SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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THE KOREA FUND, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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The following is the text of a letter sent to stockholders of The Korea Fund,
Inc. on September 22, 2004:
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THE KOREA FUND, INC.
345 Park Avenue
New York, NY 10154
September 22, 2004
ACT NOW TO PROTECT YOUR INVESTMENT IN THE FUND
Dear Fellow Stockholder:
The annual meeting of stockholders of The Korea Fund, Inc. is on
October 6 -- but you still have time to act to protect your investment in the
Fund against the efforts by the investment managers of City of London and
Harvard to further their own agendas.
Your directors unanimously urge you to reject City of London's and
Harvard's efforts, by signing, dating and returning the enclosed WHITE proxy
card today. If you have returned a gold proxy card, it's not too late to sign,
date and send in a WHITE proxy card and change your vote - only your
latest-dated signed proxy counts.
-- Institutional Shareholder Services Recommends: Vote FOR the Fund's
Candidates and AGAINST Harvard's Proposal --
Institutional Shareholder Services, widely recognized as the leading
independent proxy advisory firm, has recommended to its subscribers, who are
primarily institutional investors, that they vote FOR the Fund's director
candidates, not for City of London's nominees, and AGAINST Harvard's proposal to
terminate the Fund's investment advisory contract with Deutsche Investment
Management.
ISS made its recommendation after meeting with the Fund and with City
of London. Here's what ISS says in its report:^1
o "KF has performed admirably with respect to both fund
performance and fund expense."
o "The board meets all formal standards of independence and
there is no evidence to suggest that it is beholden to DeIM or
Deutsche."
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^1 Report of Institutional Shareholder Services, September 20, 2004.
Permission to quote from the ISS report has not been sought or
obtained.
o "The discount is less important in light of the fund's strong
performance and the board's independence."
o "DeIM has performed well as the investment advisor as
performance has been strong, leading to strong returns for
shareholders over the five and ten year periods. Strong total
returns are the best indication of the functioning fund."
o "In conclusion, ISS believes that long-term investors,
presumably the majority of shareholders, can still benefit
from the fund's overall performance, relatively low expense,
and exposure to the Korean market."
-- City of London and Harvard Have Fundamental Conflicts of
Interest --
Harvard and City of London have basic conflicts of interest. Their
goal, as we see it, is to increase their opportunities to realize arbitrage
profits. That goal is inconsistent with the Fund's objective of long-term
capital appreciation through investing in Korean securities.
Just what is the City of London group? City of London consists of an
investment manager and a group of investment vehicles organized under many
different laws (Chile, Ireland, Ontario, Delaware), all involved in closed-end
investment company arbitrage. City of London would have you believe that it is a
typical long-term holder -- even though its group has made 175 purchases and 69
sales of Fund shares in the past two years alone.
Harvard and City of London both appear to be advocating excessive
repurchases by the Fund of its own shares. The repurchases would likely create
more arbitrage opportunities for Harvard and City of London - but would increase
the Fund's expense ratio (as at other funds which made large repurchase offers
under pressure from Harvard and City of London), and would harm the Fund and its
long-term investment results.
As ISS reports, "large scale tenders, even for a large fund, can create
problems" as "fixed expenses are spread over a decidedly smaller asset base" and
the management fee increases as a percentage of assets. "Remaining shareholders
would therefore be doubly punished and the discount would likely return as
future expectations were discounted by higher expense."
-- Risks to You from Harvard's Proposal: Don't Jeopardize Investment
Performance --
The investment performance of The Korea Fund under the Fund's
Investment Manager, DeIM, has been extraordinary:
o ISS: "KF has not only outperformed the KOSPI Index, but over
the past ten years also ranks in the top half of all
closed-end non-US Equity funds covered by Wiesenberger. KF has
also has also outperformed the MSCI Korea Index over the past
five-year and ten-year periods."
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The numbers tell the facts:
Korea Fund's Superior Performance (Through August 31, 2004)(a)
----------------------------- --------- --------- --------- ----------
1 Year 3 Years 5 Years 10 Years
----------------------------- --------- --------- --------- ----------
Korea Fund (net asset value) 9.57% 23.17% 8.90% 4.11%
----------------------------- --------- --------- --------- ----------
KOSPI 8.73% 19.68% -1.59% -5.14%
----------------------------- --------- --------- --------- ----------
MSCI Korea 9.35% 25.43% 2.90% 0.83%
----------------------------- --------- --------- --------- ----------
(a) Percentages are average annual percentages. Past results are not
necessarily indicative of future performance.
Your Board is overwhelmingly independent. Only one of the Fund's seven
directors is affiliated with the Investment Manager.
o ISS: "Both the audit committee and committee of independent
directors are fully independent as is the chairman of the
board. . . . The board operates independently from management
with the independent directors setting the board agenda."
o ISS: "It is difficult to make a compelling case that the
current board is not independent from DeIM."
Your independent directors unanimously believe few, if any, investment
advisers have experience and capabilities in researching and choosing
investments in Korea that compare with those of the Investment Manager.
-- Termination of DeIM Will Hurt the Fund and its Stockholders --
Termination of the Investment Manager would disrupt the Fund's
investment process, cause substantial expense to the Fund, and adversely affect
the Fund's investment performance - and therefore harm you and other Korea Fund
stockholders.
o ISS: "Removal of this manager would not directly move
shareholders closer to realizing NAV and may in the interim
increase the discount as a level of uncertainty clouds the
fund's future."
Upon termination of DeIM's investment advisory agreement, the Board
would have to make new investment advisory arrangements, which stockholders
would then have to approve. This would involve delays, uncertainties and large
expenses - and the grave risk that the Fund would be terminating an investment
manager with a proven record of success, without any assurance of being able to
find another manager of comparable experience and capabilities. Our conclusion:
terminating the Investment Manager will harm the Fund and your investment in the
Fund.
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-- Your Board Is Committed To Building Value for Stockholders --
The Fund's candidates, Susan Kaufman Purcell and Vincent J. Esposito,
will continue to work hard to achieve superior total returns for you and all
Fund stockholders. Each has the experience needed to represent the best
interests of ALL of the Fund's stockholders. Each is committed to good corporate
governance and to building value for Fund stockholders.
-- -- -- -- --
We urge you to act today, to protect Korea Fund and your investment in
it, by signing and sending back today a WHITE proxy card voting FOR the Korea
Fund candidates and AGAINST Harvard's proposal and the City of London's
candidates.
If you need additional assistance in the proxy voting process, please
call 1-800-843-0369 to speak with one of the Fund's proxy specialists at
Georgeson Shareholder Communications.
On behalf of the Board of Directors of The Korea Fund, Inc.
/s/Robert J. Callander
Robert J. Callander
Chairman of the Board
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Internet and Telephone Voting
Holders in many banks and brokerage firms will be able to vote by internet or by
toll-free telephone. Instructions for internet and telephone voting in most
cases will be included on the enclosed WHITE voting form that has been provided
by your broker or bank. We urge you to take advantage of the opportunity to vote
your WHITE proxy card today by following the instructions on the WHITE voting
form for using the internet or toll-free telephone.
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