Annual Report and Notice of AGM

18 June 2024

Ashoka WhiteOak Emerging Markets Trust plc

(the ‘Company’)

Annual Report and Notice of AGM

For the period from incorporation to 31 March 2024

Ashoka WhiteOak Emerging Markets Trust plc, the alpha driven global emerging markets equity trust, is pleased to report the Company’s maiden Annual Report for the period from incorporation on 15 March 2023 to 31 March 2024.

The Company also announces that its first Annual General Meeting (‘AGM’) will be held at 10.00am on 16 July 2024 at the offices of JTC (UK) Limited, The Scalpel, 18th Floor, 52 Lime Street, London, EC3M 7AF.

The Annual Report and the formal Notice of AGM (included in the Annual Report) are available on the Company's website at https://awemtrust.com/reports-account/ and will also shortly be available to view on the FCA’s National Storage Mechanism https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Highlights for the period:

• The Company listed on the Premium Segment of the Main Market of the London Stock Exchange on 3 May 2023 and is the sole premium-listed investment company to launch since 2021, as well as the first premium-listed equity focused investment company listing since 2018.
• Net Asset Value (NAV) total return of 11.81%, outperforming the Company’s benchmark (MSCI EM (GBP) Index) performance of 7.94% and producing +3.87% (+387bps) of excess returns.
• The Investment Manager’s approach to bottom-up stock selection remains robust and a key driver of performance. From a country perspective, stock selection has been strong across nearly all stock markets, but the most significant contribution has come from the Company’s Indian holdings.
• Key contributors for the period included:
  • DOMS, an Indian children’s stationery and art/craft materials business.
  • Senco Gold, the leading jewellery retailer in Eastern India.
  • Disco Corporation, which manufactures capital equipment for the semiconductor industry.
  • Qualitas Controlodara, the leading automobile insurer in Mexico.
• Key detractors for the period included:
  • Hong Kong Exchanges & Clearing, the owner of the only stock and futures exchange in Hong Kong and the London Metals Exchange.
  • Budweiser Brewing APAC, the leading premium brewer in China.
  • AIA, a Hong Kong listed insurer with a presence in multiple emerging markets.

• The Company has traded at an average premium of 0.1% over the period to 31 March 2024. The Company was also able to take advantage of its rating to issue 1,663,530 new shares through six separate issues.
• Post period-end the Company announced a proposed transaction to effect a combination with Asia Dragon Trust plc. The Company was pleased to see the subsequent announcement by Asia Dragon Trust plc on 21 May 2024, that it was initiating a full strategic review of its future, the Company has announced that it intends to participate in that process.

Martin Shenfield, Chair of the Company, commented:

“We are delighted to be issuing our maiden Annual Report, covering the period since the Company’s incorporation on 15 March 2023 to 31 March 2024. Since the Company’s landmark IPO in May 2023, the first premium-listed equity-focused investment company listing since 2018, the Company has continued to deploy capital through WhiteOak’s unique OpcoFIncoTM and ABLExTM methodologies to identify a highly diversified portfolio of attractively valued stocks with positive catalysts.

This differentiated and distinctive approach has enabled the Company already to outperform against the benchmark reference index despite its short history and the volatile nature of the EM sector during the period. It was pleasing that the key positive contributors came from a range of sectors and regions, especially mid and small cap stocks, highlighting the success of the team’s focus on rigorous bottom-up stock selection.

Finally, the Board would like to reiterate its thanks to all shareholders who have supported the Company’s IPO and share issues since incorporation.” 

For further information:

Company Secretary

WhiteOak Capital Partners Pte Ltd.

Ellora Partners

Buchanan

About Ashoka WhiteOak Emerging Markets Trust plc

Ashoka WhiteOak Emerging Markets Trust plc (AWEMT) is a UK investment trust seeking to achieve long-term capital appreciation primarily through investing in a multi-cap portfolio of equities that provide exposure to global emerging markets. AWEMT is advised by WhiteOak Capital Partners Pte. Ltd, founded by Prashant Khemka with leading Emerging Markets investment experience. WhiteOak Capital Group has delivered an exceptional track record for its other strategies, and has £5.5 billion in assets under management or advisory. WhiteOak Capital Group pursues a disciplined research process underpinned by its proprietary frameworks OpcoFinco™ for valuation and ABLExTM for ESG research. While Emerging Markets remain under-researched and inefficient, AWEMT leverages WhiteOak's investment approach to capture the higher alpha potential in these markets. There is no fixed management fee, instead the Investment Manager is remunerated solely as a function of outperformance over the benchmark and hence is directly aligned with shareholders' interests.

STRATEGIC REPORT

Chair’s Statement

This is the Company’s maiden Annual Report for the period from the date of incorporation on 15 March 2023 to 31 March 2024, reflecting its Initial Public Offering (‘IPO’) and subsequent commendable performance.

The Company’s listing on the Premium Segment of the Main Market of the London Stock Exchange in May 2023 is the sole premium-listed investment company to launch since 2021 and the first premium-listed equity‑focused investment company listing since 2018. Since the Company’s launch up to 31 March 2024, there have been no further investment company IPOs. With this challenging backdrop in mind, the Board would like to take this opportunity to thank again all shareholders who supported the Company’s IPO and the subsequent share issues under the Company’s placing programme.

The investment trust industry has faced increasing challenges over the last few years, particularly from the current inappropriate and inconsistent interpretation of UK cost disclosure rules. Following the broad global capital markets correction in 2022, this has exacerbated the average discount at which investment trust shares trade versus their NAV. It is to be hoped that this will be resolved sooner rather than later, but it is encouraging that the Company’s discount rating by contrast has remained robust.

However, the Board and Investment Manager are committed to and confident of growing the Company over time and are considering with the Company’s Corporate Broker, Ellora Partners, all options to accomplish this. On 7 May 2024, the Company announced a proposed transaction to effect a combination with Asia Dragon Trust plc. Accordingly, we were pleased to see the subsequent announcement by Asia Dragon Trust plc on 21 May 2024 that it was initiating a full strategic review of its future, and the Company has announced that it intends to participate in that process. Further updates will be announced by the Company as appropriate in due course.

Performance

During the period between 3 May 2023 to 31 March 2023 the Company’s NAV recorded a total return of 11.81% compared to the benchmark MSCI EM (GBP) Index of 7.94%. Given how volatile and challenging Emerging Markets (‘EMs’) have been at times since launch, this outperformance is testimony to the Investment Manager’s portfolio construction and risk management disciplines. Notably, any temporary drawdown in NAV has been kept to a bare minimum.

Since launch, the Company has traded close to NAV, supported by what we consider to be a “best-in-class” discount control mechanism in the form of its annual redemption facility, as explained later. The share price rose by 5.00% and the average premium at which the shares traded versus NAV was 0.1%.

The Company’s capital has been deployed in accordance with the Investment Manager’s stated investment process, utilising its unique OpcoFinco™ methodology to identify attractively valued stocks with positive catalysts, which in turn is complemented by its proprietary ABLExTM Environmental Social and Governance (ESG) screening filter analysis, designed to avoid companies with inherently poor governance.

Moreover, the Investment Manager’s fundamental local knowledge and breadth of in-house analytical research coverage supported its anticipated overweighting of mid and small cap stocks. The latter tend to be under‑researched and inefficiently valued, thereby offering superior stock picking selection alpha opportunities in which the Investment Manager has a proven track record and performance edge.

It is thus encouraging that the Company’s portfolio benefitted from the significant outperformance of its small cap holdings, notably amongst Indian stocks. The Investment Manager, by virtue of its local knowledge and connections, has a strong track record in accessing high quality pre-IPO and anchor IPO opportunities and the Company has already notably benefitted from one such holding (viz Senco Gold).

Alpha Fee

The Board remains focused on keeping costs as low as possible given the relatively small size of the Company’s asset base. It should be remembered that the Investment Manager does not receive a fixed management fee and is instead only entitled to an Alpha Fee, measured over discrete three-year periods and which is only earned if the Company’s adjusted NAV exceeds the benchmark MSCI EM (GBP) Index during that time. Moreover, any Alpha Fee is capped at 12% of time weighted average Adjusted Net Assets and is only paid out in the Company’s shares, 50% of which are subject to a three-year lock-up.

Shareholders should note that the Alpha Fee is a relative measure and as such remains payable if the Investment Adviser outperforms a falling benchmark. The Board has engaged the Investment Adviser on behalf of shareholders to invest in Global Emerging Markets equities with the aim to outperform the Company’s reference benchmark, the MSCI EM (GBP) Index, over the medium-term and thus believes a benchmark relative fee measure is appropriate for the Company. The Board believes that the Company’s fee structure in totality creates a very strong alignment of interest with the Investment Adviser and results in shareholders only paying fees to the Investment Adviser when they have demonstrated positive value. Shareholders can find full details of the Alpha Fee in the Company’s Prospectus.

An Alpha Fee was able to be accrued following the investment of at least 70% of the Company’s net IPO proceeds, which occurred on 12 May 2023. From 12 May 2023 to 31 March 2024, an Alpha Fee of £384,732 was accrued, reflecting the Company’s outperformance over this time.

Revenue and Dividends

The Company’s principal objective is to provide attractive returns through long-term capital appreciation rather than a focus on income generation. Therefore, the Company is unlikely to pay an annual dividend under normal circumstances. Where the Company’s portfolio may in future generate a small amount of income this will, in the first instance, be allocated to offset its operational costs. If required, the Company may declare an annual dividend to maintain its UK investment trust status. During the period under review no dividend has been declared.

Share Issuance

At IPO, the Company took the authority to issue further shares subject to its Placing Programme. On 26 May 2023, the Company was granted a Block Listing facility by the Financial Conduct Authority, enabling it to issue shares efficiently on an ad hoc basis to the market to manage the premium at which the Company’s shares trade to their NAV from time to time.

Since launch up to 31 March 2024, the Company has issued 1,663,530 new shares through six separate issues, representing 5.4% of the shares issued at IPO*. All issuances have been undertaken at the prevailing NAV plus a premium to cover the costs and expenses of each issue. We look forward to growing the Company through further share issuances in due course and point to the parallel experience of Ashoka India Equity Investment Trust plc, also managed by our own Investment Manager, where the NAV has grown significantly since its IPO from a comparably small initial base.

* Through five separate issues the Company has issued a further 650,000 shares since 31 March 2024 to 7 June 2024, raising £741,700.

Annual Redemption Facility

The Company aims to provide an investment opportunity for shareholders seeking long-term capital appreciation. The Company also employs a redemption facility through which shareholders will be entitled to request the redemption of all or part of their shareholding on an annual basis. The objective of the redemption facility is to assist with the limiting of any discount at which the Company’s shares may trade from time to time. It should be noted that the authority to approve any redemption rests at the sole discretion of the Board.

It was pleasing to see that only 14,014 of the Company’s shares (0.04%) were redeemed at the first redemption point in December 2023.

Annual General Meeting

The first Annual General Meeting (“AGM”) of the Company is scheduled to take place at the offices of JTC (UK) Limited, 18th Floor, The Scalpel, 52 Lime Street, London, United Kingdom, EC3M 7AF at 10:00 on 16 July 2024.

Those shareholders who are unable to attend the AGM in person are encouraged to raise any questions in advance with JTC (UK) Limited, the appointed Company Secretary, at AWEMT.cosec@jtcgroup.com (please include ‘AWEM AGM’ in the subject heading). Questions must be received by 5.00 p.m. on 2 July 2024. Any questions received will be replied to by either the Investment Manager or the Board, via the Company Secretary, before the AGM. A shareholder presentation will be made available on the Company website following the AGM, updating shareholders on the activities of the Company.

Outlook

After a somewhat challenging and at times volatile 2023 for EM economies and capital markets, notably in the case of China which is still the largest constituent of the benchmark MSCI EM (GBP) Index, the outlook is now more promising. Global Trade and PMIs, to which most EMs are particularly sensitive, are recovering and both Developed Markets (“DM”) and leading EM central banks are generally set upon a path of easing monetary policy. This should be broadly supportive of both EM economies and corporate earnings growth as well as valuations, which remain close to historic lows relative to DM equity markets.

The major uncertainties, apart from renewed US Dollar strength, are firstly whether the Chinese economy, given its massive overhang of non-performing property debt, can be stabilised through various fiscal and policy measures. Secondly, it is uncertain who the next US President may be, and to what degree US tariffs may be ramped up as a result. The Investment Manager, as part of its core strategy has, however, mitigated some of these China investment risks, both economic and governance related, through its holding in large DM multinationals but which derive a significant part of their revenue and profits from China and/or other EM economies.

Moreover, it is now well understood that China’s challenges and decoupling from the rest of the world will continue to benefit other EMs as multinationals reconfigure their supply chains. Although the latter are vulnerable to any further escalation of the current various regional conflicts, it is to be hoped that these will be resolved over time.

The Investment Manager’s report contains a more detailed exposition of the positive structural outlook for India, where the Investment Manager has a notable stock-picking edge amongst mid and small cap stocks due to being able to draw upon the resources of one of the largest local research teams.

The elections in Taiwan and Indonesia earlier this year passed without, as yet, any major turbulence and although the Indian election result was a disappointment for the ruling Bharatiya Janata Party, there is unlikely to be any major change in the successful reform policies of recent years. The Korean election outcome was, something of a stalemate but should not materially impact the investment case for the Investment Adviser’s preferred companies or negatively influence the local equity market.

The artificial intelligence boom has predictably turbocharged the semiconductor upcycle to the advantage of major Taiwanese and Korean technology companies. Although the recent Korean government sponsored corporate governance reforms were well-intentioned, these, however, have for now turned out to be something of a damp squib.

Within Latin America, Brazil offers a strong longer term outlook despite shorter term unhelpful political interference, driven by various structural reforms including tax and financial inclusion initiatives as well as its competitive strengths in renewable energy.

Mexico continues to benefit from the robust US economy propelling exports and remittances. In both countries, improving inflation dynamics should allow real yields eventually to decline in turn supporting local equities.

In conclusion, EM economies and capital markets will remain, as ever, sensitive to global macro-economic forces and geopolitics. However, the Investment Manager eschews any overreliance on such ‘top-down’ analysis, and focuses instead on disciplined individual stock-picking, complemented by its proprietary ESG screening process.

The Company’s history is short but the Investment Manager’s strengths and differentiated approach has been refined for over a decade and can be readily gleaned from its outperformance so far.

On behalf of the Board and the Investment Manager, I would like to thank you for your continued support as a shareholder of this Company. The Board welcomes any shareholder feedback and engagement and further information about the Company can be found on its dedicated website (https://awemtrust.com/), as well as its Company profile on the AIC website (https://www.theaic.co.uk/companydata/ashoka-whiteoak-emerging-markets).

Martin Shenfield
Chair

17 June 2024

Investment Manager’s Report

Market Review

The MSCI EM (GBP) Index (in sterling terms) rose by 7.94% since the listing of the Company to 31 March 2024. In the same period, the MSCI World Index was 22.91% and S&P 500 was 27.37% (all in sterling terms). Over this period, IT Services, Energy and Utilities outperformed, while Communication Services, Materials and Real Estate underperformed. Large caps broadly outperformed mid and small caps over this period. Among major EM markets, Taiwan, India, and Brazil outperformed, while China, South Africa, and Indonesia underperformed.

Performance Review

The Company has delivered a NAV total return of 11.81% over the period from 3 May 2023 to 31 March 2024, significantly outperforming the benchmark MSCI EM (GBP) Index by 3.87%. Despite a turbulent market environment, the portfolio has generally outperformed during this timeframe as it is very well diversified and balanced across both sectors and regions. The portfolio has a low concentration with the top 10 holdings making up 26.3% of the portfolio, further reducing the Company’s risk profile. The key positive contributors came from a range of sectors and regions, highlighting the team’s focus on bottom-up stock selection.

From a market capitalisation perspective, even as stock selection was positive across all segments, it was more pronounced within the small and mid-cap bucket. The Company provides exposure to great business franchises which are well-governed and are leaders in their respective market segments and Acorn Asset Management Limited, (referred to as the “Investment Manager”) has a notable stock picking expertise amongst small and mid cap stocks due to being able to draw upon the resources of one of the largest EM investment research teams.

From a country perspective, stock selection has been strong across nearly all stock markets but the most significant contribution has come from the Company’s Indian holdings. In the Investment Manager’s experience, compared to its large peers, the Indian market has the most heterogeneous composition at a sectoral level, and within that, it is the most diverse at a company level providing significant opportunities for alpha value creation. And here, just as is the case generally with small and mid cap stocks, the Investment Manager has a particular stock picking edge.

The team at White Oak Capital Partners Pte. Ltd (hereafter referred to as the “Investment Adviser”) is rigorously focused on stock selection. The sector exposures reflect this robust and rigorous bottom-up stock selection process. The team does not make any top-down sectoral bets as the team believes that such investment decisions are fraught with high risk of substantial absolute and relative losses. Having said that, given the investment philosophy, there are certain sectors where the team might expect to find more attractive opportunities compared to other sectors from a bottom-up perspective. For example, at the present time, the team finds a greater number of opportunities in consumer, IT services, and industrials.

The sectoral and geography exposures reflect the disciplined bottom-up stock selection process. From a country perspective, the biggest positions are in India, China, Taiwan, Korea, Mexico and Brazil. From a relative perspective, India is the biggest overweight while China is the biggest underweight. There is also an allocation towards developed world companies. These companies derive the majority of their revenues or value from emerging markets, mostly countries that the Company is underweight on, like China. Though not a perfect hedge, the Company’s investments in these companies do mitigate the risk of lower exposure to countries like China.             

Key contributors & detractors

Contributors

DOMS is, in our view, the best-managed children’s stationery and art/craft materials business in India. Run by an exceptional promoter CEO, Santosh Raveshia, the company has been growing revenues at a 20% CAGR over the past decades at a pace that is twice as fast as the wider industry. The operating performance is characterised by healthy profitability supported by an exceptionally strong balance sheet with regards to working capital management. Strong results over the reporting period, as well as an increasing awareness and understanding of the company by investors, have driven recent outperformance. Looking forward, the stationery business remains a very fragmented market and we believe DOMS’s market share gains and CAGR can be sustained.

Senco Gold is the leading jewellery retailer in Eastern India with a strong leadership position in its home state of West Bengal. The key drivers include firstly the continued formalisation of the large (US$70 bn+) Indian retail market; as the unorganised sector still represents 60% of the market share & most well-run organised national and regional chains continue to gain share from the fragmented players on the back of trust, design and aggressive store expansion. Secondly, an advantageous competitive positioning as apart from Titan, Senco is the only other player in the industry to have a well-established franchisee model which aids quicker expansion and shores up the return on capital employed and thirdly a solid, eager-to-learn and ever-improving management team led by Suvankar Sen, the son of the founder Shankar Sen. Senco was also among the early adopters of IT infrastructure across the supply chain (for artisans, franchise partners, store and inventory management), which has led to an improvement in its operational efficiency. This successful holding was originally initiated as an anchor position before the stock’s IPO and thus validates the Investment Manager’s ability to identify & access under-researched investment opportunities.

Disco Corporation (Disco) manufactures capital equipment for the semiconductor industry, the main products being grinders (which reduce the thickness of semiconductor wafers), dicers (which cut completed wafers into individual chips) and the related consumables. Owing to its technical prowess, Disco commands a market share of more than 80% in this critical industry. Recent developments within the semiconductor industry, such as quicker than expected adoption of silicon carbide in electric vehicles and the adoption of chiplets/advanced packaging, have led to Disco’s strong operating performance compared to its peers. Silicon carbide is amongst the hardest materials, so dicing and grinding such materials takes longer and requires more equipment and consumables which plays to Disco’s competitive strengths.

Qualitas Controlodara (Qualitas) is the leading automobile insurer in Mexico, with nearly a 35% market share. At 93.8%, the combined ratio (claims cost plus operating expenses plus commissions paid to agents as proportion of net earned premiums) is among the lowest in the Mexican Auto Insurance segment. Qualitas has held onto a 30%+ market share in Mexico’s Auto Insurance segment for almost a decade, with a 40%+ market share in the fast-growing Trucks and Commercial Vehicle Segment. Qualitas has built a strong moat with its brand, easy claims process, and large network of third-party agents. In addition, the company’s foray into health insurance and expansion into other Andean countries like Peru provide future growth optionality. The operating performance has improved with a 9.2% Return on Invested capital (9M23), compared to 1.6% during 9M22. The positive momentum in operating performance has been one of the contributing factors to the recent stock price outperformance.

Detractors

Hong Kong Exchanges & Clearing (HKEX) owns and operates the only stock and futures exchange in Hong Kong and the London Metals Exchange (LME). HKEX functions as a monopoly in Hong Kong, which is unlikely to change, although it competes for listings with other global exchanges. Overall, HKEX operates in a supportive ecosystem, with the number of listings and their trading volumes growing consistently over the years. The ‘Stock Connect Programme’, a market access platform between Hong Kong and mainland China, already represents 34% of trading volume and provides a structural growth driver as China liberalises its capital markets. The stock underperformed due to subdued trading volumes on the back of poor equity market performance in Hong Kong and China. Investor sentiment in the stock was further dampened by an increase in operating expenses which put its profit margin under pressure.

Budweiser Brewing APAC (Budweiser APAC) is the leading premium brewer in China (85% of EBITDA) with c. 16% of overall volumes on the back of leading brands, including Budweiser and Corona. It also has a smaller but market-leading position in Korea. Over time, beer markets globally tend to ‘premiumise’, resulting in attractive earnings growth together with high barriers to entry, particularly for breweries that are able to manage their brands well. Although the benefit of the reopening of the economy was slower than expected across all brewers in China, Chinese brewers have been following this premiumisation path over the last 5-10 years. We believe that COVID has obscured some of Budweiser APAC’s underlying strengths, given its relatively short listing history (the IPO was in 2019). During the last few quarters, the stock has performed mostly in line with its peers in the beer space but the beer industry in China has seen headwinds from a weak consumption environment where c.50% consumption is on-premise (restaurants/pubs). However, the company has highlighted that the premiumisation trend is progressing and noted that Jan/Feb 2024 continued to see a strong product mix upgrade driven by Premium and Super Premium segment growth (up double digits year‑on‑year).

Prosus is a global internet and entertainment group and one of the largest technology investors in the world. Its listed investments include stakes of 25% in Tencent and 29.5% in Delivery Hero. The underlying value of Tencent is central to Prosus along with Prosus’s own holding company discount and unlisted assets. The multi-year buyback, funded by Tencent sales, should support a narrower discount. The decline in Prosus’s share price primarily reflects the decline in the listed value of Tencent.

AIA is a Hong Kong listed insurer with a presence in multiple EMs, including Hong Kong (35% of Embedded Value or EV), Mainland China (18% of EV), and Thailand (12% of EV), along with a growing presence in other ASEAN countries as well as India. AIA is primarily an agency-driven business with a focus on selling protection products. In partnership with South Africa based Discovery, AIA launched ‘AIA Vitality’, bringing the successful health insurance and loyalty program to its Asian markets. AIA maintains a prudent investment portfolio with 75% of its book in fixed-income securities (50% of which is in government bonds), while lower quality securities with BB rating or below make up only c.7% of the portfolio. The company’s focus to return excess capital to shareholders is noteworthy, with US$3.6 billion returned in 1H23. However, operational performance was likely affected by a slower than expected economic rebound in China.

Investment Outlook

Global GDP growth is projected to increase by 3.1% in 2024 and 3.2% in 2025, slightly higher than the consensus forecasts made six months ago. With the prospect of gradual disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are now more broadly balanced. As per the International Monetary Fund (‘IMF’), EM economies are likely to record relatively higher growth, led by the momentum from stronger structural reforms which could bolster productivity. On the downside, renewed commodity price spikes from geopolitical shocks could prolong tight monetary conditions and any further aggravation of the property crisis in China, the dominant EM economy by market capitalisation, could impinge on market sentiment.

US monetary policy is expected to become more accommodative, which could represent a positive development for EMs in the short term, especially given the previously weak cross border flows in 2023. Global headline inflation is expected to fall from an estimated 6.8% in 2023 (annual average) to 5.8% in 2024 and 4.4% in 2025. The drivers of declining inflation differ by country but generally reflect lower core inflation due to still-tight monetary policies and relative softening across labour markets. This should allow most central banks to move progressively to an easier monetary policy stance.

India’s economy delivered solid, above expectation GDP growth of 8.2% for the fiscal year ending March 2024. Its healthy macro-economic fundamentals, resilient corporate earnings as well as promising growth prospects continue to garner strong FDI as well as portfolio flows. A moderating inflation trajectory and benign current account deficit opens up room for RBI monetary easing. Fiscal policy will remain in consolidation mode, driven by a pickup in tax revenues and improved rationalisation of government outlays even as capex spending will likely remain robust. The imminent initial inclusion of Indian government bonds into the JP Morgan Bond index will also be supportive of local debt markets.

India’s diverse corporate sectors and generally improving ROE suggests it will remain one of the best EM equity markets within which to capture sustained outperformance. Also noteworthy has been the corporate deleveraging and cleaning up of banks’ balance sheets with a marked decline in non-performing loans. This in turn has kickstarted a robust recovery in private sector credit and capex underpinning stronger economic growth and profits, further enhanced by the government’s extensive infrastructure investment upgrade. ‘Made in India’ is still in its very early stages, but the likes of Apple and Samsung are expanding local production with India clearly one of the major beneficiaries of global supply chain reconfiguration. Furthermore, the value of India’s IT exports recently exceeded its oil import bill providing a cushion to the external sector. Moreover, unlike China, India’s economy is much more consumption than investment driven, and the thrust of policymaking in recent years has been towards capacity building which is likely to ensure that economic growth is sustainable and broad-based and not propelled by a rise in leverage.

China’s economy has been grappling with persistent deflationary pressures, exacerbated by its property crisis and stubbornly weak domestic demand. Over the past three years, policy uncertainty, muted fiscal stimulus and certain regulatory interventions have weighed on investor confidence. US-China relations, since the trade tensions began in 2018, have also been one of the factors constraining equity returns in China. While we are not influenced by strong ‘top-down’ macroeconomic views on China, we do expect domestic sentiment to improve gradually, driven by more proactively supportive government policies and stimulus, albeit the latter is likely to remain moderate by historic standards. The government’s ongoing focus on technology and innovation, manufacturing capacity upgrades and decarbonisation should also underpin economic growth. However, the private credit money multiplier remains impaired and both households’ and corporates’ animal spirits somewhat muted. Chinese companies are, however, actively exploring commercial opportunities abroad resulting in some potential new revenue streams, assuming tariffs do not become more of a challenge again post the US election.

Taiwan and Korea are significantly benefitting from the AI boom given their semiconductor and technology expertise whilst the recovery in global economic growth and trade is an added boon.

Meanwhile, despite some unhelpful domestic political interference, Brazil is poised to deliver a new positive structural growth story supported by tax reform and new financial inclusion policies which should raise productivity and trend growth rates.

In summary, even though the global growth outlook has improved over the last year, the Investment Manager is still operating against the backdrop of a macroeconomic environment characterised by challenges pertaining to potential commodity price spikes amid geopolitical risks, climate change, weather shocks, and faltering growth in China together with potentially unpredictable policies given the impending elections in many geographies. However, the fundamentals of EM economies have generally strengthened despite this challenging environment and, at present at an aggregate level, are recording lower inflation, lower debt levels and higher growth compared to their DM counterparts. However, at a disaggregated level, EMs offer different opportunity sets, with the most significant negative risk being from China’s slowdown (but this provides a rewarding backdrop for active stock picking).

Despite the volatile macroeconomic environment, EMs collectively present attractive individual investment opportunities, backed by favourable demographics, rising incomes and pockets of economic resilience, although identifying positive performance differentiation will be key going forward.

The Investment Adviser never relies on aggregate market valuations in isolation, but it is worth noting that EMs are trading at a significant discount to DMs as well as their own long-term history. On a one year forward P/E, compared to its developed market peers, EMs are trading at a discount of 35%, much below the average discount of 25%. Irrespective of market levels, the Investment Adviser looks for attractively valued businesses on a relative basis. Our proprietary OpcoFincoTM analytical framework provides insights into economic cash flow generation characteristics and the intrinsic value of a business. Within the market, sectors or businesses trade at different valuations based on their respective risk‑reward dynamics, but within the rankings of relative attractiveness we identify the best opportunities.

The Investment Adviser’s investment philosophy of seeking compelling combinations of great businesses at attractive valuations together with strong portfolio risk management has placed the Company in good stead in the current environment. For the most part, the Company’s portfolio comprises industry leaders, dominant players or companies gaining market share in their respective industries on the back of strong execution. These businesses typically have superior returns on invested capital, robust cash flow generation, and, as a result, strong balance sheets. Together with the Investment Adviser, we place great credence on the resilience of their operating models and their ability to adapt quickly and thrive in an often volatile environment caused by rising geopolitical tensions and resultant spikes in commodity prices. Therefore, we expect the Company’s portfolio companies to emerge stronger through any period characterised by macro uncertainties, as was the case during the global Covid-19 pandemic.

The Investment Adviser employs significant research resources to build a deep understanding of various business models across EMs and DMs, including engaging with experts and industry professionals from across the world, and has scaled up its research and investment team, now 40+ strong, including dedicated resources to track ESG issues. The Investment Adviser also uses its proprietary ESG risk assessment framework ABLExTM (Assessment of Business Longevity and Excellence) to assess companies on their ESG practices. The framework contains a sector-specific list of ESG risks and opportunities against which a company’s practices, policies and disclosures are assessed. As such, owing to its bottom-up stock selection philosophy, the investment advisory team aims to generate alpha from its stock selection, rather than market timing, sector rotation or other macroeconomic views.

ACORN ASSET MANAGEMENT LTD
17 June 2024

Top Ten Holdings

Top Ten Active Holdings

Active weight refers to the deviation vis-a-vis the benchmark (MSCI EM GBP) weight.

Investment Policy, Results and Key Performance Indicators

Investment Policy

The Company shall invest primarily in securities admitted to trading on any stock exchange (which may include stock exchanges in Developed Markets) that provide exposure to companies that are domiciled in Global Emerging Markets, or that are domiciled in Developed Markets but, at the time of investment, derive a majority of their economic value, revenues or profits from, or whose assets or cost base are mainly located in, Global Emerging Markets (“Global Emerging Markets Companies”).

The Company may also invest:

• up to 10% of Gross Assets (calculated at the time of investment) in securities admitted to trading on any stock exchange (which may include stock exchanges in Developed Markets) that provide exposure to companies that are domiciled in Frontier Markets, or companies which are domiciled in Developed Markets, but, at the time of investment, derive a majority of their economic value, revenues or profits from, or whose assets or cost base are mainly located in Frontier Markets (“Frontier Markets Companies”);

• up to 10% of Gross Assets (calculated at the time of investment) in unquoted Global Emerging Markets Companies or Frontier Markets Companies; and

• up to 10% of Gross Assets (calculated at the time of investment) in companies domiciled in Developed Markets that may not derive a majority of their economic value, revenues, profits, assets or cost base from Global Emerging Markets or Frontier Markets.

“Global Emerging Markets” means the constituent countries of the MSCI EM (GBP) Index from time to time; “Developed Markets” means the constituent countries of the MSCI Developed Markets Index from time to time; and “Frontier Markets” means those countries that are neither constituents of the MSCI Emerging Markets (GBP) Index nor the MSCI Developed Markets Index from time to time.

The Company shall invest primarily in equities and equity-related securities (including ordinary shares, preference shares, convertible unsecured loan stock, rights, warrants and other similar securities). The Company may also, in pursuance of its investment objective:

• hold publicly traded and privately placed debt instruments (including bonds, notes and debentures);

• hold American Depository Shares (“ADS”) as part of American Depository Receipt issuances, European Depository Receipts and Global Depositary Receipts (“GDRs”) or their equivalent, such as structured securities, including structured participation notes (“P-Notes”);

• hold equity-linked derivative instruments (including options and futures on indices and individual securities);

• hedge against directional risk using index futures and/or cash;

• hold participation notes;

• invest in index funds, listed funds and exchange traded funds; and

• hold cash and cash equivalents including money market liquid / debt mutual funds, treasury bills, municipal bonds and commercial paper for the purposes of cash management.

Notwithstanding the above, the Company does not intend to utilise derivatives or other financial instruments to take short positions, nor to increase the Company’s gearing in excess of the limit set out in the borrowing policy, and any restrictions set out in this investment policy shall apply equally to exposure through derivatives. The Company may invest, calculated at the time of investment, no more than:

• 50% of Gross Assets in companies that are domiciled in, or which derive a majority of their economic value, revenues or profits from, or whose assets or cost base are mainly located in, a single Global Emerging Market jurisdiction;

• 40% of Gross Assets in any single sector;

• 15% of Gross Assets in any single holding or in the securities of any one issuer (calculated at the time of investment) save that any investment in unlisted securities of any one issuer will be limited to no more than 5% of Gross Assets (calculated at the time of investment);

• 10% of Gross Assets in other listed closed-ended investment funds, except that this restriction shall not apply to investments in listed closed-ended investment funds which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed ended investment funds; and

• 15% of Gross Assets in other investment companies or investment trusts which are listed on the Official List.

The Company is not restricted to investing in the constituent companies of any benchmark. It is expected that the Company’s portfolio will comprise approximately 100 to 200 investments although, in order to allow the Investment Manager and Investment Adviser flexibility to take advantage of opportunities as they arise, the portfolio may comprise holdings outside this range.

For the avoidance of doubt, the Company will not be compelled to divest of any of its investments should, after the time of investment, such an investment cease to adhere to the limits set out in the investment policy.

The Company does not expect to take controlling interests in investee companies and will at all times invest and manage the portfolio in a manner consistent with spreading investment risk.

It is expected that the Company’s investments will predominantly be exposed to non-Sterling currencies in terms of their revenues and profits. The base currency of the Company is Sterling, which creates a potential currency risk exposure. Whilst the Company retains the flexibility to do so, it is expected in the normal course that this potential currency exposure will not be hedged using any sort of foreign currency transactions, forward transactions or derivative instruments.

Borrowing policy

The Company may deploy gearing to seek to enhance long-term capital growth and for the purposes of capital flexibility and efficient portfolio management. The Company may be geared through bank borrowings, the use of derivative instruments that have the effect of gearing the Company’s portfolio, and any such other methods as the Board may determine. Gearing will not exceed 25% of Net Asset Value at the time of drawdown of the relevant borrowings or entering into the relevant transaction, as appropriate.

No gearing has been employed since inception.

No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution.

Asset allocation at period end

The breakdown of the top ten holdings, top ten active weights and the industrial classification of the portfolio at the Company’s period-end are shown below.

Dividend policy

The Directors intend to manage the Company’s affairs to achieve Shareholder returns primarily through capital growth rather than income. Any income derived from the Company’s operations would normally, in the first instance, be used to cover operating expenses. Therefore, it should not be expected that the Company will pay a significant annual dividend, if any.

Regulation 19 of the Investment Trust (Approved Company) (Tax) Regulations 2011 provides that, subject to certain exceptions, an investment trust may not retain more than 15% of its income (as calculated for tax purposes) in respect of each accounting period. Accordingly, the Company may declare an annual dividend from time to time for the purpose of seeking to maintain its status as an investment trust.

Results and dividend

The Company had a revenue shortfall for the period of £788,252 but made a capital surplus after tax of £4,468,793. Therefore, the total surplus after tax for the Company was £3,680,541.

The Board is proposing that no dividend be paid in respect of the period ended 31 March 2024 in accordance with the Company’s dividend policy, outlined above.

Key performance indicators

The Board measures the Company’s success in attaining its investment objective by reference to the following KPIs (for information on how these have been calculated please refer to the Alternative Performance Measures).

(i) Achievement of NAV and share price growth over the long term

The Board monitors both the NAV and share price performance and compares them with the MSCI Emerging Markets NR index (sterling) and other similar investment trusts. A review of performance is undertaken at each quarterly Board meeting and the reasons for relative under and over performance against various comparators is discussed. The Company’s NAV and share price total returns for the period from the IPO to 31 March 2024 were 11.81% and 5.00% respectively compared to a total return of 7.94% for the MSCI EM (GBP) Index.

The Chair’s Statement incorporates a review of the highlights during the period. The Investment Manager’s Report highlights investments made during the period and how performance has been achieved.

(ii) Maintenance of premium or discount of share price to NAV

With the assistance of Ellora Partners (hereafter referred to as the Company’s “Corporate Broker”), the Board monitors the premium or discount of the Company’s share price to NAV on an ongoing basis and at quarterly Board meetings reviews the share price rating in the period since the previous meeting in comparison with other investment companies with a similar mandate. The Company has a redemption facility through which Shareholders will be entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis (the authority to approve any redemption request rests at the sole discretion of the Board). The Company’s shares traded at an average premium of 0.1% over the period to 31 March 2024.

(iii) Maintenance of a reasonable level of ongoing charges (excluding Alpha Fee)

The Board receives quarterly management accounts which contain an analysis of expenditure, and these are formally reviewed at quarterly Board meetings. The Management Engagement Committee reviews the fees payable to the Company’s main service providers on an annual basis. The Board reviews the ongoing charge ratio as well as the Alpha Fee accrual on a quarterly basis. The Company’s ongoing charge ratio, based on the Company’s average net assets during the period ended 31 March 2024, was 1.94%. The Board considers this to be reasonable given the size and short life of the Company but will endeavour to undertake all reasonable efforts to reduce this over time.

Risk and Risk Management

Principal and emerging risks

The principal risks and emerging risks have all been reviewed in detail, including the significant economic risks that might impact the Company and the attainment of its investment objectives. The Board recognises that there are risks and uncertainties that could have a material effect on the Company’s financial results. Under the 2019 AIC Code of Corporate Governance (the ‘AIC Code’), directors of listed companies are required to confirm in the annual report that they have performed a robust assessment of the Company’s emerging and principal risks, including those that would threaten its business model, future performance, solvency or liquidity and reputation.

The Board is ultimately responsible for the Company’s risk management with oversight of the risk assessment framework and management process delegated to the Audit Committee. The Board recognises the importance of identifying and actively monitoring the risks facing the business and has in place a risk management framework, details of which can be found in the Audit Committee report.

The Company’s risk register is the core element of the risk management process. The register is prepared, in conjunction with the Board, by the Investment Adviser and Company Secretary, is updated frequently and is used to assess all the operational, performance and other risks that might impact the Company. The register also provides detail as to how these risks are potentially mitigated by the Board or third-party service provider controls.

The Board receives a risk report on the material risks facing the Company on a quarterly basis, assessing the likelihood and potential impact of each risk on the Company as well as the strength of controls operating in relation to each risk. The Audit Committee also review and challenge the full register on an annual basis.

The below table provides a summary of the Board’s assessment of the Company’s principal risks as well as an explanation of how these are being managed or mitigated is detailed in the table below.

Emerging Risks

The key emerging risks faced by the Company during the year under review were the impact of climate change, geopolitical risk (as mentioned above), and technological advances. These emerging risks are discussed in detail as part of the Company’s risk framework and management process to ensure emerging risks as well as well-known risks are identified and mitigated as far as possible.

Climate Change

Investors can no longer ignore the impact that the world’s changing climate will have on businesses and their customers. It is likely to have a potentially material impact on emerging market investment portfolio returns. The energy transition to a low carbon economy may also provide attractive new investment opportunities. The Board receives ESG reports from the Investment Adviser on the portfolio and the way financially material ESG considerations, including climate change, are integrated into the investment decision-making, both to mitigate risk and to enhance investment gains at the level of stock selection and portfolio construction.

Artificial Intelligence

The Board is also monitoring the potential risks on the portfolio and investee companies posed by the dramatic progress of Artificial Intelligence (AI). Cyber-attacks (for example impersonation, spoofing and deepfakes) using AI systems are a new type of threat that exploit limitations in underlying AI algorithms. In addition, the use of AI could be a significant disrupter to business processes and whole companies leading to added uncertainty in corporate valuations. The Board will work closely with the Investment Manager in identifying these threats and, in addition, monitor the strategies of the service providers to address these concerns.

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report in accordance with applicable laws and regulations.

The Companies Act 2006 (the “company law”) requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Company financial statements in accordance with UK-adopted international accounting standards.

Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company during and as at the end of the year. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates, which are reasonable and prudent;

• present information including accounting policies and additional disclosures as required to ensure the report is presented in a manner that provides relevant, reliable, comparable and understandable information;

• state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the accounts comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The accounts are published on the Company’s website, which is maintained by the Investment Manager. The work carried out by the auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts since being initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ confirmation statement

The Directors each confirm to the best of their knowledge that:

(a) the financial statements, prepared in accordance with UK adopted international financial reporting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.1.12R; and

(b) this Annual Report comprising the Strategic Report and Governance Statements includes a fair review of the development and performance of the business and position of the Company, together with a description of the principal and emerging risks that it faces as required by DTR 4.1.8R and DTR 4.1.9R.

Having taken advice from the Audit Committee, the Directors consider that the Annual Report taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance, business model and strategy.

For and on behalf of the Board

Martin Shenfield
Chair

17 June 2024

FINANCIAL STATEMENTS

Statement of Comprehensive Income

For the financial period ended 31 March 2024

There is no other comprehensive income and therefore the ‘Profit for the period’ is the total comprehensive income for the period ended 31 March 2024.

The total column of the above statement is the profit and loss account of the Company. The supplementary revenue and capital columns, including the earnings per Ordinary Share, are prepared under guidance from the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

The notes below form an integral part of these financial statements.

Statement of Comprehensive Income
As at 31 March 2024

Approved by the Board of Directors on 17 June 2024 and signed on its behalf by:

Howard Pearce
Director

The notes below form an integral part of these financial statements.

Statement of Comprehensive Income
For the financial period ended 31 March 2024

The Company’s distributable reserves consist of the special distributable reserve and revenue reserves

The notes below form an integral part of these financial statements.

Statement of Comprehensive Income
For the financial period ended 31 March 2024

The notes below form an integral part of these financial statements.

Notes to the Financial Statements

1. Reporting entity

Ashoka WhiteOak Emerging Markets Trust Plc is a public limited company, registered and incorporated in England and Wales on 15 March 2023. The Company’s registered office is 18th Floor, The Scalpel, 52 Lime Street, London, United Kingdom, EC3M 7AF. Business operations commenced on 3 May 2023 when the Company’s Ordinary Shares were admitted to trading on the London Stock Exchange. Its share capital is denominated in British Pounds Sterling (£) and currently consists of ordinary shares. The audited report and accounts (the “Financial Statements”) of the Company are presented for the period from 15 March 2023 to 31 March 2024.

The Company shall invest primarily in securities admitted to trading on any stock exchange (which may include stock exchanges in Developed Markets) that provide exposure to companies that are domiciled in Global Emerging Markets (EMs), or that are domiciled in Developed Markets but at the time of investment, derive a majority of their economic value, revenues or profits from, or whose assets or cost base are mainly located in EMs.

2. Basis of preparation

Statement of compliance

These financial statements have been prepared in accordance with applicable law and the UK-adopted international accounting standards. The financial statements have been prepared on a historical cost basis, except for the measurement at fair value of investments.

When presentational guidance set out in the Statement of Recommended Practice (“SORP”) for Investment Companies issued by the Association of Investment Companies (“the AIC”) in July 2022 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

In preparing these Financial Statements the Directors have considered the impact of climate change risk as an emerging risk. In line with the UK-adopted international accounting standards, investments are valued at fair value, being primarily quoted prices for investments in active markets at the balance sheet date, and therefore reflect market participant’s view of climate change risk.

The Financial Statements are also prepared on the assumption that approval as an investment trust will continue to be granted.

Going concern

The Directors have concluded that there is a reasonable expectation that the Company will have adequate liquidity and cash balances to meet its liabilities as they fall due and continue in operational existence for the foreseeable future and continue as a going concern for the period to 30 June 2025. As such the Directors have adopted the going concern basis in preparing the financial statements.

Use of estimates and judgements

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The Indian capital gains tax provision represents an estimate of the amount of tax payable by the Company. Tax amounts payable may differ from this provision depending on when the Company disposes of investments. The current provision for Indian capital gains tax is calculated based on the long-term or short-term nature of the investments and the applicable tax rate at the year end. Currently, the short-term tax rate is 15% and the long-term tax rate is 10%. The estimated tax charge is subject to regular review including a consideration of the likely period of ownership, tax rates and market valuation movements.

As disclosed in the statement of financial position, the Company made a capital gains tax provision as at 31 March 2024 of £188,238 in respect of unrealised gains on investments held. Please refer to Note 9 for further details related to this provision.

The Company’s investments are denominated in the currency that the underlying investment is traded. However, the Company’s shares are issued in sterling and the majority of its investors are UK based. The Company’s expenses and dividends are also paid in sterling. Therefore, the financial statements are presented in sterling, which is the Company’s functional currency. All financial information has been rounded to the nearest thousand pounds.

New and revised standard and interpretations

New and revised IFRSs in issue but not yet effective

A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning on or after 31 March 2024. None of these are expected to have a material impact on the measurement of the amounts recognised in the financial statements of the Company.

Basis of measurement

The financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss, which are measured at fair value.

3. Accounting policies

(a) Investments

Listed investments

Changes in the fair value of investments held at fair value through profit or loss and gains or losses on disposal are included in the capital column of the Statement of Comprehensive Income within “gains on investments”.

Investments are derecognised on the trade date of their disposal, which is the point where the Company transfers substantially all the risks and rewards of the ownership of the financial asset.

Transaction costs directly attributable to the acquisition of investments at fair value through profit or loss are recognised under gains/(losses) on investments.

(b) Foreign currency

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At the date of each Statement of Financial Position, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the Statement of Comprehensive Income within the revenue or capital column depending on the nature of the underlying item. Foreign exchange movements on investments are included in the Statement of Comprehensive Income within “losses on currency” movements.

(c) Income from investments

Dividend income from shares is accounted for on the basis of ex-dividend dates. Overseas income is grossed up at the appropriate rate of tax.

Special dividends are assessed on their individual merits and may be credited to the Statement of Comprehensive Income as a capital item if considered to be closely linked to reconstructions of the investee company or other capital transactions. All other investment income is credited to the Statement of Comprehensive Income as a revenue item.

(d) Capital reserves

Profits or losses arising on the sale of investments and changes in fair value arising upon the revaluation of investments are credited or charged to the capital column of the Statement of Comprehensive Income and allocated to the capital reserve.

Company’s redemption facility is subject to approval by the Board and as such the redemption facility does not represent a contractual obligation on the Company and the shares are accordingly classified as equity.

3. Accounting policies (continued)

(e) Expenses

All expenses are accounted for on an accrual’s basis. Expenses are recognised through the Statement of Comprehensive Income as revenue items except that the Alpha Fee, if any, is payable directly by reference to the capital performance of the Company as per the Investment Management Agreement and are therefore charged to the Statement of Comprehensive Income as a capital item. No other management fees are payable.

(f) Cash and cash equivalents

Cash comprises cash at hand and demand deposits. For purposes of the statement of cash flows, cash equivalents, including bank overdrafts, are short-term, highly liquid investments that are readily convertible to known amounts of cash, are subject to insignificant risks of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

(g) Taxation

Irrecoverable taxation on dividends is recognised on an accrual basis in the Statement of Comprehensive Income.

The Company is approved as an Investment Trust Company (ITC) under sections 1158 and 1159 of the Corporation Taxes Act 2010 and Part 2 Chapter 1 Statutory Instrument 2011/2999 for accounting periods commencing on or after 25 May 2018.

The approval is subject to the Company continuing to meet the eligibility conditions of the Corporations Tax Act 2010 and the Statutory Instrument 2011/2999. The Company intends to ensure that it complies with the ITC regulations on an ongoing basis and regularly monitors the conditions required to maintain ITC status.

Current tax is the expected tax payable on any taxable income for the period, using tax rates enacted or substantively enacted at the end of the relevant period. The current tax rate is 25%.

The tax charges on Indian capital gains are shown in the Statement of Comprehensive Income, recognised on an accrual basis. The Company is not subject to UK capital gains tax.

The tax charges on Indian capital gains taxes are shown in the Statement of Comprehensive Income, recognised on an accrual basis.

Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment trusts which have approval as such under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.

(h) Adoption of new IFRS standards

A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning on or after 1 January 2024. None of these are expected to have a material impact on the measurement of the amounts recognised in the financial statements of the Company.

4. Investments held at fair value through profit or loss

(a) Investments held at fair value through profit or loss

(b) Movements in valuation

(c) Gains on investments

Under IFRS 13 ‘Fair Value Measurement’, an entity is required to classify investments using a fair value hierarchy that reflects the significance of the inputs used in making the measurement decision.

4. Investments held at fair value through profit or loss (continued)

The following shows the analysis of financial assets recognised at fair value based on:

Level 1

Quoted prices (unadjusted) in active markets 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 for the asset or liability, either directly or indirectly.

Level 3

Unobservable inputs for the asset or liability.

The classification of the Company’s investments held at fair value is detailed in the table below:

5. Income

6. Other payables

7. Alpha Fee provision

The Investment Manager does not receive a fixed management fee in respect of its portfolio management services to the Company. The Investment Manager will become entitled to a Alpha Fee subject to the Company delivering excess returns versus the MSCI Emerging Markets Net Total Return GBP Index (sterling). The Alpha Fee will be measured over periods of three years (Performance Period), with the first period ending (approximately three years from 3 May 2023) on 31 March 2026. The Alpha Fee in any Performance Period shall be capped at 12% of the time weighted average adjusted net assets during the relevant Performance Period.

The Alpha Fee is calculated at a rate of 30% of the excess returns between adjusted NAV per share on the last day of the performance period and the MSCI Emerging Markets Net Total Return GBP Index (sterling) over the performance period, adjusted for the weighted average number of Ordinary Shares in issue during the performance period. The Alpha Fee in respect of each Performance Period will be paid 100% in shares of the Company at the end of the three year period, 50% of which are subject to a further three year lock-up period.

An Alpha Fee was able to be accrued following the investment of at least 70% of the Company’s net IPO proceeds, which occurred on 12 May 2023. Further detail on the Alpha Fee can be found in the Prospectus. As at 31 March 2024, there was a £384,732 provision for the Alpha Fee liability to the Investment Manager.

8. Expenses

Expenses include VAT where applicable

9. Taxation

Analysis of tax charge for the period:

A deferred tax provision on Indian capital gains is calculated based on the long term or short nature of the investments and the applicable tax rate at the period end. The short-term tax rate is 15% and the long-term tax rate is 10%.

Factors affecting the tax charge for the year:

The effective UK corporation tax rate for the year is 25%. Reconciliation below:

The Company is liable to Indian capital gains tax under Section 115 AD of the Indian Income Tax Act 1961. A tax provision on Indian capital gains is calculated based on the long term (securities held more than one year) or short term (securities held less than one year) nature of the investments and the applicable tax rate at the period end. The short-term tax rate is 15% and the long-term tax rate is 10%, given the Company has been in operation for less than a year the short term rate of 15% has been applied. The provision is raised based on both realised and unrealised capital gains on the Indian investments held by the Company. As at 31 March 2024 the Indian securities held had a market value of £8,065,383. If the market value of the Indian securities had increased or decreased by 10%, this would have led to an estimated increase or decrease of the year end tax provision by £16,308 in the provision. A provision of £188,200 was raised at the end of the accounting period to account for this. It is difficult to predict the actual realised gain/unrealised gain in the future as its calculated on an individual investment level and it is difficult to estimate the disposal date of individual investment which is further dependent on various market factors affecting the investment decision.

Investment Trust Companies which have been approved by HM Revenue & Customs are exempt from UK corporation tax on their capital gains. Due to the Company’s status as an approved Investment Trust Company, and the intention to continue meeting the conditions required to maintain that approval for the foreseeable future, the Company has not provided for deferred tax in respect of any gains or losses arising on the revaluation of its investments. Taxes are based on the UK Corporate tax rates which existed as of the balance sheet date which was 25%.

The Company has an unrecognised deferred UK Corporation tax asset of £297,000 based on the prospective UK corporation tax rate of 25%. This asset has accumulated because deductible expenses exceeded taxable income for the period ended 31 March 2024. No asset has been recognised in the accounts because, given the composition of the Company’s portfolio, it is unlikely that this asset will be utilised in the foreseeable future.

10. Earnings per Ordinary Share

Earnings per Ordinary Share is based on the profit for the period of £3,680,541 attributable to the weighted average number of Ordinary Shares in issue during the period ended 31 March 2024 of 31,314,383. Revenue and capital profits are £(788,252) and £4,468,793 respectively.

11. Dividend

The Company’s objective is to provide shareholder returns through capital growth with income being a secondary consideration. It should not be expected that the Company will pay a significant annual dividend, but the Board intends to declare such annual dividends as are necessary to maintain the Company’s UK investment trust status. The Board is proposing that no dividend be paid in respect of the year ended 31 March 2024 in accordance with the Company’s Dividend policy.

12. Share capital

Ordinary Shares

On incorporation, 15 March 2023, the issued share capital of the Company was 1 ordinary share of 1p and 50,000 Management Shares of nominal value £1.00 each. On 3 May 2023, 30,532,278 ordinary shares were allotted and issued to shareholders as part of the placing and offer for subscription in accordance with the Company’s prospectus dated 18 April 2023. Following admission of the Company’s Ordinary Shares to trading on the London Stock Exchange, the Directors applied to the Court to cancel the amount standing to the credit of the share premium account of the Company. On 12 September 2023, the share premium amount of £29,694,678 was cancelled and credited to the Capital reduction reserve.

From 5 October to 5 December 2023, a total of 1,663,530 Ordinary shares were issued on the London Stock Exchange utilising the Block Listing.

Redemption

The Company has a redemption facility through which shareholders will be entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis. The objective of the redemption facility is to assist with the limiting of any discount at which the Company’s Ordinary Shares may trade from time to time. The first Redemption Point for the Ordinary Shares is 29 December 2023. The Directors have absolute discretion to operate the annual redemption facility on any given Redemption Point. On 15 January 2024, 14,014 shares were redeemed.

Reserves

The nature and purpose of each of the reserves included within equity as at 31 March 2024 are as follows:

• Share premium reserve: represents the surplus of the gross proceeds of share issues over the nominal value of the shares, net of the direct costs of equity issues and net of conversion amount.

• Capital reduction reserve: represents a distributable reserve created following a Court approved reduction in capital. This reserve is distributable and maybe used, where the Board considers it appropriate, by the Company for the purpose of paying dividends to Shareholders.

• Revenue reserve: represents a distributable reserve of cumulative net gains and losses recognised in the Revenue account of the Statement of Comprehensive Income.

• Capital Reserves: represents a non-distributable reserve of cumulative net capital gains and losses recognised in the Statement of Comprehensive Income

The only movements in these reserves during the period are disclosed in the Statement of Changes in Equity.

Management shares

In addition to the above, on incorporation the Company issued 50,000 Management Shares of nominal value of £1.00 each.

The holder of the Management Shares undertook to pay or procure payment of one quarter of the nominal value of each Management share on or before the fifth anniversary of the date of issue of the Management Shares. The Management Shares are held by an associate of the Investment Manager.

The Management Shares do not carry a right to attend or vote at general meetings of the Company unless no other shares are in issue at that time. The Management Shares have been treated as equity in accordance with IFRS.

13. Capital Reduction distributable reserve

As indicated in the Company’s prospectus dated 18 April 2023, following admission of the Company’s Ordinary Shares to trading on the LSE, the Directors applied to the Court and obtained a judgement on 12 September 2023 to cancel the amount standing to the credit of the share premium account of the Company. The amount of the share premium account cancelled and credited to a Capital Reduction distributable reserve was £29,694,678. This reserve may also be used to fund dividend/distribution payments.

14. Net asset value (“NAV”) per Ordinary Share

Net assets per ordinary share as at 31 March 2024 of 109.86p is calculated based on £35,408,685 of net assets of the Company attributable to the 32,181,795 Ordinary Shares in issue as at 31 March 2024.

15. Financial instruments and capital disclosures

(i) Market risks

The Company is subject to a number of market risks in relation to economic conditions in the emerging markets. Further detail on these risks and the management of these risks is included in the Strategic report.

The Company’s financial assets and liabilities comprised:

Market price risk sensitivity

The effect on the portfolio of a 10.0% increase or decrease in market prices would have resulted in an increase or decrease of £3,367,803 in the investments held at fair value through profit or loss at the period end, which is equivalent to 9.51% of the net assets attributable to equity holders. This analysis assumes that all other variables remain constant.

Management of liquidity risks

The Company has a diversified portfolio which is readily realisable. The liquidity of the portfolio is reviewed regularly by the Investment Manager and the Board.

(iii) Currency risks

Although the Company’s performance is measured in sterling, a high proportion of the Company’s assets are denominated in Indian rupees and various other currencies. Change in the exchange rate between sterling and respective currencies may lead to a depreciation of the value of the Company’s assets as expressed in sterling and may reduce the returns to the Company from its investments.

Currency sensitivity

The below table shows the foreign currency profile of the Company.

Foreign currency risk profile

15. Financial instruments and capital disclosures (continued)

Based on the financial assets and liabilities at 31 March 2024, and with all other variables remaining constant, if the respective currencies had weakened/strengthened against the Great British Pound by 10%, the impact on the Company’s net assets at 31 March 2024 would have been an increase/(decrease) in fair value as follows:

Management of currency risks

The Company’s Investment Manager monitors the currency risk of the Company’s portfolio on a regular basis. Foreign currency exposure is regularly reported to the Board by the Investment Manager.

The Board does not intend to use hedge currency risk using any sort of foreign currency transactions, forward transactions or derivative instruments.

(iv) Credit risks

Credit risk is the risk that the issuer of a financial instrument will fail to fulfil an obligation or commitment that it has entered into with the Company.

Cash and securities are held by the custodian.

Management of credit risks

The Company has appointed The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) as its custodian bank and Barclays the provider of the cash account. The credit rating of HSBC and Barclays was reviewed at the time of appointment and is reviewed on a regular basis by the Investment Manager and the Board.

The Investment Manager monitors the Company’s exposure to its counterparties on a regular basis and trades in equities are performed on a delivery versus payment basis. Impairment assessment based on an expected credit loss model is not considered material to the Company.

At 31 March 2024, HSBC held 33,678,027 GBP in respect of quoted investments. A total cash balance of 2,393,154 GBP was held by the Company in the HSBC and Barclays accounts.

(v) Capital management policies and procedures

The Company considers its capital to consist of its share capital of Ordinary Shares of 1p each, Management Shares of £1 each, and reserves totalling £33,360,574.

The Company is not subject to any externally imposed capital requirements.

The Investment Manager and the Company’s Broker monitor the demand for the Company’s shares and the Directors review the position at Board meetings.

16. Related party transactions

The Alpha Fee payable to the Investment Manager is disclosed in Note 7.

White Oak Capital Partners provides investment advisory services to the Investment Manager and no fees are paid to them from the Company.

Since commencement of operations on 3 May 2023 fees were payable at an annual rate of £35,000 to the Chairman, £30,000 to the Chair of the Audit Committee, and £27,500 to the other Directors.

The Directors had the following shareholdings in the Company, all of which are beneficially owned.

17. Post balance sheet events

The NAV per share of the Company has increased by 2.75% from 28 March 2024 (last reported NAV of financial year) to 11 June 2024 (latest available reported NAV).

On 7 May 2024, the Company announced a proposed transaction to effect a combination with Asia Dragon Trust plc. Following the announcement by Asia Dragon Trust plc on 21 May 2024 that it was initiating a full strategic review of its future, the Company announced that it intended to participate in that process. Further updates will be announced by the Company as appropriate in due course.

As part of the Company’s share issuance programme by way of its block listing facility, a further 650,000 shares were issued post period end to 7 June 2024 raising additional funds of £741,700.

OTHER INFORMATION

Financial calendar