# Section 13 Reporting — Ownership Disclosure

## What It Is

Section 13 of the Securities Exchange Act of 1934 requires disclosure of significant ownership positions in public companies. Three main filing types affect fund managers: Form 13F, Schedule 13D, and Schedule 13G.

## Form 13F — Quarterly Holdings Report

**Who must file**: Institutional investment managers exercising investment discretion over $100 million or more in Section 13(f) securities (primarily US exchange-listed equity securities).

**What is reported**: All Section 13(f) securities held at the end of each calendar quarter, including number of shares, market value, and investment discretion type.

**Deadline**: 45 days after the end of each calendar quarter.

**For Palace Fund**: Unless the fund manages $100 million+ in US-listed equities, 13F filing is not required. This threshold is unlikely for an emerging fund.

## Schedule 13D — Beneficial Ownership (Activist)

**Trigger**: Acquiring beneficial ownership of more than 5% of any class of a public company's voting equity securities.

**Deadline**: Within 10 business days of crossing the 5% threshold.

**What is disclosed**:
- Identity of the filer and background information
- Source and amount of funds used for the purchase
- Purpose of the acquisition (passive investment, seeking board seats, activist campaign, etc.)
- Number of shares owned
- Any contracts, arrangements, or understandings regarding the securities

**Amendments**: Must amend promptly upon any material change (including a 1%+ change in ownership).

**Key issue**: Filing Schedule 13D signals to the market that someone is building a position, often with activist intent. This typically moves the stock price.

## Schedule 13G — Beneficial Ownership (Passive)

**Who can use 13G instead of 13D**: Investors who acquire more than 5% but can certify that the securities were NOT acquired with the purpose or effect of changing or influencing control of the company.

**Types of 13G filers**:
- **Qualified Institutional Investor (QII)**: Banks, insurance companies, registered investment companies. Most private funds do NOT qualify.
- **Exempt Investor**: Beneficial owner of more than 5% before the company's IPO.
- **Passive Investor**: Acquired shares in the ordinary course of business without intent to change control. **This is the category most relevant to private funds.** Must hold less than 20% to use 13G.

**Passive Investor 13G deadlines**:
- Initial filing: Within 5 business days of crossing 5%
- Annual amendment: Within 45 days of calendar year end if there were changes
- Must promptly switch to 13D if you change your intent to passive

## How It Applies to a Small Fund

For a small fund, Section 13 reporting becomes relevant primarily in concentrated portfolios:
- If you take a large position in a small-cap or micro-cap company, you can cross the 5% threshold relatively easily.
- Crossing 5% triggers immediate disclosure obligations and restricts your trading flexibility.
- Even below 5%, if you are acting in concert with other investors (e.g., other Korean investors buying the same stock based on your recommendation), the SEC may aggregate your holdings.

## Action Items for Palace Fund

1. **Monitor position sizes relative to outstanding shares.** Before building a position, check the company's shares outstanding and calculate what percentage you would own.
2. **Set alerts at 4% ownership.** Give yourself a buffer before hitting the 5% trigger.
3. **If you cross 5%**: Determine whether to file 13D or 13G. If your intent is purely passive (no plans to influence management), file Schedule 13G. If you want to engage with management or seek board seats, file 13D.
4. **13F is not currently applicable** unless AUM exceeds $100 million in 13(f) securities.
5. **Be cautious about "group" formation.** If you and Korean co-investors are communicating about a position and coordinating purchases, the SEC may treat you as a group whose holdings are aggregated for 13D/13G purposes.
6. **Consult counsel before crossing 5%** in any position. The filing obligations and trading restrictions are significant.