Weiss Korea Opportunity Fund - Annual Report and Audited Financial Statements for the Year Ended 31 December 2024
LEI 213800GXKGJVWN3BF511
(Classified Regulated Information, under DTR 6 Annex 1 section 1.1)
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED
FOR THE YEAR ENDED
Financial Highlights As at 31 December Since inception 2024 NAV Return (15.9%) 81.1% Benchmark (18.5%) 41.2% Return As at 31 December 31 December 2023 2024 Portfolio 46.0% 49.7% Discount* Share Price (3.2%) (0.4%) Discount Fund Dividend 3.8% 3.2% Yield Average Trailing 12-Month P/E Ratio of 6.0x 4.8x Preference Shares Held P/B Ratio of Preference 0.3 0.3 Shares Held Annualised Total Expense 2.0% 2.1% Ratio
*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
Chair’s Review
For the year ended
Investment Performance
During the period from
Dividend
The Directors declared an interim dividend yield of
In line with the previous financial year, the Board intends to take into account all dividends received up to, and
including,
Strategic Review
At the beginning of
The Board assessed a number of proposals, including a change of investment mandate and/or a potential combination of WKOF’s assets with another suitable investment company or fund, as an alternative to a Managed Wind-down.
The Board confirms that the short-listed proposals were thoroughly assessed and meetings were held with interested parties in late
Managed Wind-down
On
Shareholders overwhelmingly approved the Managed Wind-down at an Extraordinary General Meeting on
During the Managed Wind-down process, the Company will be managed with the intention of realising all of the assets in its portfolio in an orderly manner that aims to achieve a balance between seeking to obtain the best achievable value for those assets and making timely returns of capital to Shareholders.
Returns of capital to shareholders will be made by way of compulsory redemptions of shares and are anticipated to be made as, and when, sufficient cash is realised to make it economically expedient to do so. The first return of capital is expected to be made by the end of
The Board intends to maintain the trading of Shares on the AIM for as long as the Directors believe it to be practicable during the Managed Wind-down, subject to the ability of the Company to continue to comply with its obligations under the AIM Rules.
The Board considers that the inclusion of a viability statement in the Financial Statements would not provide additional benefit to the Company’s stakeholders given that the Company has entered a Managed Wind-down which aligns with the
Share buybacks
The Board is also authorised to repurchase up to 40% of WKOF’s outstanding Ordinary Shares in issue as of
Chair
Investment Manager’s Report
For the year ended
Managed Wind-down of the Fund
In
-- Several large and more liquid preference shares have had their discounts narrow to the point where they are no longer attractive investments for the fund. Consequently, the pool of more liquid preference shares available for investment has decreased. --South Korea's continued efforts to open its financial markets to foreign investors mean that the fund's holdings can now be replicated in more cost-effective ways than through the fund itself. -- It was felt that given the above and the performance over the least 2 years, more shareholders would be likely to consider taking up the next realisation opportunity. If this were to happen, the overhead cost per share to investors would increase.
As discussed in the Chair’s Review of this Annual Report, the Board subsequently commenced a strategic review to consider the future of the Company and explore the strategic options available, including a change of investment mandate and/or a potential combination of the Company’s assets with another suitable investment company or fund. The shortlisted proposals were thoroughly assessed and meetings were held with interested parties in late
WKOF Performance Attribution
At the end of
WKOF’s returns, on a currency-neutral basis, are driven by five primary factors:
-- The performance of the Korean equity market generally as indicated by the South Korea Index; -- The discounts of the preference shares WKOF holds narrowing or widening relative to their corresponding common shares; -- The performance of the common shares (which correspond to the preference shares held by WKOF) relative to the performance of the South Korean equity market; -- 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
Performance Attribution Table
Return Component 2024 Since Inception The Korea Index -18.5% 41.2% Discount Narrowing of Preferred Shares Owned 9.2% 97.6% WKOF Common Shares vs. The Korea Index -1.1% -47.3% Excess Dividend Yield of Preferred Shares Owned 1.3% 15.0% Fees, Expenses and Others -6.8% -25.4% NAV Performance -15.9% 81.1%
Macro and Corporate Governance update
In our 2024 Half Yearly Report, we mentioned that investors might gain more clarity on South Korea’s Corporate Value-Up Programme (CVUP) by the end of the year. However, despite some periods of optimism, the CVUP still lacks clarity and effectiveness. A large part of this was due to increased political turmoil in
This political instability has temporarily hindered the government's ability to function effectively and damaged the nation’s international reputation. The economic impact is already being felt in
The “Korea Value-Up Index” is considered one of the three main components of the Corporate Value-Up Programme (CVUP). According to the
However, when the KRX launched the Value-Up Index on
One potentially positive development in corporate governance this year is that lawmakers have voted to expand the fiduciary duties of corporate boards to include responsibilities to shareholders, not just the company.
Finally, protectionist trade policies under the Trump administration pose significant risks to the profitability of South Korea’s leading companies. The
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
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 we believe would generate high returns if
CDS Notional Amount (GBP) Cost Paid as a % of Notional Value Expiration Date per Annum (Spread) 79,617,834 0.238% 20/06/2025
Concluding Remarks
Thank you to our long-term shareholders. We are proud of WKOF’s performance during the nearly 12 years the Company has been listed on AIM, during which we have continually sought to do what is in the best interest of shareholders. For the reasons outlined above, we believe the Managed Wind-down is in the best interest of shareholders, and will seek to manage the portfolio accordingly.
Statement of Financial Position
As at
As at As at 31 December 31 December 2024 2023 £ £ Assets Financial assets at fair value through profit or loss 94,780,296 112,427,879 Other receivables 913,777 1,627,052 Margin account 1,041,581 1,396,037 Cash and cash equivalents 1,224,127 3,364,287 Total assets 97,959,781 118,815,255 Liabilities Derivative financial liabilities 283,591 903,381 Due to broker - 271,189 Other payables 715,723 790,981 Total liabilities 999,314 1,965,551 Net assets 96,960,467 116,849,704 Represented by: Shareholders' equity and reserves Share capital 33,912,856 33,912,856 Other reserves 63,047,611 82,936,848 Total Shareholders' equity 96,960,467 116,849,704 Net Assets Value per Ordinary Share 1.3998 1.6870
The Financial Statements were approved and authorised for issue by the Board of Directors on
Chair Director
Statement of Comprehensive Income
For the year ended
For the year For the year ended ended 31 December 31 December 2023 2024 £ £ Income Net loss on financial assets at fair value (16,403,274) (4,498,384) through profit or loss Net gain on derivative financial instruments at 619,646 242,072 fair value through profit or loss Net foreign currency losses (373,493) (559,160) Dividend income 4,180,485 2,490,245 Bank interest income 3,951 12,747 Total loss (11,972,685) (2,312,480) Expenses Operating expenses (3,405,984) (3,586,733) Total operating expenses (3,405,984) (3,586,733) Loss for the year before dividend withholding (15,378,669) (5,899,213) tax Dividend withholding tax (919,084) (548,479) Loss for the year after dividend withholding tax (16,297,753) (6,447,692) Loss and total comprehensive loss for the year (16,297,753) (6,447,692) Basic and diluted loss per Share (0.2353) (0.0931)
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.
Statement of Changes in Equity
For the year ended
Share Other capital reserves Total For the year ended 31 December 2024 £ £ £ Balance as at 1 33,912,856 82,936,848 116,849,704 January 2024 Total comprehensive loss for the year - (16,297,753) (16,297,753) Transactions with Shareholders, recorded directly in equity Distributions paid - (3,591,484) (3,591,484) Balance as at 31 33,912,856 63,047,611 96,960,467 December 2024 Share Other capital reserves Total For the year ended 31 £ £ £ December 2023 Balance as at 1 33,986,846 93,093,647 127,080,493 January 2023 Total comprehensive loss for the year - (6,447,692) (6,447,692) Transactions with Shareholders, recorded directly in equity Purchase of (73,990) - (73,990) Realisation Shares Redemption of - (3,709,107) (3,709,107) Realisation Shares Balance as at 31 33,912,856 82,936,848 116,849,704 December 2023
Statement of Cash Flows
For the year ended
For the year ended 31 For the year ended 31 December 2024 December 2023 £ £ Cash flows from operating activities Loss and total comprehensive (16,297,753) (6,447,692) loss for the year Adjustments for: Interest income (3,951) (12,747) Net loss on financial assets at fair value through profit 16,403,274 4,498,384 or loss Exchange losses/(gains) on 359,527 (81,949) cash and cash equivalents Net gain on derivative financial instruments at fair (619,646) (242,072) value through profit or loss Decrease/(increase) in receivables excluding 3,074 (1,731) dividends Increase in other payables 81,000 89,974 excluding withholding tax Dividend income net of (3,261,401) (1,941,766) withholding taxes Dividend received net of 3,815,344 4,261,019 withholding taxes Bank interest received 3,951 12,747 Purchase of financial assets at fair value through profit (49,779,905) (18,040,415) or loss Proceeds from the sale of financial assets at fair 50,753,022 22,149,787 value through profit or loss Net cash generated from 1,456,536 4,243,539 operating activities Cash flows from investing activities Closure of derivative (141) - financial instruments Decrease/(increase) in margin 354,456 (68,724) account Net cash generated/(used in) 354,315 (68,724) from investing activities Cash flows from financing activities Purchase of Realisation - (73,990) Shares Distributions paid (3,591,484) (3,709,107) Net cash used in financing (3,591,484) (3,783,097) activities Net (decrease)/increase in (1,780,633) 391,718 cash and cash equivalents Exchange (losses)/gains on (359,527) 81,949 cash and cash equivalents Cash and cash equivalents at 3,364,287 2,890,620 the beginning of the year Cash and cash equivalents at 1,224,127 3,364,287 the end of the year
For further information, please contact:
SingerCapital Markets Limited James Maxwell /Justin McKeegan – Nominated Adviser +44 20 7496 3000James Waterlow – Sales NorthernTrustInternationalFund Administration Services (Guernsey) Limited +44 1481 745385Samuel Walden
