Asia Dragon Regulatory News (DGN)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO, THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF South Africa, In any Member State of the EEA OR IN ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

This announcement is not an offer to sell, or a solicitation of an offer to acquire, securities in the United States or in any other jurisdiction in which the same would be unlawful. Neither this announcement nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

Legal Entity Identifier: 549300W4KB0D75D1N730

22 September 2023

Asia Dragon Trust plc

Proposed combination with abrdn New Dawn Investment Trust plc

Publication of Prospectus and Circular

On 21 July 2023, the board of Asia Dragon Trust plc (the "Company" or "DGN") announced that it had agreed terms with the board of abrdn New Dawn Investment Trust plc ("ABD" or "New Dawn") in respect of a proposed combination of the assets of the Company with the assets of New Dawn. The combination, if approved by Shareholders and New Dawn Shareholders, will be effected by way of a scheme of reconstruction and winding up of New Dawn under section 110 of the Insolvency Act 1986 (the "Scheme") and the associated transfer of part of the cash, assets and undertaking of New Dawn to the Company in exchange for the issue of new ordinary shares in the Company (the "New Shares") (the "Scheme Issue").

The Board announces that the Company will shortly publish a prospectus (the "Prospectus") in relation to the issue of New Shares pursuant to the Scheme together with a circular to provide Shareholders with further details of the Proposals (as defined below) and to convene a general meeting of the Company (the "General Meeting") to seek approval from Shareholders for the implementation of the Proposals (the "Circular").

The Prospectus and Circular will shortly be available for inspection at the National Storage Mechanism which is located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and, subject to certain access restrictions, on the Company's website at https://www.asiadragontrust.co.uk/en-gb.

Overview of the Scheme and the Proposals

The Scheme will be effected by way of a scheme of reconstruction of New Dawn under section 110 of the Insolvency Act, resulting in the voluntary winding up of New Dawn and the transfer of part of New Dawn's cash, assets and undertaking to the Company on a formula asset value ("FAV") for FAV basis.

Under the Scheme, Eligible New Dawn Shareholders will be entitled to elect to receive in respect of some or all of their New Dawn Shares:

· New Shares (the "Rollover Option"); and/or

· cash (the "Cash Option").

The Cash Option is limited to 25 per cent. of the New Dawn Shares in issue (excluding treasury shares). Should total elections for the Cash Option exceed 25 per cent. of the New Dawn Shares in issue (excluding treasury shares), excess elections for the Cash Option will be scaled back into New Shares on a pro rata basis.

The Cash Option will be offered at the ABD FAV per Share less a discount of 2 per cent. (the "Cash Option Discount") less the costs of realising the assets allocated to the Cash Pool for the benefit of the New Dawn Shareholders electing (or who are deemed to have elected) for the Cash Option. The Cash Option Discount will be for the benefit of the Enlarged Company.

New Shares will be issued as the default option under the Scheme in the event that New Dawn Shareholders do not make a valid election under the Scheme or to the extent elections for the Cash Option are scaled back as a result of the Cash Option being oversubscribed.

Following implementation of the Scheme, the Enlarged Company will continue to be managed by abrdn Fund Managers Limited ("AFML") and abrdn Asia Limited (the "Investment Manager"). However, in connection with, and as a condition of, the Scheme, the Board is proposing certain amendments to the Company's investment objective and policy (the "Investment Policy Change") which will be subject to Shareholder approval. The principal amendment will be to permit investment in Australasia in order to provide the management team with greater geographic flexibility, but there will also be other clarificatory or modernising amendments (all as set out in Part 3 of the Circular). The Company's current portfolio managers are Adrian Lim and Pruksa Iamthongthong. Adrian Lim is retiring from the Investment Manager on 30 September 2023, after which the portfolio managers of the Company will be Pruksa Iamthongthong and James Thom (who is currently co-manager of New Dawn).

The Scheme Issue and the Investment Policy Change together constitute the "Scheme Proposals". Implementation of the Scheme Proposals is conditional upon, among other things, approval of the Scheme by Shareholders and New Dawn Shareholders and approval of the Investment Policy Change by Shareholders.

Whilst not a requirement or condition of the Scheme, the Board is also proposing amendments to the Company's existing articles of association in order to provide the Directors with the power to (i) request certain information from Shareholders, (ii) refuse to register a transfer of shares in the Company or (iii) require the transfer of shares to an eligible transferee, in circumstances where the Directors believe a failure to do so may result in a breach of, or give rise to onerous obligations on the Company under, certain US securities laws.

The proposals for the Company's participation in the Scheme, including the Scheme Proposals, and the adoption of the Revised Articles together comprise the "Proposals".

Benefits of the Scheme Proposals

Both the Company and New Dawn invest in the Asia Pacific ex Japan region and both are managed by AFML with a high level of commonality across their shareholder bases. In the light of these similarities, the Board believes a combination of the companies will create an enlarged vehicle that offers similar investment exposure for each set of shareholders while offering shareholders in the Enlarged Company the following benefits.

· Enhanced profile: The Enlarged Company is expected to have a Net Asset Value in excess of £700 million (based on valuations as at 19 September 2023), creating a significant closed-ended vehicle for investment in the Asia Pacific ex Japan region. On the basis of the current market capitalisations of the Company and New Dawn, the Enlarged Company would be expected to qualify as a constituent of the FTSE 250 Index, which is expected to raise the profile and enhance the marketability of the Enlarged Company.

· Lower management fee: AFML has agreed that, with effect from Admission, the management fee payable by the Company to AFML will be reduced to 0.75 per cent. per annum (currently 0.85 per cent. per annum) on the initial £350 million of the Company's NAV and 0.50 per cent. per annum on the Company's NAV in excess of £350 million. In addition, the Company will benefit from lower weighted costs following implementation of the Scheme Proposals as the Company's tiered fee structure will have the effect of reducing the weighted average fee given the increase in the Company's NAV.

· Lower ongoing charges: Shareholders in the Enlarged Company are expected to benefit from a lower ongoing charges ratio with the Company's fixed costs spread over a larger asset base.

· Enhanced liquidity: The scale of the Enlarged Company is expected to improve the secondary market liquidity of the Shares.

· Shareholder register: The Scheme Proposals will allow a number of Shareholders to consolidate their holdings across the Company and New Dawn while also creating a more diversified shareholder base through a combination of the balance of the two share registers.

· Contribution to costs: As described further below, AFML has agreed to make a cost contribution in respect of the Scheme Proposals which, in addition to the contribution to the costs arising from the Cash Option Discount described above, is expected to offset the direct transaction costs for Shareholders.

Costs and expenses of the Scheme Proposals

Subject as noted below, if the Scheme is implemented, the Company and New Dawn have each agreed to bear their own costs associated with the Scheme Proposals. The fixed direct costs of the Scheme Proposals payable by the Company are expected to be approximately £750,000 inclusive of VAT (which is assumed to be irrecoverable) where applicable. In addition, the Enlarged Company will also incur listing fees in respect of the listing of the New Shares issued under the Scheme and the acquisition costs and taxes based on the value and constitution of the Rollover Pool transferred to the Company.

Any costs of realignment/realisation of the New Dawn Portfolio incurred prior to the Calculation Date will be borne by New Dawn, with any such costs incurred after the Calculation Date to be borne by the Enlarged Company.

In the event that implementation of the Scheme does not proceed, each party will bear its own costs.

AFML Contribution

AFML has agreed to make a contribution to the costs of the Scheme by means of a reduction in the management fee payable by the Enlarged Company to AFML. The fee reduction will constitute a waiver of the management fee that would otherwise be payable by the Enlarged Company to AFML in respect of the assets transferred by New Dawn to the Company pursuant to the Scheme for the first six months following the Effective Date (the "AFML Contribution"). The AFML Contribution is subject to the Company not terminating the Management Agreement (other than for cause as provided for under the Management Agreement) within three years from the Effective Date, failing which the Enlarged Company will be obliged to repay all or part of the AFML Contribution (depending on the point of termination and reducing by one-third on each anniversary of the Effective Date). The AFML Contribution will be for the benefit of the Shareholders of the Enlarged Company following implementation of the Scheme. For the avoidance of doubt, the AFML Contribution will not be taken into account in the calculation of either the DGN FAV per Share or the ABD FAV per Share for the purposes of the Scheme.

Performance-related Conditional Tender Offer

At the Annual General Meeting held in 2021, Shareholders voted in favour of the introduction of a performance-related conditional tender offer (the "Conditional Tender Offer"), which will take place every five years. At the time of the vote, the Board advised that the size of any Conditional Tender Offer will be set by the Board up to a maximum of 25 per cent. of the prevailing issued share capital of the Company.

The first performance period runs from 1 September 2021 to 31 August 2026. In the light of the Scheme Proposals and the expected increase in the size of the Company, and conditional on the Scheme being implemented, the Board has resolved that, in the event the Company underperforms the Benchmark over the current performance period and a Conditional Tender Offer is triggered, the Company will offer Shareholders the opportunity to tender up to 15 per cent. of the issued share capital (excluding treasury shares) of the Enlarged Company under such Conditional Tender Offer. The size of any Conditional Tender Offer resulting from any future performance period after August 2026 will be subject to the original maximum of 25 per cent. of the prevailing issued share capital of the Company (excluding treasury shares).

Board structure

It is intended that, following completion of the Scheme, Donald Workman, Stephen Souchon and Nicole Yuen (each a New Dawn Director) (the "Prospective Directors") 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. After a transition period that will end on the six month anniversary of Admission, 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. Each of the Prospective Directors is independent of the AIFM and the Investment Manager.

Conditions of the Scheme Proposals

Implementation of the Scheme Proposals is subject to a number of conditions, including:

· the passing of the New Dawn Resolutions to approve the Scheme and the winding up of New Dawn at the New Dawn General Meetings and the Scheme becoming unconditional in all respects (including the Transfer Agreement becoming unconditional in all respects);

· the passing of Resolution 1 (approval of the Scheme Issue) and Resolution 2 (approval of the New Investment Policy) at the General Meeting, and such Resolutions becoming unconditional in all respects;

· the FCA agreeing to admit the New Shares to the Official List and the London Stock Exchange agreeing to admit the New Shares to trading on the Main Market, subject only to allotment; and

· the Directors and the New Dawn Directors resolving to proceed with the Scheme.

Unless the conditions referred to above have been satisfied or, to the extent permitted, waived on or before 30 November 2023, no part of the Scheme Proposals will become effective and the New Shares will not be issued.

Admission and Dealings

Applications will be made by the Company to the FCA and to the London Stock Exchange for the New Shares to be admitted to the premium listing category of the Official List and to trading on the Main Market, respectively. If the Scheme Proposals become effective, it is expected that the New Shares will be admitted to the Official List, and dealings in the New Shares will commence on the Main Market, on 9 November 2023. For the avoidance of doubt, New Dawn Shareholders receiving New Shares under the Scheme will not, in respect of those New Shares, be entitled to the dividend payable by the Company in respect of its financial year ended 31 August 2023.

General Meeting

The Proposals are subject to Shareholder approval. The notice convening the General Meeting, to be held at 2.00 p.m. on 25 October 2023 at the offices of abrdn plc, 18 Bishop's Square, London, E1 6EG, is set out in the Circular. The Notice includes the full text of the Resolutions.

The Board considers the Proposals to be in the best interests of Shareholders as a whole and recommends that Shareholders vote in favour of all of the Resolutions to be proposed at the General Meeting.

Expected Timetable

Capitalised terms used but not defined in this announcement will have the same meaning as set out in the Circular unless the context otherwise requires.

For further information:

General

This announcement is an advertisement for the purposes of the Prospectus Regulation Rules of the UK Financial Conduct Authority ("FCA") and is not a prospectus. This announcement does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer to subscribe for or to acquire, any ordinary shares in the Company in any jurisdiction, including in or into Australia, Canada, Japan, the Republic of South Africa, the United States of America or any member state of the EEA.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the US Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.

This announcement does not contain all the information set out in the Circular. Shareholders should read the Circular in full before deciding what action to take in respect of the Proposals.

Approval of the Prospectus by the FCA should not be understood as an endorsement of the securities that are the subject of the Prospectus. New Dawn Shareholders are recommended to read the Prospectus before making a decision in order to fully understand the potential risks associated with a decision to invest in the Company's securities.