Annual Financial Report
29 October 2021
ASIA DRAGON TRUST PLC
Capturing growth from world-class Asian companies
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 AUGUST 2021
HIGHLIGHTS
· Positive returns amid a challenging environment
o The Company's net asset value (NAV) total return rose by 20.5% in sterling terms. In comparison, the benchmark, the MSCI Asia ex Japan Index, rose by 14.7%. The share price rose by 24.3% as at 31 August 2021.
o The discount to NAV per share narrowed to 9.6% (2020 - 12.3%).
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
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FINANCIAL HIGHLIGHTS |
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Net asset value total return{A} |
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Share price total return{A} |
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Benchmark total return{A} (in sterling terms) |
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+20.5% |
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+24.3% |
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+14.7% |
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2020 |
+4.7% |
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2020 |
+4.6% |
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2020 |
+10.9% |
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Ongoing charges{A} |
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Earnings per share (revenue) |
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Dividend per share |
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0.83% |
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7.36p |
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6.50p |
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2020 |
0.89% |
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2020 |
5.01p |
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2020 |
4.75p |
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{A} Considered to be an Alternative Performance Measure. Further details can be found on pages 86 and 87 o f the Company's annual report for the year ended 31 August 2021 . |
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STRATEGIC REPORT
CHAIRMAN'S STATEMENT
Overview
It has been a challenging year for Asian markets and, while equities in the region generally posted respectable gains, it was a volatile period, marked by widespread outbreaks of Covid-19 and a regulatory clampdown in China. Against this backdrop, the Company's net asset value (NAV) rose in the year by 20.5%, well ahead of its benchmark, the MSCI Asia ex Japan Index, which increased by 14.7% on a comparable basis. The share price rose by 23.1% to 512p as at 31 August 2021, with the discount to NAV per share narrowing to 9.6%.
The year began with regional stockmarkets in Asia posting steady advances despite intermittent Covid-19 outbreaks. Most economies re-opened and both governments and central banks offered sustained support, helping to buoy sentiment. Developed economies in Asia led the way, as wider vaccine access and aggressive mobility curbs seemed to work in containing Covid-19. In particular, Taiwan and South Korea, both markets with a bias towards technology stocks, were standout performers. Technology stocks, as a whole, remained buoyant, as a sustained surge in demand for electronics following the pandemic sparked a global chip shortage. This also lifted the Company's performance, given its higher exposure to the technology sector. Towards the end of the year, the emerging markets, namely Southeast Asia and India, staged a solid rebound as their Covid-19 infection rates showed signs of having reached a peak. These markets also benefited from a rotation away from technology stocks in Northeast Asia and towards cyclical stocks tied to economic reopening.
Aside from Covid-19, investors had to come to grips with other uncertainties. China, the first major economy to enter and exit the pandemic, started to tighten its monetary policy in early 2021 and certain sectors, such as property, began to underperform. Thereafter, as the Chinese Communist Party marked a century since its founding, it also embarked on a campaign against inequality under a "common prosperity" slogan. This precipitated a raft of reforms across sectors ranging from internet and online gaming to private education and a new focus on antitrust and data security considerations. Recognising the more interventionist tone in control and regulation, your Manager positioned the portfolio more cautiously. During 2021 the Company's positions were consolidated into higher-quality and higher-conviction names and the portfolio's internet exposure was diversified into stocks outside of China. These actions helped to mitigate the impact of the sell-off in Chinese markets shortly afterwards. The threat of government bans and fines have since continued to weigh on mainland Chinese shares.
Taking a longer-term view, your Manager believes that the structural growth of China remains intact. In particular, your Manager continues to see promise in five areas of growth in China, namely, aspiration, digital, green technology, health and wealth. New stocks that are well positioned to grow in these areas have been added to the portolio. Details of these and more information on the Trust's performance can be found in the Manager's report.
For now, mitigating regulatory risk is key for investors in China. In this respect, your Manager's long track record, on the ground presence and focus on companies with good ESG practices has enabled them to anticipate the notable strides made by Chinese corporates. Many now appreciate the importance of engaging with long-term investors and the value it can create for a company. Boards and senior management are also paying attention to the environmental impact of their company's practices. Companies understand, too, that how they manage their relationships with key stakeholders, such as employees, vendors and society, is important, as regulatory scrutiny is tightened to address a range of issues. ESG considerations have always been an integral part of your Manager's investing process and the Trust's holdings - in China and elsewhere - are selected after careful due diligence on their ESG underpinnings, among others. You will find more details on these in the ESG report.
Gearing
The Board continues to believe that the sensible use of modest financial gearing should enhance returns to shareholders over the longer term. At the beginning of the financial year, the Company had in place a £50 million three-year loan facility, of which £25 million was fixed and fully drawn down and £25 million was revolving. Under the facility agreement, the Trust also had the option to increase the revolving facility by a further £25 million to £50 million ('the accordion option'), subject to approval from the lending bank's credit committee. In order to take advantage of the increasing attractive opportunities within the Asian stock markets, the Company implemented this accordion option under the facility in early January 2021.
At 31 August 2021, £40 million of the revolving facility was drawn and the Trust's net gearing position was 7.9%, compared to 3.5% at the end of August 2020.
The Manager continues to monitor closely gearing levels and bank covenants. As at 27 October 2021 the Company's net assets stood at £708.4 million and net gearing was 7.6%, and the Company is pleased to report that these levels remain comfortably within the covenant limits.
Discounts and Share Buybacks
The discount level of the Company's shares is closely monitored by the Board and Manager and share buybacks are undertaken when appropriate. During the year ended 31 August 2021, 1.6 million shares were bought back into treasury at a cost of £7.7 million (2020: 2.4 million shares were bought back into treasury at a cost of £9.7 million). Since the period end, a further 0.7 million shares have been bought back into treasury at a cost of £3.3 million. The discount at the end of August 2021 was 9.6% compared to 12.3% at the previous year end. As at 27 October 2021, the discount was 11.6%.
Revenue Account
I am pleased to report that the Company's revenue return per share increased to 7.36p for the year to 31 August 2021 (2020 - 5.01p). A large part of this rise, however, was due to the Board's previously announced decision to change the allocation policy for management fees and finance costs. For the year to 31 August 2020 these were allocated 100% to revenue. Under the new policy, for the year to 31 August 2021, they have been allocated 25% to revenue and 75% to capital. 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. Accordingly, the Board has declared a final dividend of 6.5p per Ordinary share (2020 - 4.75p). The dividend, if approved by shareholders at the Annual General Meeting, will be paid on 17 December 2021.
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. Kathryn Langridge, having served on the Board for nine years, will retire from the conclusion of the AGM later this year. On behalf of the Board, I should like to thank Kathryn for her invaluable contribution to the Board. During the year, the Board appointed a recruitment firm to identify a potential candidate for a new Board appointment. This search is progressing well and the Board hopes to announce the appointment of a new non-executive director at, or before, the Company's AGM.
Continuation Vote and Proposed Introduction of Conditional Tender Offers
As shareholders may be aware, they are given the opportunity to vote on the continuation of the Company every three years. Asia Dragon Trust is one of the largest investment trusts specialising in the Asia (ex Japan) sector. The Board believes that the Trust offers investors a broad and marketable exposure to Asian equity markets, many of which continue to provide attractive long-term investment opportunities in the region. The Directors believe that the prospects for Asian markets remain positive and your Company is managed by one of the leading Asian fund managers. Your Board, thus, strongly recommends that shareholders vote in favour of the resolution for continuation at the forthcoming AGM.
On 21 October 2021, the Board announced that, subject to the passing of the continuation vote at the 2021 AGM, the Board will introduce five-yearly performance-related conditional tender offers (the "Conditional Tender Offers") in addition to its regular continuation votes.
There will be no tender offers in the event that the Company's net asset value total return continues to outperform the benchmark total return (MSCI All Country Asia (ex Japan) Index (sterling adjusted) (the "Benchmark")). However, should the NAV total return underperform the Benchmark over a five-year assessment period (the "Assessment Period") then shareholders will be offered the opportunity to realise a proportion of their investment for cash at a level close to NAV. The five-yearly period has been chosen as this best corresponds with the Investment Manager's typical investment time horizon.
If over the Assessment Period the Company's NAV per share total return fails to equal or exceed the total return on the Benchmark, the Board will put forward proposals to shareholders to undertake a tender offer. The size of any Conditional Tender Offer will be set by the Board up to a maximum of 25 per cent of the then issued share capital of the Company. Any such tender offer will be at a price equal to 98 per cent of the then prevailing NAV per share (after deduction of the costs of implementing the tender offer). Any tender offer would be subject to the passing of the relevant continuation vote, and itself would require the approval of shareholders, and it is expected that any tender offer will be made within three months after the passing of such continuation vote.
The Company's largest shareholder, City of London Investment Management, representing 27.73% of the Company's issued share capital, as at the date of this report, has provided an irrevocable undertaking to vote in favour of both the continuation vote and the resolution to approve the implementation of five yearly continuation votes and conditional tender offers.
Subject to the passing of Resolution 11, the Assessment Period for the first Conditional Tender Offer shall run from 1 September 2021 to 31 August 2026. Subsequent Conditional Tender Offers shall be assessed every five years thereafter.
In addition, if Resolution 11 relating to the introduction of the Conditional Tender Offers is passed, in order to align the Company's regular continuation votes with the assessment period for the Conditional Tender Offers that will be introduced by the passing of Resolution 11, the Board will move from the Company's current cycle of triennial continuation votes to five-yearly continuation votes.
Annual General Meeting ("AGM")
The Board continues to monitor the impact of the Covid-19 pandemic upon the arrangements for the Company's AGM. The Board was disappointed that the AGM in 2020 was restricted to following the minimum legal requirements for an AGM but believes it was in the best interests of shareholders.
However, in light of the improved position, the intention is to hold the Company's AGM on Wednesday, 15 December 2021 at 12:00 noon at the offices of abrdn plc, 6 St Andrew Square, Edinburgh, EH2 2BD. Should events require a change of venue this will be notified to Shareholders in the usual way via an announcement.
Outlook
Your Board remains optimistic on Asian stocks. While regulatory risks persist in China, Beijing appears to want to strike a balance between promoting innovation and achieving its political goals. A broad-brush clampdown on all new-economy sectors therefore appears unlikely, especially given their importance in China's vision for a modern, consumption-led economy. Once the dust settles, we expect that fundamental growth drivers should reassert themselves. Furthermore, simmering tensions between the US and China will continue to drive the latter's push towards self-sufficiency. This, in turn, presents opportunities for the astute investor, whether in areas linked to domestic consumption, technology or green energy.
Across the region, there are other hopeful signs. Accelerating vaccination rates should underpin further economic re-openings. This would spur consumption, adding another driver to growth alongside strong external demand. Your Manager's focus on quality companies should position the Company well to deliver sustainable returns over the long term.
For Asia Dragon Trust plc
James Will
Chairman
28 October 2021
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 2021 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 abrdn (Asia) Limited ("abrdn Asia" or the "Investment Manager") by way of a delegation agreement. abrdn Asia and ASFML are both wholly owned subsidiaries of abrdn plc.
Achieving the Investment Policy and Objective
The Directors are responsible for determining the investment policy and the investment objective of the Company. Day-to-day management of the Company's assets has been delegated to the Investment Manager. The Investment Manager follows a bottom-up investment process based on a disciplined evaluation of companies through direct contact by its fund managers. Stock selection is the major source of added value. No stock is bought without the Investment Manager having first met management, either in person, where possible, or virtually. The Investment Manager evaluates a company's worth in two stages; quality then price. Quality is defined by reference to management, business focus, the balance sheet and corporate governance. Price is evaluated by reference to key financial ratios, the market, the peer group and business prospects. Stock selection is key in constructing a diversified portfolio of companies. 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 30 to 36 o f the Company's annual report for the year ended 31 August 2021 , including a description of the ten largest investments, the full investment portfolio by value and sector/geographical analysis. At 31 August 2021, the Company's portfolio consisted of 64 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 2021, the Company's net gearing was 7.9%.
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 & Risk Committee and managed by the Board through the adoption of a risk matrix which identifies the key risks for the Company, including emerging risks, and covers strategy, investment management, operations, shareholders, regulatory and financial obligations and third party service providers. The principal risks and uncertainties facing the Company, which have been identified by the Board, are described in the table below, together with the mitigating actions.
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Risk |
Mitigating Action |
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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 previously used consultants to provide an independent perspective on the Manager's process and performance. The Board and Manager communicates with major shareholders regularly to gauge their views on the Company, including performance. |
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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. |
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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 Covid-19 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 continuing challenges arising from the Covid-19 pandemic . The Manager continues to assess and review 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, continue to be supplied effectively and the Board will continue to monitor arrangements through regular updates from the Manager. |
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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 its compliance with the management contract formally on an annual basis. As part of that review, the Board assesses the Manager's succession plans, risk management framework and marketing activities. |
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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. |
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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. |
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Gearing - As at 31 August 2021 the Company had £65 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. |
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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 & Risk Committee monitors compliance with regulations by reviewing internal control reports from the Manager, AIC updates and reports from the Company Secretary. |
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.
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KPI |
Description |
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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. |
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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. |
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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 28 of the Company's annual report for the year ended 31 August 2021. |
Further analysis of the above KPIs is provided in the Chairman's Statement.
Promoting the Success of the Company
The Board is required to report on how it has discharged its duties and responsibilities under section 172 of the Companies Act 2006 (the "s172 Statement"). Under section 172, the Directors have a duty to promote the success of the Company for the benefit of its members as a whole, taking into account the likely long term consequences of decisions, the need to foster relationships with the Company's stakeholders and the impact of the Company's operations on the environment.
The Company consists of five Directors and has no employees or customers in the traditional sense . As the Company has no employees, the culture of the Company is embodied in the Board of Directors. The Board seeks to promote a culture of strong governance, high standards of business conduct and to challenge, in a constructive and respectful way, the Company's third party service providers and advisers, whilst considering the impact on the Company and other stakeholders.
The Board's principal concern has been, and continues to be, the interests of the Company's shareholders and potential investors and the need to act fairly between shareholders. The Manager undertakes an annual programme of meetings with the largest shareholders and investors and reports back to the Board on issues raised at these meetings. The Investment Manager, who is based in the Singapore office, will attend such meetings in person, where possible. However, during the year under review, due to the ongoing travel restrictions arising from the Covid-19 pandemic their attendance has been by videoconference. 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. Due to the ongoing travel restrictions arising from the Covid-19 pandemic, the Board undertook a virtual visit to the region to conduct due diligence on the fund management and research teams. The Board met with the senior management team and the fund management team, and attended virtual investee company meetings alongside the Manager.
The portfolio activities undertaken by the Manager on behalf of the Company can be found in the 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:
- In the run up to the Company's three yearly continuation vote which is due to take place on 15 December 2021, the Board and Manager have: continued to raise the Company's profile; highlighted the benefits of investing in the region; and undertaken increased engagement with investors. The Board also considered the continuation and exit mechanisms the Company has in place as a whole, considering whether these remain appropriate and in the best interests of the Company and shareholders as a whole over the longer term. Subsequently, the Board agreed to propose the introduction of five-yearly conditional tender offers to shareholders which, if approved, would also result in the Board policy on continuation votes being amended such that five yearly rather than three yearly continuation votes would be offered.
- The Board is cognisant of the importance of ESG factors to all stakeholders and has been working alongside the Manager to better understand the impact of ESG factors on the Manager's decision making. At the Board's request, the Manager has presented its ESG investment framework and, in particular, the potential impact of climate change on the Company's portfolio. More details on the Manager's approach to ESG is set out on pages 19 to 25 of the Company's annual report for the year ended 31 August 2021.
- The Board has continued to consider Board succession planning, as it recognises the benefits of regular Board refreshment, and hopes to announce the appointment of a new non-executive director shortly before the Company's AGM in December 2021.
- To continue the Board's discount control policy through the buyback of shares which provides a degree of liquidity to the market at times when the discount widens.
- The Board continues to believe that the sensible use of modest financial gearing should enhance returns to shareholders over the longer term. The Company has in place a £75 million (2020: £50 million) three year loan facility, of which £25 million (2020: £25 million) is fixed and fully drawn down and £50 million is revolving (2020: £25 million). In January 2021, the Company increased the revolving facility by £25 million to £50 million to take advantage of opportunities within the Asian stock markets.
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 on 15 December 2021.
As noted in the Chairman's Statement and the Directors' Report, if Resolution 10 to be proposed at the upcoming Annual General Meeting is passed, in order to align the Company's regular continuation votes with the assessment period for the conditional tender offers that will be introduced by the passing
of Resolution 11, the Board will move from the Company's current cycle of triennial continuation votes to five-yearly continuation votes.
Board Diversity
The Board's statement on diversity is set out in the Statement of Corporate Governance. At 31 August 2021 there were two 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 on pages 19 to 25 o f the Company's annual report for the year ended 31 August 2021 .
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 on pages 14 and 15 of the Company's annual report for the year ended 31 August 2021 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 £50 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; and
- the engagement with investors and expectation that the Company's continuation vote resolution will pass successfully at the forthcoming AGM, as set out in the Chairman's Statement.
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 2026.
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 Covid-19), 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
28 October 2021
INVESTMENT MANAGER'S REVIEW
Portfolio review
In the year under review, the MSCI Asia ex Japan Index rose by 14.7%. In comparison, your Company's net asset value (NAV) rose by 20.5% in sterling terms, whereas the share price rose by 24.3% to 512p as at 31 August, with the discount to NAV per share narrowing.
We are pleased by the significant outperformance, with the Company's portfolio well-positioned for the challenging conditions, which had deteriorated progressively as the second half evolved. We did particularly well in China, with our selection of underlying holdings accounting for the bulk of the Trust's outperformance, even though the market grew increasingly turbulent. Investors were worried by China's chilly reception to US President Joe Biden's decision to maintain the same course as his predecessor in an attempt to contain China's growing influence across the globe. Moreover, market participants were spooked by Beijing's intensified regulatory scrutiny of several key sectors as the central government sought to level the playing field and protect the interests of key stakeholders, particularly the consumer. Exacerbating this was the looming spectre of inflation, which had compelled the Chinese central bank to broadly tighten its policy stance.
At the stock level, an underweight exposure to Alibaba Group was a major contributor to performance as it was among a number of Internet companies that faced the ire of the authorities. The company was fined a record US$2.8 billion for monopolistic practices, while associate Ant Group, whose initial public offer was scuttled days before its billion-dollar flotation, was forced to become a financial holding company that would be regulated like any other traditional lender.
Performance benefited from our earlier decision to consolidate our exposure to the internet sector, exiting smaller companies and focusing on companies more resilient to policy change. For example, we remained invested in Tencent Holdings which although its share price also retreated under the same intense regulatory glare, we believe remains well positioned in an attractive sector with long-term growth.
Ultimately, we believe the regulatory changes must be seen in the context of a rapidly-changing technological landscape. It has been a challenge for the authorities to keep pace with innovations and we think that a broad-brush, heavy-handed clampdown on these innovative sectors is unlikely to be sustained given their importance to Beijing's vision of a modern, consumption-led economy. The current regulatory scrutiny reflects the government's need to adjust its priorities as the economy matures: away from the fundamental need to alleviate poverty, to more nuanced goals of shared prosperity and social equality.
Among the other mainland China holdings that stood out during the period was leading battery separator maker Yunnan Energy New Mate rial, which was buoyed by optimism over demand for electric vehicles (EVs). Notably, the portfolio's significant exposure to the renewable energy segment benefited your Company, with Longi Green Energy also doing well. Longi is benefiting from an attractive long-term outlook for its solar modules, which is supported by President Xi Jinping's carbon zero ambitions. Also contributing to performance was Nari Technology , which supplies power and automation products and services to the State grid. Nari will benefit from a new pricing mechanism that should boost both power generators and encourage further investment in grid optimisation and energy storage solutions. Elsewhere, Wuxi Biologics's shares advanced after the contract drugmaker upgraded its 2021 forecast for sales and earnings, underpinned by its line of vaccines that were either under development or already in production.
Apart from the changes to the portfolio already mentioned above, we also added to several China A Share names. We prefer high-quality companies that cater to domestic consumption or clean energy solutions, as these are aligned with Beijing's strategic goals and should provide some measure of shelter from the regulatory headwinds now buffeting the market. In the renewable energy sector, we see potential in companies with exposure to solar energy, electric vehicle batteries and the State grid system. To this end, we invested in Sungrow , a leading global supplier of inverters which are an essential component of solar projects. Sungrow benefits from greater cost advantage, superior product quality and higher brand awareness versus its domestic peers. It is also the largest domestic provider of energy storage systems and is poised to capitalise on opportunities in clean-tech development, especially in China. We also introduced Glodon , which offers construction budgeting software solutions and is set to benefit from Beijing's push for infrastructure development. This should support Glodon's goal of expanding into growing markets for cloud-based solutions and construction management. Another new addition to the portfolio was Shenzhen Mindray Bio-Medical Electronics , China's largest premium medical equipment maker. It focuses heavily on research and development and is able to price its products competitively, enabling it to win substantial market share overseas. Geopolitical tensions with the US should continue to drive China's push for self-sufficiency, which in turn presents us with investment opportunities, whether in domestic consumption, technology, or the green energy sector. Finally, we also initiated a position in Tongcheng-Elong (TCEL). Backed by Tencent Holdings and Trip.com, its two largest shareholders, TCEL is the biggest online travel platform in China, offering air, train and bus tickets as well as hotel bookings. The company enjoys superior margins as it has access to massive user bases, enabling it to acquire customers at a relatively low cost. Management is also keen to improve cross-selling between its ticketing and accommodation businesses. We see TCEL as being well-placed to benefit from increasing domestic travel among those living in lower-tier cities. We will continue to position your Company's portfolio around these structural growth themes, which should imbue them with the ability to withstand the near-term uncertainties.
Elsewhere in Asia, we took advantage of the rotation from growth to value stocks. This allowed us to raise our exposure to markets beyond China that had also been sold down, albeit without the accompanying regulatory risks. A notable addition was South Korea's Kakao Corp . The internet company offers a suite of services built around its flagship messaging platform KakaoTalk. It is well positioned to ride the trend of consumers moving online despite the competitive domestic market, given its dominant brand, an ability to innovate and led by solid management with a good track record. We also introduced US-listed Sea , which has key businesses in online video gaming, e-commerce and payment platforms across emerging Asia. The group owns leading Asean e-commerce platform Shopee and earns most of its revenues from Southeast Asia. It is gaining market share against its rivals in Indonesia, and continues to strengthen its ecosystem to deepen its penetration elsewhere in Asia.
In Taiwan, we added two new holdings. Delta Electronics makes power systems for various industries, including servers, consumer electronics, telecommunications, industrial and building automation and electric vehicles. Delta boasts a superior growth profile, a wide client base and established relationships with its suppliers. It benefits from pandemic-driven demand for data centres and cloud computing-related products. We are upbeat about its longer-term prospects too, which are underpinned by its exposure to multiple growth drivers, such as 5G, data centres and Internet of Things applications, and the rising adoption of EVs amid a global clean energy push. The other initiation was GlobalWafers , a Taiwanese silicon wafer manufacturer that ranks among the world's leaders in a consolidating industry. It is benefiting from improving wafer demand, while its long-term supply contracts underpin its future earnings and cash flow growth.
The portfolio includes frontier market exposure in Vietnam, which is not part of the benchmark. We hold Vietnam Technological & Commercial Bank as a proxy for this fast-growing developing economy. Vietnam stands to benefit from the diversification of supply chains away from China. This trend started a few years ago during the Trump administration, with businesses forced to relocate elsewhere in Asia to circumvent the punitive tariffs imposed on goods made in China. The pandemic further exposed the vulnerability of placing entire supply chains within a single country, accelerating the need to diversify production facilities to countries such as Vietnam.
On the ESG front, we continued to engage with the management of the Company's underlying holdings on a regular basis. A comprehensive report on these engagement efforts can be found on page 20 o f the Company's annual report for the year ended 31 August 2021 .
In view of better growth opportunities elsewhere, we exited Astra International, JD Health, KE Holdings, Koh Young Technology, New Oriental Education, Shanghai International Airport and Singtel. We also sold Singapore property developer CapitaLand after a share-price rally on the back of a proposed group restructuring.
Outlook
Looking ahead, we remain cautiously optimistic about Asian markets in spite of the challenging operating environment, including fresh Covid-19 outbreaks caused by the delta variant, the intense regulatory scrutiny in China, and a build-up of inflationary pressures that could precipitate higher interest rates globally.
Notwithstanding these uncertainties, corporate earnings growth across Asia is likely to rebound sharply this year, led by the technology hardware sector. This is due in part to low-base effects, with some estimates as high as 30%. At the same time, government and central bank policies are likely to remain supportive. Notably, the bounce in earnings so far has been confined to the more developed Asian markets, with many developing ones still coming to grips with the latest spikes in Covid infections. But with vaccination rates now accelerating across the region, restrictions should ease gradually as economies re-open. This could help mitigate cost pressures tied to near-term supply chain bottlenecks. It should also make Asian equities appear more attractive vis-à-vis those in developed markets elsewhere as earnings recover further.
In the longer term, the region's growth drivers remain intact. A burgeoning middle class with rising affluence should continue to drive demand across numerous sectors, such as retail , financial services, healthcare and infrastructure. As stock-pickers, we remain focused on seeking out and investing in well-managed companies backed by solid fundamentals and led by sound management. These companies are dominant in their segments, have strong franchises, with sustainable earnings streams and robust balance sheets. We believe that the quality of the portfolio should buffer it against the uncertainties of such an unprecedented period.
abrdn (Asia) Limited*
28 October 2021
* on behalf of Aberdeen Standard Fund Managers Limited. Both companies are subsidiaries of abrdn plc.
RESULTS
|
Financial Highlights |
|
|
|
|
|
|
|
|
|
|
31 August 2021 |
31 August 2020 |
% change |
|
Performance |
|
|
|
|
Equity shareholders' funds (£'000) |
706,929 |
599,431 |
+17.9 |
|
Net asset value per share (capital return basis) (basic) (p) |
566.60 |
474.39 |
+19.4 |
|
Share price (capital return basis) (p) |
512.00 |
416.00 |
+23.1 |
|
Market capitalisation (£'000) |
638,804 |
525,651 |
+21.5 |
|
MSCI AC Asia (ex Japan) Index (in sterling terms; capital return basis) |
1138.78 |
1012.62 |
+12.5 |
|
Revenue return per share (basic) (p) |
7.36 |
5.01 |
+46.9 |
|
Total return per share (basic) (p) |
96.60 |
19.94 |
+384.5 |
|
Gearing |
|
|
|
|
Net gearing (%){A} |
7.9 |
3.5 |
|
|
Discount |
|
|
|
|
Discount to net asset value (basic) (%){A} |
9.6 |
12.3 |
|
|
Operating costs |
|
|
|
|
Ongoing charges ratio{A} |
0.83 |
0.89 |
|
|
|
|
||
|
{A} Considered to be an Alternative Performance Measure. Further details can be found on pages 86 and 87 o f the Company's annual report for the year ended 31 August 2021 . |
|||
|
PERFORMANCE (TOTAL RETURN) |
|
|
|
|
|
|
|
|
|
|
1 year return |
3 year return |
5 year return |
|
|
% |
% |
% |
|
Share price{A} |
+24.3 |
+43.0 |
+78.7 |
|
Net asset value{AB} |
+20.5 |
+38.5 |
+72.3 |
|
MSCI AC Asia (ex Japan) Index (in sterling terms) |
+14.7 |
+27.6 |
+65.8 |
|
|
|||
|
{A} Considered to be an Alternative Performance Measure. Further details can be found on page 86 o f the Company's annual report for the year ended 31 August 2021 .
|
|||
|
{B} 1 year and 3 year returns are presented on an undiluted basis; 5 year return presented on a diluted basis as CULS in issue during those periods were "in the money". |
|||
PORTFOLIO
TEN LARGEST INVESTMENTS
As at 31 August 2021
|
Taiwan Semiconductor Manufacturing Company |
|
Samsung Electronics (Pref) |
|
As the world's largest pure-play semiconductor manufacturer, TSMC provides a full range of integrated foundry services, along with a robust balance sheet and good cash generation that enables it to keep investing in cutting-edge technology and innovation. |
|
One of the global leaders in the memory chips segment, and a major player in smartphones and display panels as well. It has a vertically integrated business model and robust balance sheet, alongside good free cash flow generation. |
|
|
|
|
|
Tencent Holdings |
|
AIA Group |
|
The internet giant continues to strengthen its ecosystem and whilst the regulator is keen to makes sure that large companies do not sacrifice other stakeholders' interests for their own profit, the Manager continues to see great potential in Tencent Holdings' ability to balance its multiple revenue streams, its ability to monetise its social media and payment platforms whilst addressing the regulator's concerns. |
|
A leading pan-Asian life insurance company, it is poised to take advantage of Asia's growing affluence, backed by an effective agency force and a strong balance sheet. |
|
|
|
|
|
Housing Development Finance Corp |
|
Alibaba Group |
|
A steady, well-managed financial services conglomerate with leading positions in mortgage finance, retail banking, life insurance and asset management, supported by a broad distribution network, efficient cost structure and balance sheet quality. |
|
The Chinese internet group is a leading global e-commerce company with many impressive businesses, including the Taobao and Tmall online platforms in the mainland. It also has interests in logistics, media as well as cloud computing platforms and payments. |
|
|
|
|
|
Tata Consultancy Services |
|
Bank Central Asia |
|
A best-in-class Indian IT services provider with the most consistent execution and lowest attrition rates. It is a long-term compounder with a decent outlook for revenue growth and order wins over the medium term. |
|
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. |
|
|
|
|
|
Hon Hai Precision Industry |
|
Oversea-Chinese Banking Corporation |
|
Hon Hai is Apple's main iPhone supplier. We like that the company is broadening its business into electric vehicle-related opportunities, while management has become more disciplined in its investments. |
|
A well-managed Singapore bank with a solid capital base and good cost-to-income ratio. It is diversified by both geography and service offerings, with interests spanning Southeast Asia, North Asia, wealth management and life assurance as well as its core banking activities. |
OTHER INVESTMENTS
As at 31 August 2021
|
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2021 |
assets |
2020 |
|
Company |
Industry |
Country |
£'000 |
% |
£'000 |
|
Taiwan Semiconductor Manufacturing Company |
Semiconductors & Semiconductor Equipment |
Taiwan |
80,788 |
10.4 |
55,144 |
|
Samsung Electronics (Pref) |
Technology Hardware, Storage & Peripherals |
South Korea |
66,610 |
8.6 |
52,160 |
|
Tencent Holdings |
Interactive Media & Services |
China |
53,993 |
7.0 |
63,167 |
|
AIA Group |
Insurance |
Hong Kong |
39,446 |
5.1 |
17,244 |
|
Housing Development Finance Corp |
Thrifts & Mortgage Finance |
India |
32,093 |
4.1 |
14,799 |
|
Alibaba Group |
Internet & Direct Marketing Retail |
China |
30,664 |
4.0 |
- |
|
Tata Consultancy Services |
IT Services |
India |
17,679 |
2.3 |
10,656 |
|
Bank Central Asia |
Banks |
Indonesia |
16,968 |
2.2 |
17,745 |
|
Hon Hai Precision Industry |
Electronic Equipment Instruments & Components |
Taiwan |
15,856 |
2.0 |
6,054 |
|
Oversea-Chinese Banking Corporation |
Banks |
Singapore |
15,494 |
2.0 |
10,441 |
|
Top ten investments |
|
|
369,591 |
47.7 |
|
|
Kweichow Moutai 'A' |
Beverages |
China |
13,627 |
1.8 |
18,051 |
|
China Merchants Bank{A} |
Banks |
China |
13,077 |
1.7 |
11,085 |
|
Hong Kong Exchanges & Clearing |
Capital Markets |
Hong Kong |
13,009 |
1.7 |
8,241 |
|
China Tourism Group Duty Free Corp 'A' |
Speciality Retail |
China |
12,809 |
1.6 |
10,680 |
|
DBS Group |
Banks |
Singapore |
12,076 |
1.5 |
5,694 |
|
Wuxi Biologics (Cayman) |
Life Sciences Tools & Services |
China |
11,531 |
1.5 |
14,532 |
|
Kerry Logistics Network |
Air Freight & Logistics |
Hong Kong |
11,496 |
1.5 |
6,173 |
|
Ping An Insurance 'H' |
Insurance |
China |
11,302 |
1.5 |
18,719 |
|
Nari Technology |
Electrical Equipment |
China |
11,144 |
1.4 |
- |
|
China Resources Land |
Real Estate Management & Development |
China |
10,897 |
1.4 |
16,325 |
|
Twenty largest investments |
|
|
490,559 |
63.3 |
|
|
Kotak Mahindra Bank |
Banks |
India |
10,573 |
1.4 |
10,567 |
|
LG Chem |
Chemicals |
South Korea |
10,459 |
1.3 |
8,233 |
|
Samsung SDI |
Electronic Equipment Instruments & Components |
South Korea |
10,333 |
1.3 |
3,550 |
|
SBI Life Insurance |
Insurance |
India |
10,124 |
1.3 |
7,167 |
|
Yunnan Energy New Material - A |
Containers & Packaging |
China |
9,417 |
1.2 |
3,445 |
|
Delta Electronic |
Electronic Equipment Instruments & Components |
Taiwan |
9,004 |
1.2 |
- |
|
Global Wafers Co |
Semiconductors & Semiconductor Equipment |
Taiwan |
8,954 |
1.2 |
- |
|
Ayala Land |
Real Estate Management & Development |
Philippines |
8,728 |
1.1 |
7,914 |
|
China Conch Venture Holdings |
Construction & Engineering |
China |
8,611 |
1.1 |
9,049 |
|
Info Edge (India) |
Interactive Media & Services |
India |
8,527 |
1.1 |
4,560 |
|
Thirty largest investments |
|
|
585,289 |
75.5 |
|
|
China Resources Gas |
Gas Utilities |
China |
8,317 |
1.1 |
6,181 |
|
ITC |
Tobacco |
India |
8,102 |
1.1 |
6,208 |
|
Longi Green Energy Technology - A |
Semiconductors & Semiconductor Equipment |
China |
7,986 |
1.0 |
- |
|
Ultratech Cement |
Construction Materials |
India |
7,959 |
1.0 |
6,579 |
|
Silergy Corp |
Semiconductors & Semiconductor Equipment |
Taiwan |
7,702 |
1.0 |
5,255 |
|
Meituan-Dianping Class B |
Internet & Direct Marketing Retail |
China |
6,915 |
0.9 |
10,530 |
|
China Vanke 'H' |
Real Estate Management & Development |
China |
6,788 |
0.9 |
3,159 |
|
Shenzhou International Group |
Textiles, Apparel & Luxury Goods |
China |
6,759 |
0.9 |
8,131 |
|
Hindustan Unilever |
Household Products |
India |
6,713 |
0.9 |
3,062 |
|
Sea ADS |
Entertainment |
Singapore |
6,576 |
0.8 |
- |
|
Forty largest investments |
|
|
659,106 |
85.1 |
|
|
Samsung Biologics |
Life Sciences Tools & Services |
South Korea |
6,564 |
0.8 |
- |
|
Midea Group 'A' |
Household Durables |
China |
6,474 |
0.8 |
10,337 |
|
Budweiser Brewing |
Beverages |
Hong Kong |
6,463 |
0.8 |
4,786 |
|
Wanhua Chemical Group - A |
Chemicals |
China |
6,400 |
0.8 |
- |
|
Kakao Corp |
Internet & Directing Marketing Retail |
South Korea |
6,370 |
0.8 |
- |
|
Sands China |
Hotels, Restaurants & Leisure |
China |
6,086 |
0.8 |
9,135 |
|
Accton Technology Corp |
Communications Equipment |
Taiwan |
5,880 |
0.8 |
2,293 |
|
Bank of Philippine Islands |
Banks |
Philippines |
5,765 |
0.8 |
5,606 |
|
Siam Cement 'F' |
Construction Materials |
Thailand |
5,598 |
0.7 |
5,753 |
|
Vietnam Technological & Commercial Bank |
Banks |
Vietnam |
5,507 |
0.7 |
4,119 |
|
Fifty largest investments |
|
|
720,213 |
92.9 |
|
|
Hangzhou Tigermed Consulting Co{A} |
Life Sciences Tools & Services |
China |
4,378 |
0.6 |
2,424 |
|
Sungrow Power Supply Co -A |
Electrical Equipment |
China |
4,243 |
0.5 |
- |
|
Vietnam Dairy Products |
Food Products |
Vietnam |
4,221 |
0.5 |
4,918 |
|
Mobile World Investment Corporation |
Speciality Retail |
Vietnam |
4,129 |
0.5 |
2,653 |
|
Glodon Co -A |
Software |
China |
4,021 |
0.5 |
- |
|
ShenZhen Mindray Bio-Medical Electronics - A |
Health Care Equipment & Supplies |
China |
3,948 |
0.5 |
- |
|
Chacha Food Co-A |
Food Products |
China |
3,805 |
0.5 |
- |
|
Toncheng Elong Holdings |
Hotels, Restaurants & Leisure |
China |
3,632 |
0.5 |
- |
|
GDS Holdings ADS |
IT Services |
China |
3,512 |
0.4 |
4,999 |
|
GDS Holdings - Class A |
IT Services |
China |
2,989 |
0.4 |
- |
|
Sixty largest investments |
|
|
759,091 |
97.8 |
|
|
ASM Pacific Technology |
Semiconductors & Semiconductor Equipment |
Hong Kong |
2,888 |
0.4 |
2,683 |
|
Beijing Sinnet Technology 'A' |
IT Services |
China |
2,675 |
0.3 |
4,875 |
|
Joinn Laboratories China - H |
Life Sciences Tools & Services |
China |
2,083 |
0.3 |
- |
|
John Keells Holdings |
Industrial Conglomerates |
Sri Lanka |
57 |
- |
6,383 |
|
|
|
|
766,794 |
98.8 |
|
|
Net current assets{B} |
8,942 |
1.2 |
|
||
|
Total assets less current liabilities{B} |
775,736 |
100.0 |
|
||
|
|
|
|
|
||
|
{A} Holding includes investment in both 'A' and 'H' shares. |
|||||
|
{B} Excluding bank loan of £64,998,000. |
|||||
|
|
|||||
|
Note: Unless otherwise stated, foreign stock is held and all investments are equity holdings. |
|||||
CHANGES IN ASSET DISTRIBUTIONS
Year Ended 31 August 2021
|
|
Value at |
|
|
|
Value at |
|
|
1 September 2020 |
Purchases |
Sales |
Gains/ |
31 August 2021 |
|
Country |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
China |
256,359 |
133,177 |
101,748 |
(9,705) |
278,083 |
|
Hong Kong |
43,218 |
31,885 |
7,254 |
5,453 |
73,302 |
|
India |
67,429 |
10,229 |
12,092 |
36,204 |
101,770 |
|
Indonesia |
26,859 |
- |
11,295 |
1,404 |
16,968 |
|
Malaysia |
3,830 |
- |
4,104 |
274 |
- |
|
Myanmar |
2,097 |
- |
2,160 |
63 |
- |
|
Philippines |
13,520 |
- |
910 |
1,883 |
14,493 |
|
Singapore |
37,158 |
13,803 |
25,323 |
8,508 |
34,146 |
|
South Korea |
65,867 |
33,481 |
29,300 |
30,288 |
100,336 |
|
Sri Lanka |
9,344 |
- |
8,878 |
(409) |
57 |
|
Taiwan |
72,648 |
33,669 |
15,577 |
37,444 |
128,184 |
|
Thailand |
10,808 |
892 |
7,302 |
1,200 |
5,598 |
|
Vietnam |
11,690 |
266 |
5,095 |
6,996 |
13,857 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|
Total investments |
620,827 |
257,402 |
231,038 |
119,603 |
766,794 |
|
Net current assets |
10,653 |
- |
- |
(1,711) |
8,942 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|
Total assets less current liabilities |
631,480 |
257,402 |
231,038 |
117,892 |
775,736 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
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
28 October 2021
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 multicurrency revolving facility in place until July 2022. The Company also has in place a fixed loan facility of £25 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, and the next continuation vote is due to be held in December 2021.
As noted in the Chairman's Statement and the Directors' Report, if Resolution 11 to be proposed at the upcoming Annual General Meeting is passed, in order to align the Company's regular continuation votes with the assessment period for the conditional tender offers that will be introduced by the passing of Resolution 11, the Board will move from the Company's current cycle of triennial continuation votes to five-yearly continuation votes.
The Board has considered the ongoing impact of Covid-19 on the Company and its underlying portfolio and believes that it will continue to 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 2021 |
|||
|
|
|
Revenue |
Capital |
Total |
|
|
|
Notes |
£'000 |
£'000 |
£'000 |
|
|
Gains on investments held at fair value through profit or loss |
10 |
- |
119,603 |
119,603 |
|
|
Currency losses |
|
- |
(573) |
(573) |
|
|
Income |
3 |
13,074 |
- |
13,074 |
|
|
Investment management fee |
4 |
(1,194) |
(3,580) |
(4,774) |
|
|
Administrative expenses |
5 |
(1,102) |
- |
(1,102) |
|
|
|
|
_______ |
_______ |
_______ |
|
|
Net return before finance costs and taxation |
|
10,778 |
115,450 |
126,228 |
|
|
|
|
|
|
|
|
|
Interest payable and similar charges |
6 |
(189) |
(567) |
(756) |
|
|
|
|
_______ |
_______ |
_______ |
|
|
Return before taxation |
|
10,589 |
114,883 |
125,472 |
|
|
|
|
|
|
|
|
|
Taxation |
7 |
(1,349) |
(2,942) |
(4,291) |
|
|
|
|
_______ |
_______ |
_______ |
|
|
Return after taxation |
|
9,240 |
111,941 |
121,181 |
|
|
|
|
_______ |
_______ |
_______ |
|
|
Return per share (pence) |
9 |
7.36 |
89.24 |
96.60 |
|
|
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
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 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 |
|
|
|
|
_______ |
_______ |
_______ |
|
|
|
STATEMENT OF FINANCIAL POSITION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
As at |
||
|
|
|
31 August 2021 |
31 August 2020 |
||
|
|
Notes |
£'000 |
£'000 |
||
|
Non-current assets |
|
|
|
||
|
Investments at fair value through profit or loss |
10 |
766,794 |
620,827 |
||
|
|
|
_______ |
_______ |
||
|
Current assets |
|
|
|
||
|
Debtors and prepayments |
11 |
5,782 |
3,929 |
||
|
Cash and cash equivalents |
12 |
5,000 |
11,390 |
||
|
|
|
_______ |
_______ |
||
|
|
|
10,782 |
15,319 |
||
|
|
|
_______ |
_______ |
||
|
Creditors: amounts falling due within one year |
|
|
|
||
|
Bank loan |
13(a) |
(64,998) |
(6,000) |
||
|
Other creditors |
13(b) |
(1,840) |
(4,666) |
||
|
|
|
_______ |
_______ |
||
|
|
|
(66,838) |
(10,666) |
||
|
|
|
_______ |
_______ |
||
|
Net current (liabilities)/assets |
|
(56,056) |
4,653 |
||
|
|
|
_______ |
_______ |
||
|
Creditors: amounts falling due after more than one year |
|
|
|
||
|
Bank loan |
13(a) |
- |
(24,995) |
||
|
Deferred tax liability on Indian capital gains |
13(c) |
(3,809) |
(1,054) |
||
|
|
|
_______ |
_______ |
||
|
|
|
(3,809) |
(26,049) |
||
|
|
|
_______ |
_______ |
||
|
Net assets |
|
706,929 |
599,431 |
||
|
|
|
_______ |
_______ |
||
|
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 |
545,582 |
441,359 |
||
|
Revenue reserve |
|
40,855 |
37,580 |
||
|
|
|
_______ |
_______ |
||
|
Equity shareholders' funds |
|
706,929 |
599,431 |
||
|
|
|
_______ |
_______ |
||
|
Net asset value per Ordinary share (pence) |
16 |
566.60 |
474.39 |
||
|
|
|
_______ |
_______ |
||
|
|
|
|
|
||
|
The financial statements were approved by the Board of Directors and authorised for issue on 28 October 2021 and were signed on its behalf by: |
|||||
|
James Will |
|||||
|
Chairman |
|||||
|
The accompanying notes 4 are an integral part of the financial statements. |
|||||
|
|
STATEMENT OF CHANGES IN EQUITY |
|||||||
|
|
|
|||||||
|
For the year ended 31 August 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Share |
Capital |
|
|
|
|
|
|
|
Share |
premium |
redemption |
Capital |
Revenue |
|
|
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Balance at 1 September 2020 |
|
31,922 |
60,416 |
28,154 |
441,359 |
37,580 |
599,431 |
|
|
Return after taxation |
|
- |
- |
- |
111,941 |
9,240 |
121,181 |
|
|
Buyback of Ordinary shares for treasury |
14 |
- |
- |
- |
(7,718) |
- |
(7,718) |
|
|
Dividend paid |
8 |
- |
- |
- |
- |
(5,965) |
(5,965) |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
Balance at 31 August 2021 |
|
31,922 |
60,416 |
28,154 |
545,582 |
40,855 |
706,929 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
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 1 September 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 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
The capital reserve includes investment holding gains amounting to £241,988,000 (2020 - £179,491,000), 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 2021 |
31 August 2020 |
|
|
|
Notes |
£'000 |
£'000 |
|
|
Operating activities |
|
|
|
|
|
Net return before taxation |
|
125,472 |
26,007 |
|
|
Adjustment for: |
|
|
|
|
|
Gains on investments |
|
(119,603) |
(19,336) |
|
|
Currency losses |
|
573 |
893 |
|
|
Decrease in accrued dividend income |
|
568 |
138 |
|
|
Decrease in other debtors |
|
14 |
31 |
|
|
Increase in other creditors |
|
176 |
81 |
|
|
Interest payable and similar charges |
6 |
756 |
548 |
|
|
Scrip dividends included in investment income |
|
(587) |
(222) |
|
|
Overseas withholding tax |
|
(1,767) |
(1,329) |
|
|
|
|
_______ |
_______ |
|
|
Cash from operations |
|
5,602 |
6,811 |
|
|
Interest paid |
6 |
(749) |
(545) |
|
|
|
|
_______ |
_______ |
|
|
Net cash inflow from operating activities |
|
4,853 |
6,266 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Purchases of investments |
|
(259,733) |
(179,449) |
|
|
Sales of investments |
|
229,021 |
190,990 |
|
|
Capital gains tax on sales |
|
(187) |
(112) |
|
|
|
|
_______ |
_______ |
|
|
Net cash (outflow)/inflow from investing activities |
|
(30,899) |
11,429 |
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Equity dividends paid |
8 |
(5,965) |
(6,088) |
|
|
Buyback of Ordinary shares |
|
(7,806) |
(9,489) |
|
|
Tender Offer for Ordinary shares inclusive of expenses |
|
- |
(5) |
|
|
Drawdown of bank loan |
|
34,000 |
- |
|
|
|
|
_______ |
_______ |
|
|
Net cash from/(used in) financing activities |
|
20,229 |
(15,582) |
|
|
|
|
_______ |
_______ |
|
|
(Decrease)/increase in cash and cash equivalents |
|
(5,817) |
2,113 |
|
|
|
|
_______ |
_______ |
|
|
Analysis of changes in cash and cash equivalents during the year |
|
|
|
|
|
Opening balance |
|
11,390 |
10,170 |
|
|
Effect of exchange rate fluctuations on cash held |
|
(573) |
(893) |
|
|
(Decrease)/increase in cash and cash equivalents as above |
|
(5,817) |
2,113 |
|
|
|
|
_______ |
_______ |
|
|
Closing cash and cash equivalents |
|
5,000 |
11,390 |
|
|
|
|
_______ |
_______ |
|
|
Represented by: |
|
|
|
|
|
Money market funds |
|
500 |
3,300 |
|
|
Cash and short term deposits |
|
4,500 |
8,090 |
|
|
|
|
_______ |
_______ |
|
|
|
|
5,000 |
11,390 |
|
|
|
|
_______ |
_______ |
|
|
|
||||
|
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 2021 and 31 August 2020 and total return for the period. |
|
|||||
|
|
|
|
|
|
||
|
|
Dividend |
|
Share |
|
||
|
2021 |
rate |
NAV |
price |
|
||
|
31 August 2020 |
N/A |
474.39p |
416.00p |
|
||
|
19 November 2020 |
4.75p |
540.65p |
479.50p |
|
||
|
31 August 2021 |
N/A |
566.60p |
512.00p |
|
||
|
Total return |
|
+20.5% |
+24.3% |
|
||
|
|
|
|
|
|
||
|
|
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% |
|
||
|
|
|
|
|
|
||
|
Discount to net asset value per Ordinary share. The difference between the share price and the net asset value per Ordinary share expressed as a percentage of the net asset value per Ordinary share. The highest and lowest discount during the year is shown on page 26 o f the Company's annual report for the year ended 31 August 2021 . |
|
|||||
|
|
|
|
|
|
||
|
|
|
31 August 2021 |
31 August 2020 |
|
||
|
NAV per Ordinary share (p) |
a |
566.60 |
474.39 |
|
||
|
Share price (p) |
b |
512.00 |
416.00 |
|
||
|
Discount |
(a-b)/a |
9.6% |
12.3% |
|
||
|
|
|
|
|
|
||
|
Net gearing. Net gearing measures the total borrowings less cash and cash equivalents divided by shareholders' funds, expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes net amounts due to and from brokers at the year end as well as cash and short term deposits. |
|
|||||
|
|
|
|
|
|
||
|
|
|
31 August 2021 |
31 August 2020 |
|
||
|
Borrowings (£'000) |
a |
64,998 |
30,995 |
|
||
|
Cash (£'000) |
b |
5,000 |
11,390 |
|
||
|
Amounts due to brokers (£'000) |
c |
260 |
3,266 |
|
||
|
Amounts due from brokers (£'000) |
d |
4,150 |
2,133 |
|
||
|
Shareholders' funds (£'000) |
e |
706,929 |
599,431 |
|
||
|
Net gearing |
(a-b+c-d)/e |
7.9% |
3.5% |
|
||
|
|
|
|
|
|
||
|
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. |
|
|||||
|
|
|
|
||||
|
|
2021 |
2020 |
||||
|
Investment management fees (£'000) |
4,774 |
4,058 |
||||
|
Administrative expenses (£'000) |
1,102 |
1,070 |
||||
|
Less: non-recurring charges{A} (£'000) |
(18) |
(49) |
||||
|
|
_______ |
_______ |
||||
|
Ongoing charges (£'000) |
5,858 |
5,079 |
||||
|
|
_______ |
_______ |
||||
|
Average net assets (£'000) |
707,217 |
573,046 |
||||
|
|
_______ |
_______ |
||||
|
Ongoing charges ratio |
0.83% |
0.89% |
||||
|
|
_______ |
_______ |
||||
|
|
|
|
||||
|
{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 2021 |
|
|
|
|
|
|
|
|
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 preparation. The financial statements have been prepared in accordance with Financial Reporting Standard 102, the Companies Act 2006 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in April 2021. The financial statements are prepared in Sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The accounting policies applied are unchanged from the prior year and have been applied consistently. |
|
|
|
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 multicurrency revolving facility in place until July 2022. The Company also has in place a fixed loan facility of £25 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, and the next continuation vote is due to be held in December 2021. If Resolution 10 to be proposed at the upcoming Annual General Meeting is passed, in order to align the Company's regular continuation votes with the assessment period for the conditional tender offers that will be introduced by the passing of Resolution 10, the Board will move from the Company's current cycle of triennial continuation votes to five-yearly continuation votes. As set out in the Chairman's Statement, the Board has engaged with the Company's largest investors and expects that the Company's continuation vote resolution will pass successfully at the forthcoming AGM. The Board has considered the ongoing impact of Covid-19 on the Company and its underlying portfolio and believes that it will continue to 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. |
|
|
|
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 except as follows: |
|
|
|
- expenses directly relating to the acquisition or disposal of an investment, which are charged to the capital column of the Statement of Comprehensive Income and are separately identified and disclosed in note 10; and |
|
|
|
- the Company charges 75% of investment management fees and finance costs to the capital column and 25% to the revenue column of the Statement of Comprehensive Income, in accordance with the Board's expected long term return in the form of capital gains and income respectively from the investment portfolio of the Company. |
|
|
(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. The realised gains part of reserve is distributable for the purpose of funding share buybacks and dividends. |
|
|
|
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. |
|
|
|
When making a distribution to shareholders, the Directors determine profits available for distribution by reference to "Guidance on realised and distributable profits under the Companies Act 2006" issued by the Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants of Scotland in April 2017. The availability of distributable reserves in the Company is dependent on those dividends meeting the definition of qualifying consideration within the guidance and on available cash resources of the Company and other accessible sources of funds. The distributable reserves are therefore subject to any future restrictions or limitations at the time such distribution is made. |
|
|
(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 recognised in the financial statements in the period in which Shareholders approve them. |
|
|
(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. |
|
|
(k) |
Borrowings. Bank loans are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. Subsequently, they are measured at amortised cost using the effective interest method. Finance charges are accounted for on an accruals basis using the effective interest rate method and are charged 25% to revenue and 75% to capital. |
|
3. |
Income |
|
|
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
UK dividend income |
- |
38 |
|
|
Overseas dividend income |
12,474 |
12,946 |
|
|
Scrip dividends |
587 |
222 |
|
|
|
_______ |
_______ |
|
|
|
13,061 |
13,206 |
|
|
|
_______ |
_______ |
|
|
Other income |
|
|
|
|
Deposit interest |
- |
9 |
|
|
Interest from money market funds |
3 |
23 |
|
|
Other income |
10 |
2 |
|
|
|
_______ |
_______ |
|
|
|
13 |
34 |
|
|
|
_______ |
_______ |
|
|
Total income |
13,074 |
13,240 |
|
|
|
_______ |
_______ |
|
4. |
Management fee |
|
|||||
|
|
|
2021 |
2020 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Management fee |
1,194 |
3,580 |
4,774 |
4,058 |
- |
4,058 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
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 £500,000 (2020 - £3,300,000) in Aberdeen Standard Liquidity Fund (Lux) - Sterling Fund which is managed and administered by abrdn. The Company pays a management fee on the value of these holdings but no fee is chargeable at the underlying fund level. |
||||||
|
|
With effect from 1 September 2020, the Board agreed a change in the allocation of management fees and finance charges from 100% to revenue, to 75% capital and 25% to revenue. |
||||||
|
|
The balance due to the Manager at the year end was £1,190,000 (2020 - £1,056,000). |
||||||
|
|
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 |
|
|
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
Promotional activities |
200 |
200 |
|
|
Directors' fees |
176 |
183 |
|
|
Custody fees |
289 |
244 |
|
|
Depositary fees |
69 |
63 |
|
|
Auditor's remuneration: Fees payable to the Company's auditor for |
|
|
|
|
- audit of the Company's annual report |
30 |
30 |
|
|
Legal and professional fees |
61 |
104 |
|
|
Other expenses |
277 |
246 |
|
|
|
_______ |
_______ |
|
|
|
1,102 |
1,070 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
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 (2020 - £200,000) and the sum due to the Manager at the year end was £34,000 (2020 - £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 |
||||||
|
|
|
|
|||||
|
|
|
2021 |
2020 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Interest on bank loans |
189 |
567 |
756 |
548 |
- |
548 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
With effective from 1 September 2020, the Board agreed a change in the allocation of management fees and finance charges from 100% to revenue, to 75% capital and 25% to revenue |
||||||
|
7. |
Taxation |
|
|
|||||
|
|
|
|
2021 |
2020 |
||||
|
|
|
|
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 |
- |
187 |
187 |
- |
135 |
135 |
|
|
|
Indian capital gains tax rebate on sales |
- |
- |
- |
- |
(23) |
(23) |
|
|
|
Overseas tax suffered |
1,349 |
- |
1,349 |
1,167 |
- |
1,167 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
Total current tax charge for the year |
1,349 |
187 |
1,536 |
1,167 |
112 |
1,279 |
|
|
|
Movement of deferred tax liability on Indian capital gains |
- |
2,755 |
2,755 |
- |
(730) |
(730) |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
Total tax charge for the year |
1,349 |
2,942 |
4,291 |
1,167 |
(618) |
549 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 £3,809,000 (2020 - £1,054,000) on capital gains which may arise if Indian investments are sold. |
||||||
|
|
|
The Company has not recognised a deferred tax asset of £24,071,000 (2020 - £17,039,000) 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. The Finance Act 2021 received Royal Assent on 10 June 2021 and the rate of Corporation Tax of 25% effective from 1 April 2023 has been used to calculate the potential deferred tax asset. |
||||||
|
|
(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. |
||||||
|
|
|
|
||||||
|
|
|
|
2021 |
2020 |
||||
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
Return before taxation |
10,589 |
114,883 |
125,472 |
7,564 |
18,443 |
26,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective rate of corporation tax at 19.00% (2020 - 19.00%) |
2,012 |
21,828 |
23,840 |
1,437 |
3,504 |
4,941 |
|
|
|
Effects of: |
|
|
|
|
|
|
|
|
|
UK dividend income |
- |
- |
- |
(7) |
- |
(7) |
|
|
|
Gains on investments not taxable |
- |
(22,725) |
(22,725) |
- |
(3,674) |
(3,674) |
|
|
|
Currency losses not taxable |
- |
109 |
109 |
- |
170 |
170 |
|
|
|
Other non-taxable income |
(2,482) |
- |
(2,482) |
(2,502) |
- |
(2,502) |
|
|
|
Expenses not deductible for tax purposes |
3 |
- |
3 |
4 |
- |
4 |
|
|
|
Increase in excess expenses and loan relationship deficit |
467 |
788 |
1,255 |
1,068 |
- |
1,068 |
|
|
|
Indian capital gains tax charge on sales |
- |
187 |
187 |
- |
112 |
112 |
|
|
|
Movement in deferred tax liability on Indian capital gains |
- |
2,755 |
2,755 |
- |
(730) |
(730) |
|
|
|
Net overseas tax suffered |
1,349 |
- |
1,349 |
1,167 |
- |
1,167 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
Total tax charge for year |
1,349 |
2,942 |
4,291 |
1,167 |
(618) |
549 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
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 £9,240,000 (2020 - £6,397,000). |
||
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
Proposed final dividend for 2021 - 6.50p per Ordinary share (2020 - 4.75p) |
8,067 |
5,983 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The amounts reflected above for the cost of the proposed final dividend for 2021 is based on 124,100,797 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 17 December 2021 to shareholders on the register at the close of business on 19 November 2021. |
||
|
9. |
Return per Ordinary share |
|
|||
|
|
|
2021 |
2020 |
||
|
|
|
£'000 |
pence |
£'000 |
pence |
|
|
Revenue return |
9,240 |
7.36 |
6,397 |
5.01 |
|
|
Capital return |
111,941 |
89.24 |
19,061 |
14.93 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
Total return |
121,181 |
96.60 |
25,458 |
19.94 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
Weighted average Ordinary shares in issue |
|
125,442,821 |
|
127,658,730 |
|
|
|
|
___________ |
|
___________ |
|
10. |
Investments at fair value through profit or loss |
|
|
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
Opening book cost |
441,336 |
412,480 |
|
|
Opening investment holding gains |
179,491 |
199,349 |
|
|
|
_______ |
_______ |
|
|
Opening fair value |
620,827 |
611,829 |
|
|
Analysis of transactions made during the year |
|
|
|
|
Purchases at cost |
257,402 |
182,769 |
|
|
Sales - proceeds |
(231,038) |
(193,107) |
|
|
Gains on investments |
119,603 |
19,336 |
|
|
|
_______ |
_______ |
|
|
Closing fair value |
766,794 |
620,827 |
|
|
|
_______ |
_______ |
|
|
Closing book cost |
524,806 |
441,336 |
|
|
Closing investment gains |
241,988 |
179,491 |
|
|
|
_______ |
_______ |
|
|
Closing fair value |
766,794 |
620,827 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
Investments listed on an overseas investment exchange |
766,794 |
620,827 |
|
|
|
_______ |
_______ |
|
|
|
766,794 |
620,827 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The Company received £231,038,000 (2020 - £193,107,000) from investments sold in the period. The book cost of these investments when they were purchased was £173,932,000 (2020 - £153,915,000). 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: |
||
|
|
|
|
|
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
Purchases |
313 |
295 |
|
|
Sales |
466 |
327 |
|
|
|
_______ |
_______ |
|
|
|
779 |
622 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
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. |
||
|
11. |
Debtors and prepayments |
|
|
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
Accrued income |
137 |
670 |
|
|
Overseas withholding tax recoverable |
1,062 |
679 |
|
|
Amounts due from brokers |
4,150 |
2,133 |
|
|
Other debtors and prepayments |
433 |
447 |
|
|
|
_______ |
_______ |
|
|
|
5,782 |
3,929 |
|
|
|
_______ |
_______ |
|
12. |
Cash and cash equivalents |
|
|
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
Cash at bank and in hand |
4,500 |
8,090 |
|
|
Money market funds |
500 |
3,300 |
|
|
|
_______ |
_______ |
|
|
|
5,000 |
11,390 |
|
|
|
_______ |
_______ |
|
13. |
Creditors |
|
|
|
|
|
|
|
2021 |
2020 |
|
|
(a) |
Bank loans |
£'000 |
£'000 |
|
|
|
Falling due within one year |
65,000 |
6,000 |
|
|
|
Falling due in more than one year |
- |
25,000 |
|
|
|
Unamortised expenses |
(2) |
(5) |
|
|
|
|
_______ |
_______ |
|
|
|
|
64,998 |
30,995 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
|
The Company has a £50,000,000 multi-currency 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 £40,000,000 of this facility had been drawn down at a rate of 1.003% which matured on 27 September 2021. At the date of this Report the Company had drawn down £40,000,000 at a rate of 1.0327%. |
||
|
|
|
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 facility has been drawn down in full. 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. |
||
|
|
|
|
|
|
|
|
|
|
2021 |
2020 |
|
|
(b) |
Other creditors - falling due within one year |
£'000 |
£'000 |
|
|
|
Amounts due to brokers |
181 |
3,099 |
|
|
|
Amounts due for the purchase of own shares to treasury |
79 |
167 |
|
|
|
Other amounts due |
1,580 |
1,400 |
|
|
|
|
_______ |
_______ |
|
|
|
|
1,840 |
4,666 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
2021 |
2020 |
|
|
|
|
£'000 |
£'000 |
|
|
(c) |
Deferred tax liability on Indian capital gains |
3,809 |
1,054 |
|
|
|
|
_______ |
_______ |
|
14. |
Called-up share capital |
|
|
|
|
|
|
|
2021 |
2020 |
|
|
|
|
£'000 |
£'000 |
|
|
Allotted, called-up and fully paid: |
|
|
|
|
|
Ordinary shares of 20p |
|
24,953 |
25,272 |
|
|
Treasury shares |
|
6,969 |
6,650 |
|
|
|
|
_______ |
_______ |
|
|
|
|
31,922 |
31,922 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
|
Ordinary |
Treasury |
Total |
|
|
|
shares |
shares |
shares |
|
|
|
Number |
Number |
Number |
|
|
At 31 August 2020 |
126,358,453 |
33,253,224 |
159,611,677 |
|
|
Buyback of own shares |
(1,592,103) |
1,592,103 |
- |
|
|
|
__________ |
__________ |
__________ |
|
|
At 31 August 2021 |
124,766,350 |
34,845,327 |
159,611,677 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
|
|
|
|
|
During the year 1,592,103 Ordinary shares of 20p each were purchased to be held in treasury by the Company (2020 - 2,390,395) at a total cost of £7,718,000 (2020 - £9,656,000). At the year end 34,845,327 (2020 - 33,253,224) Ordinary shares of 20p each were held in treasury, which represents 21.8% (2020 - 20.8%) of the Company's total issued share capital at 31 August 2021. |
|||
|
|
Since the year end a further 665,553 Ordinary shares of 20p each have been purchased by the Company at a total cost of £3,344,,000 all of which were held in treasury. |
|||
|
15. |
Capital reserve |
|
|
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
At 1 September 2020 |
441,359 |
431,945 |
|
|
Movement in fair value gains |
119,603 |
19,336 |
|
|
Foreign exchange movement |
(573) |
(893) |
|
|
Buyback of Ordinary shares for treasury |
(7,718) |
(9,656) |
|
|
Tender Offer of Ordinary shares for cancellation |
- |
9 |
|
|
Expenses allocated to capital |
(4,147) |
- |
|
|
Movement in capital gains tax charge |
(2,942) |
618 |
|
|
|
_______ |
_______ |
|
|
As at 31 August 2021 |
545,582 |
441,359 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The capital reserve includes investment holding gains amounting to £241,988,000 (2020 - £179,491,000), 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: |
||
|
|
|
|
|
|
|
|
2021 |
2020 |
|
|
Net assets attributable to the Ordinary shareholders (£'000) |
706,929 |
599,431 |
|
|
Number of Ordinary shares in issue {A} |
124,766,350 |
126,358,453 |
|
|
Net asset value per share (p) |
566.60 |
474.39 |
|
|
{A} Excluding shares held in treasury. |
|
|
|
17. |
Analysis of changes in net debt |
|||||
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
At |
|
|
|
1 September 2020 |
Currency differences |
Cash flows |
Non-cash |
31 August 2021 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash and short term deposits |
11,390 |
(573) |
(5,817) |
- |
5,000 |
|
|
Debt due within one year |
(6,000) |
- |
(34,000) |
(24,998) |
(64,998) |
|
|
Debt due after one year |
(24,995) |
- |
- |
24,995 |
- |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
(19,605) |
(573) |
(39,817) |
(3) |
(59,998) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
At |
|
|
|
1 September 2019 |
Currency differences |
Cash flows |
Non-cash |
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) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
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 and Risk 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 on page 3 o f the Company's annual report for the year ended 31 August 2021 . Details of the loan facilities the Company has in place can be found in note 13 on page 76 o f the Company's annual report for the year ended 31 August 2021 . |
|
|||||||||||
|
|
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 |
|
|
||||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
||||||||
|
|
At 31 August 2021 |
Years |
% |
£'000 |
£'000 |
||||||||
|
|
Assets |
|
|
|
|
||||||||
|
|
Sterling |
- |
0.04 |
- |
2,991 |
||||||||
|
|
Hong Kong Dollars |
- |
- |
- |
224 |
||||||||
|
|
Indian Rupee |
- |
- |
- |
24 |
||||||||
|
|
Sri Lanka Rupee |
- |
- |
- |
1,553 |
||||||||
|
|
Taiwanese Dollar |
- |
- |
- |
97 |
||||||||
|
|
Thailand Baht |
- |
- |
- |
100 |
||||||||
|
|
US Dollar |
- |
- |
- |
9 |
||||||||
|
|
Vietnamese Dong |
- |
- |
- |
2 |
||||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||
|
|
Total assets |
n/a |
n/a |
- |
5,000 |
||||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||
|
|
Liabilities |
|
|
|
|
||||||||
|
|
Short-term loan - £40,000,000 |
0.07 |
1.00 |
40,000 |
- |
||||||||
|
|
Long-term loan - £25,000,000 |
0.91 |
1.61 |
24,998 |
- |
||||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||
|
|
|
- |
- |
64,998 |
- |
||||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||
|
|
|
|
|
|
|
||||||||
|
|
|
Weighted average |
|
|
|
||||||||
|
|
|
period for which |
Weighted |
|
|
||||||||
|
|
|
rate is fixed |
interest rate |
rate |
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 |
- |
||||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||
|
|
|
|
|
|
|
||||||||
|
|
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 2021 |
31 August 2020 |
|
|||||||||
|
|
|
|
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} |
278,083 |
- |
278,083 |
256,359 |
2 |
256,361 |
|
|||||
|
|
Hong Kong Dollar{A} |
73,302 |
43 |
73,345 |
43,218 |
1,186 |
44,404 |
|
|||||
|
|
Indian Rupee |
101,770 |
24 |
101,794 |
67,429 |
21 |
67,450 |
|
|||||
|
|
Indonesian Rupiah |
16,968 |
1,415 |
18,383 |
26,859 |
99 |
26,958 |
|
|||||
|
|
Korean Won |
100,336 |
2,735 |
103,071 |
65,867 |
- |
65,867 |
|
|||||
|
|
Malaysian Ringgit |
- |
- |
- |
3,830 |
- |
3,830 |
|
|||||
|
|
Philippine Peso |
14,493 |
- |
14,493 |
13,520 |
- |
13,520 |
|
|||||
|
|
Singapore Dollar |
34,146 |
- |
34,146 |
39,255 |
- |
39,255 |
|
|||||
|
|
Sri Lankan Rupee |
57 |
1,553 |
1,610 |
9,344 |
- |
9,344 |
|
|||||
|
|
Taiwanese Dollar |
128,184 |
97 |
128,281 |
72,648 |
961 |
73,609 |
|
|||||
|
|
Thailand Baht |
5,598 |
100 |
5,698 |
10,808 |
80 |
10,888 |
|
|||||
|
|
US Dollar{A} |
- |
9 |
9 |
- |
4 |
4 |
|
|||||
|
|
Vietnamese Dong |
13,857 |
2 |
13,859 |
11,690 |
2,081 |
13,771 |
|
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|||||
|
|
|
766,794 |
5,978 |
772,772 |
620,827 |
4,434 |
625,261 |
|
|||||
|
|
Sterling |
- |
2,912 |
2,912 |
- |
5,823 |
5,823 |
|
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|||||
|
|
Total |
766,794 |
8,890 |
775,684 |
620,827 |
10,257 |
631,084 |
|
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|||||
|
|
{A} If currency denomination of overseas investments is used then exposure for Chinese Yuan is £91,958,000 (2020 - £63,955,000), for Hong Kong Dollar £255,915,000 (2020 - £220,056,000) and for US Dollar £10,088,000 (2020 - £15,566,000). |
|
|||||||||||
|
|
|
|
|||||||||||
|
|
Foreign currency sensitivity. The following table details the Company's sensitivity to a 10% increase and decrease in sterling against the foreign currencies in which the Company has exposure as set out in the foreign currency risk table above. |
|
|||||||||||
|
|
|
|
|
|
|||||||||
|
|
|
2021 |
2020 |
|
|||||||||
|
|
|
£'000 |
£'000 |
|
|||||||||
|
|
Chinese Yuan |
27,808 |
25,636 |
|
|||||||||
|
|
Hong Kong Dollar |
7,335 |
4,440 |
|
|||||||||
|
|
Indian Rupee |
10,179 |
6,745 |
|
|||||||||
|
|
Indonesian Rupiah |
1,838 |
2,696 |
|
|||||||||
|
|
Korean Won |
10,307 |
6,587 |
|
|||||||||
|
|
Malaysian Ringgit |
- |
383 |
|
|||||||||
|
|
Philippine Peso |
1,449 |
1,352 |
|
|||||||||
|
|
Singapore Dollar |
3,415 |
3,926 |
|
|||||||||
|
|
Sri Lankan Rupee |
161 |
934 |
|
|||||||||
|
|
Taiwanese Dollar |
12,828 |
7,361 |
|
|||||||||
|
|
Thailand Baht |
570 |
1,089 |
|
|||||||||
|
|
US Dollar |
1 |
- |
|
|||||||||
|
|
Vietnamese Dong |
1,386 |
1,377 |
|
|||||||||
|
|
|
_______ |
_______ |
|
|||||||||
|
|
|
77,277 |
62,526 |
|
|||||||||
|
|
|
_______ |
_______ |
|
|||||||||
|
|
|
|
|
|
|||||||||
|
|
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 o f the Company's annual report for the year ended 31 August 2021 , 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 2021 would have increased/decreased by £76,679,000 (2020 - increased/decreased by £62,083,000) and equity reserves would have increased/decreased by the same amount. |
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|
|
Liquidity risk. This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. |
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|
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 abrdn, the total percentage holdings of those securities owned by abrdn-managed funds is reviewed by the Board. |
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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. |
|
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|
|
Liquidity risk exposure. At 31 August 2021, the Company had drawn down £40,000,000 from a £50,000,000 Revolving Facility Agreement with Scotiabank Europe, which matured on 27 September 2021. At the date of this Report the Company had drawn down £40,000,000 at a rate of 1.0327%. 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 on page 76 o f the Company's annual report for the year ended 31 August 2021 . |
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|
|
Management of the risk |
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|
- 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; |
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|
- 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; |
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- cash is held only with reputable banks with high quality external credit enhancements. |
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|
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None of the Company's financial assets are secured by collateral or other credit enhancements. |
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|
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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: |
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|||||||||||
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|
|
|
|
||||||||||
|
|
|
2021 |
2020 |
|
|||||||||
|
|
|
Balance |
Maximum |
Balance |
Maximum |
|
|||||||
|
|
|
Sheet |
exposure |
Sheet |
exposure |
|
|||||||
|
|
Current assets |
£'000 |
£'000 |
£'000 |
£'000 |
|
|||||||
|
|
Loans and receivables |
5,782 |
5,782 |
3,929 |
3,929 |
|
|||||||
|
|
Cash and cash equivalents |
5,000 |
5,000 |
11,390 |
11,390 |
|
|||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|||||||
|
|
|
10,782 |
10,782 |
15,319 |
15,319 |
|
|||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
|
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: |
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|||||||||||
|
|
|
|
|
|
|||||||||
|
|
|
2021 |
2020 |
|
|||||||||
|
|
|
£'000 |
£'000 |
|
|||||||||
|
|
In less than one year |
66,838 |
10,666 |
|
|||||||||
|
|
In more than one year |
- |
24,995 |
|
|||||||||
|
|
|
_______ |
_______ |
|
|||||||||
|
|
|
66,838 |
35,661 |
|
|||||||||
|
|
|
_______ |
_______ |
|
|||||||||
|
|
|
|
|
|
|||||||||
|
|
Fair value of financial assets and liabilities. As at 31 August 2021, there is no fair value long-term loan calculation as the loan is repayable in less than one year. As at 31 August 2020, the fair value long-term loan was calculated at £25,108,000 compared to an accounts value in the financial statements of £24,995,000 (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. |
|
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|
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 (2020 - 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 2021 of £766,794,000 (31 August 2020 - £620,827,000) 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 54 and 55 o f the Company's annual report for the year ended 31 August 2021 . |
|
|
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 £500,000 (31 August 2020 - £3,300,000) invested in Aberdeen Standard Liquidity Fund (Lux) - Sterling Fund which is managed and administered by abrdn. 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. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 August 2021 or 2020 but is derived from those accounts. Statutory accounts for 2020 have been delivered to the registrar of companies, and those for 2021 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 2021 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 12:00 noon on 15 December 2021 at 6 St Andrew Square, Edinburgh.
The Annual Report will be posted to shareholders in November 2021 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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