Korea Asia Fund Limited
17 November 1999
The Company
The Korea Asia Fund Limited is a company incorporated in the Cayman Islands but
conducts itself in such a way as to be resident for tax purposes in the United
Kingdom in order to take advantage of exemptions from taxation on capital gains
both in Korea and in the United Kingdom. The Fund invests primarily in listed
securities in Korea in accordance with its licence granted by the Korean
Ministry of Finance and Economy. The Company's shares are listed on the London
Stock Exchange.
Registered Office
The Genesis Building, George Town
Grand Cayman, Cayman Islands
British West Indies
Directors
The Hon. Rupert Francis John Carington (Chairman)
Christopher Michael Bond
Roger David Corley
The Rt. Hon. The Earl of Cromer
Succ-Young Kim
Bryce Dryden McDonnell
Ho Young Park
Hyung Koo Yim
Eun Sang Yoo
Secretary
Christopher Michael Bond
35 Vine Street
London EC3N 2AA
England
Investment Manager
The Korea Asia Fund Management Co.,
Limited
12th Floor. Tower 1, HSBC Centre,
1 Sham Mong Road, Kowloon.
Hong Kong
Telephone: +(852) 2523 1313
Fax: +(852) 2288 8260
Company Secretarial Advisers
KPMG
Aquis Court, 31 Fishpool Street
St Albans
Hertfordshire
AL3 4RF England
Telephone: +44(0) 1727 733000
Fax: +44(0) 1727 733001
Brokers
Merrill Lynch International
20 Farringdon Road
London EC1M 3NH
England
Telephone:+ 44(0)171 867 2000
Fax: + 44(0)171 772 2919
CHAIRMAN'S REVIEW
Performance
The company's net asset value (NAV) over the 6-month period of this report
outperformed the benchmark index KOSPI by a significant margin. The index
increased by 36.1% in US dollar terms while the company's NAV increased by
44.8%. Despite this good relative performance the discount to NAV increased from
19.68% at the fiscal year end to 21.05% over the period.
Corporate Developments
As reported in the last annual report your Board regularly reviews measures that
might enhance shareholder value and in particular assist in the reduction of the
discount in the share price to NAV and will implement them as appropriate.
On behalf of the shareholders, the Board would like to thank Mr. K. J. Gregory
who has resigned as a director of the company for his contribution over the last
4 years. The directors have invited Mr. B. McDonnell and Mr. S. Y. Kim to join
the board.
Outlook
The Korean economy recorded GDP growth of 7.3% in the first half of 1999 and the
consensus forecast is for GDP of 8.3% for the full year. This strong growth is
attributed to the rapid recovery in private consumption, facility investment and
exports. The current account surplus has grown significantly but despite strong
GDP growth the consumer price index rose only 0.8% year-on-year to September 30
indicating that inflationary pressures are still subdued. The high level of
foreign exchange reserves, the current account surplus and the expected
stability of the currency should assist the government in maintaining a loose
monetary policy whilst the financial markets remain concerned over the effects
of the financial problems of Daewoo.
Investment Policy
During the first half of the company's financial year the weighting of equities
has been increased to reflect the favourable outlook of the Korean stockmarket.
The Board believes that there may be short term corrections in the market caused
by the financial problems at Daewoo as well as the high level of rights issues.
The longer term outlook remains positive due to the continuing de-leveraging and
cost reductions in the Korean corporate sector as well as the favourable effect
of the strong Japanese Yen for Korean exports. These factors should assist
corporate earnings growth and support the stock market.
Rupert Carington
Chairman
PERFORMANCE COMPARISONS
30 September 31 March % change 30 September
1999 1999 1998
Unaudited Unaudited
Assets
Shareholders' funds 262,769 181.442 44.82% 91,005
(USD'000)
Number of shares
in issue 72,875,000 72,875,000 72,875,000
Net asset value per share 3.61 2.49 44.98% 1.25
(USD)
Share price
Share price (USD) 2.85 2.00 42.50% 1.05
Discount of share price to -21.05% -19.68% -16.00%
net asset value per share
Benchmark
KOSPI (USD) 687.42 504.92 36.14% 310.32
Total returns for the period:
Return on net assets 45.98% 30.46% -26.89%
BALANCE SHEET
As at 30 As at 30 As at 31
September, September, March,
1999 1998 1999
US$ US$ US$
Unaudited Unaudited
Fixed assets
Investments 259,596,838 78,746,689 175,395,394
Current assets
Debtors 221,777 233,344 1,333,125
Cash at bank 5,017,296 12,387,961 6,176,213
5,239,073 12,621,305 7,509,338
Creditors: amounts falling due
within one year 2,066,782 362,497 1,462,949
Net current assets 3,172,291 12,258,808 6,046,389
Net assets 262,769,129 91,005,497 181,441,783
Capital and reserves
Called-up share capital 728,750 728,750 728,750
Share premium account 197,547,000 197,547,000 197,547,000
Other reserves
Capital reserve - realised (9,029,258) (8,078,738) (18,379,885)
Capital reserve - unrealised 77,404,213 (95,377,636) 4,569,351
Revenue reserve (3,881,576) (3,813,879) (3,023,433)
Total shareholder funds 262,769,129 91,005,497 181,441,783
STATEMENT OF TOTAL RETURN
6 months 6 months
ended ended
30 Sept 1999 30 Sept 1998
Revenue Capital Total Revenue Capital Total
Note US$ US$ US$ US$ US$ US$
Unaudited Unaudited
Gains(losses)
on investments 0 82,206,895 82,206,895 0 (42,032,542)(42,032,542)
Exchange gains and
losses 28,104 (21,406) 6,698 130,624 (159,111) (28,487)
Income 880,952 0 880,952 613,799 0 613,799
Investment
management (1,370,604) 0 (1,370,604)(557,222) 0 (557,222)
fee
Other expenses (266,382) 0 (266,382)(362,814) 0 (362,814)
Return on
ordinary
activities
before tax (727,930)82,185,489 81,457,559(175,613)(42,191,653)(42,367,266)
Tax on
ordinary
activities (1) (130,213) 0 (130,213) (42,055) 0 (42,055)
Return on
ordinary
activities
after tax
for the
financial
year and
attributable
to equity
shareholders
transferred
to/(from)
reserves (858,143) 82,185,489 81,327,346 (217,668)(42,191,653)(42,409,321)
Return per
ordinary
share (2) (0.0118) 1.1278 1.1160 (0.0030) (0.5789) (0.5819)
Net asset value
Per ordinary share 3.6058 1.2488
Year ended 31 March 1999
Revenue Capital Total
US$ US$ US$
Gains(losses)
on investments 0 47,155,510 47,155,510
Exchange gains and
losses 138,702 233,841 372,543
Income 2,681,853 0 2,681,853
Investment management
fee (4,358,671) 0 (4,358,671)
Other expenses (567,768) 0 (567,768)
Return on ordinary
activities before tax 894,116 47,389,351 48,283,467
Tax on
ordinary
activities (1) (321,339) 0 (321,339)
Return on ordinary
activities after tax
for the financial
year and attributable
to equity shareholders
transferred to/(from)
reserves 572,777 47,389,351 47,962,128
Return per ordinary
share (2) 0.0078 0.6503 0.6581
Net asset value
Per ordinary share 2.4898
Notes:
(1) Taxation represents Korean withholding tax on dividends at 15% and at rates
varying between 10% and 15% on interest received.
(2) The calculation of return per ordinary share is based on the net revenue
loss after taxation of US$858,143 and capital gain of US$82,185,489 (1998:
revenue loss of US$217,668 and capital loss of US$42,191,653) and on the
outstanding number of 72,875,000 ordinary shares in issue.
TEN LARGEST INVESTMENTS
As at 30 September. 1999
Company Percentage of
Market Value Shareholders' Funds
US$ %
Samsung Electronics 34,231,908 13.01
POSCO* 22,764,660 8.65
SK Telecom* 22,138,769 8.41
Samsung F & M Insurance 16,303,847 6.20
Korea Telecom* 15,305,373 5.82
KEPC0 9,873,068 3.75
Samsung Display Devices 8,025,079 3.05
Kookmin Bank* 7,727,754 2.94
Daeduck Electronics 7,397,410 2.81
LG Info & Comm 6,071,097 2.31
* Holdings include new shares and depository receipts.
SECTOR BREAKDOWN OF THE PORTFOLIO
CHART
%
Sector Sep 99 Mar 99
Electronics 27.83 23.23
Ranking & Other Financials 17.25 20.72
Telecommunications 15.57 12.75
Steel 9.89 6.78
Chemicals 7.99 10.19
Utility 5.69 6.40
Food 4.21 5.65
Transportation 2.03 1.64
Construction 0.95 2.38
Others 8.59 10.26
100.00 100.00