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Presentation on Corporate Governance December 14, 2001

Presentation on Corporate Governance December 14, 2001. KOREA EQUITY. John J. Lee Managing Director. Scudder’s View on Valuing Korean Companies. Management Quality Corporate Governance Management Integrity Business Capability Financial Strength Industry

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Presentation on Corporate Governance December 14, 2001

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  1. Presentation • on • Corporate Governance • December 14, 2001 KOREA EQUITY John J. Lee Managing Director

  2. Scudder’s View on Valuing Korean Companies • Management Quality • Corporate Governance • Management Integrity • Business Capability • Financial Strength • Industry Korea Fund, established in 1984, considers management’s quality as the most important factor investing in Korean companies. Scudder Korea Fund

  3. Korea Fund Proves the Importance of Corporate GovernanceTotal Returnsas of October 31,2001 Scudder Korea Fund

  4. Performance Comparison Between Foreign & Domestic Managers As of October 31, 2001 Source: HSBC Scudder Korea Fund

  5. Scudder’s Observation on Korea’s Corporate Governance 1984 - 1990 • No Concept on Corporate Governance • No Understanding on Shareholders Rights • Directors Don’t Understand Their Responsibilities • Shareholders Not Aware of Rights • Most of Shareholders Day Traders • Stock Market was Not a Major Source of Capital Needs • Unreliable Accounting & Independent Auditors Scudder Korea Fund

  6. Scudder’s Observation on Korea’s Corporate Governance 1991 - 1997 • Poor Corporate Governance Especially by Chaebols Led to Economic Crisis • Hostile Attitude Towards Foreign Investors • Arrogant Management Frustrated Institutional Investors • Lack of Legal Infrastructure • Unreliable Accounting and Independent Auditors Scudder Korea Fund

  7. Scudder’s Observation on Korea’s Corporate Governance 1998 - Present • Government’s Accomplishments • More Attention on Corporate Governance • Foreign Capital is Welcomed • Legal Framework to Enhance Shareholders’ Right • Reform on Chaebol • PSPD’s Role has Become Critical to Reform on Korea • Much Improved Quality of Accounting & Independent Audit • Improved Public Awareness • Improved Management Attitude Scudder Korea Fund

  8. What’s Next • Class Action by Minority Shareholders Should be Allowed • Enhancing Shareholders’ Legal Rights Not Enough • Education & Training Regulators and Law Professionals • Severe Punishments For Managements’ Wrong Doings • On-Going Education of Outside Directors Scudder Korea Fund

  9. What’s Next Con’t • Institutional Investors Should Be More Involved • More Local Presence of Foreign Asset Managers • Good Corporate Governance is Critical to Korea’s Long-Term Economic Prosperity • Western Style Transparent Mutual Funds Needed • Scudder Launches Corporate Governance Fund Scudder Korea Fund

  10. Cross-Border Valuation Comparison for Korea’s Top Market Capitalization stocks Source: CSFB Scudder Korea Fund

  11. Historical Stock Market TrendsAugust 1984 - October 2001 KOSPI in Won Scudder Korea Fund

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