PREC14A 1 e400675_pre14c-clig.txt PRELIMINARY PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant |_| Filed by a party other than the Registrant |X| Check the appropriate box: |X| Preliminary Proxy Statement |_| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |_| Definitive Proxy Statement |_| Definitive Additional Materials |_| Soliciting Material Pursuant to Section 240.14a-12 THE KOREA FUND, INC. -------------------------------------------------------------------------------- (Name of Registrant as Specified In its Charter) CITY OF LONDON INVESTMENT GROUP PLC -------------------------------------------------------------------------------- (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: -------------------------------------------------------------------------------- (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 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: CITY OF LONDON INVESTMENT GROUP PLC o 10 Eastcheap, London, England, EC3M ILX o o 1125 Airport Road, Coatesville, PA, United States, 19320 o o 30 Cecil Street, Singapore 049712 o August __, 2004 VOTE THE GOLD PROXY TO ELECT INDEPENDENT NOMINEES TO THE BOARD OF THE KOREA FUND, INC. Dear Fellow Stockholder of The Korea Fund, Inc. (the "Fund"): City of London Investment Group PLC ("City of London") is seeking your support in electing each of Julian Reid and Chris Russell (referred to collectively herein as the "Independent Nominees") to the Board of Directors of the Fund (the "Board") at the Annual Meeting of Stockholders of the Fund scheduled for October 6, 2004 (the "Annual Meeting"). City of London has been a Stockholder in the Fund for more than three years and believes it currently is the second largest holder of outstanding shares of the Fund's Common Stock (the "Shares"). As of the date of this letter, City of London beneficially owns approximately 9.74% of the outstanding Shares. The Fund's current officers and directors, as a group, own approximately 0.02% of the outstanding Shares. City of London believes that both the size and the duration of its holdings, as well as its intention to remain a Stockholder of the Fund, closely align its interests with the other Stockholders of the Fund. We Believe the Election of the Independent Nominees Will Benefit the Fund and its Stockholders City of London believes that a truly independent Board, one that is free from any ties to Deutsche Investment Asset Management Americas, Inc. ("DeIM"), the Fund's investment manager, is the only way to ensure that the Board will: o be committed to good corporate governance (and not take actions, as the Board did in February when it revised the Fund's bylaws, to entrench management--please see discussion below); and o take meaningful actions designed to narrow the persistent, double-digit discount to net asset value ("NAV") at which the Shares trade and cause the Fund to seek to maximize value on behalf of all of the Fund's Stockholders. Neither of the Independent Nominees has any relationship with DeIM nor does either of such nominees have a relationship with City of London which, in any way, could compromise his independence. In contrast, City of London believes that the Fund's current directors have far too many ties to DeIM to be truly independent and that, perhaps as a result, the Board consistently has failed to adequately address Stockholders' needs. 1 According to the Fund's proxy statement, six of the seven directors on the Board are "independent" notwithstanding the fact that each "independent" director on the Board (a) serves on the board of directors of, and receives fees from, three other closed-end funds managed by DeIM,(1) and (b) additionally receives fees directly from DeIM in connection with his/her service as a director of such closed-end funds. The seventh director, who is a managing director of an affiliate of DeIM and is one of the Board's nominees at the Annual Meeting, is an "interested person" (as defined in the Investment Company Act of 1940, as amended) according to the Fund's proxy statement because of his affiliation with DeIM and because he is an officer of the Fund. City of London believes that individuals who are "interested persons" by virtue of their relationship with the investment manager should not serve on the Board and you--as a Stockholder of the Fund--can help take a major step in improving corporate governance and reducing DeIM's direct influence on the Board by NOT electing this "interested" director. Instead, vote for our Independent Nominees on the GOLD proxy card. Even if you have already sent in a proxy to the Fund, you make revoke your vote and support the Independent Nominees by signing and returning a later-dated GOLD proxy card. City of London believes the Board's relationships to DeIM create potential conflicts of interest when, for example, the Board evaluates the performance of DeIM or when the Board considers steps which could be taken to narrow the discount to NAV at which the Shares trade (please see discussion under the heading "Providing Effective Measures to Deal With The Substantial and Persistent Discount to NAV"). The Independent Nominees have indicated to City of London that, unlike the current members of the Board, they will not serve on the board of directors of any other closed-end fund currently managed by DeIM or accept fees directly from DeIM while serving as a director of the Fund. Improving Corporate Governance and Respecting Stockholder Rights City of London believes that the Board should be dedicated to the highest standards of good corporate governance and to enhancing Stockholder rights. In the view of City of London, the Board has not met this standard and appears to be insensitive if not opposed to real Stockholder democracy. For example, in February 2004, the Board--without Stockholder approval or without even notifying the Stockholders--amended the Fund's bylaws to, among other things, increase the percentage of the outstanding Shares necessary for Stockholders to call a Special Meeting of Stockholders from 25% to 50%--a level that is far more difficult to achieve. Why would the Board engage in such an act when it makes it harder for you as a Stockholder to have your say on matters of importance to the Fund? City of London believes that a truly independent Board, unfettered by its myriad relationships with DeIM, would take a very different approach to corporate governance and would not countenance actions which potentially disenfranchise Stockholders. ---------- (1) Each of the "independent" directors serves on the board of the following funds managed by DeIM: The Brazil Fund, Inc., the Scudder New Asia Fund, Inc. and the Scudder Global High Income Fund, Inc. 2 Providing Effective Measures to Deal With The Substantial and Persistent Discount to NAV The Shares have traded at an average discount to NAV in excess of 19% over the past five years. When Shares trade at a significant discount for a substantial period of time, City of London believes that the Board is obligated to take meaningful actions to address the problem. City of London believes that the current directors on the Board have failed the Stockholders in this regard. While it is true that over the years the Fund has taken several different measures purportedly designed to address the discount, City of London believes that such measures have been ineffectual at best. For example, in the first quarter of 2004, the Fund conducted a cash tender offer for 10% of the outstanding Shares at a price equal to 95% of NAV. More than 61% of the outstanding Shares were tendered into the Fund's cash tender offer. City of London believes that the magnitude of the Stockholders' response to the cash tender offer clearly demonstrates the Stockholders' desire an offer for a percentage of the Shares that is significantly higher than 10%. Furthermore, City of London believes that the Fund's cash-tender offer has had little effect on the discount (as demonstrated by the fact that the Shares continue to trade at double-digit discounts to NAV). Most recently, the Board has proposed an in-kind tender offer for 10% of the outstanding Shares at a price equal to 95% of NAV. The tender offer only will be made if the Shares have traded at an average weekly discount from NAV greater than 15% during a 13-week period preceding December 31, 2004 and is subject to the approval of the U.S. Securities and Exchange Commission. It appears that the Board considers a discount of 15% or less to be acceptable to Stockholders. City of London believes that such an in-kind tender offer will not result in a meaningful reduction in the discount and falls far short of meeting the desire of many Stockholders to sell their Shares for cash at or near NAV. City of London believes that the Fund's proposed tender offer should be a cash offer--not an in-kind offer--and should be for at least 50% or more of the outstanding Shares at not less than NAV (less transactional fees and expenses). City of London believes that the Fund should explore a variety of strategic alternatives designed to provide all Stockholders, regardless of size, with regular opportunities to realize NAV for their Shares (less transactional fees and expenses). Among the strategic alternatives that City of London believes should be considered are: meaningful share repurchase plans, a regular cash tender, and conversion to interval status, as well as other actions that would increase Stockholders' ability to realize NAV for their Shares (less transactional fees and expenses) on a regular basis. City of London recognizes that certain of the alternatives would shrink the size of the Fund and, thereby, reduce the approximately $10 million in management fees payable to DeIM per year. In the view of City of London, it is imperative, therefore, that critical decisions regarding the Fund's response to the discount be made by a truly independent Board. 3 We Believe The Independent Nominees Are Better Qualified Than The Fund's Nominees The Independent Nominees, Julian Reid and Chris Russell, have extensive experience in the Asian markets (including the Korean markets) and the closed-end fund industry. In City of London's view, the Independent Nominees are far more qualified to serve on the Board than the Fund's nominees. Mr. Reid has more than 20 years of U.S. and other closed-end fund experience, including serving as the head of the closed-end fund business for Jardine Fleming Investment Management (one of the leading investment management companies in Asia). During this time, Mr. Reid spent time focusing on, among others, the Korean markets. Mr. Russell has nearly 30 years of institutional investment experience globally and in Asia on behalf of U.S. and international institutions, including 20 years of experience as an institutional fund manager responsible for investment in Asia, including Korea. Both Mr. Reid and Mr. Russell were based in Asia for many years. The qualifications of the Fund's nominees, in City of London's view, pale in comparison to those of Mr. Reid and Mr. Russell. The information provided by the Fund in its proxy materials indicates that the Fund's nominees have experience in Europe and Central America but does not disclose any relevant closed-end fund or Asian experience beyond their service as a director of multiple funds managed by DeIM. In addition, as noted above, one of the Fund's nominees is not independent because of his affiliation with DeIM and because he is an officer of the Fund. City of London Is Not The Only Stockholder Dissatisfied With The Way The Fund Has Been Managed. City of London is aware of one other matter that is scheduled to be voted upon at the Annual Meeting. The President and Fellows of Harvard College ("Harvard"), a Stockholder unaffiliated with City of London that holds approximately 22% of the outstanding Shares, has proposed that Stockholders vote to terminate the investment management agreement (the "Investment Management Agreement") between the Fund and DeIM. The Fund's proxy materials set forth Harvard's proposal and statement in favor of its proposal. We urge you to review Harvard's proposal and statement carefully. City of London agrees with Harvard's statement concerning "the severe conflicts that exist between Fund [Stock]holders and DeIM" and believes that the Board will not become more attuned to good corporate governance, Stockholder democracy and narrowing the persistent discount to NAV at which the Shares trade unless DeIM is removed as the Fund's manager. Accordingly, City of London supports the Stockholder proposal to terminate the Investment Management Agreement. The proposal to terminate the Investment Management Agreement is included on the GOLD proxy card. You may vote on this matter by using the GOLD proxy card. Remember: You Can Vote For the Independent Nominees Only On the GOLD Proxy Card 4 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 proxy you return is the GOLD proxy card. Only your latest dated proxy counts A GOLD proxy card that is returned to us will be voted as you indicate on it. If a 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. In addition, a GOLD proxy card will be voted in the proxy holders' discretion on all other matters as may properly come before the Annual Meeting of which City of London is not made aware within a reasonable amount of time prior to the Annual Meeting. Thank you for your cooperation 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 seek to maximize value on behalf of all of the Stockholders. Sincerely yours, Barry M. Olliff Director City of London Investment Group PLC 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. 5 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 6 CITY OF LONDON INVESTMENT GROUP PLC PROXY STATEMENT IN OPPOSITION TO THE BOARD OF DIRECTORS OF THE KOREA FUND, INC. ----------------------------------- 2004 ANNUAL MEETING OF STOCKHOLDERS OF THE KOREA FUND, INC. ----------------------------------- PLEASE SIGN, DATE AND RETURN THE ENCLOSED GOLD PROXY CARD This proxy statement and the enclosed GOLD proxy card are being furnished to the stockholders (the "Stockholders") of The Korea Fund, Inc., a Maryland corporation (the "Fund"), by City of London Investment Group PLC, a company incorporated under the laws of England and Wales ("City of London"), on behalf of itself, its wholly-owned subsidiary, City of London Investment Management Company Limited, a company incorporated under the laws of England and Wales ("CLIM"), and the City of London Funds,(1) in connection with the solicitation of proxies from the Stockholders to be used at the 2004 Annual Meeting of Stockholders of the Fund (the "Annual Meeting"), including any adjournments or postponements thereof and any special meeting which may be called in lieu thereof, to vote FOR the election of each of Julian Reid and Chris Russell (collectively, the "Independent Nominees")(2) to the Board of Directors of the Fund (the "Board"). The Fund's principal executive office is located at 345 Park Avenue, New York, New York 10154. This proxy statement and the enclosed GOLD proxy card are first being furnished to the Stockholders on or about [August __, 2004.] ---------- (1) The term "City of London Funds" as used herein means each of: (a) The Emerging World Fund, a Dublin, Ireland-listed investment company managed by CLIM and organized under the laws of Ireland ("EWF"), (b) Emerging Markets Country Fund, a private investment fund managed by CLIM and organized as a Delaware business trust ("GEM"), (c) Investable Emerging Markets Country Fund, a private investment fund managed by CLIM and organized as a Delaware business trust ("IEM"), (d) Emerging Free Markets Country Fund, a private investment fund managed by CLIM and organized as a Delaware business trust ("FREE"), (e) GFM (Institutional) Emerging Markets Country Fund, a fund managed by CLIM and organized under the laws of the Province of Ontario ("GFM"), and (f) Global Optimization Fondo de Inversion Internacional, a closed-end fund managed by a company controlled by City of London, City of London Quantitative Management Ltd., and organized under the laws of Chile ("Global"). (2) The Independent Nominees were nominated by Mellon Trust of Delaware NA TTEE, Emerging Markets Country Fund ("Mellon") at the request of GEM's investment manager, CLIM. Mellon is the trustee of GEM and is the record holder of certain of the Shares beneficially owned by GEM. Mellon is not a participant in this solicitation. The Fund has established a record date of July 19, 2004 for determining Stockholders entitled to notice of and to vote at the Annual Meeting (the "Record Date") and October 6, 2004 as the date of the Annual Meeting. The Annual Meeting will be held at 10:45 a.m., Eastern Time, at the offices of Deutsche Investment Management Americas Inc., 280 Park Avenue, 29th Floor, New York, New York 10017. Each Stockholder of record at the close of business on the Record Date will be entitled to one vote at the Annual Meeting for each share of the Fund's common stock, $0.01 par value per share ("Share"), held by such Stockholder on the Record Date. City of London, together with all of the participants in this solicitation, beneficially owns an aggregate of 4,356,082 Shares, which represents approximately 9.74% of the Shares outstanding (based on the most recent Share information publicly disclosed by the Fund). City of London and all of the participants intend to vote all of their Shares held on the Record Date FOR the election of the Independent Nominees to the Board and FOR the Stockholder proposal discussed below to terminate the investment management agreement (the "Investment Management Agreement") between the Fund and Deutsche Investment Asset Management Americas, Inc. ("DeIM").(3) This solicitation is being made by City of London and not on behalf of the Board or management of the Fund. SUMMARY: Election of Directors City of London is soliciting proxies FOR the election of the Independent Nominees to the Board because it believes that the election of the Independent Nominees represents the best means for the Stockholders to obtain representatives on the Board who will: o be committed to good corporate governance (and not take actions, as the Board did in February when it revised the Fund's bylaws, to entrench management); and o take meaningful actions designed to narrow the persistent, double-digit discount to net asset value ("NAV") at which the Shares trade and cause the Fund to seek to maximize value on behalf of all of the Fund's Stockholders. Termination of Investment Management Agreement City of London is aware of one other matter that is scheduled to be voted upon at the Annual Meeting. The President and Fellows of Harvard College ("Harvard"), a Stockholder unaffiliated with City of London that holds approximately 22% of the outstanding Shares, has proposed that Stockholders vote to terminate the Investment Management Agreement. The Fund's proxy materials set forth Harvard's proposal and statement in favor of its proposal. We urge you to review Harvard's proposal and statement carefully. City of London agrees with Harvard's statement concerning "the severe conflicts that exist between Fund [Stock]holders and DeIM" and believes that the Board will not become more attuned to good corporate governance, Stockholder democracy and narrowing the persistent discount to NAV at which the Shares trade unless DeIM is removed as the Fund's manager. Accordingly, City of London supports the Stockholder proposal to terminate the Investment Management Agreement. The proposal to terminate the Investment Management Agreement is included on the GOLD proxy card. You may vote on this matter by using the GOLD proxy card. ---------- (3) On the Record Date, City of London, together with all of the other participants in this solicitation, beneficially owned an aggregate of 4,250,282 Shares, which represents approximately 9.51% of the Shares outstanding. 2 Other Matters To City of London's knowledge, there are no other matters scheduled to be voted upon at the Annual Meeting. In the event other proposals are brought before the Annual Meeting of which City of London is not made aware within a reasonable amount of time prior to the Annual Meeting, the persons named as proxies in the enclosed GOLD proxy card will vote on such matters in their discretion. IMPORTANT! Your vote is important, no matter how many or how few Shares you own. City of London urges you to sign, date and return the enclosed GOLD proxy card today to vote FOR the election of the Independent Nominees to the Board. Remember, you can vote for the Independent Nominees only on the GOLD proxy card. We urge you not to return any proxy card to the Fund. 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 proxy you return is the GOLD proxy card. Only your latest dated proxy counts If you intend to vote on the Stockholder proposal to terminate the Investment Management Agreement, please do so on the GOLD proxy card. City of London supports the Stockholder proposal to terminate the Investment Management Agreement. If any of your Shares are held in the name of a brokerage firm, bank, bank nominee or other institution on the Record Date, only it can vote such Shares and only upon receipt of your specific instructions. Accordingly, please sign, date and return your GOLD proxy card in the envelope provided by your brokerage firm, bank, bank nominee or other institution. If you have any questions regarding your proxy, or need assistance in voting your Shares, please call: 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 A more detailed discussion of the proposals to be presented before the Annual Meeting of which City of London is aware, and City of London's recommendations with respect to such proposals, follows. 3 PROPOSAL 1 ELECTION OF DIRECTORS As indicated in the Fund's proxy statement, the Board is divided into three classes of directors and each class serves for three years with one class being elected each year. At the Annual Meeting, the Stockholders will be asked to elect two Class I directors to hold office until the 2007 Annual Meeting of Stockholders (or thereafter until their respective successors are elected and qualified). The Board has nominated Vincent J. Esposito and Susan Kaufman Purcell for election to the Board. Mellon has nominated the Independent Nominees, Julian Reid and Chris Russell, for election to the Board. City of London is soliciting your proxy in support of the election of the Independent Nominees. If you wish to vote FOR the Independent Nominees, you can only do so by completing and returning a GOLD proxy card. Why You Should Vote For the Independent Nominees City of London believes that the election of the Independent Nominees represents the best means for Stockholders to obtain representatives on the Board who will: o be committed to good corporate governance (and not take actions, as the Board did in February when it revised the Fund's bylaws, to entrench management--please see discussion below); and o take meaningful actions designed to narrow the persistent, double-digit discount to NAV at which the Shares trade and cause the Fund to seek to maximize value on behalf of all of the Fund's Stockholders. Neither of the Independent Nominees has any relationship with DeIM nor does either of such nominees have a relationship with City of London which, in any way, could compromise his independence. In contrast, City of London believes that the Fund's current directors have far too many ties to DeIM to be truly independent and that, perhaps as a result, the Board consistently has failed to adequately address Stockholders' needs. According to the Fund's proxy statement, six of the seven directors on the Board are "independent" notwithstanding the fact that each "independent" director on the Board (a) serves on the board of directors of, and receives fees from, three other closed-end funds managed by DeIM,(4) and (b) additionally receives fees directly from DeIM in connection with his/her service as a director of such closed-end funds. The seventh director, who is a managing director of an affiliate of DeIM and is one of the Board's nominees at the Annual Meeting, is an "interested person" (as defined in the Investment Company Act of 1940, as amended) according to the Fund's proxy statement because of his affiliation with DeIM and because he is an officer of the Fund. City of London believes that individuals who are "interested persons" by virtue of their relationship with the investment manager should not serve on the Board and you--as a Stockholder of the Fund--can help take a major step in improving corporate governance and reducing DeIM's direct influence on the ---------- (4) Each of the "independent" directors serves on the board of the following funds managed by DeIM: The Brazil Fund, Inc., the Scudder New Asia Fund, Inc. and the Scudder Global High Income Fund, Inc. 4 Board by NOT electing this "interested" director. Instead, vote FOR the Independent Nominees on the GOLD proxy card. Even if you have already sent in a proxy to the Fund, you may revoke your vote and support the Independent Nominees by signing and returning a later-dated GOLD proxy card. City of London believes the Board's relationships to DeIM create potential conflicts of interest when, for example, the Board evaluates the performance of DeIM or when the Board considers steps which could be taken to narrow the discount to NAV at which the Shares trade (please see discussion under the heading "Providing Effective Measures to Deal With The Substantial and Persistent Discount to NAV").(5) The Independent Nominees have indicated to City of London that, unlike the current members of the Board, they will not serve on the board of directors of any other closed-end fund currently managed by DeIM or accept fees directly from DeIM while serving as a director of the Fund. Improving Corporate Governance and Respecting Stockholder Rights City of London believes that the Board should be dedicated to the highest standards of good corporate governance and to enhancing Stockholder rights. In the view of City of London, the Board has not met this standard and appears to be insensitive if not opposed to real Stockholder democracy. For example, in February 2004, the Board--without Stockholder approval or without even notifying the Stockholders--amended the Fund's bylaws to, among other things, increase the percentage of the outstanding Shares necessary for Stockholders to call a Special Meeting of Stockholders from 25% to 50%--a level that is far more difficult to achieve. Why would the Board engage in such an act when it makes it harder for you as a Stockholder to have your say on matters of importance to the Fund? City of London believes that a truly independent Board, unfettered by its myriad relationships with DeIM, would take a very different approach to corporate governance and would not countenance actions which potentially disenfranchise Stockholders. Providing Effective Measures to Deal With The Substantial and Persistent Discount to NAV The Shares have traded at an average discount to NAV in excess of 19% over the past five years. When Shares trade at a significant discount for a substantial period of time, City of London believes that the Board is obligated to take meaningful actions to address the problem. City of London believes that the current directors on the Board have failed the Stockholders in this regard. While it is true that over the years the Fund has taken several different measures purportedly designed to address the discount, City of London believes that such measures have been ineffectual at best. For example, in the first quarter of 2004, the Fund conducted a cash tender offer for 10% of the outstanding Shares at a price equal to 95% of NAV. More than 61% of the outstanding Shares were tendered into the Fund's cash tender offer. City of London believes that the magnitude of the Stockholders' response to the cash tender offer clearly demonstrates the Stockholders' desire an offer for a percentage of the Shares that is significantly higher than 10%. Furthermore, City of London ---------- (5) Mr. Reid is not affiliated with the investment manager of any closed-end fund on whose board he serves and he has advised City of London that he does not intend to serve in the future on the board of any fund if he is affiliated with the fund's investment manager. Mr. Reid did serve, more than six years ago, on the board of directors of two closed-end funds at a time when he was director of the investment manager of such funds. Mr. Reid is an unpaid officer of one fund on whose board he serves. He receives no compensation from either the fund or the fund's investment manager for serving as an officer of the fund and he has no affiliation with the fund's investment manager. 5 believes that the Fund's cash-tender offer has had little effect on the discount (as demonstrated by the fact that the Shares continue to trade at double-digit discounts to NAV). Most recently, the Board has proposed an in-kind tender offer for 10% of the outstanding Shares at a price equal to 95% of NAV. The tender offer only will be made if the Shares have traded at an average weekly discount from NAV greater than 15% during a 13-week period preceding December 31, 2004 and is subject to the approval of the U.S. Securities and Exchange Commission. It appears that the Board considers a discount of 15% or less to be acceptable to Stockholders. City of London believes that such an in-kind tender offer will not result in a meaningful reduction in the discount and falls far short of meeting the desire of many Stockholders to sell their Shares for cash at or near NAV. City of London believes that the Fund's proposed tender offer should be a cash offer--not an in-kind offer--and should be for at least 50% or more of the outstanding Shares at not less than NAV (less transactional fees and expenses). City of London believes that the Fund should explore a variety of strategic alternatives designed to provide all Stockholders, regardless of size, with regular opportunities to realize NAV for their Shares (less transactional fees and expenses). Among the strategic alternatives that City of London believes should be considered are: meaningful share repurchase plans, a regular cash tender, and conversion to interval status, as well as other actions that would increase Stockholders' ability to realize NAV for their Shares (less transactional fees and expenses) on a regular basis. City of London recognizes that certain of the alternatives would shrink the size of the Fund and, thereby, reduce the approximately $10 million in management fees payable to DeIM per year. In the view of City of London, it is imperative, therefore, that critical decisions regarding the Fund's response to the discount be made by a truly independent Board. City of London's Interests Are Aligned With Yours. City of London has been a Stockholder for more than three years and fully expects to remain a Stockholder in the Fund. As of the date of this proxy statement, City of London beneficially owns approximately 9.74% of the outstanding shares of the Fund's Common Stock (the "Shares"). As a group, the Fund's current officers and directors own approximately 0.02% of the outstanding Shares. City of London intends to vote FOR the election of each of the Independent Nominees to the Board. The Fund asserts in its proxy materials that City of London "appears to be more interested in arbitrage opportunities than achieving long term capital appreciation." Nothing could be further from the truth. City of London has been a long term Stockholder of the Fund and intends to remain a Stockholder of the Fund. Given our substantial interest, City of London wants to ensure that the Fund is managed for the benefit of all Stockholders and not in the best interest of DeIM. Don't be fooled by the Board's rhetoric or its attempts to deflect attention from its performance and the conflicts of interest inherent in its relationship with DeIM. 6 The Independent Nominees The Independent Nominees, Julian Reid and Chris Russell, have extensive experience in the Asian markets (including the Korean markets) and the closed-end fund industry. In City of London's view, the Independent Nominees are far more qualified to serve on the Board than the Fund's nominees. Mr. Reid has more than 20 years of U.S. and other closed-end fund experience, including serving as the head of the closed-end fund business for Jardine Fleming Investment Management (one of the leading investment management companies in Asia). During this time, Mr. Reid spent time focusing on, among others, the Korean markets. Mr. Russell has nearly 30 years of institutional investment experience globally and in Asia on behalf of U.S. and international institutions, including 20 years of experience as an institutional fund manager responsible for investment in Asia, including Korea. Both Mr. Reid and Mr. Russell were based in Asia for many years. The qualifications of the Fund's nominees, in City of London's view, pale in comparison to those of Mr. Reid and Mr. Russell. The information provided by the Fund in its proxy materials indicates that the Fund's nominees have experience in Europe and Central America but does not disclose any relevant closed-end fund or Asian experience beyond their service as a director of multiple funds managed by DeIM. In addition, as noted above, one of the Fund's nominees is not independent because of his affiliation with DeIM and because he is an officer of the Fund The following table sets forth certain information regarding the Independent Nominees. This information has been furnished to City of London by the Independent Nominees.
Name, (Age) and Principal Business Principal Occupation and Business Directorships in Publicly Held Address Experience During the Last Five Years; Companies Julian Reid (60) Chief Executive Officer of 3a Asset Chairman of the Board of Directors 1 Queen Anne's Gate, Management Limited (since 1998); President of the Saffron Fund, Inc.(since London SW 1 H 9 BT of the Saffron Fund, Inc. (1994-1998, since 1998); and Director of JF China 2004); and Chairman of Morgan's Walk Region Fund, Inc. (since 1997). Properties Ltd. (since 2002). Chris Russell (55) Consultant of Gavekal Research (since None. 39 De Vere Gardens, 2001); and Director of each of: Candover London W8 5AW plc (since 2004); LIM Japan Fund (since 2002); Enhanced Index Funds (since 2002); Investec High Income Trust (since 2001); and Gartmore Investment Management plc (1997-2001).
7 The Independent Nominees (a) are completely independent from City of London, (b) will not receive any compensation from City of London for their services as a director of the Fund, (c) do not have an equity interest in City of London, and (d) have been nominated to serve the interests of all of the Stockholders (not just the interests of City of London). Each of the Independent Nominees has executed a written consent agreeing to be a nominee for election to the Board and to serve as a director if so elected. None of the Independent Nominees has been convicted in any criminal proceedings (excluding traffic violations or similar misdemeanors) over the past ten years. Additional information about the Independent Nominees and the other participants in this solicitation is set forth in Schedule I hereto and is incorporated herein by reference. None of the Independent Nominees beneficially owns any Shares of the Fund and none of the Independent Nominees is an "interested person" of the Fund within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended. Neither City of London nor any of the Independent Nominee is adverse to the Fund or any of its subsidiaries in any material pending legal proceedings. The following table sets forth the dollar range of equity securities beneficially owned by each Independent Nominee in the Fund and in all registered investment companies to be overseen by the Independent Nominees within the Fund's family of investment companies as of August 10, 2004:
--------------------------------------------------------------------------------------------------------------- Aggregate dollar range of equity securities in all registered investment companies to be overseen by the Dollar range of equity Independent Nominees within the Fund's family of investment Name securities in the Fund companies. --------------------------------------------------------------------------------------------------------------- Julian Reid None None --------------------------------------------------------------------------------------------------------------- Chris Russell None None ---------------------------------------------------------------------------------------------------------------
City of London does not expect that the Independent Nominees will be unable to stand for election but, in the event that any such person is unable to do so or for good cause will not serve, and City of London does not learn of this circumstance a reasonable time before the Annual Meeting, the Shares represented by the enclosed GOLD proxy card will be voted for substitute Independent Nominees (who would be named after the solicitation of proxies). We have been informed by the Fund that it may not accept substitute Independent Nominees under the circumstances described above. City of London believes that this another example of anti-Stockholder bias by the Board. The Independent Nominees Will Constitute Only a Minority of the Directors on the Board. Even if the Independent Nominees are elected to the Board, they will constitute only two of the seven members of the Board. Accordingly, the Independent Nominees would not be in a position, without the support of at least two or more of the incumbent members of the Board, to cause any action to be taken. There can be no assurance that the incumbent members of the Board will vote with the Independent Nominees on matters that the Independent Nominees 8 propose. City of London believes, however, that the election of the Independent Nominees will send a strong message to the other members of the Board that the Stockholders want representatives on the Board who will: o be committed to good corporate governance (and not take actions, as the Board did in February when it revised the Fund's bylaws, to entrench management; and o take meaningful actions designed to narrow the persistent, double-digit discount to NAV at which the Shares trade and cause the Fund to seek to maximize value on behalf of all of the Fund's Stockholders. Other Information The Fund's proxy statement contains information regarding: (a) ownership of Shares by directors and executive officers of the Fund and by other persons who own more than 5% of the outstanding Shares, (b) meetings of the Board and certain committees thereof, (c) background of the Fund's directors (including the nominees for election to the Board) and executive officers, (d) compensation paid and payable to the Fund's directors and executive officers, and (e) committees of the Board and their responsibilities. We urge you to review the Fund's proxy materials concerning these matters. 9 PROPOSAL 2 TERMINATION OF THE INVESTMENT MANAGEMENT AGREEMENT As indicated in the Fund's proxy statement, Harvard, a Stockholder unaffiliated with City of London that holds approximately 22% of the outstanding Shares, has submitted a proposal to terminate the Investment Management Agreement, as currently in effect, immediately. The Fund's proxy materials set forth Harvard's proposal and statement in favor of its proposal. We urge you to review Harvard's proposal and statement carefully. City of London agrees with Harvard's statement concerning "the severe conflicts that exist between Fund [Stock]holders and DeIM" and believes that the Board will not become more attuned to good corporate governance, Stockholder democracy and narrowing the persistent discount to NAV at which the Shares trade unless DeIM is removed as the Fund's manager. Accordingly, City of London supports the Stockholder proposal to terminate the Investment Management Agreement. The proposal to terminate the Investment Management Agreement is included on the GOLD proxy card. You may vote on this matter by using the GOLD proxy card. Effect of Termination Under the Investment Company Act of 1940, as amended, in the event that the Investment Management Agreement is terminated and no successor is immediately selected, the Board may select an interim investment manager for a period not to exceed 150 days following the date on which the Investment Management Agreement was terminated. A new investment management agreement would require votes of the Board and the Stockholders of the Fund. Information Regarding Investment Management Agreement Because this proposal relates to the termination of the Investment Management Agreement, included in Schedule III to this proxy statement is information that Stockholders may wish to consider concerning the Investment Management Agreement. As City of London has no independent knowledge regarding this information, its presentation is based entirely on disclosures contained in the Fund's proxy statement. CITY OF LONDON'S RECOMMENDATIONS City of London is soliciting proxies FOR the election of the Independent Nominees and supports the Stockholder proposal to terminate the Investment Management Agreement. To City of London's knowledge, there are no other matters scheduled to be voted upon at the Annual Meeting. In the event other proposals are brought before the Annual Meeting of which City of London is not made aware within a reasonable amount of time prior to the Annual Meeting, the persons named as proxies in the enclosed GOLD proxy card will vote on such matters in their discretion. YOU ARE URGED TO VOTE FOR THE ELECTION OF THE INDEPENDENT NOMINEES TO THE BOARD ON THE ENCLOSED GOLD PROXY CARD. REMEMBER, YOU CAN VOTE FOR THE INDEPENDENT NOMINEES ONLY ON THE GOLD PROXY CARD. 10 WE URGE YOU NOT TO RETURN ANY PROXY CARD TO THE FUND. 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 PROXY YOU RETURN IS THE GOLD PROXY CARD. ONLY YOUR LATEST DATED PROXY COUNTS IF YOU INTEND TO VOTE ON THE STOCKHOLDER PROPOSAL TO TERMINATE THE INVESTMENT MANAGEMENT AGREEMENT, PLEASE DO SO ON THE GOLD PROXY CARD. CITY OF LONDON SUPPORTS THE STOCKHOLDER PROPOSAL TO TERMINATE THE INVESTMENT MANAGEMENT AGREEMENT. VOTING AND PROXY PROCEDURES Only Stockholders of record on the Record Date will be entitled to notice of and to vote at the Annual Meeting. Based on publicly available information, City of London believes that the only outstanding class of securities of the Fund entitled to vote at the Annual Meeting is the Shares. Each Share is entitled to one vote on each matter as may properly be brought before the Annual Meeting. According to the Fund's proxy statement, there were 44,701,497 Shares issued and outstanding as of the Record Date. The presence at the Annual Meeting, in person or by proxy, of Stockholders holding a majority of the votes entitled to be cast will constitute a quorum for the transaction of business. If a quorum is present at the Annual Meeting, the election of each nominee requires the affirmative vote of a majority of the Shares present in person or by proxy and entitled to vote at the Annual Meeting. Approval of the proposal to terminate the Investment Management Agreement will require the affirmative vote of a "majority of the outstanding voting securities" of the Fund, which means the affirmative vote of the lesser of (a) 67% or more of the Shares entitled to vote thereon present or represented by proxy at the Annual Meeting, if the holders of more than 50% of the outstanding Shares entitled to vote thereon are present or represented by proxy, or (b) more than 50% of the total outstanding Shares entitled to vote thereon. Abstentions will be counted as Shares present at the Annual Meeting for quorum purposes but not voting and will have the same effect as votes cast against the nominees and the proposal to terminate the Investment Management Agreement. Shares represented by properly executed GOLD proxy cards will be voted at the Annual Meeting as marked and, in the absence of specific instructions, will be voted: o FOR the election of the Independent Nominees to the Board; o FOR the termination of the Investment Management Agreement; and o in the discretion of the persons named as proxies, on all other matters as may properly come before the Annual Meeting of which City of London is not made aware within a reasonable amount of time prior to the Annual Meeting. 11 City of London recommends that Stockholders vote FOR the election of the Independent Nominees and supports the Stockholder proposal to terminate the Investment Management Agreement. Stockholders may revoke their proxies at any time prior to its exercise by attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself constitute revocation of a proxy) or by delivering a written notice of revocation. The delivery of a subsequently dated proxy that is properly completed will constitute a revocation of any earlier proxy. The revocation may be delivered either to City of London, in care of Barry M. Olliff, at 1125 Airport Road, Coatesville, PA 19320 or to the Fund at 345 Park Avenue, New York, New York 10154 or any other address provided by the Fund. Although a revocation is effective if delivered to the Fund, City of London requests that either the original or photostatic copies of all revocations be mailed to City of London, in care of Barry Olliff, at the address set forth above so that City of London will be aware of all revocations. CITY OF LONDON RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE INDEPENDENT NOMINEES TO THE BOARD ON THE ENCLOSED GOLD PROXY CARD. CITY OF LONDON SUPPORTS THE STOCKHOLDER PROPOSAL TO TERMINATE THE INVESTMENT MANAGEMENT AGREEMENT AND URGES YOU TO VOTE FOR THIS PROPOSAL ON THE GOLD PROXY CARD. IF YOU WISH TO VOTE, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED GOLD PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. A GOLD PROXY CARD THAT IS RETURNED TO CITY OF LONDON WILL BE VOTED AS THE STOCKHOLDER INDICATES THEREON. IF A GOLD PROXY CARD IS RETURNED WITHOUT A VOTE INDICATED THEREON, IT WILL BE VOTED FOR THE ELECTION OF THE INDEPENDENT NOMINEES TO THE BOARD AND FOR THE TERMINATION OF THE INVESTMENT MANAGEMENT AGREEMENT. SOLICITATION OF PROXIES City of London is making the solicitation of proxies pursuant to this proxy statement. Proxies may be solicited by mail, facsimile, telephone, telegraph, internet, e-mail, in person and by advertisements. It is anticipated that City of London will employ approximately three persons, each of whom will be a director, officer and/or employee of City of London and none of whom will receive additional compensation for such solicitation, to solicit Stockholders for the Annual Meeting. It is anticipated that Messrs. Reid and Russell will solicit Stockholders. Messrs. Reid and Russell will not receive compensation from City of London in connection with their solicitation. City of London has retained Morrow & Co., Inc. for solicitation and advisory services in connection with this solicitation, for which Morrow & Co., Inc. will receive a fee not to exceed $45,000, together with reimbursement for its reasonable out-of-pocket expenses, and will be indemnified against certain liabilities and expenses, including certain liabilities under the federal securities laws. Morrow & Co., Inc. will solicit proxies from individuals, brokers, banks, bank 12 nominees and other institutional holders. City of London has requested banks, brokerage houses and other custodians, nominees and fiduciaries to forward all solicitation materials to the beneficial owners of the Shares they hold of record. City of London will reimburse these record holders for their reasonable out-of-pocket expenses in so doing. It is anticipated that Morrow & Co., Inc. will employ approximately 25 persons to solicit Stockholders for the Annual Meeting. City of London does not intend to seek reimbursement of the costs of this solicitation from the Fund. Costs of this solicitation of proxies are currently estimated to be approximately $300,000. City of London estimates that, through the date hereof, its expenses in connection with this solicitation are approximately $100,000. 13 OTHER INFORMATION According to the Fund's proxy statement, if a Stockholder intends to present a proposal at the 2005 Annual Meeting of Stockholders of the Fund and desires to have the proposal included in the Fund's Proxy Statement and form of proxy for that meeting, the Stockholder must deliver the proposal to John Millette, Secretary of the Fund, c/o Deutsche Investment Management Americas Inc., at 345 Park Avenue, New York, New York 10154 by [April __, 2005] for consideration by the Fund. In addition, according to the Fund's proxy statement, any Stockholder wishing to nominate candidates for election to the Board or present a proposal at the 2005 Annual Meeting of Stockholders of the Fund, which is not to be included in the Fund's proxy materials, must comply with the Fund's bylaws, which, among other things, require that (a) such Stockholder give timely notice of such nomination and/or proposal in writing to the Secretary of the Fund, (b) such Stockholder be a Stockholder of record, and (c) the Stockholder's notice contains the information required in the Fund's bylaws regarding nominations and/or proposals. According to the Fund's proxy statement, any such notice, to be timely, must be delivered to or mailed by certified mail, return receipt requested, and received at the principal executive offices of the Fund not later than 90 days nor more than 120 days prior to the date of the meeting; provided, however, that if less than 100 days' notice or prior public disclosure is given or made to Stockholders, any such notice by a Stockholder to be timely must be so received not later than the close of business on the 10th day following the earlier of the day on which such notice of the date of the annual or special meeting was given or such public disclosure was made. CERTAIN INFORMATION ABOUT THE FUND The Korea Fund, Inc. is a Maryland corporation with its principal executive office located at 345 Park Avenue, New York, New York 10154. The Fund is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith is required to file reports, proxy statements and other information with the Commission. Reports, registration statements, proxy statements and other information filed by the Fund with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W. Room 1024, Washington, DC 20549. Documents filed electronically by the Fund are also available at the SEC's Web site (http://www.sec.gov). In addition to the information contained in the Fund's proxy statement as discussed under the caption "Election of Directors" and "Stockholder Proposal", the Fund's proxy statement contains information regarding: o number of Shares outstanding as of the record date; o establishment of a quorum; o vote required for approval of each of the proposals; o treatment of abstentions and "broker non-votes;" 14 o admission requirements for the Annual Meeting; o identity of the Fund's investment advisers, managers, distributors and/or administrators; o revocability of proxies; and o requirements regarding the submission of Stockholder proposals to be considered for inclusion in the Fund's proxy statement for the 2005 Annual Meeting of Stockholders. City of London assumes no responsibility for the accuracy or completeness of any such information. OTHER MATTERS AND ADDITIONAL INFORMATION City of London is unaware of any other matters to be considered at the Annual Meeting. Should other proposals be brought before the Annual Meeting of which City of London is not made aware within a reasonable amount of time prior to the Annual Meeting, the persons named as proxies on the enclosed GOLD proxy card will vote on such matters in their discretion. August __, 2004 CITY OF LONDON INVESTMENT GROUP PLC (on behalf of itself and as attorney-in-fact for the participants in this solicitation) By: ------------------------------------ Barry Olliff, Director 15 SCHEDULE I INFORMATION ABOUT PARTICIPANTS City of London is soliciting proxies on behalf of itself, CLIM and the City of London Funds. By virtue of their roles as the Independent Nominees, Messrs. Reid and Russell may be deemed participants in this solicitation. Similar information for the Independent Nominees is located under the caption "The Independent Nominees" of this proxy statement, which information is incorporated by reference into this Schedule I. City of London The principal business of City of London is serving as the parent holding company for the City of London group of companies, including CLIM. The business address of City of London is 10 Eastcheap, London EC3M ILX, England. As of the date of the mailing of this proxy statement, City of London, through its control of CLIM and City of London Quantitative Management Ltd., is the beneficial owner of 4,356,082 Shares (representing 120,786 Shares owned directly by EWF, 1,157,847 Shares owned directly by GEM, 1,135,127 Shares owned directly by IEM, 321,494 Shares owned directly by FREE, 109,686 Shares owned directly by GFM, 1,483,122 Shares owned directly by the four segregated accounts to which CLIM provides investment advisory services (the "Accounts"), and 28,020 Shares owned directly by Global). CLIM CLIM is an emerging markets fund manager which specializes in investing in closed-end investment companies and is a registered investment adviser under Section 203 of the Investment Advisers Act of 1940. CLIM is principally engaged in the business of providing investment advisory services to segregated accounts and various investment funds, including EWF, GEM, IEM, FREE and GFM. The business address of CLIM is 10 Eastcheap, London EC3M ILX, England. As of the date of the mailing of this proxy statement, CLIM, through EWF, GEM, IEM, FREE, GFM and the Accounts, is the beneficial owner of 4,308,062 Shares (representing 120,786 Shares owned directly by EWF, 1,157,847 Shares owned directly by GEM, 1,135,127 Shares owned directly by IEM, 321,494 Shares owned directly by FREE, 109,686 Shares owned directly by GFM, and 1,483,122 Shares owned directly by the Accounts). EWF EWF is a Dublin, Ireland-listed investment company organized under the laws of Ireland. The business address of EWF is IFSC House, International Financial Services Centre, Dublin 1, Ireland. As of the date of the mailing of this proxy statement, EWF owns directly and beneficially 120,786 Shares. GEM GEM is a private investment fund organized as a Delaware business trust. The business address of GEM is 10 Eastcheap, London EC3M ILX, England. As of the date of the mailing of this proxy statement, GEM owns directly and beneficially 1,157,847 Shares. IEM IEM is a private investment fund organized as a Delaware business trust. The business address of IEM is 10 Eastcheap, London EC3M ILX, England. As of the date of the mailing of this proxy statement, IEM owns directly and beneficially 1,135,127 Shares. FREE FREE is a private investment fund organized as a Delaware business trust. The business address of FREE is 10 Eastcheap, London EC3M ILX, England. As of the date of the mailing of this proxy statement, FREE owns directly and beneficially 321,494 Shares. GFM GFM is a fund organized under the laws of the Province of Ontario. The business address of GFM is 20 Queen Street, West Suite 3206, Toronto, Ontario, MSH 3R3, Canada. As of the date of the mailing of this proxy statement, GFM owns directly and beneficially 109,686 Shares. Global Global is a closed-end fund organized under the laws of Chile. The business address of Global is 510 Thornall Street, Suite 220, Edison, NJ 08837, United States. As of the date of the mailing of this proxy statement, Global owns directly and beneficially 28,020 Shares. Attached hereto is Schedule II which sets forth information concerning purchases and sales of Shares by the participants in this solicitation during the last two years. Neither the soliciting participants nor any associate of the soliciting participants have any arrangement or understanding with any person with respect to any future employment by the Fund or its affiliates or with respect to any future transactions to which the Fund or any of its affiliates will or may be a party. During the past five years, none of the participants in this solicitation has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or state securities laws or finding any violation with respect to such laws. None of the participants in this solicitation is, or was within the past year, a party to any contract, arrangement or understanding with any person with respect to any securities of the Fund, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies. SCHEDULE II TRANSACTIONS IN THE SECURITIES OF THE FUND Except as disclosed in this proxy statement, none of the participants in this solicitation has, or had, any interest, direct or indirect, by security holdings or otherwise, in the Fund. The following table sets forth certain information with respect to purchases and sales of Shares by the participants in this solicitation within the past two years. The following open market purchases and sales of Shares have been made by EWF: Date of Purchase Number of Shares Purchased Price Paid/Share 08/24/2004 1,000 $17.0100 03/22/2004 4,560 $19.9000 11/13/2003 17,500 $17.6600 09/22/2003 3,130 $15.9210 09/05/2003 3,000 $16.8000 09/04/2003 10,000 $16.9100 04/24/2003 15,000 $12.2959 04/15/2003 3,600 $12.9000 04/14/2003 9,700 $12.3968 02/14/2003 3,700 $12.3800 02/12/2003 14,000 $12.6300 02/07/2003 5,000 $12.7000 02/06/2003 7,600 $12.8768 02/05/2003 800 $13.1199 01/24/2003 5,000 $13.2500 01/15/2003 5,000 $13.9600 01/14/2003 6,580 $14.0037 10/11/2002 12,000 $12.5998 10/09/2002 2,800 $12.8400 10/08/2002 5,200 $13.0292 09/09/2002 7,500 $15.0000 08/02/2002 2,500 $15.4400 Date of Sale Number of Shares Sold Price Received/Share 05/27/2004 4,100 $19.4200 02/27/2004 164 $21.7875 02/24/2004 22,540 $21.7875 02/04/2004 2,580 $19.5800 02/04/2004 15,000 $19.5800 02/04/2004 17,420 $19.5800 01/30/2004 5,000 $19.9500 01/29/2004 7,900 $19.8791 01/28/2004 20,000 $20.1569 01/22/2004 2,880 $20.0000 01/21/2004 6,800 $20.0387 01/21/2004 15,400 $20.0387 08/22/2003 7,400 $17.2100 08/22/2003 8,000 $17.2100 08/22/2003 9,600 $17.2100 06/06/2003 14,000 $14.7163 06/05/2003 15,000 $14.6503 01/09/2003 8,600 $13.9737 11/15/2002 1,000 $14.7508 11/15/2002 20,000 $14.7508 The following open market purchases and sales of Shares have been made by GEM: Date of Purchase Number of Shares Purchased Price Paid/Share 07/27/2004 5,400 $17.1732 07/06/2004 25,000 $18.0862 05/07/2004 12,100 $18.5913 05/06/2004 10,000 $19.1441 05/03/2004 900 $19.6000 04/30/2004 15,200 $19.6027 04/29/2004 73,900 $19.9555 04/19/2004 22,400 $21.2413 04/16/2004 7,000 $21.0803 04/15/2004 40,615 $21.6300 04/14/2004 9,300 $21.4968 02/09/2004 1,200 $20.6200 11/13/2003 43,072 $17.6300 11/11/2003 26,400 $16.9050 11/10/2003 2,000 $17.1500 11/03/2003 7,600 $17.3325 09/24/2003 17,500 $15.9250 09/23/2003 15,000 $16.1093 09/22/2003 14,220 $15.9210 09/18/2003 4,000 $16.6000 09/17/2003 10,000 $16.8000 09/16/2003 4,800 $16.8109 09/05/2003 9,000 $16.8000 09/04/2003 30,000 $16.9100 08/06/2003 20,000 $15.4000 08/05/2003 26,800 $15.6933 08/04/2003 41,500 $15.7183 08/01/2003 11,400 $15.9000 07/17/2003 8,975 $15.5488 07/16/2003 7,750 $15.7958 07/14/2003 5,000 $16.1861 04/25/2003 1,000 $11.7500 04/24/2003 10,000 $12.2959 04/10/2003 17,500 $11.8000 02/18/2003 75,000 $13.0442 02/14/2003 3,700 $12.3800 02/13/2003 46,400 $12.4040 02/12/2003 17,600 $12.6287 02/12/2003 43,000 $12.6300 01/29/2003 900 $12.9800 01/28/2003 3,800 $13.0563 01/24/2003 5,000 $13.2500 01/15/2003 10,000 $13.9600 01/14/2003 13,160 $14.0037 10/11/2002 62,000 $12.5998 10/02/2002 20,000 $13.5378 09/23/2002 10,000 $13.6550 08/29/2002 10,000 $15.4150 08/28/2002 10,000 $15.6250 08/21/2002 2,200 $16.2000 08/13/2002 7,500 $15.3067 08/05/2002 20,000 $14.6750 08/02/2002 27,500 $15.4400 Date of Sale Number of Shares Sold Price Received/Share 02/27/2004 1,287 $21.7875 02/24/2004 176,813 $21.7875 02/02/2004 382,977 $20.0750 08/22/2003 25,000 $17.2100 08/21/2003 5,600 $17.1600 08/20/2003 2,000 $16.6500 06/12/2003 7,600 $14.9900 06/11/2003 20,000 $14.8405 06/10/2003 15,000 $14.7359 06/06/2003 56,200 $14.7163 06/05/2003 7,500 $14.6503 11/22/2002 7,500 $15.7500 11/06/2002 15,200 $14.6937 The following open market purchases and sales of Shares have been made by IEM: Date of Purchase Number of Shares Purchased Price Paid/Share 08/05/2004 15,000 $17.3068 08/04/2004 3,500 $17.0100 07/26/2004 10,900 $17.1474 04/15/2004 7,385 $21.6300 12/15/2003 25,000 $17.5600 12/10/2003 19,000 $16.9103 11/17/2003 5,100 $17.0748 11/13/2003 33,500 $17.6300 10/22/2003 8,600 $16.7800 09/22/2003 5,500 $15.9210 09/18/2003 4,000 $16.6000 09/16/2003 16,000 $16.8109 09/05/2003 7,000 $16.8000 09/04/2003 10,000 $16.9100 08/14/2003 3,000 $15.9000 07/29/2003 10,000 $15.8500 07/17/2003 22,437 $15.5488 07/16/2003 7,750 $15.7958 07/14/2003 5,000 $16.1861 04/10/2003 14,000 $11.8000 04/04/2003 34,200 $11.8638 02/13/2003 30,000 $12.4040 02/12/2003 17,600 $12.6287 02/12/2003 43,000 $12.6300 02/06/2003 7,700 $12.8768 02/05/2003 7,100 $13.1199 02/03/2003 25,000 $13.3000 01/31/2003 25,500 $13.2176 01/15/2003 10,000 $13.9600 01/14/2003 13,160 $14.0037 10/11/2002 52,000 $12.5998 10/02/2002 22,650 $13.5378 Date of Sale Number of Shares Sold Price Received/Share 02/27/2004 1,510 $21.7875 02/24/2004 207,472 $21.7875 01/26/2004 10,300 $20.2506 01/23/2004 22,200 $20.0343 01/22/2004 6,720 $20.0000 01/21/2004 51,800 $20.0387 01/12/2004 10,100 $19.9057 06/11/2003 20,000 $14.8405 06/10/2003 25,000 $14.7359 06/06/2003 56,200 $14.7163 06/05/2003 3,300 $14.6503 11/22/2002 7,500 $15.7500 The following open market purchases and sales of Shares have been made by FREE: Date of Purchase Number of Shares Purchased Price Paid/Share 08/05/2004 5,000 $17.3068 05/05/2004 10,000 $19.8788 04/05/2004 146,000 $21.9900 03/19/2004 10,000 $20.6800 12/30/2003 22,700 $17.9972 11/17/2003 5,000 $17.0748 11/13/2003 33,428 $17.6300 11/07/2003 2,800 $17.2400 11/06/2003 6,500 $17.0000 11/04/2003 71,100 $17.2767 11/03/2003 11,500 $17.3325 10/31/2003 26,100 $17.1383 Date of Sale Number of Shares Sold Price Received/Share 02/27/2004 207 $21.7875 02/24/2004 28,428 $21.7875 The following open market purchases and sales of Shares have been made by GFM: Date of Purchase Number of Shares Purchased Price Paid/Share 06/17/2004 2,200 $18.1900 12/10/2003 6,000 $16.9103 11/13/2003 2,500 $17.6600 10/22/2003 1,200 $16.7800 09/24/2003 2,500 $15.9250 09/22/2003 850 $15.9210 09/18/2003 2,000 $16.6000 09/16/2003 3,000 $16.8109 09/05/2003 1,000 $16.8000 07/17/2003 4,488 $15.5488 04/10/2003 3,500 $11.8000 02/11/2003 800 $12.4000 02/07/2003 5,000 $12.7000 02/06/2003 7,600 $12.8768 10/11/2002 2,900 $12.5998 10/08/2002 5,200 $13.0292 10/02/2002 2,000 $13.5378 09/09/2002 6,000 $15.0000 Date of Sale Number of Shares Sold Price Received/Share 02/27/2004 148 $21.7875 02/24/2004 20,304 $21.7875 01/30/2004 5,000 $19.9500 06/06/2003 14,000 $14.7163 The following open market purchases and sales of Shares have been made by Global: Date of Purchase Number of Shares Purchased Price Paid/Share 02/24/2004 5,000 $19.9500 11/19/2003 4,000 $16.7500 11/11/2003 13,800 $16.9305 11/06/2003 6,500 $17.0155 10/24/2003 4,000 $16.1875 10/23/2003 5,500 $16.2545 04/25/2003 10,000 $11.8789 04/24/2003 18,000 $12.3575 04/23/2003 22,000 $12.7036 04/22/2003 2,000 $12.8190 Date of Sale Number of Shares Sold Price Received/Share 03/02/2004 4,380 $21.9100 01/29/2004 2,000 $19.8700 01/28/2004 600 $20.1500 01/23/2004 1,500 $20.1000 01/22/2004 1,300 $19.9838 12/16/2003 1,000 $17.5033 12/16/2003 4,000 $17.5033 12/16/2003 10,000 $17.5033 12/15/2003 6,300 $17.6070 12/01/2003 5,900 $17.3500 10/28/2003 2,500 $16.8500 06/09/2003 2,700 $14.7800 05/28/2003 10,000 $14.1500 05/27/2003 10,600 $13.7500 The following open market purchases and sales of Shares have been made by the Accounts: Date of Purchase Number of Shares Purchased Price Paid/Share 08/06/2004 20,000 $16.7398 07/28/2004 20,000 $17.3156 06/25/2004 4,000 $18.5500 06/24/2004 96,200 $18.3916 06/03/2004 13,100 $18.1612 06/01/2004 88,200 $19.3500 04/30/2004 84,000 $19.6027 04/28/2004 74,300 $20.7771 04/27/2004 135,000 $21.3565 04/26/2004 23,400 $21.4934 04/23/2004 40,400 $21.8056 04/21/2004 29,000 $21.6723 04/20/2004 29,000 $21.5429 04/13/2004 12,600 $22.0232 04/12/2004 1,300 $21.9700 04/08/2004 25,300 $21.9910 04/05/2004 114,500 $21.9900 04/02/2004 84,300 $21.7458 04/01/2004 66,700 $21.4849 03/31/2004 157,200 $21.1758 03/22/2004 5,040 $19.9000 03/11/2004 49,000 $19.8751 02/06/2004 140,000 $20.0286 02/04/2004 35,000 $19.5800 02/02/2004 382,977 $20.0750 Date of Sale Number of Shares Sold Price Received/Share 06/01/2004 88,200 $19.3500 04/30/2004 70,000 $19.5500 02/27/2004 644 $21.7875 02/24/2004 88,551 $21.7875 As of the date of mailing of this proxy statement, City of London beneficially owns: (a) 120,786 Shares together with EWF, which represents approximately 0.27% of the issued and outstanding Shares, (b) 1,157,847 Shares together with GEM, which represents approximately 2.59% of the issued and outstanding Shares, (c) 1,135,127 Shares together with IEM, which represents approximately 2.54% of the issued and outstanding Shares, (d) 321,494 Shares together with FREE, which represents approximately 0.72% of the issued and outstanding Shares, (e) 109,686 Shares together with GFM, which represents approximately 0.25% of the issued and outstanding Shares, (f) 28,020 Shares together with Global, which represents approximately 0.06% of the issued and outstanding Shares, and (g) 1,483,122 Shares together with the Accounts, which represents approximately 3.32% of the issued and outstanding Shares. Accordingly, City of London is the beneficial owner of an aggregate of 4,356,082 Shares, constituting approximately 9.74% of the Shares. SCHEDULE III INFORMATION CONCERNING THE FUND'S INVESTMENT MANAGER, THE INVESTMENT MANAGEMENT AGREEMENT AND CERTAIN OTHER MATTERS The following information relating to DeIM and the Investment Management Agreement and certain other matters is included herein because it may be required by the rules of the Commission in a proxy statement that contains proposals relating to the continuation or termination of the Investment Management Agreement. This information is based entirely upon the disclosure in the Fund's proxy statement and certain of the Fund's periodic reports filed with the Commission and City of London has no independent knowledge concerning its accuracy. DeIM's headquarters are located at 345 Park Avenue, New York, New York. DeIM is a Delaware corporation. The names and addresses of its officers and directors are as follows: Evelyn Tresset, 280 Park Avenue, New York, NY 10017, Director and Chief Operating Officer; William N. Shiebler, 280 Park Avenue, New York, NY 10017, Director, President and Chief Executive Officer; Jeffrey S. Wallace, 280 Park Avenue, New York, NY 10017, Director, Chief Financial Officer and Treasurer; William G. Butterly, II, 1251 Avenue of the Americas, New York, NY 10020, Secretary, Chief Legal Officer and General Counsel; Stephen R. Burke,1325 Avenue of the Americas, New York, NY 10019, Executive Vice President; Thomas F. Eggers, 1325 Avenue of the Americas, New York, NY 10019, Executive Vice President; Leo P. Grohowski, 345 Park Avenue, New York, NY 10154, Executive Vice President; Gloria S. Nelund, 300 South Grand Avenue, Los Angeles, CA 90071, Executive Vice President; and Philip W. Gallo, 1251 Avenue of the Americas, New York, NY 10020, Chief Compliance Officer. Under the Investment Management Agreement, DeIM directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. DeIM determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. In addition to portfolio management services, DeIM provides certain administrative services in accordance with the Investment Management Agreement. The management fee payable monthly under the Investment Management Agreement is equal to an annual rate of 1.15% of the first $50,000,000 of the Fund's month-end net assets, 1.10% of the next $50,000,000 of such net assets, 1% of the next $250,000,000 of such net assets, 0.95% of the next $400,000,000 of such net assets, 0.90% of the next $300,000,000 of such net assets, and 0.85% of such net assets in excess of $1,050,000,000 of the Fund's month-end net assets. For the six (6) months ended December 31, 2003, DeIM received a management fee of $4,761,268. The Investment Management Agreement was last approved by the Stockholders in March 2002. IMPORTANT! Your vote is important. No matter how many Shares you own, please give City of London your proxy FOR the election of the Independent Nominees to the Board by: 1. signing the enclosed GOLD proxy card, 2. dating the enclosed GOLD proxy card, and 3. mailing the enclosed GOLD proxy card today in the envelope provided (no postage is required if mailed in the United States). If you intend to vote on the Stockholder proposal to terminate the Investment Management Agreement, please do so on the GOLD proxy card. City of London supports the Stockholder proposal to terminate the Investment Management Agreement. If any of your Shares are held in the name of a brokerage firm, bank nominee or other institution, only it can vote such Shares and only upon receipt of your specific instructions. Accordingly, please sign, date and return your GOLD proxy in the envelope and contact the person responsible for your account and instruct that person to execute the GOLD proxy card representing your Shares. City of London urges you to confirm in writing your instructions to City of London at the address provided below so that City of London will be aware of all instructions given and can attempt to ensure that such instructions are followed. PLEASE DO NOT RETURN ANY PROXY CARD SUPPLIED TO YOU BY THE FUND, AS IT MAY REVOKE YOUR PREVIOUS PROXY. REMEMBER, ONLY YOUR LATEST-DATED PROXY COUNTS. If you have any questions or require any additional information concerning this proxy statement, please contact City of London's proxy solicitor, Morrow & Co., Inc., at the address set forth below. 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 THE KOREA FUND, INC. 2004 ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF CITY OF LONDON AND NOT ON BEHALF OF THE BOARD OF DIRECTORS OR MANAGEMENT OF THE KOREA FUND, INC. The undersigned appoints Jeffry S. Hoffman and Adam M. Fox, each of them, attorneys and agents with full power of substitution to vote, as designated below, all shares of Common Stock of The Korea Fund, Inc. (the "Fund") which the undersigned would be entitled to vote if personally present at the 2004 Annual Meeting of Stockholders of the Fund, and at any adjournments or postponements thereof and at any special meeting called in lieu thereof. The undersigned hereby revokes any other proxy or proxies heretofore given to vote or act with respect to the shares of Common Stock of the Fund held by the undersigned, and hereby ratifies and confirms all action the herein named attorneys and proxies, their substitutes, or any of them may lawfully take by virtue hereof. (Continued and to be signed on the reverse side) CITY OF LONDON RECOMMENDS A VOTE FOR THE ELECTION OF THE INDEPENDENT NOMINEES TO THE BOARD AND FOR THE STOCKHOLDER PROPOSAL TO TERMINATE THE INVESTMENT MANAGEMENT AGREEMENT. 1. Election of Directors. Nominees (Class I) to serve until the year 2007 Annual Meeting: ELECTION OF JULIAN REID (AN INDEPENDENT NOMINEE): To elect Julian Reid as a Class I director of the Fund FOR |_| TO WITHHOLD AUTHORITY |_| ELECTION OF CHRIS RUSSELL (AN INDEPENDENT NOMINEE): To elect Chris Russell as a Class I director of the Fund FOR |_| TO WITHHOLD AUTHORITY |_| 2. To terminate the Investment Management Agreement between the Fund and Deutsche Investment Asset Management Americas, Inc., as currently in effect, immediately. FOR |_| AGAINST |_| ABSTAIN |_| 3. In their discretion, the herein named attorneys and proxies are authorized to vote upon such other matters as may properly come before the Annual Meeting, of which such persons are not made aware within a reasonable period of time prior to the Annual Meeting. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. IF YOU SIGN AND RETURN THE ENCLOSED PROXY CARD, AND DO NOT DIRECT HOW THE PROXY IS TO BE VOTED, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE INDEPENDENT NOMINEES TO THE BOARD AND FOR THE TERMINATION OF THE INVESTMENT MANAGEMENT AGREEMENT. DATED: ----------------------------- Please Sign Exactly As Name Appears On This Proxy. -------------------------------------------------------------------------- (signature) -------------------------------------------------------------------------- (signature, if held jointly) -------------------------------------------------------------------------- (title) WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC., SHOULD INDICATE THE CAPACITY IN WHICH SIGNING. IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE! IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL MORROW & CO., INC. TOLL FREE AT 800-607-0088.