KOREAN INVESTMENT FUND INC, N-2, 1995-08-16

KOREAN INVESTMENT FUND INC
N-2, 1995-08-16

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<PAGE>

As filed with the Securities and Exchange Commission
on August 16, 1995
1933 Act File No. 33-_____
1940 Act File No. 811-6467
___________________________________________________________

U.S. Securities and Exchange Commission
Washington, D.C. 20549

FORM N-2
(Check appropriate box or boxes)

/X/ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ / Pre-Effective Amendment No.
/ / Post-Effective Amendment No.

and/or

/ / REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
/X/ Amendment No. 6

Exact Name of Registrant as Specified in Charter:

The Korean Investment Fund, Inc.

Address of Principal Executive Offices (Number, Street, City,
State, Zip Code):

1345 Avenue of the Americas
New York, New York 10105

Registrant's Telephone Number, including Area Code:
(212) 969-1000

Name and Address (Number, Street, City, State, Zip Code) of Agent
for Service:

Edmund P. Bergan, Jr.
Senior Vice President and General Counsel
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, New York 10105

with copies to:

Patricia A. Poglinco John A. MacKinnon
Seward & Kissel Brown & Wood
One Battery Park Plaza One World Trade Center
New York, New York 10004 New York, New York 10048

<PAGE>

Approximate Date of Proposed Public Offering: As soon as
practicable after the effective date of this Registration
Statement.

If any securities being registered on this form will be offered
on a delayed or continuous basis in reliance on Rule 415 under
the Securities Act of 1933, other than securities offered in
connection with a dividend reinvestment plan, check the following
box.......................................................... /X/

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

Title of Proposed Proposed Maximum
Securities Amount Maximum Aggregate Amount of
Being Being Offering Price Offering Registration
Registered Registered Per Unit(1) Price Fee
__________ __________ ___________ _________ ____________

Common Stock, $.01 par 2,484,546 $11.375 $28,261,710 $9,745.42
value

The registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.

_____________________________________________________________________________
_____________________________________________________________________________

(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933 on the
basis of market price per share on August 11, 1995

<PAGE>

THE KOREAN INVESTMENT FUND, INC.

Form N-2
Cross-Reference Sheet

Location in
N-2 Item Number Prospectus (Caption)
______________ ____________________

Part A
______

Item 1 Outside Front Cover.......... Outside Front Cover Page

Item 2 Inside Front and Outside Back
Cover Page................... Inside Front Cover Page; Outside Back
Cover Page

Item 3 Fee Table and Synopsis....... Expense Information

Item 4 Financial Highlights......... Financial Highlights

Item 5 Plan of Distribution......... Outside Front Cover Page; The Offer;
Distribution Arrangements

Item 6 Selling Shareholders......... Not Applicable

Item 7 Use of Proceeds.............. Use of Proceeds; Investment
Objective and Policies

Item 8 General Description of the
Registrant................. The Fund; Net Asset Value and
Market Price Information;
Investment Objective
and Policies; Special Risk
Considerations Description
of Common Stock

Item 9 Management................... Management of the Fund;
Custodian,
Dividend Paying Agent, Transfer
Agent and Registrar

Item 10 Capital Stock, Long-Term Debt,
and Other Securities....... Dividend Retirement Plan;
Taxation; The Offer;
Description of Common Stock

Item 11 Defaults and Arrears on Senior
Securities................. Not Applicable

<PAGE>

Item 12 Legal Proceedings............ Not Applicable

Item 13 Table of Contents of the
Statement of Additional
Information................ Table of Contents of the
Statement of
Additional Information

<PAGE>

Location in
Statement of
Additional
N-2 Item Number Information (Caption)
_______________ _____________________

Part B
______

Item 14 Cover Page................... Outside Front Cover Page

Item 15 Table of Contents............ Outside Front Cover Page

Item 16 General Information and
History............................ Not Applicable

Item 17 Investment Objective and
Policies........................... Investment Objective and
Policies; Investment
Restrictions

Item 18 Management .................. Management of the Fund

Item 19 Control Persons and Principal
Holders of Securities.............. Management of the Fund; Certain
Owners of Record

Item 20 Investment Advisory and Other
Services............................. Management of the Fund

Item 21 Brokerage Allocation and Other
Practices............................ Brokerage and Portfolio Transactions

Item 22 Tax Status................... Taxation

Item 23 Financial Statements......... Financial Statements

Part C
______

Items 24-33 have been answered in order in Part C.

5
00250225.AA9

<PAGE>

The Korean Investment Fund, Inc.

1,987,637 Shares of Common Stock
Issuable Upon Exercise of
Rights to Subscribe for Such Shares

The Korean Investment Fund, Inc. (the "Fund") is issuing
to its shareholders of record as of the close of business on
[ ], 1995 (the "Record Date") non-transferable rights
("Rights") entitling the holders thereof to subscribe for an
aggregate of 1,987,637 shares ("Shares") of the Fund's Common
Stock at the rate of one share of Common Stock for every three
Rights held (the "Offer"). Shareholders of record will receive
one Right for each whole share of Common Stock held on the Record
Date. Shareholders who fully exercise their Rights will be
entitled to subscribe for additional shares of Common Stock
pursuant to the Over-Subscription Privilege as described herein.
The Fund may increase the number of Shares of Common Stock
subject to subscription by up to 25% of the Shares, or 496,909
Shares, for an aggregate total of 2,484,546 Shares. Fractional
shares will not be issued upon the exercise of Rights. The
Rights are non-transferable and will not be admitted for trading
on the New York Stock Exchange or any other exchange and,
accordingly, may not be purchased or sold. See "The Offer." THE
SUBSCRIPTION PRICE PER SHARE (THE "SUBSCRIPTION PRICE") WILL BE
[ ]% OF THE LOWER OF (i) THE AVERAGE OF THE LAST REPORTED SALES
PRICE OF A SHARE OF THE FUND'S COMMON STOCK ON THE NEW YORK STOCK
EXCHANGE ON THE DATE OF THE EXPIRATION OF THE OFFER (THE "PRICING
DATE") AND ON THE FOUR PRECEDING BUSINESS DAYS AND (ii) THE NET
ASSET VALUE PER SHARE AS OF THE CLOSE OF BUSINESS ON THE PRICING
DATE.

The Fund announced the Offer after the close of trading
on the New York Stock Exchange on August 16, 1995. Shares of the
Common Stock trade on that exchange under the symbol "KIF." The
net asset value per share of Common Stock at the close of
business on August 11, 1995 and [ ], 1995 was $12.66
and $[ ], respectively, and the last reported sales price
of a share of the Fund's Common Stock on the New York Stock
Exchange on those dates was $11.25 and $[ ], respectively.

THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON [ ], 1995 (THE "EXPIRATION DATE"), UNLESS EXTENDED
AS DESCRIBED HEREIN.

The Fund is a non-diversified, closed-end management
investment company. The Fund's investment objective is to seek
long-term capital appreciation through investment primarily in
equity securities of Korean companies. Under normal
circumstances, the Fund invests at least 65% of its total assets

<PAGE>

in such securities. Equity securities include common stocks,
preferred stocks, rights or warrants to purchase common or
preferred stock and debt securities convertible into common or
preferred stock. Investment in the Fund involves special
considerations that are not normally associated with investment
in United States issuers. See "Special Risk Considerations."
There can be no assurance that the Fund's investment objective
will be achieved. See "Investment Objective and Policies."

This Prospectus sets forth concisely information about
the Fund that a prospective investor ought to know before
investing and should be retained for future reference. A
Statement of Additional Information dated [ ], 1995
(the "SAI") containing additional information about the Fund has
been filed with the Securities and Exchange Commission and is
incorporated by reference in its entirety into this Prospectus.
A copy of the SAI, the table of contents of which appears on page
[ ] of this Prospectus, may be obtained without charge by
calling the Fund at (800) 227-4618.

_______________________________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Estimated Estimated
Subscription Estimated Proceeds to
Price(1) Sales Load(2) Fund(3)(4)
________ ____________ __________

Per Share [ ] [ ] [ ]
Total Maximum(5) [ ] [ ] [ ]

PaineWebber Incorporated

The date of this Prospectus is [ ], 1995.

<PAGE>

(Continued from previous page)

Upon the completion of the Offer, shareholders who do
not fully exercise their Rights will own a smaller proportional
interest in the Fund than would otherwise be the case if the
Offer had not been made. In addition, because the Subscription
Price per Share will be less than the current net asset value per
share and because the Fund will incur expenses in connection with
the Offer, the Offer will result in a dilution of net asset value
per share for all shareholders. Such dilution will
disproportionately affect non-exercising shareholders. If the
Subscription Price per Share were to be substantially less than
the current net asset value per share, such dilution would be
substantial. Shareholders will have no right to rescind their
subscriptions after receipt of their payment for Shares by the
Subscription Agent. See "Special Risk Considerations--Dilution
and the Effect of Non-Participation in the Offer." For the
recent trading history of the Fund see "Net Asset Value and
Market Price Information."

The Fund's investment manager and administrator is
Alliance Capital Management L.P. ("Alliance"), a leading
international investment manager. Orion Asset Management Co.,
Ltd. ("Orion"), a subsidiary of Tong Yang Securities Co., Ltd.
("Tong Yang Securities"), a component member of a leading Korean
securities company, serves as investment manager to the Fund with
respect to its investments in Korean securities. See "Management
of the Fund." The address of the Fund is 1345 Avenue of the
Americas, New York, New York 10105 and its telephone number is
(800) 247-4154.

Unless otherwise specified, references in this
Prospectus to "U.S. Dollars," "US $" or "$" are to United States
Dollars and references to "Won" or "W" are to Korean Won. On
August 14, 1995, the market average exchange rate, as published
by The Korea Financial Telecommunications and Clearings
Institute, was 760.10 Won per U.S. Dollar. See "Special Risk
Considerations--Currency Fluctuation." Certain numbers in this
Prospectus and in the SAI have been rounded. Unless otherwise
indicated, U.S. Dollar equivalent information in Won for a period
is based on the average of the daily exchange rates for the days
in the period, and U.S. Dollar information for Won as of a
specified date is based on the exchange rate for that date.

<PAGE>

(Footnotes from previous page)

(1) Estimated on the basis of [market price] [net asset value]
per share on [ ], 1995.
(2) In connection with the Offer, PaineWebber Incorporated (the
"Dealer Manager") and other broker-dealers soliciting the
exercise of Rights will receive soliciting fees equal to
2.50% of the Subscription Price per Share for each Share
issued pursuant to the exercise of the Rights and the
Over-Subscription Privilege. The Fund has also agreed to pay
the Dealer Manager a fee for financial advisory services in
connection with the Offer equal to 1.25% of the Subscription
Price per Share for each Share issued upon exercise of the
Rights and pursuant to the Over-Subscription Privilege and
has agreed to indemnify the Dealer Manager against certain
liabilities, including liabilities under the Securities Act
of 1933, as amended (the "Securities Act").
(3) Before deduction of offering expenses incurred by the Fund,
estimated at $[ ], including an aggregate of up to
$100,000 to be paid to the Dealer Manager as partial
reimbursement for its expenses.
(4) Funds received by check prior to the final due date of this
Offer will be deposited into a segregated interest bearing
account (which interest will be paid to the Fund) at State
Street Bank and Trust Company pending proration and
distribution of Shares.
(5) Assumes all Rights are exercised at the Estimated
Subscription Price. Pursuant to the Over-Subscription
Privilege, the Fund may at its discretion increase the number
of Shares subject to subscription by up to 25% of the Shares
offered hereby. If the Fund increases the number of Shares
subject to subscription by 25%, the aggregate maximum
Estimated Subscription Price, Estimated Sales Load and
Estimated Proceeds to Fund will be $[ ], $[ ] and
$[ ], respectively.

<PAGE>

EXPENSE INFORMATION

Shareholder Transaction Expenses
Sales load (as a percentage of offering price)(1)... 3.75%
Annual Expenses (as a percentage of net assets)(2)
Management and Administration fees(3)............... 1.25%
Other expenses...................................... [ ]%
______
Total annual expenses................................... [ ]%
=====

(1) Consists of Dealer Manager and soliciting fees. See
"Distribution Agreements." The fees will be borne by all of
the Fund's shareholders, including those shareholders who do
not exercise their rights.
(2) Amounts based on the Fund's most recently completed fiscal
year, except that "Other expenses" are based on estimated
amounts for the Fund's current fiscal year and assume that
the Fund's shareholders exercise their Rights to purchase all
of the Shares, including all of the Shares offered pursuant
to the Over-Subscription Privilege.
(3) See "Management of the Fund--Management and Administration
Arrangements" herein and in the SAI.

Example
1 year 3 years 5 years 10 years
______ _______ _______ ________
You would pay the following expenses
on a $1,000 investment, assuming
a 5% annual return $[ ] $[ ] $[ ] $[ ]

The purpose of the foregoing table is to assist the
investor in understanding the various costs and expenses that a
shareholder bears directly or indirectly. The above example is
based on an operating expense ratio of [ ]% and reinvestment of
all dividends and distributions at net asset value. The example
should not be considered a representation of future expenses;
actual expenses may be greater or less than those shown.

<PAGE>

FINANCIAL HIGHLIGHTS

The following information as to per share data, ratios
and certain supplemental data for each of the periods shown below
has been audited by Price Waterhouse LLP, independent
accountants, as stated in their report included in the SAI. This
information should be read in conjunction with the financial
statements and notes thereto included in the SAI, copies of which
can be obtained by shareholders.

<TABLE>
Per Share Data, Ratios and Certain Supplemental Data
<CAPTION>
Year Ended Year Ended Year Ended February 24,
April 30, April 30, April 30, 1992(a) to
1995 1994 1993 April 30, 1992
__________ _________ __________ ______________
<C> <C> <C> <C>

<S>
Selected Per Share Data:

Net asset value, beginning.........
of period....................... $13.09 $10.37 $11.00 $10.90(b)

Income From Investment Operations
Net investment loss............. $(.13)* (.09) (.03) (.01)

Net realized and unrealized gain
(loss) on securities and foreign
currency transactions........... $.28 2.81 (.59) .11
Net increase (decrease) in net asset
value........................... $.15 2.72 (.62) .10
Less: Distributions
Distributions from net realized
gains on investment and foreign
currency transactions........... -0- -0- (.01) -0-

Capital Share Transactions
Dilutive effect of rights
offering........................ (.48) -0- -0- -0-
Offering costs charged to
additional paid-in capital...... (.10) -0- -0- -0-
Total capital share transactions... (.58) -0- -0- -0-
Net asset value, end of period..... $12.66 $13.09 $10.37 $11.00
Market value, end of period........ $12.375 $13.375** $12.125 $10.000
====== ====== ====== ======

<PAGE>

Total investment return based
on: (c)
Market value....................... (5.88)% 10.31%** 21.39% (10.39)%
Net asset value.................... (3.28)% 26.23% (5.62)% (1.43)%
Net assets, end of period
(000's omitted).................$75,461 $55,078 $43,663 $46,278
Ratios and Supplemental Data:
Ratio of expenses to average
net assets...................... 2.00% 2.26% 2.55% 2.37%(d)
Ratio of net investment loss
to average net assets........... (.83)% (.82)% (.27)% (.49)%(d)
Portfolio turnover rate............ 34% 14% 43% 8%

<FN>

* Based on average shares outstanding during the period.
** Restated.
(a) Commencement of operations.
(b) Net of offering costs of $.26.
(c) Total investment return is calculated assuming a purchase of common stock on the
opening of the first day and a sale on the closing of the last day of each period
reported. Dividends and distributions, if any, are assumed for purposes of this
calculation to be reinvested at prices obtained under the Fund's dividend reinvestment
plan. Rights offerings, if any, are assumed for purposes of this calculation to be
fully subscribed under the terms of the rights offering. Generally, total investment
return based on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a decrease in the
premium of the market value to the net asset value from the beginning to the end of
such periods. Conversely, total investment return based on the net asset value will be
lower than total investment return based on market value in periods where there is a
decrease in the discount or an increase in the premium of the market value to the net
asset value from the beginning to the end of such periods. Total investment return for
a period of less than one year is not annualized.
(d) Annualized.

The per share amounts reported herein are not necessarily consistent with the corresponding
amounts reported on the Statement of Operations due to the change in capital stock caused
by the rights offering.
</TABLE>

<PAGE>

THE OFFER

Purpose of the Offer

The Board of Directors of the Fund has determined that
it would be in the best interest of the Fund and its shareholders
to increase the assets of the Fund available for investment,
thereby enabling the Fund to more fully take advantage of
available investment opportunities consistent with the Fund's
investment objective of long-term capital appreciation. In
reaching its decision, the Board of Directors was advised by
Alliance and Orion that the availability of new funds would
enable the Fund to more fully take advantage of attractive
investment opportunities available in the Korean market as a
result of current valuations of equity securities and economic
conditions, as well as the recent liberalization of the Korean
securities market. In this regard, Alliance and Orion informed
the Board that the Korean government recently relaxed foreign
investment regulations to increase (in general) from 12% to 15%
the percentage of each class of a Korean company's outstanding
equity shares that may be held by all foreign investors as a
group. Alliance and Orion have advised the Board of Directors
that an increase in the assets of the Fund at this time would
permit the Fund to invest in additional investment opportunities
in the Korean securities markets without having to sell portfolio
securities that Alliance and Orion believe should be held. The
Board of Directors also took into account that a well-subscribed
rights offering may reduce the Fund's expense ratio, which may be
of long-term benefit to shareholders. In addition, the Board of
Directors considered that such a rights offering could result in
an improvement in the liquidity of the trading market for shares
of the Fund's common stock on the New York Stock Exchange, where
the shares are listed and traded. The Board of Directors also
considered the proposed terms of the Offer, the expense of the
Offer, and its dilutive effect, including its effect on non-
exercising shareholders of the Fund. After careful
consideration, the Fund's Board of Directors unanimously voted to
approve the Offer.

Alliance and Orion, as well as the Dealer Manager in its
capacity as a provider of certain ongoing services with respect
to the Fund, will benefit from the Offer because their fees are
based on the average weekly net assets of the Fund. See
"Management of the Fund-Management and Administration
Arrangements" and "Distribution Arrangements."

The Fund may, in the future and at its discretion,
choose to make additional rights offerings from time to time for
a number of shares and on terms which may or may not be similar
to the Offer. Any such future rights offering will be made in

<PAGE>

accordance with the Investment Company Act of 1940, as amended
(the "1940 Act").

Terms of the Offer

The Fund is issuing to holders of its common stock, par
value $.01 per share (the "Common Stock"), of record on
[ ], 1995 non-transferable Rights to subscribe for an
aggregate of 1,987,637 Shares (2,484,546 Shares if the Fund
increases the number of Shares available by up to 25% pursuant to
the Over-Subscription Privilege). Each shareholder is being
issued one Right for each whole share of Common Stock owned on
the Record Date. The Rights entitle the holders thereof to
subscribe for one Share for every three Rights held (1 for 3).
Fractional Shares will not be issued upon the exercise of Rights.
Rights may be exercised at any time during the Subscription
Period, which commences on [ ], 1995 and ends at
5:00 p.m., New York City time, on [ ], 1995, unless
extended by the Fund until 5:00 p.m., New York City time, on a
date not later than [ ], 1995. A shareholder's right to
acquire during the Subscription Period at the Subscription Price
one Share for every three Rights held is hereinafter referred to
as the "Primary Subscription."

Any shareholder who fully exercises all Rights issued to
such shareholder pursuant to the Primary Subscription will be
entitled to request additional Shares at the Subscription Price
pursuant to the terms of the "Over-Subscription Privilege" (as
described below). Shares available, if any, pursuant to the
Over-Subscription Privilege are subject to allotment and may be
subject to increase, as is more fully discussed below under
"Over-Subscription Privilege." For purposes of determining the
maximum number of Shares a shareholder may acquire pursuant to
the Offer, broker-dealers whose Shares are held of record by Cede
& Co. ("Cede"), the nominee for The Depository Trust Company, or
by any other depository or nominee will be deemed to be the
holders of the Rights that are issued to Cede or such other
depository or nominee on their behalf.

As fractional Shares will not be issued, shareholders
who receive fewer than three Rights or have fewer than three
Rights remaining will be unable to purchase Shares upon the
exercise of such Rights and will not be entitled to receive any
cash in lieu thereof, although such shareholders may request
Shares pursuant to the Over-Subscription Privilege.

Shareholders will have no right to rescind their
subscriptions after receipt of their payment for Shares by the
Subscription Agent.

<PAGE>

Over-Subscription Privilege

To the extent shareholders do not exercise all Rights
issued to them pursuant to the Primary Subscription, any
underlying Shares represented by such Rights will be offered by
means of the Over-Subscription Privilege to shareholders who have
exercised all the Rights issued to them and who desire to acquire
additional Shares at the Subscription Price. Only shareholders
who exercise all such Rights issued to them may indicate on the
Subscription Certificate (as defined below) the number of
additional Shares desired pursuant to the Over-Subscription
Privilege. If sufficient Shares remain as a result of
unexercised Rights, all over-subscription requests will be
honored in full. If sufficient Shares are not available to honor
all over-subscription requests, the Fund may, at its discretion,
issue up to an additional 25% of the Shares available pursuant to
the Offer (up to 496,909 Shares) in order to cover such over-
subscription requests. Regardless of whether the Fund issues the
additional Shares, to the extent Shares are not available to
honor all over-subscriptions, the available Shares will be
allocated among those who over-subscribe based on the number of
Rights originally issued to them by the Fund, so that the number
of Shares issued to shareholders who subscribe pursuant to the
Over-Subscription Privilege will generally be in proportion to
the number of Shares owned by them on the Record Date. The
allocation process may involve a series of allocations in order
to assure that the total number of Shares available for over-
subscriptions is distributed on a pro rata basis. The issuance
of Shares in the Primary Subscription and pursuant to the Over-
Subscription Privilege is subject to certain conditions described
in "Description of Common Stock -- Certain Anti-Takeover
Provisions of the Articles of Incorporation and Bylaws."

The Fund will not offer or sell any Shares that are not
subscribed for pursuant to the Primary Subscription or the Over-
Subscription Privilege.

Subscription Price

The Subscription Price per Share for the Shares to be
issued pursuant to the Offer will be [ %] of the lower of
(i) the average of the last reported sales price of a share of
the Fund's Common Stock on the New York Stock Exchange on the
date of the expiration of the Offer (the "Pricing Date") and on
the four preceding business days and (ii) the net asset value per
share as of the close of business on the Pricing Date. For
example, if the average of the last reported sales price on the
New York Stock Exchange on the Pricing Date and on the four
preceding business days of a share of the Fund's Common Stock is
$15.00, and the net asset value is $13.00, the Subscription Price

<PAGE>

will be $[ ] ([ %] of $13.00). If, however, the
average of the last reported sales price of a share on that
exchange on the Pricing Date and on the four preceding business
days is $10.00, and the net asset value as of the close of
business on the Pricing Date is $12.00, the Subscription Price
will be $[ ] ([ %] of $10.00). See "Description of
Common Stock."

The Fund announced the Offer after the close of trading
on the New York Stock Exchange on August 16, 1995. The net asset
value per share of Common Stock at the close of business on
August 11, 1995 and [ ], 1995 was $12.66 and $[ ],
respectively, and the last reported sales price of a share of the
Fund's Common Stock on the New York Stock Exchange on those dates
was $11.25 and $[ ], respectively. On [ ], 1995, the
Fund's Common Stock was trading at a [discount] [premium] to its
net asset value.

Non-Transferability of Rights

The Rights are non-transferable and, therefore, may not
be purchased or sold. The Rights will not be admitted for
trading on the New York Stock Exchange. However, the Shares
issued pursuant to the exercise of Rights and the
Over-Subscription Privilege will be authorized for listing on the
New York Stock Exchange, subject to official notice of issuance.

Expiration of the Offer

The Offer will expire at 5:00 p.m., New York City time,
on [ ], 1995, unless extended by the Fund until
5:00 p.m., New York City time, to a date not later than
[ ], 1995. Any extension of the Offer will be followed
as promptly as practical by announcement thereof. Without
limiting the manner in which the Fund may choose to make such
announcement, the Fund will not, unless otherwise required by
law, have any obligation to publish, advertise or otherwise
communicate any such announcement other than by making a release
to the Dow Jones News Service or such other means of announcement
as the Fund deems appropriate. Rights will expire on the
Expiration Date and thereafter may not be exercised. Since the
Expiration Date and the Pricing Date will be the same date,
shareholders who decide to acquire Shares in the Primary
Subscription or pursuant to the Over-Subscription Privilege will
not know, when they make such decision, the purchase price for
such Shares.

<PAGE>

Subscription Agent

The Subscription Agent is State Street Bank and Trust
Company, which will receive, for its administrative, processing,
invoicing and other services as subscription agent, a fee
estimated to be $[ ] plus reimbursement for its out-of-
pocket expenses related to the Offer. The Subscription Agent is
also the Fund's Transfer Agent, Dividend-Paying Agent and
Registrar with respect to the Common Stock. Shareholder
communications should be directed to State Street Bank and Trust
Company, Two Heritage Drive, North Quincy, Massachusetts 02171
(telephone (800) 426-5523). Shareholders may also consult their
brokers or nominees for information. SIGNED SUBSCRIPTION
CERTIFICATES MUST BE SENT TO STATE STREET BANK AND TRUST COMPANY
by one of the methods described below. The Fund will accept only
Subscription Certificates or Notices of Guaranteed Delivery
received prior to 5:00 p.m., New York City time, on the
Expiration Date. See "Method of Exercising Rights" below.
Alternatively, a Notice of Guaranteed Delivery may also be sent
at any of the addresses listed.

(1) BY FIRST CLASS MAIL:

State Street Bank and Trust Company
Corporate Reorganization
P.O. Box 9061
Boston, MA 02205-8686
U.S.A.

(2) BY EXPRESS MAIL OR OVERNIGHT COURIER:

State Street Bank and Trust Company
Corporate Reorganization
Two Heritage Drive, MB2
North Quincy, MA 02171
U.S.A.

(3) BY HAND:

State Street Bank and Trust Company
Corporate Reorganization
225 Franklin Street-Concourse Level
Boston, MA 02110
U.S.A.
or
State Street Bank and Trust Company
Corporate Reorganization
61 Broadway-Concourse Level
New York, NY 10006
U.S.A.

<PAGE>

(4) BY FACSIMILE:
FOR NOTICE OF GUARANTEED DELIVERY ONLY

(617) 774-4519

Confirm facsimile by telephone
(617) 774-4511

Delivery to an address other than those above does not
constitute valid delivery.

Method of Exercise of Rights

The Rights are evidenced by subscription certificates
("Subscription Certificates"), which will be mailed to
shareholders as of the Record Date, except as discussed below
under "Foreign Restrictions." If a shareholder's shares are held
by Cede or any other depository or nominee on their behalf, the
Subscription Certificates will be mailed to Cede or such
depository or nominee. Rights may be exercised by completing and
signing the Subscription Certificate and mailing or otherwise
delivering it to the Subscription Agent at one of the addresses
set forth above together with payment for the Shares as described
below under "Payment for Shares." Rights may also be exercised by
contacting your broker, banker or trust company, which can
arrange, on your behalf, to guarantee delivery of payment and of
a properly completed and executed Subscription Certificate.
Fractional Shares will not be issued, and shareholders who
receive, or who have remaining, fewer than three Rights will not
be able to purchase any Shares upon the exercise of such Rights
(although such shareholders may subscribe for Shares pursuant to
the Over-Subscription Privilege). Completed Subscription
Certificates or Notices of Guaranteed Delivery must be received
by the Subscription Agent prior to 5:00 p.m., New York City time,
on the Expiration Date at one of the offices of the Subscription
Agent at one of the addresses set forth above.

Shareholders Who Are Registered Record Owners.
Shareholders who are registered record owners can choose between
either option set forth under "Payment for Shares" below. If a
shareholder who is a registered record owner chooses option (2)
below, an additional fee may be charged by the firm guaranteeing
delivery for this service. If time is of the essence, option (2)
will permit delivery of the Subscription Certificate and payment
after the Expiration Date.

Shareholders Whose Shares Are Held By A Nominee.
Shareholders whose shares are held by a nominee, such as a broker
or trustee, must contact that nominee to exercise their Rights.
In that case, the nominee will complete the Subscription
Certificate on behalf of the investor and arrange for proper

<PAGE>

payment by one of the methods set forth under "Payment for
Shares" below.

Nominees. Nominees who hold shares for the account of
others should notify the beneficial owners of such shares as soon
as possible to ascertain such beneficial owners' intentions and
to obtain instructions with respect to the Rights. If the
beneficial owner so instructs, the nominee should complete the
Subscription Certificate and submit it to the Subscription Agent
with the proper payment described under "Payment for Shares"
below.

Foreign Restrictions

Subscription Certificates will not be mailed to
shareholders whose addresses are outside the United States (for
these purposes the United States includes its territories and
possessions and the District of Columbia). The Rights to which
those Subscription Certificates relate will be held by the
Subscription Agent for such shareholders' accounts until
instructions are received to exercise the Rights.

Information Agent

Any questions or requests for assistance may be directed
to the Information Agent at its telephone number and address
listed below:

The Information Agent for the Offer is:

Shareholder
Communications Corporation

17 State Street
New York, New York 10004
Toll Free: (800) [ ], Extension [ ]

Shareholders may also contact their brokers or nominees
for information with respect to the Offer.

The Information Agent will receive a fee estimated to be
$[ ] plus reimbursement for its out-of-pocket expenses
related to the Offer.

Payment for Shares

Shareholders who acquire Shares during the Primary
Subscription or pursuant to the Over-Subscription Privilege may
choose between the following methods of payment:

<PAGE>

(1) A shareholder can send the Subscription Certificate,
together with payment for the Shares acquired during the Primary
Subscription and for additional Shares requested pursuant to the
Over-Subscription Privilege to the Subscription Agent,
calculating the total payment on the basis of an estimated
Subscription Price of $[ ] per share. To be accepted, such
payment, together with the executed Subscription Certificate,
must be received by the Subscription Agent at one of the
Subscription Agent's offices at the addresses set forth above
prior to 5:00 p.m., New York City time, on the Expiration Date.
A PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES
DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK LOCATED IN THE
UNITED STATES, MUST BE PAYABLE TO THE KOREAN INVESTMENT FUND,
INC. AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION CERTIFICATE FOR
SUCH SUBSCRIPTION CERTIFICATE TO BE ACCEPTED.

(2) Alternatively, subscription instructions will be
accepted by the Subscription Agent if, prior to 5:00 p.m., New
York City time, on the Expiration Date, the Subscription Agent
has received a Notice of Guaranteed Delivery by facsimile or
otherwise from a bank, trust company, or New York Stock Exchange
member guaranteeing delivery to State Street Bank and Trust
Company of (i) payment of the full Subscription Price for the
Shares subscribed for during the Primary Subscription and any
additional Shares subscribed for pursuant to the Over-
Subscription Privilege, and (ii) a properly completed and
executed Subscription Certificate. The Subscription Agent will
not honor a Notice of Guaranteed Delivery if a properly completed
and executed Subscription Certificate is not received by the
Subscription Agent by the close of business on the third business
day after the Expiration Date, [ ], 1995.

Within eight business days following the Expiration Date
(the "Confirmation Date"), [ ], 1995, unless the offer
is extended, a confirmation notice will be sent by the
Subscription Agent to each participating shareholder (or, if the
shareholder's Shares are held by Cede or any other depository or
nominee, to Cede or such depository or nominee), showing (i) the
number of Shares acquired pursuant to the Primary Subscription,
(ii) the number of Shares, if any, acquired pursuant to the Over-
Subscription Privilege, (iii) the per Share and total purchase
price for the Shares, and (iv) any additional amount payable by
such shareholder to the Fund or any excess to be refunded by the
Fund to such shareholder, in each case based on the Subscription
Price as determined on the Pricing Date. If any shareholder
exercises the right to acquire Shares pursuant to the Over-
Subscription Privilege, any such excess payment which would
otherwise be refunded to him will be applied by the Fund toward
payment for Shares acquired pursuant to exercise of the Over-
Subscription Privilege. Any additional payment required from a
shareholder must be received by the Subscription Agent within ten

<PAGE>

business days after the Confirmation Date, [ ], 1995,
unless the offer is extended. Any excess payment to be refunded
by the Fund to shareholders will be mailed by the Subscription
Agent to them as promptly as possible. All payments by a
shareholder must be in U.S. Dollars by money order or check drawn
on a bank located in the United States of America and payable to
The Korean Investment Fund, Inc.

The Subscription Agent will deposit all checks received
by it prior to the final due date into a segregated interest
bearing account (which interest will accrue to the benefit of the
Fund) at State Street Bank and Trust Company pending distribution
of the Shares.

Whichever of the two methods described above is used,
issuance and delivery of certificates for the Shares purchased
are subject to collection of checks and actual payment pursuant
to any Notice of Guaranteed Delivery.

Shareholders will have no right to rescind their
subscriptions after receipt of their payment for Shares by the
Subscription Agent.

If a shareholder who acquires Shares pursuant to the
Primary Subscription or Over-Subscription Privilege does not make
payment of any additional amounts due, the Fund reserves the
right to take any or all of the following actions: (i) sell such
subscribed and unpaid-for Shares to other shareholders,
(ii) apply any payment actually received by it toward the
purchase of the greatest whole number of Shares which could be
acquired by such holder upon exercise of the Primary Subscription
and/or Over-Subscription Privilege, and/or (iii) exercise any and
all other rights or remedies to which it may be entitled,
including, without limitation, set-off against payments actually
received by it with respect to such subscribed Shares and/or to
enforce the relevant guaranty of payment.

THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND
PAYMENT OF THE SUBSCRIPTION PRICE TO THE FUND WILL BE AT THE
ELECTION AND RISK OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT
IS RECOMMENDED THAT SUCH CERTIFICATES AND PAYMENT BE SENT BY
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED,
AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE
DELIVERY TO THE FUND AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR,
YOU ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS
OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.

All questions concerning the timeliness, validity, form
and eligibility of any exercise of Rights will be determined by

<PAGE>

the Fund, whose determinations will be final and binding. The
Fund in its sole discretion may waive any defect or irregularity,
or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or
accepted until all irregularities have been waived or cured
within such time as the Fund determines in its sole discretion.
The Fund will not be under any duty to give notification of any
defect or irregularity in connection with the submission of
Subscription Certificates or incur any liability for failure to
give such notification.

Notice of Net Asset Value Decline

The Fund has, pursuant to the Securities and Exchange
Commission's regulatory requirements, undertaken that, if
subsequent to [ ], 1995, the effective date of the
Fund's Registration Statement, the Fund's net asset value
declines more than 10% from its net asset value as of that date,
the Fund will suspend the Offer until it amends this Prospectus.
In such event, the Fund will notify shareholders of any such
decline and thereby permit them the opportunity to cancel their
subscription.

Delivery of Share Certificates

Except as noted below in this paragraph, share
certificates for all Shares acquired during the Primary
Subscription and pursuant to the Over-Subscription Privilege will
be mailed promptly after payment for the Shares subscribed for
has cleared. Participants in the Fund's Dividend Reinvestment
Plan (the "Plan") will have any Shares acquired during the
Primary Subscription or pursuant to the Over-Subscription
Privilege credited to their shareholder dividend reinvestment
accounts in the Plan. Share certificates will not be issued for
Shares credited to Plan accounts. Shareholders whose shares of
Common Stock are held of record by Cede or by any other
depository or nominee on their behalf or their broker-dealers'
behalf will have any Shares acquired during the Primary
Subscription or pursuant to the Over-Subscription Privilege
credited to the account of Cede or such other depository or
nominee.

Federal Income Tax Consequences of the Offer

For U.S. federal income tax purposes, neither the receipt nor the
exercise of the Rights by shareholders will result in taxable
income to holders of Common Stock, and no loss will be realized
if the Rights expire without exercise. A shareholder's holding
period for a Share acquired upon exercise of a Right begins with
the date of exercise. Unless a shareholder makes the election

<PAGE>

described below, a shareholder's basis for determining gain or
loss upon the sale of a Share acquired upon the exercise of a
Right will be equal to the sum of the Subscription Price per
Share and any servicing fee charged to the shareholder by the
shareholder's broker, bank or trust company. A shareholder's
gain or loss recognized upon a sale of a Share acquired upon the
exercise of a Right will be capital gain or loss (assuming the
Share is held as a capital asset at the time of sale) and will be
long-term capital gain or loss if the Share has been held at the
time of sale for more than one year.

The following portion of this discussion assumes that
the fair market value of the Rights upon the date of distribution
will be less than 15% of the fair market value of the Shares of
Common Stock outstanding on that date. A shareholder may elect
to allocate his basis in those Shares of the Fund which he
originally owned between such Shares and the Rights issued in the
Offer. This allocation is based upon the relative fair market
value of such Shares and the Rights as of the date of issuance of
the Rights. Thus, if such an election is made, the shareholder's
basis in the Shares originally owned will be reduced by an amount
equal to the basis allocated to the Rights. This election must
be made in a statement attached to the shareholder's federal
income tax return for the year in which the Offer occurs.
However, if an electing shareholder does not exercise the Rights,
no loss will be recognized and no portion of the shareholder's
basis in the Shares will be allocated to the unexercised Rights.
If an electing Shareholder does exercise the Rights, the basis of
any Shares acquired through exercise of the Rights will be
increased by the basis allocated to such Rights. Accordingly,
shareholders should consider the advisability of making the
election described above if the shareholder intends to exercise
the Rights.

The foregoing is a general summary of the applicable
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and U.S. Treasury regulations currently in effect, and
does not cover state or local taxes. The Code and regulations
are subject to change by legislative or administrative action.
Shareholders should consult their tax advisors regarding specific
questions as to federal, state or local taxes. See "Taxation" in
the SAI.

Employee Plan Considerations

Shareholders subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (including corporate
savings and 401(k) plans), Keogh Plans of self-employed
individuals and Individual Retirement Accounts (collectively,
"Benefit Plans") should be aware of the complexity of the rules
and regulations governing Benefit Plans and the penalties for

<PAGE>

noncompliance, and should consult their counsel and tax advisors
regarding the consequences under ERISA and the Code of their
exercise of the Rights.

Dilution and Effect of Non-Participation
in the Offer

Upon the completion of the Offer, shareholders who do
not fully exercise their Rights will own a smaller proportional
interest in the Fund than would be the case if the Offer had not
been made. In addition, because the Subscription Price of each
Share will be less than the current net asset value per share of
the Fund's Common Stock and because the Fund will incur expenses
in connection with the Offer, the Offer will result in a dilution
of net asset value per share for all shareholders, which will
disproportionately affect shareholders who do not exercise their
Rights. Although it is not possible to state precisely the
amount of such decrease in net asset value because it is not
known at the date of this Prospectus how many Shares will be
subscribed for, or what the Subscription Price will be, such
dilution might be substantial. For example, assuming all Rights
are exercised at the estimated Subscription Price per Share,
including up to an additional 25% of the Shares which may be
issued to satisfy over-subscriptions, the Fund's net asset value
as of [ ], 1995 of $[ ] per share would be
reduced by approximately $[0. ], or [ ]%. Expenses related to
the Offer will be borne by the Fund and will reduce the net asset
value of the Fund's Common Stock.

It is expected that no dividends or other distributions
will be payable with respect to the Shares offered hereby until
December 1995.

Important Dates to Remember

Event Date
--------------------------------------------------------
Record Date........................ , 1995
Subscription Period................ , 1995 -
, 1995

Expiration Date and Pricing Date... , 1995*
Subscription Certificates and
Payment for Shares Due+.......... , 1995*
Notices of Guaranteed Delivery
Due+............................. , 1995*
Payment for Guarantees of
Delivery Due..................... , 1995*

<PAGE>

Confirmation to Participants....... , 1995*
Final Payment for Shares........... , 1995*

* Unless the Offer is extended to a date not later than
[ ], 1995.

+ A shareholder exercising Rights must deliver either (i) a
Subscription Certificate and Payment for Shares or (ii) a
Notice of Guaranteed Delivery by [ ], 1995.

THE FUND

The Korean Investment Fund, Inc. is a non-diversified,
closed-end management investment company. The Fund's investment
objective is to seek long-term capital appreciation through
investment primarily in equity securities of Korean companies.
At April 30, 1995, approximately 100% of the Fund's net assets
were invested in equity securities of Korean companies. As a
matter of fundamental policy, the Fund, under normal
circumstances, invests at least 65% of its total assets in equity
securities of Korean companies. Equity securities include common
stocks, preferred stocks, rights or warrants to purchase common
or preferred stock and debt securities convertible into common or
preferred stock. The Fund defines Korean companies to be
entities (i) that are organized under the laws of Korea and
conduct business in Korea, (ii) that derive 50% or more of their
total revenues from business in Korea or (iii) the equity or debt
securities of which are traded principally in Korea. The Fund
may invest up to 25% of its total assets, to the extent permitted
by future Korean laws or regulations with respect to foreign
investment, in equity or debt securities for which there is no
ready market. The Fund may also invest up to 35% of its total
assets in nonconvertible debt securities provided that such
securities are rated BBB or higher by Standard & Poor's
Corporation ("S&P") or Baa or higher by Moody's Investors
Service, Inc. ("Moody's") or rated of equivalent credit quality
by an internationally recognized statistical rating organization
or, if not so rated, of equivalent credit quality as determined
by Alliance. Nonconvertible debt securities in which the Fund
may invest include U.S. Dollar or Won denominated debt securities
issued by the Korean government or Korean companies and
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Securities"). In
general, Korean law does not currently permit foreign investors
to acquire debt securities denominated in Won or stocks of
companies organized under the laws of Korea that are not listed
on the Korea Stock Exchange. See "Investment Objective and
Policies."

<PAGE>

Alliance Capital Management L.P., a Delaware limited
partnership listed on the New York Stock Exchange, serves as
investment manager and administrator to the Fund. Alliance is a
leading international investment manager supervising client
accounts with assets as of June 30, 1995 totaling more than $135
billion. See "Management of the Fund -- Management and
Administration Arrangements."

Orion Asset Management Co., Ltd., a Cayman Islands
corporation that is a wholly-owned subsidiary of Tong Yang
Securities Co., Ltd., a component member of a leading Korean
securities company, serves as investment manager to the Fund with
respect to its investments in Korean securities. See "Management
of the Fund-Management and Administration Arrangements."

The Fund was incorporated under the laws of the State of
Maryland on November 1, 1991 and is registered under the 1940
Act. It commenced investment operations on February 24, 1992
after an initial public offering of 4,200,000 shares of Common
Stock. The net proceeds of the offering were approximately
$46,900,000. On August 2, 1994, the Fund completed a rights
offering during which shareholders purchased 1,753,797 shares of
Common Stock, the net proceeds to the Fund of which were
approximately $21,809,340. The Fund's outstanding Common Stock
is listed and traded on the New York Stock Exchange under the
symbol "KIF." For the fiscal year ended April 30, 1995 the
average weekly trading volume of the Fund's shares was [ ]
shares and the aggregate net assets of the Fund at April 30, 1995
were $75,460,898. There are currently 5,962,912 shares of Common
Stock outstanding. The Fund's principal office is located at
1345 Avenue of the Americas, New York, New York 10105 and its
telephone number is (800) 247-4154.

USE OF PROCEEDS

Assuming all Shares offered hereby are sold at an
assumed Subscription Price of $[ ] per Share, the net
proceeds of the Offer are estimated to be $[ ] after
payment of the Dealer Manager and soliciting fees and estimated
offering expenses. Expenses related to the issuance of the
Shares will be borne by the Fund and will reduce the net asset
value of the Common Stock. If the Fund increases the number of
Shares subject to the Offer by 25%, or 496,909 Shares, in order
to satisfy over-subscriptions, the additional net proceeds will
be approximately $[ ]. The net proceeds will be
invested within six months following receipt by the Fund of
payment for the Shares in accordance with the Fund's investment
objective and policies. Pending such investment, the proceeds
may be invested in U.S. Dollar-denominated bank deposits, short-
term debt or money market instruments rated high quality by any
nationally recognized statistical rating service, or if not so

<PAGE>

rated, of equivalent investment quality as determined by
Alliance. All proceeds of the Offer will be paid to the Fund in
U.S. Dollars and, prior to investment in Won denominated
securities, will be converted into Won at prevailing rates.

NET ASSET VALUE AND MARKET PRICE INFORMATION

The outstanding shares of Common Stock of the Fund are
listed on the New York Stock Exchange. The following table
shows, for each fiscal quarter for the two most recently
completed fiscal years, (i) the high and low sales price per
share of Common Stock of the Fund, as reported in the
consolidated transaction reporting system, (ii) the net asset
value per share of the Fund as determined on the date closest to
each quotation, and (iii) the percentage by which the shares of
Common Stock of the Fund traded at a premium over, or discount
from, the Fund's net asset value per share represented by the
quotation.

<TABLE>
<CAPTION>
Premium (Or
Discount)
Market Price Net Asset Value Percentage
--------------- --------------- -----------------
Quarter Ended High Low High Low High Low
------------------ ------- ------- ------- ------- ------ ----------

<S> <C> <C> <C> <C> <C> <C>
April 30, 1993.... 12.500 10.125 10.40 9.50 17.79 6.97
July 31, 1993..... 13.250 11.125 10.84 10.09 21.44 11.75
October 31, 1993.. 13.500 10.750 10.58 9.41 24.05 12.92
January 31, 1994.. 18.500 12.375 12.43 11.57 44.81 9.21
April 30, 1994.... 17.250 11.875 13.28 12.51 30.23 (0.08)
July 31, 1994..... 16.375 13.125 13.75 13.47 19.09 (2.56)
October 31, 1994.. 15.125 13.500 14.36 13.82 5.33 (2.32)
January 31, 1995.. 14.375 11.625 15.12 14.52 (4.93) (19.94)
April 30, 1995.... 13.500 11.750 13.92 13.45 (3.02) (12.84)
July 31, 1995..... 12.875 11.250 13.04 12.58 (1.27) (10.57)

</TABLE>

During the first two years of the Fund's operations, the
Fund's shares generally traded at a price greater than the Fund's
net asset value per share. Since[ ], 1994, however,
the Fund's shares have generally traded at a discount from the
Fund's net asset value per share. At the close of business on
[ ], 1995, the Fund's net asset value was $[ ]
per share while the closing market price of the Common Stock on
the New York Stock Exchange was $[ ] per share.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

General

The investment objective of the Fund is to seek long-
term capital appreciation through investment primarily in equity
securities of Korean companies. Under normal circumstances, the
Fund invests at least 65% of its total assets in equity
securities of Korean companies. Equity securities include common
stocks, preferred stocks, rights or warrants to purchase common
or preferred stock and debt securities convertible into common or
preferred stock. The Fund defines Korean companies to be
entities (i) that are organized under the laws of Korea and
conduct business in Korea, (ii) that derive 50% or more of their
total revenues from business in Korea or (iii) the equity or debt
securities of which are traded principally in Korea. The Fund
invests in companies that, in the opinion of Alliance and Orion,
possess the potential for growth, including established companies
in rapidly growing industry sectors such as telecommunications,
electronics and consumer products. While investment in large
companies is emphasized, on occasion the Fund may invest in
smaller companies believed by Alliance and Orion to have growth
potential. See "Special Risk Considerations-Investment in
Securities of Smaller Companies." In particular, securities of
Korean companies that are believed to be the likely beneficiaries
of the emergence of new markets for their products are identified
for investment by the Fund. In addition, the Fund may not invest
more than 20% of its total assets in rights or warrants to
purchase equity securities. The Fund may invest up to 25% of its
total assets in securities which are not readily marketable.
Although the Fund is authorized to engage in various strategies
to hedge its portfolio against adverse changes in the
relationship between the U.S. Dollar and the Won, it is not
currently permitted to do so in Korea under Korean laws or
regulations (with certain limited exceptions) and there can be no
assurance that such strategies will become permissible and
available in Korea in the future. The Fund does not presently
intend to engage in these strategies outside of Korea.

The Fund's investment objective and its policy of
investing at least 65% of its total assets in equity securities
of Korean companies are fundamental and cannot be changed without
the approval of a majority of the Fund's outstanding voting
securities, which, as used in this Prospectus and the SAI, means
the lesser of (i) 67% of the shares represented at a meeting at
which more than 50% of the outstanding shares are present in
person or represented by proxy or (ii) more than 50% of the
outstanding shares. The Fund's investment policies that are not
designated fundamental policies may be changed by the Fund
without shareholder approval, but the Fund will not change its
investment policies without contemporaneous notice to its

<PAGE>

shareholders. The Fund is designed primarily for long-term
investment, and investors should not consider it a trading
vehicle. As with all investment companies, there can be no
assurance that the Fund's objective will be achieved.

The Fund may also invest up to 35% of its total assets
in nonconvertible debt securities, including U.S. Dollar or Won
denominated debt securities issued by the Korean government or
Korean companies and U.S. Government Securities. Korean law does
not currently permit foreign investors to acquire debt securities
denominated in Won, except for (i) non-guaranteed convertible
bonds which are issued in Korea by listed small- and medium-sized
companies and are listed on the Korea Stock Exchange (the
"Exchange") and (ii) certain government or public bonds which are
designated by the Securities and Exchange Commission of Korea
(the "KSEC") from time to time. At the present time, however,
foreign investors are permitted to invest in bonds with warrants,
depositary receipts and other debt securities (including floating
rate notes, bonds and commercial paper) issued by Korean
companies outside of Korea and denominated in currencies other
than the Won. The Ministry of Finance and Economy (the "MFE")
has announced a plan to permit foreign investors to make further
investments in Won denominated debt securities. See "The Korean
Securities Markets - Regulation of Foreign Investment." There can
be no assurance that such plan will be implemented. If, in the
future, other types of Won denominated debt securities become
permissible investments for foreign investors, the Fund may
invest in such securities. The Fund may invest in debt
securities rated BBB or higher by S&P or Baa or higher by Moody's
or rated of equivalent credit quality by another internationally
recognized statistical rating organization or, if not so rated,
of equivalent credit quality as determined by Alliance.
Securities rated Baa by Moody's are considered to have
speculative characteristics. Sustained periods of deteriorating
economic conditions or rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and
repay principal than in the case of higher-rated securities. The
Fund expects that it will not retain a debt security which is
downgraded below BBB or Baa or, if unrated, determined by
Alliance to have undergone similar credit quality deterioration,
subsequent to purchase by the Fund.

<PAGE>

equivalents denominated in U.S. Dollars or, if it becomes
permissible for the Fund to so invest, denominated in Won. The
Fund may also at any time, with respect to up to 35% of its total
assets, temporarily invest funds in U.S. Dollar-denominated money
market instruments as reserves for dividends and other
distributions to shareholders.

Securities Not Readily Marketable

The Fund may invest up to 25% of its total assets, to
the extent permitted by future Korean laws or regulations with
respect to foreign investment, in equity or debt securities for
which there is no ready market. The Fund may therefore not be
able to readily sell such securities. Such securities are unlike
securities that are traded in the open market and which can be
expected to be sold immediately if the market is adequate. The
sale price of securities that are not readily marketable may be
lower or higher than the Fund's most recent estimate of their
fair value. Generally, less public information is available with
respect to the issuers of these securities than with respect to
companies whose securities are traded on an exchange. Securities
not readily marketable are more likely to be issued by start-up,
small or family businesses and therefore subject to greater
economic, business and market risks than the listed securities of
more well-established companies. Adverse conditions in the
public securities markets may at certain times preclude a public
offering of an issuer's securities. While Korean law requires
registration with a government agency of a public offering or
secondary public distribution of securities, that law does not
contain restrictions like those contained in the United States
Securities Act of 1933 regarding the length of time the
securities must be held or manner of resale. There may be
contractual restrictions on the resale of securities.

Borrowing

The Fund may borrow from a bank or other entity in a
privately arranged transaction to the maximum extent permitted
under the 1940 Act but only in order to finance the repurchase of
its shares or to pay dividends for purposes of complying with the
Code. See "Special Risk Considerations-Borrowing" below,
"Description of Common Stock-Repurchase of Shares" below and
"Taxation-United States Federal Income Taxes-General" in the SAI.
The 1940 Act requires the Fund to maintain "asset coverage" of
not less than 300% of its "senior securities representing
indebtedness" as those terms are defined and used in the 1940
Act. In addition, the Fund may not pay any cash dividends or
make any cash distributions to shareholders if, after the
distribution, there would be less than 300% asset coverage of a
senior security representing indebtedness for borrowings
(excluding for this purpose certain evidences of indebtedness

<PAGE>

made by a bank or other entity and privately arranged, and not
intended to be publicly distributed). If, as a result of the
foregoing restriction or otherwise, the Fund were unable to
distribute at least 90% of its investment company taxable income
in any year, it would lose its status as a regulated investment
company for such year and become liable at the corporate level
for federal income taxes on its income for such year. See
"Taxation-United States Federal Income Taxes-General" in the SAI.
In the event of any borrowing from a Korean source, such
borrowing may be subject to any applicable Korean laws and
regulations.

The Fund may also borrow for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the
Fund. Such borrowings are not subject to the asset coverage
restrictions set forth in the preceding paragraph. See
"Investment Restrictions" in the SAI.

Investment in Other Investment Companies

The Fund may invest in the securities of other
investment companies that invest a substantial portion of their
assets in Korean securities to the extent permitted by the 1940
Act. Under the 1940 Act, the Fund may invest up to 10% of its
total assets in shares of other investment companies and up to 5%
of its total assets in any one investment company, provided that
the investment does not represent more than 3% of the voting
stock of the related acquired investment company. By investing
in an investment company, the Fund's shareholders will bear a
ratable share of the investment company's expenses, as well as
continue to bear the Fund's investment management and
administrative fees with respect to the amount of the investment.

Repurchase Agreements

<PAGE>

requires continual maintenance by its custodian of its account in
the Federal Reserve/Treasury Book Entry System of collateral in
an amount equal to, or in excess of, the resale price. In the
event a vendor defaults on its repurchase obligation, the Fund
might suffer a loss to the extent that the proceeds from the sale
of the collateral are less than the repurchase price. In the
event of a vendor's bankruptcy, the Fund might be delayed in, or
prevented from, selling the collateral for the Fund's benefit.
The Fund's Board of Directors has established procedures, which
are periodically reviewed by the Board, pursuant to which
Alliance monitors the creditworthiness of the institutions with
which the Fund enters into repurchase agreement transactions.

Other Investment Practices

General. Certain investment practices in which the Fund
is authorized to engage are not currently permitted in Korea
under Korean laws and regulations (with certain limited
exceptions). These investment practices include the purchase or
sale of put and call options, currency hedging techniques,
including currency options and futures, options on such futures
and forward foreign currency transactions, the selling of
securities short, the lending of portfolio securities, forward
commitments and standby commitment agreements. The Fund does not
presently intend to engage in these investment practices outside
of Korea. The Fund may engage in these investment practices in
Korea to the extent the practices become available in the future.
These investment practices and the risks involved in engaging in
such investment practices are described in the SAI.

Future Developments. The Fund may, following written
notice thereof to its shareholders, take advantage of investment
practices that are not presently contemplated for use by the Fund
or which are not currently available but which may be developed,
to the extent such practices are both consistent with the Fund's
investment objective and legally permissible for the Fund. Such
practices, if they arise, may involve risks which exceed those
involved in the various investment practices described in the
SAI.

SPECIAL RISK CONSIDERATIONS

The Fund is a closed-end investment company designed for
long-term investment and investors should not consider it a
trading vehicle. Shares of closed-end investment companies
frequently trade at a discount from net asset value. During the
first two years of the Fund's operations, the Fund's shares
generally traded at a price greater than the Fund's net asset
value per share. Since [ ], 1994, however, the
Fund's shares have generally traded at a discount from the Fund's
net asset value per share. As of [ ], 1995 the Fund's

<PAGE>

shares were trading at a [ ]% discount from net asset value.
The Fund cannot predict whether its shares of Common Stock will,
in the future, trade at, below or above net asset value. See
"Investment Objective and Policies." Investing in the Fund, which
invests in Korean securities, involves certain considerations set
forth below not usually associated with investing in U.S.
securities.

Relations with North Korea

Tensions between Korea and The Democratic People's
Republic of Korea ("North Korea") increased following the
announcement in March 1993 by North Korea of its intention to
withdraw from participation in the Nuclear Non-Proliferation
Treaty. Tensions have become further heightened during recent
months, both as a result of North Korea's uncertain status under
the Nuclear Non-Proliferation Treaty and its continuing refusal
to allow the International Atomic Energy Agency to conduct full
inspections of North Korea's nuclear facilities. North Korea's
lack of disclosure has raised significant concern that North
Korea now poses a nuclear threat to Korea. The International
Atomic Energy Agency has referred the issue to the United Nations
Security Council, which has issued two separate statements urging
North Korea to allow full inspections and suggesting that if
North Korea does not cooperate, further action, including
potential economic sanctions, will be taken.

Korea's President has approached both China and the
United States in an effort to seek their assistance in defusing
these tensions. The United States has announced its intention to
offer various economic and other inducements to North Korea for
regular nuclear inspections. These inducements could include a
joint United States-Korean offer to reduce forces in the
demilitarized zone between Korea and North Korea and other steps
to build mutual confidence if North Korea reciprocates.

The heightened tensions between Korea and North Korea
have depressed new foreign investment in Korea and the
availability of foreign financing for Korean companies, and the
uncertainty surrounding the situation may adversely affect the
economic climate in Korea. The tensions between North Korea and
Korea also may adversely affect both the prices of the Fund's
portfolio securities and the Fund's share price.

In addition, there are reports of increasing
militarization in North Korea, accompanied by a general economic
decline in that country. Military action or the risk of military
action or the economic collapse of North Korea could have a
material adverse effect on Korea, and consequently, on the
ability of the Fund to achieve its investment objective.

<PAGE>

Currency Fluctuation

Because the Fund's assets are invested in equity
securities of Korean companies and, to the extent permissible
under future Korean laws or regulations, in Won denominated fixed
income securities, and because the great majority of the Fund's
revenues are received in Won, the U.S. Dollar equivalent of the
Fund's net assets and distributions will be adversely affected by
reductions in the value of the Won relative to the U.S. Dollar to
the extent the Fund does not hedge against such reductions. Such
changes will also affect the Fund's income. If the value of the
Won falls relative to the U.S. Dollar between receipt of income
and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if the Fund
has insufficient cash in U.S. Dollars to meet distribution
requirements. Similarly, if the exchange rate for the Won
declines between the time the Fund incurs expenses in U.S.
Dollars and the time cash expenses are paid, the amount of Won
required to be converted into U.S. Dollars in order to pay
expenses in U.S. Dollars could be greater than the equivalent
amount of such expenses in Won at the time they were incurred.
Under current Korean laws and regulations, the Fund is permitted
to enter into forward contracts between the Won and other
currencies with Korean banks up to the amount of the Fund's
assets denominated in Won. The Fund does not presently intend to
enter into such forward contracts. In addition, the Fund is not
currently permitted under Korean laws or regulations to employ
certain other investment techniques in Korea which may be
designed principally to hedge against currency exchange rate
risks. The Fund does not presently intend to employ these
techniques outside of Korea. Accordingly, investors should
consider that the Fund presently will not hedge devaluations or
fluctuations in the value of the Won in determining whether to
invest in the Fund. See "Investment Objective and Policies-Other
Investment Practices" in the SAI for a discussion of the use,
risks and costs of the currency hedging techniques the Fund may
utilize, including currency options and futures, options on such
futures and forward foreign currency transactions.

The exchange rate for the Won at the end of each of the
past six years is set forth in the table under "The Republic of
Korea-Domestic Economy." For a more recent exchange rate, see the
inside front cover of this Prospectus.

Investment and Repatriation Restrictions

There are significant restrictions and controls on
foreign investment in the Korean securities markets. These
restrictions or controls may at times limit or preclude
investment in certain securities, which may adversely affect the
performance of the Fund. Beginning on January 3, 1992, the

<PAGE>

Korean securities markets were opened to general direct foreign
investment following the adoption and implementation by the KSEC
and the MFE of regulations (collectively, the "Foreign Investment
Regulations") that allow foreign investors to directly purchase
and sell equity shares on the Exchange, subject to certain
restrictions that are described below. Under the current Foreign
Investment Regulations, the percentage of each class of a
company's outstanding equity shares that may be held by a
particular foreign investor and by all foreign investors as a
group generally is limited to 3% and 15%, respectively. The 15%
limitation is, however, subject to reduction to 10% for
government designated public corporations ("public corporations")
with shares listed on the Exchange and no foreign investment is
permitted in shares of Korean companies designated as "general
telecommunications service providers" under the
Telecommunications Business Law. In addition, Korean law
provides that public corporations may impose stricter limits on
foreign ownership of their shares and a limit on ownership of
their shares by a single investor (Korean or foreign) in their
articles of incorporation. The articles of incorporation of
Korea Electric Power Corporation ("KEPCO") and Pohang Iron &
Steel Co., Ltd. ("POSCO"), the two largest Korean companies
listed on the Exchange, set a 1% ceiling on acquisition by a
single foreign or Korean investor of the shares of their
respective common stock (together with certain holdings by
specially related persons). Further, the KSEC is authorized to
increase or decrease the 15% limitation, and it has acknowledged
several exceptions for companies whose shares are held by
foreigners under the Foreign Capital Inducement Act or certain
sections of the Foreign Exchange Management Regulations and for
companies which have issued equity related securities outside of
Korea. The Korean government has announced its intention to
gradually further raise the 15% foreign investment limitation.
If and when the 15% limitation is raised, the Fund may have more
flexibility in selecting investments for its portfolio. There
can be no assurance that the 15% limitation will be raised. The
Korean government has implemented a system to monitor foreign
investment limits and transactions.

Under the Foreign Exchange Management Act, if the MFE
deems that certain emergency circumstances are likely to occur,
including but not limited to, sudden fluctuation in interest
rates or exchange rates, extreme difficulty in stabilizing the
balance of payments or substantial disturbance in the Korean
financial and capital markets, the MFE may impose any
restrictions it deems necessary such as requiring foreign
investors, including the Fund, to obtain approval prior to the
acquisition of Korean equity securities or for the remittance of
sales proceeds overseas. The MFE has the authority, with prior
public notice of scope and duration, to suspend all or part of
foreign exchange transactions when emergency measures are deemed

<PAGE>

necessary in case of a radical change in the international or
domestic economic situation. To date, the MFE has not exercised
this authority.

There can be no assurance that the Foreign Investment
Regulations adopted to permit direct foreign investment in shares
traded on the Exchange and the repatriation of funds so invested
will enable the Fund to continue to make investments in a manner
consistent with its investment objective and policies. The
limitations on individual and aggregate holdings by foreign
investors may preclude the Fund from making particular
investments or may limit the size of investments that may be
made. Furthermore, these limitations, as well as purchasing
programs by other foreign investors, could substantially increase
the prices of portfolio securities to the Fund over the prices
that would be paid by Korean investors. The same factors could
lengthen the time period required to fully invest the proceeds of
the Offer in Korean securities.

It is impossible to predict the extent to which foreign
investment will continue to increase in Korea or the Fund's
ability to participate in such increased foreign investment in
light of the foreign holding limitations or governmental
restrictions that may be imposed in the future. As of
December 31, 1994, approximately US $18.95 billion had been
invested in Korea by foreign investors since January 1992.

Foreign investors are prohibited from engaging in
purchase transactions on the Exchange in a security that has
reached or exceeded the maximum aggregate foreign ownership
limit. As of June 30, 1995, of the 30 largest Exchange-listed
companies (as measured by total market capitalization), which
accounted for approximately 53% of the aggregate market
capitalization of the Exchange, 97 had reached the applicable
maximum aggregate foreign ownership limit. At such date, 97 of
the 877 companies listed on the Exchange had reached the
applicable maximum aggregate foreign ownership limit (11.06% of
all companies listed on the Exchange). Approximately [ ]
additional companies were within 1% of the limit at such date.
Currently, the information regarding the number of shares of a
class of each listed company available for investment by an
individual foreign investor and foreign investors in the
aggregate and the classes of shares of each listed company for
which the aggregate foreign ownership limit has been reached is
available from Korean securities companies. Foreign investors
are, however, allowed to effect transactions with other foreign
investors in the class of shares of companies that have reached
or exceeded the maximum aggregate foreign ownership limit off the
Exchange through a securities company in Korea (including
branches in Korea of foreign securities companies) or an
intermediary. However, foreign investors are not permitted to

<PAGE>

enter into such transactions with branches and subsidiaries of
foreign banks, securities companies and insurance companies
(collectively, "foreign financial institutions") and certain
residents of Korea. Such transactions ("OTC transactions")
generally occur at a premium over prices on the Exchange. The
Fund invests in equity securities of Exchange-listed companies
through such OTC transactions, and thus pays premiums over the
share prices quoted on the Exchange, which premium can be
substantial. There can be no assurance that the Fund will be
able to realize such premiums if it sells the shares to another
foreign investor. Such premiums may be affected by changes in
regulation, changes in the supply of or demand for shares and
otherwise, including changes in the percentage of foreign
ownership permitted in Exchange-listed companies.

Market Characteristics

The Korean securities markets, while relatively small as
compared to the securities markets of the United States, Japan
and certain European countries, have, with the exception of 1990
and 1991, been generally characterized by gradual and consistent
growth. The development of the Korean securities markets may be
attributed to, among other things, the Korean government's
extensive involvement in the private sector, including the
securities markets. The aggregate market capitalization of
domestic equity securities listed on the Exchange was
approximately W 151,217 billion (approximately US $191.7 billion)
at December 31, 1994, as compared to US $4.4 trillion on the New
York Stock Exchange and US $3.6 trillion on the Tokyo Stock
Exchange. As discussed above in "Investment and Repatriation
Restrictions," however, only a small portion of the equity
securities that compose this market capitalization may be
purchased by foreign investors.

Market capitalization along with trading volume is
concentrated in a limited number of companies within a small
number of industries. The Korean government has from time to
time taken measures to minimize excessive price volatility on the
Exchange, including the imposition of limitations on daily price
movements of securities and varying margin requirements. Such
actions by the Korean government have had and in the future could
have a significant effect on the market prices and dividend
yields of Korean equity securities. In particular, during 1990
the Korea Securities Market Stabilization Fund (the
"Stabilization Fund"), a partnership operated by its contributors
which include substantially all Exchange-listed companies, Korean
securities companies and certain institutional investors, was
formed to stabilize the market through the purchase and sale of
securities. In January and February 1994, the Stabilization Fund
sold approximately W 500 billion (approximately US $618 million)
and approximately W 300 billion (approximately US $371 million)

<PAGE>

worth of equity securities, respectively. Future liquidations of
the Stabilization Fund's portfolio could exert significant
downward pressure on the market price of Exchange-listed
securities in which the Fund may invest. In addition, any
purchases by the Stabilization Fund could reduce the shares
available for investment by foreign investors such as the Fund or
retard a decline in the market price of Exchange-listed
securities. As of [ ], 1995, the Stabilization Fund
held cash reserves of approximately W [ ] trillion and owned
Korean securities with a value of approximately W [ ] trillion
constituting, in the aggregate, approximately [ ]% of the total
listed equity market capitalization of W [ ] trillion as of
that date. By virtue of its Charter, the Stabilization Fund is
due to be liquidated in May 1996. The Korean government recently
announced that it is considering the liquidation mechanics which
might minimize downward pressure on the market.

Under the Foreign Investment Regulations, a foreign
investor must appoint one or more standing proxies from among the
Korea Securities Depository, securities firms (including Korean
branches of foreign securities firms) which have obtained a
license to act as a standing proxy and banks (including Korean
branches of foreign banks) to exercise shareholders' rights,
apply to change a name on the shareholders' registry, place an
order to sell or purchase shares or engage in any matters related
to these activities, if any such activities are not conducted by
the foreign investor itself. The Fund has appointed a subsidiary
of the Fund's subcustodian as a standing proxy. Because the Fund
will be engaged in transactions with several Korean brokers, it
may need to appoint a number of standing proxies to efficiently
conduct its trading activities. Each such standing proxy
appointed will receive a commission for its services. If a
standing proxy other than the Fund's custodian or subcustodian
were deemed to have custody over certain assets of the Fund, the
Fund may be required to obtain relief from the United States
Securities and Exchange Commission or a waiver or modification of
the standing proxy requirement from the KSEC. There can be no
assurance that such relief, waiver or modification will be
obtained.

There are currently a limited number of securities firms
engaged in securities underwriting and trading in Korea. Tong
Yang Securities frequently manages underwritten offerings of debt
and equity securities of Korean issuers. The Fund is prohibited
by the 1940 Act from purchasing any securities in an offering for
which Tong Yang Securities is the principal underwriter and,
under current Korean laws and regulations, is prohibited from
participating in initial public offerings of securities with a
few exceptions. Tong Yang Securities may also be a dealer in
various securities in which the Fund may invest. In the absence
of exemptive relief, the Fund will not purchase or sell

<PAGE>

securities from or to Tong Yang Securities in principal
transactions or purchase securities in secondary offerings in
which Tong Yang Securities is an underwriter. The Fund does not
currently intend to apply for such exemptive relief. The
underwriting and trading activities of Tong Yang Securities,
however, as well as its investment positions, could adversely
affect the availability of securities the Fund is seeking to
purchase or the demand for securities the Fund is seeking to
sell.

Government Involvement in the Private Sector

The Korean government has historically exercised and
continues to exercise substantial influence over many aspects of
the private sector including the securities markets. The Korean
government from time to time has informally influenced the
payment of dividends and the prices of certain products,
encouraged companies to invest or to concentrate in particular
industries, induced mergers between companies in industries
suffering from excess capacity and induced private companies to
publicly offer their securities. Certain government actions
could have a greater adverse impact on foreigners, such as the
Fund, than on Korean nationals. The effect of future government
actions on the Fund cannot be predicted.

Corporate Disclosure Standards

Issuers of securities in Korea are not subject to the
same degree of regulation as are U.S. issuers with respect to
such matters as insider trading rules, restrictions on market
manipulation, shareholder proxy requirements and timely
disclosure of information. Korean accounting, auditing and
financial standards are not equivalent to United States standards
in important respects and, therefore, less information is
generally available to investors in publicly-traded Korean
securities than to investors in publicly-traded U.S. securities.

Transaction Costs

Maximum brokerage commission rates have been established
by regulations of the Exchange. There is generally no deviation
in commission rate schedules among Korean brokers. Brokerage
commissions and transaction costs for transactions both on and
off the Exchange are generally higher than in the United States.

United States and Foreign Taxes

Korean taxes paid by the Fund may be creditable or
deductible by U.S. shareholders for U.S. income tax purposes. No
assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-

<PAGE>

U.S. investors may not be able to credit or deduct such foreign
taxes. Investors should review carefully the information
discussed under the heading "Taxation" herein and in the SAI and
should discuss with their tax advisers the specific tax
consequences of investing in the Fund.

Other Risks of Foreign Investment

The economy of an individual foreign country may differ
favorably or unfavorably from the U.S. economy in such respects
as growth of gross domestic product or gross national product,
rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position. For example, the
Korean economy is heavily dependent upon international trade and,
accordingly, has been and may continue to be adversely affected
by economic conditions in the U.S. and other countries with which
it trades, trade barriers, managed adjustments in the value of
the Won and other protectionist measures imposed or negotiated by
the U.S. and other countries with which it trades.

The Fund's portfolio investments in Korea may be
adversely affected by nationalization, expropriation or
confiscatory taxation, currency blockage, political changes,
government regulation, social instability or diplomatic
developments.

Investment in Securities of Smaller Companies

While investment in large companies is emphasized, on
occasion the Fund may invest in smaller companies believed by
Alliance or Orion to have growth potential. Investment in
smaller companies involves greater risk than is customarily
associated with the securities of more established companies.
The securities of smaller companies may have relatively limited
marketability and may be subject to more abrupt or erratic market
movements than securities of larger companies or broad market
indices.

Securities Not Readily Marketable

Although the Fund invests primarily in listed securities
of established companies, it may, to the extent permitted by
future Korean laws and regulations, invest up to 25% of its total
assets in securities which are not readily marketable and which
may involve a high degree of business and financial risk that can
result in substantial losses. Because of the absence of a
trading market for these investments, the Fund may not be able to
realize their value upon sale. See "Investment Objective and
Policies-Securities Not Readily Marketable."

Dilution and the Effect of Non-Participation in the Offer

<PAGE>

Upon the completion of the Offer, shareholders who do
not fully exercise their Rights will own a smaller proportional
interest in the Fund than would be the case if the Offer had not
been made. In addition, an immediate dilution of the net asset
value per share will be experienced by all shareholders as a
result of the Offer because the Subscription Price will be less
than the then current net asset value per share, the Fund will
bear the expenses of the Offer and the number of shares
outstanding after the Offer will have increased proportionately
more than the increase in the size of the Fund's net assets.
Although it is not possible to state precisely the amount of such
a decrease in value, because it is not known at this time how
many Shares will be subscribed for or what the Subscription Price
will be, such dilution might be substantial. For example, if the
Subscription Price per share is $[ ], representing a price
that is [ ]% of an assumed net asset value per share of $[ ],
assuming that all Rights are exercised, including an additional
25% of the Shares which may be issued to satisfy over-
subscriptions, the Fund's net asset value per share would be
reduced by approximately $[0. ] per share. If, on the other
hand, the Subscription Price represents a price that is less than
[ ]% of the Fund's then net asset value, which would be the case
if the Subscription Price is set at a time when the market price
per share is lower than the net asset value per share, the
dilution would be greater. For example, if the Subscription
Price per share is $[ ], representing a price which is only
[ ]% of the net asset value per share, assuming that all Rights
are exercised, including an additional 25% of the Shares which
may be issued to satisfy over-subscriptions, the Fund's net asset
value per share would be reduced by approximately $[0. ] per
share. The foregoing examples assumed Subscription Prices of
$[ ] and $[ ], respectively per Share. However, the actual
Subscription Price may be greater or less than such assumed
Subscription Price. This dilution of net asset value per share
will disproportionately affect shareholders who do not exercise
their Rights.

Non-Diversified Status

The Fund is classified as a "non-diversified" investment
company under the 1940 Act, which means the Fund is not limited
by the 1940 Act in the proportion of its assets that may be
invested in the securities of a single issuer. However, the Fund
has conducted and intends to continue to conduct its operations
so as to qualify as a "regulated investment company" for purposes
of the Code, which will relieve the Fund of any liability for
federal income tax to the extent that its earnings are
distributed to shareholders. See "Taxation-United States Federal
Income Taxes-General" in the SAI. To so qualify, among other
requirements, the Fund will limit its investments so that, at the
close of each quarter of the taxable year, (i) not more than 25%

<PAGE>

of the market value of the Fund's total assets will be invested
in the securities of a single issuer or a group of related
issuers (other than U.S. Government Securities or securities of
other regulated investment companies) and (ii) at least 50% of
the market value of its assets is represented by cash, U.S.
Government Securities, securities of other regulated investment
companies, and other securities with respect to which the Fund's
investment is limited in respect of any one issuer to an amount
not greater than 5% of the market value of the Fund's total
assets and 10% of the outstanding voting securities of any single
issuer. Because the Fund, as a non-diversified investment
company, may invest in a smaller number of individual issuers
than a diversified investment company, an investment in the Fund
presents greater risk to an investor than an investment in a
similar diversified company.

Borrowing

The Fund may borrow from a bank or other entity in a
privately arranged transaction to the maximum extent permitted
under the 1940 Act, but only to finance the repurchase of its
shares or to pay distributions for purposes of complying with the
Code. Borrowing creates an opportunity for the Fund to finance
the limited activities described above without the requirement
that portfolio securities be liquidated at a time when it would
be disadvantageous to do so. Any investment income or gains on,
or savings in transaction costs made through the retention of,
portfolio securities in excess of the interest paid on and the
other costs of the borrowings will cause the net income or net
asset value per share of the Fund's Common Stock to be greater
than would otherwise be the case. On the other hand, if the
income or gain, if any, on the securities retained fails to cover
the interest paid on and the other costs of the borrowing, the
net income or net asset value per share of the Fund's Common
Stock will be less than would otherwise be the case. In the
event of any borrowing from a Korean source, such borrowing may
be subject to any applicable Korean laws and regulations.

MANAGEMENT OF THE FUND

Board of Directors

The management of the Fund, including general
supervision of the duties performed by Alliance and Orion, is the
responsibility of its Board of Directors. Although the Fund is a
Maryland corporation, certain of its Directors and officers are
residents of Korea, and substantially all of the assets of such
persons may be located outside of the United States. As a
result, it may be difficult for United States investors to effect
service of process upon such Directors or officers within the
United States or to realize judgments of courts of the United

<PAGE>

States predicated upon civil liabilities of such Directors or
officers under the federal securities laws of the United States.
The Fund has been advised that there is substantial doubt as to
the enforceability in Korea of such civil remedies and criminal
penalties as are afforded by the federal securities laws of the
United States. There is no extradition treaty currently in
effect between the United States and Korea. It is unclear if any
future extradition treaty in effect between the United States and
Korea would subject such Directors and officers to effective
enforcement of the criminal penalties of the federal securities
laws. For certain information regarding the Directors and
officers of the Fund, see "Management of the Fund-Directors and
Officers" in the SAI.

Management and Administration Arrangements

Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under
an investment management and administration agreement (the
"Management and Administration Agreement") to serve as investment
manager and administrator to the Fund. Orion Asset Management
Co., Ltd., a Cayman Islands corporation with principal offices at
780 Third Avenue, New York, New York 10017, has been retained
under an investment management agreement (the "Management
Agreement") to serve as investment manager to the Fund with
respect to the Fund's investments in Korean securities. The
employees of Alliance and Orion who have been principally
responsible for the Fund's portfolio investment decisions are
Mr. A. Rama Krishna since March 1993 and Mr. In Kee Oh since May
1995. Mr. Krishna is Vice President of Asian Equity Research of
Alliance and of Alliance Capital Management (Japan) Inc.
Mr. Krishna has been associated with Alliance since March 1993.
Previously, Mr. Krishna was Chief Investment Strategist and
Director of Equity Research for CS First Boston Corporation since
prior to 1990. Mr. Oh is a Director of Orion with which he has
been associated since October 1991. Previously, Mr. Oh was an
Analyst in the New York and Seoul, Korea offices of Tong Yang
Securities since prior to 1990.

Alliance is a leading international investment manager
supervising client accounts with assets as of June 30, 1995
totaling more than $135 billion (of which approximately $44
billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds and included, as of June 30,
1995, 29 of the FORTUNE 100 Companies. As of that date, Alliance
and its subsidiaries employed approximately 1,350 employees
operating out of domestic offices and the overseas offices of
subsidiaries in Bombay, Istanbul, London, Sydney, Tokyo, Toronto,

<PAGE>

Bahrain, Luxembourg and Singapore. The 51 registered investment
companies comprising 103 separate investment portfolios managed
by Alliance currently have more than one million shareholders.

Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect, wholly-owned subsidiary of
The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of June 30, 1995,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, owned
approximately 59% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interest in Alliance ("Units"). As of June 30, 1995,
approximately 33% and 8% of the Units were owned by the public
and employees of Alliance and its subsidiaries, respectively,
including employees of Alliance who serve as Directors of the
Fund.

Orion is a wholly-owned subsidiary of Tong Yang
Securities, a listed company which was established in 1962 and is
a component member of a leading Korean securities company. Tong
Yang Securities is part of the Tong Yang Group, which is a group
of affiliated companies based in Korea which have operations in
the basic industrial, foods, merchandising and service and
finance industries. Tong Yang Group has one of the most broadly
diversified groups of financial services companies in Korea. At
June 30, 1995, the aggregate assets of the Tong Yang Group
exceeded $[ ] billion and it employed over [ ] persons.
Tong Yang Securities and its affiliates manage funds and accounts
with approximately $[ ] million invested in Korean equity
securities as of June 30, 1995. Orion, as an affiliate of Tong
Yang Securities, has access to its resources and research
capabilities. To the extent that certain of the directors and
officers of Orion are residents of Korea, and substantially all
of their assets may be located outside of the United States, it
may be difficult for United States investors to effect service of
process upon such directors or officers within the United States
or to realize judgments of courts of the United States predicated
upon civil liabilities of such directors or officers under the
federal securities laws of the United States. The Fund has been
advised that there is substantial doubt as to the enforceability
in Korea of such civil remedies and criminal penalties as are
afforded by the federal securities laws of the United States.
There is no extradition treaty currently in effect between the
United States and Korea. It is unclear if any future extradition
treaty in effect between the United States and Korea would

<PAGE>

subject such directors and officers to effective enforcement of
the criminal penalties of the federal securities laws.

The Management and Administration Agreement between the
Fund and Alliance provides that Alliance will furnish investment
advice and recommendations to the Fund as described above and
will also furnish administrative, legal, accounting and
bookkeeping, internal auditing and other such services to the
Fund under the Management and Administration Agreement. Alliance
also provides office space in New York, order placement
facilities and persons satisfactory to the Fund's Board of
Directors to act as officers and employees of the Fund. Such
officers and employees, as well as certain Directors of the Fund,
may be employees of Alliance or directors, officers or employees
of its affiliates. Under the Management and Administration
Agreement and the Management Agreement (collectively, the
"Agreements"), Alliance and Orion have established a joint
working relationship with respect to the Fund's investments in
Korean securities. Under the Management and Administration
Agreement, the Fund pays monthly to Alliance a fee at an
annualized rate of .85% of the Fund's average weekly net assets.
Under the Management Agreement, the Fund pays monthly to Orion a
fee at an annualized rate of .40% of the Fund's average weekly
net assets.

For purposes of the calculation of the fees payable to
Alliance and Orion, average weekly net assets are determined on
the basis of the average net assets of the Fund for each weekly
period (ending on Friday) ending during the month. The net
assets for each weekly period are determined by averaging the net
assets on Friday of such weekly period with the net assets on
Friday of the immediately preceding weekly period. When a Friday
is not a Fund business day, then the calculation will be based on
the net assets of the Fund on the Fund business day immediately
preceding such Friday. The aggregate fees payable by the Fund to
Alliance and Orion are higher than those paid by most U.S.
investment companies investing exclusively in securities of U.S.
issuers, although Alliance believes they are generally comparable
to those paid by other closed-end investment companies of
comparable size that invest primarily in the securities of
issuers in a single foreign country. In addition to payments to
Alliance under the Management and Administration Agreement and to
Orion under the Management Agreement, the Fund pays certain other
costs.

Each of the Agreements by its terms continues in effect
from year to year if such continuance is specifically approved,
at least annually, by a majority vote of the Directors who
neither are interested persons of the Fund nor have any direct or
indirect financial interest in the Agreement, cast in person at a
meeting called for the purpose of voting on such approval.

<PAGE>

THE KOREAN SECURITIES MARKETS

Background and Development

The Korean securities markets have developed largely as
a result of measures of the Korean government designed to
stimulate the Korean economy and investment in Korea. The
Exchange was established in 1956, at which time it functioned
primarily as a market for the trading of Korean government bonds,
with only 12 equity securities listed for trading. It was not
until the Korean government enacted the first economic
development plan in 1962 that the securities markets began to
develop. During the 1960's, the Korean government enacted
legislation which provided tax and other incentives to both
issuers and buyers of equity securities. The securities markets
developed more fully during the 1970's pursuant to further
governmental measures which, among other things, empowered the
Korean government to induce corporations to publicly offer their
securities and list their shares on the Exchange. In 1976, the
Korean Securities and Exchange Law (the "Korean Securities Law")
was amended to provide for, among other things, the establishment
of the KSEC and its executive body, the Securities Supervisory
Board (the "Securities Board").

Government Involvement in the Private Sector

The Korean government has historically exercised and
continues to exercise substantial influence over many aspects of
the private sector including the securities markets. The Korean
government from time to time has influenced the payment of
dividends and the prices of certain products, encouraged
companies to invest in or to concentrate in particular
industries, induced mergers between companies in industries
suffering from excess capacity and induced private companies to
publicly offer their securities. The Exchange has also sought to
minimize excessive price volatility through various steps,
including the imposition of limitations on daily price movements
of securities.

In August 1993, the Korean government introduced a real-
name financial transactions system. Financial institutions are
required to confirm, whenever they enter into financial
transactions with their clients, that those clients are using
their real names. The system was introduced to increase
disclosure in financial transactions and is expected by the
government to enhance the integrity and efficiency of the Korean
financial markets.

<PAGE>

Regulation of Foreign Investment

The Korean securities markets have historically been
closed to foreign investors. In 1981, however, the MFE announced
the intention to gradually internationalize the Korean securities
markets. Since then, the Korean government has progressively
implemented steps to liberalize foreign investment in the Korean
securities markets. At the present time, however, foreign
investors, including the Fund, are not permitted to make direct
or indirect investments in Won denominated debt securities,
except for certain convertible bonds and public bonds. The MFE
has recently announced a plan to permit foreign investors to make
certain limited investments in Won denominated debt securities.
Foreign investors currently may not participate in the purchase
of shares through initial public offerings and there are no
current proposed regulations that would permit this type of
investment.

Since January 3, 1992, the Korean stock markets have
been open to general direct foreign investment following the
adoption and implementation by the KSEC and MFE of the Foreign
Investment Regulations. These regulations allow foreign
investors to directly purchase and sell equity shares on the
Exchange, subject to certain restrictions that are described
below and in the SAI. Under the Foreign Investment Regulations
as amended, the percentage of each class of a company's
outstanding equity shares that may be held by a particular
foreign investor and by all foreign investors as a group is
generally limited to 3% and 15%, respectively. In December 1994,
the Korean government announced that it will continue to raise
the 15% foreign investment limitation. If, and when, the 15%
limitation is raised, the Fund may have more flexibility in
selecting investments for its portfolio. There can be no
assurance that the 15% limitation will be raised.

In December 1994, the MFE announced a three-phase plan
to be implemented during the period from 1995 to 1999 to
liberalize foreign exchange transactions, including further
opening of the securities markets to foreign investors. In the
plan, the government announced its intention to gradually raise
the ceilings on investments by foreign investors in companies
listed on the Exchange. The plan provides for the further
opening of the debt securities market step-by-step, by way of
indirect investment in debt securities through Korean investment
in long-term non-guaranteed bonds, together with the issuance in
Korea of Won-denominated or foreign-currency-denominated debt
securities by foreign entities. The plan also provides for the
easing of requirements for the establishment of Korean branches
of foreign securities companies and for further opening of the
securities industry to foreign participants. The plan also

<PAGE>

provides for Korean investors to be permitted more opportunities
to invest directly and indirectly in foreign securities.

The Korea Stock Exchange

The Exchange is Korea's sole securities exchange and has
its trading floor in Seoul. The Exchange, which has been a non-
profit member organization since 1988, is currently owned by 33
member securities companies. Both equity and debt securities are
traded on the Exchange, although equity securities account for
most of the Exchange's trading activity. Equity securities
listed on the Exchange are divided into two separate trading
sections based on, among other things, the total number of shares
held by minority shareholders and the monthly average trading
volume. See "The Korean Securities Markets--The Korea Stock
Exchange--Listing, Reporting and Disclosure Requirements" in the
SAI.

Transactions on the Exchange may only be effected
through securities companies that are members of the Exchange.
Securities companies that wish to engage in securities dealing,
brokering or underwriting in Korea must be licensed by the MFE.
Currently all 33 members of the Exchange are licensed in all
three categories. Financial intermediaries including banks,
investment trust companies, short-term finance companies and
merchant banking corporations are not eligible for membership on
the Exchange. However, they may engage in underwriting upon
obtaining a license from the MFE.

Regulation. The MFE establishes the basic policies
governing the overall operation of the Korean securities markets.
Although the KSEC is authorized to regulate and make decisions on
all major issues relating to the securities markets pursuant to
the Korean Securities Law, all decisions of the KSEC must be
reported to the MFE. The MFE may repeal any decision of the KSEC
or suspend its enforcement. The KSEC is composed of nine
commissioners, one of whom is appointed as chairman by the
President. The day-to-day management and implementation of the
policies of the KSEC are conducted by the Securities Board.

<PAGE>

without the need for physical delivery of securities
certificates, and provided a statutory basis for futures trading
on the Exchange. In addition, the 1987 amendments strengthened
control over insider trading and contained extensive new
provisions which, for the first time, regulate the investment
advisory business. The 1991 amendments introduced stricter
restrictions on insider trading and supplemented the existing
disclosure system. The Korean Securities Law was further amended
in January 1994, to permit listed companies to hold their own
shares subject to certain limitations, improve the central
depository system and securities dispute conciliation committee,
strengthen the reporting requirements imposed on shareholders
holding 5% or more of the issued and outstanding voting shares of
a listed company, and expand the scope of dissenting shareholders
entitled to request that the issuer purchase their shares under
certain circumstances, including at the time of merger or
business transfer, to include holders of non-voting shares. The
January 1994 amendments also lifted the 10% beneficial ownership
limitation on the acquisition of voting shares of a listed
company (with effect from January 1, 1997). The Korean
Securities Law and regulations promulgated thereunder currently
require the initial registration of companies and the filing of
separate registration statements for both initial and subsequent
public issues of securities and provide for the administration
and supervision of securities companies, investment advisory
companies, listed companies, and other securities-related
institutions, including foreign securities firms conducting
business in Korea and domestic securities companies conducting
business abroad.

Securities Financing. The Korea Securities Finance
Corporation (the "KSFC"), which was established in 1955 to
facilitate financing in the securities markets, is the only
institution specializing in securities financing in Korea. The
KSFC provides loans to underwriting groups and securities
collateral loans to the public. In March 1986 the KSFC suspended
credit extension for margin transactions as one measure to
stabilize the securities markets. Korean securities companies
may extend credit for margin transactions and provide for their
clients subscription loans, purchase loans and securities
collateral financing by using their own resources or by borrowing
from the KSFC.

The margin requirement as set by the KSEC is [40]% of
the total of the sale value of the securities purchased. The
margin requirements are varied by the KSEC depending upon market
conditions. Foreign investors, including the Fund, are not
permitted to engage in margin transactions or enjoy the benefit
of other loans or financing.

<PAGE>

The Korea Securities Market Stabilization Fund

The Stabilization Fund, a partnership operated by its
contributors, which include substantially all of the Exchange-
listed companies, Korean securities companies and certain
institutional investors including banks and insurance companies,
was formed during 1990 to stabilize the market through the
purchase and sale of securities. In August 1992, the MFE asked
the Stabilization Fund, together with banks, insurance companies
and pension funds, to purchase an additional W 3.9 trillion worth
of stock in the succeeding twelve months. In January and
February 1994, the Stabilization Fund sold approximately W 500
billion (approximately US $618 million) and approximately W 300
billion (approximately US $371 million) worth of equity
securities, respectively. As of [ ], 1995, the
Stabilization Fund held cash reserves of approximately W [ ]
trillion and owned Korean securities with a value of
approximately W [ ] trillion constituting, in the aggregate,
approximately [ ]% of the total listed equity market
capitalization of W[ ] trillion as of that date. The
Stabilization Fund's securities holdings, cash balances and
trading activities are not publicly disclosed. By virtue of its
charter, the Stabilization Fund is due to be liquidated by May
1996. The Korean government recently announced that it is
considering the liquidation mechanics which might minimize
downward pressure on the market.

Market Capitalization and Trading Volume

The following table sets forth the number of listed
issues, listed companies, market capitalization and trading
volume of listed Korean equity securities for 1982 through 1994.

<PAGE>

<TABLE>
<CAPTION>
Number of
Listed Number of
Equity Listed Equity Trading Volume
Issues Companies Market Capitalization on the Exchange
__________ _________ _____________________ ______________________
(Won billions) (US $ millions) (Won billions) (US $ millions)

1982.. 416 334 3,001 4,008 1,974 2,700

1983.. 422 328 3,490 4,387 1,753 2,260

1984.. 455 336 5,149 6,223 3,118 3,869

1985.. 414 342 6,570 7,380 3,621 4,162

1986.. 485 355 11,994 13,924 9,598 10,890

1987.. 603 389 26,172 33,033 20,494 24,915

1988.. 970 502 64,544 94,349 58,122 79,460

1989.. 1,284 626 95,477 140,490 81,200 120,931

1990.. 1,115 669 79,020 110,302 53,455 75,527

1991.. 1,013 686 73,118 96,107 62,565 85,314

1992.. 1,014 688 84,712 107,448 90,624 116,088

1993.. 1,045 693 112,665 139,419 169,918 211,691

1994.. 1,089 699 151,217 191,729 229,772 291,330
<FN>

Sources: Korea Stock Exchange, Stock, June 1995; Securities
Supervisory Board, Monthly Review, June 1995.
</TABLE>

<PAGE>

The Korea Composite Stock Price Index

Market performance of the Exchange is measured by a
composite index and several additional indices based on the first
and second trading sections of the Exchange, industry sectors and
the capitalization of individual stocks. The Korea Composite
Stock Price Index (the "KOSPI") is the major measure of changes
in the aggregate market value of all common stocks listed on the
Exchange. Under the current aggregate market value method of
computing the KOSPI, the market price of each listed common stock
is multiplied by the number of shares listed and then aggregated.

The KOSPI rose to an all-time high of 1138.75 on
November 8, 1994. During 1994, the KOSPI traded within a range
of 855.37 to 1138.75. The KOSPI closed on August 12, 1995 at
910.03.

Options and Futures

Currently, the Korean securities markets do not provide
mechanisms for the purchase and sale of options and futures
contracts. However, the Exchange announced that it plans to open
a stock index futures market during 1996 and a stock index
futures option market during 1997.

Equity Securities

The Primary Market. The primary market for equity
securities in Korea has generally been characterized by
consistent and significant growth. A downward trend in the
number of primary equity offerings began in 1990, however, and
continued through 1994.

Privatizations. As part of its program for the
development of the securities markets, the Korean government has
sold portions of certain government-owned corporations to the
public. These sales were intended to increase the participation
of low and middle-income investors in the Korean securities
markets. Participation was encouraged through government-
provided discounts and loans. The sale by the Korean government
of a portion of its interest in POSCO and KEPCO in 1988 and 1989,
respectively, constituted the first public offerings under this
program. In 1991, Korea Exchange Bank, formerly wholly-owned by
the Korean government, sold its newly issued shares to the
public. The Korean government recently sold to the public a
portion of its interest in Korea Telecom, which is the largest
telecommunications service provider in Korea, through a
competitive bidding process. The Korean government recently
announced that it is considering the sale of additional

<PAGE>

government-owned corporations although any such sale would be
subject to a number of factors and there can be no assurance that
such sale will occur.

The aggregate market capitalization of all equity
securities of the 699 companies listed on the Exchange as of
December 31, 1994 was approximately W 151.2 trillion
(approximately US $191.7 billion). As of May 31, 1995, the
market capitalization had decreased to W 133.4 trillion. Market
capitalization, along with trading volume, is concentrated in a
limited number of companies within a small number of industries.
As of December 31, 1994, the 30 largest companies by market
capitalization represented 49.0% of the total market
capitalization of Korean equity securities and the 30 most
actively traded domestic equity securities accounted for 26.43%
of total trading volume of domestic equity securities for the
year ended December 31, 1994.

Bond Market

The Korean listed bond market is less developed than the
market for listed equity securities. The official Korean bond
market was established in 1968 pursuant to the Capital Market
Promotion Act to promote the development of the bond and equity
markets. The Korean bond market is comprised of corporate bonds
issued by Korean corporations and public bonds including
government bonds, municipal bonds issued by city governments and
special bonds issued by government-run corporations. The
majority of corporate bonds are guaranteed by banking
institutions.

The secondary market in bonds listed on the Exchange has
been relatively inactive compared to equity securities listed on
the Exchange. There is also an active over-the-counter market in
certain non-listed bonds. Currently, foreign investors are not
permitted to invest in listed or unlisted Won denominated bonds,
except for certain convertible bonds and public bonds; however,
Korean branches and subsidiaries of certain foreign financial
institutions are generally permitted to invest in listed Won
denominated bonds.

<PAGE>

THE REPUBLIC OF KOREA

Background

Government. Governmental authority in Korea is highly
centralized and is concentrated in a strong presidency. The
current President is Kim Young Sam, who was elected in December
1992. President Kim has emphasized reform and liberalization of
politics and deregulation and revitalization of the economy of
Korea.

Legislative power is vested in the National Assembly.
Approximately four-fifths of the members of the National Assembly
are elected by popular vote for a term of four years. The
remaining seats are generally distributed proportionately among
parties winning 5% or more of votes or 5 or more seats in the
direct election. The National Assembly enacts laws and approves
treaties and the national budget. Judicial power in Korea is
vested in the Supreme Court, the Constitutional Court and other
lower courts at various levels.

International Relations. Korea maintains diplomatic
relations with most nations, but its strongest ties are with the
United States. Korea and the United States have entered into
several agreements designed to promote Korea's economy and a
mutual defense treaty. Korea also maintains strong ties with
Japan which constitutes Korea's leading source of imported
capital goods, technology and foreign direct investment and which
provides 49% of foreign visitors to Korea. Since the beginning
of 1989, Korea has established diplomatic relations with
Bulgaria, the Czech Republic, Slovakia, Hungary, Mongolia,
Poland, Romania, Russia, the Federal Republic of Yugoslavia and
Croatia. A Chinese trade office was established in Seoul in
April 1991, and diplomatic relations with the People's Republic
of China were officially established in August 1992.

Relations between Korea and North Korea have been tense
since the end of World War II. North Korea maintains a regular
army estimated at close to one million, compared with the Korean
army of 633,000. The majority of both forces are concentrated on
either side of the demilitarized zone in a state of military
readiness. The United States maintains a military force of
approximately 36,000 in Korea.

Tension between Korea and North Korea was temporarily
eased in 1972 when the first moves towards conciliation and
eventual reunification were initiated. On December 13, 1991, the
leaders of North Korea and Korea signed an Agreement on
Reconciliation, Nonaggression and Exchange and Cooperation. This
agreement was put into force on February 19, 1992. As discussed
above under "Special Risk-Considerations--Relations with North

<PAGE>

Korea," tensions between North Korea and Korea increased
following the announcement in March 1993 by North Korea of its
intention to withdraw from participation in the Nuclear Non-
Proliferation Treaty. Korea's relations with North Korea have
been further strained in recent months due to its uncertain
status under the Nuclear Non-Proliferation Treaty and its
continuing refusal to allow full inspections of its nuclear
facilities by officials of the International Atomic Energy
Agency.

Domestic Economy

Korean industry and commerce are predominately privately
owned and operated. However, the Korean government is heavily
involved in establishing economic policy objectives and
implementing such policies with a view toward maintaining
national security, encouraging industrial development and
improving living standards. Economic, financial and business
priorities can be influenced by the Korean government through its
controls of approvals and licenses and through the allocation of
credit. However, such government influence has gradually
diminished through deregulation and market self-regulation, in
keeping with Korea's liberalization policy.

Primary responsibility for formulating Korea's economic
policies, including the development and implementation of a
series of successive economic and social development plans (the
"Economic Plans") which have guided economic policy since 1962,
is with the government's Economic Planning Board, headed by the
Deputy Prime Minister. The emphasis of the Economic Plans has
changed from the development of import substitution industries
and the infrastructure to a focus on economic stabilization,
liberalization of the economy, reduction of restrictions on
direct foreign investment and improvements in social conditions.
Since the establishment of the Economic Plans, Korea has made
significant progress toward the transformation of its economy
from one characterized by agricultural production and the export
of raw materials, textiles and clothing to that of a modern
industrial state. Korea's exports now include ships, motor
vehicles, integrated circuits and consumer electronics. In early
1993, the Korean government announced economic reform and
development programs to be implemented in a new Five Year
Economic Plan for the period through 1997. Pursuant to this
plan, the government will promote fiscal, financial and
administrative reforms and changes in prevailing patterns of
economic behavior. The new plan is also intended to promote
stable growth and globalization of the Korean economy and to
improve the quality of life in Korea.

<PAGE>

The following table sets forth certain indicators of
economic activity in Korea from 1989 to 1994.

<TABLE>
<CAPTION>
Year Ended December 31
_____________________________________________________________________
1989 1990 1991 1992 1993 1994(1)
____ ____ ____ ____ ____ ____

<S> <C> <C> <C> <C> <C> <C>
Gross National Product at Constant 1990
Market Prices (Won billions)............... 162,683.7 178,262.1 194,458.8 204,231.0 216,162.4 233,940.2
Percentage Increase of GNP over Previous
Year at Constant 1990 Market Prices........ 6.9% 9.6% 9.1% 5.0% 5.6% 8.2%
Exports FOB (U.S. $ millions).............. 62,377.2 65,015.7 71,870.1 76,631.5 82,235.9 96,013.2
Imports CIF (U.S. $ millions).............. 61,464.8 69,843.7 81,524.9 81,775.3 83,800.1 102,348.2
Total Official Reserves (U.S. $ millions).. 15,245.2 14,822.4 13,733.0 17,153.9 20,262.4 25,672.7
Exchange rate (in Won per Dollar).......... 679.6 716.4 760.8 788.4 808.1 788.7

<FN>
____________________
(1) Preliminary

Source: The Bank of Korea, Monthly Bulletin, April 1995; National
Statistical Office, Monthly Statistics of Korea, April 1995.
</TABLE>

Energy

Korea is heavily dependent on imported oil to meet its
energy requirements. The performance of the Korean economy is,
therefore, broadly affected by the price of oil, resulting in
high inflation when world oil prices have risen sharply. Any
significant long-term increase in the price of oil may increase
inflationary pressures on the Korean economy and adversely affect
Korea's balance of trade. See "Foreign Trade and Balance of
Payments-Foreign Trade" in the SAI.

To reduce its dependence on oil imports, the Korean
government encouraged efforts to implement an energy source
diversification program, with primary emphasis on nuclear energy.
Korea's first nuclear power plant went into full operation on
March 3, 1978 with a rated generating capacity of 587 megawatts.
The total Korean nuclear power generating capacity at the end of
1994 was 58,650 megawatts, accounting for 35.5% of total annual
power generation.

<PAGE>

The Financial Sector

Korea's financial sector has developed along with the
economy and today comprises a banking system, a range of non-
banking financial institutions and the securities markets.

In addition to the officially regulated financial
institutions described above, there has been an unofficial money
market or "curb" market which consists of individual brokers and
professional money lenders who make or arrange loans to business
borrowers. The curb market is significantly less important now
than it was several years ago. The increase in interest rates on
officially regulated markets, the increase in number of lending
institutions, and increased price stability, as well as steps
taken by the government, have contributed to the substantial
decline of the curb market.

The Bank of Korea, which was established in 1950, is
Korea's central bank and sole currency issuing bank. Monetary
and credit policies of The Bank of Korea are formulated and
controlled by a nine-member Monetary Board comprised of the MFE,
the Governor of The Bank of Korea and seven other members. The
Monetary Board regulates the activities of banking institutions
and sets and implements monetary policy.

Although The Bank of Korea has primary responsibility
for monetary policy, the Korean government, through the MFE,
exerts considerable influence on monetary policy. For example,
the MFE has the power to request the reconsideration of
resolutions adopted by the Monetary Board and, if such a request
is rejected by the Monetary Board, the President has the
authority to override the Monetary Board's decision.

Effective December 5, 1988, the Korean government
deregulated interest rates on loans (other than loans entailing
government subsidies) and deposits (including money market
instruments such as certain categories of commercial paper,
certificates of deposit, bank debentures, corporate bonds, cash
management accounts and development trust funds, but excluding
traditional time deposits and savings deposits).

In August 1991, the Monetary Board adopted a four-stage
interest rate deregulation plan in furtherance of the

<PAGE>

deregulation process. Pursuant to such plan, in 1991 the Korean
government deregulated interest rates on other financial
products, including certain time deposits.

On June 30, 1993, the MFE announced a three-phase
liberalization plan. The principal proposals under such phase
relate to further interest rate deregulation, improvement of
monetary control measures and the development of money markets,
improvement of credit control management, and foreign exchange
and capital market liberalization. Each area of deregulation is
to be phased in under three stages from 1993 to 1997.

In November 1994, the government announced a plan for
the deregulation of interest rates, which accelerates the
government's 1991 plan to reduce the use of direct intervention
as a means of implementing monetary policy. In accordance with
the 1991 plan, at the end of 1993, all restrictions on interest
rates for loans, (other than Bank of Korea-supported policy
loans), long-term (not less than two years) deposits, certain
short-term money market instruments, short-term (less than two
years) corporate and financial debt, monetary stabilization bonds
and public bonds were lifted. The 1994 plan provides that in
1995 interest rates will be liberalized for other short-term
money market instruments and Bank of Korea-supported policy
loans, in 1996 interest rates will be liberalized for all
deposits other than demand deposits, and beginning in 1997
limitations on interest rates for demand deposits gradually will
be lifted.

Foreign Trade and Balance of Payments

Korea's trade balance has been highly sensitive to world
crude oil prices. The balance of trade in 1990, 1991 and 1992
was adversely affected by increases in oil prices, increased
imports of machinery and other capital goods and consumer goods,
the economic recession in countries constituting important
markets for Korean exports, principally the United States, and
increased competition for Korea's exports in certain markets,
principally exports to Japan from other Asian countries. The
balance of trade could continue to be adversely affected if,

<PAGE>

among other things, Korea's trading partners increased barriers
against imports, prices for essential natural resources imported
by Korea increased or the economic slowdown continued in
countries constituting important markets for Korean exports.

Exchange Controls. Only authorized banks are permitted
to effect foreign exchange transactions. Approval by the MFE is
required to become an authorized bank.

Authorization or approval, either by the MFE, The Bank
of Korea or authorized banks, as appropriate, is necessary for
overseas remittances, issuance of international bonds and certain
other instruments, overseas investments and other transactions
involving foreign exchange payments in conformity with the
foreign exchange control regulations unless such authorization or
approval is expressly exempted under the regulations.

Foreign Exchange

Prior to 1989, The Bank of Korea set daily exchange
rates for the Won based on a trade-weighted multi-currency basket
system. This rate was known as The Bank of Korea concentration
base rate. In 1989, the Korean government announced a three-
phase plan to produce a free-floating exchange rate system. The
first phase allowed the domestic banks to decide buying and
selling rates of foreign exchange within narrow limits of The
Bank of Korea concentration base rate. In the second phase,
which took effect in March 1990, the trade-weighted multi-
currency basket system was replaced by a system whereby the
foreign exchange rates are determined by averaging the previous
day's inter-bank rates settled through the Korean
Telecommunications and Clearings Institute, weighted by trading
volume. This system is known as the market average exchange rate
system. Under this system, foreign exchange rates are permitted
to move each day within narrow ranges on either side of the
market average exchange rates published daily by the Korea
Financial Telecommunications and Clearings Institute. The
government recently announced that it would decide whether to
introduce a free-floating exchange rate system during 1996 and
1997 after considering trends in the international monetary
system.

The market average exchange rate for the Won as of a
recent date is set forth on the inside cover page of this
Prospectus.
NET ASSET VALUE

The Fund calculates and makes available for weekly
publication the net asset value of its shares of Common Stock.
Net asset value per share of Common Stock is determined by adding

<PAGE>

the market value of all securities in the Fund's portfolio and
other assets, subtracting liabilities accrued, and dividing by
the total number of the Fund's shares of Common Stock then
outstanding.

All securities listed on the Exchange for which market
quotations are readily available, including those traded by
foreign investors in OTC transactions at a premium over prices on
the Exchange, are valued at the closing price on the Exchange on
the day of valuation or, if no such closing price is available,
at the last bid price quoted on such day. Other securities for
which market quotations are readily available will be valued in a
like manner. Options will be valued at such market value or fair
value if no market exists. Futures contracts will be valued in a
like manner, except that open futures contracts sales are valued
using the closing settlement price or, in the absence of such a
price, the most recent quoted asked price. If there are no
quotations available for the day of valuation, the last available
closing price will be used. However, readily marketable fixed
income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed by Alliance to
reflect the fair market value of such securities. The prices
provided by a pricing service take into account institutional
size, trading in similar groups of securities and any
developments related to specific securities. Securities and
assets for which market quotations are not readily available
(including investments that are subject to limitations as to
their resale) are valued at fair value as determined in good
faith by the Fund's Board of Directors. In making this
determination, the Board of Directors considers, among other
things, publicly available information regarding an issue, recent
transactions in the issuer's securities, market conditions and
values ascribed to comparable companies in Korea.

Short-term debt securities that mature in less than 60
days are valued at amortized cost if their term to maturity from
date of purchase was less than 60 days, or by amortizing their
value on the 61st day prior to maturity if their term to maturity
from date of purchase when acquired by the Fund was more than 60
days, unless such amortized cost is determined by the Board of
Directors not to represent fair value.

For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in Won
or other foreign currencies are converted into U.S. Dollars at
the mean of the current bid and asked prices of such currency
against the U.S. Dollar last quoted by a major bank that is a
regular participant in the foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks.

<PAGE>

DIVIDEND REINVESTMENT PLAN

Pursuant to the Fund's Dividend Reinvestment Plan (the
"Plan") all shareholders whose shares are registered in their own
names will have all distributions reinvested automatically in
additional shares of the Fund by State Street Bank and Trust
Company (the "Agent"), as agent under the Plan, unless a
shareholder elects to receive cash. Shareholders whose shares
are held in the name of a broker or nominee will automatically
have distributions reinvested by the broker or the nominee in
additional shares under the Plan, unless the shareholder elects
to receive distributions in cash. If the service is not
available, such distributions will be paid in cash. See
"Dividend Reinvestment Plan" in the SAI.

The Agent has furnished each shareholder with written
information relating to the Plan. Included in such information
are procedures for electing to receive dividends and
distributions in cash (or, in the case of shares held in the name
of a broker or a nominee who does not participate in the Plan,
for electing to participate in the Plan). Shareholders whose
shares are held in the name of a broker or nominee should contact
the broker or nominee for details. All distributions to
investors who elect not to participate in the Plan will be paid
by check mailed directly to the record holder by or under the
direction of State Street Bank and Trust Company, as the
dividend-paying agent.

If the Board declares an income distribution or
determines to make a capital gain distribution payable either in
shares or in cash, as holders of the shares may have elected,
non-participants in the Plan will receive cash and participants
in the Plan will receive the equivalent in shares of the Fund
valued as follows:

(i) If the shares are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund
will issue new shares at the greater of net asset value or 95% of
the then current market price.

(ii) If the shares are trading at a discount from net
asset value at the time of valuation, the Agent will receive the
dividend or distribution in cash and apply it to the purchase of
the Fund's shares in the open market, on the New York Stock
Exchange or elsewhere, for the participants' accounts. Such
purchase will be made on or shortly after the payment date for
such dividend or distribution and in no event more than 30 days
after such date except where temporary curtailment or suspension
of purchase is necessary to comply with Federal securities laws.
If, before the Agent has completed its purchases, the market
price exceeds the net asset value of a share of Common Stock, the

<PAGE>

average purchase price per share paid by the Agent may exceed the
net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if the dividend or distribution
had been in shares issued by the Fund.

There is no charge to participants for reinvesting
dividends and capital gains distributions. The fees of the Agent
for handling the reinvestment of dividends and capital gains
distributions are paid by the Fund. There are no brokerage
charges with respect to shares issued directly by the Fund as a
result of dividends or capital gains distributions payable either
in shares or in cash. However, each participant will bear a pro-
rata share of brokerage commissions incurred with respect to the
Agent's open market purchases in connection with the reinvestment
of dividends or capital gains distributions paid in cash.

The automatic reinvestment of income and capital gains
distributions will not relieve participants of any income tax
that may be payable on such income and capital gains
distributions. The federal income tax treatment of reinvestment
is described in the SAI under "Taxation."

All correspondence concerning the Plan should be
directed to the Agent at State Street Bank and Trust Company, at
P.O. Box 1713, Boston, Massachusetts 02105. For a more complete
description of the Plan, see "Dividend Reinvestment Plan" in the
SAI.

TAXATION

The Fund intends to continue to qualify and elect to be
treated as a "regulated investment company" under the Code. The
Fund intends to make timely distributions of the Fund's taxable
income (including any net capital gain) so that the Fund will not
be subject to federal income or excise taxes. However, Korean
exchange control or other regulations on the repatriation of
investment income, capital or the proceeds of securities sales by
non-Korean individuals or entities may limit the Fund's ability
to make distributions sufficient in amount to avoid being subject
to one or both of such federal taxes. It is anticipated that a
portion of the distributions of the Fund's taxable income will be
taxable as ordinary income to holders of the Fund's shares
("Holders") who are citizens or residents of the United States or
United States corporations ("United States Holders") and a
portion will be taxable as long-term capital gain. After the end
of each taxable year, the Fund will notify United States Holders
of the United States federal income tax status of any
distributions made by the Fund to such Holders during such year.

<PAGE>

Dividends and interest received by the Fund in respect
of Korean securities will also be subject to Korean income taxes,
including withholding taxes. Interest on foreign-currency
denominated bonds issued by Korean entities will be exempt from
Korean income taxes, including withholding taxes, until December
31, 1998 by virtue of the Korean Tax Exemption and Reduction
Control Law of 1993, as amended, and it is not certain whether
such exemption will be extended. Pursuant to a ruling issued by
the MFE interpreting the income tax treaty between the United
States and Korea (the "Korean Tax Treaty"), capital gains derived
by the Fund upon the sale of stock or other securities of Korean
corporations will be exempt from any Korean withholding tax as
long as all of the Fund's shares are listed solely on recognized
United States stock exchanges and traded by general investors on
such exchanges. At present, all of the Fund's shares are listed
solely on the New York Stock Exchange and the shares of the Fund
are traded on such stock exchange by general investors within the
meaning of the MFE's ruling. The Board of Directors has no
intention of authorizing the listing of the shares on any other
stock exchange. The Korean tax treatment described above could
change in the event of changes in Korean or United States tax
laws or changes in the terms of, or the interpretation by the
Korean tax authorities of, the Korean Tax Treaty.

DESCRIPTION OF COMMON STOCK

The Fund is authorized to issue 100,000,000 shares of
Common Stock, par value $.01, per share, of which 5,962,912
shares were outstanding as of June 30, 1995. The Fund's shares
of Common Stock have no preemptive, conversion, exchange or
redemption rights. Each share of Common Stock has equal voting,
dividend, distribution and liquidation rights. The shares of
Common Stock outstanding are, and the Shares when issued will be,
fully paid and nonassessable. Shareholders are entitled to one
vote per share. All voting rights for the election of Directors
are noncumulative, which means that the holders of more than 50%
of the shares can elect 100% of the Directors then nominated for
election if they choose to do so and, in such event, the holders
of the remaining shares of Common Stock will not be able to elect
any Directors. The foregoing description and the description
under "Certain Anti-Takeover Provisions of the Articles of
Incorporation and Bylaws" are subject to the provisions contained
in the Fund's Articles of Incorporation and Bylaws.

The Fund has no present intention of offering additional
shares of Common Stock, except under the Plan and in connection
with the Offer. See "Dividend Reinvestment Plan." Other
offerings of the Fund's shares of Common Stock, if made, will
require approval of its Board of Directors. Any additional
offering of Common Stock will be subject to the requirement of

<PAGE>

the 1940 Act that shares may not be sold at a price below the
then current net asset value, exclusive of sales load, except in
connection with an offering to existing shareholders or with the
consent of the holders of a majority of the Fund's outstanding
voting securities.

Certain Anti-Takeover Provisions of the Articles of Incorporation
and Bylaws

The Fund presently has provisions in its Articles of
Incorporation and Bylaws (together, the "Charter Documents") that
are intended to limit (i) the ability of other entities or
persons to acquire control of the Fund, (ii) the Fund's freedom
to engage in certain transactions or (iii) the ability of the
Fund's Directors or shareholders to amend the Charter Documents
or effect changes in the Fund's management. These provisions of
the Charter Documents may be regarded as "anti-takeover"
provisions. The Board of Directors is divided into three
classes, each having a term of three years. At each annual
meeting of shareholders, the term of one class of Directors
expires. Accordingly, only those Directors in one class may be
changed in any one year, and it would require two years to change
a majority of the Board of Directors (although under Maryland law
procedures are available for the removal of Directors even if
they are not then standing for re-election, and under Securities
and Exchange Commission regulations, procedures are available for
including shareholder proposals in management's annual proxy
statement). Such system of electing Directors is intended to
have the effect of maintaining the continuity of management and,
thus, make it more difficult for the Fund's shareholders to
change the majority of Directors. A director may be removed from
office only by a vote of at least 75% of the outstanding shares
of Common Stock of the Fund entitled to vote for the election of
Directors. Under Maryland law and the Fund's Articles of
Incorporation, the affirmative vote of the holders of a majority
of the votes entitled to be cast is required for the
consolidation of the Fund with another corporation, a merger of
the Fund with or into another corporation (except for certain
mergers in which the Fund is the successor), a statutory share
exchange in which the Fund is not the successor, a sale or
transfer of all or substantially all of the Fund's assets, the
dissolution of the Fund and any amendment to the Fund's Articles
of Incorporation. The affirmative vote of 75% (which is higher
than that required under Maryland law or the 1940 Act) of the
outstanding shares of Common Stock of the Fund is required to
authorize the liquidation or dissolution of the Fund in the
absence of approval of the liquidation or dissolution by a
majority of the Continuing Directors of the Fund (defined for
this purpose as those Directors who were either members of the
Board of Directors on the date of closing of the initial offering

<PAGE>

of the shares of the Fund's Common Stock or subsequently became
Directors and whose election was approved by a majority of the
Continuing Directors then on the Board). In addition, the
affirmative vote of 75% (which is higher than that required under
Maryland law or the 1940 Act) of the outstanding shares of Common
Stock of the Fund is required generally to authorize any of the
following transactions involving a corporation, person or entity
that is directly, or indirectly through affiliates, the
beneficial owner of more than 5% of the outstanding shares of the
Fund (a "Principal Shareholder"), or to amend the provisions of
the Articles of Incorporation relating to such transactions:

(i) merger, consolidation or statutory share exchange of
the Fund with or into any Principal Shareholder;

(ii) issuance of any securities of the Fund to any
Principal Shareholder for cash except upon reinvestment of
dividends pursuant to a dividend reinvestment plan of the Fund;

(iii) sale, lease or exchange of all or any substantial
part of the assets of the Fund to any Principal Shareholder
(except assets having an aggregate fair market value of less than
$1,000,000); or

(iv) sale, lease or exchange to the Fund, in exchange
for securities of the Fund, of any assets of any Principal
Shareholder (except assets having an aggregate fair market value
of less than $1,000,000).

However, such vote would not be required when, under certain
conditions, the Continuing Directors approve the transactions
described in (i)-(iv) above, although in certain cases involving
merger, consolidation or statutory share exchange or sale of all
or substantially all of the Fund's assets, the affirmative vote
of a majority of the outstanding shares of Common Stock of the
Fund would nevertheless be required. The affirmative vote of 75%
(which is higher than that required under Maryland law or the
1940 Act) of the outstanding shares of Common Stock of the Fund
is required to convert the Fund to an open-end investment company
and to amend the Fund's Articles of Incorporation to effect any
such conversion. For the full text of these provisions,
reference is made to the Articles of Incorporation and Bylaws of
the Fund, on file with the Securities and Exchange Commission.
See "Available Information."

The provisions of the Charter Documents described above
could have the effect of depriving the owners of shares of Common
Stock of opportunities to sell their shares at a premium over
prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund in a tender offer or
similar transaction. See "Repurchase of Shares." The overall

<PAGE>

effect of these provisions is to render more difficult the
accomplishment of a merger or the assumption of control by a
Principal Shareholder. The Board of Directors of the Fund has
considered the foregoing anti-takeover provisions and concluded
that they are in the best interests of the Fund and its
shareholders.

Repurchase of Shares

Although shares of closed-end investment companies
frequently trade at a discount from net asset value, the Fund's
shares of Common Stock have generally traded at a premium to the
Fund's net asset value per share. In recognition of the
possibility that the Fund's shares might in the future trade at a
discount to net asset value, the Fund's Board of Directors has
determined that it would be in the interest of shareholders for
the Fund to take action to attempt to reduce or eliminate any
market value discount from net asset value. To that end, the
Board contemplates that the Fund would from time to time take
action either to repurchase in the open market or to make a
tender offer for its own shares at net asset value. The Board
intends each quarter to consider the making of a tender offer.
The Board may at any time, however, decide that the Fund should
not make a tender offer.

Subject to the Fund's fundamental policy with respect to
borrowings, the Fund may incur debt to finance repurchases and
tenders. The Fund will comply with the 1940 Act asset coverage
requirements. See "Investment Objective and Policies-Borrowing"
above and "Investment Restrictions" in the SAI. Interest on such
borrowing will reduce the Fund's net income. See "Special Risk
Considerations-Borrowing."

The Fund anticipates that the market price of its shares
will generally vary from net asset value. The market price of
the Fund's shares will, among other things, be determined by the
relative demand for and supply of such shares in the market, the
Fund's investment performance, the Fund's distributions, and
investor perception of the Fund's overall attractiveness as an
investment as compared with other investment alternatives.
Nevertheless, the fact that the Fund's shares may be the subject
of tender offers at net asset value from time to time may reduce
the spread between market price and net asset value that might
otherwise exist. In the opinion of Alliance, sellers may be less
inclined to accept a significant discount if they have a
reasonable expectation of being able to recover net asset value
in conjunction with a possible open market share repurchase or
tender offer. There can be no assurance that open market share
repurchases or tender offers will result in shares of the Fund's

<PAGE>

Common Stock trading at a price which is equal to their net asset
value.

Although the Board of Directors believes that share
repurchases and tenders generally would have a favorable effect
on the market price of the Fund's shares, it should be recognized
that the acquisition of shares by the Fund will decrease the
total assets of the Fund and therefore have the effect of
increasing the Fund's expense ratio. Because of the nature of
the Fund's investment objective, policies and portfolio, Alliance
does not anticipate that repurchases and tenders should have an
adverse effect on the Fund's investment performance and does not
anticipate any material difficulty in disposing of portfolio
securities in order to consummate stock repurchases or tenders.

Even if a tender offer has been made, it is the Board's
announced policy, which may be changed by the Board, not to
accept tenders or effect repurchases if (i) such transaction, if
consummated, would (a) result in the delisting of the Fund's
shares from the New York Stock Exchange (the New York Stock
Exchange having advised the Fund that it would consider delisting
if the aggregate market value of the Fund's outstanding publicly
held Common Stock is less than $5,000,000, the number of publicly
held shares of Common Stock falls below 600,000 or the number of
round-lot holders falls below 1,200) or (b) impair the Fund's
status as a regulated investment company under the Code (which
would make the Fund a taxable entity, causing the Fund's income
to be taxed at the corporate level in addition to the taxation of
shareholders who receive dividends from the Fund); (ii) the Fund
would not be able to liquidate portfolio securities in an orderly
manner and consistent with the Fund's investment objective and
policies in order to repurchase shares; or (iii) there is any
(a) material legal action or proceeding instituted or threatened
which challenges, in the Board's judgment, such transactions or
otherwise materially adversely affects the Fund, (b) suspension
of or limitation on prices for trading securities generally on
the New York Stock Exchange or any foreign exchange on which
portfolio securities of the Fund are traded, (c) declaration of a
banking moratorium by foreign authorities or any suspension of
payment by banks in Korea, (d) limitation which affects the Fund
or the issuers of its portfolio securities imposed by federal,
state or Korean authorities on the extension of credit by lending
institutions or on the exchange of foreign currency,
(e) commencement of war, armed hostilities or other international
or national calamity directly or indirectly involving Korea, or
(f) other event or condition which, in the Board's judgment,
would have a material adverse effect on the Fund or its
shareholders if shares were repurchased. The Board may modify
these conditions in light of experience.

<PAGE>

Any tender offer made by the Fund will be at a price
equal to the net asset value of the shares as of the close of
business on the date the offer ends. Each offer will be made and
shareholders notified in accordance with the requirements of the
Securities Exchange Act of 1934 and the 1940 Act, either by
publication or mailing or both. Each offering document will
contain such information as is prescribed by such laws and the
rules and regulations promulgated thereunder. When a tender
offer is authorized to be made by the Board, a shareholder
wishing to accept the offer will be required to tender all (but
not less than all) of the shares owned by such shareholder (or
attributed to the shareholder for federal income tax purposes
under section 318 of the Code). The Fund will purchase all
shares tendered by a holder of shares at any time during the
period of the tender offer in accordance with the terms of the
offer unless it determines to accept none of the shares tendered
in the tender offer (based upon one of the conditions set forth
above). Each person tendering shares will be required to submit
a check in the amount of $25.00 payable to the Fund, which will
be used to help defray the costs associated with effecting the
tender offer. This $25.00 fee will be imposed upon each
tendering shareholder any of whose tendered shares are purchased
in the tender offer and will be imposed regardless of the number
of shares purchased. The Fund expects the cost to the Fund of
effecting a tender offer will exceed the aggregate of all service
charges received from those who tender their shares. Costs
associated with the tender offer will be charged against capital.
During the period of a tender offer, the Fund's shareholders will
be able to determine the Fund's current net asset value by use of
a toll-free telephone number.

Shares that have been purchased by the Fund will be
retired and will be authorized but unissued shares. The purchase
of shares by the Fund will reduce the Fund's net asset value.

If the Fund must liquidate portfolio securities in order
to purchase Fund shares tendered, and if such securities have
been held for less than three months, such sales may impair the
Fund's tax status as a regulated investment company under the
Code because of the limitation that not more than 30% of the
Fund's gross income may be derived from the sale of securities
held for less than three months. The liquidation of securities
held for less than three months to purchase Fund shares tendered
would reduce the ability of the Fund to sell other securities
held for less than three months. The inability of the Fund to
sell such securities in the ordinary course of its portfolio
management may adversely affect the Fund's return. See
"Taxation-United States Federal Income Taxes-General" in the SAI.
The portfolio turnover rate of the Fund may or may not be
affected by the Fund's repurchase of shares pursuant to a tender
offer or in open market transactions.

<PAGE>

DISTRIBUTION ARRANGEMENTS

PaineWebber Incorporated, 1285 Avenue of the Americas,
New York, New York, will act as dealer manager for the Offer.
Under the terms and subject to the conditions contained in a
Dealer Manager Agreement dated the date hereof, the Dealer
Manager will provide financial advisory services and marketing
assistance in connection with the Offer and will solicit the
exercise of Rights by Record Date shareholders. The Offer is not
contingent upon any number of Rights being exercised. The Fund
has agreed to pay the Dealer Manager a fee for financial advisory
services equal to 1.25% of the Subscription Price per Share for
Shares issued upon exercise of the Rights and the
Over-Subscription Privilege and to pay broker-dealers, including
the Dealer Manager, fees for their soliciting efforts (the
"Soliciting Fees") of 2.50% of the Subscription Price per Share
for each Share issued upon exercise of the Rights. Soliciting
Fees will be paid to the broker-dealer designated on the
applicable portion of the Subscription Certificates, or if no
broker-dealer is so designated, to the Dealer Manager.

In addition, the Fund has agreed to reimburse the Dealer
Manager up to $100,000 for its reasonable expenses incurred in
connection with the Offer, and will indemnify the Dealer Manager
with respect to certain liabilities, including liabilities under
the Securities Act.

The Fund, Alliance and Orion have each agreed to
indemnify the Dealer Manager or contribute to losses arising out
of certain liabilities including liabilities under the Securities
Act. The Dealer Manager Agreement also provides that the Dealer
Manager will not be subject to any liability to the Fund in
rendering the services contemplated by the Agreement for any act
or omission on the part of any broker-dealer (other than the
Dealer Manager) except in instances involving the bad faith,
willful misfeasance, or gross negligence of the Dealer Manager or
reckless disregard by the Dealer Manager of its obligations and
duties under the Agreement. The staff of the Securities and
Exchange Commission has advised the Fund and the Dealer Manager
that the staff is considering whether a dealer manager is an
underwriter for purposes of the Securities Act and the 1940 Act.

The Fund has agreed not to offer or sell, or enter into
any agreement to sell, any equity or equity related securities of
the Fund or securities convertible into such securities for a
period of 180 days after the date of the Dealer Manager Agreement
without the prior consent of the Dealer Manager except for the
Shares and Common Stock issued in reinvestment of dividends or
distributions.

<PAGE>

Alliance has entered into a written agreement with
PaineWebber Incorporated, the Dealer Manager, pursuant to which
it pays PaineWebber Incorporated out of Alliance's own resources,
a quarterly fee at an annualized rate of 0.10% of the Fund's
average weekly net assets in consideration of the provision by
PaineWebber Incorporated of certain economic research and
statistical services not including advice or recommendations
regarding the purchase or sale of portfolio securities. In
addition, PaineWebber Incorporated provides a variety of services
designed to publicize the Fund on an ongoing basis and to remind
investors and prospective investors of the Fund's features and
benefits. Such services include communications with clients and
their representatives, periodic seminars or conference calls,
internal and external publications, presentations at retail
system meetings, responses to questions from potential or current
shareholders and specific shareholder contact where appropriate.
PaineWebber Incorporated also makes available to its brokers and
customers market price and net asset value and dividend
information regarding the Fund. These ongoing efforts (which to
Alliance's knowledge are not provided with respect to most
closed-end investment companies) help to maintain the visibility
of the Fund to brokers and clients, both those who are
shareholders of the Fund and those for whom ownership might be
suitable in the future. In addition, PaineWebber Incorporated
provides advice and consultation at the request of Alliance with
respect to tender offers and share repurchases. This array of
special services helps to maintain shareholder knowledge of the
Fund, facilitate the liquidity of the Fund and minimize potential
trading discounts from net asset value. PaineWebber Incorporated
does not give advice as to the value of securities. Following
the initial one-year term which ended on February 21, 1993, the
agreement between PaineWebber Incorporated and Alliance continues
for successive one-year periods unless it is terminated by either
party. The agreement has not resulted in any increase in the
total expense ratio of the Fund or in the aggregate amount of
fees paid to Alliance by the Fund.

CUSTODIAN

Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts 02109, serves as custodian for the Fund. The
majority of the Fund's assets are held by its foreign
subcustodian, Korea Exchange Bank, 181, 2-Ga, Ulchiro, Chung-gu,
Seoul 100-793, Korea.

<PAGE>

TRANSFER AGENT, DIVIDEND-PAYING AGENT AND REGISTRAR

State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, acts as the Fund's transfer
agent, dividend-paying agent and registrar.

LEGAL MATTERS

The validity of the Shares offered hereby will be passed
upon for the Fund by Seward & Kissel, New York, New York.
Certain legal matters will be passed upon for the Dealer Manager
by Brown & Wood, New York, New York. Seward & Kissel and Brown &
Wood will rely upon the opinion of Venable, Baetjer and Howard,
LLP, Baltimore, Maryland, for matters relating to Maryland law.
Matters of Korean law will be passed on for the Fund by Shin &
Kim, Seoul, Korea.

EXPERTS

The audited financial statements included in this
Prospectus have been so included in reliance on the report by
Price Waterhouse LLP, independent accountants, given on the
authority of such firm as experts in auditing and accounting.

AVAILABLE INFORMATION

The Fund is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and the 1940
Act, and in accordance therewith is required to file reports,
proxy statements and other information with the Securities and
Exchange Commission. Any such reports, proxy statements and
other information can be inspected and copied at the public
reference facilities of the Securities and Exchange Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Securities and Exchange Commission's New
York Regional Office, Seven World Trade Center, 13th Floor, New
York, New York 10048 and Chicago Regional Office, Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained
from the public reference section of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Reports, proxy statements and other
information concerning the Fund can also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.

Additional information regarding the Fund and the Shares
is contained in the Registration Statement on Form N-2, including

<PAGE>

amendments, exhibits and schedules thereto, relating to such
shares filed by the Fund with the Securities and Exchange
Commission, Washington, D.C. This Prospectus and the SAI do not
contain all of the information set forth in the Registration
Statement, including any amendments, exhibits and schedules
thereto. For further information with respect to the Fund and
the shares offered hereby, reference is made to the Registration
Statement. Statements contained in this Prospectus and the SAI
as to the contents of any contract or other document referred to
are not necessarily complete and in each instance reference is
made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the
Registration Statement may be inspected without charge at the
Securities and Exchange Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be
obtained from the Securities and Exchange Commission upon the
payment of certain fees prescribed by the Securities and Exchange
Commission.

A copy of the Fund's annual report for the fiscal year
ended April 30, 1995 was mailed to shareholders in June 1995.

<PAGE>

TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION

Page
____
Investment Objective and Policies........

Investment Restrictions..................

Management of the Fund...................

The Korean Securities Markets............

The Republic of Korea....................

Brokerage and Portfolio Transactions.....

Dividends and Distributions..............

Dividend Reinvestment Plan...............

Taxation.................................

Certain Owners of Record.................

Financial Statements.....................

<PAGE>

No person has been authorized to
give any information or to make any
representations in connection with
this offering other than those con-
tained in this Prospectus and the
SAI and, if given or made, such
other information and representa-
tions must not be relied upon as
having been authorized by the Fund,
Alliance, Orion or the Dealer
Manager. Neither the delivery of The Korean
this Prospectus nor any sale made Investment Fund, Inc.
hereunder shall, under any circum-
stances, create any implication that
there has been no change in the
affairs of the Fund since the date 1,987,637 Shares of
hereof or that the information Common Stock Issuable
contained herein is correct as of Upon Exercise of Rights to
any time subsequent to its date. Subscribe for Such Shares
However, if any material change
occurs while this Prospectus is
required by law to be delivered,
this Prospectus will be amended or
supplemented accordingly. This
Prospectus does not constitute an PROSPECTUS
offer to sell or a solicitation of
an offer to buy any of the securi-
ties other than the shares offered
by this Prospectus, nor does it
constitute an offer to sell or an
offer to buy the shares by anyone in
any jurisdiction in which such offer PaineWebber Incorporated
or solicitation is not authorized or
in which the person making such
offer or solicitation is not
qualified to do so or to any person
to whom it is unlawful to make such
offer or solicitation.

TABLE OF CONTENTS
Page
Expense Information.......... [ ], 1995
Financial Highlights.........
The Offer....................
The Fund.....................
Use of Proceeds..............
Net Asset Value and Market
Price Information..........
Investment Objective
and Policies...............
Special Risk Considerations..

<PAGE>

Management of the Fund.......
The Korean Securities Markets
The Republic of Korea........
Net Asset Value..............
Dividend Reinvestment Plan...
Taxation.....................
Description of Common Stock..
Distribution Arrangements....
Custodian....................
Transfer Agent, Dividend-Paying
Agent and Registrar........
Legal Matters................
Experts......................
Available Information........
Table of Contents of Statement
of Additional Information..

69
00250225.AA9

<PAGE>

THE KOREAN INVESTMENT FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

The Korean Investment Fund, Inc. (the "Fund") is a non-
diversified, closed-end management investment company. The
Fund's investment objective is to seek long-term capital
appreciation through investment primarily in equity securities of
Korean companies. Under normal circumstances, the Fund invests
at least 65% of its total assets in such securities. Equity
securities include common stocks, preferred stocks, rights or
warrants to purchase common or preferred stock and debt
securities convertible into common or preferred stock. The Fund
may invest up to 25% of its total assets, to the extent permitted
by future laws or regulations of The Republic of Korea ("Korea")
with respect to foreign investment, in equity or debt securities
for which there is no ready market. The Fund may also invest up
to 35% of its total assets in nonconvertible debt securities
provided that such securities are rated BBB or higher by Standard
& Poor's Corporation ("S&P") or Baa or higher by Moody's
Investors Service, Inc. ("Moody's") or rated of equivalent credit
quality by another internationally recognized statistical rating
organization or, if not so rated, of equivalent credit quality as
determined by Alliance Capital Management L.P., the Fund's
investment manager and administrator ("Alliance").

This Statement of Additional Information ("SAI") is not
a prospectus, but should be read in conjunction with the
Prospectus for the Fund dated [ ], 1995 (the
"Prospectus"). This SAI does not include all information that a
prospective investor should consider before purchasing shares of
the Fund, and investors should obtain and read the Prospectus
prior to purchasing shares. A copy of the Prospectus may be
obtained without charge, by calling (800) 227-4618. This SAI
incorporates by reference the entire Prospectus.

<PAGE>

TABLE OF CONTENTS

Page

Investment Objective and Policies.......................
Investment Restrictions.................................
Management of the Fund..................................
The Korean Securities Market............................
The Republic of Korea...................................
Brokerage and Portfolio Transactions....................
Dividends and Distributions.............................
Dividend Reinvestment Plan..............................
Taxation................................................
Certain Owners of Record................................
Financial Statements....................................

The Prospectus and this SAI omit certain of the
information contained in the registration statement filed with
the Securities and Exchange Commission, Washington, D.C. The
registration statement may be obtained from the Securities and
Exchange Commission upon payment of the fee prescribed, or
inspected at the Securities and Exchange Commission's office at
no charge.

This Statement of Additional Information is dated
[ ], 1995.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

General

The investment objective of the Fund is to seek long-
term capital appreciation through investment primarily in equity
securities of Korean companies. Under normal circumstances, the
Fund invests at least 65% of its total assets in equity
securities of Korean companies. At April 30, 1995, approximately
100% of the Fund's net assets were invested in equity securities
of Korean companies. Equity securities include common stocks,
preferred stocks, rights or warrants to purchase common or
preferred stock and debt securities convertible into common or
preferred stock. The Fund defines Korean companies to be
entities (i) that are organized under the laws of Korea and
conduct business in Korea, (ii) that derive 50% or more of their
total revenues from business in Korea or (iii) the equity or debt
securities of which are traded principally in Korea. The Fund
invests in companies that, in the opinion of Alliance and Orion
Asset Management Co., Ltd., the Fund's investment manager with
respect to its investments in Korean securities ("Orion"),
possess the potential for growth, including established companies
in rapidly growing industry sectors such as telecommunications,
electronics and consumer products. While investment in large
companies is emphasized, on occasion the Fund may invest in
smaller companies believed by Alliance and Orion to have growth
potential. See "Special Risk Considerations--Investment in
Securities of Smaller Companies" in the Prospectus. In
particular, securities of Korean companies that are believed to
be the likely beneficiaries of the emergence of new markets for
their products are identified for investment by the Fund,
including investment opportunities in Korean companies that may
benefit from future improved relations with The Democratic
People's Republic of Korea ("North Korea"). If possible, the
Fund would consider investing up to 10% of its total assets in
North Korean issuers; however, the Fund will not do so without
contemporaneous written notice to shareholders. Such investments
are not now permitted under U.S. or Korean law or available, and
there can be no assurance that such investments will become
permissible and available in the future. See "Special Risk
Considerations--Relations with North Korea" in the Prospectus.
In addition, the Fund may not invest more than 20% of its total
assets in rights or warrants to purchase equity securities. The
Fund may invest up to 25% of its total assets in securities which
are not readily marketable. Although the Fund is authorized to
engage in various strategies to hedge its portfolio against
adverse changes in the relationship between the U.S. Dollar and
the Won, it is not currently permitted to do so in Korea under
Korean laws or regulations, with certain exceptions, and there
can be no assurance that such strategies will become permissible

<PAGE>

and available in Korea in the future. The Fund does not
presently intend to engage in these strategies outside of Korea.

The Fund's investment objective and its policy of
investing at least 65% of its total assets in equity securities
of Korean companies are fundamental and cannot be changed without
the approval of a majority of the Fund's outstanding voting
securities, which, as used in the Prospectus and this SAI, means
the lesser of (i) 67% of the shares represented at a meeting at
which more than 50% of the outstanding shares are present in
person or represented by proxy or (ii) more than 50% of the
outstanding shares. The Fund's investment policies that are not
designated fundamental policies may be changed by the Fund
without shareholder approval, but the Fund will not change its
investment policies without contemporaneous notice to its
shareholders. The Fund is designed primarily for long-term
investment, and investors should not consider it a trading
vehicle. As with all investment companies, there can be no
assurance that the Fund's objective will be achieved.

The Fund may also invest up to 35% of its total assets
in nonconvertible debt securities, including U.S. Dollar or Won
denominated debt securities issued by the Korean government or
Korean companies and U.S. Government Securities (as defined in
the Prospectus). Korean law does not currently permit foreign
investors to acquire debt securities denominated in Won except
for certain convertible bonds and public bonds. At the present
time, however, foreign investors are permitted to invest in bonds
with warrants, depositary receipts and other debt securities
(including floating rate notes, bonds and commercial paper)
issued by Korean companies outside of Korea and denominated in
currencies other than the Won. However, the Ministry of Finance
and Economy (the "MFE") has recently announced a plan to permit
foreign investors to make certain limited investments in Won
denominated debt securities, as described more fully below. See
"The Korean Securities Markets--Regulation of Foreign
Investment." If, in the future, Won denominated debt securities
become permissible investments for foreign investors, the Fund
may invest in such securities. The Fund may invest in debt
securities rated BBB or higher by S&P or Baa or higher by Moody's
or rated of equivalent credit quality by another internationally
recognized statistical rating organization or, if not so rated,
of equivalent credit quality as determined by Alliance.
Securities rated Baa by Moody's are considered to have
speculative characteristics. Sustained periods of deteriorating
economic conditions or rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and
repay principal than in the case of higher-rated securities. The
Fund expects that it will not retain a debt security which is
downgraded below BBB or Baa or, if unrated, determined by

<PAGE>

Alliance to have undergone similar credit quality deterioration,
subsequent to purchase by the Fund.

For temporary defensive purposes, the Fund may vary from
its investment policies during periods in which conditions in the
Korean securities markets or other economic or political
conditions in Korea warrant. Under such circumstances, the Fund
may reduce its position in equity securities and increase its
position in debt securities, which may include U.S. Government
Securities, securities rated AA or better by S&P or Aa or better
by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance, short-term indebtedness or cash
equivalents denominated in U.S. Dollars or, if it becomes
permissible for the Fund to so invest, denominated in Won. The
Fund may also at any time, with respect to up to 35% of its total
assets, temporarily invest funds in U.S. Dollar denominated money
market instruments as reserves for dividends and other
distributions to shareholders.

Securities Not Readily Marketable

The Fund may invest up to 25% of its total assets, to
the extent permitted by future Korean laws or regulations with
respect to foreign investment, in equity or debt securities for
which there is no ready market. The Fund may therefore not be
able to readily sell such securities. Such securities are unlike
securities that are traded in the open market and which can be
expected to be sold immediately if the market is adequate. The
sale price of securities that are not readily marketable may be
lower or higher than the Fund's most recent estimate of their
fair value. Generally, less public information is available with
respect to the issuers of these securities than with respect to
companies whose securities are traded on an exchange. Securities
not readily marketable are more likely to be issued by start-up,
small or family businesses and therefore subject to greater
economic, business and market risks than the listed securities of
more well-established companies. Adverse conditions in the
public securities markets may at certain times preclude a public
offering of an issuer's securities. If, in the future, the Fund
makes any investments in North Korea, all or substantially all of
such investments are likely to be in securities which are not
readily marketable. While Korean law requires registration with
a government agency of a public offering or secondary public
distribution of securities, that law does not contain
restrictions like those contained in the United States Securities
Act of 1933, as amended (the "Securities Act") regarding the
length of time the securities must be held or manner of resale.
There may be contractual restrictions on the resale of
securities.

<PAGE>

Investment in Other Investment Companies

The Fund may invest in the securities of other
investment companies that invest a substantial portion of their
assets in Korean securities to the extent permitted by the
Investment Company Act of 1940, as amended (the "1940 Act").
Under the 1940 Act, the Fund may invest up to 10% of its total
assets in shares of other investment companies and up to 5% of
its total assets in any one investment company, provided that the
investment does not represent more than 3% of the voting stock of
the related acquired investment company. By investing in an
investment company, the Fund's shareholders will bear a ratable
share of the investment company's expenses, as well as continue
to bear the Fund's investment management and administrative fees
with respect to the amount of the investment.

Repurchase Agreements

The Fund may enter into "repurchase agreements"
involving U.S. Government Securities with member banks of the
Federal Reserve System or "primary dealers" (as designated by the
Federal Reserve Bank of New York) in such securities. There is
no percentage restriction on the Fund's ability to enter into
repurchase agreements. A repurchase agreement arises when a
buyer such as the Fund purchases a security and simultaneously
agrees to resell it to the vendor at an agreed-upon future date,
normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon
interest rate which is effective for the period of time the
buyer's money is invested in the security and which is related to
current market interest rates rather than the coupon rate on the
purchased security. Such agreements permit the Fund to keep all
of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. The Fund
requires continual maintenance by its custodian for its account
in the Federal Reserve/Treasury Book Entry System of collateral
in an amount equal to, or in excess of, the resale price. In the
event a vendor defaults on its repurchase obligation, the Fund
might suffer a loss to the extent that the proceeds from the sale
of the collateral are less than the repurchase price. In the
event of a vendor's bankruptcy, the Fund might be delayed in, or
prevented from, selling the collateral for the Fund's benefit.
The Fund's Board of Directors has established procedures, which
are periodically reviewed by the Board, pursuant to which
Alliance monitors the creditworthiness of the institutions with
which the Fund enters into repurchase agreement transactions.

<PAGE>

Other Investment Practices

General. Certain investment practices in which the Fund
is authorized to engage, such as the purchase or sale of put and
call options, currency hedging techniques, the selling of
securities short, the lending of portfolio securities, forward
commitments and standby commitment agreements are not currently
permitted in Korea under Korean laws or regulations (with certain
limited exceptions). The Fund does not presently intend to
engage in these investment practices outside of Korea. The Fund
may engage in these investment practices in Korea to the extent
such investment practices become available in the future.

Options on Korean Securities. In an effort to enhance
income and to reduce fluctuations in net asset value, the Fund
may, to the extent permitted by future Korean regulations, write
covered put and call options and purchase put and call options on
securities of the types in which it is permitted to invest that
are traded on the Korea Stock Exchange (the "Exchange"). The
Fund may also write call options for cross-hedging purposes.
There are no specific percentage limitations on the Fund's
writing and purchasing of options.

A put option gives the purchaser of such option, upon
payment of a premium, the right to deliver a specified amount of
a security to the writer of the option on or before a fixed date
at a predetermined price. A call option gives the purchaser of
the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date, at a predetermined price. A call option written by
the Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by
its custodian) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund
holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash
and/or other liquid assets in a segregated account with its
custodian. A put option written by the Fund is "covered" if the
Fund maintains cash and/or other liquid assets with a value equal
to the exercise price in a segregated account with its custodian,
or else holds a put on the same security and in the same
principal amount as the put written where the exercise price of
the put held is equal to or greater than the exercise price of
the put written. The premium paid by the purchaser of an option
will reflect, among other things, the relationship of the
exercise price to the market price and volatility of the

<PAGE>

underlying security, the remaining term of the option, supply and
demand and interest rates.

The Fund may write call options for cross-hedging
purposes. A call option is for cross-hedging purposes if the
Fund does not own the underlying security, and is designed to
provide a hedge against a decline in value in another security
which the Fund owns or has the right to acquire. In such
circumstances, the Fund collateralizes its obligation under the
option by maintaining in a segregated account with its custodian,
cash and/or other liquid assets in an amount not less than the
market value of the underlying security, marked to market daily.
The Fund would write a call option for cross-hedging purposes,
instead of writing a covered call option, when the premium to be
received from the cross-hedge transaction would exceed that which
would be received from writing a covered call option, while at
the same time achieving the desired hedge.

In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period by more than the amount of the
premium. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security declined by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by more than the amount of the
premium. If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.

If a put option written by the Fund were exercised, the
Fund would be obligated to purchase the underlying security at
the exercise price. If a call option written by the Fund were
exercised, the Fund would be obligated to sell the underlying
security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value
of the underlying security. If this occurred, the option could
be exercised and the underlying security would then be sold by
the option holder to the Fund at a higher price than its current
market value. The risk involved in writing a call option is that
there could be an increase in the market value of the underlying
security. If this occurred, the option could be exercised and
the underlying security would then be sold by the Fund at a lower
price than its current market value. These risks could be
reduced by entering into a "closing transaction" in which the
Fund would write or purchase another option having the same
features as the one it purchased or wrote, thereby having the two

<PAGE>

offsetting options cancel each other out. The Fund retains the
premium received from writing a put or call option whether or not
the option is exercised.

The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated transactions. The Fund will effect such transactions
only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions)
deemed creditworthy by Alliance, and the Fund will adopt
procedures for monitoring the creditworthiness of such entities.
Options purchased or written by the Fund in negotiated
transactions are illiquid and it may not be possible for the Fund
to effect a closing transaction at a time when Alliance believes
it would be advantageous to do so.

Currency Hedging Techniques. Although the Fund has no
present intention to engage in currency hedging techniques, it is
authorized to engage, to the extent permitted by future Korean
regulations, in various portfolio strategies to hedge its
portfolio against adverse changes in the relationship between the
U.S. Dollar and the Won. These strategies include use of
currency options and futures, options on such futures and forward
foreign currency transactions. The Fund may enter into such
transactions only in connection with its currency hedging
strategies. While the Fund's use of hedging strategies is
intended to reduce the volatility of the net asset value of Fund
shares caused by currency fluctuation, the Fund's net asset value
will fluctuate. There can be no assurance that the Fund's
hedging transactions will be effective. Furthermore, the Fund
will only engage in hedging activities from time to time and may
not necessarily be engaging in hedging activities when movements
in the U.S. Dollar-Won exchange rate occur.

Although certain risks are involved in forward, futures
and options transactions, Alliance and Orion believe that,
because the Fund will only engage in these transactions for
hedging purposes, the forward, futures and options portfolio
strategies of the Fund will not subject the Fund to the risks
frequently associated with the speculative use of such
transactions. United States tax requirements applicable to
regulated investment companies may limit the Fund's ability to
engage in hedging transactions. See "Taxation--United States
Federal Income Taxes--General; Currency Fluctuations "Section
988" Gains or Losses; and Options, Futures Contracts and Forward
Foreign Currency Contracts."

Hedging Foreign Currency Risks. Generally, the foreign
exchange transactions of the Fund will be conducted on a spot,
i.e., cash, basis at the spot rate for purchasing or selling
currency prevailing in the foreign exchange market. Under normal

<PAGE>

market conditions this rate differs from the prevailing exchange
rate in an amount generally less than one-tenth of one percent
due to the costs of converting from one currency to another.
However, the Fund has authority to deal in forward foreign
currency transactions between currencies of the different
countries in whose securities it will invest as a hedge against
possible variations in the foreign exchange rates between these
currencies. This hedging is accomplished through contractual
agreements to purchase or sell a specified currency at a
specified future date (up to one year) and price set at the time
of the contract. The Fund's dealings in forward foreign currency
transactions will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward foreign currency with respect to
specific receivables or payables of the Fund accruing in
connection with the purchase and sale of its portfolio securities
or the payment of dividends and distributions by the Fund.
Position hedging is the sale of forward foreign currency with
respect to portfolio security positions denominated or quoted in
such foreign currency. The Fund will not speculate in forward
foreign exchange. Consequently, the Fund may not position hedge
with respect to the currency of a particular country to an extent
greater than the aggregate market value (at the time of making
such sale) of the securities held in its portfolio denominated or
quoted in that particular foreign currency. If the Fund enters
into a position hedging transaction, its custodian bank will
place cash or other liquid assets in a segregated account of the
Fund in an amount equal to the value of the Fund's total assets
committed to the consummation of such forward contract. If the
value of the securities placed in the segregated account
declines, additional cash or other liquid assets will be placed
in the account so that the value of the account will equal the
amount of the Fund's commitment with respect to such contracts.
The Fund will not enter into a position hedging commitment if, as
a result thereof, the Fund would have more than 15% of the value
of its assets committed to such contracts. The Fund will not
enter into a forward contract with a term of more than one year.

Under the foreign exchange control regulations of Korea,
non-residents are allowed to enter into forward transactions
between Won and foreign currencies with a bank in Korea in order
to hedge currency risks involving their holding of Won-
denominated assets in connection with their permissible
investments in Korean equities and bonds.

Hedging against a decline in the value of a currency
does not eliminate fluctuations in the prices of portfolio
securities denominated in that currency or prevent losses if the
prices of such securities decline. Such transactions also
preclude the opportunity for gain if the value of the hedged
currency should rise. Moreover, it may not be possible for the

<PAGE>

Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency transactions
varies with such factors as the currency involved, the length of
the contract period and the market conditions then prevailing.
Since foreign currency transactions are usually conducted on a
principal basis, no fees or commissions are involved.

The Fund is also authorized to purchase or sell listed
or unlisted foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or
long hedge against possible variations in foreign exchange rates.
Such transactions may be effected with respect to hedges on non-
U.S. Dollar-denominated securities owned by the Fund, sold by the
Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund. As an illustration, the Fund may use such
techniques to hedge the stated value in U.S. Dollars of an
investment in a Won-denominated security. In such circumstances,
for example, the Fund may purchase a foreign currency put option
enabling it to sell a specified amount of Won for Dollars at a
specified price by a future date. To the extent the hedge is
successful, a loss in the value of the Won relative to the Dollar
will tend to be offset by an increase in the value of the put
option. To offset, in whole or in part, the cost of acquiring
such a put option, the Fund may also sell a call option which, if
exercised, requires it to sell a specified amount of Won for
Dollars at a specified price by a future date (a technique called
a "straddle"). By selling such call option in this illustration,
the Fund gives up the unlimited opportunity to profit from
increases in the relative value of the Won to the Dollar. All
options written by the Fund must be "covered," and must remain
"covered" as long as the Fund is obligated as a writer. For
example, where the Fund sells a call option on a futures or
forward contract, it may cover either by entering into a long
position in the same contract at a price no higher than the
strike price of the call option or by owning the instruments or
currency underlying the futures or forward contract. The Fund
could also cover this position by holding a separate call option
permitting it to purchase the same futures or forward contract at
a price no higher than the strike price of the call option sold
by the Fund. A put option written by the Fund may be "covered"
if the Fund maintains cash or liquid assets with a value equal to
the exercise price in a segregated account with its custodian, or
else owns a put on the same contract as the put written where the
exercise price of the put held is equal to or greater than the
exercise price of the put written.

Certain differences exist between these foreign currency
hedging instruments. Foreign currency options provide the holder
thereof the right to buy or sell a currency at a fixed price on a

<PAGE>

future date. Listed options are third-party contracts (i.e.,
performance of the parties' obligations is guaranteed by an
exchange or clearing corporation) which are issued by a clearing
corporation, traded on an exchange and have standardized strike
prices and expiration dates. Unlisted options are two-party
contracts and have negotiated strike prices and expiration
dates.The Fund will engage in unlisted transactions involving
options only with member banks of the Federal Reserve System and
primary dealers in U.S.Government Securities or with affiliates
of such banks or dealers which have capital of at least $50
million or whose obligations are guaranteed by an entity having
capital of at least $50 million. The Fund will acquire only
those unlisted options for which management believes the Fund can
receive on each business day at least two independent bids or
offers (one of which will be from an entity other than a party to
the option). A futures contract on a foreign currency is an
agreement between two parties to buy and sell a specified amount
of a currency for a set price on a future date. Certain futures
contracts and options on futures contracts are traded on boards
of trade or futures exchanges.

The Fund will not speculate in foreign currency options,
futures or related options. Accordingly, the Fund will not hedge
a currency substantially in excess of (i) the market value of the
securities denominated in such currency which it owns, (ii) the
expected acquisition price of securities which it has committed
or anticipates to purchase which are denominated in such
currency, and (iii) in the case of securities which have been
sold by the Fund but not yet delivered, the proceeds thereof in
its denominated currency. Further, the Fund will maintain a
segregated account with its custodian bank with cash or liquid
assets having a market value substantially representing any
subsequent decrease in the market value of such hedged security,
less any initial or variation margin held in the account of its
broker. The Fund may not incur potential net liabilities of more
than 33 1/3% of its total assets from foreign currency forward,
futures and option transactions.

Risk Factors in Options, Futures and Currency
Transactions. Utilization of futures transactions involves the
risk of imperfect correlation in movements in the price of
futures contracts and movements in the price of the currencies
which are the subject of the hedge. If the price of the futures
contract moves more or less than the price of the currency, the
Fund will experience a gain or loss which will not be completely
offset by movements in the price of the currencies which are the
subject of the hedge. Unanticipated changes in currency prices
may result in poorer overall performance for the Fund than if it
had not entered into such contract. Transactions in options and
options on futures contracts involve similar risks. The
successful use of such instruments draws upon Alliance's special

<PAGE>

skills with respect to such instruments and usually depends on
Alliance's ability to forecast currency exchange rate movements
correctly.

Prior to exercise or expiration, an exchange-traded
option position written by the Fund can only be terminated by
entering into a closing purchase or sale transaction. This
requires a secondary market on an exchange for call or put
options of the same series. The Fund will enter into an option
or futures transaction on an exchange only if there appears to be
a liquid secondary market for such options or futures. However,
there can be no assurance that a liquid secondary market will
exist for any particular call or put option or futures contract
at any specific time. Thus, it may not be possible for the Fund
to close a particular option or futures position. The Fund will
acquire only unlisted options for which management believes the
Fund can receive on each business day at least two independent
bids or offers (one of which will be from an entity other than a
party to the option). In the case of a futures position, in the
event of adverse price movements, the Fund would continue to be
required to make daily cash payments of variation margin. In
such situations, if the Fund has insufficient cash, it may have
to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so.
In addition, the Fund may be required to take or make delivery of
the currency underlying futures contracts it holds. The
inability to close options and futures positions also could have
an adverse impact on the Fund's ability to effectively hedge its
portfolio. There is also the risk of loss by the Fund of margin
deposits in the event of the bankruptcy of a broker with whom the
Fund has an open position in the futures contract or related
option.

The exchanges on which the Fund intends to conduct
options transactions have generally established "position limits"
which are limitations governing the maximum number of call or put
options on the same underlying currency (whether or not covered)
which may be written by a single investor, whether acting alone
or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written
on one or more accounts or through one or more brokers).
"Trading limits" are imposed on the maximum number of contracts
which any person may trade on a particular trading day. An
exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or
restrictions. Alliance does not believe that these position and
trading limits will have any adverse impact on the portfolio
strategies for hedging the Fund's portfolio. On the other hand,
the protections afforded to exchange participants by position and
trading limits are not available with respect to transactions in
unlisted options.

<PAGE>

Short Sales. The Fund may make short sales of
securities or maintain a short position only for the purpose of
deferring realization of gain or loss for United States Federal
income tax purposes, provided that at all times when a short
position is open the Fund owns an equal amount of such securities
of the same issue as, and equal in amount to, the securities sold
short. In addition, the Fund may not make a short sale if more
than 10% of the Fund's net assets (taken at market value) is held
as collateral for short sales at any one time. If the price of
the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the
Fund will incur a loss; conversely, if the price declines, the
Fund will realize a capital gain. See "Investment Restrictions."
The Fund is not currently permitted under Korean laws and
regulations to engage in short sales of Korean securities in
Korea.

Lending of Portfolio Securities. In order to increase
income, the Fund may from time to time lend portfolio securities
to brokers, dealers and financial institutions and receive
collateral in the form of cash or U.S. Government Securities.
Under the Fund's procedures, collateral for such loans must be
maintained at all times in an amount equal to at least 100% of
the current market value of the loaned securities (including
interest accrued on the loaned securities). The interest
accruing on the loaned securities will be paid to the Fund and
the Fund will have the right, on demand, to call back the loaned
securities. The Fund may pay fees to arrange the loans. The
Fund will neither lend portfolio securities in excess of 30% of
the value of its total assets nor lend its portfolio securities
to any officer, director, employee or affiliate of the Fund,
Alliance or Orion. The lending of portfolio securities by
foreign investors in Korea is not currently permitted under
Korean laws and regulations.

Forward Commitments. The Fund may, to the extent
permitted by future Korean regulations, enter into forward
commitments for the purchase or sale of securities in Korea.
Such transactions may include purchases on a "when-issued" basis
or purchases or sales on a "delayed delivery" basis. In some
cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).

When forward commitment transactions are negotiated, the
price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement
date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. Securities

<PAGE>

purchased or sold under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the
purchaser prior to the settlement date. At the time the Fund
enters into a forward commitment, it will record the transaction
and thereafter reflect the value of the security purchased or, if
a sale, the proceeds to be received, in determining its net asset
value. Any unrealized appreciation or depreciation reflected in
such valuation of a "when, as and if issued" security would be
cancelled in the event that the required conditions did not occur
and the trade was cancelled. No forward commitments will be made
by the Fund if, as a result, the Fund's aggregate commitments
under such transactions would be more than 30% of the then
current value of the Fund's total assets.

The use of forward commitments for the purchase or sale
of fixed income securities enables the Fund to protect against
anticipated changes in interest rates and prices. For instance,
in periods of rising interest rates and falling bond prices, the
Fund might sell securities in its portfolio on a forward
commitment basis to limit its exposure to falling prices. In
periods of falling interest rates and rising bond prices, the
Fund might sell a security in its portfolio and purchase the same
or a similar security on a when-issued or forward commitment
basis, thereby obtaining the benefit of currently higher cash
yields. However, if Alliance were to forecast incorrectly the
direction of interest rate movements, the Fund might be required
to complete such when-issued or forward transactions at prices
inferior to then current market values.

The Fund's right to receive or deliver a security under
a forward commitment may be sold prior to the settlement date,
but the Fund will enter into forward commitments only with the
intention of actually receiving or delivering the securities, as
the case may be. To facilitate such transactions, the Fund's
custodian will maintain, in the segregated account of the Fund,
cash and/or other liquid assets having value equal to, or greater
than, any commitments to purchase securities on a forward
commitment basis and, with respect to forward commitments to sell
portfolio securities of the Fund, the portfolio securities
themselves. If the Fund, however, chooses to dispose of the
right to receive or deliver a security subject to a forward
commitment prior to the settlement date of the transaction, it
might incur a gain or loss. In the event the other party to a
forward commitment transaction were to default, the Fund might
lose the opportunity to invest money at favorable rates or to
dispose of securities at favorable prices.

Standby Commitment Agreements. The Fund may, to the
extent permitted by future Korean regulations, from time to time
enter into standby commitment agreements in Korea. Such
agreements commit the Fund, for a stated period of time, to

<PAGE>

purchase a stated amount of a fixed income security which may be
issued and sold to the Fund at the option of the issuer. The
price and coupon of the security are fixed at the time of the
commitment. At the time of entering into the agreement the Fund
is paid a commitment fee which is typically approximately 0.5% of
the aggregate purchase price the Fund has committed to purchase.
The fee is payable regardless of whether or not the security is
ultimately issued. The Fund will enter into such agreements only
for the purpose of investing in the security underlying the
commitment at a yield and price which are considered advantageous
to the Fund and which are unavailable on a firm commitment basis.
The Fund will not enter into a standby commitment with a
remaining term in excess of 45 days and will limit its investment
in such commitments so that the aggregate purchase price of the
securities subject to such commitments, together with the value
of portfolio securities that are not readily marketable, will not
exceed 25% of its assets taken at the time of acquisition of such
commitment of security. The Fund will at all times maintain a
segregated account with its custodian of cash and/or other liquid
assets in an aggregate amount equal to the purchase price of the
securities underlying the commitment.

There can be no assurance that the securities subject to
a standby commitment will be issued and the value of the
security, if issued, on the delivery date may be more or less
than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the
Fund will bear the risk of capital loss in the event the value of
the security declines and will not benefit from any appreciation
in the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.

The purchase of a security subject to a standby
commitment agreement and the related commitment fee will be
recorded on the date on which the security can reasonably be
expected to be issued and the value of the security will
thereafter be reflected in the calculation of the Fund's net
asset value. The cost basis of the security will be adjusted by
the amount of the commitment fee. In the event the security is
not issued, the commitment fee will be recorded as income on the
expiration date of the standby commitment.

<PAGE>

INVESTMENT RESTRICTIONS

The Fund has adopted the following investment
restrictions, which are fundamental investment policies and may
not be changed without the approval of the holders of a majority
of the Fund's outstanding voting securities as defined above
under "Investment Objective and Policies--General." The
percentage limitations set forth below as well as those described
in the Prospectus (except insofar as they relate to restrictions
on borrowing under the 1940 Act and the diversification
requirements under the Internal Revenue Code of 1986, as amended
(the "Code")) apply only at the time an investment is made or
other relevant action is taken by the Fund. With respect to
investment restriction 7 below, it is the Fund's present
intention to make short sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes.

The Fund will not:

1. Purchase more than 10% of the outstanding voting
securities of any one issuer;

2. Invest more than 15% of the value of its total assets
in the securities of any one issuer (except that the Fund may
invest up to 25% of the value of its total assets in the
securities of the Korean government, its agencies and
instrumentalities to the extent such investments may be
permitted under Korean laws or regulations) or 25% or more of
the value of its total assets in the securities of issuers in
the same industry, provided, however, that the foregoing
restriction shall not be deemed to prohibit the Fund from
purchasing the securities of any issuer pursuant to the
exercise of rights distributed to the Fund by the issuer,
except that no such purchase may be made if as a result the
Fund will fail to meet the diversification requirements of
the Code, and any such acquisition in excess of the foregoing
15% or 25% limits will be sold by the Fund as soon as
reasonably practicable. The foregoing restrictions do not
apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;

3. Make loans except through (i) the purchase of debt
obligations in accordance with its investment objective and
policies, (ii) the lending of portfolio securities or
(iii) the use of repurchase agreements;

4. Borrow money or issue senior securities, except that
the Fund may borrow from a bank or other entity in a
privately arranged transaction for (i) the repurchase and/or
tenders for its shares or to pay dividends for purposes of
complying with the Code, if after such borrowing there is

<PAGE>

asset coverage of at least 300% as defined in the 1940 Act
and (ii) temporary purposes in an amount not exceeding 5% of
the value of the total assets of the Fund;

5. Pledge, hypothecate, mortgage or otherwise encumber
its assets, except (i) to secure permitted borrowings and
(ii) in connection with initial and variation margin deposits
relating to futures contracts;

6. Invest in companies for the purpose of exercising
control;

7. Make short sales of securities or maintain a short
position unless at all times when a short position is open it
owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and
equal in amount to, the securities sold short ("short sales
against the box"), and unless not more than 10% of the Fund's
net assets (taken at market value) is held as collateral for
such sales at any one time; or

8. (i) Purchase or sell real estate, except that it may
purchase and sell securities of companies which deal in real
estate or interests therein, (ii) purchase or sell
commodities or commodity contracts (except foreign
currencies, foreign currency options and futures and forward
contracts or contracts for the future acquisition or delivery
of foreign currencies and related options on futures
contracts and other similar contracts), (iii) invest in
interests in oil, gas, or other mineral exploration or
development programs, except that it may purchase and sell
securities of companies that deal in oil, gas or other
mineral exploration or development programs, (iv) purchase
securities on margin, except for such short-term credits as
may be necessary for the clearance of transactions or (v) act
as an underwriter of securities, except that the Fund may
acquire securities in private placements under circumstances
in which, if such securities were sold, the Fund might be
deemed to be an underwriter within the meaning of the
Securities Act of 1933.

It should not be assumed that activities that the Fund
can perform as exceptions to the restrictions above will
necessarily be permissible under Korean laws and regulations. In
addition to the restrictions described above, the Fund is subject
to additional restrictions imposed by Korean laws and regulations
and restrictions imposed by the Code. See "Special Risk
Considerations--Investment and Repatriation Restrictions" in the
Prospectus and "Taxation--United States Federal Income Taxes-
-General" and "Korean Securities Markets--Regulation of Foreign

<PAGE>

Investment" herein. Should any restriction imposed by Korean
laws or regulations be removed or liberalized, the Fund reserves
the right to invest accordingly, except to the extent that such
investment conflicts with the Fund's investment objective or
investment restrictions.

MANAGEMENT OF THE FUND

Directors and Officers

The Directors and officers of the Fund and their
principal occupations during the past five years are set forth
below. A Director or officer may also serve as a director,
trustee or officer of other registered investment companies
sponsored by Alliance.

<PAGE>

Principal Occupations
During The Past Five Years
Name and Address Office And Other Affiliations
________________ ______ ___________________________

John D. Carifa* Chairman President, Chief Operating Officer
1345 Avenue of the Americas and Chief and a Director of ACMC.**
New York, NY 10105 Executive
Officer

David H. Dievler Director Former Senior Vice President
204 Washington Avenue of ACMC.
Spring Lake, NJ 07762

William H. Foulk, Jr. Director Investment Adviser and Independent
Hekma Road Consultant. Formerly senior
Greenwich, CT 06831 Manager of Barrett Associates,
Inc., a registered investment
adviser.

Dr. James M. Hester Director President of the Harry Frank
45 East 89th Street Guggenheim Foundation and a
New York, NY 10128 Director of Union Carbide
Corporation.

Hon. James D. Hodgson Director Formerly U.S. Ambassador to Japan
10132 Hillgrove Drive and U.S. Secretary of Labor.
Beverly Hills, CA 90210 Director of United Television Inc.
(broadcasting).

Wang-Ha Cho* Director and Executive Vice President of Tong
TIFC Building #185 President Yang Securities Co., Ltd.
2 Kaulchi-ro Chung-ku Formerly President of Corporate
Seoul, Korea Planning and Control Group of
Tong Yang Group and Executive
Vice President of Tong Yang
Benefit Life Insurance Co., Ltd.

Sung Jin Kim* Director President of Tong Yang Securities
780 Third Avenue and Senior (America), Inc.
42nd Floor Vice Former General Manager of
New York, NY 10017 President International Business Department
of Tong Yang Securities Co., Ltd.
____________________________________

* An "interested person" of the Fund, as defined in the 1940 Act.

** For the purpose of this SAI, ACMC refers to Alliance Capital Management
Corporation, the sole general partner of Alliance, and to the predecessor
general partner of Alliance of the same name.

<PAGE>

Choong (John) H. Koh Director Founder and Chief Executive
P.O. Box 361 Officer of CHK Management, Inc.
Alpine, NJ 07620 Formerly a Partner of Ernst &
Young LLP

Robert Heisterberg Executive Senior Vice President of ACMC
1345 Avenue of the Americas Vice- and Global Economic and Policy
New York, NY 10105 President- Analyst
Investments

Yung Chul Park Executive Professor of Economics, Korea
1 Anam-dong Vice University since 1976.
Seoul, Korea President- Director of Institute of Economic
Investments Research, Korea University

A. Rama Krishna Vice Senior Vice President of ACMC
Shiroyama JT Mori Bldg. President-
9th Floor Investments
4-309, Toranomon
Minato-Ku, Tokyo 105 Japan

In Kee Oh Vice Director of Orion
23-8 Yoido-Dong Young President-
Dungpo-gu Investments
Seoul, Korea

Thomas J. Bardong Vice Senior Vice President of ACMC
1345 Avenue of the Americas President
New York, NY 10105

Mark D. Gersten Treasurer Senior Vice President of Alliance
500 Plaza Drive and Fund Services, Inc. ("AFS")
Secaucus, NJ 07094 Financial
Officer

Edmund P. Bergan, Jr. Secretary Senior Vice President and General
1345 Avenue of the Americas Counsel of Alliance Fund
New York, NY 10105 Distributors, Inc. ("AFD")

Joseph J. Mantineo Controller Vice President of AFS
500 Plaza Drive
Secaucus, NJ 07094

The Board of Directors was divided into three classes,
each class having a term of three years. Each year the term of
one class expires. See "Description of Common Stock--Certain
Anti-Takeover Provisions of the Articles of Incorporation and
Bylaws" in the Prospectus.

<PAGE>

The Fund does not pay any fees to, or reimburse expenses
of, its Directors who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Directors during its fiscal year ended April 30, 1995, the
aggregate compensation paid to each of the Directors during
calendar year 1994 by all of the funds to which Alliance provides
investment advisory services (collectively, the "Alliance Fund
Complex") and the total number of funds in the Alliance Fund
Complex with respect to which each of the Directors serves as a
director or trustee, are set forth below. Neither the Fund nor
any other fund in the Alliance Fund Complex provides compensation
in the form of pension or retirement benefits to any of its
directors or trustees.

Total Number
of Funds
Total in the
Compensation Alliance Fund
from the Complex,
Alliance Including the
Aggregate Fund Complex, Fund, as to which
Name of Director Compensation Including the Director is a
of the Fund from the Fund the Fund Director or Trustee
_________________ _____________ __________ _____________________

John D. Carifa $ 0 $ 0 49
Wang-Ha Cho $ 0 $ 0 1
David H. Dievler $2,500 $ 0 42
William H. Foulk, Jr. $9,500 $141,500 30
Dr. James M. Hester $8,500 $154,500 32
The Hon. James D.
Hodgson $8,500 $ 73,000 8
Sung Jin Kim $ 0 $ 0 1
Choong H. Kohn $2,500 $ 2,500 1

As of June 23, 1995, the Directors and officers of the
Fund as a group owned less than 1% of the outstanding shares of
Common Stock of the Fund.

Management and Administration Arrangements

<PAGE>

Agreement") to serve as investment manager to the Fund with
respect to the Fund's investments in Korean securities. Under
the Management and Administration Agreement and the Management
Agreement (collectively, the "Agreements"), Alliance and Orion
have established a joint working relationship with respect to the
Fund's investments in Korean securities.

ACMC, the sole general partner of and owner of a 1%
general partnership interest in Alliance, is an indirect, wholly-
owned subsidiary of The Equitable Life Assurance Society of the
United States ("Equitable"), one of the largest life insurance
companies in the United States and a wholly-owned subsidiary of
The Equitable Companies Incorporated ("ECI"), a holding company
controlled by AXA, a French insurance holding company. As of
June 30, 1995, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, owned in the aggregate approximately 59% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interest in Alliance ("Units").
As of June 30, 1995 approximately 33% and 8% of the Units were
owned by the public and employees of Alliance and its
subsidiaries, respectively, including employees of Alliance who
serve as Directors of the Fund.

AXA owns approximately 60% of the outstanding voting
shares of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also
engaged in asset management, investment banking and brokerage,
real estate and other financial services activities in the United
States and Europe. Based on information provided by AXA, as of
January 1, 1995, 42.3% of the issued shares (representing 54.7%
of the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company. The voting shares
of Midi Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation
("Generali") (one of which, Belgica Insurance Holding S.A., a
Belgian corporation, owned 34.1%). As of January 1, 1995, 62.1%
of the issued shares (representing 75.7% of the voting power) of
Finaxa were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
owned 31.8% of the issued shares) (representing 39.0% of the
voting power), and 26.5% of the issued shares (representing 16.6%
of the voting power) of Finaxa were owned by Banque Paribas, a
French bank ("Paribas"). Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly

<PAGE>

or indirectly owned 51.3% of the issued shares (representing
65.8% of the voting power) of AXA. In addition, certain
subsidiaries of AXA own 0.4% of the shares of AXA which are not
entitled to be voted. Acting as a group, the Mutuelles AXA
control AXA, Midi Participations and Finaxa.

Orion is a wholly-owned subsidiary of Tong Yang
Securities Co. Ltd. ("Tong Yang Securities"), a listed company
which was established in 1962 and is a component member of a
leading Korean securities company. Tong Yang Securities is part
of the Tong Yang Group, which is a group of affiliated companies
based in Korea which have operations in the basic industrial,
foods, merchandising and service and finance industries. Tong
Yang Group has one of the most broadly diversified groups of
financial services companies in Korea. At December 31, 1994, the
aggregate assets of the Tong Yang Group exceeded $[ ] billion
and it employed over [ ] persons. Tong Yang Securities
and its affiliates manage funds and accounts with approximately
$[ ] million invested in Korean equity securities as of
December 31, 1994 Orion, as an affiliate of Tong Yang
Securities, has access to its resources and research
capabilities.

Since the commencement of the Fund's operations, the
Fund's management arrangements have undergone two revisions,
effective August 27, 1992 and November 30, 1993, respectively,
each of which was approved by the Fund's shareholders. The
responsibility for investment management services provided to the
Fund with respect to Korean securities was changed although
Alliance's sole responsibility for the Fund's limited investments
in securities other than Korean securities and its role as the
Fund's administrator was unaffected. In addition, the Fund's
Investment Strategy Committee was eliminated during the first
revision. Although the revisions did not involve any change in
the aggregate fees payable by the Fund to Alliance and Orion, the
first revision increased the fee paid by the Fund to Alliance
from .75% to 1.05%, and decreased the fee paid to Orion from .50%
to .20%, of the Fund's average weekly net assets and the second
revision decreased the fee paid by the Fund to Alliance to .85%,
and increased the fee paid by the Fund to Orion to .40%, of the
Fund's average weekly net assets. For the fiscal years ended
April 30, 1993, April 30, 1994 and April 30, 1995, the Fund paid
fees to Alliance that, in the aggregate, amounted to $388,934,
$455,066 and $655,205, respectively, and to Orion that, in the
aggregate amounted to $122,319, $139,967 and $308,335,
respectively.

Certain other clients of Alliance or Orion or any of
their respective affiliates may have investment objectives and
policies similar to those of the Fund. Alliance or Orion and any
of their respective affiliates may, from time to time, make

<PAGE>

recommendations that result in the purchase or sale of a
particular security by their other clients simultaneously with
the Fund. If transactions on behalf of more than one client
during the same period increase the demand for securities being
purchased or the supply of securities being sold, there may be an
adverse effect on price or quantity. It is the policy of
Alliance and Orion and any of their respective affiliates to
allocate advisory recommendations and the placing of orders in a
manner that is deemed equitable by Alliance or Orion and any of
their respective affiliates to the accounts involved, including
the Fund. When two or more clients of Alliance or Orion and any
of their respective affiliates (including the Fund) are
purchasing or selling the same security on a given day from the
same broker-dealer, such transactions may be averaged as to
price.

Custodian

Brown Brothers Harriman & Co. ("Brown Brothers"), 40
Water Street, Boston, Massachusetts, 02109, serves as custodian
for the Fund. Rule 17f-5 adopted under the 1940 Act permits the
Fund to maintain its Korean securities and cash in the custody of
certain eligible non-U.S. custodians. Pursuant to that Rule,
under the terms of a subcustodial agreement between Brown
Brothers and Korea Exchange Bank, the Fund's portfolio of assets
invested in Korean securities are held by Korea Exchange Bank,
181, 2-Ga, Ulchiro, Chung-gu, Seoul 100-793, Korea. The majority
of the Fund's assets are held in Korea.

Selection of Korea Exchange Bank as the Fund's
subcustodian was made by the Board following consideration of a
number of factors, including, but not limited to, the reliability
and financial stability of the institution, the ability of the
institution to perform custodial services for the Fund, the
reputation of the institution in its national market, the
political and economic stability of Korea and the risks of
potential nationalization or expropriation of Fund assets.

Transfer Agent, Dividend-Paying Agent and Registrar

State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts, 02110, acts as the Fund's transfer
agent, dividend-paying agent and registrar.

<PAGE>

THE KOREAN SECURITIES MARKETS

Background and Development

The Korean securities markets have developed largely as
a result of measures of the Korean government designed to
stimulate the Korean economy and investment in Korea. The Korea
Stock Exchange (the "Exchange") was established in 1956, at which
time it functioned primarily as a market for the trading of
Korean government bonds, with only 12 equity securities listed
for trading. It was not until the Korean government enacted the
first economic development plan in 1962 that the securities
markets began to develop. During the 1960's, the Korean
government enacted legislation which provided tax and other
incentives to both issuers and buyers of equity securities. The
securities markets developed more fully during the 1970's
pursuant to further governmental measures which, among other
things, empowered the Korean government to induce corporations to
publicly offer their securities and list their shares on the
Exchange. In 1976, the Korean Securities and Exchange Law (the
"Korean Securities Law") was amended to provide for, among other
things, the establishment of the Securities and Exchange
Commission of Korea (the "KSEC") and its executive body, the
Securities Supervisory Board (the "Securities Board").

Government Involvement in the Private Sector

The Korean government has historically exercised and
continues to exercise substantial influence over many aspects of
the private sector including the securities markets. The Korean
government from time to time has influenced the payment of
dividends and the prices of certain products, encouraged
companies to invest in or to concentrate in particular
industries, induced mergers between companies in industries
suffering from excess capacity and induced private companies to
publicly offer their securities. The Exchange has also sought to
minimize excessive price volatility through various steps,
including the imposition of limitations on daily price movements
of securities.

Regulation of Foreign Investment

The Korean securities markets have historically been
closed to foreign investors. In 1981, however, the MFE announced
its intention to gradually internationalize the Korean securities
markets. Since then, the Korean government has progressively
implemented steps to liberalize foreign investment in the Korean
securities markets. At the present time, however, foreign
investors, including the Fund, are not permitted to make direct
or indirect investments in equity securities of Korean companies

<PAGE>

that are not listed on the Exchange (unless otherwise approved
specifically by the Korean government) and Won denominated debt
securities except for certain convertible bonds and public bonds.
The MFE has recently announced a plan to permit foreign investors
to make certain limited investments in Won denominated debt
securities, as described more fully below. Foreign investors
currently may not participate in the purchase of shares through
initial public offerings. There are no current proposed
regulations that would permit this type of investment.

The liberalization of the Korean securities markets
began with the authorization of indirect investment by foreign
investors primarily in Korean equity securities through Korean
investment trusts and other pooled vehicles. The first type of
permitted indirect foreign investments in Korea were a number of
investment trusts in Korea commencing in late 1981 and managed by
Korean investment management companies. Foreign investors were
also permitted to invest indirectly in the Korean securities
markets through three foreign investment funds licensed by the
Korean government and established outside Korea commencing in
1984.

Beginning in 1985, a number of Korean companies listed
on the Exchange have been permitted to issue equity-related
securities including convertible bonds, and, in later years,
bonds with subscription warrants and depositary receipts to
foreign investors outside of Korea as a means of raising capital.

Since January 3, 1992, the Korean stock markets have
been open to general direct foreign investment following the
adoption and implementation by the KSEC and MFE of regulations
(the "Foreign Investment Regulations"). These regulations allow
foreign investors to directly purchase and sell equity shares on
the Exchange, subject to certain restrictions that are described
below. Either a "general limit" or "exceptional limit" is
imposed on aggregate foreign ownership of the shares of each
class of a Korean company. Under the general limit, the total
foreign investment in each class of a company's outstanding
equity shares may not exceed 15%. In December 1994, the Korean
government announced its intention to continue to raise the 15%
foreign investment limitation. However, there can be no
assurance that the 15% limitation will be raised.

The KSEC may increase or decrease this 15% limitation if
it deems necessary for the public interest, protection of
investors or industrial policy. Currently, the KSEC has
authorized several exceptional limits including the following:
(1) subject to prior report to the Governor of the Securities
Board by a company whose shares are held by foreign investors
under the Foreign Capital Inducement Act ("FCIA") or certain
sections of the Foreign Exchange Management Act ("FEMA"), (x) in

<PAGE>

which the percentage of such foreign shareholding is less than
50%, a ceiling equal to the sum of (a) the current percentage of
foreign shareholding under the FCIA or the FEMA and (b) a
percentage (up to 15%) requested by such company (provided that
in this case the ceiling may not equal or exceed 50%) or (y) in
which the percentage of foreign ownership is 50% or more, a
ceiling equal to the percentage requested by such company may be
established; (2) a 10% ceiling on the acquisition of shares by
foreigners in the aggregate has been established for certain
public corporations designated by the MFE (the "public
corporations") (currently, only Korea Electric Power Corporation
("KEPCO") and Pohang Iron & Steel Co., Ltd. ("POSCO") are subject
to this lower ceiling); and (3) subject to application by a
company which has issued equity-related securities outside Korea
and approval by the KSEC, a ceiling equal to the sum of (a) the
percentage of current foreign shareholding in connection with
such issuance of equity-related securities and (b) a percentage
(up to 15%) requested by such company (provided that in this case
the ceiling may not equal or exceed 50%). Further, no foreign
investment is permitted in shares of Korean companies designated
as "general telecommunications service providers" under the
Telecommunications Business Law. Currently, only two companies,
Korea Telecom and DACOM Corporation, are designated in this
category and only DACOM Corporation is listed on the Exchange.

Each foreign investor, including the Fund, is limited to
an investment of 3% of the total outstanding equity shares of
each class of a listed company. In addition, Korean law provides
that public corporations may impose limits on ownership (by
Korean nationals or foreigners) of their shares in their articles
of incorporation. The articles of incorporation of each of KEPCO
and POSCO currently provide for a 1% ceiling on the acquisition
by a single investor (by a Korean national or foreigner) of their
common shares. As of June 30, 1995, KEPCO and POSCO represented
approximately 12.9% and 4.5%, respectively, of the total market
capitalization of the Exchange.

The foregoing aggregate and individual foreign ownership
limits may be exceeded, however, as a result of acquiring
(i) shares obtained pursuant to the FCIA or the FEMA, (ii) shares
held by a depositary which issues depositary receipts evidencing
an interest in such shares, (iii) shares listed on the Exchange
acquired as a result of conversion of, or exercise of warrants or
withdrawal rights under or attached to, equity-related securities
issued overseas by Korean companies (collectively, "Converted
Shares"), or (iv) shares arising from the exercise of
shareholder's rights and other rights and shares obtained by way
of gift, inheritance or bequest; provided that the number of
shares exceeding the 3% limit (except in the cases of (i) and
(ii) above) must be sold within three months from the date of
acquisition.

<PAGE>

In calculating these limits, all foreign shareholdings
(other than those owned by certain foreigners treated as Korean
nationals) must be counted regardless of whether the shares were
purchased through the Exchange, or whether they are newly issued
shares or outstanding shares. Newly issued shares (including
Converted Shares) are calculated as of the date of their listing
on the Exchange. When applying a ceiling with respect to
acquisitions by a single foreign investor, each entity (including
individuals, corporations, foreign government agencies, and
foreign funds, unit trusts and partnerships) is entitled to a
separate 3% limitation. However, all branches in Korea of any
foreign investors that constitute a group are entitled to their
own 3% limitation separate from that of their head office. When
calculating these ceilings, shares purchased are deemed to be
acquired at the time of placing the relevant order and shares
sold are deemed to be disposed of at the time of execution.

A foreigner who has acquired shares in excess of any
ceiling described above may not exercise its voting rights with
respect to the shares exceeding such limit, and the KSEC may take
necessary corrective action with regard to such foreigner
pursuant to the Korean Securities Law. The Governor of the
Securities Board of Korea may, in his discretion, disclose the
numbers of shares of a class available for investment by a single
foreign investor and foreign investors in the aggregate, and
provide a list of shares that have reached or exceeded the
ceiling on acquisition by foreign investors in the aggregate.
Currently, the Governor discloses this list every morning on
which trading occurs.

The Korean government has implemented a system to
monitor foreign investment limits and transactions, including the
issuance of identification cards to all foreign investors. As of
June 30, 1995, 3,386 foreign investors, 1,570,859 individuals and
2,617 institutions have registered to trade shares on the
Exchange; and at such date, foreign investment totalled an
aggregate amount of approximately US $13.7 billion. Shares
acquired by foreign investors must be traded on the Exchange,
with certain limited exceptions including OTC transactions as
described below. For transactions on the Exchange, a foreign
investor must open a Won account for securities transactions with
a securities company in Korea and at that time must present its
investment registration card to the securities company.

Once the applicable maximum aggregate foreign ownership
limit in a class of particular security has been reached or
exceeded, foreign investors are prohibited from engaging in
purchase transactions in that security on the Exchange. As of
June 30, 1995, of the 30 largest Exchange-listed companies (as
measured by total market capitalization), which accounted for
approximately 53% of the aggregate market capitalization of the

<PAGE>

Exchange, 97 had reached the applicable maximum aggregate foreign
ownership limit. At such date, of the 877 companies listed on
the Exchange, 97 companies had reached the applicable maximum
aggregate foreign ownership limit (11.06% of all the companies
listed on the Exchange at such time). Foreign investors are,
however, allowed to effect transactions in the class of shares of
these companies with other foreign investors (other than branches
and subsidiaries in Korea of certain financial institutions) and
certain residents of Korea off the Exchange through a securities
company in Korea as an intermediary. Such transactions ("OTC
transactions") generally occur at a premium over prices on the
Exchange. The Fund invests in equity securities of Exchange-
listed companies through such OTC transactions, and thus pays
premiums over the share prices quoted on the Exchange, which
premium can be substantial. There can be no assurance that the
Fund will be able to realize such premiums if it sells the shares
to another foreign investor. Such premiums may be affected by
changes in regulations, changes in the supply of or demand for
shares and otherwise, including changes in the percentage of
foreign ownership permitted in Exchange-listed companies.

Under the Foreign Investment Regulations, a foreign
investor must appoint one or more standing proxies from among the
Korea Securities Depository, securities firms (including Korean
branches of foreign securities firms) which have obtained a
license to act as a standing proxy and foreign exchange banks
(including Korean branches of foreign banks) to exercise
shareholders' rights, apply to change a name on the shareholders'
registry, place an order to sell or purchase shares or engage in
any matters related to these activities, if any such activities
are not conducted by the foreign investor itself. The Fund has
appointed a subsidiary of the Fund's subcustodian as a standing
proxy. Because the Fund will be engaged in transactions with
several Korean brokers, it may need to appoint a number of
standing proxies to efficiently conduct its trading activities.
Each such standing proxy appointed will receive a commission for
its services. If a standing proxy other than the Fund's
custodian or subcustodian were deemed to have custody over
certain assets of the Fund, the Fund may be required to obtain
relief from the United States Securities and Exchange Commission
or a waiver or modification of the standing proxy requirement
from the KSEC. There can be no assurance that such relief,
waiver or modification will be obtained.

A foreign investor who intends to acquire shares must
designate a single bank in Korea and open Won and foreign
currency accounts, exclusively for investment in shares
(respectively, "Won Account" and "Foreign Currency Account").
The Fund has opened such accounts with its subcustodian in Korea.
No approval is required for remittance into Korea and deposit of
foreign currency funds in the Foreign Currency Account. With the

<PAGE>

confirmation of the designated bank, foreign currency funds may
be transferred to a Won account held with a broker (i.e.,
securities company) only at the time Won funds are necessary for
the purchase of shares (i.e., payment of the deposit money at the
time of placing an order if required, and the remainder of the
purchase price outstanding at the time of settlement). Funds in
the Foreign Currency Account may be remitted abroad without any
governmental approval.

Dividends on shares of Korean companies are paid in Won.
No governmental approval is required for foreign investors to
receive dividends on, or the Won proceeds of the sale of, any
such shares to be paid, received and retained in Korea.
Dividends paid on, and the Won proceeds of the sale of, any such
shares held by a non-resident of Korea must be deposited either
in a Won Account with the investor's securities company or its
Won Account. Funds in the investor's Won Account may be
transferred to its Foreign Currency Account or withdrawn for
local living expenses (subject to a certain limitations), in each
case subject to approval of the investor's designated bank. In
addition, funds in the Won Account may be used for future
investment in shares or for payment of the subscription price of
new shares obtained through the exercise of pre-emptive rights.

Effective July 1, 1994, foreign investors are allowed to
invest in (i) Exchange listed non-guaranteed convertible bonds
issued by listed small-and medium-sized companies and (ii) low
interest rate public bonds designated from time to time by the
KSEC, subject to certain ceilings and procedural limitations.

As of March 20, 1995, certain designated securities
companies are allowed to open foreign currency accounts and Won
accounts with banks exclusively for accommodating foreign
investors' stock investments in Korea. Through such account,
these designated securities companies may enter into foreign
exchange transactions on a limited basis, such as conversion of
foreign currency funds and Won funds, either as a counterparty to
or on behalf of foreign investors without such investors having
to open their own accounts with banks.

In December 1994, the MFE announced a three-phase plan
to be implemented during the period from 1995 to 1999 to
liberalize foreign exchange transactions, including further
opening of the securities markets to foreign investors. In the
plan, the government announced its intention to gradually raise
the ceilings on investments by foreign investors in companies
listed on the Exchange. The plan provides for the further
opening of the debt securities market step-by-step, by way of
indirect investment in debt securities through Korean investment
in long-term non-guaranteed bonds, together with issuance in
Korea of Won-denominated or foreign-currency-denominated debt

<PAGE>

securities by foreign entities. The plan also provides for the
easing of requirements for the establishment of Korean branches
of foreign securities companies and for further opening of the
securities industry to foreign participants. The plan also
provides for Korean investors to be permitted more opportunities
to invest directly and indirectly in foreign securities. There
can be no assurance that the provisions of the plan, including
the provisions relating to foreign investment, will be put into
effect or have the intended impact.

The Korea Stock Exchange

The Exchange is Korea's sole securities exchange and has
its trading floor in Seoul. The Exchange, which has been a non-
profit member organization since 1988 is currently owned by 33
member securities companies. Both equity and debt securities are
traded on the Exchange, although equity securities account for
most of the Exchange's trading activity. The aggregate market
value of equity securities listed on the Exchange was
approximately W 151.2 trillion (approximately US $191.7 billion)
at December 31, 1994, and the average daily trading value of such
securities for 1994 was W 776 million (US $984.2 thousand).
Equity securities listed on the Exchange are divided into two
separate trading sections based on, among other things, the total
number of shares held by minority shareholders and the monthly
average trading volume. See "Listing, Reporting and Disclosure
Requirements."

<PAGE>

The Korean Securities Law was originally enacted in 1962
and amended fundamentally in 1976, 1982, 1987 and 1991 to broaden
the scope and improve the effectiveness of official supervision
of the securities markets. As amended, the Korean Securities Law
introduced restrictions on insider trading, required that
specified information be made available by listed companies to
investors and established rules regarding margin trading, proxy
solicitation and takeover bids. The 1987 amendment generally
improved the regulatory and disclosure requirements under the
Korean Securities Law, established a more effective system for
the transfer of securities through the use of a book-entry system
without the need for physical delivery of securities
certificates, and provided a statutory basis for futures trading
on the Exchange. In addition, the 1987 amendments strengthened
control over insider trading and contained extensive new
provisions which, for the first time, regulate the investment
advisory business. The 1991 amendments introduced stricter
restrictions on insider trading and supplemented the existing
disclosure system. The Korean Securities Law was further amended
in January 1994, effective generally from April 1, 1994, to
permit listed companies to hold their own shares subject to
certain limitations, improve the central depository system and
securities dispute conciliation committee, strengthen the
reporting requirements imposed on shareholders holding 5% or more
of the issued and outstanding voting shares of a listed company,
and expand the scope of dissenting shareholders entitled to
request that the issuer purchase their shares under certain
circumstances, including at the time of merger or business
transfer, to include holders of non-voting shares. The January
1994 amendments also lifted the 10% beneficial ownership
limitation on the acquisition of voting shares of a listed
company (with effect from January 1, 1997). The Korean
Securities Law and regulations promulgated thereunder currently
require the initial registration of companies and the filing of
separate registration statements for both initial and subsequent
public issues of securities and provide for the administration
and supervision of securities companies, investment advisory
companies, listed companies, and other securities-related
institutions, including foreign securities firms conducting
business in Korea and domestic securities companies conducting
business abroad.

Trading Procedures. The Exchange is open Monday through
Friday for trading between 9:30 a.m. - 11:30 a.m. (except for
trading of debt securities, which ends at 12:30 p.m.) and
1:00 p.m. - 3:00 p.m. It is also open on Saturday mornings. The
Exchange has established a daily price change limitation schedule
for equities and certain other securities traded on the Exchange
based on the previous day's closing price. The Exchange may
suspend trading in the securities of an individual company.
Share transactions are effected through accounts with one of the

<PAGE>

33 securities companies which act as brokers, but which may also
buy and sell as principals. A computerized order-routing system
transmits a customer's order to the trading floor, where it is
submitted to an appropriate trading post by a floor
representative of the member securities firm.

An Exchange employee determines the price of a
particular security by matching the best bids and offers.
Opening prices are determined by all bids and offers received
during the 100 minutes prior to the opening of each trading
session. The Exchange has established procedures for block sales
of shares.

Settlement Procedures. All securities transactions are
settled and cleared through the settlement unit of the Exchange.
With respect to delivery and receipt of securities, the Exchange
moved its settlement function to the Korea Securities Depository,
a special statutory corporation of which the Exchange is the
majority shareholder and a number of major financial institutions
are minority shareholders. Transactions are classified either as
regular way transactions, for which settlement is due on the
second business day following the day of contract, or as cash
transactions which are due on the day of contract. Shares,
equity-related bonds and beneficial certificates are traded as
regular way transactions, while bonds (excluding equity-related
bonds) may be traded either as regular way or cash transactions.
The delivery and receipt of securities may be cleared by a book
entry clearing system of the Korean Securities Depository.

Regulations of the Exchange require that investors place
an "entrustment guarantee" deposit in an amount equal to 40% of
the purchase or sales order price with the relevant broker on or
prior to placing a purchase or sales order. The remaining
purchase price must be paid on or prior to the settlement date,
which typically occurs two days after the date of execution. The
"entrustment guarantee" deposit requirement applies to both
Korean and foreign investors. However, certain institutional
investors designated by the Exchange, including the Fund, are
exempt from such deposit requirement. If the Fund were not
exempt from the deposit requirement and an entity other than the
Fund's custodian or subcustodian were deemed to have custody over
certain assets of the Fund due to such deposit requirement, the
Fund may be required to obtain relief from the United States
Securities and Exchange Commission or a waiver or modification of
the entrustment guarantee deposit requirement from the Exchange.
There can be no assurance that the Fund could obtain such relief,
waiver or modification.

Transaction Costs. Regulations of the Exchange have
established certain maximum brokerage commission rates for all
transactions effected on the Exchange. The rates currently

<PAGE>

provide for a commission of up to 0.6% for equity securities and
up to 0.3% for bonds and beneficial certificates. Each
individual broker may determine brokerage commissions within the
established ranges. Each broker is required to report its
commission rate schedule and any deviation therefrom to the
Exchange. Accordingly, there is generally no deviation in
commission rate schedules among Korean brokers. The same
commission rates are, in practice, applied to all trades in the
same volume range. In addition, a securities transaction tax is
levied on the seller for most transactions at a rate of 0.3% of
the value of shares sold on the Exchange and 0.5% of the value of
shares sold off the Exchange. However, under certain
circumstances, the tax may be reduced to zero. Effective as of
July 1 , 1994, an additional agricultural and fishery special tax
of 0.15% of the sales price is imposed on securities transactions
on the Exchange. Under the terms of the relevant law, this
agricultural and fishery special tax expires on June 30, 2004.

The margin requirement as set by the KSEC is 40% of the
total of the sale value of the securities purchased. The margin
requirements are varied by the KSEC depending upon market
conditions. Foreign investors, including the Fund, are not
permitted to engage in margin transactions or enjoy the benefit
of other loans or financing.

Listing, Reporting and Disclosure Requirements. The
listing of securities is regulated by the Securities Listing
Regulation of the Exchange, which classifies the four types of
securities which may be listed as equity securities, warrants to
subscribe for new shares, beneficial certificates and debt
securities. A listing application and initial listing fee
(except for certain limited cases where the Exchange exempted
such fee) must be submitted to the Exchange, which determines
whether an applicant is eligible for listing. The Exchange is
empowered to de-list securities.

The Exchange has two separate market sections within
which equity securities are traded. The main difference between

<PAGE>

the two sections is that margin transactions are permitted only
in the first trading section (with the exception of securities
issued by the securities company providing the margin loans). A
newly listed equity security must be traded in the second trading
section for at least one year after its initial listing.
Additional listing criteria must be met in order for an equity
security to be traded in the first trading section. As of
May 31, 1995, the securities of 471 companies out of 701
companies listed on the Exchange were traded in the first trading
section. An equity security trading in the first trading section
that fails to maintain certain criteria will be reassigned to the
second trading section.

Under the current regulations of the Exchange, the
primary listing criteria for equity securities include the
following: (i) corporate existence for at least five years;
(ii) paid-in capital of at least W 3 billion, at least 300,000
outstanding shares and stockholders' equity of at least W 5
billion; (iii) average annual sales revenue for the last three
accounting periods of at least W 15 billion and sales revenue for
the most recent accounting period of at least W 20 billion;
(iv) the provision of a favorable auditor's opinion (whether
qualified or not) on the company's financial statements for the
last three accounting periods; (v) at least 30% of the
outstanding shares, including at least 30% of all voting shares,
must be publicly offered for subscription or sale within six
months prior to the listing application date; (vi) a debt to
equity ratio of less than 150% of the average for the same
industry sector; (vii) shares issued by way of rights or bonus
issues (including stock dividends) during the past year (or two
years in the case of bonus issues from asset revaluation
reserves) must not exceed a specified percentage, and, with
certain exceptions, the stockholding ratio must not have been
changed during the past year; and (viii) the asset value per
share and the earnings value per share (as defined in the KSEC
regulations) must exceed 150% and 100% of its par value,
respectively.

The listing criteria a company must meet for its equity
securities to be traded on the first trading section of the
Exchange include the following: (i) paid-in capital of at least
W 5 billion as of the end of the most recent accounting period;
(ii) after-tax net profit for each of the last three accounting
periods must have been at least 10% of paid-in capital, or,
alternatively, the ratio of stated capital plus reserves to
stated capital as of the end of each such accounting periods must
have been at least 250%; (iii) debt to equity ratio must be no
greater than the average for the sector; (iv) current ratio for
each of the last three accounting periods must have equalled or
exceeded the average for the sector; (v) a dividend of at least
5% of the par value per share must have been declared and paid to

<PAGE>

each stockholder holding voting shares of less than 1% of the
issued and outstanding shares in respect of at least two out of
the last three accounting periods; (vi) the provision of a
favorable auditor's opinion (whether qualified or not) on the
company's financial statements for the last three accounting
periods; (vii) at least 40% of the outstanding shares, excluding
those held by the Korean government or certain foreign investors
("Government and Foreign Owned Shares"), must be held by certain
institutional investors and a minimum number (400 to 500
depending on the amount of the paid-in capital) of stockholders,
each holding less than 1% of the company's issued and outstanding
shares; (viii) the company's shares must have been listed for at
least one year in the second trading section; (ix) monthly
average trading volume on the Exchange for the accounting period
in which listing in the first section initially takes place must
be at least 1% of the company's shares, excluding Government and
Foreign Owned Shares, if any; and (x) with the exception of the
Korean government holding shares of certain designated
corporations no stockholder may own more than 51% of the
company's outstanding voting shares.

The listing requirements for corporate bonds include,
but are not limited to: (i) the paid-in capital of the issuer
must equal or exceed W 500 million; (ii) the total amount issued
must equal or exceed W 300 million; (iii) less than one year has
passed since issuance; (iv) a total unredeemed amount of at least
W 300 million at par value; (v) the issuer must be listed on the
Exchange or registered with the KSEC; and (vi) the bonds must be
publicly offered or sold. For warrants, the total amount of par
value of shares to be issued upon exercise of the warrant must be
at least W 50 million; and for beneficial certificates the
principal amount of the trust must be at least W 300 million and
the principal amount per unit must be at least W 500.

Listed companies are required to submit both semi-annual
and annual reports to the KSEC and the Exchange. Upon the
occurrence of certain events such as the revocation of a license
for the main line of business, the suspension of a bank account
or conditions for corporate dissolution, direct disclosure of
such event must be made by listed companies to the public
investors through the broadcasting facilities located in the
Exchange. Within two days after certain less material events
such as a change of business objectives, the filing of a
significant lawsuit against the company and notification of a tax
investigation, disclosure must be made to the Exchange, which
will be disseminated to the public.

An over-the-counter market for non-listed securities was
established in April 1987 as a mechanism for smaller companies
that are unable to meet the Exchange listing requirements to gain
access to the securities markets. As of April 30, 1995, 313

<PAGE>

Korean companies were registered on the over-the-counter market.
This market, which is distinct from the OTC system for trading in
Exchange-listed shares among foreign investors, is not open to
foreign investors.

Government Stabilization Activities

In January and February of 1994, the Korean government
announced a number of measures intended to stabilize the
securities market. The more significant of these measures
include, among others, increasing the number of new listings on
the Exchange; strengthening the guarantee deposit requirement for
purchase of stocks on the Exchange; lowering the interest rate on
deposits with securities companies; encouraging institutional
investors, including the Stabilization Fund, to sell listed
stocks in their possession; permitting short sales; lowering the
ceiling on the percentage of outstanding shares of a single
company which may be held by a securities investment trust; and
raising the securities transaction tax rate for sales effected on
the Exchange.

Market Capitalization and Trading Volume

The Korean securities markets, while relatively small as
compared to the securities markets of the United States, Japan
and certain European countries, have, with the exception of 1990
and 1991, been generally characterized by gradual and consistent
growth. The development of the Korean securities markets may be
attributed to, among other things, the Korean government's
extensive involvement in the private sector, including the
securities markets. From 1982 to 1989, market capitalization of
equity securities listed on the Exchange increased substantially
from approximately W 3.0 trillion to approximately W 95.5
trillion at December 31, 1989. During 1990 and 1991, however,
market capitalization did not continue such growth, and the total
market capitalization of equity securities listed on the Exchange
decreased 17.2% to approximately W 79.0 trillion at December 31,

<PAGE>

1990 and decreased 7.5% to approximately W 73.1 trillion at
December 31, 1991. Since the beginning of 1992 and the opening
of the Korean stock markets to foreign investment, market
capitalization has increased and at December 31, 1992,
December 31, 1993 and December 31, 1994, the total market
capitalization of equity securities listed on the Exchange was
approximately W 84.7 trillion, W 112.6 trillion and W 151.2
trillion, respectively. However, at May 31, 1995, the market
capitalization had decreased to W 133.4 trillion.

Large groups of related companies referred to as
"chaebol" are engaged in a wide range of businesses and play a
significant role in the Korean economy. As of December 31, 1994,
the 30 largest chaebol groups accounted for 48.1% of the total
market capitalization on the Exchange. The Korean government has
requested that the chaebol companies reduce their shareholdings
both within and outside of the chaebol group. The Korean
government's policy is to encourage the growth of smaller and
medium-sized companies.

Total trading volume of equity securities listed on the
Exchange has fluctuated widely, but also has, with the exception
of 1990 and 1991, generally increased from 1982 through 1994. In
1994, total trading volume was approximately W 229.8 trillion,
which represented an increase of 35.3% from total trading volume
of W 169.9 trillion in 1993. Trading activity in equity
securities is concentrated in relatively few securities. In
1994, the 30 most actively traded equity securities listed on the
Exchange accounted for 26.40% of total trading volume.

The following table sets forth the number of listed
companies, market capitalization and trading volume of domestic
equity securities in Korea and other selected countries for year-
end 1994.

<PAGE>

Selected Market Capitalization and Trading Volume of
Domestic Equity Securities(1)
(US $ millions)

Number of Market Trading Volume
Listed Companies Capitalization for the
as of as of Year Ended
December 31, December 31, December 31,
Country 1994 1994 1994
________________ ________________ ______________ ______________

United States... 7,770 5,081,810 3,592,668
Japan........... 2,205 3,719,914 1,121,438
United Kingdom.. 2,070 1,210,245 928,171
Germany......... 417 470,519 460,617
France.......... 459 451,263 615,371
Hong Kong....... 529 269,508 147,158
Taiwan.......... 313 247,325 711,346
Malaysia........ 478 199,276 126,458
Korea........... 699 191,778 286,056
Thailand........ 389 131,479 80,188
Mexico.......... 206 130,246 82,964
India........... 7,000 127,515 27,290
Indonesia....... 216 47,241 11,801

(1) This table sets forth information for selected countries
only.

Source: International Finance Corporation, Emerging Stock Markets
Factbook, 1995

The Korea Composite Stock Price Index

Market performance of the Exchange is measured by a
composite index and several additional indices based on the first
and second trading sections of the Exchange, industry sectors and
the capitalization of individual stocks. The KOSPI is the major
measure of changes in the aggregate market value of all common
stocks listed on the Exchange. Under the current aggregate
market value method of computing the KOSPI, the market price of
each listed common stock is multiplied by the number of shares
listed and then aggregated.

The KOSPI rose to an all-time high of 1,138.75 on
November 8, 1994. During 1994, the KOSPI traded within a range
of 855.37 to 1,138.75. The KOSPI closed on August 12, 1995 at
910.03.

<PAGE>

The following table illustrates the market performance
of the Exchange as measured by the KOSPI from 1983 through 1994
and for 1995 through May 31.

Korea Composite Stock Price Index(1)

Period
High Low End
-------- ------ ------

1983..... 134.46 115.59 121.21
1984..... 142.46 114.37 142.46
1985..... 163.37 131.40 163.37
1986..... 279.67 153.85 272.61
1987..... 525.11 264.82 525.11
1988..... 922.56 527.89 907.20
1989..... 1,007.77 844.75 909.72
1990..... 928.82 566.27 696.11
1991..... 763.10 586.51 610.92
1992..... 691.48 459.07 678.44
1993..... 874.10 605.93 886.18
1994..... 1,138.75 855.37 1,027.37
1995(2).. 922.05 847.07 882.50

(1) The KOSPI covers all common stocks listed on the Exchange
with a base date of January 4, 1980 and a base index of 100.
(2) Through May 31, 1995.

Source: Korea Stock Exchange, Fact Book, 1995; Stock, June 1995.

Movements in individual company share prices are
confined to fixed limits around the previous day's closing price.
Such restrictions limit the maximum movement in the KOSPI on any
day. As a result, the quoted closing price of a listed security,
if such closing price has been fixed by the limit, may not
necessarily represent the price at which persons are willing to
buy and to sell such security in the absence of such a limit.

Options and Futures

Currently, the Korean securities markets do not provide
mechanisms for the purchase and sale of options and futures
contracts. However, the Exchange announced that it intends to
open a stock index futures market in early 1996 and a stock index
futures option market in 1997. It has not been announced whether
foreign investors (including the Fund) will be permitted to
participate in such markets.

<PAGE>

Equity Securities

Total
Equity
Offerings to Capital
Total Public Offerings(1) Shareholders Raised
_________________________ ____________ __________
Amount Amount Amount
(Won (Won (Won
Number millions) Number millions) millions)
______ _________ ______ ___________________

1986.. 16 (4) 43,060 110 797,705 840,765
1987.. 44 (4) 243,763 178 1,654,950 1,898,713
1988.. 112 (14) 1,049,431 298 6,720,644 7,734,075
1989.. 126 (16) 3,050,970 274 11,124,538 14,669,186
1990.. 36 (3) 336,023 169 2,581,808 2,917,831
1991.. 21 (0) 226,894 136 2,180,164 2,687,058
1992.. 8 (0) 81,650 133 1,711,188 2,349,889
1993.. 7 (0) 181,245 171 2,788,862 3,258,770
1994.. 25 (0) 579,524 161 5,378,678 6,247,792

(1) The number in parenthesis specifies the number of secondary
offerings included in the total.

Source: Securities Supervisory Board, Monthly Review, May 1995.

Privatizations. As part of its program for the
development of the securities markets, the Korean government has
sold portions of certain government-owned corporations to the
public. These sales were intended to increase the participation
of low and middle-income investors in the Korean securities
markets. Participation was encouraged through government-
provided discounts and loans. The sale by the Korean government
of a portion of its interest in POSCO and KEPCO in 1988 and 1989,
respectively, constituted the first public offerings under this
program. In 1991, Korea Exchange Bank, formerly wholly-owned by
the Korean government, sold its newly issued shares to the
public. The Korean government recently sold to the public a
portion of its interest in Korea Telecom, which is the largest
telecommunications service provider in Korea, through a
competitive bidding process. The Korean government announced
that it is considering the sale of additional government-owned

<PAGE>

corporations although any such sale would be subject to a number
of factors and there can be no assurance that such sale will
occur.

The Secondary Market. The total trading volume of
equity securities in 1994 was approximately W 229.3 trillion
representing an increase of 35.5% from the 1993 level of W 169.2
trillion. In 1993, the total trading volume increased 87.2% from
the 1992 level of W 90.4 trillion. Trading activity, however, is
concentrated in a limited number of companies within a small
number of industries. The 30 most actively traded domestic
equity securities accounted for 26.4% of total trading volume of
domestic equity securities for the year ended December 31, 1994.
The following table illustrates the trading volume of the 30 most
actively traded equity securities on the Exchange for the year
ended December 31, 1994.

<PAGE>

Number of
Shares In Billions In Millions
(thousands) of Won of Dollars
_________ ___________ ___________
The Commercial Bank of Korea,
Ltd. 247,024 W1,980 $2,464
LG Electronics, Inc. 233.607 6,247 7,775
Daewoo Heavy Industries, Ltd. 200,578 2,834 3,527
Korea Electric Power Corporation 191,369 5,683 7,073
Cho Hung Bank 187,305 2,100 2,614
Daewoo Corporation 176,496 2,831 3,524
Bank of Seoul 172,517 1,371 1,706
Korea First Bank 139,095 1,677 2,087
Sacil Heavy Industries Co., Ltd. 138,306 1,174 1,461
LG Chemical 131,652 2,545 3,168
Hanhwa Chemical 130,253 1,805 2,247
Hyundai Engineering &
Construction Co., Ltd. 120,067 4,751 5,913
Pohang Iron & Steel Co., Ltd. 117,953 8,085 10,063
Daewoo Electronics Co., Ltd. 108,376 1,475 1,836
Shinhan Bank 102,763 1,792 2,230
Yukong Limited 100,715 4,044 5,033
Hanil Bank 99,626 1,036 1,289
Kohap Inc. 93,197 1,106 1,377
Hyundai Motor Company 89,419 3,611 4,494
Kukje Corporation 82,585 721 897
Samsung Electronics Co., Ltd. 77,416 7,117 8,859
Sammi Steel Co., Ltd. 76,833 700 871
Ssang Yong Oil Refining Co., Ltd. 72,106 1,614 2,009
Ssang Yong Cement Ind. Co., Ltd. 69,971 1,956 2,435
Kumho Construction & Engineering 64,818 760 946
Honam Petrochemical Corp. 64,210 833 1,037
Daelim Industrial Co., Ltd. 61,614 1,202 1,496
Korean Air Lines Co., Ltd. 59,723 1,514 1,885
Asia Motors Co., Ltd. 58,679 954 1,187
Sammi Corporation 57,294 375 467

Source: Korea Stock Exchange, Fact Book, 1995; Stock, June 1995.

The aggregate market capitalization of all equity
securities of the 699 companies listed on the Exchange as of
December 31, 1994 was approximately W 151.2 trillion
(approximately US $191.7 billion). Market capitalization, along
with trading volume, is concentrated in a limited number of
companies within a small number of industries. As of
December 31, 1994, the 30 largest companies by market
capitalization represented approximately 49.0% of the total
market capitalization of Korean equity securities. The following
tables illustrate the 30 largest companies on the Exchange by
market capitalization on December 31, 1994 and the sectoral
distribution of listed companies at May 31, 1995.

<PAGE>

Market Capitalization
at December 31, 1994
Company (Won billions) (US $ Mil.)
_______ ______________ ___________

Korea Electric Power Corporation(1) 16,777 21,272
Samsung Electronics Co., Ltd. 6,716 8,515
Pohang Iron & Steel Co., Ltd.(1) 6,007 7,617
Daewood Heavy Industries, Inc. 4,389 5,565
LG Electronics, Inc. 2,742 3,476
Korea Mobile Telecommunication Corp. 2,327 2,950
Hyundai Motor Company 2,047 2,596
Shinhan Bank 2,012 2,552
Yukong Limited 1,952 2,475
Cho Hung Bank 1,909 2,420
Samsung Heavy Industries Co., Ltd. 1,854 2,351
LG Chemical 1,839 2,332
Hyundai Engineering & Construction Co., Ltd. 1,778 2,254
Hanil Bank 1,696 2,151
Daewoo Securities Co., Ltd. 1,643 2,083
Daewoo Corporation 1,562 1,980
Ssangyong Oil Refining Co., Ltd. 1,537 1,949
DACOM Corporation 1,531 1,941
Korea First Bank 1,430 1,813
The Commercial Bank of Korea, Ltd. 1,339 1,698
Korea Exchange Bank 1,295 1,642
Korean Air Lines Co., Ltd. 1,239 1,571
Kookmin Bank 1,235 1,566
Bank of Seoul 1,219 1,546
Kia Motors Corporation 1,186 1,503
Ssang Yong Cement Ind. Co., Ltd. 1,035 1,313
LG Securities Co., Ltd. 1,022 1,296
Korea Long Term Credit Bank 1,022 1,295
Daewoo Electronics Co., Ltd. 956 1,212
Dong AR Construction Industries Co., Ltd. 866 1,098

Total(2) 72,732 94,032

(1) Under its articles of incorporation, each of KEPCO and
POSCO provide for a 1% ceiling on the acquisition by a single
investor (including Korean national and foreign investor) of its
common shares.
(2) Amounts may not add up due to rounding.

Source: Korea Stock Exchange, Fact Book, 1995; Stock, June 1995.

<PAGE>

Sectoral Distribution of Listed Companies at May 31, 1995

Percentage
Number of Market Value Market
Companies (Won billions) Share (1)
_________ ______________ _________

Fishing......................... 3 68.5 0.0
Mining.......................... 3 186.4 0.1
Foods & Beverages............... 47 3,157.3 2.3
Textile, Wearing Apparel &
Leather....................... 63 4,889.1 3.6
Luggage, Handbags, Saddlery,
Harness and Footwear.......... 12 393.0 0.2
Wood & Wood Products............ 4 226.9 0.1
Paper & Paper Products.......... 24 1,822.7 1.3
Publishing, Printing,
Reproduction of Recorded Media 3 144.3 0.1
Chemicals, Petroleum, Coal &
Rubber........................ 104 12,105.7 9.0
Non-metallic Mineral............ 26 2,803.7 2.1
Basic metals.................... 38 10,183.4 7.6
Fabricated metals & Machinery... 151 31,477.4 23.6
Other Products.................. 10 318.6 0.2
Electricity & Gas............... 3 17,675.0 13.2
Construction.................... 51 8,103.4 6.0
Wholesale Trade................. 38 4,357.8 3.2
Retail Trade.................... 8 1,125.7 0.8
Hotels and Restaurants.......... 1 205.5 0.1
Transport & Storage............. 14 2,656.0 1.9
Communication................... 2 3,872.5 2.9
Financial Institutions.......... 83 25,687.4 19.2
Insurance....................... 12 1,893.3 1.4
Recreational and Cultural
Services...................... 1 4.8 0.0
Total........................... 701 133,358.4 100.0

(1) Amounts may not add up due to rounding.

Source: Korea Stock Exchange, Stock, June 1995.

Bond Market

<PAGE>

government bonds, municipal bonds issued by city governments and
special bonds issued by government-run corporations. The
majority of corporate bonds are guaranteed by banking
institutions. As of May 31, 1995, the total amount of listed
public bonds and listed corporate bonds was W 66.3 trillion and
W 49.2 trillion, respectively. The following table illustrates
the total amount in Won of all bond issues listed on the Exchange
for 1986 through 1994 and for 1995 through May 31.

Total Bond Issues
(Won billions)

Listed Listed
Public Bonds Corporate Bonds Total(1)
____________ _______________ ________

1986..... 8,638.2 8,474.3 17,112.6
1987..... 15,033.8 9,972.9 25,006.7
1988..... 22,159.0 11,521.0 33,680.1
1989..... 28,094.7 15,395.5 43,490.1
1990..... 29,049.1 22,068.2 51,117.3
1991..... 32,249.7 29,241.0 61,490.7
1992..... 32,446.0 32,697.0 65,143.0
1993..... 41,359.0 37,574.0 78,932.7
1994..... 55,620.7 45,876.4 102,497.1
1995(2).. 66,307.0 49,199.2 115,506.2

(1) Amounts may not add up due to rounding.
(2) January 1 through May 31, 1995.

Source: Korea Stock Exchange, Stock, June 1995.

The secondary market in bonds listed on the Exchange has
been relatively inactive compared to equity securities listed on
the Exchange. In 1994, the value of bonds traded on the Exchange
was W 1,168.9 billion compared to the value of equity securities
traded which was W 230 trillion. There is also an active over-
the-counter market in certain non-listed bonds. Currently,
foreign investors are not permitted to invest in listed or
unlisted Won denominated bonds, except for Exchange-listed non-
guaranteed convertible bonds of small- and medium-sized companies
and certain low-interest rate government or public bonds to be
designated from time to time by the KSEC; however, Korean
branches and subsidiaries of certain foreign financial
institutions are permitted to invest in listed Won-denominated
bonds. The following table illustrates the trading volume of
bonds listed on the Exchange for 1986 through 1994 and for 1995
through May 31.

<PAGE>

Bond Trading Volume
(Won billions)

Public Bonds Corporate Bonds Total(1)
____________ _______________ _________

1986..... 1,001.2 2,165.7 3,166.9
1987..... 5,326.8 1,911.6 7,238.4
1988..... 7,000.7 1,544.6 8,545.3
1989..... 4,377.7 771.4 5,149.1
1990..... 2,455.0 795.3 3,250.3
1991..... 1,393.7 704.1 2,097.8
1992..... 453.0 152.0 605.0
1993..... 3.8 1.8 5.5
1994..... 24.5 1,144.5 1,169.0
1995(2).. 13.1 214.4 227.5

(1) Amounts may not add up due to rounding.
(2) January 1 through May 31, 1995.

Source: Korea Stock Exchange, Stock, June 1995.

THE REPUBLIC OF KOREA

Background

Area and Population. Korea, which was founded on
August 15, 1948, occupies approximately 38,000 square miles
(98,600 square kilometers) of the southern portion of the Korean
peninsula. It is bordered to the north by North Korea and to the
east, west and south by the East Sea, the Yellow Sea and the
Korean Strait, respectively. Korea's present border with North
Korea was determined as a result of the armistice that ended the
Korean War (1950-1953), which established a demilitarized zone
near the 38th parallel that separates Korea and North Korea. The
population of Korea is approximately 44.1 million. Seoul, the
capital, has a population of approximately 10.6 million.

Government. Governmental authority in Korea is highly
centralized and is concentrated in a strong presidency. The
President, who is the Chief of State and head of the government,
is also Chairman of the State Council (cabinet) which consists of
the Prime Minister, who is appointed by the President with the
consent of the National Assembly, and other members appointed by
the President on the recommendation of the Prime Minister. The
Prime Minister, by order of the President, is responsible for the
overall coordination of the various ministries and agencies. The

<PAGE>

President has the right to veto new legislation and to take
emergency measures in case of natural disaster, serious fiscal or
economic crisis, a state of war or a similar condition. The
present Constitution provides that the President is elected by
popular vote for a term of five years, after which he may not be
reelected. The current President is Kim Young Sam, who was
elected in December 1992. President Kim has emphasized reform
and liberalization of politics and deregulation and
revitalization of the economy of Korea.

The two primary political parties in Korea are the
Democratic Liberal Party ("DLP") led by President Kim, and the
opposition party, the Democratic Party ("DP"). The last National
Assembly elections were held in March 1992 and the next election
is scheduled to be held in 1996. As of August 31, 1994, the DLP
and DP held 176 and 97 seats in the National Assembly,
respectively. The remaining 26 seats were held by others.

International Relations. Korea maintains diplomatic
relations with most nations, but its strongest ties are with the
United States. Korea and the United States have entered into
several agreements designed to promote Korea's economy and a
mutual defense treaty. Korea also maintains strong ties with
Japan and Japan constitutes Korea's leading source of imported
capital goods, technology and foreign direct investment and
provides 43.3% of foreign visitors to Korea. Since the beginning
of 1989, Korea has established diplomatic relations with
Bulgaria, the Czech Republic, Slovakia, Hungary, Mongolia,
Poland, Romania, Russia, the Federal Republic of Yugoslavia and
Croatia. A Chinese trade office was established in Seoul in
April 1991, and diplomatic relations with the People's Republic
of China were officially established in August 1992.

<PAGE>

Tension between Korea and North Korea was temporarily
eased in 1972 when the first moves towards conciliation and
eventual reunification were initiated. The talks broke down at
an early stage and efforts to revive them during 1979-80 were
unsuccessful. Since 1984 there has been intermittent contact
between the two countries, consisting mainly of a series of talks
on economic relations, humanitarian issues, unified sports teams
and the possibility of the two heads of state and their
legislatures meeting with one another. However, until recently
these talks yielded only minimal results. On December 13, 1991,
the leaders of North Korea and Korea signed an Agreement on
Reconciliation, Nonaggression and Exchange and Cooperation. This
agreement was put into force on February 19, 1992. Tensions
between North Korea and Korea increased following the
announcement in March 1993 by North Korea of its intention to
withdraw from participation in the Nuclear Non-Proliferation
Treaty. Subsequent discussions between North Korea and other
nations have not resolved North Korea's status under the treaty.
Relations with North Korea have been further strained in recent
months due to its uncertain status under the Nuclear Non-
Proliferation Treaty and its continuing refusal to allow full
inspections of its nuclear facilities by officials of the
International Atomic Energy Commission.

In October 1994, North Korea signed an accord in Geneva
in which it agreed to stop the development of nuclear weapons in
exchange for the development of nuclear power plants. On June
13, 1995, a multi-national consortium led by the United States
agreed to provide North Korea with two nuclear reactors and moved
toward selecting Korea's state-controlled electric utility as the
prime contractor in the project. Korea has agreed to provide
most of the $4 billion cost for the reactors. It is still not
clear whether this cooperation between North Korea and Korea and
further implementation of the Geneva accord will reduce the
tension between the two countries.

Both Korea and North Korea were admitted as members of
the United Nations on September 17, 1991. In addition, Korea is
a member of a number of international organizations, including
the Asian Development Bank, the International Bank for
Reconstruction and Development (The World Bank), the
International Development Association, the International Monetary
Fund and the International Finance Corporation. It is also a
party to the General Agreement on Tariffs and Trade.

Domestic Economy

General. Korean industry and commerce are predominately
privately owned and operated. However, the Korean government is
heavily involved in establishing economic policy objectives and
implementing such policies with a view toward maintaining

<PAGE>

national security, encouraging industrial development and
improving living standards. Economic, financial and business
priorities can be influenced by the Korean government through its
controls of approvals and licenses and through the allocation of
credit. However, such government influence has gradually
diminished through deregulation and market self-regulation, in
keeping with Korea's liberalization policy.

Primary responsibility for formulating Korea's economic
policies, including the development and implementation of a
series of successive economic and social development plans (the
"Economic Plans") which have guided economic policy since 1962,
is with the government's Economic Planning Board, headed by the
Deputy Prime Minister. The emphasis of the Economic Plans has
changed from the development of import substitution industries
and the infrastructure to a focus on economic stabilization,
liberalization of the economy, reduction of restrictions on
direct foreign investment and improvements in social conditions.
Since the establishment of the Economic Plans, Korea has made
significant progress toward the transformation of its economy
from one characterized by agricultural production and the export
of raw materials, textiles and clothing to that of a modern
industrial state. Korea's exports now include ships, motor
vehicles, integrated circuits and consumer electronics. The
Korean government announced in early 1993 economic reform and
development programs to be implemented in a new Five Year
Economic Plan for the period through 1997. Pursuant to this
plan, the government will promote fiscal, financial and
administrative reforms and changes in prevailing patterns of
economic behavior. The new plan is also intended to promote
stable growth and globalization of the Korean economy and to
improve the quality of life in Korea.

Gross National Product. During the fifteen years ending
in 1993, the average annual real increase in Korea's Gross
National Product ("GNP") has been approximately 7.85%. Such
increase is attributable in part to government policies, as
articulated in the Economic Plans, favoring export-led growth and
an industrious and well-trained labor force. During this period,
Korea made significant progress toward the transformation of its
economy from one characterized by agricultural production and the
export of raw materials to that of a modern industrial state.

The Korean economy has been characterized in recent
years by high growth and, until 1988 when inflation accelerated,
low inflation rates. The GNP grew at 7.0% in 1985, 12.9% in
1986, 13.0% in 1987 and 12.4% in 1988. In 1989, growth slowed by
comparison to the previous three years, increasing by only 6.8%.
This decrease in the GNP growth rate was largely attributable to
an appreciation in the Won and to nationwide labor-management
disputes which reduced the competitiveness of Korean products in

<PAGE>

international markets. In 1990 and 1991, the GNP growth rate
recovered to 9.3% and 8.4%, respectively, due in part to
increased domestic demand. In 1992, 1993 and 1994 GNP grew at a
rate of 4.7%, 5.6% and 8.2%, respectively based on preliminary
figures released by the Bank of Korea and the Exchange.

The following table shows the composition of Korea's GNP
at current market prices and the GNP at constant 1990 market
prices from 1990 to 1994.

<TABLE>
<CAPTION>
1990 1991 1992 1993 1994

<S> <C> <C> <C> <C> <C>
Gross National Product at
Current Market Prices:
Private Consumption 96,387.7 115,042.8 129,735.2 143,721.7 164,212.1
General Government
Consumption 18,187.0 22,169.5 26,110.3 28,745.9 32,482.9
Gross Domestic Fixed
Capital Formation 66,568.7 82,946.5 87,907.0 96,218.5 109,374.1
Increase in Stocks (270.0) 973.9 35.2 (2,511.7) 198.5
Exports of Goods and
Services 53,467.0 60,735.0 69,432.7 78,162.6 91,780.1
Less Imports of Goods
and Services (54,417.2) (66,049.7) (71,840.0) (76,970.7) (94,313.2)
Statistical
Discrepancy (384.3) (82.6) (988.2) (220.4) 1,273.2
Expenditures on Gross
Domestic Product 179,539.0 215,734.4 240,392.2 267,146.0 305,007.7
Net Factor Income
from the Rest of
the World (1,276.9) (1,494.5) (1,687.6) (1,628.1) (2,140.7)
Total 178,262.1 214,239.9 238,704.6 265,517.9 302,867.0

Gross National Product at
Constant 1990 Market
Prices 178,262.1 194,458.8 204,231.0 216,162.4 233,940.2
Percentage increase of GNP
over Previous Years
At Current Prices 20.5% 20.2% 11.4% 11.2% 14.1%
At Constant 1990
Market Prices 9.6% 9.1% 5.0% 5.8% 8.2%

<FN>
__________________________

Source: The Bank of Korea, Monthly Bulletin, April 1995
Note:
(1) Preliminary

<PAGE>

</TABLE>

The high rate of growth of the Korean economy was due to
rapid growth in the exports of goods and services and in domestic
fixed capital formation. The former grew 17.4% and the latter at
13.7% from 1993 to 1994. The growth in the volume of exports has
been achieved by geographical diversification of markets and a
shift in emphasis in the composition of exports from agricultural
products, raw materials and textile products to manufactured
goods, particularly electronics products, ships, machinery and
steel. In 1989 and 1990, as growth in exports slowed,
construction expenditures and private consumption expenditures
increased, primarily as a result of the steady increase in income
levels and the demand for housing and consumption goods,
particularly consumer durables such as passenger cars and
household electric appliances. In 1991, export growth was slower
than the increase in imports, and Korea's trade deficit grew to
U.S. $7 billion while its balance on current account registered a
shortfall of U.S. $8.7 billion. A recession during the second
half of 1992 restricted import growth to 1%, cut the current
account deficit to U.S. $4.6 billion and cut the trade deficit to
U.S. to $2.2 billion. By the first half of 1993, a rise in
exports and a decline in imports virtually eliminated Korea's
merchandise trade deficit. Although Korea's leading export
groups, clothing and footwear comprising 13% of Korea's exports
in 1992, experienced a decline in 1993, the introduction of new
export lines and growth in existing export groups mitigated the
effects of the decrease by outpacing the growth rate of imports.
See "Foreign Trade and Balance of Payments--Foreign Trade." The
following table sets forth the composition of Korea's GNP in
current prices for the years 1989 to 1994.

<PAGE>

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994(1)
____ ____ ____ ____ ____ _______
<S> <C> <C> <C> <C> <C> <C>
Primary Industries
Agriculture, Forestry
and Fisheries W14,380.6 W15,592.4 W16,549.8 W17,805.8 W18,832.5 W21,499.9
Secondary Industries
Mining and Quarrying 992.0 1,025.0 1,142.4 928.5 902.1 1,010.4
Manufacturing 46,252.9 52,351.0 61,527.3 66,710.1 72,158.5 81,991.1
Construction 13,358.2 20,736.6 30,035.3 32,870.6 37,005.9 41,026.2
Tertiary Industries
Electricity, Gas and
Water 3,731.5 3,888.7 4,056.7 5,285.2 6,194.5 7,070.3
Transport, Storage and
Communication 10,328.1 12,017.3 14,356.7 16,390.1 19,112.2 22,629.3
Wholesale and Retail Trade,
Restaurants and Hotels 19,822.0 23,110.6 26,419.5 28,802.6 31,187.6 35,603.1
Financing, Insurance,
Real Estate and
Business Services 21,302.1 26,801.0 33,052.3 39,923.0 45,481.4 52,119.5
Public Administration and
Defense 5,984.4 7,386.0 8,995.1 10,616.1 11,876.6 13,315.7
Community, Social and
Personal Services 9,966.1 11,974.5 14,617.0 17,593.8 20,030.0 23,184.7
Net Private Household
Services, Import
Duties and Bank
Service Charges 3,046.6 4,655.9 4,532.3 3,466.1 4,364.8 5,557.7
Net Factor Income from
the Rest of the World (1,223.1) (1,276.9) (1,494.5) (1,687.6) (1,628.1) (2,140.7)
_________ _________ ________ ________ ________ ________
Total W147,941.6 W178,262.1 W214,239.9 W238,704.6 W265,518.0 W302,867.1
__________ __________ __________ __________ __________ __________
<FN>
_____________________________

(1) Preliminary

Source: The Bank of Korea, Monthly Bulletin, April 1995.

</TABLE>

Prices, Wages and Employment. During the 1960's and
early 1970's, Korea experienced a period of increasingly high
inflation rates. Government measures successfully reduced
inflation rates and from 1982 to 1987, and inflation, as measured
by the Consumer Price Index, increased by an average of 2.8%.
Thereafter, however, inflation, as measured by the Consumer Price
Index, began to accelerate from 3.0% in 1987 to 7.1% in 1988. In

<PAGE>

1989, the inflation rate, as measured by the Consumer Price
Index, decreased to 5.7% but increased in 1990 to 8.6% and 9.7%
in 1991. In recent years, the inflation rate, as measured by the
Consumer Price Index, decreased to 6.2% in 1992, 4.8% in 1993 and
6.2% in 1994.

The recent increased acceleration in inflation rates has
been caused in part by wage increases. Until recently, the
Korean labor movement was constrained by labor laws and policies
which limited the ability of workers and their unions to take
collective action. In December 1986 and November 1987, these
laws were amended, relaxing constraints on the formation of
democratic unions and the staging of strikes. During 1988 and
1989, backed by stronger unions, the Korean work force won
significant wage concessions as workers demanded higher pay to
compensate for increases in productivity achieved during the
1980's. Labor disputes in Korea have decreased since 1990.
Since 1988, wages have increased sharply. Monthly wages in all
industries rose 15.5% in 1988, 21.1% in 1989, 18.8% in 1990,
17.5% in 1991, 15.2% in 1992, 12.2% in 1993 and 12.7% in 1994.
These wage increases can be compared with increases in
productivity of 10.4% in 1988, 7.5% in 1989, 12.7% in 1990, 13.3%
in 1991, 10.2% in 1992, 8.1% in 1993 and 9.9% in 1994.

Korea's labor force is one of the economy's principal
assets. In the period from 1989 to 1994, the economically active
population of Korea increased by 17.5% to 20.3 million, while the
number of employees increased 13.1% to 19.8 million. The
economically active population over 15 years old as a percentage
of the total population over 15 years old has remained fairly
stable at between 58% and 62% over the past decade. The labor
force is well-educated, with literacy being almost universal
among workers under 50.

<PAGE>

The following table shows selected price indices for the
periods indicated.

Increase Increase
Producer Over Consumer Over
Price Previous Price Previous Unemployment
Index(1) Year Index(1) Year Rate(1)(2)
_________ ________ ________ ________ ____________

(1990=100) (%) (1990=100) (%) (%)
1989.. 96.0 1.5 92.1 5.7 2.6
1990.. 100.0 4.2 100.0 8.6 2.4
1991.. 104.7 4.7 109.3 9.3 2.3
1992.. 107.0 2.2 116.1 6.2 2.4
1993.. 108.6 1.5 121.7 4.8 2.8
1994.. 116.6 2.8 129.3 6.2 2.4

(1) Average for year.
(2) Expressed as a percentage of the economically active
population.

Source: National Statistical Office, Major Statistics of Korean
Economy, 1995; National Statistical Office, Monthly Statistics of
Korea, April 1995.

Industry. Industrial production increased by 3.3% in
1989, 8.8% in 1990, 9.6% in 1991, 5.8% in 1992, 4.4% in 1993 and
11.1% in 1994. The drop in production in 1989 was due in large
part to the large number of working days lost as a result of
labor strikes. Because of the importance of exports to Korean
industry, increases in protectionist trade barriers by countries
to which Korean industry exports products would adversely affect
industrial production. See "Foreign Trade and Balance of
Payments--Foreign Trade."

The following table sets forth indices of industrial
production for various products from 1989 through 1994 and their
relative contribution to total industrial production.

<PAGE>

<TABLE>
Industrial Production

<CAPTION>
1990 Index
Weight (1) 1989 1990 1991 1992 1993 1994
__________ ____ ____ ____ ____ ____ ____

<S> <C> <C> <C> <C> <C> <C> <C>
Mining.................................... 184.5 109.7 100.0 99.8 85.9 79.9 78.7
Coal................................... 95.8 116.2 100.0 84.4 66.6 51.6 39.4
Metal Ores ............................ 4.9 117.2 100.0 94.8 95.8 69.3 43.4
Other Mining & Quarrying............... 83.8 97.4 100.0 117.6 107.3 112.9 125.8
Manufacturing............................. 9,392.9 91.8 100.0 109.7 116.2 121.1 134.4
Food Products & Beverages.............. 709.9 94.3 100.0 108.6 110.9 112.7 122.1
Tobacco Products....................... 93.2 94.2 100.0 101.1 104.7 107.2 101.9
Textiles............................... 633.1 100.8 100.0 98.1 94.6 86.5 86.2
Wearing Apparel & Fur Articles......... 343.3 103.5 100.0 95.1 86.5 73.3 76.8
Leather, Luggage, Saddlery, Harness,
Handbags & Footwear.................. 385.7 93.2 100.0 93.4 86.5 66.0 55.8
Wood & Products of Wood and Cork....... 104.5 96.2 100.0 108.2 103.0 85.6 88.3
Pulp, Paper & Paper Products........... 227.7 94.9 100.0 103.9 110.5 119.51 133.7
Publishing, Printing & Reproduction
of Record Media...................... 223.4 92.2 100.0 103.1 114.6 110.6 120.9
Coke, Refined Petroleum Products &
Nuclear Fuel......................... 379.8 93.6 100.0 128.8 164.0 179.4 184.1
Chemicals & Chemical Products.......... 826.5 86.6 100.0 116.3 138.0 152.1 164.9
Rubber & Plastic Products.............. 449.4 96.4 100.0 108.3 114.8 119.9 129.7
Non-Metallic Mineral Products.......... 504.1 93.2 100.0 116.0 123.6 124.7 134.1
Basic Metals........................... 555.3 89.4 100.0 110.8 115.9 129.0 139.9
Fabricated Metal Products.............. 416.6 92.7 100.0 108.1 103.2 102.4 118.1
Machinery & Equipment, nec. ........... 916.2 89.7 100.0 110.7 107.6 114.4 133.6
Office, Accounting & Computing
Machinery............................ 150.5 89.6 100.0 104.9 112.3 139.9 190.0
Electrical Machinery & Apparatus, nec.. 276.6 83.4 100.0 108.1 115.6 121.4 136.7
Radio, Television & Communication
Equipment............................ 768.1 92.2 100.0 115.4 125.4 136.3 167.5
Medical Precision & Optical Instrument,
Watches.............................. 118.9 104.0 100.0 105.8 106.1 118.0 135.9
Motor Vehicles & Trailers.............. 814.0 80.8 100.0 115.4 131.4 153.2 183.3
Other Transport Equipment.............. 205.6 89.7 100.0 118.0 147.3 136.3 148.2
Furniture and Manufacturing nec. ...... 290.5 102.2 100.0 101.6 94.5 87.7 85.8
Electricity and Gas....................... 422.6 87.8 100.0 111.3 124.4 139.2 160.5
Electricity............................ 410.8 87.8 100.0 110.2 121.6 134.2 153.3
Gas.................................... 11.8 - 100.0 152.4 219.6 315.3 410.6
All Items................................. 10,000.0 91.9 100.0 109.6 116.0 121.1 134.5
Percentage Increase of All Items Over
Previous Year.......................... - 3.3% 8.8% 9.6% 5.8% 4.4% 11.1%

<FN>
______________

(1) Index weights were established on the basis of an industrial
census in 1990 and reflect the average annual value added by
production in each of the classifications shown, expressed as a
percentage of total value added in the mining, manufacturing and
electricity and gas industries in that year.

Source: National Statistical Office, Major Statistics of Korea,
February 1995.

<PAGE>

</TABLE>

Manufacturing. The manufacturing sector has been the
most rapidly growing sector of Korea's economy in recent years.
In 1992, 1993 and 1994 the production of manufactured goods
increased 4.8%, 5.3% and 10.4%, respectively, as a result of
overall slow economic growth. Performance within the
manufacturing sector has been particularly strong in electronics
and heavy industries (iron and steel, machinery and automobiles),
reflecting the relative importance attached to import
substitution and export competition in these products.
Performance has also been strong in the petrochemical,
semiconductor and automobile industries, which have experienced
strong growth in domestic and overseas markets.

The electronics industry grew at an average annual rate
of approximately 13.6% during the period 1988 to 1993. This
growth may be traced to both domestic and overseas demand, as
well as to encouragement by the Korean government of technology
through tax incentives, loans at favorable interest rates and
tariff protection. Korea is among the world's largest producers
of electronic products and semiconductors. The electronics goods
produced in Korea include personal computers, videocassette
recorders and compact disc players.

Supported by large increases in domestic demand for
steel due to the growth of other heavy industry and large scale
public investment in road, harbor and housing construction, steel
production increased from 13.5 million tons in 1988 to 33.0
million tons in 1993. This growth has been achieved in large
part by the expansion of POSCO's integrated facilities, which in
1994 produced 21.6 million tons of crude steel. These increases
in production have permitted a substantial increase in iron and
steel exports.

The Korean automobile industry has grown significantly
from 1984 to 1993. In 1984, the Hyundai Motor Co., Korea's
leading car manufacturer, began exporting cars to Canada and in
1986 shipped its first cars to the United States. Daewoo Motors
began exporting cars to the United States in 1987, and Kia Motors
began exporting cars to the United States in 1988. Recently,
exports to Europe and Asia have become increasingly important as
United States demand for Korean cars has declined. The domestic
market for cars has increased as incomes have risen. Total
passenger car production amounted to 1,592,669 units in 1993,
compared with 1,259,500 units in 1992 and 166,759 in 1984.

Construction. The construction industry has become one
of the major industries in Korea, growing 12.6% in 1993 and 10.8%
in 1994. The recent decline in overseas construction has been
offset by the growth of domestic construction markets.

<PAGE>

Domestically, orders rose to W 25,569.4 billion in 1991,
W 27,861.0 billion in 1992, W 33,246.5 billion in 1993 and
W 37,197.1 billion in 1994.

Agriculture, Forestry and Fisheries. The contribution
of agriculture, forestry and fisheries to Korea's GNP has
declined from 10.7% in 1988 to 7.1% in 1994. The Korean
government's agricultural policy emphasizes increasing grain
production, the development of irrigation systems, land
consolidation and reclamation, seed improvement, mechanization
measures to combat drought and flood damage, and increasing
agricultural incomes. The government has encouraged the
development of the fishing industry by encouraging the building
of large fishing vessels, and the modernization of fishing
equipment, marketing techniques and distribution outlets.

Energy

Reliance on Imported Energy

Total Reliance
Demand Imports Ratio
______ ________ ________

(in million tons of oil equivalents)
1985.. 56.3 42.9 76.2%
1986.. 61.5 48.1 78.2%
1987.. 67.9 54.3 80.0%
1988.. 75.4 62.7 83.2%
1989.. 81.7 69.8 85.5%
1990.. 93.2 81.9 87.9%
1991.. 103.6 94.6 91.3%
1992.. 116.0 108.5 93.6%
1993.. 126.9 120.2 94.8%
1994.. [ ] [ ] [ ]

________

Source: National Statistical Office, Major Statistics of Korean
Economy, 1995; Korea Energy Economics Institute, Monthly Energy
Statistics, March 1995.

<PAGE>

To reduce its dependence on oil imports, the Korean
government encouraged efforts to implement an energy source
diversification program, with primary emphasis on nuclear energy.
The total Korean nuclear power generating capacity at the end of
1994 was 58,650 megawatts, accounting for 35.5% of total annual
power generation. The following table sets out the principal
primary sources of energy consumed in Korea, expressed in million
tons of oil equivalents and as a percentage of total energy
consumption, for the period 1985 to 1994.

Consumption of Primary Energy Sources

Coal Petroleum Nuclear Other Total(1)
____ _________ _______ _____ __________

Quantity % Quantity % Quantity % Quantity % Quantity %
________ ___ ________ ___ ________ ___ ________ ___________ ___

1985.. 22.0 39.1 27.1 48.2 4.2 7.4 2.9 5.3 56.3 100.0
1986.. 23.3 38.0 28.5 46.4 7.1 11.5 2.6 4.2 61.5 100.0
1987.. 23.6 34.8 29.7 43.7 9.8 14.5 4.8 7.0 67.9 100.0
1988.. 25.2 33.4 35.4 47.0 10.0 13.3 4.8 6.3 75.4 100.0
1989.. 24.5 30.0 40.5 49.6 11.8 14.5 4.8 5.9 81.7 100.0
1990.. 24.4 26.2 50.2 53.8 13.2 14.2 5.4 5.8 93.2 100.0
1991.. 24.5 23.7 59.6 57.5 14.1 13.6 5.4 5.2 103.6 100.0
1992.. 23.6 20.4 71.7 61.8 14.1 12.2 6.5 5.5 116.0 100.0
1993.. 25.8 20.4 78.5 61.9 14.5 11.5 7.9 6.3 126.9 100.0
1994.. [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]

________________

(1) Amounts may not add up due to rounding.

Source: National Statistical Office, Major Statistics of Korean Economy, 1995;
Korea Energy Economics Institute, Monthly Energy Statistics, March 1995.

The Financial Sector

Korea's financial sector has developed along with the
economy and today comprises a banking system, a range of non-
banking financial institutions and the securities markets.

Korean financial institutions may be divided into two
main categories: monetary institutions and other financial
institutions. Monetary institutions are comprised of The Bank of
Korea and deposit taking banks. Deposit taking banks are in turn
divided into commercial banks and specialized banks according to
their legal status and the banking businesses in which they may
engage.

<PAGE>

Commercial banks are classified into city banks,
regional banks and foreign bank branches. City banks engage in
both domestic and foreign business and are owned by the private
sector. Regional banks perform similar functions to the city
banks.

Specialized banks are established by statutes and
currently include: The Industrial Bank of Korea, The Korea
Housing Bank, National Agricultural Cooperative Federation, The
National Federation of Fisheries Cooperatives and National
Livestock Cooperative Federation.

Other financial institutions are divided into
development institutions, investment institutions, savings
institutions and insurance institutions. Development
institutions include The Korea Development Bank, The Export-
Import Bank of Korea and the Korea Long Term Credit Bank. There
are 15 investment and finance companies and 15 joint-venture
merchant banks. The financial sector also includes a number of
domestic and foreign insurance companies and mutual savings
companies.

In addition, the law to introduce the real-name system
for real estate transactions was enacted and became effective
July 1, 1995. The main purpose of the law is to discourage real
estate speculation and to prevent property taxes from rising out
of control. The law bans the current practice of borrowing names
for property registration, thereby avoiding taxes.

Monetary Policy. The Bank of Korea, which was
established in 1950, is Korea's central bank and sole currency
issuing bank. Monetary and credit policies of The Bank of Korea
are formulated and controlled by a nine-member Monetary Board
comprised of the Minister of Finance and Economy, the Governor of
The Bank of Korea and seven other members. The Monetary Board
regulates the activities of banking institutions and sets and
implements monetary policy.

Although The Bank of Korea has primary responsibility
for monetary policy, the Korean government, through the MFE,

<PAGE>

exerts considerable influence on monetary policy. For example,
the MFE has the power to request the reconsideration of
resolutions adopted by the Monetary Board and, if such a request
is rejected by the Monetary Board, the President has the
authority to override the Monetary Board's decision.

Monetary policy is implemented by influencing the
reserve positions of banking institutions, principally through
changes in the terms and conditions of discounts, open market
operations and changes in reserve requirements. The Bank of
Korea may also set or alter maximum interest rates on deposits
and loans and, in periods of extreme monetary expansion, directly
control the volume and nature of bank credit. In November 1994,
the Government announced a plan to further reduce the employment
of direct intervention as a means of implementing its monetary
policy, in order to encourage the liberalization of financial
institutions' activities.

In August 1991, the Monetary Board adopted a four-stage
interest rate deregulation plan in furtherance of the
deregulation process. Pursuant to such plan, in 1991 the Korean
government deregulated interest rates on other financial
products, including certain time deposits.

On June 30, 1993, the MFE announced a three-phase
liberalization plan. The principal proposals under such phase
relate to interest rate deregulation (which is to accelerate the
1991 plan above), improvement of monetary control measures and
the development of money markets, improvement of credit control
management, and foreign exchange and capital market
liberalization. Each area of deregulation is to be phased in
under three stages from 1993 to 1997.

In November 1994, the Government announced a plan for
deregulation of interest rates, which accelerates the
Government's 1991 plan to reduce the use of direct intervention
as a means of implementing monetary policy. In accordance with
the 1991 plan, at the end of 1993, all restrictions on interest
rates for loans, (other than Bank of Korea-supported policy
loans), long-term (not less than two years) deposits, certain
short-term money market instruments, short-term (less than two
years) corporate and financial debt, monetary stabilization bonds
and public bonds were lifted. The 1994 plan provides that in

<PAGE>

1995 interest rates will be liberalized for other short-term
money market instruments and Bank of Korea-supported policy
loans, in 1996 interest rates will be liberalized for all
deposits other than demand deposits, and beginning in 1997
limitations on interest rates for demand deposits gradually will
be lifted.

Money Supply. From 1983 to 1984, the Korean government,
in an effort to consolidate a foundation for price stability,
maintained a tight control of monetary aggregates. However, as
economic growth slowed in 1985, the government reversed its tight
monetary policy and money supply increased 15.6% in 1985. In
response to greatly expanded economic activity, the money supply
increased at a rate of 18.4% in 1986, 19.1% in 1987, 21.5% in
1988, 19.8% in 1989, 17.2% in 1990, 21.9% in 1991, 14.9% in 1992,
16.6% in 1993 and 18.7% in 1994.

The following table shows the volume of the money supply
for each year during the period 1989 to 1994.

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
________ ________ ________ ________ ________ ________
(Won billions)
<S> <C> <C> <C> <C> <C> <C>
Money Supply (M1)............ 14,329.0 15,905.3 21,752.4 24,586.3 29,041.0 32,511
Quasi-money (1).............. 44,309.0 52,803.2 61,993.6 71,672.2 83,178.0 100,668
________ ________ ________ ________ _________ _________
Money Supply (2)(3).......... 58,638.0 68,707.5 83,745.9 96,258.6 112,219.0 133,179
======== ======== ======== ======== ========= =========
Percentage increase
over previous year.. 19.8% 17.2% 21.9% 14.9% 16.6% 18.7%

<FN>

(1) Comprised of time and savings deposits and residents' deposits in foreign currencies.
(2) Money Supply is the sum of currency in circulation, demand deposits and quasi-money.
(3) Amounts may not add up due to rounding.

Source: National Statistical Office, Major Statistics of Korean Economy, 1995; National Statistical
Office, Monthly Statistics of Korea, May 1995; The Bank of Korea, Monthly Bulletin, April 1995.
<ps=12
</TABLE>

<PAGE>

Foreign Trade and Balance of Payments

Foreign Trade. Foreign trade is vital to the Korean
economy, which lacks natural resources and must rely on extensive
trading activity as a base for growth. Virtually all domestic
requirements for petroleum, wood and rubber are imported, as are
much of Korea's requirements for coal and iron ore. Exports
constitute a high percentage of Korea's GNP, and the
international economic environment is, accordingly, of crucial
importance to Korea's economy. In each of 1991, 1992, 1993 and
1994, export growth was 10.5%, 6.6%, 7.3% and 16.8%,
respectively, due to reduced international competitiveness
resulting primarily from the continuation of relatively high Won
values, domestic wage increases, increased foreign competition,
and economic slowdowns in countries constituting Korea's
principal export markets.

Korea's trade balance has been highly sensitive to world
crude oil prices. The country's trade deficit reached US $4.4
billion in 1979, the year of the second large oil price rise of
the decade. After 1979, Korea's balance of trade improved. In
1986, Korea recorded the first substantial trade surplus in the
nation's history, amounting to US $4.2 billion. The trade
surplus nearly doubled to US $7.7 billion in 1987 and increased
further to US $11.4 billion in 1988. In 1989, the trade surplus
declined to US $4.6 billion, due principally to the decline in
export growth. In 1990, 1991 and 1992, Korea recorded trade
deficits of US $2.0 billion, US $7.0 billion and US $2.1 billion,
respectively. The balance of trade in 1990, 1991 and 1992 was
adversely affected by increases in oil prices that occurred in
late 1990 as a result of the Persian Gulf crisis, increased
imports of machinery and other capital goods and consumer goods,
the economic recession in countries constituting important
markets for Korean exports, principally the United States, and
increased competition for Korea's exports in certain markets,
principally exports to Japan from other Asian countries. In 1993
Korea recovered from its trade deficit, reaching a trade surplus
of US $1.8 billion. However, in 1994 Korea again recorded a
trade deficit of US $3.1 billion.

Korea's largest trading partners are the United States
and Japan. In 1994, the United States accounted for
approximately 21.4% of total exports and approximately 21.1% of
total imports while Japan accounted for approximately 14.1% of
total exports and approximately 24.8% of total imports. Over 85%
of Korea's exports are manufactured goods, machinery and
transportation equipment. Korea's primary imports are
commodities such as oil, iron ore, and, increasingly, consumer
durables. From 1979 until the recent Gulf War, world oil and
commodity prices had risen more slowly than inflation rates, and

<PAGE>

several of Korea's major imports (including oil, iron ore and
coal) experienced price weakness.

The following tables provide a breakdown of Korea's
exports and imports by major commodity groups from 1988 through
1994 and the geographic distribution of Korea's foreign trade for
each of the years 1989 through 1994.

<TABLE>
Exports by Major Commodity Groups (F.O.B.)

<CAPTION>
As % As % As % As % As % As %
of of of of of of
1989 Total 1990 Total 1991 Total 1992 Total 1993 Total 1994 Total
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ ____ _____
(U.S. $ millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Crude Materials 902.0 1.4 990.6 1.5 989.1 1.4 1,072.6 1.4 1,160.0 1.4 1,430.4 1.5
Minerals
(Including Fuels) 686.6 1.1 697.2 1.1 1,508.6 2.1 1,742.3 2.3 1,851.7 2.3 1,745.8 1.8
Chemicals 2,049.7 3.3 2,511.3 3.9 3,190.0 4.4 4,454.9 5.8 4,921.9 6.0 6,339.2 6.6
Manufactured
Goods 13,733.9 22.0 14,357.2 22.1 16,078.7 22.4 18,490.8 24.1 20,685.6 25.2 22,949.2 24.0
Machinery and
Transportation
Equipment 23,590.3 37.8 25,544.5 39.3 29,978.3 41.7 32,547.4 42.5 36,950.4 44.9 47,067.5 49.0
Miscellaneous
Manufactured
Goods 18,970.3 30.4 18,573.3 28.6 17,649.6 24.6 15,883.2 20.7 14,233.3 17.3 13,504.2 14.1
Others 2,444.4 3.9 2,341.6 3.6 2,474.8 3.4 2,440.1 3.2 2,433 3.0 2,997.0 3.1
_______ _____ _______ ____ _______ ____ _______ ___ _______ ____ ______ ___

Total(1) 62,377.2 100.0 65,015.7 100.0 71,870.1 100.0 76,631.5 100.0 82,235.9 100.0 96,013.2 100.0
======= ===== ======= ==== ======= ==== ======= === ======= ==== ====== ===
</TABLE>

<PAGE>

<TABLE>

Imports by Major Commodity Groups

<CAPTION>
As % As % As % As % As % As %
of of of of of of
1989 Total 1990 Total 1991 Total 1992 Total 1993 Total 1994 Total
____ _____ ____ _____ ____ _____ ____ _____ ____ _____ ____ _____
(U.S. $ millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Crude Materials 8,728.2 14.2 8,647.8 12.4 8,900.2 10.9 8,314.9 10.2 8,869.5 10.6 9,404.5 9.2
Minerals
(Including
Fuels) 7,627.1 12.4 11,023.2 15.8 12,747.9 15.6 14,636.1 17.9 15,052.6 18.0 15,414.5 15.0
Chemicals 7,157.7 11.6 7,433.5 10.6 8,288.6 10.2 7,667.6 9.4 8,234.8 9.8 9,762.8 9.5
Manufactured
Goods 9,672.2 15.7 10,580.8 15.1 13,461.7 16.5 11,898.4 14.6 12,069.7 14.4 15,936.4 15.6
Machinery and
Transportation
Equipment 21,104.8 34.3 23,940.0 34.3 28,250.7 34.7 28,965.7 35.4 28,416.8 33.9 37,408.2 36.5
Miscellaneous
Manufactured
Goods 3,555.0 5.8 4,241.6 6.1 5,102.9 6.3 5,227.4 6.4 6,147.8 7.3 8,164.6 7.8
Others 3,610.2 5.9 3,976.8 5.7 4,772.9 5.9 5,065.2 6.2 5,009.1 6.0 6,257.1 6.1
_______ _____ ________ ____ ________ ____ ________ ____ ________ _____ ________ ___
Total(1) 61,464.8 100.0 69,843.7 100.0 81,524.9 100.0 81,775.3 100.0 83,800.1 100.0 102,348.2 100.0
======= ===== ======== ==== ======== ==== ======== ==== ======== ===== ======== ====
<FN>
_________________________________

(1) Amounts may not add up due to rounding.

Source: The Bank of Korea, Monthly Bulletin, April 1995.
</TABLE>

<PAGE>

Exports

Country 1989 1990 1991 1992 1993 1994
_______________ ____ _____ _____ _____ _____ _____

(percentage of total exports)
U.S.A. ......... 33.1 29.8 25.8 23.6 22.1 21.4
Canada.......... 3.0 2.7 2.3 2.1 1.7 1.4
United Kingdom.. 3.0 2.7 2.5 2.4 2.0 1.9
France.......... 1.4 1.7 1.6 1.3 1.1 1.0
Germany......... 3.4 4.4 4.4 3.8 4.4 4.5
Netherlands..... 1.2 1.5 1.6 1.3 1.2 1.2
Japan........... 21.6 19.4 17.2 15.1 14.1 14.1
Hong Kong....... 5.4 5.8 6.6 7.7 7.8 8.3
Singapore....... 2.5 2.8 3.8 4.2 3.8 4.3
All Others...... 25.4 29.2 34.2 38.5 41.8 41.9
_____ _____ ____ ____ _____ ____

Total........... 100.0 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ==== ===== ====

Imports

Country 1989 1990 1991 1992 1993 1994
________________ ____ ____ ____ ____ ____ ____

(percentage of total imports)
U.S.A. ......... 25.9 24.3 23.2 22.4 21.4 21.1
Canada.......... 2.7 2.1 2.3 1.9 2.0 2.0
United Kingdom.. 1.5 1.8 1.7 1.7 1.7 1.6
France.......... 1.4 1.8 1.7 1.7 1.8 1.8
Germany......... 4.3 4.7 4.6 4.6 4.7 5.0
Netherlands..... 0.6 0.7 0.7 0.8 0.9 0.8
Japan........... 28.4 26.6 25.9 23.8 23.9 25.0
Hong Kong....... 0.9 0.9 1.0 1.0 1.1 0.6
Singapore....... 1.0 1.3 1.3 2.2 1.8 1.6
All Others...... 33.3 35.8 37.6 39.9 40.7 40.5
_____ _____ _____ _____ _____ _____
Total........... 100.0 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ===== ===== =====

__________________

Source: National Statistical Office, Major Statistics of Korean
Economy, 1995;
National Statistical Office, Monthly Statistics of
Korea, April 1995.

<PAGE>

The following table summarizes Korea's balance of trade
from 1987 through 1994.

Balance of Trade

Balance Exports as %
Exports (1) Imports (1) of Trade of Imports
__________ __________ ________ ____________
(US $ millions)

1987..... 46,243.8 38,584.8 7,659.0 119.8
1988..... 59,648.2 48,202.8 11,445.4 123.7
1989..... 61,408.7 56,811.5 4,597.2 108.1
1990..... 63,123.6 65,127.2 (2,003.6) 96.9
1991..... 69,581.5 76,561.3 (6,979.8) 90.9
1992..... 75,169.4 77,315.8 (2,146.4) 97.2
1993..... 80,949.9 79,089.7 1,860.2 102.0
1994(2).. 93,676.3 96,757.5 (3,081.2) 96.8

____________________

(1) These entries are derived from trade statistics and are
valued on a F.O.B. basis.
(2) Preliminary.

Source: National Statistical Office, Major Statistics of Korean
Economy, 1995; The Bank of Korea, Monthly Bulletin, April 1995.

Balance of Payments. From 1987 to 1989, Korea had a
surplus on the current account of its balance of payments. The
surplus increased to US $ 14.2 billion in 1988 before declining
to US $ 5.1 billion in 1989. Korea incurred a deficit on the
current account of its balance of payments of US $ 2.2 billion
during 1990, with deficits in the visible and invisible trade
balances. In 1990, exports increased by 2.7% to US $63.1
billion. During the same period imports increased 14.6% to US
$65.1 billion. The invisible trade balance decreased from a US $
0.2 billion surplus in 1989 to a deficit of US $0.5 billion in
1990. However, the deficit on the current account of its balance
of payments increased to US $8.7 billion in 1991 and US $4.5
billion in 1992. In 1993 and 1994 Korea had a surplus on the
current account of its balance of payments of US $385 million and
$4.8 billion, respectively.

The following table sets forth certain information with
respect to Korea's balance of payments from 1988 through 1994.

<PAGE>

<TABLE>
Balance of Payments

<CAPTION>
Classification 1988 1989 1990 1991 1992 1993 1994(4)
_______________________ ____ _____ ____ ____ ____ ____ ______
(US $ millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Current Balance...... 14,160.7 5,054.6 (2,179.4) (8,727.7) (4,528.5) 384.6 (4,777.8)
Trade Balance........ 11,445.4 4,597.2 (2,003.6) (6,979.8) (2,146.4) 1,860.2 (3,081.2)
Exports (1).......... 59,648.2 61,408.7 63,123.6 69,581.5 75,169.4 80,949.2 93,676.3
Imports (1).......... 48,202.8 56,811.5 65,127.2 76,561.3 77,315.8 79,089.7 96,757.5
Invisible Trade
Balance.............. 1,267.2 210.8 (450.6) (1,595.5) (2,614.3) (1,966.8) (2,295.1)
Unrequired Transfers
(Net)................ 1,448.1 246.6 274.8 (152.4) 232.2 491.2 598.5
Long-term
Capital (2).......... (2,732.8) (3,362.5) 547.5 4,185.8 7,232.7 8,899.8 6,133.0
Loans and
Investment........... (1,891.7) (1,104.8) 33.3 3,091.2 5,160.3 8,707.3 7,406.8
Others (Net)......... (841.1) (2,257.7) 514.2 1,094.6 2,072.4 192.5 (1,273.8)
Basic Balance........ 11,427.9 1,692.1 (1,631.9) (4,541.9) 2,704.2 9,284.4 1,355.2
Short-term Capital
Balance (2)......... 1,336.3 60.3 3,333.7 41.2 1,109.9 (2,021.2) 2,951.1
Errors and
Omissions............ (589.0) 700.7 (1,975.7) 759.9 1,084.0 (721.0) (1,504.1)
Overall Balance...... 12,175.2 2,453.1 (273.9) (3,740.8) 4,898.1 (6,542.2) 2,802.2
Financial
Account (3).......... (12,175.2) (2,453.1) 273.9 3,740.8 (4,898.1) (6,542.2) (2,802.2)
Liabilities.......... (1,320.0) 966.3 1,486.6 8,429.8 1,947.4 673.7 8,353.4
Assets............... (10,855.2) (3,419.4) (1,212.7) (4,689.0) (6,845.5) (7,215.9) (11,155.6)

<FN>

(1) These entries are derived from trade statistics and valued on an F.O.B.
basis.
(2) The distinction between long-term and short-term capital is based on an
original maturity of one year or more.
(3) Includes borrowings from the International Monetary Fund, syndicated
bank loans and short-term borrowings.
(4) Preliminary.

Source: The Bank of Korea, Monthly Bulletin, April 1995.
</TABLE>

The following table shows Korea's total official
reserves as of December 31 for the years 1989 through 1994.

<TABLE>

<PAGE>

Total Official Reserves

<CAPTION>
1989 1990 1991 1992 1993 1994(3)
____ ____ ____ ____ ____ ______
(US $ millions)
<S> <C> <C> <C> <C> <C> <C>
Gold (1)............... 31.6 31.6 32.3 32.6 33.3 33.6
Foreign Exchange (2)... 14,977.8 14,459.1 13,306.0 16,639.9 19,704.2 25,032.0
Total Gold and
Foreign Exchange...... 15,009.5 14,490.8 13,338.3 16,672.5 19,737.5 25,065.6
Reserve Position at
IMF................... 234.2 317.3 364.9 439.3 466.7 530.8
Special Drawings
Rights................ 1.6 14.3 29.8 42.1 58.2 76.3
_______ ________ ________ ________ ________ ________
Total Official
Reserves.............. 14,245.2 14,822.4 13,733.0 17,153.9 20,262.4 25,672.7
======== ======== ======== ======== ======== ========

<FN>

(1) For this purpose, domestically-owned gold is valued at US $42.22 per
troy ounce (31.1035 grams) and gold deposited overseas is calculated at
cost of purchase.
(2) Since January 1, 1988, foreign exchange holdings of domestic foreign
exchange banks have been excluded.

Source: The Bank of Korea, Monthly Bulletin, April 1995.

</TABLE>

Exchange Controls. Only authorized foreign exchange
banks are permitted to effect foreign exchange transactions.
Approval by the MFE is required to become an authorized foreign
exchange bank.

Authorization or approval, either by the MFE, The Bank
of Korea or authorized foreign exchange banks, as appropriate, is
necessary for overseas remittances, issuance of international
bonds and certain other instruments, overseas investments and
other transactions involving foreign exchange payments in
conformity with the foreign exchange control regulations unless
such authorization or approval is expressly exempted under the
regulations.

<PAGE>

Foreign Exchange

Prior to 1989, The Bank of Korea set daily exchange
rates for the Won based on a trade-weighted multi-currency basket
system. This rate was known as The Bank of Korea concentration
base rate. In 1989, the Korean government announced a three-
phase plan to produce a free-floating exchange rate system. The
first phase allowed the domestic banks to decide buying and
selling rates of foreign exchange within narrow limits of The
Bank of Korea concentration base rate. In the second phase,
which took effect in March 1990, the trade-weighted multi-
currency basket system was replaced by a system whereby the
foreign exchange rates are determined by averaging the previous
day's inter-bank rates settled through the Korea Financial
Telecommunications and Clearings Institute, weighted by trading
volume. This system is known as the market average exchange rate
system. Under this system, foreign exchange rates are permitted
to move each day within narrow ranges on either side of the
market average exchange rates published daily by the Korea
Financial Telecommunications and Clearings Institute. The
government recently announced that it would decide whether to
introduce a free-floating exchange rate system during 1996 and
1997 after considering trends in the international monetary
system.

The following table shows exchange rates (The Bank of
Korea concentration base rate until February 1, 1990 and the
market average exchange rate thereafter) of the Won from 1988
through 1994 and for the first three months of 1995.

Exchange Rate of the Won

Exchange Rate
_____________

(in Won per Dollar)
December 31, 1988.. 684.1
December 31, 1989.. 679.6
December 31, 1990.. 716.4
December 31, 1991.. 760.8
December 31, 1992.. 788.4
December 31, 1993.. 808.1
December 31, 1994.. 788.7
January 31, 1995... 789.8
February 28, 1995.. 789.1
March 31, 1995..... 774.5

____________________

Source: The Bank of Korea, Monthly Bulletin, April 1995.

<PAGE>

The market average exchange rate as of a recent date is
set forth on the inside cover page of this Prospectus.

Government Finance

The MFE is responsible for the preparation of the
national budget. The fiscal year commences on January 1, and the
budget must be submitted to the National Assembly for its
approval not later than 90 days prior to the commencement of the
fiscal year. Supplementary budgets revising the original budget
may be submitted to the National Assembly for its approval at any
time during the fiscal year.

The fiscal budget of the government consists of a
General Account and Special Accounts. Revenues in the General
Account include national taxes, stamp duties and profits from
government monopolies. Expenditures include those for general
administration, national defense, community service, education,
health, social security services, certain annuities and pensions,
and local finance which comprises the transfer of tax revenues to
local governments.

Special Accounts are set up to aggregate the accounts of
certain functions of the government to achieve more effective
budgetary control and administration. They include government
activities of a business nature, such as communications, grain
administration and government procurement.

The following table sets out government revenues and
expenditures, excluding Special Accounts, for the years 1988 to
1994.

<TABLE>

<PAGE>

Consolidated Central
Government Revenues and Expenditures

<CAPTION>
1988 1989 1990 1991 1992 1993 1994(1)
____ ____ ____ ____ ____ _______ _______
(Won billions)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Internal Taxes........... 12,545.1 15,211.0 9,134.2 24,029.8 30,099.1 34.178.2 38,461.5
Customs Duties........... 2,573.3 2,099.1 2,774.5 3,435.3 3,153.4 2,885.9 3,448.9
Defense Surtax........... 2,978.4 3,614.7 4,575.1 1,462.5 329.7 269.1 79.5
Education Surtax......... 512.3 423.4 521.3 816.0 943.2 998.9 1,204.9
Monopoly Profits......... 874.0 74.6 - - - - -
Agricultural and Fishery
Special Tax............ - - - - - - 185.5
Government Enterprises
Receipts (Net)........... 331.5 408.3 590.5 810.2 1,042.2 902.3 1,078.9
Others................... 4,133.9 7,016.8 6,942.7 8,774.7 10,699.1 13,893.6 7,601.2
________ ________ ________ ________ ________ ________ ________
Total Revenues........... 23,948.3 28,847.9 34,538.3 39,328.5 46,266.6 53,127.9 54,509.5
======== ======== ======== ======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994(1)
____ ____ ____ ____ ____ _______ _______
(Won billions)
<S> <C> <C> <C> <C> <C> <C> <C>
Expenditures
Defense.................. 5,572.1 6,147.4 6,854.0 8,012.0 8,770.8 9,308.1 10,055.5
General Expenses......... 11,241.9 14,703.7 18,973.0 22,319.5 23,862.6 26,951.1 31,118.1
Fixed Capital Formation.. 1,540.5 2,032.5 2,401.0 2,048.8 2,821.4 2,889.1 2,547.4
Others................... 2,968.9 5,483.5 5,609.0 8,616.6 11,685.6 13,721.3 9,053.4
________ ________ ________ ________ ________ ________ ________
Total Expenditures....... 21,323.3 28,367.1 3,836.9 40,996.8 46,960.4 52,869.7 54,774.3
======== ======== ======== ======== ======== ======== ========
Net Lending.............. (73.4) 37.0 (53.6) 38.4 (5.3) 23.3 5.5
Budget Surplus........... 2,698.4 443.8 754.9 (1,706.7) (693.8) 258.2 1,735.2

<FN>
____________________

(1) Preliminary.

Source: The Bank of Korea, Monthly Bulletin, April 1995.
</TABLE>

<PAGE>

External Debt

The rapid economic development of Korea has led to large
foreign borrowings. The private and governmental external debt
of Korea was US $40.5 billion at the end of 1987. Since then,
the external debt declined to US $31.7 billion as of December 31,
1990 as a result of substantial current account surpluses, but
rose to US $39.1 billion, US $42.8 billion, US $43.9 billion and
US $52.8 billion as of December 31, 1991, 1992, 1993 and
October 31, 1994, respectively, as a result of current account
deficits in each of these years.

BROKERAGE AND PORTFOLIO TRANSACTIONS

Subject to the general supervision of the Fund's Board
of Directors, Alliance is responsible, and, with respect to the
Fund's investments in Korean securities, Alliance and Orion are
jointly responsible, for the placing of the orders for portfolio
transactions for the Fund. The Fund allocates portfolio
transactions for execution by brokers that offer best execution,
taking into account such factors as size of order, difficulty of
execution and skill required to execute, in the case of agency
transactions, the commission, and in the case of principal
transactions, the net price. Any number of brokers may be used
for execution of the Fund's portfolio transactions. Alliance and
Orion effect the bulk of the Fund's transactions in Korean
securities through brokers, dealers or underwriters located in
that country. U.S. government or corporate debt or other U.S.
securities constituting permissible investments will be purchased
and sold through U.S. brokers, dealers or underwriters. The Fund
may place brokerage orders with Donaldson, Lufkin & Jenrette
Securities Corporation, a U.S. registered broker-dealer and an
affiliate of Alliance, and with Tong Yang Securities, an
affiliate of Orion. The Fund will not engage in principal
transactions with Tong Yang Securities or any other affiliate of
the Fund unless an exemption is received from the Securities and
Exchange Commission allowing the Fund to do so. At present, the
Fund does not intend to apply for such exemptive relief.

With respect to orders placed with Donaldson, Lufkin &
Jenrette Securities Corporation and Tong Yang Securities for
execution on a securities exchange, commissions received must
conform to Section 17(e)(2)(A) of the 1940 Act and Rule 17e-1
thereunder, which permit an affiliated person of a registered
investment company (such as the Fund), or any affiliated person
of such person, to receive a brokerage commission from such
registered investment company provided that such commission is
reasonable and fair compared to the commissions received by other
brokers in connection with comparable transactions involving
similar securities during a comparable period of time.

<PAGE>

Subject to best execution, orders may be placed with
brokers that supply research, market and statistical information
to the Fund and Alliance or Orion. The research may be used by
Alliance or Orion in advising other clients, and the Fund's
negotiated commissions to brokers supplying research may not
represent the lowest obtainable commission rates.

The Fund's Board of Directors reviews periodically the
commissions paid by the Fund to determine if the commissions paid
over representative periods of time were reasonable in relation
to the benefits realized by the Fund.

During the fiscal years ended April 30, 1993, 1994 and
1995, the Fund incurred brokerage commissions amounting in the
aggregate to $198,834, $60,853 and $276,480. During the fiscal
years ended April 30, 1993, 1994 and 1995, brokerage commissions
amounting in the aggregate to $22,153, $9,623 and $52,315,
respectively, were paid to Tong Yang Securities. During the
fiscal years ended April 30, 1993, 1994 and 1995, no brokerage
commissions were paid to Donaldson, Lufkin & Jenrette Securities
Corporation and brokerage commissions amounting in the aggregate
to $5,854, $5,110 and $17,125, respectively, were paid to brokers
utilizing the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corporation. During the fiscal year ended April 30,
1995, the brokerage commissions paid to Tong Yang Securities
constituted 18.9% of the Fund's aggregate brokerage commissions,
the brokerage commissions paid to Donaldson, Lufkin & Jenrette
Securities Corporation constituted 0% of the Fund's aggregate
brokerage commissions and the brokerage commissions paid to
brokers utilizing the Pershing Division of Donaldson, Lufkin &
Jenrette Securities Corporation constituted 6.2% of the Fund's
aggregate brokerage commissions. During the fiscal year ended
April 30, 1995, of the Fund's aggregate dollar amount of
brokerage transactions involving the payment of commissions,
19.9% were effected through Tong Yang Securities, 0% were
effected through Donaldson, Lufkin & Jenrette Securities
Corporation and 6.4% were effected through brokers utilizing the
Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corporation. During the fiscal year ended April 30, 1995,
transactions in portfolio securities of the Fund aggregated
approximately $11,167,652 with associated brokerage commissions
of approximately $55,296 were allocated to persons or firms
supplying research services to the Fund, Alliance or Orion.

DIVIDENDS AND DISTRIBUTIONS

The Fund will distribute to shareholders of record, at
least annually at approximately year-end, substantially all of
its net investment income from dividends and interest and net
realized capital gains, if any. If the Fund's annual operating

<PAGE>

expenses exceed its dividend and interest income for the year,
the excess will be charged to the Fund's capital and no income
dividends will be paid.

DIVIDEND REINVESTMENT PLAN

The Agent has furnished each shareholder with written
information relating to the Plan. Included in such information
were procedures for electing to receive dividends and
distributions in cash (or, in the case of shares held in the name
of a broker or a nominee who does not participate in the Plan,
for electing to participate in the Plan). Shareholders whose
shares are held in the name of a broker or nominee should contact
the broker or nominee for details. All distributions to
investors who elect not to participate in the Plan will be paid
by check mailed directly to the record holder by or under the
direction of State Street Bank and Trust Company, as the
dividend-paying agent.

<PAGE>

after such date except where temporary curtailment or suspension
of purchase is necessary to comply with Federal securities laws.
If, before the Agent has completed its purchases, the market
price exceeds the net asset value of a share of Common Stock, the
average purchase price per share paid by the Agent may exceed the
net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if the dividend or distribution
had been in shares issued by the Fund.

The Agent maintains all shareholder accounts in the Plan
and furnishes written confirmations of all transactions in the
account, including information needed by shareholders for
personal and tax records. Shares in the account of each Plan
participant will be held by the Agent in the name of the
participant and each shareholder's proxy will include those
shares purchased pursuant to the Plan. Share certificates will
not be issued in the name of individual Plan participants.

The automatic reinvestment of income and capital gains
distributions will not relieve participants of any income tax
that may be payable on such income and capital gains
distributions.

Experience under the Plan may indicate that changes are
desirable. Accordingly, the Fund reserves the right to amend or
terminate the Plan as applied to any income or capital gain
distributions paid subsequent to written notice of the change
sent to the Plan participants at least 90 days before the date of
such income or capital gain distribution. The Plan may also be
amended or terminated by the Agent, with the Fund's prior
consent, on at least 90 days' written notice to Plan
participants. All correspondence concerning the Plan should be
directed to State Street Bank and Trust Company, at P.O. Box
1713, Boston, Massachusetts 02105.

<PAGE>

TAXATION

The following summary addresses the principal United
States and Korean income tax considerations regarding the
purchase, ownership and disposition of shares in the Fund. The
Fund and its shareholders may also be subject to other United
States federal, state, local and foreign taxes.

IN VIEW OF THE INDIVIDUAL NATURE OF TAX CONSEQUENCES,
EACH SHAREHOLDER IS ADVISED TO CONSULT HIS OWN TAX ADVISER WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF BEING A SHAREHOLDER
OF THE FUND, INCLUDING THE EFFECT AND APPLICABILITY OF UNITED
STATES FEDERAL, STATE AND LOCAL, AS WELL AS FOREIGN AND OTHER TAX
LAWS AND THE POSSIBLE EFFECTS OF CHANGES THEREIN.

The statements regarding taxation set out below are
based on those laws in force on the date of this Prospectus and
are subject to any subsequent changes in such laws.

United States Federal Income Taxes

The following discussion of the United States federal
income taxes is based upon the advice of Seward & Kissel, counsel
for the Fund.

General. The Fund intends to continue to qualify and
elect to be treated as a "regulated investment company" under
sections 851 through 855 of the Code. To so qualify, the Fund
must, among other things, (i) derive at least 90% of its gross
income in each taxable year from dividends, interest, payments
with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currency, or
certain other income (including, but not limited to, gains from
options, futures and forward contracts) derived with respect to
its business of investing in stock, securities or currency;
(ii) derive less than 30% of its gross income in each taxable
year from the sale or other disposition within three months of
their acquisition by the Fund of stocks, securities, options,
futures or forward contracts and foreign currencies (or options,
futures or forward contracts on foreign currencies) that are not
directly related to the Fund's principal business of investing in
stock or securities (or options and futures with respect to
stocks or securities); and (iii) diversify its holdings so that,
at the end of each quarter of its taxable year, the following two
conditions are met: (a) at least 50% of the value of the Fund's
assets is represented by cash, U.S. government securities,
securities of other regulated investment companies and other
securities with respect to which the Fund's investment is
limited, in respect of any one issuer, to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting

<PAGE>

securities of such issuer and (b) not more than 25% of the value
of the Fund's assets is invested in securities of any one issuer
(other than U.S. government securities or securities of other
regulated investment companies).

The United States Treasury Department is authorized to
issue regulations to provide that foreign currency gains that are
"not directly related" to the Fund's principal business of
investing in stock or securities may be excluded from the income
which qualifies for purposes of the 90% gross income requirement
described above with respect to the Fund's qualification as a
"regulated investment company." No such regulations have yet
been issued.

If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to holders of
the Fund's shares ("Holders") of 90% or more of its net
investment income for that year (calculated without regard to its
net capital gain, i.e., the excess of its net long-term capital
gain over its net short-term capital loss) it will not be subject
to federal income tax on the portion of its taxable income for
the year (including any net capital gain) that it distributes to
Holders.

The Fund will also avoid the nondeductible 4% federal
excise tax that would otherwise apply to certain undistributed
income for a given calendar year if it makes timely distributions
to the Holders equal to the sum of (i) 98% of its ordinary income
for such year, (ii) 98% of its capital gain net income for the
twelve-month period ending on October 31 (or November 30 or
December 31 if elected by the Fund) of such year, and (iii) any
ordinary income or capital gain net income from the preceding
calendar year that was not distributed during such year. For
this purpose, income or gain retained by the Fund that is subject
to corporate income tax will be considered to have been
distributed by the Fund by year-end.

The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes
(see "Dividends and Distributions"). However, Korean exchange
control or other regulations on the repatriation of investment
income, capital or the proceeds of securities sales by non-Korean
individuals or entities may limit the Fund's ability to make
distributions sufficient in amount to avoid being subject to one
or both of such federal taxes. For federal income and excise tax
purposes, dividends declared and payable to Holders of record as
of a date in October, November or December will be treated as if
they were paid on December 31 of such calendar year provided that
the dividends are actually paid during the following January.
These dividends will be taxable to Holders in the year declared

<PAGE>

and not in the year in which Holders actually receive the
dividend.

If the Fund owns shares in a foreign corporation that
constitutes a "passive foreign investment company" for federal
income tax purposes and the Fund does not elect to treat the
foreign corporation as a "qualified electing fund" within the
meaning of the Code, the Fund may be subject to United States
federal income taxation on a portion of any "excess distribution"
it receives from the foreign corporation or any gain it derives
from the disposition of such shares, even if such income is
distributed as a taxable dividend by the Fund to its United
States Holders (as defined below). The Fund may also be subject
to additional tax in the nature of an interest charge in respect
of deferred taxes arising from such distributions or gains. Any
tax paid by the Fund as a result of its ownership of shares in a
"passive foreign investment company" will not give rise to any
deduction or credit to the Fund or any Holder. A "passive
foreign investment company" means any foreign corporation if, for
any taxable year during which its stock was held by the Fund,
either (i) it derives at least 75% of its gross income from
"passive income" (including, but not limited to, interest,
dividends, royalties, rents and annuities), or (ii) at least 50%
of the value (or adjusted tax basis, if elected) of the assets
held by the corporation produce "passive income." If the Fund
owns shares in a "passive foreign investment company" and the
Fund does elect to treat the foreign corporation as a "qualified
electing fund" under the Code, the Fund may be required to
include in its income each year a portion of the ordinary income
and net capital gains of the foreign corporation, even if this
income is not distributed to the Fund. Any such income would be
subject to the 90% and calendar year distribution requirements
described above. It is noted that proposed federal income tax
regulations would allow the Fund to elect to "mark to market"
shares it owns in "passive foreign investment companies" at the
end of each of the Fund's taxable years. If the Fund were to
make this election, the Fund would recognize annually as ordinary
income the annual increase, if any, in the value of any such
shares held by the Fund at year-end, and the interest charge on
deferred taxes described above would be inapplicable. It is not
clear whether the Fund will ultimately be able to make this
election.

Currency Fluctuations--"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies or

<PAGE>

from the disposition of debt securities denominated in a foreign
currency attributable to fluctuations in the value of the foreign
currency between the date of acquisition of the security and the
date of disposition also are treated as ordinary gain or loss.
These gains or losses, referred to under the Code as "section
988" gains or losses, increase or decrease the amount of the
Fund's net investment income available to be distributed to its
Holders as ordinary income, rather than increasing or decreasing
the amount of the Fund's net capital gain. If section 988 losses
exceed such other net investment income during a taxable year,
the Fund would not be able to make any ordinary dividend
distributions, or distributions made before the losses were
realized would be recharacterized as a return of capital to
Holders, rather than as an ordinary dividend, reducing each
Holder's basis in his Fund shares. To the extent that such
distributions exceed such Holder's basis, they will be treated as
a gain from the sale of shares. As discussed below, certain
gains or losses with respect to forward foreign currency
contracts, over-the-counter options on foreign currencies and
certain options traded on foreign exchanges will also be treated
as section 988 gains or losses.

Options, Futures Contracts and Forward Foreign Currency
Contracts. Certain listed options, regulated futures contracts
and forward foreign currency contracts are considered "section
1256 contracts" for federal income tax purposes. Section 1256
contracts held by the Fund at the end of each taxable year will
be "marked to market" and treated for federal income tax purposes
as though sold for fair market value on the last business day of
such taxable year. Gain or loss realized by the Fund on section
1256 contracts other than forward foreign currency contracts will
be considered 60% long-term and 40% short-term capital gain or
loss. Gain or loss realized by the Fund on forward foreign
currency contracts will be treated as section 988 gain or loss
and will therefore be characterized as ordinary income or loss
and will increase or decrease the amount of the Fund's net
investment income available to be distributed to Holders as
ordinary income, as described above. The Fund can elect to
exempt its section 1256 contracts which are part of a "mixed
straddle" (as described below) from the application of Code
section 1256.

The Internal Revenue Service has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. Temporary
regulations that were recently issued under this authority
generally should not apply to the type of hedging transactions in
which the Fund intends to engage.

<PAGE>

Gain or loss realized by the Fund on the lapse or sale
of put and call options on foreign currencies which are traded
over-the-counter or on certain foreign exchanges will be treated
as section 988 gain or loss and will therefore be characterized
as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be
distributed to Holders as ordinary income, as described above.
The amount of such gain or loss shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund). In
general, if the Fund exercises such an option on a foreign
currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option. The foregoing rules will also
apply to other put and call options which have as their
underlying property foreign currency and which are traded over-
the-counter or on certain foreign exchanges, to the extent gain
or loss with respect to such options is attributable to
fluctuations in foreign currency exchange rates.

Any option, futures contract, forward foreign currency
contract or other position entered into or held by the Fund in
conjunction with any other position held by the Fund may
constitute a "straddle" for federal income tax purposes. A
straddle of which at least one, but not all, the positions are
section 1256 contracts may constitute a "mixed straddle." In
general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with
respect to straddle positions by requiring, among other things,
that (i) loss realized on disposition on one position of a
straddle not be recognized to the extent that the Fund has
unrealized gains with respect to the other position in such
straddle; (ii) the Fund's holding period in straddle position be
suspended while the straddle exists (possibly resulting in gain
being treated as short-term capital gain rather than long-term
capital gain); (iii) losses recognized with respect to certain
straddle positions which are part of a mixed straddle and which
are non-section 1256 positions be treated as 60% long-term
capital loss and 40% short-term capital loss; (iv) losses
recognized with respect to certain straddle positions which would
otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may
be deferred. Various elections are available to the Fund which
may mitigate the effects of the straddle rules, particularly with

<PAGE>

respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by the Fund
all of the offsetting positions of which consist of section 1256
contracts.

United States Holders--Distributions. Distributions
payable by the Fund either in cash or in additional shares to an
individual Holder who is a citizen or resident of the United
States or a United States corporation (a "United States Holder")
will be subject to United States federal income taxes. United
States Holders electing to receive such distributions in the form
of additional shares will be treated as receiving a distribution
in an amount equal to the fair market value, determined as of the
payment date, of the shares received. Such value may exceed the
amount of the cash distribution that would have been paid. In
either event, the Holder's cost basis in the shares received will
equal the amount recognized as a taxable distribution.
Distributions to United States Holders of the Fund's dividend and
interest income and of any net short-term capital gain in any
year will be taxable as ordinary income to such Holders to the
extent of the Fund's taxable income (without regard to any net
capital gain) for that year.

It is anticipated that substantially all of the
distributions of the Fund's ordinary income and any net short-
term capital gain will be taxable as ordinary income to United
States Holders. Distributions which are so taxable will
constitute dividends for federal income tax purposes but will not
be eligible for the 70% dividends-received deduction for
corporations. To the extent that such distributions to a United
States Holder in any year are not taxable as ordinary income,
they will be treated as a nontaxable return of capital and will
reduce the United States Holder's basis in his shares. The
amount of such distributions, if any, in excess of the Holder's
basis in his shares, will be treated as a gain from the sale of
shares, as discussed below. Distributions of the Fund's net
capital gain (which will be designated as capital gain dividends
by the Fund) will be taxable to United States Holders as long-
term capital gain, regardless of the length of time the Holder
has held his shares.

After the end of the taxable year, the Fund will notify
United States Holders of the United States federal income tax
status of any distributions made by the Fund to such Holders
during such year.

United States Holders--Sales and Redemptions. A United
States Holder will recognize taxable gain or loss if the Holder
sells or redeems shares of the Fund. Any gain or loss arising
from such sale or redemption generally will be capital gain or
loss except in the case of a dealer or a financial institution

<PAGE>

and will be long-term capital gain or loss if such Holder has
held such shares for more than one year at the time of the sale
or redemption; otherwise it will be short-term capital gain or
loss. However, any capital loss arising from the sale or
redemption of shares held for six months or less by a Holder
shall be treated as a long-term capital loss to the extent of the
amount of capital gain dividends received by the Holder. In
determining the holding period of such shares for this purpose,
any period during which a Holder's risk of loss is offset by
means of options, short sales or similar transactions is not
counted. Under current law, capital gains are taxed at the same
rate as ordinary income, except that the maximum rate on long-
term capital gains is 28% for individuals.

Any loss realized by a United States Holder on a sale or
exchange of shares of the Fund will be disallowed to the extent
the shares disposed of are replaced within a period of 61 days
beginning 30 days before and ending 30 days after the shares are
sold or exchanged. For this purpose, acquisitions pursuant to
the Plan will constitute a replacement if made within the period.
If disallowed, the loss will be reflected in an upward adjustment
to the basis of the shares acquired.

United States Holders--Foreign Tax Credits. Income
received by the Fund may also be subject to foreign income taxes,
including withholding taxes. See "Korean Taxes" below. If more
than 50% of the value of the Fund's total assets at the close of
its taxable year consists of stocks or securities of foreign
corporations, the Fund will be eligible and intends to file an
election with the Internal Revenue Service to pass through to its
Holders the amount of foreign taxes paid by the Fund. While the
Fund expects to meet the foregoing requirements, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a United States Holder will be required to (i) include
in gross income (in addition to taxable dividends actually
received) his pro rata share of foreign taxes paid by the Fund,
(ii) treat his pro rata share of such foreign taxes as having
been paid by him, and (iii) either deduct such pro rata share of
foreign taxes in computing his taxable income or treat such
foreign taxes as a credit against United States federal income
taxes. No deduction for foreign taxes may be claimed by an
individual United States Holder who does not itemize deductions.
In addition, certain individual United States Holders may be
subject to rules which limit or reduce their ability to fully
deduct their pro rata share of the foreign taxes paid by the
Fund. Each Holder will be notified within 60 days after the
close of the Fund's taxable year whether the foreign taxes paid
by the Fund will pass through for that year and, if so, such
notification will designate (i) such Holder's portion of the
foreign taxes paid to each such country and (ii) the portion of

<PAGE>

dividends that represents income derived from sources within each
such country.

Generally, a credit for foreign taxes may not exceed the
United States Holder's United States tax attributable to its
total foreign source taxable income. Generally, the source of
the Fund's income flows through to its Holders. Thus, dividends
and interest received by the Fund in respect of Korean securities
will give rise to foreign source income to the Holders. However,
certain items of the Fund's income, including income and gains
from securities transactions (including Korean securities) as
well as certain foreign currency gains, may be treated as United
States source income to Holders. Accordingly, if the Fund
becomes subject to Korean taxation on its capital gain income due
to the inapplicability of the Korean Tax Treaty, as described
below, United States Holders may not be deemed to receive foreign
source income against which the foreign tax credit could be
applied. The overall limitation on a foreign tax credit is also
applied separately to specific categories of foreign source
income, including foreign source "passive income," such as
dividends, interest and capital gains. Further, the foreign tax
credit is allowed to offset only 90% of any alternative minimum
tax to which a United States Holder may be subject. As a result
of these rules, certain United States Holders may be unable to
claim a credit for the full amount of their proportionate share
of the foreign taxes paid by the Fund. If the United States
Holder could not credit the foreign tax paid because of an
absence of sufficient foreign source income, double taxation of
such gain could only be mitigated by deducting the Korean tax
paid, which may be subject to limitation as described above.

The federal income tax status of each year's
distributions by the Fund will be reported to Holders and to the
Internal Revenue Service. The foregoing is only a general
description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a
foreign tax credit or deduction will depend on the particular
circumstances of each Holder, potential investors are advised to
consult their own tax advisers.

United States Holders--Backup Withholding. The Fund may
be required to withhold United States federal income tax at the
rate of 31% of all taxable distributions payable to United States
Holders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who
have been notified by the Internal Revenue Service that they are
subject to backup withholding. Corporate shareholders and
certain other shareholders specified in the Code are exempt from
such backup withholding. Backup withholding is not an additional
tax; any amounts so withheld may be credited against a United

<PAGE>

States Holder's United States federal income tax liability or
refunded.

Non-United States Holders--Distributions. A Holder who
is not a United States Holder (a "Non-United States Holder") and
whose income from the Fund is not effectively connected with the
conduct of a United States trade or business carried on by such
Holder (i) will have tax withheld on ordinary income considered
distributed by the Fund at a rate of 30% or a lower tax treaty
rate, if applicable, and (ii) will not be subject to tax on
capital gain dividends as long as such Holder is not a non-
resident alien individual who was present in the United States
for 183 days or more during the taxable year. Non-United States
Holders may also be subject to United States withholding tax (at
a rate of 30% or a lower tax treaty rate) on dividend income
treated as arising from the pass through of foreign taxes paid by
the Fund, but may not be able to claim a foreign credit or
deduction with respect to such taxes.

A Non-United States Holder whose holdings in the Fund
are effectively connected with a United States trade or business
carried on by such Holder will be taxed on actual and deemed
distributions received from the Fund in the same manner as a
United States Holder as discussed above. Each Non-United States
Holder should consult his own tax adviser to determine whether
his holdings in the Fund would be treated as effectively
connected with the conduct of a United States trade or business.

Non-United States Holders--Sales and Redemptions. Any
gain arising from (or treated as arising from) the sale or
redemption by a Non-United States Holder of his shares will not
be subject to United States federal income tax unless (i) the
gain is effectively connected with a United States trade or
business carried on by such Holder, in which event the gain will
be taxed in the same manner as for a United States Holder as
discussed above, or (ii) the gain is a capital gain and, among
other requirements, the Non-United States Holder is a non-
resident alien individual who was present in the United States
for 183 days or more during the taxable year, in which event the
capital gain (less any capital losses) may be taxed at a 30% rate
unless such capital gain is exempt from United States taxation,
or subject to a lower rate of tax, by reason of an applicable tax
treaty.

Non-United States Holders--Backup Withholding. Under
existing Code provisions and the Treasury regulations thereunder,
(i) ordinary income dividends distributed to a Non-United States
Holder will not be subject to United States information reporting
or to 31% backup withholding if the payor thereof is satisfied
that the payee is a Non-United States Holder, and (ii) the gross
proceeds from the sale or redemption by a Non-United States

<PAGE>

Holder of his shares will not be subject to United States
information reporting or to 31% backup withholding if the payor
thereof is satisfied that (a) the payee is a Non-United States
Holder, (b) any gain arising from the sale or redemption is not
effectively connected with a trade or business that the Non-
United States Holder is or expects to be engaged in, and (c) the
Non-United States Holder (if an individual) has not been and does
not plan to be present within the United States for 183 days or
more during the taxable year of the sale or redemption (or, in
lieu of (b) and (c) above, any gain arising from the sale or
redemption is exempt from United States federal income tax under
an income tax treaty with the United States of which such Holder
is a beneficiary). Non-dividend distributions made by the Fund
may be subject to United States information reporting, regardless
of the status of the Holder. These results may be altered by
future amendments to applicable Treasury regulations.
Notwithstanding anything to the contrary contained in the
foregoing, distributions will not be subject to 31% backup
withholding if the payor is satisfied that the payee is a
corporation.

The foregoing contains a general discussion of the
federal income tax consequences to Non-United States Holders of
distributions by the Fund and sales and redemptions of shares.
Non-United States Holders should consult their own tax advisers
as to the application of the principles discussed to their
particular circumstances and as to the foreign, state and local
tax consequences of the purchase, ownership and disposition of
shares of the Fund.

Korean Taxes

The following discussion of certain Korean tax matters
relating to the Fund and its shareholders is based upon the
advice of Shin & Kim, Korean counsel to the Fund.

Assuming the Fund does not maintain any permanent
establishment within Korea, under the provisions of the income
tax treaty between the United States and Korea (the "Korean Tax
Treaty"), the Fund generally will not be subject to any Korean
income taxes other than those Korean withholding taxes described
below.

Under current Korean law, when the Korean Tax Treaty
applies, payments to the Fund of interest income by Korean
corporations would be subject to a 12% Korean withholding tax and
a resident withholding tax of 7.5% of that tax, for a total
Korean tax of 12.9%, and dividends received by the Fund from
Korean corporations will generally be subject to a 15% Korean
withholding tax and a resident withholding tax of 7.5% of that

<PAGE>

tax, for a total Korean tax of 16.125%. The rate of this total
tax on dividends is reduced to 10.75% if the Fund owns at least
10% of the outstanding voting shares of the Korean corporation
paying the dividend and if certain other conditions are
satisfied. Under the rules of the KSEC currently in effect, each
foreign investor, such as the Fund, generally may not own more
than 3% of the total outstanding equity shares of each class of a
listed company. Under current Korean law, when the Korean Tax
Treaty applies, capital gains derived by the Fund upon the sale
of stock or other securities of Korean corporations will be
exempt from any Korean withholding tax.

Neither the reduced tax rate nor the exemption under the
provisions of the Korean Tax Treaty will apply to the dividend,
interest and capital gain income derived by the Fund from Korean
corporations if both (i) the Fund is treated by the Korean tax
authorities, by reason of the existence of special measures under
United States federal income tax law, as being subject to United
States federal income tax with respect to any of those types of
income in an amount substantially less than the United States
federal income tax generally imposed on corporate profits, and
(ii) at least 25% of the Fund's outstanding shares are considered
owned, directly or indirectly, by one or more persons who are not
individual residents of the United States. The MFE has ruled
that a U.S. investment company incorporated in order to invest in
Korean securities will not be considered 25% or more owned by
persons who are not individual residents of the United States as
long as all the shares of such company are listed solely on a
recognized stock exchange(s) in the United States and the shares
of such company are traded on such stock exchange(s) by general
investors. At present, all of the Fund's shares are listed
solely on the New York Stock Exchange and the shares of the Fund
are traded on such stock exchange by general investors within the
meaning of this ruling. The Board of Directors has no intention
of listing the shares on any other stock exchange. Accordingly,
insofar as all of the Fund's shares are listed solely on the New
York Stock Exchange and the shares of the Fund are traded on such
stock exchange by general investors, the benefits of the Korean
Tax Treaty will be available to the Fund.

The Korean tax treatment described above with respect to
income derived by the Fund could change in the event of changes
in Korean or United States tax laws or changes in the terms of,
or the interpretation by the Korean tax authorities of, the
Korean Tax Treaty. If the benefits of the Korean Tax Treaty are
not applicable to the Fund, the total rate of Korean withholding
taxes (including the resident tax) imposed on the dividend and
interest income derived by the Fund from Korean corporations will
be 26.875%, and capital gains derived by the Fund from the sale
of Korean stock or other securities will be subject to a Korean
withholding tax equal to the lower of (i) 10.75% of the gross

<PAGE>

sales proceeds, or (ii) 26.875% of the difference between the
gross sales proceeds and the acquisition cost of the stock or
security sold (excluding any transaction charges, commissions,
fees or taxes paid at the time of acquisition), provided the Fund
can provide satisfactory evidence of the acquisition cost.

Whether or not the Korean Tax Treaty applies, payments
of interest on bonds denominated in a foreign currency issued by
Korean entities are currently exempted from income taxes,
including withholding taxes, by virtue of the Korean Tax
Exemption and Reduction Control Law of 1993 as amended ("TERCL").
As a result of such exemption, the resident tax referred to above
is also eliminated. Under the TERCL, the tax exemptions on such
interest payments will expire on December 31, 1998, and it is not
certain whether such exemption will be extended.

Under current Korean law, no Korean inheritance and gift
tax will apply to any testamentary, intestate or intervivos
transfer of the shares of the Fund unless the decedent or the
donee, as the case may be, is domiciled in Korea.

A securities transaction tax is payable on the transfer
of shares issued by a Korean corporation. The securities
transaction tax is assessed at the rate of 0.3% of the sale price
of the shares (except when the sale price is less than the par
value of the share traded on the Exchange, in which case no tax
is charged, or when the shares are traded outside the Exchange,
in which case the tax is payable at the rate of 0.5% of the sale
price); provided, however, that any such securities transaction
tax will not be imposed if (i) the shares are listed on a foreign
stock exchange and the sales are executed on such exchange; or
(ii) the sales are executed between non-residents without a
permanent establishment in Korea and the non-resident investor
did not own 10% or more of the total issued and outstanding
shares at any time during the five years before the year within
which the transfer occurs and the non-resident investor does not
sell such shares through a securities company in Korea.
Effective as of July 1, 1994, an additional agricultural and
fishery special tax will be imposed on securities transactions on
the Exchange which will equal 0.15% of the sales price. Under the
terms of the relevant law, this agricultural and fishery special
tax expires on June 30, 2004.

The transferor of shares is obliged to pay the
securities transaction tax. When the transfer is effected
through the Korea Securities Depository, the Korea Securities
Depository will withhold the tax, and when such transfer is made
through a securities company only such securities company will
make the withholding. Where the transfer is effected by a non-
resident individual or a non-resident corporation without a
permanent establishment in Korea other than through the Korea

<PAGE>

Securities Depository or a securities company in Korea, the
transferee is required to withhold the securities transaction
tax. For the purpose of the securities transaction tax, warrants
or rights to subscribe shares are deemed shares.

Korean stamp duty will not apply to the sale of Korean
securities made on the Exchange or over the counter by the Fund.

CERTAIN OWNERS OF RECORD

Set forth below is certain information as to all persons
who owned of record 5% or more of the outstanding shares of
Common Stock of the Fund as of the close of business on August
11, 1995.

The Chase Manhattan Bank, N.A. 5.02%
1 Chase Manhattan Plaza
3B-Proxy Dept.
New YOrk, NY 10081

SSB-Custodian 5.05%
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717

Morgan Guaranty Trust Co. of New York 7.69%
37 Wall Street, 16th Floor
New York, NY 10260

Smith Barney, Inc. 8.07%
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717

Merrill Lynch, Pierce, Fenner & Smith 8.44%
4 Corporate Place
Corporate Park 287, 2nd Floor
Piscataway, NJ 08855

89
00250225.AA9

<PAGE>

The Korean
Investment
Fund

PORTFOLIO OF INVESTMENTS
April 30, 1995 The Korean Investment Fund
-------------------------------------------------------------------------------

Company Shares U.S.$Value
-------------------------------------------------------------------------------
COMMON & PREFERRED STOCKS - 99.0%
CONSUMER MANUFACTURING - 20.6%
AUTO & RELATED - 9.8%
Hanil E Wha Corp Ltd. 8,300 $ 338,598
Hyundai Motor Co., Ltd. 15,000 924,772
Kia Motors Corp.* (GDS)(a) 67,200 991,200
Sam Lip Industrial Co. 39,310 2,114,134
Sam Sung Radiator Industries 24,000 2,156,490
Yoosung Enterprise 15,000 869,679
7,394,873
BUILDING & RELATED - 6.0%
Hanil Cement Manufacturing 30,132 1,660,056
Hanshin Construction Co. 52,473 450,840
Hyundai Cement Co. 100 4,329
Keum Kang, Ltd. 29,000 2,438,382
4,553,607
TEXTILE PRODUCTS - 4.8%
Baikyang Co. 2,880 487,335
Cheil Synthetics Inc. 39,690 963,160
Korea Moolsan Co., Ltd. 30,000 527,317
new #1 7,721 111,407
Sunkyong Industrial 38,254 1,530,461
3,619,680
15,568,160

BASIC INDUSTRIES - 20.4%
CHEMICALS - 3.2%
Hannong 15,000 $ 948,383
Hanwha Chemical Corp. 20,000 459,107
Kun Sul Chemical Industries 20,150 1,044,041
2,451,531
CONTAINERS - 1.2%
Jindo Corp. 126 2,727
Hyundai Precision 36,050 912,658
915,385
MINING & METALS - 11.6%
Dae Han Jung Suok 9,364 389,373
new #1 645 26,820
new # 2 3,110 129,320
Dongkuk Steel Mill 95,811 2,425,595
Dong Won Co. Ltd.* 5,000 141,011
Inchon Iron & Steel 10,400 477,471
Moon Bae Steel Co. Ltd. 13,700 767,530
Nam Sun Aluminum 10,000 253,165
Pohang Iron & Steel Mill 48,100 4,138,991
8,749,276
PAPER & FOREST PRODUCTS - 4.0%
Donghae Pulp Co. 11,300 398,728
Hansol Paper Manufacturing Co. 61,408 2,601,795
3,000,523
OTHER - 0.4%
Doosan Glass Co. 17,510 298,590
15,415,305

The Korean Investment Fund
-------------------------------------------------------------------------------

Company Shares U.S.$Value
-------------------------------------------------------------------------------
FINANCIAL SERVICES - 19.0%
BANKING - 7.1%
Cho Hung Bank 60,390 $ 732,744
Daegu Bank, Ltd. 16,000 197,285
Hana Bank 72,800 1,308,270
Kookmin Bank 50,000 977,241
Korea Exchange Bank 100,000 951,007
new #1 29,090 251,845
Shinhan Bank 40,000 813,275
new #1 7,344 136,794
5,368,461
BROKERAGE & MONEY
MANAGEMENT - 8.1%
Daewood Securities 60,000 1,739,359
Samsung Securities 81,200 3,067,567
KFB Securities 35,145 673,073
Ssangyong Investments & Securities 38,858 652,433
6,132,432
INSURANCE - 2.9%
Korea Reinsurance Co. 24,789 1,203,113
Samsung Fire & Marine Insurance Co. 3,700 970,683
2,173,796
OTHER - 0.9%
Shinhan Investment & Finance 30,000 554,863
pfd. 10,553 105,205
660,068
14,334,757

CAPITAL GOODS - 14.2%
ELECTRICAL EQUIPMENT - 9.8%
Kumho Electric 34,204 1,166,530
Korea Electro Devices Manufacturing Co. 20,000 314,816
Orion Electric 70,000 $ 1,781,334
Saehan Precision 26,750 1,438,643
Samsung Electro - Mechanics 35,765 1,843,726
new # 1 17,895 849,740
7,394,789
ENGINEERING & CONSTRUCTION - 2.8%
Chonggu Housing and Construction 24,833 1,195,476
Sungwon Construction Co. 32,100 795,816
new #1 4,892 121,281
2,112,573
MACHINERY - 1.6%
Daewoo Heavy Industries 65,586 808,695
Tong Yang Mool San 20,005 362,129
1,170,824
10,678,186

UTILITY - 10.1%
Korea Electric Power Corp. 208,000 7,612,252

TRANSPORTATION - 5.0%
SHIPPING - 3.9%
Hanjin Shipping 28,580 1,874,467
Korea Line Co. 32,310 1,084,982
2,959,449
OTHER - 1.1%
Global Enterprise 10,000 811,963
3,771,412

MULTI-INDUSTRY - 3.4%
Korea Mobile Telecom Corp.* (GDS) 89,200 2,576,096

CONSUMER SERVICES - 2.8%
RETAIL - 1.2%
Hwasung Industries 18,415 886,509
OTHER - 1.6%
Hyundai Motor Service Co. 22,626 1,261,370
2,147,879

PORTFOLIO OF INVESTMENTS (continued) The Korean Investment Fund
-------------------------------------------------------------------------------

Company Shares U.S.$Value
-------------------------------------------------------------------------------
ENERGY - 1.3%
OIL SERVICE - 1.3%
Yukong Ltd. (GDR)(a) 85,440 $ 982,560

CONSUMER STAPLES - 1.2%
FOOD - 1.2%
Dongwon Industries, Co. 25,000 583,721
Woo Sung Feedmill 10,000 289,893
873,614

HEALTHCARE - 1.0%
DRUGS -1.0 %
Dong Sung Pharmaceuticals 10,602 278,140
Shin Poong Pharmaceuticals 10,000 $ 491,900
770,040
Total Common & Preferred Stocks
(cost $ 67,738,585 ) 74,730,261

TOTAL INVESTMENTS - 99.0%
(cost $ 67,738,585 ) 74,730,261
Other assets less liabilities - 1.0% 730,637

NET ASSETS - 100% $75,460,898

STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 The Korean Investment Fund
-------------------------------------------------------------------------------

ASSETS
Investments in securities, at value (cost $67,738,585) $74,730,261
Cash, at value (cost $1,987,394) 2,055,217
Dividends receivable 303,946
Deferred organization expense and other assets 61,284
Total assets 77,150,708

LIABILITIES
Payable for investment securities purchased 1,396,369
Management fee payable 54,285
Sub-advisory fee payable 25,546
Accrued expenses and other liabilities 213,610
Total liabilities 1,689,810

NET ASSETS
(equivalent to $12.66 per share, based on 5,962,912
shares outstanding) $75,460,898

COMPOSITION OF NET ASSETS
Capital stock, at par $59,629
Additional paid-in capital 65,884,104
Accumulated net realized gain on investments and
foreign currency transactions 2,453,441
Net unrealized appreciation of investments and
foreign currency denominated assets and liabilities 7,063,724
$75,460,898

NET ASSET VALUE PER SHARE $12.66

See notes to financial statements.

STATEMENT OF OPERATIONS
Year Ended April 30, 1995 The Korean Investment Fund
-------------------------------------------------------------------------------

INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $165,081) $724,413
Interest 185,528 $ 909,941

EXPENSES
Management fee 655,205
Sub-advisory fee 308,335
Custodian 210,787
Audit and legal 159,163
Directors' fees and expenses 91,107
Printing 41,261
Transfer agency 33,456
Amortization of organization expenses 22,995
Registration 20,367
Miscellaneous 8,095
Total expenses 1,550,771
Net investment loss (640,830)

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investment transactions 4,477,623
Net realized gain on foreign currency transactions 178,806
Net change in unrealized appreciation (depreciation) of:
Investments (4,899,124)
Foreign currency denominated assets and liabilities 72,308
Net loss on investments and foreign currency denominated
assets and liabilities (170,387)

NET DECREASE IN NET ASSETS FROM OPERATIONS $ (811,217)

STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
Year Ended Year Ended
April 30, April 30,
1995 1994
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $(640,830) $(391,295)
Net realized gain on investments and
foreign currency transactions 4,656,429 350,580
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities (4,826,816) 11,455,405
Net increase (decrease) in net assets from operations (811,217) 11,414,690
CAPITAL STOCK TRANSACTIONS
Proceeds from sale of shares of common stock
in rights offering 21,809,342 -0-
Offering costs charged to additional paid-in-capital (615,279) -0-
Total increase 20,382,846 11,414,690
NET ASSETS
Beginning of year 55,078,052 43,663,362
End of year $75,460,898 $55,078,052

NOTES TO FINANCIAL STATEMENTS
April 30, 1995 The Korean Investment Fund
-------------------------------------------------------------------------------

NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The Korean Investment Fund, Inc. (the 'Fund') was incorporated in the State of
Maryland on November 1, 1991 as a non-diversified, closed-end management
investment company. The following is a summary of significant accounting
policies followed by the Fund.

1. SECURITY VALUATION
Investments are stated at value. Investments for which market quotations are
readily available are valued at the closing price on the Korea Stock Exchange
on the day of valuation or if no such closing price is available, at the last
bid price quoted on such day. Securities for which market quotations are not
readily available and restricted securities are valued in good faith at fair
value using methods determined by the Board of Directors. In determining fair
value, consideration is given to cost, operating and other financial data.
Securities that mature in 60 days or less are valued at amortized cost, which
approximates market value, unless this method does not represent fair value.

2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the quoted bid and asked price of the respective
currency against the U.S. dollar on the valuation date. Purchases and sales of
portfolio securities are translated at the rates of exchange prevailing when
such securities were acquired or sold. Income and expenses are translated at
rates of exchange prevailing when earned or accrued.

Net realized gain on foreign currency transactions of $178,806 represents net
foreign exchange gains and losses from holding of foreign currencies, currency
gains or losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends and foreign
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized currency gains and losses from
valuing foreign currency denominated assets and liabilities at fiscal year end
exchange rates are reflected as a component of unrealized appreciation on
investments and foreign currency denominated assets and liabilities. The Fund
does not isolate that portion of the results of operations arising as a result
of changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the fiscal year.

The exchange rate for the Korean Won at April 30, 1995 was Won 762.35 to U.S.
$1.00.

3. ORGANIZATION EXPENSES
Organization expenses of approximately $115,000 have been deferred and are
being amortized on a straight-line basis through February, 1997.

4. TAXES
It is the Fund's policy to meet the requirements of the U.S. Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to its
shareholders. Therefore, no provision for U.S. income or excise taxes is
required. Withholding taxes on foreign interest and dividends have been
provided for in accordance with the applicable tax requirements. To reflect
reclassifications arising from permanent book/tax differences for the year
ended April 30, 1995, $640,830 and ($178,325) was reclassified from accumulated
net investment loss and accumulated net realized gain, respectively, to
additional paid-in-capital.

5. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Security transactions are accounted for on the date securities are
purchased or sold. Realized and unrealized gains and losses from security and
currency transactions are calculated on the identified cost basis. The Fund
accretes discounts as adjustments to interest income.

6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principals.

NOTES TO FINANCIAL STATEMENTS (continued) The Korean Investment Fund
-------------------------------------------------------------------------------
NOTE B: MANAGEMENT FEE, SUB-ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Management and Administration Agreement, the Fund paid
Alliance Capital Management L.P. ('Alliance') a fee at an annualized rate of
.85 of 1% of the Fund's average weekly net assets. Such fee is calculated
weekly and paid monthly.

Under the terms of the Management Agreement, the Fund pays Orion Asset
Management Co., Ltd. (the 'Co-Manager') a fee at an annualized rate of .40 of
1% of the Fund's average weekly net assets. Such fee is calculated weekly and
paid monthly.

Brokerage commissions paid on securities transactions for the year ended April
30, 1995 amounted to $276,480, of which $52,315 was paid to Tong Yang
Securities Co., Ltd., an affiliate of the Co-Manager and $17,125 was paid to
Baring Securities, a broker utilizing the services of the Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corp., an affiliate of Alliance.

NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $44,271,881 and $23,663,524, respectively, for the year ended April
30, 1995. At April 30, 1995, the cost of securities for federal income tax
purposes was $67,755,564. Accordingly, gross unrealized appreciation of
investments was $13,220,875 and gross unrealized depreciation of investments
was $6,246,178 resulting in net unrealized appreciation of $6,974,697
(excluding foreign currency translations). The Fund fully utilized its capital
loss carryover of $2,007,203 to offset gains realized during the year ended
April 30, 1995.

NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $.01 par value common stock authorized. Of the
5,962,912 shares outstanding at April 30, 1995, the Investment Manager owned
9,000 shares.

NOTE E: RIGHTS OFFERING
During the year ended April 30, 1995, the Fund issued 1,753,797 shares in
connection with a rights offering of the Fund's shares. Shareholders of record
on June 10, 1994, were issued one non-transferable right for each share of
common stock owned, entitling shareholders the opportunity to acquire one newly
issued share of common stock for every three rights held at a subscription
price of $12.92 per share. Offering costs of $615,279 attributed to the rights
offering were charged to additional paid-in-capital. Dealer management and
soliciting fees of $849,715 were netted against the proceeds of the
subscription.

The Korean Investment Fund
-------------------------------------------------------------------------------
NOTE F: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
Net Realized and Net Increase
Unrealized Gain (Loss) (Decrease)
on Investments and in Net Assets
Net Investment Foreign Currency Resulting from Market Price
Income (loss) Transactions Operations on NYSE
----------------- ------------------ ------------------ ------------------
Total Per Total Per Total Per
Quarter Ended (000) Share (000) Share (000) Share High Low
---------------------- ------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
April 30, 1995 $(341) $(.06) $(4,179) $ (.69) $(4,520) $(.75) $13.500 $11.750
January 31, 1995 258 .04 (7,838) (1.31) (7,580) (1.27) 14.375 11.625
October 31, 1994 (272) (.05) 7,915 1.33 7,643 1.28 15.125 13.500
July 31, 1994 (286) (.06) 3,931 .95 3,645 .89 16.375 13.125
$(641) $(.13) $(171) $ .28 $(812) $ .15

April 30, 1994 $(252) $(.06) $(1,009) $ (.23) $(1,261) $(.29) $17.250 $11.875
January 31, 1994 346 .08 11,463 2.72 11,809 2.80 18.500 12.375
October 31, 1993 (181) (.04) 863 .20 682 .16 13.500 10.750
July 31, 1993 (304) (.07) 489 .12 185 .05 13.250 11.125
$(391) $(.09) $11,806 $ 2.81 $11,415 $2.72
</TABLE>

FINANCIAL HIGHLIGHTS The Korean Investment Fund
-------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

<TABLE>
<CAPTION>
Year Ended April 30, Feb. 24, 1992 (a)
--------------------------------- through
1995 1994 1993 April 30, 1992
---------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.09 $10.37 $ 11.00 $10.90(b)

INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.13)* (.09) (.03) (.01)
Net realized and unrealized gain (loss) on
securities and foreign currency transactions .28 2.81 (.59) .11
Net increase (decrease) in net asset value .15 2.72 (.62) .10

LESS: DISTRIBUTIONS
Distributions from net realized gains on
investments and foreign currency transactions -0- -0- (.01) -0-

CAPITAL SHARE TRANSACTIONS
Dilutive effect of rights offering (.48) -0- -0- -0-
Offering costs charged to additional
paid-in-capital (.10) -0- -0- -0-
Total capital share transactions (.58) -0- -0- -0-
Net asset value, end of period $12.66 $13.09 $ 10.37 $11.00
Market value, end of period $12.375 $13.375** $12.125 $10.00

TOTAL RETURN
Total investment return based on:(c)
Market value (5.88)% 10.31%** 21.39% (10.39)%
Net asset value (3.28)% 26.23% (5.62)% (1.43)%
Net assets, end of period (000's omitted) $75,461 $55,078 $43,663 $46,278

RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 2.00% 2.26% 2.55% 2.37%(d)
Ratio of net investment loss to
average net assets (.83)% (.82)% (.27)% (.49)%(d)
Portfolio turnover rate 34% 14% 43% 8%
</TABLE>

* Based on average shares outstanding.
** Restated.
(a) Commencement of operations.
(b) Net of offering costs of $.26.
(c) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are assumed
for purposes of this calculation, to be reinvested at prices obtained
under the Fund's dividend reinvestment plan. Rights offerings, if any, are
assumed for purposes of this calculation, to be fully subscribed under the
terms of the rights offering. Generally, total investment return based on
net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from
the beginning to the end of such periods. Conversely, total investment
return based on the net asset value will be lower than total investment
return based on market value in periods where there is a decrease in the
discount or an increase in the premium of the market value to the net
asset value from the beginning to the end of such periods. Total
investment return for a period of less than one year is not annualized.
(d) Annualized.

The per share amounts reported herein are not necessarily consistent with
the corresponding amounts reported on the Statement of Operations due to
the change in capital stock caused by the rights offering.

REPORT OF INDEPENDENT ACCOUNTANTS The Korean Investment Fund
-------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE KOREAN INVESTMENT FUND, INC.

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, 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 Korean Investment Fund, Inc.
(the 'Fund') at April 30, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the three years in the
period then ended and for the period February 24, 1992 (commencement of
operations) through April 30, 1992, 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 April 30, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations were not received, provide a reasonable basis for the
opinion expressed above.

PRICE WATERHOUSE LLP

New York, New York
June 16, 1995

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

1. Financial Statements

Included in Part A:
Financial Highlights

Included in Part B:
Portfolio of Investments, April 30, 1995.
Statement of Assets and Liabilities, April 30, 1995.
Statement of Operations for the year ended April 30,
1995.
Statement of Changes in Net Assets for the year ended
April 30, 1995 and for the year ended April 30, 1994.
Notes to Financial Statements, April 30, 1995.
Financial Highlights for the year ended April 30, 1995,
for the year ended April 30, 1994, for the year ended
April 30, 1993 and for the period from February 24, 1992
(commencement of operations) to April 30, 1992.
Report of Independent Accountants dated June 16, 1995.

2. Exhibits

A(1) Articles of Incorporation1
A(2) Articles of Amendment to Articles of Incorporation2
B By-Laws1
C Not Applicable
D(1) Form of Subscription Certificate3
D(2) Form of Notice of Guaranteed Delivery3
D(3) DTC Participant Over-Subscription Certificate3
D(4) Nominee Holder Over-Subscription Certificate3
D(5) Subscription Rights Agency Agreement3
E Dividend Reinvestment Plan4
F Inapplicable
G(1) Investment Management and Administration Agreement
between the Registrant and Alliance Capital
Management L.P.4
G(2) Investment Management Agreement between the Fund
and Orion Asset Management Co. Ltd.4
H Dealer Manager Agreement3
I Inapplicable
J Custodian Agreement5
K Registrar, Transfer Agency and Service Agreement5
L(1) Opinion and Consent of Seward & Kissel3
L(2) Opinion and Consent of Venable, Baetjer and Howard3
L(3) Consent of Shin & Kim3
M Inapplicable

<PAGE>

N Consent of Independent Accountants
O Inapplicable
P Investment Representation Letter6
Q Inapplicable
Other Exhibit: Powers of Attorney of Messrs.
Carifa, Cho, Dievler, Foulk, Hester, Hodgson, Kim
and Koh.

____________________

1. Incorporated by reference from Registrant's Registration Statement on Form
N-2 (File No. 33-43867 and 811-6467) as filed with the Securities and
Exchange Commission on November 8, 1991.
2. Incorporated by reference from Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-2 (File Nos. 33-43867 and
811-6467) as filed with the Securities and Exchange Commission on November
27, 1991.
3. To be filed by subsequent amendment.
4. Incorporated by reference from Registrant's Registration Statement on Form
N-2 (File No. 33-77974 and 811-6467) as filed with the Securities and
Exchange Commission on April 20, 1994.
5. Incorporated by reference from Amendment No. 3 to Registrant's
Registration Statement on Form N-2 (File No. 33-43867 and 811-6467) as
filed with the Securities and Exchange Commission on September 8, 1992.
6. Incorporated by reference from Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-2 (File Nos. 33-43867 and
811-6467) as filed with the Securities and Exchange Commission on February
13, 1992.

<PAGE>

Item 25. Marketing Arrangements

See Dealer Manager Agreement to be filed by subsequent
amendment as Exhibit H.

Item 26. Other Expenses of Issuance and Distribution

Registration fees................................. $9,745.42
National Association of Securities
Dealers, Inc. fees.............................. $
Printing ......................................... $
Fees and expenses of qualifications under state
securities laws (including fees of counsel)....... $
Legal fees and expenses........................... $
Dealer Manager expenses........................... $
Auditing fees and expenses........................ $
New York Stock Exchange listing fees.............. $
Subscription Agent fees and expenses.............. $
Information Agent fees and expenses............... $
Miscellaneous..................................... $

Item 27. Persons Controlled by or Under Common Control with
Registrant

Not applicable

Item 28. Number of Holders of Securities (as of June 30, 1995)

Title of Class Number of Record Holders

Common Stock ($.01 par value per share) 4,572

Item 29. Indemnification

Item 3 of Part II of the Registrant's Pre-Effective
Amendment No. 2 to its Registration Statement on Form N-2, File
Nos. 33-43687 and 811-6467, as filed with the Securities and
Exchange Commission on February 13, 1992, is incorporated herein
by reference.

The Registrant's liability for indemnification and
contribution to the Dealer Manager and soliciting broker-dealers
is set forth in Section 7 of the Dealer Manager Agreement, as set
forth below.

Section 7 of the Dealer Manager Agreement reads as follows:

[Section 7 of the Dealer Manager Agreement to be
provided by subsequent amendment]

<PAGE>

"7. Indemnification and Contribution.

Item 30. Business and Other Connections of Alliance and Orion

The description of each of Alliance Capital Management
L.P. and Orion Asset Management Co. Ltd. under the caption
"Management of the Fund--Management and Administration
Arrangements" in the Prospectus and Statement of Additional
Information is incorporated by reference herein.

The information as to the directors and executive
officers of Alliance Capital Management Corporation, the general
partner of Alliance, set forth in Alliance Capital Management
L.P.'s Form ADV filed with the Securities and Exchange Commission
on April 21, 1988 (File No. 801-32361) and as amended through the
date hereof is incorporated herein by reference. The information
as to the directors and executive officers of Orion Asset
Management Co. Ltd. set forth in Orion Asset Management Co.
Ltd.'s Form ADV filed with the Securities and Exchange Commission
on October 30, 1991 (File No. 801-40145) and as amended through
the date hereof is incorporated herein by reference.

Item 31. Location of Accounts and Records

The accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940
and the Rules thereunder are maintained as follows: journals,
ledgers, securities records and other original records are
maintained principally at the offices of Alliance Capital
Management L.P., 500 Plaza Drive, Secaucus, New Jersey 07094, and
at the offices of State Street Bank and Trust Company, the
Registrant's Dividend-Paying Agent, Transfer Agent and Registrar,
225 Franklin Street, Boston, Massachusetts 02110. All other
records so required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York,New York 10105. Additional records are
maintained at the offices of Brown Brothers Harriman & Co., the
Registrant's Custodian, 40 Water Street, Boston, MA 02109.

Item 32. Management Services

Not applicable

Item 33. Undertakings

1. Registrant undertakes to suspend offering of the
shares covered hereby until it amends its Prospectus contained
herein if subsequent to the effective date of this Registration

<PAGE>

Statement, its net asset value per share declines more than 10
percent from its net asset value per share as of the effective
date of this Registration Statement.

2. Not applicable

3. Not applicable

4. (a) Registrant undertakes to file, during any period
in which offers or sales are being made, a post-effective
amendment to this Registration Statement:

(1) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(2) to reflect in the prospectus any facts or events
after the effective date of this Registration Statement (or the
most recent post-effective amendment hereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement; and

(3) to include any material information with respect to
the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information
in this Registration Statement.

(4) (a) Registrant undertakes to file, during any
period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:

(1) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;

(2) to reflect in the prospectus any facts or
events after the effective date of this Registration (or the most
recent post-effective amendment hereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in this Registration Statement; and

(3) to include any material information with
respect to the plan of distribution not previously disclosed in
this Registration Statement or any material change to such
information in this Registration Statement.

(b) Registrant undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each
subsequent post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of those securities at that time shall
be deemed to be the initial bona fide offering thereof.

<PAGE>

(c) Registrant undertakes to remove from registration by
means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.

5. Not applicable

6. Registrant undertakes to send the SAI by first class
mail or other means designed to ensure equally prompt delivery,
within two business days of receipt of a written or oral request
for the SAI.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in The City of New York and the State
of New York, on the 15th day of August, 1995.

The Korean Investment Fund, Inc.

By /s/ John D. Carifa
__________________
John D. Carifa
Chairman

Pursuant to the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed
below by the following persons in the capacities and on the date
indicated.

Signature Title Date
_________ _____ ____

(1) Principal Executive Chairman August 15, 1995

/s/ John D. Carifa
__________________
John D. Carifa

(2) Principal Financial Treasurer August 15, 1995
and Accounting and Chief
Officer: Financial
Officer
/s/ Mark D. Gersten
___________________
Mark D. Gersten

<PAGE>

(3) All of the Directors: August 15, 1995
John D. Carifa*
Wang Ha Cho*
David H. Dievler*
William H. Foulk, Jr.*
Dr. James M. Hester*
Hon. James D. Hodgson*
Sung Jin Kim*
Choong H. Koh*

*By /s/ Edmund P Bergan, Jr.
____________________________
Edmund P. Bergan, Jr.
Attorney-in-fact

<PAGE>

EXHIBIT INDEX

Sequentially
Numbered
Exhibit Page

N Consent of Independent
Accountants

Other Exhibits Powers of Attorney of
Messrs. Carifa, Cho,
Dievler, Foulk, Hester,
Hodgson, Kim and Koh

8
00250225.AA9

<PAGE>

Consent of Independent Accountants

We hereby consent to the use in the Statement of Additional

Information constituting part of the registration statement on

Form N-2 (the "Registration Statement") of our report dated

June 16, 1995, relating to the financial statements and financial

highlights of The Korean Investment Fund, Inc., which appears in

such Statement of Additional Information, and to the

incorporation by reference of our report into the Prospectus

which constitutes part of this Registration Statement. We also

consent to the references to us under the headings "Financial

Highlights" and "Experts" in such Prospectus.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
August 14, 1995

00250225.AD5

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints Edmund P. Bergan, Jr., and each of them,

to act severally as attorneys-in-fact and agents, with power of

substitution and resubstitution, for the undersigned, solely for

the purpose of signing on such person's behalf any Registration

Statement on Form N-2, and any amendments thereto, of The Korean

Investment Fund, Inc. and filing the same, with the Securities

and Exchange Commission, hereby ratifying and confirming all that

said attorneys-in-fact, or their substitute or substitutes, may

do or cause to be done by virtue hereof.

/s/ John D. Carifa
_____________________________
John D. Carifa

Dated: August 15, 1995
00250225.AD3

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa and Edmund P. Bergan,

Jr., and each of them, to act severally as attorneys-in-fact and

agents, with power of substitution and resubstitution, for the

undersigned, solely for the purpose of signing on such person's

behalf any Registration Statement on Form N-2, and any amendments

thereto, of The Korean Investment Fund, Inc. and filing the same,

with exhibits thereto, and other documents in connection

therewith, with the Securities and Exchange Commission, hereby

ratifying and confirming all that said attorneys-in-fact, or

their substitute or substitutes, may do or cause to be done by

virtue hereof.

/s/ Dr. James M. Hester
_____________________________
Dr. James M. Hester

Dated: August 15, 1995
00250225.AD3

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa and Edmund P. Bergan,

Jr., and each of them, to act severally as attorneys-in-fact and

agents, with power of substitution and resubstitution, for the

undersigned, solely for the purpose of signing on such person's

behalf any Registration Statement on Form N-2, and any amendments

thereto, of The Korean Investment Fund, Inc. and filing the same,

with exhibits thereto, and other documents in connection

therewith, with the Securities and Exchange Commission, hereby

ratifying and confirming all that said attorneys-in-fact, or

their substitute or substitutes, may do or cause to be done by

virtue hereof.

/s/ William H. Foulk, Jr.
_____________________________
William H. Foulk, Jr.

Dated: August 15, 1995
00250225.AD3

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa and Edmund P. Bergan,

Jr., and each of them, to act severally as attorneys-in-fact and

agents, with power of substitution and resubstitution, for the

undersigned, solely for the purpose of signing on such person's

behalf any Registration Statement on Form N-2, and any amendments

thereto, of The Korean Investment Fund, Inc. and filing the same,

with exhibits thereto, and other documents in connection

therewith, with the Securities and Exchange Commission, hereby

ratifying and confirming all that said attorneys-in-fact, or

their substitute or substitutes, may do or cause to be done by

virtue hereof.

/s/ Wang-Ha Cho
_____________________________
Wang-Ha Cho

Dated: August 15, 1995
00250225.AD3

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa and Edmund P. Bergan,

Jr., and each of them, to act severally as attorneys-in-fact and

agents, with power of substitution and resubstitution, for the

undersigned, solely for the purpose of signing on such person's

behalf any Registration Statement on Form N-2, and any amendments

thereto, of The Korean Investment Fund, Inc. and filing the same,

with exhibits thereto, and other documents in connection

therewith, with the Securities and Exchange Commission, hereby

ratifying and confirming all that said attorneys-in-fact, or

their substitute or substitutes, may do or cause to be done by

virtue hereof.

/s/ Sung Jim Kim
_____________________________
Sung Jim Kim

Dated: August 15, 1995
00250225.AD3

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa and Edmund P. Bergan,

Jr., and each of them, to act severally as attorneys-in-fact and

agents, with power of substitution and resubstitution, for the

undersigned, solely for the purpose of signing on such person's

behalf any Registration Statement on Form N-2, and any amendments

thereto, of The Korean Investment Fund, Inc. and filing the same,

with exhibits thereto, and other documents in connection

therewith, with the Securities and Exchange Commission, hereby

ratifying and confirming all that said attorneys-in-fact, or

their substitute or substitutes, may do or cause to be done by

virtue hereof.

/s/ Choong Koh
_____________________________
Choong Koh

Dated: August 15, 1995
00250225.AD3

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa and Edmund P. Bergan,

Jr., and each of them, to act severally as attorneys-in-fact and

agents, with power of substitution and resubstitution, for the

undersigned, solely for the purpose of signing on such person's

behalf any Registration Statement on Form N-2, and any amendments

thereto, of The Korean Investment Fund, Inc. and filing the same,

with exhibits thereto, and other documents in connection

therewith, with the Securities and Exchange Commission, hereby

ratifying and confirming all that said attorneys-in-fact, or

their substitute or substitutes, may do or cause to be done by

virtue hereof.

/s/ David H. Dievler
_____________________________
David H. Dievler

Dated: August 15, 1995
00250225.AD3

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa and Edmund P. Bergan,

Jr., and each of them, to act severally as attorneys-in-fact and

agents, with power of substitution and resubstitution, for the

undersigned, solely for the purpose of signing on such person's

behalf any Registration Statement on Form N-2, and any amendments

thereto, of The Korean Investment Fund, Inc. and filing the same,

with exhibits thereto, and other documents in connection

therewith, with the Securities and Exchange Commission, hereby

ratifying and confirming all that said attorneys-in-fact, or

their substitute or substitutes, may do or cause to be done by

virtue hereof.

/s/ James D. Hodgson
_____________________________
James D. Hodgson

Dated: August 15, 1995
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