. Taylor & Co.
(Investment firm); and Director of
Louisiana Land & Exploration Company and
Pitney Bowes, Inc from 1982 to 1997.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Shares of
Common Stock
of the Fund
Principal Occupations Beneficially
Name and Address During Past Five Years Director Owned at
of Nominee and Public Directorships(1) Age Since March 31, 2000
---------- --------------------------- --- ----- --------------
<S> <C> <C> <C> <C>
John F. Wallace(3) Vice President of the Fund from 1997 to 71 1993 1,000
180 Maiden Lane 2000 and Secretary and Treasurer of the
New York, New York 10038 Fund from 1993 to 1997; Senior Vice
President of NAM-U.S.A. from 1981 to
2000, Secretary from 1976 to 2000,
Treasurer from 1984 to 2000 and Director
from 1986 to 2000.
</TABLE>
- ----------
(1) Each of the nominees is also a director of Jakarta Growth Fund, Inc.,
Japan OTC Equity Fund, Inc., and Nomura Pacific Basin Fund, Inc.,
investment companies for which NAM-U.S.A. acts as manager.
(2) Member of Audit Committee and Nominating Committee of the Board of
Directors.
(3) "Interested person," as defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"), of the Fund.
(4) Effective June 1, 1999, Nobuo Katayama was elected a Director of the Fund
to fill the vacancy created by the resignation of Haruo Sawada.
Committees and Directors' Meetings. The Board of Directors has a standing
Audit Committee and Nominat-ing Committee, each of which consists of the
Directors who are not "interested persons" of the Fund within the meaning of the
Investment Company Act. The principal purpose of the Audit Committee is to
review the scope of the annual audit conducted by the Fund's independent
accountants and the evaluation by such accountants of the accounting procedures
followed by the Fund. The principal purpose of the Nominating Committee is to
select and nominate the Directors who are not "interested persons" of the Fund
as defined in the Investment Company Act. The Nominating Committee will consider
nominees recommended by shareholders of the Fund. Shareholders should submit
nominees to the Secretary of the Fund. The Fund has no standing Compensation
Committee.
During the fiscal year ended October 31, 1999, the Board of Directors held
5 meetings, and the Audit Committee held two meetings and the Nominating
Committee held one meeting. Each Director attended at least 75% of the meetings
of the Board of Directors, and each Director who is a member of the Audit and
Nominating Committees attended at least 75% of the meetings of such Committees
held during such period.
Interested Persons. The Fund considers two nominees, Messrs. Katayama and
Wallace, to be "interested persons" of the Fund within the meaning of Section
2(a) (19) of the Investment Company Act. Mr. Katayama is President of the Fund,
the President and a director of NAM-U.S.A. Mr. Wallace is a former Vice
President of the Fund and a former Senior Vice President, Secretary, Treasurer
and director of NAM-U.S.A.
Compensation of Directors. The Manager pays all compensation of all
Directors of the Fund who are affiliated with the Manager or any of its
affiliates. The Fund pays to each Director not affiliated with the Manager an
annual fee of $5,000 plus $500 per meeting attended, together with such
Director's actual out-of-pocket expenses relating to attendance at meetings.
Such fees and expenses aggregated $26,467 for the fiscal year ended October 31,
1999.
The following table sets forth for the periods indicated compensation paid
by the Fund to its Directors and the aggregate compensation paid to the
Directors by all investment companies managed by NAM-U.S.A. or advised by NAM:
3
<PAGE>
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Total Compensation from
Compensation Benefit Accrued as Part of Fund Complex Paid to
from Fund For Fund Expenses for its Directors During the
its Fiscal Year Ended Fiscal Year Ended Calendar Year Ended
Name of Director October 31, 1999 October 31, 1999 December 31, 1999*
- ---------------- ---------------- ---------------- ------------------
<S> <C> <C> <C>
William G. Barker..... $8,000 None $32,500
George H. Chittenden.. $8,000 None $32,500
Nobuo Katayama........ -- None --
Chor Weng Tan......... $7,500 None $30,500
Arthur R. Taylor...... $8,000 None $32,500
John F. Wallace....... -- None --
</TABLE>
- ----------
* In addition to the Fund, the "Fund Complex" includes Jakarta Growth Fund,
Inc., Japan OTC Equity Fund, Inc., and Nomura Pacific Basin Fund, Inc.
Officers of the Fund. The following table sets forth information
concerning the officers of the Fund. Officers of the Fund are elected and
appointed by the Directors and hold office until they resign, are removed or are
otherwise disqualified to serve.
<TABLE>
<CAPTION>
Shares of
Common Stock
of the Fund
Beneficially
Officer Owned at
Name and Principal Occupation During Past Five Years Office Age Since March 31, 2000
- ---------------------------------------------------- ------ --- ----- --------------
<S> <C> <C> <C> <C>
Nobuo Katayama ......................................... President 52 1999 -0-
President and Director of NAM-U.S.A. since 1999,
Marketing Officer of NAM from 1997 to 1999, Director
and Chief Portfolio Manager of NAM from 1993 to 1997.
Keisuke Haruguchi...................................... Vice President 49 1999 -0-
Senior Vice President and Director of NAM-U.S.A.
since 1999, Senior Manager of NAM from 1997 to
1998; Manager of The Nomura Securities Co.,
Ltd. from 1994 to 1996.
David G. Stoeffel...................................... Vice President 41 1999 -0-
Senior Vice President of NAM-U.S.A. since 1999,
Vice President since 1998, Eastern Division
Manager of Brinson Funds from 1997 to 1998,
Northeast Region Funds Coordinator of
Prudential Investments from 1994 to 1997.
John J. Boretti........................................ Secretary and 47 1997 -0-
Senior Vice President of NAM-U.S.A. since 1996, Treasurer
Vice President and Chief Financial Officer of
Kidder Peabody Asset Management, Inc. and
Kidder, Peabody Mutual Funds and Vice President
of Kidder, Peabody & Co. Inc. from 1993 to 1995.
</TABLE>
4
<PAGE>
Stock Ownership. At March 31, 2000, the Directors and officers of the Fund
as a group (9 persons) owned an aggregate of 4,500 shares of the Fund,
representing less than 1% of the outstanding shares of the Fund. Mr. Katayama,
President of the Fund and Mr. Haruguchi Vice President of the Fund, together own
less than 1% of the shares of The Nomura Securities Co., Ltd., an affiliate of
both NAM-U.S.A. and NAM.
ITEM 2. SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Fund, including a majority of the Directors
who are not interested persons of the Fund, has selected the firm of
PricewaterhouseCoopers llp ("PWC"), as independent accountants, to audit the
financial statements of the Fund for the fiscal year ending October 31, 2000.
PWC has acted as the Fund's independent accountants since the inception of the
Fund. The Fund knows of no direct or indirect financial interest of such firm in
the Fund. Such appointment is subject to ratification or rejection by the
shareholders of the Fund. Unless a contrary specification is made, the
accompanying proxy will be voted in favor of ratifying the selection of such
accountants.
PWC also acts as independent accountants for The Nomura Securities Co.,
Ltd. and certain of its affiliated entities, including NAM-U.S.A., and for three
other investment companies for which NAM-U.S.A. acts as manager. The Board of
Directors of the Fund considered the fact that PWC has been retained as the
independent accountants for these other entities in its evaluation of the
ability of PWC to also function in that capacity for the Fund.
A representative of PWC is expected to be present at the Meeting and will
have the opportunity to respond to questions from shareholders and to make a
statement if such person so desires.
ITEM 3 AND 4. APPROVAL OR DISAPPROVAL OF THE MANAGEMENT AND INVESTMENT ADVISORY
ARRANGEMENTS
Nomura Asset Management U.S.A. Inc. ("NAM-U.S.A.") has served as the
management company for the Fund since the Fund commenced operations in 1993.
Nomura Asset Management Co., Ltd. ("NAM"), the sole shareholder of NAM-U.S.A.
has served as the investment adviser for the Fund since that time. NAM is a
subsidiary of The Nomura Securities Co., Ltd. ("Nomura"), which is the largest
securities company in Japan. The existing agreements between the Fund and
NAM-U.S.A. and NAM-U.S.A. and NAM are referred to below as the Current
Management Agreement and the Current Investment Advisory Agreement.
Following changes in Japanese regulations, Nomura has announced that it
intends to reorganize into a holding company. As part of the process toward the
holding company concept, Nomura has increased its share ownership in NAM from
4.99% to a majority shareholder positioning with the ultimate goal of acquiring
100% of NAM. At March 31, 2000, Nomura had acquired 73.8% of the outstanding
voting shares of NAM.
NAM-U.S.A. has advised the Board of Directors and the Fund that the
changes in the ownership structure of NAM-U.S.A. and NAM are not expected to
affect the portfolio management or day-to-day operations of the Fund. However,
these changes may constitute an "assignment" of the relevant contracts under the
Investment Company Act, which result in a termination of the Current Management
Agreement and the Current Investment Advisory Agreement. Accordingly, with the
ownership changes in NAM-U.S.A. and NAM and in order to ensure the continuity of
management and investment advisory services provided to the Fund by NAM-U.S.A.
and NAM, respectively, the Board of Directors of the Fund approved, under the
Investment Company Act of 1940 Rule 15a-4 interim Management and Advisory
Agreements (the "Interim Agreements") for up to 150 days after the
5
<PAGE>
termination of the current agreements while the Fund seeks shareholder approval
of new agreements. A new management agreement between the Fund and NAM-U.S.A.
(the "New Management Agreement") and a new investment advisory agreement between
NAM-U.S.A. and NAM (the "New Investment Advisory Agreement") are proposed to be
approved by a majority of the Fund's shareholders.
The Interim Agreements and the proposed New Agreements under which the
Fund will operate after the ownership change are substantially identical to the
agreements under which the Fund currently operates. The services to be approved
by NAM-U.S.A. and NAM after the ownership change will be identical to the
services currently provided by NAM-U.S.A. and NAM,. respectively. NAM-U.S.A. has
further advised the Board of Directors that it believes that there will be no
reduction in the quality of any of the services presently furnished by
NAM-U.S.A. and NAM, respectively. As described below, the proposed new
agreements do not alter the rate of management compensation presently payable by
the Fund.
In their consideration of the above agreements, the Board of Directors
received information relating to, among other things, alternatives to the
present arrangements, the nature, quality and extent of the advisory and other
services to be provided to the Fund by NAM-U.S.A. and NAM, and other comparative
data with respect to the advisory fees paid by other international funds, the
operating expenses and expense ratio of the Fund as compared to such funds and
the performance of the Fund as compared to such funds. The Independent Directors
also considered NAM's representations that there will be no material adverse
change in the services provided to the Fund after the ownership change, the
relative profitability of the present arrangements to NAM-U.S.A. and NAM, and
information about the services to be performed and the personnel performing such
services under the proposed agreements. The Independent Directors were advised
by separate counsel in connection with their review of the management and
investment advisory arrangements of the Fund.
If approved by the Fund's shareholders at the Meeting, each of the New
Management Agreement and the New Investment Advisory Agreement will remain in
effect until June 30, 2002, unless terminated as described below. The Current
Management and the Current Investment Advisory Agreement were each last approved
by the Fund's shareholders on September 24, 1997. Although the management and
investment advisory arrangements consist of two separate contracts, neither of
the agreements will become effective unless both are approved by shareholders.
Information Concerning NAM-U.S.A. and NAM
NAM-U.S.A. provides global investment advisory services, primarily with
respect to Japanese and other Pacific Basin securities, for U.S. institutional
clients. NAM-U.S.A. also acts as one of the investment advisors to five other
investment companies, three of which are U.S. registered investment companies.
At March 3, 2000, NAM-U.S.A. is wholly owned subsidiary of NAM.
The following table sets forth the name, title and principal occupations
of the principal executive officer and each director of NAM-U.S.A. effective
April 1, 2000.
<TABLE>
<CAPTION>
Name* Title with NAM-U.S.A. Present Principal Occupation
----- --------------------- ----------------------------
<S> <C> <C>
Nobuo Katayama.......... Director and President Director and President of NAM-U.S.A.
John J. Boretti......... Senior Vice President Senior Vice President and Compliance Officer
and Compliance Officer of NAM-U.S.A.
Keisuke Haruguchi....... Director, Senior Vice Director, Senior Vice President and Treasurer
President and Treasurer of NAM-U.S.A.
Michael A. Morrongielio.. Senior Vice President Senior Vice President of NAM-U.S.A.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Name* Title with NAM-U.S.A. Present Principal Occupation
----- --------------------- ----------------------------
<S> <C> <C>
Kenneth L. Munt........ Senior Vice President Senior Vice President and Secretary
and Secretary of NAM-U.S.A.
David G. Stoeffel...... Senior Vice President Senior Vice President of NAM-U.S.A.
Marti G. Subrahmanyam.. Director Professor of Finance and Economics, New York
University, Leonard N. Stern School of
Business Administration
</TABLE>
- ----------
* The address of Messrs. Katayama, Boretti, Haruguchi, Morrongielo, Munt,
Stoeffel and Subramanyam, is 180 Maiden Lane, New York, New York 10038.
NAM provides investment advisory services for Japanese and international
clients. In addition to the Fund, NAM acts as an investment advisor with respect
to the following registered investment companies: Jakarta Growth Fund, Inc.,
Japan OTC Equity Fund, Inc., and Nomura Pacific Basin Fund, Inc.
The following table sets forth the name, title and principal occupation of
the principal executive officers of NAM.
<TABLE>
<CAPTION>
Name* Title with NAM Present Principal Occupation
----- -------------- ----------------------------
<S> <C> <C>
Hitoshi Tonomura...... Chairman Chairman of NAM
Akira Kiyokawa........ President and CEO President of NAM and CEO
Atsushi Kinebuchi .... Executive Managing Director Executive Managing Director of NAM
Takanori Tanabe....... Executive Managing Director Executive Managing Director of NAM
Hisaaki Hino.......... Executive Managing Director Executive Managing Director of NAM
Kenjiro Hayashi....... Director Executive Vice President of Nomura Research Institute Ltd.
Haruo Miyako.......... Senior Executive OfficerSenior Executive Officer of NAM
Yasuo Takebayashi..... Senior Executive OfficerSenior Executive Officer of NAM
Takanori Shimiziu..... Senior Executive OfficerSenior Executive Officer of NAM
Akio Nakaniwa......... Senior Executive OfficerSenior Executive Officer of NAM
Hiroshi Tsujimura..... Executive Officer Executive Officer of NAM
Yukio Suzuki.......... Executive Officer Executive Officer of NAM
Mitsunori Minamio..... Executive Officer Executive Officer of NAM
Yasunobu Watase....... Executive Officer Executive Officer of NAM
Naotake Hirasawa...... Executive Officer Executive Officer of NAM
Takashi Harino........ Executive Officer Executive Officer of NAM
Takahide Mizuno ...... Executive Officer Executive Officer of NAM
Yuji Miyachi.......... Executive Officer Executive Officer of NAM
Takahisa Matsuura..... Executive Officer Executive Officer of NAM
Masato Tanaka......... Executive Officer Executive Officer of NAM
</TABLE>
- ----------
* The address of the principal executive officer and each director is 1-14,2-
chome, Nihonbashi, Chuo-ku, Tokyo 103-8260, Japan.
7
<PAGE>
Terms of the New Management Agreement and the New Investment Advisory Agreement
Copies of the forms of the New Management Agreement and the New Investment
Advisory Agreement are set forth as Exhibits A and B, respectively. Set forth
below is a summary of the terms of such agreements. As discussed above, the
proposed agreements are substantively identical to the agreements under which
the Fund currently operates. The proposal agreements do not change the amount of
management fees payable by the Fund.
Under the New Management Agreement, NAM-U.S.A. agrees to provide, or
arrange for the provision of, investment advisory and management services to the
Fund, subject to the oversight and supervision of the Board of Directors of the
Fund. In addition to the management of the Fund's portfolio in accordance with
the Fund's investment policies and the responsibility for making decisions to
buy, sell or hold particular securities, NAM-U.S.A. is obligated to perform, or
arrange for the performance of, the administrative and management services
necessary for the operation of the Fund. NAM-U.S.A. is also obligated to provide
all the office space, facilities, equipment and personnel necessary to perform
its duties thereunder. Pursuant to such agreement, NAM-U.S.A. is authorized to
retain NAM to act as an investment advisor for the Fund.
Pursuant to the New Investment Advisory Agreement between NAM-U.S.A. and
NAM, NAM agrees to furnish NAM-U.S.A. with economic research, securities
analysis and investment recommendations and to review and render investment
advice with respect to the Fund. NAM will not be responsible for the actual
portfolio decisions of the Fund.
Compensation And Expenses
As described above, the management compensation presently payable by the
Fund will remain the same under the proposed contractual arrangements. As
compensation for its services to the Fund, NAM-U.S.A. will receive a monthly
fee, computed daily, at the annual rate of 1.10% of the value of the Fund's
average weekly net assets. NAM-U.S.A. will pay NAM monthly fees at the annual
rate of .55% of the Fund's average weekly net assets. The fee payable to
NAM-U.S.A. is higher than that paid by most management investment companies, but
NAM-U.S.A. believes it is comparable to fees paid by other international funds.
For the fiscal year ended October 31, 1999, the Fund paid or accrued fees to
NAM-U.S.A. of $447,245. At March 31, 2000, the net assets of the Fund aggregated
approximately $50.8 million. At this net asset level, the annual management fee
would aggregate approximately $558,000.
The New Management Agreement obligates NAM-U.S.A. to provide, or arrange
for the provision of, investment advisory services and to pay all compensation
of and furnish office space for officers and employees of the Fund, as well as
the fees of all Directors of the Fund who are affiliated persons of NAM-U.S.A.
or any of its affiliates. The Fund pays all other expenses incurred in the
operation of the Fund, including, among other things, taxes, expenses for legal,
tax and auditing services, costs of printing proxies, listing fees, stock
certificates, shareholder reports, prospectuses, charges of the custodian,
sub-custodians and transfer agent, Securities and Exchange Commission (the
"Commission") fees, expenses of registering the shares under Federal, state and
foreign laws, fees and expenses of unaffiliated Directors, accounting and
pricing costs (including the daily/weekly calculation of net asset value),
insurance, interest, brokerage costs, litigation and other extraordinary or
non-recurring expenses, and other expenses properly payable by the Fund.
For the fiscal year ended October 31, 1999, the Fund paid brokerage
commissions of $97,380. Nomura and its affiliates earned $9,938 in commission,
from the Fund on the execution of such portfolio security transactions. In
addition, the Fund purchased a security in an initial public offering from an
unaffiliated broker dealer for a total $16,536 where a Nomura affiliate was a
co-manager.
8
<PAGE>
The following table sets forth information relating to the registered
investment companies which invest primarily in securities of companies domiciled
in Pacific Basin countries with the investment objective of long-term capital
appreciation for which NAM-U.S.A., NAM, and their affiliates act as manager or
investment advisor:
<TABLE>
<CAPTION>
Approximate
Net Assets at
March 31, 2000
Investment Company Annual Advisory Fees (Millions)
------------------ -------------------- ----------
<S> <C> <C>
Jakarta Growth Fund, Inc.(1) $11.2
Manager: Management Fee:
NAM-U.S.A. 1.10% of net assets.
Investment Advisor: Investment Advisory Fee:
NAM .50% of net assets; paid by NAM-U.S.A.
Japan OTCEquity Fund, Inc. $255.3
Manager: Management Fee:
NAM-U.S.A. 1.10% of net assets not in excess of $50 million,
Investment Advisor: 1.00% of net assets in excess of $50 million, but
NAM not exceeding $100 million, and .90% of nets assets
in excess of $100 million but not exceeding $175
million, and .80% of net assets in excess of $175
million.
Investment Advisory Fee:
.50% of net assets not in excess of $50 million,
.45% of net assets in excess of $50 million but
not exceeding $100 million,.40% of net assets in
excess of $100 million, but not exceeding $175
million, and .35% of net assets in excess of $175
million paid by NAM-U.S.A.
Nomura Pacific Basin Fund, Inc. $18.6
Manager: Management Fee:
NAM-U.S.A. .75% of net assets.
Investment Advisors: Investment Advisory Fee:
NAM .26125% of net assets; paid by NAM-U.S.A.
to NAM
NAM-Singapore .0275% of net assets; paid by NAM-U.S.A.
to NAM-Singapore
</TABLE>
- ----------
(1) Nomura Asset Management Singapore Ltd. ("NAM-Singapore"), which is an
affiliate of NAM-U.S.A. and NAM, acts as investment sub-advisor to Jakarta
Growth Fund, Inc. for which it receives compensation of .25% of net assets
paid by NAM.
Duration and Termination. As indicated above, each of the New Management
Agreement and the New Investment Advisory Agreement will remain if effect until
June 30, 2002, and from year to year thereafter if approved annually (a) by the
Board of Directors of the Fund or by a majority of the outstanding shares of the
Fund and (b) by a majority of the Directors who are not parties to such contract
or interested persons (as defined in the Investment Company Act) of any such
party. Such contracts are not assignable and may be terminated without penalty
on 60 days' written notice at option of either party thereto or by the vote of
the shareholders of the Fund.
9
<PAGE>
PROPOSAL 5. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INDUSTRY CONCENTRATION TO PERMIT THE FUND TO INVEST UP TO 35% OF ITS TOTAL
ASSETS IN CERTAIN INDUSTRIES.
The Board of Directors has approved, and recommends that the shareholders
of the Fund approve, a proposal that would modify the Fund's fundamental policy
concerning industry concentration to permit the Fund to invest, under certain
circumstances, up to 35% of its total assets in the securities of companies
whose principal business activities are in the same industry. The Fund's current
fundamental policy concerning concentration provides that the Fund may not:
Invest more than 25% of its total assets (taken at market value at the
time of each investment) in securities of issuers in a single industry.
If the proposal is approved, the Fund would adopt the following
fundamental policy concerning concentration. The Fund may not:
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Fund's total
assets would be invested in companies whose principal business activities
are in the same industry, except that the Fund may purchase the securities
of any issuer, if as a result, no more than 35% of the Fund's total assets
would be invested in any industry that accounts for more than 20% of the
Korean market as a whole, as measured by an index determined by NAM-U.S.A.
to be an appropriate measurer of the Korean market.
The Investment Company Act requires funds to state a policy regarding
concentration of investments in a particular industry, and to make the policy
fundamental (changeable only by stockholder vote). The Securities Exchange
Commission has taken the position that a fund that invests more than 25% of its
total assets in a particular industry is concentrating its investments. However,
a fund is permitted to retain the freedom of action to invest more than 25% of
its total assets in an industry provided it specifies the conditions under which
it intends to do so.
The proposed policy would permit the Fund to invest up to 35% of its total
assets in an industry that made up more than 20% of the Korean market as
represented by an index determined by NAM-U.S.A. to be an appropriate measure of
the Korean market. NAM-U.S.A. recommended this change to the Board of Directors
in recognition of the fact that the Korean market tends to be more concentrated
in individual industries than the U.S. market. As a result, it may not be
possible for the Fund to keep pace with Korean benchmarks or to overweight
specific industries relative to benchmarks without investing more than 25% of
its total assets in an industry (or in each of several industries) from time to
time. The amended concentration policy would provide the Fund flexibility to
overweight or underweight industries in a region relative to the local market
benchmarks and give the Fund greater flexibility to respond to changing market
conditions.
As of March 31, 2000, two industries represented over 20% of the Korean
market. The electrical/semi-conductor and telecommunications industries
accounted for approximately 23% and 26%, respectively, of the market as
represented by the Korea Composite Stock Price Index.
The Korean Composite Stock Price Index is a capitalization-weighted index
of all common stocks listed on the Korea Stock Exchange. NAM-U.S.A. currently
believes this index is an appropriate measure of the Korean market, based on
index characteristics including the percentage of the total market
capitalization covered, economic sector and industry representation, and the
types and liquidity of securities that make up the index. NAM-U.S.A. could use
different indexes or additional indexes to represent the local markets in the
future, if those indexes were determined to be appropriate based on these
factors. For any index that is selected, NAM-U.S.A.
10
<PAGE>
intends to measure the percentage of the index represented by each industry no
less frequently than once per month.
Providing the Fund with the ability to invest up to 35% of its total
assets in one or more industries would allow the Fund to respond to changing
market conditions by overweighting or underweighting each industry relative to
the local market benchmarks. The amended policy may expose the Fund to greater
risk, however, to the extent that the particular industry or industries in which
it invests is sensitive to adverse changes in economic or political conditions.
The Board has concluded that the proposal will benefit the Fund and its
shareholders. The Directors recommend voting FOR the proposal. Upon shareholder
approval, the proposed policy will become effective immediately. If the proposal
is not approved by the shareholders of the Fund, the Fund's current policy will
remain in effect.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The City of London Investment Group PLC, an English Corporation, ("COL")
has reported a 9.88% beneficial ownership of the Fund's Common Stock. COL is
located at 10 Eastcheap, London EC3M1LX England.
The MP Emerging Markets Country Fund, a business trust organized under the
laws of the State of Delaware, ("MPEM Country Fund") has reported a 5.99%
beneficial ownership of the Fund's Common Stock. MPEM Country Fund is loceaated
at 10 Eastcheap, London EC3M1LX England.
To the knowledge of the management of the Fund, the persons listed below
are the only beneficial owners of more than 5% of the Fund's outstanding shares.
<TABLE>
<CAPTION>
Shares of Common Stock the Percentage of the Fund's
Fund Beneficially Owned Common Stock Owned
Name of Beneficial Owner at March 31, 2000 March 31, 2000
------------------------ ----------------- --------------
<S> <C> <C>
City of London Investment Group PLC. ... 830,400 9.88%
The MP Emerging Markets Country Fund.... 503,600 5.99%
</TABLE>
ADDITIONAL INFORMATION
The expense of preparation, printing and mailing of the enclosed form of
proxy and accompanying Notice and Proxy Statement will be borne by the Fund,
except to the extent such expenses are attributable to the proposed new
management and investment advisory agreements in which case they will be borne
by NAM-U.S.A. The Fund will reimburse banks, brokers and others for their
reasonable expenses in forwarding proxy solicitation material to the beneficial
owners of the shares of the Fund. In addition to the solicitation of proxies by
mail, proxies may be solicited in person or by telephone. The Fund has retained
Corporate Investor Communications, Inc., a proxy solicitation firm, to assist in
the solicitation of proxies for the Meeting, for a fee of approximately $3,500,
together with reimbursement of such firm's expenses.
The election of Directors requires a plurality of the votes cast, in
person or by proxy, at a meeting at which a quorum is duly constituted.
Ratification of the selection of independent accountants requires the
affirmative vote of a majority of shares present and voting on the proposal at a
meeting at which a quorum is present.
Approval of each of the Management Agreement, the Investment Advisory
Agreement and the amendment of the Fund's fundamental investment limitation
concerning industry concentration to permit the Fund to invest up to 35% of its
total assets in certain industries requires the vote of a majority of the
outstanding voting securities of the Fund which, under the Investment Company
Act, is the vote (a) 67% or more of the shares of the Fund present at the
meeting of its shareholders if more than 50% of the outstanding shares are
present or represented by proxy, or (b) of more than 50% of the outstanding
shares whichever is less. If the Management and Investment Advisory agreements
are not approved by shareholders at the meeting, the Board of Directors will
reconsider the Fund's
11
<PAGE>
management and investment advisory arrangements. If the proposal to amend the
fundamental investment limitation concerning industry concentration is not
approved by the shareholders of the Fund, the Fund's current policy will remain
in effect.
The holders of a majority of the shares of stock of the Fund entitled to
vote at the Meeting, present in person or by proxy, shall constitute a quorum
for the transaction of business at the Meeting. The Fund expects that
broker-dealer firms holding shares of the Fund in "street name" for the benefit
of their customers and clients, as well as the Japan Securities Clearing
Corporation ("JSCC") holding shares of the Fund on behalf of its beneficial
shareholders, will request the instructions of such customers, clients and
beneficial shareholders, on how to vote their shares on each proposal before the
Meeting. The Fund understands that the New York Stock Exchange and the Osaka
Securities Exchange permit such broker-dealers and the JSCC, without
instructions from such customers, clients and beneficial shareholders, to grant
authority to the proxies designated by the Fund to vote on the items to be
considered at the Meeting if no instructions have been received prior to the
date specified in the broker-dealer firm's or the JSCC's request for voting
instructions. Certain broker-dealer firms may exercise discretion over shares
held in their name for which no instructions are received by voting such shares
in the same proportion as they have voted shares for which they have received
instructions.
The shares as to which the proxies so designated are granted authority by
broker-dealer firms and the JSCC to vote on the items to be considered at the
Meeting, the shares as to which broker-dealer firms have declined to vote
("broker non-votes"), as well as the shares as to which proxies are returned by
record shareholders but which are marked "abstain" on any item will be included
in the Fund's tabulation of the total number of votes present for purposes of
determining whether the necessary quorum of shareholders exists. However,
abstentions and broker non-votes will not be counted as votes cast. Therefore,
abstentions and broker non-votes will not have an effect on the election of
Directors or the ratification of independent accountants. Abstentions and broken
non-votes will have the same effect as a vote against the approval of each of
the Management Agreement and Investment Advisory Agreement and the amendment of
the fundamental investment limitations concerning industry concentration to
permit the Fund to invest up to 35% of its total assets in certain industries.
The address of NAM-U.S.A. is 180 Maiden Lane, New York, New York
10038-4936. The address of NAM is 1-14,2- chome, Nihonbashi, Chuo-ku, Tokyo
103-8260, Japan.
The Fund sends quarterly reports to shareholders. The Fund will furnish,
without charge, a copy of its most recent annual and semi-annual report
succeeding such annual report, if any, to shareholders upon request to the Fund
at 180 Maiden Lane, New York, New York 10038-4936 (or call 1-800-833-0018).
Proposals of Shareholders
Proposals of shareholders intended to be presented at the next annual
meeting of shareholders of the Fund must be received by the Fund for inclusion
in its proxy statement and form of proxy relating to that meeting by November 1,
2000.
By Order of the Board of Directors
John J. Boretti
Secretary
New York, New York
Dated: May , 2000
12
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of ____ 2000, by and between NOMURA ASSET
MANAGEMENT U.S.A. INC., a New York corporation (hereinafter referred to as the
"Manager"), and NOMURA ASSET MANAGEMENT CO., LTD., a Japanese corporation
(hereinafter referred to as the "Investment Adviser").
W I T N E S S E T H :
WHEREAS, Korea Equity Fund, Inc. (the "Fund") is engaged in business as a
non-diversified, closed-end, management investment company registered under the
Investment Company Act of 1940, as amended (hereinafter referred to as the
"Investment Company Act"); and
WHEREAS, the Manager and the Investment Adviser are engaged in business as
registered investment advisers under the Investment Advisers Act of 1940, as
amended; and
WHEREAS, the Manager has entered into a management agreement with the Fund
of even date herewith (the "Management Agreement"); and
WHEREAS, the Investment Adviser is willing to provide investment advisory
services to the Manager in connection with the Fund's operations on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE I
Duties of the Investment Adviser
Subject to the broad supervision of the Manager and the Fund, the
Investment Adviser shall provide the Manager with such economic research,
securities analysis and investment recommendations as the latter may from time
to time consider necessary for the proper supervision of the Fund's assets. The
Investment Adviser shall continuously review the Fund's holdings and shall make
recommendations as to which securities shall be purchased, sold or exchanged and
what portion of the assets of the Fund shall be held in the various securities
in which the Fund invests, subject always to the restrictions of the Articles of
Incorporation and By-Laws of the Fund, as amended from time to time, the
provisions of the Investment Company Act and the statements relating to the
Fund's investment objective, investment policies and investment restrictions as
the same are set forth in filings made by the Fund under Federal securities
laws. The Investment Adviser shall make recommendations as to foreign currency
matters and the advisability of entering into foreign exchange contracts. The
Investment Adviser shall also make recommendations as to the manner in which
voting rights, rights to consent to
<PAGE>
corporate action and any other rights pertaining to the Fund's portfolio
securities shall be exercised.
ARTICLE II
Allocation of Charges and Expenses
The Investment Adviser shall furnish, at its own expense, all
administrative services, office space, equipment and facilities, investment
advisory, statistical and research services, and executive, supervisory and
clerical personnel necessary to carry out its obligations under this Agreement.
ARTICLE III
Compensation of the Investment Adviser
For the services to be rendered as provided herein, the Manager shall pay
to the Investment Adviser at the end of each calendar month a fee based upon the
average weekly value of the net assets of the Fund at the annual rate of 0.55%
of the Fund's average weekly net assets (i.e., the average weekly value of the
total assets of the Fund minus the sum of accrued liabilities of the Fund),
commencing on the day following effectiveness hereof. For purposes of this
calculation, average weekly net assets is determined at the end of each month on
the basis of the average net assets of the Fund for each week during the month.
The assets for each weekly period are determined by averaging the net assets at
the last business day of the prior week. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month, compensation for that part of the month that this Agreement is in
effect shall be prorated in a manner consistent with the calculation of the fee
as set forth above. During any period when the determination of net asset value
is suspended by the Board of Directors of the Fund, the average net asset value
of a share for the last week prior to such suspension shall for this purpose be
deemed to be the net asset value at the close of each succeeding week until it
is again determined.
ARTICLE IV
Limitation of Liability of the Investment Adviser
The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As used
in this Article IV, the term "Investment Adviser" shall include any affiliates
of the Investment Adviser performing services for the Fund contemplated hereby
and directors, officers, partners and employees of the Investment Adviser and
such affiliates.
2
<PAGE>
ARTICLE V
Activities of the Investment Adviser
The services of the Investment Adviser to the Fund are not to be deemed to
be exclusive, the Investment Adviser and any person controlled by or under
common control with the Investment Adviser (for the purpose of this Article V
referred to as "affiliates") being free to render services to others. It is
understood that directors, officers, employees and shareholders of the Manager
are or may become interested in the Investment Adviser and its affiliates, as
directors, officers, employees, partners and shareholders or otherwise and that
directors, officers, employees, partners and shareholders of the Investment
Adviser and its affiliates are or may become similarly interested in the Manager
or the Fund, and that the Investment Adviser is or may become interested in the
Manager or the Fund as shareholder or otherwise.
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force until ____ __, 2002 and thereafter, but only so long
as the Management Agreement remains in force and provided that such continuance
is specifically approved at least annually by (i) the Board of Directors of the
Fund or by the vote of a majority of the outstanding voting securities of the
Fund and (ii) a majority of those directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Manager, by the Board of Directors of the Fund, by vote of a
majority of the outstanding voting securities of the Fund or by the Investment
Adviser, on sixty days' written notice to the parties. This Agreement shall
automatically terminate in the event of its assignment or upon the termination
of the Management Agreement.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved in accordance with applicable requirements under the
Investment Company Act.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
3
<PAGE>
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
NOMURA ASSET MANAGEMENT U.S.A. INC.
By /s/ David G. Stoeffel
--------------------------------------
David G. Stoeffel
Vice President
NOMURA ASSET MANAGEMENT CO., LTD.
By /s/ Nobuo Katayama
--------------------------------------
Nobuo Katayama
President
5
<PAGE>
MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of ____, 2000, by and between KOREA EQUITY
FUND, INC., a Maryland corporation (hereinafter referred to as the "Fund"), and
NOMURA ASSET MANAGEMENT U.S.A. INC., a New York corporation (hereinafter
referred to as the "Manager").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a non-diversified, closed-end,
management investment company registered under the Investment Company Act of
1940, as amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Manager is willing to provide management and investment
advisory services to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE I
Duties of the Manager
The Fund hereby retains the Manager to act as the manager of the Fund and
to furnish the Fund with the management and investment advisory services
described below, subject to the policies of, review by and overall control of
the Board of Directors of the Fund, for the period and on the terms and
conditions set forth in this Agreement. The Manager hereby accepts such
employment and agrees during such period, at its own expense, to render, or
arrange for the rendering of, such services and to assume the obligations herein
set forth for the compensation provided for herein.
(a) Management and Administrative Services. The Manager shall perform, or
supervise the performance of, the management and administrative services
necessary for the operation of the Fund including administering shareholder
accounts and handling shareholder relations. The Manager shall provide the Fund
with office space, equipment and facilities and such other services as the
Manager, subject to review by the Board of Directors of the Fund, shall from
time to time determine to be necessary or useful to perform its obligations
under this Agreement. The Manager shall also, on behalf of the Fund, conduct
relations with custodians, depositories, transfer agents, dividend disbursing
agents, other shareholder servicing agents, accountants, attorneys,
underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and
such other persons in any such other capacity deemed to be necessary or
desirable. The Manager shall generally monitor the Fund's compliance with
investment policies and restrictions as set forth in filings made by the Fund
under Federal securities laws. The Manager shall make reports to the Board of
Directors of the Fund of the performance of its obligations hereunder and
furnish advice and recommendations with respect to such other aspects of the
business and affairs of the Fund as it shall determine to be desirable. The
Manager and each of its affiliates shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly
<PAGE>
provided or authorized, have no authority to act for or represent the Fund in
any way or otherwise be deemed an agent of the Fund.
(b) Investment Advisory Services. The Manager shall provide the Fund with
such investment research, advice and supervision as the latter may from time to
time consider necessary for the proper supervision of the assets of the Fund.
The Manager shall act as investment adviser to the Fund and as such shall
furnish continuously an investment program for the Fund and shall determine from
time to time which securities shall be purchased, sold or exchanged and what
portion of the assets of the Fund shall be held in the various securities in
which the Fund invests, options, futures, options on futures or in cash, subject
always to the restrictions of the Articles of Incorporation and By-Laws of the
Fund, as amended from time to time, the provisions of the Investment Company Act
and the statements relating to the Fund's investment objective, investment
policies and investment restrictions as the same are set forth in filings made
by the Fund under Federal securities laws. The Manager shall make decisions for
the Fund as to foreign currency matters and make determinations as to foreign
exchange contracts. The Manager shall make recommendations as to the manner in
which voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's portfolio securities shall be exercised. Should the
Board of Directors of the Fund at any time, however, make any definite
determination as to investment policy and notify the Manager thereof in writing,
the Manager shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked. The Manager shall take, on behalf of the Fund, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or dealers selected by
it, and to that end, the Manager is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers and dealers and the placing of such orders, the Manager is
directed at all times to seek to obtain executions and price within the policy
guidelines determined by the Board of Directors of the Fund and set forth in the
filings made by the Fund under Federal securities laws. Subject to this
requirement and the provisions of the Investment Company act, the Securities
Exchange Act of 1934, as amended, and other applicable provisions of law, the
Manager may select brokers or dealers with which it, or the Fund, is affiliated.
ARTICLE II
Allocation of Charges and Expenses
(a) The Manager. The Manager assumes and shall pay for maintaining the
staff and personnel necessary to perform its obligations under this Agreement
and shall, at its own expense, provide the office space, equipment and
facilities which it is obligated to provide under Article I hereof, and shall
pay all compensation of officers of the Fund and all directors of the Fund who
are "affiliated persons" (as defined in the Investment Company Act) of the
Manager.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: organization costs, taxes,
expenses for legal and auditing services, costs of printing proxies, stock
certificates, shareholder reports, prospectuses,
2
<PAGE>
charges of the Custodian, any Sub-Custodian and Transfer and Dividend Disbursing
Agent, expenses of portfolio transactions, Securities and Exchange Commission
and stock exchange fees, expenses of registering the Fund's shares under
Federal, state and foreign laws, expenses of administering any dividend
reinvestment plan (except to the extent set forth in such plan), fees and actual
out-of-pocket expenses of directors who are not affiliated persons of the
Manager, accounting and pricing costs (including the daily calculation of the
net asset value), insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other like expenses properly
payable by the Fund.
ARTICLE III
Compensation of the Manager
For the services rendered, the equipment and facilities furnished and
expenses assumed by the Manager, the Fund shall pay to the Manager at the end of
each calendar month a fee based upon the average daily value of the net assets
of the Fund, at the annual rate of 1.10% of the Fund's average weekly net assets
(i.e., the average weekly value of the total assets of the Fund, minus the sum
of liabilities of the Fund), commencing on the day following effectiveness
hereof. For purposes of this calculation, average weekly net assets is
determined at the end of each month on the basis of the average net assets of
the Fund for each week during the month. The assets for each weekly period are
determined by averaging the net assets at the last business day of the prior
week. If this Agreement becomes effective subsequent to the first day of a month
or shall terminate before the last day of a month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fee as set forth above. During any period when the
determination of net asset value is suspended by the Board of Directors of the
Fund, the average net asset value of a share for the last week prior to such
suspension shall for this purpose be deemed to be the net asset value at the
close of each succeeding week until it is again determined. It is understood
that one-half of such compensation is being paid by the Fund to the Manager, as
agent for the Investment Adviser referenced in Article IV hereof, and that the
Manager will remit such compensation to the Investment Adviser pursuant to the
Investment Advisory Agreement referenced in such Article IV.
ARTICLE IV
Limitation of Liability of the Manager
The Manager shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the execution and management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article V, the term "Manager" shall include any affiliates of the Manager
performing services for the Fund contemplated hereby and directors, officers and
employees of the Manager as well as that corporation itself.
3
<PAGE>
ARTICLE V
Activities of the Manager
The services of the Manager to the Fund are not to be deemed to be
exclusive, the Manager and any person controlled by or under common control with
the Manager (for purposes of this Article VII referred to as "affiliates") being
free to render services to others. It is understood that directors, officers,
employees and shareholders of the Fund are or may become interested in the
Manager and its affiliates, as directors, officers, employees, partners, and
shareholders or otherwise and that directors, officers, employees, partners, and
shareholders of the Manager and its affiliates are or may become similarly
interested in the Fund, and that the Manager is or may become interested in the
Fund as shareholder or otherwise.
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force until ____ __, 2002 and thereafter, but only so long
as such continuance is specifically approved at least annually by (i) the Board
of Directors of the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of those directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Fund, or by the Manager, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
ARTICLE VII
Amendments of the Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved in accordance with applicable requirements under the
Investment Company Act.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
4
<PAGE>
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
KOREA EQUITY FUND, INC.
By /s/ David G. Stoeffel
--------------------------------------
David G. Stoeffel
Vice President
NOMURA ASSET MANAGEMENT U.S.A. INC.
By /s/ Nobuo Katayama
--------------------------------------
Nobuo Katayama
President
6
