-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Cd1HOm63RpHZ7lyF+LQe+5Vx+8ENkL1IttuRpYVsH3cjt1pt/JLzPEOcmmIYdejh VrbG+28BHqhiz0MTJYHY5Q== 0000793597-95-000034.txt : 19950906 0000793597-95-000034.hdr.sgml : 19950906 ACCESSION NUMBER: 0000793597-95-000034 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950905 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOREA FUND INC CENTRAL INDEX KEY: 0000748691 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133226146 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04058 FILM NUMBER: 95570259 BUSINESS ADDRESS: STREET 1: 345 PARK AVE STREET 2: C/O SCUDDER STEVENS & CLARK INC CITY: NEW YORK STATE: NY ZIP: 10154 BUSINESS PHONE: 6173305464 N-30D 1 ANNUAL REPORT - THE KOREA FUND, INC. THE KOREA FUND, INC. Annual Report June 30, 1995 A closed-end investment company seeking long-term appreciation of capital through investment in Korean securities. The Korea Fund, Inc. Investment objective and policies o long-term capital appreciation through investment in Korean securities Investment characteristics o investments in a broad spectrum of Korean industries o closed-end investment company o first United States investment company authorized to invest in Korean securities o a vehicle for international diversification through participation in the Korean economy General Information Executive offices The Korea Fund, Inc. 345 Park Avenue New York, NY 10154 Telephone: For Fund Information: 1-800-349-4281 Transfer agent, registrar and dividend reinvestment plan agent For account information: 1-800-426-5523 State Street Bank and Trust Company P.O. Box 8200 Boston, MA 02266-8200 Custodian Brown Brothers Harriman & Co. Subcustodian-Citibank, N.A.--Seoul office Legal counsel Debevoise & Plimpton Independent Accountants Coopers & Lybrand L.L.P. New York Stock Exchange Symbol--KF Contents Letter to Shareholders 3 Investment Summary 7 Portfolio Summary 8 Investment Performance 9 Investment Portfolio 11 Financial Statements 19 Financial Highlights 22 Notes to Financial Statements 23 Report of Independent Accountants 27 Tax Information 28 Dividend Reinvestment and Cash Purchase Plan 29 Investment Manager 31 Korean Adviser 31 Officers and Directors Back Cover Comparisons between changes in the Fund's net asset value per share and changes in the Korea Stock Exchange Index should be considered in light of the Fund's investment policy and objective, the characteristics and quality of the Fund's investments, the size of the Fund, and variations in the won/dollar exchange rate. This report is sent to the shareholders of The Korea Fund, Inc. for their information. It is not a prospectus, circular, or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in the report. 2 Letter to Shareholders - -------------------------------------------------------------------------------- Dear Shareholders: During the fiscal year ended June 30, 1995, the net asset value ("NAV") per share of your Fund rose 6.6% from $18.66 to $19.89. The rights offering, which commenced on June 5, 1995 and expired on June 21, 1995, was significantly over-subscribed and resulted in net proceeds to the Fund of approximately $110 million. Pursuant to the offering, the Fund issued one right for each share held on June 5, 1995, the record date. In the primary subscription, four rights were required to purchase one new share of the Fund's common stock at the subscription price of $15.50. Of the 7,386,102 shares available in the offering, approximately 7.28 million shares or 98.6% were subscribed through the primary subscription. In addition, there were 4,836,283 shares requested in the over subscription allotment. However, there were only approximately 100,000 shares available after the primary subscription. These shares were issued at the same subscription price and on a pro rata basis to record date shareholders who elected to subscribe to additional new shares pursuant to the over subscription privilege. The Fund's share price on the New York Exchange on June 30, 1995 was 19.625, a 1.3% discount to the NAV. Over the same one year period the index of the Korea Stock Exchange declined from 933.36 to 894.41, a decrease of 4.2%, and the Korean won rose 6.3% in value relative to the U.S. dollar from 0.001241 to 0.001319. The Portfolio The Fund is broadly diversified by industry sector. As of June 30, 1995, 21.4% of the Fund's portfolio was invested in electronics; 2% in chemicals; and 5.7% in construction and building materials. With the proceeds from the rights offering, the Fund is now able to subscribe to the rights offerings of the portfolio companies and to add new names to the portfolio. Until the proceeds are fully invested in the Korean equities, we have started to take advantage of the Fund's privilege to buy Korean bonds with high yields. Under the license from the Korean government, the Fund is able to buy Korean bonds up to 10% of total assets. The three-year corporate bond yield, the benchmark Korean interest rate, is around 14%. Since the March 31, 1995 third quarter report, we have made a number of adjustments to the portfolio. We liquidated the holdings of Dae Ho Construction, Dong-Ah Securities, Dongsuh Securities and Shin Young Securities. We have reduced a number of holdings in the portfolio and added to our positions in Dong Ah Construction, Hwa Sung Industries, Kia Steel, Samsung Engineering and Construction, and Samsung Securities. The Fund's five largest equity investments in order of market value are as follows: Samsung Electronics, Korea Mobile Telecom, Hyundai Motor Services, Samsung Fire and Marine Insurance, and Keumkang Co. Ltd. As a group, these holdings account for 43% of the portfolio. However, all of these companies have been described in previous reports, so we have selected five others to continue our practice of providing descriptions of your Fund's holdings. Dong Ah Construction is one of the largest construction companies in the world. It has been selected by the Libyan government for the construction of the Great Man-Made River Project Phase 1, Phase 2 and expects to win the $5 billion contract for Phase 3 as well. The company plans to build a 3.2 trillion won, multi-purpose, tourism, distribution and high-tech industrial park on tidal land near Kimpo. Dong-Ah Construction also plans to undertake private sector social infrastructure development projects including the expressway leading from Seoul 3 to the Youngeongdo Airport, the Kyunggi-Inchon canal and a liquid natural gas terminal. It also plans to establish branches in the U.S., Australia, Malaysia and Vietnam in order to expand the company's overseas bidding activities. Hwa Sung is one of the leading department store chains in Korea, managing five department stores and 28 supermarkets. These include Dong-A Department Store, Dong-A Shopping Center and Pretemps Department Store in Seoul. The company plans to open a shopping center in Daegu. Hwa Sung is also involved in the construction business and has recently expanded substantially. The company has also taken over a mutual savings and finance company with assets of 36 billion won to diversify into the financial business. Samsung Securities has been growing rapidly since being acquired by the Samsung Group in 1992. It is one of the top securities houses in the categories of institutional sales and underwriting. The company has completed the first stage of its upgrading program by extending its branch network, introducing new services and improving operational procedures. Samsung Securities has dramatically improved the return on investments by customers and deposits in customer accounts have risen sharply. In preparation for internationalization and liberalization it has created a new computerized information processing system. The company seeks complete job satisfaction of all its workers, thus raising their productivity. Sungwon Construction is a medium-sized general contractor that focuses on civil engineering projects. Its main business is apartment distribution and construction. The company grew rapidly since 1989 by aggressively participating in housing development projects. Improved cost control helped the company post an increase in net income despite an increase in financial expenses. It has distributed 160 housing units in the Los Angeles, California area. The company also plans to expand into Chinese housing development. Korea Electric Power Co. is Korea's only electric utility company. It also has the largest market capitalization among Korean companies and plans to diversify by entering the telecommunications business (cable TV and mobile telecommunications). The company has recently entered into agreements with the governments of China and the Philippines to provide those countries with power equipment and to develop power stations. It is also expected to win a $1 billion project in Indonesia. As of June 30, 1995, most of the Fund's holdings are companies that have reached the 12% foreign ownership limitation. Some of these shares are traded among foreign investors at a premium. The Fund's NAV is calculated using local prices except for Samsung Electronics, Korea Mobile Telecom, Samsung Fire and Marine, and Pohang Iron and Steel, which are valued at fair value as determined in good faith by the valuation committee of the Fund's Board of Directors. Stock Market and Economics Following a historical high of 1,145 on November 9, 1994, the Korean stock market has experienced a consolidation phase, declining to 894.41 on June 30, 1995. Major reasons for the decline were higher interest rates and deteriorating trade figures. High interest rates are attributable largely to Korean companies' aggressive facilities investments to cope with a rapid increase in demand for Korean products from overseas and domestically. Given the managed money supply by the central bank and Korea's semi-closed capital and money markets, the increased cash demand from corporations for facilities investments became a major cause for high interest rates. The three-year corporate bond yield, a benchmark Korean interest rate, increased from the 1994 average of 13% to more than 15% in early 1995 and then stabilized at around 14% as of June 30, 1995. Despite strong gains in exports, trade deficits are widening as imports grow even faster than exports. For the first half of this year, imports have 4 risen by around 38% year-on-year which outpaced export growth rates of around 34% for the same period. As a result, the trade deficit for the first five months was $3.6 billion. Exports were led by heavy industrial products such as semiconductors, petrochemical products and motor vehicles. Capital goods and raw materials led the sharp growth in imports. Imports of capital goods accounted for about 50%. However, the trade deficit is expected to decline as facilities investments slow down, production capacity improves and exports continue to expand. Supported by strong exports and facilities investments, Korea's Gross Domestic Product ("GDP") growth posted 9.9% during the first quarter of this year, the highest rate since the second quarter of 1991 when the GDP grew by 10.6%. Despite concerns about the overheating economy, Korea is expected to maintain an expansionary trend with a high GDP growth in 1995 (8.5-9.0%). Inflation, measured by the Consumer Price Index, has been relatively stable. For the first six months, consumer prices increased by 4.8% over the same period last year (a substantial decline from 6.2%). Inflationary pressures may increase in the second half of this year because of increasing domestic spending. However, stable international prices of raw materials, won appreciation and slower wage increases should have a positive effect on inflation. The six-month results of Korean companies, excluding banks and securities companies, with fiscal years ending in December showed a substantial increase in net income by more than 40-50% mainly because of the expanding economy and fast growing exports. On July 1, 1995, the ceiling on the foreign ownership in each listed company was raised from 12% to 15%. Since the July 1 increase in the foreign ownership limit, overseas investors have been actively purchasing Korean stocks amounting to $1.4 billion. Based on the fundamental strength of the nation's economy and the positive outlook in interest rates, we are optimistic about the future of the market. Recent corrections made the Korean stock market more attractive. With new proceeds from the rights offering, we will use periods of market weakness as buying opportunities. In the short term, the Korean market may be volatile, but the medium and long term prospects for the Korean economy and stock market are strong. Politics On June 27, 1995, Koreans had an election for local and provincial officers for the first time since 1960. This election has been perceived as a significant progress towards Korea's becoming a genuine democratic country. The currently ruling Democratic Liberal Party failed to secure a majority in the local government elections. Among the fifteen electorate big cities and districts, only five were claimed by the ruling party. However, the results of the election is expected to have little impact on the stock market. With Kim Il-Sung's death in mid-1994, North Korea has been more active in opening its economy. To facilitate foreign investment, the North has made moves to improve the transportation network and is also opening up some financial services. Even though there are obstacles to overcome, it seems inevitable that economic cooperation between South and North Korea will expand. Assuming the transition of power in the North proceeds smoothly and South and North Korea dialogues improve, many South Korean companies will benefit. Utilizing the North's inexpensive and well educated labor force and abundant natural resources, South Korean companies will be more competitive especially in the labor intensive industries. Recently, more people are traveling to North Korea and North Korean delegates have visited the United States more frequently. 5 Dividend Reinvestment Plan The Korea Fund, Inc. invests with a long-term view. Capital gains distributions will vary from year to year depending on investment conditions and portfolio considerations. They are part of your capital and therefore represent a withdrawal of capital if they are not reinvested. The Fund's Dividend Reinvestment and Cash Purchase Plan offers you a convenient way to have your dividends and capital gain distributions reinvested in shares of the Fund. Your participation is automatic unless you or the bank, broker or other nominee holding shares beneficially owned by you specifies otherwise. We believe this Plan is attractive for shareholders. Its features are more fully described on page 29. Of particular interest is the ability of Plan participants to reinvest their dividends and capital gains distributions at up to a 5% discount to the Fund's share price on the New York Stock Exchange (but not less than the net asset value) when the Fund's shares are selling at a premium to net asset value. A Team Approach to Investing The Korea Fund, Inc. is managed by a team of Scudder investment professionals who each play an important role in the Fund's management process. Team members work together to develop investment strategies and select securities for the Fund. They are supported by Scudder's large staff of economists, research analysts, traders, and other investment specialists who work in Scudder's offices across the United States and abroad. We believe our team approach benefits Fund investors by bringing together many disciplines and leveraging Scudder's extensive resources. Lead Portfolio Manager John J. Lee has set Fund investment strategy and overseen its daily operation since 1991, the year he joined Scudder's global equity area. Nicholas Bratt, Portfolio Manager, has been a member of the Portfolio team since 1984 and has over 20 years of experience in worldwide investing. Mr. Bratt, who has been at Scudder since 1976, is the Director of Scudder's Global Equity Department. Other Information The Fund's NAV is published every Monday in The Wall Street Journal under the heading "Closed End Funds." The Fund's NAV is also published in The New York Times and Barron's. As a service to overseas shareholders, The Korea Fund's NAV is listed daily in The Financial Times ("FT") newspaper. For your information the NAV of the Fund and other Scudder closed-end funds can be found in the "FT Managed Funds Service" section under the heading "Other Offshore Funds" below the Scudder, Stevens & Clark, Inc. banner. We are pleased that you have chosen to invest in The Korea Fund, Inc. and we welcome any questions or comments you may have. Respectfully, /s/Nicholas Bratt /s/Juris Padegs Nicholas Bratt Juris Padegs President Chairman of the Board 6 The Korea Fund, Inc. Investment Summary as of June 30, 1995 - ----------------------------------------------------------------------------- Historical Information Life of Fund
Total Return (%) --------------------------------------------------------------- Market Value Net Asset Value(a) Index(c) ------------------- ------------------- ------------------- Average Average Average Cumulative Annual Cumulative Annual Cumulative Annual ------------------- ------------------- ------------------- Current Quarter -3.24 -- 1.36 -- -4.01 -- One Year -5.43 -5.43 13.00 13.00 -4.17 -4.17 Three Year 86.72 23.14 100.24 26.04 62.02 17.45 Five Year 18.44 3.44 83.80 12.95 26.55 4.82 Ten Year 589.53 21.30 796.33 24.52 551.90 20.62
- ----------------------------------------------------------------------------- Per Share Information and Returns (a) Yearly periods ended June 30 A chart in the form of a bar graph appears here, illustrating the Fund Total Return (%) and Index Total Return (%) with the exact data points listed in the table below. 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------------------------------------------------------------------------- Net Asset Value (b). $ 7.46 $11.13 $13.97 $16.84 $14.45 $10.27 $10.75 $11.40 $18.66 $19.89 Income Dividends.... $ .28 $ .01 $ .29 $ .11 $ .08 $ -- $ .06 $ .04 $ .01 $ -- Capital Gain Distributions....... $ -- $ .03 $ .68 $ 1.74 $ 1.88 $ 2.20 $ .34 $ .20 $ -- $ .15 Total Return (%).... 106.32 49.77 31.17 33.21 -9.52 -14.91 7.87 8.20 63.77 13.00
(a) Total return based on per share net asset value reflects the effects of changes in net asset value on the performance of the Fund during each period, and assumes dividends and capital gains distributions, if any, were reinvested. These percentages are not an indication of the performance of a shareholder's investment in the Fund based on market value due to differences between the market price of the stock and the net asset value of the Fund during each period. (b) Net asset value per share through 1988 has been adjusted for a 200% stock dividend paid in October 1988. (c) Korea Stock Price ("KOSPI") Past results are not necessarily indicative of future performance of the Fund. 7 The Korea Fund, Inc. Portfolio Summary as of June 30, 1995 - ----------------------------------------------------------------------------- Diversification - ----------------------------------------------------------------------------- Common Stocks 86% Notes 6% Convertible Bonds 5% Preferred Stocks 2% Cash Equivalents 1% ---- 100% ==== A graph in the form of a pie chart appears here, illustrating the exact data points in the above table. - ----------------------------------------------------------------------------- Sectors - ----------------------------------------------------------------------------- Sector breakdown of the Fund's equity securities Technology 23% Communications 16% Financial 13% Durables 12% Manufacturing 6% Construction 6% Consumer Staples 6% Consumer Discretionary 5% Health 3% Other 10% ---- 100% ==== A graph in the form of a pie chart appears here, illustrating the exact data points in the above table. - -------------------------------------------------------------------------- Ten Largest Equity Holdings - -------------------------------------------------------------------------- 1. Samsung Electronics Co., Ltd. Major electronics manufacturer 2. Korea Mobile Telecom Mobile telecommunication company 3. Hyundai Motor Services Co., Ltd. Auto parts and services 4. Samsung Fire and Marine Insurance Insurance company 5. Keumkang Co., Ltd. Construction company and manufacturer of building materials 6. Korea Long Term Credit Bank Major commercial bank 7. Cheil Food and Chemical Co., Ltd. Korea's largest sugar refiner and major integrated food processor 8. Hansol Paper Manufacturing Co., Ltd. Korea's largest paper manufacturer 9. Hankook Tire Manufacturing Co., Ltd. Major tire manufacturer 10. Yukong, Ltd. Korea's largest oil refiner 8 The Korea Fund, Inc. Investment Performance - -------------------------------------------------------------------------------- LINE CHART OMITTED CHART TITLE: KOREA FUND INVESTMENT PERFORMANCE History (in terms of N.Y.S.E. Value) of a $10,000 Investment in Fund Shares Assuming Reinvestment of Capital Gains and Income Distributions Through the Fund's Dividend Reinvestment and Cash Purchase Plan vs. the S&P 500* CHART PERIOD: (8/84 - 6/95) CHART DATA:
----------------------------------------------------------------------------------------------------------------------- TOTAL SHARE CAPITAL GAINS DISTRIBUTION SHARE VALUE OF INITIAL S&P TOTAL VALUE ($84,756) REINVESTED ($73,791) INVESTMENT ($49,063) RETURN ($46,995) ----------------------------------------------------------------------------------------------------------------------- 10000 10000 10000 10000 11983 11983 11983 9972 11875 11875 11875 10159 11458 11458 11458 11095 12292 12292 12292 11906 11787 11250 11250 11422 15393 14692 14692 13395 20632 19692 19692 15286 29440 27817 27817 16186 32537 30709 30625 15054 30103 28411 28333 15905 56221 53061 52917 19304 62087 58597 58438 20265 67523 63039 62396 21689 51016 47628 45938 16801 73921 69011 66563 17755 65476 61127 58958 18925 59075 54750 50000 18993 80516 74621 65625 19608 108121 100205 88125 21000 97003 89900 79063 22837 133542 123540 105000 25283 109297 101112 85938 25801 73983 68442 57188 25017 71567 66198 55313 26571 44506 41173 30625 22930 48402 44777 31250 24976 56630 52389 36563 28611 54694 50598 35313 28520 57251 52736 36250 30052 50380 46407 31563 32576 47388 43651 29688 31761 46392 41813 28438 32345 49876 45787 30625 33368 57001 52328 35000 35054 52421 48123 32188 36585 61073 56068 37500 36763 59037 54197 36250 37711 97766 89706 60000 38587 78417 71952 48125 37122 89619 82230 55000 37277 107003 98181 65313 39097 93227 85541 56875 39091 87592 80371 53438 42897 84756 73791 49063 46995
9 The Korea Fund, Inc. Investment Performance - -------------------------------------------------------------------------------- LINE CHART OMITTED CHART TITLE: KOREA FUND INVESTMENT PERFORMANCE History (in terms of Net Asset Value) of a $10,000 Investment in Fund Shares Assuming Reinvestment of Capital Gains and Income Distributions Through the Fund's Dividend Reinvestment and Cash Purchase Plan* CHART PERIOD: (8/84 - 6/95) CHART DATA: ------------------------------------------------------------------------------- TOTAL NET ASSET CAPITAL GAINS DISTRIBUTIONS NET ASSET VALUE OF INITIAL VALUE ($92,365) REINVESTED ($80,416) INVESTMENT ($53,468) ------------------------------------------------------------------------------- 10000 10000 10000 10072 10072 10072 10268 10269 10268 10197 10197 10197 10287 10287 10287 10083 9624 9624 12598 12025 12025 16796 16030 16030 21224 20054 20054 23020 21726 21667 23315 22004 21944 31873 30082 30000 31788 30001 29918 31515 29422 29122 33685 31447 30332 38620 36055 34776 41695 38926 37545 40580 37609 34346 52539 46693 42823 62236 57679 50726 55541 51474 45269 65403 60505 51425 64510 59679 49866 60372 55851 46667 50252 46489 38844 42972 39754 29570 46216 42755 29839 45050 41676 29086 42750 39558 27608 45385 41806 28737 45269 41699 28360 54322 50039 34032 46127 42489 28898 42982 39467 26398 46494 42683 28549 46844 43004 28764 49908 45818 30645 50128 46018 30780 72886 66877 44731 74814 68646 46914 81734 74896 50162 94467 86679 57662 90990 83489 55511 91123 83610 55592 92365 80416 53468 The data set forth above should not be construed as an indication of the record of a shareholder's investment in the Fund based on market prices; nor should it be construed as a representation of the future performance of the Fund's net asset value. * The Korea Fund, Inc. performance charts make the following key assumptions: 1. The data have been adjusted to reflect a 200% stock dividend paid in October 1988. 2. Investment income reinvested at the greater of the following on the valuation date: (a) Net asset value per share or (b) 95% of the mean market price per share. 3. No adjustments have been made for U.S. income taxes. Korean taxes are reflected. 4. Initial $10,000 investment was made at initial public offering price and at initial net asset value price. The Standard & Poor's 500 Stock Index is a widely followed, unmanaged index of 500 industrial, transportation, utility and financial companies widely regarded as representative of the equity market in general. 10 [LOGO]The Korea Fund, Inc. Investment Portfolio as of June 30, 1995 - ------------------------------------------------------------------------------------------------------------------
Principal Market Amount (e) Value ($) - ------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT 0.9% U.S.$ 5,712,000 Repurchase Agreement with Salomon Brothers Inc. dated 6/30/95 at 6.125%, to be repurchased at $5,714,916 on 7/3/95, collaterized by a $6,040,000 U.S. Treasury Note, 6.25%, 8/15/23 (Cost $5,712,000).............................. 5,712,000 ---------- - ------------------------------------------------------------------------------------------------------------------ NOTES 5.4% 1,100,000,000 Korea Development Bank, 13.1%, 7/26/95........... 1,453,726 25,500,000,000 Korea Development Bank, 10.69%, 7/26/95.......... 33,428,625 ---------- TOTAL NOTES (Cost $34,092,409)................... 34,882,351 ---------- - ------------------------------------------------------------------------------------------------------------------ CONVERTIBLE BONDS 5.3% CONSUMER DISCRETIONARY 0.4% APPAREL & SHOES 1,000,000,000 Shinwon, 6%, 12/31/96 (Major apparel manufacturer) (c).............................. 2,452,199 ---------- CONSUMER STAPLES 1.2% Food & Beverage 0.5% 800,000,000 Crown Confectionery Co., 3%, 12/31/97 (Major producer of snacks) (c)........................ 946,727 2,000,000,000 Haitai Confectionery Co., 1%, 6/30/98 (Major producer of snacks) (c)........................ 2,484,748 ---------- 3,431,475 ---------- Textiles 0.7% U.S.$ 2,000,000 Kolon Industries, Inc., 0.25%, 12/31/04 (Leading manufacturer of nylon, polyester yarn and fabrics)....................................... 995,000 2,400,000,000 Kukje Corp., 12%, 12/31/97 (Shoe manufacturer) (c) 3,277,262 ---------- 4,272,262 ---------- HEALTH 0.6% Pharmaceuticals 3,000,000,000 Korean Green Cross Corp., 1%, 12/31/97 (Pharmaceutical company) (c)................... 3,232,878 400,000,000 Yuhan Corporation, 5.5%, 12/31/97 (Pharmaceutical company) (c)................... 539,822 ---------- 3,772,700 ---------- DURABLES 0.4% Tires 2,000,000,000 Kumho Co., 4%, 12/31/97 (Korea's largest tire manufacturer) (c).............................. 2,446,053 ----------
The accompanying notes are an integral part of the financial statements. 11 [LOGO]The Korea Fund, Inc. Investment Portfolio (continued) - ------------------------------------------------------------------------------------------------------------------
Principal Market Amount (e) Value ($) - ------------------------------------------------------------------------------------------------------------------ MANUFACTURING 1.0% Containers & Paper 4,000,000,000 Hansol Paper Manufacturing Co., Ltd., 3%, 12/31/99 (Korea's largest paper manufacturer) (c)........ 4,216,499 2,500,000,000 Hansol Paper Manufacturing Co., Ltd., 1%, 12/31/99 (c).................................... 2,366,766 ---------- 6,583,265 ---------- TECHNOLOGY 0.2% Electronic Components/ Distributors 500,000,000 Anam Electronics, 5.5%, 12/31/96 (Major consumer electronics company) (c)........................ 700,903 250,000,000 Anam Electronics, 6%, 12/31/96 (c)................ 357,636 CHF 500,000 Samsung Electromechanics Co., Ltd., 0.25%, 12/31/00 (Major electronics parts company)...... 267,159 ---------- 1,325,698 ---------- ENERGY 0.9% Oil & Gas Production 3,000,000,000 Yukong, Ltd., 1%, 12/31/98 (Korea's largest oil refiner) (c).................................... 3,847,240 2,000,000,000 Yukong, Ltd., 2%, 12/31/97 (c).................... 2,150,214 ---------- 5,997,454 ---------- METALS AND MINERALS 0.4% Steel & Metals 1,000,000,000 Kangwon Industry, 6%, 6/30/97 (Steel company) (c).................................... 1,466,456 500,000,000 Sammi Steel, 4%, 12/31/97 (Specialty steel company) (c).................................... 745,420 ---------- 2,211,876 ---------- CONSTRUCTION 0.2% Miscellaneous 1,000,000,000 Sungwon Construction, 5%, 12/31/97 (Construction company) (c).................................... 1,293,215 ---------- TOTAL CONVERTIBLE BONDS (Cost $35,868,433)........ 33,786,197 ---------- - ------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS 2.2% Shares ------ CONSUMER STAPLES 0.2% Alcohol & Tobacco 0.0% 1,165 Oriental Brewery Co., Ltd. (Korea's largest brewery)........................................ 10,678 ---------- Food & Beverage 0.2% 38,690 Cheil Food and Chemical Co., Ltd. (Korea's largest sugar refiner and major integrated food processor)...................................... 1,071,533 52,280 Haitai Confectionery Co. ......................... 482,638 ---------- 1,554,171 ----------
The accompanying notes are an integral part of the financial statements. 12 - ------------------------------------------------------------------------------------------------------------------
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------ FINANCIAL 0.5% Insurance 0.2% 6,175 Samsung Fire and Marine Insurance (Insurance company) (d).................................... 928,021 ---------- Other Financial Companies 0.3% 100,000 Boo Kook Securities (Securities company).......... 890,208 100,000 Boram Securities (Securities company)............. 837,455 33,200 LG Securities Co., Ltd. (Securities company)...... 380,492 ---------- 2,108,155 ---------- DURABLES 0.8% Automobiles 0.5% 106,358 Hyundai Motor Services Co., Ltd. (Auto parts and services)....................................... 2,805,355 ---------- Tires 0.3% 388,000 Kumho Co. ........................................ 2,046,818 ---------- MANUFACTURING 0.0% Chemicals 19,375 Oriental Chemical Industries Co., Ltd. (Manufacturer of specialty chemicals)........... 265,744 ---------- TECHNOLOGY 0.6% Electronic Components/ Distributors 8,198 Samsung Display Devices (Korea's largest manufacturer of CRT and picture tubes).......... 366,518 823 Samsung Display Devices (New) (b) (c)............. 36,454 30,920 Samsung Electronics Co., Ltd. (Major electronics manufacturer) (d)............................... 2,853,570 6,119 Samsung Electronics Co., Ltd. (New) (b) (d)....... 535,357 ---------- 3,791,899 ---------- ENERGY 0.0% Oil Companies 1,174 Ssangyong Oil Refining Co. (Major oil refiner) (c) 18,564 ---------- CONSTRUCTION 0.1% Miscellaneous 45,540 Kumho Construction and Engineering (Engineering and construction company)....................... 318,315 ---------- TOTAL PREFERRED STOCKS (Cost $16,284,011)......... 13,847,720 ---------- - ------------------------------------------------------------------------------------------------------------------ COMMON STOCKS 86.2% CONSUMER DISCRETIONARY 4.6% Apparel & Shoes 0.9% 32,083 Shin Won Corp. (Major apparel manufacturer)....... 1,510,535 89,052 Ssang Bang Wool Co. (Leading underwear manufacturer)................................... 4,415,899 ---------- 5,926,434 ----------
The accompanying notes are an integral part of the financial statements. 13 [LOGO]The Korea Fund, Inc. Investment Portfolio (continued) - ------------------------------------------------------------------------------------------------------------------
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------ Department & Chain Stores 3.7% 165,730 Hwa Sung Industries (Department store)............ 7,693,631 32,858 Hwa Sung Industries (New) (b) (c)................. 1,512,807 9,436 Keum Kang Development Industries Co, Ltd. (Operator of department stores and hotels) (New) (b) (c)................................... 179,251 114,577 Shinsegae (Major department store chain).......... 8,628,219 34,753 Shinsegae (New) (b)............................... 2,429,158 115,860 Taegu Department Store (Department store)......... 3,162,944 ---------- 23,606,010 ---------- CONSUMER STAPLES 4.3% Alcohol & Tobacco 0.4% 120,740 Oriental Brewery Co., Ltd. ....................... 2,786,614 ---------- Food & Beverage 3.0% 268,413 Cheil Food and Chemical Co., Ltd. ................ 16,814,530 9,000 Haitai Confectionery Co. ......................... 154,303 32,271 Nhong Shim Co. (Manufacturer of instant noodles and snacks)..................................... 1,119,324 37,458 Tongyang Confectionery (Major producer of snacks). 1,160,914 ---------- 19,249,071 ---------- Textiles 0.9% 79,739 Cheil Industries (Korea's largest woolen yarn and fabric manufacturer)............................ 1,850,849 31,895 Cheil Industries (New) (b)........................ 651,992 3,040 Taekwang Industrial Co., Ltd. (Major producer of acrylic fiber).................................. 2,325,354 16,500 Tongyang Nylon (Korea's largest producer of nylon filament yarn).................................. 691,988 ---------- 5,520,183 ---------- HEALTH 2.1% Pharmaceuticals 75,428 Chong Kun Dang Co., Ltd. (Pharmaceutical company). 2,854,973 21,000 Daewoong Pharmaceutical Co. (Pharmaceutical company)........................................ 1,038,576 4,840 Daewoong Pharmaceutical Co. (New 1) (b) (c)....... 239,087 3,200 Daewoong Pharmaceutical Co. (New 2) (b)........... 144,332 138,121 Yuhan Corporation................................. 8,925,722 ---------- 13,202,690 ---------- COMMUNICATIONS 14.8% Cellular Telephone 100,702 Korea Mobile Telecom (Mobile telecommunication company) (d).................................... 94,786,712 ---------- FINANCIAL 11.2% Banks 5.4% 240,028 Cheju Bank (Regional bank)........................ 2,883,818
The accompanying notes are an integral part of the financial statements. 14 - ------------------------------------------------------------------------------------------------------------------
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------ 242,929 Hanil Bank (Major commercial bank)................ 2,748,870 103,170 Kookmin Bank (Major commercial bank).............. 1,836,855 160,000 Korea Exchange Bank (Major commercial bank)....... 1,466,535 17,454 Korea Exchange Bank (New) (b)..................... 144,788 43,900 Korea First Bank (Major commercial bank).......... 413,960 667,902 Korea Long Term Credit Bank (Major commercial bank)........................................... 19,114,373 242,000 Shin Han Bank (Major commercial bank)............. 4,978,833 44,435 Shin Han Bank (New) (b)........................... 873,170 ---------- 34,461,202 ---------- Insurance 4.8% 85,376 Daehan Fire and Marine Insurance (Insurance company)........................................ 3,130,172 44,656 Hyundai Fire and Marine Insurance (Insurance company)........................................ 2,296,847 49,912 LG Insurance (Insurance company).................. 3,324,176 67,867 Samsung Fire and Marine Insurance (d)............. 21,931,356 ---------- 30,682,551 ---------- Other Financial Companies 1.0% 19,989 Boo Kook Securities............................... 276,801 87,191 Hanyang Securities (Securities company)........... 983,163 1,224 Hyundai Securities (Securities company)........... 23,729 763 LG Securities Co., Ltd. .......................... 13,383 68,510 Samsung Securities (Securities company)........... 2,520,843 172,384 Ssangyong Investments and Securities (Securities company)........................................ 2,932,711 ---------- 6,750,630 ---------- SERVICE INDUSTRIES 2.0% Miscellaneous Commercial Services 250,042 Samsung Co., Ltd. (Trading company)............... 7,122,858 100,195 Samsung Co., Ltd. (New) (b) ...................... 2,523,870 156,060 Sunkyong Ltd. (Trading company)................... 2,984,332 ---------- 12,631,060 ---------- DURABLES 9.7% Automobiles 9.2% 169,216 Hankook Tire Manufacturer Co., Ltd. (Major tire manufacturer).............................. 13,613,157 116,209 Hyundai Motor Co., Ltd. (Korea's largest auto manufacturer)................................... 7,172,544 423,380 Hyundai Motor Services Co., Ltd................... 22,892,951 113,341 Mando Machinery Co. (Major auto parts manufacturer)................................... 7,563,541 35,000 Samlip Industries (Auto parts manufacturer)....... 1,998,681
The accompanying notes are an integral part of the financial statements. 15 [LOGO]The Korea Fund, Inc. Investment Portfolio (continued) - ------------------------------------------------------------------------------------------------------------------
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------ 90,000 Yoosung Enterprise (Leading manufacturer of engine parts).......................................... 5,471,810 ----------- 58,712,684 ----------- Leasing Companies 0.5% 93,000 Korea Development Leasing Co. (Largest leasing company in Korea)............................... 3,250,247 ----------- MANUFACTURING 4.9% Chemicals 1.8% 37,540 Korea Chemical Co. (Paint company)................ 4,450,836 229,853 LG Chemicals (Korea's largest integrated chemical company)........................................ 6,002,096 47,400 Oriental Chemical Industries Co., Ltd............. 1,350,267 2,647 Oriental Chemical Industries Co., Ltd. (New) (b).. 62,837 ----------- 11,866,036 ----------- Containers & Paper 1.3% 210,712 Hansol Paper Manufacturing Co., Ltd............... 8,475,722 ----------- Diversified Manufacturing 1.1% 23,256 Hyundai Precision Industry Co. (Leading transport container manufacturer and machinery producer).. 555,138 200,239 Samsung Heavy Industries Co., Ltd. (Machinery manufacturer)................................... 5,598,506 30,070 Samsung Heavy Industries Co., Ltd. (New) (b)...... 753,485 ----------- 6,907,129 ----------- Electrical Products 0.7% 114,086 Kyungwon Century Co., Ltd. (Major manufacturer of heating and cooling equipment)............... 4,242,961 ----------- TECHNOLOGY 20.6% Electronic Components/ Distributors 20.4% 109,643 LG Electronics, Inc. (GDR) (Major electronics manufacturer)................................... 1,315,716 6,395 LG Electronics, Inc. (GDR) (c).................... 123,903 88,367 Samsung Display Devices........................... 7,178,908 53,095 Samsung Display Devices (New) (b) (c)............. 4,291,408 167,073 Samsung Electromechanics Co., Ltd. ............... 7,976,317 65,331 Samsung Electromechanics Co., Ltd. (New) (b)...... 2,981,144 523,910 Samsung Electronics Co., Ltd. (d)................. 89,353,170 103,682 Samsung Electronics Co., Ltd. (New) (b) (d)....... 17,465,614 ----------- 130,686,180 ----------- Electronic Data Processing 0.2% 50,000 Trigem Computer Inc. (Major personal computer manufacturer)................................... 1,496,868 -----------
The accompanying notes are an integral part of the financial statements. 16 - ------------------------------------------------------------------------------------------------------------------
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------ ENERGY 2.0% Oil & Gas Production 24,940 Samchully (Producer and distributor of anthracite and gas)........................................ 1,447,227 135,744 Ssangyong Oil Refining Co. ....................... 3,902,696 160,499 Yukong, Ltd. ..................................... 6,709,948 19,232 Yukong, Ltd. (New) (b) (c)........................ 799,327 ---------- 12,859,198 ---------- METALS AND MINERALS 2.6% Steel & Metals 1,641 Hankook Core Co. (Steel company).................. 31,597 165,000 Inchon Iron & Steel (Steel company)............... 6,724,036 254,428 Kia Steel Co, Ltd. (Specialty steel company)...... 2,181,051 76,481 Kia Steel Co., Ltd. (New) (b) (c)................. 655,623 61,000 Pohang Iron & Steel Co., Ltd. (Korea's largest steel producer) (d)............................. 6,103,138 72,463 Sammi Steel (Specialty steel producer)............ 745,416 ---------- 16,440,861 ---------- CONSTRUCTION 5.4% Building Materials 4.7% 24,000 Hanil Cement Manufacturer (Cement manufacturing company)........................................ 1,455,984 224,337 Keumkang Co., Ltd. (Construction company and manufacturer of building materials)............. 19,941,067 197,307 Ssangyong Cement Industrial Co., Ltd. (Major cement company)................................. 5,308,358 63,000 Sung Shin Cement Co., Ltd. (Major cement company). 2,492,582 34,000 Tong Yang Cement Co., Ltd. (Major cement company). 1,121,002 200 Tong Yang Cement Co., Ltd. Warrants (expire 8/18/96) (f).................................... 35,000 ---------- 30,353,993 ---------- Miscellaneous 0.7% 30,000 Dong Ah Construction Industries Co., Ltd. (Leading construction company).................. 993,076 38,510 Han Shin Construction (Construction company)...... 328,091 101,270 Kumho Construction and Engineering................ 1,307,528 60,320 Samsung Engineering and Construction Co. (Engineering and construction company).......... 1,630,808 11,401 Samsung Engineering and Construction Co. (New) (b) 266,136 370 Sungwon Construction.............................. 9,027 864 Sungwon Construction (New) (b) ................... 18,459 ---------- 4,553,125 ----------
The accompanying notes are an integral part of the financial statements. 17 [LOGO]The Korea Fund, Inc. Investment Portfolio (continued) - ------------------------------------------------------------------------------------------------------------------
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------ TRANSPORTATION 0.9% Airlines 0.3% 59,996 Korean Airlines Co., Ltd. (Airline)................ 2,160,093 ----------- Marine Transportation 0.5% 80,000 Korea Line Corp. (Maritime transportation company). 2,753,709 ----------- Trucking 0.1% 13,670 Korea Express Co., Ltd. (General freight transport company)......................................... 526,428 11,356 Korea Express Co., Ltd (New) (b)................... 389,391 ----------- 915,819 ----------- UTILITIES 1.1% Electric Utilities 0.8% 130,900 Korea Electric Power Co. (Electric utility)........ 4,902,816 ----------- Natural Gas Distribution 0.3% 37,600 Daesung Industrial (Natural gas distributor)....... 2,043,020 ----------- TOTAL COMMON STOCKS (Cost $226,208,918)............ 552,223,618 ----------- - ------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENT PORTFOLIO - 100.0% (Cost $318,165,771) (a).......................... 640,451,886 =========== (a) The cost for federal income tax purposes was $318,211,095. At June 30, 1995, net unrealized appreciation for all securities based on tax cost was $322,240,791. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over tax cost of $350,133,482 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value of $27,892,691. (b) New shares issued during 1995, eligible for a pro rata share of 1995 dividends (Note A). (c) Securities valued in good faith by the Valuation Committee of the Board of Directors. The cost of these securities at June 30, 1995 was $39,056,517 (Note A). (d) Equity securities that have met the foreign-ownership limitation valued at a premium in good faith by the Valuation Committee of the Board of Directors. The cost of these securities at June 30, 1995 was $20,962,878 (Note A). (e) Principal amount stated in Korean won unless otherwise noted. CHF Swiss Francs. (f) Non-income producing.
The accompanying notes are an integral part of the financial statements. 18 [LOGO]The Korea Fund, Inc. Financial Statements - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 - -------------------------------------------------------------------------------------------------------------- ASSETS Investments, at market (identified cost $318,165,771) (Note A)...... $640,451,886 Cash: U.S. dollars..................................................... 566 Won at market (identified cost $118,068,657) (Note A)............ 118,110,387 Receivables: Investments sold................................................. 188,117 Dividends and interest........................................... 1,505,189 Other assets........................................................ 3,747 ------------ Total assets............................................... 760,259,892 LIABILITIES Payables: Investments purchased............................................ $22,373,675 Offering costs (Note A).......................................... 856,500 Withholding taxes................................................ 1,466,109 Accrued management fee (Note C).................................. 606,255 Other accrued expenses (Note C).................................. 410,618 ----------- Total liabilities.......................................... 25,713,157 ------------ Net assets, at market value......................................... $734,546,735 ============ NET ASSETS Net assets consist of: Accumulated net realized gain.................................... $ 11,053,379 Net unrealized appreciation on: Investments.................................................. 322,286,115 Won.......................................................... 41,730 Won related transactions..................................... 21,820 Common stock..................................................... 369,305 Additional paid-in capital....................................... 400,774,386 ------------ Net assets, at market value......................................... $734,546,735 ============ NET ASSET VALUE per share ($734,546,735 -:- 36,930,508 shares of common stock issued and outstanding, 50,000,000 shares authorized, $.01 par value)................................................... $19.89 ======
The accompanying notes are an integral part of the financial statements. 19 [LOGO]The Korea Fund, Inc. Financial Statements (continued) - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1995 - -------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Income: Dividends (net of withholding taxes of $904,810) (Note A)..... $ 4,130,508 Interest (net of withholding taxes of $276,758) (Note A)...... 1,803,719 --------------- 5,934,227 Expenses: Management fee (Note C)........................................ $ 6,260,081 Directors' fees and expenses (Note C).......................... 174,331 Custodian fees................................................. 1,173,802 Legal.......................................................... 151,170 Auditing....................................................... 103,612 Reports to shareholders........................................ 123,123 Services to shareholders....................................... 81,147 Other.......................................................... 111,554 8,178,820 --------------- --------------- Net investment loss............................................... (2,244,593) --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized gain during the period on: Investments.................................................... 13,172,511 Won related transactions....................................... 597,431 13,769,942 --------------- Net unrealized appreciation during the period on: Investments.................................................... 65,993,286 Won............................................................ 12,003 Won related transactions....................................... 21,272 66,026,561 --------------- --------------- Net gain on investment transactions............................... 79,796,503 --------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $ 77,551,910 ===============
The accompanying notes are an integral part of the financial statements. 20 STATEMENTS OF CHANGES IN NET ASSETS - -----------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30, -------------------------------- INCREASE (DECREASE) IN NET ASSETS 1995 1994 - ----------------------------------------------------------------------------------------------------------- Operations: Net investment loss................................................... $ (2,244,593) $ (749,702) Net realized gain from investment transactions........................ 13,769,942 5,972,730 Net unrealized appreciation on investment transactions during the period.......................................................... 66,026,561 179,703,180 ------------ ------------ Net increase in net assets resulting from operations...................... 77,551,910 184,926,208 ------------ ------------ Distributions to shareholders from: Net investment income ($.01 per share)................................ - (325,166) ------------ ------------ Net realized gains from investment transactions ($.15 per share)...... (4,359,655) - ------------ ------------ Fund share transactions: Net proceeds of shares issued in connection with the Fund's rights offering, net of broker and dealer manager fees of $4,006,960 and expenditures and offering costs of $860,000......... 109,617,621 - ------------ ------------ Net proceeds of shares issued in connection with the Fund's fourth tranche offering, net of underwriting commissions of $5,750,000 and expenditures and offering costs of $1,618,000........ - 107,631,989 ------------ ------------ Reinvestment of distributions......................................... 1,798,229 106,509 ------------ ------------ INCREASE IN NET ASSETS.................................................... 184,608,105 292,339,540 Net assets at beginning of period......................................... 549,938,630 257,599,090 ------------ ------------ NET ASSETS AT END OF PERIOD............................................... $734,546,735 $549,938,630 ============ ============ OTHER INFORMATION INCREASE IN FUND SHARES Shares outstanding at beginning of period................................. 29,474,985 22,604,432 Shares issued in connection with the Fund's rights offering........... 7,386,102 - Shares issued in connection with the Fund's fourth tranche offering... - 6,865,671 Shares issued to shareholders in reinvestment of distributions........ 69,421 4,882 ------------ ------------ Shares outstanding at end of period....................................... 36,930,508 29,474,985 ============ ============
The accompanying notes are an integral part of the financial statements. 21 [LOGO]The Korea Fund, Inc. Financial Highlights - -------------------------------------------------------------------------------------------------------------------------------- THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS AND MARKET PRICE DATA. - --------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED JUNE 30, ------------------------------------------------------------------------ 1995 1994 1993 1992 1991 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period............... $18.66 $11.40 $10.75 $ 10.27 $ 14.45 ------ ------ ------ ------- ------- Income from investment operations (a): Net investment income (loss)................... (.07) (.03) .02 .08 .09 Net realized and unrealized gain (loss) on investment transactions..................... 2.50(b) 7.13 .86 .78 (2.13) ------ ------ ------ ------- ------- Total from investment operations................... 2.43 7.10 .88 .86 (2.04) ------ ------ ------ ------- ------- Less distributions from: Net investment income.......................... - (.01) (.04) (.06) - Net realized gains on investment transactions................................ (.15) - (.20) (.34) (2.20) ------ ------ ------ ------- ------- Total distributions................................ (.15) (.01) (.24) (.40) (2.20) ------ ------ ------ ------- ------- Antidilution (dilution) resulting from the rights offering (1995), fourth tranche (1994), and reinvestment of distributions for shares at market value................................... (1.02) .22 .01 .02 .06 ------ ------ ------ ------- ------- Broker and dealer manager fees and offering costs................................. (.03) (.05) - - - ------ ------ ------ ------- ------- Net asset value, end of period..................... $19.89 $18.66 $11.40 $ 10.75 $ 10.27 ====== ====== ====== ======= ======= Market value, end of period........................ $19.63 $22.00 $15.00 $ 11.38 $ 14.13 ====== ====== ====== ======= ======= TOTAL RETURN Per share market value (%)......................... (5.43) 46.74 34.54 (17.01) (23.57) Per share net asset value (%) (c).................. 13.00 63.77 8.20 7.87 (14.91) RATIOS AND SUPPLEMENTAL DATA Net assets, end of period ($ millions)............. 735 550 258 241 228 Ratio of operating expenses to average net assets (%)................................. 1.32 1.37 1.52 1.52 1.47 Ratio of net investment income (loss) to average net assets (%)......................... (.36) (.18) .15 .70 .83 Portfolio turnover rate (%)........................ 10.5 14.3 14.3 18.2 19.2 (a) Based on monthly average of shares outstanding during each period. (b) Due to the timing and magnitude of the rights offering, the amount reported herein is not proportional to the aggregate value reported in the Statements of Operations and Changes in Net Assets and Note E to the financial statements. (c) Total return based on per share net asset value reflects the effects of changes in net asset value on the performance of the Fund during each period, and assumes dividends and capital gains distributions, if any, were reinvested. These percentages are not an indication of the performance of a shareholder's investment in the Fund based on market value due to differences between the market price of the stock and the net asset value of the Fund during each period.
22 [LOGO]The Korea Fund, Inc. Notes to Financial Statements ================================================================================ A. SIGNIFICANT ACCOUNTING POLICIES ------------------------------- The Korea Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a non-diversified, closed-end management investment company. The policies described below are followed consistently by the Fund in the preparation of its financial statements in conformity with generally accepted accounting principles. SECURITY VALUATION. Portfolio securities which are traded on the Korean, U.S., or foreign stock exchanges are valued at the most recent sale price reported on the exchange on which the security is traded most extensively. If no sale occurred, the security is then valued at the calculated mean between the most recent bid and asked quotations. If there are no such bid and asked quotations, the most recent bid quotation is used. Short-term investments having a maturity of sixty days or less are valued at amortized cost. All other securities are valued at fair value as determined in good faith by the Valuation Committee of the Board of Directors including certain investments in Korean equity securities that have met the limit for aggregate foreign ownership and for which premiums to the local stock exchange prices are offered by prospective foreign investors. The aggregate premium ($39,776,807) over the local share price ($194,180,131) for these securities valued by the Valuation Committee was approximately 5.4% of the Fund's net assets at June 30, 1995. Other securities valued in good faith by the Valuation Committee amounted to $40,380,462 or 5.5% of the Fund's net assets at June 30, 1995. DIVIDEND INCOME. Korean-based corporations have generally adopted calendar year-ends, and their corporate actions are normally approved by their boards of directors and shareholders in the first quarter of each calendar year. Accordingly, dividend income from Korean equity investments is earned and received by the Fund primarily in the first calendar quarter of each year. As a result, the Fund, which has a June 30 year end, receives substantially less dividend income in the first half of its year than in the second half of such year. INCOME TAXES. The Fund's policy is to comply with the requirements of the Internal Revenue Code which are applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. The Fund, accordingly, paid no federal income taxes and no federal income tax provision was required. Under the United States-Korea income tax treaty, as presently in effect, the government of Korea imposes a nonrecoverable withholding tax and resident tax aggregating 16.125% on dividends and 12.9% on interest paid to the Fund by Korean issuers. Under the United States-Korea income tax treaty, there is no Korean withholding tax on realized capital gains. DISTRIBUTION OF INCOME AND GAINS. Distribution of net investment income is made annually. It is expected that net realized gains from investment transactions during any particular year in excess of available capital loss carryforwards which, if not distributed, would be taxable to the Fund, will be distributed to shareholders. An additional distribution may be made to the extent necessary to avoid the payment of a four percent federal excise tax. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. These differences relate primarily to foreign denominated investments. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. The Fund uses the identified cost method for determining realized gain or loss on investments for both financial and federal income tax reporting purposes. 23 [LOGO]The Korea Fund, Inc. Notes to Financial Statements (continued) =============================================================================== FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained in U.S. dollars. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, other assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. The Fund does not isolate that portion of gains and losses on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains and losses from investments. Net realized gain (loss) from won related transactions includes net currency gains and losses between trade and settlement dates on securities transactions, gains and losses arising from the sales of won and gains and losses between the ex and payment dates on dividends, interest, and foreign withholding taxes. At June 30, 1995 the exchange rate for Korean won was U.S. $.001319 to W 1. SUBSCRIPTIONS FOR NEW SHARES. As part of their annual corporate action matters, certain Korean companies offer rights to their shareholders to subscribe to new shares which are eligible for a portion of the dividends paid on existing shares in the year of subscription. The Fund follows a policy of subscribing to new share offerings by Korean companies. RIGHTS OFFERING. During the year ended June 30, 1995, the Fund issued 7,386,102 shares in connection with a rights offering of the Fund's shares. Shareholders of record on June 5, 1995 were issued one transferable right for each share owned. The rights entitle shareholders the opportunity to purchase one share of common stock for each four rights held at a subscription price of $15.50 per share. Rights offering costs were approximately $860,000 and broker and dealer manager fees were $4,006,960. The net asset value per share of the Fund's common shareholders was reduced by approximately $1.02 per share as a result of the share issuance. OTHER. Investment security transactions are accounted for on a trade-date basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. All original issue and acquisition discounts are accreted for both tax and financial reporting purposes. B. PURCHASES AND SALES OF SECURITIES --------------------------------- For the year ended June 30, 1995, purchases and sales of investment securities (excluding short-term investments) aggregated $62,394,762 and $70,934,118, respectively. C. RELATED PARTIES --------------- On October 14, 1994, the Fund's shareholders approved a new Investment Advisory and Management Agreement (the "Management Agreement") with Scudder, Stevens & Clark, Inc. (the "Manager"). Under the Management Agreement the Fund agrees to pay the Manager a monthly fee at an annual rate equal to 1.15% of the Fund's month-end net assets up to and including $50,000,000, 1.10% of such net assets on the next $50,000,000, 1% of such assets on the next $250,000,000, 0.95% of such net assets on the next $400,000,000, and 0.90% of such net assets in excess of $750,000,000. Under the Investment Advisory and Management Agreement (the "Agreement") between the Fund and the Manager which was in effect prior to October 14, 1994, the Fund agreed to pay the Manager a monthly fee equal to an annual rate of 1.15% of the first $50,000,000 of month-end net assets of the Fund, 1.10% of such net assets in excess of $50,000,000 up to and including $100,000,000, and 1.00% of the excess over $100,000,000. 24 =============================================================================== For the year ended June 30, 1995, the fee pursuant to such agreements amounted to $6,260,081 which was equivalent to an annual effective rate of 1.01% of the Fund's average month-end net assets. On October 14, 1994, the Fund's shareholders approved a new Research and Advisory Agreement (the "Advisory Agreement") with Daewoo Capital Management Co., Ltd. (the "Korean Adviser"), whereby the Korean Adviser provides such investment advice, research and assistance as the Manager may from time to time reasonably request. Under the Advisory Agreement, the Manager pays the Korean Adviser a monthly fee, equal to an annual rate of 0.2875% of the first $50,000,000 of the Fund's month-end net assets, 0.275% of such net assets on the next $50,000,000, and 0.25% of such net assets on the next $250,000,000, 0.2375% of such net assets on the next $400,000,000, and 0.225% of such net assets in excess of $750,000,000. Under the Research and Advisory Agreement (the "Research Agreement") which was in effect prior to October 14, 1994, the Manager agreed to pay the Korean Adviser a monthly fee equal to an annual rate of 0.2875% of the first $50,000,000 of the Fund's month-end net assets, 0.275% of such net assets in excess of $50,000,000 up to and including $100,000,000, and 0.25% of the excess over $100,000,000. For the year ended June 30, 1995, brokerage commissions on investment transactions amounting to $74,082 were paid by the Fund to Daewoo Securities Co., Ltd., the parent company of the Korean Adviser. The Fund paid each Director not affiliated with the Manager or the Korean Adviser $4,500 annually plus specified amounts for attended board and committee meetings. Effective October 1, 1994, the Fund pays each Director not affiliated with the Manager or the Korean Adviser $6,000 annually plus specified amounts for attended board and committee meetings. For the year ended June 30, 1995, Directors' fees and expenses amounted to $174,331. D. FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN KOREA ------------------------------------------------- The Foreign Exchange Management Act, the Presidential Decree relating to such Act and the regulations of the Minister of Finance and Economy issued thereunder impose certain limitations and controls which generally affect foreign investors in Korea. The Fund has obtained from the Minister of Finance and Economy a license to invest in Korean securities and to repatriate income received from dividends and interest earned on, and net realized capital gain from, its investments in Korean securities and, upon termination of the Fund or for payment of expenses in excess of income, to repatriate investment principal. The Minister of Finance and Economy may, when it deems it to be in the public interest, modify the Fund's license to invest in Korean securities or, according to the terms of the license, revoke it in the event of the Fund's noncompliance with conditions of the license or a material violation of Korean law. The Minister of Finance and Economy or the Securities and Exchange Commission of Korea ("KSEC") may issue orders imposing additional restrictions, when deemed in the public interest, for the protection of investors or in the interest of maintaining an orderly securities market. Under the Foreign Exchange Management Act, the Minister of Finance and Economy has the power, with prior public notice of scope and duration, to suspend all or a part of foreign exchange transactions when emergency measures are deemed necessary in case of radical change in the international or domestic economic situation. The Fund could be adversely affected by delays in, or the refusal to grant, any required governmental approval for such transactions. Under current regulations of the Minister of Finance and Economy and the KSEC, foreigners are subject to certain restrictions with respect to investing in equity securities of Korean companies listed on the Korea Stock Exchange. Until December 1, 1994, total foreign investment was limited generally to 10% of each class of a company's outstanding shares. 25 [LOGO]The Korea Fund, Inc. Notes to Financial Statements (continued) =============================================================================== At December 1, 1994, the general limit was increased from 10% to 12%. Effective July 1, 1995, the general limit increased from 12% to 15%. A single foreign investor may only invest up to 3% of each class of outstanding shares. Pursuant to its license, however, the Fund may invest in shares representing 5% of each class in general. E. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (000 OMITTED) ---------------------------------------------------------
NET INCREASE (DECREASE) NET GAIN (LOSS) IN NET ASSETS INVESTMENT NET INVESTMENT ON INVESTMENT RESULTING QUARTER ENDED INCOME * INCOME (LOSS) TRANSACTIONS FROM OPERATIONS - ------------------ -------------- ----------------- ----------------- ------------------ PER PER PER PER FISCAL 1995 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE - ----------- ----- ----- ----- ----- ----- ----- ----- ----- September 30, 1994 $ 625 $.02 $(1,311) $(.04) $ 87,443 $2.97 $ 86,131 $2.93 December 31, 1994 398 .01 (1,772) (.06) (21,665) (.73) (23,436) (.79) March 31, 1995 4,878 .17 2,977 .10 (1,963) (.08) 1,014 .02 June 30, 1995 33 .00 (2,139) (.07) 15,982 .49 13,843 .42 ------ ---- ------- ----- -------- ----- -------- ----- Totals $5,934 $.20 $(2,245) $(.07) $ 79,797 $2.65 $ 77,552 $2.58 ====== ==== ======= ===== ======== ===== ======== ===== PER PER PER PER FISCAL 1994 TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE - ----------- ----- ----- ----- ----- ----- ----- ----- ----- September 30, 1993 $ 52 $ - $ (878) $(.04) $ 2,205 $ .09 $ 1,327 $ .05 December 31, 1993 341 .02 (995) (.04) 124,881 4.82 123,886 4.78 March 31, 1994 4,432 .17 2,556 .10 10,248 .40 12,804 .50 June 30, 1994 231 - (1,433) (.05) 48,342 1.82 46,909 1.77 ------ ---- ------- ----- -------- ----- -------- ----- Totals $5,056 $.19 $ (750) $(.03) $185,676 $7.13 $184,926 $7.10 ====== ==== ======= ===== ======== ===== ======== ===== *Net of Korean taxes withheld.
26 [LOGO]The Korea Fund, Inc. Report of Independent Accountants =============================================================================== TO THE BOARD OF DIRECTORS AND THE SHAREHOLDERS OF THE KOREA FUND, INC.: We have audited the accompanying statement of assets and liabilities of The Korea Fund, Inc. including the investment portfolio, as of June 30, 1995, and the related statement of operations for the year then ended, the statements of changes in 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. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1995 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Korea Fund, Inc. as of June 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 five years in the period then ended in conformity with generally accepted accounting principles. As explained in Note A, the financial statements include certain equity and convertible debt securities valued at $40,380,462 (5.5% of net assets) and equity securities valued at a premium of $39,776,807 (5.4% of net assets) over local stock exchange prices, whose values have been estimated by the Board of Directors in the absence of readily ascertainable market values or other market factors, respectively. We have reviewed the procedures used by the Board of Directors in arriving at their estimate of value of such securities and have inspected underlying documentation, and, in the circumstances, we believe the procedures are reasonable and the documentation appropriate. However, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the difference could be material. Boston, Massachusetts COOPERS & LYBRAND L.L.P. August 23, 1995 27 [LOGO]The Korea Fund, Inc. Tax Information =============================================================================== Pursuant to section 852 of the Internal Revenue Code, the Fund designates $8,791,734 as capital gain dividend for its fiscal year ended June 30, 1995. Due to the nature of its investments, the Fund pays foreign taxes to the Republic of Korea throughout the year. As in prior years, the Fund intends to make an election under Section 853 of the Internal Revenue Code. This election will allow shareholders to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. Additionally, shareholders will be required to report their proportionate share of such taxes paid as gross income (in addition to other amounts of reportable distributions paid by the Fund). The Fund paid taxes to the Republic of Korea of $.03 per share during the taxable year ended June 30, 1995. Pursuant to an election made by the Fund under Section 853 of the Internal Revenue Code, shareholders may treat their proportionate share of such taxes as having been paid by them. During the same year, the Fund recognized $.03 per share of foreign source income, all of which was derived from the Republic of Korea. Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your Korea Fund account, please call 800-426-5523. 28 Dividend Reinvestment and Cash Purchase Plan - -------------------------------------------------------------------------------- The Plan The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers you an automatic way to reinvest your dividends and capital gains distributions in shares of the Fund. The Plan also provides for cash investments in Fund shares of $100 to $3,000 semiannually through State Street Bank and Trust Company, the Plan Agent. Automatic Participation Each shareholder of record is automatically a participant in the Plan unless the shareholder has instructed the Plan Agent in writing otherwise. Such a notice must be received by the Plan Agent not less than 10 days prior to the record date for a dividend or distribution in order to be effective with respect to that dividend or distribution. A notice which is not received by that time will be effective only with respect to subsequent dividends and distributions. Shareholders who do not participate in the Plan will receive all distributions in cash paid by check in dollars mailed directly to the shareholder by State Street Bank and Trust Company, as dividend paying agent. Shares Held by a Nominee If your shares are held in the name of a brokerage firm, bank, or other nominee as the shareholder of record, please consult your nominee (or any successor nominee) to determine whether it is participating in the Plan on your behalf. Many nominees are generally authorized to receive cash dividends unless they are specifically instructed by a client to reinvest. If you would like your nominee to participate in the Plan on your behalf, you should give your nominee instructions to that effect as soon as possible. Pricing of Dividends and Distributions If the market price per share on the payment date for the dividend or distribution (the "Valuation Date") equals or exceeds net asset value per share on that date, the Fund will issue new shares to participants at the greater of the following on the Valuation Date: (a) net asset value, or (b) 95% of the mean market price. The Valuation Date will be the dividend or distribution payment date or, if that date is not a New York Stock Exchange trading date, the next preceding trading date. If the net asset value exceeds the market price of Fund shares at such time, participants in the Plan are considered to have elected to receive shares of stock from the Fund, valued at market price, on the Valuation Date. In either case, for Federal income tax purposes, the shareholder receives a distribution equal to the market value on Valuation Date of new shares issued. State and local taxes may also apply. If the Fund should declare an income dividend or net capital gains distribution payable only in cash, the Plan Agent will, as agent for the participants, buy Fund shares in the open market, on the New York Stock Exchange or elsewhere, for the participants' account on, or shortly after, the payment date. Voluntary Cash Purchases Participants in the Plan have the option of making additional cash payments to the Plan Agent, semiannually, in any amount from $100 to $3,000, for investment in the Fund's shares. The Plan Agent will use all such monies received from participants to purchase Fund shares in the open market on or about February 15 and August 15. Any voluntary cash payments received more than 30 days prior to these dates will be returned by the Plan Agent, and interest will not be paid on any uninvested cash payments. To avoid unnecessary cash accumulations, and also to allow ample time for receipt and processing by the Plan Agent, it is suggested that participants send in voluntary cash payments to be received by the Plan Agent approximately ten days before February 15, or August 15, as the case may be. A participant may withdraw a voluntary cash payment by written notice, if the notice is received by the Plan Agent not less than 48 hours before such payment is to be invested. 29 Participant Plan Accounts The Plan Agent maintains all participant accounts in the Plan and furnishes written confirmation of all transactions in the account, including information needed by participants for personal and tax records. Shares in the account of each plan participant will be held by the Plan Agent in non-certificated form in the name of the participant, and each participant will be able to vote those shares purchased pursuant to the Plan at a shareholder meeting or by proxy. No Service Fee to Reinvest There is no service fee charged to participants for reinvesting dividends or distributions from net realized capital gains. The Plan Agent's fees for the handling of the reinvestment of dividends and capital gains distributions will be paid by the Fund. There will be no brokerage commissions with respect to shares issued directly by the Fund as a result of dividends or capital gains distributions payable either in stock or in cash. However, participants will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of any dividends or capital gains distributions payable only in cash. Costs for Cash Purchases With respect to purchases of Fund shares from voluntary cash payments, the Plan Agent will charge $0.75 for each such purchase for a participant. Each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases of Fund shares in connection with voluntary cash payments made by the participant. Brokerage charges for purchasing small amounts of stock for individual accounts through the Plan are expected to be less than the usual brokerage charges for such transactions, because the Plan Agent will be purchasing stock for all participants in blocks and pro-rating the lower commission thus attainable. Amendment or Termination The Fund and the Plan Agent each reserve the right to terminate the Plan. Notice of the termination will be sent to the participants of the Plan at least 30 days before the record date for a dividend or distribution. The Plan also may be amended by the Fund or the Plan Agent, but (except when necessary or appropriate to comply with applicable law, rules or policies of a regulatory authority) only by giving at least 30 days' written notice to participants in the Plan. A participant may terminate his account under the Plan by written notice to the Plan Agent. If the written notice is received 10 days before the record day of any distribution, it will be effective immediately. If received after that date, it will be effective as soon as possible after the reinvestment of the dividend or distribution. If a participant elects to sell his shares before the Plan is terminated, the Plan Agent will deduct a $2.50 fee plus brokerage commissions from the sale transaction. Plan Agent Address and Telephone Number You may obtain more detailed information by requesting a copy of the Plan from the Plan Agent. All correspondence (including notifications) should be directed to: The Korea Fund Dividend Reinvestment and Cash Purchase Plan, c/o State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200, 1-800-426-5523. 30 Investment Manager - -------------------------------------------------------------------------------- The investment manager and administrator of The Korea Fund, Inc. (the "Fund") is Scudder, Stevens & Clark, Inc. ("Scudder"), one of the most experienced investment management and investment counsel firms in the United States. Established in 1919, the firm provides investment counsel for individuals, investment companies and institutions. Scudder has offices throughout the United States and subsidiaries in London and Tokyo. Scudder has been a leader in international investment management for over 40 years. It manages Scudder International Fund, which was initially incorporated in Canada in 1953 as the first foreign investment company registered with the U.S. Securities and Exchange Commission. Scudder's investment company clients include nine other open-end investment companies which invest primarily in foreign securities. In addition to the Fund, Scudder also manages the assets of seven other closed-end investment companies which invest in foreign securities. The Argentina Fund, Inc. (investing primarily in securities of Argentine issuers), The Brazil Fund, Inc. (investing in securities, primarily equity securities, of Brazilian issuers), The Latin America Dollar Income Fund, Inc. (investing principally in Latin American debt instruments), Scudder New Asia Fund, Inc. (investing in a broad spectrum of Asian companies), Scudder World Income Opportunities Fund, Inc. (investing primarily in global income and, to a limited extent, equity securities) and Scudder New Europe Fund, Inc. (investing in equity securities traded in smaller or emerging European securities markets) are traded on the New York Stock Exchange. The First Iberian Fund, Inc. (investing primarily in Spanish and Portuguese securities) is traded on the American Stock Exchange. Korean Adviser - -------------------------------------------------------------------------------- Daewoo Capital Management Co., Ltd., registered under the U.S. Investment Advisers Act of 1940, acts as Korean adviser to Scudder, Stevens & Clark, Inc., the Fund's investment manager. Daewoo Capital Management Co., Ltd. is a subsidiary of Daewoo Securities Co., Ltd., the largest Korean securities firm, and an affiliate of Daewoo Research Institute. Daewoo Capital Management Co., Ltd. provides investment advice, research, and assistance to Scudder. The Daewoo staff makes specific investment recommendations, which are then evaluated by Scudder's research department and portfolio managers in light of their own expertise and information from other sources in making investment decisions for the Fund. 31 Officers and Directors - -------------------------------------------------------------------------------- JURIS PADEGS* Chairman of the Board and Director CHANG-HEE KIM Vice Chairman of the Board and Director NICHOLAS BRATT* President and Director WILLIAM H. GLEYSTEEN, JR. Director ROBERT W. LEAR Director DR. SANG C. LEE Director TAI HO LEE Director DR. WILSON NOLEN Director SIDNEY M. ROBBINS Director JERARD K. HARTMAN* Vice President KUN-HO HWANG Vice President H. JIN KIM Vice President JOHN J. LEE* Vice President DAVID S. LEE* Vice President DONG WOOK PARK Vice President THOMAS F. McDONOUGH* Secretary and Assistant Treasurer PAMELA A. McGRATH* Treasurer EDWARD J. O'CONNELL* Vice President and Assistant Treasurer KATHRYN L. QUIRK* Vice President and Assistant Secretary COLEEN DOWNS DINNEEN* Assistant Secretary * Scudder, Stevens & Clark, Inc. -----END PRIVACY-ENHANCED MESSAGE-----