As Filed with the Securities and
Exchange Commission on
May 10, 2000
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:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to 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.
1. Amount previously paid:
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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 20, 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 offices
of Nomura Asset Management U.S.A. Inc., 180 Maiden Lane, New York, New York, on
Tuesday, June 20, 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;
(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 10, 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 20, 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 offices of Nomura
Asset Management U.S.A. Inc., 180 Maiden Lane, New York, New York, on Monday,
June 20, 2000, at 10:30 A.M. The approximate mailing date of this Proxy
Statement is May 11, 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.
("NAM-U.S.A."), (d) FOR approval of a new Investment Advisory Agreement between
NAM-U.S.A. and Nomura Asset Management Co., Ltd. ("NAM") 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>
PROPOSAL 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 unless
otherwise indicated.
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. It is currently expected that any substitute nominee
for Director who is not an "interested person" of the Fund (within the meaning
of the Investment Company Act of 1940) also will be a non-interested person.
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 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 and NAM acts as
investment adviser.
(2) Member of Audit Committee and Nominating Committee of the Board of
Directors.
(3) "Interested person" of the Fund, as defined in the Investment Company Act
of 1940, as amended (the "Investment Company Act").
(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.
Because the Funds in the Fund Complex do not share a common fiscal year, the
information relating to compensation from the Fund Complex paid to the
directors is provided as of December 31, 1999.
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. ("Nomura"), an
affiliate of both NAM-U.S.A. and NAM.
PROPOSAL 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 Nomura 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.
PROPOSAL 3, APPROVAL OR DISAPPROVAL OF THE MANAGEMENT AND ARRANGEMENT
NAM-U.S.A. has served as the management company for the Fund since the
Fund commenced operations in 1993. NAM-U.S.A. provides management and
administrative services, including administering shareholder accounts and
handling shareholder relations, to the Fund. NAM-U.S.A. is an affiliate of both
Nomura and NAM. The existing agreement between the Fund and NAM-U.S.A. is
referred to below as the Interim Management 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 an ultimate goal of acquiring
100% of NAM. At March 31, 2000, Normura had acquired 73.8% of the outstanding
voting shares of NAM and NAM had increased its share ownership in NAM-U.S.A.
from approximately 88% to 100%.
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 day-to-day operations or portfolio management, respectively, of the
Fund. However, these changes may constitute an "assignment" of the relevant
contracts under the Investment Company Act, which resulted in a termination of
the Former Management Agreement. Accordingly, with the ownership changes in
NAM-U.S.A. and NAM and in order to ensure the continuity of management services
provided to the Fund by NAM-U.S.A., the Board of Directors of the Fund approved,
under the Investment Company Act of 1940 Rule 15a-4, the interim Management
Agreement (the "Interim Management Agreement") for up to 150 days after the
5
<PAGE>
termination of the former agreement while the Fund seeks shareholder approval of
a new agreement. A new management agreement between the Fund and NAM-U.S.A. (the
"New Management Agreement") is proposed to be approved by a majority of the
Fund's shareholders.
The Interim Management Agreement under which the Fund is operating after
the ownership change is substantially identical to the agreement under which the
Fund currently operates. The services to be approved by NAM-U.S.A. after the
ownership change will be identical to the services currently provided by
NAM-U.S.A. 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. As described below, the proposed new agreement
does not alter the rate of management compensation presently payable by the
Fund.
In their consideration of the New Management Agreement, the Board of
Directors received information relating to, among other things, alternatives to
the present arrangement, the nature, quality and extent of the management and
other services to be provided to the Fund by NAM-U.S.A., and other comparative
data with respect to the management 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-U.S.A.'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 arrangement to NAM-U.S.A., and
information about the services to be performed and the personnel performing such
services under the proposed agreement. The Independent Directors were advised by
separate counsel in connection with their review of the management arrangements
of the Fund. After considering the factors stated above, the Board of Directors
approved the New Management Agreement of the Fund.
If approved by the Fund's shareholders at the Meeting, the New Management
Agreement will remain in effect until June 1, 2002, unless terminated as
described below. The former Management Agreement was 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.
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. acts as one of the investment advisors to five other
investment companies, three of which are U.S. registered investment companies.
At March 31, 2000, NAM-U.S.A. is a 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. Morrongiello.. 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, Morrongiello, Munt,
Stoeffel and Subramanyam, is 180 Maiden Lane, New York, New York 10038.
7
<PAGE>
Terms of the New Management Agreement
A copy of the form of the New Management Agreement is set forth as
Exhibits A. Set forth below is a summary of the terms of that agreement. As
discussed above, the proposed agreement is substantively identical to the
agreement under which the Fund currently operates. The proposed agreement does
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.
Compensation And Expenses
As described above, the management compensation presently payable by the
Fund will remain the same under the proposed contractual arrangement. 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 services it rendered during the fiscal year ended October 31, 1999, the
Fund accrued, under generally accepted accounting principles, fees of $447,245
and paid NAM-U.S.A. fees of $423,031 on a cash basis. 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 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 earned $9,938 (10.2%) 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 of $16,536 where Nomura was 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. and their affiliates act as manager:
<TABLE>
<CAPTION>
Approximate
Net Assets at
March 31, 2000
Investment Company Annual Advisory Fees (Millions)
------------------ -------------------- ----------
<S> <C> <C>
Jakarta Growth Fund, Inc. $11.2
Manager: Management Fee:
NAM-U.S.A. 1.10% of net assets.
Japan OTCEquity Fund, Inc. $255.3
Manager: Management Fee:
NAM-U.S.A. 1.10% of net assets not in excess of $50 million,
1.00% of net assets in excess of $50 million, but
not exceeding $100 million, .90% of net assets
in excess of $100 million but not exceeding $175
million, and .80% of net assets in excess of $175
million.
Nomura Pacific Basin Fund, Inc. $18.6
Manager: Management Fee:
NAM-U.S.A. .75% of net assets.(1)
</TABLE>
(1) For the fiscal year ended March 31, 2000 NAM-U.S.A. waived its entire
management fee.
Duration and Termination. As indicated above, the New Management Agreement
will remain if effect until June 1, 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 4, APPROVAL OR DISAPPROVAL OF THE INVESTMENT ADVISORY ARRANGEMENT
NAM, the sole shareholder of NAM-U.S.A., has served as the investment
adviser for the Fund since the Fund commenced operations in 1993. NAM is a
subsidiary of Nomura, which is the largest securities company in Japan. NAM
provides economic research, securities analysis and investment recommendations
to the Fund. The existing agreement between NAM-U.S.A. and NAM is referred to
below as the Interim Investment Advisory Agreement.
As described above, 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 NAM-U.S.A. and NAM are not expected to affect the day-to-day
operations or portfolio management, respectively, of the Fund. However, these
changes may constitute an "assignment" of the relevant contracts under the
Investment Company Act, which resulted in a termination of the former Investment
Advisory Agreement. Accordingly, with the ownership changes in NAM-U.S.A. and
NAM and in order to ensure the continuity of investment advisory services
provided to the Fund by NAM, the Board of Directors of the Fund approved, under
the Investment Company Act of 1940 Rule 15a-4, the interim Investment Advisory
Agreement (the "Interim Investment Advisory Agreement") for up to 150 days after
the
10
<PAGE>
termination of the former agreement while the Fund seeks shareholder approval of
a new agreement. A new investment advisory agreement between NAM-U.S.A. and NAM
(the "New Investment Advisory Agreement") is proposed to be approved by a
majority of the Fund's shareholders.
The Interim Investment Advisory Agreement and the proposed New Investment
Advisory Agreement under which the Fund is operating after the ownership change
are substantially identical to the agreement under which the Fund currently
operates. The services to be approved by NAM after the ownership change will be
identical to the services currently provided by NAM. 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. As described
below, the proposed new agreement does not alter the rate investment advisory
compensation presently payable by NAM-U.S.A. to NAM. The Fund does not
compensate NAM for its investment advisory services.
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, and other comparative data with
respect to the management 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, 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 investment advisory arrangements
of the Fund. After considering the factors stated above, the Board of Directors
investment advisory agreement of the Fund.
If approved by the Fund's shareholders at the Meeting, the New Investment
Advisory Agreement will remain in effect until June 1, 2002, unless terminated
as described below. The former Investment Advisory Agreement was 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
11
<PAGE>
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 and CEO of NAM
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.
12
<PAGE>
Terms of the New Investment Advisory Agreement
A copy of the form of the New Investment Advisory Agreement is set forth
as Exhibits B. Set forth below is a summary of the terms of that agreement. As
discussed above, the proposed agreement is substantively identical to the
agreement under which the Fund currently operates. The proposed agreement does
not change the amount of investment advisory fees payable by NAM-U.S.A. to NAM.
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 investment advisory compensation presently payable
by NAM-U.S.A. to NAM will remain the same under the proposed contractual
arrangements. As compensation for its services to the Fund, NAM-U.S.A. will pay
NAM monthly fees at the annual rate of .55% of the Fund's average weekly net
assets. For the services rendered during the fiscal year ended October 31,
1999, NAM-U.S.A. accrued, under generally accepted accounting principles, fees
of $223,623 and paid NAM fees of $211,517 on a cash basis. At March 31, 2000,
the net assets of the Fund aggregated approximately $50.8 million. At this net
asset level, the fee received by NAM from NAM-U.S.A. would aggregate
approximately $279,000.
The New Investment Advisory Agreement obligates NAM to provide economic
research, securities analysis and investment recommendations to the Fund.
13
<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 and its affiliates act as 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
Investment Advisor: Investment Advisory Fee:
NAM .50% of net assets; paid by NAM-U.S.A.
Japan OTC Equity Fund, Inc. $255.3
Investment Advisor: Investment Advisory Fee:
NAM .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
Investment Advisors: Investment Advisory Fee:
NAM .26125% of net assets; paid by NAM-U.S.A.
to NAM(2)
NAM-Singapore .0275% of net assets; paid by NAM-U.S.A.
to NAM-Singapore(2)
</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.
(2) For the fiscal year ended March 31, 2000, NAM and NAM-Singapore waived
their entire investment advisory fee.
Duration and Termination. As indicated above, the New Investment Advisory
Agreement will remain in effect until June 1, 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.
14
<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 measure 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 and 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. In determining the percentage of the Fund's total assets to
invest in a particular industry, NAM-U.S.A. will consider a variety of factors
including, but not limited to, political, economic and financial developments
affecting the global and Korean economies, the condition and growth potential of
the particular industry and NAM-U.S.A.'s assessment of companies within that
industry.
The proposed policy would permit the Fund to invest up to 35% of its total
assets in any 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.
The Korea 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. intends to measure the
percentage of the index represented by each industry no less frequently than
once per month.
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.
As a result of the amended concentration policy, the Fund may concentrate
a larger percentage of its investments in a limited number of industries, such
as the electrical/semi-conductor or telecommunications industries. As a result
there is a risk that the Fund's investments will perform poorly during a
downturn in any of the industries in which its investments are concentrated
because each investment has a greater effect on the Fund's performance. Both the
electrical/semi-conductor and telecommunications industries are strongly
affected by worldwide scientific and technological developments, and government
regulations, that may have an adverse effect on the companies within those
industries, which may affect the Fund's investments.
13
<PAGE>
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%
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's cost in connection with the printing, mailing and
solicitation of proxies relating to the Meeting will not exceed $18,000. Any
costs relating to the above services in excess of $18,000 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., ("CIC"), a firm that specializes in
proxy solicitation services, 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. CIC is obligated to provide proxy solicitation services
including, but not limited to, distribution of proxies to broker dealers,
telephonic communication with shareholders and broker dealers and monitoring of
voting results.
The election of Directors (Proposal 1) 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 (Proposal 2) 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 (Proposal 3), the Investment
Advisory Agreement (Proposal 4) 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 (Proposal 5) 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
14
<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. Under the rules of the New York Stock Exchange and the Osaka Securities
Exchange, broker-dealers and the JSCC, without instructions from such customers,
clients and beneficial shareholders, grant authority to the proxies designated
by the Fund to vote on the election of Directors (Proposal 1) and the
ratification of the selection of the independent accountants (Proposal 2) 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. Broker-dealer firms,
including the JSCC, will not be permitted to grant voting authority without
instructions with respect to Proposals 3-5. 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 (Proposal 1) or the ratification of independent accountants (Proposal
2) . Abstentions and broker non-votes will have the same effect as a vote
against the approval of each of the Management Agreement (Proposal 3) and
Investment Advisory Agreement (Proposal 4) 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 (Proposal 5).
Address of Manager and Investment Advisor
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.
Annual Report Delivery
The Fund sends annual, semi-annual and quarterly reports to shareholders.
The Fund will furnish, without charge, a copy of its most recent annual and any
semi-annual and quarterly reports 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 10, 2000
15
Exhibit A
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
16
<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,
17
<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.
18
<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.
19
<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.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
KOREA EQUITY FUND, INC.
By
--------------------------------------
David G. Stoeffel
Vice President
NOMURA ASSET MANAGEMENT U.S.A. INC.
By
--------------------------------------
Nobuo Katayama
President
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EXHIBIT B
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
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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.
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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.
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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.
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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
--------------------------------------
Nobuo Katayama
President
NOMURA ASSET MANAGEMENT CO., LTD.
By
--------------------------------------
Hisaaki Hino
Executive Managing Director
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KOREA EQUITY FUND, INC.
180 Maiden Lane
New York, New York 10038-4936
PROXY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Nobuo Katayama and John J. Boretti as proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse hereof, all the common stock
of Korea Equity Fund, Inc. (the "Fund") held of record by the undersigned on
March 31, 2000 at the Annual Meeting of the Shareholders of the Fund to be held
on June 19, 2000 or any adjournment thereof.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign exactly as name(s) appear(s) hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized persons.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ----------------------------------- ---------------------------------
- ----------------------------------- ---------------------------------
- ----------------------------------- ---------------------------------
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
KOREA EQUITY FUND, INC.
Please be sure to sign and date this Proxy Date
Mark box at right if an address change or comment has been noted on the
reverse side of this card. [ ]
Shareholder sign here------------------------------------Co-owner sign here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ALL PROPOSALS
1. Election of Directors.
For For All
All With- Nominees
William G. Barker, Jr. Chor Weng Tan Nominees hold Except
George H. Chittenden Arthur R. Taylor
Nobuo Katayama John F. Wallace [ ] [ ] [ ]
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Nominees Except" box and strike a line through the nominee(s)' name(s).
Your shares will be voted for the remaining nominee(s).
2. Proposal to ratify the selection of For Against Abstain
PricewaterhouseCoopers LLP as the
independent accountants of the Fund. [ ] [ ] [ ]
3. Proposal to approve a new Management For Against Abstain
agreement between the Fund and Nomura
Asset Management U.S.A. Inc. [ ] [ ] [ ]
4. Proposal to approve a new Investment For Against Abstain
Advisory Agreement between Nomura Asset
Management U.S.A. Inc. and Nomura Asset [ ] [ ] [ ]
Management Co., Ltd.
5. Proposal to amend the Fund's For Against Abstain
fundamental investment limitation
concerning industry concentration to [ ] [ ] [ ]
permit the Fund to invest up to 35% of
its total assets in certain industries.
6. In the discretion of such proxies, upon For Against Abstain
such other business as may properly
come before the meeting or any [ ] [ ] [ ]
adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR Proposals 1, 2, 3, 4, 5 and 6.
RECORD DATE SHARES:
