-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BdlLI8sHlLtC2hXGaA2VK4VU5cl0QiVKJ7YBTJQ1F5mWbmswzHRPjwogDg3FdSDa xX4kcrB4miM+9e198J7y0Q== 0000088053-04-000480.txt : 20040720 0000088053-04-000480.hdr.sgml : 20040720 20040720155515 ACCESSION NUMBER: 0000088053-04-000480 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20040720 EFFECTIVENESS DATE: 20040720 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOREA FUND INC CENTRAL INDEX KEY: 0000748691 IRS NUMBER: 133226146 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: DEFA14A SEC ACT: 1934 Act SEC FILE NUMBER: 811-04058 FILM NUMBER: 04922128 BUSINESS ADDRESS: STREET 1: 345 PARK AVE STREET 2: C/O DEUTSCHE ASSET MANAGEMENT CITY: NEW YORK STATE: NY ZIP: 10154 BUSINESS PHONE: 617-295-3986 MAIL ADDRESS: STREET 1: DEUTSCHE ASSET MANAGEMENT STREET 2: TWO INTERNATIONAL FUND CITY: BOSTON STATE: MA ZIP: 02110 DEFA14A 1 px072004kor.txt 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 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)) |_| Definitive proxy statement |_| Definitive additional materials |X| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12 THE KOREA 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(c)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: |_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |_| 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 statement number, or the form or schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: 2 The following is the text of slides that may be shown to shareholders of the Korea Fund, Inc: SCUDDER INVESTMENTS The Korea Fund, Inc. Deutsche Asset Management [LOGO] A Member of the Deutsche Bank Group Overview 1. Commitment to Corporate Governance 2. Deutsche Asset Management's Approach to Investing 3. Performance Characteristics and Portfolio Performance 1 Commitment to Corporate Governance 2 The Fund o Investment Objective: The Korea Fund, Inc. seeks long-term capital appreciation through investment in Korean securities o Total Net Assets: $963,644,984 (as of June 30, 2004) o Shares Outstanding: 44,701,493 o NYSE Symbol: KF o Expense Ratio: 1.25% o Cusip: 50063410 o Inception Date: 8/29/84 Foreign security markets generally exhibit greater price volatility and are less liquid than the US market. Additionally, this fund focuses its investments in certain geographical regions, thereby increasing its vulnerability to developments in that region and potentially subjecting the fund's shares to greater price volatility. 3 Corporate Governance - Independence of Board o The Fund has always had a majority of outside directors > currently 6 out of 7 directors are independent o Only one director is affiliated with the investment manager > Vincent Esposito is managing director and head of product development in the Americas for Deutsche Asset Management o Fund's investment advisory contract continues only if specifically approved annually by the independent directors o Wholly independent audit committee and nominating committee o Independent directors meet in executive session at every board meeting 4 Corporate Governance - New Initiatives o Independent directors have engaged independent consultant to advise them on a wide range of issues o On May 10, the Board appointed the Chairman of the Committee on Independent Directors to be Chairman of the Board o The Fund's Board believes its appointment of an independent director as Chairman reaffirms the Board's long-standing commitment to: > Strong, independent oversight of the Fund's operations > Progressive governance practices that seek to protect and serve the interests of the Fund and its stockholders 5 Korea Fund - Addressing the discount o In 2001, the Board implemented a large special in-kind dividend. The Fund's shareholders received portfolio securities with a market value equal to 10% of the Fund's total net assets at the time. o Purchases of fund shares pursuant to Dividend Reinvestment Plan. - 2003: $436,037 USD worth of repurchased shares - 2004: $155,571 USD worth of repurchased shares o Buybacks - 2003 & 2004(YTD): $4,170,792 USD repurchased and retired o In January and February 2004, the Fund successfully conducted a tender offer for 10% of its outstanding shares at a price of 95% of net asset value. 6 Korea Fund - Addressing the discount The Fund conducted a tender offer as a result of the Board's special review, initiated in April 2003, of alternatives to enable shareholders to receive value near NAV for at least a portion of their shares. o The tender offer was for up to 10% of the Fund's outstanding shares at a price equal to 95% of NAV. o The Fund accepted 4.97 million shares at a price of $21.91 per share. On a pro rata basis, tendering round lot shareholders sold 16% of shares tendered. o The Board approved a program of making additional repurchase offers, one in the first quarter of 2005 and one in the first quarter of 2006, if the Fund's shares trade at a 15% discount over a measuring period. 7 The Board Considers the Interests of All Stockholders o The Board seeks to treat all stockholders fairly and equally o Harvard seeks to terminate the Fund's investment advisory contract o City of London is asking shareholders to vote for its director nominees o Harvard and City of London may have different interests from those seeking long-term capital appreciation through investment in Korean securities 8 Harvard's Arbitrage and Hedging Activities o "We look for mispricings among similar securities, arbitrage-type situations." - President of Harvard's investment manager, 2003 o Harvard essentially told the Fund's Board in December 2003 that, to the extent that the Fund invested in smaller cap stocks rather than index stocks, such investments would cause "tracking errors" in Harvard's hedging strategies o Harvard has suggested that the Fund approve a tender offer for 50% or more of the Fund's shares or become an interval fund. These strategies might help Harvard's arbitrage and hedging strategies - but could hurt the Fund and its stockholders by causing: > Downward pressure on Fund NAV from sales of portfolio securities > Likely material increase in the Fund's expense ratio > Possible increased capital gains distributions > Smaller public float and liquidity of Fund shares 9 Harvard: Risk of Terminating Fund's Manager o Fund's independent directors believe few investment managers can compare with DeAM in Korean stock research and selection capabilities o No assurance that a new manager could provide the strong performance DeAM has achieved o Terminating advisory agreement: > won't eliminate the discount > far more likely to harm Fund and stockholders by : > disrupting investment process, which would likely harm investment performance > causing significant additional expenses to Fund 10 City of London: Interest in Arbitrage Opportunities o 2002: City of London helped pressure Asia Tigers Fund to adopt an interval-fund structure o 2003: City of London helped pressure India Growth Fund to liquidate 11 City of London's Nominees Julian Reid - ----------- o CEO of 3a Asset Management Ltd., a Mauritius company o Chairman, President and director of Saffron Fund, which is being liquidated o Director of JF China Region Fund, which has shrunk in size through large repurchases of shares. Expense ratio for 2003: 2.54% Christopher Russell - ------------------- o No indication in City of London materials on nominees that Mr. Russell or Mr. Reid has managed or been a director of a fund investing primarily in Korea 12 Corporate Governance: The Fund's Experienced Directors o Each of the Fund's candidates has the experience needed to represent the best interests of all of the Fund's shareholders o Susan Kaufman Purcell. Vice President of the Council of the Americas and the Americas Society. Formerly Senior Fellow at the Council on Foreign Relations, member of the U. S. Department of State Policy Planning Staff and professor at UCLA and at Columbia. Independent director since 2001 o Vincent J. Esposito. Managing Director of Deutsche Asset Management. Only Fund director affiliated with Fund's manager. Over 20 years of professional experience developing and building investment products and establishing global joint ventures and new business opportunities in asset management 13 Deutsche Asset Management's Approach to Investing 14 Korea Fund o Scudder Investments has managed Fund since inception in August 1984 o John Lee has been Portfolio Manager for over 14 years o Licensed by Korean Government - transaction tax savings o Strong DeAM aftermarket support from closed-end fund department > Shareholder Communications - Institutional shareholder visits - Website providing monthly updates - Dedicated shareholder service line > Public Relations - Press Articles - Industry Forums 15 Investment Philosophy & Process Korea Equity Team(1) - Market Knowledge and Strong Teamwork --------------------------------- | John J. Lee - | | Lead Portfolio Manager, | | Korea PST(2) | --------------------------------- ------------------------------- | | Andrew K. Dong, Ph.D. - | |------------------------ | Director of Private Investment| | ------------------------------- --------------------------------- | Chang-Geun Nam - PM | | Economics, Strategy | ------------------------------ |Portfolio Construction, Korea PST| | Chong-Hak Park - | --------------------------------- | Investment Specialist | | ------------------------------ |------------------------ | - Quantitative Analysis | | | - Investment Communications| | ------------------------------ | -------------------------------------------------------------------------------------------------- | | ----------------------------- ---------------------------- ------------------------------- ----------------------------- | O-Jin Kwon - PM/Analyst | | Hong-Suk Kim - | | Gia Hwang - | | Joo-Yon Hong - | | Korea PST | | Analyst | | Analyst | | Analyst | |----------------------------- ---------------------------- ------------------------------- ----------------------------- | - Small & Medium Cap stocks | | - Sector Coverage | | - Sector Coverage | | - Small & Medium Cap stocks | | | | o Automobiles & Components| | o Consumer goods / Retail | | | | | | o Capital goods | | o Media/Software | | | | | | o Materials | | o Telecom service | | | | | | o Technology Hardware | | o Financials | | | ----------------------------- ---------------------------- ------------------------------ -----------------------------
(1) See slide 27 (2) PST is portfolio sector team 16 DeAM: a focused approach to investing We believe that an approach targeting long-term strong performance incorporates: Consistency of people, process Leads to expectation and performance ----------------> of long-term strong performance potential o Investment team with disciplined process o Proprietary fundamental research o Deep quantitative resources o Rigorous risk management 17 Investment philosophy and goal Philosophy o We believe that long-term market outperformance can be achieved by investing in a growth portfolio focused on: > High quality companies > Undiscovered opportunities > Risk management > Solid financials Goal o Provide stockholders competitive returns that outperform the benchmark (KOSPI) over a 1, 3, 5 and 10-year period The fund's manager seeks to achieve this goal, but there can be no assurance that it will be achieved. 18 - -------------------------------------------------------------------------------- Investment Philosophy & Process - -------------------------------------------------------------------------------- Disciplined Investment Process - Overview | | 1600 ------| ---------------------- | | Identify potential | | | investment universe | | | | | | Utilize global | ---------------- 150 -------| | network | | | | | | | | | | Quantitative | | Company visits | | |screening for relative| | | | | valuation | | Earnings model | -------------------- 100 -------| | | | | | | | | Liquidity screening | |Internal ratings| | Security Selection | ----------------- | | | | | | Risk analysis | | Portfolio | | | | | | | | | construction | | | | | | | | | | | ---------------------- ---------------- -------------------- ----------------- -------------------------------------------------------------------------------------------- ^ | | - --------------------------------------------------------------------------------------------------------------- Utilizing research information of Global Network (New York, London, Frankfurt, Tokyo, Singapore, Sydney etc.) - ---------------------------------------------------------------------------------------------------------------
19 Investment Philosophy & Process Disciplined Investment Process - Overview 2 BROAD Stage I UNIVERSE ----------------> | (KSE, | KOSDAQ) Stage II 1600 ------| ---------------------- | | Identify potential | Research | | investment universe | Universe ----------------> | | |subject to rigorous research | | Utilize global | ---------------- 150 -------| | network | | | Stage III | | | | | | | Quantitative | | Company visits | Narrow Universe ------------> | |screening for relative| | | Fair Value > Current Price | | valuation | | Earnings model | -------------------- 100 -------| | | | | | | Fund Portfolio | | Liquidity screening | |Internal ratings| | Security Selection | ----------------- | | | | | | Risk analysis | | Portfolio | | | | | | | | | construction | | | | | | | | | | App. No. of| ---------------------- ---------------- -------------------- ----------------- stocks -------------------------------------------------------------------------------------------- ^ | | - --------------------------------------------------------------------------------------------------------------- Utilizing research information of Global Network (New York, London, Frankfurt, Tokyo, Singapore, Sydney etc.) - ---------------------------------------------------------------------------------------------------------------
20 Portfolio Characteristics and Investment Performance 21 Investment Performance - 6/30/04 - ------------------------------------------------------------------- KF Market KF(a) KOSPI(b) Price NAV Index - ------------------------------------------------------------------- YTD 2.72% 2.52% .48% (Cumulative) - ------------------------------------------------------------------- 1 Year 27.66% 24.15% 21.67% - ------------------------------------------------------------------- 3 Year 24.18% 21.18% 15.88% - ------------------------------------------------------------------- 5 Year 9.47% 8.58% -1.29% - ------------------------------------------------------------------- 10 Year 1.97% 5.07% -5.22% - ------------------------------------------------------------------- Inception 12.79% 13.98% N/A (8/29/84) - ------------------------------------------------------------------- Past results are not necessarily indicative of future performance of the fund. Investment return and principal value will fluctuate, therefore current performance may be lower or higher than the figures shown. 22 Investment Performance - 6/30/04 - ------------------------------------------------------------------- KF Market KF MSCI Korea(c) Price NAV Index - ------------------------------------------------------------------- YTD 2.72% 2.52% 1.03% (Cumulative) - ------------------------------------------------------------------- 1 Year 27.66% 24.15% 26.78% - ------------------------------------------------------------------- 3 Year 24.18% 21.18% 22.81% - ------------------------------------------------------------------- 5 Year 9.47% 8.58% 3.47% - ------------------------------------------------------------------- 10 Year 1.97% 5.07% N/A - ------------------------------------------------------------------- Past results are not necessarily indicative of future performance of the fund. Investment return and principal value will fluctuate, therefore current performance may be lower or higher than the figures shown. 23 KF Relative to MSCI - 6/30/04 - -------------------------------------------------------------------------------- 3 Years Kore Fund Relative to Benchmark MSCI Korea (Annualized) - -------------------------------------------------------------------------------- Alpha^1 (.17)% - -------------------------------------------------------------------------------- Standard Deviation^2 of KF 28.35% - -------------------------------------------------------------------------------- Standard Deviation^2 of Benchmark 31.61% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 10 Years Kore Fund Relative to Benchmark MSCI Korea (Annualized) - -------------------------------------------------------------------------------- Alpha 3.84% - -------------------------------------------------------------------------------- Standard Deviation^2 of KF 41.23% - -------------------------------------------------------------------------------- Standard Deviation^2 of Benchmark 47.52% - -------------------------------------------------------------------------------- 1) A measure of selection risk (also known as residual risk) of a fund in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return 2) Standard Deviation. A measure of the degree to which an individual probability value varies from the distribution mean. The higher the number, the greater the risk. Past performance is no guarantee of future results. Source: Deutsche Investment Management Americas Inc. 24 Peer Group Comparison - 6/30/04 - -------------------------------------------------------------------------------- 1 Year 3 Year 5 Year 10 Year Expense NAV NAV NAV NAV Ratio % - -------------------------------------------------------------------------------- KF 24.15% 21.18% 8.58% 5.07% 1.256 - -------------------------------------------------------------------------------- KEF 26.44% 17.59% -2.14% -5.79% 2.310 - -------------------------------------------------------------------------------- Matthews 24.10% 24.87% 6.01% N/A 1.640 Korea (MAKOX) - -------------------------------------------------------------------------------- Fidelity 18.57% 15.90% -1.64% N/A 2.750 Korea (FAKAX) - -------------------------------------------------------------------------------- Past results are not necessarily indicative of future performance of the fund. Investment return and principal value will fluctuate, therefore current performance may be lower or higher than the figures shown. Important information about comparisons on next slide. Source: Bloomberg, Statestreet, Matthews International Capital Management, LLC & Fidelity Advisors 25 Important Notes: (a) Total investment returns reflect changes in net asset value per share during each period and assume that dividend and capital gains distributions, if any, were reinvested. These percentages are not an indication of the performance of a shareholder's investment in the Fund based on market price. Index assume reinvestment of distributions and are not available for direct investment. (b) KOSPI is a capitalization-weighted index of all common shares on the Korea Stock Exchanges. Index returns assume reinvestment of all dividends and unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly in an index. (c) The MSCI Korea Index is a capitalization weighted index that monitors the performance of stocks from the country of Korea. Index assumes reinvestment of distributions and are not available for direct investment. Past results are not necessarily indicative of future performance of the fund. Investment return and principal value will fluctuate, therefore current performance may be lower or higher than the figures shown. Net Asset Value (NAV) is total assets less total liabilities divided by the number of shares outstanding. Notes on Slide 20: KF and KEF [The Korea Fund and The Korean Equity Fund] are closed-end funds. Fidelity Korea and Matthews Korea Funds are open- end funds sold by prospectus only. Fidelity Korea is distributed by Fidelity Management & Research Company. Matthews Korea Fund is distributed by Matthews International Capital Management, LLC. The Funds were included in the comparison because they are like investment vehicles. The sampling of competitor funds is limited therefore open-end funds within the industry were added. Presently, these funds are the most comparable funds to The Korea Fund. Please be advised that certain differences between the funds do exist such as investment objective, investment strategy, management, and expense ratios. An investor should take these factors into consideration before making an investment decision. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. The number of shares will change only at the direction of management. Shares can be increased through the issuance of new shares in conjunction with an offering or through shareholder reinvestment of dividends into the fund. Shares can be reduced when they are repurchased in conjunction with a stock repurchase program or tender offer. Further, open-end funds need to maintain a cash position for redemptions, therefore, portfolio managers must manage redemptions and inflows. 26 Portfolio Composition by Market Cap - 6/30/04 - -------------------------------------------------------------------------------- Market Cap Breakdown KF MSCI Korea (%MV) - -------------------------------------------------------------------------------- Greater than $25.0B 15.68% 34.03% - -------------------------------------------------------------------------------- $10.B - $25.0B 15.68% 18.02% - -------------------------------------------------------------------------------- $5.0B - $10.0B 9.81% 14.88% - -------------------------------------------------------------------------------- $1.0B - $5.0B 30.18% 26.13% - -------------------------------------------------------------------------------- $500M - $1.0B 8.46% 5.41% - -------------------------------------------------------------------------------- $250M - $500M 6.44% 1.54% - -------------------------------------------------------------------------------- Less than $250M 12.80% 0.00% - -------------------------------------------------------------------------------- Not Available 1.05% 0.00% - -------------------------------------------------------------------------------- Total 100.0% 100.0% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Size Factors KF MSCI Korea - -------------------------------------------------------------------------------- Wtd Avg Mkt Cap ($MM) 14,862 28,310 - -------------------------------------------------------------------------------- Median Mkt Cap ($MM) 377 1,159 - -------------------------------------------------------------------------------- Portfolio composition is subject to change Source: Deutsche Investment Management Americas Inc.
27 - -------------------------------------------------------------------------------- Return on Small Cap Stocks as of 12/03 - -------------------------------------------------------------------------------- Small Cap Stocks purchased by The Korea Fund significantly outperformed in 2003 In 2003 10 small cap stocks held by the Fund overwhelmingly outperformed the Fund's overall return THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE BAR CHART DATA: 91.79% 24.00% 25.20% Ten small caps x-Ten small caps Total Fund Wgt=2% Wgt=98% Wgt=100% ** Note that the return attribution here excluded the cash flows from cash and cash-equivalents and other relevant expenses which may have resulted in higher returns. This example is for illustrative purposes only and is intended to illustrate how the performance of the small cap holdings contributed to the Fund's overall performance. It is management's goal to transition the portfolio more heavily into the small cap sector. Given the volatility and higher risks associated with small cap stocks, there is no guarantee that such results will be repeated. 10 stocks having a market cap of less than 8 bn when purchased by The Korea Fund. X-10 stocks are the remaining holdings except for small cap stocks purchased by the Fund in 2003 Past results are not necessarily indicative of future performance of the fund. Investment return and principal value will fluctuate, therefore current performance may be lower or higher than the figures show Source: Deutsche Investment Management Trust Company Limited. 28 STOCK SELECTION Internet Auction - Market Capitalization $ 1,049,312,714 - -------------------------------------------------------------------------------- Investment Rationale - -------------------- o Korea's leading online marketplace with dominant market share in Korea o Continuous growth : revenue growth for the past 5 years was about 80%. o High entry barrier : economies of scale and its strong customer base keep its potential competitors from entering the market Valuation Indicators - -------------------- 04E P/E: 30.9x 04E EV/EBITDA: 19.7x Estimates made as of Dec. 2003 by Deutsche Asset Management analyst and may not come to fruition. Holding equals 0.8% of total portfolio. - -------------------------------------------------------------------------------- Revenue - -------------------------------------------------------------------------------- THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE BAR CHART DATA: 9.0 23.9 36.6 62.4 100.4 2000 2001 2002 2003 2004E - -------------------------------------------------------------------------------- Net Income - -------------------------------------------------------------------------------- THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE BAR CHART DATA: - -12.7 -7.6 5.9 18.8 24.4 2000 2001 2002 2003 2004E Source: Deutsche Investment Management Trust Company Limited. Past performance is no guarantee of future results
29 STOCK SELECTION Dong Kuk Steel Mill - Market Capitalization $ 489,755,414 - -------------------------------------------------------------------------------- Investment Rationale - -------------------- o One of the largest electric-arc- furnace steel manufacturers in Korea with domestic M/S of over 40%. o Improving profitablity due to global supply shortage caused by China's excessive demand. o Suprior fundamentals : Both ASP and production volume should boost the profit margin in 2004, increasing net profits by 30%. Valuation Indicators - -------------------- Y04E P/E: 4.1x (36% discount to our universe material sector P/E) - -------------------------------------------------------------------------------- Net Profit on Investment THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE BAR CHART DATA: ROE ROA ROC 1994 7.3% 3.0% 6.2% 1995 4.9% 1.9% 7.0% 1996 18.2% 6.2% 11.4% 1997 10.4% 2.7% 2.7% 1998 7.6% 2.6% 7.6% 1999 4.6% 2.0% 9.2% 2000 -12.5% -5.0% -2.0% 2001 1.3% 0.5% 4.9% 2002 7.6% 3.1% 8.9% 2003 11.3% 4.5% 11.3% Estimates made as of Dec. 2003 by Deutsche Asset Management analyst and may not come to fruition. Holding equals 0.8% of total portfolio. Source: Deutsche Investment Management Trust Company Limited. Past performance is no guarantee of future results
30 - -------------------------------------------------------------------------------- STOCK SELECTION - -------------------------------------------------------------------------------- Korean Re - Market Capitalization $ 386,542,420 Investment Rationale - -------------------- o The sole dominant reinsurance company in Korea (M/S of about 70%) and also one of the biggest reinsurance companies in Asia. o Top line growth has remained steady and stronger than other Korean non-life insurance companies o Underwriting profitability has continued to improve : The accumulated net profit for the past 5 years was KRW185 billion while the total for the past 35 years was KRW 79 billion. o Valuation Indicators -------------------- 04E Adjusted ROE: 17% 04E Adjusted BV: 0.8x - -------------------------------------------------------------------------------- Small globally, but largest reinsurer in Asian ex-Japan market - --------------------------------------------------------------
-------------------------------------------------------------------- Global reinsurance ranking Net Premiums written Expense Ratio (%) Loss Ratio (%) Pretax op inc (USD mn.) 2002 2002 2002 2002 - ------------------------------------------------------------------------------------------------- 1 Munich Re Group 24,924 26.6 95.8 (4,001) 2 Swiss Re Group 21,600 27.0 77.0 397 3 Berkshire Hathaway Re 13,083 25.0 82.0 na 4 Hannover Re Group 8,526 16.9 77.9 328 5 Employers Re Group 7,892 33.0 119.0 (2,907) 6 Lloyd's 6,809 36.3 62.3 1,338 7 SCOR Re Group 4,693 26.0 91.0 (350) 8 Allianz Re Group 4,585 28.2 79.0 (627) 9 Gerling Global Re 4,463 29.8 90.4 (587) 10 XL Re Group 3,544 16.1 84.8 na 11 Converium Re Group 3,322 25.3 77.8 68 12 Partner Re Group5 2,655 28.6 69.3 200 13 Everest Re Group 2,638 27.3 71.7 312 14 AXA Re Group 2,572 27.2 88.1 (247) 15 Transatlantic Re Group 2,500 26.5 75.8 194 16 London Re Group 2,487 37.4 74.0 1 17 Millea Insurance Group 2,455 na na na 18 Reinsurance Group of America 1,981 19.8 77.7 209 19 Sompo Japan Insurance Group 1,525 33.9 55.0 315 20 Odyssey Re Group 1,477 30.2 69.1 119 21 Mitsui Sumitomo Insurance 1,399 33.4 54.2 398 22 ACE Tempest 1,307 30.3 47.8 398 23 Aioi Insurance Group 1,219 35.3 60.1 (134) 24 Toa Re Group 1,161 na 59.3 (8) - ------------------------------------------------------------------------------------------------- 25 Korean Re 1,161 29.8 65.2 66 - ------------------------------------------------------------------------------------------------- 26 Caisse Centrale de Reassurance 1,030 8.7 64.5 118 27 RenaissancRe Holdings 924 19.0 38.1 365 28 OBE Re Group 862 30.1 67.6 261 29 Endurance Specialty Holdings 765 30.9 55.3 406 30 St. Paul Re Group2 751 30.7 72.1 na
Source: Standard & Poor's, Global Reinsurance Highlights, 2003 edition Estimates made as of Dec. 2003 by Deutsche Asset Management analyst and may not come to fruition. Holding equals 0.3% of total portfolio Past performance is no guarantee of future results 31 - -------------------------------------------------------------------------------- STOCK SELECTION - -------------------------------------------------------------------------------- Hotel Shilla - Market Capitalization $ 175,687,285 - -------------------------------------------------------------------------------- Investment Rationale - -------------------- o Well-recognized hotel brand in Korea : No.2 market share of about 23% following Lotte (unlisted) o Favorable business environment : Beneficiary of Japan's economic recovery, introduction of 5 day work week and the "Well-being" trend. o Deep discount to NAV despite comparable dividend and ROE profiles to regional peers. o Valuation Indicators -------------------- 04E P/B: 0.5x Operating Income by Division THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE BAR CHART DATA Hotel Duty Free Others Total Net Income ------ ---------------- '99 48.2 14.7 '00 57.9 15.3 '01 44.5 10.0 '02 16.9 6.5 '03 21.4 10.1 Large discount to NAV Premium 2003 2003 2004 to 2004 NAV Dividend Yield ROE ROE ^E - -------------------------------------------------------------------------------- Hotel Shilla -50% 3.7% 2.4% 3.3% - -------------------------------------------------------------------------------- New World Dev (HK) -53.1% 2.0% -4.2% 2.5% Great Eagle (HK) -27.2% 1.1% 3.1% 3.0% HK Land (HK) 28.0% 3.2% 3.7% 3.8% - -------------------------------------------------------------------------------- HK Sample Average -17.4% 2.1% 0.9% 3.1% - -------------------------------------------------------------------------------- Estimates made as of Dec. 2003 by Deutsche Asset Management analyst and may not come to fruition. Holding equals 0.3% of total portfolio Source: Deutsche Investment Management Trust Company Limited. Past performance is no guarantee of future results
32 - -------------------------------------------------------------------------------- Team Profile - -------------------------------------------------------------------------------- o John J. Lee, a Managing Director of Deutsche Investment Management Americas Inc., is a member of the Global Equity Group, focusing on investment in Korea. Mr. Lee is the Lead Portfolio Manager for The Korea Fund, - Korea Equity Fund, Korea Investment Fund and the Hangkang Restructuring Fund. Mr. Lee, a Certified Public Accountant, joined the firm in 1991 from KPMG Peat Marwick. He studied Economics at Yonsei University in Seoul, Korea from 1978 to 1980 and received a B.S. degree in Accounting from New York University in 1985. He is a member of the American Institute of Certified Public Accountants. o Chang-Geun Nam, CFA, graduated from Seoul National University with B.A. of Economics and did his master's work at New York University. He completed Ph.D. program in economics in Princeton University. Chang-Geun joined Zurich Scudder Investments Korea (ZSIK) in December 2000. ZSIK was subsequently acquired by Deutsche Asset Management in April 2002. He heads up the domestic Korean equity team and supervises research for Korean equities. He is a member of the Korea Portfolio Selection Team. Prior to joining Zurich Scudder, he served as Senior Economist and Head of Research for Daewoo Securities for over 2 years. Before that, he worked for structured products division of Daewoo Securities for 3 years. o O-Jin Kwon, graduated from Sungkyunkwan University with B.A. of Business Administration. O-Jin joined Zurich Scudder Investments Korea (ZSIK) in September 2001 as equity portfolio manager. ZSIK was subsequently acquired by Deutsche Asset Management in April 2002. He is currently covering listed Korean Equity stocks, focusing on small and mid-small cap stocks. He is a member of the Korea Portfolio Selection Team. Prior to joining Zurich Scudder, he worked for Daewoo Capital Management as an Equity Research Analyst to support the Korea Fund and the Hankang Restructuring Fund for 7 years. o Chong-Hak Park, graduated from Sogang University with B.A. in Economics and received MBA and MS in Statistics with specialization in computational finance from Purdue University. He spent about seven years working at Korea Investment Trust Company as a research analyst of International Business Division and about three years at SEI Investments/SEI Asset Korea as investment strategist & quantitative investment analyst. Chong-Hak joined Deutsche Asset Management in 2003 as an investment specialist and Risk & Quantitative Analyst. Chong-Hak is a Chartered Financial Analyst. o Hong-Suk Kim, graduated from Michigan State University with B.A. in Accounting and received MBA of International Business in Helsinki School of Economics. Hong-Suk joined Zurich Scudder Investments Korea (ZSIK) in December 2000 as equity research analyst. ZSIK was subsequently acquired by Deutsche Asset Management in April 2002. He is currently covering Korean equities. Before joining Scudder, Hong-Suk worked in Deloitte Touche Thomatsu as an assistant manager for one year. He also has 3 years experience in management consulting. o Gia Hwang, holds a bachelor's degree in Business Administration and an MBA with concentration on international finance both from Seoul National University. She is currently covering Korean equities. Prior to joining Deutsche Asset Management in Aug 2002, she worked for Franklin Templeton Investments, Korea for 3 years as equity/credit analyst. She is a CFA and Financial Risk Manager certified by the Global Association of Risk Professionals. o Joo-Yon Hong, holds a bachelor's degree in Business Administration from Hankuk University of Foreign Studies. Prior to joining Deutsche Asset Management in Oct. 2002, she worked for Asian Strategic Partners Investment Management. She also has experience at Aurthur Andersen (currently Anjin Deloitte LLC) in the auditing department. 33 Closed-end funds, unlike open-end funds, are not continuously offered. There is a one time public offering and once issued, shares of closed end funds are sold in the open market through a stock exchange. Shares of closed-end funds frequently trade at a discount to net asset value. The price of the fund's shares is determined by a number of factors, several of which are beyond the control of the fund. Therefore, the fund cannot predict whether its shares will trade at, below or above net asset value. Fund shares are not FDIC-insured and are not deposits or other obligations of, or guaranteed by, any bank. Fund shares involve investment risk, including possible loss of principal. Deutsche Asset Management is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Investment Management Americas Inc.,Deutsche Asset Management Inc., Deutsche Asset Management Investment Services Trust Americas and Scudder Trust Company. The opinions and forecasts expressed are those of the investment team as of 6/18/2004, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security. Performance assumes reinvestment of dividends and capital gain. For More Information Please call: 800-349-4281 Or Visit us on the web at http;//cef.scudder.com This presentation is provided for informational purposes only and is not intended for trading purposes. (32132) 34 Additional Information For information on the identity of potential participants (as defined in Instruction 3 to Item 4 of Section 240.14a-101 of the Securities Exchange Act of 1934) who may be soliciting proxies in connection with the Fund's annual meeting on October 6, 2004 and a description of their interests, by security holdings or otherwise, please see Exhibit A of the Schedule 14A filed by the Korea Fund, Inc. with the Securities and Exchange Commission on July 20, 2004. The Company intends to mail a proxy statement to its shareholders on or about August 20, 2004 in connection with its 2004 annual meeting. Investors of the Company are urged to read the proxy statement when it becomes available because it will contain important information about the Company. Investors and security holders may obtain a free copy of the proxy statement (when it is available) at the SEC's web site at www.sec.gov. A free copy of the proxy statement may also be obtained from the Company. In addition to the proxy statement, the Company files annual and quarterly reports, proxy and information statements, and other information with the SEC. Investors may read and copy any of these reports, statements, and other information at the SEC's public reference room located at 450 5th Street, N.W., Washington, D.C., 20549, or any of the SEC's other public reference rooms located in New York. Investors should call the SEC at 1-800-SEC-0330 for further information on these public reference rooms. These SEC filings are also available for free at the SEC's web site at www.sec.gov. A free copy of these filings may also be obtained from the Company. 35 EX-99 2 exa-kor.txt INFORMATION CONCERNING PARTICIPANTS EXHIBIT A Information Concerning Participants The following is a list of potential participants (as defined in Instruction 3 to Item 4 of Section 240.14a-101 of the Securities Exchange Act of 1934) who may be soliciting proxies in connection with the Fund's annual meeting on October 6, 2004. Unless otherwise noted, the business address of all participants is The Korea Fund, Inc., c/o Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, NY 10154. Further information concerning the participants will be furnished in the Fund's proxy statement. Except as disclosed below, none of the participants owns any securities of the Fund, beneficially or of record, or is or was within the past year a party to any contract, arrangement or understanding with any person with respect to such securities. Except as disclosed below, to the knowledge of the participants, none of their associates beneficially owns, directly or indirectly, any securities of the Fund.
- ---------------------------------- ---------------------------------------- ------------------------- Participant Relation to Fund Shares of the Fund Beneficially Owned - ---------------------------------- ---------------------------------------- ------------------------- Julian F. Sluyters President and Chief Executive; --- Managing Director, Deutsche Asset Management - ---------------------------------- ---------------------------------------- ------------------------- Robert J. Callander Director, Chairman of the Board of the 2,500 Fund - ---------------------------------- ---------------------------------------- ------------------------- Vincent J. Esposito Vice Chairman --- of the Board of the Fund; Managing Director, Deutsche Investment Management Americas Inc. - ---------------------------------- ---------------------------------------- ------------------------- Kenneth C. Froewiss Director 1000 - ---------------------------------- ---------------------------------------- ------------------------- William H. Luers Director 475 - ---------------------------------- ---------------------------------------- ------------------------- Ronaldo A. da Frota Nogueira Director 4,000 - ---------------------------------- ---------------------------------------- ------------------------- Susan Kaufman Purcell Director 175 - ---------------------------------- ---------------------------------------- ------------------------- Kesop Yun Director --- - ---------------------------------- ---------------------------------------- ------------------------- Patricia Rosch Director, Deutsche Asset Management --- - ---------------------------------- ---------------------------------------- -------------------------
None of the Fund, the Participants or other representatives of the Fund or, to their knowledge, their associates has any arrangement or understanding with any person with respect to (1) any future employment by the Fund or its affiliates or (2) future transactions to which the Fund or any of its affiliates will be or may be a party. None of the Fund, the Participants or other representatives of the Fund, or to their knowledge, their associates has any material interest, direct or indirect, in any transaction that has occurred since July 1, 2002, or any currently proposed transaction, or series of similar transactions, which the Fund or any of its affiliates was or is to be a party and in which the amount involved exceeds $60,000. Deutsche Asset Management is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Investment Management Americas Inc., Deutsche Asset Management, Inc., Deutsche Investment Trust Management Company, Deutsche Bank Trust Company Americas and Scudder Trust Company. Deutsche Investment Management Americas Inc., with headquarters at 345 Park Avenue, New York, NY, is the investment manager for the Fund. -----END PRIVACY-ENHANCED MESSAGE-----