Annual Financial Report

RNS Number : 4141K

Weiss Korea Opportunity Fund Ltd

16 April 2015

WEISS KOREA OPPORTUNITY FUND LTD.

ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2014

The Company has today, released its Annual Report and Audited Financial Statements for the year ended 31 December 2014. The Report will shortly be available from the Company's website www.weisskoreaopportunityfund.com.

Chairman's Review

Dear Shareholders,

We are pleased to provide the 2014 Annual Report on the Company. During the period from 31 December 2013 to 31 December 2014 (the "Period"), the Company's NAV per Share increased from 108.46 pence to 120.40 pence giving the Company a total investment return of 11.0%, or £12.5m, outperforming the reference MSCI Korea 25/50 Capped Index, which lost 5.2% in pounds sterling. A report from the Investment Manager follows below.

The Company paid a dividend of 1.4413 pence per share on 27 June 2014. 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 the Company's annual dividend distributions in the early summer. This timing helps ensure that dividends are paid out reasonably soon after the Company receives them.

The Board maintains its firm commitment 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, on 9 January 2015, the Company repurchased and cancelled 900,000 shares on instructions from the Board. Also, the Board established standing instructions with the Company's broker, N+1 Singer Advisory LLP, for the repurchase of shares during closed periods when the Board is not permitted to give individual instructions, typically around the preparation of the Annual and Semi-Annual Reports. We will continue to keep Shareholders informed of any share repurchases through public announcements.

Shareholders will be aware of the substantial fall in the share price of one of the Company's largest investments, Hyundai Motor Company, in September 2014. This topic will be covered in more detail in the Investment Managers Report, however I feel it is only right that shareholders should also understand events from the perspective of the Board. On the day of the Hyundai announcement, and in the days that followed, Weiss kept the Board and the other company advisors appraised of the situation and their views on the potential outcomes. Such a precipitous fall in the share price of any of the holdings in the portfolio is a cause for concern and every effort is made to avoid similar situations. However, it is a timely reminder of the risks of investing in equity markets, not only in Asia but also in developed markets. Despite this event, the strategy remains attractive and the portfolio robust to these random, shock occurrences.

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.

We will be holding our Annual General Meeting later this year, notices of which will be sent out once the final arrangements have been made. As I have mentioned in previous letters, all Directors have agreed to stand for election annually. This year, a Special Resolution will be put to Shareholders proposing to amend the Articles of Incorporation to remove the strict prohibition of a Director of the Company who is physically present in the United Kingdom from being able to dial into a meeting of the Board of Directors. All Board meetings will continue to be held in Guernsey and the chairman of any meeting will be in Guernsey. If any Director is dialling in from outside Guernsey, the chairman of that meeting will be physically present in Guernsey and the decision making process will remain unchanged.

This is in response to occasional circumstances where, due to adverse weather conditions in Guernsey, the Chairman is unable to travel.

We invite all Shareholders to attend, and look forward to meeting you. If you are 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.

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

Sincerely,

Norman Crighton

14 April 2015

[1] Total investment return includes both increases in NAV and dividends distributed to shareholders.

Investment Manager's Report

For the year ended 31 December 2014

The Weiss Korea Opportunity Fund's ("WKOF" or the "Company") total return on net assets was 11.0% in 2014, with a cumulative total return on net assets of 22.9% since inception (inclusive of dividends in both cases). In comparison, the reference MSCI Korea 25-50 Index[1] was down 5.2% in 2014 and has lost 3.3% since the Company's inception. WKOF's outperformance is mostly attributable to the narrowing of preferred share discounts. As of 31 December 2014, the weighted average discount of preferred shares held[2] was 37.6%, compared with 49.5% as of 31 December 2013. The average trailing 12-month price to earnings ratio of preferred shares held was 6.9 at year-end 2014, whereas it was 6.0 at year-end 2013.[3]

During the year, the performance of the South Korean stock market was disappointing. There was, however, a lot of volatility between the start and finish of the year. Over the course of the year, the depreciation of the yen against the won, and (to a lesser extent the depreciation of the euro against the won) hurt expectations of future earnings and thus was a drag on market performance. The strong won raised concerns about exporters that compete directly against Japanese and European companies, such as automobile manufacturers.

During the summer, the Korean stock market reacted favorably to initiatives from the Korean government that create incentives for corporations to increase dividend payout ratios. Specifically, President Park's tax proposal (which passed in December) taxes retained earnings. While we do not believe that this is generally a good economic policy, it does create strong pressure for corporations to increase their dividends. As described below, we believe that increased dividends are a catalyst to close the price gap between preferred and ordinary shares. They may also increase the market value of some ordinary shares.

The Korean index reversed course in mid-September when Hyundai Motor Group announced its purchase of a parcel of land for over £6 billion. Hyundai Motor Company, Kia Motors, and Hyundai Mobis together bid this amount in a sealed bid auction for land that had previously been appraised at roughly £2 billion. In response, the shares of the "successful" bidders plummeted. The shares of other Korean stocks also fell as markets re-priced Korean equities in response to the perceived lack of interest on the part of the management of the chaebols in maximizing shareholder value.

It is important to note that both common and preferred shareholders suffered a permanent impairment of capital from any excess paid by the Hyundai Motor Group. In other words, the preferred shareholders were not disproportionately affected. In the months that followed, Hyundai Motor Company announced that it would significantly increase its dividend per share[4] from ₩1,950 to ₩3,000 and it announced a pro rata share repurchase that would include preferred shares. In the recent past, Hyundai Motor Company had repurchased common shares but not preferred shares, so this has positive signal value. Preferred shares should benefit disproportionately from any increases in dividend payout ratio because preferred shares trade at discounts to their corresponding common shares.

As a hypothetical example, if the dividend yield on a common stock is increased from 1% to 2% but its corresponding preferred shares trade at a 50% discount, then the preferred share dividend yield will increase from 2% to 4%. In a low yield environment, increases to dividend payout ratios may make preferred shares relatively more attractive. As discussed above, the new tax policy creates strong incentives for such increases.

Although Hyundai's land purchase reminded us of the corporate governance concerns that Korea faces, we expect to see major improvements in corporate governance in South Korea over the long run. We are optimistic about the Korean government's initiatives to improve shareholder rights. If standard accounting metrics are used to value companies, the large cash holdings of Korean companies artificially depress their reported earnings yields and return on equity. If the cash is either used to repurchase shares, pay dividends, or profitably invested, the returns to investors would increase, ultimately pushing up the prices of Korean equities. In the meantime, Korean companies are exceptionally well-capitalized.

The most important good news for South Korea in the short-term is the dramatic fall in the prices of oil and iron ore. Together, net imports of those commodities have comprised around 8% of South Korea's GDP. The prices of these commodities fell about 50% in won in 2014. South Korea benefits more from these price falls than does any other major country. In the U.S. net imports of these commodities is roughly zero. In Japan and Germany, net imports of these commodities are less than half the percentage of GDP as in South Korea. As these price falls improve the economic fundamentals of Korean companies, the prices of their equities should be positively affected. The fall in oil prices also frees up consumer spending and should provide a short-run boost to domestic sales of Korean manufacturers.

Comments on Large Positions

Our major investments are the preferred shares of Hyundai Motor, Samsung Electronics, LG Electronics, and two members of the CJ group: CJ CheilJedang and CJ Corp. LG Electronics preferred shares traded at around a 50% discount to the ordinary shares at year-end. CJ CheilJedang and CJ Corp were trading at 47% and 51% discounts respectively to the prices of their ordinary shares as of the end of 2014. We think that both CJ ordinary shares are fairly valued, so the discounts enable us to buy companies at half the price representing fair value. In addition, the Korean National Pension Service ("NPS") owns about 12% of the shares of CJ CheilJedang which gives them some (albeit limited) power to push for an increase in the dividend payout rate. The NPS has been vocal about publicly stating their desire for higher dividend payments. It also showed a willingness to vote against management multiple times during 2014, most notably in its unsuccessful attempt to remove the CEO of Mando Corp.

The least liquid Hyundai preferred shares traded at around a 30% discount to the ordinary shares at the end of 2014. We believe the ordinary shares are undervalued. In the month following the bid for the property in Seoul the aggregate market value of the members of the Hyundai Motor Group that bought the land (Hyundai Motor, Kia Motors, and Hyundai Mobis) fell by roughly twice as much as the amount they have committed to pay for the land. Unless the bid was a precedent for even greater wasteful expenditures, the price fall from an already depressed level creates an exceptional value proposition.

Regarding Samsung Electronics, we are underweight relative to the index, but do have a substantial position. Samsung is trading at higher earnings yields than comparable firms in other countries. The risk for Samsung Electronics is that increased competition in the smartphone business will hurt their profits. However, even if Samsung Electronics were to terminate their smartphone business, which remains highly profitable, the value of their remaining businesses and cash holdings might justify the current share price. By buying the preferred shares, we are getting the economics of Samsung at roughly a 20% discount, and those preferred shares are highly liquid.

South Korean Debt Exposure

Korean sovereign debt is roughly 36% of GDP;[5] by comparison government debt to GDP in the Euro area and U.K. are both at 91%,[6] and the U.S. is around 102% of GDP.[7] Japan is at 227% of GDP, but a considerable fraction of its debt is held by the Japanese Central Bank.[8] Korea's budget deficit was 1.5% of GDP.[9] It has a large trade surplus, and positive net international assets. Although the NPS has large liabilities, it also has large and growing assets. As discussed previously, the NPS is increasing the fraction of its assets invested in domestic equities, which should not only support equity prices but will also help its long run solvency. Corporate debt is high, but corporations also have substantial holdings of cash and securities, as well as overseas assets.

Most commentators seem to view the high levels of household debt as being the greatest threat to the Korean economy. While household debt is 156% of average annual disposable income,[10] household assets are around twice as large as household debt. The Korean government limits the loan-to-value ratio of all transactions at no greater than 70%, and regulates the permissible debt-to-income ratio. The Korea's jeonse system of renting residential property makes it very difficult to compare household debt in Korea with that in other countries in which all renters have to make regular rent payments. Only about half of renters in Korea pay a monthly rent (this ratio is rising).[11] The remainder use the jeonse system in which the renter does not pay rent, but instead gives the landlord an interest free loan that the landlord repays at the termination of the fixed term lease. This loan is a significant fraction of the value of the property, and is collateralized by it. The loan by the renter to the landlord is a form of savings: it is an asset that offsets the liabilities of the household.

One way to think about the effect of the jeonse system is to compare a jeonse tenant with a renter who makes monthly rental payments. Let's suppose that the jeonse tenant obtained the entire jeonse deposit by taking out a bank loan. Like the monthly renter, the jeonse tenant must make regular payments, except as interest to the bank, rather than as rent. The interest and rent payments should tend to be roughly equal. The usual computation of debt to disposable income would suggest that the jeonse renter is heavily indebted relative to renters in other countries. This is misleading. The jeonse renter has the same fixed obligations, they are just called interest payments, while in other countries the fixed obligation is called rent. Furthermore, his outstanding debt obligation can be completely repaid when his lease expires - standard leases are two years. From the viewpoint of the landlord, matters are trickier. When the lease expires he needs to repay the loan to the jeonse tenant, but this is not much different from a term loan that needs to be renewed. Because interest rates have been low, the jeonse deposits have become a larger proportion of the value of the property, which likely increases household assets and household debt. On the other hand the percentage of rental agreements paid for through jeonse leases has been falling, which has the opposite effect. The data is insufficient to determine the net effect, but it is likely that changes in household indebtedness overstate changes in the net financial position of Korean households.

Long-term prospects for South Korean companies

In the short run, markets are often driven by swings in sentiment; in the long run, market returns tend to reflect fundamental values. When growth is driven by increased competition, markets do not perform well. However, when growth is driven by lower input prices for existing producers, and an increased supply of well trained workers, that would be expected to raise profits and drive share prices higher. As long-term investors we are very pleased with the outstanding performance of Korean students on the international PISA tests of mathematics, reading, science and problem solving ability. They score among the very top performers in every category. The high performance on problem solving ability should translate into a large supply of workers with managerial potential, and consequently higher performance by the Korean firms who can avail themselves of those highly skilled workers. The only country that does better on problem solving is Singapore, and wages there are roughly twice the level of South Korea and its population is a small fraction of that of Korea. When those improved fundamentals are accompanied by improved shareholder rights we would expect them to eventually generate higher equity values. It is impossible to know when markets will recognize these superior fundamentals, but we believe they eventually will be reflected in equity valuations.

Stepping back, 2014 was an important year because a powerful activist entered the market: the Korean government. President Park has vowed to reform the chaebol system. The NPS has been empowered to improve corporate governance and increase dividend payout ratios. Consequently, we continue to be bullish on the long-term prospects for Korean preferred shares.

Weiss Asset Management LP

14 April 2015

[1]MSCI Korea 25-50 Index performance in British pounds.

[2]Weighted average discount of preferred shares held is the average discount of the last traded price of the preferred shares held by WKOF to the last traded price of the respective common shares of the same issuer, weighted by the market value of each investment on the report date.

[3]The average trailing 12-month price to earnings 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 earnings allocable to WKOF based on WKOF's holdings on the report date divided by the total market value of WKOF's preferred share portfolio on the report date. It does not account for any estimated or forecasted future earnings of WKOF's investments.

[4]These dividend figures are for the ordinary shares; preferred shares receive slightly higher dividends.

[5]CIA Factbook, 2013 estimate (as of Feb 2015).

[6]Eurostat, accessed through www.tradingeconomics.com.

[7]Federal Reserve Bank of St. Louis and U.S. Office of Management and Budget. The accuracy of this statistic, as well as that of the other debt figures, is complicated by unaccounted government liabilities and assets.

[8]Japan Ministry of Finance, accessed through www.tradingeconomics.com.

[9]Statistics Korea, accessed through www.tradingeconomics.com.

[10]Reuters, Nov 13, 2014.

[11]The fraction of monthly rent payers was 45% in 2011 (Korea Herald, May 8, 2011) and we believe that it has continued to rise in the last few years.

Top Ten Holdings

		Fair	% of
Investments	Holdings at	Value	Total Net
	31.12.2014	£	Assets

Samsung Electronics Co Ltd Preferred Share	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 Share	120,633	8,802,064	6.96%
Hyundai Motor Company 3rd Preferred Shares	92,792	6,337,307	5.01%
CJ Cheiljedang ist Preferred Share	58,523	5,551,218	4.39%
CJ Corporation Preferred Share	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	3.36%

Investments	Holdings at	Value	Total Net
	31.12.2013	£	Assets

Samsung Electronics Co Ltd Preferred Share	26,232	15,190,364	13.34%
Hyundai Motor Company 1st Preferred Share	187,888	13,331,438	11.71%
iShares MSCI South Korea Capped ETF	275,000	10,739,606	9.44%
Hyundai Motor Company 2nd Preferred Shares	138,991	10,259,653	9.01%
LG Chemical Ltd Preferred Shares	107,097	9,284,237	8.15%
LG Electronics Inc Preferred Shares	527,980	7,945,651	6.98%
Hyundai Motor Company 3rd Preferred Shares	110,581	7,181,789	6.31%
Samsung Fire & Marine Insurance Co Ltd Preferred Shares	60,309	4,900,346	4.30%
Samsung SDI Co Ltd Preferred Shares	91,748	3,769,444	3.31%
Kumho Petro Chemical Co Ltd Preferred Shares	177,650	3,522,287	3.09%

This schedule forms an integral part of the Financial Statements, refer to Note 10 of the Financial Statements.

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 48)

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 51)

Mr King is a non-executive director for a number of open and closed-ended investment funds and companies. 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 offshore open and closed-ended investment funds. Robert is British and resident in Guernsey. Mr King was appointed to the Board in 2013.

Report of the Directors

The Directors of the Company present their Annual Report and Audited Financial Statements for the year ended 31 December 2014.

Principal Activity

The Company was incorporated with limited liability in Guernsey on 12 April 2013 as a company limited by shares and as an authorised closed-ended investment company. The Company's Shares were admitted to trading on the AIM Market of the London Stock Exchange ("LSE") on 14 May 2013. As an existing closed-ended fund, the Company is deemed to be granted an authorised declaration in accordance with Section 8 of the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and Rule 6.02 of the Authorised Closed-ended Investment Schemes Rules 2008 on the same date as the Company obtained consent under the Control of Borrowing (Bailiwick of Guernsey) Ordinance 1959 to 1989.

Investment Objective and Investment Policy

The investment objective and investment policy of the Company is to provide Shareholders with an attractive return on their investment, predominantly though long-term capital appreciation, by investing primarily in listed Korean preferred shares. The full investment objective and investment policy is detailed in the Annual Report.

Going Concern

The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements since the assets of the Company consist mainly of securities which are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.

Results and dividends

The results for the year ended 31 December 2014 are set out in the Statement of Comprehensive Income. A dividend of 1.44 pence per share was paid on 27 June 2014.

The Board has resolved to declare and pay a dividend in June 2015 for the year ended 31 December 2014, based on dividends from investments in Korean preferred shares with a record date on or before 31 December 2014, and received by the Company by 31 May 2015.

Investment Management

The Investment Manager of the Company is Weiss Asset Management LP, a Delaware limited partnership formed on 10 June 2003, (the "Investment Manager"). The key terms of the Investment Management Agreement and specifically the fee charged by the Investment Manager are set out in Note 16 of the Financial Statements. The Board believes that the investment management fee is competitive with other investment companies with similar investment mandates.

The Board reviews on an ongoing basis, the performance of the Investment Manager and considers whether the investment strategy utilised is likely to achieve the Company's investment objective.

Having considered the portfolio performance and investment strategy, the Board has unanimously agreed that the interests of the Shareholders as a whole are best served by the continuing appointment of the Investment Manager on the terms agreed.

Directors

The details of the Directors of the Company during the year and at the date of this Report are set out in the Directors' section.

Directors' Interests

The Directors who held office at 31 December 2014 and up to the date of this Report held the following numbers of Ordinary Shares beneficially:

	As at 31 December		As at 31 December
	2014		2013
	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%

There have been no changes in the interests of the above directors during the year.

Substantial Interests

Disclosure and Transparency Rules ("DTRs") are now comprised in the Financial Conduct Authority handbook. Section 5, the only section of the DTRs which applies to AIM listed companies, requires substantial Shareholders to make relevant holding notifications to the Company. The Company must then disseminate this information to the wider market. Details of major Shareholders in the Company can be found in Note 10.

Corporate Governance

The Board recognises the importance of a sound corporate governance culture that meets the listing requirements. All Directors contribute to Board discussions and debates. The Board considers that reporting against the principles and recommendations of the UK Corporate Governance Code (the "UK Code") will provide better information to Shareholders.

The UK Code is publicly available on the Financial Reporting Council's (the "FRC") website. The FRC issued a revised UK Code in September 2014, for reporting periods beginning on or after 1 October 2014. The Board have not early adopted the revised code.

The Board, having reviewed the UK Code, considers that it has maintained procedures during the year ended 31 December 2014 and up to the date of this report to ensure that it complies with the UK Code except as explained elsewhere in the Report.

The Board needs to ensure that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. In seeking to achieve this, the Directors have set out the Company's investment objective and policy and have explained how the Board and its delegated Committees operate and how the Directors review the risk environment within which the Company operates and set appropriate risk controls. Furthermore, throughout the Annual Report and Financial Statements the Board has sought to provide further information to enable shareholders to better understand the Company's business and financial performance.

Guernsey Regulatory Environment

The Guernsey Financial Services Commission's (the "Commission") Finance Sector Code of Corporate Governance (the "GFSC Code") comprises Principles and Guidance, and provides a formal expression of good corporate practice against which Shareholders, Boards and the Commission can better assess the governance exercised over companies in Guernsey's finance sector. The Commission recognises that the different nature, scale and complexity of business will lead to differing approaches to meeting the GFSC Code. Companies reporting against the UK Code are deemed to comply with the GFSC Code.

Composition and Independence of the Board

The Board currently comprises three non-executive Directors, all of whom are considered independent of the Investment Manager.

The Chairman is Mr Crighton. A biography for Mr Crighton and all other Directors appears on the Board members' section. In considering the independence of the Chairman, the Board has taken note of the provisions of the UK Code relating to independence, and has determined that Mr Crighton is an independent Director. The Board believes it has a good balance of skills and experience to ensure it operates effectively. The Chairman is responsible for leadership of the Board and ensuring its effectiveness.

As the Chairman is an independent Director, no appointment of a senior independent Director has been made. The Company has no employees and therefore there is no requirement for a chief executive.

The Board has engaged external companies to undertake the investment management, administrative and custodial activities of the Company. Documented contractual arrangements are in place with these companies which define the areas where the Board has delegated responsibility to them.

The Company holds a minimum of four Board meetings per year to discuss general management, structure, finance, corporate governance, marketing, risk management, compliance, asset allocation and gearing, contracts and performance. The quarterly Board meetings are the principal source of regular information for the Board enabling it to determine policy and to monitor performance, compliance and controls. These meetings are supplemented by communication and discussions throughout the year.

A representative of the Investment Manager, Administrator and Company Secretary attends each Board meeting either in person or by telephone thus enabling the Board to fully discuss and review the Company's operations and performance. Each Director has direct access to the Investment Manager and Company Secretary and may at the expense of the Company seek independent professional advice on any matter.

Attendance at the Board and other Committee meetings during the year was as follows:

	Number of		Norman		Robert	Stephen
	Meetings held		Crighton		King	Coe
Board Meetings	6		4	*	6	6
Audit Committee Meetings	4		4		4	4
Management Engagement Committee Meetings		1	1		1	1

* Mr Crighton's non-attendance at two Board Meetings was due to bad weather causing flight delays, and the current Articles of Incorporation prevent Directors from attending telephonically in such circumstances.

Board diversity

The Board considers the composition of the Board on an ongoing basis.

Re-election

The Articles of Incorporation provide that one-third of the Directors retire by a voluntary rotation basis at each AGM. However, in order to meet the highest standards of corporate governance, the Directors have agreed to stand for election yearly.

The Directors may at any time appoint any person to be a Director either to fill a casual vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office only until, and shall be eligible for re-election at, the next AGM following their appointment but shall not be taken into account in determining the Directors or the number of Directors who are to retire by a voluntary rotation basis, at that meeting, if it is an AGM.

Board Performance

The Board will evaluate its performance and consider the tenure and independence of each Director on an annual basis.

To enable this evaluation to take place, the Company Secretary will circulate a detailed questionnaire plus a separate questionnaire for the evaluation of the Chairman. The questionnaires, once completed, are returned to the Company Secretary who collates responses, prepares a summary and discusses the Board evaluation with the Chairman prior to circulation to the remaining Board members. The performance of the Chairman is evaluated by the other Directors. On occasions, the Board may seek to employ an independent third party to conduct a review of the Board.

During a Board Meeting held on 24 November 2014, the Chairman and Directors reviewed the board performance. The Chairman was satisfied that the Directors complemented each other and worked well as a Board.

Audit Committee

The Company has established an Audit Committee, with formally delegated duties and responsibilities within written terms of reference. The Audit Committee is chaired by Mr Coe. The Audit Committee's other members are Mr Crighton and Mr King. The Audit Committee meets formally at least twice a year and each meeting is attended by the external auditor and Administrator.

Appointment to the Audit Committee is for a period up to three years which may be extended for two further three year periods.

The table above sets out the number of Audit Committee Meetings held during the year ended 31 December 2014 and the number of such meetings attended by each Audit Committee member.

A report of the Audit Committee detailing responsibilities and activities is presented in the Audit Committee report.

Management Engagement Committee

The Company has established a Management Engagement Committee, with formally delegated duties and responsibilities within written terms of reference. The Management Engagement Committee is chaired by Mr King. The Management Engagement Committee's other members are Mr Crighton and Mr Coe. The Management Engagement Committee meets formally once a year.

The principal duties of the Management Engagement Committee are to review the performance of and contractual arrangements with the Investment Manager and all other service providers to the Company (other than the external auditors).

During the year the Management Engagement Committee has reviewed the services provided by the Investment Manager as well as the other service providers and have recommended to the Board that their continuing appointments are in the best interests of the Shareholders. The last meeting was held on 24 November 2014.

Nomination Committee

The Board does not have a separate Nomination Committee. The Board as a whole fulfils the function of a Nomination Committee. Any proposal for a new Director will be discussed and approved by the Board. The Board will determine whether in future an external search consultancy or open advertising is used in the appointments of non-executive Directors.

Remuneration Committee

In view of its non-executive and independent nature, the Board considers that it is not appropriate for there to be a Remuneration Committee as anticipated by the UK Code because this function is carried out as part of the regular Board business. A Remuneration Report prepared by the Board is contained in the Annual Report. Directors' remuneration is considered on an annual basis.

Terms of Reference

All Terms of Reference for Committees are available from the Company Secretary upon request or on the Company's website, www.weisskoreaopportunityfund.com.-

Environmental Policy

Due to the Company's listing on AIM, the Company is required to disclose its Environmental Policy but this is not applicable due to the nature of its operations.

Internal Controls

The Board is ultimately responsible for establishing and maintaining the Company's system of internal controls and for maintaining and reviewing its effectiveness. The system of internal controls is designed to manage rather than to eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss. These controls aim to ensure that assets of the Company are safeguarded, proper accounting records are maintained and the financial information for publication is reliable. The Board uses a formal risk assessment matrix to identify and monitor business risks.

The Board has delegated the management of the Company's investment portfolio and the administration, registrar and corporate secretarial functions including the independent calculation of the Company's NAV and the production of the Annual Report and Financial Statements, which are independently audited. Whilst the Board delegates these functions, it remains responsible for the functions it delegates and for the systems of internal control. Formal contractual agreements have been put in place between the Company and providers of these services. On an ongoing basis Board reports are provided at each quarterly Board meeting from the Investment Manager, Administrator, Registrar and Company Secretary; and a representative from the Investment Manager is asked to attend these meetings.

In common with most investment companies, the Company does not have an internal audit function. All of the Company's management functions are delegated to the Investment Manager, Administrator, Registrar and Company Secretary which have their own internal audit and risk assessment functions.

Principal risks and uncertainties

Investment Risks

The Company is exposed to the risk that its portfolio fails to perform in line with its investment objective and policy if markets move adversely or if the Investment Manager fails to comply with the investment policy. The Board reviews reports from the Investment Manager at the quarterly Board meetings, with a focus on the performance of the portfolio in line with its investment policy. The Administrator is responsible for ensuring that all transactions are in accordance with the investment restrictions.

Operational Risks

The Company is exposed to the risk arising from any failures of systems and controls in the operations of the Investment Manager, Administrator and the Custodian. The Board and its Committees regularly review reports from the Investment Manager and the Administrator on their internal controls.

Accounting, Legal and Regulatory Risks

The Company is exposed to the risk that it may fail to maintain accurate accounting records or fail to comply with requirements of its Admission document. The accounting records prepared by the Administrator are reviewed by the Investment Manager. The Administrator, Broker and Investment Manager provide regular updates to the Board on compliance with the Admission document and changes in regulation.

Financial Risks

The financial risks, including market, credit and liquidity risk faced by the Company are set out in Note 17 of the Financial Statements. These risks and the controls in place to reduce the risks are reviewed at the quarterly Board meetings.

Dialogue with Shareholders

The Directors are available to enter into dialogue with Shareholders and are contactable via the Company Secretary. All Shareholders have the opportunity to attend and vote at the AGM. The Board stays abreast of Shareholders' views via regular updates from the Company's Broker and the Investment Manager.

Auditor

The Auditor, KPMG Channel Islands Limited, have indicated their willingness to continue in office. Accordingly, a resolution for their reappointment will be proposed at the forthcoming AGM.

Directors' Responsibilities

The Directors are responsible for preparing the Report of the Directors and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law they have elected to prepare the Financial Statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and applicable law.

The Financial Statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these Financial Statements the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; and

• prepare the Financial Statements on the going concern basis unless it is inappropriate to assume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the Financial Statements have been properly prepared in accordance with The Companies (Guernsey) Law, 2008. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors confirm that they have complied with the above requirements in preparing the Financial Statements and that to the best of their knowledge and belief:

• these Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for the shareholders to assess the Company's performance, business model and strategy; and

• these Financial Statements have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company.

Disclosure of information to the Auditor:

So far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

The Directors recognise their responsibilities stated above.

Signed on behalf of the Board

Norman Crighton Stephen Coe

Chairman Director

14 April 2015

Directors' Remuneration Report

Introduction

An ordinary resolution for the approval of the Director's Remuneration Report will be put to the Shareholders at the AGM to be held on 29 July 2015.

Remuneration policy

All Directors are non-executive and a Remuneration Committee has not been established. The Board as a whole considers matters relating to the Directors' remuneration. No advice or services were provided by any external person in respect of its consideration of the Directors' remuneration.

The Company's policy is that the fees payable to the Directors should reflect the time spent by the Directors on the Company's affairs and the responsibilities borne by the Directors and be sufficient to attract, retain and motivate directors of a quality required to run the Company successfully. The Chairman of the Board is paid a higher fee in recognition of his additional responsibilities, as is the Chairman of the Audit Committee. The policy is to review fee rates periodically, although such a review will not necessarily result in any changes to the rates, and account is taken of fees paid to Directors of comparable companies. 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 £200,000 per annum.

There are no long term incentive schemes provided by the Company and no performance fees are paid to Directors.

None of the Directors has a service contract with the Company but each of the Directors is appointed by a letter of appointment which sets out the main terms of their appointment. Directors hold office until they retire by rotation or cease to be a Director in accordance with the Articles of Incorporation, by operation of law or until they resign.

Remuneration

Directors are remunerated in the form of fees, payable quarterly in arrears, to the Director personally. No Directors have been paid additional remuneration outside their normal Directors' fees and expenses.

The annual Directors' fees comprise £26,000 payable to Mr Crighton, the Chairman, £22,000 to Mr Coe as Chairman of the Audit Committee and £20,000 to Mr King.

For the year ended 31 December 2014, Directors fees were:

	For the year ended	For the period from 12 April 2013 (date of incorporation) to
	31 December 2014	31 December 2013
Norman Crighton	26,000	18,699
Stephen Coe	22,000	15,822
Robert King	20,000	13,452

Signed on behalf of the Board by:

Norman Crighton Stephen Coe

Chairman Director

14 April 2015

Audit Committee Report

Dear Shareholders,

On the following, we present the Audit Committee's Report for 2014, setting out the responsibilities of the Audit Committee and its key activities in 2014. The Audit Committee has reviewed the Company's financial reporting, significant areas of judgement and estimation within the Company's Financial Statements, the independence and effectiveness of the external auditor and the internal control and risk management systems of the Company's service providers. The Audit Committee considered whether the Annual Report and Financial Statements are fair, balanced and understandable and whether they provided the necessary information for shareholders to access the Company's performance, business model and strategy before recommending them to the Board for approval. In order to assist the Audit Committee in discharging these responsibilities, regular reports are received from the Investment Manager, Administrator and external auditor. Following its review of the independence and effectiveness of the Company's external auditors, the Audit Committee has recommended to the Board that KMPG Channel Islands Limited be reappointed as auditor, which the Board has submitted for approval to the Company's Shareholders.

A member of the Audit Committee will continue to be available at each AGM to respond to any Shareholder questions on the activities of the Audit Committee.

Responsibilities

The Audit Committee reviews and recommends the approval of the Financial Statements of the Company to the Board and is the forum through which the external auditor reports to the Board of Directors. The external auditor and the Audit Committee will meet together without representatives of either the Administrator or Investment Manager being present if either consider this to be necessary.

The role of the Audit Committee includes:

• monitoring the integrity of the published Financial Statements of the Company;

• review and report to the Board on the significant issues and judgements and estimates made in the preparation of the Company's published Financial Statements;

• monitor and review the quality and effectiveness of the external auditors and their independence;

• consider and make recommendations to the Board on the appointment, reappointment, replacement and remuneration to the Company's external auditor;

• review the Company's procedures for prevention, detection and reporting of fraud, bribery and corruption; and

• monitor and review the internal control and risk management systems of the service providers.

The Audit Committee's full terms of reference can be obtained by contacting the Company's Secretary or on the Company's website, www.weisskoreaopportunityfund.com.-

Key Activities of the Audit Committee

The following sections discuss the assessments made by the Audit Committee during the year:

Financial Reporting:

The Audit Committee's review of the Annual Report and Audited Financial Statements focused on the following significant area:

Valuation of investments:

The Company's investments had a fair value of £118,537,000 as at 31 December 2014 and represent the majority of the net assets of the Company. The investments are all listed and traded and the valuation is by reference to the fair value measurement required by IFRS. The Audit Committee considered the fair value of the investments held by the Company as at 31 December 2014 to be reasonable from a review of information provided by the Investment Manager and Administrator. All prices have been confirmed by the Administrator, to independent pricing sources as at 31 December 2014.

The Investment Manager and Administrator confirmed to the Audit Committee that they were not aware of any material misstatements including matters relating to Financial Statement presentation, nor were they aware of any fraud or bribery relating to the Company's activities. Furthermore, the external auditor reported to the Audit Committee that no material misstatements were found in the course of their work.

Following a review of the presentations and reports from the Administrator and consulting where necessary with the external auditor, the Audit Committee is satisfied that the Financial Statements appropriately address the critical judgements and key estimates made in the preparation of the Financial Statements (both in respect to the amounts reported and the disclosures). The Audit Committee is also satisfied that the significant assumptions used for determining the value of assets and liabilities have been appropriately scrutinised, challenged and are sufficiently robust.

Risk Management:

The Audit Committee continued to consider the process for managing the risk of the Company and its service providers. Risk management procedures for the Company, as detailed in the Company's risk assessment matrix, were reviewed and approved by the Audit Committee.

Fraud, Bribery and Corruption:

The Audit Committee continues to monitor the fraud, bribery and corruption policies of the Company. The Board receives a confirmation from all service providers that there have been no instances of fraud or bribery.

The External Auditor

Independence, objectivity and fees:

The independence and objectivity of the external auditor is reviewed by the Audit Committee which also reviews the terms under which the external auditor is appointed to perform non-audit services. The Audit Committee has established pre-approval policies and procedures for the engagement of the auditor to provide audit and assurance services.

These are that the external auditors may not provide a service which:

• places them in a position to audit their own work;

• creates a mutuality of interest;

• results in the external auditor developing close relationships with service providers of the Company;

• results in the external auditor functioning as a manager or employee of the Company; and

• puts the external auditor in the role of advocate of the Company.

As a general rule, the Company does not utilise external auditors for internal audit purposes, secondments or valuation advice. Services such as tax compliance, tax structuring, private letter rulings, accounting advice, quarterly reviews and disclosure advice are normally permitted but will be pre-approved by the Audit Committee.

The following table summarises the remuneration paid to KPMG Channel Islands Limited and to other KPMG member firms for audit and non-audit services.

	For the year ended		For the period from 12 April 2013 (date of incorporation) to
	31 December 2014		31 December 2013
KPMG Channel Islands Limited		£	£
Annual audit		23,500	20,000
Advisory fees (FATCA consultation)		3,000	-
Advisory fees (reporting accountant's report on IPO listing)		-	38,295
Tax fees (UK Fund Reporting Status)		5,000	1,500
		31,500	59,795

The Audit Committee does not consider KPMG Channel Islands Limited's independence to be under threat. In making this assessment, the Audit Committee has concluded that the non-audit fees do not relate to prohibited services identified by the Audit Committee. In approving the non-audit services the Audit Committee considered the safeguards put in place by KPMG Channel Islands Limited to reduce the threats to independence and objectivity to an acceptable level.

KPMG Channel Islands Limited has been the external auditor from the date of the initial listing on the London Stock Exchange. The recent revisions to the UK Corporate Governance Code introduced a recommendation that the external audit be put out to tender every ten years. The Audit Committee has noted this and will develop a plan for tendering at the appropriate time.

The Audit Committee has examined the scope and results of the audit, its cost effectiveness and the independence and objectivity of the external auditor, with particular regard to non-audit fees, and considers KPMG Channel Islands Limited, as external auditor, to be independent of the Company.

Performance and effectiveness:

During the period, when considering the effectiveness of the external auditors, the Audit Committee has taken into account the following factors:

• The audit plan presented to them before the audit;

• The post audit report including variations from the original plan;

• Changes in audit personnel;

• The external auditors' report on independence; and

• Feedback from both the Investment Manager and Administrator.

Further to the above, at the conclusion of the 2014 audit fieldwork, the Audit Committee performed specific evaluation of the performance of the external auditor through discussion with the Administrator, Investment Manager and the Auditors, themselves.

There were no significant adverse findings from this evaluation.

Reappointment of external auditors:

Consequent to this review process, the Audit Committee has recommended to the Board that a resolution be put to the 2015 AGM for the reappointment of KPMG Channel Islands Limited as external auditor. The Board has accepted this recommendation.

Internal control and risk management systems

After consultation with the Investment Manager, Administrator and external auditor, the Audit Committee considers the impact of the risk of the override of controls by its service providers, the Investment Manager and Administrator.

The Audit Committee reviews externally prepared assessments of the control environment in place at the Administrator, with the Administrator providing a Service Organization Controls Report on a bi-annual basis. The Audit Committee noted that the Management Engagement Committee received a self-assessment from the Investment Manager and no issues were identified in this. Norman Crighton also visited the office of the Investment Manager to discuss and review the controls in place at the Investment Manager. No significant failings or weaknesses were identified in these reviews by the Audit Committee.

The Audit Committee has also reviewed the need for an internal audit function. The Audit Committee has decided that the systems and procedures employed by the Investment Manager and the Administrator's internal audit function provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.

Therefore, in finalising the Financial Statements for recommendation to the Board for approval, the Audit Committee is satisfied that, taken as a whole, the Annual Report and Financial Statements are fair, balanced and understandable.

For any questions on the activities of the Audit Committee not addressed in the foregoing, a member of the Audit Committee remains available to attend each Annual General Meeting to respond to such questions.

The Audit Committee Report was approved by the Board on 14 April 2015 and signed on behalf of the Audit Committee by:

Stephen Coe

Chairman, Audit Committee

14 April 2015

Independent Auditor's Report

To the Members of Weiss Korea Opportunity Fund Ltd.

Opinions and conclusions arising from our audit

Opinion on financial statements

We have audited the financial statements (the "financial statements") of Weiss Korea Opportunity Fund Ltd. (the "Company") for the year ended 31 December 2014 which comprise the statement of financial position, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union ('EU'). In our opinion, the financial statements:

· give a true and fair view of the state of the Company's affairs as at 31 December 2014 and of its total comprehensive income for the year ended 31 December 2014;

· have been properly prepared in accordance with International Financial Reporting Standards as adopted by the EU; and

· comply with the Companies (Guernsey) Law, 2008.

Our assessment of risks of material misstatement

The risks of material misstatement detailed in this section of this report are those risks that we have deemed, in our professional judgment, to have had the greatest effect on: the overall audit strategy; the allocation of resources in our audit; and directing the efforts of the engagement team. Our audit procedures relating to these risks were designed in the context of our audit of the financial statements as a whole. Our opinion on the financial statements is not modified with respect to any of these risks, and we do not express an opinion on these individual risks.

In arriving at our audit opinion above on the financial statements, the risk of material misstatement that had the greatest effect on our audit was as follows:

Valuation of investments (£118,537,000 (95% of NAV)

Refer to the Report of the Audit Committee, Note 2e (accounting policies) and Notes 11 and 18 (financial instrument disclosures).

· The risk - The Company invests primarily in listed preferred shares issued by companies incorporated and listed in South Korea, which in certain cases may trade at a discount to the corresponding common shares of the same companies. As highlighted in the Report of the Audit Committee, the valuation of the Company's investments, given they represent the majority of the Company's net assets as at 31 December 2014, is a significant area of our audit. Fair value of investments traded in active markets are based on the bid price at the close of business of the relevant stock exchange on the reporting date. As disclosed in Note 18 to the financial statements, 100% of the Company's investments are traded in an active market.

· Our response - Our audit procedures with respect to the Company's investments included, but were not limited to, evaluating the design and implementation of controls at the administrator in relation to valuation of investments, using our own financial instruments valuation specialist to perform a comparison of the latest available bid prices to an independent third party pricing provider who reports bid prices from the South Korean Stock Exchange, and assessing the quality of the available bid prices used as at 31 December 2014 for evidence of stale prices or bid prices not quoted in an active market against observed market trading data.

We also considered the Company's disclosures (see Note 4) in relation to the use of estimates and judgments regarding valuation of investments and the Company's valuation policies adopted and fair value disclosures in Notes 2e, 11 and 18 for compliance with International Financial Reporting Standards as adopted by the EU.

Our application of materiality and an overview of the scope of our audit

Materiality is a term used to describe the acceptable level of precision in financial statements. Auditing standards describe a misstatement or an omission as "material" if it could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. The auditor has to apply judgment in identifying whether a misstatement or omission is material and to do so the auditor identifies a monetary amount as "materiality for the financial statements as a whole".

The materiality for the financial statements as a whole was set at £3,800,000. This has been calculated using a benchmark of the Company's net asset value (of which it represents approximately 3%) which we believe is the most appropriate benchmark as net asset value is considered as the prime driver of returns to the members and to be one of the principal considerations for members of the Company in assessing the financial performance of the Company.

We agreed with the audit committee to report to it all corrected and uncorrected misstatements we identified through our audit with a value in excess of £190,000, in addition to other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds.

Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above. The audit was performed at the offices of the Administrator.

Whilst the audit process is designed to provide reasonable assurance of identifying material misstatements or omissions it is not guaranteed to do so. Rather we plan the audit to determine the extent of testing needed to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements does not exceed materiality for the financial statements as a whole. This testing requires us to conduct significant depth of work on a broad range of assets, liabilities, income and expense as well as devoting significant time of the most experienced members of the audit team, in particular the Responsible Individual, to subjective areas of the accounting and reporting process.

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Board of Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Matters on which we are required to report by exception

Under International Standards on Auditing ("ISAs") (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the Annual Report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading.

In particular, we are required to report to you if:

· we have identified material inconsistencies between the knowledge we acquired during our audit and the directors' statement that they consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for members to assess the Company's performance, business model and strategy; or

· theAudit Committee Report does not appropriately address matters communicated by us to the audit committee.

Under the Companies (Guernsey) Law, 2008, we are required to report to you if, in our opinion:

· the Company has not kept proper accounting records; or

· the financial statements are not in agreement with the accounting records; or

· we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.

We have nothing to report in respect of the above responsibilities.

Scope of report and responsibilities

The purpose of this report and restrictions on its use by persons other than the Company's members as a body

This report is made solely to the Company's members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008 and, in respect of any further matters on which we have agreed to report, on terms we have agreed with the Company. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and ISAs (UK and Ireland). Those standards require us to comply with the UK Ethical Standards for Auditors.

KPMG Channel Islands Limited

Chartered Accountants

Glategny Court

Glategny Esplanade

St Peter Port, Guernsey

GY1 1WR

15 April 2015

The maintenance and integrity of the Weiss Korea Opportunity Fund Ltd. website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements or audit report since they were initially presented on the website.

Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Statement of Financial Position

			As at	As at
			31 December	31 December
			2014	2013
		Notes	£	£
Assets
Current assets
Financial assets at fair value through profit or loss		11,18	118,537,000	108,700,883
Other receivables		13	2,235,438	1,999,503
Cash and cash equivalents		12	6,408,790	3,869,125
Total assets			127,181,228	114,569,511

Liabilities
Current liabilities
Other payables		14	765,408	688,248
Total liabilities			765,408	688,248
Net assets			126,415,820	113,881,263

Represented by:
Shareholders' equity and reserves
Share capital		15	102,900,000	102,900,000
Other reserves		2(r)	23,515,820	10,981,263
Total shareholders' equity			126,415,820	113,881,263
Net assets per Share		6	1.2040	1.0846
The Financial Statements were approved and signed by the Board of Directors on 14 April 2015.

Norman Crighton	Stephen Coe
Chairman	Director

The notes form an intergral part of these Financial Statements.

Statement of Comprehensive Income

		For the year ended	For the period from 12 April 2013 (date of incorporation)
		31 December 2014	to 31 December 2013
	Notes	£	£
Income
Net changes in fair value of financial assets
at fair value through profit or loss	7	14,924,253	10,855,001
Other income	8	2,183,389	2,008,782
Net income		17,107,642	12,863,783

Expenses
Operating expenses	9	(2,579,362)	(1,440,637)
Total operating expenses		(2,579,362)	(1,440,637)

Operating profit for the year/period before tax		14,528,280	11,423,146
Withholding tax	2(q)	(480,324)	(441,883)
Operating profit for the year/period after tax		14,047,956	10,981,263
Total comprehensive income for the year/period		14,047,956	10,981,263
Basic and diluted earnings per share	5	0.1338	0.1046

All items derive from continuing activities.

The notes form an intergral part of these Financial Statements.

Statement of Changes in Equity

For the year ended 31 December 2014

		Share	Other
		capital	reserves	Total
	Notes	£	£	£
Balance at 12 April 2013		-	-	-
Total comprehensive income for the period		-	10,981,263	10,981,263
Transactions with Shareholders, recorded directly in equity
Shares issued	15	105,000,000	-	105,000,000
Share issue costs	15	(2,100,000)	-	(2,100,000)
Balance at the 31 December 2013		102,900,000	10,981,263	113,881,263

Balance at 1 January 2014		102,900,000	10,981,263	113,881,263
Total comprehensive income for the year		-	14,047,956	14,047,956
Transactions with Shareholders, recorded directly in equity
Distributions paid	3	-	(1,513,399)	(1,513,399)
Balance at 31 December 2014		102,900,000	23,515,820	126,415,820

The notes form an intergral part of these Financial Statements.

Statement of Cash Flows

		For the year ended	For the period from 12 April 2013 (date of incorporation)
		31 December 2014	to 31 December 2013
	Notes	£	£
Cash flows from operating activities
Total comprehensive income for the year/period		14,047,956	10,981,263

Adjustments for:
Net change in fair value of financial assets held at fair value through profit or loss	7	(14,924,253)	(10,855,001)
Increase in debtors	13	(235,935)	(1,999,503)
Increase in creditors	14	77,160	688,248
Net cash used by operating activities		(1,035,072)	(1,184,993)

Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss	11	(57,294,034)	(160,786,482)
Proceeds from the sale of financial assets at fair value through profit or loss	11	61,999,255	62,561,526
Net cash inflows/(outflows) from investing activities		4,705,221	(98,224,956)

Cash flows from financing activities
Proceeds from issue of ordinary shares		-	105,000,000
Share issue costs		-	(2,100,000)
Distributions paid	3	(1,513,399)	-
Net cash (outflows)/inflows from financing activities		(1,513,399)	102,900,000

Effects of exchange rate fluctuations		382,915	379,074

Net increase in cash and cash equivalents		2,539,665	3,869,125
Cash and cash equivalents at the beginning of the year/period		3,869,125	-
Cash and cash equivalents at the end of the year/period		6,408,790	3,869,125

Operating cash flows includes dividends received of £1,947,352 (2013: £12,057), less taxes withheld of £428,418 (2013: £2,604).

The notes form an intergral part of these Financial Statements.

Notes to the 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 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.

The Company's investment policy is geographically focused on South Korean companies. Specifically, the Company invests predominantly 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 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 will be selected by the Investment Manager at its sole discretion subject to the overall control of the Board.

The Company invests predominantly 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 cash and cash equivalents. The Company does not have any concentration limits.

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

2. Significant accounting policies

a) Statement of Compliance

The Annual Report and Audited Financial Statements of the Company for the year ended 31 December 2014 have been prepared in accordance with IFRS issued by the European Union and the AIM Listing 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 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.

c) Going Concern

The Directors believe that it is appropriate to adopt the going concern basis in preparing the 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 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) Financial instruments

i) Classification

Financial assets are classified into the following categories: financial assets at fair value through profit or loss and loans and receivables.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the timeframe established by regulation or convention in the marketplace.

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

ii) Recognition

Investment assets at fair value through profit or loss ("investments")

Financial assets and derivatives are recognised in the Company's Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument.

Purchases and sales of investments are recognised on the trade date (the date on which the Company commits to purchase or sell the investment). Investments purchased are initially recorded at fair value, being the consideration given and excluding transaction or other dealing costs associated with the investment.

Subsequent to initial recognition, investments are measured at fair value. Gains and losses arising from changes in the fair value of investments and gains and losses on investments that are sold are recognised through profit or loss in the Statement of Comprehensive Income within net changes in fair value of financial assets at fair value through profit or loss.

Derivatives

Futures and forward foreign currency contracts are treated as derivative contracts and as such are recognised at fair value on the date on which they are entered into and subsequently re-measured at their fair value. Fair value is determined by rates in active currency markets. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The gain or loss on re-measurement to fair value is recognised immediately through profit or loss in the Statement of Comprehensive Income within net changes in fair value of financial assets at fair value through profit or loss in the period in which they arise.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise assets and settle the liabilities simultaneously.

iii) Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Investments traded in active markets are valued at the latest available bid prices ruling at midnight on the reporting date. The Directors are of the opinion that the bid-market prices are the best estimate on fair value. Gains and losses arising from changes in the fair value of financial assets/(liabilities) are shown as net gains or losses on financial assets through profit or loss in Note 11 and recognised in the Statement of Comprehensive Income in the period in which they arise.

Derecognition of financial instruments

A financial asset is derecognised when: (a) the rights to receive cash flows from the asset have expired, (b) the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a "pass through arrangement"; or (c) the Company has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.

Realised and unrealised gains and losses

Realised gains and losses arising on disposal of investments are calculated by reference to the proceeds received on disposal and the average cost attributable to those investments, and are recognised in the Statement of Comprehensive Income. Unrealised gains and losses on investments are recognised in the Statement of Comprehensive Income.

f) Income

Dividend income from equity investments is recognised through profit or loss in the Statement of Comprehensive Income when the relevant investment is quoted ex-dividend. Investment income is included gross of withholding tax.

g) Expenses

All expenses are accounted for on an accruals basis.

h) Cash and cash equivalents

Cash comprises cash in hand and demand deposits. Cash equivalents, which can include bank overdrafts, are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant changes in value. Cash, deposits with banks and bank overdrafts are stated at their principal amount.

i) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are shown in equity as a deduction, net of tax, from the proceeds and disclosed in the Statement of Changes in Equity.

j) Foreign currency translations

Functional and presentation currency

The 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. For the purpose of the Financial Statements, the results and financial position of the Company are expressed in pounds sterling, which is the presentation currency of the Company. Transactions denominated in foreign currencies are translated into pounds sterling at the rate of exchange ruling on the date of the transaction. Financial assets and liabilities denominated in foreign currencies at the reporting date are translated into pounds sterling at the exchange rate prevailing at that date. Realised and unrealised gains or losses on currency translation are recognised in the Statement of Comprehensive Income. Foreign currency differences relating to investments at fair value through profit or loss are included within net changes in fair value of financial assets at fair value through profit or loss (Note 7).

k) Treasury Shares

Where the Company purchases its own share capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from Shareholders' equity through the other reserves, which is a distributable reserve.

When such Shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is recognised as an increase in equity and the resulting surplus or deficit on the transaction is transferred to/from the other reserve.

Where the Company cancels treasury shares, no further adjustment is required to the share capital account at the time of cancellation. Shares held in treasury are excluded from calculations when determining NAV per share and earnings per share.

l) 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.

The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's NAV, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in these Audited Financial Statements.

The Board of Directors is charged with setting the Company's investment strategy in accordance with the investment policy. They have delegated the day to day implementation of this strategy to its Investment Manager but retain responsibility to ensure that adequate resources of the Company are directed in accordance with their decisions. The investment decisions of the Investment Manager are reviewed on a regular basis to ensure compliance with the policies and legal responsibilities of the Board. The Investment Manager has been given full authority to act on behalf of the Company, including the authority to purchase and sell securities and other investments on behalf of the Company and to carry out other actions as appropriate to give effect thereto. Whilst the Investment Manager may make the investment decisions on a day to day basis regarding the allocation of funds to different investments, any changes to the investment strategy or major allocation decisions have to be approved by the Board, even though they may be proposed by the Investment Manager. The Board therefore retains full responsibility as to the major decisions made on an ongoing basis. The Investment Manager will always act under the terms of the Admission Document which cannot be significantly changed without the approval of the Board of Directors and where necessary, Shareholders.

m) Other receivables

Other receivables are amounts due in the ordinary course of business. Other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

n) Other payables

Other payables are obligations to pay for services that have been acquired in the ordinary course of business. Other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

o) Due from and due to brokers

Amounts due from and due to brokers represent receivables for securities sold and payables purchased that have been contracted for but not yet settled or delivered on the Statement of Financial Position date respectively.

p) Dividend distribution

Dividend distribution to the Company's Shareholders is recognised as a liability in the Company's Financial Statements and disclosed in the Statement of Changes in Equity in the period in which the dividends are proposed and approved by the Board.

q) 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 £600 (which has increased to £1,200 with effect from 1 January 2015).

The amounts disclosed as taxation in the Statement of Comprehensive Income relates solely to withholding tax levied in South Korea on distribution from Korean companies at an offshore rate of 22%.

r) Other reserves

Total comprehensive income for the year is transferred to Other Reserves.

3. Dividends to Shareholders

Dividends, if any, will be paid annually in June of each year. An annual dividend of 1.44 pence per share (£1,513,399) was approved on 5 June 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

The preparation of the 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 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 Annual Financial Statements:

Functional currency

As disclosed in Note 2(i), the Company's functional currency is Sterling. Sterling is 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.

5. Basic and diluted earnings per Share

The basic and diluted earnings per share for the Company has been calculated based on the total comprehensive income for the year of £14,047,956 (for the period from 12 April (date of incorporation) to 31 December 2013: £10,981,263) and the weighted average number of Ordinary Shares in issue during the year of 105,000,000 (for the period from 12 April (date of incorporation) to 31 December 2013: 105,000,000).

6. Net Asset Value per Ordinary Share

The net asset value of each Share of £1.2040 (as at 31 December 2013: £1.0846) is determined by dividing the net assets of the Company attributed to the Ordinary Shares of £126,415,820 (as at 31 December 2013: £113,881,263) by the number of Ordinary Shares in issue at 31 December 2014 of 105,000,000 (as at 31 December 2013: 105,000,000 Ordinary Shares in issue).

7. Net changes in fair value on financial assets at fair value through profit or loss

	For the year ended	For the period from 12 April 2013 (date of incorporation) to
	31 December 2014	31 December 2013
	£	£
Realised gain on investments	9,488,378	526,094
Realised gain on foreign currency	329,733	396,721
Movement in unrealised gain on investments	5,052,960	9,949,833
Movement in unrealised exchange gain/(loss) on foreign currency	53,182	(17,647)
Net changes in fair value on financial assets at fair value through profit or loss	14,924,253	10,855,001

8. Other Income

	For the year ended	For the period from 12 April 2013 (date of incorporation) to
	31 December 2014	31 December 2013
	£	£
Dividend income	2,183,389	2,008,782

9. Operating expenses

	For the year ended	For the period from 12 April 2013 (date of incorporation) to
	31 December 2014	31 December 2013
	£	£
Investment Management fee (note 16c)	1,956,259	1,010,578
Custodian fees	49,899	50,162
Audit fees	24,268	20,000
Administration and Secretarial fees	92,599	59,141
Directors' fees (note 16a)	68,000	47,973
Auditors remuneration for non-audit services *	8,000	1,500
Professional fees	45,940	-
Transaction costs	206,126	154,964
Financial Adviser, Nominated Adviser and Broker fee	30,000	18,956
Bank interest	-	467
Sundry expenses	98,271	76,896
	2,579,362	1,440,637

* Fees of £8,000 (period to 31 December 2013: £1,500) were paid to the auditors, KPMG Channel Islands Limited, in respect of tax services provided in the period to 31 December 2014.

10. Operating segments

Information on realised gains and losses derived from sales of investments are disclosed in Note 7 of the Financial Statements. The Company is domiciled in Guernsey. Substantially all of the Company's income is from its investment in listed preferred shares issued by companies incorporated in South Korea.

The Company has no assets classified as non-current assets. The Company is likely to have a high degree of portfolio concentration as Korean preferred shares are concentrated with a small number of issuers.

The Company also has a diversified Shareholder base. As at 31 December, registered Shareholders that have notified the market of their holding in the Company via RNS, were as follows:

				As at 31 December 2014
					% of issued
Shareholders	Shares				share capital
Ruffer LLP	11,500,000				10.95%
Lepercq Lynx Investment Advisory LLC		10,208,265			9.72%
Advance Emerging Capital Ltd	9,777,000				9.31%
Henderson Global Investors	8,800,000				8.38%
Mount Capital	8,000,000				7.62%
Andrew M. Weiss	6,427,550				6.12%

			As at 31 December 2013
					% of issued
Shareholders	Shares				share capital
Ruffer LLP	11,000,000				10.48%
Chalkstream Capital Group L.P	8,990,000				8.56%
Lepercq Lynx Investment Advisory LLC		8,671,077			8.26%
Miton Group plc	7,000,000				6.67%
Andrew M. Weiss	6,427,550				6.12%

11. Financial assets at fair value through profit or loss

	As at	As at
	31 December	31 December
	2014	2013
	£	£
Cost of investments at beginning of the year/period	98,751,050	-
Purchases of investments in the year/period	57,294,034	160,786,482
Disposal of investments in the year/period	(61,999,255)	(62,561,526)
Realised gain on disposal of investments in the year/period	9,488,378	526,094
Cost of investments held at end of the year/period	103,534,207	98,751,050
Movement in unrealised gain on investments	15,002,793	9,949,833
Financial assets at fair value through profit or loss	118,537,000	108,700,883

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.

12. Cash and cash equivalents

	As at	As at
	31 December	31 December
	2014	2013
	£	£
Cash at bank	6,408,790	3,869,125

Cash at bank earns interest at floating rates based on daily bank deposit rates.

13. Other receivables

	As at	As at
	31 December	31 December
	2014	2013
	£	£
Dividends receivable	2,232,660	1,996,725
Prepaid expenses	2,778	2,778
	2,235,438	1,999,503

The Directors consider that the carrying amount of receivables approximate their fair value.

14. Other payables

	As at	As at
	31 December	31 December
	2014	2013
	£	£
Investment management fees payable (note 16c)	170,718	148,336
Withholding Tax payable	491,185	439,279
Administration fee payable	24,200	22,573
Custody fee payable	4,276	8,377
Directors' fees payable (note 16a)	17,000	17,000
Audit fees payable	15,220	20,000
Other payables	42,809	32,683
	765,408	688,248

The Directors consider that the carrying amount of payables approximate their fair value.

15. Share Capital

	As at		As at
	31 December		31 December
	2014		2013
Authorised
Unlimited Ordinary Shares at no par value	-		-

Issued at no par value
105,000,000 unlimited Ordinary Shares at no par value		-	-

Reconciliation of number of Shares
	As at		As at
	31 December		31 December
	2014		2013
	No. of Shares		No. of Shares
Ordinary Shares at the beginning of the year/period	105,000,000		-
Issue of Ordinary Shares	-		105,000,000
Total Ordinary Shares in issue at the end of the year/period	105,000,000		105,000,000

	As at	As at
	31 December	31 December
	2014	2013
	Share Capital	Share Capital
	£	£
Share Capital at the beginning of the year/period	102,900,000	-
Issued Share Capital	-	105,000,000
Share issue costs	-	(2,100,000)
Total Share Capital at the end of the year/period	102,900,000	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.

16. Related party transactions and Material Agreements

Related party transactions

a) Directors Remuneration and expenses

During the year ended 31 December 2014, director fees of £68,000 (period from 12 April 2013 (date of incorporation) to 31 December 2013: £47,973) were charged to the Company and £17,000 remained payable at the year end (as at 31 December 2013: £17,000). For additional information refer to the Directors Remuneration Report.

b) Shares held by related parties

	As at 31 December		As at 31 December
	2014		2013
	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 31 December 2014, Dr. Andrew Weiss and his immediate family members held an interest in 6,427,550 Ordinary Shares (as at 31 December 2013: 6,427,550 Ordinary Shares) representing 6.12 per cent. (as at 31 December 2013: 6.12 per cent.) of the issued share capital of the Company.

As at 31 December 2014, 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 Ordinary Shares (as at 31 December 2013: 2,468,333 Ordinary Shares) representing 2.35 per cent. (as at 31 December 2013: 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 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 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.

For the year ended 31 December 2014, investment management fees and charges of £1,956,259 (period from 12 April 2013 (date of incorporation) to 31 December 2013: £1,010,578) were charged to the Company and £170,718 (as at 31 December 2013: £148,336) remained payable at the year end.

17. Financial Risk Management

The Company's objective in managing risk is the creation and protection of Shareholder value. Risk is inherent in the Company's activities, but it is managed through an ongoing process of identification, measurement and monitoring.

The Company's financial instruments include investments designated as fair value through profit or loss and cash and cash equivalents.

The main risks arising from the Company's financial instruments are market price risk, interest rate risk, credit risk, liquidity risk and currency risk. The techniques and instruments utilised for the purposes of efficient portfolio management are those which are reasonably believed by the Board to be economically appropriate to the efficient management of the Company.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company's activities expose it primarily to the market risks of changes in market prices, interest rates and foreign currency exchange rates.

Market price risk

The Company's NAV is sensitive to movement in market prices. As at 31 December 2014, if market prices had been 5% higher, or 5% lower, with all other variables held constant then the increase/decrease in NAV would have been £5,926,850 (as at 31 December 2013: £5,435,044). Actual trading results may differ from the above sensitivity analysis and those differences may be material.

Foreign Currency Risk

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

The Company does not hedge its exposure to foreign currency (predominantly Korean Won (KWR)) and NAV per share will fluctuate with movements in foreign exchange rates. As at 31 December 2014, the Company held the following assets and liabilities in foreign currencies:

	As at 31 December		As at 31 December
	As at 31 December		As at 31 December
	2014		2013
Amounts in Sterling	KRW	USD	KRW	USD
Assets
Monetary assets	6,458,801	1,083,572	2,753,934	298,070
Non-monetary assets	109,591,060	8,945,940	97,961,277	10,739,606

Liabilities
Monetary liabilities	491,185	-	439,279	-

Amounts in the above table are based on the carrying value of monetary assets and liabilities.

The table below summarises the sensitivity of the Company's monetary and non-monetary assets and liabilities to changes in foreign exchange movements at 31 December 2014.

	Reasonable	As at	Reasonable	As at
	possible	31 December	possible	31 December
	shift in rate	2014	shift in rate	2013
	2014	£	2013	£
Currency
KRW
- Monetary	+/- 5%	322,940	+/- 5%	137,697
- Non-Monetary	+/- 5%	5,479,553	+/- 5%	4,898,064
- Monetary liabilities	+/- 5%	24,559	+/- 5%	21,964

US Dollars
- Monetary	+/- 5%	54,179	+/- 5%	14,904
- Non-monetary	+/- 5%	447,297	+/- 5%	536,980

Interest rate risk

The Company holds limited amounts on interest bearing deposits (as at 31 December 2014: £6,408,790 [as at 31 December 2013: £3,869,125]) and does not invest in interest bearing securities and instruments. Accordingly interest rate risk is considered very low.

The tables below summarise the Company's exposure to interest rate risk:

				As at
	Floating	Fixed	Non-Interest	31 December
	rate	rate	bearing	2014
	£	£	£	£
Financial Assets
Investments designated at fair value
through profit or loss	-	-	118,537,000	118,537,000
Cash and cash equivalents	6,408,790	-	-	6,408,790
Other receivables	-	-	2,235,438	2,235,438
	6,408,790	-	120,772,438	127,181,228

				As at
	Floating	Fixed	Non-Interest	31 December
	rate	rate	bearing	2014
	£	£	£	£
Financial Liabilities
Other payables	-	-	765,408	765,408
	-	-	765,408	765,408

				As at
	Floating	Fixed	Non-Interest	31 December
	rate	rate	bearing	2013
	£	£	£	£
Financial Assets
Investments designated at fair value
through profit or loss	-	-	108,700,883	108,700,883
Cash and cash equivalents	3,869,125	-	-	3,869,125
Other receivables	-	-	1,999,503	1,999,503
	3,869,125	-	110,700,386	114,569,511

				As at
	Floating	Fixed	Non-Interest	31 December
	rate	rate	bearing	2013
	£	3	£	£
Financial Liabilities
Other payables	-	-	688,248	688,248
	-	-	688,248	688,248

Credit Risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company. Credit risk is limited to the carrying value of financial assets at 31 December 2014 as follows:

	As at	As at
	31 December	31 December
	2014	2013
	£	£
Cash and cash equivalents	6,408,790	3,869,125
Other receivables	2,235,438	1,999,503
	8,644,228	5,868,628

The Company is exposed to material credit risk in respect of cash and cash equivalents. The credit risk from cash and cash equivalents is mitigated as all cash is placed with Northern Trust (Guernsey) Limited ("NTGL"). NTGL is a wholly owned subsidiary of The Northern Trust Corporation ("TNTC"). TNTC is publicly traded and a constituent of the S&P 500. As at 31 December 2014, TNTC has a credit rating of A+ (as at 31 December 2013: A+) from Standard & Poor's and A2 (as at 31 December 2013: A2) from Moody's.

Liquidity risk

Liquidity risk is the risk that the Company may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous.

The Company's investments are relatively liquid and the Company holds sufficient cash balances (or liquid investments) to meet its obligations as they fall due. The Board reviews its resources and obligations on a regular basis to ensure sufficient liquid assets are held.

As at 31 December 2014, the Company had no significant financial liabilities other than payables arising directly from investing activity.

				As at
	Less than 1			31 December
	month	1-3 months	3-12 months	2014
	£	£	£	£

Other payables	259,003	-	506,405	765,408
	259,003	-	506,405	765,408

				As at
	Less than 1			31 December
	month	1-3 months	3-12 months	2013
	£	£	£	£

Other payables	228,969	-	459,279	688,248
	228,969	-	459,279	688,248

Capital risk management

The fair value of the Company's financial assets and liabilities approximate to their carrying amounts at the reporting date. For the purposes of this disclosure, redeemable participating preference shares are considered to be capital.

The Company's objective when managing capital is to maintain an optimal capital structure in order to reduce the cost of capital. The Company may borrow, however as at 31 December 2014 there were no borrowings (as at 31 December 2013: £ Nil).

The gearing ratio below is calculated as total liabilities divided by total equity.

	As at	As at
	31 December	31 December
	2014	2013
	£	£
Total assets	127,181,228	114,569,511
Less: total liabilities	(765,408)	(688,248)
Net Asset Value	126,415,820	113,881,263

Gearing Ratio	0.61%	0.60%

Share buybacks

The Directors have general Shareholder authority to purchase in the market up to 40 per cent. of the Ordinary Shares in issue from time to time following Admission. The Directors intend to seek annual renewal of this authority from Shareholders at each general meeting of the Company.

Pursuant to this authority, and subject to Guernsey law and discretion of the Directors, the Company may repurchase Ordinary Shares in the market on an ongoing basis at a discount to NAV with a view to increasing the NAV per Ordinary Share and assisting in controlling the discount to NAV per Ordinary Share in relation to the price at which such Ordinary Shares may be trading.

Purchases by the Company will be made only at prices below the estimated prevailing NAV per Ordinary Share based on the last Published NAV but taking account of movements in investments, stock markets and currencies, in consultation with the Investment Manager and at prices where the Directors believe such purchases will result in an increase in the NAV per Ordinary Share of the remaining Ordinary Shares.

The Directors will consider repurchasing Ordinary Shares when the price per Ordinary Share plus the pro forma cost to the Company per share repurchased is less than 95 per cent. of the NAV per Ordinary Share. The pro forma cost per share should include any brokerage commission payable and costs of realising portfolio securities to fund the purchase. The Directors may, at their discretion, also consider repurchasing Ordinary Shares at a smaller discount to NAV per Ordinary Share, provided that such purchase would be accretive to NAV per Ordinary Share for any continuing Shareholders.

Realisation opportunity

The Company will offer all Shareholders the right to elect to realise some or all of the value of their Ordinary Shares, less applicable costs and expenses, on or prior to the fourth anniversary of Admission, being 14 May 2017 (the "Realisation Date").

Subject to the aggregate Net Asset Value of the continuing Ordinary Shares at the close of business on the last Business Day before the Realisation Date being not less than £50 million, the Ordinary Shares held by the Shareholders who have elected for Realisation will be redesignated as Realisation Shares and the Portfolio will be split into two separate and distinct Pools namely the Continuation Pool (comprising the assets attributable to the continuing Ordinary Shares) and the Realisation Pool (comprising the assets attributable to the Realisation Shares).

With effect from the Realisation Date, the assets in the Realisation Pool will be managed in accordance with an orderly realisation programme with the aim of making progressive returns of cash, as soon as practicable, to those Shareholders who have elected to receive Realisation Shares. Ordinary Shares held by Shareholders who do not submit a valid and complete election in accordance with the Articles during the Election Period will remain Ordinary Shares.

Unless it has already been determined that the Company will be wound-up; every two years after the Realisation Date, the Directors will propose further realisation opportunities for Shareholders who have not previously elected to realise their Ordinary Shares using a similar mechanism to that described above.

If the weighted average discount on the Portfolio is less than 25 per cent. over any 90 day period, then the Directors shall propose an ordinary resolution for the winding up of the Company. If one or more Realisation Elections are duly made and the Net Asset Value of the continuing Ordinary Shares at the close of business on the last Business Day before the Reorganisation Date is less than £50 million, the Directors may propose an ordinary resolution for the 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.

18. 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 judgment 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 31 December 2014:

				As at
				31 December
	Level 1	Level 2	Level 3	2014
	£	£	£	£
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

				As at
				31 December
	Level 1	Level 2	Level 3	2013
	£	£	£	£
Financial assets at fair value through
profit or loss:
Korean preferred shares	97,961,277	-	-	97,961,277
Korean Exchange Traded Fund	10,739,606	-	-	10,739,606
Total assets	108,700,883	-	-	108,700,883

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 year end 31 December 2014 (for the period from 12 April 2013 (date of incorporation) to 31 December 2013: None).

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 year ended 31 December 2014 (as at and for the period from 12 April 2013 (date of incorporation) to 31 December 2013: None).

19. 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 Financial Statements, using IFRS to the NAV per share reported to the LSE:

	As at 31 December 2014		As at 31 December 2013
		NAV per		NAV per
		Participating		Participating
	NAV	Share	NAV	Share
	£	£	£	£
Net Asset Value reported to the LSE	124,674,345	1.1874	112,323,817	1.0698
Adjustment for dividend income	1,741,475	0.0166	1,557,446	0.0148
Net Assets Attributable to Shareholders per Financial Statements	126,415,820	1.2040	113,881,263	1.0846

The published NAV per Share of £1.1874 (as at 31 December 2013: £1.0698) is different from the accounting NAV per Share of £1.2040 (as at 31 December 2013: £1.0846) due to the adjustments noted above.

20. Subsequent events

These Financial Statements were approved for issuance by the Board on 14 April 2015. Subsequent events have been evaluated until this date.

On 9 January 2015 the Company purchased 900,000 Ordinary shares (£1,072,608) of the Company at a price of £1.19 per share. These purchased shares were subsequently cancelled by the Company.

Following the purchase and cancellation of the Ordinary Shares, the Company has 104,100,000 Ordinary Shares in issue.

No further subsequent events have occurred.

This information is provided by RNS

The company news service from the London Stock Exchange

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