(logo)
THE KOREA
FUND, INC.
Semiannual Report
December 31, 1998
A closed-end investment company
seeking long-term appreciation of capital
through investment in Korean securities.
<PAGE>
(logo) The Korea Fund, Inc.
================================================================================
Investment objective and policies
o long-term capital appreciation through investment in Korean securities
Investment characteristics
o investments in a broad spectrum of Korean industries
o closed-end investment company
o first United States investment company authorized to invest in
Korean securities
o a vehicle for international diversification through participation
in the Korean economy
General Information
================================================================================
Executive offices
The Korea Fund, Inc.
345 Park Avenue
New York, NY 10154
For Fund Information: 1-800-349-4281
Transfer agent, registrar and dividend
reinvestment plan agent
For account information: 1-800-426-5523
EquiServe
P.O. Box 8200
Boston, MA 02266-8200
Custodian
Brown Brothers Harriman & Co.
Subcustodian -- Citibank, N.A. - Seoul office
Legal counsel
Debevoise & Plimpton
Independent Accountants
PricewaterhouseCoopers LLP
New York Stock Exchange Symbol -- KF
Contents
=====================================================
In Brief ....................................... 3
Letter to Stockholders.......................... 3
Other Information............................... 6
Investment Summary.............................. 8
Portfolio Summary............................... 9
Investment Performance.......................... 10
Investment Portfolio............................ 12
Financial Statements............................ 21
Financial Highlights............................ 24
Notes to Financial Statements................... 25
Report of Independent Accountants............... 31
Stockholder Meeting Results..................... 32
Dividend Reinvestment and
Cash Purchase Plan........................... 34
Officers and Directors.......................... 36
2
<PAGE>
(logo) The Korea Fund, Inc.
In Brief
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o Proactive reform initiatives by both the government and the private sector
have allowed Korea to begin the process of economic recovery.
o Financial markets responded positively to this development, as interest
rates, equities, and the won all performed extremely well in the period.
o Fund management continues to use intensive fundamental research to identify
well-managed companies with strong balance sheets, lower-than-average debt
ratios, and promising prospects for long term growth.
(logo) Letter to Stockholders
================================================================================
Dear Stockholders:
After a nightmarish twelve-month period that began with the devaluation of
the won in August 1997, Korean equities bounced back strongly in the second half
of 1998. Investor sentiment, which had been extremely weak due to ongoing
concerns about the struggling economy, improved markedly once it became evident
that both the government and the private sector were responding proactively to
the financial crisis. The net asset value of The Korea Fund rose sharply as a
result, posting a gain of 115.99% for the calendar year to close the period at
$9.59 a share. Its share price quoted on the New York Stock Exchange rose 40.94%
to $9.25, representing a 3.55% discount to NAV as of December 31, 1998. For the
six month reporting period ended December 31, 1998, the Fund's NAV rose 70.34%
while its market price increased 46.53%.
Investment Environment
Korea, which was one of the last countries to be affected by the Asian
crisis, has been one of the first to start the process of recovery. While Japan
and other Pacific Rim nations continue to flounder, Korea's government, led by
President Kim Dae Jung, has taken forceful measures to boost and restructure the
economy. Their most important initiative has been to reduce production
overcapacity, the nation's most critical problem, by encouraging consolidation
in the private sector. The high-profile mergers of Hyundai Motors with Kia
Motors and Hyundai Electronics with LG Semiconductor are both positive steps in
the long-term process of capacity rationalization. The government has also been
aggressive in closing down weak financial institutions and disposing of their
non-performing loans, improving the overall health of the banking sector in the
process. A key development on this front was the signing of a memorandum of
understanding with Newbridge Capital of the United States on the sale of Korean
First Bank, which had been nationalized earlier in the year. The government has
also taken steps to liberalize Korean business activity by inducing the chaebols
- -- the oligarchy of corporate families that has long dominated Korean business
activity -- to restructure their operations and introduce a greater degree of
reporting transparency. In addition, the political leadership has encouraged
greater activism by minority stockholders, thereby reducing the power of the
industrial conglomerates.
By adhering to the stringent requirements of the IMF's $55 billion bailout
package, the government has provided a significant boost to the economy.
Throughout the course of the year, numerous measures of the nation's financial
3
<PAGE>
(logo) The Korea Fund, Inc.
Letter to Stockholders
================================================================================
health have reversed course and turned decidedly positive. For example, the
sharp rebound in exporting activity caused the balance of payments to improve to
a record high of US$39.9 billion in 1998, compared to a deficit of $8.5 billion
in 1997. Largely as a result of this development, usable foreign exchange
reserves increased to $48.5 billion from $8.9 billion, while foreign direct
investment rose 27% year-over-year to $8.85 billion, also a record high. As a
result of Korea's strengthened financial position, Standard & Poor's recently
reestablished Korea's investment grade status, and Moody's announced that they
have placed the country on review for a possible upgrade in the year ahead.
Financial Market Reaction
The markets have responded positively to these events. Interest rates dropped
sharply throughout the year, taking a degree of pressure off private business.
In addition, the exchange rate improved from 1373 won/$ on June 30 to 1204 won/$
on the last day of 1998, reflecting the substantial increase in foreign exchange
reserves.
Investors in Korea have reacted favorably to the good news by pouring money
into the stock market. While high corporate debt levels and continued bankruptcy
risks have caused institutional investors to remain cautious, individuals have
reallocated money to equities from low-paying fixed income instruments. In the
process, they have driven up the stock prices of even the most highly leveraged
companies, which institutional investors generally tend to avoid. This activity
propelled the dollar-adjusted Korea Stock Price Index (KOSPI) to a total return
of 97.77% for the full calendar year. By comparison, the Index posted a loss of
69.64% in 1997. The rapid turnaround in equity prices is a primary indicator of
the change in sentiment that has taken place in Korea, and represents a vote of
confidence in the reforms that have been implemented thus far.
Investment Strategy
We continue to emphasize intensive fundamental research to identify
well-managed companies with strong balance sheets, lower-than-average debt
ratios, and promising prospects for long-term growth. We also focus on
uncovering dominant market leaders that will be positioned to capitalize on the
new, more competitive Korean economy that will feature a smaller number of more
efficient players. These criteria prompted us to increase the Fund's weighting
in the financial, electronics, and telecom sectors.
The ongoing threat of bankruptcy risk has led us to underweight the financial
sector for some time. Many businesses have failed in the last twelve months, and
the institutions that lent money to them have been forced to write off loans and
watch their earnings -- and stock prices -- suffer as a result. Now that the
economy has started to improve, we have begun to add to our holdings in
companies that are afforded unreasonably low valuations by the market despite
their obvious financial strength. A stock that fits this mold is Samsung
Securities, whose stellar reputation among Korean individual investors has
enabled it to gain substantial market share in the securities industry. The
company benefited from significant inflows into its mutual fund family when the
market rose in the second half of the year, giving it a commanding position in
what has become a rapidly growing industry. We believe that Samsung Securities,
which held up well when the market was under pressure, is undervalued given its
strong fundamental outlook. Another financial stock that we find attractive is
Korea Housing Bank, which possesses a level of risk exposure that is among the
lowest in the industry. A mortgage lender, the bank is benefiting from having
almost all of its loans collateralized, meaning that it has only minimal
4
<PAGE>
(logo) The Korea Fund, Inc.
Letter to Stockholders
================================================================================
exposure to bankruptcy risk. In addition, the bank has appointed a new chairman
whose aggressive restructuring initiatives are likely to increase profitability
and employee productivity. We felt that the company's cheap valuation was
unwarranted given its strong financial position, and added it to our holdings
accordingly.
In the electronics sector, we increased our position in Samsung Electronics.
Although the company is financially sound and has engaged in important
restructuring initiatives, its stock has been weighed down by weakness in
semiconductor prices. Now that excess capacity has been worked out of the
market, prices have improved and Samsung, as one of the world's lowest cost
producers, is poised to increase its profits significantly. In the
telecommunications sector, we continue to favor SK Telecom, whose mobile phone
business has experienced strong growth. Although its stock price performed below
expectations in the reporting period, we feel that its cash flow potential and
low valuation still make it an attractive long-term investment.
Year 2000 Readiness
Like other registered investment companies and financial business
organizations worldwide, the Fund could be adversely affected if computer
systems on which the Fund relies, which primarily include those used by the
Fund's Adviser, its affiliates or other service providers, are unable to
correctly process date-related information on and after January 1, 2000. This
risk is commonly called the Year 2000 Issue (Y2K). Failure to successfully
address the Y2K Issue could result in interruptions to and other material
adverse effects on the Fund's business and operations. Scudder Kemper
Investments has commenced a review of the Y2K Issue as it may affect the Fund
and is taking steps it believes are reasonably designed to address the Y2K
Issue, although there can be no assurances that these steps will be sufficient.
In addition, there can be no assurances that the Y2K Issue will not have any
adverse effect on the companies whose securities are held by the Fund or on
global markets or economies generally. The foregoing is a Year 2000 readiness
disclosure under the Year 2000 Information and Readiness Disclosure Act.
Outlook
Although Korea's government has made progress in getting the economy back on
track, we believe that some caution is warranted in the months ahead. The stock
market has come a long way in a very short period, and has been driven by an
unusually large inflow of liquidity. Given the stock market's recent
performance, it is reasonable to expect that returns will be more muted in the
first half of 1999. From here, we believe it will be a "stockpicker's market,"
where superior fundamental analysis will enable us to uncover strong,
undervalued companies. This is clearly a different environment from that which
existed just six months ago. We believe that our focus on careful stock
selection will enable us to benefit in the months ahead.
Sincerely,
/s/Nicholas Bratt /s/Juris Padegs
Nicholas Bratt Juris Padegs
President Chairman of the Board
and Director
5
<PAGE>
(logo) The Korea Fund, Inc.
Other Information
================================================================================
Investment Manager
The investment manager of The Korea Fund, Inc. is Scudder Kemper Investments
Inc. ("the Manager"), one of the most experienced investment management firms in
the world. Established in 1919, the firm manages investments for institutional
and corporate clients, retirement and pension plans, insurance companies, mutual
fund investors, and individuals. The Manager has offices throughout the United
States and has subsidiaries in the United Kingdom, Switzerland, Hong Kong, and
Japan.
The Manager has been a leader in international investment management for over
40 years. It manages Scudder International Fund, which was originally
incorporated in Canada in 1953 as the first foreign investment company
registered with the United States Securities and Exchange Commission. The
Manager's clients which invest primarily in foreign securities include thirty
open-end investment companies as well as portfolios for institutional investors.
The Manager also manages the assets of other closed-end investment
companies which invest primarily in foreign securities, including: The Argentina
Fund, Inc., The Brazil Fund, Inc., Scudder Global High Income Fund, Inc.,
Scudder New Asia Fund, Inc., and Scudder New Europe Fund, Inc.
Korean Adviser
Daewoo Capital Management Co., Ltd., registered under the U.S. Investment
Advisers Act of 1940, acts as Korean adviser to Scudder Kemper Investments,
Inc., the Fund's investment manager. Daewoo Capital Management Co., Ltd. is a
subsidiary of Daewoo Securities Co., Ltd., the largest Korean securities firm,
and an affiliate of Daewoo Research Institute.
Daewoo Capital Management Co., Ltd. provides investment advice, research,
and assistance to the Manager. The Daewoo staff makes specific investment
recommendations, which are then evaluated by the Manager's research department
and portfolio managers in light of their own expertise and information from
other sources in making investment decisions for the Fund.
A Team Approach to Investing
The Korea Fund, Inc. is managed by a team of the Manager's professionals who
each play an important role in the Fund's management process. Team members work
together to develop investment strategies and select securities for the Fund.
They are supported by the Manager's large staff of economists, research
analysts, traders, and other investment specialists who work in the Manager's
offices across the United States and abroad. We believe our team approach
benefits Fund investors by bringing together many disciplines and leveraging its
extensive resources.
Lead Portfolio Manager John J. Lee has set Fund investment strategy and
overseen its daily operation since 1991, the year he joined the Manager's global
equity area. Nicholas Bratt, Portfolio Manager, has been a member of the
Portfolio team since 1984 when the Fund was launched and has over 26 years of
experience in worldwide investing. Mr. Bratt, who has been with the Manager
since 1976, is the Director of the Manager's Global Equity Group.
Dividend Reinvestment and Cash Purchase Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan offers you a
convenient way to have your dividends and capital gain distributions reinvested
in shares of the Fund. We believe this Plan is attractive for stockholders. Its
features are more fully described on page 34.
6
<PAGE>
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Net Asset Value
The Fund's NAV is published every Monday in The Wall Street Journal under the
heading "Closed End Funds." The Fund's NAV is also published in The New York
Times and Barron's.
As a service to overseas stockholders, the Fund's NAV is listed daily in The
Financial Times ("FT"). For your information, the NAV of the Fund and other
Scudder closed-end funds can be found in the "FT Managed Funds Service" section
under the heading "Other Offshore Funds" below the Scudder Kemper Investments,
Inc. banner.
7
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Summary as of December 31, 1998
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<TABLE>
<CAPTION>
Historical Total Return (%)
Information ----------------------------------------------------------------------------------
Life of Fund Market Value Net Asset Value (a) Index (b) Index (c)
------------------- ------------------- ------------------- -------------------
Average Average Average Average
Cumulative Annual Cumulative Annual Cumulative Annual Cumulative Annual
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current Quarter 51.02 -- 68.25 -- 108.5 -- 81.25 --
One Year 40.94 40.94 115.99 115.99 97.77 97.77 49.47 49.47
Three Year -55.51 -23.66 -49.36 -20.29 -59.19 -25.82 -36.30 -13.96
Five Year -55.92 -15.11 -34.09 -8.00 -56.60 -15.38 -35.06 -8.27
Ten Year -46.48 -6.06 -8.56 -.89 -64.92 -9.95 -38.00 -4.67
</TABLE>
- --------------------------------------------------------------------------------
Per Share Information and Returns (a)
Yearly periods ended December 31
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value.... $18.55 $11.10 $10.55 $10.62 $16.64 $20.65 $20.04 $13.55 $ 4.44 $ 9.59
Income Dividneds... $ .08 $ -- $ .06 $ .04 $ .01 $ -- $ .06 $ -- $ -- $ --
Capital Gains
Distributions...... $ 1.88 $ 2.20 $ .34 $ .20 $ -- $ .15 $ .36 $ .60 $ -- $ --
Total Return (%)... 22.79 -28.36 -2.05 2.71 56.77 24.84 4.26 -30.01 -66.50 115.99
</TABLE>
(a) Total investment returns reflect changes in net asset value per share
during each period and assume that dividends and capital gains
distributions, if any, were reinvested. These percentages are not an
indication of the performance of a shareholder's investment in the Fund
based on market price.
(b) Korea Stock Price Index ("KOSPI") in U.S. Dollars.
(c) Korea Stock Price Index ("KOSPI") in local terms. Past results are not
necessarily indicative of future performance of the Fund.
8
<PAGE>
[LOGO] The Korea Fund, Inc.
Portfolio Summary as of December 31, 1998
================================================================================
Diversification
- ---------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Common Stocks 79%
Convertible Bonds 8%
Preferred Stocks 6%
Cash Equivalents 5%
Corporate Bonds 2%
-----
100%
-----
- --------------------------------------------------------------------------------
Sectors
- -------
Sector breakdown of the Fund's equity securities
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Communications 24%
Financial 23%
Technology 19%
Metals & Minerals 7%
Consumer Staples 6%
Manufacturing 5%
Durables 4%
Health 3%
Utilities 2%
Other 7%
-----
100%
-----
- --------------------------------------------------------------------------------
Ten Largest Equity Holdings
(61% of Portfolio)
- ---------------------------
1. SK Telecom Co., Ltd.
Mobile telecommunication services
2. Samsung Fire & Marine Insurance Co.
Insurance company
3. Samsung Electronics Co., Ltd.
Major electronics manufacturer
4. Pohang Iron & Steel Co., Ltd.
Leading steel producer
5. Samsung Display Devices Co.
Leading manufacturer of CRT and picture tubes
6. Samsung Electro-Mechanics Co., Ltd.
Major electronics parts company
7. Hankook Tire Manufacturing Co., Ltd.
Major tire manufacturer
8. S.K. Corporation
Leading oil refinery company
9. Keum Kang Co., Ltd.
Construction company and manufacturer of building materials
10. Housing & Commercial Bank
Bank
9
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Performance
================================================================================
KOREA FUND INVESTMENT PERFORMANCE
History (in terms of N.Y.S.E. Value) of a $10,000 Investment in Fund Shares
vs. the S&P 500 Index*
THE PRINTED DOCUMENT CONTAINS A MOUNTAIN CHART HERE
CHART DATA:
S&P 500 CHANGE IN SHARE WITH CAPITAL GAINS WITH INCOME
TOTAL RETURN VALUE OF INITIAL DISTRIBUTION DISTRIBUTIONS
($113,537) INVESTMENT REINVESTED REINVESTED
------------ ---------------- ------------------ -------------
8/84 10000 10942 10942 10942
9972 11983 11983 11983
12/84 10159 11875 11875 11875
11095 11458 11458 11458
11906 12292 12292 12292
11422 11250 11250 11787
12/85 13395 14692 14692 15393
15286 19692 19692 20632
16186 27817 27817 29440
15054 30625 30709 32537
12/86 15905 28333 28411 30103
19304 52917 53061 56221
20265 58438 58597 62087
21689 62396 63039 67523
12/87 16801 45938 47628 51016
17755 66563 69011 73921
18925 58958 61127 65476
18993 50000 54750 59075
12/88 19608 65625 74621 80516
21000 88125 100205 108121
22837 79063 89900 97003
25283 105000 123540 133542
12/89 25801 85938 102850 111177
25017 57188 68442 73983
26571 55313 66198 71557
22930 30625 41173 44506
12/90 24976 31250 44777 48402
28611 36563 52389 56630
28520 35313 50598 54694
30052 36250 52736 57251
12/91 32576 31563 46407 50380
31761 29688 43650 47387
32345 28438 41813 45392
33368 30625 45787 49876
12/92 35054 35000 52328 57001
36585 32188 48123 52421
36763 37500 56066 61073
37711 36250 54197 59037
12/93 38587 60000 89706 97766
37122 48125 71951 78417
37277 55000 82230 89619
39097 65313 98181 107003
12/94 39091 56875 85541 93227
42897 53438 80371 87592
46995 49063 73790 84754
50730 55313 84340 96871
12/95 53785 55000 84082 96850
56670 52500 80261 92448
59211 52813 80738 92999
60998 45625 72148 83103
12/96 66080 37188 58805 67735
67903 35938 56829 65548
79766 36875 59657 68716
85740 29525 47766 55020
12/97 88205 16400 26532 30561
100511 20325 32882 37876
103831 15775 25521 29397
93500 15971 25838 29762
12/98 113537 24119 39021 44947
$44,947 (TOTAL RETURN)
WITH INCOME DISTRIBUTIONS REINVESTED $5,926
-------
WITH CAPITAL GAINS DISTRIBUTION REINVESTED $14,902
-------
CHANGE IN SHARE VALUE OF INITIAL INVESTMENT $24,119
S&P 500 TOTAL RETURN ($113,537)
10
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Performance
================================================================================
KOREA FUND INVESTMENT PERFORMANCE (Continued)
History (in terms of Net Asset Value) of a $10,000 Investment in Fund Shares*
THE PRINTED DOCUMENT CONTAINS A MOUNTAIN CHART HERE
CHART DATA:
CHANGE IN NET WITH CAPITAL GAINS WITH INCOME
ASSET VALUE OF DISTRIBUTIONS DISTRIBUTIONS
INITIAL INVESTMENT REINVESTED REINVESTED
------------------ ------------------ -------------
8/84 10000 10000 10000
10072 10072 10072
12/84 10269 10269 10269
10197 10197 10197
10305 10305 10305
9624 9624 10083
12/85 12025 12025 12599
16030 16030 16796
20054 20054 21224
21667 21726 23020
12/86 21944 22004 23315
30000 30082 31873
29919 30001 31788
29122 29422 31515
12/87 30332 31447 33685
34776 36055 38620
37545 38926 41695
34346 37609 40580
12/88 42823 48693 52539
50726 57679 62236
45269 51474 55541
51425 60505 65403
12/89 49866 59679 64511
46667 55851 60372
38844 46489 50252
29570 39754 42973
12/90 29839 42755 46216
29086 41676 45050
27608 39558 42760
28737 41806 45385
12/91 28360 41699 45269
34032 50039 54323
28898 42489 46127
26398 39467 42992
12/92 28548 42683 46494
28763 43004 46844
30645 45817 49909
30780 46018 50128
12/93 44731 66877 72887
45914 68646 74814
50161 74996 81735
57661 86679 94468
12/94 55511 83489 90991
55591 83610 91123
53468 80416 92364
59409 90585 104044
12/95 53871 82356 94862
53333 81535 93916
49785 76110 87667
44301 70054 80692
12/96 36452 57642 66394
35188 55644 64093
35565 57537 66274
31559 51057 58810
12/97 11935 19310 22242
20430 33052 38071
15161 24528 28253
14711 23800 27414
12/98 24776 40084 46171
$46,122 (TOTAL RETURN)
WITH INCOME DISTRIBUTIONS REINVESTED $6,080
-------
WITH CAPITAL GAINS DISTRIBUTIONS REINVESTED $15,292
-------
CHANGE IN NET ASSET VALUE OF INITIAL INVESTMENT $24,750
The data set forth in these graphs should not be construed as an indication of
the record of a shareholder's investment in the Fund based on market prices; nor
should it be construed as a representation of the future performance of the
Fund's net asset value.
* The Korea Fund, Inc. performance charts make the following key assumptions:
1. The data have been adjusted to reflect a 200% stock dividend paid in
October 1988.
2. Investment income and capital gains reinvested at the greater of the
following on the valuation date:
(a) Net asset value per share or
(b) 95% of the mean market price per share.
3. No adjustments have been made for U.S. income taxes. Korean taxes are
reflected.
4. Initial $10,000 investment was made at initial public offering price and at
initial net asset value price.
The Standard & Poor's 500 Stock Index is a widely followed, unmanaged index of
500 industrial, transportation, utility and financial companies widely regarded
as representative of the equity market in general.
11
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Portfolio as of December 31, 1998
================================================================================
<TABLE>
<CAPTION>
Principal Market
Amount (d) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT 3.8%
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 12/31/1998 at 5% to
be repurchased at $17,540,739 on 1/4/1999, collateralized by a $17,176,000
U.S. Treasury Note, 6%, 8/15/1999 (Cost $17,531,000) ............................. U.S.$ 17,531,000 17,531,000
------------
- -----------------------------------------------------------------------------------------------------------------------
SHORT TERM NOTES 1.1%
Federal Home Loan Mortgage Corp. Discount Note, 4.768%**, 1/4/1999
(Cost $4,998,042) ................................................................ U.S.$ 5,000,000 4,998,042
------------
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 1.8%
Utilities
Korea Electric Power, 6.375%, 12/1/2003 (Cost $7,473,268) .......................... U.S.$ 10,000,000 8,525,000
------------
- -----------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS 8.4%
Consumer Staples 2.0%
Food & Beverage 1.9%
Halim & Co. Ltd., 3% with 58.62% bonus interest at maturity, 12/31/2001 (b) (e) .... 5,000,000,000 5,399,040
Halim & Co. Ltd., 5% with 42.27% bonus interest at maturity, 12/31/2001 (b) (e) .... 3,400,000,000 3,414,295
------------
8,813,335
------------
Textiles 0.1%
Kolon Industries, Inc., 0.25%, 12/31/2004 .......................................... U.S.$ 1,000,000 250,000
------------
Media 0.5%
Print Media
Woongjin Publishing Co., Zero Coupon with 17% bonus interest at maturity,
4/15/1999 (b) (e) ................................................................ 2,500,000,000 2,377,672
------------
Durables 0.5%
Tires
Hankook Tire Manufacturing Co. Ltd., Zero Coupon with 5.83% bonus interest at
maturity, 12/31/2002 (b) (e) ..................................................... 1,890,000,000 2,322,455
------------
Manufacturing 1.1%
Containers & Paper
Dae Young Packaging Co. #20, 5% with 41.567% bonus interest at maturity,
12/31/2000 (b) (e) ............................................................... 1,000,000,000 1,041,297
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Portfolio
================================================================================
<TABLE>
<CAPTION>
Principal Market
Amount (d) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hansol Paper Manufacturing Co. Ltd., 3% with 28.24% bonus interest at maturity,
12/31/1999 (b) (e) ............................................................... 4,000,000,000 4,030,121
------------
5,071,418
------------
Technology 1.4%
Electronic Components/Distributors 1.0%
Hyundai Electronics Industries Co. #86, Zero Coupon with 35.54% bonus interest at
maturity, 12/31/2000 (b) (e) ..................................................... 5,000,000,000 4,802,668
------------
Semiconductors 0.3%
D.I. Corporation, 3% with 34.44% bonus interest at maturity, 12/31/2000 (b) (e) .... 1,604,800,000 1,565,594
------------
Miscellaneous 0.1%
Kasan Electronics, 5% with 14% bonus interest at maturity, 12/31/2000 (b) (e) (h)* . 3,000,000,000 254,721
------------
Construction 0.3%
Miscellaneous
Dae Ho Construction, 4% with 27.8% bonus interest at maturity, 12/31/2000 (b) (e) .. 1,580,000,000 1,479,076
------------
Transportation 0.7%
Marine Transportation
Hanjin Shipping Company, Zero Coupon with 35.25% bonus interest at maturity,
12/31/1999 (b) (e) ............................................................... 2,000,000,000 2,077,052
Hyundai Merchant & Marine Co., Zero Coupon with 34.13% bonus interest at
maturity, 12/31/2000 (b) (e) ..................................................... 1,500,000,000 1,425,813
------------
3,502,865
------------
Utilities 1.9%
Electric Utilities
Korea Electric Power Co. #6, 5% with 9.5% bonus interest at maturity,
12/31/2000 (b) (e) ............................................................... 9,951,000,000 8,689,423
------------
Total Convertible Bonds (Cost $46,551,965).......................................... 39,129,227
------------
- -----------------------------------------------------------------------------------------------------------------------
Shares
------------
PREFERRED STOCKS 5.5%
Consumer Discretionary 0.0%
Hotels & Casinos
Hotel Shilla Co., Ltd.* ............................................................ 32,070 113,831
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Portfolio
================================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Staples 0.7%
Food & Beverage 0.5%
Cheil Jedang Co. ................................................................... 100,670 2,493,737
Nam Yang Dairy Products Co., Ltd. (b) (g) .......................................... 1,160 53,275
------------
2,547,012
------------
Textiles 0.2%
BYC Co., Ltd. (g) .................................................................. 14,130 258,404
Kolon Industries, Inc.* ............................................................ 225,910 638,482
------------
896,886
------------
Health 0.1%
Medical Supply & Specialty 0.0%
Medison Co., Ltd ................................................................... 20,000 101,413
------------
Pharmaceuticals 0.1%
Korea Green Cross Corp. ............................................................ 6,700 119,742
Korea Green Cross Corp. (New) ...................................................... 1,260 21,995
------------
141,737
------------
Financial 1.7%
Insurance
Samsung Fire & Marine Insurance Co. (g) ............................................ 53,385 7,721,521
------------
Durables 0.2%
Automobiles
Hyundai Motor Co., Ltd.* ........................................................... 120,000 845,885
Hyundai Motor Co., Ltd. (New)* ..................................................... 21,672 142,318
Mando Machinery Corp. .............................................................. 12,914 25,764
------------
1,013,967
------------
Manufacturing 0.4%
Chemicals
LG Chemical Co., Ltd. .............................................................. 134,800 651,029
Oriental Chemical Industries Co., Ltd. ............................................. 116,380 1,035,134
------------
1,686,163
------------
Technology 2.1%
Electronic Components/Distributors
Samsung Display Devices Co. ........................................................ 34,318 878,632
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Portfolio
================================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Samsung Electro-Mechanics Co., Ltd. ................................................ 180,000 2,573,566
Samsung Electronics Co., Ltd. ...................................................... 198,201 6,524,322
------------
9,976,520
------------
Construction 0.1%
Building Materials
Tong Yang Cement Co., Ltd. ......................................................... 50,000 300,083
------------
Transportation 0.2%
Airlines 0.1%
Korean Airlines Co., Ltd. (2nd)* ................................................... 20,080 105,491
Korean Airlines Co., Ltd.* ......................................................... 80,320 354,530
------------
460,021
------------
Trucking 0.1%
Global Enterprises Co., Ltd. ....................................................... 25,500 231,047
------------
Total Preferred Stocks (Cost $25,043,535) 25,190,201
------------
- -----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 79.4%
Consumer Discretionary 1.1%
Department & Chain Stores 0.6%
Shinsegae Department Store ......................................................... 119,014 2,611,779
------------
Hotels & Casinos 0.5%
Hotel Shilla Co., Ltd.* ............................................................ 402,648 2,376,393
------------
Consumer Staples 4.4%
Consumer Specialties 0.1%
Pacific Corp., Ltd. ................................................................ 20,000 322,527
------------
Food & Beverage 2.4%
Cheil Jedang Corp. ................................................................. 49,337 2,243,337
Nam Yang Dairy Products Co., Ltd. (g) .............................................. 43,390 2,885,453
Nhong Shim Co., Ltd. ............................................................... 76,164 4,381,171
Pulmuone Co., Ltd. ................................................................. 100,450 1,753,491
------------
11,263,452
------------
Package Goods/Cosmetics 0.1%
Hankook Cosmetics Co. .............................................................. 50,000 565,254
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Portfolio
================================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Textiles 1.8%
BYC Co., Ltd. (g) .................................................................. 52,530 2,008,628
Dae Ha Fashion Co.* ................................................................ 10,000 45,719
Daehan Synthetic Fiber Company ..................................................... 2,610 108,696
Hankook Synthetics, Inc. ........................................................... 48,240 1,074,673
Kolon Industries, Inc.* ............................................................ 40,969 325,232
Tae Kwang Industry Company ......................................................... 11,760 3,978,653
Vivien Corp. ....................................................................... 25,000 604,738
------------
8,146,339
------------
Health 2.7%
Medical Supply & Specialty 0.8%
Medison Co., Ltd. .................................................................. 329,760 3,837,606
------------
Pharmaceuticals 1.9%
Chong Kun Dang Corp. ............................................................... 112,578 2,236,587
Daewoong Pharmaceutical Co. ........................................................ 41,503 564,068
Korea Green Cross Corp. ............................................................ 26,543 1,097,684
Yuhan Corporation .................................................................. 169,604 4,934,447
------------
8,832,786
------------
Communications 20.0%
Cellular Telephone 19.6%
SK Telecom Co., Ltd. (c) (f) ....................................................... 114,527 83,932,202
SK Telecom Co., Ltd. (f) ........................................................... 12,358 6,913,495
------------
90,845,697
------------
Telecommunications Equipment 0.4%
LG Information & Communication Ltd. ................................................ 71,301 1,914,399
------------
Financial 17.7%
Banks 1.7%
Housing & Commercial Bank .......................................................... 250,000 3,096,426
Housing & Commercial Bank (GDR) .................................................... 189,997 2,256,214
Kookmin Bank* ...................................................................... 50,000 407,731
Shin Han Bank* ..................................................................... 297,597 2,275,887
------------
8,036,258
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Portfolio
================================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance 14.6%
Daehan Fire & Marine Insurance Co., Ltd. ........................................... 52,902 549,688
Hyundai Marine & Fire Insurance Co. ................................................ 44,656 697,866
L.G. Insurance Co., Ltd. ........................................................... 107,192 3,831,468
Oriental Fire & Marine Insurance Co. ............................................... 140,000 1,443,059
Samsung Fire & Marine Insurance Co. (g) ............................................ 136,590 51,093,516
Samsung Fire & Marine Insurance Co. (Rights) (b) (g) ............................... 52,962 10,178,566
------------
67,794,163
------------
Other Financial Companies 1.4%
Dongwon Securities Co. ............................................................. 250,000 3,823,774
Hyundai Securities* ................................................................ 50,000 768,911
Samsung Securities* ................................................................ 70,000 1,920,200
------------
6,512,885
------------
Service Industries 1.0%
Miscellaneous Commercial Services 1.0%
S1 Corporation ..................................................................... 19,224 3,595,511
SK Global, Ltd. .................................................................... 57,859 277,031
Samsung Co., Ltd. .................................................................. 99,888 538,050
------------
4,410,592
------------
Durables 3.2%
Automobiles 1.7%
Hyundai Motor Co., Ltd. ............................................................ 97,294 1,730,749
Hyundai Motor Services Co., Ltd. ................................................... 478,369 4,970,584
Yoosung Enterprise Company ......................................................... 90,000 1,241,895
------------
7,943,228
------------
Tires 1.5%
Hankook Tire Manufacturing Co., Ltd. ............................................... 1,600,450 6,784,950
------------
Manufacturing 3.9%
Chemicals 1.6%
Honam Petrochemical Corp., Ltd.* ................................................... 100,000 1,163,757
Korea Chemical Co., Ltd. ........................................................... 91,440 3,298,833
LG Chemical Co., Ltd. .............................................................. 240,009 2,613,564
Oriental Chemical Industries Co., Ltd. ............................................. 8,185 114,985
------------
7,191,139
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Portfolio
================================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Containers & Paper 0.1%
Dae Young Packaging Co., Ltd. ...................................................... 16,950 162,032
Korea Export Packaging Industries* ................................................. 29,214 315,696
------------
477,728
------------
Diversified Manufacturing 0.4%
Samsung Heavy Industries Co., Ltd.* ................................................ 307,274 1,747,094
------------
Electrical Products 0.1%
Century Corp.* ..................................................................... 114,086 630,650
------------
Industrial Specialty 0.3%
Hankuk Glass Industries Co., Ltd. (GDR)* ........................................... 122,937 510,189
Samsung Radiator Industrial Co. .................................................... 35,440 839,601
------------
1,349,790
------------
Office Equipment/Supplies 0.4%
Sindo Ricoh Co., Ltd. .............................................................. 50,000 1,791,355
------------
Specialty Chemicals 0.4%
Korea Fine Chemical Co. ............................................................ 60,000 2,019,950
------------
Miscellaneous 0.6%
Hyundai Heavy Industries ........................................................... 120,000 3,002,494
------------
Technology 14.2%
Electronic Components/Distributors
Dae Duck Electronics Co., Ltd. ..................................................... 40,000 3,059,019
L G Electronics .................................................................... 100,000 1,213,633
Samsung Display Devices Co. ........................................................ 321,246 15,835,318
Samsung Electro-Mechanics Co., Ltd. ................................................ 604,090 13,055,977
Samsung Electronics Co., Ltd. ...................................................... 484,443 32,497,548
------------
65,661,495
------------
Energy 2.0%
Oil & Gas Production
Ssangyong Oil Refining Co. ......................................................... 165,370 3,161,687
SK Corporation ..................................................................... 445,264 6,107,112
------------
9,268,799
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Portfolio
================================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Metals & Minerals 5.7%
Steel & Metals
Pohang Iron & Steel Co., Ltd. (c) (f) .............................................. 275,762 17,446,588
Pohang Iron & Steel Co., Ltd. (f) .................................................. 169,320 9,078,254
------------
26,524,842
------------
Construction 1.2%
Building Materials
Asia Cement Manufacturing Co. ...................................................... 18,370 207,674
Keum Kang Co., Ltd. ................................................................ 234,337 5,454,230
------------
5,661,904
------------
Transportation 0.7%
Airlines 0.1%
Korean Air Lines Co., Ltd.* ........................................................ 80,000 590,524
------------
Marine Transportation 0.6%
Hyundai Merchant Marine Co. ........................................................ 216,259 2,786,379
------------
Utilities 1.6%
Electric Utilities 0.3%
Korea Electric Power Co. ........................................................... 50,000 1,238,570
------------
Natural Gas Distribution 1.3%
Daehan City Gas Co. ................................................................ 126,179 4,038,150
Daesung Industries Co., Ltd. ....................................................... 61,287 1,212,494
Samchully Company .................................................................. 31,504 783,017
------------
6,033,661
------------
Total Common Stocks (Cost $242,865,720) 368,174,682
------------
- -----------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $344,463,530) (a) 463,548,152
============
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
[LOGO] The Korea Fund, Inc.
Investment Portfolio
================================================================================
- --------------------------------------------------------------------------------
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $343,566,022. At December 31,
1998, net unrealized appreciation for all securities based on tax cost was
$119,982,130. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $172,144,116 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$52,161,986.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $49,111,068 (10.2% of net assets).
Their values have been estimated by the Board of Directors in the absence
of readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at December 31, 1998 aggregated $45,582,306. These
securities may also have certain restrictions as to resale (See Note A to
the Notes to Financial Statements).
(c) Certain investments in Korean equity securities that have met the limit
for aggregate foreign ownership and for which premiums to the local stock
exchange prices are offered by prospective foreign investors. The
aggregate premium of $22,523,146 over the local share price of $78,855,644
for these securities valued by the Valuation Committee was approximately
4.69% of the Fund's net assets at December 31, 1998. The cost of these
securities at December 31, 1998 was $27,729,406 (See Notes A and D to the
Notes to Financial Statements). Their values have been estimated by the
Board of Directors in the absence of readily ascertainable market values
or other market factors, respectively. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material.
(d) Principal amount stated in Korean won unless otherwise noted. U.S.$
represents United States Dollar.
(e) Bonus interest represents the amount available to be paid to the holder at
maturity in lieu of conversion.
(f) At December 31, 1998, 24% of the Fund's net assets were invested in SK
Telecom Co., Ltd. and Pohang Iron & Steel Co., Ltd.
(g) Affiliated issuers (See Notes to Financial Statements).
(h) In October 1998, Kasan Electronics was declared insolvent under the Korean
Company Recomposition Act.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
[LOGO] The Korea Fund, Inc.
Financial Statements
================================================================================
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market:
Unaffiliated issuers (identified cost $308,355,621) ...................................... $ 389,348,789
Affiliated issuers (identified cost $36,107,909) ......................................... 74,199,363
----------------
Total investments, at market (identified cost $344,463,530) .............................. 463,548,152
Won at market (identified cost $7,134,179) ............................................... 7,930,387
Receivables:
Proceeds from maturities ................................................................. 6,268,734
Dividends and interest ................................................................... 1,011,048
Unrealized appreciation on forward currency exchange contracts ........................... 12,343,389
Other assets ............................................................................. 7,175
----------------
Total assets ............................................................................. 491,108,885
----------------
LIABILITIES
Payables:
Accrued management fee ................................................................... 388,345
Unrealized depreciation on forward currency exchange contracts ........................... 10,094,587
Other payables and accrued expenses ...................................................... 935,311
----------------
Total liabilities ........................................................................ 11,418,243
----------------
Net assets, at market value .............................................................. $ 479,690,642
================
NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net investment income ............................. (31,573,192)
Net unrealized appreciation (depreciation) on:
Investments .............................................................................. 119,084,622
Won ...................................................................................... 796,208
Won related transactions ................................................................. 2,410,241
Accumulated net realized loss ............................................................ (169,097,854)
Paid-in capital .......................................................................... 558,070,617
----------------
Net assets, at market value .............................................................. $ 479,690,642
================
Net asset value per share ($479,690,642 B 49,999,999 shares of common stock
issued and outstanding, 200,000,000 shares authorized, $.01 par value) ................ $9.59
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
[LOGO] The Korea Fund, Inc.
Financial Statements
================================================================================
- --------------------------------------------------------------------------------
Statement of Operations
Six Months Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Income:
Dividends -- Unaffiliated issuers ....................................................... $ 104,337
Interest ................................................................................ 2,299,808
Korean withholding tax .................................................................. (358,079)
----------------
2,046,066
----------------
Expenses:
Management fee .......................................................................... 1,855,195
Custodian and accounting fees ........................................................... 350,948
Directors' fees and expenses ............................................................ 123,954
Legal ................................................................................... 37,334
Auditing ................................................................................ 47,506
Reports to shareholders ................................................................. 57,932
Services to shareholders ................................................................ 29,087
Other ................................................................................... 40,920
----------------
2,542,876
----------------
Net investment income (loss) (496,810)
----------------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) during the period on:
Investments ............................................................................. (61,959,306)
Won related transactions ................................................................ 5,041,692
----------------
(56,917,614)
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ............................................................................. 254,218,951
Won ..................................................................................... (774,213)
Won related transactions ................................................................ 2,385,398
----------------
255,830,136
----------------
Net gain (loss) on investment transactions .............................................. 198,912,522
----------------
Net increase (decrease) in net assets resulting from operations ......................... $ 198,415,712
================
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
[LOGO] The Korea Fund, Inc.
Financial Statements
================================================================================
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Six Months
Ended December Year Ended
Increase (Decrease) in Net Assets 31, 1998 June 30, 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .......................................... $ (496,810) $ 3,651,927
Net realized gain (loss) from investment transactions ................. (56,917,614) (136,184,210)
Net unrealized appreciation (depreciation) on investment
transactions during the period ..................................... 255,830,136 (247,288,494)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations ....... 198,415,712 (379,820,777)
---------------- ----------------
Increase (decrease) in net assets ..................................... 198,415,712 (379,820,777)
Net assets at beginning of period ..................................... 281,274,930 661,095,707
---------------- ----------------
Net assets at end of period (including accumulated distributions
in excess of net investment income of $31,573,192 and
$31,076,382, respectively) ......................................... $ 479,690,642 $ 281,274,930
================ ================
Other Information
Increase (decrease) in Fund Shares
Shares outstanding at beginning of period ............................. 49,999,999 49,999,999
Shares issued to shareholders in reinvestment of distributions ........ -- --
---------------- ----------------
Net increase (decrease) in Fund shares ................................ -- --
---------------- ----------------
Shares outstanding at end of period ................................... 49,999,999 49,999,999
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
[LOGO] The Korea Fund, Inc.
Financial Highlights
================================================================================
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements and market price data.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For the Six
Months Ended Years Ended June 30,
December 31, -----------------------------------------------------------
1998 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 5.63 $ 13.22 $ 18.52 $ 19.89 $ 18.66 $ 11.40
------- ------- ------- ------- ------- -------
Income from investment operations (a):
Net investment income (loss) (.01) .07 .07 .02 (.02) (.03)
Net realized and unrealized gain (loss) on
investment transactions 3.97 (7.66) (4.48)(c) (.97) 2.42 7.13
------- ------- ------- ------- ------- -------
Total from investment operations 3.96 (7.59) (4.41) (.95) 2.40 7.10
------- ------- ------- ------- ------- -------
Less distributions:
From net investment income -- -- -- (.06) -- (.01)
From net realized gains on investment
transactions -- -- (.60) (.36) (.15) --
------- ------- ------- ------- ------- -------
Total distributions -- -- (.60) (.42) (.15) (.01)
------- ------- ------- ------- ------- -------
Antidilution (dilution) resulting from the
rights offering (1997 and 1995), fourth
tranche (1994), and reinvestment of
distributions for shares at market value -- -- (.29) -- (1.02) .22
------- ------- ------- ------- ------- -------
Underwriting expenditures and offering costs -- -- -- -- -- (.05)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 9.59 $ 5.63 $ 13.22 $ 18.52 $ 19.89 $ 18.66
======= ======= ======= ======= ======= =======
Market value, end of period $ 9.25 $ 6.31 $ 14.75 $ 21.13 $ 19.63 $ 22.00
======= ======= ======= ======= ======= =======
Total Return
Per share market value (%) 46.53* (57.20) (26.11) 9.73 (5.43) 46.74
Per share net asset value (%) (b) 70.34* (57.41) (24.40) (5.09) 13.00 63.77
Ratios and Supplemental Data
Net assets, end of period ($ millions) 480 281 661 689 735 550
Ratio of operating expenses to average net
assets (%) 1.41** 1.38 1.28 1.28 1.32 1.37
Ratio of net investment income (loss) to
average net assets (%) (.14)(d) .90 .46 .10 (.10) (.18)
Portfolio turnover rate (%) 24.3** 24.3 12.9 32.6 10.5 14.3
</TABLE>
(a) Based on monthly average of shares outstanding during each period.
(b) Total investment returns reflect changes in net asset value per share during
each period and assume that dividends and capital gains distributions, if
any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market price.
(c) Due to the timing and magnitude of the rights offerings, the amounts
reported herein are not proportional to the aggregate value reported in the
Statement of Changes in Net Assets.
(d) The ratio for the six months ended December 31, 1998 has not been annualized
since the Fund believes it would not be appropriate because the Fund's
dividend income is not earned ratably throughout the fiscal year (Note A).
* Not annualized
** Annualized
- --------------------------------------------------------------------------------
24
<PAGE>
[LOGO] The Korea Fund, Inc.
Notes to Financial Statements
================================================================================
A. Significant Accounting Policies
-------------------------------
The Korea Fund, Inc. (the "Fund") is registered under the Investment Company Act
of 1940, as amended, as a non-diversified, closed-end management investment
company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on the Korean, U.S.,
or foreign stock exchanges are valued at the most recent sale price reported on
the exchange on which the security is traded most extensively. If no sale
occurred, the security is then valued at the calculated mean between the most
recent bid and asked quotations. If there are no such bid and asked quotations,
the most recent bid quotation is used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at fair value as determined in good faith by the
Valuation Committee of the Board of Directors. See notes (b) and (c) of the
notes to the Investment Portfolio.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value is equal to at least the repurchase price.
Dividend Income. Korean-based corporations have generally adopted calendar
year-ends, and their corporate actions are normally approved by their boards of
directors and shareholders in the first quarter of each calendar year.
Accordingly, dividend income from Korean equity investments is earned and
received by the Fund primarily in the first calendar quarter of each year. As a
result, the Fund, which has a June 30 year end, receives substantially less
dividend income in the first half of its year than in the second half of such
year.
Income Taxes. The Fund's policy is to comply with the requirements of the
Internal Revenue Code of 1986, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. The Fund, accordingly, paid no federal income taxes and no federal
income tax provision was required. At June 30, 1998, the Fund had a net tax
basis capital loss carryforward of approximately $14,335,000 which may be
applied against any realized net taxable capital gains of each succeeding year
until fully utilized or until June 30, 2006, the expiration date, whichever
occurs first. In addition, from November 1, 1997 through June 30, 1998, the Fund
incurred approximately $95,500,000 of net realized capital losses on investments
and approximately $31,000,000 on realized currency losses. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
arising in the fiscal year ending June 30, 1999.
Under the United States-Korea Income Tax Treaty, as presently in effect, the
government of Korea imposes a nonrecoverable withholding tax and resident tax
aggregating 16.5% on dividends and 13.2% on interest earned by the Fund from
Korean issuers. Under the United States-Korea Income Tax Treaty, there is no
Korean withholding tax on realized capital gains.
Distribution of Income and Gains. Distribution of net investment income is made
annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An
25
<PAGE>
[LOGO] The Korea Fund, Inc.
Notes to Financial Statements
================================================================================
additional distribution may be made to the extent necessary to avoid the payment
of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in foreign denominated investments
and certain securities sold at a loss. As a result, net investment income (loss)
and net realized gain (loss) on investment transactions for a reporting period
may differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized gain (loss) from won related transactions includes net currency
gains and losses between trade and settlement dates on securities transactions,
gains and losses arising from the sales of won and gains and losses between the
ex-dividend and payment dates on dividends, interest, and foreign withholding
taxes. At December 31, 1998 the exchange rate for Korean won was U.S. $0.000831
to W 1.
Subscriptions for New Shares. As part of their annual corporate action matters,
certain Korean companies offer rights to their shareholders to subscribe to new
shares which are eligible for a portion of the dividends paid on existing shares
in the year of subscription. The Fund follows a policy of subscribing to new
share offerings by Korean companies.
Other. Investment security transactions are accounted for on a trade-date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All original
issue and acquisition discounts are accreted for both tax and financial
reporting purposes.
B. Purchases and Sales of Securities
---------------------------------
For the six months ended December 31, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $65,802,184 and
$36,386,473, respectively.
C. Related Parties
---------------
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Manager"), the Manager directs the
investments of the Fund in accordance with its investment
26
<PAGE>
[LOGO] The Korea Fund, Inc.
Notes to Financial Statements
================================================================================
objectives, policies, and restrictions. The Manager 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, the
Manager provides certain administrative services in accordance with the
Agreement. The management fee payable under the Agreement is equal to an annual
rate of 1.15% of the Fund's month-end net assets up to and including
$50,000,000, 1.10% of such net assets on the next $50,000,000, 1% of such assets
on the next $250,000,000, 0.95% of such net assets on the next $400,000,000, and
0.90% of such net assets in excess of $750,000,000. For the six months ended
December 31, 1998, the fee pursuant to such Agreement amounted to $1,855,195
which was equivalent to an annual effective rate of 1.03% of the Fund's average
month-end net assets.
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
Manager, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's Management Agreement with Scudder Kemper was deemed to
have been assigned and, therefore, terminated. In December 1998, the Board of
Directors and the shareholders of the Fund approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the former
Management Agreement, except for the dates of execution and termination.
Under the Agreement, the Manager pays the Korean Adviser a monthly fee, equal to
an annual rate of 0.2875% of the first $50,000,000 of the Fund's month-end net
assets, 0.275% of such net assets on the next $50,000,000, and 0.25% of such net
assets on the next $250,000,000, 0.2375% of such net assets on the next
$400,000,000, and 0.225% of such net assets in excess of $750,000,000.
For the six months ended December 31, 1998, there were no brokerage commissions
on investment transactions paid by the Fund to Daewoo Securities Co., Ltd., the
parent company of the Korean Adviser.
Scudder Service Corporation ("SSC"), a subsidiary of the Manager, provides
shareholder communications services for the Fund. For the six months ended
December 31, 1998 the amount charged to the Fund by SSC aggregated $7,500, of
which $1,250 is unpaid at December 31, 1998.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Manager, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended December 31, 1998, the amount charged to the Fund by SFAC aggregated
$103,768, of which $20,789 is unpaid at December 31, 1998.
The Fund pays each Director not affiliated with the Manager or the Korean
Adviser $6,000 annually plus specified amounts for attended board and committee
meetings. For the six months ended December 31, 1998, Directors' fees and
expenses amounted to $123,954.
D. Foreign Investment and Exchange Controls in Korea
-------------------------------------------------
The Foreign Exchange Management Act, the Presidential Decree relating to such
Act and the regulations of the Minister of Finance and Economy issued thereunder
impose certain limitations and controls which generally affect foreign investors
in Korea. The Fund has obtained from the Minister of Finance and Economy a
license to invest in Korean securities and to repatriate income received from
dividends and interest earned on, and net realized capital gain from, its
investments in Korean securities or to repatriate from investment principal up
to
27
<PAGE>
[LOGO] The Korea Fund, Inc.
Notes to Financial Statements
================================================================================
10% of the net asset value (taken at current value) of the Fund (except upon
termination of the Fund, or for expenses in excess of Fund income, in which case
the foregoing restriction shall not apply). The Minister of Finance and Economy
may, when it deems it to be in the public interest, modify the Fund's license to
invest in Korean securities or, according to the terms of the license, revoke it
in the event of the Fund's noncompliance with conditions of the license or a
material violation of Korean law. The Minister of Finance and Economy or the
Financial Supervisory Commission ("FSC") may issue orders imposing additional
restrictions, when deemed in the public interest, for the protection of
investors or in the interest of maintaining an orderly securities market. Under
the Foreign Exchange Management Act, the Minister of Finance and Economy has the
power, with prior public notice of scope and duration, to suspend all or a part
of foreign exchange transactions when emergency measures are deemed necessary in
case of radical change in the international or domestic economic situation. The
Fund could be adversely affected by delays in, or the refusal to grant, any
required governmental approval for such transactions.
On May 25, 1998, the Korean Minister of Finance and Economy and the FSC
abolished certain restrictions with respect to investing in equity securities of
Korean companies listed on the Korea Stock Exchange, with the exception of
public corporations and telecommunication corporations. As of December 31, 1998,
two of the Fund's holdings had ownership limits still in place: Pohang Iron &
Steel, which had a foreign ownership limit of 30%, and SK Telecom, which had a
foreign ownership limit of 33%.
E. Investing in the Korean Market
------------------------------
Investing in the Korean market may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currency, high rates of inflation, Korean taxes, repatriation
restrictions on income and capital, and future adverse political and economic
developments.
Moreover, securities issued in this market may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
At December 31, 1998, included in receivables is $940,468 (0.2% of net assets)
of convertible bond proceeds due from a company currently restructuring its
debt. This amount has been valued in good faith by the Valuation Committee of
the Board of Directors.
F. Transactions in Securities of Affiliated Issuers
------------------------------------------------
An affiliated issuer is a company in which the Fund has ownership of at least 5%
of the voting securities. A summary of the Fund's transactions during the period
with companies which are or were affiliates are as follows:
<TABLE>
<CAPTION>
Purchases Sales Dividend Market
Affiliate Cost ($) Cost ($) Income ($) Value ($)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BYC Co., Ltd. 1,054,289 -- -- 2,267,032
Nam Yang Dairy Products Co. -- -- -- 2,938,728
Samsung Fire & Marine Insurance Co. 5,352,843 -- -- 68,993,603
---------------- ------------- ------------- ----------------
6,407,132 74,199,363
================ ============= ============= ================
</TABLE>
28
<PAGE>
[LOGO] The Korea Fund, Inc.
Notes to Financial Statements
================================================================================
G. Commitments
-----------
As of December 31, 1998, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized appreciation of
$2,248,802.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Settlement (Depreciation)
Contracts to Deliver In Exchange For Date (U.S.$)
------------------------------------ ---------------------------------- --------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
KRW 11,735,911,000 USD 8,553,871 8/4/1999 983,129
KRW 5,892,174,000 USD 4,525,479 2/4/1999 354,168
KRW 5,944,875,000 USD 4,463,119 2/8/1999 458,274
KRW 5,944,875,000 USD 4,283,051 8/9/1999 545,691
KRW 6,255,250,000 USD 4,359,059 8/11/1999 720,835
KRW 8,535,181,000 USD 5,826,062 8/13/1999 1,104,061
KRW 6,350,750,000 USD 4,456,667 2/18/1999 795,658
KRW 37,388,250,000 USD 25,942,984 8/27/1999 4,374,475
KRW 6,255,250,000 USD 4,319,924 8/31/1999 750,438
KRW 10,199,400,000 USD 6,915,434 9/1/1999 1,351,190
KRW 7,649,550,000 USD 5,413,694 3/2/1999 905,469
USD 8,810,744 KRW 11,735,911,000 8/4/1999 (726,256)
USD 4,596,080 KRW 5,892,174,000 2/4/1999 (283,568)
USD 4,565,956 KRW 5,944,875,000 2/8/1999 (355,437)
USD 4,419,981 KRW 5,944,875,000 8/9/1999 (408,761)
USD 4,468,036 KRW 6,255,250,000 8/11/1999 (611,859)
USD 5,989,601 KRW 8,535,181,000 8/13/1999 (940,522)
USD 4,578,767 KRW 6,350,750,000 2/18/1999 (673,557)
USD 26,705,893 KRW 37,388,250,000 8/27/1999 (3,611,566)
USD 4,474,428 KRW 6,255,250,000 8/31/1999 (595,934)
USD 7,167,533 KRW 10,199,400,000 9/1/1999 (1,099,091)
USD 5,531,128 KRW 7,649,550,000 3/2/1999 (788,035)
---------------
2,248,802
===============
</TABLE>
Currency Abbreviations
-------------------------------
KRW Korean Won
USD US Dollar
29
<PAGE>
[LOGO] The Korea Fund, Inc.
Notes to Financial Statements
================================================================================
H. Line of Credit
--------------
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 5 percent of its net assets under the agreement.
30
<PAGE>
[LOGO] The Korea Fund, Inc.
Report of Independent Accountants
================================================================================
To the Board of Directors and the Shareholders of The Korea Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Korea Fund, Inc. (the "Fund")
at December 31, 1998, the results of its operations for the six months then
ended and the changes in its net assets for the six months then ended and for
the year ended June 30, 1998, and the financial highlights for the six months
ended December 31, 1998 and for each of the five years in the period ended June
30, 1998, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
February 25, 1999
31
<PAGE>
(logo) The Korea Fund, Inc.
Stockholder Meeting Results
================================================================================
The Annual Meeting of Stockholders of The Korea Fund, Inc. (the "Fund") was held
on October 14, 1998 at the office of Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY 10154. At the Meeting the following matters were voted upon
by the stockholders and the resulting votes are presented below.
1. To elect three Directors of the Fund to hold office for a term of three
years or until their respective successors shall have been duly elected
and qualified.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Director (Class I) For Withheld Broker Non-Votes*
-------- --- -------- -----------------
<S> <C> <C> <C>
Juris Padegs 26,112,464 370,693 0
Chang Hee Kim 25,867,234 615,923 0
Hugh T. Patrick 26,205,119 278,038 0
</TABLE>
2. To ratify or reject the action taken by the Board of Directors in
selecting PricewaterhouseCoopers LLP as the Fund's independent
accountants for the fiscal year ending June 30, 1999.
<TABLE>
<CAPTION>
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
<S> <C> <C> <C>
26,310,527 95,591 77,039 0
</TABLE>
- --------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
32
<PAGE>
(logo) The Korea Fund, Inc.
Notes to Financial Statements
================================================================================
A Special Meeting of Stockholders (the "Meeting") of The Korea Fund, Inc. (the
"Fund") was held on December 17, 1998, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the stockholders (the resulting
votes for each matter are presented below).
1. To approve a new Investment Advisory, Management and Administration Agreement
for the Fund with Scudder Kemper Investments, Inc.
<TABLE>
<CAPTION>
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
<S> <C> <C> <C>
28,577,102 261,093 538,393 0
</TABLE>
2. To approve a new Research and Advisory Agreement between Scudder Kemper
Investments, Inc. and Daewoo Capital Management Co., Ltd.
<TABLE>
<CAPTION>
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
<S> <C> <C> <C>
28,614,190 269,291 493,107 0
</TABLE>
- --------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
33
<PAGE>
(logo) The Korea Fund, Inc.
Dividend Reinvestment and Cash Purchase Plan
================================================================================
The Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers
you an automatic way to reinvest your dividends and capital gains distributions
in shares of the Fund. The Plan also provides for cash investments in Fund
shares of $100 to $3,000 semiannually through EquiServe, the Plan Agent.
Automatic Participation
Each stockholder of record is automatically a participant in the Plan unless
the stockholder has instructed the Plan Agent in writing otherwise. Such a
notice must be received by the Plan Agent not less than 10 days prior to the
record date for a dividend or distribution in order to be effective with respect
to that dividend or distribution. A notice which is not received by that time
will be effective only with respect to subsequent dividends and distributions.
Stockholders who do not participate in the Plan will receive all
distributions in cash paid by check in dollars mailed directly to the
stockholder by EquiServe, as dividend paying agent.
Shares Held by a Nominee
If your shares are held in the name of a brokerage firm, bank, or other
nominee as the stockholder of record, please consult your nominee (or any
successor nominee) to determine whether it is participating in the Plan on your
behalf. Many nominees are generally authorized to receive cash dividends unless
they are specifically instructed by a client to reinvest. If you would like your
nominee to participate in the Plan on your behalf, you should give your nominee
instructions to that effect as soon as possible.
Pricing of Dividends and Distributions
If the market price per share on the payment date for the dividend or
distribution (the "Valuation Date") equals or exceeds net asset value per share
on that date, the Fund will issue new shares to participants at the greater of
the following on the Valuation Date: (a) net asset value, or (b) 95% of the mean
market price. The Valuation Date will be the dividend or distribution payment
date or, if that date is not a New York Stock Exchange trading date, the next
preceding trading date. If the net asset value exceeds the market price of Fund
shares at such time, participants in the Plan are considered to have elected to
receive shares of stock from the Fund, valued at market price, on the Valuation
Date. In either case, for Federal income tax purposes, the stockholder receives
a distribution equal to the market value on Valuation Date of new shares issued.
State and local taxes may also apply. If the Fund should declare an income
dividend or net capital gains distribution payable only in cash, the Plan Agent
will, as agent for the participants, buy Fund shares in the open market, on the
New York Stock Exchange or elsewhere, for the participants' account on, or
shortly after, the payment date.
Voluntary Cash Purchases
Participants in the Plan have the option of making additional cash payments
to the Plan Agent, semiannually, in any amount from $100 to $3,000, for
investment in the Fund's shares. The Plan Agent will use all such monies
received from participants to purchase Fund shares in the open market on or
about February 15 and August 15. Any voluntary cash payments received more than
30 days prior to these dates will be returned by the Plan Agent, and interest
will not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent, it is suggested that participants send in voluntary cash payments to
be received by the Plan Agent approximately ten days before February 15, or
August 15, as the case may be. A participant may withdraw a voluntary cash
payment by written notice, if the notice is received by the Plan Agent not less
34
<PAGE>
(logo) The Korea Fund, Inc.
Dividend Reinvestment and Cash Purchase Plan
================================================================================
than 48 hours before such payment is to be invested.
Participant Plan Accounts
The Plan Agent maintains all participant accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by participants for personal and tax records. Shares in the account of
each plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each participant will be able to vote those
shares purchased pursuant to the Plan at a stockholder meeting or by proxy.
No Service Fee to Reinvest
There is no service fee charged to participants for reinvesting dividends or
distributions from net realized capital gains. The Plan Agent's fees for the
handling of the reinvestment of dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage commissions with respect to
shares issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, participants will pay
a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of any
dividends or capital gains distributions payable only in cash.
Costs for Cash Purchases
With respect to purchases of Fund shares from voluntary cash payments, the
Plan Agent will charge $0.75 for each such purchase for a participant. Each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases of Fund shares in connection
with voluntary cash payments made by the participant.
Brokerage charges for purchasing small amounts of stock for individual
accounts through the Plan are expected to be less than the usual brokerage
charges for such transactions, because the Plan Agent will be purchasing stock
for all participants in blocks and pro-rating the lower commission thus
attainable.
Amendment or Termination
The Fund and the Plan Agent each reserve the right to terminate the Plan.
Notice of the termination will be sent to the participants of the Plan at least
30 days before the record date for a dividend or distribution. The Plan also may
be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by giving at least 30 days' written notice to participants in
the Plan.
A participant may terminate his account under the Plan by written notice to
the Plan Agent. If the written notice is received 10 days before the record day
of any distribution, it will be effective immediately. If received after that
date, it will be effective as soon as possible after the reinvestment of the
dividend or distribution.
If a participant elects to sell his shares before the Plan is terminated, the
Plan Agent will deduct a $2.50 fee plus brokerage commissions from the sale
transaction.
Plan Agent Address and Telephone Number
You may obtain more detailed information by requesting a copy of the Plan
from the Plan Agent. All correspondence (including notifications) should be
directed to: The Korea Fund Dividend Reinvestment and Cash Purchase Plan, c/o
EquiServe, P.O. Box 8200, Boston, MA 02266-8200, 1-800-426-5523.
35
<PAGE>
(logo) The Korea Fund, Inc.
Officers and Directors
================================================================================
Juris Padegs*
Chairman of the Board and Director
CHANG HEE KIM
Vice Chairman of the Board and Director
ROBERT J. CALLANDER
Director
WILLIAM H. GLEYSTEEN, JR.
Director
DR. SANG C. LEE
Director
TAI HO LEE
Director
WILSON NOLEN
Director
HUGH T. PATRICK
Director
SIDNEY M. ROBBINS
Emeritus Founding Director
NICHOLAS BRATT*
President
BRUCE H. GOLDFARB*
Vice President and Assistant Secretary
JUDITH A. HANNAWAY*
Vice President
KUN-HO HWANG
Vice President
YOUNG H. KIM
Vice President
JOHN J. LEE*
Vice President
ANN M. McCREARY*
Vice President
DONG WOOK PARK
Vice President
Thomas F. McDonough*
Vice President and Secretary
KATHRYN L. QUIRK*
Vice President and Assistant Secretary
JOHN R. HEBBLE*
Treasurer
CAROLINE PEARSON*
Assistant Secretary
* Scudder Kemper Investments, Inc.
36
