THE KOREAN INVESTMENT FUND
ANNUAL REPORT
APRIL 30, 1996
LETTER TO SHAREHOLDERS THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
June 3, 1996
Dear Shareholder:
For the twelve months ended April 30, 1996, The Korean Investment Fund (KIF)
had a total return of +4.0% based on the net asset value (NAV). This compares
with the Korean Composite Stock Price Index (KOSPI) return of 9.35% over the
same period. Much of the underperformance occurred in the second quarter of the
fiscal year (August-October, 1995), when the KOSPI rose by 7.26%, while KIF's
net asset value declined by 4.47%. The overall market rise at that time was led
by industry sectors in which the Fund was underweight relative to KOSPI, namely
larger capitalization manufacturing companies. The Fund's performance in the
last two quarters of the fiscal year just ended has been strong relative to
KOSPI, outperforming the larger index by about 4 percentage points. On April
30, 1996, KIF's net asset value was $12.36 per share and the market price was
$11.50, representing a 6.96% discount to NAV.
HEALTHY ECONOMIC GROWTH IN FIRST QUARTER, 1996
According to preliminary statistics from the Bank of Korea, real gross domestic
product (GDP) grew 7.9% YoY (year-on-year) during the first quarter of 1996.
Household consumption, construction investment and trade were the three areas
contributing most to this robust growth. Household expenditures for consumer
durables jumped 9.4%, leading overall growth in consumption; and although
domestic shipments of durables are gradually losing momentum, non-durable
shipments are rising. The only serious threat to consumption is a resurgence of
inflation. Soaring international commodity prices, coupled with a weak won,
will likely drive up the producer price index and eventually affect the
consumer price index in the same way. Although the latter has remained quite
low by Korean standards, rising 4.6% YoY in April, should it move higher, the
government is likely to launch an austerity campaign aimed at consumers.
Construction investment remained buoyant and facility investment picked up
moderately, supporting fixed capital formation growth at nearly the same level
recorded in the fourth quarter of last year. Front-loading of infrastructure
projects should sustain rapid construction investment growth for at least
another quarter. Private-sector housing construction has bottomed out and is
likely to enter a modest recovery phase in the second half of this year.
Recent trade figures provide cause for concern, however. The first quarter 1996
trade deficit of US$3.7 billion is almost 50% of the total forecast by the
government for the whole of 1996. Weakness in export markets should slow import
growth in export industries. Import growth fell 10.1% in February and 1.9% in
March. We expect the current account deficit to fall from 1.9% of GDP in 1995
to a more modest 1.3% in 1996.
LOW INTEREST RATES SUSTAIN MARKET
A collapse in interest rates is making equity valuations attractive. The yield
on the three year corporate bond has dropped 140 basis points since the start
of the year when yields were 10.53%. Given that the Bank of Korea is
considering the reduction of reserve requirements for banks by another 2%, to
7.4% in July, it is feasible that three-year corporate bond yields will drop to
single digits. Indeed, the government seems intent on achieving this before the
bond market opens to foreign investors. Given the historically low interest
rate levels of around 11%, the market is likely to be driven up by an influx of
cash from local individual investors. As in Taiwan, the Korean market got a
boost from reports that as of September 2, 1995, Morgan Stanley Capital
International (MSCI) decided to increase the weighting of Korea in its emerging
market indices. The new weighting for Korea in the MSCI Emerging Markets Free
Index is 6.3%, up from 2.86%. The change is significant in that it should
prompt regional/global portfolio managers to put substantially more money into
Korea, largely at the expense of other Asian markets. We expect a steady inflow
of overseas funds into the Korean equity market.
INVESTMENT ACTIVITIES AND STRATEGY
KIF's portfolio continues to overweight banks, which appear to be some of the
most undervalued stocks in the market. With the sector trading on a
historically low price-to-earnings ratio of 9X, we believe that most of the
negatives are now reflected in current share prices. We foresee considerable
upside given our expectations of strong profits in 1996. Government policy
changes are also likely to favor the banks. We continue to prefer the large
banks vis-a-vis smaller banks, because of their superior earnings growth and
ability to take full advantage of new trends, such as deregulation, a process
that continues in the Korean banking market.
1
THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
We are generally underweight basic industry stocks at this time. The two
exceptions are Hansol Paper and Pohang Iron and Steel (POSCO), both of which
appear to be trading at a discount to their intrinsic value. We therefore
continue to hold significant positions in both companies. The reason for the
underweighting of other basic industry stocks, is that paper and pulp prices
have further to fall and oversupply in both steel and chemicals will likely
exert downward price pressure in these two industries.
The weak Japanese yen is likely to hurt Korean export competitiveness in the
world market. The Japanese yen has depreciated by 2% against the U.S. dollar
during the first four months of this year, while the Korean won has appreciated
1% against the U.S. dollar for the same period. The semiconductor industry in
Korea, which accounted for 17.7% of total exports, or US$22.1 billion in 1995,
will see tough competition and falling chip prices in 1996. As a result, we
remain underweight in Samsung Electronics.
We expect the telecommunications sector to have bright prospects in Korea. With
the successful introduction of CDMA cellular phone service in January 1996,
Korea's telecom equipment manufacturers are poised to be world market leaders
in commercializing CDMA technology. We added to our position in LG Information
& Communications, Korea's largest manufacturer of telecom equipment. We expect
deregulation in the telecom services market to generate US$10 billion in
additional telecom equipment demand between the second half of 1996 and 2001.
In the short term, it is likely that the Korean stock market will consolidate
at current levels as a result of the recent sharp gains in late April and early
May and higher-than expected cash calls during the third quarter. Longer term,
the market is trading at a discount to its fundamental valuations. The latter,
along with improving liquidity, should push the market higher during the second
half of 1996.
Thank you for your interest in The Korean Investment Fund. We look forward to
reporting to you again on market activity and the Fund's investment results in
the coming months.
Sincerely,
John D. Carifa
Chairman and Chief Executive Officer
A. Rama Krishna
Vice President
Inkee Oh
Vice President
2
TEN LARGEST HOLDINGS
APRIL 30, 1996 THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
COMPANY U.S. $VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
LG Information & Communications $ 8,582,718 8.2%
Korea Exchange Bank 7,104,840 6.8
Korea Electric Power Corp. 6,679,345 6.4
Korea Mobile Telecom Corp. (GDS) 5,728,500 5.5
Samsung Electronics (common & new shares) 3,832,400 3.7
Pohang Iron & Steel Co. (ADR) 3,740,000 3.6
Kookmin Bank 3,497,057 3.3
Namhae Chemical 3,063,026 2.9
Cho Hung Bank 2,922,973 2.8
Keum Kang Development 2,910,376 2.8
$48,061,235 46.0%
3
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
COMMON STOCKS98.6%
FINANCIAL SERVICES29.2%
BANKING20.8%
Cho Hung Bank 210,630 $ 2,922,973
Daegu Bank, Ltd. 49,490 826,688
Hana Bank 106,912 2,252,948
Hyundai International Merchant Bank 67,139 2,242,999
Kookmin Bank 159,157 3,497,057
Korea Exchange Bank 485,030 7,104,840
Seoul Bank 100,000 916,158
Shinhan Bank 87,774 1,939,882
-----------
21,703,545
BROKERAGE & MONEY MANAGEMENT4.6%
Daewoo Securities 64,523 2,114,149
Samsung Securities 61,200 2,673,691
-----------
4,787,840
INSURANCE3.4%
Korea Reinsurance Co. 25,780 1,146,146
Samsung Fire & Marine Insurance Co. 3,700 2,429,425
-----------
3,575,571
OTHER0.4%
Korea Industrial Leasing Co., Ltd. 20,000 444,587
-----------
30,511,543
CAPITAL GOODS12.9%
ELECTRICAL EQUIPMENT6.2%
LG Industrial Systems 34,510 1,081,971
Orion Electric 82,400 1,736,409
Saehan Precision 43,366 1,771,974
Samsung Display Devices 7,000 715,066
Samsung Electro-Mechanics 19,029 892,462
new #1 4,763 214,817
-----------
6,412,699
ENGINEERING & CONSTRUCTION6.0%
Dong-Ah Construction 59,144 2,317,882
Hyundai Engineering & Construction* 44,880 2,266,346
Sambu Construction Co., Ltd.* 20,000 765,821
Sungwon Construction Co. 36,992 846,075
new #1 7,222 143,837
-----------
6,339,961
MACHINERY0.7%
Daewoo Heavy Industries 65,586 728,968
-----------
13,481,628
BASIC INDUSTRIES12.0%
CHEMICALS3.6%
Korea Chemical 6,000 724,703
Namhae Chemical 58,000 3,063,026
-----------
3,787,729
MINING & METALS6.5%
Dongkuk Steel Mill 85,811 2,028,811
Inchon Iron & Steel 10,400 338,092
new #1 4,465 131,956
Moon Bae Steel Co., Ltd. 13,700 614,366
Pohang Iron & Steel Co. (ADR) 136,000 3,740,000
-----------
6,853,225
PAPER & FOREST PRODUCT1.9%
Hansol Paper Co., Ltd. 6,087 234,642
Hansol Paper Manufacturing Co. 30,000 1,310,633
Korea Export Packaging 10,000 323,803
new #1 2,849 80,903
-----------
1,949,981
-----------
12,590,935
4
THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
TECHNOLOGY11.9%
COMMUNICATION EQUIPMENT8.2%
LG Information & Communications 61,000 $ 8,582,718
SEMI-CONDUCTOR3.7%
Samsung Electronics 23,559 3,208,807
new #1 4,689 623,593
-----------
3,832,400
-----------
12,415,118
UTILITY11.9%
ELECTRIC POWER6.4%
Korea Electric Power Corp. 158,000 6,679,345
TELEPHONE UTILITY5.5%
Korea Mobile Telecom Corp. (GDS)(a) 100,500 5,728,500
-----------
12,407,845
CONSUMER MANUFACTURING11.9%
AUTO & RELATED6.2%
Hanil E Wha Corp., Ltd. 27,770 834,973
Hyundai Motor Co., Ltd. 20,000 997,109
Sam Lip Industrial Co. 39,310 1,752,723
Sam Sung Radiator Industries 24,000 2,063,090
Yoosung Enterprise 15,000 755,541
-----------
6,403,436
BUILDING & RELATED3.2%
Hanil Cement Manufacturing 20,000 1,182,139
Keum Kang, Ltd. 29,000 2,157,533
-----------
3,339,672
TEXTILE PRODUCTS2.5%
Baikyang Co. 2,880 352,298
Cheil Industries 100,000 2,248,635
-----------
2,600,933
-----------
12,344,041
CONSUMER SERVICES5.4%
AIRLINES0.6%
Korean Air Lines 20,000 647,607
OTHER4.8%
Hyundai Motor Service Co. 45,736 2,098,009
Keum Kang Development 150,000 2,910,376
-----------
5,008,385
-----------
5,655,992
TRANSPORTATION2.4%
AIR FREIGHT0.8%
Global Enterprise 10,000 860,906
SHIPPING1.6%
Hanjin Shipping 46,689 1,661,786
-----------
2,522,692
MULTI-INDUSTRY0.7%
Korea Housing Bank
new #1 27,300 778,747
5
PORTFOLIO OF INVESTMENTS (CONTINUED) THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
HEALTHCARE0.3%
DRUGS0.3%
Dong Sung Pharmaceuticals* 10,814 $ 301,528
Total Common Stocks
(cost $87,810,602) 103,010,069
TOTAL INVESTMENTS-98.6%
(cost $87,810,602) $103,010,069
Other assets less liabilities-1.4% 1,411,045
NET ASSETS100% $104,421,114
* Non-income producing security.
(a) Securities are exempt from registration under Rule 144A of the Securities
Exchange Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At April 30,
1996, these securities were valued at $5,728,500 representing 5.5% of net
assets.
Glossary of Terms:
ADR - American Depositary Receipt.
GDS - Global Depositary Shares.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $87,810,602) $103,010,069
Cash, at value (cost $1,370,834) 1,377,423
Receivable for investment securities sold 492,701
Dividends receivable 366,050
Deferred organization expense and other assets 30,366
Total assets 105,276,609
LIABILITIES
Payable for investment securities purchased 522,698
Management fee payable 68,043
Co-Manager fee payable 32,020
Accrued expenses and other liabilities 232,734
Total liabilities 855,495
NET ASSETS $104,421,114
COMPOSITION OF NET ASSETS
Capital stock, at par $ 84,507
Additional paid-in capital 90,842,591
Accumulated net investment loss (66,883)
Accumulated net realized loss on investments and foreign
currency transactions (1,645,699)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 15,206,598
$104,421,114
NET ASSET VALUE PER SHARE(based on 8,450,704 shares outstanding) $12.36
See notes to financial statements.
7
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996 THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $245,987) $1,153,105
Interest 187,873 $ 1,340,978
EXPENSES
Management fee 730,550
Co-Manager fee 343,788
Custodian 291,549
Directors' fees and expenses 201,738
Audit and legal 67,072
Printing 63,574
Transfer agency 53,344
Amortization of organization expenses 23,121
Registration 20,524
Miscellaneous 31,720
Total expenses (1,826,980)
Net investment loss (486,002)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized loss on investment transactions (1,628,721)
Net realized loss on foreign currency transactions (14,730)
Net change in unrealized appreciation (depreciation) of:
Investments 8,207,791
Foreign currency denominated assets and liabilities (64,917)
Net gain on investments and foreign currency
denominated assets and liabilities 6,499,423
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,013,421
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1996 1995
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (486,002) $ (640,830)
Net realized gain (loss) on investments and
foreign currency transactions (1,643,451) 4,656,429
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities 8,142,874 (4,826,816)
Net increase (decrease) in net assets from
operations 6,013,421 (811,217)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments and foreign
currency transactions (2,470,881) -0-
CAPITAL STOCK TRANSACTIONS
Proceeds from sale of shares of common stock
in rights offering 25,898,597 21,809,342
Offering costs charged to additional
paid-in-capital (515,887) (615,279)
Reinvestment of dividends resulting in
issuance of common stock 34,966 -0-
Total increase 28,960,216 20,382,846
NET ASSETS
Beginning of year 75,460,898 55,078,052
End of year $104,421,114 $75,460,898
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 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 loss on foreign currency transactions of $14,730 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 net unrealized appreciation of
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, 1996 was Won 778.25 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, 1996, ($419,119) and ($15,192) was reclassified from
accumulated net investment loss and accumulated net realized loss on
investments and foreign currency transactions, respectively, to additional
paid-in-capital.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Realized and unrealized gains and losses from investment and
currency transactions are calculated on the identified cost basis.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
10
THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
NOTE B: MANAGEMENT FEE, CO-MANAGER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Management and Administration Agreement, the Fund pays
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 Funds average weekly net assets. Such fee is calculated weekly and
paid monthly. During the year ended April 30, 1996, the Fund entered into a
Shareholder Inquiry Agency Agreement with Alliance Fund Services, Inc. ('AFS')
whereby the Fund reimburses AFS for costs relating to servicing calls for the
Fund. The Fund reimbursed AFS $1,592 during the year ended April 30, 1996
relating to shareholder servicing costs.
Brokerage commissions paid on securities transactions for the year ended April
30, 1996 amounted to $367,543, of which $52,903 was paid to Tong Yang
Securities Co., Ltd., an affiliate of the Co-Manager and $53,781 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 $54,572,130 and $32,859,780, respectively, for the year ended April
30, 1996. At April 30, 1996, the cost of securities for federal income tax
purposes was $87,810,602. Accordingly, gross unrealized appreciation of
investments was $19,857,696 and gross unrealized depreciation of investments
was $4,658,229 resulting in net unrealized appreciation of $15,199,467
(excluding foreign currency translations).
The Fund incurred and elected to defer post October currency losses of $66,883
and capital losses of $1,189,535. At April 30, 1996, the Fund had a net capital
loss carryover of $456,162. Such losses will be available to offset capital
gains arising through April 30, 2004. To the extent that any net capital loss
carryover or Post October loss is used to offset future capital gains, it is
probable that these gains will not be distributed to shareholders.
NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $.01 par value common stock authorized. Of the
8,450,704 shares outstanding at April 30, 1996, the Investment Manager owned
9,000 shares.
During the year ended April 30, 1996 the Fund issued 3,246 shares of common
stock in connection with the Fund dividend reinvestment plan respectively.
NOTE E: RIGHTS OFFERING
During the fiscal years ended April 30, 1996 and April 30, 1995, the Fund
issued 2,484,546 and 1,753,797 shares, respectively, in connection with rights
offerings of the Fund's shares. During the two respective offerings
shareholders of record on September 25, 1995 and 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 $10.83 and $12.92 per
share, respectively. Offering costs of $515,887 and $615,279, respectively,
attributed to the rights offering were charged to additional paid-in-capital.
Dealer management and soliciting fees of $1,009,036 and $849,715, respectively,
were netted against the proceeds of the subscription.
11
FINANCIAL HIGHLIGHTS THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FEBRUARY 24,
------------------------------------------------------------------
1992(A)
YEAR ENDED APRIL 30, THROUGH
---------------------------------------------------- APRIL 30,
1996 1995 1994 1993 1992
------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.66 $13.09 $10.37 $11.00 $10.90(b)
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.01)* (.13)* (.09) (.03) (.01)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .86 .28 2.81 (.59) .11
Net increase (decrease) in net asset value .85 .15 2.72 (.62) .10
LESS: DISTRIBUTIONS
Distributions from net realized gains
on investments and foreign currency
transactions (.29) -0- -0- (.01) -0-
CAPITAL SHARE TRANSACTIONS
Dilutive effect of rights offering (.80) (.48) -0- -0- -0-
Offering costs charged to additional
paid-in-capital (.06) (.10) -0- -0- -0-
Total capital share transactions (.86) (.58) -0- -0- -0-
Net asset value, end of period $12.36 $12.66 $13.09 $10.37 $11.00
Market value, end of period $11.50 $12.375 $13.375** $12.125 $10.00
TOTAL RETURN
Total investment return based on: (c)
Market value (1.55)% (5.88)% 10.31%** 21.39% (10.39)%
Net asset value 4.00% (3.28)% 26.23% (5.62)% (1.43)%
Net assets, end of period (000's omitted) $104,421 $75,461 $55,078 $43,663 $46,278
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 2.09% 2.00% 2.26% 2.55% 2.37%(d)
Ratio of net investment loss to average
net assets (.53)% (.83)% (.82)% (.27)% (.49)%(d)
Portfolio turnover rate 40% 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 the market
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
_______________________________________________________________________________
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, 1996, 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 four 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, 1996 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 14, 1996
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. 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.
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 Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock 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 of Common Stock 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 of
Common Stock in the open market on the New York Stock Exchange or elsewhere,
for the participants' accounts. Such purchases 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 average purchase price per share paid by the
Agent may exceed the net asset value of the Fund's shares of Common Stock,
resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares 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-certificate 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 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.
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.
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. 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, (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, the Vice President of the Fund.
14
THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
SUPPLEMENTAL PROXY INFORMATION (UNAUDITED)
The Annual Meeting of Shareholders of the Korean Investment Fund was held on
August 8, 1995. The description of each proposal and number of shares are as
follows:
SHARES VOTED
SHARES WITHOUT
VOTED FOR AUTHORITY
- -------------------------------------------------------------------------------
1. To elect directors: Class Three Directors
(term expires 1998)
Dr. James M. Hester 3,896,836 108,083
Wang-Ha Cho 3,896,069 108,850
Choong (John) H. Koh 3,896,069 108,850
Class Two Directors
(term expires 1997)
John D. Carifa 3,896,069 108,850
SHARES SHARES SHARES VOTED
VOTED FOR VOTED AGAINST ABSTAIN
- -------------------------------------------------------------------------------
2. To ratify the selection of Price
Waterhouse LLP as the Fund's
independent auditors of the Fund's
fiscal year ending April 30, 1996 3,906,256 55,155 43,506
15
THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
WANG-HA CHO, PRESIDENT
DONG HOON SHIN, SENIOR VICE PRESIDENT
DAVID H. DIEVLER (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
THE HON. JAMES D. HODGSON (1)
CHOONG (JOHN) H. KOH (1)
OFFICERS
ROBERT HEISTERBERG, EXECUTIVE VICE PRESIDENT-INVESTMENTS
YUNG CHUL PARK, EXECUTIVE VICE PRESIDENT-INVESTMENTS
A. RAMA KRISHNA, VICE PRESIDENT
INKEE 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
(1) Member of the Audit Committee.
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.
16
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
17
THE KOREAN INVESTMENT FUND, INC.
Summary of General Information
POLICIES AND OBJECTIVES
The investment objective of the Fund is to seek long-term capital appreciation
through investment primarily in equity securities of Korean companies.
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 YORKTIMES 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.
THE KOREAN INVESTMENT FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
ALLIANCECAPITAL
INVESTING WITHOUT THE MYSTERY.
THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
KORAR
