Half-yearly Financial Report

WEISS KOREA OPPORTUNITY FUND LTD.

HALF-YEARLY FINANCIAL REPORT

FOR THE PERIOD ENDED 30 JUNE 2015

Weiss Korea Opportunity Fund Ltd. (the “Company”) has today, released its Half-Yearly Financial Report for the period ended 30 June 2015. The Report will shortly be available for inspection via the Company's website www.weisskoreaopportunityfund.com.

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 AIM Market 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 intends to return to Shareholders dividends received on an annual basis.

Investment Policy

The Company is geographically focused on South Korean companies. Specifically, the Company invests primarily in listed preferred shares issued by companies incorporated in South Korea, which in many cases are currently trading at a discount to the corresponding common shares of the same companies. The Investment Manager has assembled a portfolio of Korean preferred shares that it believes are undervalued and could appreciate based on criteria it selects. 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 shares, its dividend yield, its liquidity and its common shares weighting (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.

The Company invests primarily in Korean preferred shares, but it may invest some portion of its assets in other securities, including exchange-traded funds, futures contracts and other types of options, swaps and derivatives related to Korean equities, as well as cash and cash equivalents. The Company does not have any concentration limits.

The Company has not hedged its exposure to foreign currency during the period ended 30 June 2015.

Share Buybacks

At the Annual General Meeting ("the AGM") on 29 July 2015, Shareholders granted the Company a general buy-back authority of up to 40% of the Company's issued share capital. In addition, on 9 February 2015, the Company appointed N+1 Singer Advisory LLP to manage an irrevocable programme during close periods (the "Close Period Buy-Back Programme") to buy-back ordinary shares within certain pre-set parameters. Any shares purchased in the Close Period Buy-Back Programme will count towards the Company's general buyback authority of 40% of the Company's issued share capital, as approved at the Company's AGM.

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 Ordinary Share is calculated on a weekly basis and at the month end by the Administrator, which 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 2015
						As at	As at
						30 June	31 December
						2015	2014
						(Unaudited)	(Audited)
						£	£
Total Net Assets						125,980,898	126,415,820
NAV per share						1.2527	1.2040
Basic and diluted earnings per share						0.0719	0.1338
Mid-Market Share price						1.2300	1.2000
Discount to NAV						(1.8%)	(0.3%)
As at 3 September 2015, the NAV per share had decreased to £1.1192 and the share price stood at £1.0950.

Total expense ratio

The annualised total expense ratio for the six months ended 30 June 2015 was 1.81% (as at 31 December 2014: 1.82%).

Chairman’s Review

We are pleased to provide the 2015 Half-Yearly Financial Report on the Company. During the period from    31 December 2014 to 30 June 2015 (the “Period”), the Company’s NAV increased by 5.4%,[1] outperforming the reference MSCI Korea 25/50 Capped Index, which returned -0.03% in pounds sterling.[2] A report from the Investment Manager follows.

The Company paid a dividend of 1.8580 pence per share on 26 June 2015. As stated in the Admission Document, the Directors intend to return to Shareholders all dividends received, net of withholding tax, on an annual basis.  Typically, South Korean companies pay a single annual dividend to shareholders of record near the end of the calendar year. However, the dividends are generally not announced or paid to shareholders until several months into the following calendar year. The Board has decided to schedule payment of the Company’s annual dividend distributions in the early summer. This timing helps ensure that dividends are paid out as soon as reasonably practical after the Company receives them. 

The Board is committed to adding value for Shareholders, as well as enhancing the liquidity of the Company’s shares, through the exercise of its authority to repurchase up to 40% of the shares of the Company at a discount to NAV. In this regard, during the Period, the Company repurchased and cancelled 4,436,250 shares (4.225% of shares outstanding on 31 December 2014) on instructions from the Board. Also, the Board has in place standing instructions with the Company’s broker, N+1 Singer Advisory LLP, for the repurchase of shares during close periods when the Board is not permitted to give individual instructions, typically around the preparation of the Annual and Half-Yearly Financial Reports. We will continue to keep Shareholders informed of any share repurchases through public announcements.

Since its inception, the Company has not engaged in hedging activities or 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 Annual General Meeting was held on 29 July 2015. If you were unable to attend in person, the Board is always happy to answer questions or to meet with Shareholders directly if required. Please contact the Company at the address given. Additionally, 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.

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, as well as the other service providers, all of whom have contributed greatly to the Company.

Sincerely,

Norman Crighton

3 September 2015

[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 six month period ended 30 June 2015

Introduction

The Company invests primarily in South Korean preferred shares. In general, South Korean preferred shares do not have a fixed dividend or a maturity date. Instead, the typical contractual terms of preferred shares state that their dividends will be incrementally higher than the dividends of their corresponding common shares. Hence, such preferred shares fully participate in dividend growth of the issuer and are essentially non-voting equity shares.  Despite this, many South Korean preferred shares trade at significant discounts to their corresponding common shares. For example, CJ CheilJedang Corp. ordinary shares closed at ?441,000 on 30 June 2015 while the preferred shares closed at ?260,500 (a 41% discount to the price of the ordinary shares). As a result of this anomaly, preferred shares’ price-to-earnings ratios are typically substantially lower, and their dividend yields are higher, than those of their corresponding common shares. For the Company’s portfolio of preferred shares, the weighted average discount of preferred shares held was 38.3% on 30 June 2015, compared with  37.6% on 31 December 2014.

Performance

The Company’s NAV increased 5.4% from 31 December 2014 to 30 June 2015.[1] By comparison, the MSCI Korea 25/50 Index[2] was flat over the period.[3] From the Company’s inception, its NAV has increased by 31.0% compared with a decline of 3.3% for the MSCI Korea 25/50 Index over the same period.[4] Although we report the Company’s NAV weekly, we caution readers against using past performance (and particularly short-term returns) to predict long-term performance. 

Portfolio

At the end of the Period, preferred shares made up 97% of the Company’s NAV. The remainder of the portfolio was held in cash as a liquidity buffer. On 30 June 2015, the Company did not have a position in the iShares MSCI South Korea Capped ETF (EWY), compared with 7% on 31 December 2014. The trailing price-to-earnings ratio of the Company on 30 June 2015 was 7.5x,[5] the trailing net dividend yield was 1.5%,[6] and the weighted average discount of the preferred shares in the portfolio was 38.3%.[7] Please see Top Ten Holdings section for a list of our ten largest positions.

Principal Risks and Uncertainties

The principal risks and uncertainties with the Company’s business fall into the following categories: investment risk; operational risk; accounting, legal and regulatory risk; and financial risks. A detailed explanation of the principal risks and uncertainties in each of these categories can be found on the Company’s published Annual Report and Audited Financial Statements for the year ended 31 December 2014 which can be found on the Company’s website. These risks and uncertainties have not materially changed during the six months ended 30 June 2015, and are not expected to change in the remaining six months of the year.

Commentary

Samsung C&T/Cheil Industries Merger

The merger of Samsung C&T and Cheil Industries, which received the required 2/3 vote from shareholders by a slim margin on 17 July 2015, attracted considerable media attention. Cheil Industries did not have preference shares, and we sold the Company’s small position in Samsung C&T preferred shares prior to the merger vote in response to attractive prices. Hedge fund manager Elliott Management aggressively opposed the merger, arguing that it would damage shareholders of Samsung C&T. Elliott also unsuccessfully sued to block the sale of treasury shares in Samsung C&T to KCC prior to the vote, claiming that the sale deliberately put votes in the hands of an investor supportive of the controlling Lee family.[8] The Canadian Pension Plan, APG Groep NV, and Aberdeen Asset Management also publicly opposed the merger.[9] Cheil Industries has said that it will increase its dividend. Also, the proposed listing of Samsung BioLogics, which is jointly owned by Samsung Electronics and Cheil Industries, may potentially increase the value of the merged entity. The main problem that the merger presents to investors in South Korea is that it indicates that the founding family of Samsung is attempting to keep control of the chaebol by reorganizing the group. Continuing family control is likely to be a negative for the long-term economic value of South Korean companies, affecting common and preferred shareholders alike. Our hope is that the significant resistance to this reorganization by large shareholders will discourage similar reorganizations in the future.

China

A recession in China is one of the most significant short-term risks for South Korean equities and for the Company.  No large country has ever grown as fast for as long as China has. However, growth in Japan, though not as fast as that in China, lasted just as long (from 1952 to 1990). Furthermore, Japanese growth, like Chinese growth, was accompanied by a stock market bubble and by a real estate bubble. When those markets crashed, the Japanese economy went into a lengthy slump, often referred to as the Lost Decade. We do not have a crystal ball, but wage inflation in China may be eroding China’s competitive advantage and slowing growth.  Additionally, markets are valuing Chinese banks as if the banks’ loan portfolios are in much worse shape than the banks are reporting. China is a large and growing market for a range of South Korean products, from cars to cosmetics.  As such, a recession in China could hurt South Korean investments.

Japan

In the first half of the year the Japanese yen did not depreciate against the Korean won. However, in the last twelve months to June 30 the yen depreciated 8.8% against the won, and over the last 3 years it depreciated 35%. This has been a drag on the earnings of Korean companies that compete against Japanese manufacturers, and may continue to hurt those Korean firms. The South Korean central bank’s recent lowering of interest rates may be an attempt to depreciate the won against the yen in response to the weak yen. Also, if higher interest rates in the U.S. cause the U.S. dollar to appreciate against the won, this would improve the competitive position of Korean manufacturers with respect to U.S. producers as well as directly increase the profit of products produced in Korea and sold in the U.S.

Our Outlook

Events in China and Japan in the short term may affect the Company’s underlying portfolio in the short run.  However, the South Korean market remains cheaper than comparable markets, and Korean preferred shares appear cheap both on an absolute basis (price-to-earnings ratios, etc.) and on a relative basis (large discounts to corresponding common shares). The weighted average discount of preferred shares held by the Company was 38.3% on 30 June 2015, which means that common equity market investors are still willing to pay more than 1.6x the price of the Company’s portfolio for the right to vote and increased liquidity.

In absolute terms, the prices of South Korean companies may be depressed by low dividend yields, as South Korean companies continue to retain earnings and offer low payout ratios. South Korea’s history of poor corporate governance may also explain Korean companies’ low valuations. We believe that corporate governance developments in South Korea are positive over the long run. Also, the NPS has been aggressively buying shares in South Korean companies: in the first quarter of the year we estimate that it bought shares at an annualized rate of roughly 1.5% of the market capitalization of the KOSPI Index.[10]   

However, it is almost impossible to predict the timing of changes in countries, economies, and cultures.  Historically, changes that affected preferred share discounts in other countries (e.g. Brazil and Italy) have occurred somewhat suddenly and unexpectedly. In the short run, prices are driven by sentiment, but in the long run, prices tend to reflect underlying value. We continue to believe that a portfolio of stocks with low price-to-earnings ratios and trading at large discounts to securities with the same economics is likely to do well over the long run. 

Market Update

Since the end of the Period, the Fund’s NAV has dropped significantly, as have the Korean stock market, the Chinese stock market, and other markets around the world. The percentage decline in the WKOF NAV has been similar to that of the MSCI South Korea Index. The discounts of Korean preferred shares to their respective common shares have generally widened slightly, but not substantially. Such corrections in markets are normal and to be expected from time to time. They do not alter our conviction in our long-term strategy. We believe that the general fall in global markets reflects investors’ concerns about a recession in China, and that the losses in South Korea may also in part reflect concerns about recent escalated tensions with North Korea. We continue to monitor the situation and remain alert for opportunities that may arise as a result of the recent volatility.

Weiss Asset Management LP

3 September 2015

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

[2] All returns are denominated in GBP. The MSCI Korea 25/50 Index is a free float weighted equity index.  It has 108 components. This is the benchmark used by the iShares MSCI South Korea Capped ETF (EWY), the largest ETF investing in Korea. The KOSPI is broader, but is not free float weighted.  Free float can vary widely across securities.

[3] 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. As discussed in footnote 1, WKOF's performance figures include such distributions, but the distributions are not assumed to be reinvested in WKOF when calculating WKOF's performance.

[4] Since inception of the Company on 14 May 2013. The WKOF return since inception is calculated on the basis of the Initial Net Asset Value per Ordinary Share.

[5] The average trailing 12-month P/E ratio of preferred shares held is based on the consolidated diluted earnings per share reported by Bloomberg over the trailing 12-month period, and is calculated as the total market value of WKOF’s preferred share portfolio on the report date divided the total earnings allocable to WKOF based on WKOF’s holdings on the report date. For calculating P/E ratios for indices, the total earnings allocable to WKOF does not include earnings of companies with trailing 12-month losses.

[6] Trailing net dividend yield of preferred shares held represents the weighted average dividend yield of the preferred shares owned by WKOF over the 12-month period ending on the report date as reported by Bloomberg, after accounting for Korean taxes applicable to WKOF, and weighted by the market value of each investment on the report date. This figure does not estimate or forecast future dividend payments on WKOF's investments.

[7] For this computation, the discounts of preferred shares to their respective ordinary shares are weighted by the size of the position in the WKOF portfolio.

[8] Kim, Rose, “Korean Court Sides With Samsung Again in Fight With Elliott,” Bloomberg, 6 July 2015, http://www.bloomberg.com/news/articles/2015-07-07/court-rejects-injunction-against-samsung-c-t-treasury-stock-sale.

[9] Kim, Rose, “Korea Pension Fund to Back Samsung Deal, Economic Daily Says,” Bloomberg, 10 July 2015, http://www.bloomberg.com/news/articles/2015-07-10/korea-pension-fund-to-back-samsung-merger-economic-daily-says.

[10] This estimate assumes that the performance of the NPS portfolio was similar to the MSCI Korea 25-50 Net Index, and is based on NPS reported allocation to Korean Equities:  http://fund.nps.or.kr/jsppage/fund/mcs_e/mcs_e_04_01_01.jsp

Top Ten Holdings

					Fair		% of
Investments			Holdings at		Value		Total Net
			30.06.2015		£		Assets
			(Unaudited)		(Unaudited)		(Unaudited)
Samsung Electronics Co Ltd Preferred Shares			40,204		22,709,578		18.03%
CJ Corporation Preferred Shares			114,738		9,459,751		7.51%
LG Electronics Inc Preferred Shares			712,980		9,315,742		7.39%
Hyundai Motor Company 2nd Preferred Shares			151,643		8,955,036		7.11%
CJ Cheiljedang 1st Preferred Shares			58,523		8,681,695		6.89%
Hyundai Motor Company 1st Preferred Shares			131,373		7,570,631		6.01%
Amorepacific Group Preferred Shares			56,300		6,536,984		5.19%
LG Household & Healthcare Preferred Shares			25,400		4,912,901		3.90%
Hyundai Motor Company 3rd Preferred Shares			87,802		4,638,953		3.68%
LG Chemical Ltd Preferred Shares			41,414		4,383,244		3.48%
					87,164,515		69.19%
					Fair		% of
Investments			Holdings at		Value		Total Net
			31.12.2014		£		Assets
			(Audited)		(Audited)		(Audited)
Samsung Electronics Co Ltd Preferred Shares			39,204		23,342,046		18.46%
LG Electronics Inc Preferred Shares			712,980		11,216,167		8.87%
Hyundai Motor Company 2nd Preferred Shares			117,643		9,201,937		7.28%
iShares MSCI South Korea Capped ETF			252,182		8,945,940		7.08%
Hyundai Motor Company 1st Preferred Shares			120,633		8,802,064		6.96%
Hyundai Motor Company 3rd Preferred Shares			92,792		6,337,307		5.01%
CJ Cheiljedang 1st Preferred Shares			58,523		5,551,218		4.39%
CJ Corporation Preferred Shares			114,738		5,076,739		4.02%
LG Chemical Ltd Preferred Shares			53,218		4,349,056		3.44%
Samsung SDI Co Ltd Preferred Shares			103,943		4,253,257		3.37%
					87,075,731		68.88%

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 49)

Mr Crighton is Chairman of the Company. He is also a non-executive director of Private Equity Investor plc and, Global Fixed Income Realisation Limited. 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 22 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. Mr Crighton was appointed to the Board in 2013.

Stephen Charles Coe (aged 49)

Mr Coe is Chairman of the Audit Committee. He qualified as a Chartered Accountant with PricewaterhouseCoopers in 1990. From 1997 to 2006 he was a director of the Bachmann Trust Company Limited and managing director of Bachmann Fund Administration Limited. Between 2003 and 2006, Stephen was managing director of Investec Administration Services Limited and of Investec Trust (Guernsey) Limited prior to becoming self-employed in 2006 providing director services to financial services clients.

Currently, Mr Coe sits on the board of a number of listed companies including Raven Russia Limited, a main market listed property investment specialist focused on Russia, and European Real Estate Investment Trust Limited, a European focused closed-ended property investment company. Stephen is also a non-executive director of Kolar Gold Limited, an AIM listed gold exploration and development company incorporated in Guernsey, Trinity Capital Limited, an AIM listed Indian real estate investment company, and South Africa Property Opportunities plc, an AIM listed, close-ended investment fund focused on South African real estate assets. Stephen is British and resident in Guernsey. Mr Coe was appointed to the Board in 2013.

Robert Paul King (aged 52)

Mr King is a non-executive director for a number of open and closed-ended investment funds including Chenavari Capital Solutions Limited, JPMorgan Senior Secured Loans Fund Limited and Threadneedle UK Select Trust Limited. He was a director of Cannon Asset Management Limited and their associated companies, from 2007 to 2011. 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. Robert is British and resident in Guernsey. Mr King 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 affect 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 affect 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                                                                 Robert Paul King

Chairman                                                                               Director

3 September 2015

Condensed Statement of Financial Position

							As at	As at
							30 June	31 December
							2015	2014
							(Unaudited)	(Audited)
						Notes	£	£
Assets
Current assets
Financial assets at fair value through profit or loss							121,908,628	118,537,000
Cash and cash equivalents							4,140,689	6,408,790
Other receivables							253,165	2,235,438
Total assets							126,302,482	127,181,228
Liabilities
Current liabilities
Other payables							321,584	765,408
Total liabilities							321,584	765,408
Net assets							125,980,898	126,415,820
Represented by:
Shareholders' equity and reserves
Share capital						5	97,103,422	102,900,000
Other reserves							28,877,476	23,515,820
Total shareholders' equity							125,980,898	126,415,820
Net assets per Share						8	1.2527	1.2040

The Condensed Financial Statements were approved and signed by the Board of Directors on 3 September 2015.

Norman Crighton                                                                 Robert Paul King

Chairman                                                                               Director

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

Condensed Statement of Comprehensive Income

							For the period ended	For the period ended
							30 June 2015	30 June 2014
							(Unaudited)	(Unaudited)
							£	£
Income
Net changes in fair value of financial assets at fair value through profit or loss							8,273,293	27,257,591
Other income							243,064	(74,328)
Net income							8,516,357	27,183,263
Expenses
Operating expenses							(1,232,712)	(1,144,014)
Total operating expenses							(1,232,712)	(1,144,014)
Operating profit for the period before tax							7,283,645	26,039,249
Withholding tax							(53,515)	16,364
Operating profit for the period after tax							7,230,130	26,055,613
Total comprehensive income for the period							7,230,130	26,055,613
Basic and diluted earnings per share							0.0719	0.2481

All items derive 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 2015 (Unaudited)
					Share	Other
					capital	reserves	Total
			Notes		£	£	£
Balance at 1 January 2015					102,900,000	23,515,820	126,415,820
Total comprehensive income for the period					-	7,230,130	7,230,130
Transactions with Shareholders, recorded directly in equity
Repurchase of ordinary shares and cancelled on purchase				5	(5,796,578)	-	(5,796,578)
Distributions paid				3	-	(1,868,474)	(1,868,474)
Balance at 30 June 2015					97,103,422	28,877,476	125,980,898
For the period ended 30 June 2014 (Unaudited)
					Share	Other
					capital	reserves	Total
					£	£	£
Balance at 1 January 2014					102,900,000	10,981,263	113,881,263
Total comprehensive income for the period					-	26,055,613	26,055,613
Transactions with Shareholders, recorded directly in equity
Distributions paid			3		-	(1,513,399)	(1,513,399)
Balance at 30 June 2014					102,900,000	35,523,477	138,423,477

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 2015	30 June 2014
			(Unaudited)	(Unaudited)
		Notes	£	£
Cash flows from operating activities
Total comprehensive income for the period			7,230,130	26,055,613
Adjustments for:
Net change in fair value of financial assets held at fair value profit or loss			(8,273,293)	(27,257,591)
Decrease in debtors			1,982,273	1,987,504
Decrease in creditors			(443,824)	(434,389)
Net cash generated by operating activities			495,286	351,137
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss			(9,244,983)	(14,973,560)
Proceeds from the sale of financial assets at fair value through profit or loss			14,139,390	17,639,278
Net cash inflows from investing activities			4,894,407	2,665,718
Cash flows from financing activities
Repurchase of ordinary shares and cancelled on purchase		5	(5,796,578)	-
Distributions paid		3	(1,868,474)	(1,513,399)
Net cash outflows from financing activities			(7,665,052)	(1,513,399)
Effects of exchange rate fluctuations			7,258	(50,182)
Net (decrease)/increase in cash and cash equivalents			(2,268,101)	1,453,274
Cash and cash equivalents at the beginning of the period			6,408,790	3,869,125
Cash and cash equivalents at the end of the period			4,140,689	5,322,399

Operating cash flows include dividends received of £2,237,064 (period ended 30 June 2014: £1,896,154) net of taxes withheld of £492,195 (period ended 30 June 2014: £417,154).

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 Market of the LSE on 14 May 2013.

The Company’s investment objective, policy and dividend policy are disclosed in the Summary Information section.

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 2015 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. 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 presentation 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 2015, are not audited.

The same accounting policies and methods of computation have been applied to the Condensed Financial Statements as in the Annual Report and Audited Financial Statements at 31 December 2014. The presentation of the Condensed Financial Statements is consistent with the Annual Report and Audited Financial Statements.

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 at 31 December 2014. The Audit Report on those accounts was not qualified.

The preparation of the Condensed Financial Statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities at the date of 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 Directors believe that it is appropriate to adopt the going concern basis in preparing the Condensed Financial Statements in view of its holding in cash and cash equivalents and liquid investments and the income deriving from those investments, meaning the Company has adequate financial resources to meet its liabilities as they fall due.

d)     Standards, amendments and interpretations not yet effective

At the date of approval of these Condensed Financial Statements, the following standards and interpretations, which have not been applied in these Financial Statements, were in issue but not yet effective:

IFRS 9, ‘Financial instruments’, was updated in October 2010 and the final issue of this standard was made in July 2014. The standard addresses the classification and measurement of financial assets. IFRS 9 divides all financial assets that are currently in the scope of IAS 39 into two classifications – those measured at amortised cost and those measured at fair value. The standard is not expected to be applicable until 1 January 2018 but is available for early adoption. IFRS 9 requires that the effects of changes in credit risk of liabilities designated as at fair value through profit or loss are presented in other comprehensive income unless such treatment would create or enlarge an accounting mismatch in profit or loss, in which case all gains or losses on that liability are presented in profit or loss. Other requirements of IFRS 9 relating to classification and measurement of financial liabilities are unchanged from IAS 39. Its adoption is not expected to have a significant impact on the Company’s Financial Statements because the majority of the Company’s financial assets are designated as at fair value through profit or loss and there are presently no financial liabilities designated as at fair value through profit or loss.

There are no other standards, amendments or interpretations that are not yet effective that would be expected to have a material impact on the Company.

e)     Operating Segments

The Board has considered the requirements of IFRS 8 ‘Operating Segments’, and is of the view that the Company is engaged in a single segment of business, being an investment strategy tied to listed preferred shares issued by companies incorporated in South Korea. The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company.

f)     Investments at fair value through profit or loss

Financial assets are valued at the bid-market prices ruling as at the close of business at the statement of financial position date, net of any accrued interest which is included in the Statement of Financial Position as an income related item. The Directors are of the opinion that the bid-market prices are the best estimate of fair value in accordance with the requirements of IFRS 13. Movements in fair value are included in the Statement of Comprehensive Income.

3. Dividends to Shareholders

Dividends, if any, will be paid annually in June each year. An annual dividend of 1.8580 pence per share (£1,868,441) was approved on 4 June 2015 and paid on 26 June 2015, in respect of the year ended                             31 December 2014. 

For the period ended 30 June 2014, an annual dividend of 1.4413 pence per share (£1,513,399) was approved on  5 June 2014 and paid on 27 June 2014, in respect of the period from 12 April 2013 (date of incorporation) to 31 December 2013.

4. Significant accounting judgements, estimates and assumptions

Significant accounting estimates and assumptions

The preparation of the Condensed Financial Statements in conformity with IFRS requires management to make 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 estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.

Judgements

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the Condensed Financial Statements.

Functional currency

The Condensed Financial Statements of the Company are presented in the currency of the primary economic environment in which the Company operates (its ‘functional currency’). The Directors have considered the currency in which the original capital was raised, distributions will be made and ultimately the currency in which capital would be returned in a liquidation. On balance, the Directors believe that pounds sterling best represents the functional currency of the Company.

5. Share capital

							As at	As at
							30 June	31 December
							2015	2014
							(Unaudited)	(Audited)
							£	£
Authorised
Unlimited Ordinary Shares at no par value							-	-
Issued at no par value
100,563,750 (2014: 105,000,000) unlimited Ordinary Shares at no par value							-	-
Reconciliation of number of Shares
							As at	As at
							30 June	31 December
							2015	2014
							No. of Shares	No. of Shares
							(Unaudited)	(Audited)
Ordinary Shares at the beginning of the period							105,000,000	105,000,000
Purchase of own Shares for cancellation							(4,436,250)	-
Total Ordinary Shares in issue at the end of the period							100,563,750	105,000,000
							As at	As at
							30 June	31 December
							2015	2014
							Share Capital	Share Capital
							(Unaudited)	(Audited)
							£	£
Share Capital at the beginning of the period							102,900,000	102,900,000
Purchase cost of own Shares for cancellation							(5,796,578)	-
Total Share Capital at the end of the period							97,103,422	102,900,000

The Share Capital of the Company consists of an unlimited number of Ordinary Shares of no par value.

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 attaching 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)     the Shareholders present in person or by proxy or (being a corporation) present by a duly authorised representative at a general meeting has, on a show of hands, one vote and, on a poll, one vote for every Share.

d)    On 20 March 2017, being 56 days before the fourth anniversary of admission (the “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 redesignated 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 2015, the Company had purchased 4,436,250 of its own shares at a consideration of £5,796,578 under the general buy back authority granted to the Company in 2014. These shares have been subsequently cancelled.

6. 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 £26,000 (period ended 30 June 2014: £26,000) payable to Mr Crighton, the Chairman, £22,000 (period ended 30 June 2014: £22,000) to Mr Coe as Chairman of the Audit Committee and £20,000 (period ended 30 June 2014: £20,000) to Mr King.

During the period ended 30 June 2015, directors fees of £34,000 (period ended 30 June 2014: £34,000) were charged to the Company and £17,000 (as at 30 June 2014: £17,000) remained payable at the period end.               

b)     Shares held by related parties

The Directors who held office at 30 June 2015 and up to the date of this Report held the following numbers of Ordinary Shares beneficially:

					As at 30 June 2015 (Unaudited)		As at 31 December 2014 (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	0.01%	15,000	0.01%

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 2015, Dr. Andrew Weiss and his immediate family members held an interest in 6,427,550                (as at 31 December 2014: 6,427,550) Ordinary Shares representing 6.39 per cent (as at 31 December 2014: 6.12 per cent) of the issued share capital of the Company.

As at 30 June 2015, employees of the Investment Manager, their respective immediate family members or entities controlled by them or their immediate family members held an interest in 2,468,333 (as at 31 December 2014: 2,468,333) Ordinary Shares representing 2.45 per cent (as at 31 December 2014: 2.35 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 the 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 management fee is subject to a minimum annual amount of £1 (one) million per annum for the first 48 months following Admission. 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, such notice not to expire prior to the fourth anniversary of admission other than in limited circumstances.

During the period ended 30 June 2015, investment management fees and charges of £990,560 (period ended         30 June 2014: £909,896) were charged to the Company and £164,490 (as at 30 June 2014: £178,334) remained payable at the period end.

7. Fair value measurement

IFRS 13 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 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 2015:

							Total
							30 June
				Level 1	Level 2	Level 3	2015
							(Unaudited)
				£	£	£	£
Financial assets at fair value through
profit or loss:
Korean preferred shares				121,908,628	-	-	121,908,628
Total assets				121,908,628	-	-	121,908,628

The following table presents the Company's financial assets and liabilities by level within the valuation hierarchy as of 31 December 2014:

							Total
							31 December
				Level 1	Level 2	Level 3	2014
							(Audited)
				£	£	£	£
Financial assets at fair value through
profit or loss:
Korean preferred shares				109,591,060	-	-	109,591,060
Korean Exchange Traded Fund				8,945,940	-	-	8,945,940
Total assets				118,537,000	-	-	118,537,000

The Company recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the transfer has occurred. There were no transfers between levels during the period.

Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include Korean preference shares and Exchange Traded Funds.

The Company held no Level 2 or 3 investments as at or during the period ended 30 June 2015.

8. 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 Ordinary shareholders as presented in these financial statements, using IFRS to the NAV per share reported to the LSE:

					As at 30 June 2015 (Unaudited)			As at 31 December 2014 (Audited)
						NAV per			NAV per
						Participating			Participating
					NAV	Share	NAV		Share
					£	£	£		£
Net Asset Value reported to the LSE					125,794,745	1.2509	124,674,345		1.1874
Adjustment for dividend income					186,153	0.0018	1,741,475		0.0166
Net Assets Attributable to Shareholders per Financial Statements					125,980,898	1.2527	126,415,820		1.2040

The published NAV per Share of £1.2509 (31 December 2014: £1.1874) is different from the accounting NAV per Share of £1.2527 (31 December 2014: £1.2040) due to the adjustments noted in the table above.

9. Subsequent events

These Condensed Financial Statements were approved for issuance by the Board on 3 September 2015. Subsequent events have been evaluated until this date.