REG - Asia Dragon Trust - Annual Financial Report
30 October 2020
ASIA DRAGON TRUST PLC
Capturing growth from world-class Asian companies
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 AUGUST 2020
HIGHLIGHTS
· Positive absolute returns amid a challenging environment
o The Company's net asset value (NAV) rose by 4.7% in sterling terms. In comparison, the benchmark, the MSCI Asia ex Japan Index, however, did better, rising 10.9%. The share price rose by 3.4% to 416p as at 31 August 2020
o The discount to NAV per share was broadly unchanged,12.3% (2019 - 12.1%).
o While performance has been disappointing over the very challenging recent period, over three years the NAV has increased by 17.5%, versus the benchmark's 13.6% return
· Asia's appeal remains undimmed.
o The region remains the fastest-growing in the world, with structural trends that will play out in the years to come.
o It is home to many good quality companies, with clear earnings streams, robust balance sheets and healthy cash levels.
· The Manager's focus on quality world-class companies will position the Trust well to deliver sustainable returns over the long term.
INVESTMENT OBJECTIVE
Asia Dragon Trust's objective is long-term capital growth through investment in Asia, with the exception of Japan and Australasia. Investments are made primarily in stock markets in the region, principally in large companies. When appropriate, the Company will utilise gearing to maximise long term returns.
The Company`s benchmark is the MSCI All Country Asia (ex Japan) Index.
Further information can be found at: www.asiadragontrust.co.uk or contact:
Adrian Lim, Investment Director,
Aberdeen Standard Investments (Asia) Limited 0065 6395 2700
FINANCIAL HIGHLIGHTS
Net asset value total return{A}
Share price total return{A}
Benchmark total return{A} (in sterling terms)
2020
+4.7%
2020
+4.6%
2020
+10.9%
2019
+9.8%
2019
+10.0%
2019
+0.3%
Ongoing charges{A}
Earnings per share (revenue)
Dividend per share
2020
0.89%
2020
5.01p
2020
4.75p
2019
0.83%
2019
4.87p
2019
4.75p
{A} Considered to be an Alternative Performance Measure. Further details can be found on pages 80 and 81 of the published 2020 Annual Report.
STRATEGIC REPORT
CHAIRMAN'S STATEMENT
Results
It was a year of two halves for Asian markets. The optimism of the first six months was obviously eclipsed by the spread of Covid-19 across the world in the latter half, which sparked unprecedented market turmoil. Amid such a challenging environment, the Company's net asset value (NAV) rose by 4.7% in sterling terms. In comparison, the benchmark, the MSCI Asia ex Japan Index did better, rising 10.9%. The share price rose by 3.4% to 416p as at 31 August 2020 and the discount to NAV per share was broadly unchanged,12.3% (2019 - 12.1%). While performance has been disappointing over the very challenging recent period, over three years the NAV has increased by 17.5%, versus the benchmark's 13.6% return.
Market Background and Portfolio
In the first six months, stocks seemed tethered to the vagaries of US-China relations. As the world's two largest economies approached a trade deal near the end of 2019, markets jumped. The rally, however, was short-lived as the spread of Covid-19 from China to the rest of the world triggered a historic sell-off in March.
The Covid-19 lockdowns and the impact upon consumer spending, travel tourism and many other industries have been widely reported. This triggered a slump in the oil price, along with a collapse in talks between Saudi Arabia and Russia as well as recession fears. Companies began to withdraw their earnings forecasts and cut dividends. Faced with severe economic pain, central banks and governments unleashed unprecedented monetary and fiscal support. This supported sentiment and stocks recovered. While Covid-19 infection rates stabilised, allowing a gradual re-opening in some countries, this re-opening has not been universal and business activity has languished. In certain sectors, such as travel and hospitality, job losses have increased and some companies have struggled to stay afloat.
The impact of the pandemic was uneven. On one level, it depended on the efficiency of policymakers. For example, China and Taiwan dealt with the virus deftly and were able to re-focus quickly on reviving their economies. However, India and Indonesia are still grappling with high Covid-19 infection rates at the time of writing. On another level, the more trade-dependent economies, including Singapore, faced the brunt of weak external demand. As a result, the Trust's higher exposure to India and Singapore hurt performance.
Meanwhile, Hong Kong was caught in the worsening political crossfire between Washington and Beijing. After China passed a national security law for Hong Kong, the US revoked the former British colony's special economic status. This created economic uncertainty and cast a pall over the stockmarket. While the Trust divested some holdings, such as Standard Chartered, during the period, this was due to the waning outlook of those individual stocks. Your Manager continues to be selective in investing in good quality companies in the Hong Kong market.
Amid the gloom, a silver lining emerged. The sharp drop in share prices, especially in February and March, gave your Manager the opportunity to buy into attractive stocks that were previously too expensive. These companies were a mix of both old and new economy with businesses tied to long-term trends, such as rising consumption, technological innovation and clean energy. Your Manager also views such companies as being in sectors that should benefit from structural changes arising from Covid-19, such as working from home arrangements. Pleasingly, some of these new holdings have started to boost the portfolio's returns. These include Taiwan-listed integrated-circuit maker Silergy, Chinese "super app" Meituan Dianping and fabric manufacturer Shenzhou International. Conversely, your Manager sold some lenders which were hindered by the low interest-rate environment, such as Public Bank and Bank Rakyat Indonesia. Holdings which faced increasing pressure from deteriorating US-China tensions were also sold, such as Hangzhou Hikvision and Sunny Optical. You will find more details about the portfolio's performance and activity in the Manager's Review.
As a result, the portfolio's overall make-up has changed. Your Manager is investing more in Taiwan, South Korea and China, markets with better growth prospects, while reducing exposure to Singapore and India. In particular, the large market swings in February and March resulted in indiscriminate selling, providing your Manager with opportunities to acquire good quality stocks at attractive valuations. Your Manager is also giving further thought to the structural impact of the pandemic on economies and industries and broader geopolitical shifts.
In times of upheaval, your Manager's investment process and style and focus on world-class Asian companies should provide reassurance. The process of careful due diligence, and meeting companies' management before initiating a holding in a stock, results in better quality holdings. In particular, the portfolio has lower debt to equity, higher profit margins and also provides a better return on equity compared to the wider universe of listed stocks in the region. These are important in these trying times, when companies with robust fundamentals have had better access to capital markets.
Aside from fundamentals, the pandemic has also led to a greater focus on environmental, social and governance (ESG) issues which we welcome. The pandemic has highlighted how important it is for companies to manage business risks well, including those related to workers' health and safety, and social responsibility in responding to a crisis. Your Manager embeds ESG in its investment process as a key part in how it analyses a company holistically. You will find further details on the Manager's engagement with the portfolio's holdings in the investment case studies on pages 31 to 32 of the published 2020 Annual Report.
Marketing
The Board and the Manager continue to focus on the effective marketing of the Company, particularly to individual investors. As many individual investors increasingly select their own investments through online platforms, it is important for most investment companies to market themselves effectively to such individuals.
The Board believes that reinforcing the Company's essential message, as a long-term, cornerstone investment in Asia aiming for capital growth from world class Asian companies, resonates well with many individual investors.
Successfully stimulating additional demand for the Company's shares should assist in the reduction of discount volatility and, over time, increase liquidity.
Gearing
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 a £50 million three-year loan facility, of which £25 million is fixed and fully drawn down and £25 million is revolving. At 31 August 2020, £6 million of the revolving facility was drawn down and the Trust's net gearing position was 3.5% (2019 - 3.5%).
The Manager has been prudent in the use of gearing during the year which has helped to cushion performance during the sell-off. Subsequent to the year end, the Manager has drawn down the remainder of the revolving facility (£19 million) in order to fund investments in attractive opportunities which may arise during this period of uncertainty and volatility.
The Manager continues to monitor closely gearing levels and bank covenants. As at 28 October 2020 the Company's net assets stood at £643 million and net gearing was 7.8%. The Company is pleased to report that these levels remain comfortably within the covenant limits.
Discounts and Share Buybacks
The Board seeks to manage the Company's discount in line with its peer group. The discount level of the Company's shares is closely monitored by the Board and Manager and share buybacks are undertaken when appropriate. During the year ended 31 August 2020, 2.4 million shares were bought back into treasury at a cost of £9.7 million. Since the period end, a further 403,116 shares have been bought back into treasury at a cost of £1.8 million. The discount at the end of August 2020 was 12.3% compared to 12.1% at the previous year end. As at 28 October 2020, the discount was 12.0%.
Revenue Account
The Company's revenue return per share marginally increased to 5.01p for the year to 31 August 2020 (2019 - 4.87p). The Board's policy has been to pay a final dividend marginally in excess of the minimum required to maintain investment trust status, which may, of course, lead to some volatility in the level of dividend paid. This policy would have resulted in a slightly lower dividend than last year but, given the current environment, the Board believes it is more desirable to maintain the dividend level and therefore, recommends the payment of a final dividend of 4.75p per Ordinary share. The dividend, if approved by shareholders at the Annual General Meeting, will be paid on 15 December 2020.
The Company has historically charged 100% of its management fee and financing costs to revenue. Following a review, the Board has agreed a change in this allocation to 75% capital and 25% to revenue which will take effect from 1 September 2020. The revised allocation is in line with the AIC's statement of recommended practice which recommends that an investment trust recognises expenses between income and capital that reflects its expected returns over the longer term.
Monitoring of the Manager
The Board continues to monitor closely the Manager's operations and performance in the light of the key refinements made by the Manager since 2017 to its investment process. These refinements followed an evaluation of the Manager conducted by the Board in 2017. While the NAV performance of the Company was behind the benchmark in the year to 31 August 2020, the Board is encouraged by the Company's NAV performance over the three year period to 31 August 2020 which, as I mentioned above, is 3.9% ahead of the Company's benchmark for that period.
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. As part of the Board's succession planning, Susan Sternglass Noble was appointed as a non-executive Director on 7 August 2020. Susan has over 30 years' experience of investment management and analysis, specialising in financial sector equities, with a focus on global, European and Asian mandates. Peter Maynard, having served nine years on the Board, will retire following the conclusion of the AGM. On behalf of the Board, I should like to thank Peter for his invaluable contribution.
Amendments to the Articles of Association
The Board will seek approval from shareholders at the AGM to adopt new, updated, Articles of Association for the Company. The changes proposed primarily reflect changes in law and regulation, and developments in market practice. Details are provided in the Appendix to the Notice of the AGM.
Against the background of the current pandemic, the new Articles will allow for virtual/hybrid general meetings to be held, and conducted in such a way that persons who are not present together at the same physical location may attend, speak and vote at the meeting by electronic means. The Directors, however, have no present intention of holding wholly virtual meetings. These provisions will only be used where the Directors consider it is in the best interests of shareholders for a virtual or hybrid meeting to be held, such as in the current environment. Nothing in the new Articles will prevent the Company from continuing to hold physical general meetings, which is indeed the firm preference of the Directors.
Annual General Meeting ("AGM")
The Board have been closely monitoring the impact of the Covid-19 pandemic upon the arrangements for the Company's upcoming AGM. The intention is to hold the AGM at 9.00 am on 10 December 2020 at the offices of Aberdeen Standard Investments in Edinburgh.
In the light of the developing Government guidance and measures, including the restrictions on public gatherings and maintaining social distancing, and the possibility that these measures will remain in place until December, this year's AGM will follow the minimum legal requirements for an AGM. Arrangements will be made by the Company to ensure that the minimum number of shareholders required to form a quorum will attend the meeting in order that the meeting may proceed and the business concluded. Other shareholders will, almost certainly, be precluded from attending.
Accordingly, the Board strongly advises that all shareholders should not attend the AGM in person and instead exercise their votes in respect of the meeting in advance. Any questions which shareholders may have should be submitted to the company secretary at asiadragontrust@aberdeen-asset.co.uk.
The Board considers these arrangements to be in the best interests of shareholders in the current circumstances.
Outlook
After about six months, the world is starting to adjust to a new normal. As we learn more about Covid-19, expectations as to what governments need to do are more clear. We are also seeing progress in developing potential vaccines and treatments. We would expect monetary and fiscal support to continue until economies show concrete signs of getting back on track. This should support stock prices in the short to medium term. However, US-China tensions remain a key concern, with more noise expected ahead of the US presidential elections in November. In Hong Kong, while social unrest and the pandemic unnerved investors, the market is being bolstered by returning US-listed Chinese companies amid the intensifying glare of regulatory scrutiny. Elsewhere, the worsening relations between China and India also bears monitoring.
All things considered, I believe Asia's appeal remains undimmed. It is home to many good quality companies, with clear earnings streams, robust balance sheets and healthy cash levels. The region remains the fastest-growing in the world, with structural trends that will play out in the years to come. Your Manager's focus on quality world-class companies will position the Trust well to deliver sustainable returns over the long term.
For Asia Dragon Trust plc
James Will
Chairman
29 October 2020
OVERVIEW OF STRATEGY
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 2020 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
MSCI All Country Asia (ex Japan) Index (sterling adjusted).
Alternative Investment Fund Manager ("AIFM")
The AIFM is Aberdeen Standard Fund Managers Limited ("ASFML" 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 Aberdeen Standard Investments (Asia) Limited ("ASI Asia" or the "Investment Manager") by way of a delegation agreement. ASI Asia and ASFML are both wholly owned subsidiaries of Standard Life Aberdeen 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. Stock selection is the major source of added value. No stock is bought without the Investment Manager having first met management. 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. The Investment Manager is authorised to invest up to 15% of the Company's gross assets in any single stock, calculated at the time an investment is made.
A comprehensive analysis of the Company's portfolio by country and by sector is disclosed on pages 25 to 30 of the published 2020 Annual Report, including a description of the ten largest investments, the full investment portfolio by value and sector/geographical analysis. At 31 August 2020, the Company's portfolio consisted of 72 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 2020, the Company's net gearing was 3.5%.
Principal Risks and Uncertainties
There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial position, performance and prospects.
The Board has in place a robust process to identify, assess and monitor the principal risks and uncertainties facing the Company and to identify and evaluate newly emerging risks. The Company's risks are regularly assessed by the Audit 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.
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.
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. In addition to its own due diligence, the Board has 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.
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 normal 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 net asset value ("NAV") per Ordinary share.
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.
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 on the operations of the Company and losses.
The Board is cognisant of the risks arising from the outbreak and spread of the Coronavirus around the world, including stockmarket instability and longer term economic effects, and the impact on the operations of the third-party suppliers, including the Manager.
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.
The Manager has undertaken an assessment of the Company's portfolio and is in close communication with the underlying investee companies in order to navigate and guide the Company through the current challenges. The Manager assesses and reviews the investment risks arising from Covid-19 on companies in the portfolio, including but not limited to: employee absence, reduced demand, supply chain breakdown, balance sheet strength, ability to pay dividends, and takes the necessary investment decisions.
The Manager has extensive business continuity procedures and contingency arrangements to ensure they are able to service their clients, including investment trusts. The services from third parties, including the Manager, have continued to be supplied effectively and the Board will continue to monitor arrangements through regular updates from the Manager.
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, Aberdeen Standard 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.
The Board reviews the performance of the Manager on a regular basis and their 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.
Reliance on Third Party Service Providers -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.
The Board reviews the performance of third party providers on an annual basis. The Manager monitors the quality of services provided through regular reports and due diligence reviews. Third party service providers report periodically on their internal controls which includes confirmation of their business continuity arrangements and procedures to address cyber-crime.
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.
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 Board and Manager communicates with major shareholders regularly to gauge their views on the Company, including discount volatility.
Gearing - As at 31 August 2020 the Company had £31 million of bank borrowings. Gearing has the effect of exacerbating market falls and gains.
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, could lead to a number of detrimental outcomes and reputational damage.
The Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager, AIC updates and reports from the Company Secretary.
Brexit - The potential impact of Brexit remains an economic risk for the Company, principally in relation to its impact on currency volatility and the Manager's operations. The uncertainty surrounding Brexit could impact investor sentiment and could lead to increased or reduced demand for the Company's shares, which would be reflected in a narrowing or widening of the discount at which the Company's shares trade relative to their net asset value.
As an investment trust with an Asian mandate, the Company's portfolio is unlikely to be adversely impacted as a direct result of Brexit although some currency volatility could arise. Aberdeen Standard Investments has a significant Brexit program in place aimed at ensuring that they can continue to satisfy their clients' investment needs post Brexit. The Board will continue to monitor developments as they occur so that the Company is ready to respond appropriately.
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.
Performance against benchmark
Performance is measured against the Company's benchmark, the MSCI All Country Asia (ex Japan) Index (in sterling terms).
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 21 of the published 2020 Annual Report.
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 six 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 the Singapore office, will attend such meetings. The Board encourage all shareholders to attend and participate in the Company's AGM in normal circumstances 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.
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. The portfolio activities undertaken by the Manager on behalf of the Company can be found in the 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:
- To raise the Company's profile among, and increase demand from, individual investors. The Board believed that by raising the profile of Asia Dragon Trust and highlighting its differentiation from its peers, combined with greater marketing focus on individuals, this should help to grow demand from self-directed retail investors. The Company's change of name to Asia Dragon Trust and the development of Dragon's key messaging, as a long-term, cornerstone investment in Asia aiming for capital growth from world-class Asian companies provided the Company with a fresher and clearer identity. The Board and the Manager have worked closely to develop the Company's communication with investors.
- The appointment of Susan Sternglass Noble as a non-executive Director under the Board's succession plan which recognises the benefits of regular Board refreshment.
- 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.
- To update the Company's articles of association. The Board is seeking shareholder authority to adopt new articles of association to reflect changes in law and regulations and to allow the Company to hold shareholder meetings using electronic means.
- To change the allocation of management fees and finance costs in line with the Trust's expected returns over the longer term.
The Board is supportive of the Manager's philosophy that Environmental, Social and Governance (ESG) factors are fundamental components to evaluate when investing. ESG considerations are embedded in the investment process undertaken by the Manager and the Manager dedicates a significant amount of time and resource on focusing on the ESG characteristics of the companies in which they invest. Further details of how the Manager seeks to address ESG matters across the portfolio are disclosed in the Statement of Corporate Governance.
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 third Annual General Meeting. The next continuation vote will be at the AGM in December 2021.
Board Diversity
The Board's statement on diversity is set out in the Statement of Corporate Governance. At 31 August 2020 there were three male Directors and three 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 in the Statement of Corporate Governance.
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.
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 above and the steps available to mitigate these risks. In particular, the Board has considered the operational ability of the Company to continue in the current environment, which has been impacted by the global Covid-19 pandemic, and the ability of the key third-party suppliers to continue to provide essential services to the Company. Third party services have continued to be provided effectively;
- 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 revolving loan facility of £25 million in place until July 2022. 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.
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 2025.
In making this assessment, the Board has considered that matters such as significant economic or stockmarket volatility (including the possibility of a greater than anticipated economic impact of the spread of the coronavirus), a substantial reduction in the liquidity of the portfolio, or changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future. As an investment trust with an Asian mandate, the Company's portfolio is unlikely to be adversely impacted as a direct result of Brexit although some currency volatility could arise.
James Will,
Chairman
29 October 2020
INVESTMENT MANAGER'S REVIEW
Portfolio review
In a year marred by a pandemic that sparked the steepest economic downturn in recent memory, Asian equities still managed a double-digit return. Markets suffered heavy losses in early 2020 when the deadly coronavirus (Covid-19) began to spread worldwide but they rebounded robustly as massive fiscal and monetary stimulus inflated asset prices. For the year, the MSCI Asia ex Japan Index increased by 10.9%. In comparison, your Company's net asset value rose by 4.7%, while the share price climbed 4.6%.
While we were disappointed by the underperformance, much of the stockmarket exuberance was fuelled by excessive liquidity. The unparalleled monetary stimulus sent interest rates to record lows. As a result, riskier assets with higher yields appeared more attractive. Investors also shrugged off weak economic and corporate forecasts, focusing instead on hopes of a vaccine that would enable the world economy to get back on track. The portfolio, with its holdings selected carefully for their quality and defensive traits, tends to lag in such sentiment-driven markets.
That said, there are grounds for optimism. Markets have turned volatile again after the review period ended. In our view, this reflects mounting unease over the prevailing risks and could signal a renewed focus on company fundamentals which should be positive for the portfolio's holdings. During the year, we also took advantage of market swings to introduce several new holdings to the portfolio. These are quality companies with good growth potential and should position the Trust for a post-pandemic world.
Turning to performance, major areas of weakness included the exposure to India and Singapore. These have long been among our favoured regional markets because of the quality of their companies. But both countries found the going tough after the pandemic outbreak.
India struggled to contain Covid-19 and had the second highest number of cases globally. Share prices suffered from the impact on an economy that was already losing steam. Financial stocks, in particular, suffered as anaemic credit growth and government-imposed loan moratoriums amplified concerns about bad debts. The Trust's holdings, including mortgage provider Housing Development Finance Corp (HDFC), were caught in the ensuing selloff. Nonetheless, we retain a high level of conviction in HDFC, which remains one of India's best private-sector financial institutions. It is managed well, with a conservative loan profile and excellent asset quality that sets it apart from its peers. In addition, the still-growing home mortgage market, coupled with supportive government policies on affordable housing and favourable demographics, underpin its prospects.
Meanwhile, Singapore faced its own Covid-19 challenges as a spike in cases at migrant worker dormitories forced a costly two-month lockdown. Its open economy fell into recession, with manufacturing, retail and travel bearing the brunt of the curbs and weak external demand. Heavyweight bank stocks, including OCBC, pulled back amid slowing growth and falling interest rates. For some investors, the Central Bank's call to cap dividends was another concern. Given the cautious outlook, we felt it prudent to reduce the exposure to the banks. That said, we expect OCBC, along with other Singapore holdings, to overcome these challenges. Their capital positions should stay robust even after factoring in a potential build-up in non-performing loans and profit declines.
More positively, China contributed the most. Tencent, now the Trust's largest holding, was also among the best performers as it enjoyed soaring demand for its mobile games and social-media offerings, with users forced to stay home. Forecasts of better profits, amid expectations that its upcoming game-launch cycle would be its best since 2008, also buoyed its shares. We like Tencent because it is a high-quality diversified player, with corporate governance standards superior to most of its rivals. Another holding that benefited from pandemic-related trends was biologic drugs services provider Wuxi Biologics. Global demand for outsourced drug research held steady, with new Covid-19 projects further boosting Wuxi's earnings.
Furthermore, some of our domestic-oriented consumer holdings enjoyed impressive rebounds too as the economic re-opening gathered pace. Notably, China Tourism Duty Free Group's shares more than doubled amid the resumption of domestic travel and more favourable duty-free shopping polices at the Hainan resort island. Liquor maker Kweichow Moutai rallied on resilient sales of its premium baijiu, reflecting its unrivalled brand equity.
These more than offset the negative impact of not holding Alibaba. Alibaba's shares had risen on the back of solid sales, coupled with positive sentiment from the planned listing of its digital-payments unit, Ant Group. Outside China, the Trust's other exposures within Northeast Asia proved rewarding too. Portfolio stalwarts, Taiwan Semiconductor Manufacturing Co (TSMC) and Samsung Electronics outperformed too. Increased online activity and work-from-home lifted demand for chips used to power electronics and servers, lifting their earnings. Expectations that they stood to gain from US giant Intel's plans to outsource some production of advanced chips gave both companies' share prices a further boost. We believe the pair will continue to perform well, with structural themes, including 5G networks, cloud computing and the Internet of Things driving potential new demand in the semiconductor segment.
As for portfolio activity, the bulk of new holdings came from the "new economy". This was not a rush into "flavour of the month" plays, but the result of considered work into companies and industries that will be well placed once the world is past Covid-19. In line with our investment philosophy, we have continued to take a disciplined approach, focusing on well-managed businesses with solid financials, clear competitive advantages and promising prospects.
Notably, we have done substantial work on the technology sector, and identified compelling prospects within growing niches. One area of interest was data centres, which we think will be the engines of the next wave of digital growth. Here, we invested in two data-centre providers in China. The first was Beijing Sinnet Technology, which also offers broadband and cloud services. Trends, such as 5G networks and the internet of things, are expected to propel demand for its services. Furthermore, the company has made good progress on the environmental, social and governance (ESG) front. Within months after we urged the company to improve disclosures, it issued a report outlining its efforts on environmental protection, staff treatment and corporate structure. The other addition was GDS, which is well-placed to benefit from the structural growth of cloud adoption. The company has invested amply to grow the business, while margins have improved along with scale.
We are also upbeat about prospects for electric vehicles (EV). Therefore, we introduced Korea's Samsung SDI. A cash-generative electronic materials and display segment forms a solid base for the company to build up its EV business. Alongside LG Chem, it is among the five most dominant players in the EV batteries market, where barriers to entry are high. The initial capital investment required is hefty, along with the need for sustained investment in new technologies. The push for cleaner energy sources further supports SDI's prospects.
Outside the tech sector, we see promise in shifting consumption patterns, with the pandemic speeding up adoption of internet shopping and online payments. In China, we initiated Meituan Dianping, which is uniquely placed to tap into this trend. It has used its core food delivery business as a base to build a super app, including travel bookings, beauty treatments and wedding services. We believe it has the potential to become a powerful lifestyle platform, given the rapid growth in users, merchants and transactions. We also bought India's Info Edge, a domestic leader in online classifieds and restaurant bookings. Unlike most peers, Info Edge is profitable. Its portfolio of promising dot.com start-ups further sets it apart. We also like its financial discipline, reflected in a steady balance sheet and solid cash position.
Apart from these, we introduced a few stocks from more traditional sectors on attractive valuations as well. China Vanke, for example, is one of the biggest real estate groups in the mainland. It has interests in logistics, residential housing and warehousing. Operating in 80 cities, it is among the most established developers, with professional management to ensure sustainable growth. Although its shares have lagged in 2020, we see room for a re-rating as it unlocks value from its non-residential assets.
Elsewhere, we added select names from fast-developing frontier markets. In Vietnam, we initiated Mobile World, the country's biggest retailer in mobile devices and consumer electronics, which has branched out to groceries too. Vietnam's expanding middle class, coupled with the growth of the modern retail sector, underpins its prospects. We also included Commercial Bank of Ceylon, a prudent Sri Lankan lender with a strengthening digital platform. During the crisis, it pruned its lending portfolio in response to moratoriums on loan repayments. Its profits and balance sheet remained steady, supporting a decent dividend yield. Efforts to align its practices to the United Nations' sustainable development goals underscore its progressive approach towards ESG.
Against these, we sold holdings with a tougher outlook. Given the uncertain outlook for growth and prospects of lower interest rates for longer, we sold several banking stocks, including Bank Rakyat Indonesia, HDFC Bank, Public Bank and Standard Chartered. We also adjusted the portfolio's mix of holdings in China and India, exiting names with less certain prospects. In India, we divested Piramal Enterprises, as well as motorcycle maker Hero Motocorp as we expect discretionary spending to remain lacklustre. In China, we exited Hangzhou Hikvision in view of US-China tensions, and divested 58.com because of a takeover offer that limited its upside. We sold Autohome and Huazhu in view of better opportunities.
Outlook
We believe Asian markets will remain volatile. Risks of a resurgence in Covid-19 infections is still present, at least until an effective vaccine is widely available. In the meantime, businesses continue to face restrictions and consumer demand will remain muted due to rising unemployment. The geopolitical backdrop is another concern, with the US-China dispute now broadening out beyond trade and technology.
That said, having learnt lessons from past crises, most governments in Asia are less indebted now. This puts them in a better position to expand fiscal stimulus. Orthodox monetary policies mean that central banks still have room to lower interest rates, with inflation under control. Meanwhile, recent indicators across Asia point to a tentative growth rebound that should gain momentum as economies re-open. At the corporate level, many companies are still focused on preserving capital amid the uncertainty, which constrains shareholder returns and capital spending. But we are seeing signs of a nascent recovery in corporate profits. The recent uptick in earnings among the Trust's holdings provides some encouragement that the worst of Covid-19 may be over for the better managed companies.
Despite the uncertain landscape, the drivers of Asia's long-term growth are intact. A burgeoning middle class with rising spending power should drive demand across segments, including retail, financial services, healthcare and infrastructure. Innovative companies are leading the development and adoption of nascent technologies. We remain focused on investing in well-managed companies with sound fundamentals, which are the best placed to make the most of these opportunities. The holdings in your Company's portfolio are solid franchises, with sustainable earnings streams and robust balance sheets. Several are also leaders in terms of ESG, with others committed to improving their standards. We believe that the quality of the portfolio's holdings should enable them to weather the storm. This ensures that the Trust can continue to deliver sustainable returns.
Aberdeen Standard Investments (Asia) Limited*
29 October 2020
* on behalf of Aberdeen Standard Fund Managers Limited. Both companies are subsidiaries of Standard Life Aberdeen plc.
RESULTS
Financial Highlights
31 August 2020
31 August 2019
% change
Performance
Equity shareholders' funds (£'000)
599,431
589,708
+1.6
Net asset value per share (capital return basis) (basic) (p)
474.39
458.03
+3.6
Share price (capital return basis (p)
416.00
402.50
+3.4
Market capitalisation (£'000)
525,651
518,214
+1.4
MSCI AC Asia (ex Japan) Index (in sterling terms; capital return basis)
1012.62
935.63
+8.2
Revenue return per share (basic) (p)
5.01
4.87
+2.9
Total return per share (basic) (p)
19.94
23.90
-16.6
Gearing
Net gearing (%){A}
3.5
3.5
Discount
Discount to net asset value (basic) (%){A}
12.3
12.1
Operating costs
Ongoing charges ratio{A}
0.89
0.83
{A} Considered to be an Alternative Performance Measure. Further details can be found on pages 80 and 81 of the published 2020 Annual Report.
PERFORMANCE (TOTAL RETURN)
1 year return
3 year return
5 year return
%
%
%
Share price{A}
+4.6
+19.0
+86.6
Net asset value{AB}
+4.7
+17.5
+86.5
MSCI AC Asia (ex Japan) Index (in sterling terms)
+10.9
+13.6
+92.3
{A} Considered to be an Alternative Performance Measure. Further details can be found on page 80 of the published 2020 Annual Report.
{B} 1 year return presented on an undiluted basis; 3 and 5 year return presented on a diluted basis as CULS in issue during those periods were "in the money".
PORTFOLIO
TEN LARGEST INVESTMENTS
As at 31 August 2020
Tencent Holdings
Taiwan Semiconductor Manufacturing Company
The internet giant continues to strengthen its ecosystem, and the Manager sees tremendous potential in Tencent's advertising business as it starts monetising its social media and payment platforms.
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.
Samsung Electronics (Pref)
Ping An Insurance 'H'
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.
China's biggest insurer, which is transforming itself from a traditional life insurer into a one-stop for financial services. It harbours ambitions to be a fintech powerhouse.
Kweichow Moutai 'A'
Bank Central Asia
A distilled Chinese liquor maker, which has a wide domestic business moat supported by strong brand equity.
Among the largest local private 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.
AIA Group
China Resources Land
The group offers life insurance, accident insurance, health insurance and wealth management solutions to individuals and businesses in the Asia Pacific region.
A Chinese developer and mall owner that is seeing steady returns from its investment property portfolio.
Housing Development Finance Corp
Wuxi Biologics (Cayman)
A leading domestic mortgage provider in India with a leading distribution network, cost structure and balance sheet quality.
The Chinese company discovers, develops and produces biologics for its pharmaceutical customers. Wuxi Bio ranks no.1 in China and no.4 worldwide among its peers. We believe it is well placed to benefit from the increased R&D outsourcing of biologics.
OTHER INVESTMENTS
As at 31 August 2020
Valuation
Total
Valuation
2020
assets
2019
Company
Industry
Country
£'000
%
£'000
Tencent Holdings
Interactive Media & Services
China
63,167
10.0
41,885
Taiwan Semiconductor Manufacturing Company
Semiconductors & Semiconductor Equipment
Taiwan
55,144
8.7
30,907
Samsung Electronics (Pref)
Technology Hardware Storage & Peripherals
South Korea
52,160
8.3
36,636
Ping An Insurance 'H'
Insurance
China
18,719
3.0
21,641
Kweichow Moutai 'A'
Beverages
China
18,051
2.9
11,852
Bank Central Asia
Banks
Indonesia
17,745
2.8
17,749
AIA Group
Insurance
Hong Kong
17,244
2.7
19,580
China Resources Land
Real Estate Management & Development
China
16,325
2.6
14,947
Housing Development Finance Corp
Thrifts & Mortgage Finance
India
14,799
2.3
22,063
Wuxi Biologics (Cayman)
Life Sciences Tools & Services
China
14,532
2.3
7,254
Top ten investments
287,886
45.6
China Merchants Bank 'H'
Banks
China
11,085
1.8
5,092
China Tourism Group Duty Free Corp 'A'
Specialty Retail
China
10,680
1.7
17,646
Tata Consultancy Services
IT Services
India
10,656
1.7
15,771
Kotak Mahindra Bank
Banks
India
10,567
1.7
8,702
Meituan-Dianping Class B
Internet & Direct Marketing Retail
China
10,530
1.7
-
Oversea-Chinese Banking Corporation
Banks
Singapore
10,441
1.7
17,286
Midea Group 'A'
Household Durables
China
10,337
1.6
6,913
Sands China
Hotels, Restaurants & Leisure
China
9,135
1.4
-
China Conch Venture Holdings
Construction & Engineering
China
9,049
1.4
5,703
Hong Kong Exchanges & Clearing
Capital Markets
Hong Kong
8,241
1.3
8,876
Twenty largest investments
388,607
61.6
LG Chem
Chemicals
South Korea
8,233
1.3
8,451
Shenzhou International Group
Textiles, Apparel & Luxury Goods
China
8,131
1.3
-
Ayala Land
Real Estate Management & Development
Philippines
7,914
1.3
11,764
Saic Motor Corp 'A'
Automobiles
China
7,636
1.2
2,694
SBI Life Insurance
Insurance
India
7,167
1.1
7,717
Shanghai International Airport 'A'
Transport Infrastructure
China
7,015
1.1
7,571
Singapore Telecommunications
Diversified Telecommunication Services
Singapore
6,609
1.0
5,294
Ultratech Cement
Construction Materials
India
6,579
1.0
7,714
John Keells Holdings
Industrial Conglomerates
Sri Lanka
6,383
1.0
8,093
CNOOC
Oil, Gas & Consumable Fuels
China
6,317
1.0
7,617
Thirty largest investments
460,591
72.9
ITC
Tobacco
India
6,208
1.0
12,684
Astra International
Automobiles
Indonesia
6,191
1.0
9,112
China Resources Gas
Gas Utilities
China
6,181
1.0
-
Kerry Logistics Network
Air Freight & Logistics
Hong Kong
6,173
1.0
6,338
Hon Hai Precision Industry
Electronic Equipment, Instruments & Components
Taiwan
6,054
1.0
-
Siam Cement 'F'
Construction Materials
Thailand
5,753
0.9
9,487
DBS Group
Banks
Singapore
5,694
0.9
9,214
City Developments
Real Estate Management & Development
Singapore
5,649
0.9
9,470
Bank of Philippine Islands
Banks
Philippines
5,606
0.9
6,321
Silergy Corp
Semiconductors & Semiconductor Equipment
Taiwan
5,255
0.8
-
Forty largest investments
519,355
82.3
GDS Holdings ADS
IT Services
China
4,999
0.8
-
Vietnam Dairy Products
Food Products
Vietnam
4,918
0.8
6,984
Beijing Sinnet Technology 'A'
IT Services
China
4,875
0.8
-
Budweiser Brewing
Beverages
Hong Kong
4,786
0.8
-
New Oriental Education & Technology Group Inc ADR
Diversified Telecommunication Services
China
4,667
0.7
-
Info Edge (India)
Interactive Media & Services
India
4,560
0.7
-
Vietnam Technological & Commercial Bank
Banks
Vietnam
4,119
0.6
4,568
Swire Properties
Real Estate Management & Development
Hong Kong
4,091
0.6
11,665
Taiwan Mobile
Wireless Telecommunication Services
Taiwan
3,902
0.6
5,207
Yum China Holdings
Hotels, Restaurants & Leisure
China
3,861
0.6
5,356
Fifty largest investments
564,133
89.3
IHH Healthcare Berhad
Health Care Providers & Services
Malaysia
3,830
0.6
-
Samsung SDI
Electronic Equipment, Instruments & Components
South Korea
3,550
0.6
-
Yunnan Energy New Material
Containers & Packaging
China
3,445
0.5
-
CapitaLand
Real Estate Management & Development
Singapore
3,403
0.5
-
China Vanke 'H'
Real Estate Management & Development
China
3,159
0.5
-
Hindustan Unilever
Household Products
India
3,062
0.5
4,984
Commercial Bank of Ceylon
Banks
Sri Lanka
2,951
0.5
-
Indocement Tunggal Prakarsa
Construction Materials
Indonesia
2,923
0.5
5,030
United Overseas Bank
Banks
Singapore
2,902
0.5
4,856
ASM Pacific Technology
Semiconductors & Semiconductor Equipment
Hong Kong
2,683
0.4
6,802
Sixty largest investments
596,041
94.4
Mobile World Investment Corporation
Speciality Retail
Vietnam
2,653
0.4
-
Bangkok Dusit Medical Services 'F'
Health Care Providers & Services
Thailand
2,547
0.4
5,996
Central Pattana Public Co 'F'
Real Estate Management & Development
Thailand
2,508
0.4
2,636
Keppel Corp
Industrial Conglomerates
Singapore
2,460
0.4
9,216
Hangzhou Tigermed Consulting Co{A}
Life Sciences Tools & Services
China
2,424
0.4
-
Prestige Estate Projects
Real Estate Management & Development
India
2,305
0.4
3,132
Accton Technology Corp
Communications Equipment
Taiwan
2,293
0.4
-
Yoma Strategic Holdings
Real Estate Management & Development
Myanmar
2,097
0.3
2,415
KE Holdings
Real Estate Management & Development
China
2,039
0.3
-
Koh Young Technology
Semiconductors & Semiconductor Equipment
South Korea
1,924
0.3
2,852
Seventy largest investments
619,291
98.1
Asian Paints
Chemicals
India
1,526
0.2
-
DFCC Bank
Banks
Sri Lanka
10
-
2,646
620,827
98.3
Net current assets{B}
10,653
1.7
Total assets less current liabilities{B}
631,480
100.0
{A} Holding includes investment in both 'A' and 'H' shares.
{B} Excluding bank loan of £6,000,000.
Note: Unless otherwise stated, foreign stock is held and all investments are equity holdings.
CHANGES IN ASSET DISTRIBUTIONS
Year Ended 31 August 2020
Value at
Sales
Gains/
Value at
31 August 2019
Purchases
proceeds
(losses)
31 August 2020
Country
£'000
£'000
£'000
£'000
£'000
China
181,592
79,318
69,905
65,354
256,359
Hong Kong
70,904
22,376
31,830
(18,232)
43,218
India
104,832
13,496
31,002
(19,897)
67,429
Indonesia
40,605
5,287
7,660
(11,373)
26,859
Malaysia
4,092
4,111
3,695
(678)
3,830
Myanmar
2,415
-
-
(318)
2,097
Philippines
18,085
2,190
-
(6,755)
13,520
Singapore
59,330
9,617
18,306
(13,483)
37,158
South Korea
48,855
17,250
13,375
13,137
65,867
Sri Lanka
10,739
4,337
3,446
(2,286)
9,344
Taiwan
36,114
19,339
3,533
20,728
72,648
Thailand
18,119
1,270
4,230
(4,351)
10,808
United Kingdom
4,595
-
4,986
391
-
Vietnam
11,552
4,178
1,139
(2,901)
11,690
_______
_______
_______
_______
_______
Total investments
611,829
182,769
193,107
19,336
620,827
Net current assets
10,656
-
-
(3)
10,653
_______
_______
_______
_______
_______
Total assets less current liabilities
622,485
182,769
193,107
19,333
631,480
_______
_______
_______
_______
_______
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
- use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
- the Strategic report /Director's report include a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, 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.
For Asia Dragon Trust plc
James Will,
Chairman
29 October 2020
GOING CONCERN
The Directors believe that it is appropriate to continue to adopt the going concern basis in the preparation of the financial statements.
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 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. The revenue forecast for the coming year demonstrates that the Company has the ability to cover its expenses.
The Company has a three year loan facility of £50 million in place until July 2022. The Board has set limits for borrowing and regularly reviews the Company's gearing levels and its compliance with bank covenants. A replacement option would be sought in advance of the expiry of the facility in July 2022, or, should the Board decide not to renew this facility, any outstanding borrowing would be repaid through the proceeds of equity sales as required.
Shareholders are given the opportunity to vote on the continuation of the Company every three years. The last continuation vote held in December 2018 was passed.
The Board has considered the impact of Covid-19 and believes that this will have a limited financial impact on the Company's operational resources and existence. Given that the Company's portfolio comprises primarily "Level One" assets (listed on a recognisable exchange and realisable within a short timescale), and the Company's relatively low level of gearing, the Directors believe that adopting a going concern basis of accounting remains appropriate.
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 August 2020
Revenue
Capital
Total
Notes
£'000
£'000
£'000
Gains on investments held at fair value through profit or loss
10
-
19,336
19,336
Currency losses
-
(893)
(893)
Income
3
13,240
-
13,240
Investment management fee
4
(4,058)
-
(4,058)
Administrative expenses
5
(1,070)
-
(1,070)
_______
_______
_______
Net return before finance costs and taxation
8,112
18,443
26,555
Interest payable and similar charges
6
(548)
-
(548)
_______
_______
_______
Return before taxation
7,564
18,443
26,007
Taxation
7
(1,167)
618
(549)
_______
_______
_______
Return after taxation
6,397
19,061
25,458
_______
_______
_______
Return per share (pence)
9
5.01
14.93
19.94
_______
_______
_______
The total column of this statement represents the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.
STATEMENT OF COMPREHENSIVE INCOME (Cont'd)
Year ended 31 August 2019
Revenue
Capital
Total
Notes
£'000
£'000
£'000
Gains on investments held at fair value through profit or loss
10
-
31,412
31,412
Currency losses
-
(1,938)
(1,938)
Income
3
14,244
-
14,244
Investment management fee
4
(4,272)
-
(4,272)
Administrative expenses
5
(1,040)
-
(1,040)
_______
_______
_______
Net return before finance costs and taxation
8,932
29,474
38,406
Interest payable and similar charges
6
(466)
-
(466)
Return before taxation
8,466
29,474
37,940
Taxation
7
(1,045)
(458)
(1,503)
_______
_______
_______
Return after taxation
7,421
29,016
36,437
_______
_______
_______
Return per share (pence)
9
4.87
19.03
23.90
_______
_______
_______
STATEMENT OF FINANCIAL POSITION
As at
As at
31 August 2020
31 August 2019
Notes
£'000
£'000
Non-current assets
Investments at fair value through profit or loss
10
620,827
611,829
_______
_______
Current assets
Debtors and prepayments
11
3,929
1,818
Cash and cash equivalents
12
11,390
10,170
_______
_______
15,319
11,988
_______
_______
Creditors: amounts falling due within one year
Bank loan
13(a)
(6,000)
(6,000)
Other creditors
13(b)
(4,666)
(1,332)
_______
_______
(10,666)
(7,332)
_______
_______
Net current assets
4,653
4,656
_______
_______
Creditors: amounts falling due after more than one year
Bank loan
13(c)
(24,995)
(24,993)
Deferred tax liability on Indian capital gains
13(d)
(1,054)
(1,784)
_______
_______
(26,049)
(26,777)
_______
_______
Net assets
599,431
589,708
_______
_______
Share capital and reserves
Called-up share capital
14
31,922
31,922
Share premium account
60,416
60,416
Capital redemption reserve
28,154
28,154
Capital reserve
15
441,359
431,945
Revenue reserve
37,580
37,271
_______
_______
Equity shareholders' funds
599,431
589,708
_______
_______
Net asset value per Ordinary share (pence)
16
474.39
458.03
_______
_______
The financial statements were approved by the Board of Directors and authorised for issue on 29 October 2020 and were signed on its behalf by:
James Will
Chairman
The accompanying notes are an integral part of the financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 August 2020
Share
Capital
Share
premium
redemption
Capital
Revenue
capital
account
reserve
reserve
reserve
Total
Notes
£'000
£'000
£'000
£'000
£'000
£'000
Balance at 31 August 2019
31,922
60,416
28,154
431,945
37,271
589,708
Return after taxation
-
-
-
19,061
6,397
25,458
Buyback of Ordinary shares for treasury
14
-
-
-
(9,656)
-
(9,656)
Buyback of Ordinary shares for cancellation as a result of the Tender Offer
-
-
-
9
-
9
Dividend paid
8
-
-
-
-
(6,088)
(6,088)
_______
_______
_______
_______
_______
_______
Balance at 31 August 2020
31,922
60,416
28,154
441,359
37,580
599,431
_______
_______
_______
_______
_______
_______
For the year ended 31 August 2019
Share
Capital
Share
premium
redemption
Capital
Revenue
capital
account
reserve
reserve
reserve
Total
Notes
£'000
£'000
£'000
£'000
£'000
£'000
Balance at 31 August 2018
43,061
60,416
17,015
630,239
37,288
788,019
Return after taxation
-
-
-
29,016
7,421
36,437
Buyback of Ordinary shares for treasury
14
-
-
-
(9,347)
-
(9,347)
Buyback of Ordinary shares for cancellation as a result of the Tender Offer
13,14
(11,139)
-
11,139
(217,963)
-
(217,963)
Dividend paid
8
-
-
-
-
(7,438)
(7,438)
_______
_______
_______
_______
_______
_______
Balance at 31 August 2019
31,922
60,416
28,154
431,945
37,271
589,708
_______
_______
_______
_______
_______
_______
The capital reserve includes investment holding gains amounting to £179,491,000 (2019 - £199,349,000), as disclosed in note 10.
The Revenue reserve and the part of the Capital reserve represented by realised capital gains represent the amount of the Company's reserves distributable by way of dividend.
The accompanying notes are an integral part of the financial statements.
STATEMENT OF CASH FLOWS
Year ended
Year ended
31 August 2020
31 August 2019
Notes
£'000
£'000
Operating activities
Net return before taxation
26,007
37,940
Adjustment for:
Gains on investments
(19,336)
(31,412)
Currency losses/(gains)
893
(1,353)
Decrease in accrued dividend income
138
497
Decrease/(increase) in other debtors
31
(27)
Increase/(decrease) in other creditors
81
(267)
Interest payable and similar charges
6
548
466
Scrip dividends included in investment income
(222)
(548)
Overseas withholding tax
(1,329)
(1,163)
_______
_______
Cash from operations
6,811
4,133
Interest paid
6
(545)
(476)
_______
_______
Net cash inflow from operating activities
6,266
3,657
Investing activities
Purchases of investments
(179,449)
(111,885)
Sales of investments
190,990
337,511
Capital gains tax on sales
(112)
-
_______
_______
Net cash inflow from investing activities
11,429
225,626
Financing activities
Equity dividends paid
8
(6,088)
(7,438)
Buyback of Ordinary shares
(9,489)
(9,347)
Tender Offer for Ordinary shares inclusive of expenses
(5)
(217,949)
Repayment of bank loan
-
(25,500)
Drawdown of bank loan
-
30,993
_______
_______
Net cash used in financing activities
(15,582)
(229,241)
_______
_______
Increase in cash and cash equivalents
2,113
42
_______
_______
Analysis of changes in cash and cash equivalents during the year
Opening balance
10,170
8,775
Effect of exchange rate fluctuations on cash held
(893)
1,353
Increase in cash and cash equivalents as above
2,113
42
_______
_______
Closing cash and cash equivalents
11,390
10,170
_______
_______
Represented by:
Money market funds
3,300
1,500
Cash and short term deposits
8,090
8,670
_______
_______
11,390
10,170
_______
_______
The accompanying notes are an integral part of the financial statements.
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures ("APMs") are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.
Total return. NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend.
The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the years ended 31 August 2020 and 31 August 2019 and total return for the period.
Dividend
Share
2020
rate
NAV
price
31 August 2019
N/A
458.03p
402.50p
21 November 2019
4.75p
445.34p
396.50p
31 August 2020
N/A
474.39p
416.00p
Total return
+4.7%
+4.6%
Dividend
Share
2019
rate
NAV
price
31 August 2018
N/A
421.54p
370.00p
22 November 2018
4.00p
387.05p
347.00p
31 August 2019
N/A
458.03p
402.50p
Total return
+9.8%
+10.0%
Discount to net asset value per Ordinary share. The difference between the share price of 416.00p (31 August 2019 - 402.50p) and the net asset value per Ordinary share of 474.39p (31 August 2019 - 458.03p) expressed as a percentage of the net asset value per Ordinary share. The highest and lowest discount during the year is shown on page 19 of the published 2020 Annual Report.
Net gearing. Net gearing measures the total borrowings of £30,995,000 (31 August 2019 - £30,993,000) less cash and cash equivalents of £10,257,000 (31 August 2019 - £10,186,000) divided by shareholders' funds of £599,431,000 (31 August 2019 - £589,708,000), expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes net amounts due to brokers at the year end of £1,133,000 (31 August 2019 - due from brokers - £16,000) as well as cash and short term deposits of £11,390,000 (31 August 2019 - £10,170,000).
Ongoing charges. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year.
2020
2019
Investment management fees (£'000)
4,058
4,272
Administrative expenses (£'000)
1,070
1,040
Less: non-recurring charges{A} (£'000)
(49)
(13)
________
________
Ongoing charges (£'000)
5,079
5,299
________
________
Average net assets (£'000)
573,046
638,726
________
________
Ongoing charges ratio
0.89%
0.83%
{A} Comprises legal and professional fees which are not expected to recur.
The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations which among other things, includes the cost of borrowings and transaction costs.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 August 2020
1.
Principal activity. The Company is a closed-end investment company, registered in Scotland No SC106049, with its Ordinary shares being listed on the London Stock Exchange.
2.
Accounting policies
(a)
Basis of accounting. All of the Company's operations are of a continuing nature and the Financial Statements are prepared on a going concern basis under the historical cost convention, modified to include the revaluation of fixed asset investments and on the assumption that approval as an investment trust under section 1158 of the Corporation Tax Act 2010 and the Investment Trust (Approved Company) (Tax) Regulations 2011 will be retained. The Board has in particular, considered the impact of heightened market volatility since the Covid-19 outbreak including through the performance of stress testing using a variety of parameters which have the potential to impact the Company's share price and net asset value. The Directors do not believe the Company's going concern status is affected. In addition, the Company is subject to a continuation vote every three years which previously has been passed with a significant majority. The next continuation vote will be at the AGM in December 2021. The Directors have no reason to believe that the vote will not continue to be in favour based on their assessment of the Company's performance and the views collated from shareholders. For these reasons the Directors have prepared the financial statements on a going concern basis. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. The Company has continued to comply with the investment trust status requirements of section 1158 of the Corporation Tax Act 2010 and the Investment Trust (Approved Company) (Tax) Regulations 2011. The Company's primary third party suppliers, including its Managers and Secretaries, Depositary and Custodian, Registrar, Auditor and Broker, are not experiencing significant operational difficulties affecting their respective services to the Company. Accordingly, the Financial Statements have been prepared on a going concern basis as it is the Directors' opinion, having assessed the principal and emerging risks and other matters including the impact of the coronavirus outbreak set out in the Viability Statement which assesses the prospects of the Company over a period of five years, that the Company will continue in operational existence for a period of at least twelve months from the date of approval of these Financial Statements.
The Financial Statements have been prepared in accordance with Financial Reporting Standard 102 and with the AIC's Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued November 2014 and updated in October 2019 with consequential amendments.
In order to better reflect the activities of the Company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented. Financial assets and financial liabilities are recognised in the Company's Statement of Financial Position when it becomes a party to the contractual provisions of the instrument.
The financial statements are prepared in Sterling which is the functional currency of the Company and rounded to the nearest £'000.
Key Accounting Judgements. The Company's investments are made in a number of currencies, however the Board considers the Company's functional currency to be Sterling. In arriving at this conclusion, the Board considered that the shares of the Company are listed on the London Stock Exchange, it is regulated in the United Kingdom, principally having its shareholder base in the United Kingdom, draws down borrowings, pays dividends and expenses in Sterling. The Board also considers the Company's presentational currency to be Sterling.
(b)
Investments. Listed investments have been designated upon initial recognition as held at fair value through profit or loss. Investments are recognised and de-recognised on the trade date at fair value, which is generally deemed to be the cost of the investment at that point. Subsequent to initial recognition, investments are valued at fair value, which for listed investments is deemed to be bid market prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from the London Stock Exchange. Gains and losses arising from changes in fair value are included as a capital item in the Income Statement and are ultimately recognised in the capital reserve.
(c)
Income. Dividends (other than special dividends), including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the foregone cash dividend is recognised as income. Any excess in the value of the shares received over the amount of cash dividend foregone is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis.
(d)
Expenses. All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Statement of Comprehensive Income with the exception of expenses directly relating to the acquisition or disposal of an investment, in which case, they are added to the cost of the investment or deducted from the sale proceeds. Such transaction costs are disclosed in accordance with the SORP. These expenses are charged to the capital column of the Statement of Comprehensive Income and are separately identified and disclosed in note 10.
(e)
Taxation. The tax expense represents the sum of the tax currently payable and deferred tax. Tax payable is based on the taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date.
Deferred tax is recognised in respect of all temporary differences at the Statement of Financial Position date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the Statement of Financial Position date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise, using enacted tax rates that are expected to apply at the date the deferred tax position is unwound.
(f)
Nature and purpose of reserves
Called-up share capital. The Ordinary share capital on the Statement of Financial Position relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, is a transfer made to the capital redemption reserve. This reserve is not distributable.
Share premium account. The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity share capital comprising Ordinary shares of 20p. This reserve is not distributable.
Capital redemption reserve. The capital redemption reserve arose when Ordinary shares were redeemed, and subsequently cancelled by the Company, at which point an amount equal to the par value of the Ordinary share capital was transferred from the Ordinary share capital to the capital redemption reserve. This reserve is not distributable.
Capital reserve. This reserve reflects any gains or losses on investments realised in the period along with any increases and decreases in the fair value of investments held that have been recognised in the Statement of Comprehensive Income. This reserve is not distributable except for the purpose of funding share buybacks to the extent that gains are deemed realised.
Revenue reserve. This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.
(g)
Foreign currency. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the reporting date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. Gains and losses on the realisation of foreign currencies are recognised in the Statement of Comprehensive Income and are then transferred to the capital reserve. Unrealised and realised gains and losses on foreign currency movements on investments held through profit or loss are recognised in the capital column of the Statement of Comprehensive Income.
(h)
Dividends payable. Final dividends are dealt with in the period in which they are paid.
(i)
Treasury shares. When the Company purchases its Ordinary shares to be held in treasury, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effect, and is recognised as a deduction from the capital reserve. When these shares are sold subsequently, the amount received is recognised as an increase in equity, and any resulting surplus on the transaction is transferred to the share premium account and any resulting deficit is transferred from the capital reserve.
(j)
Cash and cash equivalents. Cash comprises cash at bank and in hand. Cash equivalents are short-term, comprising money market funds and highly-liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value.
3.
Income
2020
2019
£'000
£'000
Income from investments
UK dividend income
38
788
Overseas dividend income
12,946
12,838
Scrip dividends
222
548
_______
_______
13,206
14,174
_______
_______
Other income
Deposit interest
9
26
Interest from money market funds
23
44
Other income
2
-
_______
_______
34
70
_______
_______
Total income
13,240
14,244
_______
_______
2020
2019
Income from investments
£'000
£'000
Listed UK
-
144
Listed overseas
13,206
14,030
_______
_______
13,206
14,174
_______
_______
4.
Management fee
2020
2019
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
Management fee
4,058
-
4,058
4,272
-
4,272
_______
_______
_______
_______
_______
______
Management fees paid to Aberdeen Standard Fund Managers Limited ("the Manager") are calculated at 0.85% per annum on net assets up to £350 million and 0.50% per annum on net assets over £350 million. Management fees are calculated and payable on a quarterly basis.
Net assets exclude long term borrowings less (i) the value of any investment funds managed by the Manager and (ii) 50% of the value of any investment funds managed or advised by investment managers other than the Manager. During the year and at the year end, the Company held £3,300,000 (2019 - £1,500,000) in Aberdeen Standard Liquidity Fund (Lux) - Sterling Fund which is managed and administered by ASI. The Company pays a management fee on the value of these holdings but no fee is chargeable at the underlying fund level.
The balance due to the Manager at the year end was £1,056,000 (2019 - £1,043,000).
The management agreement is terminable by the Company on three months' notice or in the event of a change of control in the ownership of the Manager. The notice period required to be given by the Manager is six months.
5.
Administrative expenses
2020
2019
£'000
£'000
Promotional activities
200
200
Directors' fees
183
180
Custody fees
244
265
Depositary fees
63
68
Auditor's remuneration: Fees payable to the Company's auditor for
- audit of the Company's annual report
30
20
- review of the Company's half yearly report
-
5
Legal and professional fees
104
49
Other expenses
246
253
_______
_______
1,070
1,040
_______
_______
The Company has an agreement with Aberdeen Standard Fund Managers Limited for the provision of promotional activities. The total fees paid and payable under the agreement were £200,000 (2019 - £200,000) and the sum due to the Manager at the year end was £84,000 (2019 - £84,000).
No pension contributions were made in respect of any of the Directors.
The Company does not have any employees.
6.
Interest payable and similar charges
2020
2019
£'000
£'000
Interest on bank loans
548
466
_______
_______
548
466
_______
_______
7.
Taxation
2020
2019
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
(a)
Analysis of charge for the year
Indian capital gains tax charge on sales
-
135
135
-
-
-
Indian capital gains tax rebate on sales
-
(23)
(23)
-
-
-
Overseas tax suffered
1,167
-
1,167
1,045
-
1,045
______
______
______
______
______
_____
Total current tax charge for the year
1,167
112
1,279
1,045
-
1,045
Movement of deferred tax liability on Indian capital gains
-
(730)
(730)
-
458
458
______
______
______
______
______
_____
Total tax charge for the year
1,167
(618)
549
1,045
458
1,503
______
______
______
______
______
_____
On 1 April 2018, the Indian Government withdrew an exemption from capital gains tax on investments held for twelve months or longer. Accordingly, the Company has recognised a deferred tax liability of £1,054,000 (2019 - £1,784,000) on capital gains which may arise if Indian investments are sold.
The Company has not recognised a deferred tax asset of £17,039,000 (2019 - £14,290,000) arising as a result of excess management expenses and non-trading loan relationship deficits. These expenses will only be utilised if the Company has profits chargeable to UK corporation tax in the future.
(b)
Factors affecting the tax charge for the year. The tax assessed for the year is lower than the effective rate of corporation tax in the UK.
2020
2019
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
Return before taxation
7,564
18,443
26,007
8,466
29,474
37,940
______
______
______
______
______
_____
Effective rate of corporation tax at 19.00% (2019 - 19.00%)
1,437
3,504
4,941
1,609
5,600
7,209
Effects of:
UK dividend income
(7)
-
(7)
(150)
-
(150)
Gains on investments not taxable
-
(3,674)
(3,674)
-
(5,968)
(5,968)
Currency losses not taxable
-
170
170
-
368
368
Other non-taxable income
(2,502)
-
(2,502)
(2,543)
-
(2,543)
Expenses not deductible for tax purposes
4
-
4
5
-
5
Increase in excess expenses and loan relationship deficit
1,068
-
1,068
1,079
-
1,079
Indian capital gains tax charge on sales
-
112
112
-
-
-
Movement in deferred tax liability on Indian capital gains
-
(730)
(730)
-
458
458
Net overseas tax suffered
1,167
-
1,167
1,045
-
1,045
______
______
______
______
______
_____
Total tax charge for year
1,167
(618)
549
1,045
458
1,503
______
______
______
______
______
_____
8.
Dividends. In order to comply with the requirements of Sections 1158 -1159 of the Corporation Tax Act 2010 and with company law, the Company is required to make a final dividend distribution.
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.
The table below sets out the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158 - 1159 are considered. The revenue available for distribution by way of dividend for the year is £6,397,000 (2019 - £7,421,000).
2020
2019
£'000
£'000
Proposed final dividend for 2020 - 4.75p per Ordinary share (2019 - 4.75p)
5,983
6,088
______
______
The amounts reflected above for the cost of the proposed final dividend for 2020 is based on 125,955,337 Ordinary shares in issue, being the number of Ordinary shares in issue at the date of this Report.
The final dividend will be paid on 15 December 2020 to shareholders on the register at the close of business on 20 November 2020.
9.
Return per Ordinary share
2020
2019
£'000
pence
£'000
pence
Revenue return
6,397
5.01
7,421
4.87
Capital return
19,061
14.93
29,016
19.03
______
______
______
______
Total return
25,458
19.94
36,437
23.90
______
______
______
______
Weighted average Ordinary shares in issue
127,658,730
152,439,217
__________
__________
10.
Investments at fair value through profit or loss
2020
2019
£'000
£'000
Opening book cost
412,480
540,036
Opening investment holding gains
199,349
265,721
_________
_________
Opening fair value
611,829
805,757
Analysis of transactions made during the year
Purchases at cost
182,769
112,156
Sales - proceeds
(193,107)
(337,496)
Gains on investments
19,336
31,412
_________
_________
Closing fair value
620,827
611,829
_________
_________
Closing book cost
441,336
412,480
Closing investment gains
179,491
199,349
_________
_________
Closing fair value
620,827
611,829
2020
2019
£'000
£'000
Investments listed on an overseas investment exchange
620,827
607,234
Investments listed on the UK investment exchange
-
4,595
_________
_________
620,827
611,829
_________
_________
The Company received £193,107,000 (2019 - £337,496,000) from investments sold in the period. The book cost of these investments when they were purchased was £153,915,000 (2019 - £239,712,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of investments.
Transaction costs. During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Statement of Comprehensive Income. The total costs were as follows:
2020
2019
£'000
£'000
Purchases
295
158
Sales
327
629
_________
_________
622
787
_________
_________
The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations.
In the year ended 31 August 2019, the transaction costs were higher due to the increased volume of trading ahead of the Tender Offer, see note 14 for further details.
11.
Debtors and prepayments
2020
2019
£'000
£'000
Accrued income
670
840
Overseas withholding tax recoverable
679
484
Amounts due from brokers
2,133
16
Other debtors and prepayments
447
478
_________
_________
3,929
1,818
_________
_________
12.
Cash and cash equivalents
2020
2019
£'000
£'000
Cash at bank and in hand
8,090
8,670
Money market funds
3,300
1,500
_________
_________
11,390
10,170
_________
_________
13.
Creditors
Amounts falling due within one year:
2020
2019
(a)
Bank loans
£'000
£'000
Falling due within one year
6,000
6,000
_________
_________
The Company has a £25,000,000 multicurrency revolving facility with Scotiabank Europe Plc. The agreement was entered into on 30 July 2019 with a termination date of 29 July 2022.
At the year end £6,000,000 of this facility had been drawn down at a rate of 1.014% which is due to mature on 27 November 2020. Subsequent to the year end a further £19,000,000 of this facility was drawn down at a rate of 0.99563% until 23 November 2020.
2020
2019
(b)
Other creditors
£'000
£'000
Amounts due to brokers
3,099
-
Amounts due for the purchase of own shares to treasury
167
-
Other amounts due
1,400
1,332
_________
_________
4,666
1,332
_________
_________
In the year to 31 August 2019, £14,000 was included within other amounts due which related to the Tender Offer for shares.
Amounts falling due in more than one year:
2020
2019
(c)
Bank loans
£'000
£'000
Falling due in more than one year
25,000
25,000
Unamortised expenses
(5)
(7)
_________
_________
24,995
24,993
_________
_________
On 30 July 2019, the Company entered into a new fixed loan facility agreement of £25,000,000 at an interest rate of 1.61% with Scotiabank Europe, with a termination date of 29 July 2022. The agreement of this facility incurred an arrangement fee of £7,500, which will be amortised over the life of the loan.
The agreements contains the following covenants:
- the net asset value of the Company shall not at any time be less than £385 million.
- the adjusted asset coverage of the Company, as defined in the loan facility agreement, shall not at any time be less than 4.00 to 1.00.
All covenants have been complied with throughout the year.
2020
2019
£'000
£'000
(d)
Deferred tax liability on Indian capital gains
1,054
1,784
_________
_________
14.
Called-up share capital
2020
2019
£'000
£'000
Allotted, called-up and fully paid:
Ordinary shares of 20p
Opening balance of 159,611,677 (2019 - 215,304,353) shares
31,922
43,061
Tender offer of 55,692,676 Ordinary shares
-
(11,139)
_________
_________
Closing balance of 159,611,677 (2019 - 159,611,677) shares
31,922
31,922
_________
_________
During the year to 31 August 2019, 55,692,676 Ordinary shares were repurchased by the Company under a Tender Offer and cancelled at a cost of £217,963,000 which was taken to the Capital Reserve. The costs of the Tender Offer were wholly incurred by the exiting shareholders.
During the year 2,390,395 Ordinary shares of 20p each were purchased to be held in treasury by the Company (2019 - 2,496,885) at a total cost of £9,656,000 (2019 - £9,347,000). At the year end 33,253,224 (2019 - 30,862,829) Ordinary shares of 20p each were held in treasury, which represents 20.8% (2019- 19.3%) of the Company's total issued share capital at 31 August 2020.
Since the year end a further 403,116 Ordinary shares of 20p each have been purchased by the Company at a total cost of £1,748,000 all of which were held in treasury.
15.
Capital reserve
2020
2019
£'000
£'000
At 1 September 2019
431,945
630,239
Movement in fair value gains
19,336
31,412
Foreign exchange movement
(893)
(1,938)
Buyback of Ordinary shares for treasury
(9,656)
(9,347)
Tender Offer of Ordinary shares for cancellation
9
(217,963)
Movement in capital gains tax charge
618
(458)
_________
_________
As at 31 August 2020
441,359
431,945
_________
_________
The capital reserve includes investment holding gains amounting to £179,491,000 (2019 - £199,349,000), as disclosed in note 10.
16.
Net asset value per share. The net asset value per share and the net asset values attributable to the Ordinary shareholders at the year end calculated in accordance with the Articles of Association were as follows:
2020
2019
Net assets attributable (£'000)
599,431
589,708
Number of Ordinary shares in issue {A}
126,358,453
128,748,848
Net asset value per share (p)
474.39
458.03
{A} Excluding shares held in treasury.
17.
Analysis of changes in net debt
At
At
31 August 2019
Currency
differences
Cash flows
Non-cash
movements
31 August 2020
£'000
£'000
£'000
£'000
£'000
Cash and short term deposits
10,170
(893)
2,113
-
11,390
Debt due within one year
(6,000)
-
-
-
(6,000)
Debt due after one year
(24,993)
-
-
(2)
(24,995)
________
________
________
________
________
(20,823)
(893)
2,113
(2)
(19,605)
________
________
________
________
________
At
At
31 August 2018
Currency
differences
Cash flows
Non-cash
movements
31 August 2019
£'000
£'000
£'000
£'000
£'000
Cash and short term deposits
8,775
1,353
42
-
10,170
Debt due within one year
(25,500)
-
19,500
-
(6,000)
Debt due after one year
-
-
(25,000)
7
(24,993)
________
________
________
________
________
(16,725)
1,353
(5,458)
7
(20,823)
________
________
________
________
________
A statement reconciling the movement in net funds to the net cash flow has not been presented as there are no differences from the above analysis.
18.
Financial instruments
Risk management. The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments comprise securities and other investments, cash balances, bank loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income.
The Board has delegated the risk management function to ASFML under the terms of its management agreement with ASFML (further details of which are included under note 4). The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors.
Risk management framework. The directors of Aberdeen Standard Fund Managers Limited collectively assume responsibility for ASFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.
ASFML is a fully integrated member of the Standard Life Aberdeen Group (the "Group"), which provides a variety of services and support to ASFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to Aberdeen Standard Investments Asia Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.
The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Group CEO. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SHIELD").
The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.
The Group's corporate governance structure is supported by several committees to assist the board of directors of Standard Life Aberdeen Group, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference.
Risk management. The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.
Market risk. The fair value of, or future cash flows from a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk. The Company is exposed to gearing risk which has the effect of exacerbating market falls and gains. The level of net gearing is shown above. Details of the loan facilities the Company has in place can be found in note 13.
Interest rate risk. Interest rate movements may affect the level of income receivable on cash deposits.
Management of the risk. The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
Interest risk profile. The interest rate risk profile of the portfolio of the Company's financial assets and liabilities, excluding equity holdings which are all non-interest bearing, at the reporting date was as follows:
Weighted average
period for which
Weighted
average
rate is fixed
interest rate
Fixed
rateFloating
rate
At 31 August 2020
Years
%
£'000
£'000
Assets
Sterling
-
0.40
-
5,990
Chinese Yuan
-
-
-
2
Hong Kong Dollars
-
-
-
24
Indian Rupee
-
-
-
21
Indonesian Rupiah
-
-
-
99
Taiwanese Dollar
-
-
-
3,089
Thailand Baht
-
-
-
80
US Dollar
-
-
-
4
Vietnamese Dong
-
-
-
2,081
________
________
________
________
Total assets
n/a
n/a
-
11,390
________
________
________
________
Liabilities
Short-term loan - £6,000,000
0.24
1.01
6,000
-
Long-term loan - £25,000,000
1.91
1.61
24,995
-
________
________
________
________
-
-
30,995
-
________
________
________
________
Weighted average
period for which
Weighted
average
rate is fixed
interest rate
Fixed
rateFloating
rate
At 31 August 2019
Years
%
£'000
£'000
Assets
US Dollar
-
-
-
8
Sterling
-
1.05
-
5,193
Taiwanese Dollar
-
-
-
4,826
Vietnamese Dong
-
-
-
143
________
________
________
________
Total assets
n/a
n/a
-
10,170
________
________
________
________
Liabilities
Short-term loan - £6,000,000
0.08
1.66
6,000
-
Long-term loan - £25,000,000
2.91
1.61
24,993
-
________
________
________
________
-
-
30,993
-
________
________
________
________
The weighted average interest rate is based on the current yield of each asset, weighted by its market value.
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.
The Company's equity portfolio and short-term debtors and creditors have been excluded from the above tables.
Interest rate sensitivity. Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit.
Foreign currency risk. The majority of the Company's investment portfolio is invested in overseas securities and the Statement of Financial Position, therefore, can be significantly affected by movements in foreign exchange rates.
Management of the risk. It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investments with foreign currency borrowings.
The Statement of Comprehensive Income is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk.
Foreign currency risk exposure by currency of listing of incorporation is as follows:
31 August 2020
31 August 2019
Net
Total
Net
Total
Overseas
monetary
currency
Overseas
monetary
currency
investments
assets
exposure
investments
assets
exposure
£'000
£'000
£'000
£'000
£'000
£'000
Chinese Yuan{A}
256,359
2
256,361
181,593
-
181,593
Hong Kong Dollar{A}
43,218
1,186
44,404
70,904
-
70,904
Indian Rupee
67,429
21
67,450
104,831
-
104,831
Indonesian Rupiah
26,859
99
26,958
40,605
-
40,605
Korean Won
65,867
-
65,867
48,855
-
48,855
Malaysian Ringgit
3,830
-
3,830
4,092
-
4,092
Philippine Peso
13,520
-
13,520
18,085
-
18,085
Singapore Dollar
39,255
-
39,255
61,745
-
61,745
Sri Lankan Rupee
9,344
-
9,344
10,739
-
10,739
Taiwanese Dollar
72,648
961
73,609
36,114
4,826
40,940
Thailand Baht
10,808
80
10,888
18,119
-
18,119
US Dollar{A}
-
4
4
-
24
24
Vietnamese Dong
11,690
2,081
13,771
11,552
143
11,695
________
________
________
________
________
________
620,827
4,434
625,261
607,234
4,993
612,227
Sterling
-
5,823
5,823
4,595
5,193
9,788
________
________
________
________
________
________
Total
620,827
10,257
631,084
611,829
10,186
622,015
________
________
________
________
________
________
{A} If currency denomination of overseas investments is used then exposure for Chinese Yuan is £63,955,000 (2019 - £55,089,000), for Hong Kong Dollar £220,056,000 (2019 - £167,081,000) and for US Dollar £15,566,000 (2019 - £30,326,000).
Foreign currency sensitivity. There is no sensitivity analysis included, as the Company's significant foreign currency financial instruments are in the form of equity investments, which have been included within the other price risk sensitivity analysis, so as to show the overall level of exposure.
Other price risk. Other price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
Management of the risk. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. Both the allocation of assets and the stock selection process, as detailed on page 13 of the published 2020 Annual Report, act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock exchanges worldwide.
Other price risk sensitivity. If market prices at the reporting date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 August 2020 would have increased/decreased by £62,083,000 (2019 - increased/decreased by £61,183,000) and equity reserves would have increased/decreased by the same amount.
Liquidity risk. This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Management of the risk. The Company's assets mainly comprise readily realisable securities which can be sold to meet funding requirements if necessary. In order to monitor the concentration of Dragon's investee companies with Standard Life Aberdeen, the total percentage holdings of those securities owned by Standard Life Aberdeen-managed funds is reviewed by the Board.
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions, and reviews these on a regular basis. The Board has imposed a maximum gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of 20%. Short-term flexibility can be achieved through the use of loan and overdraft facilities.
Liquidity risk exposure. At 31 August 2020, the Company had drawn down £6,000,000 from a £25,000,000 Revolving Facility Agreement with Scotiabank Europe, which is due to mature on 27 November 2020. There was a further facility of £25,000,000 with Scotiabank Europe due for repayment on 29 July 2022, details of which are disclosed in note 13.
Credit risk. This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.
Management of the risk
- investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker;
- the risk of counterparty, including the Depositary, exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, the third party administrators' carries out a stock reconciliation to the Depositary's records on a daily basis to ensure discrepancies are picked up on a timely basis. The Manager's Compliance department carries out periodic reviews of the Depositary's operations and reports its finding to the Manager's Risk Management Committee. This review will also include checks on the maintenance and security of investments held;
- cash is held only with reputable banks with high quality external credit enhancements.
None of the Company's financial assets are secured by collateral or other credit enhancements.
Credit risk exposure. In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 31 August was as follows:
2020
2019
Balance
Maximum
Balance
Maximum
Sheet
exposure
Sheet
exposure
Current assets
£'000
£'000
£'000
£'000
Loans and receivables
3,929
3,929
1,818
1,818
Cash and cash equivalents
11,390
11,390
10,170
10,170
________
________
________
________
15,319
15,319
11,988
11,988
________
________
________
________
None of the Company's financial assets is past due or impaired.
Maturity of financial liabilities. The maturity profile of the Company's financial liabilities at 31 August was as follows:
2020
2019
£'000
£'000
In less than one year
10,666
7,332
In more than one year
24,995
24,993
________
________
35,661
32,325
________
________
Fair value of financial assets and liabilities. The fair value of the long-term loan has been calculated at £25,108,000 as at 31 August 2020 (2019 - £25,145,000) compared to an accounts value in the financial statements of £24,995,000 (2019 - £24,993,000) (note 13). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. The carrying values of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices.
19.
Fair value hierarchy. FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following classifications:
Level 1:
unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.
Level 2:
inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
Level 3:
inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
All of the Company's investments are in quoted equities (2019 - same) which are actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments as at 31 August 2020 of £620,827,000 (31 August 2019 - £611,829,000) has therefore been deemed as Level 1.
20.
Related party transactions and transactions with the Manager. Fees payable during the year to the Directors and their interests in shares of the Company are disclosed within the Directors' Remuneration Report on pages 50 and 51 of the published 2020 Annual Report.
The Company has an agreement in place with Aberdeen Standard Fund Managers Limited for the provision of management and administration services, promotional activities and secretarial services. Details of transactions during the year and balances outstanding at the year end disclosed in notes 4 and 5.
At the year end the Company had £3,300,000 (31 August 2019 - £1,500,000) invested in Aberdeen Standard Liquidity Fund (Lux) - Sterling Fund which is managed and administered by ASI. The Company pays a management fee on the value of these holdings but no fee is chargeable at the underlying fund level.
21.
Capital management policies and procedures. The Company's capital management objectives are:
- to ensure that the Company will be able to continue as a going concern; and
- to maximise the capital return to its equity shareholders through an appropriate balance of equity capital and debt. The Board has imposed a maximum gearing level of 20% of net assets.
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market, and the extent to which revenue in excess of that which is required to be distributed should be retained.
The Company has no externally imposed capital requirements.
22.
Subsequent events. Following a review, the Board has agreed a change in the allocation of management fees and finance charges from 100% to revenue, to 75% capital and 25% to revenue which takes effect from 1 September 2020. The revised allocation is in line with the AIC's statement of recommended practice ("SORP") which recommends that an investment trust recognises expenses between income and capital that reflects its expected returns over the longer term.
23. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 August 2020 or 2019 but is derived from those accounts. Statutory accounts for 2019 have been delivered to the registrar of companies, and those for 2020 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006
The statutory accounts for the financial year ended 31 August 2020 have been approved by the Board and audited but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which will be held at 9.00 am on 10 December 2020 at 6 St Andrew Square, Edinburgh.
The Annual Report will be posted to shareholders in November 2020 and copies will be available from the Manager or from the Company's website (www.asiadragontrust.co.uk).
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.
By Order of the Board
Aberdeen Asset Managers Limited, Secretary
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