INVESTMENT ADVISORY, MANAGEMENT AND
ADMINISTRATION AGREEMENT
AGREEMENT, dated and effective as of September 7, 1998 between THE
KOREA FUND, INC., a Maryland corporation (herein referred to as the "Fund"), and
XXXXXXX XXXXXX INVESTMENTS, INC., a Delaware corporation (herein referred to as
the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed by
the parties as follows:
1. The Manager hereby undertakes and agrees, upon the terms and
conditions herein set forth, (i) to make investment decisions for the Fund, to
prepare and make available to the Fund research and statistical data in
connection therewith and to supervise the acquisition and disposition of
securities by the Fund, including the selection of brokers or dealers to carry
out the transactions, all in accordance with the Fund's investment objectives
and policies and in accordance with guidelines and directions from the Fund's
Board of Directors; (ii) to assist the Fund as it may reasonably request in the
conduct of the Fund's business, subject to the direction and control of the
Fund's Board of Directors; (iii) to maintain or cause to be maintained for the
Fund all books, records, reports and any other information required under the
Investment Company Act of 1940, as amended (the "1940 Act"), and to furnish or
cause to be furnished all required reports or other information under Korean
securities laws, to the extent that such books, records and reports and other
information are not maintained or furnished by the custodian or other agents of
the Fund; (iv) to furnish at the Manager's expense for the use of the Fund such
office space and facilities as the Fund may require for its reasonable needs in
the City of New York and to furnish at the Manager's expense clerical services
in the United States related to research, statistical and investment work; (v)
to render to the Fund administrative services such as preparing reports to and
meeting materials for the Fund's Board of Directors and reports and notices to
stockholders, preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including preliminary and definitive proxy materials and post-effective
amendments to the Fund's registration statement on Form N-2 under the Securities
Act of 1933, as amended, and the 1940 Act, as amended from time to time,
providing assistance in certain accounting and tax matters and investor and
public relations, monitoring the valuation of portfolio securities, assisting in
the calculation of net asset value and calculation and payment of distributions
to stockholders, and overseeing arrangements with the Fund's custodian,
including the maintenance of books and records of the Fund; and (vi) to pay the
reasonable salaries, fees and expenses of such of the Fund's officers and
employees (including the Fund's shares of payroll taxes) and any fees and
expenses of such of the Fund's directors as are directors, officers or employees
of the Manager; provided, however, that the Fund, and not the Manager, shall
bear travel expenses (or an appropriate portion thereof) of directors and
officers of the Fund who are directors, officers or employees of the Manager to
the extent that such expenses relate to attendance at meetings of the Board of
Directors of the Fund or any committees thereof or advisors thereto. The Manager
shall bear all expenses arising out of its duties hereunder but shall not be
responsible for any expenses of the Fund other than those specifically allocated
to the Manager in this paragraph 1. In particular, but without limiting the
generality
of the foregoing, the Manager shall not be responsible, except to the extent of
the reasonable compensation of such of the Fund's employees as are directors,
officers or employees of the Manager whose services may be involved, for the
following expenses of the Fund: organization and certain offering expenses of
the Fund (including out-of-pocket expenses, but not including overhead or
employee costs of the Manager or of any one or more organizations retained by
the Fund or by the Manager as Korean adviser of the Fund); fees payable to the
Manager and to any advisor or consultants, including an advisory board, if
applicable; legal expenses; auditing and accounting expenses; telephone, telex,
facsimile, postage and other communication expenses; taxes and governmental
fees; stock exchange listing fees; fees, dues and expenses incurred by the Fund
in connection with membership in investment company trade organizations; fees
and expenses of the Fund's custodians, subcustodians, transfer agents and
registrars; payment for portfolio pricing or valuation services to pricing
agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and other expenses in connection with the issuance,
offering, distribution, sale or underwriting of securities issued by the Fund;
expenses of registering or qualifying securities of the Fund for sale; expenses
relating to investor and public relations; freight, insurance and other charges
in connection with the shipment of the Fund's portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of preparing and distributing reports, notices and
dividends to stockholders; costs of stationery; costs of stockholders' and other
meetings; litigation expenses; or expenses relating to the Fund's dividend
reinvestment and cash purchase plan (except for brokerage expenses paid by
participants in such plan).
2. In connection with the rendering of the services required under
paragraph 1, the Fund and the Manager have entered into an agreement dated the
date hereof with Daewoo Capital Management Co., Ltd. to furnish investment
advisory services to the Manager pursuant to such agreement. The Manager may
also contract with or consult with such banks, other securities firms or other
parties in Korea or elsewhere as it may deem appropriate to obtain information
and advice, including investment recommendations, advice regarding economic
factors and trends, advice as to currency exchange matters, and clerical and
accounting services and other assistance, but any fee, compensation or expenses
to be paid to any such parties shall be paid by the Manager, and no obligation
shall be incurred on the Fund's behalf in any such respect.
3. The Fund agrees to pay to the Manager in United States dollars, as
full compensation for the services to be rendered and expenses to be borne by
the Manager hereunder, a monthly fee which, on an annual basis, is equal to 1.15
% per annum of the value of the Fund's net assets up to and including $50
million; 1.10% per annum of the value of the Fund's net assets on the next $50
million of assets; 1.00% per annum of the value of the Fund's net assets on the
next $250 million of assets; 0.95% per annum of the value of the Fund's net
assets on the next $400 million of assets; and 0.90% per annum of the value of
the Fund's net assets in excess of $750 million. Each payment of a monthly fee
to the Manager shall be made within the ten days next following the day as of
which such payment is so computed. For purposes of computing the monthly fee,
the value of the net assets of the Fund shall be determined as of the close of
business on the last business day of each month; provided, however, that the fee
for the period from the end of the last month ending prior to termination of
this Agreement, for whatever reason, to date of the termination shall be based
on the value of the net assets of the Fund determined as of the close of
business on the date of termination and the fee for such period
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through the end of the month in which such proceeds are received shall be
prorated according to the proportion which such period bears to a full monthly
period.
The value of the net assets of the Fund shall be determined pursuant to
the applicable provisions of the Articles of Incorporation and By-laws of the
Fund, as amended from time to time.
4. The Manager agrees that it will not make a short sale of any capital
stock of the Fund or purchase any share of the capital stock of the Fund
otherwise than for investment.
5. In executing transactions for the Fund and selecting brokers or
dealers, the Manager shall use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any Fund
transaction, the Manager shall consider on a continuing basis all factors it
deems relevant, including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction. In selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available, the
Manager may consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other accounts over which the Manager or an affiliate exercises
investment discretion.
6. Nothing herein shall be construed as prohibiting the Manager from
providing investment advisory services to, or entering into investment advisory
agreements with, other clients (including other registered investment
companies), including clients which may invest in securities of Korean issuers,
or from utilizing (in providing such services) information furnished to the
Manager by Daewoo Capital Management Co., Ltd. and others as contemplated by
sections 1 and 2 of this Agreement by advisors and consultants to the Fund and
others; nor shall anything herein be construed as constituting the Manager as an
agent of the Fund.
Whenever the Fund and one or more other accounts or investment
companies advised by the Manager have available funds for investment,
investments suitable and appropriate for each shall be allocated in accordance
with procedures believed by the Manager to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in a manner
believed by the Manager to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund. In addition, the Fund acknowledges that
the persons employed by the Manager to assist in the performance of the
Manager's duties hereunder will not devote their full time to such service and
nothing contained herein shall be deemed to limit or restrict the right of the
Manager or any affiliate of the Manager to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
7. The Manager may rely on information reasonably believed by it to be
accurate and reliable. Neither the Manager nor its officers, directors,
employees or agents shall be subject to any liability for any act or omission,
error of judgment or mistake of law, or for any loss suffered by the Fund, in
the course of, connected with or arising out of any services to be rendered
hereunder, except by reason of willful misfeasance, bad faith, or gross
negligence on the part of the Manager in the performance of its
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duties or by reason of reckless disregard on the part of the Manager of its
obligations and duties under this Agreement. Any person, even though also
employed by the Manager, who may be or become an employee of the Fund and paid
by the Fund shall be deemed, when acting within the scope of his employment by
the Fund, to be acting in such employment solely for the Fund and not as an
employee or agent of the Manager.
8. This Agreement shall remain in effect for an initial term ending on
September 30, 1999, and shall continue in effect thereafter, but only so long as
such continuance is specifically approved at least annually by the affirmative
vote of (i) a majority of the members of the Fund's Board of Directors who are
not parties to this Agreement or interested persons of any party to this
Agreement, or of any entity regularly furnishing investment advisory services
with respect to the Fund pursuant to an agreement with any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) a majority of the Fund's Board of Directors or the holders of
a majority of the outstanding voting securities of the Fund. This Agreement may
nevertheless be terminated at any time without penalty, on 60 days' written
notice, by the Fund's Board of Directors, by vote of holders of a majority of
the outstanding voting securities of the Fund, or by the Manager.
This Agreement shall automatically be terminated in the event of its
assignment, provided that an assignment to a corporate successor to all or
substantially all of the Manager's business or to a wholly-owned subsidiary of
such corporate successor which does not result in a change of actual control or
management of the Manager's business shall not be deemed to be an assignment for
the purposes of this Agreement. Any notice to the Fund or the Manager shall be
deemed given when received by the addressee.
9. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by either party hereto, except as permitted under
the 1940 Act or rules and regulations adopted thereunder. It may be amended by
mutual agreement, but only after authorization of such amendment by the
affirmative vote of (i) the holders of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of the members of the Fund's Board
of Directors who are not parties to this Agreement or interested persons of any
party to this Agreement, or of any entity regularly furnishing investment
advisory services with respect to the Fund pursuant to an agreement with any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval.
10. This Agreement shall be construed in accordance with the laws of
the State of New York, without giving effect to the conflicts of laws principles
thereof, provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act. As used herein, the terms "interested person,"
"assignment," and "vote of a majority of the outstanding voting securities"
shall have the meanings set forth in the 1940 Act.
11. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this agreement to produce or account for more than
one such counterpart.
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12. This Agreement supersedes all prior investment advisory,
management, and/or administration agreements in effect between the Fund and the
Manager.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
officers thereunto duly authorized as of the day and year first written above.
THE KOREA FUND, INC.
By: /s/Xxxxxx X. XxXxxxxxx
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Vice President
XXXXXXX XXXXXX INVESTMENTS, INC.
By: /s/Xxxxxx Xxxxxx
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Managing Director
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