In relation to the Half-Yearly Financial Report that was sent to
shareholders on 12 September 2022,
there was a typographical error as follows:
“In March 2022, SK Inc., the
holding company for companies such as SK Hynix and SK Inc” now
reads “In March 2022, SK Inc., the
holding company for companies such as SK Hynix and SK Chem”.
For the sake of clarity the amended Half-Yearly Financial Report
is detailed below in full:
WEISS KOREA OPPORTUNITY FUND LTD.
LEI 213800GXKGJVWN3BF511
(Classified Regulated Information, under DTR 6 Annex 1 section
1.2)
HALF-YEARLY REPORTHALF-YEARLY
FINANCIAL REPORT AND UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2022
Financial Highlights
Performance
Summary |
|
|
|
|
|
|
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
|
30
June 2022 |
|
31
December 2021 |
|
|
|
|
|
£ |
|
£ |
Total Net Assets |
|
|
|
|
127,059,174 |
|
166,541,145 |
NAV per share |
|
|
|
|
1.83 |
|
2.40 |
Mid-Market Share
price |
|
|
|
|
1.85 |
|
2.47 |
|
|
|
|
|
|
|
|
Financial
Highlights |
|
|
|
|
|
As
at |
|
Since inception |
30
June 2022 |
NAV Return |
|
|
|
|
-21.40% |
|
123.70% |
Benchmark Return |
|
|
|
|
-18.20% |
|
51.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
|
30
June 2022 |
|
31
December 2021 |
Portfolio
Discount |
|
|
|
|
51.92% |
|
52.16% |
Share Price
Premium/Discount |
|
|
|
|
0.64% |
|
2.79% |
Fund Dividend
Yield |
|
|
|
|
3.45% |
|
2.12% |
Average
Trailing 12-Month P/E Ratio of Preference Shares Held |
4.7x |
|
6.1x |
P/B Ratio
of Preference Shares Held |
|
|
|
0.35 |
|
0.46 |
Annualised Total
Expense Ratio |
|
|
|
|
1.92% |
|
1.80% |
|
|
|
|
|
|
|
|
As at close of business on 9 September
2022, the latest published NAV per Share was £1.8793 and the
Share Price was £1.9050.
*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.
Company Summary
The Company
Weiss Korea Opportunity Fund Ltd. (“WKOF” or 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 the Alternative
Investment Market (“AIM”) of the London Stock Exchange (the “LSE”)
on 14 May 2013.
The Company is managed by Weiss Asset Management LP (the
“Investment Manager”), a Boston-based investment management company
registered with the Securities and Exchange Commission in
the United States of America.
Investment Objective and Dividend
Policy
Weiss Korea Opportunity Fund’s (“WKOF” or the “Company”)
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 the
Alternative Investment Market (“AIM”), Weiss Asset Management LP
(“WAM” or 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 purchases certain credit default
swaps on the sovereign debt of South
Korea and put options on iShares MSCI South Korea ETF
(“EWY”) as general market and portfolio hedges, but generally did
not hedge its exposure to interest rates or foreign currencies
during the period ended 30 June 2022
(2021: 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 Samsung Electronics, LG
Electronics and SK Hynix 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 years1
• Filed the highest number of
patent applications relative to GDP in 20202
• 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.3
• Ranked 7th largest exporter in
the world in 20214
• Ranked 10th largest economy by
GDP in the world in 20215
• Ranked in the top 3% in the
World Bank’s Ease of Doing Business Report in 20206
• Ranked in the top 10% in each of
reading, mathematics and science PISA test scores in 20187
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 consistently among the top performing students in the Programme
for International Student Assessment tests, including the subtest
on critical thinking. This provides a pool of talent that can be
tapped for future growth.
Index Name |
P/E
Ratio |
P/B
Ratio |
Nifty Index (India) |
17.8 |
2.9 |
S&P 500 (US) |
16.6 |
3.8 |
Nikkei 225 (Japan) |
14.7 |
1.6 |
TAIEX (Taiwan) |
10.2 |
1.9 |
FTSE 100 (UK) |
9.9 |
1.6 |
Hang Seng Index (HK) |
11.3 |
0.9 |
Shanghai Composite (China) |
11.7 |
1.5 |
KOSPI 200 (S.
Korea) |
8.6 |
0.9 |
The South Korean stock market appears fundamentally cheap
relative to other equity markets. As of 30
June 2022, the KOSPI 200 trades at a 35% lower price to
earnings ratio and a 56% lower price to book ratio compared to the
average of the major indices shown in the table above. 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 were a record-high 27 publicly traded South Korean companies
subject to activist demands in 2021, which represented a 170%
increase year-over-year compared to 2020. In the first quarter of
2022 alone, 33 publicly traded Korean companies were subjected to
activist demands, representing a year-over-year increase of
150%.8 The Investment Manager report sets forth some
examples of improvements in corporate governance that have taken
place during the most recent 12 months. The underlying thesis of
our strategy is that improved corporate governance will attract
more investors to South Korea and
the companies in which we invest which will, over time, increase
the value of the common shares and 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 which 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
124 Korean preference shares outstanding with an aggregate market
capitalisation of approximately £38 billion.
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 such as that experienced over the
past several years could 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 Hyundai Motor Co, LG Chem Ltd., LG
Electronics Inc and AmorePacific Corp.
Top 10 Holdings
1. HYUNDAI MOTOR COMPANY,
2ND PFD.
14.0% OF WKOF NAV* DISCOUNT TO COMMON
SHARE: -51%
Hyundai Motor Company is Korea’s leading car manufacturer,
producing and selling more than 3.8 million units globally in over
200 countries in 2021. Hyundai was ranked a top 5 global automotive
maker by market share in 2021. Hyundai plans on increasing its
presence in the electric vehicle market, while targeting to sell
over 4.3 million units in 2022.
2. LG CHEM LTD., PFD.
12.3% OF WKOF NAVDISCOUNT TO COMMON
SHARE: -53%
Korea’s largest chemical company by market capitalisation, LG
Chem manufacturers and sells petrochemical products and advanced
materials, including plastics and EV batteries. Its EV battery
business and subsidiary, LG Energy Solution is the second- largest
EV battery maker in the world. In 2021, LG Chem generated over
$37bn in revenue globally.
3. AMOREPACIFIC CORP.,
PFD
7.1% OF WKOF NAV DISCOUNT TO COMMON
SHARE: -61%
Amorepacific Corp 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.
4. HANWHA CORPORATION 3RD
PFD.
7.1% OF WKOF NAVDISCOUNT TO COMMON
SHARE: -44%
Hanwha Corporation specialises in producing and trading
chemicals, aerospace & defense products, and energy products.
It also deals in the construction and financial services industry.
As a Fortune Global 500 company, Hanwha is also the holding company
of Hanwha group which owns a majority stake in Korea’s second
largest life insurance company by assets and Hanwha Solutions, a
leading domestic manufacturer of solar cell panels. Hanwha
Corporation’s network includes 469 offices worldwide.
5. CJ CHEILJEDANG CORP,
PFD.
6.6% OF WKOF NAVDISCOUNT TO COMMON
SHARE: -57%
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.
* WKOF also invests in Hyundai Motor Company, Pfd and 3rd Pfd.,
bringing WKOF's total exposure to Hyundai Motor Company to 17% of
WKOF's NAV.
6. LG ELECTRONICS INC.,
PFD.
6.5% OF WKOF NAVDISCOUNT TO COMMON
SHARE: -52%
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, capturing 18.5% of global TV sales. LG Electronics has 128
sites focused on manufacturing, R&D, and distribution of their
products.
7. MIRAE ASSET DAEWOO CO.,
LTD., 2ND PFD.
5.9% OF WKOF NAVDISCOUNT TO COMMON
SHARE: -43%
Mirae Asset Daewoo is a South Korean financial services firm
offering securities trading, equity underwriting, investment
banking services, and wealth/asset management. One of the top 5
securities brokerages in Korea, Mirae Asset conducts business
globally, including the United
States, Canada,
United Kingdom, and China.
8. SK CHEMICALS CO., LTD.,
NEW PREF
4.8% OF WKOF NAVDISCOUNT TO COMMON
SHARE: -47%
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. Its
life science segment spans treatments for the common cold to asthma
treatments. SK Chemicals also owns majority stake in Korea’s
largest vaccine maker by market capitalisation.
9. DOOSAN FUEL CELL CO.,
LTD., 1P
4.4% OF WKOF
NAV
DISCOUNT TO COMMON SHARE: -67%
One of the largest fuel cell manufacturers by market
capitalisation, Doosan Fuel Cell produces and sell 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.9
10. SOLUS ADVANCED MATERIALS, CO.,
LTD., 1ST PFD.
3.7% OF WKOF NAVDISCOUNT TO COMMON
SHARE: -75%
Solus Advanced Materials is a major Korean manufacturer of
copper foil, which has significant applications in communication
equipment and circuit boards. Solus Advanced Materials’ business
lines also include the specialised production of battery copper
foil and OLED materials. In 2022, Solus began supplying battery
copper foil to Tesla, a leading electric vehicle manufacturer.
Chair’s Review
For the period ended 30 June 2022
On behalf of the Directors, I am pleased to provide the 2022
Half-Yearly Report on the Company. During the period from
31 December 2021 to 30 June 2022 (the “Period”), the Company’s net
asset value fell by -21.4% including reinvested
dividends10. The Company underperformed the reference
MSCI Korea 25/50 Net Total Return Index (the “Korea Index”), which
fell by -18.2% in Pounds Sterling (“GBP”). Since the admission of
the Company to AIM in May 2013, the
net asset value has increased by 123.7% including reinvested
dividends10 compared to the Korea Index returns of
51.0%.11, an annualised outperformance of the index of
8.0%. A report from the Investment Manager is included in this
report.
The Company’s underperformance against the Korea Index in 2022
was due to the poor performance of the common shares that the
Company owns the preference shares of, relative to those in the
Index. Like many major Asian markets, the Korean equity market did
poorly in the first half of 2022 due to challenging macro-economic
conditions leading to weakening demands for Korean exports,
increased import costs and an increase in foreign net selling of
Korean securities.
The Directors declared an interim dividend of 6.3732 pence per Share, ex-dividend date
19 May 2022, to distribute the income
received by the Company in respect of the year ended 31 December 2021. This dividend was paid to all
Shareholders on 10 June 2022. The
growth in dividends per Share since the launch of the Company is in
line with the thesis that WAM has been promoting over the past
several years; that Korean companies pay out low dividends but this
is improving which should attract more global investors to the
Korean stock market.
The Company’s Portfolio Discount of preference shares to the
equivalent common shares remains very wide at around 52% which has
now been the case for over 12 months. These wide and volatile
discounts, similar to the levels at the inception of WKOF, provide
greater opportunities for the Investment Manager to “trade the
discount”, selling when discounts are relatively narrow and buying
when they widen. Over the past nine years, and more actively
employed starting in 2018, the Investment Manager believes this
strategy allows us to invest in securities with favourable expected
risk-adjusted return profiles.
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 it is
appropriate for the Financial Statements to be prepared on a going
concern basis.
The Board is authorised to repurchase up to 40 per cent of the
Company's outstanding Ordinary Shares in issue as at 30 June 202212. Since Admission almost
nine years ago, and as at the date of this document, the Company
has repurchased, at a discount to NAV, 13,190,250 Ordinary Shares
of the original 105,000,000 Ordinary Shares issued at Admission
(12.6%). The Board also has in place standing instructions with the
Company’s broker, Singer Capital Markets Limited (“Broker” or
“Singer”), for the repurchase of the Company’s Shares during closed
periods when the Board is not permitted to give individual
instructions; such closed periods typically occur around the
preparation of the Annual and Half Yearly Financial Reports. The
Board intends to continue to aggressively repurchase Shares if the
Company’s Shares are trading at a significant discount to net asset
value. We will continue to keep Shareholders informed of any share
repurchases through public announcements.
The Board and the Investment Manager believe that the
opportunity offered by Korean preferred shares is as attractive as
it has been since launch. We would hope that the next ten years
provide the same opportunities for the Company to outperform the
Korean Index.
Other Initiatives
The Board has recently implemented several new strategies
including refreshing the look and content of the Annual Report and
this Half-Yearly Financial Report which we hope Shareholders find
more informative and “user friendly”. I also mentioned in the
Annual Report for 2021 that the Board is considering a move to the
Main Board of the London Stock Exchange. Unfortunately, it has not
been possible to proceed with the initiative at this time. We hope
to achieve this in the future.
As the Company approaches its tenth anniversary, following
corporate governance best practices, the Directors will perform an
orderly handover of the custodianship of your assets to new
directors. In our last letter, we previewed that a replacement
director for Rob King would be
appointed, following the appointment of Gill Morris. The board would like to thank Rob
for his expertise, help and guidance to the Company since its
launch. We believe that it is in the best interest of the Company
and Shareholders to appoint directors with skills and experience
which enhance the overall value of the Board to the Company. We are
therefore delighted to welcome Krishna
Shanmuganathan and Wendy
Dorey to the Board. I believe that they will provide great
insight, good governance and that together with Gill, will be a
hardworking, collaborative and progressive team. In order to make
the transition of the new board as seamless as possible, one of
these new directors will be appointed Chair, as my ten years’
service approaches in 2023. Any changes to the Board will be
notified to the market.
As always, I would like to thank new and existing Shareholders
for their support over the last six months. If there are any
questions for the Board, please do not hesitate to contact me
through the Company’s broker, Singers.
If any of the new shareholders wish to speak with the Board then
please contact Singers and we will be happy to answer any questions
you may have.
Norman
Crighton
Chair
9 September 2022
Investment Manager’s Report
For the period ended 30 June 2022
Introduction
In the first half of 2022, WKOF’s Net Asset Value (“NAV”) in
pounds Sterling (“GBP”) declined 21.4%,
including reinvested dividends,13 compared to the
reference MSCI South Korea 25/50 Net Total Return Index (the “Korea
Index”),14 which decreased 18.2% in GBP. From its
inception until 30 June 2022, WKOF
outperformed the Korea Index: WKOF’s NAV, including reinvested
dividends, increased 123.7%, compared to a return of 51.0% for the
Korea Index over the same period.
|
YTD
2022 |
3
Years |
5
Years |
Since Inception |
WKOF |
-21.4% |
24.1% |
14.6% |
123.7% |
MSCI South Korea 25/50 Net Total
Return Index |
-18.2% |
6.4% |
1.5% |
51.0% |
WKOF Excess Performance |
-3.2% |
17.7% |
13.1% |
72.8% |
Source: Bloomberg as of 30 June
2022. Inception Date: 14 May
2013. WKOF returns are based on NAV per share.
WKOF Performance Attribution
WKOF’s returns are driven by four primary factors:
· the performance of the common shares
of the same issuers whose preference shares WKOF owns,
· dividend yields,
· the narrowing or widening of the
discounts of the preference shares it holds relative to their
corresponding common shares and
· currency fluctuation/fees/other
expenses.
The underperformance of WKOF against the Korea Index in the
first half of 2022 was largely attributed to the underperformance
of the common shares of the same companies of which WKOF owns
preference shares against the benchmark.
Return
Source |
YTD to
6/30/22 |
MSCI South Korea Index |
-19.6% |
WKOF Common Shares vs. MSCI
Index |
-1.6% |
Excess Dividend Yield of Preferred
Shares Owned |
-1.1% |
Discount Narrowing of Preferred
Shares Owned |
-0.4% |
Impact of Currency / Fees /
Others |
1.3% |
Source: Bloomberg and Weiss Asset Management, LP (data as of
30 June 2022)
Review of the WKOF Portfolio
We continue to believe that South Korean equities and the
portfolio holdings of WKOF offer significant valuation discounts
relative to other countries’ equity markets as represented by
price-to-earnings ratios (‘P/E ratios’) and price-to-book ratios
(‘P/B ratios’) below.
Index Name |
P/E Ratio |
P/B Ratio |
Dividend Yield |
Nifty Index
(India) |
17.8 |
2.9 |
1.4% |
S&P 500
(US) |
16.6 |
3.8 |
1.7% |
Nikkei 225
(Japan) |
14.7 |
1.6 |
2.1% |
TAIEX
(Taiwan) |
10.2 |
1.9 |
4.0% |
FTSE 100
(UK) |
9.9 |
1.6 |
4.2% |
Hang Seng Index
(HK) |
11.3 |
0.9 |
3.1% |
Shanghai Composite
(China) |
11.7 |
1.5 |
2.3% |
KOSPI 200 (S.
Korea) |
8.6 |
0.9 |
2.1% |
WKOF Portfolio
Holdings |
4.7 |
0.4 |
3.5% |
Source: Bloomberg L.P. Weiss Asset Management, LP. Data
retrieved as of 30 June 2022
WKOF’s portfolio holdings currently trade at a 63% lower P/E
ratio and 79% lower P/B ratio compared to the average ratios of the
selected indices above. While the KOSPI 200 already yields low
price multiples, the valuation discounts of WKOF’s portfolio
holdings relative to these indices are the result of those holdings
being preference shares trading at large discounts to the
corresponding common shares. This is further amplified by owning
the preference shares of certain “holding companies” that the
Investment Manager believes trade at substantial discounts to their
subsidiaries. WKOF’s current portfolio discount is approximately
52%, which is similar to its discount at inception in 2013.
As discussed in previous correspondence, the Investment Manager
evaluates its investment decisions across multiple criteria,
including the discount between each preference share and its
corresponding common share, the expected dividend yield, and the
fundamentals of a company. In assessing the fundamentals of a
company, the Investment Manager is focused on understanding whether
other discounts exist between the market price of the company and
the implied price derived from certain analyses conducted on the
company, as well as whether WKOF is able to take advantage of such
discounts.
Over the course of the first half of 2022, WKOF has continued to
maintain a double-digit percentage holding of its portfolio in the
preference shares of LG Chem Ltd. (“LG Chem”). As of 30 June 2022, LG Chem’s preference shares traded
at a discount of 53% to its common shares. The Investment Manager
also believes the current price of LG Chem’s preference shares is
exposed to an additional discount that exists between the
valuations of the common shares of LG Chem and its net asset value
on a look-through basis.
LG Chem is an example of a holding company (“holdco”) in the
South Korean market. Holdcos, which are generally controlled by
“chaebols” (large family-owned conglomerates), have controlling
stakes in the major subsidiaries of their respective conglomerates.
Many of these subsidiaries are publicly traded, which allows us to
assess whether the holdcos are trading at a discount with a
reasonable degree of certainty. When we conduct this
sum-of-the-parts analysis on LG Chem, we observe that the current
market value of its common shares implies a much lower value than
the look-through value assessed based on the economic value of LG
Chem’s ownership of its subsidiaries. For example, LG Chem owns
81.8% of LG Energy Solution (“LG ES”)15, the largest EV
Battery maker in Korea and the second largest battery maker in the
world.16 It also operates a valuable battery materials
business that supplies to LG ES. Given our estimates of LG Chem’s
discount to net asset value (including its LG ES stake) of
approximately 60%, and LG Chem preference share discount of 53%
(both as of 30 June 2022), and the
value of other subsidiaries as reported LG Chem’s balance sheet,
the final look-through discount of LG Chem’s preference shares is
estimated to be approximately 81%. We believe any future sales of
LG ES shares by LG Chem could lead to value accretion to common
shareholders of LG Chem, and even more so to the preference
shareholders.
Another example of this concept is SK Chemicals Co. (“SK Chem”).
SK Chem owns a controlling stake of 68.34%17 of another
listed company in South Korea, SK
Bioscience Co. Ltd. (“SK Bioscience”), which is trading at a market
capitalisation of 4.9bn GBP as of
30 June 2022. In contrast, SK Chem
traded at a market capitalisation of approximately 1.0bn GBP the same day. In other words, SK Chem
traded at a 70% discount to the market value of its stake in SK
Bioscience, which amounts to 3.3bn
GBP. In addition, factoring in the 47% discount at which SK
Chem’s preference shares trade relative to its common shares as of
the end of June, the final look-through discount including the
reported valuations of other subsidiaries as reported on the
balance sheet of SK Chem is estimated to be over 80% (i.e. WKOF is
paying less than 20p for each GBP of assets).
Gaining an understanding of the economic and non-economic
motives of the chaebols which own many of the issuers of South
Korean preference shares is a critical part of our fundamental
analysis. Additionally, we look to seek out investments which could
benefit from corporate governance changes, especially those that
have low expectations implied by valuations. We continue to
maintain the view that, in general, corporate governance has been
improving within the South Korean market.
In the first half of 2022, we have witnessed some notable events
in corporate governance that the Investment Manager believes
demonstrates the growing trend of Korean companies more closely
aligning their interests with their minority shareholders. In
March 2022, SK Inc., the holding
company for companies such as SK Hynix and SK Chem, announced a
revised shareholder return policy, which includes an annual share
buyback program until 2025 and a possibility of the cancellation
of its treasury shares.18 Additionally, SK Inc.
opted to increase the level of stock-based compensation for its
senior executives and began using its stock price as one of its
management team’s key performance indicators.
In the second quarter of 2022, LG Corp, which investors have
also historically criticised for its lack of shareholder friendly
policies, also indicated improvements in corporate governance as
its board of directors approved a 500
billion KRW (317 million GBP)
share buyback program until 2024.19 As this environment
continues to improve, we hope to see improvements in the valuations
of common shares of the holdcos as well as narrowing discounts of
their preference shares relative to their common shares.
Review of the South Korean Macro
Environment
Challenging global macroeconomic conditions have led to weaker
South Korean market performance over the last two quarters.
According to figures released by Bank of Korea (“BoK”),
South Korea experienced a 3.1%
drop in exports between the first and second quarter of 2022. Data
published for June 2022 indicate a
5.4% year-over-year increase in exports, led by demand for
semiconductors and petrochemicals; however, this figure also
represents the slowest monthly growth in exports since November 2020. 20 The decrease in
export activity comes as a result of lower global demand while the
economies of South Korea’s largest export partners continue to be
impacted by the economic toll stemming from the Russia-Ukraine war, uncertainty in the Chinese
economy, and recovery from COVID-19. In contrast to the single
digit increase in exports, South
Korea experienced a year-over-year increase of 19% in
imports at the end of Q2 2022 as energy and commodity prices
increased, resulting in a growing trade deficit that had begun to
take effect in early 2022. 21
Despite the slowdown in exports between the first and second
quarter, the South Korean economy continued to grow between April
and June 2022, outpacing inflation
for a 0.7% increase in real GDP. An increase in household spending
was the main contributor to this growth, spurred by the loosening
of COVID-19 restrictions. This increase in consumption, however,
contributed further to inflationary pressure experienced by both
consumers and producers with South Korea’s consumer price index
(“CPI”) up 6.0% year-over-year and producer price index (“PPI”) up
9.9% over the same period.22
With the growth in CPI reaching its fastest pace since the Asian
Financial Crisis of 1997, the South Korean government implemented a
number of initiatives to control this rising inflation. Elected in
March 2022, new BoK governor
Rhee Chang-yong has taken a stance
to focus on combating inflation. BoK delivered four rate hikes
throughout the first half of the year, raising the country’s policy
rate from 1.00% at the beginning of 2022 to 2.50% as of the date of
this report.23 In addition, South Korea’s newly elected president
Yoon Suk-yeol has attempted to enact
his own set of economic policies to combat inflation and shift the
government to a more pro-business and market-friendly stance. After
assuming office in May, President Yoon’s conservative government
expanded its list of tariff-free import items to include more than
25 major imported products and floated the idea of a
corporate-friendly tax reform to encourage private sector
investments.24 The new administration’s attempts to
usher in more shareholder-friendly practices in South Korea while fostering a deregulated
business environment for private-led growth, have received mixed
levels of responses. For instance, the four largest conglomerates
in South Korea have pledged
capital investments of more than 860
trillion KRW (550 billion GBP)
in the next five years following the entrance of the new
administration.25 Nevertheless, President Yoon’s
approval ratings have deteriorated from 52% when he was sworn in to
28% as of the last week of July.26 It is likely too
early to predict whether the new administration will successfully
achieve its stated goals to stimulate the economy while improving
corporate governance.
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 WKOF experienced
geopolitical disaster without introducing 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 tables below provide details about the hedges as of
30 June 2022. Note that outside of
the general market and portfolio hedges described herein, WKOF has
generally not hedged interest rates or currencies.
Credit
Default Swaps on South Korean Sovereign Debt |
Notional
Value (GBP) |
Total
Cost to Expiration (GBP) |
Annual
Cost (GBP) |
Price
Paid as % of Notional Value
(per annum) |
Expiration Date |
Duration
(Years) |
3-year
CDS |
82m |
601,974 |
182,384 |
0.23% |
2025 |
3.0 |
Total Cost |
|
731,377 |
193,611 |
|
|
|
Concluding Remarks
While the South Korea equity
market exhibited poor performance in the first half of 2022 caused
by macro uncertainty and poor economic conditions, the Investment
Manager believes the investment thesis for WKOF remains intact.
Discounts in the portfolio remain at historically high levels. As
previously discussed, on a look-through basis, the Investment
Manager believes holdings of the fund offer significant valuation
discounts to South Korean common shares which, in turn, offer
significant discounts to global equities. While it may require
patience, we believe long-term investors will be rewarded as other
investors discover this value opportunity, and there could be
additional upside if South Korean corporate governance continues
what we believe are improving trends to narrow the substantial
discounts that are currently available.
Thank you for your trust, and we look forward to providing you
with updates in the future.
Weiss Asset Management LP
9 September 2022
Condensed Statement
of Financial Position
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
|
|
30
June |
|
31
December |
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
(Unaudited) |
|
(Audited) |
|
|
|
|
|
Notes |
£ |
|
£ |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
assets at fair value through profit or loss |
|
8 |
121,851,545 |
|
159,614,094 |
Derivative
financial assets |
|
|
9 |
- |
|
221,639 |
Other
receivables |
|
|
|
|
308,980 |
|
3,881,815 |
Cash and
cash equivalents |
|
|
|
4,177,520 |
|
3,091,245 |
Margin
account |
|
|
|
|
2,408,971 |
|
1,381,413 |
Due from
broker |
|
|
|
|
12,452 |
|
696 |
Total
assets |
|
|
|
|
128,759,468 |
|
168,190,902 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Derivative
financial liabilities |
|
|
9 |
1,438,881 |
|
984,227 |
Due to
broker |
|
|
|
|
- |
|
263,091 |
Other
payables |
|
|
|
|
261,413 |
|
402,439 |
Total
liabilities |
|
|
|
|
1,700,294 |
|
1,649,757 |
Net assets |
|
|
|
|
|
127,059,174 |
|
166,541,145 |
|
|
|
|
|
|
|
|
|
Represented by: |
|
|
|
|
|
|
|
Shareholders' equity and reserves |
|
|
|
|
|
|
Share
capital |
|
|
|
10 |
33,986,846 |
|
33,986,846 |
Other
reserves |
|
|
|
|
93,072,328 |
|
132,554,299 |
Total
shareholders' equity |
|
|
|
127,059,174 |
|
166,541,145 |
Net
assets per share |
|
|
|
7 |
1.8333 |
|
2.4029 |
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 9
September 2022.
Norman
Crighton
Gill Morris
Chair
Director
Condensed Statement
of Comprehensive Income
|
|
|
|
|
|
For
the period ended |
For
the period ended |
|
For
the period ended |
For
the period ended |
|
|
|
|
|
|
30
June 2022 |
30
June 2022 |
|
30
June 2022 |
30
June 2021 |
|
|
|
|
|
|
(Unaudited) |
(Unaudited) |
|
(Unaudited) |
(Unaudited) |
|
|
|
|
|
|
Income |
Capital |
|
Total |
|
|
|
|
|
|
Notes |
£ |
£ |
|
£ |
£ |
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
changes in fair value of financial assets
at fair value through profit or loss |
|
- |
(34,996,104) |
|
(34,996,104) |
32,880,404 |
Net
changes in fair value of derivative financial
instruments through profit or loss |
|
- |
959,892 |
|
959,892 |
82,819 |
Net
foreign currency (losses)/gains |
|
(309,417) |
797,241 |
|
487,824 |
(311,025) |
Dividend
income |
|
|
|
445,389 |
- |
|
445,389 |
619,918 |
Bank
interest |
|
|
|
|
- |
- |
|
- |
(90) |
Total
income |
|
|
|
|
135,972 |
(33,238,971) |
|
(33,102,999) |
33,272,026 |
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
(323,645) |
(1,539,845) |
|
(1,863,490) |
(3,068,708) |
Total
operating expenses |
|
|
(323,645) |
(1,539,845) |
|
(1,863,490) |
(3,068,708) |
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Profit for the period before dividend withholding
tax |
(187,673) |
(34,778,816) |
|
(34,966,489) |
30,203,318 |
Dividend
withholding tax |
|
3 |
(98,403) |
- |
|
(98,403) |
(136,305) |
(Loss)/Profit for the period after dividend withholding
tax |
(286,076) |
(34,778,816) |
|
(35,064,892) |
30,067,013 |
(Loss)/Profit and total comprehensive
(loss)/income for the period |
|
(286,076) |
(34,778,816) |
|
(35,064,892) |
30,067,013 |
Basic
and diluted (loss)/earnings per Share |
|
|
|
|
|
|
Continuation Pool |
|
6 |
(0.0041) |
(0.5018) |
|
(0.5059) |
0.3792 |
Realisation Pool* |
|
|
6 |
- |
- |
|
- |
0.0894 |
All items derive from continuing activities.
*No Realisation shares were in issue for the period ended
30 June 2022.
The Notes form an integral part of these Condensed Financial
Statements.
Condensed Statement
of Changes in Equity
|
|
|
|
Share |
Other |
|
|
|
|
|
capital |
reserves |
Total |
For the
period ended 30 June 2022 (Unaudited) |
Notes |
£ |
£ |
£ |
Balance at 1
January 2022 |
|
|
|
33,986,846 |
132,554,299 |
166,541,145 |
Total
comprehensive income for the period |
|
|
- |
(35,064,892) |
(35,064,892) |
Transactions with Shareholders, recorded directly in
equity |
|
|
|
|
|
Distributions
paid |
|
|
4 |
- |
(4,417,079) |
(4,417,079) |
Balance at 30 June
2022 |
|
|
|
33,986,846 |
93,072,328 |
127,059,174 |
|
|
|
|
|
|
|
For the
period ended 30 June 2021 (Unaudited) |
|
|
|
|
|
|
|
Continuation Pool |
|
Realisation Pool |
|
|
|
Share |
Other |
Share |
Other |
|
|
|
capital |
reserves |
capital |
reserves |
Total |
|
Notes |
£ |
£ |
£ |
£ |
£ |
Balance at 1
January 2021 |
|
68,124,035 |
135,000,918 |
- |
- |
203,124,953 |
Total
comprehensive income for the period |
- |
29,572,100 |
- |
494,913 |
30,067,013 |
Transactions with
Shareholders, recorded directly in equity |
|
|
|
|
|
|
Redesignation of
Realisation Shares |
10 |
(32,417,757) |
- |
32,417,757 |
- |
- |
Distributions
paid |
4 |
- |
(4,238,125) |
- |
- |
(4,238,125) |
Redemption of
Realisation Shares |
10 |
- |
- |
(25,000,000) |
- |
(25,000,000) |
Repurchase of Ordinary
Shares |
10 |
(1,719,432) |
- |
- |
- |
(1,719,432) |
Balance at 30 June
2021 |
|
33,986,846 |
160,334,893 |
7,417,757 |
494,913 |
202,234,409 |
The Notes form an integral part of these Condensed Financial
Statements.
Condensed Statement
of Cash Flows
|
|
For
the period ended |
|
For
the period ended |
|
|
30
June 2022 |
|
30
June 2021 |
|
|
(Unaudited) |
|
(Unaudited) |
|
Notes |
£ |
|
£ |
Cash flows from
operating activities |
|
|
|
|
Profit for the
period |
|
(35,064,892) |
|
30,067,013 |
|
|
|
|
|
Adjustments for: |
|
|
|
|
Net change in fair
value of financial assets held at fair value through profit or
loss |
|
34,996,104 |
|
(32,880,404) |
Exchange gains on cash
and cash equivalents |
|
(487,824) |
|
(311,025) |
Net change in fair
value of derivative financial instruments held at fair value
through profit or loss |
|
(959,892) |
|
(82,819) |
Increase in
receivables |
|
(18,869) |
|
(14,171) |
Decrease in other
payables |
|
(141,026) |
|
(102,038) |
Dividend income |
|
(346,988) |
|
(619,918) |
|
|
|
|
|
Dividend received |
|
3,938,692 |
|
4,248,379 |
Net cash generated
from operating activities |
|
1,915,305 |
|
305,017 |
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
|
Purchase of financial
assets at fair value through profit or loss |
|
(5,198,292) |
|
(76,849,505) |
Opening of derivative
financial instruments |
9 |
1,799,402 |
|
(358,461) |
Proceeds from the sale
of financial assets at fair value through profit or loss |
|
7,689,890 |
|
108,036,164 |
Closure of derivative
financial instruments |
|
(163,217) |
|
- |
(Increase)/decrease in
margin account |
9 |
(1,027,558) |
|
388,301 |
Net cash generated
from investing activities |
|
3,100,225 |
|
31,216,499 |
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
Purchase of own Shares
for cancellation |
|
- |
|
(1,719,433) |
Repurchase of
Realisation Shares |
|
- |
|
(25,000,000) |
Distributions
paid |
4 |
(4,417,079) |
|
(4,238,125) |
Net cash used in
financing activities |
|
(4,417,079) |
|
(30,957,558) |
|
|
|
|
|
Net increase in
cash and cash equivalents |
|
598,451 |
|
563,958 |
Exchange gains on
cash and cash equivalents |
|
487,824 |
|
311,025 |
Cash and cash
equivalents at the beginning of the period |
|
3,091,245 |
|
5,972,867 |
Cash and cash
equivalents at the end of the period |
|
4,177,520 |
|
6,847,850 |
The Notes form an
integral part of these Condensed Financial Statements.
Notes to the Unaudited Condensed
Financial Statements
For the period ended 30 June 2022
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 LSE on 14 May 2013.
The Investment Manager of the Company is Weiss Asset Management
LP.
At the 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 2022 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 2022, 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 2021.
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 2021. 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
The Company has continued in existence following the third
Realisation Opportunity and will continue to operate as a going
concern unless a determination to wind up the Company is made.
Given this, the Directors will propose further realisation
opportunities for Shareholders who have not previously elected to
realise all of their Ordinary Shares. Such opportunities will be
made using a similar mechanism to previously announced Realisation
Opportunities. The next Realisation Opportunity will take place
during May 2023. The Board and the
Investment Manager believe the investment policy continues to be
valid.
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 it 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 (2021:
£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 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. An annual dividend of
5.2311 pence per Share (£4,238,125)
was approved on 4 May 2021 and paid
on 4 June 2021 in respect of the year
ended 31 December 2020.
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
2021.
6. Basic and diluted
earnings per Share
The total basic and diluted loss per Ordinary Share of £0.5059
(30 June 2021: profit per Share of
£0.3792 for the continuation pool and profit per Share of £0.0894
for the realisation pool) for the Company has been calculated based
on the total loss after tax for the year of £35,064,892 (for the
period ended 30 June 2021:
£30,067,013 profit) and the weighted average number of Ordinary
Shares in issue during the period of 69,307,078 (for the period
ended 30 June 2021: 77,981,628
continuation pool and 5,537,079 realisation pool).
Income and capital earnings and losses for the period
30 June 2022 have both been
calculated on the weighted average number of Ordinary Shares in
issue during the year of 69,307,078.
7. Net Asset Value per Ordinary
Share
The NAV of each Share of £1.8333 (as at 31 December 2021: £2.4029) is determined by
dividing the net assets of the Company attributed to the Ordinary
Shares of £127,059,174 (as at 31 December
2021: £166,541,145) by the number of Ordinary Shares in
issue at 30 June 2022 of 69,307,078
(as at 31 December 2021: 69,307,078
Ordinary Shares in issue).
8. Financial assets at fair value
through profit or loss
|
|
|
|
As
at |
|
As
at |
|
|
|
|
30
June |
|
31
December |
|
|
|
|
2022 |
|
2021 |
|
|
|
|
(Unaudited) |
|
(Audited) |
|
|
|
|
£ |
|
£ |
Cost of
investments at beginning of the year |
|
|
149,112,223 |
|
137,878,681 |
Purchases
of investments in the year |
|
|
4,935,202 |
|
101,777,858 |
Disposal
of investments in the year |
|
|
(7,701,647) |
|
(137,572,478) |
Net
realised gains on investments in the year |
|
|
686,757 |
|
47,028,162 |
Cost of
investments held at end of the year |
|
|
147,032,535 |
|
149,112,223 |
Unrealised
(loss)/gain on investments |
|
|
(25,180,990) |
|
10,501,871 |
Financial
assets at fair value through profit or loss |
|
|
121,851,545 |
|
159,614,094 |
9. Derivative financial instruments at
fair value through profit or loss
|
|
|
|
|
As
at |
|
|
|
As
at |
|
|
|
|
|
30
June |
|
|
|
31
December |
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
(Unaudited) |
|
|
|
(Audited) |
|
|
|
|
|
£ |
|
|
|
£ |
Cost of
derivatives at beginning of the period/year |
|
|
|
(724,897) |
|
|
|
(1,745,063) |
Opening of
derivatives in the period/year |
|
|
|
(1,799,402) |
|
|
|
(724,897) |
Closure of
derivatives in the period/year |
|
|
|
163,217 |
|
|
|
1,084,182 |
Realised
gain on closure of derivatives in the period/year |
|
|
|
525,523 |
|
|
|
660,881 |
Net cost
of derivatives held at end of the period/year |
|
|
|
(1,835,559) |
|
|
|
(724,897) |
Unrealised
gain on derivative financial instruments at fair value through
profit or loss |
|
|
396,678 |
|
|
|
(37,691) |
Net fair
value on derivative financial instruments at fair value through
profit or loss |
|
|
(1,438,881) |
|
|
|
(762,588) |
The following are the composition of the Company’s derivative
financial instruments at period/year end:
|
|
|
|
|
As
at |
|
|
|
As
at |
|
|
|
|
|
30
June |
|
|
|
31
December |
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
|
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
|
|
|
(Unaudited) |
|
(Unaudited) |
|
(Audited) |
|
(Audited) |
Derivatives held for
trading: |
|
|
£ |
|
£ |
|
£ |
|
£ |
Options |
|
|
- |
|
- |
|
221,639 |
|
- |
Credit default
swaps |
|
|
- |
|
(1,438,881) |
|
- |
|
(984,227) |
Total |
|
|
- |
|
(1,438,881) |
|
221,639 |
|
(984,227) |
10. 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 |
|
|
|
|
2022 |
|
2021 |
|
|
|
|
(Unaudited) |
|
(Audited) |
Authorised |
|
|
|
|
|
|
Unlimited
Ordinary Shares at no par value |
|
|
- |
|
- |
Issued at no par
value |
|
|
|
|
|
|
69,307,078
(2021: 69,307,078 unlimited Ordinary Shares at no par value) |
- |
|
- |
|
|
|
|
|
|
|
Reconciliation of number of Shares |
|
|
|
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
30
June |
|
31
December |
|
|
|
|
2022 |
|
2021 |
|
|
|
|
Shares |
|
Shares |
Ordinary
Shares at the beginning of the year |
|
|
69,307,078 |
|
81,617,828 |
Purchase
of own Shares for cancellation |
|
|
- |
|
(600,000) |
Purchase
of Realisation Shares |
|
|
- |
|
(11,710,750) |
Total
Ordinary Shares in issue at the end of the period/year |
|
69,307,078 |
|
69,307,078 |
|
|
|
|
|
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
30
June |
|
31
December |
|
|
|
|
2022 |
|
2021 |
|
|
|
|
Shares |
|
Shares |
Treasury
Shares at the beginning of the year |
|
|
11,437,662 |
|
- |
Redesignation of Realisation Shares |
|
|
273,085 |
|
11,437,662 |
Total
Shares at the end of the period/year |
|
|
11,710,747 |
|
11,437,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
account |
|
|
|
|
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
30
June |
|
31
December |
|
|
|
|
2022 |
|
2021 |
|
|
|
|
£ |
|
£ |
Share
capital at the beginning of the year |
|
|
33,986,846 |
|
68,124,035 |
Purchase
of own Shares for cancellation |
|
|
- |
|
(1,719,433) |
Purchase
of Realisation Shares |
|
|
- |
|
(32,417,756) |
Total
Share capital at the end of the period/year |
|
|
33,986,846 |
|
33,986,846 |
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 15 March
2021, being 44 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. As Shareholders elected to
participate in the Realisation Opportunity, the Company’s portfolio
was divided into two pools: the Continuation Pool; and the
Realisation Pool.
e) On 14 May 2021,
11,710,750 Ordinary Shares, which represented 14.5% of the
Company’s issued Ordinary Share capital were redesignated as
Realisation Shares.
On 23 June 2021, the Company
announced that it had made good progress with the sale of assets in
the Realisation Pool and would commence with the first compulsory
redemption of 8,979,885 Realisation shares representing
approximately 76.7%. of Realisation Shares in issue. The First
Redemption was effected pro-rata to holdings of Realisation Shares
on the register at the close of business on 22 June 2021. The First Redemption price was
278.4 pence per Realisation Share,
equivalent to the unaudited Net Asset Value per Realisation Share
as at 31 May 2021.
The Company made good progress with the sale of the remaining
assets in the Realisation Pool and on 7
September 2021 announced a second compulsory redemption of
2,457,780 Realisation shares representing approximately 90% of
Realisation Shares. The Second Redemption was effected in the same
manner as the First Redemption at a price of 275.55 pence per Realisation Share, equivalent to
the Net Asset Value per Realisation Share as at 31 August 2021, and with a record date of
6 September 2021.
On the 21 December 2021 the
Company announced the final compulsory redemption of the final
273,085 Realisation Shares. The Final Redemption price was
266.39 pence per Realisation Share,
equivalent to the unaudited Net Asset Value per Realisation Share
as at 17 December 2021.
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
2022, the Company purchased Nil shares (31 December 2021: 600,000) of its own Shares at a
consideration of £Nil (31 December
2021: £1,719,433) under its general buyback authority
originally granted to the Company in 2014.
The Company has 69,307,078 Ordinary Shares in issue as at
30 June 2022 (as at 31 December 2021: 69,307,078).
At the AGM held on 21 July 2022,
Shareholders approved the authority of the Company to buy back up
to 40% of the issued Ordinary Shares to facilitate the Company’s
discount management. Any Ordinary Shares bought back may be
cancelled or held in treasury.
11. 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 annual Directors’ fees comprise £35,000 payable to Mr
Crighton as the Chair, £32,500 to Mrs Morris as Chair of the Audit
Committee and £30,000 to Mr King. On 1 June
2022, the Board announced the appointment of Mr
Shanmuganathan to the Board. The annual Directors’ fees payable to
Mr Shanmuganathan and Mrs Dorey will be £30,000.
During the period ended 30 June
2022, Directors’ fees of £51,250 (period ended 30 June 2021: £40,750) were charged to the
Company and £Nil remained payable at the end of the period (as at
31 December 2021: £Nil).
b) Shares held by
related parties
The Directors who held office at 30 June 2022 and up to the
date of this Report held the following number of
Ordinary Shares beneficially:
|
|
|
|
|
As at 30 June 2022 (Unaudited) |
As at 31 December 2021
(Audited) |
|
|
|
|
|
|
|
|
|
|
Ordinary |
% of
issued |
Ordinary |
% of
issued |
|
|
|
|
|
Shares |
share
capital |
Shares |
share
capital |
Norman
Crighton |
|
|
20,000 |
0.03% |
20,000 |
0.03% |
Robert
King |
|
|
|
15,000 |
0.02% |
15,000 |
0.02% |
Gillian
Morris |
|
|
|
3,934 |
0.01% |
3,934 |
0.01% |
Krishna
Shanmuganathan |
|
|
|
- |
- |
N/A |
N/A |
Wendy Dorey (appointed
9 September 2022) purchased 2,552
shares on 24 August 2022.
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 2022, Dr
Andrew Weiss and his immediate
family members held an interest in 5,316,888 Ordinary Shares (as at
31 December 2021: 6,486,888)
representing 7.67% (as at 31 December 2021: 9.36 %) of the
Ordinary issued share capital of the Company.
As at 30 June 2022, 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 3,594,333 Ordinary Shares (as at
31 December 2021: 2,844,333)
representing 5.19% (as at 31 December
2021: 4.10 %) of the Ordinary issued share capital of the
Company.
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 2022,
investment management fees and charges of £ 1,101,447 (for the
period ended 30 June 2021:
£1,599,511) were charged to the Company and £168,934 (as at
31 December 2021: £214,941) remained
payable at the period/year end.
12. Financial risk management
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 following table presents the Company’s financial assets and
liabilities by level within the valuation hierarchy as of
30 June 2022:
|
|
|
|
|
Total |
|
|
|
|
|
As
at |
|
|
|
|
|
30
June |
|
|
Level
1 |
Level
2 |
Level
3 |
2022 |
|
|
|
|
|
(Unaudited) |
|
|
£ |
£ |
£ |
£ |
Financial
assets/(liabilities) at fair value through |
|
|
|
|
profit or loss: |
|
|
|
|
|
Korean preference shares |
|
121,851,545 |
- |
- |
121,851,545 |
Financial derivative liabilities |
|
- |
(1,438,881) |
- |
(1,438,881) |
Total net assets |
|
121,851,545 |
(1,438,881) |
- |
120,412,664 |
|
|
|
|
|
Total |
|
|
|
|
|
As
at |
|
|
|
|
|
31
December |
|
|
Level
1 |
Level
2 |
Level
3 |
2021 |
|
|
|
|
|
(Audited) |
|
|
£ |
£ |
£ |
£ |
Financial
assets/(liabilities) at fair value through |
|
|
|
|
profit or loss: |
|
|
|
|
|
Korean preference shares |
|
159,614,094 |
- |
- |
159,614,094 |
Financial derivative assets |
|
221,639 |
- |
- |
221,639 |
Financial derivative liabilities |
|
- |
(984,227) |
- |
(984,227) |
Total net assets |
|
159,835,733 |
(984,227) |
- |
158,851,506 |
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
2022, there were no transfers from Level 2 to Level 1 (for the year
ended 31 December 2021: £Nil).
Investments whose values are based on quoted market prices in
active markets, and are therefore classified within Level 1,
include Korean preference shares, exchange traded funds, 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 (£1,438,818) (as at 31 December 2021: (£984,227)). As at
30 June 2022, the Company held no
Level 1 derivative financial instruments (31
Dec 2021: £221,639).
13. NAV reconciliation
The Company announces its NAV to the LSE after each daily and
month-end valuation point. 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 June 2022 |
As at 31 December 2021 |
|
|
|
NAV
per |
|
NAV
per |
|
|
|
Participating |
|
Participating |
|
|
NAV |
Share |
NAV |
Share |
|
|
£ |
£ |
£ |
£ |
Net Asset Value
reported to the LSE |
|
126,979,752 |
1.8321 |
162,661,741 |
2.3470 |
Adjustment to accruals
and cash |
|
(24,419) |
(0.0004) |
- |
- |
Adjustment for
dividend income |
|
103,841 |
0.0015 |
3,879,404 |
0.0560 |
Net Assets
Attributable to Shareholders per Financial Statements |
|
127,059,174 |
1.8333 |
166,541,145 |
2.4030 |
The published NAV per Share of £1.8321 (as at 31 December 2021: £2.3470) is different from the
accounting NAV per Share of £1.8333 (as at 31 December 2021: 2.4030) due to the adjustments
noted above.
14. Subsequent events
These Condensed Financial Statements were approved for issuance
by the Board on 9 September 2022.
Subsequent events have been evaluated until this date.
Wendy Dorey was appointed to the
Board effective 9 September 2022.
No further subsequent events have occurred.
Statement of Principal and Emerging
Risks and Uncertainties
For the period ended 30 June 2022
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. COVID-19
The Board monitored the development of the pandemic and
considered the impact it has had to date and assessing the impact
it may have in the future. Despite the impact on the Company’s
share performance and subsequent recovery and easing of
restrictions in relation to the pandemic, there remains continued
uncertainty such that predicting any future impact with any
certainty remains challenging. The Board will continue to assess
the position.
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. There is a continuing risk of further COVID
outbreaks in Korea, Guernsey, and the U.S.
Principal Risks and Uncertainties
In respect to 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
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.
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. Furthermore, it is possible that South Korea could impose currency-exchange or
capital controls on foreign investors, making it difficult or
impossible for the Company to repatriate funds. 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.
Going Concern
The Company has continued in existence following the third
Realisation Opportunity and will continue to operate as a going
concern unless a resolution to wind up the company is made. Every
two years after the Realisation Date, the Directors will propose
further realisation opportunities for Shareholders who have not
previously elected to realise all of their Ordinary Shares using a
similar mechanism used in the previously announced Realisation
Opportunity. The next Realisation Opportunity will take place
during 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 it is
appropriate for the financial statements to be prepared on a going
concern basis.
Directors’
Responsibility Statement
For the period ended 30 June 2022
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,
Norman Crighton
Gill Morris
Chair
Director
9 September 2022
Board of
Directors
The Company has five Directors and will revert to four Directors
from 1 October 2022. All Directors
are considered independent of the Investment Manager.
Norman
Crighton (aged 56)
Mr. Crighton is Chairman of the Company. 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.
Robert Paul
King- retires 30 September
2022 (aged 59)
Rob is an independent non-executive director for a number of
open and closed-ended investment funds including one Specialist
Fund Sector fund, Tufton Oceanic Assets Limited (Chairman); one AIM
listed fund, Weiss Korea Opportunities Fund Limited; and one
International Stock Exchange listed fund, Golden Prospect Precious
Metals Limited (which also has a trading listing on the LSE).
Before becoming an independent non-executive director in 2011, he
was a director of Cannon Asset Management Limited and their
associated companies. Prior to this he was a director of Northern
Trust International Fund Administration Services (Guernsey) Limited
(formerly Guernsey International Fund Managers Limited) where he
had worked from 1990 to 2007. He has been in the offshore finance
industry since 1986 specialising in administration and structuring
of offshore open and closed ended investment funds. Rob is British
and resident in Guernsey.
Gillian Yvonne
Morris (aged 59)
Gill is Chairman of the Audit Committee. Gill is also a
non-executive director and Chair of the Audit Committee at The
International Stock Exchange, and a panel member of the States of
Guernsey Financial Scrutiny Panel and the Guernsey Tax Tribunal.
She also runs her own consultancy and coaching business. Gill
qualified as a Chartered Accountant with the Institute of Chartered
Accountants of England &
Wales in 1988 and a Chartered Tax
Advisor with the Chartered Institute of Taxation in 1994. Gill
started her career in 1985 as a tax advisor at Touche Ross &
Co. in London. She worked with
Touche Ross & Co. and KPMG in Australia before returning to Guernsey with
KPMG. Gill moved into the industry in 1994, joining Specsavers
Optical Group as their tax manager and during her time with the
Group was promoted to Director of Tax and Treasury and ultimately
served as Director of Risk and Government Affairs until 2020. Gill
has also assumed other government roles in Guernsey since 2012,
including as a member of the Public Accounts Committee and a
Non-States member of the Scrutiny Management Committee. Gill is
British and resident in Guernsey. Gill was appointed to the Board
in 2021.
Krishna
Shanmuganathan- appointed 1 June
2022 (aged 48)
Krishna Shanmuganathan is an
independent non-executive director of the Company. He is also an
independent non-executive director of abrdn Asia Focus plc since
June 2020 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, chairman of the trustees of St Jude India ChildCare
Centres UK and a trustee of Solefield School Educational Trust.
Krishna has Masters 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.
Wendy
Dorey- appointed 9 September
2022 (aged 49)
Mrs Dorey 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, and a Non-Executive
Director for Schroders (CI) Limited.
Mrs Dorey has over 20 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. She is a
Fellow of the Institute of Directors and qualified as a Chartered
Director in 2020. She is also currently Chair of the Guernsey
Branch of the Institute of Directors.
Investment
Manager
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. In addition to WKOF, WAM manages multiple
investment vehicles, including private hedge funds, an
institutional separate account and other opportunity funds.
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 over 20 years.
Over this time, the firm has built out a dedicated night desk of 6
employees focused on trading its Asian strategies, as well as
strong relationships with a number of Korean brokers.
The firm has 80+ employees and assets under management of
approximately £2.5 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 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’s 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.
Corporate
Information
Directors
(Non-Executive)
Norman Crighton (Chairman)
Robert Paul King (retires 30 September 2022)
Gillian Yvonne Morris
Krishna Shanmuganathan
(appointed 1 June 2022)
Wendy Dorey (appointed 9 September 2022)
|
Company Secretary,
Administrator and
Designated Manager
Northern Trust International Fund
Administration Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
GY1 3QL |
Registered
Office
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
GY1 3QL |
|
Financial Adviser,
Nominated
Adviser and Broker
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX |
|
|
|
Investment
Manager
Weiss Asset Management LP
222 Berkeley Street, 16th Floor
Boston, MA 02116
USA |
|
Guernsey Legal
Adviser to the Company
Mourant Ozannes (Guernsey) LLP
Royal Chambers
St. Julian’s Avenue
St. Peter Port
Guernsey
GY1 4HP |
|
|
|
English Legal
Adviser to the Company
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH |
|
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey
GY2 4LH |
|
|
|
Custodian and
Principal Bankers
Northern Trust (Guernsey) Limited
PO Box 71
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
GY1 3DA |
|
Independent
Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St. Peter Port
Guernsey
GY1 1WR |
Endnotes
1 Bloomberg L.P. (2022). Bloomberg Innovation
Scores as of 12/31 since 2013. Retrieved from Bloomberg
terminal.
2 WIPO IP Facts and Figures 2021. (n.d.). World
Intellectual Property Organization.
3 The Sovereign Credit Rating of Korea. (n.d.).
Bank of Korea.
4 Leading export countries worldwide in 2021.
(n.d.). Statista.
5 GDP. (n.d.). World Bank.
6 Doing Business 2020. (2020). World Bank.
7 PISA 2018 Insights and Interpretations. (n.d.). Organisation
for Economic Co-operation and Development.
8 Activist Targets. (n.d.). Activist
Insight.
9 Technology and
Products. (2022). Doosan Fuel Cell.
10 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.
11 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.
12 On 30 July
2022 the Company had 9,307,078 shares outstanding
13 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.
14 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.
15 LG Energy Solution Raises $10.8 bln in S.Korea's Biggest IPO.
(2022). Reuters.
16 CATL Retains Top Position As World’s
Biggest EV Battery Maker. (2022). Bloomberg.
17 Subsidiaries Companies.
(2022). SK Chemicals.
18 US Hedge Fund Urges SK to Focus On Share
Buybacks. (2022). The Korea Economic Daily.
19 LG to Buy Back $398
Mn Of Its Own Shares. (2022). The Korea Economic
Daily.
20 Bloomberg L.P. (2022). World Economic
Statistics: South Korea. Retrieved
from Bloomberg terminal.
21 Bloomberg L.P. (2022). World Economic
Statistics: South Korea. Retrieved
from Bloomberg terminal.
22 Bloomberg L.P. (2022). World Economic
Statistics: South Korea. Retrieved
from Bloomberg terminal.
23 South Korea Raises Rates, Warns Inflation
Fight Not Over. (2022). Reuters.
24 S. Korea to lift import tariffs on more
key foodstuffs amid high inflation. (2022). The Korea
Times.
25 S. Korea’s top 5 conglomerates pledge
capex nearly matching half of GDP through 2026.
(2022). Pulse News.
26Approval rating of South Korea's President Yoon Suk-yeol from April to August 2022. (2022). Statista.