Fidelity Emerging Markets : Half Yearly Financial Report

FIDELITY EMERGING MARKETS LIMITED

Half Year Report for the six months ended 31 December 2023

We speak the language of opportunity

• wherever it emerges

Ithuba Elingavinjelwe

FIDELITY EMERGING MARKETS LIMITED

Whether it's in South African mining, Indian financial services or Chinese infrastructure, we know where to find opportunities hidden within emerging markets.

Fidelity Emerging Markets Limited uncovers great companies through our experienced global team, backed by what we believe are unrivalled on-the- ground research capabilities. Meaning you can make the most of our extensive expertise, without learning a whole new language.

The value of investments can go down as well as up, so you may get back less than you invest. Overseas investments are subject to currency fluctuations.

Investments in emerging markets can be more volatile than other more developed markets. The Company uses financial derivative instruments for investment purposes, which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations.

To find out more, visit fidelity.co.uk/emergingmarkets, scan the QR code or speak to your adviser.

The latest annual reports, key information document (KID) and factsheets can be obtained from our website at www.fidelity.co.uk/its or by calling 0800 41 41 10. The full prospectus can also be obtained from Fidelity. The Alternative Investment Fund Manager (AIFM) of Fidelity Investment Trusts is FIL Investment Services (UK) Limited. Issued by Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM0123/381013/SSO/0623

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Half Year Report 2023 | Fidelity Emerging Markets Limited

Contents

Directors' Reports

		Company Overview	02
		At a Glance	03
		Financial Highlights	04
		Chairman's Statement	05
		Investment Manager's Half Year Review	08
		Spotlight on the Top 5 Holdings	15
		Twenty Largest Investments	17
		Interim Management Report	19
Chairman's Statement
Read more on pages 5 to 7
	Financial Statements (unaudited)
		Statement of Comprehensive Income	22
		Statement of Changes in Equity	24
		Statement of Financial Position	25
		Statement of Cash Flows	26
		Notes to the Financial Statements	27

DIRECTORS' REPORTS

FINANCIAL STATEMENTS

Information for Shareholders

						Additional Information	38
						Glossary of Terms
Investment Manager's Half Year Review		(including Alternative Performance Measures) 39
Read more on pages 8 to 14
Net Asset Value per Share		Share Price
as at 31 December					as at 31 December
2023		694.49p				2023		616.10p
2022		683.96p				2022		602.00p
2021			919.08p			2021			821.00p

INFORMATION FOR SHAREHOLDERS

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Fidelity Emerging Markets Limited | Half Year Report 2023

Company Overview

Investment Objective

The investment objective of Fidelity Emerging Markets Limited (the 'Company' or 'FEML') is to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging market companies, both listed and unlisted.

Investment Approach

Fidelity International believes that many emerging market companies can sustain high levels of economic growth for years to come, driven by attractive demographic profiles, immature markets, an abundance of untapped natural resources, and generally low levels of indebtedness. However, whilst these positive attributes provide a fertile environment for companies to grow their earnings, it is critical to ensure that each company we invest in can generate superior and sustainable returns on assets that permit them to fund the growth of their business, withstand competitive pressures and achieve attractive returns for minority shareholders. With this in mind, Fidelity International defines high-calibre companies as those that exhibit: quality, consistency of returns, and are available at a reasonable price.

Structure

FEML is a Guernsey based Authorised Closed-Ended Investment Scheme with the ability to issue additional shares.

The Company's shares are listed on the premium segment of the Official List of the UK Listing Authority, traded on the London Stock Exchange and are included in the FTSE 250. The total number of Participating Preference Shares in issue is 91,100,066 which includes 637,175 shares held in treasury

as at 31 December 2023 (30 June 2023: 91,100,066 with nil shares held in treasury).

Manager and Investment Manager Until 4 October 2021, the Company's Investment Manager was Genesis Investment Management LLP ('GIML' or 'Genesis').

With effect from 4 October 2021, FIL Investment Services (UK) Limited was appointed as

the Alternative Investment Fund Manager of the Company ('the Manager'), with the investment management of the Company to be undertaken by FIL Investments International ('Fidelity International', 'the Investment Manager'), collectively 'Fidelity'.

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Half Year Report 2023 | Fidelity Emerging Markets Limited

At a Glance

for the six months ended 31 December 2023 (Total Return in GBP)

Share Price

Total Return1,2

+7.5%

MSCI Emerging

Markets Index1,3

+4.4%

Source: Fidelity.

Net Asset Value per

Participating Preference

Share Total Return1,2

+3.2%

Active Share2

+122.3%

DIRECTORS' REPORTS

FINANCIAL STATEMENTS

1. Includes reinvested income.
2. Alternative Performance Measure - refer to Glossary of Terms on pages 39 to 43.
3. The Company's Benchmark Index.

As at 31 December 2023

Equity Shareholders' Funds

£628.3m

Market Capitalisation

£557.3m

Capital Structure

Number of Participating Preference Shares in issue excluding held in Treasury

90,462,891

Summary of the key aspects of the Investment Policy

The Company aims to achieve long term growth by primarily investing in securities and financial instruments, providing exposure to emerging markets companies.

The Investment Manager invests at least 80% in companies with head offices, listings, assets, operations, income, or revenues predominantly in or derived from emerging markets.

A diversified portfolio of at least 75 holdings in companies listed or operating in at least 15 countries is maintained.

The Company may also invest in other transferable securities, investment companies, money market instruments, unlisted shares, cash and deposits. It is able to use derivatives for efficient portfolio management, to gain additional market exposure (gearing), to seek a positive return from falling asset prices, and for other investment purposes.

INFORMATION FOR SHAREHOLDERS

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Fidelity Emerging Markets Limited | Half Year Report 2023

Financial Highlights

	31 December	30 June
	2023	2023
Assets
USD
Gross Asset Exposure1	$1,220.2m	$1,185.0m
Equity Shareholders' Funds	$800.9m	$796.7m
NAV per Participating Preference Share2	$8.85	$8.75
Gross Gearing2,3	52.3%	48.7%
Net Gearing2,4	(1.7)%	(3.9)%
GBP
Gross Asset Exposure1,5	£957.2m	£932.1m
Equity Shareholders' Funds5	£628.3m	£626.7m
NAV per Participating Preference Share2,5	£6.94	£6.88
Participating Preference Share Price and Discount Data
Participating Preference Share Price at the period end	£6.16	£5.88
Discount to NAV per Participating Preference Share at period end2	11.29%	14.61%
Number of Participating Preference Shares in issue	90,462,891	91,100,066
Earning for the six months ended 31 December	2023	2022
Revenue Earnings per Participating Preference Share6	$0.06	$0.09
Capital Earnings/(Loss) per Participating Preference Share6	$0.23	($0.45)
Total Earnings/(Loss) per Participating Preference Share6	$0.29	($0.36)
Ongoing charges ratio2	0.82%	0.84%

1. The value of the portfolio exposed to market price movements.
2. Alternative Performance Measures. See Glossary of Terms on pages 39 to 43.
3. Gross Asset Exposure less Equity Shareholders' Funds expressed as a percentage of Equity Shareholders' Funds.
4. Net Market Exposure less Equity Shareholders' Funds expressed as a percentage of Equity Shareholders' Funds.
5. The conversion from USD to GBP is based on exchange rates prevailing at the reporting dates.
6. Calculated based on weighted average number of participating preference shares in issue during the period.

Annualised Total Returns GBP to 31 December 2023 (%)

FEML Share Price FEML NAV (net of annual fees) MSCI Emerging Markets Index

	+7.5
		+4.4	+4.9							+5.7
						+3.9
	+3.2	+3.8	+3.6		+1.3	+1.1	+3.5	+3.5
	-3.8					-2.8
					-9.7	-8.8
	-11.0
-11.7

Since Tenure	6 months1	1 Year	3 Years	5 Years	10 Years
(4 October 2021)

Source: JPMorgan and Datastream. 1 Six months figure not annualised.

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Half Year Report 2023 | Fidelity Emerging Markets Limited

Chairman's Statement

Heather Manners, Chairman

DIRECTORS' REPORTS

I am pleased to present your Company's half-year report, covering a period in which portfolio performance has been encouraging with the share price total return increasing by 7.5% in spite of continued geopolitical volatility.

Overview

In the six months under review, China - the largest emerging market, yet an underweight in the Company's portfolio compared with the benchmark - continued to struggle amid a slower-than-expectedpost-Covid reopening and an ongoing debt crisis in the property market. Conversely, less prominent areas such as South East Asia and Latin America have been reaping the benefits of the trend towards developed market companies relocating manufacturing capacity away from China, while an uptick in the semiconductor cycle has been positive for leading chipmakers in Taiwan. The Company's retained holdings in Russian entities have been written down to $Nil in the balance sheet. For further information please refer to the Portfolio Manager's review and to Note 10 of the financial statements on page 36.

Against this backdrop, net asset value ('NAV') total return performance for the six months ended 31 December 2023 was positive, at 3.2%. While this was slightly behind the 4.4% sterling return of the Company's benchmark, the MSCI Emerging Markets Total Return Index ('the Index'), the share price total return per Participating Preference Share notably outperformed the Index, rising by 7.5%. This is particularly pleasing not just because it suggests an improvement in sentiment towards emerging markets as an asset class, but also as it underlines the hard work of your Board and Fidelity's efforts to promote the Company's enhanced investment proposition and narrow the share price discount to NAV.

Fundamental to this is Fidelity's unique investment process. The managers' ability to hold short as well as long positions - investing in well financed, well managed businesses that can drive growth, while also making money from identifying those at risk of disruption - is a key differentiating factor that is increasingly feeding into positive performance for the Company.

FINANCIAL STATEMENTS

INFORMATION FOR SHAREHOLDERS

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Fidelity Emerging Markets Limited | Half Year Report 2023

Chairman's Statement continued

While we are yet to reach a three-year track record under the management of Fidelity's Nick Price and Chris Tennant (appointed in September 2021), performance for the 12 months ended 31 December 2023 was ahead of the benchmark on both a share price and a NAV total return basis. As well as having a full investment toolkit, your Company also benefits from Fidelity's large and experienced team of portfolio managers and analysts, the majority of whom are based in the markets they cover, giving them an invaluable advantage in terms of identifying new investment opportunities.

At Board level, your Directors and I have continued to focus on building awareness of the strength of Fidelity's approach, as well as keeping costs in check (our ongoing charges ratio is the lowest in the AIC Global Emerging Markets sector, at 0.82%) and taking deliberate action to limit the discount to NAV. During

the period under consideration, the discount narrowed from 14.6% to 11.3%. While a 3.3% narrowing is not inconsiderable, the discount remains wider than we would like. We have the authority to repurchase up to 14.99% of the issued share capital each year in order to manage the discount, and in November 2023 we launched a buyback programme under which 637,175 shares (c. 0.7% of

the total) were bought back into treasury between 13 November and 31 December. Since then, a further 458,056 shares have been repurchased, bringing the total bought back to date under the current programme to 1,095,231 (c. 1.2%). In addition, we have announced our intention to implement a tender offer for up to 15% of the issued share

capital, expected to be at a 2% discount to the prevailing NAV. We expect the tender offer to conclude in the first quarter of 2024.

2023 AGM and final dividend

The Company held its Annual General Meeting ('AGM') on 7 December 2023, and I appreciate the shareholders' support and thank you for your approval of all resolutions presented at the meeting. A final dividend of $0.19 (15.27p) per Participating Preference Share (2022: $0.16) was approved by shareholders and paid on 15 December 2023.

Shareholders should note that the Board will review the final dividend payment later in the year based on dividend receipts from the companies held in the portfolio.

Board changes

Following the December 2023 AGM, Julian Healy, Chairman of the Audit Committee, announced his intention to step down from the Board for personal reasons. We wish him well and thank him for his significant contribution to the Company. On 17 January we announced the appointment to the Board of Mark Little, who replaces Julian both as a Director and as Chairman of the Audit and Risk Committee with immediate effect. Mark is a Chartered Accountant with extensive financial services experience in fund management, research and private banking, and has a strong understanding of compliance and regulation in the modern financial services world, as well as a successful track record as an investment company director. He will stand for election at the next AGM in December 2024.

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Half Year Report 2023 | Fidelity Emerging Markets Limited

Outlook

Although developed markets (particularly the US, driven by the 'magnificent seven' major technology stocks) once again performed better than emerging markets in 2023, we continue to believe there are compelling reasons to consider a long-term allocation to emerging markets. In contrast with many Western economies, emerging nations largely did not undertake massive fiscal support programmes during the Covid pandemic, and as such they have not been subject to the same inflationary pressures as restrictions have eased. Away from China, and as noted above, the trend towards deglobalisation and the relocation of manufacturing capacity is boosting markets from India to Vietnam to Mexico. All of these factors are positive for potential investment returns from emerging markets, with the added bonus that (with the notable exception of some areas of the Indian stock market) valuations generally look very favourable compared with developed markets. Furthermore, the global push towards a lower-carbon future provides a tailwind for commodity prices, which should benefit developing nations across the EMEA and Latin America regions which are rich in natural resources.

With an improving trend of performance, solid action to manage the discount, continued efforts to raise your Company's profile and decent prospects for investment returns in an arena that boasts significant hidden value, your Board and I are hopeful that the remainder of the financial year will build further on the progress the Company has achieved over the last year.

Heather Manners

Chairman

11 March 2024

DIRECTORS' REPORTS

FINANCIAL STATEMENTS

INFORMATION FOR SHAREHOLDERS

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Fidelity Emerging Markets Limited | Half Year Report 2023

Investment Manager's Half Year Review

Macroeconomic Review

Emerging markets rose over the second half of 2023, closing out the first calendar year of positive performance for the index since 2020. Sentiment oscillated over the period as emerging markets continued to grapple with tighter monetary policy and continued weakness in China. Markets declined from the end of the summer, with October another weak month as rising government bond yields dented risk appetite. The market then rebounded significantly in November as the dollar pulled back and bond yields came down, and it appeared that the Fed was reaching the end of its rate tightening cycle, with this rally continuing into December.

Performance across regions was mixed. Latin America rallied significantly as interest rates came down, most notably in Brazil. Emerging Asia was weaker, largely due to the underwhelming recovery in China, although this was somewhat offset by strength in India as the country benefited from higher spending in advance of an election year and improving consumer confidence. Several emerging European markets also rallied following a market-friendly election result in Poland and interest-rate cuts both there and in Hungary.

We also saw dispersion between sectors. Technology stocks continued to perform well, enjoying the tailwind from the improved outlook for AI-related demand, while energy stocks also rallied in a relatively high oil price environment. Returns across other sectors were more varied, with the communication services and real estate sectors impacted by weakness in China. The US dollar was broadly flat, rallying through the late summer, and then falling back as the outlook for interest-rate rises moderated.

Portfolio performance for the six months to 31 December 2023

Over the six-month period ending 31 December 2023, the net asset value ("NAV") total return of Fidelity Emerging Markets Limited was 3.2% (net of fees, in GBP terms), while the share price rose by 7.5%. This was relative to a 4.4% increase for the benchmark index (all figures are stated on a total return basis, in GBP terms).

The portfolio's small underperformance relative to the index over the last six months of the year followed a strong first half of the year, which meant the portfolio outperformed the index over the calendar year in aggregate. While the long book detracted overall, the short book performed well, and added over 100bps to relative returns over the six-month period.

Weakness in the second half of the year was largely due to the continued derating of the high-quality Chinese consumer names we hold. This was despite our underweight exposure to China (which we view as China and Hong Kong combined). Although this underweight positioning helped, our positioning in the country detracted overall as many of the Hong Kong listed names that we hold sold off much more than the broader market as foreign investors looked to exit the region.

There was marked dispersion among consumer companies, however, and some of the strong performers over the period included consumer discretionary names outside of China, for example in India and Poland. Consumer names accounted for half of both the top ten contributors and detractors, emphasising just how much variation there was within the sector. The portfolio's underweight exposure to the communication services sector also helped us as the industry came under pressure from new regulations on Chinese gaming companies. There was also a contribution from Russia

as we took steps to reduce exposure when liquidity was offered up (see page 14).