TIDMDGN
RNS Number : 5986X
Asia Dragon Trust PLC
27 April 2023
26 April 2023
Legal Entity Identifier (LEI): 549300W4KB0D75D1N730
Asia Dragon Trust plc (the "Company")
Half-Yearly Report 28 February 2023
Capturing growth from world-class Asian companies
Financial highlights for Company for the six month reporting
period include:
-- Net asset value ("NAV") fell by 7.2% over the period,
underperforming the MSCI All-Country Asia ex Japan Index (the
"Benchmark"), which declined by 5.7% (both in sterling and total
return terms). The share price decreased by 6.5% as the discount to
NAV per share narrowed from 13.1% at the end of August 2022 to
12.6%.
-- Continued long-term outperformance of the benchmark: over 15%
in NAV terms in the five years to 28 February 2023. The Company
targets long-term capital growth through investment in Asia (with
the exception of Japan and Australasia), investing primarily in
stock markets in the region, principally in large companies.
-- The Company's six month performance reflected another
challenging period for stock markets, including those in Asia. Amid
the on-going Ukraine war, rising inflation led to fears that
central banks would continue to raise interest rates and a global
recession could soon be at hand. The end of China's strict
'zero-Covid' policy raised hopes of the start of an economic
recovery and Asia continued to be supported by strong, long-term
structural drivers. As a result Asian equity markets recovered some
lost ground in the second part of the period.
-- Portfolio well positioned to weather near-term risks, and
take advantage of the strong structural secular trends across Asia.
The focus remains on quality companies with sustainable business
models, robust finances and access to macro growth drivers. The
Company continues to favour fundamental themes including
consumption, technology and green energy, with the firm belief that
these will continue to deliver positive long-term results for
shareholders.
James Will, Chairman, Asia Dragon Trust plc, said : " Within a
global context, several themes continue to favour Asia as a region.
Compared to much of the developed world, many Asian economies have
been late in reopening after the easing of Covid-19 restrictions.
We are also seeing continued policy support in the region. These
positive moves are helping to bolster a recovery in consumer
spending and we expect an improved earnings outlook for companies
exposed to this domestic demand theme. Meanwhile, both current
account and fiscal discipline have improved in Asia since the 1997
Asian Financial Crisis which has increased the region's resilience
to economic downturns."
Performance Highlights
Net asset value total return (A) Share price total return (A)
Six months ended 28 February 2023 Six months ended 28 February 2023
-7.2% -6.5%
Year ended 31 August 2022 -8.4% Year ended 31 August 2022 -11.8%
Benchmark total return (in sterling Discount to net asset value(A)
terms)
Six months ended 28 February As at 28 February 2023
2023
-5.7% 12.6%
Year ended 31 August 2022 -7.1% As at 31 August 2022 13.1%
(A) Considered to be an Alternative Performance Measure see below.
6 months Year ended 01/09/2021 3 years 5 years 10 years
ended - ended ended ended
28/02/2023 28/02/2023 28/02/2023(A) 28/02/2023 28/02/2023 28/02/2023
======================== ========== ========== ============== ========== ========== ===========
Net asset value
per share(B) -7.2% -8.0% -13.9% +10.0% +15.4% +63.6%
======================== ========== ========== ============== ========== ========== ===========
Share price(B) -6.5% -12.0% -14.1% +9.3% +18.0% +55.9%
======================== ========== ========== ============== ========== ========== ===========
MSCI AC Asia (ex
Japan) Index (sterling
adjusted) -5.7% -4.8% -12.4% +10.7% +10.4% +82.0%
======================== ========== ========== ============== ========== ========== ===========
(A) The monitoring period for the Company's five year performance
related conditional tender commenced on 1 September 2021. See the outside
back cover of the published Half Yearly Report for the six months to
28 February 2023 for further details.
(B) Considered to be an Alternative Performance Measure see below.
Financial Calendar and Highlights
Financial Calendar
Financial year end 31 August 2023
========================================= ===============
Announcement of annual results for year November 2023
ending 31 August 2023
========================================= ===============
Annual General Meeting December 2023
========================================= ===============
Final Ordinary dividend payable for year December 2023
ending 31 August 2023
========================================= ===============
Financial Highlights
28 February 31 August % change
2023 2022
======================================= =========== ===================== ========
Total shareholders' funds (GBP'000) 549,954 614,369 -10.5
======================================= =========== ===================== ========
Net asset value per share (capital
return basis) (p) 469.24 513.32 -8.6
======================================= =========== ===================== ========
Share price (capital return basis)
(p) 410.00 446.00 -8.1
======================================= =========== ===================== ========
Discount to net asset value (%) (A) 12.6 13.1
======================================= =========== ===================== ========
MSCI AC Asia (ex Japan) Index (in
sterling terms; capital return basis) 964.33 1,030.48 -6.4
======================================= =========== ===================== ========
Net gearing % (A) 9.6 9.0
======================================= =========== ===================== ========
Ongoing charges ratio (A) 0.91 0.84
--------------------------------------- ----------- --------------------- --------
(A) Considered to be an Alternative Performance Measure see below.
Chairman's Statement
Results
The six months to 28 February 2023 was another challenging
period for stock markets, including those in Asia. Amid the
on-going Ukraine war, rising inflation led to fears that central
banks would continue to raise interest rates and a global recession
could soon be at hand. The end of China's strict 'zero-Covid'
policy raised hopes of the start of an economic recovery and Asia
continued to be supported by strong, long-term structural drivers.
As a result Asian equity markets recovered some lost ground in the
second part of the period.
Against this backdrop, the Company's net asset value ("NAV")
fell by 7.2% over the period, underperforming the MSCI All-Country
Asia ex Japan Index (the "Benchmark"), which declined by 5.7% (both
in sterling and total return terms). The share price decreased by
6.5% as the discount to NAV per share narrowed from 13.1% at the
end of August 2022 to 12.6%.
Market Review
The review period saw the dominance of a few key overarching
global themes which held sway over market sentiment. Investors were
worried not just about continued tightening of monetary policy
across most developed economies, but also its duration, with
concerns that major central banks would keep interest rates higher,
and for longer, to combat persistently high inflation, thereby
potentially triggering a global recession. In the US, for instance,
although the annual rate of inflation began to abate initially,
subsequent buoyant US economic data signalled a potential delay in
loosening monetary policy. The US 10-year Treasury yield touched
almost 4% in February, not far off its near 14-year high of 4.3%,
recorded last October.
Developments in China also featured prominently. As the 20th
Communist Party Congress drew to a close in late October, the
increased centralisation of power caused some market unease.
Investor sentiment improved from November, however, as the
government eased stringent Covid-19 curbs and rolled out economic
support measures. Aside from buoying up Chinese equity prices,
China's faster-than-expected reopening in December also lifted the
export-oriented markets of Taiwan and South Korea.
Performance and Portfolio Activity
The main reason for underperformance in the period was the
Company's exposure to China and Vietnam. In China, this was mainly
a result of holdings within the internet sector, which have been
particularly volatile during the review period.
When it comes to investing in companies, environmental, social
and governance (ESG) criteria are deeply embedded in your Manager's
investment process. As a result, the Company had no exposure to
India-based Adani Group's stable of listed companies which were
sold off heavily on the back of a US short-seller's report alleging
fraud at the conglomerate. Your Manager has avoided Adani entities
on governance concerns and the lack of exposure contributed
materially to performance in the current period.
Revenue Account
For the six months ended 28 February 2023, the revenue account
recorded an increased return on ordinary activities after taxation
of GBP1.5m, representing 1.29p per share, compared with a return of
GBP1.2m for the six months to 28 February 2022 (0.97p per share).
The Company does not pay an interim dividend.
Gearing
The Board believes that the sensible use of modest financial
gearing should enhance returns to shareholders over the longer
term. The Company has two loan facilities which have been provided
by The Royal Bank of Scotland International; the first is a GBP25
million fixed rate loan which has been drawn in full and fixed for
two years to July 2024 at an all-in rate of 3.5575% and the second
is a GBP35 million multi-currency revolving credit facility under
which GBP30m had been drawn down at the period end. At 28 February
2023 the net gearing position was 9.6%, compared to 9.0% at the end
of August 2022. At the time of writing net gearing now stands at
8.1%.
Discount and Share Buybacks
The discount level of the Company's shares is closely monitored
by the Board and Investment Manager and the Board seeks to manage
the discount in line with the peer group. During the six months to
28 February 2023, 2.8 million shares were bought back at a discount
for treasury. Since 28 February 2023, a further 1.0 million shares
have been bought back into treasury. Shares held in treasury can be
reissued at a future date, at a premium to NAV per share, should a
suitable opportunity arise.
Outlook
Within a global context, several themes continue to favour Asia
as a region. Compared to much of the developed world, many Asian
economies have been late in reopening after the easing of Covid-19
restrictions. We are also seeing continued policy support in the
region. These positive moves are helping to bolster a recovery in
consumer spending and your Manager expects an improved earnings
outlook for companies exposed to this domestic demand theme.
Meanwhile, both current account and fiscal discipline have improved
in Asia since the 1997 Asian Financial Crisis which has increased
the region's resilience to economic downturns.
James Will
Chairman
26 April 2023
Investment Manager's Review
Performance
The benchmark index fell by 5.7% during the period under review;
this disguises the volatility during the period.
During the period the Company's NAV fell by 7.2%. This
underperformance was mainly due to our holdings in China and
Vietnam.
In China, the volatility within the internet sector provided
buying opportunities for us and we selectively added to our
holdings in the period where we believe that the fundamentals
continue to remain supportive and the valuations attractive.
Moreover, inflation is less of an issue in China and the rest of
Asia than it is elsewhere in the world, allowing the People's Bank
of China to cut interest rates, whereas other major central banks
outside Asia are still increasing them. Overall, we remain positive
on China's longer-term growth potential, especially around the
themes of aspirational spending, digitalisation, health, renewable
energy, and wealth.
In Vietnam, although the Manager had reduced the Company's
exposure, it is still a non-benchmark position, and this proved
costly during the period due to concerns over the health of its
banking and real estate sectors. That said, we believe that the
fundamentals remain largely intact and we added a new holding in
the period.
Portfolio Themes
We continue to believe that rising affluence in Asia will
underpin strong growth in premium consumption in certain areas,
including financial services, personal-care products and food and
beverages. In particular, the portfolio has a sizeable exposure to
the financial sector. For instance, we hold Hong Kong-based AIA
Group , one of the biggest insurance companies in Asia, where
investors welcomed the potential for the company to kickstart its
performance with growth in China, a key market for the group. In
addition, we continue to favour well-capitalised banks with strong
retail deposit franchises. Examples of these include OCBC and DBS ,
in Singapore, and Bank of Central Asia , in Indonesia.
The second theme that we seek to benefit from is the widespread
adoption of technology and the growing integration of Asian
economies. We believe that this should result in a bright future
for companies providing gaming, internet, fintech and technology
services, such as cloud computing. The current macro environment
has hurt the technology sector, although we are seeing a recovery
in demand in some areas, such as the consumer sector. We therefore
prefer to gain exposure to the sector through quality companies,
such as Tencent and Alibaba in China, TSMC in Taiwan and Samsung
Electronics in South Korea. Meanwhile, Asian supply chains are
well-positioned for long-term structural growth related to the
rollout of 5G, big data and digital interconnectivity. Taiwan-based
Andes Technology , which designs and licenses CPU processor cores
for use in electronic devices, is a beneficiary of these
trends.
The other major theme we seek to benefit from is increasing
commitment by policymakers, globally, to a greener and lower carbon
future. In this regard Asia is leading the way. Companies exposed
to renewable energy, batteries, electric vehicles, related
infrastructure, and environmental management should all benefit
significantly. Achieving grid parity - where the cost of energy
from renewables becomes as cost-effective as that for energy
sourced from fossil fuels - will be a key event on the path towards
decarbonising the world and moving closer to achieving net zero by
2050. Examples of green energy names held in the portfolio include
Sungrow Power Supply , which provides solutions for solar power
projects, and Longi Green Energy Technology , a manufacturer of
high-efficiency solar products.
Notable Holdings
A number of the above-mentioned companies were among the key
positive contributors to performance but, in China, a key stock
laggard during the period was Yunnan Energy . As a supplier of
advanced materials to electric vehicle battery manufacturers, the
company very much matches the above-mentioned theme but its share
price weakened substantially amid a probe into the chairman and
vice chairman. Following engagement with management, although still
recognising the company's strength in the overall battery supply
chain, we chose to exit the stock. Other holdings in JD.com , GDS
and Contemporary Amperex Technology retreated on profit-taking
following a strong rally previously. In Vietnam, our holding in
Mobileworld was indirectly impacted by the aforementioned concerns
regarding the real estate and banking sectors.
During the half year, we sold out of positions in India-based
global IT services provider Infosys , Hong Kong-based power tools
manufacturer Techtronic Industries , and Indian logistics company
Delhivery , all in view of better opportunities elsewhere.
New Holdings
FPT is a Vietnam-based diversified technology group with a
fast-growing software outsourcing business. FPT also owns a
telecommunications unit and an electronics retailing company, as
well as having interests in other sectors, such as education. We
are positive for the profitability prospects of FPT's various
segments, especially given the company's
entrepreneurial management.
Autohome is the dominant online destination for automobile
consumers in China. It delivers comprehensive, independent and
interactive content to automobile buyers and owners. The core
business benefits from the powerful network effect characteristic
of a classifieds business. In this instance, leadership in content
drives high quality user traffic, which benefits advertising and,
in turn, leads to the generation of higher revenues.
Aier Eye Hospital Group is China's largest domestic private
eyecare hospital chain, with demand supported by the ageing
population, rising living standards and government policies to
improve the accessibility and standards of drugs and
healthcare.
Outlook
China's faster-than-expected reopening post-Covid bodes well for
the Asian region's prospects in 2023. Global geopolitical risks
remain while economic risks appear to be more focussed upon Europe
and the US. That said, despite earlier fears, investors now expect
the US Fed's monetary policy tightening cycle to come to an end
later this year. Moreover, Asia is in a demonstrably better
position than developed economies in the West, with relatively
strong consumer and corporate balance sheets, and more solid
government finances in most of the region.
At the company level, it now appears that earnings downgrades in
the Asia ex-Japan region - particularly in the technology sector -
are close to bottoming. Just as Asia was the first region to see
earnings forecasts being revised lower, it is likely to be one of
the first to come out of the downgrade cycle.
We believe that we have positioned the portfolio to weather
near-term risks, while keeping in mind the strong long-term secular
trends across Asia. The focus remains on quality companies with
sustainable business models, robust finances and access to
structural growth drivers. We continue to favour fundamental themes
like consumption, technology and green energy, with the firm belief
that these will deliver positive long-term results for
shareholders.
Adrian Lim and Pruksa Iamthongthong
abrdn (Asia) Limited
26 April 2023
Interim Management Report and Directors' Responsibility
Statement
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. A summary of the principal risks and uncertainties
facing the Company is summarised below under the following
headings:
-- Major Market Event or Geo-Political Risk
-- Unacceptable Discount Volatility
-- Investment Performance
-- Concentration Risk
-- Resource
-- Operational Risk
-- Gearing
-- Regulatory
Details of these risks and a description of the mitigating
actions which the Company has taken are provided in detail on pages
16 to 18 of the 2022 Annual Report.
In addition to these risks, there are also a large number of
international political and economic uncertainties which could have
an impact on the performance of Asian markets and the Board is
monitoring closely the current geo-political risks, market
volatility and uncertainty associated with Russia's invasion of
Ukraine as well as the residual effects of the Covid-19
pandemic.
The Board is also mindful of the risks arising from emerging
environmental, social and governance ("ESG") challenges and climate
change. The Board continues to monitor, through the Investment
Manager, the potential risk that investee companies may fail to
keep pace with ESG and climate change developments.
In the view of the Board, in all other respects, the principal
risks and uncertainties have not changed materially during the six
months to 28 February 2023. The Board continues to monitor the risk
environment and does not expect the risks facing the Company to
change materially in the second half of the financial year ending
31 August 2023.
Going Concern
The Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern. The Company's assets
consist substantially of equity shares in companies listed on
recognised stock exchanges and in most circumstances are realisable
within a short timescale.
The Company has a two year fixed rate loan and a two year
revolving credit facility which both expire in July 2024. The Board
has set limits for borrowing and regularly monitors the Company's
covenant compliance and gearing levels and is satisfied that there
is sufficient headroom in place and flexibility if required. The
Board will start to explore replacement options in advance of the
expiry of the facilities and, should the Board decide not to renew
the facilities, any outstanding borrowing would be repaid through
the proceeds of equity sales as required.
The Board has considered the residual impact of Covid-19 on the
Company's operational resources and existence. The Company's
portfolio comprises entirely "Level 1" assets (listed on a
recognisable exchange and realisable within a short timescale), and
the Company employs a moderate level of gearing. Furthermore, the
Investment Manager's systems as well as those of the other key
third party service providers have proved effective throughout the
course of the pandemic.
The Directors are mindful of the principal risks and
uncertainties disclosed above and, having reviewed forecasts
detailing revenue and liabilities, they believe that the Company
has adequate financial resources to continue its operational
existence for the foreseeable future and for at least twelve months
from the date of this Report. Accordingly, they continue to adopt
the going concern basis of accounting in preparing the financial
statements.
Related Party Disclosures and Transactions with the Alternative
Investment Fund Manager and Investment Manager
abrdn Fund Managers Limited ("aFML") has been appointed as the
Company's Alternative Investment Fund Manager ("AIFM").
aFML has (with the Company's consent) delegated certain
portfolio and risk management services, and other ancillary
services, to abrdn Investments Limited and abrdn Asia Limited which
are regarded as related parties under the UKLA's Listing Rules.
Details of the fees payable to ASFML are set out in note 13 to the
condensed
financial statements.
Responsibility Statement of the Directors in respect of the
Half-Yearly Financial Report
The Disclosure Guidance and Transparency Rules of the UK Listing
Authority require the Directors to confirm their responsibilities
in relation to the preparation and publication of the Interim
Management Report and Financial Statements.
The Directors confirm to the best of their knowledge that:
-- the condensed set of financial statements contained within
the Half-Yearly financial report has been prepared in accordance
with FRS 104 Interim Financial Reporting and give a true and fair
view of the assets, liabilities, financial position and return of
the Company for the period ended 28 February 2023; and;
-- the Interim Management Report, together with the Chairman's
Statement includes a fair review of the information required
by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the Company
during that period; and any changes in the related party
transactions described in the last Annual Report that could do
so.
The Half-Yearly Financial Report was approved by the Board and
the above Directors' Responsibility Statement was signed on its
behalf by the Chairman.
For Asia Dragon Trust plc,
James Will
Chairman
26 April 2023
Ten Largest Investments
As at 28 February 2023
Taiwan Semiconductor Manufacturing
Company Tencent Holdings
As the world's largest pure-play The internet giant continues to
semiconductor manufacturer, TSMC strengthen its ecosystem and we
provides a full range of integrated see great potential in its ability
foundry services, along with to balance its multiple revenue
a robust balance sheet and good streams and monetise its social
cash generation that enables media and payment platforms whilst
it to keep investing in cutting-edge navigating the regulatory landscape.
technology and innovation.
AIA Group Samsung Electronics (Pref)
A leading pan-Asian life insurance One of the global leaders in the
company, it is poised to take memory chips segment, and a major
advantage of Asia's growing affluence, player in smartphones and display
backed by an effective agency panels as well. It has a vertically
force and a strong balance sheet. integrated business model and
robust balance sheet, alongside
good free cash flow generation.
Housing Development Finance Corp Alibaba Group
A steady, well-managed financial The Chinese internet group is
services conglomerate with leading a leading global e-commerce company
positions in mortgage finance, with many impressive businesses,
retail banking, life insurance including the Taobao and Tmall
and asset management, supported online platforms in China. It
by a broad distribution network, also has interests in logistics,
efficient cost structure and media as well as cloud computing
balance sheet quality. platforms and payments.
DBS Group Bank Central Asia
The largest Singapore bank, DBS Among the largest local non state
Group is also the best managed owned banks in Indonesia, it is
with a clear strategy. It is well capitalised and has a big
backed by good digital infrastructure, and stable base of low-cost deposits
and operates with a strong focus that funds its lending, while
on efficiency of returns, as asset quality has remained solid.
shown in the distinctively better
return on equity than local peers.
Kweichow Moutai 'A' China Tourism Group Duty Free
Corp (A)
Kweichow Moutai is a leading China Tourism Group is the largest
hard liquor (baiju) producer duty-free operator in China and
that boasts a dominant brand a good proxy for the rising demand
and a cash generative business. for duty-free cosmetics and skincare
Its brand value stems from a and outbound travel on the mainland.
long history and its rich heritage,
which account for its wide domestic
business moat.
Investment Portfolio
At 28 February 2023
===================================================================================================
Total
Valuation assets
Company Industry Country GBP'000 %
============================== ================================== ============ ========= ======
Taiwan Semiconductor Semiconductors & Semiconductor
Manufacturing Company Equipment Taiwan 55,530 9.2
============================== ================================== ============ ========= ======
Tencent Holdings Interactive Media & Services China 37,039 6.1
============================== ================================== ============ ========= ======
AIA Group Insurance Hong Kong 36,208 6.0
============================== ================================== ============ ========= ======
Samsung Electronics Technology Hardware Storage
(Pref) & Peripherals South Korea 33,875 5.6
============================== ================================== ============ ========= ======
Housing Development
Finance Corp Diversified Financial Services India 24,165 4.0
============================== ================================== ============ ========= ======
Internet & Direct Marketing
Alibaba Group Retail China 21,807 3.6
============================== ================================== ============ ========= ======
DBS Group Banks Singapore 16,444 2.7
============================== ================================== ============ ========= ======
Bank Central Asia Banks Indonesia 16,017 2.6
============================== ================================== ============ ========= ======
Kweichow Moutai 'A' Beverages China 14,862 2.4
============================== ================================== ============ ========= ======
China Tourism Group
Duty Free Corp (A) Speciality Retail China 12,451 2.1
------------------------------ ---------------------------------- ------------ --------- ------
Top ten investments 268,398 44.3
-------------------------------------------------------------------------------- --------- ------
Oversea-Chinese Banking
Corporation Banks Singapore 12,422 2.0
============================== ================================== ============ ========= ======
SBI Life Insurance Insurance India 11,579 1.9
============================== ================================== ============ ========= ======
LG Chem Chemicals South Korea 10,622 1.8
============================== ================================== ============ ========= ======
Budweiser Brewing Beverages Hong Kong 10,273 1.7
============================== ================================== ============ ========= ======
Electronic Equipment, Instruments
Hon Hai Precision Industry & Components Taiwan 10,131 1.7
============================== ================================== ============ ========= ======
Internet & Direct Marketing
JD.com Inc - Class A Retail China 9,919 1.6
============================== ================================== ============ ========= ======
Meituan-Dianping - Class Internet & Direct Marketing
B Retail China 9,815 1.6
============================== ================================== ============ ========= ======
Power Grid Corporation Electric Utilities India 9,741 1.6
============================== ================================== ============ ========= ======
Kasikornbank 'F' Banks Thailand 9,717 1.6
============================== ================================== ============ ========= ======
Maruti Suzuki India Automobiles India 9,461 1.6
------------------------------ ---------------------------------- ------------ --------- ------
Twenty largest investments 372,078 61.4
-------------------------------------------------------------------------------- --------- ------
Hong Kong Exchanges
& Clearing Capital Markets Hong Kong 9,180 1.5
============================== ================================== ============ ========= ======
Real Estate Management
Ayala Land & Development Philippines 9,071 1.5
============================== ================================== ============ ========= ======
Longi Green Energy Technology Semiconductors & Semiconductor
- A Equipment China 8,911 1.5
============================== ================================== ============ ========= ======
China Merchants Bank
(A) Banks China 8,871 1.5
============================== ================================== ============ ========= ======
Kotak Mahindra Bank Banks India 8,280 1.3
============================== ================================== ============ ========= ======
Hindustan Unilever Personal Products India 8,057 1.3
============================== ================================== ============ ========= ======
ShenZhen Mindray Bio-Medical Health Care Equipment &
Electronics - A Supplies China 7,997 1.3
============================== ================================== ============ ========= ======
Real Estate Management
China Resources Land & Development China 7,397 1.2
============================== ================================== ============ ========= ======
Astra International Automobiles Indonesia 7,259 1.2
============================== ================================== ============ ========= ======
Contemporary Amperex
Technology - A Electrical Equipment China 7,139 1.2
------------------------------ ---------------------------------- ------------ --------- ------
Thirty largest investments 454,240 74.9
-------------------------------------------------------------------------------- --------- ------
Bank of Philippine Islands Banks Philippines 6,674 1.1
============================== ================================== ============ ========= ======
Electronic Equipment, Instruments
Delta Electronic & Components Taiwan 6,633 1.1
============================== ================================== ============ ========= ======
Ultratech Cement Construction Materials India 6,621 1.1
============================== ================================== ============ ========= ======
Semiconductors & Semiconductor
Silergy Corp Equipment Taiwan 6,563 1.1
============================== ================================== ============ ========= ======
Tata Consultancy Services IT Services India 6,425 1.1
============================== ================================== ============ ========= ======
FPT Corporation IT Services Vietnam 6,268 1.0
============================== ================================== ============ ========= ======
Wuxi Biologics (Cayman) Life Sciences Tools & Services China 6,245 1.0
============================== ================================== ============ ========= ======
Aier Eye Hospital Group Health Care Equipment &
- A Supplies China 6,194 1.0
============================== ================================== ============ ========= ======
Sungrow Power Supply
Co - A Electrical Equipment China 6,108 1.0
============================== ================================== ============ ========= ======
Chacha Food - A Food Products China 6,093 1.0
------------------------------ ---------------------------------- ------------ --------- ------
Forty largest investments 518,064 85.4
-------------------------------------------------------------------------------- --------- ------
Samsung Biologics Life Sciences Tools & Services South Korea 6,086 1.0
============================== ================================== ============ ========= ======
Yonyou Network Technology
- A Software China 5,948 1.0
============================== ================================== ============ ========= ======
Glodon Co -A Software China 5,910 1.0
============================== ================================== ============ ========= ======
Kakao Corp Interactive Media & Services South Korea 5,570 0.9
============================== ================================== ============ ========= ======
Zhongsheng Group Holdings Speciality Retail China 5,417 0.9
============================== ================================== ============ ========= ======
Semiconductors & Semiconductor
Andes Technology Equipment Taiwan 5,405 0.9
============================== ================================== ============ ========= ======
GDS Holdings Class A IT Services China 5,057 0.8
============================== ================================== ============ ========= ======
Tongcheng Travel Holdings Hotels, Restaurants & Leisure China 4,857 0.8
============================== ================================== ============ ========= ======
Info Edge (India) Interactive Media & Services India 4,825 0.8
============================== ================================== ============ ========= ======
ShenZhen Inovance Technology
- A Machinery China 4,502 0.8
------------------------------ ---------------------------------- ------------ --------- ------
Fifty largest investments 571,641 94.3
-------------------------------------------------------------------------------- --------- ------
Real Estate Management
China Vanke 'H' & Development China 4,316 0.7
============================== ================================== ============ ========= ======
Siam Cement 'F' Construction Materials Thailand 4,174 0.7
============================== ================================== ============ ========= ======
PB Fintech Insurance India 4,115 0.7
============================== ================================== ============ ========= ======
Autohome - ADR Software China 4,087 0.7
============================== ================================== ============ ========= ======
Mobile World Investment
Corporation Speciality Retail Vietnam 4,022 0.7
============================== ================================== ============ ========= ======
Hangzhou Tigermed Consulting
Co(A) Life Sciences Tools & Services China 3,890 0.6
============================== ================================== ============ ========= ======
Nari Technology - A Electrical Equipment China 3,862 0.6
============================== ================================== ============ ========= ======
Singapore Telecommunications Diversified Telecommunication Singapore 3,042 0.5
============================== ================================== ============ ========= ======
Internet & Direct Marketing
FSN E-Commerce Ventures Retail India 2,717 0.4
------------------------------ ---------------------------------- ------------ --------- ------
605,866 99.9
------------------------------------------------------------------------------ --------- ------
Net current assets(B) 548 0.1
-------------------------------------------------------------------------------- --------- ------
Total assets less current
liabilities(B) 606,414 100.0
-------------------------------------------------------------------------------- --------- ------
(A) Holding includes investment in both 'A' and 'H' shares.
(B) Excluding bank loan of GBP30,000,000
Note: Unless otherwise stated, foreign stock is held and all investments
are equity holdings.
Investment Portfolio by Country
Country allocation
China 36.1
Hong Kong 9.2
=====
India 15.8
=====
Indonesia 3.8
=====
Philippines 2.6
=====
Singapore 5.3
=====
South Korea 9.3
=====
Taiwan 13.9
=====
Thailand 2.3
=====
Vietnam 1.7
=====
Our Investment Manager's Case Studies
TSMC (Taiwan)
Everyone's foundry : TSMC has become an integral part of the
global supply chain as megatrends like artificial intelligence and
the internet of things are driving demand for semiconductors.
What does the company do?
Taiwan Semiconductor Manufacturing Company (TSMC) makes
integrated circuits that are used in a variety of products
today-from laptops and smartphones to cars, industrial equipment
and high performance computing. Founded in 1987, the company
pioneered the pure-play foundry business model where instead of
designing or making semiconductor chips under its own brand name,
it focuses exclusively on manufacturing its customers'
products.
Why do we like the investment?
Semiconductors is a structurally attractive industry. By 2030,
it is expected to grow to US$1 trillion -averaging from 6% to 8%
growth a year-driven by megatrends such as artificial intelligence
and the Internet of Things, which require high-power computing. We
view TSMC as a high quality catch-all play of this trend,
underpinned by its positioning as "everyone's foundry."
TSMC has a strong financial profile. The strength of its balance
sheet has allowed it to invest billions of dollars a year to stay
ahead of global peers on the technology curve and in terms of
production capacity. By doing so, the company is able to
manufacture the most advanced semiconductors for its customers,
making it a global leader in an industry where cutting-edge tech
raises the barrier to compete. In fact, we have seen several of
TSMC's competitors dropping off over time in the race as the size
of semiconductors shrank.
Beyond manufacturing excellence, TSMC's market-leading position
in the foundry business and its long experience in the field gives
it tremendous scale advantage, allowing it to operate at the best
yield and utilisation levels in the industry. That translates to
the lowest cost among competitors. The strength of its customer
relationships is also difficult to replicate. We also like the fact
that TSMC has a strong management team with an excellent track
record.
On the geopolitical front, the impact from the fallout between
the US and China is relatively less severe on TSMC. Given its
global technological leadership among foundries, there are
currently no alternatives to TSMC if countries want to invest in
their own semiconductor capabilities. Evidently, we have seen the
company leading the charge in establishing new cutting-edge
factories in the US, European Union and Japan. We continue to
closely monitor the evolving geopolitical dynamics between China
and the US.
What is our key area of engagement?
We have engaged TSMC in areas of sustainability, including water
conservation as well as human capital development. Going forward,
engagements will focus on the company's progress on producing more
energy efficient products as well as its commitment to reach Net
Zero emissions by 2050.
What is the result?
TSMC is one of the most advanced companies in Taiwan on the ESG
front, and is rated AAA by MSCI. The bulk of the company's
semiconductor manufacturing facilities in Taiwan had high exposure
to water-related risks in 2021 due to a severe drought, which
prompted the government to place restrictions on the supply and
usage of water by industrial companies. Semiconductor manufacturing
is a water-intensive process, hence water usage and conservation is
a material ESG risk. As a result, TSMC took strides towards
sustainability by investing in water conservation and recycling
measures-it set a 2030 target of reducing water usage per unit to
30% below 2010 levels. Further, the company is working to develop
water reclamation technologies as well as using reclaimed water
during manufacturing. TSMC aims to increase more than 60%
replacement of water resources with reclaimed water in 2030.
TSMC also leads the domestic industry in corporate governance
and corporate behaviour practices. Most directors on the TSMC board
are independent, while the company leads peers in initiatives such
as employee development programs. While we do think highly of its
ability in human capital management, there is a risk that their
edge-in sourcing, training and retention-may erode in view of TSMC
shifting some of its manufacturing capabilities to the US, where
the market for talent is more competitive and the work culture
differs from Asia. The management is aware of this risk and remains
focused on getting this right and it remains an area we will
continue to monitor.
TSMC is also a full member of the Responsible Business Alliance,
which is dedicated to electronics supply chain sustainability. It
conducts environmental, safety and health audits to suppliers'
manufacturing sites and routinely encourages them to implement
measures to save energy, reduce carbon emissions, conserve water
and reduce waste. In 2020, TSMC was also the first semiconductor
manufacturer worldwide to join RE100, committing to source 100%
renewable electrically globally-an important step given the
company's net zero target.
FPT Corp (Vietnam)
Riding the digital wave: FPT aims to be in the top 50 global
leading digital transformation (DX) solutions and services
providers by 2030.
What does the company do?
FPT Corp is the largest technology company in Vietnam with
significant market share in each of its three core businesses:
technology (software outsourcing, systems integration and IT
services), education (K-12, vocational, post-secondary diplomas and
degrees), and telecommunications (fixed-line, PayTV and broadband
internet services).
Why do we like the investment?
In our search for potential stock ideas, we cast a wide net that
encompasses non-traditional markets and companies. One such market
is Vietnam, where structural trends of increasing urbanisation and
income levels are becoming central in driving growth. We have spent
a lot of time over the years gaining comfort with Vietnam, and
recognise its growing importance in global supply chains and the
positive direction of the government to open up capital
markets.
During this journey, we have been impressed by FPT Corp, which
has demonstrated entrepreneurship and competence in this frontier
market. Its revenue base is diversified and the industry backdrop
is healthy. The company has a solid balance sheet that should
support its pursuit of growth opportunities. We also rate its
management highly because of its good execution track record and
transparency with investors.
On the tech front, when it comes to its growth strategy, FPT
aims to be in the top 50 global leading digital transformation (DX)
solutions and services providers by 2030. It is seeing strong
growth in DX revenues, which is already accounting for a
significant portion of its overall outsourcing revenues. The
industry is attractive with structural growth tailwinds and a huge
market. FPT believes that growth in this area will ride on new
technologies, such as cloud, AI, big data analytics and robotic
process automation.
Across its businesses, the education segment is the most
profitable and management expects this division to continue to
deliver consistently strong revenue growth over the coming years.
This will be driven by rising demand from growing middle-income
students for quality education. Elsewhere, its telecom business is
stable and defensive, supported by PayTV growth. This should
provide a good buffer in times of weak macroeconomic
conditions.
What is our key area of engagement?
We continue to engage FPT on better disclosure around data
privacy and the setting of targets to track its progress around its
carbon footprint and renewable energy mix.
What is the result?
FPT has one of the most developed board structures in Vietnam.
Its seven-member board has three independent directors. The stakes
of inside shareholders and major shareholders are around 18%. In
response to shareholders' feedback, FPT changed auditor to PwC from
Deloitte in 2021. The company also provides business updates to its
investors on a monthly basis.
Meanwhile, cybersecurity and talent management are key areas of
focus. We think the company has done a good job in managing
employee welfare so far. FPT also maintains good diversity in its
workforce. Female employees accounted for 37.2% of its overall
headcount in 2021 versus 36.1% in 2017. Separately, disclosures
about data privacy and cybersecurity are limited, and we continue
to engage with the company on better transparency.
FPT's environmental record is clean. FPT has fully complied with
waste and emissions management regulations, with no related
violations recorded in the 30 years since its establishment.
However, FPT has not set any trackable carbon emissions reduction
or renewable energy targets. Instead, it discloses broad-based
statements for its environmental initiatives, such as usage of
smart energy and water control systems, timely maintenance to avoid
energy losses and increasing the use of natural energy and water
sources. We are also urging the company to track its carbon
footprint better.
While MSCI has yet to rate FPT Corp for its ESG standards,
overall we regard the company as a good ESG stewardship example in
Vietnam.
Condensed Statement of Comprehensive Income (unaudited)
Six months ended Six months ended
28 February 2023 28 February 2022
============================== ==== =========================== ===========================
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ==== ======= ======== ======== ======= ======== ========
Losses on investments - (44,882) (44,882) - (53,526) (53,526)
============================== ==== ======= ======== ======== ======= ======== ========
Net currency losses - (855) (855) - (74) (74)
============================== ==== ======= ======== ======== ======= ======== ========
Income 2 3,218 - 3,218 2,689 - 2,689
============================== ==== ======= ======== ======== ======= ======== ========
Investment management fee (500) (1,501) (2,001) (565) (1,697) (2,262)
============================== ==== ======= ======== ======== ======= ======== ========
Administrative expenses (562) - (562) (508) - (508)
------------------------------ ---- ------- -------- -------- ------- -------- --------
Net return/(loss) before finance
costs and taxation 2,156 (47,238) (45,082) 1,616 (55,297) (53,681)
==================================== ======= ======== ======== ======= ======== ========
Interest payable and similar
charges (263) (791) (1,054) (101) (302) (403)
------------------------------ ---- ------- -------- -------- ------- -------- --------
Return/(loss) before taxation 1,893 (48,029) (46,136) 1,515 (55,599) (54,084)
============================== ==== ======= ======== ======== ======= ======== ========
Taxation 3 (369) 306 (63) (317) 722 405
------------------------------ ---- ------- -------- -------- ------- -------- --------
Return/(loss) after taxation 1,524 (47,723) (46,199) 1,198 (54,877) (53,679)
------------------------------ ---- ------- -------- -------- ------- -------- --------
Return per Ordinary share
(pence) 4 1.29 (40.27) (38.98) 0.97 (44.43) (43.46)
------------------------------ ---- ------- -------- -------- ------- -------- --------
The total columns of this statement represent 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 condensed financial
statements.
Condensed Statement of Financial Position (unaudited)
As at As at
28 February 31 August 2022
2023
Notes GBP'000 GBP'000
=========================================== ===== =========== ==============
Non-current assets
=========================================== ===== =========== ==============
Investments at fair value through profit
or loss 605,866 672,379
------------------------------------------- ----- ----------- --------------
Current assets
=========================================== ===== =========== ==============
Debtors and prepayments 1,191 2,693
=========================================== ===== =========== ==============
Cash and cash equivalents 2,957 5,094
------------------------------------------- ----- ----------- --------------
4,148 7,787
------------------------------------------- ----- ----------- --------------
Creditors: amounts falling due within
one year
=========================================== ===== =========== ==============
Bank loan 10 (30,000) (35,000)
=========================================== ===== =========== ==============
Other creditors (3,600) (3,413)
------------------------------------------- ----- ----------- --------------
(33,600) (38,413)
------------------------------------------- ----- ----------- --------------
Net current liabilities (29,452) (30,626)
------------------------------------------- ----- ----------- --------------
Creditors: amounts falling due after
more than one year
=========================================== ===== =========== ==============
Bank loan 10 (24,987) (24,983)
=========================================== ===== =========== ==============
Deferred tax liability on Indian capital
gains 3 (1,473) (2,401)
------------------------------------------- ----- ----------- --------------
(26,460) (27,384)
------------------------------------------- ----- ----------- --------------
Net assets 549,954 614,369
------------------------------------------- ----- ----------- --------------
Share capital and reserves
=========================================== ===== =========== ==============
Called-up share capital 31,922 31,922
=========================================== ===== =========== ==============
Share premium account 60,416 60,416
=========================================== ===== =========== ==============
Capital redemption reserve 28,154 28,154
=========================================== ===== =========== ==============
Capital reserve 6 395,060 453,273
=========================================== ===== =========== ==============
Revenue reserve 34,402 40,604
------------------------------------------- ----- ----------- --------------
Equity shareholders' funds 549,954 614,369
------------------------------------------- ----- ----------- --------------
Net asset value per Ordinary share (pence) 7 469.24 513.32
------------------------------------------- ----- ----------- --------------
The accompanying notes are an integral part of the condensed financial
statements.
Condensed Statement of Changes in Equity (unaudited)
Six months ended 28 February 2023
==============================================================================================
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================= ==== ======= ======= ========== ======== ======= ========
Balance at 1 September 2022 31,922 60,416 28,154 453,273 40,604 614,369
============================= ==== ======= ======= ========== ======== ======= ========
(Loss)/return after taxation - - - (47,723) 1,524 (46,199)
============================= ==== ======= ======= ========== ======== ======= ========
Dividend paid (note 8) 8 - - - - (7,726) (7,726)
============================= ==== ======= ======= ========== ======== ======= ========
Buyback of Ordinary shares
for treasury - - - (10,490) - (10,490)
----------------------------- ---- ------- ------- ---------- -------- ------- --------
Balance at 28 February 2023 31,922 60,416 28,154 395,060 34,402 549,954
----------------------------- ---- ------- ------- ---------- -------- ------- --------
Six months ended 28 February 2022
==============================================================================================
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================= ==== ======= ======= ========== ======== ======= ========
Balance at 1 September 2021 31,922 60,416 28,154 545,582 40,855 706,929
============================= ==== ======= ======= ========== ======== ======= ========
(Loss)/return after taxation - - - (54,877) 1,198 (53,679)
============================= ==== ======= ======= ========== ======== ======= ========
Dividend paid (note 8) 8 - - - - (8,041) (8,041)
============================= ==== ======= ======= ========== ======== ======= ========
Buyback of Ordinary shares
for treasury - - - (12,710) - (12,710)
----------------------------- ---- ------- ------- ---------- -------- ------- --------
Balance at 28 February 2022 31,922 60,416 28,154 477,995 34,012 632,499
----------------------------- ---- ------- ------- ---------- -------- ------- --------
The accompanying notes are an integral part of the condensed financial
statements.
Condensed Statement of Cash Flows (unaudited)
Six months Six months
ended ended
28 February 28 February
2023 2022
GBP'000 GBP'000
==================================================== =========== ===========
Operating activities
==================================================== =========== ===========
Net return before taxation (46,136) (54,084)
==================================================== =========== ===========
Adjustments for:
==================================================== =========== ===========
Losses on investments 44,882 53,526
==================================================== =========== ===========
Currency losses 855 74
==================================================== =========== ===========
Increase in accrued dividend income (4) (324)
==================================================== =========== ===========
Decrease in other debtors 857 13
==================================================== =========== ===========
Decrease in other creditors (23) (161)
==================================================== =========== ===========
Interest payable and similar charges 1,054 392
==================================================== =========== ===========
Overseas withholding tax 271 (356)
---------------------------------------------------- ----------- -----------
Cash from/(used in) operations 1,756 (920)
==================================================== =========== ===========
Interest paid (1,050) (427)
---------------------------------------------------- ----------- -----------
Net cash inflow/(outflow) from operating activities 706 (1,347)
==================================================== =========== ===========
Investing activities
==================================================== =========== ===========
Purchases of investments (58,759) (108,233)
==================================================== =========== ===========
Sales of investments 80,669 129,304
==================================================== =========== ===========
Capital gains tax on sales (622) (67)
---------------------------------------------------- ----------- -----------
Net cash inflow from investing activities 21,288 21,004
---------------------------------------------------- ----------- -----------
Financing activities
==================================================== =========== ===========
Equity dividends paid (7,726) (8,041)
==================================================== =========== ===========
Buyback of Ordinary shares (10,550) (12,710)
==================================================== =========== ===========
Repayment of bank loans (5,000) -
---------------------------------------------------- ----------- -----------
Net cash used in financing activities (23,276) (20,751)
---------------------------------------------------- ----------- -----------
Decrease in cash and cash equivalents (1,282) (1,094)
---------------------------------------------------- ----------- -----------
Analysis of changes in cash and cash equivalents
during the period
==================================================== =========== ===========
Opening balance 5,094 5,000
==================================================== =========== ===========
Effect of exchange rate fluctuations on cash
held (855) (74)
==================================================== =========== ===========
Decrease in cash and cash equivalents as above (1,282) (1,094)
---------------------------------------------------- ----------- -----------
Closing balance 2,957 3,832
---------------------------------------------------- ----------- -----------
Represented by:
==================================================== =========== ===========
Money market funds 5 -
==================================================== =========== ===========
Cash and short term deposits 2,952 3,832
---------------------------------------------------- ----------- -----------
2,957 3,832
---------------------------------------------------- ----------- -----------
Notes to the Financial Statements
As at 28 February 2023
1. Accounting policies
Basis of preparation. The condensed financial statements have been
prepared in accordance with Financial Reporting Standard 104 (Interim
Financial Reporting) and with the principles of the Statement of
Recommended Practice for 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts'. Given that the Company's
portfolio comprises primarily "Level 1" 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. The condensed
financial statements have also been prepared on the assumption
that approval as an investment trust will continue to be granted
by HMRC.
The interim financial statements have been prepared using the same
accounting policies as the preceding annual financial statements.
2. Income
================================= =========== ===========
Six months Six months
ended ended
28 February 28 February
2023 2022
GBP'000 GBP'000
================================= =========== ===========
Income from investments
================================= =========== ===========
Overseas dividend income 3,148 2,688
------------------------------------- ----------- -----------
3,148 2,688
------------------------------------- ----------- -----------
Other income
================================= =========== ===========
Deposit interest 58 -
===================================== =========== ===========
Interest from money market funds 12 1
------------------------------------- ----------- -----------
70 1
------------------------------------- ----------- -----------
Total income 3,218 2,689
------------------------------------- ----------- -----------
3. Taxation
The taxation for the period represents withholding tax suffered
on overseas dividend income and a movement in provision for Indian
Capital Gains Tax.
An amount of GBP369,000 of withholding tax was suffered in the
six months to 28 February 2023 (28 February 2022 - GBP317,000).
The Indian Capital Gains Tax accrual has decreased by GBP928,000
(28 February 2022 - GBP789,000) since the year end with a balance
outstanding at 28 February 2023 of GBP1,473,000 (28 February 2022
- GBP3,020,000).
4. Return per Ordinary share
============================================== =========== ===========
Six months Six months
ended ended
28 February 28 February
2023 2022
p p
============================================== =========== ===========
Basic
============================================== =========== ===========
Revenue return 1.29 0.97
================================================== =========== ===========
Capital return (40.27) (44.43)
-------------------------------------------------- ----------- -----------
Total return (38.98) (43.46)
-------------------------------------------------- ----------- -----------
The figures above are based on the following:
============================================== =========== ===========
GBP'000 GBP'000
============================================== =========== ===========
Revenue return 1,524 1,198
================================================== =========== ===========
Capital return (47,723) (54,877)
-------------------------------------------------- ----------- -----------
Total return (46,199) (53,679)
-------------------------------------------------- ----------- -----------
Weighted average number of Ordinary shares
in issue 118,509,837 123,525,060
-------------------------------------------------- ----------- -----------
5. Transaction costs
During the period 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/(losses) on investments in the Condensed Statement of Comprehensive
Income. The total costs were as follows:
Six months Six months
ended ended
28 February 28 February
2023 2022
GBP'000 GBP'000
======================= ========================== ==========================
Purchases 78 141
======================= ========================== ==========================
Sales 162 261
----------------------- -------------------------- --------------------------
240 402
----------------------- -------------------------- --------------------------
6. Capital reserves
The capital reserve reflected in the Condensed Statement of Financial
Position at 28 February 2023 includes gains of GBP85,496,000 (31
August 2022 - GBP144,902,000) which relate to the revaluation of
investments held at the reporting date.
7. Net asset value per share
The net asset value per share and the net assets attributable to
the Ordinary shareholders at the period end were as follows:
=====================================================================
As at As at
28 February 31 August 2022
2023
======================================== =========== ==============
Net assets attributable (GBP'000) 549,954 614,369
============================================ =========== ==============
Number of Ordinary shares in issue(A) 117,200,797 119,686,001
============================================ =========== ==============
Net asset value per share (pence) 469.24 513.32
-------------------------------------------- ----------- --------------
(A) Excluding shares held in treasury.
8. Dividends
===================================== =============== ===============
Six months Six months
ended ended
28 February 28 February
2023 2022
GBP'000 GBP'000
===================================== =============== ===============
2021 final dividend - 6.5p - 8,041
========================================= =============== ===============
2022 final dividend - 6.5p 7,726 -
----------------------------------------- --------------- ---------------
7,726 8,041
----------------------------------------- --------------- ---------------
There will be no interim dividend for the year to 31 August 2023
(2022 - nil) as the objective of the Company is long-term capital
appreciation.
9. 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
has 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 (31 August
2022 - 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 28 February 2023 of GBP605,866,000 (31 August 2022 - GBP672,379,000)
has therefore been deemed as Level 1.
10. Bank loans
The Company has a GBP35,000,000 multicurrency facility with The
Royal Bank of Scotland (with the option of a further GBP15m accordion
facility which can be drawn down subject to further bank consent).
This agreement was entered into on 29 July 2022 with a termination
date of 29 July 2024. At 28 February 2023, GBP30,000,000 of this
facility has been drawn down at a rate of 4.927% which matured
on 24 March 2023. At the date of this Report the Company had drawn
down GBP20,000,000 at a rate of 5.1771%.
On 29 July 2022, the Company entered into a new fixed loan facility
agreement of GBP25,000,000 at an interest rate of 3.5575% with
The Royal Bank of Scotland International Limited, London Branch,
with a termination date of 29 July 2024. The agreement of this
facility incurred an arrangement fee of GBP18,000 which is being
amortised over the life of the loan.
The agreements contain the following covenants:
- the net asset value of the Company shall not at any time be less
than GBP375 million.
- consolidated gross borrowings expressed as a percentage of adjusted
portfolio value shall not exceed 25% at any time.
- the number of eligible investments shall not be less than 30
at any time.
All covenants have been complied with throughout the period.
11. Called-up share capital
In the six months to 28 February 2023, the Company bought back
2,485,204 (28 February 2022 - 2,504,682) Ordinary shares to be
held in treasury, at a total cost of GBP10,490,000 (28 February
2022 - GBP12,710,000).
At the end of the period there were 159,611,677 (28 February 2022
- 159,611,677) Ordinary shares in issue, of which 42,410,880 (28
February 2022 - 37,350,009) were held in treasury.
Since the period end a further 1,000,000 Ordinary shares of 20p
each have been purchased by the Company at a total cost of GBP4,024,000
all of which were held in treasury.
12. Analysis of changes in net debt
=========================================================================================
At Currency Cash Non-cash At
31 August differences flows movements 28 February
2022 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ========= ============ ======== ========= ===========
Cash and short term deposits 5,094 (855) (1,282) - 2,957
=================================== ========= ============ ======== ========= ===========
Debt due within one year (35,000) - 5,000 - (30,000)
=================================== ========= ============ ======== ========= ===========
Debt due after one year (24,983) - - (4) (24,987)
----------------------------------- --------- ------------ -------- --------- -----------
(54,889) (855) 3,718 (4) (52,030)
----------------------------------- --------- ------------ -------- --------- -----------
At Currency Cash Non-cash At
31 August differences flows movements 28 February
2021 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ========= ============ ======== ========= ===========
Cash and short term deposits 5,000 (74) (1,094) - 3,832
=================================== ========= ============ ======== ========= ===========
Debt due within one year (64,998) - - (1) (64,999)
----------------------------------- --------- ------------ -------- --------- -----------
(59,998) (74) (1,094) (1) (61,167)
----------------------------------- --------- ------------ -------- --------- -----------
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.
13. Related party transactions and transactions with the Manager
The Company has an agreement in place with abrdn Fund Managers
Limited ("aFML" or "Manager") for the provision of management and
administration services, promotional activities and secretarial
services.
The management fee is calculated at 0.85% per annum of net assets
up to GBP350 million and 0.50% per annum of net assets over this
threshold. Management fees are calculated and payable on a quarterly
basis, and is charged 75% to capital and 25% to revenue. During
the period GBP2,001,000 (28 February 2022 - GBP2,262,000) of management
fees were payable to the Manager, with a balance of GBP2,001,000
(28 February 2022 - GBP1,097,000) due to aFML at the period end.
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.
At the end of the period the Company had GBP5,000 (28 February
2022 - GBPnil) invested in Aberdeen Standard Liquidity Fund (Lux)
- Sterling Fund which is managed and administered by abrdn plc.
The Company pays a management fee on the value of these holdings
but no fee is chargeable at the underlying fund level.
Promotional activities costs are based on current annual amount
of GBP240,000 (28 February 2022 - GBP200,000), payable quarterly
in arrears. During the period GBP116,000 (28 February 2022 - GBP100,000)
of fees were payable, with a balance of GBP99,000 (28 February
2022 - GBP32,000) being due at the period end.
14. Segmental information
The Company is engaged in a single segment of business, which is
to invest in equity securities. All of the Company's activities
are interrelated, and each activity is dependent on the others.
Accordingly, all significant operating decisions are based on the
Company as one segment.
15. Half-Yearly Financial Report
The financial information contained in this Half-Yearly Financial
Report does not constitute statutory accounts as defined in Sections
434 - 436 of the Companies Act 2006. The financial information
for the six months ended 28 February 2023 and 28 February 2022
has not been audited. The Company's external auditor, PricewaterhouseCoopers
LLP has not reviewed the financial information for the six months
ended 28 February 2023.
The information for the year ended 31 August 2022 has been extracted
from the latest published audited financial statements which have
been filed with the Registrar of Companies. The report of the auditor
on those accounts contained no qualification or statement under
Section 498(2) or (3) of the Companies Act 2006.
16. This Half-Yearly Financial Report was approved by the Board on
26 April 2023.
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.
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.
28 February 31 August 2022
2023
================================================= ============== ============= ================
NAV per Ordinary share (p) a 469.24 513.32
================================================= ============== ============= ================
Share price (p) b 410.00 446.00
================================================= ============== ============= ================
Discount (a-b)/a 12.6% 13.1%
------------------------------------------------- -------------- ------------- ----------------
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.
28 February 31 August 2022
2023
================================================= ============== ============= ================
Borrowings (GBP'000) a 54,987 59,983
================================================= ============== ============= ================
Cash (GBP'000) b 2,957 5,094
================================================= ============== ============= ================
Amounts due to brokers (GBP'000) c 506 287
================================================= ============== ============= ================
Amounts due from brokers (GBP'000) d - -
================================================= ============== ============= ================
Shareholders' funds (GBP'000) e 549,954 614,369
------------------------------------------------- -------------- ------------- ----------------
Net gearing (a-b+c-d)/e 9.6% 9.0%
------------------------------------------------- -------------- ------------- ----------------
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 published daily net asset values with
debt at fair value published throughout the year. The ratio for 28 February 2023
is based on forecast ongoing charges for the year ending 31 August 2023.
28 February 31 August 2022
2023
================================================= ============== ============= ================
Investment management fees (GBP'000) 3,989 4,387
================================================================= ============= ================
Administrative expenses (GBP'000) 1,093 1,007
================================================================= ============= ================
Less: non-recurring charges(A) (GBP'000) (3) (33)
----------------------------------------------------------------- ------------- ----------------
Ongoing charges (GBP'000) 5,079 5,361
----------------------------------------------------------------- ------------- ----------------
Average net assets (GBP'000) 556,367 640,938
----------------------------------------------------------------- ------------- ----------------
Ongoing charges ratio 0.91% 0.84%
----------------------------------------------------------------- ------------- ----------------
(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.
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. Share price and NAV total returns are monitored
against open-ended and closed-ended competitors, and the Benchmark Index, respectively.
Share
Six months ended 28 February 2023 NAV Price
================================================= ============== ============= ================
Opening at 1 September 2022 a 513.32p 446.00p
================================================= ============== ============= ================
Closing at 28 February 2023 b 469.24p 410.00p
================================================= ============== ============= ================
Price movements c=(b/a)-1 -8.6% -8.1%
================================================= ============== ============= ================
Dividend reinvestment(A) d 1.4% 1.6%
------------------------------------------------- -------------- ------------- ----------------
Total return c+d -7.2% -6.5%
------------------------------------------------- -------------- ------------- ----------------
Share
Year ended 31 August 2022 NAV Price
================================================= ============== ============= ================
Opening at 1 September 2021 a 566.60p 512.00p
================================================= ============== ============= ================
Closing at 31 August 2022 b 513.32p 446.00p
================================================= ============== ============= ================
Price movements c=(b/a)-1 -9.4% -12.9%
================================================= ============== ============= ================
Dividend reinvestment(A) d 1.0% 1.1%
------------------------------------------------- -------------- ------------- ----------------
Total return c+d -8.4% -11.8%
------------------------------------------------- -------------- ------------- ----------------
(A) 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.
==================================================================================================
Copies of the Company's Half Yearly Report for the six months
ended 28 February 2023 will be posted to shareholders in May 2023
and will be available thereafter on the Company's website:
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.
* Neither the content of the Company's website nor the content
of any website accessible from hyperlinks on the Company's website
(or any other website) is (or is deemed to be) incorporated into,
or forms (or is deemed to form) part of this announcement.
abrdn Holdings Limited
Company Secretary
26 April 2023
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END
IR SEAFMMEDSEFL
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