Weiss Korea Opp - Annual Financial Report - Part 2
16/04/2015 09:54
- Part 2: For the preceding part double click ID:nRSP4141Ka
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
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