SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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|_| Preliminary Proxy Statement
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14a-6(e)(2))
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|_| Soliciting Material Pursuant to Section 240.14a-12
THE KOREA FUND, INC.
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(Name of Registrant as Specified in its Charter)
CITY OF LONDON INVESTMENT GROUP PLC
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CITY OF LONDON INVESTMENT GROUP PLC
o 10 Eastcheap, London, England, EC3M 1LX o
o 1125 Airport Road, Coatesville, PA, United States 19320 o
o 30 Cecil Street, Singapore 049712 o
September 15, 2004
VOTE THE GOLD PROXY TO ELECT OUR INDEPENDENT NOMINEES
TO THE BOARD OF THE KOREA FUND, INC.
Dear Fellow Stockholder of The Korea Fund, Inc. (the "Fund"):
We are seeking your support in electing two independent nominees(1),
Julian Reid and Chris Russell, to the Board of Directors (the "Board") of the
Fund at the Annual Meeting of Stockholders scheduled for October 6, 2004. We
believe that Messrs. Reid and Russell are highly qualified, independent nominees
with a wealth of experience who can bring fresh viewpoints to the Board to help
ensure that the best interests of all Stockholders are represented. You can
elect these nominees by signing, dating and returning the enclosed GOLD proxy
card.
COMPARE OUR INDEPENDENT NOMINEES
WITH THE FUND'S NOMINEES. IN OUR OPINION--IT'S NO CONTEST!
Who is more qualified?
The Fund would have you believe that its nominees are more qualified than the
Independent Nominees.
FACT: The Fund's nominees have no Asian or Korean experience apart from serving
on the Board of the Fund and have no closed-end fund experience apart from their
experience with several funds managed by DeIM.
IN CONTRAST:
FACT: The Independent Nominees have extensive experience in both the closed-end
fund industry and the Asian markets, including the Korean stock markets. Each
lived and was based in Asia for many years.
Who is more qualified? In our opinion--it's no contest!
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(1) Messrs. Reid and Russell have no current or prior relationship to the
Fund, its management or Deutsche Investment Management Americas, Inc.
("DeIM"), the Fund's investment manager, and are, therefore, herein
collectively referred to as the "Independent Nominees."
Who is truly independent?
The Fund would have you believe that its directors are truly independent and
serve all the Stockholders while claiming that the Independent Nominees are
conflicted because they are "primarily interested in pursuing an agenda that
will benefit City of London..."
FACT: The Fund's nominees have numerous ties to DeIM, each serving on the Boards
of three other funds managed by DeIM and each receiving an aggregate of more
than $50,000 in fees last year from such DeIM-managed funds and from DeIM
directly.
FACT: One of the Fund's nominees is a managing director of an affiliate of DeIM.
IN CONTRAST:
FACT: The Independent Nominees are completely independent, have no affiliation
with City of London or with any of the other Stockholders and are committed to
representing the best interests of all of the Stockholders.
FACT: The Independent Nominees have no affiliation with DeIM and have agreed not
to serve on the board of any other fund currently managed by DeIM and not to
accept any fees from DeIM.
Who is truly independent? In our opinion--it's no contest!
Who do you think is more closely aligned with your interests?
The Fund would have you believe that City of London interests are not aligned
with yours and that the goal of City of London is to increase its opportunities
to realize arbitrage profits from trading in and out of Shares of your Fund.
FACT: All of the Fund's directors own only 0.02% of the Fund's Shares in the
aggregate and have numerous ties to DeIM.
IN CONTRAST:
FACT: City of London has been a Stockholder in the Fund for more than three
years and has owned in excess of 3% of the Shares at all times during the last
two years.
FACT: City of London's ownership of the Fund's Shares has steadily increased
over the last two years to 9.8% and we believe we are now the Fund's second
largest Stockholder.
FACT: City of London expects to remain a Stockholder of the Fund even if the
Fund makes a meaningful tender offer or takes other significant steps to reduce
the discount.
FACT: City of London has made investments in many other closed-end funds and has
supported the boards in those instances in which City of London believed that
they were acting in the best interest of all of the stockholders of such
funds--even if it meant that City of London would forego realizing short-term
profits. The board of the Taiwan Greater China Fund, a New York Stock Exchange
listed closed-end fund that is not managed by DeIM, for example, commended City
of London for its support in a July 2004 press release, wherein the Taiwan
Greater China Fund stated that "[w]e also continue to appreciate the support of
City of London Investment Management Group, which owns approximately 12.5% of
the Fund's outstanding shares, for the Board's recommendation that
-2-
shareholders vote against the proposal to convert the Fund into an open-end
investment company."(2)
Who do you think is more closely aligned with your interests? In our
opinion--it's no contest!
Who will be more responsive to Stockholders' interests?
The Fund would have you believe that it is responsive to Stockholders'
interests.
FACT: Notwithstanding the fact that the holders of more than 61% of the Fund's
Shares accepted the 10% tender offer conducted by the Fund in the first quarter
of 2004 (a clear sign to City of London that Stockholders desire a meaningful
opportunity to realize close to NAV for their Shares), the Board has refused to
authorize a significant cash tender.(3)
FACT: The Board has allowed to remain in place a by-law amendment, adopted in
1996, which makes it much more difficult for Stockholders to call special
meetings to have their voices heard.
FACT: The Board is so insensitive to Stockholder democracy that it has sought to
impede our ability to communicate with you by refusing to make available to us,
despite repeated demands, certain information concerning the identity of
Stockholders that it has in its possession.
IN CONTRAST:
FACT: The Independent Nominees are committed to communicating with Stockholders
with the intention of insuring that Stockholders' interests are represented on
the Board including, if desired, by seeking Board actions designed to provide
Stockholders with a meaningful opportunity to realize close to NAV for their
Shares.
FACT: The Independent Nominees are committed to seek a repeal of the restrictive
by-law amendment that limits your ability to be heard.
FACT: The Independent Nominees are committed to seeking directors on the Board,
including replacements for the two current directors who are scheduled to retire
in 2005, who are truly independent and free of ties to DeIM.
Who will be more responsive to Stockholders' interests? In our opinion--it's no
contest!
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(2) The Board is resorting to the same, tired charges that DeIM-managed funds
have employed in the past when stockholders challenge the cozy
relationship between DeIM and a fund's board. In the recently concluded
election contest at the DeIM-managed The Brazil Fund, that fund (with the
same board as the Fund) also tried to label Carrousel Capital, the entity
that initiated the contest, an "arbitrageur." The stockholders of The
Brazil Fund apparently were unmoved by the fund's charges. They rejected
the same two individuals that the Fund has nominated and you should do the
same!
(3) The Fund persists in attempting to justify its lack of responsiveness by
arguing that such a tender offer could cause the Fund's expense ratio to
increase. We urge you to disregard the Fund's scare tactics and focus on
what we believe is far more significant. First, we do not believe it is
necessary for a large tender offer to cause a meaningful increase in the
expense ratio. We believe a smaller fund can and should be managed at an
expense ratio that is comparable to the existing ratio. Second, even if
there is a modest increase in expense ratio as a result of a significant
tender offer, we believe, as demonstrated by the dramatic response to the
Fund's previous tender offer, that increase is an insignificant detriment
when compared to the significant benefit to all Stockholders of being able
to monetize their investment if they so choose.
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Who is more responsible for the recent narrowing of the discount
to NAV at which the Fund's Shares trade?
The Fund would have you believe that it is responsible for the very recent
reduction in the discount, a position we warned you in our last letter to you
that it would take.
FACT: The Fund's Shares traded at an average discount to NAV of approximately
19.2% for the five-year period preceding the date we filed our preliminary proxy
materials on August 10, 2004. On that date the discount was approximately 14%.
FACT: After we filed our preliminary proxy materials indicating that we had
nominated the Independent Nominees, the discount went below 10% on a consistent
basis. We believe it is far more likely that the recent narrowing of the
discount is largely a result of our nomination of the Independent Nominees and
the anticipation by Stockholders of a more independent and Stockholder friendly
Board than a result of anything undertaken by the Board.
Who is more responsible for the recent narrowing of the discount to NAV at which
the Fund's Shares trade? In our opinion--it's no contest!
IS THE FUND'S PERFORMANCE REALLY AS GOOD AS THE FUND IS TELLING YOU?
WE DON'T THINK SO!
The Fund repeatedly refers to what it labels its "superior" performance
compared to the Korean Composite Index ("Kospi"), the Fund's "benchmark." The
President and Fellows of Harvard College ("Harvard"), a university with more
than $19 billion in its endowment to manage and by far the Fund's largest
Stockholder, has advised the Fund in writing that Harvard does not benchmark its
Korean investments against the Kospi but uses instead the MSCI index. In a
letter to the Fund dated March 15, 2004, Harvard states, "The MSCI Korea index
is not just Harvard's benchmark; we believe it is the most widely used
measurement among institutional investors. The alternative is the IFC index."
City of London also believes that the MSCI Korea index and the IFC index
are more widely accepted indices in the institutional investment community. City
of London would characterize the Fund's performance against those indices over
the last three years(4) as anything but superior. Although the Fund has
outperformed the Kospi in the most recent one and three year periods, it has
underperformed both the MSCI and IFC indices in each of such periods.(5)
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6 mo 1 yr 3 yr
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Korea Fund NAV +2.52% +24.15% +21.18%
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Kospi +0.43% +21.10% +14.12%
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MSCI Korea Total Return +1.63% +27.57% +23.48%
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IFC Korea Global Total Return +3.25% +28.62% +22.46%
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(4) Periods ended June 30, 2004. Source: Bloomberg.
(5) The only period shown in which the Fund has outperformed either MSCI or
IFC is the six-month period against the MSCI index.
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REMEMBER: YOU CAN VOTE FOR THE INDEPENDENT NOMINEES
ONLY ON THE GOLD PROXY CARD
PLEASE SIGN, DATE AND RETURN THE ENCLOSED GOLD PROXY CARD IN THE
POSTAGE-PREPAID ENVELOPE THAT HAS BEEN PROVIDED. You should not return any proxy
card sent to you by the Fund if you wish to vote FOR the election of the
Independent Nominees to the Board. If you have already returned the proxy card
sent to you by the Fund, you have the right to REVOKE that proxy by signing,
dating and mailing a later-dated GOLD proxy card in the envelope provided.
A protest vote of "Withhold Authority" on the Fund's proxy card may revoke
an earlier vote for the Independent Nominees on the GOLD proxy card. Please make
certain that the latest dated and signed proxy you return is the GOLD proxy
card. Only your latest dated and signed proxy counts.
A GOLD proxy card that is returned to us will be voted as you indicate on
it. If a signed GOLD proxy card is returned without a vote indicated thereon,
the Shares represented thereby will be voted FOR the election of the Independent
Nominees and FOR the termination of the Investment Management Agreement.
Thank you for your support in helping to cause the Fund to be committed to
good corporate governance and take meaningful actions designed to narrow the
discount to NAV at which the Shares trade and to maximize value on behalf of all
of the Stockholders.
Sincerely yours,
Barry M. Olliff
Director
City of London Investment Group PLC
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IMPORTANT INFORMATION FOR STREET-NAME HOLDERS
If you hold your Shares in the name of a bank or brokerage firm, your bank
or broker must receive your specific instructions before they can vote your
Shares. Please make certain that your vote is counted for the Independent
Nominees by signing, dating and returning the GOLD proxy card in the envelope
provided.
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 GOLD voting form that has been
provided by your broker or bank. We urge you to take advantage of the
opportunity to vote your GOLD proxy card today by following the instructions on
the GOLD voting form for using the internet or toll-free telephone.
If you have any questions, please contact:
Morrow & Co., Inc.
445 Park Avenue
New York, New York 10022
Call toll free: 800-607-0088
Bankers and Brokers Call Collect: 212-754-8000