The Korean
Investment
Fund
Annual Report
April 30, 1995
1
LETTER TO SHAREHOLDERS The Korean Investment Fund
May 30, 1995
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Dear Shareholder:
In the three-month period since we last reported, through April 30, 1995, The
Korean Investment Fund (KIF) had a total return of -5.59% on a net asset value
basis. This compares with a return of -3.29% for the Korean Composite Stock
Price Index (KOSPI). KIF's net asset value closed at $12.66 per share and the
market price closed at $12.375 per share as of April 28, 1995, representing a
2.25% discount to net asset value. During its fiscal year ended April 30, KIF
had a total return of -3.28% on a net asset value basis, compared with a -1.29%
return for the KOSPI.
Despite the booming economy and expected expansion in foreign ownership
(scheduled on July 1, 1995, to increase to 15% from the current 12%), the
Korean stock market continued its downward correction during the first four
months of this year. Higher-than-expected economic growth caused the Bank of
Korea to keep monetary controls tight. In addition, aggressive facility
expansion by private business entities pushed interest rates higher, leading
many investors to hold off investing in the stock market.
STRONG YEN BOOSTS GROWTH IN FIRST QUARTER
For the first quarter of 1995, we expect the overall economy will report growth
of 9.8%, which is higher than our earlier expectations. Merchandise exports
were up 32% on a year-on-year basis, compared to 9% a year ago. Korean
exporters increased their share of the world market as a result of the
recovering global economy and strong yen. Industrial production grew 14.1% in
the same period, the highest level since 1988, when it increased 15.8% in the
third quarter. Meanwhile, shipments increased 15.3% and inventory growth
remained very low, at just 5%. Thus, the facility utilization ratio reached
83.5% and the unemployment ratio was lower than 2%. With strong economic
growth, monetary authorities have been haunted by the possibility of
overheating in the economy, leading the central bank to keep monetary policy
tight. As a reflection of this tightening, the yield on the benchmark
three-year corporate bond rose to over 15%, from 14.2% in January 1995. The
ongoing economic expansion and high yen boosted large-scale capital investment
in most manufacturing sectors.
CYCLICAL STOCKS TO BENEFIT FROM GROWTH
The weak tone of the domestic equity market intensified during April as
investors negatively responded to the squeeze in liquidity. Despite the strong
economy, investors have hesitated to buy equities due to soaring bond yields.
The widening trade deficit, caused by the heavy reliance of Korean
manufacturers on Japanese equipment suppliers, was also a burden, pushing share
prices down for the period.
Korea's currency, the won, reversed direction in early April by weakening
slightly. This reversal followed increases in imports throughout the month of
March. However, backed by the improving currency balance and strong desire of
the government to subdue inflation, we anticipate that the Korean won will
appreciate modestly against the U.S. dollar in 1995.
KIF is overweighted in cyclical stocks, which could benefit from the ongoing
economic expansion, and we are continuing to add to positions in fundamentally
undervalued companies. During the reporting period, we added to holdings in
KEPCO, Korea Mobile Telecom, Hanjin Shipping, and Hyundai Motor. We eliminated
positions in Chonggu House & Construction, Hannong, Tae Lim Packing, Pum Yang
Construction and Hanwha Chemical. As of April 30, the Fund's cash position was
2.7% of total net assets.
The Seoul bourse is supported by attractive valuations and an improving
liquidity outlook. In our view, there ar
1
The Korean Investment Fund
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strong prospects for a rally in the Korean equity market over the next few
months on the back of stable interest rates and a recovering trade situation.
Thank you for your continued interest in The Korean Investment Fund. We look
forward to updating you on its progress in the coming months.
Sincerely,
John D. Carifa
Chairman and Chief Executive Officer
A. Rama Krishna
Vice President
In Kee Oh
Vice President
2
TEN LARGEST HOLDINGS
April 30, 1995 The Korean Investment Fund
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PERCENT OF
COMPANY U.S.$VALUE NET ASSETS
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Korea Electric Power Corp. $ 7,612,252 10.1%
Pohang Iron & Steel Mill 4,138,991 5.5
Samsung Securities 3,067,567 4.1
Samsung Electro-Mechanics (common & new shares) 2,693,466 3.6
Hansol Paper Manufacturing Co. 2,601,795 3.4
Korea Mobile Telecom Corp. 2,576,096 3.4
Keum Kang, Ltd. 2,438,382 3.2
Dongkuk Steel Mill 2,425,595 3.2
Sam Sung Radiator Industries 2,156,490 2.9
Sam Lip Industrial Co. 2,114,134 2.8
$31,824,768 42.2%
3
PORTFOLIO OF INVESTMENTS
April 30, 1995 The Korean Investment Fund
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Company Shares U.S.$Value
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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
4
The Korean Investment Fund
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Company Shares U.S.$Value
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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
5
PORTFOLIO OF INVESTMENTS (continued) The Korean Investment Fund
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Company Shares U.S.$Value
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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
6
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 The Korean Investment Fund
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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.
7
STATEMENT OF OPERATIONS
Year Ended April 30, 1995 The Korean Investment Fund
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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
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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
8
NOTES TO FINANCIAL STATEMENTS
April 30, 1995 The Korean Investment Fund
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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.
9
NOTES TO FINANCIAL STATEMENTS (continued) The Korean Investment Fund
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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.
10
The Korean Investment Fund
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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>
11
FINANCIAL HIGHLIGHTS The Korean Investment Fund
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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.
12
REPORT OF INDEPENDENT ACCOUNTANTS The Korean Investment Fund
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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
13
ADDITIONAL INFORMATION The Korean Investment Fund
- - -------------------------------------------------------------------------------
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment and Cash Purchase Plan (the 'Plan'),
pursuant to which dividends and capital gain distributions to shareholders will
be paid in or reinvested in additional shares of the Fund (the 'Dividend
Shares'). State Street Bank and Trust Company (the 'Agent') will act as agent
for participants under the Plan. Shareholders whose shares are held in the name
of a broker or nominee should contact such broker or nominee to determine
whether or how they may participate in the Plan.
A shareholder who has elected to participate in the Plan may withdraw from the
Plan at any time. There will be no penalty for withdrawal from the Plan and
shareholders who have previously withdrawn from the Plan may rejoin it at any
time. Changes in elections must be in writing and should include the
shareholder's name and address as they appear on the share certificate. An
election to withdraw from the Plan will, until such election is changed, be
deemed to be an election by a shareholder to take all subsequent distributions
in cash. An election will only be effective for a distribution declared and
having a record date of at least ten days after the date on which the election
is received.
Commencing not more than five business days before the dividend payment date,
purchases of the Fund's shares may be made by the Agent, on behalf of the
participants in the Plan, from time to time to satisfy dividend reinvestments
under the Plan. Such purchases by the Agent on or before the dividend payment
date may be made on the New York Stock Exchange (the 'Exchange') or elsewhere
at any time when the price plus estimated commissions of the Fund's Common
Stock on the Exchange is lower than the Fund's most recently calculated net
asset value per share.
If the Agent determines on the dividend payment date that the shares purchased
as of such date are insufficient to satisfy the dividend reinvestment
requirements, the Agent, on behalf of the participants in the Plan, will obtain
the necessary additional shares as follows. To the extent that outstanding
shares are not available at a cost of less than per share net asset value, the
Agent, on behalf of the participants in the Plan, will accept payment of the
dividend, or the remaining portion thereof, in authorized but unissued shares
of the Fund on the dividend payment date. Such shares will be issued at a per
share price equal to the higher of (1) the net asset value per share on the
payment date, or (2) 95% of the closing market price per share on the payment
date. If the closing sale or offer price, plus estimated commissions, of the
Common Stock on the Exchange on the payment date is less than the Fund's net
asset value per share on such day, then the Agent will purchase additional
outstanding shares on the Exchange or elsewhere. If before the Agent has
completed such purchases, the market price plus commissions exceeds the net
asset value of the Fund's shares, the average per share purchase price paid by
the Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if shares had been issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificated form in the name of
the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There will be no brokerage charges with respect to shares issued directly by
the Fund to satisfy the dividend reinvestment requirements. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Agent's open market purchases of shares. In each case, the cost
per share of shares purchased for each shareholder's account will be the
average cost, including brokerage commissions, of any shares purchased in the
open market plus the cost of any shares issued by the Fund.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus
commissions of the Fund's shares is above the net asset value, participants in
the Plan will receive shares of the Fund at a discount of up to 5% from the
current market value. However, if the market price plus commissions is below
the net asset value, participants will receive distributions in shares with a
net asset value greater than the value of any cash distribution they would have
received on their shares. There may be
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The Korean Investment Fund
- - -------------------------------------------------------------------------------
insufficient shares available in the market to make distributions in shares at
prices below the net asset value. Also, since the Fund does not redeem its
shares, the price on resale may be more or less than the net asset value.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
In the case of foreign participants whose dividends are subject to United
States income tax withholding and in the case of any participants subject to
31% federal backup withholding, the Agent will reinvest dividends after
deduction of the amount required to be withheld.
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
voluntary cash payments made and any dividend or distribution paid subsequent
to written notice of the change sent to participants in the Plan at least 90
days before the record date for such dividend or distribution. The Plan may
also be amended or terminated by the Agent on at least 90 days' written notice
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable to the Agent by the participants. All
correspondence concerning the Plan should be directed to the Agent at State
Street Bank and Trust Company, P.O. Box 366, Boston, Massachusetts 02101.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change
of control of the Fund and (iii) no material changes in the principal risk
factors associated with investment in the Fund and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio,
who is A. Rama Krishna, a Vice President of the Fund.
15
The Korean Investment Fund
- - -------------------------------------------------------------------------------
BOARD OF DIRECTORS
John D. Carifa, Chairman and Chief Executive Officer
Wang-Ha Cho, President
Sung Jin Kim, Senior Vice President
David H. Dievler
William H. Foulk, Jr.
Dr. James M. Hester
The Hon. James D. Hodgson
Choong (John) H. Koh
OFFICERS
Robert Heisterberg, Executive Vice President - Investments
Yung Chul Park, Executive Vice President - Investments
A. Rama Krishna, Vice President
In Kee Oh, Vice President
Thomas Bardong, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Joseph J. Mantineo, Controller
INVESTMENT MANAGER AND
ADMINISTRATOR
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
CO-MANAGER
Orion Asset Management Co., Ltd.
767 Fifth Avenue
New York, NY 10153
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036-2798
TRANSFER AGENT, DIVIDEND PAYING
AGENT, AND REGISTRAR
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110-1520
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
This report, including the financial statement herein is transmitted to the
shareholders of The Korean Investment Fund, Inc. for their information. This is
not a prospectus, circular or representation intended for use in the purchase
of shares of the Fund or any securities mentioned in this report.
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THE KOREAN INVESTMENT FUND, INC.
Summary of General Information
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of newspapers under the designation
KoreanInvFd. The Fund's NYSE trading symbol is 'KIF'. Weekly comparative net
asset value (NAV) and market price information about the Fund is published each
Monday in The Wall Street Journal and each Saturday in The New York Times and
Barron's, and other newspapers in a table called 'Closed-End Funds'. Additional
information about the Fund is available by calling 1-800-221-5672.
DIVIDEND REINVESTMENT PLAN
Under the Fund's Dividend Reinvestment Plan, all shareholders will
automatically have their dividends and other distributions from the Fund
invested in additional shares of the Fund unless a shareholder elects to
receive cash. A brochure describing the Plan is available from the Plan Agent,
State Street Bank and Trust Company, by calling 1-800-219-4218.
1345 Avenue of the Americas
New York, NY 10105
(logo)
R These registered service marks used under license from the owner, Alliance
Capital Management L.P.
KORAR
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