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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY
Investment Company Act File Number: 811-04058
Registrant Name: The Korea Fund, Inc.
Address of Principal Executive Offices: 4 Embarcadero Center, 30th Floor, San Francisco, CA 94111
Name and Address of Agent for Service: Lawrence G. Altadonna — 1345 Avenue of the Americas, New York, New York 10105
Registrant’s telephone number, including area code: 212-739-3371
Date of Fiscal Year End: June 30, 2010
Date of Reporting Period: March 31, 2010
Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b 1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-2001. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
 
 

 

 

Item 1. Schedule of Investments
The Korea Fund, Inc. Schedule of Investments
March 31, 2010 (unaudited)
 
                 
Shares         Value*  
 
COMMON STOCK—96.9%        
       
 
        
Auto Components—1.6%        
  568,040    
Halla Climate Control Corp.
   $ 6,826,017  
       
 
      
       
 
        
Automobiles—4.6%        
  120,265    
Hyundai Motor Co.
     12,263,769  
  317,060    
Kia Motors Corp.
     7,070,093  
       
 
      
       
 
     19,333,862  
       
 
      
       
 
        
Building Products—1.6%        
  298,061    
Sung Kwang Bend Co., Ltd. (d)
     6,817,075  
       
 
      
       
 
        
Capital Markets—2.2%        
  779,750    
Hyundai Securities Co.
    9,366,764  
       
 
      
       
 
        
Chemicals—5.2%        
  199,238    
Cheil Industries, Inc.
     11,253,905  
  50,930    
LG Chemical Ltd.
     10,823,990  
       
 
      
       
 
     22,077,895  
       
 
      
       
 
        
Commercial Banks—8.9%        
  212,381    
Daegu Bank
     2,842,088  
  165,877    
KB Financial Group, Inc.
     7,988,733  
  1,036,583    
Korea Exchange Bank
     12,358,117  
  368,672    
Shinhan Financial Group Co., Ltd.
     14,531,628  
       
 
      
       
 
     37,720,566  
       
 
      
       
 
        
Commercial Services & Supplies—1.3%        
  121,937    
Korea Plant Service & Engineering Co., Ltd.
     5,511,529  
       
 
      
       
 
        
Construction & Engineering—1.4%        
  109,980    
Hyundai Engineering & Construction Co., Ltd.
     6,032,883  
       
 
      
       
 
        
Consumer Finance—0.5%        
  48,482    
Samsung Card Co.
     2,198,965  
       
 
      
       
 
        
Diversified Telecommunication Services—1.9%        
  197,293    
KT Corp.
     8,165,986  
       
 
      
       
 
        
Electric Utilities—3.2%        
  412,420    
Korea Electric Power Corp. (b)
     13,382,863  
       
 
      
       
 
        
Electronic Equipment, Instruments & Components—1.6%        
  192,970    
LG Display Co., Ltd.
     6,819,027  
       
 
      
       
 
        
Food & Staples Retailing—0.8%        
  7,602    
Shinsegae Co., Ltd.
     3,595,920  
       
 
      
       
 
        
Food Products—1.4%        
  59,474    
Binggrae Co., Ltd.
     2,488,925  
  17,997    
CJ CheilJedang Corp.
     3,578,187  
       
 
      
       
 
     6,067,112  
       
 
      

 

 

The Korea Fund, Inc. Schedule of Investments
March 31, 2010 (unaudited)
 
                 
Shares         Value*  
 
Hotels, Restaurants & Leisure—5.9%        
  612,600    
Grand Korea Leisure Co., Ltd.
   $ 13,265,014  
  592,500    
Hotel Shilla Co., Ltd.
     11,881,320  
       
 
      
       
 
     25,146,334  
       
 
      
       
 
        
Household Durables—0.5%        
  19,972    
LG Electronics, Inc. (d)
     2,030,267  
       
 
      
       
 
        
Industrial Conglomerates—3.5%        
  22,501    
LG Corp.
     1,412,557  
  54,343    
Orion Corp.
     13,544,324  
       
 
      
       
 
     14,956,881  
       
 
      
       
 
        
Insurance—2.7%        
  512,420    
Hyundai Marine & Fire Insurance Co., Ltd.
     8,278,483  
  19,254    
Samsung Fire & Marine Insurance Co., Ltd.
     3,088,799  
       
 
      
       
 
     11,367,282  
       
 
      
       
 
        
Internet & Catalog Retail—1.0%        
  479,463    
YES24 Co., Ltd. (d)
     4,190,444  
       
 
      
       
 
        
Internet Software & Services—1.0%        
  26,187    
NHN Corp. (b)
     4,169,834  
       
 
      
       
 
        
Media—1.7%        
  343,050    
CJ CGV Co., Ltd.
     7,218,581  
       
 
      
       
 
        
Metals & Mining—6.6%        
  63,980    
Korea Zinc Co., Ltd.
     11,411,544  
  35,824    
POSCO
     16,743,747  
       
 
      
       
 
     28,155,291  
       
 
      
       
 
        
Multiline Retail—6.7%        
  120,992    
Hyundai Department Store Co., Ltd.
     11,073,254  
  60,460    
Lotte Shopping Co., Ltd.
     17,519,091  
       
 
      
       
 
     28,592,345  
       
 
      
       
 
        
Oil, Gas & Consumable Fuels—1.9%        
  222,190    
GS Holdings Corp.
     7,874,045  
       
 
      
       
 
        
Personal Products—0.7%        
  3,819    
Amorepacific Corp.
     2,777,884  
       
 
      
       
 
        
Pharmaceuticals—1.4%        
  59,841    
Dong-A Pharmaceutical Co., Ltd.
     6,108,653  
       
 
      
       
 
        
Semiconductors & Semiconductor Equipment—18.3%        
  698,899    
Hynix Semiconductor, Inc. (b)(d)
     16,493,767  
  84,657    
Samsung Electronics Co., Ltd.
     61,206,528  
       
 
      
       
 
     77,700,295  
       
 
      

 

 

The Korea Fund, Inc. Schedule of Investments
March 31, 2010 (unaudited)
 
                 
Shares         Value*  
 
Software—1.1%        
  153,218    
Gamevil, Inc. (b)
   $ 4,459,468  
       
 
      
       
 
        
Trading Companies & Distributors—6.7%        
  286,158    
Daewoo International Corp. (d)
     9,101,167  
  230,090    
LG International Corp.
     6,204,252  
  242,390    
Samsung C&T Corp.
     13,043,004  
       
 
      
       
 
     28,348,423  
       
 
      
       
 
        
Wireless Telecommunication Services—1.0%        
  27,634    
SK Telecom Co., Ltd.
     4,244,652  
       
 
      
       
Total Common Stock (cost—$267,836,011)
     411,257,143  
       
 
      
       
 
        
SHORT-TERM INVESTMENT—2.8%        
       
 
        
Collateral Invested for Securities on Loan (c)(e)—2.8%        
  11,945,614    
BNY Institutional Cash Reserves Fund, 0.02% (cost—$11,945,614)
     11,945,614  
       
 
      
       
 
        
       
Total Investments (cost—$279,781,625) (a)—99.7%
     423,202,757  
       
Other assets less liabilities—0.3%
     1,387,697  
       
 
      
       
Net Assets—100%
   $ 424,590,454  
       
 
      
 
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 last reported sales prices, or if no sales are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services.
 
    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, or persons acting at their discretion pursuant to procedures established by the Board of Directors. The Fund’s investments are valued daily and the net asset value (“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 dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the last quoted mean price for those securities for which the over-the-counter market is the primary market or for listed securities in which there were no sales. For Korean equity securities (with rare exceptions), 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 securities 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 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 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 $373,072,343, representing 87.9% of net assets, were valued utilizing modeling tools provided by a third-party vendor.
 
(b)   Non-income producing.
 
(c)   Security purchased with cash proceeds from securities on loan.
 
(d)   All or portion of securities on loan with an aggregate market value of $11,410,934; cash collateral of $11,945,614 was received with which the Fund purchased short-term investments.
 
(e)   In connection with the Fund’s cash collateral investment in BNY Institutional Cash Reserves (“CR”) at September 12, 2008, the Fund may be subject to losses on investments in certain Lehman Brothers securities held in CR.

 

 

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 (including quoted prices for similar investments, interest rates,
 prepayment speeds, credit risk, etc.) or quotes from inactive exchanges
 
  •  
Level 3 — valuations based on significant unobservable inputs (including the Fund’s own assumptions in determining the fair
 value of investments)
An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in the aggregate, that is significant to 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 technique used.
The valuation techniques used by the Fund to measure fair value during the nine months ended March 31, 2010 maximized the use of observable inputs and minimized the use of unobservable inputs. When fair-valuing securities, the Fund utilized the estimation of the price that would have prevailed in a liquid market for international equities, given information available at the time of evaluation.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The Fund’s policy is to recognize transfers between levels at the end of the reporting period.
A summary of the inputs used at March 31, 2010 in valuing the Fund’s assets and liabilities is listed below:
                                 
            Level 2 —   Level 3 —    
            Other Significant   Significant    
    Level 1 —   Observable   Unobservable   Value at
    Quoted Prices   Inputs   Inputs   3/31/10
 
Investments in Securities — Assets
                                
Common Stock:
                                
Food Products
   $ 2,488,925     $ 3,578,187       —     $ 6,067,112  
Hotels, Restaurants & Leisure
     13,265,014       11,881,320       —       25,146,334  
Industrial Conglomerates
     13,544,324       1,412,557       —       14,956,881  
Personal Products
     2,777,884       —       —       2,777,884  
Pharmaceuticals
     6,108,653       —       —       6,108,653  
All Other
     —       356,200,279       —       356,200,279  
Short-Term Investment
     —       11,945,614       —       11,945,614  
 
Total Investments
   $ 38,184,800     $ 385,017,957       —     $ 423,202,757  
 
There were no significant transfers into and out of Levels 1 and 2 during the nine months ended March 31, 2010.

 

 

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 controls 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/ Robert Goldstein      
  Robert Goldstein     
  President & Chief Executive Officer     
Date: May 17, 2010
         
By:   /s/ Brian S. Shlissel      
  Brian S. Shlissel     
  Treasurer, Principal Financial & Accounting Officer     
Date: May 17, 2010
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/ Robert Goldstein      
  Robert Goldstein     
  President & Chief Executive Officer     
Date: May 17, 2010
         
By:   /s/ Brian S. Shlissel      
  Brian S. Shlissel     
  Treasurer, Principal Financial & Accounting Officer     
Date: May 17, 2010