"With any dividend payment, a buyer looking to receive the distribution must purchase the security before the ex-dividend date (in order to be listed as a holder on the firm's books as of the record date). Because it generally takes three business days for a trade to settle, the ex-dividend date is typically set two days prior to the record date.
However, because this particular distribution represents more than 25% of the value of the security, special NASD rules apply. (For those interested, these rules were set up to help avoid margin calls.) In this case, the ex-dividend date is the first business day following the scheduled distribution, or November 29th.
An investor who buys KF between now and November 28th will still be entitled to the distribution, even though they are not technically the holder of record. (For all practical purposes, the October 26th "record date" is not terribly significant, as it does not represent the cut-off date for those who will receive the dividend.)
However, there is one caveat: if you purchased the shares before November 14th, then you had the option to receive your dividend either in cash or in the form of additional shares. That deadline has now passed, and new shareholders must now receive their payment in the form of additional shares of KF.
According to the firm's latest press release, this share distribution will be calculated based on the lower of the fund's closing market price or its net asset value (NAV) on November 28th. As of the close of trading today, The Korea Fund's market price is about 8.5% lower than its NAV, and if that remains the case, then fund-holders will acquire the new shares at the prevailing market price.
Beginning on November 29th, KF will begin trading without the right to receive the dividend -- so the price of the fund will open lower by approximately the amount of the payment on that day. Keep in mind, from a return standpoint this distribution is essentially a wash for shareholders. Today, the fund is valued at about $40 per share. If the distribution were made tomorrow, then investors would instead have one share valued at around $24 and about $16 per share in cash (or $16 per share in additional, newly-issued shares of stock, depending upon whether you selected the option to receive your distribution in cash).
Please remember that this distribution will be taxable. Based on data provided by the fund, the vast majority of the payment ($15.82 per share) represents long-term capital gains and is taxable at the reduced 15% rate, while the remainder is subject to ordinary income tax rates."
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