Asia Dragon Trust plc 9
Overview
General Portfolio
Information
At the end of the Company’s half year, in February,
investors were optimistic that the Fed, having raised
interest rates by 425 basis points in 2022, would start to
ease up. These expectations proved to be premature,
although the severity of rate increases in 2023 has been
much reduced.
Moving into 2023, market expectations brightened over
Asia’s near-term outlook. In China, the easing of Covid
curbs and increasing government support boosted
mainland equity markets and buoyed export-oriented
markets such as Taiwan and South Korea. Investors hoped
that the faster than expected re-opening would translate
to a big recovery in consumer spending. However, this did
not transpire as expected. The economic recovery stalled
and China’s increased savings rate and looser fiscal policy
environment did not convert into increased spending.
Another key concern was the weak property sector. We
have also seen the government step up its policy support
through monetary policy easing, a liquidity boost for
capital markets and targeted measures for real estate.
In other parts of Asia, the growth picture was rosier. In
India, for instance, a recovery in urban consumer demand
and a buoyant housing market underpinned continued
economic growth, placing the country among the world’s
fastest-growing economies. Elsewhere, Indonesia
displayed signs of resilient domestic spending, while
investors turned more positive on Taiwan and South
Korea, in the expectation that artificial intelligence (AI) will
be a fillip for semiconductor manufacturing.
Gearing
The Board believes that the sensible use of modest
financial gearing should enhance returns to shareholders
over the longer term, being one of the advantages of the
closed end structure. The Company has loan facilities
totalling a commitment of £60 million with The Royal Bank
of Scotland International Limited, London Branch. The
facilities, which are unsecured, consist of a two-year fixed
rate facility of £25m, which is fully drawn, and a two year
£35m multi-currency revolving credit facility of which £15
million was drawn down at the year-end.
At 31 August 2023, the Company’s net gearing position
was 5.8%, compared to 9.0% at the end of August 2022.
The Manager continues to monitor closely gearing levels
and bank covenants. As at 1 November 2023, the
Company’s net assets stood at £449.6 million and net
gearing was 7.7%. These levels remain comfortably within
the covenant limits.
It is the Manager’s intention, subject to implementation of
the Scheme, to draw down an additional amount under its
revolving credit facility, post the combination of assets, for
identified investment opportunities and to maintain
approximately the Company’s current gearing level.
Discounts and Share Buybacks
The discount level of the Company’s shares is closely
monitored by the Board and share buybacks are
undertaken when appropriate. During the year ended 31
August 2023, 5.9 million shares were bought back into
treasury at a cost of £23.7 million (2022: 5.1 million shares
were bought back into treasury at a cost of £24.0 million).
Since 31 August 2023, a further 973,136 shares have been
bought back into treasury at a cost of £3.45 million. The
discount at the financial year end was 16.2% (2022:
13.1%). As at 1 November 2023, the discount was 16.9%.
Revenue Account
The Company’s revenue return per share was 7.06p for
the year to 31 August 2023 (2022 – 6.38p). The Board has
declared a final dividend of 6.6p per Ordinary share (2022
– 6.5p) which, if approved by shareholders at the Annual
General Meeting (“AGM”), will be paid on 15 December
2023 to shareholders on the register on 27 October 2023.
As this date precedes the proposed implementation of the
Scheme, New Dawn shareholders who elect to receive the
Company’s shares as part of the Scheme, will not receive
this dividend.
Composition of the Board
As previously outlined, it is intended that, subject to New
Dawn shareholders’ approval of the Scheme, Donald
Workman, Stephen Souchon and Nicole Yuen will be
appointed as non-executive Directors of the Company. As
such, the Board will then, initially, consist of eight Directors,
comprising the five current Directors of the Company and
three New Dawn Directors. However, after a transition
period that will end on 8 May 2024, the expected six-
month anniversary of completion of the Scheme, it is
intended that the number of Directors on the Board will be
reduced to five, with Donald Workman, Charlie Ricketts
and Gaynor Coley expected to retire from the Board at
that time. Resolutions proposing the election of Donald,
Stephen and Nicole are included in the Notice of AGM and
will be proposed, subject to successful completion of the
proposed combination with abrdn New Dawn.