Climate Change Data

Environmental Metrics

ESG Focus Areas

• Corporate Governance

Governance Achievements

• Increased number of share buybacks in South Korean companies.
• Record-high number of publicly traded South Korean companies subject to activist demands (47 in 2022, a 74% increase year-over-year).

Climate Goals & Targets

Environmental Challenges

• Widening discounts of preference shares owned by the company.
• Poor performance of the common shares corresponding to the preference shares held by the company, relative to those in the MSCI Korea 25/50 Net Total Return Index.
• Challenging macroeconomic conditions in South Korea (weakening currency, elevated inflation, rising interest rates).
• Historically poor corporate governance displayed by major South Korean conglomerates.

Mitigation Strategies

• Actively engaging with companies in the portfolio on governance issues to help narrow the discount of preference shares versus common shares.
• Monitoring and reviewing all costs to keep the expense ratio in check.
• Share buybacks to manage the share price discount to NAV.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Third-party Assurance: KPMG Channel Islands Limited

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Preference share discounts of several major positions in WKOF’s portfolio continued to narrow during March, resulting in the average portfolio discount narrowing from 45.2% to 38.5%.

Mitigation Strategies

• WKOF significantly decreased its exposure to Hyundai Motor Company’s 2nd preference shares following the discount narrowing and is rebalancing the portfolio toward more attractive opportunities. Increased holdings in the Samsung Kodex 200 ETF temporarily to manage liquidity, expecting to reduce this holding over time.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Less attractive opportunity set and strategy for continuing in its current form.

Mitigation Strategies

• Undertaking a strategic review to explore the future for WKOF.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Negative market reaction to the South Korean National Assembly elections, potentially jeopardizing the "Corporate Value-Up" program.

Mitigation Strategies

• Redeploying capital from Samsung Kodex 200 ETF into other higher discount preference shares.
• Implementing a general hedging strategy to reduce overall market risk, including the purchase of credit default swaps on South Korean sovereign debt and/or put options on the iShares MSCI South Korea ETF.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Market illiquidity of some preference shares.
• Political tensions in Asia.

Mitigation Strategies

• Investment Manager plans to rebalance portfolio toward preference shares trading at larger discounts.
• Implementation of a general hedging strategy (credit default swaps on South Korean sovereign debt and/or put options on the iShares MSCI South Korea ETF) to reduce overall market risk.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Criticism of the Korea Value-up Index's methodology.

Mitigation Strategies

• KRX plans to revise the Value-up Index components.

Supply Chain Management

Climate-Related Risks & Opportunities