Weiss Korea Opportunity Fund: Annual Report and Audited Financial Statements for the year ended 31 December 2023
02/05/2024 18:25
WEISS KOREA OPPORTUNITY FUND LTD.
LEI 213800GXKGJVWN3BF511
(Classified Regulated Information, under DTR 6 Annex 1 section 1.1)
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
As at 31 December 2023 £ As at 31 December 2022 £
Total Net Assets 116,849,704 127,080,493
Net Asset Value ("NAV") Per Share 1.69 1.83
Mid-Market Share Price 1.68 1.81
As at
31 December 2023 Since inception
NAV Return - 5.5% 112.2%
Benchmark Return 14.8% 73.2%
As at 31 December 2023 As at 31 December 2022
Portfolio Discount* 49.7% 68.0%
Share Price Discount -0.4% -1.6%
Fund Dividend Yield 3.2% 3.5%
Average Trailing 12-Month P/E Ratio of Preference Shares Held 4.8x 4.0x
P/B Ratio of Preference Shares Held 0.3 0.3
Annualised Total Expense Ratio 2.1% 2.0%
* 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
WKOF Performance Attribution
At the end of December 2023, WKOF held a portfolio of 32 South Korean
preference shares. As a reminder, the economic rights of South Korean
preference shares are generally the same or slightly better than the
corresponding common shares, yet the preference shares often trade at
substantial discounts to the common shares. WKOF’s returns, on a
currency-neutral basis, are driven by five primary factors:
* The performance of the South Korean equity market generally as indicated by
the Korea Index;
* The discounts of the preference shares WKOF holds narrowing or widening
relative to their corresponding common shares;
* The performance of the common shares (which correspond to the preference
shares held by WKOF)
* relative to the performance of the South Korean equity market;
* Excess dividend yields of the preference shares held by WKOF; and
* Fees, expenses and other factors.
In order to compare WKOF’s relative return to the South Korea Index, we
report the attribution of these aforementioned factors to WKOF’s
performance. The following table provides this performance attribution for the
year ended 31 December 2023 and for the period since the inception of WKOF in
May 2013 to 31 December 2023.
Performance Attribution Table
Return Component 2023 Since Inception
The Korea Index 14.8% 73.2%
Discount Narrowing (Widening) of Preferred Shares Owned 1.8% 66.2%
WKOF Common Shares vs. The Korea Index - 20.4% - 29.3%
Excess Dividend Yield of Preferred Shares Owned 1.7% 16.7%
Fees, Expenses and Others - 3.4% - 14.6%
NAV Performance - 5.5% 112.2%
WKOF’s investment thesis at inception was based on the likelihood that
WKOF’s NAV would perform well, largely due to (i) decreases in the large
discounts of the preference shares held by WKOF relative to their
corresponding common shares and (ii) the related excess dividend yields caused
by these large discounts. This has, indeed, generally been the case as these
two factors have collectively been the main contributors to WKOF’s
outperformance relative to the South Korea Index since inception. At present,
we continue to remain confident in both of these theses.
In September 2013, shortly after inception, the preference shares held by WKOF
traded at a 55.5% discount to their corresponding common shares and the
dividend yield was 1.7%. As at 31 December 2023, the discount and dividend
yield were 49.7% and 3.2%, respectively. We are focused on returns since
inception because we believe that due to high levels of idiosyncratic
volatility, any data that is gathered over a one-year period is unlikely to be
a reliable guide for future performance.
As displayed above in the attribution table, WKOF under-performed the South
Korea Index during 2023 due to negative attribution via common share selection
return. We believe it is primarily a result of thematic- driven investors
favouring growth-oriented common shares which typically have higher valuation
metrics. While it has been a frustrating two years for WKOF on an absolute
basis and relative to various South Korean equity indices, there is optimism
that investors could begin rewarding certain low price-to-book equities due to
investor optimism of corporate governance reform as discussed in greater
detail below. While investor sentiment could change, it is encouraging to see
a possible tailwind for low price-to-book securities like those held by WKOF.
Review of the South Korean Macro Environment
There is increasing concern that North Korea could carry out some form of
destabilising provocation against South Korea in 2024, and, as a result, WKOF
has increased its exposure to Korean sovereign bond credit default swap
protection. While it seems highly unlikely that an attack would occur that
could trigger a large-scale military conflict, we consider that there is an
increased likelihood of some form of action intended to sow political division
in Korea and increase national security distractions in China and the US. In
recent months, political and military tension in the Korean Peninsula have
continued to escalate, as North Korea has exhibited signs of increased
aggression. In January, North Korea fired artillery shells towards the border
islands of South Korea, tested more ballistic missiles and followed such
provocations with a declaration that “South Korea is its principal
enemy”. In February 2024, North Korea’s parliament announced it had
abolished laws that allow for economic cooperation with South Korea, further
signalling an ongoing deterioration of the relationship between the Koreas.
This announcement followed the discovery that North Korea demolished The
Monument to the Three Charts, a 30-meter monument that had stood as a symbol
of unification between the Koreas since 2001. With upcoming legislative
elections and presidential elections in South Korea and in the United States,
respectively, North Korea is expected to intensify their provocations
throughout the year.
South Korea’s economy, the fourth largest in Asia, expanded 1.4% in 2023.
While this year’s growth was the country’s lowest since 2020, the growth
during the fourth quarter suggests that the domestic economy remains on the
road to recovery. In 2023, South Korea’s annual exports declined by 7.4%
while annual imports decreased by 12.1%. The decline in exports has partially
been attributed to decreased demand from China, to which exports fell by 2.9%
year over year. After stagnating for sixteen months, chip exports began to
rise in November 2023 with exports jumping by 21.8% on a year on year basis
during December.
South Korea’s 3.5% policy interest rate or bank base rate, which has been
unchanged since January 2023, remains at its 15-year high. Following the Bank
of Korea’s (“BOK”) November 2023 meeting, it raised its inflation target
from 2.4% to 2.6% and, once again decided to leave its policy interest rate
unchanged following its most recent meeting in January. In the 2023
Half-Yearly Report, we discussed the Bank of Korea’s concern about levels of
household debt, which stood at 103% of GDP as of 30 June 2023. At 30 September
2023, South Korea’s household debt hit a new record, despite the restrictive
interest rate policy described above, so will most likely remain an area of
focus for the BOK. Governor Rhee has previously suggested that, should
household debt levels continue to rise, the BOK might consider subsequent rate
hikes.
Valuation of Major Indices
Index Name P/E Ratio P/B Ratio Dividend Yield
Nifty Index (India) 24.4 3.1 1.3%
S&P 500 (US) 23.4 4.5 1.5%
Nikkei 225 (Japan) 20.4 1.9 1.9%
FTSE 100 (UK) 10.7 1.7 3.9%
Shanghai Composite (China) 11.3 1.3 2.8%
Hang Seng Index (HK) 9.2 1.0 4.1%
TAIEX (Taiwan) 18.2 2.1 3.4%
KOSPI 200 (Korea) 11.6 1.0 1.6%
WKOF Portfolio Holdings 4.2 0.4 2.7%
South Korean equities and the portfolio holdings of WKOF continue to offer
apparent valuation discounts relative to other countries’ equity markets as
represented by the price-to-earnings ratios (“P/E ratios”) and
price-to-book ratios (“P/B ratios”) listed in this report.
As previously discussed, WKOF’s portfolio discount as at 31 December 2023
was 50%. This is calculated as the weighted average discount of the preference
shares owned by WKOF relative to the prices of such preference shares’
corresponding common shares. In addition, the KOSPI 200 has depressed
valuation multiples as shown above relative to the average of other major
indices.
Portfolio Discussion and Korean Corporate Governance
Investors who read our reports have become accustomed to the valuation table
above which displays South Korean equities trading at highly discounted
valuations relative to other developed markets, as well as certain emerging
markets. These discounts have persisted for an extended period of time and
investors may rightfully wonder what might cause a change. While South Korea
has been a challenging region for investors to put their capital, there are
signs that material change may be on the horizon. Due to the existing low
valuations of South Korean companies, as well as comparatively low levels of
foreign stock ownership of such companies, improvements in international
perceptions of Korea could have a material impact on Korean equity valuations.
In particular, securities which trade at steep valuation discounts due to
concerns over the issuers’ corporate governance could benefit from
market-wide improvements in corporate governance.
International concerns about South Korean corporate governance practices
typically focus on the following issues:
* Laws and regulations, which contain fewer minority protections relative to
developed markets, allow controlling shareholders of publicly traded companies
to favour their own interests over those of minority shareholders;
* A lack of truly independent directors on the boards of many publicly traded
companies due to directors only being required to maintain a standard of being
“loyal” to the company, not shareholders (source: Article 382-3 of the
Commercial Act);
* Wealthy families are often controlling shareholders of publicly traded
companies and may have an incentive to depress the valuations of the publicly
traded stocks they control to avoid high inheritance taxes (which can be as
high as 60%) when they transfer wealth to the next generation of the family;
* Stocks bought back by companies are often held in treasury without
cancellation which is dilutive to earnings per share; this practice also
maintains a defensive currency that issuers can readily use to dilute minority
shareholders in the future;
* Payout ratios to shareholders, even by profitable companies with large cash
positions, are often materially lower than in other countries; and
* Minority shareholders may be at risk of a controlling shareholder forcing
them to swap their shares of the company they own with another less attractive
company the controlling shareholder owns or be diluted through an unattractive
new stock offering.
As mentioned in our prior reports, there are reasons for optimism that the
above corporate governance regime may be ending.
The recently announced government-sponsored ‘Corporate Value-up Programme’
could be the start of more pronounced long-term changes in corporate
governance in South Korea. Japan has enacted similar corporate governance
reforms over the past decade which, having had limited early success, seem to
be now yielding results. For example, when the Tokyo Stock Exchange “named
and shamed” companies whose publicly traded equities were trading below book
value, approximately 40% of affected companies subsequently submitted plans
for improvement and share buybacks hit a record high. Despite GDP in Japan
contracting in both the third and fourth quarters last year, company profits
in the fourth quarter increased by 46% year-on-year (Source: Grant’s
Interest Rate Observer, February 2024).
While details will not be available until June 2024, the general goals of the
Korean governance programme appear to be:
* Encouraging companies to improve corporate governance standards through
incentives and tax benefits;
* Creating an index of companies, the “Korea Premium Index,” composed of
best practicing companies similar to Japan’s JPX Prime 150 Index and
exchange traded funds;
* Encouraging pension funds and domestic institutional investors to track the
new index; and
* Requiring listed companies to disclose plans to enhance corporate value
through the revised Corporate Governance Disclosures and key valuation
metrics.
If improvements are made in corporate governance, we are hopeful it will have
a positive impact on WKOF’s future performance. As shown in the table on the
right, WKOF’s Top 10 Holdings are primarily comprised of companies with low
price-to-book ratios.
Issuer Name Portfolio Weight Common Share Price-to-Book Ratio
Hyundai Motor Company, 2nd Prf. 16% 0.45
LG Electronics Inc., Prf. 10% 0.85
LG Chem Ltd., Prf. 8% 1.10
Hanwha Corporation 3rd Prf. 7% 0.18
Amorepacific Corp., Prf. 7% 1.73
CJ CheilJedang Corp, Prf. 6% 0.67
Mirae Asset Securities Co., Ltd., 2nd Prf. 5% 0.34
Samsung Kodex 200 ETF 4% N/A
Hyundai Motor Company, 3rd Prf. 4% 0.45
CJ Corporation, 1st Prf. 3% 0.47
Top 10 Holdings 70%
Domestic retail investors now represent a large shareholder base for South
Korean stocks. The number of retail investors has grown from 6 to 14 million
since 2020 - an increase of 135%, which represents approximately 33% of the
voting public in South Korea. (Source: Goldman Sachs, “Korea Value in
Action”, 7 February 2024). With legislative and presidential elections
occurring this year and in 2027, respectively, there is arguably a political
incentive to enact reforms that benefit retail and minority shareholders.
Three more recent examples of such reforms are:
* A draft plan was released to improve the dividend pay-out process of South
Korean companies. In South Korea, dividend amounts are disclosed after the
ex-date of dividends, which effectively precludes shareholders from knowing
the per-share dividend before becoming eligible to receive those dividends. By
contrast, the international market standard is to announce dividend amounts
prior to the dividend record date for additional clarity on dividend payouts.
All else being equal, the new practice is likely to provide greater insight
into indicative dividend payouts prior to South Korean issuers’ dividend
record dates, thereby allowing investors to capture attractive yield
opportunities with more information about upcoming dividend payouts;
* A 30 year old rule requiring foreign investors to register with authorities
in order to trade local shares was abolished, and a requirement to report
transaction details of firms trading shares through an omnibus account was
relaxed from two days after settlement to once a month;
* South Korean companies with market capitalisations greater than KRW 10
trillion (roughly 7-8 billion GBP market capitalisations) and foreign
ownership greater than 5% will be required to provide disclosures in English
starting in 2024.
There have already been slow but meaningful improvements to corporate
governance in South Korea (albeit from low standards) and pressure continues
to mount to improve standards:
* While South Korea still ranks eighth for corporate governance in its region
according to the Asian Corporate Governance Association, it also had the
largest absolute change in corporate governance score after Japan (Japan was
+5.3 vs South Korea +4.2) since 2000 of any country in its region;
* Over 45 companies received proactive shareholder proposals from
institutional shareholders in 2022 versus less than five instances just five
years ago (Source: Insignia; Goldman Sachs, “Korea Value in Action”,
7 February 2024);
* It was the third largest market for activism in 2023 with 77 activist
campaigns - up from 10 campaigns in 2020. (Source: Grant’s Interest Rate
Observer, February 2024); and
* Payout ratios of companies listed on the KOSPI increased to 44% in 2023 from
32% the year prior (Source: FactSet, Korea Exchange, Goldman Sachs Investment
Research).
If corporate governance in South Korea is improving and potentially
accelerating, why has the large weighted-average discount of South Korean
preference shares held by WKOF persisted or even widened?
A leading cause is our deliberate portfolio rebalancing as the Company has
rotated from preference shares where discounts have tightened towards ones
with wider discounts. For example, the Company’s largest portfolio position
at one point was Samsung Electronics, which had a discount wider than 40% over
the life of the fund. As of the end of February 2024, the discount stands at
21% and has never reverted higher than 25% since 2018. Samsung Electronics
provides an example of positive corporate governance reform having a material
impact on the preference shares tightening and investors benefiting. However,
with limited upside due to a narrower discount level, we believe other
preference shares with wider discounts offer better prospective risk-adjusted
returns over the longer-term.
Similarly, we reduced our exposure to LG Chem during 2023. It stood as the
largest position in the portfolio (approximately 15% of NAV) in 2022 and now
accounts for just under 8% of NAV. The discount of its preference shares
tightened throughout 2023, finishing the year at 38%, demonstrating reduced
scope for upside potential. It was therefore, replaced as the largest position
by Hyundai Motors’ preference shares during the year. Not only were these
preference shares trading at a wider-than- average 48% discount at mid-year,
they also offered an attractive 10% dividend yield. A similar rationale has
led us to increase the Company’s position in LG Electronics preference
shares, which were trading at a 57% discount at mid-year.
We have observed that discounts in the most liquid preference shares appear to
be tightening. This is not to say that corporate governance has improved
universally for all South Korean companies or that past trends in preference
share discounts will always repeat themselves in larger discount securities.
However, when discounts widen for reasons that are hard to explain with sound
economic principles, we will patiently capture attractive investment
opportunities as they present themselves. We are aware that a major goal of
WKOF is to enable long- term investors to benefit from the large discounts of
South Korean preference shares relative to their underlying common shares and
will continue to manage the portfolio to that end.
Hedging
WKOF pursues its investment strategy with a portfolio that is generally
long-only. However, as further described in WKOF’s Annual Report and Audited
Financial Statements for the year ended 31 December 2017 and in subsequent
Annual Reports, the Board approved a hedging strategy intended to reduce
exposure to extreme events that would be catastrophic to its Shareholders’
Investments in WKOF because of political tensions in Northeast Asia.
WKOF has limited its use of hedging instruments to purchases of credit default
swaps (“CDS”) and put options on certain Korean equity ETFs and indices
– securities that we believe would generate high returns if South Korea
experienced geopolitical disaster – which do not introduce material new
risks into the portfolio. These catastrophe hedges are not expected to make
money in most states of the world. We expect that WKOF’s hedges will lose
money most of the time but are tradeable prior to expiration. The table below
provides details about the hedges as of 31 December 2023. Note that outside of
the general market and portfolio hedges described herein, WKOF has generally
not hedged interest rates or currencies.
CDS Notional Amount (GBP) Cost Paid as a % of Notional Value per Annum (Spread) Expiration Date
78,443,677 0.195% 6/20/2025
Concluding Remarks
To echo the Half-Yearly Report, we wish to again express our thanks to our
long-term shareholders for their patience. We continue to remain disciplined
and focused on attempting to capitalise on a rare economic anomaly in the form
of Korean preference shares trading at steep discounts to the corresponding
common shares despite largely equivalent economic rights. Discounts are
similar to when WKOF was originally listed and valuations are at heavy
discounts to global equities. This is in spite of slow but steady corporate
governance reforms and the recent announcements of potentially more material
changes ahead. We remain optimistic about WKOF’s future risk-adjusted
returns and continue to be one of its largest shareholders.
Weiss Asset Management LP
2 May 2024
Statement of Financial Position
As at 31 December 2023
As at 31 December As at 31 December
2023 2022
£ £
Assets
Financial assets at fair value through profit or loss 112,427,879 120,764,446
Other receivables 1,627,052 4,598,722
Margin account 1,396,037 1,327,313
Cash and cash equivalents 3,364,287 2,890,620
Total assets 118,815,255 129,581,101
Liabilities
Derivative financial liabilities 903,381 1,145,453
Due to broker 271,189 -
Other payables 790,981 1,355,155
Total liabilities 1,965,551 2,500,608
Net assets 116,849,704 127,080,493
Represented by:
Shareholders' equity and reserves
Share capital 33,912,856 33,986,846
Other reserves 82,936,848 93,093,647
Total Shareholders' equity 116,849,704 127,080,493
Net Assets Value per Ordinary Share 1.6870 1.8336
The Financial Statements were approved and authorised for issue by the Board
of Directors on 2 May 2024.
Krishna Shanmuganathan Gill Morris
Chair Director
Statement of Comprehensive Income
For the year ended 31 December 2023
For the year ended 31 December 2023 For the year ended 31 December 2022
£ £
Income
Net losses on financial assets
at fair value through profit or loss (4,498,384) (37,206,667)
Net gain s on derivative financial
instruments through profit or loss 242,072 1,253,397
Net foreign currency (losses)/gains (559,160) 632,948
Dividend income 2,490,245 5,088,748
Bank interest income 12,747 4,488
Total loss (2,312,480) (30,227,086)
Expenses Operating expenses (3,586,733) (3,696,545)
Total operating expenses (3,586,733) (3,696,545)
Loss for the year before dividend withholding tax (5,899,213) (33,923,631)
Dividend withholding tax (548,479) (1,119,942)
Loss for the year after dividend withholding tax (6,447,692) (35,043,573)
Loss and total comprehensive loss for the year (6,447,692) (35,043,573)
Basic and diluted loss per Share (0.0931) (0.5056)
All items derive from continuing activities.
Following review of the AIC SORP and its impact on the Statement of
Comprehensive Income the Board have decided not to follow the recommended
income and capital split. This is due to the fact that the Company’s
dividend policy is not influenced by its expense policy.
Statement of Changes in Equity
For the year ended 31 December 2023
For the year ended 31 December 2023 Share capital £ Other reserves £ Total £
Balance as at 1 January 2023 33,986,846 93,093,647 127,080,493
Total comprehensive loss for the year - (6,447,692) (6,447,692)
Transactions with Shareholders, recorded directly in equity
Purchase of Realisation Shares (73,990) - (73,990)
Distributions paid - (3,709,107) (3,709,107)
Balance as at 31 December 2023 33,912,856 82,936,848 116,849,704
For the year ended 31 December 2022 Share capital £ Other reserves £ Total £
Balance as at 1 January 2022 33,986,846 132,554,299 166,541,145
Total comprehensive loss for the year - (35,043,573) (35,043,573)
Transactions with Shareholders, recorded directly in equity
Distributions paid - (4,417,079) (4,417,079)
Balance as at 31 December 2022 33,986,846 93,093,647 127,080,493
Statement of Cash Flows
For the year ended 31 December 2023
For the year ended 31 December 2023 For the year ended 31 December 2022
£ £
Cash flows from operating activities
Loss and total comprehensive loss for the year (6,447,692) (35,043,573)
Adjustments for:
Interest income (12,747) (4,488)
Net gain or loss on financial assets at fair value through profit or loss 4,498,384 37,206,667
Exchange losses on cash and cash equivalents (81,949) (523,108)
Net gain or loss on derivative financial instruments at fair value through profit or loss (242,072) (1,253,397)
Increase in receivables excluding dividends (1,731) (3,314)
Increase/(decrease) in other payables excluding withholding tax 89,974 (57,744)
Dividend income net of withholding taxes (1,941,766) (3,968,807)
Dividend received net of withholding taxes 4,261,019 4,265,673
Bank interest received 12,747 4,488
Purchase of financial assets at fair value through profit or loss (18,040,415) (10,431,005)
Proceeds from the sale of financial assets at fair value through profit or loss 22,149,787 11,811,591
Net cash generated from operating activities 4,243,539 2,002,983
Cash flows from investing activities
Opening of derivative financial instruments - 1,799,480
Closure of derivative financial instruments - (163,217)
(Increase)/decrease in margin account (68,724) 54,100
Net cash generated from investing activities (68,724) 1,690,363
Cash flows from financing activities
Purchase of Realisation Shares (73,990) -
Distributions paid (3,709,107) (4,417,079)
Net cash used in financing activities (3,783,097) (4,417,079)
Net increase/(decrease) in cash and cash equivalents 391,718 (723,733)
Exchange gains on cash and cash equivalents 81,949 523,108
Cash and cash equivalents at the beginning of the year 2,890,620 3,091,245
Cash and cash equivalents at the end of the year 3,364,287 2,890,620
For further information, please contact:
Singer Capital Markets Limited James Maxwell/ James Fischer – Nominated Adviser James Waterlow – Sales +44 20 7496 3000
Northern Trust International Fund Administration Services (Guernsey) Limited Company secretary +44 1481 745001
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