Weiss Korea Opp - Annual Financial Report - Part 3
16/04/2015 09:54
- Part 3: For the preceding part double click ID:nRSP4141Kb
- (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
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.
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