Half-year Report

WEISS KOREA OPPORTUNITY FUND LTD.
LEI 213800GXKGJVWN3BF511
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)

HALF-YEARLY FINANCIAL REPORT
FOR THE PERIOD ENDED 30 JUNE 2018

Weiss Korea Opportunity Fund Ltd. (the “Company”) has today, released its Half-Yearly Financial Report for the period ended 30 June 2018. The Report will shortly be available for inspection via the Company's website www.weisskoreaopportunityfund.com.

For further information, please contact:

N+1 Singer James Maxwell / Lauren Kettle – Nominated Adviser James Waterlow – Sales	[phone]
Northern Trust International Fund Administration Services (Guernsey) Limited Samuel Walden	[phone]

Summary Information

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

The Company's investment objective is to provide Shareholders with an attractive return on their investment, predominantly through long-term capital appreciation. The Company is geographically focussed on South Korean companies. Specifically the Company invests primarily in listed preferred shares issued by companies incorporated in South Korea, which in many cases have traded and continue to trade at a discount to the corresponding common shares of the same companies. Since the Company's Admission to AIM, the Investment Manager has assembled a portfolio of South Korean preferred 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 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 preferred share is trading relative to its respective common share, its dividend yield, its liquidity, and the weighting of its common share (if any) in the MSCI Korea 25/50 Net Total Return Index (the “Korea Index”), among other factors. Not all of these factors will necessarily be satisfied for particular investments. The Investment Manager will not generally make decisions based on corporate fundamentals or its view of the commercial prospects of the issuer. Preferred 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”).

The Company invests primarily in South Korean preferred shares, but it may 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 has purchased certain credit default swaps on the sovereign debt of South Korea and put options on iShares MSCI South Korea as general market and portfolio hedges, but has generally not hedged its exposure to interest rates or foreign currencies during the period ended 30 June 2018 (2017: £Nil).

Share Buybacks

During the period ended 30 June 2018, the Company purchased Nil (for the year ended 31 December 2017: 5,000,000) of its own Shares at a consideration of £Nil (for the year ended 31 December 2017: £8,137,189) under its general buyback authority. The Shares purchased in 2017 were subsequently cancelled.

For additional information on Share buybacks refer to Note 10.

Shareholder Information

Northern Trust International Fund Administration Services (Guernsey) Limited (the “Administrator”) is responsible for calculating the Net Asset Value (“NAV”) per Share of the Company. The unaudited NAV per Share is calculated on a weekly basis and at the month end by the Administrator, and is announced by a Regulatory News Service and is available through the Company’s website www.weisskoreaopportunityfund.com.

Company financial highlights and performance summary for the period ended 30 June 2018

							As at	As at
							30 June 2018	31 December 2017
							(Unaudited)	(Audited)
							£	£
Total Net Assets							140,193,414	161,264,280
NAV per share							1.6617	1.9115
Basic and diluted (loss)/earnings per share							(0.2156)	0.4364
Mid-Market Share price							1.66	1.82
Discount to NAV							(0.1%)	(4.8%)

As at close of business on 5 September 2018, the latest published NAV per Share had increased to £1.6734 (as at 4 September 2018) and the Share price stood at £1.615.

Total expense ratio

The annualised total expense ratio for the period ended 30 June 2018 was 1.89% (for the year ended 31 December 2017: 1.81%). The annualised total expense ratio includes charges paid to the Investment Manager and other expenses divided by the average NAV for the period.

Chairman’s Review

We are pleased to provide the 2018 Half-Yearly Financial Report on the Company. During the period from 31 December 2017 to 30 June 2018 (the “Period”), the Company’s NAV decreased by 10.2%[1] underperforming the reference MSCI Korea 25/50 Net Total Return Index, which decreased by 7.0%[2] in GBP. Since the Admission of the Company to AIM in May 2013 the NAV has increased by 81.6% compared to Index returns of 51.6%.

While this has been a disappointing half-year, both for the Company and for the South Korean market as a whole, we believe that the long-term opportunity in South Korean preferred shares remains attractive. A report from the Investment Manager follows.

On 8 June 2018, the Directors declared a dividend of 3.4155 pence per Share to distribute the income received by the Company in respect of the year ended 31 December 2017 (year ended 31 December 2016: 3.3262 pence per Share).

As previously discussed, the Board is committed to an active share repurchase program as part of its discount management strategy. Since Admission, and as at the date of this announcement, the Company has repurchased 12,590,250 Shares of the original 105,000,000 Shares issued at Admission. The Board is authorised to repurchase up to 40% of the Company's outstanding Shares in issue as at 27 April 2018 (on which date the Company had 84,364,981 Shares issued). Where appropriate, the Board has also put in place standing instructions with the Company’s broker, N+1 Singer, for the repurchase of the Company’s Shares during closed periods when the Board is not permitted to give individual instructions, typically around the preparation of the Annual and Half-Yearly Financial Reports. The Board believes that the share repurchase program is an excellent discount control mechanism and that it is mutually beneficial for continuing and exiting Shareholders. We will continue to keep Shareholders informed of any share repurchases through public announcements.

Since its inception, the Company has not made use of leverage to fund investments. However, as stated in the Admission Document, the Company reserves the right to do so in the future.

The Company has purchased certain credit default swaps on the sovereign debt of South Korea and put options on iShares MSCI South Korea as general market and portfolio hedges.

If you would like to speak with the Investment Manager or learn about potential opportunities to meet with them, please contact the Company’s broker, N+1 Singer. I would like to thank Shareholders for their support, and look forward to the continued success of the Company in the future. I would also like to thank Weiss Asset Management LP, as well as the other service providers, all of whom have contributed greatly to the Company.

Norman Crighton
Chairman
6 September 2018

[1] This return includes all dividends paid to the Company’s Shareholders, but does not assume such dividends are reinvested.

[2] 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.

Investment Manager’s Report

For the period ended 30 June 2018

The South Korean stock market has performed poorly during the first half of 2018. During the Period, the NAV of WKOF was down 10.2% in GBP, including dividends. By comparison, the MSCI Korea 25/50 Net Total Return Index was down 7.0% in GBP. Since its inception in May 2013, WKOF is up 81.6%; over the same interval, the MSCI Korea 25/50 Net Total Return Index is up 51.6%.

The poor performance of the South Korean market over the first six months of 2018 may have been due to trade tensions between the U.S. and China. If the U.S. puts tariffs on imports from China, this could have a strong adverse effect on South Korean companies that supply inputs to products that are assembled in China and exported to the U.S. The risk of protectionism is a serious threat to the South Korean economy due to its dependence on global trade. The CIA World Factbook estimates that South Korea’s exports in 2017 were
43.1% of GDP. By comparison the CIA World Factbook shows Japan’s exports at 17.8%, China at 19.7%, and the U.S. at 12.2%[3]. Consequently, South Korea seems particularly vulnerable to an increase in protectionism. The rise of protectionist sentiment and the risk of a trade war between the U.S. and China probably contributed to the poor performance of the KOSPI (“Korea Composite Stock Price Index”) thus far this year. South Korea was also hurt by the increase in oil prices. In 2016, it spent around 3.7%%[4] of its GDP on combined imports of crude and refined petroleum. The poor performance of the KOSPI is reflected in the low P/E ratios and price to book value ratios of the KOSPI. For the preference shares in our portfolio the values are even more compelling with trailing P/E ratios of 5.6 and price to book value ratio of around 0.5.

At the end of June, WKOF Ordinary Shares were trading at roughly the value of its net assets. We believe that the discount on WKOF Ordinary Shares has generally been less than 5% of the NAV, and has rarely, if ever, exceeded 7%. These caveats are necessary because the NAV is calculated on a weekly basis, and the Korean market and the AIM exchange do not have the same trading hours. We believe there are two reasons for why the Company has never traded at a substantial discount. First, the Company provides a unique opportunity for investors to gain access to underpriced, illiquid preference shares. Second, the Company has consistently repurchased its Ordinary Shares when they trade in a range below 95% of NAV. Thus, investors may be perceiving strong support in that range and buying in anticipation of favourable asymmetries in changes in the discount on WKOF Ordinary Shares.

Portfolio Review

As of 30 June 2018, WKOF owned preferred securities comprising 97% of NAV. While WKOF is invested in some illiquid securities, the Company had 37% of its NAV invested in securities (including cash) in which its position comprised less than 1 day of average trading volume.

As of the end of June, the weighted average discount of the preference shares in our portfolio was 43.6%. Since we are weighting by the market value of the preference shares, an increase in the discount of a preference share in the portfolio will cause that investment to get less weight; thus, changes in the average discount tend to understate the effects of changes in the discounts of individual holdings.

The table below shows the Company’s ten largest positions and their discount to their respective ordinary share as of 30 June 2018 (note that some of the securities that are significant components of the MSCI Index, such as SK Hynix (5.9%), POSCO (3.1%), and Celltrion (3.0%), do not have preference shares). With the exception of the investments in Samsung and Hyundai, all our major positions were in preference shares that had economically equivalent common shares trading at prices roughly two to three times higher (the different classes of Hyundai preference shares are listed separately, but they have similar economic entitlements). The Samsung Electronics preferred share is our largest holding. Its common share is also the largest member of the

MSCI Index, constituting 22.3% of the Index. Our holding in Samsung provides liquidity to adjust our portfolio as other trading opportunities arise.

Preferred Share	Investment Market Value	Percent of 30 June 2018 NAV	Discount as of 30 June 2018
Samsung Electronics Co., Ltd., Pfd.	32,489,127	23%	19%
LG Electronics Inc., Pfd.	11,303,558	8%	59%
Samsung Electro-Mechanics Co., Ltd., Pfd.	8,787,508	6%	63%
Samsung SDI Co., Ltd., Pfd.	6,984,605	5%	57%
CJ CheilJedang Corp, Pfd.	6,734,503	5%	62%
Hyundai Motor Company, 1st Pfd.	6,690,055	5%	34%
Korea Investment Holdings Co., Ltd., Pfd.	6,116,807	4%	50%
CJ Corporation, 1st Pfd.	4,828,693	3%	52%
Hyundai Motor Company, 3rd Pfd.	4,482,701	3%	36%
LG Household & Health Care Ltd., Pfd.	4,317,381	3%	48%

Over the course of the last 6 months and the last year, the market-weighted discount of the preference shares in the portfolio has increased. At the end of June 2018, the market-weighted discount was 43.6%, and at the end of June 2017, it was 37.5%. The increase in discounts has hindered our recent returns, but greater discounts provide greater upside for the long-run returns of the portfolio. Because of the way in which the average discount is calculated, and due to the variance of the discounts across our holdings, a given change in the average discount will have a larger effect on the change in the NAV. For example, if the average discount on the preference shares in the portfolio were to revert to its level in June 2017 (going from 43.6% to 37.5%), then in the absence of any change in the price of the ordinary shares, the NAV could increase by more than 10%. As we’ve pointed out in past communications, the preference shares provide the same (or slightly better) economics as the ordinary shares. Consequently, in the long run we expect the prices of preference shares to converge to the prices of ordinary shares as they’ve done in other markets. This convergence has partially occurred for Samsung Electronics and Hyundai Motors, but the other preference shares in our portfolio typically trade at less than half the price of the corresponding ordinary share. We believe these other preference shares provide exceptional opportunities to achieve high long-run returns.

Looking Forward

Our outlook is cautious; the vagaries of U.S. foreign policy (assuming that the U.S. actually has a foreign policy) certainly affect the future of South Korea. We don’t know whether to expect “fire and fury” next month, or a continuation of a “very good personal relationship” between Kim Jong Un and President Trump. Predicting the behaviour of a President who prides himself on being unpredictable is a mug’s game.

While we don’t purport to be able to predict short-term or even medium-term movements in equity indices, the high earnings yield of the South Korean market, combined with the discounts on the preference shares, would seem to more than compensate investors for geopolitical risks associated with investing in South Korea.

Weiss Asset Management LP
6 September 2018

[3] China’s number probably overstates its reliance on exports, since for Apple phones the value added in China is small, and this is likely to be true for a broader range of its exports that rely on assembly of imported components or processing of raw materials that comprise a large fraction of the final value.

[4] AJG Simoes, CA Hidalgo. The Economic Complexity Observatory: An Analytical Tool for Understanding the Dynamics of Economic Development. Workshops at the Twenty-Fifth AAAI Conference on Artificial Intelligence. (2011)

Directors

The Company has three non-executive Directors, all of whom are considered independent of the Investment Manager and details are set out below.

Norman Crighton (aged 52)

Mr Crighton is Chairman of the Company. He is also a non-executive chairman of Global Fixed Income Realisation Limited and RM Secured Direct Lending plc. Norman was, until May 2011, an investment manager at Metage Capital Limited where he was responsible for the management of a portfolio of closed-ended funds and has more than 25 years’ experience in closed-ended funds having worked at Olliff and Partners, LCF Edmond de Rothschild, Merrill Lynch, Jefferies International Limited and latterly Metage Capital Limited. His experience covers analysis and research as well as sales and corporate finance. Norman is British and resident in the United Kingdom. Norman was appointed to the Board in 2013.

Stephen Charles Coe (aged 52)

Stephen is currently Chairman of TOC Property Backed Lending Trust plc. He is also a director (and Chairman of the Audit Committee) of Raven Property Group Limited and Leaf Clean Energy Company. He has been involved with offshore investment funds and managers since 1990 with significant exposure to property, debt, emerging markets, and private equity investments.

He qualified as a Chartered Accountant with Price Waterhouse Bristol in 1990 and remained in audit practice, specialising in financial services, until 1997. From 1997 to 2003 he was a director of the Bachmann Group of fiduciary companies and Managing Director of Bachmann Fund Administration Limited, a specialist third party fund administration company. From 2003 to 2006 Stephen was a director with Investec in Guernsey and Managing Director of Investec Trust (Guernsey) Limited and Investec Administration Services Limited. He became self-employed in August 2006 providing services to financial services clients. Stephen is British and a resident in Guernsey. Stephen was appointed to the Board in 2013.

Robert Paul King (aged 55)

Rob is a non-executive director for a number of open and closed-ended investment funds including Tufton Oceanic Assets Limited (chairman), Chenavari Capital Solutions Limited (chairman), and CIP Merchant Capital Limited. 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 a resident in Guernsey. Rob was appointed to the Board in 2013.

Directors’ Responsibility Statement

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 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
Chairman

Stephen Charles Coe
Director

6 September 2018

Condensed Statement of Financial Position

						As at		As at
						30 June		31 December
						2018		2017
						(Unaudited)		(Audited)
					Notes	£		£
Assets
Current assets
Financial assets at fair value through profit or loss					8	135,710,334		154,236,177
Derivative financial assets					9	1,025,194		104,433
Other receivables						505,661		3,028,423
Cash and cash equivalents						5,517,123		3,429,302
Margin account						2,528,426		3,409,040
Due from broker						-		1,947,339
Total assets						145,286,738		166,154,714
Liabilities
Current liabilities
Derivative financial liabilities					9	1,361,130		1,059,716
Due to broker						-		2,795,180
Distribution payable					4	2,881,486		-
Other payables						850,708		1,035,538
Total liabilities						5,093,324		4,890,434
Net assets						140,193,414		161,264,280
Represented by:
Shareholders' equity and reserves
Share capital					10	72,080,642		72,080,642
Other reserves						68,112,772		89,183,638
Total shareholders' equity						140,193,414		161,264,280
Net assets per share					7	1.6617		1.9115

The notes form an integral part of these Condensed Financial Statements.

The Condensed Financial Statements were approved and signed by the Board of Directors on 6 September 2018.

Norman Crighton

Stephen Charles Coe

Condensed Statement of Comprehensive Income

							For the period ended		For the period ended
							30 June 2018			30 June 2017
							(Unaudited)			(Unaudited)
						Notes	£			£
Income
Net changes in fair value of financial assets at fair value through profit or loss							(16,788,205)			34,860,943
Net changes in fair value of derivative financial instruments through profit or loss							(255,514)			-
Income							532,318			687,034
Total (loss)/income							(16,481,401)			35,547,977
Expenses
Operating expenses							(1,531,356)			(1,716,716)
Total operating expenses							(1,531,356)			(1,716,716)
(Loss)/profit for the year before tax							(18,012,757)			33,831,261
Withholding tax						3	(176,623)			(151,105)
(Loss)/profit for the period after tax							(18,189,380)			33,680,156
(Loss)/profit and total comprehensive income for the period							(18,189,380)			33,680,156
Basic and diluted (loss)/earnings per share						6	(0.2156)			0.3458

All items derived from continuing activities.

The notes form an integral part of these Condensed Financial Statements.

Condensed Statement of Changes in Equity

For the period ended 30 June 2018 (Unaudited)
				Share	Other
				capital	reserves	Total
			Notes	£	£	£
Balance at 1 January 2018				72,080,642	89,183,638	161,264,280
Total comprehensive income for the period				-	(18,189,380)	(18,189,380)
Transactions with Shareholders, recorded directly in equity
Distributions declared			4	-	(2,881,486)	(2,881,486)
Balance at 30 June 2018				72,080,642	68,112,772	140,193,414
For the period ended 30 June 2017 (Unaudited)
Balance at 1 January 2017				93,626,149	52,748,550	146,374,699
Total comprehensive income for the period				-	32,587,821	32,587,821
Transactions with Shareholders, recorded directly in equity
Repurchase of ordinary shares and cancelled on purchase			10	(5,590,876)	-	(5,590,876)
Redemption of Realisation Shares			10	(13,408,317)	-	(13,408,317)
Distributions paid			4	-	(3,123,626)	(3,123,626)
Balance at 30 June 2017				74,626,956	82,212,745	156,839,701

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 2018		30 June 2017
		(Unaudited)		(Unaudited)
	Notes	£		£
Cash flows from operating activities
(Loss)/profit for the period		(18,189,380)		33,680,156
Adjustments for:
Net change in fair value of financial assets held at fair value through profit or loss		16,788,205		(34,860,943)
Net change in fair value of derivative financial instruments  held at fair value through profit or loss		225,514		-
Effect of foreign exchange rate fluctuations		(9,616)		(39,011)
Decrease in debtors		2,522,762		3,048,030
Decrease in creditors		(184,830)		(756,291)
Net cash generated from operating activities		1,152,655		1,071,941
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss		(22,628,701)		(9,909,082)
Open of derivative financial instruments		(967,526)		-
Proceeds from the sale of financial assets at fair value through profit or loss		23,528,114		34,605,545
Closure of derivative financial instruments		122,665		-
Decrease in margin account		880,614		-
Net cash generated from investing activities		935,166		24,696,463
Cash flows from financing activities
Repurchase of ordinary shares and cancelled on purchase		-		(5,590,876)
Distributions paid	4	-		(3,123,626)
Net cash used in financing activities		-		(8,714,502)
Net increase in cash and cash equivalents		2,087,821		17,053,902
Cash and cash equivalents at the beginning of the period		3,429,302		2,240,481
Cash and cash equivalents at the end of the period		5,517,123		19,294,383

The notes form an integral part of these Condensed Financial Statements.

Notes to the Unaudited Condensed Financial Statements

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 the AIM of the LSE on 14 May 2013.

The Company’s investment objective and policy is set out in the Summary Information.

The Investment Manager of the Company is Weiss Asset Management LP.

2.   Significant accounting policies

a)     Statement of compliance

The Condensed Financial Statements of the Company for the period ended 30 June 2018 have been prepared in accordance with IFRS issued 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 Companies (Guernsey) Law, 2008.

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 2018, 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 2017. As disclosed in those Annual Financial Statements, IFRS 9, ‘Financial Instruments’, and IFRS 15, ‘Revenue from contracts with customers’, were applicable for financial reporting periods starting 1 January 2018. As such, these standards have been adopted by the Company, but have not materially affected the Company. There were no other new standards, interpretations or amendments to standards issued and effective for the Period that materially impacted the Company.

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 2017. 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

Given that the Company has continued in existence following the first Realisation Opportunity and will continue to operate as a going concern unless a determination 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 on 15 May 2019.

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 Condensed 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 (2017: £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 3.4155 pence per Share (£2,881,486) was approved on 8 June 2018 and paid on 13 July 2018 in respect of the year ended 31 December 2017.

An annual dividend of 3.3262 pence per Share (£3,123,626) was approved on 4 May 2017 and paid on 2 June 2017 in respect of the year ended 31 December 2016.

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 2017.

6.   Basic and diluted (loss)/earnings per Share

The basic and diluted (loss)/earnings per Share for the Company has been calculated based on the total comprehensive loss for the period of (£18,189,380) (period ended 30 June 2017: £33,680,156) and the weighted average number of Ordinary Shares in issue during the period of 84,364,981 (period ended 30 June 2017: 94,226,087).

7.   Net asset value per Ordinary Share

The net asset value of each Share of £1.6617 (as at 31 December 2017: £1.9115) is determined by dividing the net assets of the Company attributed to the Ordinary Shares of £140,193,414 (as at 31 December 2017: £161,264,280) by the number of Ordinary Shares in issue at 30 June 2018 of 84,364,981 (as at 31 December 2017: 84,364,981 Ordinary Shares in issue).

8.   Financial assets at fair value through profit or loss

				As at		As at
				30 June		31 December
				2018		2017
				£		£
				(Unaudited)		Audited
Cost of investments at beginning of the period/year				106,460,720		114,888,445
Purchases of investments in the period/year				19,833,521		39,707,611
Disposal of investments in the period/year				(21,580,775)		(67,771,594)
Realised gain on disposal of investments in the period/year				4,881,740		19,636,258
Cost of investments held at end of the period/year				109,595,206		106,460,720
Unrealised gain on investments				26,115,128		47,775,457
Financial assets at fair value through profit or loss				135,710,334		154,236,177

9.   Derivative financial instruments at fair value through profit or loss

						As at		As at
						30 June		31 December
						2018		2017
						£		£
						(Unaudited)		(Audited)
Cost of derivatives at beginning of the period/year						(605,324)		-
Open of derivatives in the period/year						967,526		(378,812)
Closure of derivatives in the period/year						(122,665)		(280,560)
Realised (loss)/gain on closure of derivatives in the period/year						(791,846)		54,048
Net cost of derivatives held at end of the period/year						(552,309)		(605,324)
Net changes in fair value on derivative financial instruments at fair value through profit or loss						216,373		(349,959)
Net fair value on derivative financial instruments at fair value through profit or loss						(335,936)		(955,283)

10. Share capital

The share capital of the Company consists of an unlimited number of Ordinary Shares of no par value.

								30 June	31 December
								2018	2017
								(Unaudited)	(Audited)
								£	£
Authorised
Unlimited Ordinary Shares at no par value								-	-
Issued at no par value
84,364,981 (2017: 84,364,981) unlimited Ordinary Shares at no par value								-	-
Reconciliation of number of shares
								As at	As at
								30 June	31 December
								2018	2017
								No. of Shares	No. of Shares
								(Unaudited)	(Audited)
Ordinary Shares at the beginning of the period/year								84,364,981	97,409,750
Purchase of own shares for cancellation								-	(5,000,000)
Purchase of Realisation shares								-	(8,044,769)
Total Ordinary Shares in issue at the end of the period/year								84,364,981	84,364,981
								As at	As at
								30 June	31 December
								2018	2017
								Share Capital	Share Capital
								(Unaudited)	(Audited)
								£	£
Share Capital at the beginning of the period/year								72,080,642	93,626,149
Purchase cost of own shares for cancellation								-	(8,137,189)
Redemption of Realisation shares								-	(13,408,318)
Total share capital at the end of the period/year								72,080,642	72,080,642

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 20 March 2019, being 56 days before the Subsequent Realisation Date, the Shareholders are entitled to serve a written notice (a “Realisation Election”) requesting that all or a part of the Ordinary Shares held by them 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. A Realisation Notice, once given is irrevocable unless the Board agrees otherwise. If one or more Realisation Elections are duly made and the aggregate NAV of the continuing Ordinary Shares on the last business day before the Realisation Date is less than £50 million, the Directors may propose an ordinary resolution for winding up of the Company and may pursue a liquidation of the Company instead of splitting the Portfolio into the Continuation Pool and the Realisation Pool.

Share buyback and cancellation

During the period ended 30 June 2018, the Company purchased Nil of its own Shares (for the year ended 31 December 2017: 5,000,000) at a consideration of £Nil (for the year ended 31 December 2017: £8,137,189) under the Share buyback authority originally granted to the Company in 2014. Shares bought back in 2017 were subsequently cancelled.

Following the Share buybacks, the Company has 84,364,981 Ordinary Shares in issue as of 30 June 2018 (as at 31 December 2017: 84,364,981).

At the AGM held on 25 July 2018, 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 £30,000 (period ended 30 June 2017: £26,000) payable to Mr Crighton as the Chairman, £27,500 (period ended 30 June 2017: £22,000) to Mr Coe as Chairman of the Audit Committee and £24,000 (period ended 30 June 2017: £20,000) to Mr King.

During the period ended 30 June 2018, Directors’ fees of £40,750 (period ended 30 June 2017: £35,000) were charged to the Company and £Nil remained payable at the end of the period (as at 31 December 2017: £14,375).

b)     Shares held by related parties

The Directors who held office at 30 June 2018 and up to the date of this Report held the following number of Ordinary Shares beneficially:

					As at 30 June 2018 (Unaudited)		As at 31 December 2017 (Audited)
					Ordinary	% of issued	Ordinary	% of issued
					Shares	share capital	Shares	share capital
Norman Crighton					20,000	0.02%	20,000	0.02%
Stephen Coe					10,000	0.01%	10,000	0.01%
Robert King					15,000	0.02%	15,000	0.02%

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 2018, Dr. Andrew Weiss and his immediate family members held an interest in 6,486,888 Ordinary Shares (as at 31 December 2017: 6,486,888 Ordinary Shares) representing 7.69 per cent. (as at 31 December 2017: 7.69 per cent.) of the issued share capital of the Company.

As at 30 June 2018, employees of the Investment Manager, their respective immediate family members, or entities controlled by them or their immediate family members held an interest in 2,718,733 Ordinary Shares (as at 31 December 2017: 2,718,733) representing 3.22 per cent. (as at 31 December 2017: 3.22 per cent.) of the issued share capital of the Company. 

Material agreements

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 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 Investment Management Agreement 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 2018, investment management fees and charges of £1,111,182 (period ended 30 June 2017: £1,182,170) were charged to the Company and £563,337 (as at 31 December 2017: £188,494) remained payable at the Period end.

12. Fair value measurement

IFRS 13 ‘Fair Value Measurement’ requires the Company to establish a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under IFRS 13 ‘Fair Value Measurement’ are set as follows:

·      Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities;

·      Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is, derived from prices); and

·      Level 3 Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety.

If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The following table presents the Company’s financial assets and liabilities by level within the valuation hierarchy as of 30 June 2018:

								Total
								30 June
					Level 1	Level 2	Level 3	2018
								(Unaudited)
					£	£	£	£
Financial assets/(liabilities) at fair value through
profit or loss:
Korean preferred shares					135,551,317	-	-	135,551,317
Korean exchange traded funds					159,017	-	-	159,017
Derivative financial assets					1,025,194	-	-	1,025,194
Derivative financial liabilities					-	(1,361,130)	-	(1,361,130)
Total assets					136,735,528	(1,361,130)	-	135,374,398

								Total
								31 December
					Level 1	Level 2	Level 3	2017
								(Audited)
					£	£	£	£
Financial assets/(liabilities) at fair value through
profit or loss:
Korean preferred shares					142,619,928	3,908,155	-	146,528,083
Korean exchange traded funds					7,708,094	-	-	7,708,094
Derivative financial assets					45,180	59,253	-	104,433
Derivative financial liabilities					-	(1,059,716)	-	(1,059,716)
Total assets					150,373,202	2,907,692	-	153,280,894

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 2018, financial assets of £827,967 were transferred from Level 2 to Level 1 (for the period ended 30 June 2017: £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 (£1,361,130) (as at 31 December 2017: (£1,059,716)).

As at 30 June 2018, Level 2 financial derivative assets of £Nil were held (as at 31 December 2017: £59,253).

13. NAV reconciliation

The Company announces its NAV, based on bid value, to the LSE after each weekly and month end valuation point. The following is a reconciliation of the NAV per Share attributable to redeemable participating preference Shareholders as presented in these Condensed Financial Statements, using IFRS to the NAV per Share reported to the LSE:

					As at 30 June 2018 (Unaudited)		As at 31 December 2017 (Audited)
						NAV per		NAV per
						Participating		Participating
					NAV	Share	NAV	Share
					£	£	£	£
Net Asset Value reported to the LSE					139,820,959	1.6573	158,912,591	1.8836
Adjustment to accruals and cash					(8,113)	(0.0001)	(7,154)	(0.0001)
Adjustment for dividend income					380,568	0.0045	2,358,843	0.0280
Net Assets Attributable to Shareholders per Financial Statements					140,193,414	1.6617	161,264,280	1.9115

The published NAV per Share of £1.6573 (as at 31 December 2017: £1.8836) is different from the accounting NAV per Share of £1.6617 (as at 31 December 2017: £1.9115) due to the adjustments noted above.

14. Subsequent events

The annual dividend of 3.4155 pence per Share (£2,881,486) was approved on 8 June 2018 and paid on 13 July 2018 in respect of the year ended 31 December 2017.

As at the date of this Report, the Company has 84,364,981 Ordinary Shares in issue.

These Condensed Financial Statements were approved for issuance by the Board on 6 September 2018. Subsequent events have been evaluated until this date.

Corporate Information

Directors Norman Crighton (Non-executive Chairman) Stephen Charles Coe (Non-executive Director) Robert Paul King (Non-executive Director)

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 N+1 Singer Advisory LLP 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 PO Box 186 1 Le Marchant Street 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