TIDMWKOF
WEISS KOREA OPPORTUNITY FUND LTD.
LEI 213800GXKGJVWN3BF511
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)
HALF-YEARLY FINANCIAL REPORT AND UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIODED 30 JUNE 2023
Company Performance
[][]
Performance Summary
As at As at
30 June 2023 31 December 2022
£ £
Total Net Assets[1] 119,364,163 127,080,493
Net Asset Value ("NAV") Per Share[2] 1.72 1.83
Mid-Market Share Price 1.80 1.81
[][][][][][][][]
Financial
Highlights
As at Since inception
30 June 2023
NAV -3.4% 116.8%[5]
Return[3,4]
Benchmark 6.7% 61.0%
Return[6,7]
As at As at
30 June 2023 31 December 2022
Portfolio 53.1% 51.7%
Discount*
Share Price 4.5% -1.6%
Premium/Disc
ount[8]
Fund 3.0% 3.5%
Dividend
Yield[9]
Average 4.2x 4.0x
Trailing 12
-Month P/E
Ratio of
Preference
Shares
Held[10]
P/B Ratio 0.3 0.3
of
Preference
Shares
Held[11]
Annualised 2.1% 2.0%
Total
Expense
Ratio[12]
*Portfolio Discount
The portfolio discount represents the discount of WKOF's actual NAV to the value
of what the NAV would be if WKOF held the respective common shares of issuers
rather than preference shares on a one-to-one basis.
As at close of business on 18 September 2023, the latest published NAV per Share
was £1.68 and the Share Price was £1.64.
Company Summary
The Company
Weiss Korea Opportunity Fund Ltd. ("WKOF" or the "Company") was incorporated
with limited liability in Guernsey as a registered closed-ended investment
company on 12 April 2013. The Company's shares were admitted to trading on AIM
of the London Stock Exchange (the "LSE") on 14 May 2013.
The Company is managed by Weiss Asset Management LP (the "Investment Manager" or
"WAM"), a Boston-based investment management company registered with the
Securities and Exchange Commission and the Commodity Futures Trading Commission
in the United States of America.
Investment Objective and Dividend Policy
The Company's investment objective is to provide Shareholders with an attractive
return on their investment, predominantly through long-term capital
appreciation. The Company is geographically focused on South Korean ("Korean")
companies. Specifically, the Company invests primarily in listed preference
shares issued by companies incorporated in South Korea ("Korea"), which in many
cases trade at a discount to the corresponding common shares of the same
companies. Since the Company's admission to AIM, the Investment Manager has
assembled a portfolio of Korean preference shares that it believes are
undervalued and could appreciate based on the criteria that it selects. The
Company may, in accordance with its investment policy, also invest some portion
of its assets in other securities, including exchange-traded funds, futures
contracts, options, swaps and derivatives related to Korean equities, and cash
and cash equivalents. The Company does not have any concentration limits.
The Company intends to return to Shareholders all dividends received, net of
withholding tax, on an annual basis.
Investment Policy
The Company is geographically focused on South Korean companies. Some of the
considerations that affect the Investment Manager's choice of securities to buy
and sell may include the discount at which a preference share is trading
relative to its respective common share, dividend yield and its liquidity, among
other factors. Not all of these factors will necessarily be satisfied for
particular investments.
Preference shares are selected by the Investment Manager at its sole discretion,
subject to the overall control of the Board of Directors of the Company (the
"Board").
From time to time, the Company may purchase certain credit default swaps on the
sovereign debt of South Korea and put options on the iShares MSCI South Korea
ETF ("EWY") as general market and portfolio hedges, but did not hedge its
exposure to interest rates or foreign currencies during the period ended 30 June
2023 (2022: Nil). Please see additional information about the nature of these
hedges in the Investment Manager's Report within.
Investment Process
The Investment Manager monitors the discounts and yields on the universe of
Korean preference shares as well as events or catalysts that could affect
preference share discounts leading to material price changes.
Multiple criteria are used to rank and calculate the returns for each preference
share, including but not limited to:
· The discount that the preference share is trading at relative to its common
share
· Expected dividend yield
· Future catalysts or events
· Management quality
· Fundamentals of the company
· Market impact from entering and exiting our position
We expect to remain close to fully invested as long as the opportunity set
remains attractive.
Why South Korea?
The future of the South Korean economy looks promising. The global success of
companies like Hyundai, LG Electronics and Amorepacific stimulates other areas
of the South Korean economy both through the demand for intermediary goods and
the demand for services by the workers at these companies. In addition, South
Korea has emerged as one of the world's most innovative countries as it:
· Ranked 1st in the Bloomberg Innovation Index for eight of the last nine
years.[13]
· Filed the highest number of patent applications relative to GDP in 2022.[14]
· Has an exceptionally high credit rating on its sovereign debt. South Korea
was rated higher than Japan and the U.K. by Moody's, S&P, and Fitch.[15]
· Ranked 6th largest exporter in the world in 2022.[16]
· Ranked 13th largest economy by GDP in the world in 2022.[17]
· Ranked 5th in the World Bank's Ease of Doing Business Report in 2020.[18]
· Ranked in the top 10% in each of reading, mathematics and science Programme
for International Student Assessment (PISA) test scores in 2018.[19 ]
South Korean companies are thus a key part of the value chain in some of the
world's most exciting industries, such as electric vehicles, 5G technology and
smartphones. The country also boasts a high GDP per capita, one of the lowest
government debt/GDP ratios of any country, large foreign exchange reserves, and
low levels of unemployment.
Although its population is ageing, the general education level of South Korea's
work force is increasing. South Korean students are among the top performing
students in the Programme for International Student Assessment tests.[19] This
provides a pool of talent that can be tapped for future growth.
[]
Index Name[20] P/E Ratio P/B Ratio
Nifty Index (India) 20.1 3.5
S&P 500 (US) 20.4 4.3
Nikkei 225 (Japan) 20.5 2.0
FTSE 100 (UK) 10.6 1.7
Shanghai Composite (China) 11.2 1.4
Hang Seng Index (HK) 9.5 1.0
TAIEX (Taiwan) 18.1 2.1
KOSPI 200 (S. Korea) 15.4 0.9
The South Korean stock market appears fundamentally cheap relative to other
equity markets. This cheap valuation can be largely explained by the
historically poor corporate governance displayed by the major South Korean
conglomerates. However, events over the last several years indicate a trend of
awareness and improvements in corporate governance. There has been a large
increase in publicly traded South Korean companies subject to activist demands
in 2023, relative to previous years, with many of these demands coming from
local investors. One underlying thesis of our strategy is that improved
corporate governance will attract more investors to South Korea. The Investment
Manager's Report sets out some examples of improvements in corporate governance
that have taken place during the most recent six months. In turn, over time, we
believe that this is likely to narrow the discount of the preference shares held
in WKOF's portfolio, thus increasing the value of WKOF's holdings.
Korean Preference Shares
Many of the largest companies in the Korean market issue preference shares in
addition to their common shares. These preference shares are equity shares that
receive the same dividend per share as the voting common shares plus an
additional percentage of the preference shares' par value per share. In return
for this higher dividend, preference shares are non-voting in normal
circumstances, although they do have voting rights in certain situations. Many
of these preference shares trade at less than half the price of the
corresponding common shares despite receiving a slightly higher dividend amount
as the common shares and, therefore, provide preference shareholders with
relatively higher yields than the corresponding common shares.
The majority of Korean preference shares were issued in the mid-1990s, when the
Korean government pressured chaebols (family-owned Korean conglomerates) to
raise equity and reduce debt within their capital structures. By issuing non
-voting shares, the founders of the Korean companies were able to raise equity
capital without diluting their voting control. The additional payment as a
percentage of par value that preference shares paid out to investors, albeit
nominal today, was sufficiently large relative to the dividends in the 1990s to
attract investors. Today, there are 118 Korean preference shares outstanding
with an aggregate market capitalisation of approximately £40 billion.[21,22]
Although preference shares typically do not have voting rights, an economic or
financial model that values equity on the discounted value of future cash flows
would imply that the preference shares of these companies should be trading at
roughly the same price as the corresponding common shares. Further, preference
shares are not associated with over-priced speculative companies; rather, many
of the leading companies in the Korean economy have preference shares
outstanding today.
Continued corporate governance improvements, increased dividend payouts and
investor activism continue to serve as catalysts for preference share discounts
narrowing. The Company invests in a portfolio of discounted Korean preference
shares, including Korean market heavyweights such as LG Chem Ltd., Hyundai Motor
Company, AmorePacific Corp., and LG Electronics Inc.
Top 10 Holdings
1. LG CHEM LTD., PFD
16.5% OF WKOF NAV DISCOUNT TO COMMON SHARE: -47%
Korea's largest chemical company by market capitalisation, LG Chem manufacturers
and sells petrochemical products and advanced materials, including plastics and
EV batteries.[23] Its EV battery business and subsidiary, LG Energy Solution is
the second largest EV battery maker in the world.[24] In 2022, LG Chem generated
over £34bn in revenue globally.[25]
2. HYUNDAI MOTOR COMPANY, 2ND PFD
15.3% OF WKOF NAV DISCOUNT TO COMMON SHARE: -47%
Hyundai Motor Company is one of Korea's leading car manufacturers by market
share, producing and selling more than 3.9 million units globally in 2022.
Hyundai plans on increasing its presence in the electric vehicle market, while
targeting to sell over 4.3 million units in 2023.[26,27]
3. LG ELECTRONICS INC., PFD
10.4% OF WKOF NAV DISCOUNT TO COMMON SHARE: -57%
LG Electronics is a household brand in home appliances, with various product
lines including washing machines, televisions, refrigerators, and smart phones.
According to market research firm Omdia, the company ranked second globally in
terms of TV market share in 2022, capturing 16.7% of global TV sales.[28]
4. HANWHA CORPORATION 3RD PFD
7.1% OF WKOF NAV DISCOUNT TO COMMON SHARE: -50%
Hanwha Corporation specialises in producing and trading chemicals, aerospace &
defence products, and energy products. It also deals in the construction and
financial services industry. A Fortune Global 500 company, Hanwha Corporation's
subsidiaries include Korea's oldest life insurance company and Hanwha Solutions,
a leading domestic manufacturer of solar cell panels.[29]
5. MIRAE ASSET DAEWOO CO., LTD., 2ND PFD
5.6% OF WKOF NAV DISCOUNT TO COMMON SHARE: -49%
Mirae Asset Daewoo is a South Korean financial services firm offering securities
trading, equity underwriting, investment banking services, and wealth/asset
management. It conducts business globally, including the United States, Canada,
United Kingdom, and China.[30]
6. AMOREPACIFIC CORP., PFD
5.5% OF WKOF NAV DISCOUNT TO COMMON SHARE: -68%
Amorepacific develops beauty and cosmetic products while operating over 30
brands, including Etude and Laneige. Amorepacific's portfolio of products ranges
from perfume to dental care, including a premium tea brand.[31]
7. CJ CHEILJEDANG CORP, PFD
5.4% OF WKOF NAV DISCOUNT TO COMMON SHARE: -50%
CJ CheilJedang is a leading food company in Korea, focused on processing food
ingredients into groceries such as refined sugar, flour, and processed meats.
The company also operates a number of food brands that specialise in home meal
replacements and snacks, including names like Bibigo and Petitzel. CJ
CheilJedang also operates in the bio industry and produces plant-based protein
and amino acids.[32]
8. LG HOUSEHOLD & HEALTH CARE LTD., PFD
3.3% OF WKOF NAV DISCOUNT TO COMMON SHARE: -59%
LG Household & Health Care operates within a number of industries, spanning from
cleaning products to beauty care. Beginning with an acquisition of Coca-Cola's
Korea bottling operation in 2007, LG Household & Health Care also established a
beverage business segment, which now includes the distribution of tea, coffee,
and juices.[33]
9. DOOSAN FUEL CELL CO., LTD., 1P
3.3% OF WKOF NAV DISCOUNT TO COMMON SHARE: -70%
One of the largest fuel cell manufacturers by market capitalisation, Doosan Fuel
Cell produces and sells stationary fuel cell products globally. The company is
focused on sustainable electricity and heat generation. Its products are
targeted towards residential, commercial, and industrial use.[34]
10. SK CHEMICALS CO., LTD., NEW PREF
3.2% OF WKOF NAV DISCOUNT TO COMMON SHARE: -53%
SK Chemicals focuses on the production of environmentally friendly materials and
life science products. Green chemicals include bio-based material used in the
production of polyurethane, as well as amorphous resin for containers and home
appliances.[35] Its life science segment spans treatments for the common cold to
asthma treatments.
Chair's Report
For the period ended 30 June 2023
As mentioned in the 2022 Annual Report Chair's Report, Norman Crighton has
stepped down as Chair of WKOF, having served for 10 years. The Directors and
Investment Manager would like to thank him for his efforts and dedication and
wish him all the best in his future endeavours.
As the new WKOF Chair, I am pleased to provide the 2023 Interim Report. During
the period from 1 January 2023 to 30 June 2023 (the "Period"), WKOF's Net Asset
Value ("NAV") in pounds sterling ("GBP") declined by 3.4%, including reinvested
dividends,[36] compared to the reference MSCI South Korea 25/50 Net Total Return
Index ("the Korea Index"),[37] which appreciated by 6.7% in GBP. Since the
admission of WKOF to AIM in May 2013, the Net Asset Value has increased by
116.8% including reinvested dividends[38] compared to the Korea Index returns of
61.0%, a cumulative outperformance of 55.8% since inception.
Although the short-term absolute and relative performance has been disappointing
- and your Investment Manager provides more detail in their report relating to
this recent underperformance - the long-term performance is impressive with an
annualised return of 7.9% since inception. The Board believes that the portfolio
discount and the overarching WKOF thesis remains compelling. The "see through"
discount of the portfolio (the weighted average discount of the preference
shares WKOF owns relative to the corresponding common shares of the same
companies) was at 53.1%, close to the largest discount since WKOF joined AIM
over 10 years ago. WKOF owns securities of companies which, in aggregate, have
solid businesses in their industries, healthy balance sheets, and are making
positive corporate governance improvements.
The Directors declared an interim dividend of 5.3517 pence per Share on 2 May
2023, equating to a 3.0% net dividend yield over the past 12 months, to
distribute the income received by WKOF in respect of the year ended 31 December
2022. This dividend was paid to all Shareholders on 9 June 2023. To date, WKOF
has repurchased 12.6% of Ordinary Shares issued at admission and continues to
have the intention to repurchase shares if they trade at a significant discount
to Net Asset Value in the future. The share price traded in line with the NAV
over the period and no shares were repurchased in the period.
WKOF offers Shareholders the regular opportunity to elect to realise all, or a
part, of their shareholding in WKOF (the "Realisation Opportunity") once every
two years, on the anniversary of WKOF's admission date. The latest Realisation
Opportunity occurred in May 2023. We were pleased to see that only 41,496 shares
were tendered (0.06% of WKOF's shares). The Directors wish to thank our
Shareholders for their patience and long-term perspective as evidenced by the
limited number of shares tendered.
I look forward to communicating with you about WKOF's activities in the future
including the continued efforts to maintain the highest governance and
regulatory standards. If any Shareholder wishes to speak with the Board, please
contact our Broker, Singer Capital Markets, and we will be happy to answer any
questions you may have.
Krishna Shanmuganathan
Chair
15 September 2023
Investment Manager's Report
For the period ended 30 June 2023
On a year-to-date basis as at June 2023, WKOF's NAV in GBP declined by 3.4%,
including reinvested dividends,[38] compared to the reference MSCI South Korea
25/50 Net Total Return Index,[37] which appreciated by 6.7% in GBP.[37] Since
inception, the NAV performance to 30 June 2023, including reinvested dividends,
was +116.8%, continuing to outperform relative to the Korea Index, which
returned +61.0% over the same period.
As displayed in the performance attribution table below, the underperformance of
the underlying common shares of the companies owned by WKOF as compared to the
top positions by index weight in the Korea Index, contributed to 10.4% of WKOF's
underperformance in the period ended 30 June 2023. This can partially be
explained by the significant share price increases of memory semiconductor
manufacturers, Samsung Electronics ("SEC") and SK Hynix ("Hynix"), relative to
the index as part of the sentiment-driven global AI rally. SEC's common shares,
which made up approximately 35.2% of the Korea Index, returned 19.8% in GBP,
while Hynix's common shares, which made up approximately 5.9% of the Korea
Index, returned 40.6% in GBP.[21] At present, WKOF does not have a position in
SEC's preference shares as they trade at very narrow discounts and are thus
inconsistent with WKOF's investment thesis. WKOF also does not hold a position
in Hynix because Hynix has not issued a series of preference shares. These are
noteworthy examples offered due to their prominence in the Korea Index and the
magnitude of their performance. However, we caution investors that there are
many other differences in composition between WKOF's portfolio and the portfolio
of the Korea Index and note that these are only two reasons that a security may
be included in the Korea Index but excluded from WKOF's portfolio.
WKOF Performance Attribution
At the end of June 2023, WKOF held a portfolio of 35 South Korean ("Korean")
preference shares. As a reminder, the economic rights of Korean preference
shares are generally the same or slightly better than the corresponding common
shares, yet the preference shares often trade at substantial discounts to the
common shares. WKOF's returns, on a currency-neutral basis, are driven by five
primary factors:
· The performance of the Korean equity market generally;
· The performance of the common shares (which correspond to the preference
shares held by WKOF) relative to the performance of the Korean equity market;
· The discounts of the preference shares WKOF holds narrowing or widening
relative to their corresponding common shares;
· Excess dividend yields of the preference shares held by WKOF; and
· Fees, expenses and other factors.
In order to compare WKOF's relative return to the Korea Index, we report the
attribution of these aforementioned factors to WKOF's performance. The following
table provides this performance attribution for the last 12 months and for the
period since the inception of WKOF in May 2013 to 30 June 2023.
Performance Attribution Table
[]
Return Component[20] Year-to-Date Last 12 Months Since Inception
The Korea Index 6.7% 6.6% 61.0%
WKOF common Shares vs the -10.4% -10.0% -14.1%
Korea Index
Discount Narrowing 0.8% 0.4% 63.7%
(Widening) of Preferred
Shares Owned
Excess Dividend Yield of 1.3% 1.4% 16.4%
Preferred Shares Owned
Fees, Expenses and Others -1.8% -1.5% -10.2%
NAV Performance -3.4% -3.1% 116.8%
WKOF's investment thesis at inception was based on the likelihood that WKOF's
NAV would perform well, largely due to (i) decreases in the large discounts of
the preference shares held by WKOF relative to their corresponding common shares
and (ii) the related excess dividend yields caused by these large discounts.
This has, indeed, generally been the case as these two factors have collectively
been the main contributors to WKOF's outperformance relative to the Korea Index
since inception. At present, we remain confident in both of these theses.
In September 2013, shortly after inception, the preference shares held by WKOF
traded at a 55.5% discount to their corresponding common shares and the dividend
yield was 1.7%. As at 30 June 2023, the discount and dividend yield were 53.1%
and 3.0%, respectively. Finally, we are focused on returns since inception
because we believe that due to high levels of idiosyncratic volatility, any data
that is gathered over a one-year period is unlikely to be a reliable guide for
future performance.
Review of the South Korean Macro Environment
In the first half of 2023, the performance of Korean equity markets materially
outpaced the country's recovery in broader economic conditions.
On a year-to-date basis ending 30 June 2023, the benchmark Korea Index returned
14.4% and the KOSPI 200 Index returned 16.1%.[21] To contextualise these
returns, Korea was one of the best performing markets in Asia alongside Taiwan
and Japan.[39] Looking into daily trade flow and volume, foreign investors were
the largest net buyers, accumulating more than 12.3 trillion KRW net in the
first half of 2023, according to the Korea Exchange.[40] However, unlike
previous market cycles, the stock market gains were not evenly distributed
across a wide range of sectors. While the information technology (including
memory semiconductors) and materials (including EV batteries and other
materials) sectors outperformed the Korea Index, the utilities, healthcare,
financials, and consumer staples sectors generated negative returns. Foreign net
buying was also concentrated in select sectors and names. For instance, out of
the 12.3 trillion KRW in net buy flow by foreigners, 12.08 trillion KRW (roughly
98%) was focused on one issuer: Samsung Electronics.[41]
More broadly, the South Korean economy finally began to exhibit signs of a
rebound during the second quarter of 2023. Korea's exports posted a meaningful
rise during the final two months of the quarter, even escaping a trade deficit
for the first time since February 2022.[42] The improvement in the balance of
trade was led by trade exports, which grew 7.9% and 13% in month-over-month
terms in May and June, respectively.[43]
Focusing exclusively on rebounding exports and the surge in a few risk asset
prices, however, would present an incomplete view of the South Korean economy.
As Governor Rhee noted at the most recent Bank of Korea Monetary Policy Board
meeting on 13 July 2023, other macroeconomic indicators still require careful
attention, such as persistent high core CPI inflation and significant household
debt.[44] For instance, while year-on-year CPI increases moderated to 2.7% in
June 2023 from a high of 6.3% in July 2022, core CPI increases remained in the
4% range in June 2023 from a high of 5% in January 2023, according to Statistics
Korea.[45] Household debt remains at 103% of GDP, which is an area that the Bank
of Korea is "closely monitoring".[46]
Housing price trends are another significant economic factor for investors in
Korea to monitor. Korean households generally have a high exposure to property
assets given that a significant percentage of household debt can be attributed
to jeonse, which is a rental arrangement where tenants provide an interest-free
loan to landlords instead of monthly rents. According to the Korea Economic
Research Institute, jeonse, if counted as household debt, would account for 36%
of all Korean household debt in 2022.[47] Property market shocks therefore would
introduce volatility in overall household balance sheets.[48] For these reasons,
we monitor changes in nationwide housing prices, which have dropped 8.6% from
June 2022 to June 2023, according to the Real Estate Board in Korea.[49]
To be clear, WKOF is not a macro fund, and consequently, this information is
offered solely to help characterise WKOF's performance relative to the market in
which it is most active.
Valuation of Major Indices[21]
[]
Index Name P/E Ratio P/B Ratio Dividend Yield
Nifty Index (India) 20.1 3.5 1.4%
S&P 500 (US) 20.4 4.3 1.6%
Nikkei 225 (Japan) 20.5 2.0 1.8%
FTSE 100 (UK) 10.6 1.7 4.2%
Shanghai Composite (China) 11.2 1.4 2.7%
Hang Seng Index (HK) 9.5 1.0 3.8%
TAIEX (Taiwan) 18.1 2.1 4.1%
KOSPI 200 (S. Korea) 15.4 0.9 1.9%
WKOF Portfolio Holdings[50] 4.2 0.3 3.0%
South Korean equities and the portfolio holdings of WKOF continue to offer
apparent valuation discounts relative to other countries' equity markets as
represented by the price-to-earnings ratios ("P/E ratios") and price-to-book
ratios ("P/B ratios") listed above.
As previously discussed, WKOF's current portfolio discount of the preference
shares it owns relative to the corresponding common shares was 53.1%. In
addition, the KOSPI 200 has depressed valuation multiples as shown above
relative to the average of other major indices.
Portfolio Discussion
In this section, we will discuss WKOF's two largest positions by portfolio
weight, highlight what we believe are compelling valuations and provide examples
of what we believe to be shareholder-friendly activity that could potentially
serve as catalysts for narrowing preference share discounts over time.
WKOF's portfolio discount changed from 51.7% at the end of December 2022 to
53.1% by 30 June 2023, as we rotated the portfolio to sell tighter discount
names and buy wider discount names. We believe these levels present an
attractive risk/reward profile when considering corporate governance risk or
broad market multiples such as P/B or P/E.
The largest position by portfolio weight was WKOF's position in the preference
shares of LG Chem ("LGC"). As we discussed in previous correspondence, the
preference shares of LGC appear cheap not only in terms of preference discounts,
but also because of the large discount to NAV of the common shares of LGC itself
due to LGC's 81.8% listed stake value in the world's second largest battery cell
maker, LG Energy Solution ("LGES").[51,52] As of 30 June 2023, LGC's common
shares were trading at a roughly 60% NAV discount and LGC's preference shares
were trading at a further 47% discount to the common shares.[21]
LGC is also undertaking initiatives that appear designed to demonstrate the
value of its LGES stake to investors. For instance, on 12 July 2023, LGC decided
to raise GBP £1.5 billion by issuing bonds exchangeable for LGC's LGES shares.
The exchangeable bonds were issued at maturity interest rates of 1.25% and 1.6%
for the five-year and seven-year bonds, respectively.[53] We are hopeful that
continued use of LGC's stake in LGES in this manner will tend to reduce the
substantial discount at which the LGES preference shares trade relative to LGES'
common shares.
As of 30 June 2023, the second largest position by portfolio weight was the
preference shares issued by Hyundai Motors ("HMC"), which was also the case as
of year-end 2022. In April 2023, HMC updated its shareholder return policy with
two material changes that we view as shareholder friendly.[54] HMC increased
visibility into its dividend plan by stating that it will start paying out
quarterly dividends, a practice also employed by Samsung Electronics, and will
start using a minimum payout ratio of 25% of its net profit as opposed to its
prior practice of 30-50% of free cash flow.[55] HMC expressed that the impetus
behind this change stems from the request from shareholders to address the
difficulty in accurately projecting consolidated free cash flow of HMC due to
its financial subsidiary, HMC Capital, which provides auto financing for HMC
consumers among other financial services.[56] In addition to increasing dividend
visibility, HMC committed to share repurchase plans for both common and
preference shares.
The average discount of HMC's preference shares relative to its common shares
tightened during April 2023 from 49% at the beginning of the month to 46% but,
by 30 June 2023, the first series of HMC's preference shares had widened
slightly to a 47% discount. That having been said, this is wider than historical
five-year average levels.[21] In addition, based on local sell-side analysts'
estimates of HMC's full-year dividend per share, as of 30 June 2023 the first
series of preference shares traded at a forward yield of 9%.[57]
Korean Corporate Governance
As we noted in the 2022 Annual Report, we continue to observe early but positive
signs in the realm of corporate governance in South Korea. The source of
activist demands, volume of requests and success rates of adding board members
to target boards all appear to exhibit positive directionality. We have also
witnessed the Korean government more actively pursuing corporate governance
reforms as described later in the report.
Much of the support in favour of reform is now originating within Korea,
particularly from domestic activist funds and the Korean government. This is
new, as historically such support mostly arose from non-Korean investors and
organisations which were ineffectively attempting to exert shareholder-friendly
pressure. According to Insightia, which publishes regular reports on the state
of shareholder activism in Asia, approximately 75-80% of activism campaigns
launched in South Korea in 2022 were "by funds based in Korea or run by Korean
fund managers," which is an increase from the 60% Insightia reported for
2019.[58] We believe this dynamic is likely to make companies more agreeable to
positive reforms.
We are also encouraged by the volume and success of activist campaigns seeking
to add board members to the boards of targeted companies. The absolute number of
campaigns increased more than 480% from 2019 to 2022. The success of these
campaigns is also increasing; in 2020, no activists were successful in putting
one or more of their nominees on the target company's board, whereas in 2022, 10
campaigns succeeded on this measure.
Finally, during the first half of 2023, the Korean government put forward two
proposals which we believe could be positive for Korean preference shares.
One specific proposal that is being discussed by the Korean legislators is
reconsidering to whom the board of directors has fiduciary duties. Currently,
Article 382-3 of the Commercial Act in Korea states that the directors have a
fiduciary duty towards "the company".[59] There are currently at least two
proposed changes to this language being discussed in the National Assembly in
2023, and both proposals suggest that the language be amended to include all
"shareholders".[60] If the Commercial Act Article 382-3 is revised accordingly
later in the year, the implications are likely to be positive for minority
shareholders in Korean companies.
Secondly, in January 2023, the nation's top financial regulator, the Financial
Services Commission ("FSC"), put forward a draft plan to improve the dividend
pay-out process of Korean companies.[61] In Korea, dividend amounts are
disclosed after the ex-date of dividends, which effectively precludes
shareholders from knowing the per-share dividend before becoming eligible to
receive dividends. The plan of the FSC, although not finalised yet, is to allow
shareholders to know the indicative dividend per share before the ex-date,
thereby giving investors optionality to purchase shares with attractive dividend
yields. If successfully implemented, the draft plan would be directly relevant
for preference shareholders, as preference shares trading at material discounts
to their corresponding common shares generate relatively larger dividend yields.
Hedging
WKOF pursues its investment strategy with a portfolio that is generally long
-only. However, as further described in WKOF's Annual Report and Audited
Financial Statements for the year ended 31 December 2017 and in subsequent
Annual Reports, the Board approved a hedging strategy intended to reduce
exposure to extreme events that would be catastrophic to its Shareholders'
Investments in WKOF because of political tensions in Northeast Asia.
WKOF has limited its use of hedging instruments to purchases of credit default
swaps ("CDS") and put options on the MSCI Korea 25/50 Index - securities that we
believe would generate high returns if Korea experienced geopolitical disaster -
which do not introduce material new risks into the portfolio. These catastrophe
hedges are not expected to make money in most states of the world. We expect
that, as with any insurance policy, WKOF's hedges will lose money most of the
time. The table below provides details about the hedges as of 30 June 2023. Note
that outside of the general market and portfolio hedges described herein, WKOF
has generally not hedged interest rates or currencies.
Credit Notional Total Cost Annual Price Paid Expiration Duration
Default Value to Cost as a % of Date (Years)
Swaps (GBP) Expiration (GBP) Notional
("CDS") (GBP) Value (per
on South annum)
Korean
Sovereign
Debt
3-year 79,242,440 (567,525) (175,548) 0.23% 6/20/2025 3.0
CDS
Concluding Remarks
It has been a frustrating 18+ months of performance for WKOF, and we wish to
express our thanks to our long-term shareholders for their patience. While WKOF
could experience periods of potentially significant under-performance in the
future, it is our belief the original investment thesis for WKOF continues to
exist at present.
Despite long-term outperformance of WKOF versus its benchmark, the preference
shares that WKOF owns remain at deeply discounted levels relative to their
common share counterparts, similar to when WKOF was listed approximately 10
years ago. This, in turn, creates an attractive relative dividend yield for the
securities WKOF owns so shareholders are compensated for waiting for discounts
to narrow. As highlighted in the report, we also believe a number of companies
whose preference shares WKOF owns, are demonstrating their willingness to engage
in shareholder-friendly activity and highlight the value of the assets they own,
sometimes at steep discounts to those assets' NAVs. Finally, while progress has
been achingly slow, the corporate governance regime in Korea appears to be
improving at last.
We believe these long-term trends continue to make WKOF an attractive investment
opportunity for long-term, value-oriented shareholders.
Weiss Asset Management LP
15 September 2023
Condensed Statement of Financial Position
As at 30 June 2023
As at As at
30 June 31 December
2023 2022
(Unaudited) (Audited)
Notes £ £
Assets
Financial 10 117,693,983 120,764,446
assets at
fair value
through
profit or
loss
Other 361,971 4,598,722
receivables
Due from 63,474 -
broker
Margin 312,568 1,327,313
account
Cash and cash 2,554,883 2,890,620
equivalents
Total assets 120,986,879 129,581,101
Liabilities
Derivative 11 1,109,294 1,145,453
financial
liabilities
Other 513,422 1,355,155
payables
Total 1,622,716 2,500,608
liabilities
Net assets 119,364,163 127,080,493
Represented
by:
Shareholders'
equity and
reserves
Share capital 12 33,912,856 33,986,846
Other 85,451,307 93,093,647
reserves
Total 119,364,163 127,080,493
Shareholders'
equity
Net Assets 7 1.7233 1.8336
Value per
Ordinary
Share
The Notes form an integral part of these Condensed Financial Statements.
The Condensed Financial Statements were approved and authorised for issue by the
Board of Directors on 15 September 2023.
Krishna Shanmuganathan Gill Morris
Chair
Audit Chair
Condensed Statement of Comprehensive Income
For the period ended 30 June 2023
For the For the
period period ended
ended
30 June 30 June 2022
2023
(Unaudited) (Unaudited)
Notes £ £
Income
Net changes 8 (1,851,203) (34,996,104)
in fair value
of financial
assets
at fair value
through
profit or
loss
Net changes 9 36,181 959,892
in fair value
of derivative
financial
instruments
through
profit or
loss
Net foreign (486,385) 487,824
currency
(losses)/gains
Dividend 392,104 445,389
income
Bank interest 9,801 -
income
Total loss (1,899,502) (33,102,999)
Expenses
Operating (1,947,468) (1,863,490)
expenses
Total (1,947,468) (1,863,490)
operating
expenses
Loss for the (3,846,970) (34,966,489)
period before
dividend
withholding
tax
Dividend 3 (86,263) (98,403)
withholding
tax
Loss for the (3,933,233) (35,064,892)
period after
dividend
withholding
tax
Loss and (3,933,233) (35,064,892)
total
comprehensive
loss for the
period
Basic and 6 (0.0568) (0.5059)
diluted loss
per Share
All items derive from continuing activities.
Following review of the AIC SORP and its impact on the Statement of
Comprehensive Income, the Board has decided not to follow the recommended income
and capital split. This is due to the fact that the Company's dividend policy is
not influenced by its expense policy. See Company Summary section for details of
the Company's dividend policy.
The Notes form an integral part of these Condensed Financial Statements.
Condensed Statement of Changes in Equity
For the period ended 30 June 2023
Share Other
capital reserves Total
For the period Notes £ £ £
ended 30 June
2023
(Unaudited)
Balance as at 1 33,986,846 93,093,647 127,080,493
January 2023
Total - (3,933,233) (3,933,233)
comprehensive
loss for the
period
Transactions
with
Shareholders,
recorded
directly in
equity
Purchase of 12 (73,990) - (73,990)
Realisation
Shares
Distributions 4 - (3,709,107) (3,709,107)
paid
Balance as at 33,912,856 85,451,307 119,364,163
30 June 2023
Share Other
capital reserves Total
For the period Note £ £ £
ended 30 June
2022
(Unaudited)
Balance as at 1 33,986,846 132,554,299 166,541,145
January 2022
Total - (35,064,892) (35,064,892)
comprehensive
loss for the
period
Transactions
with
Shareholders,
recorded
directly in
equity
Distributions 4 - (4,417,079) (4,417,079)
paid
Balance as at 33,986,846 93,072,328 127,059,174
30 June 2022
The Notes form an integral part of these Condensed Financial Statements.
Condensed Statement of Cash Flows
For the period ended 30 June 2023
For the period For the period ended 30 June 2022
ended 30 June
2023
(Unaudited) (Unaudited)
Notes £ £
Cash flows
from
operating
activities
Loss and (3,933,233) (35,064,892)
total
comprehensive
loss for the
period
Adjustments
for:
Net change in 8 1,851,203 34,996,104
fair value of
financial
assets held
at fair value
through
profit or
loss
Exchange 1,147,298 (487,824)
losses/(gains)
on cash and
cash
equivalents
Net change in 9 (36,181) (959,892)
fair value of
derivative
financial
instruments
held at fair
value through
profit or
loss
Increase in (18,444) (18,869)
receivables
excluding
dividends
Increase/(decr 92,894 (141,026)
ease) in
other
payables
excluding
withholding
tax
Dividend (305,841) (346,988)
income
Dividend 3,626,410 3,938,692
received
Purchase of (9,766,020) (5,198,292)
financial
assets at
fair value
through
profit or
loss
Proceeds from 10,921,807 7,689,890
the sale of
financial
assets at
fair value
through
profit or
loss
Net cash 3,579,893 4,406,903
generated
from
operating
activities
Cash flows
from
investing
activities
Opening of 20 1,799,402
derivative
financial
instruments
Closure of - (163,217)
derivative
financial
instruments
Decrease/(incr 1,014,745 (1,027,558)
ease) in
margin
account
Net cash 1,014,765 608,627
generated
from
investing
activities
Cash flows
from
financing
activities
Repurchase of 12 (73,990) -
realisation
Shares
Distributions 4 (3,709,107) (4,417,079)
paid
Net cash used (3,783,097) (4,417,079)
in financing
activities
Net increase 811,561 598,451
in cash and
cash
equivalents
Exchange (1,147,298) 487,824
(losses)/gains
on cash and
cash
equivalents
Cash and cash 2,890,620 3,091,245
equivalents
at the
beginning of
the period
Cash and cash 2,554,883 4,177,520
equivalents
at the end of
the period
The Notes form an integral part of these Condensed Financial Statements.
Notes to the Unaudited Condensed Financial Statements
For the period ended 30 June 2023
1. General information
The Company was incorporated with limited liability in Guernsey, as a closed
-ended investment company on 12 April 2013. The Company's Shares were admitted
to trading on AIM of the London Stock Exchange ("LSE") on 14 May 2013.
The Investment Manager of the Company is Weiss Asset Management LP.
At the Annual General Meeting ("AGM") held on 27 July 2016, the Board approved
the adoption of the new Articles of Incorporation in accordance with Section
42(1) of the Companies (Guernsey) Law, 2008 (the "Law").
2. Significant accounting policies
a. Statement of compliance
The Condensed Financial Statements of the Company for the period ended 30 June
2023 have been prepared in accordance with IFRS adopted by the European Union
and the AIM Rules of the London Stock Exchange. They give a true and fair view
and are in compliance with the Law.
b. Basis of preparation
The Condensed Financial Statements are prepared in pounds sterling (£), which is
the Company's functional and presentational currency. They are prepared on a
historical cost basis modified to include financial assets at fair value through
profit or loss.
The Condensed Financial Statements, covering the period from 1 January to 30
June 2023, are not audited.
The accounting policies adopted are consistent with those used in the Annual
Report and Audited Financial Statements for the year ended 31 December 2022.
The Condensed Financial Statements do not include all the information and
disclosures required in the Annual Report and Audited Financial Statements and
should be read in conjunction with the Annual Report and Audited Financial
Statements for the year ended 31 December 2022. The Auditor's Report contained
within the Annual Report and Audited Financial Statements provided an unmodified
opinion.
The preparation of the Condensed Financial Statements requires management to
make estimates and assumptions that affect the reported amounts of revenues,
expenses, assets, and liabilities at the date of these Condensed Financial
Statements. If in the future such estimates and assumptions which are based on
management's best judgement at the date of the Condensed Financial Statements,
deviate from the actual circumstances, the original estimates and assumptions
will be modified as appropriate in the period in which the circumstances change.
c. Going concern
In accordance with the Company's Articles of Incorporation and its Admission
Document, the Company offers all Shareholders the right to elect to realise some
or all of the value of their Ordinary Shares (the "Realisation Opportunity"),
less applicable costs and expenses, on or prior to the fourth anniversary of
Company's admission to AIM and, unless it has already been determined that the
Company be wound-up, every two years thereafter, the most recent being 12 May
2023 (the "Realisation Date").
On 13 March 2023, the Company announced that pursuant to the Realisation
Opportunity, Shareholders who are on the register as at the record date may
elect, during the Election Period, to redesignate all or part (provided that
such part be rounded up to the nearest whole Ordinary Share) of their Ordinary
Shares as Realisation Shares. The Election Period commenced on 12 April 2023 and
closed at 1pm, 5 May 2023. Elections were received from Shareholders totalling
of 41,496 Ordinary Shares, representing approximately 0.06 per cent of the
Company's issued share capital.
Due to the limited number of elections received for the Realisation Opportunity,
all Realisation Shares were redeemed utilising the Company's cash reserves, with
an accompanying record date of 26 May 2023.
Based on the fact that the assets currently held by the Company consist mainly
of securities that are readily realisable, whilst the Directors acknowledge that
the liquidity of these assets needs to be managed, the Directors believe that
the Company has adequate financial resources to meet its liabilities as they
fall due for at least twelve months from the date of this report, and that is
appropriate for the Financial Statements to be prepared on a going concern
basis.
3. Taxation
The Company has been granted Exempt Status under the terms of The Income Tax
(Exempt Bodies) (Guernsey) Ordinance, 1989 to income tax in Guernsey. Its
liability is an annual fee of £1,200 (2022: £1,200). The amounts disclosed as
taxation in the Condensed Statement of Comprehensive Income relate solely to
withholding tax levied in South Korea on distributions from South Korean
companies at an offshore rate of 22 %.
4. Dividends to Shareholders
Dividends, if any, will be paid annually each year. An annual dividend of 5.3517
pence per Share (£3,709,107) was approved on 2 May 2023 and paid on 9 June 2023
in respect of the year ended 31 December 2022. An annual dividend of 6.3732
pence per Share (£4,417,069) was approved on 12 May 2022 and paid on 10 June
2022 in respect of the year ended 31 December 2021.
5. Significant accounting judgements, estimates and assumptions
The preparation of the Condensed Financial Statements in conformity with IFRS
requires management to make judgements, estimates, and assumptions that affect
the application of policies and the reported amounts of assets and liabilities,
income and expense, and the accompanying disclosures. Uncertainty about these
assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected in future
periods. The significant judgements, estimates, and assumptions made by
management when applying the Company's accounting policies, as well as the key
sources of estimation uncertainty, were the same for these Condensed Financial
Statements as those that applied to the Annual Report and Audited Financial
Statements for the year ended 31 December 2022.
6. Basic and diluted loss per Share
The total basic and diluted loss per Ordinary Share of £0.0568 (30 June 2022:
£0.5059) for the Company has been calculated based on the total loss after tax
for the period of £3,933,233 (for the period ended 30 June 2022: £35,064,892)
and the weighted average number of Ordinary Shares in issue during the period of
69,296,302 (for the period ended 30 June 2022: 69,307,078).
7. Net Asset Value per Ordinary Share
The NAV of each Share of £1.7233 (as at 31 December 2022: £1.8336) is determined
by dividing the net assets of the Company attributed to the Ordinary Shares of
£119,364,163 (as at 31 December 2022: £127,080,493) by the number of Ordinary
Shares in issue at 30 June 2023 of 69,265,582 (as at 31 December 2022:
69,307,078 Ordinary Shares in issue).
8. Net changes in fair value on financial assets at fair value through profit
or loss
For the For
period the
ended period
ended
30 June 2023 30
June
2022
(Unaudited) (Unaudited)
£ £
Realised 3,906,098 2,131,698
gain on
investments
Realised (1,015,368) (1,444,941)
loss on
investments
Unrealised 10,119,230 -
gains on
investments
Unrealised (14,861,163) (35,682,861)
losses on
investments
Net changes (1,851,203) (34,996,104)
in fair
value on
financial
assets at
fair value
through
profit or
loss
9. Net changes in fair value on derivative financial instruments at fair
value through profit or loss
For the For the
period period
ended ended
30 June 30 June
2023 2022
(Unaudited) (Unaudited)
£ £
Realised - 272,265
gain on
options
Realised - (42,589)
loss on
options
Realised - 1,157,384
gain on
credit
default
swaps
Realised - (861,537)
loss on
credit
default
swaps
Unrealised - 136,822
gain on
options
Unrealised 36,181 297,547
gain on
credit
default
swaps
Net changes 36,181 959,892
in fair
value on
financial
derivatives
at fair
value
through
profit or
loss
10. Financial assets at fair value through profit or loss
As at As at
30 June 31 December
2023 2022
(Unaudited) (Audited)
£ £
Cost of 145,672,008 149,112,223
investments
at
beginning
of the
period/year
Purchases 9,766,020 10,167,914
of
investments
in the
period/year
Disposal of (10,985,280) (11,810,895)
investments
in the
period/year
Net 2,890,730 (1,797,234)
realised
gains/(losse
s) on
investments
in the
period/year
Cost of 147,343,478 145,672,008
investments
held at end
of the
period/year
Unrealised (29,649,495) (24,907,562)
loss on
investments
Financial 117,693,983 120,764,446
assets at
fair value
through
profit or
loss
Financial assets are valued at the bid-market prices ruling as at the close of
business at the Condensed Statement of Financial Position date, net of any
accrued interest which is included in the Condensed Statement of Financial
Position as an income related item. The Directors are of the opinion that the
bid-market prices are the best estimate of fair value in accordance with the
requirements of IFRS 13 `Fair Value Measurement'. Movements in fair value are
included in the Condensed Statement of Comprehensive Income.
11. Derivative financial instruments at fair value through profit or loss
As at As at
30 June 31 December
2023 2022
(Unaudited) (Audited)
£ £
Cost of (1,835,637) (724,897)
derivatives
at
beginning
of the
period/year
Opening of (20) (1,799,480)
derivatives
in the
period/year
Closure of - 163,217
derivatives
in the
period/year
Realised - 525,523
gain on
closure of
derivatives
in the
period/year
Net cost of (1,835,657) (1,835,637)
derivatives
held at end
of the
period/year
Unrealised 726,363 690,184
gain on
derivative
financial
instruments
at fair
value
through
profit or
loss
Net fair (1,109,294) (1,145,453)
value on
derivative
financial
instruments
at fair
value
through
profit or
loss
The following are the composition of the Company's derivative financial
instruments at period/year end:
As at As at
30 June 31 December
2023 2022
Assets Liabilities Assets Liabilities
(Unaudited) (Unaudited) (Audited) (Audited)
Derivatives £ £ £ £
held for
trading:
Credit default - (1,109,294) - (1,145,453)
swaps
Total - (1,109,294) - (1,145,453)
12. Share capital
The share capital of the Company consists of an unlimited number of Ordinary
Shares of no par value.
As at As at
30 June 31 December
2023 2022
(Unaudited) (Audited)
Authorised
Unlimited - -
Ordinary
Shares at no
par value
Issued at no
par value
69,265,582 - -
(2022:
69,307,078)
Ordinary
Shares at no
par value
Reconciliation
of number of
Shares
As at As at
30 June 31 December
2023 2022
(Unaudited) (Audited)
No. of Shares No. of Shares
Ordinary 69,307,078 69,307,078
Shares at the
beginning of
the
period/year
Purchase of (41,496) -
Realisation
Shares
Total Ordinary 69,265,582 69,307,078
Shares in
issue at the
end of the
period/year
As at As at
Treasury 30 June 31 December
Shares
2023 2022
(Unaudited) (Audited)
No. of Shares No. of Shares
Treasury 11,710,747 11,437,662
Shares at the
beginning of
the
period/year
Prior year 3 -
adjustment
for
repurchase of
Ordinary
Shares
Redesignation 41,496 273,085
of
Realisation
Shares
Total Shares 11,752,246 11,710,747
at the end of
the
period/year
Share capital
account
As at As at
30 June 31 December
2023 2022
(Unaudited) (Audited)
£ £
Share capital 33,986,846 33,986,846
at the
beginning of
the
period/year
Purchase of (73,990) -
Realisation
Shares
Total Share 33,912,856 33,986,846
capital at
the end of
the
period/year
Ordinary Shares
The Company has a single class of Ordinary Shares, which were issued by means of
an initial public offering on 14 May 2013, at 100 pence per Share.
The rights attached to the Ordinary Shares are as follows:
a. The holders of Ordinary Shares shall confer the right to all dividends in
accordance with the Articles of Incorporation of the Company.
b. The capital and surplus assets of the Company remaining after payment of all
creditors shall, on winding-up or on a return (other than by way of purchase or
redemption of own Ordinary Shares) be divided amongst the Shareholders on the
basis of the capital attributable to the Ordinary Shares at the date of winding
up or other return of capital.
c. Shareholders present in person or by proxy or (being a corporation) present
by a duly authorised representative at a general meeting have on a show of
hands, one vote and, on a poll, one vote for every Share.
d. On 13 March 2023, being 61 days before the Subsequent Realisation Date, the
Company published a circular pursuant to the Realisation Opportunity, entitling
the Shareholders to serve a written notice during the election period (a
"Realisation Election") requesting that all or a part of their Ordinary Shares
be re-designated to Realisation Shares, subject to the aggregate NAV of the
continuing Ordinary Shares on the last business day before the Reorganisation
Date being not less than £50 million.
e. On 12 May 2023, 41,496 Ordinary Shares, which represented 0.06% of the
Company's issued Ordinary Share capital were redesignated as Realisation Shares.
On 24 May 2023, the Company announced that, due to the very limited number of
elections received for the Realisation Opportunity, all Realisation Shares were
compulsory redeemed utilising the Company's existing cash reserves, with an
accompanying record date of 26 May 2023 ("Redemption Date"). The Redemption
price was 177.62 pence per Realisation Share, equivalent to the unaudited Net
Asset Value per Realisation Share as at 15 May 2023.
All Realisation Shares that were redeemed have been re-designated as Ordinary
Shares and held in Treasury.
Share buyback and cancellation
During the period ended 30 June 2023, the Company purchased Nil shares (31
December 2022: Nil) of its own Shares at a consideration of £Nil (31 December
2022: £Nil) under its general buyback authority originally granted to the
Company in 2014.
The Company has 69,265,582 Ordinary Shares in issue as at 30 June 2023 (as at 31
December 2022: 69,307,078). The Company has 11,752,246 Treasury Shares in issue
as at 30 June 2023 (as at 31 December 2022: 11,710,750)
At the AGM held on 20 July 2023, Shareholders approved the authority of the
Company to buy back up to 40% of the issued Ordinary Shares (excluding Treasury
Shares) to facilitate the Company's discount management. Any Ordinary Shares
bought back may be cancelled or held in treasury.
13. Related-party transactions and material agreements
Related-party transactions
a. Directors' remuneration and expenses
The Directors of the Company are remunerated for their services at such a rate
as the Directors determine provided that the aggregate amount of such fees does
not exceed £150,000 per annum.
The Board increased their fees by £1,500 per Director, per annum effective 1
January 2023. The annual Directors' fees comprise £36,500 payable to Norman
Crighton as the Chair, £34,000 to Gill Morris as Chair of the Audit Committee
and £31,500 each to Krishna Shanmuganathan and Wendy Dorey. Effective 20 July
2023, Norman Crighton retired from the Board and Krishna was appointed as the
Chair.
During the period ended 30 June 2023, Directors' fees of £66,750 (period ended
30 June 2022: £51,250) were charged to the Company and £3,000 remained payable
at the end of the period (as at 31 December 2022: £Nil).
b. Shares held by related parties
The Directors who held office at 30 June 2023 and up to the date of this Report
held the following number of Ordinary Shares beneficially:
As at 30 June 2023 As at 31 December 2022
Ordinary % of issued Ordinary % of issued
Shares share capital Shares share capital
(Unaudited) (Unaudited) (Audited) (Audited)
Norman Crighton 20,000 0.03% 20,000 0.03%
Gillian Morris 3,934 0.01% 3,934 0.01%
Krishna Shanmuganathan - - - -
Wendy Dorey 2,552 0.00% 2,552 0.00%
There have been no changes in the interests of the above Directors during the
period.
The Investment Manager is principally owned by Dr Andrew Weiss and certain
members of the Investment Manager's senior management team. As at 30 June 2023,
Dr Andrew Weiss and his immediate family members held an interest in 7,316,888
Ordinary Shares (as at 31 December 2022: 7,010,888) representing 10.56% (as at
31 December 2022: 10.12%) of the Ordinary issued share capital of the Company.
As at 30 June 2023, employees and partners of the Investment Manager other than
Dr Andrew Weiss, their respective immediate family members or entities
controlled by them or their immediate family members held an interest in 390,408
Ordinary Shares (as at 31 December 2022: 3,594,333) representing 0.6% (as at 31
December 2022: 5.19%) of the Ordinary issued share capital of the Company.[62]
c. Investment management fee
The Company's Investment Manager is Weiss Asset Management LP. In consideration
for its services provided by the Investment Manager under the Investment
Management Agreement (IMA) dated 8 May 2013, the Investment Manager is entitled
to an annual management fee of 1.5 % of the Company's NAV accrued daily and
payable within 14 days after each month end. The Investment Manager is also
entitled to reimbursement of certain expenses incurred by it in connection with
its duties.
The IMA will continue in force until terminated by the Investment Manager or the
Company, giving to the other party thereto not less than 12 months' notice in
writing. For the period ended 30 June 2023, investment management fees and
charges of £964,912 (for the period ended 30 June 2022: £1,101,447) were charged
to the Company and £154,662 (as at 31 December 2022: £155,320) remained payable
at the period/year end.
14. Fair value measurement
IFRS 13 `Fair Value Measurement' requires the Company to establish a fair value
hierarchy that prioritises the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1 measurements) and
the lowest priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy under IFRS 13 `Fair Value
Measurement' are set as follows:
· Level 1 Quoted prices (unadjusted) in active markets for identical assets or
liabilities;
· Level 2 Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability either directly (that is, as prices) or
indirectly (that is, derived from prices); and
· Level 3 Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement is
categorised in its entirety is determined on the basis of the lowest level input
that is significant to the fair value measurement. For this purpose, the
significance of an input is assessed against the fair value measurement in its
entirety.
If a fair value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is a Level 3
measurement. Assessing the significance of a particular input to the fair value
measurement requires judgement, considering factors specific to the asset or
liability.
The determination of what constitutes `observable' requires significant
judgement by the Company. The Company considers observable data to be that
market data that is readily available, regularly distributed or updated,
reliable and verifiable, not proprietary, and provided by independent sources
that are actively involved in the relevant market.
The Company recognises transfers between levels of the fair value hierarchy as
of the end of the reporting period during which the transfers have occurred.
During the period ended 30 June 2023, there were no transfers from Level 2 to
Level 1 (for the year ended 31 December 2022: £Nil).
Investments whose values are based on quoted market prices in active markets,
and are therefore classified within Level 1, include Korean preference shares
and exchange traded options.
The Company holds investments in derivative financial instruments which are
classified as Level 2 within the fair value hierarchy. These consist of credit
default swaps with a fair value of £1,109,294 (as at 31 December 2022:
£1,145,453). The Company held no investments in derivative financial instruments
classified as Level 1 within the fair value hierarchy (as at 31 December 2022:
£Nil).
The fair value of credit default swaps is determined by estimating future
default probabilities using market standard models. The principal input into the
model is the credit curve. Credit spreads are observed directly from broker data
or third party vendors. The significant model inputs are observable in the
marketplace or set in the contract.
The following table presents the Company's financial assets and liabilities by
level within the valuation hierarchy as of 30 June 2023:
Total
As at
30 June
Level 1 Level 2 Level 3 2023
(Unaudited)
£ £ £ £
Financial
assets/(liabilities
) at fair value
through
profit or loss:
Korean 117,693,983 - - 117,693,983
preference shares
Financial - (1,109,294) - (1,109,294)
derivative
liabilities
Total net assets 117,693,983 (1,109,294) - 116,584,689
Total
As at
31 December
Level 1 Level 2 Level 3 2022
(Audited)
£ £ £ £
Financial
assets/(liabilities
) at fair value
through
profit or loss:
Korean 120,764,446 - - 120,764,446
preference shares
Financial - (1,145,453) - (1,145,453)
derivative
liabilities
Total net assets 120,764,446 (1,145,453) - 119,618,993
Cash and cash equivalents included cash in hand and deposits held with banks.
Amounts due to brokers and other payables represent the contractual amounts and
obligations due by the Company for settlement of trades and expenses. Amounts
due from brokers and other receivables represent the contractual amounts and
rights due to the Company for settlement of trades and income.
15. NAV reconciliation
The Company announces its NAV to the LSE daily, on each UK business day. The
following is a reconciliation of the NAV per Share attributable to participating
Shareholders as presented in these Condensed Financial Statements, using IFRS to
the NAV per Share reported to the LSE:
As at 30 As at 31
June 2023 December
2022
NAV per NAV per
Participating Participating
NAV Share NAV Share
(Unaudited) (Unaudited) (Audited) (Audited)
£ £ £ £
Net Asset Value 119,387,031 1.7236 127,405,980 1.8383
reported to the
LSE
Adjustment to (11,262) (0.0001) (3,136) (0.0001)
accruals and
cash
Adjustment for (11,606) (0.0002) (322,351) (0.0046)
dividend income
Net Assets 119,364,163 1.7233 127,080,493 1.8336
Attributable to
Shareholders
per Condensed
Financial
Statements
The published NAV per Share of £1.7236 (as at 31 December 2022: £1.8383) is
different from the accounting NAV per Share of £1.7233 (as at 31 December 2022:
£1.8336) due to the adjustments noted above.
15. Subsequent events
These Condensed Financial Statements were approved for issuance by the Board on
15 September 2023. Subsequent events have been evaluated until this date.
Effective 20 July 2023, Norman Crighton retired from the Board and Krishna
Shanmuganathan was appointed as the Chair.
No further subsequent events have occurred.
Statement of Principal and Emerging Risks and Uncertainties
For the period ended 30 June 2023
The Company's risk exposure and the effectiveness of its risk management and
internal control systems are reviewed by the Audit Committee at its meetings and
annually by the Board. The Board believes that the Company has adequate and
effective systems in place to identify, mitigate, and manage the risks to which
it is exposed.
Emerging Risks
In order to recognise any new risks that may impact the Company and to ensure
that appropriate controls are in place to manage those risks, the Audit
Committee undertakes a regular review of the Company's Risk Matrix. This review
took place on four occasions during the year.
Geopolitical Risks
Risks to global growth have been heightened as a result of the conflict in the
Ukraine. The level of tension between North and South Korea fluctuates. There is
a heightened risk of malicious cyber activity. Through the Management Engagement
Committee, the Company asks its service providers to confirm that they have
appropriate safeguards in place to mitigate the risk of cyber-attacks and remote
working (including minimising the adverse consequences arising from any such
attack), that they provide regular updates to the Board on cyber security, and
conduct ongoing monitoring of industry developments in this area. None of the
Service Providers have reported any problems regarding cyber security when
questioned by the MEC.
Principal Risks and Uncertainties
In respect of the Company's system of internal controls and reviewing its
effectiveness, the Directors:
· are satisfied that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its
business model, future performance, solvency, or liquidity; and
· have reviewed the effectiveness of the risk management and internal control
systems, including material financial, operational, and compliance controls
(including those relating to the financial reporting process) and no significant
failings or weaknesses were identified.
The principal risks and uncertainties which have been identified and the steps
which are taken by the Board to mitigate them are as follows:
Investment Risks
The Company is exposed to the risk that its portfolio fails to perform in line
with its investment objective and policy if markets move adversely or if the
Investment Manager fails to comply with the investment policy. The Board reviews
reports from the Investment Manager at the quarterly Board Meetings, with a
focus on the performance of the portfolio in line with its investment policy.
The Administrator is responsible for ensuring that all transactions are in
accordance with the investment restrictions.
Operational Risks
The Company is exposed to the risk arising from any failures of systems and
controls in the operations of the Investment Manager, Administrator, and the
Custodian. The Board and its Committees regularly review reports from the
Investment Manager and the Administrator on their internal controls. The
Administrator will report to the Investment Manager any valuation issues which
will be brought to the Board for final approval as required.
Accounting, Legal and Regulatory Risks
The Company is exposed to the risk that it may fail to maintain accurate
accounting records, fail to comply with requirements of its Admission Document,
and fail to meet listing obligations. The accounting records prepared by the
Administrator are reviewed by the Investment Manager. The Administrator, Broker,
and Investment Manager provide regular updates to the Board on compliance with
the Admission Document and changes in regulation.
Discount Management
The Company is exposed to Shareholder dissatisfaction through its inability to
manage the share price discount to NAV. The Board and its Broker monitor the
share price discount (or premium) continuously and have engaged in Share
buybacks from time to time to help minimise any such discount. The Board
believes that it has access to sufficiently liquid assets to help manage the
Share price discount. The Company's discount management programme is described
within Note 18 of the Annual Report and Audited Financial Statements for the
year ended 31 December 2022.
Liquidity of Investments
The Korean preference shares typically purchased by the Company generally have
smaller market capitalisations and lower levels of liquidity than their common
share counterparts. These factors, among others, may result in more volatile
price changes in the Company's assets as compared to the South Korean stock
market or other more liquid asset classes. This volatility could cause the NAV
to go up or down dramatically.
In order to realise its investments, the Company will likely need to sell its
holdings in the secondary market, which could prove difficult if adequate
liquidity does not exist at the time and could result in the values received by
the Company being significantly less than their holding values. The liquidity of
the market for preference shares may vary materially over time. There can be no
guarantee that a liquid market for the Company's assets will exist or that the
Company's assets can be sold at prices similar to the published NAV. Illiquidity
could also make it difficult or costly for the Company to purchase securities,
and this could result in the Company holding more cash than anticipated. The
Investment Manager considers the liquidity of secondary trading in assessing and
managing the liquidity of the Company's investments. The Board reviews the
Company's resources and obligations on a regular basis with a view to ensuring
that sufficiently liquid assets are held for the expected day to day operations
of the Company. However, if the Company were required to liquidate a substantial
portion of its assets at a single time, it is likely that the market impact of
the necessary sale transactions would impact the value of the portfolio
materially.
Fraud Risk
The Company is exposed to fraud risk. The Audit Committee continues to monitor
the fraud, bribery, and corruption policies of the Company. The Board receives
an annual confirmation from all service providers that there have been no
instances of fraud or bribery.
Financial Risks
The financial risks, including market, credit, and liquidity risks, faced by the
Company are set out in the annual report of the Company. These risks and the
controls in place to reduce the risks are reviewed at the quarterly Board
Meetings.
Climate Risks
Climate change is a growing area of focus for regulators, companies, investors
and other stakeholders. Climate related risks include both physical risks from
global warming and extreme weather events as well as transition risks (e.g.
increased regulation) and litigation risks. Climate risks are incorporated in
the Environmental, Social, and Governance ("ESG") analysis under environmental
factors.
Directors' Responsibility Statement
For the period ended 30 June 2023
The Directors are responsible for preparing the Unaudited Half-Yearly Financial
Report (the "Condensed Financial Statements"), which have not been audited by an
independent auditor, and confirm that to the best of their knowledge:
· these Condensed Financial Statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and in accordance with
International Accounting Standard 34 "Interim Financial Reporting" issued by the
European Union and the AIM Rules of the London Stock Exchange ("LSE");
· these Condensed Financial Statements include a fair review of important
events that have occurred during the period and their impact on the Condensed
Financial Statements, together with a description of the principal risks and
uncertainties of the Company for the remaining six months of the financial
period as detailed in the Investment Manager's Report; and
· these Condensed Financial Statements include a fair review of related party
transactions that have taken place during the six-month period which have had a
material effect on the financial position or performance of the Company,
together with disclosure of any changes in related-party transactions in the
last Annual Report and Audited Financial Statements which have had a material
effect on the financial position of the Company in the current period.
The Directors confirm that the Condensed Financial Statements comply with the
above requirements.
On behalf of the Board,
Krishna Shanmuganathan Gill Morris
Chair
Audit Chair
15 September 2023
Board of Directors
The Company had four Directors during the period ended 30 June 2023 and reverted
to 3 directors from 20 July 2023. All Directors are considered independent of
the Investment Manager.
Krishna Shanmuganathan (aged 49)
Krishna Shanmuganathan is the Chair of the Company. He is also the Chair of
abrdn Asia Focus plc and founded Scylax Partners in 2016, a provider of
specialist advisory services. Prior to Scylax, Krishna was a managing partner at
Hakluyt & Company (Asia), a risk advisory company, having established and led
the Asia Pacific offices of the firm based in Singapore. Krishna has also held
research and analyst roles at Fidelity International and Cambridge Associates
after a successful and varied career in the Foreign & Commonwealth Office. He
holds a number of other non-executive appointments, including being on the
advisory board of Serendipity Capital, former chairman of the trustees of St
Jude India ChildCare Centres UK and a former trustee of Solefield School
Educational Trust. Krishna has Master's degrees from University of Cambridge and
University of London, is British and resident in the United Kingdom. Krishna was
appointed to the Board in 2022.
Gillian Yvonne Morris (aged 60)
Gill is the Chair of the Audit Committee. She holds a number of other non
-executive appointments including The International Stock Exchange, where she is
also Audit Chair, and CICAP GP Limited. Gill has performed a number of roles in
local government including the Public Accounts Committee, the Scrutiny
Management Committee and the Tax Tribunal Panel. She is a qualified Chartered
Accountant (ICAEW) and a Chartered Tax Advisor (CIOT). She started her career in
London with Touche Ross & Co., worked for Touche Ross & Co. and KPMG in
Australia before returning to Guernsey. After almost 3 years with KPMG in
Guernsey, she joined Specsavers Optical Group Limited as their tax manager. Gill
held several positions in the Specsavers Group including Director of Specsavers
Finance (Guernsey) Limited and ultimately served as Director of Risk and
Government Affairs until 2020. She is currently also the treasurer of the
Guernsey branch of the Institute of Directors. Gill is British and resident in
Guernsey. She was appointed to the Board in 2021.
Wendy Dorey (aged 50)
Wendy is an experienced professional in the financial services industry, with
key competencies in business strategy, financial regulation, risk management and
investment marketing and distribution. She is currently a Director of Dorey
Financial Modelling, an investment consulting firm, a Commissioner for the
Guernsey Financial Services Commission, a Non-Executive Director for Schroders
(CI) Limited and a Non-Executive Director for TwentyFour Select Monthly Income
Fund Limited.
She has over 25 years' industry experience working for asset managers, pension
consultants and retail banks in the UK, Guernsey and France. She has worked for
a number of leading asset managers: BNY Mellon, M&G Asset Management, Friends
Ivory & Sime and Robert Fleming/Save & Prosper. She has also consulted to the
Defined Contribution Consulting arm of the Punter Southall Group, and obtained
retail banking experience at Lloyds Bank and Le Credit Lyonnais. A strong
advocate of continuous learning, she assisted the Investment Association in
developing a new syllabus for independent financial advisors and, in 2018,
gained the Institute of Directors Certificate and Diploma in Company Direction.
She was admitted as a Chartered Director and Fellow of the Institute of
Directors in 2019 and was, until recently, the Chair of the Guernsey Branch of
the Institute of Directors. Wendy was appointed to the Board in 2022.
Norman Crighton (aged 57)
Norman Crighton is an experienced public company director having served on the
boards of eight closed-end funds and one operating company over the past ten
years. Presently, Norman is also Non-Executive Chair of RM Infrastructure Income
plc, AVI Japan Opportunity Trust plc and Harmony Energy Income Trust plc.
Norman has extensive fund experience having previously been Head of Closed-End
Funds at Jefferies International and Investment Manager at Metage Capital Ltd.
leveraging his 31 years of experience in investment trusts. His career in
investment banking covered research, sales, market making and proprietary
trading, servicing major international institutional clients over 15 years. His
work in many countries included restructuring closed-end funds and well as
several IPOs. During his time as a fund manager, Norman managed portfolios of
closed-end funds on a hedged and unhedged basis covering developed and emerging
markets.
Following on from his long-term promotion of best corporate governance practice,
Norman has more recently been focusing on expanding his work into Environmental
and Social issues. His work in the investment trust industry is backed up with a
Master's degree from the University of Exeter in Finance and Investment and a
BA(Hons) in Applied Economics. Norman is British and resident in the United
Kingdom. Norman was appointed to the Board in 2013 and retired on 20 July 2023.
Weiss Asset Management
Weiss Asset Management is an investment management firm headquartered in Boston,
MA registered with the U.S. Securities and Exchange Commission as an investment
adviser and with the Commodity Futures Trading Commission as a commodity pool
operator. In addition to WKOF, WAM manages multiple investment vehicles,
including private hedge funds and an institutional separate account.
The firm was founded by Dr Andrew Weiss, an academic economist, who launched his
first fund in 1991.
WAM employs deep fundamental and statistical analysis to find undervalued
securities globally and seeks to maximise risk-adjusted returns for its investor
base that includes charitable foundations, pension plans, endowments, hospitals,
government entities and private investors.
WAM has been investing in the Korean market for almost 25 years. Over this time,
the firm has built out a dedicated night desk of 9 employees focused on trading
its Asian strategies, as well as strong relationships with a number of Korean
brokers.
The firm has 100+ employees and assets under management of approximately £2.3
billion.
Andrew Weiss
Founder and Chief Executive Officer
Andrew is the Founder and Chief Executive Officer of WAM. Andrew received his
Ph.D. in Economics from Stanford University, was elected a fellow of the
Econometric Society in 1989 and is currently Professor Emeritus of Economics at
Boston University.
Andrew's academic research interests have included markets with imperfect
information, macroeconomics, development economics, and labour economics. He
ranks in the top 1% of published economists by citations, and his co-authored
paper "Credit Rationing in Markets with Imperfect Information" with Joseph
Stiglitz was prominently featured in the Nobel Prize committee statement for
Stiglitz's 2001 Nobel Prize Award.
Andrew began his career as Assistant Professor at Columbia University and as a
Research Economist in the Mathematics Center at Bell Laboratories. He has
lectured at numerous major universities and international organisations and is
the author of numerous articles published in professional journals.
Andrew began managing the predecessor to WAM's existing domestic hedge fund in
1991 and founded WAM in 2003. Andrew and WAM's strategies have been featured in
articles in Forbes, Time, and Outstanding Investor Digest, as well as newspaper
articles in the U.S. and Europe.
Additionally, Andrew is a member of the Advisory Board of the University of
California Center for Effective Global Action, the Advisory Board for the Center
for Development Economics at Williams College and the Council on Foreign
Relations. Andrew and his wife Bonnie are the founders of Child Relief
International, a foundation dedicated to fighting poverty in less developed
countries. Andrew is also a board member of the WAM Foundation, a non-profit
focused on maximising the alleviation of suffering worldwide.
Jack Hsiao
Managing Director
Jack joined WAM in February 2008; he is a Managing Director and a member of the
Investment Committee. Prior to that, Jack interned at WAM from 2006-2008 while
performing his undergraduate studies. Jack works from Boston and oversees all
strategies in Asia including investments across preference shares, holding
companies, bonds, distressed, value equities and other instruments. After
graduating Valedictorian from his high school, Jack received his Bachelor's
degree in Economics from Harvard.
Ethan Lim
Portfolio Manager
Ethan joined WAM in June 2015; he is a Portfolio Manager at the firm and is
primarily responsible for managing the firm's investments in Korea, while
overseeing the Asia team and other strategies during Asia hours. Prior to
joining Weiss, Ethan interned at Goldman Sachs' Seoul office. Ethan graduated
from Seoul National University, where he received a BS in Mechanical and
Aerospace Engineering and a BA in Economics, and completed his Master's degree
in Financial Engineering at Columbia University.
How to Invest in Weiss Korea Opportunity Fund
You can invest in the Fund through the following:
Via the nominated broker
The nominated broker is Singer Capital Markets.
The Board encourages all of its Shareholders to exercise their rights and notes
that many specialist platforms provide Shareholders with the ability to receive
company documentation, to vote their shares and to attend general meetings, at
no cost.
Please refer to your investment platform for more details, or visit the
Association of Investment Companies' ("AIC") website at
www.theaic.co.uk/aic/shareholder-voting-consumer-platforms for information on
which platforms support these services and how to utilise them.
Through a professional adviser
Professional advisers are usually able to access the products of all the
companies in the market and can help you find an investment that suits your
individual circumstances. An adviser will let you know the fee for their service
before you go ahead.
You can find an adviser at unbiased.co.uk You may also buy investment trusts
through stockbrokers, wealth managers and banks. To familiarise yourself with
the Financial Conduct Authority ("FCA") adviser charging and commission rules,
visit fca.org.uk.
Shareholder Information
Share Buybacks
In addition to the Realisation Opportunity, the Company has authority to
repurchase on the open market up to 40% of its outstanding Ordinary Shares.
During the period ended 30 June 2023, the Company purchased Nil shares (2022:
Nil) of its own Shares at a consideration of £Nil (31 December 2022: £Nil) under
its general buyback authority. For additional information on Share Buybacks
refer to Note 20 of the Annual Report and Audited Financial Statements for the
year ended 31 December 2022.
Net Asset Value
Northern Trust International Fund Administration Services (Guernsey) Limited
(the "Administrator") is responsible for calculating the Net Asset Value ("NAV")
per Share of the Company. Since 4 April 2022, the unaudited NAV per Ordinary
Share is calculated on a daily basis and at the month end by the Administrator,
and is announced by a
Regulatory News Service and is available through the Company's website
www.weisskoreaopportunityfund.com.
Corporate Information
Directors (Non Company Secretary, Administrator and
-Executive) Designated Manager
Krishna Northern Trust International Fund
Shanmuganathan Administration Services (Guernsey)
(Chair) Limited
Gillian Yvonne PO Box 255
Morris (Audit Chair) Trafalgar Court
Wendy Dorey Les Banques
(Management St. Peter Port
Engagement Chair) Guernsey
Norman Crighton GY1 3QL
(retired 20 July
2023)
Registered Office Financial Adviser, NominatedAdviser and Broker
PO Box 255 Singer Capital Markets
Trafalgar Court 1 Bartholomew Lane
Les Banques London
St. Peter Port EC2N 2AX
Guernsey
GY1 3QL
Investment Manager Guernsey Legal Adviser to the Company
and AIFM Mourant Ozannes (Guernsey) LLP
Weiss Asset Royal Chambers
Management LP St. Julian's Avenue
222 Berkeley St. Peter Port
Street, Guernsey
16th Floor GY1 4HP
Boston, MA 02116
USA
English Legal Registrar
Adviser to the Link Market Services (Guernsey) Limited
Company Mont Crevelt House
Stephenson Harwood Bulwer Avenue
LLP St. Sampson
1 Finsbury Circus Guernsey
London GY2 4LH
EC2M 7SH
Custodian and Independent Auditor
Principal Bankers KPMG Channel Islands Limited
Northern Trust Glategny Court
(Guernsey) Limited Glategny Esplanade
PO Box 71 St. Peter Port
Trafalgar Court Guernsey
Les Banques GY1 1WR
St. Peter Port
Guernsey
GY1 3DA
Endnotes and Alternative Performance Measures
[1,2,3] The NAV published in this annual report and audited financial statement
will include dividends receivable as part of the NAV. Please refer to the
Admission Document for more information regarding the announcement and payment
of Korean dividends.
[4,7] For WKOF, this return includes all dividends paid to WKOF's Shareholders
and assumes that these dividends were reinvested in WKOF's Shares at the next
date for which WKOF reports a NAV, at the NAV for that date. MSCI total return
indices are calculated as if any dividends paid by constituents are reinvested
at their respective closing prices on the ex date of the distribution. iShares
MSCI Korea UCITS ETF also assumes reinvestment of dividends.
[5] Since inception of Weiss Korea Opportunity Fund on 14 May 2013. The WKOF
return since inception is calculated on the basis of the Net Asset Value per
Ordinary Share and not on the price of WKOF shares on AIM. The value of WKOF NAV
per share performance since inception represents a total return, inclusive of
all dividends paid to WKOF Shareholders since inception. The NAV per share may
differ from the price at which shares of WKOF may be purchased or sold on AIM,
and performance of NAV per share during any specific period may therefore not be
reflective of the returns an investor would receive by investing in shares of
WKOF during such period. For WKOF, this return includes all dividends paid to
WKOF's Shareholders and assumes that these dividends were reinvested in WKOF's
Shares at the next date for which WKOF reports a NAV, at the NAV for that date.
[6,7] MSCI Korea 25/50 Net Total Return Index denominated in GBP. MSCI total
return indices are calculated as if any dividends paid by constituents are
reinvested at their respective closing prices on the ex-date of the
distribution.
[8 ]If the share price of an investment company is lower than the NAV per share,
the shares are said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is usually
expressed as a percentage of the NAV per share. If the share price is higher
than the NAV per share, the shares are said to be trading at a premium.
[9 ]Calculated as the dividend per share over the last 12-months divided by the
share price as of the date of this report.
[10] The Average Trailing 12-Month P/E Ratio of Preference Shares Held is based
on the consolidated diluted earnings per share over the trailing 12- month
period as reported by Bloomberg, and is calculated as the total market value of
WKOF's preference share portfolio on the report date divided by the total
earnings allocable to WKOF based on WKOF's holdings on the report date.
Investments with negative reported earnings are excluded.
[11] P/B Ratio of Preference Shares Held is calculated as the weighted average
price to book ratio of all preference shares held at 30 June 2023.
[12] The annualised total expense ratio includes charges paid to the Investment
Manager and other expenses divided by the average NAV for the year.
1[3] Bloomberg L.P. (2022). Bloomberg Innovation Scores as of 12/31 since 2013.
Retrieved from Bloomberg terminal.
[14 ]WIPO IP Facts and Figures 2022. (n.d.). World Intellectual Property
Organization.
[15] Most recent sovereign credit ratings from Moody's, S&P, and Fitch as of 31
December 2022.
[16] Leading export countries worldwide in 2022. (n.d.). Statista.
[17 ]GDP. (n.d.). World Bank.
[18] Doing Business 2020. (2020). World Bank.
[19] PISA 2018 Insights and Interpretations. (n.d.). Organisation for Economic
Co-operation and Development.
2[0 ]Source: Bloomberg L.P. Weiss Asset Management LP Data retrieved as of 30
June 2023.[ ]
[21] Bloomberg LP. Data as of 30 June 2023.
[22 ]Please note that the Annual Report as of December 31, 2022 erroneously
stated that there were 121 series of South Korean preference shares outstanding.
As of December 31, 2022, there were 118 Korean preference shares outstanding. In
June 2022, three preference shares (Tongyang Inc, 3[rd] Pref; Dongbu Steel Co.
LTD, Pref; Shinwon Corp, Pref) were delisted due to market listing rules. They
were delisted for having less than 100,000 shares outstanding.
[23 ]Market capitalization of the leading chemical companies worldwide in March
2023. (2022). Statista.
[24 ]Global EV battery usage in 2022 is 517.9GWh, up 71.8% from the previous
year. (2023). SNE Research.
[25 ]About Us. (2022). LG Chem.
[26 ]Market share of the top six car manufacturers in South Korea in 2022, based
on sales volume. (2023). Statista.
[27 ]Hyundai Motor Reports 2022 Global Sales and 2023 Goals. (2023). Hyundai.
[28] Samsung maintains No.1 position in global TV market. (2023). The Korea
Economic Daily.
[29] Subsidiaries Info. (n.d.). Hanwha Corporation.
[30 ]Global Business. (n.d.). Mirae Asset Securities
[31] Brands. (n.d.). AmorePacific Group.
[32] Brands. (n.d.). CJ Cheijedang.
[33] Company. (n.d.). LG H&H.
[34] Technology and Products. (n.d.). Doosan Fuel Cell.
[35] Our Business. (n.d.). SK Chemicals.
[36] This return includes all dividends paid to WKOF's Shareholders and assumes
that these dividends were reinvested in WKOF's Shares at the next date for which
WKOF reports a NAV, at the NAV for that date.
[37] MSCI Korea 25/50 Net Total Return Index denominated in GBP. MSCI total
return indices are calculated as if any dividends paid by constituents are
reinvested at their respective closing prices on the ex-date of the
distribution.
[38 ]This return includes all dividends paid to the Company's Shareholders and
assumes that these dividends were reinvested in the Company's Shares at the next
date for which the Company reports a NAV, at the NAV for that date.
[39 ]Bloomberg L.P. Data as of 30 June 2023. Valuation of Major Indices Table.
[40] Market Data System. (n.d.). Korea Exchange.
[41] Foreigners who raised the KOSPI in the first half of the year (July 2023)
Economist Korea.
[42] South Korea Export Downturn Slows, Trade Balance Swings to Surplus (June
2023). Reuters
[43] Korea's ICT Exports reach $16.1 billion in June (2023). Ministry of Trade,
Industry, and Energy.
[44] Monetary Policy Discussion & Opening Remarks to the Press Conference (July
2023). Bank of Korea.
[45] Consumer Price Index in June 2023. Statistics Korea.
[46] Despite austerity measures, Korea sees highest household-debt-to-GDP ratio
of major economies in Q1 (May 2023). Hankyoreh.
[47] Korean Household Debt, Including Jeonse Deposit, economic size / income
ranks 1[st] in OECD. Korea Economic Research Institute.
[48] Unusual $828 Billion Loan Market Magnifies Housing Risk in Korea (March
2023). Bloomberg.com
[49] Sales Price Index (Comprehensive Housing Type). Real Estate Board (Korea).
[50] Weiss Asset Management LP. Data as of 30 June 2023.
[51] LG Chem to sell $1.6 bn stake in LG Energy to Foreign Investors (June
2023). The Korea Economic Daily.
[52] The 10 Biggest EV Battery Manufacturer in the World (2022), CleanTechnica.
[53] South Korea's LG Chem Raises $2bln in exchangeable bond. Reuters.
[54] Hyundai Motor Announces 2023 Q1 Business Results (April 2023). Hyundai.
[55] Committed to Shareholder Returns (2023). Samsung.
[56] Hyundai Motor Company Q1 2023 Result, Investor Relations Transcript (2023).
Hyundai Motor Company.
[57] FnConsensus (2023). FnGuide.
[58] Shareholder Activism in H1 2023. Insightia.
[59] Commercial Act. Korea Legislation Research Institute.
[60 ]Is the debate accelerating the revision of the commercial law on
shareholder protection? (April 2023). Hankung.
[61] How to Improve the Dividend Process in line with Global Standards (January
2023). Financial Services Commission.
[62] Please note that the calculation of employee holdings no longer includes
two former senior partners of the Investment Manager. The two former partners
held 3,253,925 shares of the Fund as of December 31, 2022.
This information was brought to you by Cision http://news.cision.com
END
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September 19, 2023 02:00 ET (06:00 GMT)
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