avatar Japan Smaller Capitalization Fund, Inc. Finance, Insurance, And Real Estate

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    KOREA EQUITY FUND, INC. June 9, 2017 To Our Shareholders: We present the Semi-Annual Report of Korea lar terms. The NAV of the Fund increased by Equity Fund, Inc. (the “Fund”) for the six months 8.1% and outperformed the KOSPI, in U.S. dol- ended April 30, 2017. lar terms, by 0.2%. The Fund’s share price in- creased by 10.1% during the quarter ended The net asset value per share (“NAV”) of the April 30, 2017. Fund increased by 11.1% and the closing mar- ket price of the Fund (on the New York Stock Exchange) increased by 16.9% after giving ef- South Korean Economy fect to the reinvestment of income dividends, ordinary income distributions, and long-term The Bank of Korea (“BOK”) left its policy in- capital gain distributions for the six months terest rate at 1.25% in April 2017, where it has ended April 30, 2017. The closing market price been since June 2016. The BOK forecasted that of the Fund on April 30, 2017 was $8.96, repre- inflation would for now remain within an ap- senting a discount of 3.1% to the NAV of $9.25. proximate range between the mid-1% to the The net assets of the Fund totaled $90,132,167 upper-1% level with some downside risk to do- on April 30, 2017. mestic consumption, due to depressed house- hold sentiment, but some upside potential for The Korea Composite Stock Price Index exports due to the recovering global economy. (“KOSPI”) increased from 2,008.19 to 2,205.44, or 9.8% in local currency terms, during the six Korean exports increased by 13.7% year- months ended April 30, 2017. Including the over-year (“yoy”) in March 2017, compared with South Korean Won (“Won”) appreciation of consensus expectations of an increase of 0.6% during the six months ended April 30, 12.8% yoy. Exports to the U.S. and the Euro- 2017, this represented a total increase of 10.4% pean Union decreased by 5.3% and 8.7% yoy, in United States (“U.S.”) dollar terms. The NAV respectively. Meanwhile, exports to China and of the Fund outperformed the KOSPI, in U.S. Southeast Asian Nations countries increased by dollar terms, by 0.7% during the six months 12.1% and 43.7% yoy, respectively. ended April 30, 2017. For the quarter ended April 30, 2017, the In March 2017, a major political event oc- KOSPI increased from 2,067.57 to 2,205.44, or curred when the Constitutional Court of Korea 6.7% in local currency terms, which, including voted unanimously to uphold President Park the Won appreciation of 1.2% for the quarter, Geun-Hye's impeachment. represented a total increase of 7.9% in U.S. dol-


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    South Korean Stock Market pany’s strong earnings momentum from its PVC business. The Fund added Mando Corporation The Electronic Appliances and Components based on expectations of improved earnings sector outperformed due to earnings growth ex- from its high-margin automobile component pectations from rising new smartphone ship- business. The Fund increased its position in Ko- ments, better corporate governance, and a bet- rea Zinc Co., Ltd. due to steady earnings im- ter outlook for the memory industry. The Iron provement given better contracted treatment and Steel sector also outperformed due to earn- charges than expected. The Fund purchased ings growth expectations from improvements in Samsung Engineering Co., Ltd. based on ex- steel prices through market consolidation in pectations of improving new downstream order China. momentum in the Middle East. The Fund added Hanwha Techwin Co., Ltd. in March 2017 due to On the other hand, the Textile and Apparel positive earnings momentum backed by a sta- sector underperformed given concerns over ble defense business. weak new order momentum and poor earnings. The Food sector also underperformed due to The Fund sold its position in Hyundai Engi- concerns that a slowdown in domestic demand neering & Co., Ltd. in November 2016 in order would cause earnings momentum to weaken. to realize profits when the share price rallied. In The Precision Instruments sector underper- December 2016, the Fund sold its position in In- formed due to concerns about weakened earn- tellian Technologies, Inc. due to concerns about ings and demanding valuations. slower than expected sales of satellite antennae for ships. The position in Dongbu Insurance Portfolio Management Activity Co., Ltd. was decreased in January 2017 over concerns of price competition in the automobile The Fund added POSCO in November 2016 insurance industry. The Fund decreased its po- based on expectations that steel prices would sition in Hyundai Mobis Co., Ltd. and sold its improve in response to production consolida- position in Hyundai Glovis Co., Ltd. in February tion in China. In December 2016, the Fund 2017 because of the negative impact of a weak added SK Materials Co., Ltd. given increasing earnings outlook for automobile original equip- demand for both NAND and OLED modules. ment manufacturers (OEMs) would have to the The Fund added NCsoft Corporation in re- automotive parts business. In March 2017, the sponse to strong earnings from new mobile Fund sold its position in Innocean Worldwide game pipelines. In January 2017, the Fund in- Inc. due to a weak OEM earnings outlook and creased its position in Samsung Electronics its negative impact on the automobile advertis- Co., Ltd. preferred stock because it is expected ing business. The Fund decreased or sold tex- that earnings will benefit from smartphone sales tile original design manufacturing companies and a strengthened component business. The such as Youngone Corporation; Hansae Co., Fund added KB Financial Group Inc. and Hana Ltd.; and Hwaseung Enterprise Co., Ltd. during Financial Group Inc. based on expectations of the period as a result of the slowdown in new improving profitability along with rising interest order momentum in the textile industry. rates. The Fund added Hanwha Chemical Cor- poration in February 2017 based on the com-


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    The Fund participated in an initial public of- OEM shipments. The Fund will maintain its un- fering of Samsung Biologics Co., Ltd in October derweight exposure in the Communication ser- 2016, which contributed to the Fund’s realized vices sector. Although the regulatory risks and gains during the six months ended April 2017. market competition have been improving, the slowdown in average revenue per user could be Investment Strategy a concern. Although share prices have fallen, the Fund will maintain its current exposure in The Fund will maintain an overweight expo- the Utilities sector given stable earnings im- sure in the Electronic Appliances and Compo- provements and attractive valuations with nents sector, retaining an overweight position in higher dividends. SK Hynix, Inc. based on its stable cash flow generation from the memory business and its The Fund appreciates your continuing sup- attractive current valuation. The Fund may sell port. some of its position if the share price rallies fur- ther and valuations become stretched. Given Sincerely, stable earnings and expectations of an im- provement in corporate governance, the Fund will continue to hold its exposure in Samsung Electronics Co., Ltd. The overweight exposure to NCsoft Corporation will also be kept due to expectations of further earnings growth from new mobile games. The Fund will maintain an Yutaka Itabashi overweight position in the Financing Business President sector because net interest margins of banks are holding up well, valuations still trade at an attractive level, and the sector could be the beneficiary of higher interest rates. The Fund will maintain an overweight exposure to se- lected insurance stocks based on their stable revenue generation. The Fund will maintain an underweight expo- sure to Chemicals given the uncertainty of oil prices and prefers selecting chemical names that manufacture high growth products. In the Iron and Steel sector, the Fund continues to re- tain a positive view of Korea Zinc Co., Ltd. based on its stable earnings. The Fund reduced its exposure to the Transportation Equipment sector based upon concerns of weak shipment growth for OEMs. The Fund is also concerned about automobile parts manufacturers since their earnings may also decrease due to weak


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    The Fund added exposure in the Electricity & Gas sector. The Fund has a positive view of the sector given earnings improvements aided by a change to its fuel mix, the easing of market con- cerns regarding a possible temporary tariff cut, and government policy to encourage higher divi- dend payouts. The Fund believes that attractive valuations should help to support share prices in this sector over the medium-term. DISCLOSURES Sources: Nomura Asset Management U.S.A. Inc., Nomura Asset Management Singapore Limited, and Bloomberg L.P. Past performance is not indicative of future results. There is a risk of loss. The NAV price is adjusted for reinvestment of income dividends, ordinary income distributions, and long- term capital gain distributions. The New York Stock Exchange’s closing market price is adjusted for reinvest- ment of income dividends, ordinary income distributions, and long-term capital gain distributions. The Fund’s performance does not reflect sales commissions. This material contains the current opinions of the Fund’s manager, which are subject to change without no- tice. This material should not be considered investment advice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. There is no guarantee that these invest- ment strategies will work under all market conditions, and each investor should evaluate their ability to invest for the long term. Comparisons between changes in the Fund’s net asset value or market price per share and changes in the Korea Composite Stock Price Index should be considered in light of the Fund’s investment policy and ob- jective, the characteristics and quality of the Fund’s investments, the size of the Fund, and variations in the Won/U.S. dollar exchange rate. This report is for informational purposes only. Investment products offered are not FDIC insured, may lose value, and are not bank guaranteed. Indices are unmanaged and cannot be directly invested into. Certain information discussed in this report may constitute forward-looking statements within the meaning of the U.S. federal securities laws. The Fund believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions and can give no assurance that the Fund's expectations will be achieved. Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected.


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    SHAREHOLDERS ACCOUNT INFORMATION Shareholders whose accounts are held in their own name may contact the Fund’s registrar Computershare Trust Company, N.A. at (800) 426-5523 for information concerning their accounts. PROXY VOTING A description of the policies and procedures that the Fund uses to vote proxies relating to portfolio secu- rities is available (1) without charge, upon request, by calling toll-free 1-800-833-0018; and (2) on the website of the Securities and Exchange Commission (“SEC”) at http://www.sec.gov. Information about how the Fund voted proxies relating to securities held in the Fund’s portfolio during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling toll-free 1-800-833-0018; and (2) on the SEC’s web site at http://www.sec.gov. Additional information about the Fund’s Board of Directors is available (1) without charge, upon request, by calling toll-free 1-800-833-0018; and (2) on the website of the SEC at http://www.sec.gov in the Fund’s most recent proxy statement filing. AVAILABILITY OF QUARTERLY SCHEDULE OF INVESTMENTS The Fund files a schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s web site at http://www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC- 0330. FUND CERTIFICATIONS In December 2016, the Fund filed its Principal Executive Officer Certification with the New York Stock Ex- change pursuant to Section 303A.12(a) of the New York Stock Exchange Corporate Governance Listing Standards. The Fund’s Principal Executive Officer and Principal Financial Officer Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the Fund’s Form N-CSR and are available on the SEC’s web site at http://www.sec.gov. SHARE REPURCHASES Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that from time to time the Fund may repurchase shares of its common stock in the open market. INTERNET WEBSITE Nomura Asset Management U.S.A. Inc. has established an Internet website which highlights its history, investment philosophy and process and products, which include the Fund. The Internet web address is http://funds.nomura-asset.com.


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    KOREA EQUITY FUND, INC. FUND HIGHLIGHTS—APRIL 30, 2017 (Unaudited) KEY STATISTICS Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $90,132,167 Net Asset Value per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9.25 Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8.96 Percentage Change in Net Asset Value per Share*† . . . . . . . . . . . . . . . . . . . . . . . . . 11.1% Percentage Change in Market Price*† . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.9% MARKET INDEX Percentage Change in Market Index* WON U.S.$ Korea Composite Stock Price Index* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8% 10.4% *From November 1, 2016 through April 30, 2017. †Reflects the percentage change in share price adjusted for reinvestment of income dividends, ordinary income distributions, and long-term capital gain distributions. INDUSTRY DIVERSIFICATION % of % of Net Assets Net Assets Electronic Appliances and Components . . 36.9 Other Products . . . . . . . . . . . . . . . . . . . . . . 4.8 Financing Business . . . . . . . . . . . . . . . . . . . 10.4 Construction and Engineering . . . . . . . . . . 4.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Transportation Equipment . . . . . . . . . . . . . 7.4 Transportation . . . . . . . . . . . . . . . . . . . . . . . 1.2 Iron and Steel . . . . . . . . . . . . . . . . . . . . . . . 6.2 Retail Trade . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Media and Entertainment . . . . . . . . . . . . . . 5.9 Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Precision Instruments . . . . . . . . . . . . . . . . . 0.7 TEN LARGEST EQUITY HOLDINGS BY FAIR VALUE Fair % of Security Value Net Assets Samsung Electronics Co., Ltd. Common . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,318,567 15.9 SK Hynix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,338,828 8.1 Coway Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,882,447 6.5 NCsoft Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,312,970 5.9 Samsung Electronics Co., Ltd. Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,262,254 5.8 ING Life Insurance Korea Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,942,780 5.5 Korea Zinc Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,410,011 4.9 Dongbu Insurance Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,997,711 4.4 Korea Electric Power Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,852,478 4.3 Hana Financial Group Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,577,631 4.0


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    KOREA EQUITY FUND, INC. SCHEDULE OF INVESTMENTS APRIL 30, 2017 (Unaudited) % of Fair Net Shares Cost Value Assets SOUTH KOREAN EQUITY SECURITIES Chemicals Hanwha Chemical Corporation . . . . . . . . . . . . . . . . . . . . . . . 55,006 $ 1,264,299 $ 1,214,260 1.4 Manufactures chemical products SK Chemicals Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 408,251 331,784 0.4 Manufactures chemicals SK Materials Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,777 2,179,461 2,287,961 2.5 Manufactures special gas Wonik Materials Co., Ltd.† . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,968 920,209 834,260 0.9 Manufactures gas products used in the semiconductor industry Total Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,772,220 4,668,265 5.2 Construction and Engineering Hanwah Techwin Co., Ltd.† . . . . . . . . . . . . . . . . . . . . . . . . . . 28,012 1,120,962 1,278,531 1.4 Engages in the engine, defense, and precision engineering business Hyundai Engineering & Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . 30,497 1,048,410 1,299,601 1.5 Construction business Samsung Engineering Co., Ltd.† . . . . . . . . . . . . . . . . . . . . . . 119,457 1,295,043 1,279,191 1.4 Engineering construction business Total Construction and Engineering . . . . . . . . . . . . . . . . . . . . 3,464,415 3,857,323 4.3 Electronic Appliances and Components Coway Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,685 4,028,456 5,882,447 6.5 Manufactures environment-related products LG Innotek Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788 66,584 90,953 0.1 Manufactures electronic components for various devices Samsung Electronics Co., Ltd. Common . . . . . . . . . . . . . . . . 7,312 5,475,432 14,318,567 15.9 Produces consumer electronic products Samsung Electronics Co., Ltd. Preferred . . . . . . . . . . . . . . . . 3,420 3,622,855 5,262,254 5.8 Produces consumer electronic products SK Hynix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,835 4,205,260 7,338,828 8.1 Semiconductor products Vieworks Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,480 431,338 432,664 0.5 Manufactures digital medical imaging systems Total Electronic Appliances and Components . . . . . . . . . . . . 17,829,925 33,325,713 36.9 See notes to financial statements.


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    KOREA EQUITY FUND, INC. SCHEDULE OF INVESTMENTS—(Continued) APRIL 30, 2017 (Unaudited) % of Fair Net Shares Cost Value Assets Financing Business Hana Financial Group Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,979 $ 2,725,815 $ 3,577,631 4.0 Banking and financial services KB Financial Group Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,801 1,867,091 2,321,901 2.6 Provides various financial products and services Shinhan Financial Group Co., Ltd. . . . . . . . . . . . . . . . . . . . . . 82,732 3,060,947 3,452,931 3.8 Provides various financial products and services Total Financing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,653,853 9,352,463 10.4 Insurance Dongbu Insurance Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 66,979 3,288,705 3,997,711 4.4 Non-life insurance ING Life Insurance Korea Ltd.†^ . . . . . . . . . . . . . . . . . . . . . . 170,645 5,044,254 4,942,780 5.5 Provides insurance and financial services Total Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,332,959 8,940,491 9.9 Iron and Steel Korea Zinc Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,808 3,736,714 4,410,011 4.9 Non-ferrous metal products POSCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,921 1,005,969 1,155,423 1.3 Integrated steel producer Total Iron and Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,742,683 5,565,434 6.2 Media and Entertainment NCsoft Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,814 2,934,201 5,312,970 5.9 Online gaming Total Media and Entertainment . . . . . . . . . . . . . . . . . . . . . . . . 2,934,201 5,312,970 5.9 Other Products Interojo Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,860 1,700,762 3,053,528 3.4 Manufactures contact lens KT&G Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,594 1,407,559 1,300,182 1.4 Produces cigarettes Total Other Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,108,321 4,353,710 4.8 See notes to financial statements.


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    KOREA EQUITY FUND, INC. SCHEDULE OF INVESTMENTS—(Continued) APRIL 30, 2017 (Unaudited) % of Fair Net Shares Cost Value Assets Precision Instruments i-SENS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,862 $ 711,528 $ 643,757 0.7 Develops and produces medical devices Total Precision Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . 711,528 643,757 0.7 Retail Trade GS Retail Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,547 985,301 1,004,258 1.1 Operates various convenience stores Total Retail Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 985,301 1,004,258 1.1 Transportation CJ Korea Express Corporation† . . . . . . . . . . . . . . . . . . . . . . . 7,392 911,398 1,080,289 1.2 Transportation of freight and cargo Total Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911,398 1,080,289 1.2 Transportation Equipment Halla Holdings Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,381 1,183,303 977,700 1.1 Manufactures automobile parts Hyundai Mipo Dockyard Co., Ltd.† . . . . . . . . . . . . . . . . . . . . . 9,736 630,099 791,326 0.9 Engaged in the shipbuilding business Hyundai Mobis Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,956 2,285,688 1,940,000 2.2 Manufactures automotive parts Mando Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,479 2,650,074 2,923,009 3.2 Manufactures automobile parts Total Transportation Equipment . . . . . . . . . . . . . . . . . . . . . . . . 6,749,164 6,632,035 7.4 Utilities Korea Electric Power Corporation . . . . . . . . . . . . . . . . . . . . . . 96,783 4,566,023 3,852,478 4.3 Transmission and distribution of electricity Total Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,566,023 3,852,478 4.3 Wholesale Hwaseung Enterprise Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . 56,611 814,189 879,504 1.0 Manufactures athletic shoes Total Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 814,189 879,504 1.0 TOTAL SOUTH KOREAN EQUITY SECURITIES . . . . . . . . . $67,576,180 $89,468,690 _________________ 99.3 See notes to financial statements.


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    KOREA EQUITY FUND, INC. SCHEDULE OF INVESTMENTS—(Continued) APRIL 30, 2017 (Unaudited) % of Fair Net Shares Cost Value Assets FOREIGN CURRENCY South Korean Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,833,876 $ 5,794,862 6.4 Non-interest bearing account TOTAL FOREIGN CURRENCY . . . . . . . . . . . . . . . . . . . . . . . 5,833,876 5,794,862 6.4 TOTAL INVESTMENTS AND FOREIGN CURRENCY . . . . . . $73,410,056 $95,263,552 _________________ 105.7 LIABILITIES LESS OTHER ASSETS, NET . . . . . . . . . . . . . . (5,131,385) (5.7) NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $90,132,167 100.0 †Non-income producing security. ^ Security acquired as a result of an IPO participation and classified as Level 2 Security in the fair value hierarchy in Note 5. Portfolio securities and foreign currency holdings were translated at the following exchange rate as of April 30, 2017. South Korean Won KRW 1,139.30 = USD $1.00 See notes to financial statements.


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    KOREA EQUITY FUND, INC. STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2017 (Unaudited) ASSETS: Investments in South Korean Equity securities, at fair value (cost—$67,576,180) . . . . . . . . $89,468,690 Foreign currency, at fair value (cost—$5,833,876) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,794,862 Receivable for dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,059 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,650 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,591 Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,411,852 LIABILITIES: Payable for investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,992,208 Accrued management fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,757 Accrued directors’ fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,470 Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213,250 5,279,685 NET ASSETS: Capital stock (9,740,623 shares of capital stock outstanding, 100,000,000 shares authorized, par value $0.10 each) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 974,062 Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,768,066 Accumulated net realized loss on investments and foreign currency transactions . . . . . . . . (916,352) Net unrealized appreciation on investments and foreign currency transactions . . . . . . . . . . 21,904,335 Accumulated net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402,056 Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $90,132,167 Net asset value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.25 See notes to financial statements.


  • Page 12

    KOREA EQUITY FUND, INC. STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2017 (Unaudited) INCOME: Dividend income (net of $250,227 of withholding taxes) . . . . . . . . . . . . . . . . . . . . . . . . . $1,275,271 Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,275,397 EXPENSES: Management fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,982 Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218,979 Directors’ fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,922 Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,148 Auditing and tax reporting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,096 Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,422 Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 770,549 INVESTMENT INCOME—NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504,848 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Realized gain on investments and foreign currency transactions: Net realized loss on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (622,931) Net realized gain on foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,229 Net realized loss on investments and foreign currency transactions . . . . . . . . . . . . . . . (450,702) Net change in unrealized appreciation on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 7,921,678 Net change in unrealized appreciation on foreign currency transactions and translation 962,738 Net realized and unrealized gain on investments and foreign currency transactions and translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,433,714 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $8,938,562 See notes to financial statements.


  • Page 13

    KOREA EQUITY FUND, INC. STATEMENT OF CHANGES IN NET ASSETS For the Six Months Ended For the Year April 30, 2017 Ended (Unaudited) October 31, 2016 FROM OPERATIONS: Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 504,848 $ (457,986) Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . (622,931) 2,681,225 Net realized gain on foreign currency transactions . . . . . . . . . . . . . . . . 172,229 53,890 Net change in unrealized appreciation (depreciation) on investments . 7,921,678 (1,309,696) Net change in unrealized appreciation on foreign currency . . . . . . . . . transactions and translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962,738 649,085 Net increase in net assets resulting from operations . . . . . . . . . . . . . . 8,938,562 1,616,518 FROM DISTRIBUTIONS TO SHAREHOLDERS: Ordinary income distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (1,193,226) Capital gains distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,099,104) (1,754,286) Decrease in net assets derived from distributions to shareholders . . . (2,099,104) (2,947,512) NET ASSETS: Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,292,709 84,623,703 End of period (including accumulated net investment income (loss) of $402,057 and ($102,792) respectively) . . . . . . . . . . . . . . . . . . . . . . . $90,132,167 $83,292,709 See notes to financial statements.


  • Page 14

    KOREA EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. Significant Accounting Policies at fair value as determined in good faith by or under the direction of the Board of Directors of the Fund. Korea Equity Fund, Inc. (the “Fund”) is registered under the Investment Company Act of 1940, as (b) Foreign Currency Transactions—Transactions amended (the “Investment Company Act”), as a non- denominated in South Korean Won (“Won”) are diversified, closed-end management investment recorded in the Fund’s records at the prevailing rate company. The Fund was incorporated in Maryland at the time of the transaction. Asset and liability ac- on September 7, 1993 and investment operations counts that are denominated in Won are adjusted to commenced on December 3, 1993. The Fund’s in- reflect the current exchange rate at the end of the vestment objective is to seek long-term capital ap- period. Transaction gains or losses resulting from preciation through investments primarily in equity changes in the exchange rate during the reporting securities of South Korean companies. period or upon settlement of foreign currency trans- actions are included in the results of operations for The accompanying financial statements have the current period. been prepared in accordance with United States The net assets of the Fund are presented at the (“U.S.”) generally accepted accounting principles exchange rates and fair values on April 30, 2017. The (“GAAP”) and are stated in United States dollars. The Fund does isolate that portion of the results of oper- Fund is an investment company that follows the ac- ations arising as a result of changes in the foreign counting and reporting guidance in accordance with exchange rates on investments from the fluctuations Financial Accounting Standards Board Accounting arising from changes in the market prices of securi- Standards Codification Topic 946 Financial Ser- ties held at April 30, 2017. Net realized gains or vices—Investment Companies. The following is a losses on investments include gains or losses arising summary of the significant accounting and reporting from sales of portfolio securities and sales and ma- policies used in preparing the financial statements. turities of short-term securities. Net realized gains or losses on foreign currency transactions arise from (a) Valuation of Securities—Investments traded on sales of foreign currencies, currency gains or losses stock exchanges are valued at the last sale price on realized on securities transactions between trade the principal market on which such securities are and settlement date, and the difference between the traded as of the close of business on the day the se- amounts of dividends, interest, and foreign withhold- curities are being valued or, lacking any sales, at the ing taxes recorded on the Fund’s books and the U.S. last available bid price. Securities traded in the U.S. dollar equivalent of the amounts actually received or over-the-counter market (as opposed to the over- paid. the-counter market for foreign investors in South Ko- (c) Security Transactions, Investment Income, and rea) are valued at the last reported sales price as of Distributions to Shareholders—Security transactions the close of business on such day the securities are are accounted for on the trade date. Dividend in- being valued or, if none is available, at the mean of come and distributions are recorded on the ex-divi- the bid and offer price at the close of the day or, if dend dates and interest income is recorded on the none is available, at the last reported sales price accrual basis. Realized gains and losses on the sale available to the Fund. Securities for which market of investments are calculated on a first in, first out quotations are not readily available and restricted se- basis. curities are valued in good faith at fair value using methods determined by the Board of Directors. Se- Distributions from net investment income and net curities and other assets, including futures contracts realized capital gains are determined in accordance and related options, that cannot be fair valued using with Federal income tax regulations, which may dif- one of the previously mentioned methods are stated fer from U.S. GAAP. To the extent these “book/tax”


  • Page 15

    KOREA EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS—(Continued) (Unaudited) differences are permanent in nature (i.e., that they re- (e) Income Taxes—A provision for U.S. income sult from other than timing of recognition—“tempo- taxes has not been made since it is the intention of rary”), such amounts are reclassified within the cap- the Fund to continue to qualify as a regulated invest- ital accounts based on their Federal tax-basis ment company under the Internal Revenue Code treatment; temporary differences do not require re- and to distribute within the allowable time limit all classification. Dividends and distributions which ex- taxable income to its shareholders. ceed net realized capital gains for financial reporting purposes, but not for tax purposes, are reported as Under the tax treaty between South Korea and the distributions in excess of net realized capital gains. U.S., a withholding tax is imposed on dividends and interest income at the rate of 16.5%, and such with- Pursuant to a securities lending agreement with holding taxes are reflected as a reduction of the re- Brown Brothers Harriman & Co., the Fund may lend lated revenue. There is no withholding tax on realized securities to qualified institutions. It is the Fund’s gains. policy that, at origination, all loans shall be secured by collateral of at least 102% of the value of U.S. se- In accordance with U.S. GAAP requirements re- curities loaned and 105% of the value of foreign se- garding accounting for uncertainties in income curities loaned. It is the Fund’s policy that collateral taxes, management has analyzed the Fund’s tax po- equivalent to at least 100% of the fair value of secu- sitions taken or expected to be taken on federal and rities on loan must be maintained at all times (when state income tax returns for all open tax years (the applicable). Collateral is provided in the form of current and the prior three tax years), and has con- cash, which would be invested in certain money cluded that no provision for income tax is required in market funds. The Fund is entitled to receive all in- the Fund’s financial statements. The Fund recog- come on securities loaned, in addition to a portion of nizes interest and penalties, if any, related to uncer- the income earned as a result of the lending transac- tain tax positions as income tax expense in the tion. Although each security loan is fully collateral- statement of operations. During the six months ized, there are certain risks. On November 21, 2008, ended April 30, 2017 and for the prior three tax the Fund suspended its participation in the securities years, the Fund did not incur any interest or penal- lending program. The Fund may resume its partici- ties. pation in the future. During the fiscal year ended Oc- (f) Subscription for New Shares—As part of their tober 31, 2016 and semi-annual period ended April annual corporate action matters, certain South Ko- 30, 2017, the Fund did not earn any fees from lend- rean companies offer rights to their shareholders to ing fund portfolio securities, pursuant to the securi- subscribe to new shares which are eligible for a por- ties lending agreement. tion of the dividends paid on existing shares in the (d) Capital Account Reclassification—For the fis- year of subscription. cal year ended October 31, 2016, the Fund’s accu- mulated net investment loss was decreased by (g) Use of Estimates in Financial Statement Prepa- $371,439, and the accumulated net realized gain on ration—The preparation of financial statements in investments and foreign currency transactions was accordance with U.S. GAAP requires management decreased by $371,439. These adjustments were a to make estimates and assumptions that affect the result of the reclassification of foreign exchange reported amounts and disclosures in the financial losses, disposition of passive foreign investment statements. Actual results could differ from these es- companies, and net operating loss. These adjust- timates. ments had no impact on net assets.


  • Page 16

    KOREA EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS—(Continued) (Unaudited) (h) Concentration of Risk—A significant portion of Limited (“NAM-Singapore”), as investment sub-ad- the Fund’s net assets consists of South Korean se- visers for the Fund. curities which involve certain considerations and risks not typically associated with investments in the As compensation for its services to the Fund, the U.S. In addition to the smaller size, less liquidity and Manager receives a monthly fee computed at the an- greater volatility, the South Korean securities market nual rate of 0.85% of the Fund’s average weekly net is less developed than the U.S. securities market and assets. Under the management agreement, the Fund there is often substantially less publicly available in- incurred fees to the Manager of $348,982 for the six formation about South Korean issuers than there is months ended April 30, 2017. Under the investment about U.S. issuers. Future economic and political advisory agreement, NAM earned investment advi- developments in South Korea could adversely affect sory fees of $203,231 from the Manager, not the the liquidity or value, or both, of securities in which Fund, for the six months ended April 30, 2017. Under the Fund is invested. Further, the Fund may be ex- the investment sub-advisory agreements, NAM- posed to currency devaluation and other exchange Hong Kong and NAM-Singapore earned sub-advi- rate fluctuations. sory fees of $20,323 and $91,454, respectively, from NAM, not the Fund, for the six months ended April (i) Indemnifications—Under the Fund’s organiza- 30, 2017. At April 30, 2017, the management fee tional documents, its officers and directors are in- payable to the Manager by the Fund was $61,757. demnified against certain liabilities arising from the performance of their duties to the Fund. Additionally, Certain officers and/or directors of the Fund are in the normal course of business, the Fund enters officers and/or directors of the Manager. Affiliates of into contracts that contain a variety of representa- Nomura Holdings, Inc. (the Manager’s indirect par- tions which provide general indemnifications. The ent) did not earn any fees in commissions on the ex- Fund’s maximum exposure under these agreements ecution of portfolio security transactions for the six is unknown as this would involve future claims that months ended April 30, 2017. The Fund pays each may be made against the Fund that have not yet oc- Director not affiliated with the Manager an annual fee curred. However, based on the Fund’s experience, of $17,000 plus $2,000 per meeting attended. In ad- the Fund expects the risk of loss to be remote and dition, the Fund pays each Director not affiliated with as such, no additional accruals were recorded on the the Manager $1,000 per telephone meeting attended Statement of Assets and Liabilities. together along with actual expenses related to atten- dance at meetings. The Chairman of the Board, 2. Management Agreement and presently Rodney A. Buck, is paid an additional an- Transactions With Affiliated Persons nual fee of $5,000. The Chairman of the Audit Com- mittee, presently David B. Chemidlin, is paid an ad- Nomura Asset Management U.S.A. Inc. (“NAM- ditional annual fee of $2,000. Such fees and USA” or the “Manager”) acts as the Manager of the expenses for unaffiliated Directors aggregated Fund pursuant to a management agreement. Under $75,922 for the six months ended April 30, 2017. the agreement, the Manager provides all office space, facilities and personnel necessary to perform its duties. Pursuant to such management agreement, 3. Purchases and Sales of Investments the Manager has retained its parent company, No- mura Asset Management Co., Ltd. (“NAM”), as in- Purchases and sales of investments, exclusive of vestment adviser to the Fund, and Nomura Asset foreign currency and investments in short-term se- Management Hong Kong Limited (“NAM-Hong curities, for the six months ended April 30, 2017 Kong”) and Nomura Asset Management Singapore were $22,801,763 and $24,864,668, respectively.


  • Page 17

    KOREA EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS—(Continued) (Unaudited) 4. Federal Income Taxes 5. Fair Value Measurements As of October 31, 2016, net unrealized apprecia- In accordance with U.S. GAAP, fair value is de- tion on investments, exclusive of foreign currency, fined as the price that the Fund would receive to sell for federal income tax purposes was $12,455,300, of an asset or pay to transfer a liability in an orderly which $15,343,638 related to appreciated securities transaction between market participants at the mea- and $2,888,338 related to depreciated securities. surement date. U.S. GAAP also establishes a frame- The cost of investments, exclusive of foreign cur- work for measuring fair value, and a three-level hier- rency of $524,426 at October 31, 2016, for federal archy for fair value measurements based upon the income tax purposes was $70,829,376. transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable At October 31, 2016, the components of accumu- and refer broadly to the assumptions that market lated earnings on a tax basis were as follows: participants would use in pricing the asset or liability. Unrealized appreciation on investments Observable inputs reflect the assumptions market and foreign currency transactions $12,452,558(a) participants would use in pricing the asset or liability Undistributed long-term capital gains 1,135,289 based on market data obtained from sources inde- pendent of the Fund. Unobservable inputs reflect the Undistributed ordinary income 962,734 Fund’s own assumptions about the assumptions Total accumulated earnings $14,550,581 that market participants would use in pricing the as- set or liability developed based on the best informa- (a) The difference between book basis and tax ba- tion available under the circumstances. Each invest- sis unrealized appreciation is attributable to the tax ment is assigned a level based upon the deferral of losses on wash sales and the tax treat- observability of the inputs which are significant to ment of passive foreign investment companies. the overall valuation. The three-tier hierarchy of in- puts is summarized below. The Fund paid an ordinary income distribution of $963,347, which represents $0.0989 per share and a • Level 1—quoted prices in active markets for long-term capital gains distribution of $1,135,757, identical investments which represents $0.1166 per share to shareholders of • Level 2—other significant observable inputs (in- record as of December 19, 2016. The distribution was cluding quoted prices for similar investments, in- paid on December 23, 2016. terest rates, prepayment speeds, credit risk, etc.) The Fund paid an ordinary income distribution of • Level 3—significant unobservable inputs (in- $2,288,072, which represents $0.2349 per share and cluding the Fund’s own assumptions in deter- a long-term capital gains distribution of $659,440, mining the fair value of investments) which represents $0.0677 per share to shareholders of record as of December 21, 2015. The distribution was paid on December 28, 2015. The tax character of distributions paid during the fiscal years ended October 31, 2016 and October 31, 2015 were as follows: October-16 October-15 Ordinary Income $2,288,072 $0 Capital Gains $659,440 $895,941


  • Page 18

    KOREA EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS—(Continued) (Unaudited) The following table summarizes the valuation of share as of the close of trading on the New York the Fund’s investments by the above fair value hier- Stock Exchange on March 5, 2012. As a result of the archy levels as of April 30, 2017. tender offer, $11,180,076 was distributed to the shareholders and there was a $0.02 increase to the Investments in net asset value per share. Level Securities Level 1. . . . . . . . . On December 17, 2015, the Board of Directors of Equity Securities* $84,525,910 the Fund approved an updated Discount Manage- Level 2. . . . . . . . . ment Plan. Under the updated plan, the Fund is au- Equity Securities* 4,942,780 thorized to make open-market share repurchases on Level 3. . . . . . . . . . -0- the New York Stock Exchange. Such repurchases Total. . . . . . . . . . . $89,468,690 may be made from time to time as authorized by the Board of Directors. *Please refer to the Schedule of Investments for a breakdown of the valuation by industry type. 7. Subsequent Events During the six months ended April 30, 2017, there were no transfers between Level 1, Level 2, The Fund’s shareholders approved the dissolu- or Level 3 securities. tion and liquidation of the Fund at a special meeting of shareholders held on May 24, 2017. In accor- As of April 30, 2017, the Fund held a Level 2 se- dance with the plan of dissolution previously ap- curity. This security is an IPO that was offered and proved by the Fund’s Board of Directors, the Fund’s purchased prior to April 30, 2017, but did not begin investment advisers shall convert the Fund’s portfo- trading until after April 30, 2017. As a result, this se- lio into cash as soon as practicable following the curity was fair valued at the offering price adjusted special meeting. Distributions to shareholders of the for the KOSPI daily movement between the pur- Fund will be made at times approved by the Board of chase date and April 30, 2017. Directors. During the six months ended April 30, 2017, the Fund did not hold any instrument which used signif- icant unobservable inputs (Level 3) in determining fair value. 6. Share Repurchases and Discount Management Plan The Fund announced a tender offer on June 7, 2011. This tender offer was for up to 10 percent of the Fund’s outstanding stock during the fourth quar- ter of 2011 if the Fund's stock traded at a specific discount during the third quarter of 2011. The stock did trade at the specific discount. The Fund com- menced an offer for up to 1,082,292 shares of its common stock on January 31, 2012. The offer ex- pired on March 5, 2012, at which time the Fund pur- chased the maximum number of shares covered by the offer at a price of $10.33, which represented a price equal to 98 percent of the net asset value per


  • Page 19

    KOREA EQUITY FUND, INC. FINANCIAL HIGHLIGHTS For a share of common stock outstanding throughout each period: For the Six Months Ended For the Year Ended April 30, 2017 _ October 31, (Unaudited) 2016 2015 2014 2013 2012 Net asset value, beginning of period . . . . . . . . . . $8.55 $8.69 $8.98 $10.17 $10.64 $13.69 ____ Investment operations: Net investment income (loss)* . . . . . . . . . . . . . 0.05 (0.05) (0.03) (0.07) (0.08) (0.10) Net realized and unrealized gain (loss) on investments and foreign currency . . . . . . . . 0.87 _ 0.21 (0.17) 0.13 0.66 0.10 _ Total from investment operations . . . . . . . . . . . . . 0.92 0.16 (0.20) 0.06 0.58 — Less Distributions: Distributions from capital gains . . . . . . . . . . . . (0.22) (0.18) (0.09) (1.25) (1.05) (3.07) Distributions from ordinary income . . . . . . . . . — (0.12) — — — — Total from distributions . . . . . . . . . . . . . . . . . . . . (0.22) (0.30) (0.09) (1.25) (1.05) (3.07) Fund Share Transactions Effect of Tender Offer** . . . . . . . . . . . . . . . . . . — — — — — 0.02 Total Fund share transactions . . . . . . . . . . . . . . . — — — — — 0.02 Net asset value, end of period . . . . . . . . . . . . . . $9.25 __ $8.55 $8.69 $8.98 $10.17 $10.64 Market value, end of period . . . . . . . . . . . . . . . . . $8.96 $7.89 $7.75 $8.23 $9.09 $9.65 Total investment return*** . . . . . . . . . . . . . . . . . . . 16.9% 6.2% (4.8%) 4.9% 4.9% 3.6% Ratio/Supplemental Data: Net assets, end of period (000) . . . . . . . . . . . . $90,132 $83,293 $84,624 $87,448 $99,074 $103,615 Ratio of expenses to average net assets . . . . . 1.84%† 1.84% 1.47% 1.49% 1.57% 1.81% Ratio of net income (loss) to average net assets 1.20%† (0.56%) (0.30%) (0.70%) (0.81%) (0.90%) Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . 28% 66% 46% 19% 64% 77% * Based on average shares outstanding. ** Increase is due to Tender Offer (See Note 6) *** Based on market value per share, adjusted for reinvestment of income dividends, ordinary income distributions, long- term capital gain distributions, and capital share transactions. Total return does not reflect sales commissions. † Annualized See notes to financial statements.


  • Page 20

    BOARD OF DIRECTORS Rodney A. Buck David B. Chemidlin Yutaka Itabashi E. Han Kim Marcia L. MacHarg OFFICERS Yutaka Itabashi, President Takeshi Toyoshima, Vice President Maria R. Premole, Vice President Neil A. Daniele, Secretary and Chief Compliance Officer Amy J. Marose, Treasurer Kelly S. Lee, Assistant Treasurer MANAGER Nomura Asset Management U.S.A. Inc. Worldwide Plaza 309 West 49th Street KOREA New York, NY 10019-7316 Internet Address http://funds.nomura-asset.com INVESTMENT ADVISER Nomura Asset Management Co., Ltd. 1-12-1 Nihonbashi, Chuo-ku Tokyo 103-8260, Japan Equity INVESTMENT SUB-ADVISERS Nomura Asset Management Hong Kong Limited 30th Floor, Two International Finance Center Fund, Inc. 8 Finance Street Central, Hong Kong Nomura Asset Management Singapore Limited 10 Marina Boulevard Marina Bay Financial Centre Tower 2, #33-03 Singapore 018983 CUSTODIAN Brown Brothers Harriman & Co. 50 Post Office Square Boston, Massachusetts 02110-1548 DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR Computershare Trust Company, N.A. SEMI-ANNUAL REPORT P.O. Box 505000 Louisville, KY 40233 COUNSEL APRIL 30, 2017 Sidley Austin LLP 787 Seventh Avenue New York, New York 10019 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM RSM US LLP 80 City Square Boston, Massachusetts 02129 KOREA EQUITY FUND, INC. WORLDWIDE PLAZA 309 WEST 49th STREET NEW YORK, NY 10019-7316 This Report, including the Financial Statements, is transmitted to the Shareholders of Korea Equity Fund, Inc. for their information. This is not a prospectus, circular or rep- resentation intended for use in the purchase of shares of the Fund or any securities mentioned in this Report.


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