THE KOREAN INVESTMENT FUND
ANNUAL REPORT
APRIL 30, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
June 6, 1997
Dear Shareholder:
We are pleased to provide the annual shareholder report for the Korean
Investment Fund. In the box below are your Fund's investment results, based on
net asset value, for the six- and twelve-month periods ended April 30, 1997.
For comparison, we have also shown the results for the Korean Composite Stock
Price Index (KOSPI). Your Fund's net asset value ended the period at $7.52 per
share and the market price was $7.125 per share as of April 30, 1997,
representing a 5.25% discount to net asset value.
INVESTMENT RESULTS*
TOTAL RETURNS FOR PERIODS
ENDED APRIL 30, 1997
6 MONTHS 12 MONTHS
---------- -----------
KOREAN INVESTMENT FUND -16.63% -39.16%
KOREA COMPOSITE
PRICE INDEX -13.93 -37.45
* TOTAL RETURNS ARE BASED ON NET ASSET VALUE.
The primary reason for the Fund's underperformance was overweight positions in
SK Telecom, LG Information & Communications, Cho Hung Bank and Namhae Chemical
relative to their weight in the Korea Composite Price Index. While these stocks
underperformed KOSPI in the recent period, we see their fundamentals as very
positive and expect the stocks to outperform the market in the months ahead.
INTEREST RATE OUTLOOK
The lackluster growth in the Korean market is being led by the low level of
consumption expenditures and investments and by the sharp decline in the growth
rate of exports. We expect interest rates are the key to the equity market in
1997.
Facility investment has been sluggish due to the economic recession and newly
allowed partial commercial loans from abroad have helped to reduce corporate
bond issuance. Private sector facility investment in 1997 is expected to grow
only by 0.9% over the year, amounting to 57.4 trillion won, or US$65.6 billion.
That indicates that domestic monetary demand should shrink, resulting in
falling interest rates this year. All in all, we believe interest rates should
come down to under 11% in 1997, and cause domestic investors to increase their
allocations to equities.
MARKET REVIEW
The Korean economy has shown a downward trend since the third quarter of 1995,
mainly due to sagging exports. However, industrial production has increased at
a relatively high rate compared to past recessions, which has led to high
growth in inventories. The issue now for the business cycle is when the
inventories will start to fall. The present recession is projected to end in
the second quarter of 1997, though we believe improvement in the Korean economy
will be limited to a small area.
Shipments of exports have shown a robust increase from the last fourth quarter,
due to the recovery of the world economy. We expect that exports will
accelerate more as of the second quarter this year.
PORTFOLIO STRATEGY
We see the recent sluggishness of the market as an opportunity to accumulate
stocks at low prices. Despite the recession, we believe the bottom-line growth
of Korea's publicly held companies should be 25% higher in 1997 than last year.
Overall, our primary emphasis during the next quarter will be on companies
where domestic secular trends, as a result of ongoing deregulation, are
positive (i.e. telecommunication, high-techs, civil engineering, etc.). We
remain under-exposed to cyclical companies. During the reporting period, we
added to holdings in Shin Woo, Tri Gem Computer, and LG Information &
Communications. We reduced our exposure to Daewoo Securities, Global
Enterprise, Keumkang Development, and Samsung Radiator.
1
THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
Thank you for your continued interest in The Korean Investment Fund. We look
forward to reporting to you on market activity and the Fund's investment
results in the coming periods.
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, 1997 THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
LG Information & Communications $ 7,430,377 11.7%
Korea Electric Power Corp. 4,711,659 7.4
SK Telecom Co., Ltd. - ADR 4,104,807 6.5
Korea Exchange Bank 3,390,328 5.3
Pohang Iron & Steel Co. ADR 3,281,000 5.2
Namhae Chemical 3,191,704 5.0
Tri Gem Computer, Inc. 2,571,410 4.0
Kookmin Bank 2,497,980 3.9
Shin Woo Co., Ltd. 2,280,561 3.6
Samsung Electronics 1,919,091 3.0
$35,378,917 55.6%
3
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-98.5%
FINANCIAL SERVICES-23.5%
BANKING-18.2%
Cho Hung Bank 207,630 $ 1,121,947
Daegu Bank, Ltd. 101,964 868,751
Hana Bank 75,364 971,621
Housing & Commercial Bank 27,300 471,323
Hyundai International Merchant Bank 67,419 1,118,611
Kookmin Bank 159,157 2,497,980
Korea Exchange Bank 525,030 3,390,328
Shinhan Bank 90,514 1,136,499
------------
11,577,060
BROKERAGE & MONEY MANAGEMENT-1.4%
Dongwon Securities 90,000 877,803
INSURANCE-3.9%
Korea Reinsurance Co. 33,031 785,042
Oriental Fire & Marine 20,000 457,399
Samsung Fire & Marine Insurance Co. 3,700 1,215,359
------------
2,457,800
------------
14,912,663
TECHNOLOGY-16.9%
COMMUNICATION EQUIPMENT-11.7%
LG Information & Communications 75,317 7,430,377
SEMI-CONDUCTOR-5.2%
LG Semicon (a) 45,000 1,397,422
Samsung Electronics 28,248 1,919,091
------------
3,316,513
------------
10,746,890
CAPITAL GOODS-14.7%
ELECTRICAL EQUIPMENT-9.0%
LG Industrial Systems 34,510 $ 603,538
Saehan Precision 30,900 917,993
Samsung Display Devices 36,270 1,691,516
Tri Gem Computer, Inc. 99,726 2,571,410
------------
5,784,457
ENGINEERING & CONSTRUCTION-5.7%
Dong-Ah Construction 64,355 1,219,282
Hyundai Engineering & Construction 53,404 1,071,672
Sambu Construction Co., Ltd. 40,000 887,892
Sungwon Construction Co. 44,214 416,365
------------
3,595,211
------------
9,379,668
BASIC INDUSTRIES-14.6%
CHEMICALS-5.8%
Korea Chemical 6,000 497,758
Namhae Chemical 73,000 3,191,704
------------
3,689,462
MINING & METALS-6.5%
Daihan Eunpakgy Co. (a) 19,200 856,682
Pohang Iron & Steel Co. ADR 136,000 3,281,000
------------
4,137,682
PAPER & FOREST PRODUCT-2.3%
Hansol Paper Manufacturing Co. 48,076 1,088,717
Korea Export Packaging 16,321 373,260
------------
1,461,977
------------
9,289,121
4
THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
UTILITY-13.9%
ELECTRIC POWER-7.4%
Korea Electric Power Corp. 158,000 $ 4,711,659
TELEPHONE-6.5%
SK Telecom Co., Ltd. - ADR 432,085 4,104,807
------------
8,816,466
CONSUMER MANUFACTURING-8.1%
AUTO & RELATED-1.6%
Hyundai Motor Co., Ltd. 20,000 526,906
Yoosung Enterprise 15,000 504,484
------------
1,031,390
BUILDING & RELATED-1.0%
Keum Kang, Ltd. 15,000 665,919
TEXTILE PRODUCTS-5.5%
Cheil Industries 90,000 1,180,493
Shin Woo Co., Ltd. 109,960 2,280,561
------------
3,461,054
------------
5,158,363
CONSUMER SERVICES-4.6%
AIRLINES-0.7%
Korean Air Lines (a) 23,296 $ 420,477
OTHER-3.9%
Hyundai Motor Service Co. 50,940 1,170,706
Keum Kang Development 100,000 1,356,502
------------
2,527,208
------------
2,947,685
HEALTHCARE-2.2%
DRUGS-2.2%
Dae Woong Pharmaceutical 30,000 1,378,924
TOTAL INVESTMENTS-98.5%
(cost $83,562,980) 62,629,780
Other assets less liabilities-1.5% 956,508
NET ASSETS-100% $ 63,586,288
(a) Non-income producing security.
Glossary:
ADR - American depositary receipt.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $83,562,980) $ 62,629,780
Cash 71,530
Foreign cash, at value (cost $1,268,772) 1,270,513
Receivable for investment securities sold 147,799
Dividends Receivable 61,188
Other assets 12,005
Total assets 64,192,815
LIABILITIES
Payable for investment securities purchased 279,646
Management fee payable 44,094
Co-Manager fee payable 20,750
Other accrued expenses 262,037
Total liabilities 606,527
NET ASSETS $ 63,586,288
COMPOSITION OF NET ASSETS
Capital stock, at par $ 84,507
Additional paid-in capital 90,091,030
Accumulated net investment loss (68,534)
Accumulated net realized loss on investments and
foreign currency transactions (5,588,269)
Net unrealized depreciation of investments and
foreign currency denominated assets and liabilities (20,932,446)
$ 63,586,288
NET ASSET VALUE PER SHARE (based on 8,450,704 shares outstanding) $7.52
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997 THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes
withheld of $237,347) $ 1,068,327
Interest 4,466 $ 1,072,793
EXPENSES
Management fee 656,448
Co-Manager fee 308,917
Custodian 300,616
Directors' fees and expenses 142,217
Audit and legal 77,523
Printing 50,411
Transfer agency 37,291
Amortization of organization expenses 18,610
Registration 15,921
Miscellaneous 29,781
Total expenses 1,637,735
Net investment loss (564,942)
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investment transactions (3,942,570)
Net realized loss on foreign currency transactions (188,270)
Net change in unrealized appreciation of:
Investments (36,132,667)
Foreign currency denominated assets and liabilities (6,377)
Net loss on investments and foreign
currency denominated assets and liabilities (40,269,884)
NET DECREASE IN NET ASSETS FROM OPERATIONS $(40,834,826)
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1997 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (564,942) $ (486,002)
Net realized loss on investments and
foreign currency transactions (4,130,840) (1,643,451)
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency denominated assets
and liabilities (36,139,044) 8,142,874
Net increase (decrease) in net assets
from operations (40,834,826) 6,013,421
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments and
foreign currency transactions -0- (2,470,881)
CAPITAL STOCK TRANSACTIONS
Proceeds from sale of shares of common
stock in rights offering -0- 25,898,597
Offering costs charged to additional
paid-in capital -0- (515,887)
Reinvestment of dividends resulting in
issuance of common stock -0- 34,966
Total increase (decrease) (40,834,826) 28,960,216
NET ASSETS
Beginning of year 104,421,114 75,460,898
End of year $ 63,586,288 $104,421,114
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 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 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 period end
exchange rates are reflected as a component of net unrealized
appreciation/depreciation 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, 1997 was Won 892.00 to U.S.
$1.00.
3. ORGANIZATION EXPENSES
Organization expenses of approximately $115,000 have been deferred and were
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.
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
foreign 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.
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
capital, at the end of the year to reflect the final investment results for
that year.
7. RECLASSIFICATION OF NET ASSETS
As of April 30, 1997, the Fund reclassified certain components of net assets.
The reclassification resulted in a credit to accumulated net investment loss
and accumulated net realized loss on investments and foreign currency
transactions of $563,291 and $188,270, respectively and a debit of $751,561 to
additional paid-
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
in-capital. These reclassifications were the result of permanent book and tax
differences, resulting from the Fund's operating loss. Net assets were not
affected by this change.
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.
Under the Terms of a Shareholder Inquiry Agency agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Investment Manager, the Fund
reimburses AFS for costs relating to servicing phone inquiries for the Fund.
The Fund reimbursed AFS $570 during the year ended April 30, 1997.
Brokerage commissions paid on securities transactions for the year ended April
30, 1997 amounted to $205,049, of which $24,114 was paid to Tong Yang
Securities Co., Ltd., an affiliate of the Co-Manager.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
government securities) aggregated $24,106,662 and $24,411,715, respectively,
for the year ended April 30, 1997. There were no purchases or sales of U.S.
government and government agency obligations for the year ended April 30, 1997.
At April 30, 1997, the cost of securities excluding foreign currency for
federal income tax purposes was the same as the cost for financial reporting
purposes. Accordingly, gross unrealized appreciation of investments (excluding
foreign currency) was $2,107,223 and gross unrealized depreciation of
investments was $23,040,423 resulting in net unrealized depreciation of
$20,933,200. The Fund incurred and elected to defer post October currency
losses of $68,534 and capital losses of $2,638,651. At April 30, 1997, the Fund
had a net capital loss carryover of $2,932,640, of which $439,256 expires at
April 30, 2004 and $2,493,384 expires at April 30, 2005. 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 April 30, 1997, the Investment Manager owned 9,000
shares. During the year ended April 30, 1997 the Fund issued no shares of
common stock in connection with the Fund's dividend reinvestment plan.
NOTE E: RIGHTS OFFERING
During the fiscal year ended April 30, 1996, the Fund issued 2,484,546 shares,
in connection with rights offerings of the Fund's shares. Shareholders of
record on September 25, 1995 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 per share. Offering costs of $515,887 attributed
to the rights offering were charged to additional paid-in capital. Dealer
management and soliciting fees of $1,009,036 were netted against the proceeds
of the subscription.
10
FINANCIAL HIGHLIGHTS THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
.
YEAR ENDED APRIL 30,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.36 $12.66 $13.09 $10.37 $11.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.07)(a) (.01)(a) (.13)(a) (.09) (.03)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (4.77) .86 .28 2.81 (.59)
Net increase (decrease) in net asset value (4.84) .85 .15 2.72 (.62)
LESS: DISTRIBUTIONS
Distributions from net realized gains
on investments and foreign currency
transactions -0- (.29) -0- -0- (.01)
CAPITAL SHARE TRANSACTIONS
Dilutive effect of rights offering -0- (.80) (.48) -0- -0-
Offering costs charged to additional
paid-in capital -0- (.06) (.10) -0- -0-
Total capital share transactions -0- (.86) (.58) -0- -0-
Net asset value, end of year $ 7.52 $12.36 $12.66 $13.09 $10.37
Market value, end of year $7.125 $11.50 $12.375 $13.375(b) $12.125
TOTAL RETURN
Total investment return based on: (c)
Market value (38.04)% (1.55)% (5.88)% 10.31%(b) 21.39%
Net asset value (39.16)% 4.00% (3.28)% 26.23% (5.62)%
Net assets, end of year (000's omitted) $63,586 $104,421 $75,461 $55,078 $43,663
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 2.11% 2.09% 2.00% 2.26% 2.55%
Ratio of net investment loss to
average net assets (.73)% (.53)% (.83)% (.82)% (.27)%
Portfolio turnover rate 32% 40% 34% 14% 43%
Average commission rate(d) $.1277 -- -- -- --
</TABLE>
(a) Based on average shares outstanding.
(b) Restated.
(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) For fiscal years beginning on or after September 1, 1995, a Fund is
required to disclose its average commission rate per share for trades on which
commissions are charged. This amount includes commissions paid to foreign
brokers which may materially affect the rate shown. Amounts paid in foreign
currencies have been converted into U.S. dollars using the prevailing exchange
rate on the date of the transaction.
11
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, 1997, 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 five years in the
period then ended, 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, 1997 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
June 16, 1997
12
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, PO 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.
13
ADDITIONAL INFORMATION (CONTINUED) THE KOREAN INVESTMENT FUND
_______________________________________________________________________________
SUPPLEMENTAL PROXY INFORMATION (UNAUDITED)
The Annual Meeting of Shareholders of The Korean Investment Fund, Inc. was held
on Tuesday, August 8, 1996. The description of each proposal and number of
shares are as follows:
SHARES
VOTED FOR
- ---------------------------------------------------------------
1. To elect directors: Class Two Directors
(term expires 1997)
Dong Hoon Shin 5,199,392
Class One Directors
(term expires 1999)
David H. Dievler 5,199,392
William H. Foulk, Jr. 5,199,392
Hon. James D. Hodgson 5,199,392
SHARES SHARES SHARES VOTED
VOTED FOR VOTED AGAINST ABSTAIN
- -------------------------------------------------------------------------------
2. To ratify the selection of
Price Waterhouse LLP as the
Fund's independent auditors
for the Fund's fiscal year
ending April 30, 1997: 5,223,957 20,023 13,347
14
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
IN KEE OH, VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, 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 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.
15
THE KOREAN INVESTMENT FUND
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, each Sunday in THE NEW YORKTIMES and each
Saturday in 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
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
KORAR
