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) |
Orhan Dzemaili
1633 Broadway, New York, NY 10019
(Name and address of agent for service)
Registrants telephone number, including area code: 212-739-3357
Date of fiscal year end: June 30
Date of reporting period: September 30, 2018
Item 1. Schedule of Investments
Schedule of Investments
The Korea Fund, Inc.
September 30, 2018 (unaudited)
Shares | Value* | |||||||||
COMMON STOCK97.2% |
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Airlines1.3% |
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53,111 | Jeju Air Co., Ltd. | $ | 1,795,665 | |||||||
51,444 | Jin Air Co., Ltd. | 1,003,818 | ||||||||
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2,799,483 | ||||||||||
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Auto Components0.5% |
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5,748 | Hyundai Mobis Co., Ltd. | 1,181,469 | ||||||||
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Automobiles2.6% |
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49,354 | Hyundai Motor Co. | 5,761,024 | ||||||||
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Banks11.1% |
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160,770 | Hana Financial Group, Inc. | 6,455,365 | ||||||||
178,192 | KB Financial Group, Inc. | 8,678,658 | ||||||||
199,407 | Shinhan Financial Group Co., Ltd. | 8,057,733 | ||||||||
107,130 | Woori Bank | 1,631,295 | ||||||||
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24,823,051 | ||||||||||
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Biotechnology2.1% |
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17,465 | Celltrion, Inc. (d)(e) | 4,680,548 | ||||||||
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Capital Markets0.3% |
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98,190 | Mirae Asset Daewoo Co., Ltd. | 749,650 | ||||||||
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Chemicals4.4% |
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26,890 | LG Chem Ltd. | 8,858,756 | ||||||||
3,714 | Lotte Chemical Corp. | 930,757 | ||||||||
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9,789,513 | ||||||||||
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Construction & Engineering0.6% |
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23,506 | Hyundai Engineering & Construction Co., Ltd. | 1,429,644 | ||||||||
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Electric Utilities1.0% |
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82,639 | Korea Electric Power Corp. | 2,187,320 | ||||||||
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Electronic Equipment, Instruments & Components3.8% |
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68,037 | Samsung Electro-Mechanics Co., Ltd. | 8,521,549 | ||||||||
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Entertainment0.6% |
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3,271 | NCSoft Corp. | 1,305,043 | ||||||||
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Food & Staples Retailing3.4% |
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27,066 | E-MART, Inc. | 5,063,892 | ||||||||
74,152 | GS Retail Co., Ltd. | 2,574,339 | ||||||||
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7,638,231 | ||||||||||
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Hotels, Restaurants & Leisure4.2% |
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39,280 | Hana Tour Service, Inc. | 2,616,326 | ||||||||
190,306 | Kangwon Land, Inc. | 4,923,699 | ||||||||
80,760 | Modetour Network, Inc. | 1,831,040 | ||||||||
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9,371,065 | ||||||||||
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Household Durables1.6% |
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56,225 | LG Electronics, Inc. | 3,597,873 | ||||||||
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Industrial Conglomerates2.2% |
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75,918 | LG Corp. | 4,969,217 | ||||||||
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Insurance6.2% |
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67,718 | DB Insurance Co., Ltd. | 4,444,327 | ||||||||
105,863 | Hyundai Marine & Fire Insurance Co., Ltd. | 4,001,754 | ||||||||
342,719 | Korean Reinsurance Co. | 3,229,042 | ||||||||
40,804 | Orange Life Insurance Ltd. (a) | 1,254,500 | ||||||||
9,538 | Samsung Life Insurance Co., Ltd. | 836,624 | ||||||||
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13,766,247 | ||||||||||
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Interactive Media & Services4.0% |
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57,400 | AfreecaTV Co., Ltd. | 1,851,481 | ||||||||
11,071 | NAVER Corp. | 7,145,879 | ||||||||
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8,997,360 | ||||||||||
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Shares | Value* | |||||||||
IT Services0.4% |
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4,627 | Samsung SDS Co., Ltd. | $ | 963,405 | |||||||
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Life Sciences Tools & Services1.5% |
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6,873 | Samsung Biologics Co., Ltd. (a)(d)(e) | 3,307,442 | ||||||||
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Machinery4.0% |
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97,576 | Daewoo Shipbuilding & Marine Engineering Co., Ltd. (d)(e) | 3,047,681 | ||||||||
48,774 | Hyundai Heavy Industries Co., Ltd. (e) | 5,911,775 | ||||||||
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8,959,456 | ||||||||||
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Marine2.5% |
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1,165,557 | Pan Ocean Co., Ltd. (d)(e) | 5,505,433 | ||||||||
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Metals & Mining3.7% |
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2,550 | Korea Zinc Co., Ltd. | 1,002,125 | ||||||||
27,524 | POSCO | 7,306,154 | ||||||||
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8,308,279 | ||||||||||
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Multi-Line Retail0.5% |
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3,418 | Shinsegae, Inc. | 1,117,439 | ||||||||
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Oil, Gas & Consumable Fuels2.4% |
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11,620 | S-Oil Corp. | 1,435,322 | ||||||||
20,460 | SK Innovation Co., Ltd. | 3,965,966 | ||||||||
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5,401,288 | ||||||||||
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Personal Products4.1% |
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6,375 | Amorepacific Corp. | 1,499,454 | ||||||||
6,727 | LG Household & Health Care Ltd. | 7,736,840 | ||||||||
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9,236,294 | ||||||||||
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Pharmaceuticals0.4% |
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2,229 | Hanmi Pharm Co., Ltd. | 1,004,640 | ||||||||
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Semiconductors & Semiconductor Equipment2.3% |
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78,561 | SK Hynix, Inc. | 5,197,427 | ||||||||
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Specialty Retail0.7% |
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25,670 | LOTTE Himart Co., Ltd. | 1,543,753 | ||||||||
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Technology Hardware, Storage & Peripherals21.3% |
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1,141,871 | Samsung Electronics Co., Ltd. | 47,788,276 | ||||||||
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Textiles, Apparel & Luxury Goods3.5% |
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192,740 | Fila Korea Ltd. | 7,797,237 | ||||||||
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Total Common Stock (cost$156,449,763) | 217,698,656 | |||||||||
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SHORT-TERM INVESTMENTS4.8% |
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Collateral Invested for Securities on Loan (c)4.8% |
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10,663,305 | BlackRock T-Fund, Institutional Class (cost$10,663,305) | 10,663,305 | ||||||||
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Total Investments (cost-$167,113,068) (b)(f)102.0% | 228,361,961 | |||||||||
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Liabilities in excess of other assets(2.0)% | (4,490,485 | ) | ||||||||
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Net Assets100.0% |
$ | 223,871,476 | ||||||||
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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 (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) of The Korea Fund Inc. (the Fund), or persons acting at their discretion pursuant to procedures established by the Board. The Funds investments are valued daily and the Funds 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. In unusual circumstances, the Board may determine the NAV as of 4:00 p.m., Eastern Time, notwithstanding an earlier, unscheduled close or halt of trading on the NYSE. 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 premium or discount 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 Funds 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) | 144AExempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Securities with an aggregate value of $4,561,942, representing 2.0% of net assets. |
(b) | Securities with an aggregate value of $212,072,860, representing 94.7% of net assets, were valued utilizing modeling tools provided by a third-party vendor. |
(c) | Purchased with cash collateral received from securities on loan. |
(d) | A portion of securities on loan with an aggregate value of $10,150,641; cash collateral (included in liabilities) of $10,663,305 was received with which the Fund invested in the BlackRock T-Fund Institutional Class. |
(e) | Non-income producing. |
(f) | At September 30, 2018, the cost basis of portfolio securities for federal income tax purposes was $167,190,575 Gross unrealized appreciation was $70,517,327; gross unrealized depreciation was $9,345,941; and net unrealized appreciation was $61,171,386. 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 the Funds investment managers or Funds Valuation Committees own assumptions and securities whose price was determined by using a single brokers quote) |
The valuation techniques used by the Fund to measure fair value during the three months ended September 30, 2018 were intended to maximize the use of observable inputs and to minimize the use of unobservable inputs.
The Fund policy is to recognize transfers between levels at the end of the reporting period. An investment assets or liabilitys 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 September 30, 2018 in valuing the Funds 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 9/30/18 |
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Investments in SecuritiesAssets |
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Common Stock: |
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Auto Components |
$ | 1,181,469 | | | $ | 1,181,469 | ||||||||||
Insurance |
4,444,327 | $ | 9,321,920 | | 13,766,247 | |||||||||||
All Other |
| 202,750,940 | | 202,750,940 | ||||||||||||
Collateral Invested for Securities on Loan |
10,663,305 | | | 10,663,305 | ||||||||||||
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Totals |
$ | 16,289,101 | $ | 212,072,860 | | $ | 228,361,961 | |||||||||
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At September 30, 2018, securities valued at $1,181,469 were transferred from Level 2 to Level 1. This transfer was the result of securities trading outside the U.S. whose values were adjusted by the application of a modeling tool at June 30, 2018, which was not applied on September 30, 2018.
Securities Lending Transactions Accounted for as Secured Borrowings:
Remaining Contractual Maturity of the Agreements As of September 30, 2018 |
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Overnight and Continuous |
Up to 30 days | 30 - 90 days | Greater than 90 days |
Total | ||||||||||||||||
Securities Lending Transactions |
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Common Stock |
$ | 10,663,305 | | | | $ | 10,663,305 | |||||||||||||
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Gross amount of recognized liabilities for securities lending transactions |
$ | 10,663,305 | ||||||||||||||||||
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Item 2. | Controls and Procedures |
(a) The registrants President & Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the 1940 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 registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the registrants last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
Item 3. | Exhibits |
Certifications pursuant to Rule 30a-2(a) under the 1940 Act are filed and attached hereto as Exhibit 99_CERT:
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: November 20, 2018
By: | /s/ Orhan Dzemaili | |
Orhan Dzemaili | ||
Treasurer, Principal Financial & Accounting Officer |
Date: November 20, 2018
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: November 20, 2018 | ||
By: | /s/ Orhan Dzemaili | |
Orhan Dzemaili | ||
Treasurer, Principal Financial & Accounting Officer |
Date: November 20, 2018