asiadragontrust.co.uk
Asia Dragon Trust plc
Capturing Growth from world-class Asian companies
Annual Report 31 August 2024
Asia Dragon Trust plc 1
“The Board announced on 28 October 2024 that it
had agreed heads of terms with Invesco Asia Trust
plc and Invesco Fund Managers Limited for a
combination of the assets of the Company with
Invesco Asia Trust plc by means of a section 110
scheme of reconstruction. Further details are
provided in my statement on pages 6 and 7.”
James Will, Chairman
You can also register for regular email
updates by visiting asiadragontrust.co.uk
or by activating the QR Code below using
the camera on your smart phone:
2 Asia Dragon Trust plc
Net asset value total return
A
Net asset value per share
+9.3% 452.9
p
2023 (16.7)% 2023 421.3p
Share price total return
A
Share price
+16.7% 404.0
p
2023 (19.5)% 2023 353.0p
Benchmark total return (in sterling terms) Ongoing charges
AB
+12.0% 0.75%
2023 (8.4)% 2023 0.91%
Earnings per share (revenue) Dividend per share
6.73
p
6.60
p
2023 7.06p 2023 6.60p
A
Considered to be an Alternative Performance Measure. Further details can be found on pages 104 and 105.
B
Including fee waiver (see page 104).
Net asset value per share Dividends per share Mid-market price per share
At 31 August – pence Year ended 31 August - pence At 31 August – pence
474.4
566.6
513.3
421.3
452.9
20 21 22 23 24
4.75
6.50 6.50
6.60 6.60
20 21 22 23 24
416.0
512.0
446.0
353.0
404.0
20 21 22 23 24
Performance Hi
g
hli
g
hts
Asia Dragon Trust plc 3
“The Board has declared an interim dividend in
lieu of a final dividend of 6.6p per Ordinary share
(2023 – 6.6p) for the year ended 31 August 2024,
which will be paid on 31 December 2024 to
shareholders on the register on
6 December 2024.”
James Will, Chairman
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR
IMMEDIATE ATTENTION. If you are in any doubt about the
action you should take, you are recommended to seek your
own financial advice from your stockbroker, bank manager,
solicitor, accountant or other financial adviser authorised
under the Financial Services and Markets Act 2000 (as
amended by the Financial Services Act 2012) if you are in
the United Kingdom or, if not, from another appropriately
authorised financial adviser. If you have sold or otherwise
transferred all your Ordinary shares in Asia Dragon Trust
plc, please forward this document, together with the
accompanying documents immediately to the purchaser or
transferee, or to the stockbroker, bank or agent through
whom the sale or transfer was effected for transmission to
the purchaser or transferee.
Overview
Dividends and Highlights 4
Strategic Report
Chairman’s Statement 6
Investment Manager’s Review 10
Overview of Strategy 17
abrdn’s Approach to ESG 25
Performance 30
Portfolio
Ten Largest Investments 34
Investment Portfolio 35
Changes in Asset Distribution 38
Analysis of Portfolio 39
Investment Case Studies 42
Governance
Board of Directors 46
Directors’ Report 49
Statement of Corporate Governance 52
Audit & Risk Committee’s Report 58
Directors’ Remuneration Report 61
Statement of Directors’ Responsibilities 65
Financial Statements
Independent Auditors’ Report to the Members of Asia
Dragon Trust plc 68
Statement of Comprehensive Income 77
Statement of Financial Position 78
Statement of Changes in Equity 79
Statement of Cash Flows 80
Notes to the Financial Statements 81
Corporate Information
Alternative Performance Measures (Unaudited) 103
Information about the Investment Manager 106
Investor Information 107
Glossary of Terms 110
Your Company’s Share Capital History 112
Alternative Investment Fund Managers Directive
Disclosures (Unaudited) 113
Corporate Information 117
Contents
4 Asia Dragon Trust plc
Dividends
Rate xd date Record date Payment date
Interim 2024
A
6.60p 5 December 2024 6 December 2024 31 December 2024
Final 2023 6.60p 26 October 2023 27 October 2023 15 December 2023
A
Interim dividend in lieu of final for 2024.
Highlights
31 August 2024 31 August 2023 % change
Performance
Total shareholders’ funds
A
(£’000) 711,626 479,169 +48.5
Net asset value per share (capital return basis) (p) 452.93 421.26 +7.5
Net asset value per share (total return basis) (%) 9.3 –16.7
Share price (capital return basis) (p) 404.00 353.00 +14.4
Market capitalisation
A
(£’000) 634,751 401,521 +58.1
MSCI AC Asia (ex Japan) Index (in sterling terms; capital return basis) 1,003.12 918.92 +9.2
MSCI AC Asia (ex Japan) Index (in sterling terms; total return basis) (%) 12.0 –8.4
Revenue return per share (p) 6.73 7.06 –4.7
Total return per share (p) 39.44 (88.66)
Dividend
Dividend per share (p) 6.60 6.60 –
Gearing
Net gearing (%)
B
6.2 5.8
Discount
Discount to net asset value (%)
B
10.8 16.2
Operating costs
Ongoing charges ratio including fee waiver
BC
0.75 0.91
Ongoing charges ratio excluding fee waiver
BD
0.86 0.91
A
Increase during the year includes the impact of assets acquired following the transaction with abrdn New Dawn Investment Trust plc
B
Considered to be an Alternative Performance Measure. Further details can be found on pages 103 and 104.
C
31 August 2024 includes the management fee waiver agreed between the Company and the Manager following the transaction with abrdn New Dawn Investment Trust plc
during the year (see note 4 of the financial statements for further details).
D
31 August 2024 is calculated on the assumption that the management fee waiver agreement between the Company and the Manager following the transaction with abrdn New
Dawn Investment Trust plc during the year (see note 4 of the financial statements for further details) is excluded.
Dividends and Hi
g
hli
g
hts
Asia Dragon Trust plc 5
Strategic
Report
The Company is an investment trust and aims to achieve long-term
capital growth principally through investment into companies in the
Asia Pacific region which are believed by the Investment Manager
to have above average prospects for growth.
6 Asia Dragon Trust plc
Future of the Company
In May of this year, your Board announced its intention to
undertake a strategic review of the future of the
Company, including its ongoing investment management
arrangements. The Board of the Company announced on
28 October 2024 that it had concluded such review.
The outcome of the review was a proposal by the Board
(the “Proposal”) that the Company should combine with
Invesco Asia Trust plc (“Invesco Asia”), an investment trust
managed by Invesco Fund Managers Limited (“IFML”). The
enlarged Invesco Asia would continue to be managed by
IFML under Invesco Asia’s existing investment objective
and investment policy.
Under the strategic review the Board undertook a full and
robust review process and considered a wide range of
options for the Company. The proposal to combine the
Company with Invesco Asia was considered the most
attractive outcome for shareholders, providing a partial
capital return alongside the continuation of shareholders’
investment in an investment trust that has delivered strong
long-term performance managed by a highly regarded
team at IFML. The combination, if approved, will create a
vehicle of scale with a diversified shareholder base, a
significant increase in dividend for Asia Dragon
shareholders who roll over into Invesco Asia and a more
competitive management fee. Furthermore, the
introduction of a triennial unconditional 100 per cent.
tender offer alongside ongoing buyback activity by the
enlarged Invesco Asia provides a compelling approach to
discount management that we expect to serve its
shareholders well over time.
I set out below under ‘Result of the Review’ more
background on the Proposal and its rationale and benefits
to the Company’s shareholders. The Proposal is subject to
shareholder approval at general meetings to be held in
early 2025.
Results
In the 12 months to 31 August 2024, the MSCI AC Asia ex
Japan Index rose 12.0% in sterling total return terms. The
Company’s net asset value (“NAV”) increased 9.3% on the
same total return basis after accounting for dividends. The
share price rose from 353p to 404p over the year, which,
with dividends added back, yielded a total return of 16.7%.
This reflected a narrowing of the discount to NAV to 10.8%
as at the year end, from 16.2% as at the previous financial
year end.
Performance
Your Company posted mixed returns over the reporting
year, with initial weakness in late 2023 but with
performance stabilising by August 2024. The stabilisation
followed a portfolio "reset" after the Company’s
combination with abrdn New Dawn Investment Trust plc in
November 2023, allowing the larger portfolio to invest in
Australasia and up to 30% in non-benchmark holdings.
This broadened investment universe flexibility enabled the
Manager to invest in quality stocks that had previously
been inaccessible, positively impacting performance. Key
contributors over the year included non-benchmark
stocks like ASML and ASM International in the
semiconductor and technology hardware segments. As
AI-related apps and chips start to proliferate, rising
demand in terms of usage and complexity is boosting the
semiconductor and consumer electronics segments.
Other key contributors included Taiwan Semiconductor
Manufacturing Co, power testing services provider Chroma
ATE and passive component supplier Yageo in Taiwan, as
well as Indian real estate group Godrej Properties.
I would also highlight that China, which was the biggest
detractor from performance over the interim period,
remained a key detractor for the full financial year. As I
mentioned in my interim statement, the Manager has
undertaken a thorough review of the Company’s Chinese
holdings, and resized exposures where appropriate. This
was implemented in view of the near-term headwinds in
China, namely, a slower than expected consumer
recovery and a still-weak property sector, amid a broader
soft macro backdrop.
As a result, the Manager significantly reduced overall
Chinese exposure. With a focus on good earnings visibility
and steady cash flow generation, the Manager has added
or increased exposure to Chinese holdings that show such
attributes but exited positions where the outlook is more
uncertain. The Manager retains high conviction in the
Chinese holdings that remain in the portfolio, and
continues to see significant value opportunities in this
market. However, the Manager remains watchful of
structural challenges in the country as well as more details
on the recent stimulus measures and execution and
implementation of policies. Encouragingly, in the latter
part of the financial year from 1 January 2024 to 31
August 2024, the Chinese exposure has turned around to
become a marginal contributor to the Company’s
relative performance.
The Manager’s Report on pages 10 to 12 covers the
Company’s performance in greater detail.
Chairman’s Statement
Asia Dragon Trust plc 7
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Result of the Review
In May this year, your Board announced its intention to
undertake a strategic review of the future of the
Company, including its ongoing investment management
arrangements. Under the review, the Board gave
consideration to retaining the existing manager,
appointing a new external third-party manager and
entering into a combination with another investment trust.
The Board was pleased by the interest it received from a
large number of high-quality management groups, which
were evaluated by the Board with the assistance of
Stanhope Consulting. The Board announced on 28
October 2024 that it had agreed heads of terms with
Invesco Asia and IFML for a combination of the assets of
the Company with Invesco Asia by means of a section 110
scheme of reconstruction and voluntary winding up of
the Company.
In reaching this decision, the Board noted a number of
attractions to a combination with Invesco Asia:
· Strong Long-Term Investment Performance: Invesco
Asia has delivered a total return of 49.4 per cent. over
the five years to 30 September 2024, representing
outperformance of 23.2 per cent. against the MSCI AC
Asia ex Japan Index which has delivered a five-year
total return of 26.2 per cent. over the same period.
· Unconstrained Investment Approach: Invesco Asia has a
highly rated and experienced investment team with an
unconstrained investment approach and a focus on
valuation whereby the managers seek to identify stocks
that have become dislocated from fair value with a
potential catalyst for change. The Board of the
Company was impressed by the distinctive and
disciplined value-oriented investment approach
employed by IFML which has delivered attractive
returns for Invesco Asia shareholders over the long term.
· Aligned Investment Exposure: The Proposal will allow
shareholders to continue their investment in a core Asia
(ex-Japan) equity strategy.
· Increased Dividend: The Company’s shareholders will
benefit from a significant increase in dividend as a result
of Invesco Asia’s policy of paying a distribution of 4 per
cent. of NAV per annum which will move from semi-
annual to four quarterly payments each equal to 1 per
cent. of NAV.
· Depth of Resource: Invesco Ltd, a global asset manager
with $1.8 trillion of AUM, including $15.9 billion in Asia and
EM Equities (as at 30 September 2024), will remain as
the investment manager of the combined entity.
Invesco Asia will continue to benefit from the expertise
of its portfolio managers, Fiona Yang and Ian
Hargreaves, and from the depth of resource and
experience offered by the wider Asian & Emerging
Markets Equities Team.
· Partial Cash Exit: The Proposal will provide the
Company’s shareholders with the opportunity to elect to
exit part or all of their holding in the Company for cash,
subject to an overall limit of 25 per cent. of the issued
share capital of the Company (excluding shares held in
treasury) (the “Cash Exit”).
· Continued Scale: The combination with Invesco Asia will
allow the Company’s shareholders to continue to
participate in a vehicle of scale, with the enlarged
Invesco Asia expected to be a constituent of the FTSE
250, notwithstanding the potential substantial return of
capital by the Company pursuant to the Cash Exit.
· Periodic Exit Opportunity: Following completion of the
Proposal, Invesco Asia will introduce a triennial
unconditional tender offer of up to 100 per cent. of the
issued share capital of Invesco Asia, with the first tender
offer expected to take place in 2028.
· Discount Management Policy: Invesco Asia will maintain
its stated average discount target of less than 10 per
cent. of NAV calculated on a cum-income basis over the
financial year.
· Competitive Management Fee: IFML has agreed that,
with effect from the admission to listing and trading of
the new Invesco Asia shares issued in connection with
the Proposal, the management fee payable by Invesco
Asia to IFML will be reduced to 0.75 per cent. on the initial
£125m of net assets; 0.6 per cent. of net assets between
£125m and £450m; and 0.5 per cent. on net assets in
excess of £450m. The new Invesco Asia fee structure will
result in a lower blended management fee than is
currently payable by the Company.
· Shareholder Register: The Proposal will allow a number
of shareholders to consolidate their holdings across the
two companies while also creating a more diversified
shareholder base through a combination of the balance
of the two share registers.
8 Asia Dragon Trust plc
The Proposal will be subject to approval by the
shareholders of both the Company and Invesco Asia in
addition to regulatory and tax approvals. The Company
and Invesco Asia have each received an irrevocable
undertaking from City of London Investment
Management Limited representing 30 per cent. of the
Company’s issued share capital and 21 per cent. of
Invesco Asia’s issued share capital (in each case excluding
treasury shares) and letters of intent or indications of
support from shareholders representing a further 25 per
cent. of the Company’s issued share capital and 17 per
cent. of Invesco Asia’s issued share capital (in each case
excluding treasury shares), to support the Proposal.
A circular providing further details of the Proposal and
convening general meetings to approve the Proposal, and
a prospectus in respect of the issue of new Invesco Asia
shares in connection with the Proposal, are expected to
be posted to the Company’s shareholders in due course.
The Proposal is anticipated to become effective in early
2025. In the event of the Proposal becoming effective, a
number of the Company’s Directors will join the four
existing directors of Invesco Asia on the board of the
enlarged company.
Gearing
The Board continues to believe that the sensible use of
modest financial gearing should enhance returns to
shareholders over the longer term, being one of the
advantages of the closed end structure. Cognisant of the
ongoing strategic review, the Company extended the
maturity of its unsecured £50 million multi-currency
revolving credit facility (the “RCF”) with The Royal Bank of
Scotland International Limited, London Branch (the
“Lender”) which was due to expire on 29 July 2024, out to
29 March 2025. At the same time the principal amount
available under the RCF was increased to £75 million. The
£25 million increase was used to repay the Company’s
£25 million Fixed Rate Loan with the Lender which also
matured on 29 July 2024. As a consequence, the
Company now has a single unsecured £75m RCF with the
Lender, under which the Company retains flexibility to
repay and cancel the facility at any time during its
remaining life, subject to five business days’ notice. Under
the new facility, the Company has made short term
revolving drawings of GBP 25 million at a current all-in rate
of 6.15% and HKD 480 million at a current all-in rate of
5.28%. The Company’s total borrowings remained broadly
unchanged at £71.8 million in Sterling terms at year end,
giving a net gearing figure of 6.2%. The amounts drawn
down were unchanged at the time of writing and remain
comfortably within the covenant limits.
Discounts and Share Buybacks
The discount level of the Company’s shares is closely
monitored by the Board and share buybacks are
undertaken when appropriate. During the year ended 31
August 2024, 9.5 million shares were bought back into
treasury at a cost of £34.2 million (2023: 5.9 million shares
were bought back into treasury at a cost of £23.7 million).
Since 31 August 2024, a further 891,234 shares have been
bought back into treasury at a cost of £3.7 million. The
discount at the financial year end was 10.8% (2023:
16.2%). As at 21 November 2024 the discount was 10.6%.
Annual General Meeting and Dividend
In the light of the outcome of the strategic review, the
Board intends to convene the AGM in respect of the
financial year ended 31 August 2024 to align with the
dates for the general meetings of the Company required
to implement the combination with Invesco Asia.
Accordingly, the Notice of AGM, which will include an
explanation of the proposed AGM business, will be sent to
shareholders as a separate standalone document at the
same time as the shareholder circular relating to the
combination with Invesco Asia.
The Company’s revenue return per share was 6.7p for the
year to 31 August 2024 (2023 – 7.1p). As the posting date
for the circular and Notice of AGM will be after the
publication of the Annual Report, the Board has declared
an interim dividend for the year ended 31 August 2024 of
6.6p per Ordinary share (2023 – 6.6p), in lieu of a final
dividend, to allow for a similar dividend payment date as in
recent years. The interim dividend will be paid on
31 December 2024 to shareholders on the register on
6 December 2024.
Chairman’s Statement
Continued
Asia Dragon Trust plc 9
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Following implementation of the Proposal it is expected
that the enlarged Invesco Asia will maintain its current
policy of paying an annual dividend equal to 4 per cent. of
its Net Asset Value but it will increase the frequency of its
dividend payments from the current half-yearly basis (2
per cent. in each of November and April) to a quarterly
basis (four dividends of 1 per cent. every three months).
The first dividend payable by the enlarged Invesco Asia to
which the Company’s shareholders will be entitled is
expected to be the quarterly dividend payable in late
April/early May 2025.
Composition of the Board
As outlined in last year’s Annual Report, as part of the
combination with abrdn New Dawn, Donald Workman,
Stephen Souchon and Nicole Yuen joined the Board as
non-executive Directors of the Company on 9 November
2023 and were subsequently elected by shareholders at
the AGM in December 2023. Following completion of a six
month transition period, on 9 May 2024, Donald Workman,
Charlie Ricketts and Gaynor Coley retired from the Board.
On behalf of the Board I would like to reiterate our thanks
to Charlie, Gaynor and Donald for their dedication, service
and contributions to the Company.
Outlook
The US monetary policy easing cycle has begun, boosting
companies and economies across Asia. Lower interest
rates improve borrowing conditions, encouraging
spending and investment. However, central banks must
balance this with inflation and currency stability concerns.
The election of Trump and Republican dominance of
Capitol Hill clearly present challenges to Asia. The most
obvious issue is the increased threat of tariffs, and this time
not just on Chinese exports. The impact may be in part
offset by the clearly stimulatory nature of the Trump
package, although this may have implications for
monetary conditions given the influence of US monetary
conditions across the region.
However, as our investment managers point out, Asia is a
diverse region, and does not suffer from many of the
macro-economic imbalances seen elsewhere given
generally strong fiscal positions, high domestic savings,
scope to stimulate domestic growth and robust external
positions. There should be plenty of opportunities for
active stock pickers.
Consequently, the Board remains positive about the
outlook for Asian equities. The corporate outlook is strong
due to broad-based growth and strong fundamentals
among leading companies. More broadly, Asia is evolving,
with more growth opportunities beyond China. India is fast
growing as an economic power in its own right, while
Southeast Asia is benefiting from supply chain
diversification amid geopolitical uncertainty. The AI boom
in Asia's semiconductor industry highlights the region's role
in global innovation, presenting investment opportunities in
Korea and Taiwan. Other growth themes include the
green transition, with Asia leading in electric vehicles,
smart grids, and renewable energy. Rising affluence spurs
growth in financial services, while urbanisation and the
infrastructure boom benefit property developers and
mortgage providers.
James Will
Chairman
22 November 2024
10 Asia Dragon Trust plc
Performance
As the Chairman notes in his statement, we continued to
see macro factors play an outsized role in influencing
investor sentiment and equity markets across Asia and
globally over the review period. These included a slowing
China amid a slower than expected consumer recovery
post-Covid and property downturn, US monetary policy
trajectory and geopolitical uncertainty. At the same time,
we saw optimism over potential US rate cuts, signs of
resilience in corporate earnings and strength in the
technology sector. Over the 12 months to 31 August 2024,
the MSCI AC Asia ex Japan benchmark index rose 12.0% in
sterling total return terms, while the Company’s net asset
value (“NAV”) increased 9.3% on the same total return
basis after accounting for dividends.
Over the financial year, we witnessed mixed market
fortunes across the Asia Pacific ex Japan region (see
chart 1 below). Within the China market, we saw a
meaningful style rotation out of quality into value, and a
chase for thematic names with AI and state-owned
enterprise (SOE) reform in vogue. The Hong Kong market
bore the brunt of the spillover impact, which was also
exacerbated by heavy foreign capital outflows. In
contrast, Taiwan and India were the best performing
markets. Taiwan benefitted from a big uplift in optimism
around a semiconductor sector turnaround and positive
demand trends in AI applications. India’s strength was
supported by a resilient macro backdrop, including a
property boom, strong urban consumer sentiment, and
robust infrastructure capex.
Chart 1: Benchmark Index country and sector performance – 12 months to 31 August 2024
Taiwan, India lead country gainers; Utilities and IT lead the sectoral pack
Investment Mana
g
er’s Review
Asia Dragon Trust plc 11
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Against this backdrop, the portfolio posted mixed returns
with a weak start but stabilising performance towards the
end of the financial year. We highlight three key areas of
performance drivers: China and Hong Kong, technology
and finally India.
1. China and Hong Kong
Together, China and Hong Kong were the biggest
detractors, where our still significant exposure to the
Chinese consumer weighed on performance (see Chart 2
below). We do like many of the domestic consumption-
oriented companies in China. They have been largely
insulated from the geopolitical headwinds buffeting the
country for years now. They have also been broadly
aligned with domestic policy and the multi-year effort to
shift China’s economic growth model away from a
reliance on exports and investment to one that is domestic
consumption-driven. Most importantly, many of these
companies are evidently high-quality stocks with great
brands, superior margins and return metrics, healthy cash
flow and balance sheets. They still offer huge long-term
growth potential tied to the rise of the Chinese middle
class. However, over the past 18 months, this has not been
a rewarding part of the market to be invested in. The
Chinese consumer emerged from the pandemic with
massive pent-up savings, but this did not convert into
spending as China failed to follow the re-opening
playbook seen in most other countries around the world.
Instead, the gloom around the all-important property
sector, in which so much of China’s household wealth is
tied up, weighed heavily on consumer sentiment. This was
compounded by slowing economic growth and rising
job insecurity.
Chart 2: Attribution Performance Drivers
Weak stock selection in China, Hong Kong; strong stock showing in Taiwan
Policymakers attempted to stimulate consumption and
support the property sector, but these moves proved
insufficient and consumer stocks and their proxies
continued to get punished despite sometimes resilient
underlying fundamentals. For example, our holding in
Hong Kong-listed life insurer AIA Group was amongst the
largest performance detractors despite the fact that it
delivered solid earnings growth. Baijiu maker Kweichow
Moutai was another such example. Other consumer
holdings saw some deterioration in underlying growth
given the challenging macro backdrop, for example, quick
service restaurant operator Yum China and brewer
Budweiser APAC, but this was not commensurate with
their declines in share prices, which signalled to us that
these stocks had been oversold. As detailed in the Portfolio
Activity section below, we tightened up our exposure to
the Chinese consumer over the period in light of the
headwinds, but retained core holdings given their quality
and value. Encouragingly, towards the financial year end,
we saw stabilising performance from China and Hong
Kong, leading to improved overall performance of the
portfolio over the final quarter.
12 Asia Dragon Trust plc
Chart 3: Portfolio performance stabilised towards year-end
2. Technology
We had proactively built up the portfolio’s exposure to the
technology hardware sector in anticipation of a rebound
in the semiconductor cycle. Our overweight position to the
sector significantly contributed to performance, as the
sector rallied on a cyclical upturn in semiconductor pricing
and strong demand linked to AI. Contributors included
several of the Company’s Taiwanese holdings, namely
leading passive components maker Yageo Corp and
semiconductor chip manufacturer Taiwan Semiconductor
Manufacturing Co (TSMC). Both companies posted better
than expected results in the first quarter of 2024 and
TSMC raised its medium term guidance thanks to the
rapidly growing contribution from AI-related demand.
Elsewhere, our non-benchmark Netherlands-based
holdings in ASML and ASM International also benefited
from improved prospects in the advanced
semiconductor industry.
3. India
Our Indian holdings were a key driver of positive
performance, accounting for 4 out of the top 10 biggest
contributors. These were residential real estate developer
Godrej Properties, which has been capitalising on the
boom in the housing cycle in India; leading life insurer SBI
Life Insurance; online insurance aggregator PB Fintech, and
Power Grid Corporation of India which operates the
majority of the electricity transmission network across the
country. All four names have seen robust earnings growth
tied to structural growth stories and themes within India
that we believe have many years still to run. Rising
affluence in India, for instance, is leading to fast-growing
premium consumption patterns in areas like financial
services, automobiles, food, and personal care, while
urbanisation and the current boom in infrastructure
development is benefiting property developers,
materials producers such as in cement, and industrial
and utility plays.
Portfolio Activity
Throughout this turbulent macro-economic and political
period, we have continued to focus on quality companies
for both their resilience and long term structural growth
potential. Four key areas we wish to highlight are
as follows:
1. China: Scaling back the consumer exposure and focusing
on nearer-term cash flow generation and earnings visibility
China presented us with a dilemma. On the one hand, the
headwinds buffeting the Chinese consumer were strong,
making life hard-going for even the best-run companies
(see Chart 4 below). On the other hand, investor
sentiment towards the consumer sector and its proxies
was so poor that it was also clear that many of the stocks
had been oversold and were trading at very attractive
valuations. Whilst we were confident that our companies
would weather the storm given their superior quality, it
was also difficult to pinpoint any obvious catalyst on the
Investment Mana
g
er’s Review
Continued
Asia Dragon Trust plc 13
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
horizon that would trigger a re-rating in the stocks.
Balancing these two opposing forces, we chose to
reposition the portfolio in China, re-evaluating more
carefully our exposure to the Chinese consumer given the
obvious headwinds, whilst also retaining positions in high-
quality holdings with strong cash flow generation and solid
near-term earnings visibility that were trading at deeply
discounted valuations. In some cases, this involved
completely exiting certain names where visibility was less
clear, including China Tourism Group Duty Free, GDS,
Glodon and Wuxi Biologics. However, we also introduced a
new name, Asia’s leading online travel agency Trip.com,
which was benefiting from the recovery in both domestic
and international travel and has a long runway for
growth. Overall, our decisions resulted in a reduced
exposure to China.
Chart 4: China’s macro backdrop remains weak
But valuations are attractive from a bottom-up perspective
2. India: increased exposure with new initiations across
broad swathe of sectors
India stands in stark contrast to China, being perhaps the
most attractive macro-economic story in the region
currently, with accelerating economic growth and sound
macro-economic indicators (see Chart 5 below). The
dilemma for us in this market is that much of that positive
story has seemingly already been priced into the market,
with few quality stocks trading at attractive valuations. We
have been highly cognisant of the valuation challenge, but
selectively we were still able to find multiple new ideas
centred on companies benefitting from the economic
tailwinds and delivering robust earnings growth that
underpin and support the valuations.
One good example is Bharti Airtel, a leading telecom
service provider with a pan-India reach and sophisticated
customer base with higher than average mobile spending.
The domestic telecom market has rapidly consolidated
and Bharti is now capitalising on the improved economics
and rising tariffs in the sector. Another example is Indian
Hotels (IHCL), India’s largest hospitality company, which is
well placed to tap into the industry’s multi-year upcycle
with improving occupancy rates and rising average room
rates. We also introduced conglomerate Mahindra &
Mahindra, which has been delivering healthy growth in its
autos business, with market share gains in the passenger
vehicle business, especially within the sports utility vehicle
segment. Pidilite Industries was another addition. This is a
quality consumer and specialty chemicals business with
leading brands in the home improvement category that
will benefit from the robust recovery in the housing
cycle. Conversely, we exited Kotak Mahindra Bank and
Maruti Suzuki.
14 Asia Dragon Trust plc
Chart 5: India’s attractive landscape backed by structural growth
Solid top-down factors alongside strong bottom-up growth; supportive of valuations
3. Technology: Broadening exposure to the AI supply chain with a focus on Taiwan and Korea
We broadened our exposure to the AI supply chain and cyclical laggards, given the positive structural growth outlook for
Asia’s technology sector (see chart 6 below). We focused on Taiwan and South Korea, which are key players in the
global tech supply chain and benefiting from increased demand for semiconductors, AI and other advanced
technologies. We invested in Taiwan’s GlobalWafers, a silicon wafer manufacturer that ranks as one of the global leaders
in a consolidating industry. We introduced Yageo Corp, Taiwan’s leading supplier of passive components and the world’s
third largest provider. We also added South Korea’s SK Hynix, the second largest DRAM and NAND manufacturer globally
by revenues. We view it as well positioned and benefiting from growing demand for high bandwidth memory (HBM) for
AI processing, such as machine learning and neural network AI. This reflects our rising conviction in the structural growth
memory demand backed by AI.
Investment Mana
g
er’s Review
Continued
Asia Dragon Trust plc 15
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Chart 6: Asian tech sector set to be key driver over coming years
4. Vietnam: increased exposure to this attractive non-benchmark growth market
Finally, we increased our exposure to Vietnam, a non-benchmark market with tremendous long-term growth potential
given its young demographics, rising wealth levels and entrepreneurial spirit. More broadly, the liquidity of the stock
market has improved through the years, along with market capitalisation, and this has enhanced its eligibility for the
Company from a liquidity and risk perspective. The country is also emerging as an alternative supply chain option amid
geopolitical uncertainties, attracting foreign direct investment in high-tech sectors, especially automotive and
electronics (see chart 7 below). At the time of writing, we have invested in Joint Stock Commercial Bank For Foreign Trade
Of Vietnam (Vietcombank), which we rate as among the highest quality banks in the country, with scale, a strong deposit
franchise and a good long-term track record. The bank has been able to manage through multiple cycles and deliver
growth over time, too. As for fundamentals, it leads its peers in profitability and efficiency, with a higher return on equity,
lower cost-to-income ratio and lower cost of funding versus its domestic rivals. This is our second stock holding in
Vietnam after FPT Corp.
Chart 7: Vietnam continues to draw foreign capital
16 Asia Dragon Trust plc
Outlook
The US has elected Donald Trump as its next president,
and he has also secured control of both Houses of
Congress. Asset prices have moved along with a focus on
the reflationary aspects of Trump’s pre-election pledges
and promises. We expect tax cuts and deregulation, but
also higher tariffs. This could mean higher nominal GDP,
mainly via inflation, and potentially higher for longer
interest rates. We continue to monitor Trump
developments closely, and higher nominal GDP growth
and higher-than-otherwise interest rates are the macro
implications that we are most confident about for now.
As for the implications for Asia, it is a complex picture.
Trump is likely to drive uncertainty and volatility, but this
could also create opportunities for long-term investors.
Higher tariffs and barriers to trade are bad news, and this
seems likely under Trump. China could be affected, and
this might prompt the Chinese government to ramp up
domestic economic growth efforts with aggressive
stimulus measures. It is also possible that with a more
transactional US President, the US and China could arrive
at some mutually beneficiary agreement; we should
remember the first Trump presidency did see the Chinese
equity market outperform. We should not ignore the risks
though as unmitigated; the imposition of huge tariff hikes
would have a significant impact on China’s economy.
Similarly, export markets, too, with trade-oriented
countries potentially facing pressure from higher tariffs
and limited rate cuts in the US.
Geopolitical tensions remain difficult to navigate and
whilst the world’s focus is on Ukraine and the Middle East,
Asia could also see shifts if Trump follows a similar
playbook to his first term. So, we are likely to be in for a
period of change, uncertainty, and volatility across
multiple fronts.
Asia, however, is a diverse region and it is wrong to paint it
with the same broad brush. Largely domestic driven
economies like India will be insulated and may even
benefit from continued supply diversification away from
China. Intra-regional trade continues unhindered. Asia
also does not have the macro imbalances that the West is
saddled with, so economies should be resilient. And there
is still growth. All of which means quality companies should
remain structurally well positioned.
From a portfolio perspective, we believe we are well-
prepared for a Trump victory due to our quality-focused
stock picking approach. We have tightened quality
characteristics, adding names with greater near-term
earnings visibility and steady cash flow generation, while
reducing and exiting names with less visible earnings. We
have managed down our exposure to tariff-related risks.
For our China exposure, we have focused on each
holding’s ability to defend and grow market share, expand
overseas with limited tariff risks, and deliver shareholder
returns through dividends and buybacks. We have also
reduced our technology exposure. We maintain our
conviction in our holdings and their ability to navigate
market crosswinds, given their quality and fundamentals.
Finally, Asia remains home to some of the highest quality
and most dynamic companies in the world. The region
continues to offer rich pickings, underpinned by long-term
structural growth trends such as the rising middle classes,
rapid adoption of emerging technologies and continued
urbanisation, enabling bottom-up stock pickers like us to
deliver sustainable returns over the long term.
Pruksa Iamthongthong and James Thom
abrdn (Asia) Limited
22 November 2024
Investment Mana
g
er’s Review
Continued
Asia Dragon Trust plc 17
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Future of the Company
Shareholders’ attention is drawn to the Proposal for the
combination with Invesco Asia Trust plc detailed under the
‘Future of the Company’ section of the Chairman’s
Statement on page 6 and ‘Result of Review’ on page 7.
Business Model
The business model of the Company is to operate as an
investment trust for UK capital gains tax purposes in line
with its investment objective. The Directors are of the
opinion that the Company has conducted its affairs for the
year ended 31 August 2024 so as to enable it to comply
with the relevant eligibility conditions for investment trust
status as defined by Section 1158 of the Corporation Tax
Act 2010.
Combination with abrdn New Dawn
On 21 July 2023 the Company announced that it had
agreed terms with the board of abrdn New Dawn
Investment Trust plc (“New Dawn”) in respect of a
proposed combination of the assets of the Company with
those of New Dawn. This was effected by way of a
scheme of reconstruction and winding up of New Dawn
under section 110 of the Insolvency Act 1986 (the
“Scheme”) and the associated transfer of the majority of
the cash, assets and undertaking of New Dawn to the
Company in exchange for the issue of new Ordinary
shares in the Company to those New Dawn shareholders
who elected to roll over. The Company’s shareholders
approved the proposals at the General Meeting held on 25
October 2023 with over 99.9% of votes in favour of all
resolutions. Subsequently, on 8 November 2023 New
Dawn’s shareholders approved the proposals at its
general meeting. On that date, the Company acquired
approximately £214.7 million of net assets from New
Dawn in consideration for the issue of 52,895,670 new Asia
Dragon shares in accordance with the Scheme.
Investment Policy (
up to 25 October 2023
)
For the period up to the General Meeting held on 25
October 2023 the Company’s Investment Policy was
as follows:
Investment Objective
To achieve long-term capital growth through investment
in Asia, with the exception of Japan and Australasia.
Investments are made primarily in stock markets in
the region, principally in large companies. When
appropriate, the Company will utilise gearing to
maximise long term returns.
Investment Policy
The Company’s assets are invested in a diversified
portfolio of securities in quoted companies spread across
a range of industries and economies in the Asia Pacific
region, excluding Japan and Australasia. The shares that
make up the portfolio are selected from companies that
have proven management and whose shares are
considered to be attractively priced. The Company invests
in a diversified range of sectors and countries. Investments
are not limited as to market capitalisation, sector or
country weightings within the region.
The Company’s policy is to invest no more than 15% of
gross assets in other listed investment companies
(including listed investment trusts).
The Company complies with Chapter 4 of Part 24 of the
Corporation Tax Act 2010 and the Investment Trust
(Approved Company) (Tax) Regulations 2011 and does
not invest more than 15% of its assets in the shares of any
one company.
When appropriate the Company will utilise gearing to
maximise long-term returns, subject to a maximum
gearing level of 20% of net assets imposed by the Board.
The Company does not currently utilise derivatives but
keeps this under review.
Investment Policy (
from 25 October 2023
)
Following the receipt of approval from shareholders at the
General Meeting held on 25 October 2023 the Company’s
new Investment Policy was amended to include
Australasia and is now as follows:
Investment Objective
The Company aims to achieve long-term capital growth
principally through investment in companies in the Asia
Pacific region, excluding Japan (the “Investment Region”).
Investment Policy
Asset allocation
The Company’s assets are invested principally in a
diversified portfolio of public securities of companies that
are incorporated, domiciled or listed in the Investment
Region. The Company invests in a diversified range of
sectors and countries. Investments are not limited as to
market capitalisation, sector or country weightings within
the Investment Region.
Overview of Strate
g
y
18 Asia Dragon Trust plc
The Company may invest, directly or indirectly, up to 30
per cent. of its gross assets in public securities of
companies which are not incorporated, domiciled or listed
in the Investment Region but which generate more than
50 per cent. of their annual turnover or revenue from the
Investment Region, all as measured at the time of the
Company’s investment.
The Company will primarily invest in equities and equity-
related securities (including, but not limited to, preference
shares, depositary receipts, convertible unsecured loan
stock, rights, warrants and other similar securities).
For the avoidance of doubt, however, the Company may,
in pursuance of the investment objective:
· hold cash and cash equivalents, including money
market mutual funds (which is not subject to any
investment limit);
· hold equity-linked derivative instruments (including
options and futures on indices and individual securities)
which are primarily exposed to the Investment Region;
and
· invest in index funds, listed funds, open-ended funds,
mutual funds and exchange traded funds that invest
primarily in the Investment Region.
Risk diversification
The Company’s aggregate exposure to any single holding
or issuer (or issuer group), whether direct or indirect, will
not exceed 15 per cent. of its gross assets (calculated at
the time of investment).
In order to comply with the Listing Rules, the Company will
not invest more than 10 per cent. of its gross assets in
other listed closed-ended investment funds, except that
this restriction shall not apply to investments in listed
closed-ended investment funds which themselves have
stated investment policies to invest no more than 15 per
cent. of their gross assets in other listed closed-ended
investment funds. Additionally, in any event, the Company
will itself not invest more than 15 per cent. of its gross
assets in other listed closed-ended investment funds.
Gearing
The Company may deploy gearing to seek to enhance
long-term capital growth. The Company may be geared
through bank borrowings, the use of derivative
instruments that have the effect of gearing the
Company’s portfolio, and any such other methods as the
Board may determine. Gearing will not exceed 20 per
cent. of the Company’s net asset value at the time of
drawdown of the relevant borrowings or entering into the
relevant transaction, as appropriate.
Derivatives
With prior approval of the Board, the Company may use
derivatives for the purpose of efficient portfolio
management (for the purpose of reducing, transferring or
eliminating investment risk in its investment portfolio,
including protection against currency risk) and for
investment purposes.
Notwithstanding the above, the Company does not intend
to utilise derivatives or other financial instruments to
increase the Company’s gearing in excess of the limit set
out in ‘Gearing’ above, and any restrictions set out in this
investment policy shall apply equally to exposure
through derivatives.
Company Benchmark
The total return of the MSCI All Country Asia (ex Japan)
Index (sterling adjusted).
Alternative Investment Fund Manager
(“AIFM”)
The AIFM is abrdn Fund Managers Limited, (aFML or the
“Manager”) which is authorised and regulated by the
Financial Conduct Authority. The Company's portfolio is
managed on a day-to-day basis by abrdn (Asia) Limited
(“abrdn Asia” or the “Investment Manager”) by way of a
delegation agreement. abrdn Asia and aFML are both
wholly owned subsidiaries of abrdn plc.
Overview of Strate
g
y
Continued
Asia Dragon Trust plc 19
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Achieving the Investment Policy
and Objective
The Directors are responsible for determining the
investment policy and the investment objective of the
Company. Day-to-day management of the Company’s
assets has been delegated to the Investment Manager.
The Investment Manager follows a bottom-up investment
process based on a disciplined evaluation of companies
through direct contact by its fund managers and analysts.
Stock selection is the major source of added value. No
stock is bought without the Investment Manager having
first met management, either in person, where possible, or
virtually. The Investment Manager evaluates a company’s
worth in two stages: quality then price. Quality is defined
by reference to management, business focus, the balance
sheet and corporate governance. Price is evaluated by
reference to key financial ratios, the market, the peer
group and business prospects. Stock selection is key in
constructing a diversified portfolio of companies.
A comprehensive analysis of the Company’s portfolio by
country and by sector is disclosed on pages 39 to 41,
including a description of the ten largest investments, the
full investment portfolio by value, and sector/geographical
analysis. At 31 August 2024, the Company’s portfolio
consisted of 56 holdings.
Gearing is used to leverage the Company’s portfolio in
order to enhance returns when this is considered
appropriate to do so. At 31 August 2024, the Company’s
net gearing was 6.2%.
Principal and Emerging Risks and
Uncertainties
The Board carries out a regular review of the risk
environment in which the Company operates, changes to
that environment and to individual risks. The Board also
identifies emerging risks which might impact the
Company. There are a number of other risks which, if
realised, could have a material adverse effect on the
Company and its financial condition, performance and
prospects. The most significant direct issue that the
Company has faced over the year has been the impact of
long-term poor relative portfolio performance. This led the
Board to implement a strategic review of the Company
using external advisers and this is addressed in the
Chairman’s Statement on page 6. Beyond this, the
increasing discounts to net asset value that have affected
the entire investment company sector, resulting from
selling pressure and lack of investor demand due to well
documented cost disclosure issues and budget concerns,
have heightened concerns.
The Board considers the Company’s principal and
emerging risks, which include those that would threaten its
business model, future performance, solvency, liquidity or
reputation. The Company’s risks have been regularly
assessed by the Audit & Risk Committee and managed by
the Board through the adoption of a risk matrix which
identifies the key risks for the Company, including
emerging risks, and covers strategy, investment
management, operations, shareholders, regulatory and
financial obligations and third-party service providers. A
deep dive review of the Risk Register has been performed
during the year.
Outwith the outcome of the strategic review, the principal
risks and uncertainties facing the Company, which have
been identified by the Board, are described in the table
below, together with mitigating actions.
The Board notes that there are a number of contingent
risks stemming from the global geo-political environment
that may impact the operation of the Company. Inflation
and the resultant volatility that it created in global stock
markets continued to be a key risk during the financial
year, as well as the ongoing tensions between China and
Taiwan, China and the West, and the conflagrations in the
Middle East and Ukraine, all of which have created geo-
political uncertainty which further increased market risk
and volatility.
The Board is also conscious of the risks resulting from
increasing ESG challenges. The scrutiny of human rights
violations in China by Western governments is one
example of the need for continued vigilance and
engagement regarding supply chains and the fair
treatment of workers. Likewise, as climate change
pressures increase, the Board continues to monitor,
through its Manager, the potential risk that investee
companies may fail to maintain acceptable standards.
20 Asia Dragon Trust plc
Risk Mitigating Action
Investment Risk
· The Company’s investment performance is the
most critical factor to the Company’s long-term
success.
· The Company is exposed to the risk of Sustained
Underperformance as a result of implementing
an unattractive investment strategy.
· The Company is exposed to the risk of Portfolio
Stock Concentration as a result of the combined
market share of the Manager’s investments.
· The Company is exposed to ESG Risk in the
event that its investee companies act
unethically, undertake environmentally
detrimental practices or fail to integrate ESG
factors adequately.
Risk Unchanged during the year
The Board continually monitors the investment performance of the Company,
taking account of stock-market factors, and reviews the Company’s
performance compared to its benchmark index and peer group at every
Board Meeting. A formal annual review is undertaken by the Management
Engagement Committee. The Board has regard to the skills, depth of
resources and wider capability of the abrdn group in arriving at its conclusions.
In May 2024 the Board initiated a full strategic review of the Company. The
results of the review were announced on 28 October 2024 and further details
can be found in the Chairman’s Statement on page 6.
The Chairman and Senior Independent Director have communicated with
major shareholders, particularly with respect to the strategic review, to gauge
their views on the Company, including performance.
At each Board meeting the Board reviews the concentration and liquidity risk
of the portfolio including the number of days required to liquidate the portfolio.
The Manager undertakes extensive due diligence on each investment
prior to purchase including a review of the ESG credentials. Post purchase
the Manager continues to monitor and actively engage with investee
company managements.
Operational Risk
· The Company is dependent on a number of
third-party providers, in particular those of the
Manager, Depositary and Registrar. Failure by
any service provider to carry out its contractual
obligations could have a detrimental impact or
disruption on the Company’s operations,
including that caused by information
technology breakdown or other cyber-related
issues.
Risk Unchanged during the year
The Board reviews the performance of the Manager on a regular basis and its
compliance with the management contract formally on an annual basis. As
part of that review, the Board assesses the Manager’s succession plans, risk
management framework and marketing activities.
The Audit & Risk Committee reviews reports from the Manager on its internal
controls and risk management (including an annual ISAE Report) and
considers assurances from all its other significant service providers on at least
an annual basis, including on matters relating to business continuity and cyber
security. The Audit & Risk Committee meets representatives from the
Manager’s Compliance and Internal Audit teams on at least an annual basis
and discusses any findings and recommendations relevant to the Company.
Written agreements are in place with all third-party service providers.
The Manager monitors closely the control environments and quality of
services provided by third parties, including those of the Depositary, through
service level agreements, regular meetings and key performance indicators.
A formal appraisal of the Company’s main third-party service providers is
carried out by the Management Engagement Committee on an annual basis.
Governance and Regulatory Risk
· The Company operates in a complex regulatory
environment and faces a number of regulatory
risks. Serious breaches of regulations, such as
the tax rules for investment companies, the
FCA’s Listing Rules and the Companies Act.
Risk Unchanged during the year
The Board receives updates on relevant changes in regulation from the
Manager, industry bodies and external advisers and the Board and Audit &
Risk Committee monitor compliance with regulations by review of internal
control reports from the Manager. Directors are encouraged to attend
relevant external training courses.
Overview of Strate
g
y
Continued
Asia Dragon Trust plc 21
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Risk Mitigating Action
Major Events and Geopolitical Risk
· The Company is exposed to supply chain risk,
stock-market volatility or illiquidity as a result of
a major market shock due to a national or global
crisis. The impact of such risks, associated with
the portfolio or the Company itself, could result
in disruption of the operations of the Company
and losses.
· The Company is exposed to the impact of Live
Conflict, sanctions and instability in the region as
well as the indirect impact of global conflicts.
· The Company is exposed to Pandemic Risk
which could result in disruption to supply chains.
· The Company is exposed to the risk of a major
environmental event as a result of the
consequences of climate change.
Risk Unchanged during the year
Exogenous risks over which the Company has no control are always a risk.
The Company does what it can to address these risks where possible, not
least operationally and to try and meet the Company’s investment objectives.
As part of its investment processes, the Manager regularly assesses the
Company’s portfolio as a whole, and each constituent part, and, during the
financial year, remained in close communication with the underlying investee
companies in order to navigate and guide the Company through
macroeconomic and geopolitical challenges.
The Manager’s focus on quality companies with sustainable business models
and robust finances, the diversified nature of the portfolio and a managed
level of gearing all serve to provide a degree of protection in times of
market volatility.
The Board discusses issues affecting the region at each Board meeting and
the Manager has an effective business continuity plan in place to ensure that
material processes will continue to operate. The Audit & Risk Committee
reviews controls reports from third party service providers.
The Manager undertakes due diligence on investee companies prior to and
post purchase and provides updates at each Board meeting.
Shareholder and Stakeholder Risk
· The Company is exposed to the risk of
Shareholder Dissatisfaction, Activism and
Influence stemming from a failure to adapt to
changes in the market and investor demand.
· Liquidity Risk to shareholders due to share price
trading at a discount to its underlying NAV and
reduced investor sentiment.
Risk Unchanged during the year
The Board regularly monitors the marketplace for changes in sentiment.
The Board regularly reviews the performance of the Company against the
benchmark and peer group.
The Board monitors the discount level of the Company’s shares against
the peer group and has in place an active buyback mechanism whereby
the Broker and/or the Manager is authorised to buy back shares within
certain limits.
The Board and Manager engage regularly with shareholders to understand
their views on key topics including discount volatility and shareholder views
are discussed at each Board meeting.
The Manager conducts extensive PR and promotional activities during
the year.
Shareholders are given the opportunity to vote on continuation at every fifth
AGM and there is a conditional performance-linked tender offer mechanism
in place.
In May 2024 the Board announced its intention to undertake a strategic review
of the future of the Company, including its ongoing investment management
arrangements. The strategic review culminated in the announcement on 28
October 2024 of the Proposal to combine with Invesco Asia Trust plc (refer to
page 7 of the Chairman’s Statement).
The principal risks associated with an investment in the Company’s shares can be found in the pre-investment
disclosure document (“PIDD”) published by the Manager, which is available from the Company’s website:
www.asiadragontrust.co.uk.
22 Asia Dragon Trust plc
Performance
Key Performance Indicators
At each Board meeting, the Directors consider a number of performance measures to assess the Company’s success in
achieving its objectives. The key performance indicators (“KPIs”) are established industry measures and are detailed
below with further analysis provided in the Chairman’s Statement.
KPI Description
Net asset value and share price (total return) The Board monitors the NAV and share price performance of the
Company over different time periods. Performance figures for one,
three and five years are provided in the Results section on page 29.
Performance against benchmark Performance is measured against the Company’s benchmark, the
MSCI All Country Asia (ex Japan) Index (in sterling terms), on a total
return basis. Charts showing the Company’s performance against the
benchmark by quarter during the financial year, and over one, three
and five years, and are shown on page 30.
The Board also considers peer group comparative performance over
a range of time periods, taking into consideration the differing
investment policies and objectives employed by those companies.
Discount/Premium to net asset value The discount/premium relative to the NAV represented by the share
price is closely monitored by the Board. The objective is to avoid large
fluctuations in the discount relative to similar investment companies
investing in the region by the use of share buy backs subject to market
conditions. A graph showing the share price discount relative to the
NAV is shown on page 31.
Promoting the Success of the Company
The Board is required to report on how it has discharged
its duties and responsibilities under section 172 of the
Companies Act 2006 (the “s172 Statement”). Under
section 172, the Directors have a duty to promote the
success of the Company for the benefit of its members as
a whole, taking into account the likely long-term
consequences of decisions, the need to foster
relationships with the Company’s stakeholders and the
impact of the Company’s operations on the environment.
The Company consisted of five Directors at 31 August
2024 and has no employees or customers in the traditional
sense. As the Company has no employees, the culture of
the Company is embodied in the Board of Directors. The
Board seeks to promote a culture of strong governance,
high standards of business conduct and to challenge, in a
constructive and respectful way, the Company’s third-
party service providers and advisers, whilst considering
the impact on the Company and other stakeholders.
The Board’s principal concern has been, and continues to
be, the interests of the Company’s shareholders and
potential investors and the need to act fairly between
shareholders. The Manager undertakes an annual
programme of meetings with the largest shareholders
and investors and reports back to the Board on issues
raised at these meetings. The Investment Manager, who is
based in Singapore, will attend such meetings, where
possible. The Board encourages all shareholders to attend
and participate in the Company’s AGM and shareholders
can contact the Directors via the Company Secretary.
Shareholders and investors can obtain up-to-date
information on the Company through its website and the
Manager’s information services and have direct access to
the Company through the Company Secretary.
As an investment trust, a number of the Company’s
functions are outsourced to third parties. The key
outsourced function is the provision of investment
management services to the Manager and other third-
party providers support the Company by providing
administration, depositary, custodial, banking and
audit services.
Overview of Strate
g
y
Continued
Asia Dragon Trust plc 23
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
The Board undertakes a robust evaluation of the Manager,
including investment performance and responsible
ownership, to ensure that the Company’s objective of
providing capital growth for its investors is met. The Board
typically visits the investment region on an annual basis
and meets with the Manager’s on the ground investment
teams. This enables the Board to conduct due diligence of
the fund management and research teams. During the
year the Board has met with the senior management
team and the fund management team and attended
investee company meetings alongside the Manager.
The portfolio activities undertaken by the Manager on
behalf of the Company can be found in the Investment
Manager’s Review and details of the Board’s relationship
with the Manager and other third-party providers,
including oversight, is provided in the Statement of
Corporate Governance.
During the year, the Board continued to focus on the
performance of the Manager in achieving the
Company’s investment objective within an appropriate
risk framework.
A significant amount of time was also expended in the
process of combining with abrdn New Dawn and
overseeing the effective assimilation of the new assets.
In addition to the Combination activities a number of key
decisions have been taken by the Board during the year,
including:
· The Board appointed Stanhope Consulting to assist in a
full strategic review of the future of the Company,
including the ongoing investment management
arrangements.
· The Board has declared an interim dividend of 6.6p per
Ordinary share (2023 – 6.6p) which will be paid on 31
December 2024.
· The Board has successfully completed its succession
planning activities.
· The Board has continued the Company’s discount
control policy through the buyback of shares which
provides a degree of liquidity to the market at times
when the discount widens.
· The Board continues to believe that the sensible use of
modest financial gearing should enhance returns to
shareholders over the longer term. As indicated in the
Chairman’s Statement the Company has consolidated
its loan facilities into a new extended revolving credit
facility offering the Company short term flexibility.
In summary, the Directors are cognisant of their duties
under section 172 and decisions made by the Board take
into account the interests of all the Company’s key
stakeholders and reflect the Board’s belief that the
long-term success of the Company is linked directly to
its key stakeholders.
Duration
Shareholders’ attention is drawn to the Proposal for the
combination with Invesco Asia Trust plc which will be
voted upon in early 2025 and which, if successful, will
trigger the liquidation of the Company. Outwith the
outcome of the Proposal, the Company does not have a
fixed life, but shareholders are given the opportunity to
vote on the continuation of the Company at every fifth
Annual General Meeting. The last continuation vote was
passed at the AGM on 15 December 2021. The frequency
of continuation votes was extended from triennial
continuation votes to five-yearly continuation votes at the
AGM in 2021 in order to align them with the assessment
period for performance-related conditional tender offers
approved by shareholders at the AGM in 2021. The next
performance related conditional tender offer will cover
the period from 1 September 2021 to 31 August 2026 and
the continuation vote would be due to take place at the
AGM in December 2026.
Board Diversity
The Board’s statement on diversity is set out in the
Statement of Corporate Governance. At 31 August 2024
there were three male Directors and two female Directors.
The Company meets the target that at least one Director
is from a minority ethnic background as set out in LR 6.6.6R
(9)(a)(iii).
Environmental, Social and Human
Rights Issues
The Company has no employees and therefore no
disclosures are required to be made in respect of
employees. More information on socially responsible
investment is set out on pages 25 to 28.
24 Asia Dragon Trust plc
Viability Statement
As set out in more detail in the Chairman’s Statement on
page 6, it is proposed that the Company combines with
Invesco Asia Trust plc (“Invesco Asia”). The combination, if
approved by each company's shareholders, will be
effected by way of a scheme of reconstruction and
winding up of the Company under section 110 of the
Insolvency Act 1986 and the associated transfer of part of
the assets and undertaking of the Company to Invesco
Asia in exchange for the issue of new ordinary shares in
Invesco Asia (the “Proposal”). A circular providing further
details of the Proposal and convening general meetings to
approve the Proposal, and a prospectus in respect of the
issue of new Invesco Asia shares in connection with the
Proposal, are expected to be published in due course. The
Proposal is anticipated to become effective by early 2025.
The outcome of the general meetings to make the
Proposal effective represents a material uncertainty in the
context of the preparation of these financial statements
on a going concern basis.
Notwithstanding this material uncertainty, for the
purposes of this viability statement, the Board has decided
that five years is an appropriate period over which to
report. The Board considers that this period reflects a
balance between looking out over a long term horizon
and the inherent uncertainties of looking out further than
five years.
In assessing the viability of the Company over the review
period, the Directors have also focused upon the
following factors:
· The principal risks and uncertainties detailed on pages
19 to 21 and the steps taken to mitigate these risks.
· ·The role of the Audit and Risk Committee in reviewing
and monitoring the Company’s internal control and risk
management systems (see the Audit and Risk
Committee’s Report on pages 58 to 60).
· The ongoing relevance of the Company’s investment
objective.
· The liquidity of the Company’s portfolio. All of the
Company’s investments are in quoted securities in
active markets or in collective investment schemes and
are considered to be liquid.
· The closed-ended nature of the Company which
means that it is not subject to redemptions.
· The use of the Company’s share buy back and share
issuance policies to help address any imbalance of
supply and demand for the Company’s shares.
· The current and maximum levels of gearing,
compliance with loan covenants and level of headroom
within the financial covenants (see note 13 to the
financial statements for details of loan covenants).
· The ability of the Company to refinance its loan facilities,
on or before maturity.
· The requirement of the Board to propose a resolution to
approve the continuation of the Company at future
Annual General Meetings (earliest required 2026).
· Regulatory or market changes.
· The level of the Company’s ongoing charges.
· The robustness of the operations of the Company’s third
party service providers.
In making its assessment, the Board has considered that
there are other matters that could have an impact on the
Company’s prospects or viability in the future, including
the current conflicts in the Middle East and Ukraine,
economic shocks, significant stock market volatility, and
changes in regulation or investor sentiment.
The Strategic Report has been approved by the Board and
signed on its behalf by:
James Will,
Chairman
22 November2024
Overview of Strate
g
y
Continued
Asia Dragon Trust plc 25
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
This section of the Annual Report aims to present more information on the Investment Manager’s ESG considerations.
ESG Highlights
· abrdn believes that ESG considerations can meaningfully affect a company’s performance.
· abrdn has been actively integrating ESG considerations into its investment decision-making process for 30 years.
· Deep, on the ground ESG resources and expertise enables abrdn to glean insights from company visits and obtain an
ESG information advantage.
· The Company’s portfolio is ESG A rated by MSCI, as is the Benchmark.
A 27% 109 18.1% 100%
A-rated by MSCI
ESG (versus
benchmark A)
Lower carbon
intensity than the
benchmark
Engagements with
portfolio companies
during the year
Average ROE of
portfolio companies
(versus benchmark
average 12.5%)
of abrdn
researched
companies include
ESG analysis
What is ESG?
· Environmental factors relate to how a company
conducts itself with regard to environmental impact and
sustainability.
· Social factors pertain to a company’s relationship with its
employees, vendors, and a broad set of societal
stakeholders.
· Corporate Governance factors may include the
corporate decision-making structure, the
independence of board members, treatment of
minority shareholders, executive compensation and
political contributions, capital allocation and the risk of
bribery and corruption.
abrdn is a signatory to the UN supported Principles for
Responsible Investment (PRI) and has aligned its approach
to that advocated by the PRI agenda. This aims to
promote responsible investment and better management
of risk.
abrdn’s Investment Process
abrdn is a pioneer in Asia Pacific markets and has a large, dedicated and highly experienced investment team consisting
of approximately 40 equity investment professionals with a strong team culture. Three regional ESG specialists,
supported by the Investment Manager’s central ESG team, work with the Asia Pacific equity team to provide insight on
ESG themes and sectors in local markets.
abrdn’s Approach to ESG
26 Asia Dragon Trust plc
Environmental, social and corporate governance factors
(ESG) are part of our approach to active equity investing
at abrdn. abrdn believes that ESG factors are financially
material and can impact a company’s performance,
either positively or negatively. abrdn also uses its ESG
approach to encourage higher standards and support
companies that work towards a more sustainable and
equitable world.
abrdn’s investment process considers both macro and
micro ESG issues.
Macro ESG factors being broad thematic issues that
impact companies and the products and services they
provide, whilst micro factors are company/industry
specific issues that relate to how a company’s products or
services are made or delivered.
The Importance of Engagement
Engagement is an important part of the investment
process: abrdn sees engagement not only as a right but as
an obligation of investors. In its role as a responsible owner,
abrdn engages actively and regularly with companies in
which it is or may become an investor. abrdn believes that
informed and constructive engagement helps to foster
better companies, that can help enhance the value of
investments. There are generally two core reasons for
engagement: to understand more about a company’s
strategy and performance or encourage best practice
and drive change.
Active engagement involves regular, candid
communication with management teams (or boards of
directors) of portfolio companies to discuss a broad range
of ESG issues that may impact returns, either positively or
negatively. abrdn’s focus is on the factors which it believes
to have the greatest potential to enhance or undermine
an investment case. Sometimes abrdn seeks more
information, exchanges views on specific issues,
encourages better disclosure; and at other times,
encourages change (including either corporate strategy,
capital allocation, or climate change strategy). abrdn’s
engagements cover a range of ESG issues, including but
not limited to board composition, remuneration, audit,
climate change, labour issues, human rights, bribery
and corruption.
Moreover, and since ESG disclosure by Asian companies is
often poor, these engagements give abrdn an opportunity
to source additional information and potentially to:
· Exploit an information gap: if a company does not
disclose ESG information and the market is unable to
form a robust view of its quality, its shares may be priced
inefficiently. Using abrdn’s research capabilities
including on-site, face to face visits, an informed view
may be developed of every company helping to exploit
any pricing inefficiency that is judged to exist; and
· Close the information gap: if abrdn owns a company that
is misunderstood by the market, abrdn can work
constructively with the company’s management team
to encourage improved and enhanced disclosure,
allowing the market to better understand, and hence
better price, the company’s securities.
ESG engagements are conducted with consideration of
the 10 principles of the United Nations Global Compact
and companies are expected to meet fundamental
responsibilities in the areas of human rights, labour, the
environment and anti-corruption.
Engagement is not limited to a company’s management
team. It can include many other stakeholders such as
non-government agencies, industry and regulatory
bodies, as well as activists and the company’s customers
and clients.
The Investment Manager regularly engages with
companies in which the Company invests. The below
shows the engagements that have included responsible
investment themes, for the year to 30 June 2024. This does
not include positions the Investment Manager has sold out
of or is considering investing in. Below are the themes
engaged during the year:
ESG Category % *
Climate 8
Environment 14
Labour Management, Diversity & Inclusion 20
Human Rights & Stakeholders 8
Corporate Behaviour 25
Corporate Governance 34
* a single meeting can have multiple topics
Continued
abrdn’s Approach to ESG
Continued
Asia Dragon Trust plc 27
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Measurement of ESG, including abrdn’s Proprietary ESG Scoring System
Some ESG issues can be quantified, for example the diversity of a board, the carbon footprint of a company, and the
level of employee turnover. But not everything that matters can be measured. While diversity can be monitored,
measuring inclusion is more of a challenge. Although it is possible to measure the level of staff turnover, it is more
challenging to quantify corporate culture. Nevertheless, after researching and analysing a company, and after meeting
senior management, abrdn allocates a company an ESG score of between one and five. This score of one to five is
applied across every stock covered globally. Examples of each category and a small sample of the criteria used are
detailed below:
1. Best in class 2. Leader 3. Average 4. Below average 5. Laggard
ESG considerations are
material part of the
company’s core
business strategy
Excellent disclosure
Makes opportunities
from strong ESG risk
management
ESG considerations
not market leading
Disclosure is good, but
not best in class
Governance is
generally very good
ESG risks are considered
as a part of principal
business
Disclosure in line with
regulatory requirements
Governance is generally
good but some minor
concerns
Evidence of some
financially material
controversies
Poor governance or limited
oversight of key ESG issues
Some issues in treating
minority shareholders
poorly
Many financially
material
controversies
Severe governance
concerns
Poor treatment of
minority
shareholders
abrdn also makes use of third party
ESG data for two primary reasons:
· To help build a view of a company: third party ESG data
provides insights into a company based on that
company’s disclosure. Whilst that disclosure may have
limits there is still merit in reading research from a
speciality researcher. abrdn buys in research as a
“sense check” against internal analysis to ensure that
issues or developments are not missed or weighted
incorrectly.
· To provide a proxy for market perspective: abrdn uses
third party data and scoring as a proxy for market
perception and makes use of these scores to compare
with internal assessments. If the market views a
company as low quality and abrdn sees the company
as not only higher quality but also on a positive
trajectory, it may be appropriate to exploit this
information asymmetry. The market may react and
change perceptions over time as performance and
disclosure on ESG issues improves, but abrdn is
interested in the journey as much as arrival.
Taking an independent view on ESG allows abrdn to
anticipate upgrades and drive change through
engagement. External research agencies primarily use
backward looking data but through fundamental
research abrdn forms a forward-looking view of a
company’s ESG credentials and anticipates changes,
attempting to take advantage of this inefficiency.
Climate Change
Climate change is one of the most significant challenges
of the 21st century and has big implications for investors.
The energy transition is underway in many parts of the
world, and policy changes, falling costs of renewable
energy, and a change in public perception are happening
at a rapid pace. Assessing the risks and opportunities of
climate change is part of abrdn’s investment process.
abrdn believes that climate scenario analysis provides a
forward looking, quantitative assessment of the financial
impact of climate risks and opportunities on the value of
assets under different climate pathways. As a result, abrdn
works in partnership with Planetrics to quantify the impact
of climate scenarios where a probability weighted view
based on a range of off the shelf and bespoke scenarios is
taken. This allows abrdn to model a quantitative financial
impact under 15 different climate risk scenarios at both
the stock level and at the Company level.
abrdn is focused on real-world decarbonisation by
investing in transition leaders and climate solutions rather
than the fast removal of carbon intensive companies from
the portfolios it manages. abrdn engages with the highest
carbon-emitting companies across these portfolios
through a focused priority watchlist, with a focus on clear
expectations and outcomes combined with
time-bound milestones.
28 Asia Dragon Trust plc
Important Note
The Company does not specifically exclude any sectors
from its investment universe. All investments have to pass
a quality test and ESG issues are only part of the
investment analysis. abrdn may, for example, invest in, and
vigorously engage with, a well-managed, capitalised and
attractively valued fossil fuel company that is able to
deploy a sizeable balance sheet and lower cost of capital
to that of a renewables-only alternative.
It is also important to recognise that there may be periods
in the future where it is impossible for abrdn to make
sequential annual improvements in some ESG factors like
carbon intensity. abrdn intends to maintain a lower carbon
footprint relative to the benchmark but there may be
times when investments are made in companies that
currently have a higher footprint but have a commitment
to improve this over time. abrdn will monitor and assess
their commitment on a regular basis.
abrdn (Asia) Limited
22 November 2024
abrdn’s Approach to ESG
Continued
Asia Dragon Trust plc 29
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Year’s Highs/Lows
High Low
Share price (p) 414.0 342.0
Net asset value (p) 462.7 397.8
Discount (%)
A
–18.8 –8.7
A
Considered to be an Alternative Performance Measure.
Performance (total return)
1 year return 3 year return
B
5 year return
% % %
Share price
A
+16.7 –17.1 +7.7
Net asset value
A
+9.3 –16.6 +5.2
MSCI AC Asia (ex Japan) Index (in sterling terms) +12.0 –4.7 +21.3
A
Considered to be an Alternative Performance Measure. Further details can be found on pages 104 and 105.
B
Also represents the period since the introduction of performance-related conditional tender offer, which provided that, in the event that the NAV total return per share fails to
equal or exceed the MSCI All Country Asia ex Japan Index (sterling adjusted) over a five year assessment period commencing 1 September 2021, the Board would put forward
proposals to shareholders to undertake a tender offer.
Ten Year Financial Record
Net asset Revenue Dividend Expenses
Equity value per return per Ordinary Share per as a
shareholders’ Ordinary Ordinary share price Ordinary % of average
interest share share price discount share shareholders’
Year ended 31 August £’000 p p p % p funds
A
2015 518,635 267.22 4.13 235.75 11.8 3.00 1.15
2016 664,159 348.62 4.50 302.00 13.4 3.20 1.14
2017 807,330 423.26 4.68 361.00 14.7 3.30 1.03
2018 788,019 421.54 5.03 370.00 12.2 4.00 0.80
2019 589,708 458.03 4.87 402.50 12.1 4.75 0.83
2020 599,431 474.39 5.01 416.00 12.3 4.75 0.89
2021 706,929 566.60 7.36 512.00 9.6 6.50 0.83
2022 614,369 513.32 6.38 446.00 13.1 6.50 0.84
2023 479,169 421.26 7.06 353.00 16.2 6.60 0.91
2024 711,626 452.93 6.73 404.00 10.8 6.60 0.75
A
2024 includes the impact of the management fee waiver implemented following the transaction with abrdn New Dawn Investment Trust plc.
Results
30 Asia Dragon Trust plc
Total Return of NAV and Share Price vs MSCI All Country Asia (ex Japan)
Index (in sterling terms)
One, three and five years to 31 August 2024
16.7%
-17.1%
7.7%
9.3%
-16.6%
5.2%
12.0%
-4.7%
21.3%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
1 year 3 years 5 years
Share Price
NAV
Index
Total Return of NAV and Share Price vs MSCI All Country Asia (ex Japan) Index
(in sterling terms)
By quarter for year to 31 August 2024
2.3%
-0.3%
11.9%
2.3%
16.7%
-1.7%
3.2%
3.8%
3.8%
9.3%
0.2%
3.5%
4.8%
3.0%
12.0%
-5%
0%
5%
10%
15%
20%
Quarter to
30/11/2023
Quarter to
29/02/2024
Quarter to
31/05/2024
Quarter to
31/08/2024
Year to 31/08/2024
Share Price
NAV
Index
Performance
Asia Dragon Trust plc 31
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Share Price Discount to NAV
Five years to 31 August 2024
-20%
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
31/08/19 31/08/20 31/08/21 31/08/22 31/08/23 31/08/24
Source: Morningstar
Discount to NAV
32 Asia Dragon Trust plc
Portfolio
The Investment Manager is one of
the leading investment specialists
in Asia with a strong active regional
presence. A bottom-up, fundamentals
driven approach is adopted, which
seeks out high quality companies with
effective management, good cash
flow and healthy balance sheets at
attractive valuations. The quality-
focused approach enables the
Company to capture growth from
world-class companies in the
Asia Pacific region
Asia Dragon Trust plc 33
34 Asia Dragon Trust plc
As at 31 August 2024
Taiwan Semiconductor
Manufacturing Company
Tencent Holdings
As the world’s largest pure-play
semiconductor manufacturer, TSMC
provides a full range of integrated
foundry services, along with a robust
balance sheet and good cash
generation that enables it to keep
investing in cutting-edge technology
and innovation.
The internet giant continues to
strengthen its ecosystem and we see
great potential in its ability to balance
its multiple revenue streams and
monetise its social media and payment
platforms whilst navigating the
regulatory landscape.
Samsung Electronics (Pref)
AIA Group
One of the global leaders in the memory
chips segment, and a major player in
smartphones and display panels. It has a
vertically integrated business model and
robust balance sheet, alongside good
free cash flow generation.
A leading pan-Asian life insurance
company, it is poised to take advantage
of Asia’s growing affluence, backed by
an effective agency force and a strong
balance sheet.
SBI Life Insurance
ASML
Among the leading Indian life insurers,
SBI Life’s competitive edge comes from
a wide reach of SBI branches, highly
productive agents, a low cost ratio and a
reputable SBI brand.
The Dutch company supplies
lithography equipment that enables
semiconductor chip makers to mass
produce patterns on silicon, helping to
make computer chips smaller, faster
and greener. It earns most of its
revenue from Asia.
ICICI Bank
Bank Central Asia
India’s ICICI Bank has been delivering
superior growth and returns
improvement without compromising on
asset quality. It has leveraged on its scale
as well as retail and digital franchise to
grow in mortgages and also grown off a
low base in business banking and SMEs.
Among the largest non state owned
banks in Indonesia, it is well capitalised
and has a big and stable base of low-
cost deposits that funds its lending,
while asset quality has remained solid.
DBS
ASM International
The largest bank in Singapore, it is also
the best managed with a clear strategy.
It is backed by good digital
infrastructure, and operates with
obvious focus on efficiency of returns, as
shown in the distinctively better return on
equity than local peers.
ASM International is the global leader in
single-wafer atomic layer deposition
(ALD) technology. ALD is a high-
precision process by which smooth and
ultra-thin films are deposited onto a
wafer. As semiconductor chips get
increasingly smaller, demand for ALD is
rising across the logic, foundry and
memory segments and, in turn,
expanding the addressable market
for ASMI.
Ten Lar
g
est Investments
Asia Dragon Trust plc 35
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
At 31 August 2024
Valuation Total Valuation
2024 assets 2023
Company Industry Country £’000 % £’000
Taiwan Semiconductor Manufacturing
Company
Semiconductors &
Semiconductor Equipment
Taiwan 95,507 12.1 54,535
Tencent Interactive Media & Services China 63,088 8.0 36,024
Samsung Electronics (Pref) Technology Hardware,
Storage & Peripherals
South Korea 59,435 7.5 38,960
AIA Insurance Hong Kong 31,546 4.0 29,370
SBI Life Insurance Insurance India 19,298 2.5 12,761
ASML Semiconductors &
Semiconductor Equipment
Netherlands 19,015 2.4 –
ICICI Bank Banks India 18,921 2.4 –
Bank Central Asia Banks Indonesia 17,550 2.2 10,953
DBS Banks Singapore 16,128 2.0 9,697
ASM International Semiconductors &
Semiconductor Equipment
Netherlands 15,226 1.9 5,184
Top ten investments 355,714 45.0
Chroma ATE Electronic Equipment,
Instruments & Components
Taiwan 14,401 1.8 –
Meituan-Dianping Class B Hotels, Restaurants & Leisure China 13,558 1.7 8,869
Samsung Biologics Life Sciences Tools & Services South Korea 12,888 1.6 5,550
Info Edge (India) Interactive Media & Services India 12,868 1.6 5,725
Contemporary Amperex Technology – A Electrical Equipment China 12,748 1.6 6,868
Delta Electronics Electronic Equipment,
Instruments & Components
Taiwan 12,334 1.6 5,847
FPT Corp IT Services Vietnam 12,281 1.6 8,212
Trip.com Hotels, Restaurants & Leisure China 12,231 1.6 –
SK Hynix Semiconductors &
Semiconductor Equipment
South Korea 12,121 1.5 –
Power Grid Corp of India Electric Utilities India 11,942 1.5 8,910
Twenty largest investments 483,086 61.1
Investment Portfolio
36 Asia Dragon Trust plc
Investment Portfolio
Continued
At 31 August 2024
Valuation Total Valuation
2024 assets 2023
Company Industry Country £’000 % £’000
Accton Technology Communications Equipment Taiwan 11,346 1.4 –
Kweichow Moutai Co Ltd – A Beverages China 10,918 1.4 13,811
Yageo Electronic Equipment,
Instruments & Components
Taiwan 10,830 1.4 –
abrdn New India Investment Trust
A
Closed End Investments India 10,571 1.3 –
Mahindra & Mahindra Automobiles India 9,996 1.3 –
Advanced Info Service PCL – Foreign Wireless Telecommunication
Services
Thailand 9,647 1.2 –
Bharti Airtel Wireless Telecommunication
Services
India 9,366 1.2 –
Tata Consultancy Services IT Services India 9,112 1.2 6,193
Bank of the Philippine Islands Banks Philippines 9,056 1.1 6,628
Silergy Corp Semiconductors &
Semiconductor Equipment
Taiwan 9,009 1.1 3,912
Thirty largest investments 582,937 73.7
M.P. Evans Group Food Products United Kingdom 8,698 1.1 –
Sumber Alfaria Trijaya Consumer Staples
Distribution & Retail
Indonesia 8,616 1.1 –
PB Fintech Insurance India 8,240 1.1 5,325
Godrej Properties Real Estate Management &
Development
India 8,233 1.0 –
Larsen and Toubro Construction & Engineering India 8,063 1.0 5,985
Ultratech Cement Construction Materials India 7,892 1.0 7,233
Alibaba Group Holding Broadline Retail China 7,881 1.0 23,374
CSL Biotechnology Australia 7,859 1.0 –
HDFC Bank Banks India 7,838 1.0 19,754
Nari Technology – A Electrical Equipment China 7,802 1.0 4,427
Forty largest investments 664,059 84.0
Asia Dragon Trust plc 37
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
At 31 August 2024
Valuation Total Valuation
2024 assets 2023
Company Industry Country £’000 % £’000
HD Korea Shipbuilding & Offshore
Engineering
Machinery South Korea 7,506 1.0 –
Hindustan Unilever Personal Care Products India 7,313 0.9 7,845
Indian Hotels Hotels, Restaurants & Leisure India 7,291 0.9 –
NTPC Independent Power and
Renewable Electricity
Producers
India 7,191 0.9 –
Pidilite Industries Chemicals India 6,947 0.9 –
ASMPT Ltd Semiconductors &
Semiconductor Equipment
Hong Kong 6,854 0.9 –
Telekom Indonesia Diversified
Telecommunication Services
Indonesia 6,640 0.8 –
Bank for Foreign Trade of Vietnam JSC Banks Vietnam 6,548 0.8 –
Cisarua Mountain Dairy Food Products Indonesia 6,366 0.8 –
ShenZhen Mindray Bio–Medical Electronics –
A
Health Care Equipment &
Supplies
China 6,328 0.8 6,526
Fifty largest investments 733,043 92.7
BHP Group Metals & Mining Australia 6,316 0.8 –
Yum China Holdings Hotels, Restaurants & Leisure China 5,787 0.7 –
Global Health Ltd/India Health Care Providers &
Services
India 5,592 0.7 –
China Resources Land Real Estate Management &
Development
China 4,628 0.6 6,005
Aier Eye Hospital Group – A Health Care Providers &
Services
China 4,448 0.6 6,854
abrdn Asia Focus
A
Closed End Investments Other Asia 3,346 0.4 –
763,160 96.5
Net current assets
B
27,293 3.5
Total assets less current liabilities
B
790,453 100.0
A
Holding also managed by the abrdn Group but not subject to double charging of management fees.
B
Excluding bank loan of £71,822,000.
Note: Unless otherwise stated, foreign stock is held and all investments are equity holdings. Values for 2024 and 2023 may not be directly comparable due to purchases and sales
made during the year, including investments acquired as a result of the transaction with abrdn New Dawn Investment Trust plc.
38 Asia Dragon Trust plc
For the year ended 31 August 2024
Value at Sales Gains/ Value at
1 September 2023 Purchases
A
proceeds (losses) 31 August 2024
Country £’000 £’000 £’000 £’000 £’000
Australia – 41,703 28,041 513 14,175
China 162,736 114,773 91,901 (36,191) 149,417
Hong Kong 53,957 46,211 40,340 (21,428) 38,400
India 93,524 98,069 58,068 43,149 176,674
Indonesia 10,953 41,211 12,667 (325) 39,172
Netherlands 5,184 27,429 6,189 7,817 34,241
Other Asia – 2,995 – 351 3,346
Philippines 13,154 1,611 6,965 1,256 9,056
Singapore 21,414 13,494 22,884 4,104 16,128
South Korea 58,001 54,323 21,870 1,496 91,950
Taiwan 76,989 62,437 37,601 51,602 153,427
Thailand – 8,051 – 1,596 9,647
United Kingdom – 7,512 – 1,186 8,698
Vietnam 13,307 8,626 8,656 5,552 18,829
Total investments 509,219 528,445 335,182 60,678 763,160
Net current assets 12,016 – – 15,277 27,293
Total assets less current liabilities 521,235 528,445 335,182 75,955 790,453
A
Includes £135,577,000 of investments acquired as a result of the transaction with abrdn New Dawn Investment Trust plc.
Chan
g
es in Asset Distribution
Asia Dragon Trust plc 39
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
As at 31 August 2024
1.9%
19.6%
5.0%
23.2%
5.1%
4.5%
0.4%
1.2%
2.1%
12.0%
20.1%
1.3%
1.1% 2.5%
Country allocation
Australia - 1.9% China - 19.6%
Hong Kong - 5.0% India - 23. 2%
Indonesia - 5.1% Netherlands - 4.5%
Other Asia - 0.4% Philippines - 1.2%
Singapore - 2.1% South Korea - 12.0%
Taiwan - 20.1% Thailand - 1.3%
United Kingdom - 1.1% Vietnam - 2.5%
Analysis of Portfolio
40 Asia Dragon Trust plc
As at 31 August 2023
32.0%
10.6%
18.4%
2.1%
1.0%
2.6%
4.2%
11.4%
15.1%
2.6%
Country allocation
China - 32.0% Hong Kong - 10.6%
India - 18.4% Indonesia - 2.1%
Netherlands - 1.0% Philippines - 2.6%
Singapore - 4.2% South Korea - 11.4%
Taiwan - 15.1% Vietnam - 2.6%
Analysis of Portfolio
Continued
Asia Dragon Trust plc 41
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Sector Breakdown
As at 31 August 2024
0% 5% 10% 15% 20% 25%
Automobiles
Banks
Beverages
Biotechnology
Broadline Retail
Capital Markets
Chemicals
Closed End Investments
Communications Equipment
Con stru ctio n & En gine ering
Con stru ctio n M a terials
Consumer Staples Distribution & Retail
Diversified Telecommu nication Services
Electric Utilities
Electrical Equipment
Electronic Equipment, Instruments & Components
Food Products
Health Care Equipment & Supplies
Health Care Providers & Services
Hotels, Restaurants & Leisure
Independent Power and Renewable Electricity…
Insurance
Interac tive Media & Servic es
IT Services
Life Sciences Tools & Services
Machinery
Metals & Mining
Personal Care Products
Real Estate Management & Development
Semiconductors & Semiconductor Equipment
Software
Speciality Retail
Technology Hardware, Storage & Peripherals
Wireless Telecommunication Services
2024
2023
42 Asia Dragon Trust plc
Bharti Airtel
Bharti Airtel stands as one of India’s largest integrated
telecom solutions providers, offering a wide range of
services including cellular-phone services, fixed-line
phone services, broadband, and various enterprise
solutions. Additionally, it is the second-largest mobile
operator in Africa, behind South Africa’s MTN Group.
Recently, Airtel successfully listed its Bharti Hexacom
subsidiary, marking the group’s first IPO in over a decade.
We believe Airtel is the most commercial and financially
disciplined service provider in the Indian telecom sector,
which has seen significant market repair in recent years.
The industry has consolidated from nearly a dozen
companies to just three major operators: Airtel, Reliance’s
Jio, and Vodafone Idea.
Among Indian telecom operators, Airtel boasts a relatively
healthy balance sheet, a strong execution track record,
effective cost control, and a growing, high-quality
subscriber base, including approximately 259.4 million
mobile smartphone customers. Due to market
consolidation, Airtel achieved positive free cash flow (FCF)
for the first time in 2022.
As smartphones become more affordable and
subscribers transition to 5G, the demand for data services
is increasing. For Airtel, data services are experiencing
rapid growth, and the company anticipates this trend to
continue. Another key growth area is home broadband
services, which are performing well with healthy
subscriber additions, supported by the roll out of its high-
speed Xstream AirFiber network across the country.
Airtel has further improved the mix of its subscriber base,
leading to an increase in average revenue per user (ARPU)
and gains in revenue market share. Following the Indian
parliamentary election in June, telecom operators,
including Airtel, raised mobile tariffs for the first time in
three years. This move aims to recoup some of the
significant investments made in building India’s 5G
technology infrastructure over the past two years. Airtel’s
management has emphasised that tariff adjustments are
essential for maintaining the industry’s health.
The market dynamics are favourable for Airtel: the
number of Indian smartphone users is projected to rise
from about 750 million to over a billion by 2026, driven
largely by rural demand. This indicates potential for
organic growth. Additionally, mobile spending as a
percentage of GDP is relatively low in India compared to
ASEAN markets, although many smartphone users are
willing to spend 20% to 30% more on their next
smartphones.
On the sustainability front, Airtel continues to make
progress on its ESG agenda. The company has committed
to reduce absolute Scope 1 and 2 greenhouse gas
emissions by 50.2% by FY 2030-31 from the base year of
FY 2020-21. It has also committed to reducing absolute
Scope 3 greenhouse gas (GHG) emissions by 42% over
the same time frame.
Investment Case Studies
Asia Dragon Trust plc 43
Tencent
Tencent is one of China’s highest quality, diversified
internet companies, with a deep understanding of the
Chinese consumer and a highly competent management
team. It is the largest operator of instant messaging and
social networking services in China. Tencent’s integrated
social platforms, such as WeChat/Weixin and QQ, boast
over 1.3 billion and 768 million monthly active users,
respectively, dominating internet user engagement in
China. This creates a significant barrier to entry for
competitors and generates high user stickiness for the
platform ecosystems, providing ample opportunities for
Tencent to monetise its services.
The largest contributor to Tencent’s revenue is gaming
where the company holds approximately 50% of
domestic market share in China. It has a collection of long-
running, popular titles that make revenue streams for the
gaming business more visible. This sets the company
apart from other game developers who often rely on hit-
or-miss titles. Tencent has also built up its capabilities
through mergers and acquisitions (M&A) and licensing
deals, enabling it to also grow the international
gaming business.
In the advertising space, Tencent has effectively
monetised the massive WeChat ecosystem. It has
introduced features like Moments, where users can share
pictures and statuses, similar to Facebook. Recently, the
company rolled out short-form videos, which have
increased user engagement and created more
advertising opportunities. Tencent has also been at the
forefront of AI investments, monetising some of the many
use cases of AI. For example, it helps advertisers create
better content and make more effective ad
recommendations to users. This has led to higher
click-through rates on ads and better returns on
advertising spending.
Another notable tailwind for the company is the improving
regulatory environment in China. In December 2023,
Chinese regulators announced a wide range of rules
aimed at curbing spending and rewards that encourage
video games, but the government quickly backtracked on
the proposal. Approval of video game titles on average
have also improved, pointing to a potentially more stable
regulatory landscape for Tencent.
We like the company’s track record of strong balance
sheet, its ability to fund expansion and M&A activities, and
its consistent free cash flow generation over the years.
The company’s history of successful new product
monetisation further underscores its long-term growth
prospects. We anticipate that cash flow generation will
remain relatively robust, given Tencent’s strong market
position, revenue growth across operating segments, and
significant margin expansion.
In the first quarter of 2024, Tencent announced its
commitment to return excess capital to shareholders
through share repurchases and dividends, emphasising
that these activities will be funded by its ample
cash generation.
Since the post-Covid reopening, the Chinese and Hong
Kong stock markets have experienced relative weakness
due to a challenging macroeconomic environment in
China. Investors have either chased short-term trends or
indiscriminately sold assets to de-risk their Chinese
company exposure. Despite this backdrop, Tencent has
consistently performed well, owing to its long-term
structural growth drivers, delivering over 22% annualised
returns compared to just 8% for the MSCI China Index.
44 Asia Dragon Trust plc
Governance
Asia Dragon Trust plc 45
The Company is committed to high
standards of corporate governance and
applies the principles identified in the UK
Corporate Governance Code and the AIC
Code of Corporate Governance. The
Company is registered as a public limited
company and has been approved by HM
Revenue & Customs as an investment trust.
The Directors, all of whom are non-
executive and independent of the Manager,
supervise the management of Asia Dragon
Trust plc and represent the interests of
shareholders
46 Asia Dragon Trust plc
James Will
Independent Chairman
Experience:
Former Chairman of law firm Shepherd and Wedderburn
LLP where he was a senior corporate partner, heading its
financial sector practice. He has experience of working
with companies in a wide range of industry sectors
including financial services, technology, energy and life
sciences. James is Senior Independent Director of Herald
Investment Trust plc and a non-executive director of
JPMorgan European Discovery Trust plc. He was formerly
Chairman of The Scottish Investment Trust PLC.
Length of service:
6 years, appointed on 1 October 2018
Last re-elected to the Board:
7 December 2023
Committee membership:
Management Engagement Committee (Chair),
Nomination Committee (Chair) and Remuneration
Committee
Contribution:
The Board has reviewed the contribution of James Will in
light of his expected proposed re-election at the next
AGM and has concluded that he continues to chair the
Company expertly, fostering a collaborative spirit
between the Board and Manager, whilst ensuring that
Board meetings remain focused on the key areas of
stakeholder relevance. In particular his legal expertise has
been important during the process that has culminated in
the combination with abrdn New Dawn.
Matthew Dobbs
Senior Independent Non-Executive Director
Experience:
Before retirement from full time fund management duties
in 2021, Matthew had 40 years’ fund management
experience with Schroders. He specialised in Asian and
Small Companies investment having served as Schroders’
Head of Global Small Companies from 2000. In addition to
managing the Schroders Asian Alpha Plus Fund, Matthew
was instrumental in helping grow the assets of two closed-
ended investment companies, Schroder Asia Pacific Fund
plc and Schroder Oriental Income Fund Limited into FTSE
250 Companies, serving as investment manager from
their respective launches in 1995 and 2005. He holds a BA
in history and economics from Oxford University. Matthew
is non-executive Chairman of the European Opportunities
Trust PLC.
Length of service:
2 years, appointed on 1 February 2022
Last re-elected to the Board:
7 December 2023
Committee membership:
Audit & Risk Committee, Management Engagement
Committee, Nomination Committee and Remuneration
Committee
Contribution:
The Board has reviewed the strong contribution of
Matthew Dobbs in light of his expected proposed re-
election at the next AGM and has concluded that he
brings significant investment insight, and regional
experience, to the Board and excellent knowledge of the
investment management sector.
Board of Directors
Asia Dragon Trust plc 47
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Susan Sternglass Noble
Independent Non-Executive Director
Experience:
Over 30 years’ experience of investment management
and analysis, specialising in financial sector equities, with
focus on Global, European and Asian mandates. She holds
a B.A. in Asian Studies from Cornell University and a M.S. in
Foreign Service from Georgetown University and is a
Mandarin Chinese speaker. Susan held senior roles at
Goldman Sachs, JP Morgan, CQS and AXA Investment
Managers. More recently she has held a number of board,
advisory and policy roles. Susan is a non-executive
director of Unity Trust Bank, a consultant to The Investor
Forum, a director of the US-UK Fulbright Commission and
an active angel investor. She was previously a specialist
adviser to the Treasury Select Committee of the House of
Commons and a Commissioner on the Dormant Assets
Commission.
Length of service:
4 years, appointed on 7 August 2020
Last re-elected to the Board:
7 December 2023
Committee membership:
Audit & Risk Committee, Management Engagement
Committee, Nomination Committee and Remuneration
Committee (Chair)
Contribution:
The Board has reviewed the contribution of Susan
Sternglass Noble in light of her expected proposed re-
election at the next AGM and has concluded that she
continues to bring investment, industry and corporate
governance expertise to the Board.
Stephen Souchon
Independent Non-Executive Director
Experience:
A Managing Director at Morgan Stanley until 2015 where
he held a number of senior positions in the finance
function including head of the EMEA Corporate Financial
Control Group. He is a Chartered Accountant and is
currently a non-executive director and Chairman of the
Audit Committee of SMBC Nikko Capital Markets Limited
and a non-executive director and Chairman of the Audit
Committee of TD Bank Europe Limited.
Length of service:
Deemed service 5 years, having joined the board of New
Dawn on 1 October 2019 before being appointed to the
Company’s Board on 9 November 2023
Last re-elected to the Board:
Elected on 7 December 2023
Committee membership:
Audit & Risk Committee (Chairman), Management
Engagement Committee, Nomination Committee and
Remuneration Committee
Contribution:
The Board has reviewed the contribution of Stephen
Souchon in light of his expected proposed re-election at
the next AGM and concluded that he has assumed the
role of Chairman of the Audit & Risk Committee
seamlessly bringing expert relevant accounting and
financial knowledge to the Company.
48 Asia Dragon Trust plc
Nicole Yuen
Independent Non-Executive Director
Experience:
A former partner at the law firm Clifford Chance, Hong
Kong, followed by a career in investment banking as a
Managing Director at UBS and latterly, Credit Suisse. She
was with UBS for a period of 18 years where she held a
number of senior positions and was responsible for setting
up and managing UBS’ Greater China business. She joined
Credit Suisse in 2012 where she was Chief Operating
Officer for the Greater China region and Head of Equities,
North Asia until 2018. She also sits on the board of
Interactive Brokers Group, Inc. as its independent non-
executive director.
Length of service:
Deemed service 2 years, having joined the board of New
Dawn on 1 October 2022 before being appointed to the
Company’s Board on 9 November 2023
Last re-elected to the Board:
Elected on 7 December 2023
Committee membership:
Audit & Risk Committee, Management Engagement
Committee, Nomination Committee and Remuneration
Committee
Contribution:
The Board has reviewed the contribution of Nicole Yuen in
light of her expected proposed re-election at the next
AGM and concluded that she has brought significant
expert investment insight and knowledge of Asia and in
particular the Greater China region to the Board.
Board of Directors
Continued
Asia Dragon Trust plc 49
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Capital Structure
At 31 August 2024, the Company had 157,116,517 fully
paid Ordinary shares of 20p each in issue (2023:
113,745,386) with a further 55,390,830 Ordinary shares of
20p held in treasury (2023: 45,866,291). During the year to
31 August 2024 9,524,539 Ordinary Shares were bought
back and held in treasury (2023: 5,940,615). Subsequent
to the period end a further 891,234 Ordinary shares have
been purchased in the market for treasury.
On 8 November 2023 52,895,670 new Ordinary shares
were issued in consideration for the acquisition of
approximately £214.7m of net assets following the
conclusion of the combination with abrdn New Dawn.
Further details on the changes to the capital structure
during the year ended 31 August 2024 are provided in
note 14.
The Ordinary shares carry a right to receive dividends
which are declared from time to time by an ordinary
resolution of the Company (up to the amount
recommended by the Board) and to receive any interim
dividends which the Directors may resolve the Company
should pay. On a winding-up, after meeting the liabilities of
the Company, the surplus assets will be paid to Ordinary
shareholders in proportion to their shareholdings. On a
show of hands, every Ordinary shareholder present in
person, or by proxy, has one vote and, on a poll, every
Ordinary shareholder present in person has one vote for
each share held and a proxy has one vote for every
share represented.
There are no restrictions concerning the holding or
transfer of the Ordinary shares and there are no special
rights attached to any of the shares. The Company is not
aware of any agreements between shareholders which
may result in any restriction on the transfer of shares or
the voting rights.
In the event of a winding-up of the Company, the Ordinary
shares will rank behind any creditors or prior ranking
capital of the Company.
Directors
The Directors of the Company who were in office during
the year and up to the date of signing the financial
statements were James Will, Matthew Dobbs, Susan
Sternglass Noble, Stephen Souchon (appointed 9
November 2023) and Nicole Yuen (appointed 9
November 2023). In addition, Donald Workman was
appointed a Director on 9 November 2023 and retired
from the Board on 9 May 2024. Gaynor Coley and Charlie
Ricketts also retired from the Board on 9 May 2024.
Biographies of the current Directors of the Company are
shown on pages 46 to 48.
Directors’ and Officers’ Liability Insurance
The Company’s articles of association indemnify each of
the Directors out of the assets of the Company against
any liabilities incurred by them as a Director of the
Company in defending proceedings, or in connection with
any application to the Court in which relief is granted. In
addition, the Directors have been granted qualifying
indemnity provisions by the Company which are currently
in force. Directors’ and Officers’ liability insurance cover
has been maintained throughout the year at the expense
of the Company.
Dividends
The Directors have declared an interim dividend in lieu of
the final dividend of 6.6p per Ordinary share (2023: 6.6p)
in respect of the year ended 31 August 2024 which will
be paid on 31 December 2024 to shareholders on the
register on 6 December 2024. The ex-dividend date is
5 December 2024.
Management Agreement
The Company has appointed abrdn Fund Managers
Limited (“aFML”), a wholly owned subsidiary of abrdn plc,
as its alternative investment fund manager. By way of
group delegation agreements within the abrdn Group the
management of the Company's investment portfolio is
delegated to abrdn (Asia) Limited and company
secretarial services and administrative services are
provided by abrdn Holdings Limited.
Details of the management agreement, including the
notice period and fees paid to the abrdn Group
companies during the year ended 31 August 2024, are
shown in note 20 to the financial statements.
Directors’ Report
50 Asia Dragon Trust plc
Reduction in Management Fee
As detailed in the Company’s circular to shareholders
dated 22 September 2023, with effect from 8 November
2023, the date of the completion of the combination with
abrdn New Dawn, the management fee payable by the
Company to AFML was reduced to 0.75 per cent. per
annum (from 0.85 per cent. per annum) on the initial £350
million of the Company's NAV and 0.50 per cent. per
annum on the Company's NAV in excess of £350 million. In
addition, the Manager agreed to make a contribution to
the costs of the combination proposals by means of a
reduction in the management fee payable by the
enlarged Company to aFML. The fee reduction
constituted a waiver of the management fee that would
otherwise be payable by the enlarged company to AFML
in respect of the assets transferred by abrdn New Dawn
for the first six months following the effective date of
the combination.
On 26 July 2024 the Company entered into a deemed
notice agreement (“Agreement”) with aFML. Under the
Agreement it was agreed that, inter alia, in the event of a
termination notice being served by the Company under
the management agreement within twelve months of the
date of the Agreement, aFML would deem such notice to
have been served on 26 July 2024, without prejudice to the
repayment provisions linked to the cost contribution by
aFML in connection with the combination with abrdn New
Dawn set out in the management agreement as
amended. Refer to Note 23 on page 101 for further details.
Borrowings
The Company has a £75 million multicurrency revolving
facility with The Royal Bank of Scotland International
Limited, London Branch with a maturity date of
29 March 2025.
Corporate Governance
The Statement of Corporate Governance, which forms
part of the Directors’ Report, is contained on pages
52 to 57.
Going Concern
As set out in more detail in the Chairman’s Statement on
pages 6 and 7, it is proposed that the Company combines
with Invesco Asia Trust plc (“Invesco Asia”). The
combination, if approved by each company's
shareholders, will be effected by way of a scheme of
reconstruction and winding up of the Company under
section 110 of the Insolvency Act 1986 and the associated
transfer of part of the assets and undertaking of the
Company to Invesco Asia in exchange for the issue of new
ordinary shares in Invesco Asia (the “Proposal”). The
outcome of the general meetings to make the Proposal
effective represents a material uncertainty which may
cast significant doubt on the Company’s ability to continue
as a going concern. Notwithstanding this material
uncertainty, the Board has concluded that it remains
appropriate to continue to prepare the financial
statements on a going concern basis. In reaching this
conclusion, the Board has come to the view that, as the
Proposal is contingent on shareholder approval and the
Company is considered solvent in all other regards, there
is no irrevocable path to liquidation and thus going
concern remains the most appropriate basis for
preparation. In reaching this conclusion, the Board has
also given due consideration to the risks associated with
the Proposal.
The Board has also given consideration to the liquidity of
the investment portfolio. The Company’s assets consist
substantially of equity shares in companies listed on
recognised stock exchanges and in most circumstances
are realisable within a short timescale. The Board regularly
reviews income and expenditure projections and has set
limits for borrowing and reviews compliance with banking
covenants, including the headroom available. At the year
end, the Company’s borrowings were £71.8 million in
aggregate drawn down from its £75 million multi-
currency revolving loan facility maturing on 29 March
2025. In the event of the Company being unable to renew
the facility on maturity, it is anticipated that it would be
repaid from the proceeds of investment sales. In
considering the going concern basis of accounting, the
Directors have also taken into account the potential
requirement of the Board to propose a resolution to
approve the continuation of the Company at future
Annual General Meetings (earliest being 2026).
Directors’ Report
Continued
Asia Dragon Trust plc 51
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Substantial Share Interests
At 31 August 2024 the Company had been notified or
was aware of the following substantial interests in the
Ordinary shares:
Shareholder
Number of
Ordinary
shares held % held
City of London Investment
Management
47,409,009 30.2
Allspring Global Investments 19,905,512 12.7
Lazard Asset Management 12,828,472 8.2
interactive investor 10,507,724 6.7
1607 Capital Partners 6,633,529 4.2
Rathbones 5,234,682 3.3
On 11 November 2024 the Company was notified by 1607
Capital Partners that they held 8,123,094 Ordinary shares
(5.2% of the issued capital). As at the date of this Report,
no other changes to the above interests had been notified
to the Company.
Accountability and Audit
The respective responsibilities of the Directors and the
independent auditors in connection with the financial
statements appear on pages 52 and 74.
The Directors who held office at the date of approval of
this Directors’ Report confirm that, so far as they are each
aware, there is no relevant audit information of which the
Company’s auditors are unaware and each Director has
taken all the steps that he or she ought to have taken as a
Director to make himself or herself aware of any relevant
audit information and to establish that the Company’s
auditors are aware of that information. The Directors
confirm that no non audit services were provided by the
auditor during the year and the Directors remain satisfied
that the auditor’s objectivity and independence is being
safeguarded.
Global Greenhouse Gas Emissions and
Streamlined Energy and Carbon Reporting
(“SECR”)
All of the Company’s activities are outsourced to third
parties. The Company therefore has no greenhouse gas
emissions to report from the operations of its business, nor
does it have responsibility for any other emissions
producing sources under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations
2013. For the same reason as set out above, the Company
considers itself to be a low energy user under the SECR
regulations and therefore is not required to disclose
energy and carbon information. Further information on
the Manager’s obligatory disclosures under the Taskforce
on Climate-related Financial Disclosures (“TCFD”) may be
found on the Company’s website.
Other Information
The rules concerning the appointment and replacement
of Directors, amendments to the articles of association
and powers to issue or buy back the Company's shares
are contained in the articles of association of the
Company and the Companies Act 2006. There are no
agreements which the Company is party to that might
affect its control following a takeover bid; and there are no
agreements between the Company and its Directors
concerning compensation for loss of office. Other than the
management agreement with the Manager, further
details of which are set out on pages 49 and 50 the
Company is not aware of any contractual or other
agreements which are essential to its business which
ought to be disclosed in the Directors’ Report.
The financial risk management objectives and policies
arising from its financial instruments and the exposure of
the Company to risk are disclosed in note 18 to the
Financial Statements.
By order of the Board,
abrdn Holdings Limited
Secretary
Edinburgh
22 November 2024
Registered office:
1 George Street
Edinburgh EH2 2LL
Company Registration Number: SC106049
52 Asia Dragon Trust plc
Compliance
The Company is committed to high standards of
corporate governance. The Board is responsible for good
governance, and this statement describes how the
Company applies the principles identified in the UK
Corporate Governance Code published in 2018 (the “UK
Code”), which is available on the Financial Reporting
Council’s website:
www.frc.org.uk, throughout the
financial year.
The Company is a member of the Association of
Investment Companies (“AIC”), which has published its
own Code of Corporate Governance to recognise the
special circumstances of investment trusts
(
www.theaic.co.uk) which is approved by the FRC.
The Board confirms that, during the year to 31 August
2024, the Company complied with the recommendations
of the AIC Code and the relevant provisions of the UK
Code, except as set out below:
· the role of the chief executive (A.1.2);
· executive Directors’ remuneration (D.1.1 and D.1.2); and
· the need for an internal audit function (C.3.6).
For the reasons set out in the AIC Code, and as explained
in the UK Code, the Board considers that these provisions
are not relevant to the position of the Company, being an
externally managed investment company.
The Board is cognisant of the FRC’s new Corporate
Governance Code 2024 provisions effective for financial
years commencing on 1 January 2025 and is in the
process of assessing any consequential changes to be
made to operations and governance.
The Board
The Board consists of five non-executive Directors. Each
Director has the requisite range of business and financial
experience to enable the Board to provide clear and
effective leadership and proper stewardship of the
Company. Matthew Dobbs is the Senior Independent
Director (“SID”) and is available to shareholders in the
event that there are concerns that cannot be resolved
through discussion with the Chairman.
Biographical details for each of the Directors, including
their significant external appointments, can be found on
pages 46 to 48.
All Directors are considered to be independent of the
Manager and to be free of any material relationship with
the Manager which could interfere with the exercise of
their independent judgement. Subject both to annual re-
election and renewal of the appointment every three
years, a Director’s tenure of office (including that of the
Chairman) will normally be for up to nine years. When
making a recommendation for re-electing a Director, the
Board will take into account the on-going requirements of
the UK Code.
Statement of Corporate Governance
Asia Dragon Trust plc 53
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Role and Operation of the Board
The Board normally meets at least five times each year, and more frequently where business needs require. In addition,
there is regular contact between the Directors and the Manager throughout the year. The table below sets out the
number of routine Board and Committee meetings attended by each Director during the year compared to the number
of meetings that each Director was eligible to attend. Directors also have additional discussions when required to
address administrative matters and ad hoc issues between scheduled Board meetings.
Director Board Meetings
Audit & Risk
Committee Meetings¹
Remuneration
Committee Meetings
Nomination Committee
Meetings
Management Engagement
Committee Meetings
James Will
1
5 (5) n/a 1 (1) 1 (1) 2 (2)
Matthew Dobbs 5 (5) 3 (3) 1 (1) 1 (1) 2 (2)
Susan Sternglass Noble 5 (5) 3 (3) 1 (1) 1 (1) 2 (2)
Stephen Souchon
2
4 (4) 2 (2) 1 (1) 0 (0) 0 (0)
Nicole Yuen
3
4 (4) 2 (2) 1 (1) 0 (0) 0 (0)
Donald Workman
4
3 (3) 1 (1) 0 (0) 0 (0) 0 (0)
Gaynor Coley
5
4 (4) 2 (2) 0 (0) 1 (1) 2 (2)
Charlie Ricketts
6
4 (4) 2 (2) 0 (0) 1 (1) 2 (2)
¹ All Directors are members of all Committees of the Board with the exception of James Will who can, upon invitation, attend Audit & Risk Committee meetings as an observer.
2
Stephen Souchon was appointed to the Board on 9 November 2023
3
Nicole Yuen was appointed to the Board on 9 November 2023
4
Donald Workman was appointed to the Board on 9 November 2023 and retired from the Board on 9 May 2024
5
Gaynor Coley retired from the Board on 9 May 2024
6
Charlie Ricketts retired from the Board on 9 May 2024
Board Diversity
The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge
represented on the Board in order to allow it to fulfil its obligations. The Board also recognises the benefits and is
supportive of, and will give due regard to, the principle of diversity in its recruitment of new Board members. The Board
will not display any bias for age, gender, race, sexual orientation, socio-economic background, religion, ethnic or national
origins or disability in considering the appointment of Directors. In view of its size, the Board will continue to ensure that all
appointments are made on the basis of merit against the specification prepared for each appointment. In doing so, the
Board will seek to meet the targets set out in the FCA’s Listing Rule 6.6.6R (9)(a), which are set out below.
In accordance with LR 6.6.6R (9), (10) and (11) the Board has provided the following information in relation to its diversity.
Table for reporting on gender as at 31 August 2024
Number of
board
members
Percentage of
the board
Number of
senior positions
on the board
(CEO, CFO,
Chair and SID)
Number in
executive
management
Percentage of executive
management
Men 3 60% 3
(note 3)
n/a
(note 4)
n/a
(note 4)
Women 2 40% (note 1) -
Not specified/prefer not to say - - -
54 Asia Dragon Trust plc
Table for reporting on ethnic background as at 31 August 2024
Number of
board
members
Percentage of
the board
Number of senior positions
on the board (CEO, CFO,
Chair and SID)
Number in
executive
management
Percentage of
executive
management
White British or other White
(including minority-white groups)
4
80% 3
(note 3)
n/a
(note 4)
n/a
(note 4)
Mixed / Multiple Ethnic Groups - - -
Asian/Asian British 1 20%
(note 2)
-
Black/African/Caribbean/Black British - - -
Other ethnic group, including Arab - - -
Not specified/prefer not to say - - -
Notes:
1
The Company met the target that at least 40% of Directors are women as set out in LR 6.6.6R (9)(a)(i) for the year ended 31 August 2024.
2
The Company meets the target that at least one Director is from a minority ethnic background as set out in LR 6.6.6R (9)(a)(iii) for the year ending 31 August 2024.
3
As an investment trust with no executive management, the Board has included the role of Audit Committee Chairman as one of the senior positions that it is reporting upon. The
Company does not meet the target that at least one of the senior positions is held by a woman set out in LR 6.6.6R(a)(ii) for the year to 31 August 2024 as the Company does not
have a CEO/CFO and neither the Chairman, Audit Committee Chairman nor the Senior Independent Director is a woman.
4
This column is not applicable as the Company is externally managed and does not have any executive staff.
The information included above in relation to the gender and ethnic background of the Board has been obtained
following confirmation from the individual Directors. Although not required to be disclosed under the FCA’s Listing Rules,
the Board notes that the Company’s lead portfolio managers are one male and one female, both of whom are based in
Singapore and one of whom is Asian.
There have been no changes since the year end that have affected the Company’s ability to meet the targets set out in
LR 6.6.6R (9)(a).
Statement of Corporate Governance
Continued
Asia Dragon Trust plc 55
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Role of the Board
The Board has overall responsibility for the Company’s
affairs. It delegates, through a management agreement
and specific instructions, the day-to-day management of
the Company to the Manager, abrdn Fund Managers
Limited. The Board has a schedule of matters reserved to
it for decision, and the requirement for Board approval on
these matters is communicated directly to the senior staff
of the Manager.
Such matters include overall strategy, review of
investment policy, performance, gearing policy, treasury,
corporate governance policy, promotional activities and
communications with shareholders.
Full and timely information is provided to the Board to
enable the Directors to function effectively and to
discharge their responsibilities. At each meeting the Board
reviews the following:
· Reports from the Manager covering stockmarket
environment, portfolio activities, performance and
investment outlook;
· Company financial information including revenue
forecasts, balance sheet and gearing position;
· Shareholder analysis and relations;
· Regulatory issues and industry matters;
· Reports from other service providers such as brokers
and registrars.
No contract or arrangement subsisted during the period in
which any of the Directors was materially interested. The
Board monitors, on a regular basis, the direct and indirect
interests of each Director and has concluded that there
were no situations which gave rise to an interest of a
Director which conflicted with the interests of the
Company. The Board adopts a zero-tolerance approach
to bribery and corruption and has implemented
appropriate procedures designed to prevent bribery.
It is the Company’s policy to conduct all of its business in
an honest and ethical manner. The Board takes a zero-
tolerance approach to facilitation of tax evasion, whether
under UK law or under the law of any foreign country.
Directors’ Time Commitments
The Company has a policy of ensuring that all non-
executive directors of the Company have sufficient time
to commit to the respective duties and responsibilities
applicable to their particular Board roles.
When making new appointments, the Board takes into
account other demands on potential candidates’ time and
prior to appointment any significant commitments are
disclosed with an indication of the time involved. In the
year under review the Board assessed the time
commitment of each individual Director on external
appointments. Each Director’s aggregate time
commitment is discussed with him or her as part of the
annual appraisal process.
In the year under review, all Directors were considered to
have sufficient time to commit to their respective roles on
the Board, taking account of their external appointments.
If at any time any Director wishes to accept an additional
significant external appointment, the prior approval of the
Board is first required. In considering whether to grant
such approval, the Board will in particular consider the
Director’s other time commitments and any potential
conflicts of interest.
Board Committees
The Board has appointed four Committees with specific
operations as set out below. The terms of reference,
which clearly define the responsibilities of each
Committee are available on the Company’s website. The
terms of reference of each of the Committees are
renewed and re-assessed by the Board for their
adequacy on an ongoing basis.
Audit & Risk Committee
The Audit & Risk Committee Report is contained on pages
58 to 60.
56 Asia Dragon Trust plc
Remuneration Committee
The Remuneration Committee, which comprises all
Directors and is chaired by Susan Sternglass Noble, is
responsible for determining the level of Directors’ fees,
having regard to external sources. The terms of reference
are available on request and on the Company’s website.
Further information may be found in the Directors’
Remuneration Report.
Management Engagement Committee
The Management Engagement Committee, which
comprises all the Directors and is chaired by James Will,
reviews the performance of the Manager and its
compliance with the management agreement.
The Committee keeps the resources of the Manager
under constant review, conducts an annual review of the
terms and conditions of the management agreement
(“Agreement”) and undertakes an evaluation of the
Manager’s performance under this Agreement. In
monitoring the performance of the Manager, the Board
reviews the investment performance, management
processes, risk control mechanisms and promotional
activities of the Manager.
As a result of these reviews, the Board concluded that the
Manager has the promotional, secretarial and
administrative skills required for the effective operation of
the Company. The Board however continued to be
disappointed with the longer term investment
performance of the Company. The Board announced on
28 October 2024 that it had concluded its strategic review
and had agreed heads of terms with the board of Invesco
Asia Trust plc in respect of the proposed combination of
the Company with Invesco Asia.
On 26 July 2024 the Company entered into a deemed
notice agreement (“Agreement”) with aFML. Under the
Agreement, it was agreed that, inter alia, in the event of a
termination notice being served by the Company under
the management agreement within twelve months of the
date of the Agreement, aFML would deem such notice to
have been served on 26 July 2024, without prejudice to the
repayment provisions linked to the cost contribution by
aFML in connection with the combination with abrdn New
Dawn set out in the management agreement as
amended. Refer to Note 23 on page 101 for further details.
Nomination Committee
A Nomination Committee was established in January
2020, which comprises all Directors and is chaired by
James Will, and has responsibility for Board evaluation,
succession planning, new appointments and training.
Performance Evaluation
An appraisal of each Director, including the Chairman, and
of the operation of the Board and its Committees, was
undertaken during the year. The Chairman’s performance
assessment was led by the Senior Independent Director.
The Board also reviewed the Chairman’s and Directors’
other commitments. The Board is satisfied that each
Director’s performance continues to be effective, and that
each remains fully committed to the Company.
Succession Planning
In line with the Company’s strong commitment to its
corporate governance responsibilities, the Board regularly
reviews its performance and structure to ensure it has the
correct mix of relevant skills, diversity and experience for
the effective conduct of the Company’s business to
complement the existing composition of the Board whilst
having due regard for the benefits of diversity, including
gender and ethnicity, on the Board.
New Board appointments are identified against the
requirements of the Company’s business and the need to
have a balanced Board and are routinely facilitated by an
external search consultant to ensure that a wide range of
candidates can be considered.
The Board has implemented the provisions of the UK Code
whereby all Directors of the Company will stand for re-
election on an annual basis. The Board has reviewed the
skills and experience of each Director, and supports their
re-election.
New Directors are given appropriate induction from the
Manager covering legal responsibilities, the Manager’s
operations and investment trust industry matters. All
Directors are entitled to receive appropriate and relevant
training. If necessary, there is a procedure for a Director
to take independent professional advice at the
Company’s expense.
Statement of Corporate Governance
Continued
Asia Dragon Trust plc 57
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Relations with Shareholders
The Directors place great importance on communication
with shareholders. Besides shareholders, the report and
financial statements are widely distributed to other parties
who have an interest in the Company’s performance.
Shareholders and potential investors may obtain up-to-
date information on the Company through the Manager’s
freephone information service, and the Company
responds to letters from shareholders on a wide range of
issues. The Company’s annual and half-yearly reports and
other publications can be downloaded from the
Company’s website,
asiadragontrust.co.uk.
The Board’s policy is to communicate directly with
shareholders and their representative bodies without the
involvement of the management group (either the
Company Secretary or the Manager) in situations where
direct communication is required. The Chairman meets
with representatives of the major shareholders during the
financial year on an annual basis in order to gauge their
views. The Manager maintains regular contact with
institutional shareholders and feeds back shareholder
views to the Board.
It is the intention of the Board that, in the ordinary course,
the notice of the Annual General Meeting is normally sent
out at least 20 working days in advance of the meeting.
The Board encourages shareholders to attend and
participate at the Company’s AGM. At the AGM, the
Investment Manager provides a presentation at the
meeting outlining the key investment issues that affect the
Company and all shareholders have the opportunity to
raise questions. Proxy voting figures for each resolution
are announced to the meeting and details are also
available on the Company’s website.
Responsible Investing
Our Investment Manager’s approach to ESG
considerations is included on pages 25 to 28.
Consumer Duty
The FCA’s Consumer Duty rules were published in July
2022. The rules comprise a fundamental component of
the FCA’s consumer protection strategy and aim to
improve outcomes for retail customers across the entire
financial services industry through the assessment of
various outcomes, one of which is an assessment of
whether a product provides value. Under the Consumer
Duty, the Manager is the product ‘manufacturer’ of the
Company and therefore the Manager was required to
publish its assessment of value from April 2023. The
Manager uses its proprietary assessment methodology to
assess the Company as 'expected to provide fair value for
the reasonably foreseeable future'. The Board has
reviewed the Manager's basis of assessment and no
concerns were identified with either the assessment
method or the outcome of the assessment.
The UK Stewardship Code and Proxy Voting
The Company supports the UK Stewardship Code and
seeks to play its role in supporting good stewardship of the
companies in which it invests. Responsibility for actively
monitoring the activities of portfolio companies has been
delegated by the Board to the Manager which has sub-
delegated that authority to the Investment Manager.
abrdn plc is a tier 1 signatory of the UK Stewardship Code
which aims to enhance the quality of engagement by
investors with investee companies in order to improve
their socially responsible performance and the long term
investment return to shareholders. While delivery of
stewardship activities has been delegated to the
Manager, the Board acknowledges its role in setting the
tone for the effective delivery of stewardship on the
Company’s behalf.
The Board has also given discretionary powers to the
Manager to exercise voting rights on resolutions proposed
by the investee companies within the Company’s portfolio.
The Manager reports on a quarterly basis on stewardship
(including voting) issues.
James Will,
Chairman
22 November 2024
58 Asia Dragon Trust plc
The Audit & Risk Committee (the “Committee”) presents
its Report for the year ended 31 August 2024.
Membership and Responsibilities
The Committee is chaired by Stephen Souchon, who is a
chartered accountant, and comprises all Directors, with
the exception of James Will who can, upon invitation,
attend meetings as an observer. The Committee is
satisfied that, as a whole, it has the necessary recent
and relevant financial experience and competence
relevant to the investment trust sector in order to fulfil
its responsibilities. The main responsibilities of the
Committee are:
· to review the half yearly and annual financial
statements of the Company, the accounting policies
applied therein and to ensure compliance with financial
and regulatory reporting requirements;
· to assess whether the annual report and financial
statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy;
· to review and report to the Board on the significant
financial reporting issues and judgements made in
connection with the financial reporting including the
statement on the Company’s viability;
· to consider reports from the external auditors, including
its audit strategy and findings;
· to develop and implement policy on the engagement of
the external auditors to supply non-audit services;
· to consider the re-appointment, remuneration and
terms of engagement of the external auditors and to
review annually the external auditors’ independence,
objectivity, effectiveness, resources and qualification;
· to review and monitor the internal control systems and
risk management systems (including non-financial risks)
on which the Company is reliant;
· to consider annually whether there is a need for the
Company to have its own internal audit function; and
· to review the arrangements in place within the Manager
whereby staff may, in confidence, raise concerns about
possible improprieties in matters of financial reporting or
other matters (‘whistleblowing’).
The Committee undertakes an annual performance
evaluation, in relation to discharging its responsibilities,
through questionnaires and discussion.
The respective responsibilities of the Directors and the
external auditors in connection with the financial
statements appear on pages 65 and 74.
Activities During the Year
The Committee meets at least three times per year when
it reviews the annual and half yearly financial reports in
detail. Reports from the Manager’s internal audit, risk and
compliance departments are also considered by the
Committee which cover internal control systems, risk and
the conduct of the business in the context of its regulatory
environment.
Risk Management and Internal Control
In accordance with the Disclosure and Transparency
Rules 7.2.5, the Board is responsible for the Company’s
system of internal control and has reviewed the
effectiveness of the Company’s risk management and
internal control systems. The Board confirms that there is
an ongoing and robust process for identifying, evaluating
and managing the significant risks faced by the Company
which include financial, operational, compliance and
reputational risks.
Under the Management Agreement, the management of
the Company’s assets has been delegated to the
Manager within overall guidelines. Risks are identified and
documented through a risk management framework by
each function within the Manager’s activities. The internal
control systems operated by the Manager are monitored
and supported by an internal audit function which
undertakes periodic examination of business processes
and ensures that recommendations to improve controls
are implemented. Any weaknesses identified are reported
to the Board, and timetables are agreed for implementing
improvements to systems. The implementation of any
remedial action required is monitored and feedback
provided to the Board.
This process has been in place for the year under review
and up to the date of approval of this annual report and
financial statements. It is regularly reviewed by the Board
and accords with the Financial Reporting Council’s
Guidance on Internal Controls.
Audit & Risk Committee’s Report
Asia Dragon Trust plc 59
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
In addition, the Board has adopted its own risk matrix
which identifies the key risks for the Company and covers
strategy, investment management, operations, regulatory
and financial obligations and third party service providers.
A monitoring system is undertaken whereby the controls
to mitigate these risks, and the impact of the residual risks,
are assessed on a regular basis. The risk matrix is formally
reviewed on a six monthly basis in order to identify
emerging risks which may arise. Details of the emerging
and principal risks faced by the Company are provided in
Overview of Strategy on pages 19 to 21.
The key components designed to provide effective
internal control are outlined below:
· The Manager prepares forecasts and management
accounts which allow the Board to assess the
Company’s activities and review its performance; the
emphasis is on obtaining the relevant degree of
assurance and not merely reporting by exception;
· The Board and the Manager have agreed clearly
defined investment criteria, specified levels of authority
and exposure limits. Reports on these issues, including
performance statistics and investment valuations, are
regularly submitted to the Board and there are
meetings with the Manager as appropriate;
· As a matter of course, the Manager’s risk management
department, including compliance and internal audit
functions, continually reviews the Manager’s operations
and provides reports to the Committee;
· Written agreements are in place, which specifically
define the roles and responsibilities of the Manager and
other third party service providers;
· The Board has considered the need for an internal audit
function but, because of the compliance and internal
control systems in place within the Manager, has
decided to place reliance on the Manager’s risk
management systems and internal audit procedures;
and
· The Committee carried out bi-annual reviews of the
Manager’s risk management and internal controls,
including the internal audit and compliance functions. At
its October 2024 meeting, the Committee performed its
annual assessment of internal controls for the year
ended 31 August 2024. The results of the assessment
were reported to the Board.
Internal control systems are designed to meet the
Company’s particular needs and the risks to which it is
exposed. Accordingly, the internal control systems are
designed to manage, rather than eliminate, the risk of
failure to achieve business objectives and by their nature
can only provide reasonable, and not absolute, assurance
against material misstatement or loss.
Financial Statements and Significant Matters
During its review of the Company’s financial statements
for the year ended 31 August 2024, the Audit & Risk
Committee considered the following significant matters,
in particular those communicated by the Independent
Auditors during its planning and reporting of the year
end audit.
Valuation, Existence and Ownership of Investments
How the matter was addressed - the Company uses the
services of an independent depositary (BNP Paribas SA,
London Branch) (the “Depositary”) to hold the assets of
the Company. An annual internal control report is
received from the Depositary and reviewed by the Audit &
Risk Committee. This provides details of the Depositary’s
control environment. The investment portfolio is
reconciled regularly by the Manager. The portfolio is
reviewed and verified by the Manager on a regular basis
and management accounts, including a full portfolio
listing, are prepared quarterly and are considered at the
quarterly meetings of the Board. The Audit & Risk
Committee also considered the Independent Auditor’s
work and conclusions in this area.
The valuation of investments is undertaken in accordance
with the accounting policies disclosed in note 2 to the
financial statements.
The Audit & Risk Committee satisfied itself that there were
no issues associated with the valuation, existence and
ownership of the investments which needed to be
addressed.
Income from Investments
How the matter was addressed - the recognition of
dividend income is undertaken in accordance with
accounting policy note 2 to the financial statements.
Special dividends are allocated to the capital or revenue
accounts according to the nature of the payment and the
specific circumstances. Management accounts are
reviewed by the Board on a quarterly basis and
discussions take place with the Manager regarding the
allocation of any special dividends that have been
received. The Audit & Risk Committee also considered the
Independent Auditor’s work and conclusions in this area.
60 Asia Dragon Trust plc
The Audit & Risk Committee concluded that there were no
issues associated with the recognition of dividend income
which needed to be addressed.
Other Accounting Issues
The Company’s compliance with investment trust status,
under section 1158 of the Corporation Tax Act 2010, is
monitored by the Manager on an ongoing basis and
reported to the Committee.
Review of Independent Auditors
The Committee has reviewed the independence and the
effectiveness of the external auditors,
PricewaterhouseCoopers LLP (“PwC”), as follows:
· The external auditors report on an annual basis the
steps it takes to ensure its independence and objectivity
and confirms that it has complied with the relevant UK
independence guidelines. The level of fees for non-audit
services provided by the auditors is assessed and for the
year to 31 August 2024 was nil (2023 - £nil). The Board
will review any future non-audit fees in the light of the
requirement to maintain the auditor’s independence.
· The Committee considers the experience, continuity
and tenure of the external audit team, including the
audit partner. The audit team consists of suitably
experienced staff with knowledge of the investment
trust sector and there is a process in place for the
rotation of the audit partner.
· The Committee assesses the level of audit service
annually. The audit plan is reviewed well in advance and
subsequent audit findings are reported
comprehensively in a timely manner and are resolved
satisfactorily. The auditors have a constructive working
relationship with both the Board and the Manager.
Re-appointment of the Independent Auditors
In 2020 the Committee undertook an audit tender,
following which the Board recommended the
appointment of PwC as the Company’s auditors.
Shareholders overwhelmingly voted in favour of the
appointment of PwC at the Company’s AGM on 10
December 2020.
In accordance with present professional guidelines the
Senior Statutory Auditor is rotated after no more than five
years and the year ended 31 August 2024 will be the first
year for which the present Senior Statutory Auditor, Ms
Gillian Alexander, has served. The Committee considers
PwC, the Company’s auditors, to be independent of
the Company.
Stephen Souchon
Chairman of Audit & Risk Committee
22 November 2024
Audit & Risk Committee’s Report
Continued
Asia Dragon Trust plc 61
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
The Board has prepared this Remuneration Report in
accordance with the regulations governing the disclosure
and approval of Directors’ remuneration. This
Remuneration Report comprises three parts:
a) A Remuneration Policy, set out below, which was last
approved by shareholders at the 2023 AGM. This
policy is subject to a vote every three years. Any
change to this policy during this interval would require
shareholder approval;
b) An annual Implementation Report, which provides
information on how the Remuneration policy has
been applied during the year and will be subject to an
advisory vote at the upcoming AGM; and
c) An Annual Statement.
The law requires the Company’s auditors to audit certain
of the disclosures provided in the Remuneration Report.
Where disclosures have been audited, they are indicated
as such. The auditor’s opinion is included in the report on
page 68.
Remuneration Policy
The Remuneration Policy takes into consideration the
principles of the UK Code of Corporate Governance and
the AIC’s recommendations regarding the application of
those principles to investment companies. Directors’
remuneration is determined by the Remuneration
Committee. The principles remain the same as for
previous years. There have been no changes to the
Directors’ Remuneration Policy during the period of this
Report nor are there any proposals for changes in the
foreseeable future, except for the Directors’ fees, as set
out in the Implementation Report below.
The Board’s policy is that the remuneration of non-
executive Directors should reflect the nature of their
duties, responsibilities and the value of their time spent and
be fair and comparable to that of other investment trusts
that are similar in size, have a similar capital structure and
have a similar investment objective. No shareholder views
were sought in setting the remuneration policy although
any comments received from shareholders would be
considered on an on-going basis. Fee rates are
established by having regard to external sources as to
current market levels.
Directors’ fees
The Directors are non-executive and their fees are set
within the limits of the Company’s articles of association
which limit the aggregate fees payable to the Board of
Directors per annum, currently £250,000. The level of cap
may be increased by shareholder resolution from time
to time.
Appointment
· The Company only intends to appoint non-executive
Directors under the terms of Letters of Appointment.
· Directors must retire and be subject to re-election at the
first AGM after their appointment and annually
thereafter.
· New appointments to the Board will be placed on the
fee applicable to all Directors at the time of
appointment.
· No incentive or introductory fees will be paid to
encourage a directorship.
· The Directors are not eligible for bonuses, pension
benefits, share options, long term incentive schemes or
other benefits.
· The Company indemnifies its Directors for costs,
charges, losses, expenses and liabilities which may be
incurred in the discharge of duties, as a Director of the
Company.
· The Directors are entitled to re-imbursement of out-of-
pocket expenses incurred in connection with the
performance of their duties, including travel expenses.
Performance, Service Contracts, Compensation
and Loss of Office
· The Directors’ remuneration is not subject to any
performance related fee.
· No Director has a service contract.
· No Director was interested in contracts with the
Company during the period or subsequently.
· The terms of appointment provide that a Director may
be removed without notice.
· Compensation will not be due upon leaving office.
· No Director is entitled to any other monetary payment
or any assets of the Company.
Directors’ & Officers’ liability insurance cover is maintained
by the Company on behalf of the Directors.
Directors’ Remuneration Report
62 Asia Dragon Trust plc
The Directors’ Remuneration Policy was last approved by
shareholders at the Company’s AGM on 7 December
2023. A resolution to approve the Directors’ Remuneration
Policy will next be proposed at the AGM to be held in 2026.
Implementation Report
Directors’ Fees
During the financial year the Board carried out a review of
Directors’ fees by reference to inflation, measured by the
increase in the Consumer Prices Index and taking account
of peer group comparisons by sector and by market
capitalisation. Following this review, it was decided that
the Directors’ base fee would be increased, with effect
from 1 September 2024, to £33,500 and the additional fees
payable would be increased to £13,500 (Chairman),
£6,000 (Audit & Risk Committee Chairman) and £2,000
(Senior Independent Director). Prior to these changes,
the last increase in Directors’ fees was effective from
1 September 2022.
1 September
2024
£
1 September
2023
£
Independent Director 33,500 32,000
Additional fee for Chairman 13,500 13,000
Additional fee for Chairman of
Audit & Risk Committee
6,000 5,750
Additional fee for SID 2,000 1,600
Company Performance
During the year the Board carried out a review of
investment performance. The graph below shows the
share price and NAV total return (assuming all dividends
are reinvested) to Ordinary shareholders compared to
the total return from a composite index, in Sterling terms,
consisting of the MSCI All Country Asia (ex Japan) Index
for the ten year period to 31 August 2024 (rebased to 100
at 31 August 2014). This index was chosen for comparison
purposes, as it is the reference index used for investment
performance measurement purposes.
80
100
120
140
160
180
200
220
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
NAV Share Price Index
Statement of Voting at Annual General
Meeting
At the Company’s last AGM, held on 7 December 2023,
shareholders approved the Directors’ Remuneration
Report (other than the Directors’ Remuneration Policy) in
respect of the year ended 31 August 2023. 99.87% of
proxy votes were in favour of the resolution and 0.13%
were against. Also at the AGM on 7 December 2023,
shareholders approved the Directors’ Remuneration
Policy with 99.87% of proxy votes in favour and
0.13% against.
Spend on Pay
As the Company has no employees, the Directors do not
consider it appropriate to present a table comparing
remuneration paid to Directors with distributions to
shareholders. However, for ease of reference, the total
fees paid to Directors are shown in the table on page 63
while dividends paid to shareholders are set out in note 8
and share buybacks are detailed in note 14.
Directors’ Remuneration Report
Continued
Asia Dragon Trust plc 63
Strategic Report Governance Overview Portfolio Corporate Information Financial Statements
Fees Payable (audited)
The Directors who served in the year received the
following fees which exclude employers’ NI and any VAT
payable. This represents the entire remuneration paid to
the Directors. Fees are pro-rated where a change takes
place during a financial year. No fees were paid to
third parties.
Director
2024
£
2023
£
James Will 45,000 45,000
Matthew Dobbs
1
32,347 32,000
Susan Sternglass Noble 32,000 32,000
Stephen Souchon
2
27,749 n/a
Nicole Yuen
3
25,956 n/a
Donald Workman
4
16,063 n/a
Gaynor Coley
5
26,080 37,750
Charlie Ricketts
6
23,213 33,600
Total 228,408 180,350
¹ Matthew Dobbs was appointed Senior Independent Director on 9 May 2024
2
Stephen Souchon was appointed to the Board on 9 November 2023 and became
Audit & Risk Chairman on 9 May 2024
3
Nicole Yuen was appointed to the Board on 9 November 2023
4
Donald Workman was appointed to the Board on 9 November 2023 and retired from
the Board on 9 May 2024
5
Gaynor Coley retired from the Board on 9 May 2024
6
Charlie Ricketts retired from the Board on 9 May 2024
Annual Percentage Change in Directors’ Remuneration
The following table sets out the annual percentage