The Fund’s largest detractor for the quarter was DGB Financial Group (XKRX:139130), a regional South Korean financial holding company that provides a full range of consumer and commercial banking-related financial services. Late in October, DGB released its third quarter results, which were only slightly below our estimates but were weaker than its peers in South Korea. In mid-November, DGB announced a rights issuance, which ignited a significantly negative market response. DGB plans to use the additional capital to accommodate growing its loan business, to initiate an auto finance business and to acquire Woori Aviva Life Insurance Company. We also have concerns about the issuance, as the use of capital appears to be suboptimal and is counter to DGB’s previously stated intentions of slowing growth in order to focus on harvesting better margins. However, we continue to believe DGB’s primary business region and its current undervaluation support the stock’s attractiveness.
From David Herro (Trades, Portfolio)'s Oakmark Intl Small Cap (Trades, Portfolio) Fund 4Q 2014 Letter.
