Weiss Korea Opportunity Fund - Annual Report and Audited Financial Statements for the year ended 31 December 2023

Weiss Korea Opportunity Fund Ltd. (the “Company” or “WKOF”) has today, released its Annual Financial Report for the year ended 31 December 2023. The Report will shortly be available for inspection via the Company's website www.weisskoreaopportunityfund.com.

   Financial Highlights

* The portfolio discount represents the discount of WKOF’s actual NAV to the value of what the NAV would be if WKOF held the respective common shares of issuers rather than preference shares on a one-to-one basis.

As at close of business on 30 April 2024, the latest published NAV per Share was £1.80 and the Share Price was £1.73.

Chair’s Review

For the year ended 31 December 2023

Investment Performance

Against a backdrop of weakening economic data in China and a ‘theme-driven stock frenzy’ in the Korean market, WKOF’s NAV in pounds Sterling (“GBP”) declined by 5.5%, including reinvested dividends during the period from 1 January 2023 to 31 December 2023. In comparison, the reference MSCI South Korea 25/50 Net Total Return Index (the “Korea Index”) appreciated by 14.8%. Since the admission of WKOF to the AIM in May 2013, NAV has increased by 112.2%, including reinvested dividends, compared to the Korea Index returns of 73.2%, a cumulative outperformance of 39% since inception.

Dividend

During the year, the Directors declared an interim dividend yield of 5.3517 pence per share on 2 May 2023, equating to a 3.2% net dividend yield over the past 12 months, to distribute the income received by WKOF in respect of the year ended 31 December 2022. This dividend was paid to all Shareholders on 9 June 2023.

The Company’s policy is to pay a single dividend, which incorporates all dividends received (net of withholding tax), on an annual basis. As discussed in the Investment Manager’s report below, there are changes afoot in Korean corporate governance. One of the initiatives aims to address Korean companies’ unique approach to the declaration of dividends, whereby a dividend is declared but its quantum is not announced at the same time. The proposal is that both the time and amount of the dividend ought to be declared together. Some of the companies in which we are invested have already proactively implemented this, such as Hyundai Motors. The impact of this change is that the dividends receivable in 2023 (that is those declared) are significantly lower than in previous years. This is because those companies that have moved to the new process have declared their dividends post year-end. At the time of writing, most of these companies have declared and (in most cases) already paid out their dividends. The board therefore intends to take into account all dividends received up to 30 April 2024 when declaring the Company’s own dividend.

As things currently stand, the Board expects to adopt a similar approach for future periods but will keep the dividend policy and process under review

Share Buybacks

The Board is authorised to repurchase up to 40% of WKOF’s outstanding Ordinary Shares in issue as of 31 December 2023. To date, WKOF has repurchased 12.6% of Ordinary Shares issued at admission and continues to have the intention to repurchase shares if they trade at a significant discount to NAV in the future. The share price traded in line with the NAV over the period. We will also keep shareholders informed of any share repurchases through public announcements.

Realisation Opportunity

WKOF offers shareholders the regular opportunity to elect to realise all, or a part, of their shareholding in WKOF (the “Realisation Opportunity”) once every two years, on the anniversary of WKOF’s admission date. As we said in our Half-Yearly Financial Report, we were pleased to see that only 41,496 shares were tendered (0.06% of WKOF’s shares) as this displayed positive shareholder support. The next Realisation Opportunity will take place in 2025, and we hope that shareholders will continue to show their support for WKOF and the long-term opportunity it offers.

Board Composition

This is my first Annual Report as Chairman, and I wish to extend, again, our thanks to Norman Crighton, who successfully steered WKOF from its IPO until last year. Your current board has a diverse range of skills and experiences, brings fresh perspectives, and are well qualified to act in the best interests of shareholders to enable the continued success of WKOF. Although not a requirement of the AIM listing rules, your Board is nonetheless compliant with the diversity and inclusion targets as set out in Chapter 15 of the FCA’s Listing Rules, as well as the AIC Code of Corporate Governance and remains committed to corporate governance best practices as recommended in the Hampton-Alexander and Davies reviews.

Your Investment Manager

Following a pause during COVID, I am pleased to report that your Investment Manager has been increasingly engaging with South Korean companies on governance matters, very much in support of the government’s ‘Corporate Value-Up initiative’. During the reporting period, your Investment Manager held a number of meetings with portfolio companies in the portfolio and expects to continue doing so in the future.

Value for Money

Your Board continues to keep all costs under review and we are very mindful that the ongoing charges for the year were approximately 2.1%. We strive to keep the cost of investing as low as possible for shareholders, with the investment management fee of 1.5% making up the bulk of the costs. The Realisation Opportunity added approximately £124,000 of expense for the year, but the Board believes that this periodic redemption facility is very much in the best interest of all shareholders. The Board scrutinised all other overheads during the year, cutting back where no obvious value was being generated, to ensure that shareholders receive value for money.

Responsible Investing

As an AIM quoted investment company, WKOF is not subject to the FCA Listing Rule requirement to comply with TCFD (Task Force on Climate-related Financial Disclosures). Your Investment Manager, as a US asset manager, is also not subject to the TCFD requirements. However, your Board is a keen supporter of the ambitions of TCFD, as it will improve disclosure around climate related issues. As a result, WKOF’s reporting on Responsible Investing will evolve in line with regulatory requirements and remain an area of focus for the Board in the coming years.

Outlook

2023’s relative and absolute performance was disappointing for WKOF, but there are reasons to be optimistic about the future performance, not least given the recent uplift in performance following the end of the reporting period (and as detailed in the Investment Manager’s Report). While investors will most likely remain sceptical of material change occurring in South Korea, at least in the short-term, the government appears to have introduced incentives to enact real change. Domestic retail ownership of stocks has greatly increased, and Korea has the recent success of corporate governance changes in Japan as a playbook for similar announcements and activities. We believe WKOF offers an attractive way for patient, value-oriented investors to gain exposure to the economic benefits of what we hope is an increasingly modernised and shareholder friendly investment environment in South Korea.

I look forward to communicating with you about WKOF’s activities in the future. If any Shareholders wish to speak with the Board, please contact Singers, and we will be happy to answer any questions you may have.

Krishna Shanmuganathan

Chair

2 May 2024

Investment Manager’s Report

For the year ended 31 December 2023

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