asiadragontrust.co.uk
Asia Dragon Trust plc
Annual Report 31 August 2022
Asia Dragon Trust plc
Asia Dragon Trust plc 1
“While the Company cannot be immune to the
global picture or to geopolitical pressures, the
Board remains convinced of the long-term outlook
for Asia and the types of businesses favoured by
your Manager.”
James Will, Chairman
“Our focus remains on quality companies with
sustainable business models, robust finances and
access to structural growth drivers. We continue to
favour fundamental themes like consumption,
technology and green energy, which we believe
will deliver positive results for Shareholders
over the long run.”
Adrian Lim and Pruksa Iamthongthong,
abrdn (Asia) Limited
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.
2 Asia Dragon Trust plc
Net asset value total return
A
Net asset value per share
(
8.4
)
% 513.3
p
2021 +20.5% 2021 566.6p
Share price total return
A
Share price
(
11.8
)
% 446.0
p
2021 +24.3% 2021 512.0p
Benchmark total return (in sterling terms) Ongoing charges
A
(7.1)%
0.84%
2021 +14.7% 2021 0.83%
Earnings per share (revenue) Dividend per share
6.38
p
6.50
p
2021 7.36p 2021 6.50p
A
Considered to be an Alternative Performance Measure. Further details can be found on page 99. 
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
421.5
458.0
474.4
566.6
513.3
18 19 20 21 22
4.00
4.75
4.75
6.50
6.50
18 19 20 21 22
370.0
402.5
416.0
512.0
446.0
18 19 20 21 22
Performance Hi
g
hli
g
hts
Asia Dragon Trust plc 3
“ESG factors are considered in all investment
decisions, and also at Board level, where ESG
integration has become an increasingly
important part of our discussions over the course
of the year. The Trust’s portfolio is ESG AA rated
by MSCI, which is higher than the benchmark
rating of A.”
James Will, Chairman
Overview
Financial Calendar, Dividends and Highlights 4
Strategic Report
Chairman’s Statement 8
Investment Manager’s Review 11
Overview of Strategy 15
Our Manager’s Approach to ESG 22
Results 29
Performance 30
Portfolio
Ten Largest Investments 34
Investment Portfolio 35
Changes in Asset Distribution 38
Analysis of Portfolio 39
Investment Case Studies 41
Governance
Board of Directors 44
Directors’ Report 47
Statement of Corporate Governance 51
Audit and Risk Committee’s Report 56
Directors’ Remuneration Report 59
Statement of Directors’ Responsibilities 63
Financial Statements
Independent Auditors’ Report to the Members of Asia
Dragon Trust plc 65
Statement of Comprehensive Income 72
Statement of Financial Position 73
Statement of Changes in Equity 74
Statement of Cash Flows 75
Notes to the Financial Statements 76
Corporate Information
Alternative Performance Measures 98
Information about the Investment Manager 100
Investor Information 101
Glossary of Terms 105
Your Company’s Share Capital History 107
Alternative Investment Fund Managers Directive
Disclosures (Unaudited) 108
General
Notice of Annual General Meeting 110
Corporate Information 117
Contents
4 Asia Dragon Trust plc
Financial Calendar
Pre-AGM Investor Presentation
21 November 2022
Annual General Meeting
9 December 2022
Payment of Final Dividend
16 December 2022
Half year end
28 February 2023
Expected announcement of results for the six months
ending 28 February 2023
April 2023
Financial year end
31 Au
g
ust 2023
Expected announcement of results for the year ending 31
August 2023
November 2023
Dividends
Rate xd date Record date Payment date
Proposed final 2022 6.50p 10 November 2022 11 November 2022 16 December 2022
Final 2021 6.50p 18 November 2021 19 November 2021 17 December 2021
Financial Calendar,
Dividends and Hi
g
hli
g
hts
Asia Dragon Trust plc 5
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Highlights
31 August 2022 31 August 2021 % change
Performance
Total shareholders’ funds (£’000) 614,369 706,929 -13.1
Net asset value per share (capital return basis) (p) 513.32 566.60 -9.4
Net asset value per share (total return basis) (%) –8.4 +20.5
Share price (capital return basis) (p) 446.00 512.00 -12.9
Market capitalisation (£’000) 533,800 638,804 -16.4
MSCI AC Asia (ex Japan) Index (in sterling terms; capital return basis) 1,030.48 1,138.78 -9.5
MSCI AC Asia (ex Japan) Index (in sterling terms; total return basis) (%) –7.1 +14.7
Revenue return per share (p) 6.38 7.36 -13.3
Total return per share (p) (49.53) 96.60 -151.3
Dividend
Dividend per share (p) 6.50 6.50 –
Gearing
Net gearing (%)
A
9.0 7.9
Discount
Discount to net asset value (%)
A
13.1 9.6
Operating costs
Ongoing charges ratio
A
0.84 0.83
A
Considered to be an Alternative Performance Measure. Further details can be found on pages 98 and 99. 
6 Asia Dragon Trust plc
Strategic
Report
Asia Dragon Trust plc 7
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.
8 Asia Dragon Trust plc
Overview
As Shareholders are more than aware, the last 12 months
have been another challenging and, at times, turbulent
period for investors, with macroeconomic and geopolitical
risks coming to the fore. While Asian markets have proven
more resilient than those of other emerging markets, the
region could not entirely avoid the global concerns of
rising inflation, recession risk and conflict in Europe.
Against this backdrop, the MSCI AC Asia ex Japan fell 7.1%
over the 12 months, while the Company’s net asset value
(NAV) also declined, down 8.4%, on a total return basis.
The Company’s long term performance record remains
intact, outperforming its benchmark and recording a gain,
in NAV terms, of just under 30% in the five years to 31
August 2022.
Covid-19 again dominated the early part of the period
under review, as further lockdown measures hampered
recovery. However, as 2022 has progressed, most
economies have begun to reopen, as governments
ramped up vaccinations and loosened Covid restrictions.
As a result, improving tourism and increasing consumer
spending, due to the release of pent-up demand, have
aided economic recovery. This has particularly benefited
the Company’s holdings in the ASEAN region, with
positions in Indonesia, Singapore, and off-benchmark
holdings in Vietnam among the strongest performers. In
China, however, the ‘zero-Covid’ policy has continued,
dampening domestic activity and impacting global supply
chains. This has also put further pressure on an economy
already struggling with a weak property market and
tighter regulatory conditions. As a result, China was
among the market’s worst performers, albeit your
Company’s holdings have fared better in such a difficult
landscape, reflecting your Manager’s focus on quality and
opportunities with long-term structural growth prospects.
At the time of writing, China’s 20th Party Congress has just
ended with a new seven-strong CPC Politburo Standing
Committee being established. Xi Jinping has clearly
cemented his control of the party and the extent of this
has surprised the market. The Manager discusses this
more in their Review.
Russia’s invasion of Ukraine also contributed to global
inflationary pressures through the disruption of oil supplies,
driving Brent crude above US$100 per barrel at one point.
Supply fears boosted share prices and made Asia’s
energy sector one of the top performers over the period.
This was negative for the Company’s relative returns, as
we have no exposure to the sector. With the global
transition to renewables and growing need for new
energy sources, abrdn (Asia) Limited (the Manager)
favours pockets of opportunity within this segment,
especially the various parts of the supply chains for solar
and auto electrification, including the hardware required
for developing renewable energy.
One of the key themes impacting Asia has been tightening
US monetary policy, exacerbated by the build-up of global
inflationary pressures. The US Federal Reserve
implemented four interest rate increases over 2022, which
continued to drive a de-rating of expensive growth stocks
and a rotation to value for much of the period. While
inflation is lower in most Asian countries than elsewhere,
many central banks, including those in Indonesia, India,
and Korea, have also begun to raise interest rates. The
notable exception here is the People’s Bank of China,
which cut several key lending rates to support the
economy amid significant domestic growth challenges. As
I said in this year’s interim report, prudent policies mean
that most Asian policymakers have monetary and fiscal
room for manoeuvre, which mean they are better able to
mitigate any serious slowdown in growth.
Given the global backdrop, your Manager has assessed
the portfolio to ensure that it includes high-quality stocks
that should prove more resilient to volatile markets,
consolidating exposure into companies that are best able
to withstand tougher operating conditions and seize long-
term structural growth opportunities. Environmental,
social and governance (ESG) factors are also considered
in all investment decisions, and also at Board level, where
ESG integration has become an increasingly important
part of our discussions over the course of the year. The
Trust’s portfolio is ESG AA rated by MSCI, which is higher
than the benchmark rating of A.
You can find more detail on performance and portfolio
activity in the Investment Manager’s Review, and our
approach to ESG in the ESG report.
Chairman’s Statement
Asia Dragon Trust plc 9
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Gearing
The Board believes that the sensible use of modest
financial gearing should enhance returns to shareholders
over the longer term. At the beginning of the financial year
the Company had in place a £75 million three-year loan
facility with Scotiabank Europe plc, of which £25 million
was fixed and fully drawn down with a further £40 million
of the revolving £50 million facility drawn down. The
facility expired in July 2022 and the Board was pleased to
announce that it had entered into loan facilities totalling a
commitment of £60 million with The Royal Bank of
Scotland International Limited, London Branch. The
facilities, which are unsecured, consist of a two-year fixed
facility of £25m, which is fully drawn, and a two year £35m
multi-currency revolving credit facility which has also
been fully drawn.
At 31 August 2022, the Company’s net gearing position
was 9.0%, compared to 7.9% at the end of August 2021.
The Investment Manager continues to monitor closely
gearing levels and bank covenants. As at 28 October
2022, the Company’s net assets stood at £490m and net
gearing was 11.3%. These levels 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 the Investment Manager and
share buybacks are undertaken when appropriate. During
the year ended 31 August 2022, 5.1 million shares were
bought back into treasury at a cost of £24.0 million (2021:
1.6 million shares were bought back into treasury at a cost
of £7.7 million). Since 31 August 2022, a further 651,351
shares have been bought back into treasury at a cost of
£2.7 million. The discount at the financial year end was
13.1% (2021: 9.6%). As at 28 October 2022, the discount
was 13.3%.
Revenue Account
The Company’s revenue return per share was 6.38p for
the year to 31 August 2022 (2021 – 7.36p). As reported in
the last annual report, the Company adopted a new policy
for the allocation of management fees and finance costs
during the financial year to 31 August 2021. The new
policy, to allocate 25% to revenue and 75% to capital,
continues to apply to the Company.
The Board has declared a final dividend of 6.5p per
Ordinary share (2021 – 6.5p). The Board has taken the
decision to draw on revenue reserves in order to maintain
the level of dividend to be paid to shareholders. The
dividend, if approved by shareholders at the Annual
General Meeting, will be paid on 16 December 2022 to
shareholders on the register on 11 November 2022.
The Board
The Board regularly undertakes a review of its
performance and structure to ensure that it has the
appropriate mix of relevant skills, diversity and experience
for the effective operation of the Company’s business.
Having served nine years on the Board, the Board was
sorry to see Kathryn Langridge retire at the AGM in
December 2021. However, we were delighted to
welcome Matthew Dobbs as a non-executive Director
with effect from 1 February 2022. Mr Dobbs is a renowned
Asian and Small Companies investment expert and brings
a wealth of knowledge and experience to the Board.
Annual General Meeting
In a return to the familiar format before the onset of
Covid-19, the AGM will, once again, be held in person. The
AGM in 2021 was held in Edinburgh and the Board has
agreed that the AGM in 2022 should be held in London.
The AGM will take place on Friday, 9 December 2022 at
12.00pm at the offices of abrdn plc, in Bow Bells House, 1
Bread Street, London EC4M 9HH.
The AGM provides shareholders with an opportunity to ask
any questions that they may have of either the Board or
the Manager. I look forward to meeting as many of you as
possible over refreshments which will follow the AGM.
Shareholders, whether attending the AGM or not, are
encouraged to submit questions for the Board and/or the
Manager, in advance, by email to asia.dragon@abrdn.com.
10 Asia Dragon Trust plc
Online Shareholder Presentation
In order to encourage as much interaction as possible with
our shareholders, we will be hosting an Online Shareholder
Presentation, which will be held at 11:00am on 21
November 2022. At this event there will be a presentation
from the Investment Manager followed by an opportunity
to ask live questions of the Chairman, Senior Independent
Director and the Investment Manager. The online
presentation is being held ahead of the AGM to allow
shareholders time to submit their proxy votes after the
presentation but prior to the deadline for submitting
proxies for the AGM should they so wish. Full details on
how to register for the online event can be found at
https://www.workcast.com/register?cpak=350184925450
9496.
Outlook
Given the background I referred to above, the
macroeconomic position and geopolitical turbulence are
unlikely to make the overall investment backdrop less
volatile. Asia, however, is still less vulnerable than other
emerging markets, given better economic and corporate
fundamentals. It also has yet to experience the surge in
inflation on the scale seen in the more developed markets
like Europe and the US.
Furthermore, the region is home to companies aligned
with strong long-term structural growth themes, among
them the move to decarbonisation as policy makers
globally commit to a greener future. Other themes
include rising affluence in Asia, increased urbanisation and
an infrastructure boom, and the growth in 5G, big data
and digital interconnectivity.
While it cannot be immune to the global picture or to
geopolitical pressures, the Board remains convinced of
the long-term outlook for Asia and the types of businesses
favoured by your Manager; we support the Manager’s
view that the current environment should see companies
with strong balance sheets and sustainable earnings
prospects well positioned to emerge from the current
difficult period.
James Will
Chairman
31 October 2022
Chairman’s Statement
Continued
Asia Dragon Trust plc 11
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Portfolio review
It has been a year beset by multiple crises for Asian
equities, including the coronavirus resurgence, war in the
heart of Europe and recession risk. China experienced
localised lockdowns under Beijing’s zero-Covid policy,
which disrupted international supply chains and
constrained domestic growth. China’s stance was in
stark contrast to that of other countries in Asia, where
loosened Covid measures led to a gradual re-opening
of their economies.
Meanwhile, Russia’s invasion of Ukraine triggered a
commodity price shock, pushing up already-high inflation
and hastening the reversal of accommodative monetary
policies globally as evidenced by rising interest rates. This,
in turn, deepened concerns over a global recession. In
market terms, rising interest rates resulted in significant
rotation away from growth stocks towards value across
the globe.
Against this background the MSCI Asia ex Japan Index fell
by 7.1% on a total return basis. In comparison, your
Company’s net asset value (NAV) fell by 8.4%. We
continue to take a longer-term view with regard to
investment and our longer-term investment record
remains positive when compared to the benchmark index.
Given the volatile markets it is perhaps unsurprising that
performance was impacted, both positively and
negatively, by more factors than usual. China remains the
Company’s largest individual exposure and, because of
our strong stock selection in the country, it had the largest
positive impact in relative performance terms when
compared to our benchmark. The largest detractor from
performance, again in country terms, was India. In sector
terms, the largest positive contributor was the Food and
Beverages sector and the largest detractor, where we
had no exposure, was the Energy sector. We have sought
to provide more colour on each of these below:
China & Hong Kong
The mainland Chinese market was amongst the worst
regional performers over the period. Strict Covid controls,
regulatory tightening, liquidity concerns around the real
estate sector and continued tensions with the US weighed
on investor confidence, even while extensive policy
support dispelled some of the gloom. Our average
portfolio exposure was somewhat below the benchmark’s
36% China weighting and this, helped by our overweight to
more domestically orientated stocks, aided returns
relative to the index.
This portfolio positioning reflects our focus on key
investment themes such as aspirational spending,
digitalisation, renewable energy, health and wealth.
Although Covid and a slowing economy have placed
short-term pressure on aspirational spending, we believe
the consumption upgrade is a generational shift and one
supported by the government to increase self-sufficiency.
Over the year our stock selection in China contributed
positively to our performance, helped by our bias towards
high-quality companies and an emphasis on these
structural growth opportunities. Among the portfolio’s
standout performers in China were holdings that reflected
our core themes of green energy and aspiration, where
rising affluence spurs demand for premium goods and
services. Nari Technology was buoyed by policy supporting
the development of renewable energy in China. This grid
automation provider, an indirect play on clean energy, is
well placed to benefit from power-grid reform. Liquor
maker Kweichou Moutai defied the market slump thanks
to its pricing power and earnings resilience. The liquor
maker’s brand value gives it significant competitive
advantage in the domestic Chinese market, and we
believe that it is well placed as demand for premium
products and services grow alongside rising incomes from
a growing middle class in China. Other names that
outperformed included Hong Kong companies Budweiser
APAC
,
which fared well from a share price and demand
perspective, notwithstanding Covid-related disruptions,
and AIA Group which benefited from the economic
reopening outside of China and anticipation of better
investment yields. AIA Group’s premium market position
and diversified pan-Asian revenue sources give it notable
defensive characteristics in the current environment.
Investment Mana
g
er’s Review
12 Asia Dragon Trust plc
The performance of these stocks offset the negative
impact of a period of regulatory uncertainty around the
Chinese internet sector where we had a number of
holdings. We have consolidated these into our core
holdings, including Alibaba Group, Tencent Holdings and
Meituan. We also built on the small position in JD.com, after
receiving its shares from Tencent Holdings through an in-
specie distribution. JD.com directly procures inventory
which it sells to consumers and delivers primarily via its in-
house logistics network. The company has built up
significant scale and differentiates itself through superior
customer experience. Valuations are attractive, while the
sector’s long-term outlook remains promising. Although
policy changes are disruptive, they could help to create a
better functioning market and more sustainable growth,
which should drive re-ratings for e-commerce companies
over the longer term.
We have been increasing our China A-share exposure
where we see unique longer-term opportunities not
available offshore, particularly those aligned with Beijing’s
strategic objectives. Localisation of supply chains, for
example, has accelerated as a result of China’s pursuit of
self-reliance in critical industries. Battery maker
Contemporary Amperex Technology
(CATL), an earlier
initiation highlighted in the interim report,
is well positioned,
given its economies of scale and know-how, to gain from
China’s push towards electric vehicle (EV) adoption. More
reasonable valuations also allowed us to add to Mindray,
another beneficiary of China’s self-sufficiency drive. The
medical equipment maker’s high-quality diversified
portfolio of products reflects its heavy focus on research
and development. Other noteworthy top-ups include
well-established snack producer Chacha Food, where we
see considerable growth potential given the highly
fragmented industry.
With the recently ended Party Congress in China we
believe that the overall direction remains broadly
unchanged. The main focus remains on the continued
drive for Common Prosperity and technology localisation
efforts to improve resilience and self-sufficiency. Following
the Congress, both onshore and offshore Chinese stock
markets saw a sell-off on the back of concerns that
President Xi could sacrifice economic growth for policies
driven by ideology. In particular, the market was
disappointed at the lack of a specified timeline for bringing
an end to the zero-Covid policy and also the fact that no
detailed stimulus plans were laid out. Taking a step back
and reviewing the economic policies and reform initiatives
of the government over the last few years, these
measures have largely been positive and aimed at better
positioning China for future growth and increasing the
country’s long-term competitiveness. For example, the
deleveraging of the property sector and channelling of
capital to more productive and strategic areas have been
correct, directionally at least. However, these good policy
intentions have at times been plagued by poor execution
which has led to underwhelming outcomes, to say the
least. With a more aligned new leadership team, we
believe execution should be more efficient and effective
going forward but the jury is clearly out at this stage and
geo-political tension has increased, at least in the short
term. The themes that are driving our investments in
China have not been impacted as a result of these political
changes.
India
In India, several of our financial sector holdings added
value. SBI Life Insurance, mortgage lender Housing
Development Finance Corp
(HDFC)
and Kotak Mahindra
Bank all outperformed, helped by higher interest rates and
the economic reopening. Separately, we believe HDFC’s
merger with subsidiary HDFC Bank will drive scale
efficiencies and create new growth opportunities for the
group over the medium term. These contributions,
however, failed to offset the overall negative impact of our
India exposure on portfolio performance. Stock selection
in India – notably the lack of exposure to Reliance
Industries – was the key driver of underperformance. The
conglomerate rallied on higher oil prices and expectations
of stronger refining margins. Additionally, our small
position in online insurance platform PB Fintech
suffered
due to the rotation away from growth stocks, referred to
above.
We remain sanguine about India which is home to many
quality companies underpinned by structural tailwinds. A
salient introduction over the year was Power Grid
Corporation of India. The power transmission company will
play a prominent role in the growth of renewable energy
delivery to the grid in the decades ahead as India shifts to
clean energy. We also added Infosys, a leading software
developer backed by strong management, solid financials
and a sustainable business model. We view both firms’
openness to engaging with us on ESG matters favourably.
With regard to the portfolio, as a whole, we have a strong
conviction that sound ESG credentials can both
complement a company’s quality and reduce portfolio
risks while improving long-term returns. A comprehensive
report of our active engagement with the Trust’s
underlying companies can be found on pages 23 to 25.
Investment Mana
g
er’s Review
Continued
Asia Dragon Trust plc 13
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Energy
The Trust’s zero exposure to energy detracted from
performance as energy prices surged following the
outbreak of war in the Ukraine. We are wary of the cyclical
nature of earnings that typifies the sector, as well as the
significant State interference in many national oil
companies. The Ukraine war has also highlighted the
vulnerability of an over-dependence on fossil fuels and
accelerated the global adoption of renewable energy,
which is a clear structural trend over the medium to long
term. Hence, our preferred exposure to energy is through
the renewables space via investments in renewable
energy, batteries, the EV supply chain and related
infrastructure; these do not feature in the MSCI’s Energy
sector. The global green-energy transition is well
underway, and Asia is dominant in the clean energy
supply chain. In addition to the aforementioned CATL and
Nari, we are positive on China-based Longi Green Energy
Technology, the world’s largest solar wafer maker, and
Sungrow, a global supplier of solar inverters. We added to
both of the latter two over the year as their many
strengths include a formidable cost advantage and
superior product quality.
Financials
Financial stocks are traditionally among the beneficiaries
of a rising interest rate environment. As well as in India, the
Trust’s exposure in this area was positive in Southeast Asia,
as the region’s belated relaxation of Covid restrictions
resulted in growth during the year. Our long-held
conviction in Indonesia and Singapore was especially
rewarding. Indonesia’s Bank Central Asia
and Singapore
lenders DBS Group and OCBC advanced on higher interest
rates and improving economic growth. We added to them
over the period as rising interest rates should boost net
interest margins. They are already seeing improving asset
quality metrics and increased demand for loans as
restrictions ease.
Other Portfolio Activity
The growth company sell-off impacted our holdings in
South Korean internet application provider Kakao Corp
and Taiwan-listed integrated circuit maker Silergy Corp.
Meanwhile, market turmoil led to opportunities to add
some new names to the portfolio. Apart from Thailand’s
Kasikornbank, which we detailed in the interim report,
more recent additions included Astra International and
Singtel. Astra is a well-managed conglomerate; as well as
being the industry leader in cars and motorcycles, it is also
a strong player in auto financing, mining services,
plantations and infrastructure. Telecom operator Singtel
has steady operations in Singapore and Australia, while its
regional franchises are exposed to growth in Asia’s
emerging markets. The company offers a healthy
dividend yield, buttressed by sound financials and cash
flow, with new leadership executing well on more efficient
capital allocation and management.
To help to navigate the near-term challenges we took a
number of other actions. We trimmed our technology
exposure as recession risks clouded the demand outlook,
especially for the semiconductor hardware segment, with
sales of ASM Pacific Technology, Accton Technology and
GlobalWafers. We are also monitoring the broader cost
inflation picture and its subsequent impact upon
corporate profitability. We have scrutinised our holdings,
ascertaining their ability to pass on cost pressures and
protect their margins. Accordingly, we trimmed and exited
positions in companies that could be more vulnerable in
the rising cost environment, with Midea and Wanhua
Chemical among the divestments.
Outlook
Volatility has been a feature of global stock markets in
recent years. That appears unlikely to change any time
soon. Markets continue to face a daunting set of
challenges: rising interest rates to stem inflation,
geopolitical risk, energy and food crises, and an
increasingly fragile world economy.
Asia will not be immune to global developments. The good
news is that the region is likely to be in a better position
than developed economies in the West. The pace at
which consumer prices are rising across most parts of Asia
is still relatively slow; this has allowed central banks to
adopt a more gradual stance in raising interest rates to
stem inflationary pressures.
On a related point, this difference in the pace of interest
rate increases between the developed West and Asia is
also resulting in US dollar strength, with US dollar assets
yielding more, and relative Asian currency weakness. We
have seen some Asian central banks intervene in the
foreign exchange market to support their domestic
currencies, some of which have fallen to multi-year lows
against the US dollar.
14 Asia Dragon Trust plc
On the ground, we are receiving more reports from our
holdings of rising input costs and the pressure on margins
but, encouragingly, the earnings of many of our holdings
have met our expectations in the latest results reporting
season. This environment reinforces the importance of
innovation, a premiumisation strategy, brand equity
and/or channel control.
We should also not forget that many economies,
particularly those in South-East Asia, are still recovering
following their post-Covid reopening, and this should help
to support earnings.
China continues to be a cause of market angst, with
Beijing’s zero-Covid policy a key overhang. However, we
are cautiously upbeat about its outlook. The country
remains an outlier in the global tightening cycle thanks to
benign inflation. We expect a continued recovery in
economic activity as monetary easing and stimulus
measures take effect. The next few months should also
provide greater clarity on the policy front, and we think the
central government will continue with measures to
support and stabilise the economy.
More broadly, we would highlight that valuations of Asian
stocks are attractive, below the long-term average and
below the valuations of US and global markets.
Against this backdrop, we have sought to position the
portfolio to weather near-term risks while keeping in mind
Asia’s long-term structural trends. Our focus remains on
quality companies with sustainable business models,
robust finances and access to structural growth drivers.
We continue to favour fundamental themes like
consumption, technology and green energy, which we
believe will deliver positive results for Shareholders over
the long run.
Adrian Lim and Pruksa Iamthongthong
abrdn (Asia) Limited
31 October 2022
Investment Mana
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Continued
Asia Dragon Trust plc 15
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
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 2022 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.
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.
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, called
Aberdeen Standard Fund Managers Limited until 31 July
2022, (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.
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.
For the purposes of achieving the Investment Policy and
Objective, the Investment Manager is permitted to invest
up to 30% of the portfolio in companies which are not
listed in the Asia Pacific region but which generate more
than 50% of annual turnover or revenue in the region.
A comprehensive analysis of the Company’s portfolio by
country and by sector is disclosed on pages 39 and 40,
including a description of the ten largest investments, the
full investment portfolio by value and sector/geographical
analysis. At 31 August 2022, the Company’s portfolio
consisted of 61 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 2022, the Company’s
net gearing was 9.0%.
Overview of Strate
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16 Asia Dragon Trust plc
Principal and Emerging Risks and
Uncertainties
The Board carries out a regular review of the risk
environment in which the Company operates, changes to
the environment and individual risks. 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 Board has considered
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 are 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.
The principal risks and uncertainties facing the Company,
which have been identified by the Board, are described in
the table below, together with the 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 was a key risk during the financial year, as
well as the ongoing tensions between China and Taiwan,
China and the West, and the Russian invasion of Ukraine,
all of which created geo-political uncertainty which
further increased market risk and volatility. The impact of
the global pandemic and the risk of its return remain, not
least in China where a zero-covid policy continues to stifle
economic activity.
The Board is also very conscious of the risks resulting from
the increased ESG challenges. The recent 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.
In all other respects, the Company’s principal risks and
uncertainties have not changed materially since the date
of this Annual Report and are not expected to change
materially for the current financial year.
Risk Mitigating Action
Major market event or geo-political risk
The Company is exposed to stockmarket
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.
Risk Increased 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.
Unacceptable Discount Volatility
Failure to manage the discount effectively or an
inappropriate marketing strategy could result in
the Company’s share price trading at a
discount to its underlying net asset value and
reduced investor sentiment.
Risk Increased during the year
The Board monitors the discount level of the Company’s shares and has in place
a buyback mechanism whereby the Manager is authorised to buy back shares
within certain limits. The macroeconomic and geopolitical challenges during the
year led to volatility in equity markets and a widening of the Company’s share
price discount to NAV. As a result, the Company bought back 5.1 million shares
into treasury. The Board and Manager communicate with major shareholders
regularly to gauge their views on the Company, including discount volatility.
Overview of Strate
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Risk Mitigating Action
Investment Performance
The Company’s investment performance is the
most critical factor to the Company’s long-term
success. Sustained underperformance may
result in reduced demand for the Company’s
shares and loss of investor confidence.
Risk Unchanged during the year
The Board continually monitors the investment performance of the Company,
taking account of stockmarket 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. In addition to its own due diligence, the Board has previously used
consultants to provide an independent perspective on the Manager’s process
and performance.
The Board and Manager communicates with major shareholders regularly to
gauge their views on the Company, including performance.
At the AGM in 2021, shareholders voted in favour of the introduction of a
performance-related conditional tender offer, which will take place every five
years. The first performance-related period runs from 1 September 2021 to
31 August 2026.
Concentration Risk
Trading volumes in certain securities of
emerging markets can be low. The Investment
Manager may accumulate investment positions
across all its managed funds that represent a
significant multiple of the daily trading volumes
of an investment which may result in a lack of
liquidity and price volatility. Accordingly, the
Company will not necessarily be able to realise,
within a short period of time, an illiquid
investment and any such realisation that may
be achieved may be at considerably lower
prices than the Company’s valuation of that
investment for the purpose of calculating the
NAV per Ordinary share.
Risk Unchanged during the year
The Board reviews, on a regular basis, the Manager’s total holdings for each
stock within the Company’s portfolio and the liquidity of these stocks. The Board
also considers the portfolio’s stock, sector and country concentration to ensure
that the portfolio is suitably diversified and exposure is not overly concentrated in
any particular region or sector.
Resource
The Company is an investment trust and has no
employees. The responsibility for the provision
of investment management, marketing and
administration services for the Company has
been delegated to the AIFM, abrdn Fund
Managers Limited, under the management
agreement. The terms of the management
agreement cover the necessary duties and
conditions expected of the Manager. As a result,
the Company is dependent on the
performance of the AIFM.
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.
18 Asia Dragon Trust plc
Risk Mitigating Action
Operational
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 operations,
including that caused by information
technology breakdown or other
cyber-related issues.
Risk Unchanged during the year
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.
The operational requirements of the Company, including its service providers,
were subject to rigorous testing during the Covid-19 pandemic, including
increased use of online communication and out of office working and reporting.
Gearing
As at 31 August 2022 the Company had £60
million of bank borrowings. Gearing has the
effect of exacerbating market falls and gains.
Risk Unchanged during the year
In order to manage the level of gearing, the Board has set a maximum gearing
ratio of 20% of net assets and receives regular updates from the Manager on the
actual gearing levels the Company has reached together with the assets and
liabilities of the Company and reviews these at each Board meeting.
Regulatory
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 UKLA 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.
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.
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Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
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 as follows.
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 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.
Further analysis of the above KPIs is provided in the Chairman’s Statement.
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 consists of five Directors 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 Pre-AGM
Investor Event 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 Manager’s customer services team or 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
secretarial, administration, depositary, custodial, banking
and audit services.
20 Asia Dragon Trust plc
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, whilst
taking ESG factors into account. The Board typically visits
the Manager’s offices in Singapore on an annual basis.
This enables the Board to conduct due diligence of the
fund management and research teams. Due to the travel
restrictions arising from the Covid-19 pandemic during
the financial year, the Board undertook a virtual visit to the
region to conduct due diligence on the fund management
and research teams. The Board met with the senior
management team and the fund management team and
attended virtual 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 focused on the performance of
the Manager in achieving the Company’s investment
objective within an appropriate risk framework. In addition
to ensuring that the Company’s investment objective was
being pursued, a number of key decisions and actions
were undertaken by the Directors as follows:
· The Board has declared a final dividend of 6.5p per
Ordinary share (2021 – 6.5p) which, if approved by
shareholders at the Annual General Meeting, will be paid
on 16 December 2022.
· The Board has continued to consider Board succession
planning, as it recognises the benefits of regular Board
refreshment, and appointed Matthew Dobbs as a new
non-executive director on 1 February 2022, following
the retirement of Kathryn Langridge at the Company’s
AGM in December 2021.
· To continue the Board’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. The Company has in
place loan facilities totalling a commitment of £60 million
with The Royal Bank of Scotland International Limited,
London Branch. The facilities, which are unsecured,
consist of a two-year fixed facility of £25m, which is fully
drawn, and a two year £35m multi-currency revolving
credit facility which has also been fully drawn.
· The Board continues to alternate the location of its AGM
between Edinburgh and London to allow the Board to
physically meet with shareholders in different locations.
In order to encourage as much interaction as possible
with shareholders, the Board has agreed to host an
Online Shareholder Presentation, in advance of the
AGM, to allow as many shareholders as possible to
engage with, and ask questions of, the Board.
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 sustainable success of the Company is linked directly
to its key stakeholders.
Duration
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 is 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 2022
there were three male Directors and two female Directors.
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 22 to 28.
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Asia Dragon Trust plc 21
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Viability Statement
In accordance with the provisions of the Listing Rules and
UK Corporate Governance Code the Board has assessed
the viability of the Company. The Company is a long-term
investor, and the Board believes it is appropriate to assess
the Company’s viability over a five year horizon which
reflects the Investment Manager’s long-term approach.
The Directors believe this period reflects a proper balance
between the long-term horizon and the inherent
uncertainties of looking to the future. This conclusion is
consistent with Going Concern Assessment on page 48.
In assessing the viability of the Company, the Directors
have carried out a robust assessment of the
following factors:
· the principal risks set out in the Strategic Report on
pages 16 to 18 and the steps available to mitigate these
risks;
· the liquidity and diversity (in both sector and
geography) of the Company’s investment portfolio. The
Company is invested in readily realisable listed securities
in normal market conditions and there is a spread of
investments held. Stress testing has confirmed that
shares can be easily liquidated, despite the more
uncertain and volatile economic environment;
· the level of revenue surplus generated by the Company;
· the level of gearing is closely monitored by the Board.
Covenants are actively monitored and there is
adequate headroom in place. The Company has a fixed
term loan facility of £25 million and a multi-currency
revolving loan facility of £35 million in place until July
2024. The Company has the ability to repay its gearing
through proceeds from equity sales or renew the facility,
depending on market conditions and requirements at
that time; and
· the successful passing of the continuation vote at the
Company’s AGM in 2021, the change of frequency of
continuation vote from every three years to every five
years (with the next continuation vote due to take place
at the AGM in 2026), and the introduction of the five-
yearly performance-related conditional tender.
Taking into account all of these factors, the Company’s
current position and the potential impact of the principal
risks and uncertainties faced by the Company, the Board
has concluded that it has a reasonable expectation that
the Company will be able to continue in operation and
meet its liabilities as they fall due over the five year period
of this assessment to 31 August 2027.
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 rising inflation, recession risk, a further increase
in geo-political tension in the Asian region, war in Ukraine,
economic shocks or significant stock market volatility
caused by other factors, 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
31 October 2022
22 Asia Dragon Trust plc
The Company aims to outperform whilst maintaining a
better ESG profile and a lower carbon footprint than the
benchmark. In response to a number of questions, the
Board has expanded the “Our Manager’s Approach to
ESG” in the Annual Report to present more information on
the Investment Manager’s approach to integrating ESG
into its investment decision-making and the implications
for the Trust.
ESG Highlights for Asia Dragon
· We have been actively integrating ESG into our
investment decision-making process for 30 years and
believe that ESG factors are financially material and can
meaningfully affect a company’s performance
· Deep, on the ground ESG resources and expertise
enable us to glean insights from company visits and
obtain an ESG information advantage
· The Trust’s portfolio is ESG AA rated by MSCI
· The Trust’s carbon footprint is 48% of its benchmark
What is ESG?
· Environmental factors relate to how a company
conducts itself with regard to environmental impact and
sustainability. Types of environmental risks and
opportunities may include a company’s energy and
water consumption, waste disposal, land use and
development and its carbon footprint.
· Social factors pertain to a company’s relationship with its
employees, vendors, and a broad set of societal
stakeholders. Risks and opportunities include conditions
and rates of pay, the company’s initiatives on employee
attraction and retention, gender discrimination and how
a company is managing its supply chain, including for
example the risk of forced and child labour.
· 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.
The Manager’s 30 Year Leadership in ESG activities
Our Mana
g
er’s Approach to ESG
Asia Dragon Trust plc 23
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
ESG at abrdn in Asia
The abrdn Sustainability Institute, in Asia Pacific, was
launched in September 2021. Bringing together
sustainability experts from across the firm, the Institute’s
objectives are to deliver Asia Pacific-centric sustainability
solutions and insights, build an Asia Pacific sustainable
investing knowledge community and contribute to
progress in regional sustainable investing.
Over the past year, we have ramped up our sustainable
investing capabilities in Asia Pacific, doubling our
dedicated sustainability resources from five to 10
colleagues across various teams. In addition, under our
‘Grow Sustainably’ learning & development program, we
hired 10 interns for sustainability-focused roles across
investment desks, research, marketing and compliance
teams in Singapore, Malaysia and Australia and are
supporting them through external qualifications. In
addition, two scholarships were granted for colleagues to
attend online courses.
In May 2022, we held our first ever abrdn Sustainability
Week, also celebrating our 30 years of investing in Asia
Pacific. The week culminated with the abrdn Sustainability
Summit, a one-day hybrid conference bringing together
colleagues, clients and partners from Singapore and
across the region. Insights from the conference were
shared with the broader public in our regular Thinking
Aloud articles. We also held our first leadership roundtable
in Singapore, to discuss climate change and net-zero
alignment in Asia Pacific with key clients and our subject-
matter experts. Going forward, we will seek to replicate
this roundtable across our key regional markets.
Our Investment Process
Our investment process considers both macro and
micro ESG issues.
· Macro ESG factors are broad thematic issues that
impact companies and the products and services they
provide. These include issues like climate change,
access to finance or access to healthcare. These are
secular, industry-impacting trends that may present a
clear risk or opportunity for a company.
· Micro ESG factors are company/industry specific issues
that relate to how a company’s products or services are
made or delivered.
Our five stages of ESG integration:
· Idea generation: Understanding themes and dynamics
inherent in sectors, countries, and companies, we are
able to use ESG as a lens to generate new investment
ideas for the portfolio. This could include companies that
are well placed to help in climate transition or
companies that are managing their supply chain in a
way that makes them more attractive to global clients.
· Research: ESG disclosure by companies in Asia tends to
be lower quality than might be observed in Europe or
North America but while such disclosure means it may
be challenging to collect information, it also means that
extensive company due diligence by us can create
investment opportunities.
· Buy / sell: At this stage we must weigh the decision to
buy (or sell) a company. We have a quality threshold for
investment and ESG is a fundamental and non-
negotiable part of this.
· Portfolio Construction: Whilst a simplification, the better
quality a company, and the more conviction we have in
the company, the more of that company we might elect
to buy (whilst being sensitive to valuations). ESG is a key
part of the discussion around ‘position sizing’, or just how
much of a company to buy.
· Engagement: We continue discussing ESG issues with
senior management over the course of the investment,
both to protect and to enhance the value of investments
through constructive challenge and debate around
strategy and execution, with the mutual aim of fostering
sustainable shareholder returns.
The Importance of Engagement
We believe that informed and constructive engagement
helps to foster better companies, enhancing the value of
the Trust’s investments. We are committed to regular,
ongoing engagement with companies to help maintain
and enhance their ESG standards into the future. These
meetings provide an opportunity to discuss various
relevant ESG issues including board composition,
remuneration, audit, climate change, labour issues, human
rights, bribery and corruption. Companies are strongly
encouraged to set clear targets or key performance
indicators on all material ESG risks so as to enable
performance monitoring. Discussions cover both risk and
opportunities; we constructively challenge management
teams on issues relating to strategy and execution, as well
as capital allocation and return.
24 Asia Dragon Trust plc
Moreover, and since ESG disclosure by Asian companies is
often poor, these engagements give us 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 our research capabilities including on-
site, face to face visits, we are able to develop an
informed view of every company and to exploit any
pricing inefficiency that we judge may exist.
· Close the information gap: if we own a company that is
misunderstood by the market, we 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.
Considering Trust specific examples, the Trust owns
shares in Budweiser Brewing Company APAC Ltd., a
company which listed in Hong Kong in 2019. Whilst we
viewed the company as high quality, MSCI had awarded
the company a BB rating, an overly negative view of the
company in our view (and well below our internal rating).
Since listing in 2019 we have engaged with the company
to better understand it’s approach to issues including
water stress management, encouraged the company to
disclose more information, and spoken with MSCI to
encourage them to recognise the quality of the group.
These efforts resulted in a series of upgrades by MSCI,
from BB to BBB in October 2020, from BBB to A in
December 2021, and from A to AA in June 2022 .
The same is true of China Resources Land, recently
upgraded MSCI from BBB to A, continuing a series of
upgrades which saw the firm upgraded from B to BB
(October 2020), from BB to BBB (August 2021), and from
BBB to A (August 2022). This is very pleasing given we had
been engaging with the group to improve their disclosure
– and hence receive scores that reflected the ESG quality
of the firm – for a number of years now.
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. During the period under review the breadth of
issues covered in ESG specific company engagements for
the Trust covered Climate Change (including air quality
and energy management), Environment (including waste
and waste management, and supply chain
management), Labour Management (including health
and safety), Human Risk & Stakeholders, Corporate
Behaviour (including Practices and Processes) and
Corporate Governance. The split of time spent engaging
on each topic can be broken down as follows:
Our Mana
g
er’s Approach to ESG
Continued
Asia Dragon Trust plc 25
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
ESG Engagement
Our Engagement Activity
We regularly engage with companies we invest in. The
below shows the engagements that have included ESG
topics. Over the period we met with 38 portfolio
companies on ESG topics and had 62 engagements with
them. This does not include positions we have moved out
of or are considering. Below are the themes engaged on:
Our Voting Activity
Voting Summary Total
How many meetings were you eligible to vate at? 125
How many meetings did you vote at? 123
How many resolutions were you eligible to vote on? 1,040
What % of resolutions did you vote on for which you
were eligible?
98.1%
Of the resolutions on which you voted, what % did
you vote with management?
92.1%
Of the resolutions on which you voted, what % did
you vote against management?
6.4%
Of the resolutions on which you voted, what % did
you abstain from voting?
1.6%
In what % of meetings, for which you did vote, did
you vote at least once against management?
35.0%
Measurement of ESG, including our 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, we allocate 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
Climate
Environment
Labour Management,
Diversity & Inclusion
Human Rights &
Stakeholders
Corporate Behaviour
Corporate Governance
26 Asia Dragon Trust plc
We also make 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. We
buy 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: We use third party data and scoring as a proxy for market perception and
make use of these scores to compare with internal assessments. If the market views a company as low quality and we
see 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 we are interested in the journey as much as arrival.
Taking an independent view on ESG allows us to anticipate upgrades and drive change through our engagement.
External research agencies primarily use backward looking data to create ESG ratings and in doing so form the market
view of a company’s ESG credentials. Through our fundamental research we form a forward-looking view of company’s
ESG credentials and anticipate changes, attempting to take advantage of this inefficiency.
As per the chart below, dark blue bars represent our internal scoring and purple bars represent that of an external
research agency. This shows that the external rating agency has rated a number of our holdings as below average and
laggards while we hold a different view that many of these companies are in fact leaders and improvers based on our
internal research work. Taking an independent view allows us to find good ESG companies before they get “discovered”
by the external market.
Our Mana
g
er’s Approach to ESG
Continued
Asia Dragon Trust plc 27
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
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 a core part of the investment process. In
particular, we consider:
· Transition risks and opportunities. Governments can
take robust climate change mitigation action to reduce
emissions and transition to a low-carbon economy. This
is reflected in targets, policies and regulation and can
have a considerable impact on high-emitting
companies.
· Physical risks and opportunities. Insufficient climate
change mitigation action will lead to more severe and
frequent physical damage. This results in financial
implications, including damage to crops and
infrastructure and the need for physical adaptation
such as flood defences.
We are a signatory to the UN supported Principles for
Responsible Investment (PRI) and has aligned our
approach to that advocated by the PRI agenda. This aims
to promote responsible investment as a way of enhancing
returns and better managing risk.
PRI provides an intellectual framework to steer the
massive transition of financial capital towards low-carbon
opportunities. It also encourages fund managers to
demonstrate climate action across four areas:
investments; corporate engagement; investor disclosure;
and policy advocacy.
Climate scenario analysis proprietary tool - We believe
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, we work 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 us to model a quantitative financial
impact under 15 different climate risk scenarios at both
the stock level and at the Trust level.
We joined the Net Zero Asset Management (NZAM)
initiative to demonstrate our strong support for the global
net zero 2050 goal. The core commitment is to support
the goal of net zero greenhouse gas (‘GHG’) emissions by
2050, in line with global efforts to limit warming to 1.5°C
(‘net zero emissions by 2050 or sooner’). It also commits to
support investing aligned with net zero emissions by 2050
or sooner.
The Trust is focused on real-world decarbonisation by
investing in transition leaders and climate solutions rather
than the fast removal of carbon intensive companies from
our portfolios. We engage with the highest carbon-
emitting companies across the portfolio through a
focused priority watchlist, with a focus on clear
expectations and outcomes combined with
time-bound milestones.
How does the Asia Dragon portfolio
measure up?
Whilst we note above the many qualitative assessments of
ESG undertaken, as well as the limitations of external third-
party data, there is merit in demonstrating the ESG
“quality” of the portfolio versus the reference benchmark.
We track the score of the portfolio within MSCI’s ESG
framework and compare this to a benchmark score. We
also track the carbon intensity of the portfolio versus the
reference benchmark.
The Trust’s portfolio is ESG AA rated by MSCI. This is higher
than the benchmark rating of A, and is an improvement
against the equivalent score one year ago, when the Trust
was rated A. The improvement in the Trust’s ESG MSCI
rating is a result of a mixture of changes in the portfolio as
well as MSCI upgrades on the ESG scores of a number of
investee companies.
The portfolio contains more ESG “Leaders,” and fewer
laggards, than the benchmark.
The Trust’s carbon footprint is 48% of its benchmark (2021:
66%). The improvement in the Trust’s carbon intensity,
versus the prior year, is also driven by changes in the
underlying portfolio.
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.
We may, for example, invest in, and vigorously engage with, a well-managed, capitalised and 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 us to make sequential
annual improvements in some ESG factors like carbon intensity. We intend to maintain a lower carbon footprint relative
to the benchmark but there may be times when we invest in companies that currently have a higher footprint but have a
commitment to improve this over time. We will monitor and assess their commitment on a regular basis.
abrdn (asia) Limited
31 October 2022
Our Mana
g
er’s Approach to ESG
Continued
Asia Dragon Trust plc 29
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Year’s Highs/Lows
High Low
Share price (p) 534.0 409.0
Net asset value (p) 589.7 456.9
Discount (%)
A
–10.4 –14.8
A
Considered to be an Alternative Performance Measure.
Performance (total return)
1 year return 3 year return 5 year return
% % %
Share price
A
–11.8 +14.7 +30.5
Net asset value
AB
–8.4 +15.6 +29.8
MSCI AC Asia (ex Japan) Index (in sterling terms) –7.1 +18.2 +21.1
A
Considered to be an Alternative Performance Measure. Further details can be found on page 99. 
B
1 year and 3 year returns are presented on an undiluted basis; 5 year return presented on a diluted basis as CULS in issue during those periods were “in the money”. 
Ten Year Financial Record
Equity Net asset Revenue Expenses as a
shareholders’ value per return per Ordinary Share price Dividend per % of average
interest Ordinary share Ordinary share share price discount Ordinary share shareholders’
Year ended 31 August £’000 p p p % p funds
2013 550,346 280.26 3.42 254.70 9.1 2.20 1.23
2014 603,077 307.10 3.43 272.50 11.3 2.20 1.23
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 13.1 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
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 2022
-11.8%
14.7%
30.5%
-8.4%
15.6%
29.8%
-7.1%
18.2%
21.1%
-20%
-10%
0%
10%
20%
30%
40%
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 2022
-1.7%
-4.6%
-8.0%
2.3%
-11.8%
-0.7%
-7.0%
-4.7%
4.1%
-8.4%
-2.8%
-5.4%
-1.3%
2.4%
-7.1%
-15%
-10%
-5%
0%
5%
10%
Quarter to 30/11/2021Quarter to 28/02/2022Quarter to 31/05/2022Quarter to 31/08/2022 Year to 31/08/2022
Share Price
NAV
Index
Source: abrdn, Morningstar & Factset
Performance
Asia Dragon Trust plc 31
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Share Price Discount to NAV
Five years to 31 August 2022
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
31/0 8/17 31/0 8/18 31/0 8/19 31/0 8/20 31/0 8/21 31/0 8/22
Source: Morningstar
Discount to NAV
32 Asia Dragon Trust plc
Portfolio
The Investment Manager’s
theoretical universe of companies is
all listed stocks within the Asia (ex
Japan) region as well as other listed
stocks which generate more than
50% of annual turnover or revenue in
the region. In practice the universe is
very much smaller; having met with
over 96% of all companies in the
MSCI All Country Asia (ex Japan)
universe in the last decade, the
Manager has eliminated a vast
proportion, mainly for reasons of size,
business quality or governance. Asia
Dragon Trust plc has 61 companies in
its portfolio that meet the Investment
Manager’s selection criteria.
The Investment Manager is one of the
leading Asia investment specialists
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 Trust to
capture growth from world-class
Asian companies.
Asia Dragon Trust plc 33
34 Asia Dragon Trust plc
As at 31 August 2022
Taiwan Semiconductor
Manufacturing Company
Samsung Electronics (Pref)
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.
One of the global leaders in the memory chips
segment, and a major player in smartphones
and display panels as well. It has a vertically
integrated business model and robust
balance sheet, alongside good free cash
flow generation.
Tencent Holdings
AIA Group
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.
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.
Housing Development Finance Corp
Bank Central Asia
A steady, well-managed financial services
conglomerate with leading positions in
mortgage finance, retail banking, life insurance
and asset management, supported by a broad
distribution network, efficient cost structure
and balance sheet quality.
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.
Alibaba Group
DBS Group
The Chinese internet group is a leading global
e-commerce company with many impressive
businesses, including the Taobao and Tmall
online platforms in China. It also has interests in
logistics, media as well as cloud computing
platforms and payments.
The largest Singapore bank, DBS Group is also
the best managed with a clear strategy. It is
backed by good digital infrastructure, and
operates with a strong focus on efficiency of
returns, as shown in the distinctively better
return on equity than local peers.
Kweichow Moutai ‘A’
Oversea-Chinese Banking Corporation
Kweichow Moutai is a leading hard liquor
(baijiu) producer that boasts a dominant
brand and a cash generative business. Its
brand value stems from a long history and its
rich heritage, which account for its wide
domestic business moat.
A well-managed Singapore bank with a solid
capital base and good cost-to-income ratio. It
is diversified by both geography and service
offerings, with interests spanning Southeast
Asia, North Asia, wealth management and life
assurance as well as its core banking activities.
Ten Lar
g
est Investments
Asia Dragon Trust plc 35
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
At
3
1 Au
g
ust
2022

Valuation Total Valuation
2022 assets 2021
Company Industry Country £’000 % £’000
Taiwan Semiconductor Manufacturing
Company
Semiconductors &
Semiconductor Equipment
Taiwan 59,819 8.8 80,788
Samsung Electronics (Pref) Technology Hardware,
Storage & Peripherals
South Korea 40,687 6.0 66,610
Tencent Holdings Interactive Media & Services China 32,211 4.8 53,993
AIA Group Insurance Hong Kong 31,254 4.6 39,446
Housing Development Finance Corp Diversified Financial Services India 30,440 4.5 32,093
Bank Central Asia Banks Indonesia 23,282 3.5 16,968
Alibaba Group Internet & Direct Marketing
Retail
China 19,547 2.9 30,664
DBS Group Banks Singapore 18,721 2.8 12,076
Kweichow Moutai ‘A’ Beverages China 16,405 2.4 13,627
Oversea-Chinese Banking Corporation Banks Singapore 15,832 2.3 15,494
Top ten investments 288,198 42.6
JD.com ‘H’ Internet & Direct Marketing
Retail
China 14,640 2.2
SBI Life Insurance Insurance India 12,894 1.9 10,124
China Tourism Group Duty Free Corp
A
Speciality Retail China 12,816 1.9 12,809
China Merchants Bank
A
Banks China 12,759 1.9 13,077
Hong Kong Exchanges & Clearing Capital Markets Hong Kong 11,605 1.7 13,009
Hon Hai Precision Industry Electronic Equipment,
Instruments & Components
Taiwan 11,387 1.7 15,856
Power Grid Corporation Electric Utilities India 11,274 1.7
Kasikornbank ‘F’ Banks Thailand 10,836 1.6
Wuxi Biologics (Cayman) Life Sciences Tools & Services China 10,429 1.5 11,531
Ayala Land Real Estate Management &
Development
Philippines 10,392 1.5 8,728
Twenty largest investments 407,230 60.2
Investment Portfolio
36 Asia Dragon Trust plc
Portfolio
Continued
At
3
1 Au
g
ust
2022

Valuation Total Valuation
2022 assets 2021
Company Industry Country £’000 % £’000
Kotak Mahindra Bank Banks India 9,895 1.5 10,573
Tata Consultancy Services IT Services India 9,832 1.4 17,679
Hindustan Unilever Personal Products India 9,429 1.4 6,713
Budweiser Brewing Beverages Hong Kong 9,188 1.4 6,463
Yunnan Energy New Material A Chemicals China 8,938 1.3 9,417
Astra International Automobiles Indonesia 8,873 1.3
China Resources Land Real Estate Management &
Development
China 8,779 1.3 10,897
LG Chem Chemicals South Korea 8,293 1.2 10,459
Delta Electronic Electronic Equipment,
Instruments & Components
Taiwan 8,183 1.2 9,004
Maruti Suzuki India Automobiles India 8,119 1.2
Thirty largest investments 496,759 73.4
ShenZhen Mindray Bio–Medical Electronics – A Health Care Equipment &
Supplies
China 7,963 1.2 3,948
Nari Technology Electrical Equipment China 7,939 1.2 11,144
Kakao Corp Interactive Media & Services South Korea 7,931 1.2 6,370
Contemporary Amperex Technology – A Electrical Equipment China 7,623 1.1
Longi Green Energy Technology – A Semiconductors &
Semiconductor Equipment
China 7,420 1.1 7,986
Bank of Philippine Islands Banks Philippines 6,918 1.0 5,765
Techtronic Industries Machinery Hong Kong 6,909 1.0
Samsung Biologics Life Sciences Tools & Services South Korea 6,766 1.0 6,564
Chacha Food – A Food Products China 6,607 1.0 3,805
Ultratech Cement Construction Materials India 6,591 1.0 7,959
Forty largest investments 569,426 84.2
Asia Dragon Trust plc 37
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
At
3
1 Au
g
ust
2022

Valuation Total Valuation
2022 assets 2021
Company Industry Country £’000 % £’000
Info Edge (India) Interactive Media & Services India 6,495 1.0 8,527
Singapore Telecommunications Diversified
Telecommunication
Singapore 6,461 1.0
China Vanke ‘H’ Real Estate Management &
Development
China 6,296 0.9 6,788
Mobile World Investment Corporation Speciality Retail Vietnam 6,236 0.9 4,129
Meituan-Dianping Class B Internet & Direct Marketing
Retail
China 6,180 0.9 6,915
Silergy Corp Semiconductors &
Semiconductor Equipment
Taiwan 6,080 0.9 7,702
Sungrow Power Supply Co – A Electrical Equipment China 6,056 0.8 4,243
Zhongsheng Group Holdings Speciality Retail China 5,356 0.8
Vietnam Technological & Commercial Bank Banks Vietnam 5,256 0.8 5,507
Tongcheng Elong Holdings Hotels, Restaurants & Leisure China 5,255 0.8 3,632
Fifty largest investments 629,097 93.0
Andes Technology Semiconductors &
Semiconductor Equipment
Taiwan 4,657 0.7
Siam Cement ‘F’ Construction Materials Thailand 4,621 0.7 5,598
GDS Holdings Class A IT Services China 4,610 0.7 3,512
Delhivery Air Freight & Logistics India 4,172 0.6
ShenZhen Inovance Technology – A Machinery China 3,860 0.6
Yonyou Network Technology – A Software China 3,785 0.6
Hangzhou Tigermed Consulting Co
A
Life Sciences Tools & Services China 3,796 0.5 4,378
Glodon Co -A Software China 3,779 0.5 4,021
Infosys IT Services India 3,402 0.5
FSN E-Commerce Ventures Internet & Direct Marketing
Retail
India 3,363 0.5
Sixty largest investments 669,142 98.9
PB Fintech Insurance India 3,237 0.5
672,379 99.4
Net current assets
B
4,374 0.6
Total assets less current liabilities
B
676,753 100.0
A
Holding includes investment in both ‘A’ and ‘H’ shares.
B
Excluding bank loan of £35,000,000.
Note: Unless otherwise stated, foreign stock is held and all investments are equity holdings. Values for 2022 and 2021 may not be directly comparable due to purchases and sales
made during the year.
38 Asia Dragon Trust plc
Value at Sales Gains/ Value at
1 September 2021 Purchases proceeds (losses) 31 August 2022
Country £’000 £’000 £’000 £’000 £’000
China 278,083 100,197 110,703 (44,529) 223,048
Hong Kong 73,302 11,293 32,696 7,057 58,956
India 101,770 40,859 22,344 (1,142) 119,143
Indonesia 16,968 8,851 1,517 7,853 32,155
Philippines 14,493 2,357 - 461 17,311
Singapore 34,146 9,522 2,378 (276) 41,014
South Korea 100,336 13,902 28,506 (22,054) 63,678
Sri Lanka 57 - 56 (1) -
Taiwan 128,184 10,900 38,520 (10,439) 90,125
Thailand 5,598 12,134 2,435 160 15,457
Vietnam 13,857 166 56 (2,475) 11,492
Total investments 766,794 210,181 239,211 (65,385) 672,379
Net current assets 8,942 - - (4,568) 4,374
Total assets less current liabilities 775,736 210,181 239,211 (69,953) 676,753
Chan
g
es in Asset Distribution
Asia Dragon Trust plc 39
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Geographic Summary
As at 31 August 2022
33.2%
8.8%
17.7%
4.8%
2.6%
6.1%
9.5%
13.4%
2.3%
1.7%
Country allocation
China - 33.2%
Hong K ong - 8.8%
India - 17.7%
Indonesia - 4.8%
Philippines - 2.6%
Singapore - 6.1%
South Korea - 9.5%
Taiwan - 13.4%
Thailand - 2.3%
Vietnam - 1.7%
As at 31 August 2021
36.3%
9.6%
13.3%
2.2%
1.9%
4.5%
13.1%
16.7%
0.7%
1.8%
Country allocation
China - 36.3%
Hong Kong - 9.6%
India - 13.3%
Indonesia - 2.2%
Philippines - 1.9%
Singapore - 4.5%
South Korea - 13.1%
Taiwan - 16.7%
Thailand - 0.7%
Vietnam - 1.8%
Analysis of Portfolio
40 Asia Dragon Trust plc
Sector Breakdown
As at 31 August 2022
0% 5% 10% 15% 20%
Air Freight & Logistics
Automobiles
Banks
Beverages
Capital Markets
Chemicals
Communications Equipment
Construction Materials
Construction & Engineering
Diversified Financial Services
Diversified Telecommunication
Electric Utilities
Electrical Equipment
Electronic Equipment, Instruments & Components
Energy
Food Products
Gas Utilities
Health Care Equipment & Supplies
Hotels, Restaurants & Leisure
Household Durables
Insurance
Interactive Media & Services
Internet & Direct Marketing Retail
IT Services
Life Sciences Tools & Services
Machinery
Personal Products
Real Estate Management & Development
Retailers
Semiconductors & Semiconductor Equipment
Software
Speciality Retail
Technology Hardware, Storage & Peripherals
Textiles, Apparel & Luxury Goods
Tobacco
Travel and Tourism
2022
2021
Continued
Analysis of Portfolio
Asia Dragon Trust plc 41
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Singtel (Singapore)
What does the company do?
Singtel is a telecom operator that has strong market
positions in its core markets of Singapore and Australia,
and in selective Southeast Asian and Asian emerging
markets via its regional investments.
Why do we like the investment?
Singtel operates in a competitive industry, but it is well
positioned across all of its markets, where it is often
among the top players. We believe it has sustainable
competitive advantage. Aside from technical operational
know-how and astute financial management, Singtel has
a premium brand, economies of scale and a healthy
balance sheet. The group is seeing growth from
monetising data demand, as its revenue mix migrates
from traditional sources to data. We are impressed by the
new management, which has been strong in executing
strategy, with a focus on profitability and return on
invested capital. Management has also been effective at
funding capex and investment by re-cycling capital from
its balance sheet. Despite a challenging macroeconomic
backdrop, Singtel’s share price has matched the steady
recovery of its core operations where earnings have been
resilient and dividend payouts have been improving. We
remain positive on Singtel’s prospects as it capitalises on
new growth opportunities and unlocks value from assets,
amid a recovery of demand in the post-Covid economic
re-opening.
What is our key area of engagement?
Capital allocation and management because we see a lot
of value in the recycling of assets and reallocating capital
more effectively towards more productive uses.
What is the result?
Singtel’s management has responded positively to our
engagement. Broadly, the group has actively recycled its
capital by monetising assets that do not align to its vision,
and re-investing the proceeds into higher growth areas.
With this, Singtel aims to deliver earnings growth and
narrow its significant holding company discount. Through
2022, the group has been rebalancing and optimising its
portfolio of associate companies, unlocking S$6 billion in
capital that will fund mainly 5G capex and growth
initiatives. These transactions included the divestment of
partial stakes in Australia Tower Network and Airtel Africa;
the full disposal of subsidiary Amobee; the sale of a 3.3%
direct stake in Bharti Airtel to Bharti Telecom, a JV
between Bharti Enterprises and Singtel; and the transfer of
6,000 towers from its Indonesian associate Telkomsel to
Mitratel. Singtel also appointed Lendlease to jointly
redevelop its Comcentre headquarters into a S$3 billion
sustainable workplace. Singtel will hold 51% after a joint-
venture company is formed with Lendlease.
Photo Source: Singtel
Investment Case Studies
42 Asia Dragon Trust plc
China Tourism Group Duty Free Corp (China)
What does the company do?
China Tourism Group Duty Free Corp (CTG) is the
world’s biggest travel retail operator, focused on the
duty-free market.
Why do we like the investment?
We think CTG is a good proxy for the rising demand for
duty-free cosmetics and skincare in mainland China. It
has four major business lines: airport duty free, offshore
duty free (Hainan), downtown duty free (pre-departure)
and wholesale. The group has benefited from China’s
decision to loosen restrictions on its lucrative duty-free
industry, particularly in the popular tourist island of Hainan,
amid a broader supportive policy trend of the government
to bring overseas spending back to China. In addition,
CTG’s growth via acquisitions is likely to result in greater
scale and stronger bargaining power with the potential for
a margin uplift versus new competition. In the Covid
environment, CTG’s online business has evolved rapidly,
accounting for close to half of overall sales. The pandemic
has changed the way consumers shop, and the online
business has complemented the traditional shopping
model. CTG’s ongoing focus on developing its online and
digitalisation businesses should also help the company to
compete more effectively with other cross-border e-
commerce operators. As China re-opens, and over the
longer term, we see CTG as well positioned for growth,
given its product portfolio, procurement capability and
prime store locations.
What is our key area of engagement?
Sustainability and ESG awareness, including carbon
emissions, data security, labour practices and supply-
chain management.
What is the result?
The group has been responsive to our engagement. It has
indicated to us that its suppliers are also taking ESG issues
seriously. It is working with brands to promote
sustainability and awareness. CTG is also focusing on
customer and stakeholder engagement, and collecting
feedback from stakeholders. It aims to raise its MSCI ESG
rating from BB to A and ultimately AAA over the next two
to three years. CTG has established an ESG management
framework and leadership group with the board as the
highest decision-making authority for its ESG efforts.
Management has been proactively communicating with
external ESG rating agencies and we are seeing this bear
fruit. MSCI upgraded CTG from BB to BBB, citing its
improved data privacy programme and corporate
governance practices as driving the upgrade.
Photo Source: China Tourism Group Duty Free Corp
Investment Case Studies
Continued
Asia Dragon Trust plc 43
Governance
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.
44 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 Global Growth & Income plc. He was, until
recently, Chairman of The Scottish Investment Trust PLC.
Length of service:
4 years, appointed on 1 October 2018
Last re-elected to the Board:
15 December 2021
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 proposed re-election at the 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.
Gaynor Coley
Independent Non-Executive Director and
Chair of the Audit & Risk Committee
Experience:
A chartered accountant with over 30 years’ experience in
private and public sector finance and governance. She is
currently the Audit Committee Chairman of Lowland
Investment Company plc, SQN Secured Investment Fund
plc and Foresight Enterprise VCT plc. Gaynor is also a
Director of a number of private companies. She was
previously the Chairman of the Wave Group Ltd, Director
of Public Programmes at the Royal Botanic Gardens Kew,
Managing Director of the Eden Project in Cornwall and
Director of Finance at Plymouth University.
Length of service:
3 years, appointed on 3 July 2019
Last re-elected to the Board:
15 December 2021
Committee membership:
Audit & Risk Committee (Chair), Management
Engagement Committee, Nomination Committee and
Remuneration Committee
Contribution:
The Board has reviewed the contribution of Gaynor Coley
in light of her proposed re-election at the AGM and has
concluded that she continues to chair the Audit & Risk
Committee expertly and provides significant financial, risk
management and ESG insight to Board discussions.
Board of Directors
Asia Dragon Trust plc 45
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Matthew Dobbs
Independent Non-Executive Director
Experience:
40 years’ fund management experience with Schroders,
recently stepping down from full time investment
responsibilities. He is a renowned Asian and Small
Companies investment expert having served as
Schroders' Head of Global Small Companies since 2000. In
addition to managing the Schroders Asian Alpha Plus
Fund, Matthew was instrumental in helping grow the
assets of two investment trusts, Schroder Asia Pacific Fund
plc and Schroder Oriental Income Fund Limited, since their
respective launches in 1995 and 2005, into FTSE 250
Companies. He holds a BA in history and economics from
Oxford University. Matthew is a non-executive director of
the European Opportunities Trust PLC.
Length of service:
0 years, appointed on 1 February 2022
Last re-elected to the Board:
N/A
Committee membership:
Audit & Risk Committee, Management Engagement
Committee, Nomination Committee and Remuneration
Committee
Contribution:
The Board has reviewed the strong contribution of
Matthew Dobbs since his appointment to the Board
and has concluded that he brings significant
investment insight, and regional experience, to
the Board and excellent knowledge of the investment
management sector.
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 senior adviser to The
Investor Forum 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:
2 years, appointed on 7 August 2020
Last elected to the Board:
15 December 2021
Committee membership:
Audit & Risk Committee, Management Engagement
Committee, Nomination Committee and Remuneration
Committee
Contribution:
The Board has reviewed the contribution of Susan
Sternglass Noble in light of her proposed re-election at the
AGM and has concluded that she continues to bring
investment, industry and corporate governance expertise
to the Board.
46 Asia Dragon Trust plc
Charlie Ricketts
Senior Independent Director
Experience:
Over 30 years’ experience within the investment funds
arena. He was, until 2014, the head of investment funds at
Cenkos Securities, providing equity capital markets
services to the fund management industry and to
investment trust companies. He was previously a
managing director of UBS Investment Bank and head of
investment funds. He began his investment career as an
investment director of Johnson Fry and then head of
marketing and investment product development at
Gartmore Investment Management. Charlie is a non-
executive director of Templeton Emerging Markets
Investment Trust and is co-Founder of the charity
Carefreespace.
Length of service:
6 years, appointed on 19 April 2016
Last re-elected to the Board:
15 December 2021
Committee membership:
Audit & Risk Committee, Management Engagement
Committee, Nomination Committee and Remuneration
Committee (Chair)
Contribution:
The Board reviewed the contribution of Charlie Ricketts in
light of his proposed re-election at the AGM and
concluded that he provides significant investment and
ESG insight to the Board and expert knowledge of the
investment management and investment trust sectors.
He is a strong Senior Independent Director and chairs the
Remuneration Committee effectively.
Board of Directors
Continued
Asia Dragon Trust plc 47
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Capital Structure
At 31 August 2022, the Company had 119,686,001 fully
paid Ordinary shares of 20p each in issue (2021:
124,766,350) with a further 39,925,676 Ordinary shares of
20p held in treasury (2021: 34,845,327). During the year to
31 August 2022 5,080,349 Ordinary Shares were bought
back and held in treasury (2021: 1,592,103). Further
details on the changes to the capital structure during the
year ended 31 August 2022 are provided on page 197.
Subsequent to the period end a further 651,351 Ordinary
shares have been purchased in the market for treasury.
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, Gaynor Coley, Matthew
Dobbs, Susan Sternglass Noble and Charlie Ricketts.
Biographies of the Directors of the Company are shown
on pages 44 to 46.
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 recommend that a final dividend of 6.5p per
Ordinary share (2021: 6.5p) be paid on 16 December 2022
to shareholders on the register on 11 November 2022. The
ex-dividend date is 10 November 2022.
Management Agreement
The Company has appointed abrdn Fund Managers
Limited, 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 Aberdeen Asset Managers Limited.
Details of the management agreement, including the
notice period and fees paid to the abrdn Group
companies during the year ended 31 August 2022, are
shown in note 4 to the financial statements.
Borrowings
The Company has a £35 million multicurrency revolving
facility with The Royal Bank of Scotland International
Limited, London Branch. The agreement was entered into
on 29 July 2022 with a termination date of 29 July 2024. At
the year end this facility had been fully drawn down at a
rate of 2.690%. At the date of this Report the Company
had drawn down £25 million at a rate of 3.558%. Under the
terms of the revolving credit facility, the Company has the
option to increase the level of the commitment from £35
million to £50 million at any time.
Directors’ Report
48 Asia Dragon Trust plc
On 29 July 2022, the Company also entered into a new
fixed loan facility agreement of £25 million at an interest
rate of 3.5575% with The Royal Bank of Scotland
International Limited, London Branch, with a termination
date of 29 July 2024. The agreement of this facility
incurred an arrangement fee of £7,500, which will be
amortised over the life of the loan.
Corporate Governance
The Statement of Corporate Governance, which forms
part of the Directors’ Report, is contained on pages
51 to 56.
Going Concern
The Directors have undertaken a rigorous review and
believe that it is appropriate to continue to adopt the
going concern basis in the preparation of the financial
statements. This conclusion is consistent with the longer
term Viability Statement on page 21.
The Company’s assets consist substantially of equity
shares in companies listed on recognised stock
exchanges and in normal circumstances are realisable
within a short timescale. The Board has set limits for
borrowing and regularly reviews the level of any gearing,
cash flow projections and compliance with banking and
loan covenants.
The Directors are mindful of the principal risks and
uncertainties disclosed on pages 16 to 18, and have
reviewed forecasts detailing revenues and liabilities and
undertaken sensitivity analysis. The Directors are satisfied
that the Company has adequate resources to continue in
operational existence for the foreseeable future and has
the ability to meet its financial obligations as they fall due
for a period of at least twelve months from the date of
approval of this Report. They have arrived at this
conclusion having confirmed that the Company’s
diversified portfolio of realisable securities is sufficiently
liquid and could be used to meet short-term funding
requirements were they to arise. The Directors have also
reviewed the revenue and ongoing expenses forecasts for
the coming year and considered the Company’s
Statement of Financial Position as at 31 August 2022 which
shows net current liabilities of £30.6million at that date.
The Directors believe that adopting a going concern basis
of accounting remains appropriate.
Substantial Share Interests
At 31 August 2022 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
34,878,552 29.0
Allspring Global Investments 13,729,896 11.4
Lazard Asset Management 13,199,892 11.0
abrdn Retail Plans 4,941,374 4.1
Rathbones 4,498,286 3.7
Evelyn Partners 4,297,501 3.6
Subsequent to the year end the Company was notified of
the following changes:
· On 14 September 2022, City of London Investment
Management reduced its holding to 34,625,304
Ordinary Shares (representing 29.0% of the issued share
capital of the Company).
· On 23 September 2022, City of London Investment
Management increased its holding to 34,670,304
Ordinary Shares (representing 29.0% of the issued share
capital of the Company).
· On 12 October 2022, City of London Investment
Management reduced its holding to 34,531,922
Ordinary Shares (representing 29.0% of the issued share
capital of the Company).
As at the date of this Report, no other changes to the
above interests had been notified to the Company.
Independent Auditors
The respective responsibilities of the Directors and the
independent auditors in connection with the financial
statements appear on pages 63 and 70.
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 is 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 is aware of that information.
Directors’ Report
Continued
Asia Dragon Trust plc 49
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Annual General Meeting
Among the resolutions being put at the Annual General
Meeting of the Company to be held on 9 December 2022,
the following resolutions will be proposed:
(i) Section 551 Authority to Allot Shares
Resolution 11, which is an ordinary resolution, will, if
approved, give the Directors a general authority to
allot new securities up to 33.33% of the Company’s
issued Ordinary share capital (excluding treasury
shares) as at the date of the passing of this resolution
(up to a maximum nominal amount of £7.86 million
based on the Company’s issued share capital as at the
date of this Report). Such authority will expire on 29
February 2024 or, if earlier, at the conclusion of the
next Annual General Meeting of the Company (unless
previously revoked, varied or extended by the
Company in general meeting).
(ii) Limited Disapplication of Pre-emption Rights
Resolution 12, which is a special resolution, seeks to
give the Directors power, conditional on Resolution 11
being passed, to allot Ordinary shares and to sell
Ordinary shares held in treasury for cash, without first
offering them to existing shareholders in proportion to
their existing holdings, up to an aggregate nominal
value representing 5% of the Company’s issued
Ordinary share capital as at the date of passing of this
resolution (up to a maximum nominal amount of £1.19
million based on the Company’s issued share capital
as at the date of this Report).
This authority will expire on 29 February 2024 or, if
earlier, at the conclusion of the next Annual General
Meeting of the Company (unless previously revoked,
varied or extended by the Company in general
meeting).
Pursuant to this power, Ordinary shares would only be
issued for cash and treasury shares would only be sold
for cash at a premium to the net asset value per share
(calculated after the deduction of prior charges at
market value).
The Directors consider that the powers proposed to be
granted by the above resolutions are necessary to
provide flexibility to issue shares should they deem it to
be in the best interests of shareholders as a whole.
(iii) Purchase of the Company’s own Ordinary shares
Since the Company’s last AGM the Company has
undertaken share buybacks, the details of which are
set out on page 107. Resolution 13, which will be
proposed as a special resolution, will renew the
Company’s authority to make market purchases of its
own shares. Shares so repurchased will be cancelled
or held “in treasury”. In respect of the Company’s
Ordinary shares which it buys back and does not
immediately cancel but, instead, holds in treasury it
may sell such shares (or any of them) for cash
(or its equivalent); or ultimately cancel the shares
(or any of them).
No dividends will be paid on treasury shares, and no
voting rights attach to them.
The maximum number of Ordinary shares which may
be purchased pursuant to this authority shall be
14.99% of the issued share capital of the Company as
at the date of the passing of the resolution
(approximately 17.8 million Ordinary shares based on
the Company’s issued share capital as at the date of
this Report). The minimum price which may be paid for
an Ordinary share (exclusive of expenses) shall be 20p
(being an amount equal to the nominal value of an
Ordinary share). The maximum price for an Ordinary
share (again exclusive of expenses) shall be an
amount being not more than the higher of (i) 105% of
the average of the middle market quotations for the
Company’s Ordinary shares for the five business days
immediately preceding the date of purchase and (ii)
the higher of the price of the last independent trade
and the highest current independent bid relating to an
Ordinary share on the trading venue where the
purchase is carried out.
This authority, if conferred, will only be exercised if to
do so would enhance the net asset value per share
and is in the best interests of shareholders generally.
This authority will expire on 29 February 2024 or, if
earlier, at the conclusion of the next Annual General
Meeting of the Company (unless previously
revoked, varied or extended by the Company in
general meeting).
50 Asia Dragon Trust plc
(iv) Notice Period for General Meetings
Resolution 14, which will be proposed as a special
resolution, seeks the authority from shareholders for
the Company to be able to hold general meetings
(other than AGMs) on 14 clear days' notice. The
approval will be effective until the conclusion of the
Company's next Annual General Meeting, when it is
intended that a similar resolution will be proposed. The
Company will also need to meet the requirements for
electronic voting under the Companies Act 2006 (as
amended by the Shareholders’ Rights Regulations)
before it can call a general meeting on 14 clear
days' notice.
Recommendation
The Directors believe that the resolutions to be proposed
at the Annual General Meeting are in the best interests of
the Company and its shareholders as a whole, and
recommend that shareholders vote in favour of the
resolutions, as the Directors intend to do in respect of their
own beneficial shareholdings totalling, in aggregate,
39,114 Ordinary shares, and representing 0.033% of the
existing issued Ordinary share capital of the Company.
Greenhouse Gas Emissions
The Company can report that it has no greenhouse gas
emissions or other emissions producing sources from its
operations.
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 page 47, 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,
Aberdeen Asset Managers Limited
Secretary
Edinburgh
31 October 2022
Registered office:
1 George Street
Edinburgh EH2 2LL
Company Registration Number: SC106049
Directors’ Report
Continued
Asia Dragon Trust plc 51
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
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) and approved by the FRC.
The Board confirms that, during the year to 31 August
2022, the Company complied with the recommendations
of the AIC Code and the relevant provisions of the UK
Code, except as set out below:
1. the role of the chief executive (A.1.2);
2. executive Directors’ remuneration (D.1.1 and D.1.2);
and
3. 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
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. Charlie Ricketts 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 44 to 46.
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.
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.
Statement of Corporate Governance
52 Asia Dragon Trust plc
Director
Board
Meetings
Audit & Risk
Committee
Meetings¹
Remuneration
Committee
Meetings
Nomination
Committee
Meetings
Management
Engagement
Committee
Meetings
James Will 5 (5) n/a 1 (1) 1 (1) 1 (1)
Gay Coley 5 (5) 3 (3) 1 (1) 1 (1) 1 (1)
Matthew Dobbs
2
3 (3) 2 (2) 1 (1) n/a n/a
Kathryn Langridge
3
1 (2) 0 (1) n/a 0 (1) 0 (1)
Susan Sternglass Noble 5 (5) 3 (3) 1 (1) 1 (1) 1 (1)
Charlie Ricketts 5 (5) 3 (3) 1 (1) 1 (1) 1 (1)
¹ All Directors are members of the four Committees of the Board with the exception of James Will who can, upon invitation, attend Audit & Risk Committee meetings as an
observer.
2
Appointed to the Board on 1 February 2022.
3
Retired from the Board on 15 December 2021.
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 9.8.6R (9)(a), which
are set out below.
Although the Company is not required to report against
these targets until the 2023 Annual Report, the Board has
resolved to do so on a voluntary basis for the year ended
31 August 2022. In accordance with the LR 9.8.6R (9), (10)
and (11) the Board has provided the following information
in relation to its diversity.
Board Gender as at 31 August 2022
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
Number in executive
management
Percentage of executive
management
Men 3 60% 2
B
n/a n/a
Women 2 40%
A
1
CD
n/a n/a
A
meets target of 40% as set out in LR 9.8.6R (9)(a)(i)
B
the positions of Chair of the Board and Senior Independent Director are held by men
C
the position of Chair of the Audit & Risk Committee is held by a woman
D
meets target of 1 as set out in LR 9.8.6R (9)(a)(ii)
Statement of Corporate Governance
Continued
Asia Dragon Trust plc 53
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Board Ethnic Background as at 31 August 2022
Number of
Board
members
Percentage of
the Board
Number of senior
positions on the
Board
Number in
executive
management
Percentage of
executive
management
White British or other White
(including minority-white groups)
5 100% 3 n/a n/a
Minority ethnic 0
A
0% 0 n/a n/a
A
is less than the target of 1 as asset out in LR 9.8.6R (9)(a)(iii)
As shown in the above table, the Company has not as yet
met the target set out in LR 9.8.6R (9)(a)(iii), which formally
comes into effect for the financial year ending 31 August
2023, in relation to the ethnic background of the Board. It is
the Board’s intention that achieving the target as set out in
LR 9.8.6R (9)(a)(iii) continues to be a priority during the
Board’s next succession appointments.
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 Asian and based in Singapore.
There have been no changes since the year end that have
affected the Company’s ability to meet the targets set in
LR 9.8.6R (9)(a).
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.
54 Asia Dragon Trust plc
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
56 to 58.
Remuneration Committee
The Remuneration Committee, which comprises all
directors and is chaired by Charlie Ricketts, 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 investment management, promotional,
secretarial and administrative skills required for the
effective operation of the Company. The Board believes
that the Manager has satisfactorily met the terms of the
management agreement with the Company, and
considers that the continuing appointment of the
Manager is in the interests of the Company and its
shareholders. The performance of the Manager remains
under close review.
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. The
Company has not been a constituent of the FTSE 350 and,
as such, an external evaluation of the Board was not
undertaken during the financial year.
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. Following a review of its
composition and, taking into account succession plans,
the Board engaged Trust Associates to identify potential
candidates for a new Board appointment. This resulted in
the appointment of Matthew Dobbs on 1 February 2022.
Trust Associates has previously been engaged by the
Company as an external search consultant to identify
potential candidates for Board appointments. Trust
Associates has no other connection with the Company or
any of the Directors.
Statement of Corporate Governance
Continued
Asia Dragon Trust plc 55
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
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. Matthew Dobbs, who was appointed during
the financial year, will stand for 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.
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, www.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.
As set out in the Chairman’s Statement on page 10, the
Board will be hosting an Online Shareholder Presentation
at 11:00am on 21 November 2022 in order to encourage
as much interaction as possible with the Company’s
shareholders. Full details on how to register for the online
event can be found on the Company’s website at
www.asiadragontrust.co.uk.
It is the intention of the Board that, in the ordinary course,
the notice of the Annual General Meeting included within
the annual report and financial statements 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 after voting on a show
of hands and details are available on the Company’s
website.
Environmental, Social and Governance
(“ESG”) Investing
Our Investment Manager’s approach to ESG matters is
included on pages 22 to 28.
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.
56 Asia Dragon Trust plc
The Audit & Risk Committee (“the Committee”) presents
its Report for the year ended 31 August 2022.
Membership and Responsibilities
The Committee is chaired by Gaynor Coley, 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 63 and 70.
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 and Risk Committee’s Report
Asia Dragon Trust plc 57
Strategic Report Governance Overview General 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 16 to 18.
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 2022 meeting, the Committee performed its
annual assessment of internal controls for the year
ended 31 August 2022. 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 2022, 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 Trust
Corporation UK Limited) (the “Depositary”) to hold the
assets of the Company. An annual internal control report is
received from the Depositary and reviewed by the Audit &
Review 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 required to be
addressed.
58 Asia Dragon Trust plc
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.
The Audit & Risk Committee concluded that there were
no issues associated with the recognition of dividend
income which required 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 2022 was nil (2021 - £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. This is the second year that
PwC has undertaken the audit and the second year that
Thomas Norrie, senior statutory auditor, has been
involved in the Company’s audit.
· 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
During the financial year to 31 August 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.
Based on its experience of the audit process and
engagement with PwC, the Audit & Risk Committee
supports the recommendation to the Board that the re-
appointment of PwC be put to Shareholders for approval
at the AGM.
Gaynor Coley,
Chairman of Audit & Risk Committee
31 October 2022
Audit and Risk Committee’s Report
Continued
Asia Dragon Trust plc 59
Strategic Report Governance Overview General 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 2020 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 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 65.
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
60 Asia Dragon Trust plc
The Directors’ Remuneration Policy was last approved by
shareholders at the Company’s AGM on 10 December
2020. Assuming no changes to the Remuneration Policy, a
resolution to approve the Directors’ Remuneration Policy
will next be proposed at the AGM in 2023.
Implementation Report
Directors’ Fees
During the financial year the Board carried out a review of
Directors’ fees and increased the rates as shown in the
following table with effect from 1 September 2022. The
last increase in Directors’ fees prior to this was effective
from 1 September 2021.
1 September
2022
£
1 September
2021
£
Independent Director 32,000 31,000
Additional fee for Chairman 13,000 12,500
Additional fee for Chairman of
Audit & Risk Committee
5,750 5,500
Additional fee for SID 1,600 1,500
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 2022 (rebased to 100
at 31 August 2012). This index was chosen for comparison
purposes, as it is the reference index used for investment
performance measurement purposes.
100
120
140
160
180
200
220
240
260
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Share Price NAV Index
Statement of Voting at General Meeting
At the Company’s last AGM, held on 15 December 2021,
shareholders approved the Directors’ Remuneration
Report (other than the Directors’ Remuneration Policy) in
respect of the year ended 31 August 2021. 99.87% of
proxy votes were in favour of the resolution, 0.09% were
against and 0.04% abstained. At the AGM on 10
December 2020, shareholders approved the Directors’
Remuneration Policy with 99.78% of proxy votes in favour,
0.14% against and 0.08% abstained.
A resolution to approve the Directors’ Remuneration
Report (excluding the Directors’ Remuneration Policy) in
respect of the year ended 31 August 2022 will be
proposed at the Annual General Meeting.
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 61
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 61
Strategic Report Governance Overview General 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
2022
£
2021
£
James Will 43,500 42,000
Gay Coley 36,500 35,000
Matthew Dobbs
(appointed 1 February 2022)
18,100 n/a
Kathryn Langridge
(retired 15 December 2021)
9,000 30,000
Peter Maynard
(retired 10 December 2020)
n/a 8,306
Susan Sternglass Noble 31,000 30,000
Charlie Ricketts 32,500 31,000
Total 170,600 176,306
Annual Percentage Change in Directors’
Remuneration
The following table sets out the annual percentage
change in Directors’ fees for the past three years from 1
September 2019 to 31 August 2022.
Year