The Korea Fund, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-04058

 

 

The Korea Fund, Inc.

(Exact name of registrant as specified in charter)

 

 

1633 Broadway, New York, NY                         10019
(Address of principal executive offices)                                     (Zip code)

 

 

Lawrence G. Altadonna

1633 Broadway, New York, NY 10019

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: 212-739-3371

Date of fiscal year end: June 30, 2016

Date of reporting period: March 31, 2016

 

 


Item 1. Schedule of Investments

Schedule of Investments

The Korea Fund, Inc.

March 31, 2016 (unaudited)

 

Shares            Value*  

COMMON STOCK—96.9%

  

Aerospace & Defense—3.9%

  
    104,543       Korea Aerospace Industries Ltd. (c)    $ 5,958,409   
    45,353       LIG Nex1 Co., Ltd. (c)      4,189,845   
       

 

 

 
          10,148,254   
       

 

 

 

Auto Components—2.5%

  
    62,203       Hankook Tire Co., Ltd.      2,958,759   
    419,170       Hanon Systems (c)      3,377,009   
       

 

 

 
          6,335,768   
       

 

 

 

Banks—4.7%

  
    23,000       KB Financial Group, Inc.      638,646   
    328,952       Shinhan Financial Group Co., Ltd.      11,579,055   
       

 

 

 
          12,217,701   
       

 

 

 

Capital Markets—0.9%

  
    69,800       Samsung Securities Co., Ltd.      2,439,639   
       

 

 

 

Commercial Services & Supplies—1.2%

  
    55,800       KEPCO Plant Service & Engineering Co., Ltd.      3,127,362   
       

 

 

 

Construction & Engineering—6.8%

  
    433,450       Hyundai Development Co.      17,429,541   
       

 

 

 

Electronic Equipment, Instruments & Components—1.0%

  
    110,600       LG Display Co., Ltd.      2,560,506   
       

 

 

 

Food & Staples Retailing—2.1%

  
    37,500       BGF retail Co., Ltd.      5,377,986   
       

 

 

 

Hotels, Restaurants & Leisure—4.1%

  
    292,007       Kangwon Land, Inc.      10,438,702   
       

 

 

 

Household Durables—8.4%

  
    190,431       Coway Co., Ltd.      16,039,409   
    18,600       Cuckoo Electronics Co., Ltd. (c)      3,263,816   
    11,990       Hanssem Co., Ltd.      2,342,210   
       

 

 

 
          21,645,435   
       

 

 

 

Industrial Conglomerates—2.0%

  
    38,700       LG Corp.      2,318,480   
    14,334       SK Holdings Co., Ltd.      2,797,486   
       

 

 

 
          5,115,966   
       

 

 

 

Insurance—12.0%

  
    225,900       Dongbu Insurance Co., Ltd.      15,024,203   
    104,300       Hyundai Marine & Fire Insurance Co., Ltd.      3,029,552   
    104,550       Korean Reinsurance Co.      1,276,148   
    44,785       Samsung Fire & Marine Insurance Co., Ltd.      11,566,459   
       

 

 

 
          30,896,362   
       

 

 

 

Internet & Catalog Retail—4.5%

  
    406,263       Interpark Corp. (c)      7,143,630   
    529,883       Interpark Holdings Corp.      4,365,321   
       

 

 

 
          11,508,951   
       

 

 

 

Metals & Mining—0.3%

  
    1,940       Korea Zinc Co., Ltd.      817,581   
       

 

 

 

Oil, Gas & Consumable Fuels—4.2%

  
    125,800       S-Oil Corp.      10,787,026   
       

 

 

 

Personal Products—3.3%

  
    10,268       LG Household & Health Care Ltd.      8,490,174   
       

 

 

 

Semiconductors & Semiconductor Equipment—5.8%

  
    606,891       SK Hynix, Inc.      14,940,238   
       

 

 

 

Specialty Retail—0.8%

  
    37,475       Hotel Shilla Co., Ltd. (c)      2,181,631   
       

 

 

 


Shares            Value*  

Technology Hardware, Storage & Peripherals—21.1%

  
    47,263       Samsung Electronics Co., Ltd.    $ 54,239,326   
       

 

 

 

Tobacco—4.3%

  
    115,900       KT&G Corp.      11,160,013   
       

 

 

 
 

 

Wireless Telecommunication Services—3.0%

  

    43,260       SK Telecom Co., Ltd.      7,839,111   
       

 

 

 
    

Total Common Stock (cost—$177,781,740)

     249,697,273   
       

 

 

 

SHORT-TERM INVESTMENTS—5.2%

  

Collateral Invested for Securities on Loan (b)—5.2%

  
    13,320,750       BlackRock T-Fund, Institutional Class (cost—$13,320,750)      13,320,750   
       

 

 

 
    

Total Investments (cost—$191,102,490) (a)(d)—102.1%

     263,018,023   
       

 

 

 
    

Liabilities in excess of other assets—(2.1)%

     (5,349,639
       

 

 

 
    

Net Assets—100.0%

   $ 257,668,384   
       

 

 

 

 

Notes to Schedule of Investments:

 

* Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Market value is generally determined on the basis of official closing prices, last reported sales prices, or if no sales or closing prices are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services. Investments in mutual funds are valued at the net asset value per share (“NAV”) as reported on each business day.

Portfolio securities and other financial instruments for which market quotations are not readily available, or for which a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to procedures established by the Board of Directors (the “Board”), or persons acting at their discretion pursuant to procedures established by the Board. The Fund’s investments are valued daily and the Fund’s NAV is calculated as of the close of regular trading (normally 4:00 p.m. Eastern Time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business using prices supplied by an independent pricing service or broker/dealer quotations, or by using the last sale or settlement price on the exchange that is the primary market for such securities, or the mean between the last bid and ask quotations. For foreign equity securities (with certain exceptions, if any), the Fund fair values its securities daily using modeling tools provided by a statistical research service. This service utilizes statistics and programs based on historical performance of markets and other economic data (which may include changes in the value of U.S. securities or security indices).

Short-term debt instruments maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing premiums or discounts based on their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.

Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates obtained from pricing services. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed. The prices used by the Fund to value securities may differ from the value that would be realized if the securities were sold and these differences could be material.

 

(a) Securities with an aggregate value of $249,697,273, representing 96.9% of net assets, were valued utilizing modeling tools provided by a third-party vendor.

 

(b) Purchased with cash collateral received from securities on loan.

 

(c) A portion of securities on loan with an aggregate value of $12,682,031; cash collateral of $13,320,750 was received with which the Fund invested in the BlackRock T-Fund Institutional Class.

 

(d) At March 31, 2016, the cost basis of portfolio securities for federal income tax purposes was $191,491,429. Gross unrealized appreciation was $80,972,094; gross unrealized depreciation was $9,445,500; and net unrealized appreciation was $71,526,594. The difference between book and tax cost was attributable to wash sale loss deferrals.


Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants. The three levels of the fair value hierarchy are described below:

 

   

Level 1 – quoted prices in active markets for identical investments that the Fund has the ability to access

 

   

Level 2 – valuations based on other significant observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates or other market corroborated inputs

 

   

Level 3 – valuations based on significant unobservable inputs (including Allianz Global Investors U.S. LLC’s, the Investment Manager, and the Valuation Committee’s own assumptions and securities whose price was determined by using a single broker’s quote)

The valuation techniques used by the Fund to measure fair value during the nine months ended March 31, 2016 were intended to maximize the use of observable inputs and to minimize the use of unobservable inputs.

The Fund’s policy is to recognize transfers between levels at the end of the reporting period. An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in aggregate, that is significant to the fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation techniques used. Investments categorized as Level 1 or 2 as of period end may have been transferred between Levels 1 and 2 since the prior period due to changes in the valuation method utilized in valuing the investments.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following are certain inputs and techniques that the Fund generally uses to evaluate how to classify each major category of assets and liabilities within Level 2 and Level 3, in accordance with accounting principles generally accepted in the United States of America.

Equity Securities (Common Stock)—Equity securities traded in inactive markets and certain foreign equity securities are valued using inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluated price quotes received from independent pricing services that take into account the integrity of the market sector and issuer, the individual characteristics of the security, and information received from broker-dealers and other market sources pertaining to the issuer or security. To the extent that these inputs are observable, the values of equity securities are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

A summary of the inputs used at March 31, 2016 in valuing the Fund’s assets and liabilities is listed below (refer to the Schedule of Investments for more detailed information on Investments in Securities):

 

    Level 1 -
Quoted  Prices
    Level 2 -
Other  Significant
Observable
Inputs
    Level 3  -
Significant
Unobservable
Inputs
    Value at
3/31/16
 

Investments in Securities—Assets

       

Common Stock

  $ —        $ 249,697,273      $ —        $ 249,697,273   

Collateral Invested for Securities on Loan

    13,320,750        —          —          13,320,750   
 

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $ 13,320,750      $ 249,697,273      $ —        $ 263,018,023   
 

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2016, there were no transfers between Levels 1 and 2.


Item 2. Controls and Procedures

(a) The registrant’s President & Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b) There were no significant changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits

(a) Exhibit 99.302 Cert.—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Registrant: The Korea Fund, Inc.
By:  

/s/ Joseph Quirk

  Joseph Quirk
  President & Chief Executive Officer

Date: May 24, 2016

 

By:  

/s/ Lawrence G. Altadonna

  Lawrence G. Altadonna
  Treasurer, Principal Financial & Accounting Officer

Date: May 24, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ Joseph Quirk

  Joseph Quirk
  President & Chief Executive Officer
Date: May 24, 2016
By:  

/s/ Lawrence G. Altadonna

  Lawrence G. Altadonna
  Treasurer, Principal Financial & Accounting Officer

Date: May 24, 2016