Annual Results for the year ended 30 June 2021

RNS Number : 7534Q

Fidelity Emerging Markets Limited

29 October 2021

 

Fidelity Emerging Markets Limited (the 'Company' or 'FEML')

Legal Entity Identifier: 213800HWWQPUJ4K1GS84

Annual Results for the year ended 30 June 2021

The Directors of Fidelity Emerging Markets Limited announce the Company's results for the year ended 30 June 2021.

Financial Highlights and Performance

Total Return in GBP for the year to 30 June 2021

30.0%	24.8%	26.4%
Share Price Total Return(1)	Net asset value per Participating Preference Share Total Return(1)	MSCI EM (TR) Index(2)

	30 June 2021	30 June 2020	% change
USD
Net Assets(3)	$1,699.1m	$1,235.8m	37.5
Net Asset Value per Participating Preference Share(3)	$13.99	$10.17	37.6
Dividend per Participating Preference Share(3)(4)	$0.18	$0.17	5.88
GBP
Net Assets(5)	£1,230.0m	£1,000.1m	23.0
Net Asset Value per Participating Preference Share(5)	£10.13	£8.23	23.1
Share Price	£9.19	£7.18	28.0
Discount of Share Price to Net Asset Value per Participating Preference Share(1)	9.3%	12.8%
Number of Participating Preference Shares	121,466,754	121,466,754
Ongoing charges ratio(1)	1.03%	1.07%
Countries represented in portfolio	29	30
Number of holdings	95	96

(1) Alternative Performance Measures

(2) MSCI Emerging Markets (Total Return) Index.

(3) IFRS measure.

(4) A dividend of $0.18 per Participating Preference Share on the Company's profits for the year ended 30 June 2021 has been proposed.

(5) Translation of the USD measures using the GBP/USD exchange rate as at 30 June 2021 of 1.3814 (2020: 1.2356).

Past performance is no guarantee of future performance.

Chairman's Statement

I have pleasure in presenting the thirty-second annual report of the Company, for the year ended 30 June 2021.

Overview

During the twelve months to 30 June 2021, the Company's net asset value ('NAV') increased by 23.1% in sterling total return terms to £10.13 per Participating Preference Share. This compares to an increase of 26.4% in the Company's benchmark, the MSCI Emerging Markets Total Return Index (the 'Index'). The Company's share price rose by 28.0% to £9.19 over the same period.

Emerging markets outperformed developed markets during the period under review - which saw a continuing recovery from the pandemic-related falls of the previous year. The market rally was driven by renewed risk appetite with each new vaccine breakthrough and the implementation of vaccination programs, which although mostly led by developed economies, provided a much-needed boost in consumer demand and economic activity.

In the second half of 2020, two areas dominated. First, a recovery in some of the countries which Covid had hit hardest. Second, continued strength in semiconductor companies, particularly the large-cap behemoths TSMC and Samsung Electronics; two stocks which together contributed a quarter of the Index return.

During the first half of 2021 the story somewhat reversed. The Company's overweight positions in consumer-facing stocks led to a lag in performance when markets were led by a recovery in technology and commodity stocks, where it was underweight. Concerns about US Federal Reserve tapering dampened investor appetite for emerging markets although in the latter part of the period, U.S. President Joe Biden's infrastructure plan once again increased risk appetite and commodity heavy markets rallied, spurred on by rising oil prices.

Change of Manager and Investment Manager

Mindful of the interests of the shareholders as a whole, the Board decided to undertake an extensive review of the Company's investment management arrangements. Accordingly, the Company's brokers were instructed to invite tenders for the investment management of the Company. Following an initial review, a number of strong candidates were invited to present to the Board. On 1 July 2021, the Board announced that it had selected FIL Investments Services (UK) Limited as the Alternative Investment Fund Manager (`the Manager') of the Company, with the investment management of the Company to be undertaken by FIL Investments International (the `Investment Manager', `Fidelity International'), collectively 'Fidelity'.

It was clear to the Board that Fidelity had both depth of expertise in emerging markets and in the management of investment trusts. Fidelity has a proven track record of managing and growing investment trusts and taking advantage of their structure. In addition, the Company stands to benefit considerably from Fidelity's brand, and its ability to attract a larger range of shareholders with its significant and broad ranging marketing resource.

As detailed in the Circular to shareholders dated 6 September 2021, the Board believes that the appointment of Fidelity International as Investment Manager will bring the following benefits to shareholders:

· Access to Fidelity's top decile performing emerging markets strategy: Fidelity International benefits from global coverage which is complemented with local expertise. Also, ESG considerations are fully integrated in all aspects of its global research analysis.

· Significant reduction in management fee: a reduction from the existing 0.90 percent. of net asset value to 0.60 per cent. of net asset value (per annum).

· Nine-month fee waiver : a significant cost contribution from Fidelity International to minimise the cost impact on shareholders as a result of the charge of investment management arrangements.

· Brand recognition and increased marketing focus : access to an award-winning investment trust manager with extensive in-house marketing and distribution capabilities led by a dedicated marketing team.

FIL Investments Services (UK) Limited and FIL Investments International were formally appointed as Manager and Investment Manager of the Company with effect from 4 October 2021.

Change of Investment Policy

In advance of Fidelity's formal appointment, shareholders were requested to approve a proposal to change the investment policy of the Company. The change of investment policy was duly approved by shareholders

at the extraordinary general meeting ('EGM') held on 1 October 2021.

Following shareholder approval, the Company's portfolio is being reorganised to permit the implementation of Fidelity's investment policy.

At the heart of Fidelity's strategy is a belief that it can deliver outsized returns in emerging markets through stock selection, driven by fundamental views. Fidelity combines skill, resource and discipline with the aim of generating enhanced risk-adjusted returns.

As set out in the Circular and in the proposals to the Board and shareholders, Fidelity uses enhanced investment powers through the addition of both long and short derivatives. Buying long derivative positions aims to increase exposure to those companies where the team has a high conviction investment view ('alpha') while short derivative positions target stocks expected to fall in value relative to the market, thereby carefully managing risk exposure to the market overall ('beta').

By design, the overall exposure to the market is kept relatively close to 100%. The portfolio construction however allows the manager to take geared bets in individual positions offsetting these with shorts as described above. It should be noted that the use of derivatives does introduce gearing that could result in situations where returns may rise or fall more than they would have done otherwise.

Completing the changes to the portfolio will take several weeks, and shareholders will be kept informed on the completion of this process. More information about the approach can be found on the Company's new website www.fidelity.co.uk/emergingmarkets , updated frequently and where the latest share price, discount and portfolio may be found.

Change of name

As part of the change of investment management arrangements, shareholders were requested to approve a proposal to change the name of the Company to Fidelity Emerging Markets Limited. The change of name was duly approved by shareholders at the EGM held on 1 October 2021.

Discount Control

In addition to the above changes, the Board and Fidelity have committed to ongoing discount management controls.

Tender Offer

In response to shareholder consultation during 2018 on the level of the Company's share price discount to NAV, the Board announced that a potential tender offer of up to 25% of the Company's shares would be implemented in 2021, if the Company's NAV Total Return over the five years ending 30 June 2021 did not exceed its benchmark Index.

As the Company did not produce the necessary performance to outperform its benchmark Index, the Board announced that a tender offer for up to 25% of the Company's shares in issue (excluding any shares held in treasury) ('Tender Offer') will be implemented subject to shareholder approval. The tender price was set at a 2% discount to the prevailing NAV per share. The Tender Offer was subsequently approved by shareholders at the EGM held on 1 October 2021.

The aforementioned Tender Offer had been put in place by the Board to enable shareholders wishing to realise part, or potentially all, of their investment in the Company the opportunity to do so.

Following completion of the Tender Offer on 22 October 2021, a total of 30,366,688 Participating Preference Shares (25% of the Company's issued share capital) were repurchased by the Company for cancellation.

As announced on 1 July 2021, if the Company's NAV Total Return over the five years ending on 30 September 2026 does not exceed the MSCI Emerging Markets Index over that period the Company will make a further tender offer in respect of up to 25% of the shares then in issue (excluding any shares held in treasury).

Continuation vote

The Company has also committed to hold a continuation vote in 2026 and every five years thereafter.

Board composition and succession planning

The Board is mindful of corporate governance best practice and recognises the need to refresh its composition from time to time.

I will have served on the Board for nine years in November 2021, however, following the appointment of Fidelity, the Board, on the recommendation of the Nomination Committee, requested that I continue to act as Chairman of the Company for an additional one-year period to ensure that the handover to Fidelity, and to my successor, who is still to be identified, is undertaken in an orderly manner. I will now retire from the Board following the conclusion of the 2022 annual general meeting ('AGM').

Sujit Banerji will have served as a Director of the Company for nine years in October 2022 and will also retire following the conclusion of the 2022 AGM.

Russell Edey has also indicated his intention to retire as a Director of the Company in 2023, at that point, the Board will reduce to five members.

An executive search consultant will be appointed to source additional non-executive directors to replace and enhance the skills and experience of the Board and its Committees during 2022.

All Directors are offering themselves for re-election at the forthcoming AGM.

Dividend

A resolution to declare a final dividend of 18.0 cents per share will be proposed at the AGM of the shareholders of the Company that will be held on Wednesday, 8 December 2021. Subject to shareholder approval, the final dividend will be paid on 17 December 2021 to shareholders on the Register of Members on 12 November 2021. The ex-dividend date is 11 November 2021.

Annual General Meeting

This year's AGM will be held on Wednesday, 8 December 2021 at 10:30 a.m. at the registered office of the Company, 1st Floor, Les Echelons Court, Les Echelons, South Esplanade, St Peter Port, Guernsey GY1 6JB.

Notice of the AGM, containing full details of the business to be conducted at the meeting, is set out in the Annual Report.

Electronic proxy voting is now available and shareholders are encouraged to submit voting instructions using the web-based voting facility at www.eproxyappointment.com and www.proxymity.io for institutional shareholders. In order to use electronic proxy voting, shareholders will require their shareholder registration number, control number and pin. If you do not have access to these details please contact the Company's Registrar, Computershare, their contact details can be found in the Annual Report.

Outlook

We have seen moments of market turbulence caused by China anti-trust laws and regulation and more recently by beleaguered property developer China Evergrande. The Board is confident that Fidelity, as an experienced emerging markets manager, aided by the insights of its teams based in China and throughout the Asia region will be able to navigate through volatile markets and deliver attractive returns to shareholders.

China is likely to remain in the spotlight presenting considerable near term risks, however, the new manager's exposure to the most directly impacted areas will be limited.

China Evergrande has amassed significant debts although they have so far been able to stave off collapse and recently averted a costly default with a last-minute bond coupon payment. The impact on the global financial system, should they default, depends to a considerable extent on the response of the Chinese government. Conditions remain precarious across the sector and it remains to be seen how far the Chinese government will be willing to step in to provide stability. Whether they do so or not, there will be significantly less residential construction in China which will result in a negative impact on Chinese GDP.

Beyond China the pandemic has resulted in unprecedented monetary policy; although rates are starting to rise in some emerging markets, Fidelity believes that the developed world will continue with low interest rates.

Emerging markets may have recovered somewhat, but overall, they remain on a wide discount compared to developed markets. This provides good scope to add to high quality stock positions on a selective basis.

Emerging markets have evolved, but commodities continue to play a key role. Today supply constraints are combined with huge stimulus and a transition to a cleaner, greener economy, driving demand up and lending support to prices over the medium to long-term.

The Board is committed to the view that the structural benefits of emerging markets as an asset class remain compelling. It offers the potential for risk reduction through diversification and the prospect of superior economic returns, as emerging countries have higher population growth, and higher per-capita GDP growth with relatively low debt levels, allowing them to outpace the developed world. The emerging markets' rising middle-classes are still getting richer, are still buying more and these countries are investing heavily in their own futures and infrastructure.

The Board is confident that Fidelity, using the broad investment powers of the Company, will exploit this vast investable universe and have the ability to deliver strong and sustainable investment returns.

Finally, on behalf of the Board, I would like to thank Genesis Investment Management, LLP for its contribution to the Company since its inception in 1989.

Hélène Ploix

Chairman

28 October 2021

Strategy, Business Model and Principal Risks

Business and Status

The Company is a closed-ended investment scheme authorised by the Guernsey Financial Services Commission and is listed on the London Stock Exchange.

The Company was incorporated in Guernsey on 7 June 1989 and commenced business on 19 September 1989.

Reviews of the Company's activities are included in the Chairman's Statement and GIML's Investment Review.

There has been no significant change in the activities of the Company during the year to 30 June 2021 and the Directors anticipate that the Company will continue to operate in the same manner during the current financial year following the appointment of Fidelity.

Change of Manager and Investment Manager

The Board has invested considerable time and effort in considering the future direction for the Company in order to best serve the interests of the Company's shareholders as a whole.

With this in mind, the Board conducted an extensive review of the Company's management arrangements and reached the conclusion that Genesis Investment Management LLP should be replaced by FIL Investment Services (UK) Limited as the Company's Manager. This process included consultation with major shareholders.

FIL Investment Services (UK) Limited ('the Manager') was formally appointed on 4 October 2021.

The Manager has delegated the role of Investment Manager to FIL Investments International ('Fidelity International', the 'Investment Manager'). Both the Manager and Investment Manager are part of the FIL Group of companies, collectively 'Fidelity'.

Investment Objective and Policy (for the period to 30 June 2021)

The Company's investment objective is to achieve long- term capital growth, primarily through investment in listed equity markets of emerging countries.

The Company seeks to identify high-quality companies in emerging markets and invest in them at attractive discounts to their intrinsic value

Following shareholder approval at the EGM of the Company held on 1 October 2021 the Company's investment objective and policy is now as follows:

Investment Objective

The Company's investment objective 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 Policy

The Company seeks to meet its investment objective through investment in a diversified portfolio of equity or equity-linked securities and derivative instruments providing exposure to emerging market companies.

The Manager integrates sustainability analysis into its investment process and promotes environmental and social characteristics in respect of the companies in which it invests.

Investment minimum constraints

At least 80% of the Company's total assets (measured at the time of investment) will be exposed to companies that have their head office in, are listed in or with assets, operations, income or revenues that are predominantly in or derived from emerging markets.

The Company is not subject to any geographical or sector limits, although the Manager will maintain a diversified portfolio of a minimum of 75 holdings (comprised of a mixture of long and short exposures) in companies listed in or operating across at least 15 countries.

Fidelity is not required to seek to ensure that the Company's cash resources are fully invested at all times. Accordingly, there may be times when the Company holds cash or money market instruments pending investment. The Company's net market exposure will not fall below 90% of the Company's net assets save to the extent that the Manager is required to realise cash to fund a tender offer or other return of capital.

Permitted instruments

The Company may invest through equities, index linked securities, contracts for difference (CFD), equity linked and other debt securities, cash deposits, money market instruments, equity related securities, foreign currency exchange forward transactions and other interests including derivative instruments. The Company may invest directly in China A and B Shares and invest in Non-Voting Depository Receipts, American Depositary Receipts, Global Depositary Receipts and Equity Linked Notes. References to "companies" in this investment policy may include operating businesses that are not in corporate form.

Forward transactions and derivatives, including futures, options, swaps and contracts for difference, may be used to enhance portfolio performance as well as for efficient portfolio management and hedging.

The Company may invest in unlisted securities and in other investment funds, subject to the investment restrictions set out below.

Investment Restrictions

The Company will invest and manage its assets with an objective of spreading risk with the following investment restrictions:

· no single or aggregate interest in any one company shall represent more than 15% of total assets (measured at the time of investment);

· no more than 15% of total assets (measured at the time of investment) may be invested in unlisted securities;

· up to 15% of total assets (measured at the time of investment) may be invested in other listed or unlisted investment funds where such funds offer the only practicable means of gaining exposure to a particular emerging market, including other funds managed or advised by the Manager or its associates;

· up to 20% of total assets (measured at the time of investment) may be invested in securities and instruments which provide exposure to companies which do not have their head office in, are not listed in or whose assets or operations are not predominantly in emerging markets, provided that a material proportion of the income or revenues of each such company derives from emerging markets.

Although the Company has no present intention to make any such investments, for so long as required by the Listing Rules, no more than 10% of the Company's total assets (measured at the time of investment) may be invested in other London-listed closed ended funds that do not have stated policies to invest no more than 15% of their total assets in other London-listed closed ended funds.

Leverage and derivatives

The Company may be geared through (i) borrowing of up to 10% of its net asset value and/or (ii) by entering into derivative positions (both long and short) which have the effect of gearing the Company's portfolio, to enhance performance.

Derivatives usage will focus on, but will not be limited to the following investment strategies:

· as an alternative form of gearing to bank loans, for instance by the use of long CFDs;

· to enhance the investment returns by taking short positions in stocks or markets that the Manager considers to be over-valued or impaired;

· to enhance positions, manage position sizes and control risk through the use of options;

· to hedge equity market risks where suitable protection can be purchased to limit the downside of a falling market at a reasonable cost; and

· to gain or hedge currency exposure, both long and short, using foreign currency exchange forward transactions.

The Company is subject to the following limits in respect of its use of derivatives:

·     Net Market Exposure will not exceed 120% of the net asset value of the Company.

·     Gross Asset Exposure will not exceed 165% of the net asset value of the Company.

· In normal market circumstances, the Company expects that the Manager will maintain a Net Market Exposure in the range of 100% to 110%.

Exposure Definitions

· Long Exposure is the value of the Company's direct and indirect investments in long positions (including the economic value of the exposure to the reference asset of any derivative instrument).

· Short Exposure is the value of the Company's direct and indirect investments in short positions (including the economic value of the exposure to the reference asset of any derivative instrument), excluding Hedges.

· Hedges are short positions that demonstrate risk-reduction qualities by offsetting long positions held by the Company which have regional congruence and a correlation of at least 80% to the Long Exposure of the Company.

· Net Market Exposure is the net positive market exposure of the Company's portfolio, whether through direct or indirect investment, with short and hedge positions subtracted from long positions. It is calculated as (Long Exposure - Hedges) - Short Exposure.

·   Gross Asset Exposure is the total market exposure of the Company's portfolio, whether through direct or indirect investment. It is calculated as: (Long Exposure + Short Exposure) - Hedges.

Benchmark Index

The Company's benchmark is the MSCI Emerging Markets (Total Return) Index.

Life of the Company

The Company has committed to hold a continuation vote in 2026 and every five years thereafter. The Company will propose the continuation vote at its annual general meeting in the relevant year and, if the continuation vote is not passed, will thereafter present proposals to shareholders in respect of the future of the Company.

Management

The Company has no employees or premises and the Board is comprised of non-executive Directors. During the year under review, the majority of day-to-day operations and functions of the Company were delegated to GIML and to third party service providers who are subject to the oversight of the Board. There are therefore no disclosures to be made in respect of employees.

During the year under review GIML provided investment and risk management services, JP Morgan Chase Bank was the Custodian and JP Morgan Administration Services (Guernsey) Limited was the Administrator and Company Secretary. The Board regularly reviews the performance and risks of its primary service providers and checks that they have appropriate frameworks in place for the oversight of their internal controls, monitoring and reporting.

With effect from 4 October 2021, the day-to-day operations and functions of the Company previously delegated to GIML will be undertaken by Fidelity

Principal & Emerging Risks and Risk Management

In accordance with the AIC Code, the Board is responsible for establishing procedures to manage risk, oversee the internal control framework, and determine the nature and extent of principal risks the Company is willing to take in order to achieve its long-term strategic objectives.

The Board with the support of the Audit and Risk Committee has carried out a robust assessment of the Company's principal and emerging risks which may impact the Company. The principal risk that may affect the Company is adverse changes to the value of its assets arising from the Company's investment in financial instruments (principally equity securities) due to unanticipated adverse changes in market prices and foreign currency exchange rates and an absence of liquidity.

In respect of the period under review, the Board reviewed and agreed policies for managing each of these risks with GIML as summarised below.

Volatility of emerging markets and market risk

The economies, currencies and the financial markets of a number of developing countries in which the Company invests may be extremely volatile. To manage the risks posed by adverse price fluctuations the Company's investments are geographically diversified, and will continue to be so. The exposure to any one company or group (other than an investment company, unit trust or mutual fund) is unlikely to exceed 5% of the Company's net assets at the time the investment is made.

Foreign Currency Exposure

The Company's assets will be invested in securities of companies in various countries and income will be received by the Company in a variety of currencies. However, the Company will compute its net asset value and distributions in US dollars. The value of the assets of the Company as measured in US dollars may be affected favourably or unfavourably by fluctuations in currency rates and exchange control regulations. Further, the Company may incur costs in connection with conversions between various currencies. The Company has opted not to engage in any active management of foreign currency risk, and therefore all its open foreign exchange positions are typically unhedged.

Lack of liquidity

Trading volumes on the stock exchanges of developing countries can be substantially less than in the leading stockmarkets of the developed world and trading may even be temporarily suspended during certain periods. Liquidity can also be negatively impacted by temporary capital controls in certain markets. A lower level of liquidity can exaggerate the fluctuations in the value of investments described previously. The restrictions on concentration and the diversification requirements detailed above also serve normally to protect the overall value of the Company from the risks created by the lower level of liquidity in the markets in which the Company operates.

COVID-19 pandemic

The COVID-19 pandemic continues to pose additional risks to the Company beyond those risks described above. They include liquidity risks to markets, risks associated with the maintenance of the current dividend policy and business continuity risks for the Company's key service providers. During the year under review, the day-to-day management of the risks posed by the Covid-19 pandemic was carried out by GIML. Both GIML and the Company's other key service providers confirmed that they had the necessary contingency plans in place to continue to service the Company in line with expectations during the pandemic. 

With effect from 4 October 2021, the day-to-day management of the risks posed by the Covid-19 pandemic will be performed by Fidelity. Fidelity follows Government recommendations and guidance and carries on reviewing its business continuity plans and operational resilience strategies on an ongoing basis and continues to take all reasonable steps in meeting its regulatory obligations and to assess operational risks, the ability to continue operating and the steps it needs to take to serve and support its clients, including the Board. PricewaterhouseCoopers LLP has also confirmed in the AAF Internal Controls report issued to Fidelity International that there have not been any significant changes to Fidelity International's control environment as a result of COVID-19. Further to this, the Manager has provided the Board with assurance that the Company has appropriate business continuity plans and the provision of services has continued to be supplied without interruption during the pandemic. Investment team key activities, including portfolio managers, analysts and trading/support functions, are performing well despite the operational challenges posed when working from home or when split team arrangements were in place.

Custody risk and cyber security

The Company is exposed to operational risks such as custody risk and cyber security breaches. Custody risk is the risk of loss of securities held in custody occasioned by the insolvency or negligence of the Custodian. Although an appropriate legal framework is in place that eliminates the risk of loss of value of the securities held by the Custodian, in the event of its failure, the ability of the Company to transfer the securities might be temporarily impaired. The day-to-day management of these risks is carried out by GIML under policies approved by the Board.

The risk represented by breaches in cyber security is carefully monitored by the Investment Manager, Custodian and Administrator with appropriately designed and tested controls.

Investment policy and process

Inappropriate investment policies and processes may result in under performance against the Company's peer group. The Board manages these risks by ensuring a diversification of investments and regularly reviewing the portfolio asset allocation and investment process. In addition, certain investment restrictions have been set and these are monitored as appropriate.

Investment strategy and share price movements

The objective of the Company is to achieve long-term capital growth and it is exposed to the effect of variations in the price of its investments. A fall in the value of its portfolio will have an adverse effect on shareholders' funds. The Board reviews the Company's investment strategy and the risk of adverse share price movements at its Board meetings taking into account the economic climate, market conditions and other factors that may have an effect on the sectors in which the Company invests. There can be no assurances that depreciation in the value of the Company's investments will not occur but the Board seeks to reduce this risk.

Discount to net asset value

A discount in the price at which the Company's shares trade to net asset value would mean that shareholders would be unable to realise the true underlying value of their investment. As a means of controlling the discount to net asset value the Board has the ability to buy back shares. The Board reviews the Company's discount to net asset value on a regular basis.

Credit and counterparty risk

Certain derivative instruments in which the Company may invest are not traded on an exchange but instead will be traded between counterparties based on contractual relationships, under the terms outlined in the International Swaps and Derivatives Association's ("ISDA") market standard derivative legal documentation. These are known as Over The Counter ("OTC") trades. As a result, the Company is subject to the risk that a counterparty may not perform its obligations under the related contract. In accordance with the risk management process which the Investment Managers employ, this risk is minimised by only entering into transactions with counterparties which are believed to have an adequate credit rating at the time the transaction is entered into, by ensuring that formal legal agreements covering the terms of the contract are entered into in advance, and through adopting a counterparty risk framework which measures, monitors and manages counterparty risk by the use of internal and external credit agency ratings and evaluates derivative instrument credit risk exposure.

Operational

Failure of the core accounting systems, or a disastrous disruption to the Administrator's, Manager's or Investment Manager's business, could lead to an inability to provide accurate reporting and monitoring.

The Board is reliant on the Administrator, Manager, and Investment Manager to ensure that appropriate measures are in place in order that critical operations can be performed at all times.

The Board considers the internal controls of the Administrator, Manager, and Investment Manager and other key service providers on at least an annual basis.

Loss of key personnel

During the period under review, the day-to-day management of the Company was delegated to GIML. Loss of GIML's key employees could affect investment returns. The Board is aware that GIML recognises the importance of its employees to the success of its business. Its remuneration policy is designed to be market competitive in order to motivate and retain staff and succession planning is regularly reviewed. The risk of the loss of key employees will be managed by Fidelity going forward and the Board will continue to monitor this risk.

Emerging risks

Emerging risks that could impact the Company in the future are considered at each Board meeting along with any mitigating actions. No new emerging risks were identified during the year under review although it should be noted that there are ongoing risks associated with the Covid-19 pandemic, and market risks have been heightened in recent weeks by events surrounding the heavily indebted Chinese property developer Evergrande. Fidelity's proposed portfolio is underweight in Chinese equities relative to the benchmark and has no exposure to Evergrande and Fidelity will continue to monitor the situation closely.

The Board has discussed the aforementioned principal and emerging risks facing the Company with Fidelity. The Board has noted that Fidelity does not envisage a change in the pre-existing principal risks facing the Company. However, it should be noted that the increased use of derivatives will lead to a corresponding increase in the counterparty risk of the Company as set out above. The risk management function will be performed by Fidelity on an ongoing basis following their appointment on 4 October 2021.

Key Performance Indicators

At their Board meetings the Directors consider a number of performance indicators to help assess the Company's success in achieving its objectives.

The key performance indicators used to measure the performance of the Company over time are as follows:

· Net asset value changes over time;

· Participating Preference Share price movement;

· A comparison of Participating Preference Share price and net asset value against its peer group;

· Discount/premium to net asset value.

Information on some of the above key performance indicators and how the Company has performed against them can be found in the Annual Report.

Viability Statement

In accordance with of the Code of Corporate Governance issued by the Association of Investment Companies ('AIC') in February 2019 (the 'AIC Code'), the Board has assessed the longer term prospects for the Company beyond the twelve months required by the going concern basis of accounting. The period assessed is for five years to 30 June 2026, which is aligned to both the the newly introduced continuation vote and the performance assessment point for a potential tender offer.

The Company's investment objective 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. The Board regards the Company's shares as a long-term investment and believes that a period of five years is considered a reasonable period for investment in equities and is appropriate for the composition of the Company's portfolio.

In assessing the viability of the Company, the Board has reviewed and considered the principal and emerging risks, and uncertainties (including the ongoing impact of the Covid-19 pandemic) that may affect the Company, as set out in the Annual Report. The Board has also considered the Company's business model including its investment objective and investment policy, projected income and expenses, and the liquidity of the Company's portfolio to ensure that it will be able to meet its liabilities as they fall due.

In advance of the appointment of Fidelity International as Investment Manager of the Company, the Board considered the proposed composition and liquidity of the portfolio. Following discussion, a schedule of investment limits and restrictions was agreed between Fidelity and the Company. Furthermore the Board reviewed the internal controls in place at Fidelity to mitigate principal and emerging risks.

The Board has noted that:

· The Company's portfolio consists of a diversified group of companies from a large number of emerging market countries. The majority of these are traded on major international stock exchanges. In the opinion of the Investment Manager, the portfolio is sufficiently liquid to meet all ongoing and future liabilities arising from the Company's day-to-day business.

· The Company currently has no borrowing (a maximum limit of 10% of net asset value has been set).

· The Company's ongoing charges and operational expenses are well covered by expected levels of revenue and returns.

· No significant increases to ongoing charges or operational expenses are anticipated.

· The Investment Manager and all other key service providers will service the Company in line with service   level agreements and have suitable arrangements in place to ensure that they can continue to provide their services to the Company despite the ongoing Covid-19 pandemic.

· On 22 October 2021, as a result of the Tender Offer, the Company repurchased 30,366,688 of its Participating Preference Shares for cancellation (25% of the Company's issued share capital).

Having taken all of the above information into consideration, the Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five years.

The Directors' assessment of the Company's ability to operate in the foreseeable future is included in the Going Concern Statement in the Directors' Report in the Annual Report.

Duty to promote the success of the Company

Under section 172 of the UK Companies Act 2006, a director of a company must act in a way he/she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other things) to:

· the likely consequences of their decisions in the long term;

· the interests of the company's employees;

· the need to foster the company's business; relationships with suppliers, customers and others;

· the impact of the company's operations on the community and the environment;

· the desirability of the company maintaining a reputation for high standards of business conduct; and

· the need to act fairly as between members of the company.

As an externally managed investment company, the Company has no employees or physical assets. The key stakeholders in the Company are its shareholders, the Manager, the Investment Manager, and other third party service providers.

The Board seeks to ensure high standards of business conduct are adhered to by all of the Company's service providers and that agreed service levels are met.

The Board is responsible for promoting the long-term success of the Company for the benefit of all stakeholders and in particular its shareholders. Although the majority of the day-to-day activities of the Company are delegated to the Manager, Investment Manager, and other third party service providers, the responsibilities of the Board are set out in the schedule of matters reserved for the Board and the relevant terms of reference of its committees, all of which are reviewed regularly by the Board.

To ensure that the Board is able to discharge this duty, the Manager, Investment Manager and other third party service providers are required to provide the Board with regular updates. In addition, Directors, or the Board as a whole, have the authority to seek advice from professional advisers including the Company Secretary and independent external advisers as well as attend any relevant training seminars.

The investment management function is critical to the long-term success of the Company. During the period under review, the Board monitored the performance of GIML against key performance indicators. The Board received updates from GIML on the performance of the Company at each Board meeting with additional performance updates being provided on a monthly basis. In addition to performance updates, the Board received regular updates on the marketing of the Company from both GIML and the Company's brokers. As part of these updates the Board received and considered feedback from its shareholders.

During the period under review, GIML and the Company's corporate brokers held periodic meetings with the Company's major shareholders to discuss aspects of the Company's positioning, performance and outlook. Members of the Board were available to attend meetings with shareholders upon request.

The Board also received updates from its key third party service providers at each Board meeting, the main purpose of which is to ensure that the services provided to the Company remain in line with expectations and are to the benefit of its shareholders.

The Board also considered the impact of the Company's decisions on the environment and the community. The Board received updates on ESG matters from GIML and discussed how ESG factors are taken into account by GIML as part of its selection process of investee companies.

The Board recognises the need for good communications with its shareholders and is committed to listening to their views. The primary medium through which the Company communicates with shareholders is through its Annual and Half Year Financial Reports. Monthly factsheets are also produced. Company related announcements are released via the Regulatory News Service ('RNS') to the London Stock Exchange. All of the aforementioned information is available on the Company's website www.fidelity.co.uk/emergingmarkets

In addition to the annual general meeting, all shareholders are invited to attend the Company's annual information meeting. This provides shareholders with the opportunity to interact directly with the Board.

The Board always welcomes questions from shareholders; we can be reached via either the Investment Manager or the Company Secretary.

Examples of the principal decisions taken by the Board during the year under review (and post year-end) are as follows:

Change of Manager and Investment Manager - following the underperformance of the Company against its benchmark over five years, the Board decided to undertake a thorough review of its investment management arrangements. In June 2021, the Company's brokers were instructed to invite tenders to provide investment management services to the Company. Following a competitive tender process, the Board announced that it had selected FIL Investments Services (UK) Limited as Manager of the Company, with the investment management of the Company to be undertaken by FIL Investments International, collectively 'Fidelity'. Fidelity has a depth of expertise in emerging markets, and a proven track record of managing and growing investment trusts. The Board believes that the Company will benefit considerably from Fidelity's brand, and its ability to attract a larger range of shareholders with its significant and broad ranging marketing resource. In addition, the appointment of Fidelity brings a significant saving in ongoing management fees from 0.90 per cent to 0.60 per cent. of net asset value.

The activities and processes performed by Fidelity following its appointment on 4 October 2021 are expected to be broadly consistent those provided by GIML with the addition of activities relating to derivatives trading.

Covid-19 - The Board continues to review emerging risks that could have a potential impact on the operational capability of the Investment Manager and the Company's other key service providers. During the year under review, the Board received updates from GIML and other key service providers confirming that they continued to service the Company in line with service level agreements and have suitable arrangements in place to ensure that they can continue to provide their services to the Company during the ongoing pandemic.

Succession Planning - as previously detailed in the Chairman's Statement both Helene Ploix and Sujit Banerji will retire as Directors of the Company following the conclusion of the 2022 AGM. Russell Edey has also indicated his intention to retire from the Board in 2023. It has been agreed that an executive search consultant will be appointed to source additional non-executive directors to replace and enhance the skills and experience of the Board and its Committees during 2022.

Marketing - marketing has continued in support of widening the Company's shareholder base. The Board agreed that the ongoing marketing of the Company was a key consideration of the tender process, and it is hoped that the Company will benefit considerably from Fidelity's brand, and its marketing resources.

The Board is committed to the long term success of the Company for the benefit of its shareholders, however in doing so it also has regard to the impact of its actions on all of its stakeholders. The Board takes into account section 172 considerations in all material decisions of the Company.

Diversity

The Company's policy on board diversity is included in the Nomination Committee's Report as contained in the Annual Report.

Environmental, Social and Governance Factors

During the year under review, the Genesis investment team assessed ESG factors, including climate-related risks and opportunities, in the context of materiality, mindful of the Sustainability Accounting Standards Board framework. Sector Specialists are responsible for assessing the materiality and relevance of ESG factors in their respective sectors and providing an ESG framework to the team. Each Portfolio Manager ('PM') is individually responsible for the integration of the relevant ESG factors into their investment analysis of a company, before investing in a company and throughout the investment period.

Genesis' Annual Stewardship Report 2020 (formally the Annual ESG Report) can be found on their website, www.giml.co.uk. The Stewardship report contains more information on ESG integration in the portfolio as well as GIML's approach to stewardship and a qualitative review of the top ten portfolio positions including the company- level ESG metrics.

Similarly, Fidelity is committed to ESG and incorporates ESG factors into its investment process. Details can be found at www.fidelity.co.uk/responsible-investing.

Signed on behalf of the Board

Hélène Ploix

28 October 2021

GIML's Investment Review

Investment Environment

The Company's financial year was characterised by the asset class being in recovery mode. Each quarter saw positive absolute returns for the MSCI EM (TR) Index: Q3 2020 saw a continuation of the momentum from a more positive (or less negative) emerging market outlook; Q4 2020 brought welcome news of vaccines, with high efficacy levels, to fight Covid; Q1 2021 posted a modest gain which disguised a degree of volatility; and Q2 2021 saw a comparatively calm period compared to the previous 15 months. In this environment, the Company's NAV returned 24.8% in sterling terms over the year to 30 June 2021 versus an Index return of 26.4%.

Performance

Country Contributors

China - key driver: stock selection and underweight a weak market - added 400 basis points (bps)

The Company's investments outperformed those in MSCI China, gaining 23% compared to 14%. Gains were also achieved from the underweight position in a market that underperformed the overall Index. The leading contributors were the A-share listed producers of premium baijiu, a Chinese white spirit: Jiangsu Yanghe Brewery (+93% in GBP) and Wuliangye Yibin (+70%) each performed strongly despite suffering share price weakness in the first quarter of 2021. These were followed by sportswear manufacturer ANTA Sports Products (+140%), whose results indicate that an increasing number of Chinese consumers are opting for domestic sports brands over established international brands such as Nike and Adidas. Property management company Country Garden Services Holdings (+109%) was buoyed by strong 2020 results. The portfolio also added value through not having exposure to the large state- owned Chinese banks in the Index which rose just 4% in aggregate. However, the education companies, New Oriental Education and Tech (-44%) and TAL Education Group (-67%), were significant detractors as they were adversely impacted by the government's crackdown on the sector, which was far more severe than many had anticipated.

Russia - key driver: stock selection - added 180bps

The Company's positions in banks featured, as Russia's largest bank, Sberbank, gained 52% and fintech TCS Group ('Tinkoff') achieved a stellar return of 294%. Covid has been less of a headwind for Tinkoff than the market expected, while improved disclosures has allowed investors to appreciate the contribution from its asset- light, fee-driven businesses.

India - key driver: stock selection - added 70bps

The leading contributor was IT services company Infosys which saw its share price double as technology spend by many companies rose to accommodate changing working practices due to Covid. It was supported by consumer goods company Crompton Greaves Consumer Electricals (+67%), which recovered strongly from the initial impact of the pandemic, and insurance company ICICI Prudential Life Insurance which gained 36% following its introduction to the Company in September 2020.

Country Detractors

South Korea - key driver: underweight a strong market - detracted 105bps

The Company's large holding in Samsung Electronics (+55%) was a notable performer as the global memory chip market recovered, however the weighting is lower than the Index which led to relative value being lost over the year. There was also strong performance from Index positions not in the Company, including car manufacturers Hyundai Motor (+131%) and Kia Motors (+172%), and internet company Kakao (+191%).

Mexico - key driver: stock selection - detraction 105bps

Certain consumer investments in the Company could not keep pace with MSCI Mexico which rose by 40%. Gruma, a tortilla producer, and Kimberly-Clark, a personal product manufacturer, fell 5% and gained just 7% respectively. Infrastructure concessions operator Pinfra was also among the detractors, gaining just 3%.

Thailand - key drivers: overweight a weak market and stock selection - detracted 80bps

In Thailand, the key tourism and export sectors have both been impacted by the pandemic. The Company's investment in private healthcare group Bangkok Dusit Medical Services (down 10%) was hit by the fall in medical tourism and 7-Eleven convenience store operator CP All (down 22%) was impacted by lower footfall.

Sector Contributors

The Company added 205bps in financials. Russian bank holdings, Sberbank and Tinkoff, were supported by strong performance from another central and eastern european bank, OTP Bank (Hungary), which gained 38%. The Company also benefitted from not holding the Chinese banks in the Index which underperformed. 180bps was added in communication services, largely due to the performance of Chinese digital advertiser Focus Media Information Technology (+67%), while the strong performance from Korean search engine Naver Corp (+50%) and Latam/Caribbean telco Liberty Global LiLAC (+37%) added further value.

Sector Detractors

A combination of stock selection and the Company's underweight position in materials detracted 240bps from performance. The Indonesian cement companies Semen Indonesia (-11%) and Indocement (-19%) each underperformed. A further 130bps was lost in consumerdiscretionary largely due to the underperforming Chinese education companies, while the strong performance of electrical car manufacturer NIO (+516%) and internet company Meituan (+66%), neither of which were Company holdings, also hurt relative performance. 100bps was lost by companies in the healthcare sector, where Hikma Pharmaceuticals and Mediclinic International (both +12%) underperformed, along with Brazilian private dental insurer Odontoprev (-5%) and Thai hospital group Bangkok Dusit Medical Services.

Relative Performance Attribution in GBP - 12 months to 30 June 2021

GEMF vs. MSCI EM (TR) Index

Top 10 Stock Contributors	%		Top 10 Stock Detractors	%
Jiangsu Yanghe Brewery (China)	1.08		New Oriental Education (China)	(0.87)
Wuliangye Yibin (China)	0.98		TAL Education Group (China)	(0.82)
ANTA Sports Products (China)	0.95		NIO (China)	(0.68)
Country Garden Services Holdings (China)	0.94		Bangkok Dusit Medical Services (Thailand)	(0.63)
Richemont (Switzerland)	0.80		Vale (Brazil)	(0.56)
TCS Group Holding (Russia)	0.71		Meituan (China)	(0.55)
Sberbank (Russia)	0.68		Vinamilk (Vietnam)	(0.54)
Infosys (India)	0.67		Semen Indonesia (Indonesia)	(0.47)
Alibaba Group (China)	0.62		CP All (Thailand)	(0.47)
Focus Media Information Technology (China)	0.56		Gree Electric Appliances (China)	(0.47)

Stocks in italics are not held in the portfolio but are part of the Index at period end

			Top 5			Top 5
Sector	%		Country Contributors	%		Country Detractors	%
Financials	2.04		China	3.98		South Korea	(1.06)
Communication Services	1.78		Russia	1.82		Mexico	(1.05)
Real Estate	0.80		India	0.69		Thailand	(0.78)
Energy	0.52		Malaysia	0.47		Taiwan	(0.78)
Industrials	0.46		Greece	0.25		South Africa	(0.71)
Utilities	0.42
Consumer Staples	0.18
Investment Companies	(0.24)
IT	(0.24)
Health Care	(0.98)
Consumer Discretionary	(1.32)
Materials	(2.40)

Source: Calculated by FactSet

Portfolio Activity

During the Company's financial year under review, China led the trading activity, resulting in a 130bps net increase to exposure there. The two largest purchases were stocks that had been reintroduced to the Company: air conditioning manufacturer Gree Electric Appliances was repurchased having being sold from the Company in 2016, and China's largest e-commerce retailer JD.com was reintroduced having previously exited in 2018. Other notable purchases included a new holding in vitamin and dietary supplement provider By-health, Tencent was added to, and a small holding in short-video online entertainment platform Kuaishou Technology was purchased at its IPO.

Sales activity was dominated by reductions in the baijiu producers, Jiangsu Yanghe Brewery and Wuliangye Yibin, as their share prices soared. The aggregate position was cut by 220bps during 2020 and further profits were taken at the start of 2021 prior to share price weakness. The positions represent 3% of the Company at the end of the period - still a meaningful position, reflecting the strong prospects of these companies despite demanding valuations. The positions in dairy company China Mengniu Dairy and digital advertiser Focus Media Information Technology were also reduced following strong share price performance, while the small positions in internet company Sina and pharmaceutical company 3SBio exited the portfolio.

India followed China in terms of overall activity during the period. Shifting exposure to banks accounted for much of this, with ICICI Bank introduced as Kotak Mahindra Bank was reduced and Axis bank exited the portfolio. The Company's positions in the IT services companies were reduced by 250bps in aggregate: Tata Consultancy Services was more than halved on valuation grounds and the position in Cognizant was sold as conviction in the momentum of the business had reduced. Elsewhere in India, new holdings in two insurance companies, SBI Life and ICICI Prudential Life Insurance, were introduced to the portfolio in September and Sun Pharmaceutical was sold after a tenure of almost two decades.

South Korea saw the largest net reduction during the period. A substantial portion of beauty and cosmetics conglomerate Amorepacific was sold as continued share price strength stretched its valuation. Internet search engine Naver Corp and tech hardware megacap Samsung Electronics were both reduced following strong share price performance. Samsung Fire & Marine exited the portfolio following an 18-year tenure. Away from the selling activity, a new position was initiated in video game publisher Nexon.

Elsewhere, a further nine new holdings were initiated: LatAm's largest online commerce and fintech platform MercadoLibre; South African-based investment holding company Remgro; Mexico's largest food retailer Wal- Mart de Mexico; Kenya's leading mobile network operator Safaricom was repurchased; Philippine fixed broadband operator Converge ICT Solutions; e-commerce company Ozon Holdings and online recruitment platform HeadHunter Group (both Russia); and home improvement retailer Lojas Quero-Quero and credit bureau Boa Vista Services (both Brazil). The position in Heineken was increased from 2% to 3% in early 2021. Despite the impact of the pandemic on revenues and profits, underlying brand health and operational performance were strong, particularly in key emerging markets of Vietnam, Brazil and Nigeria. The positions in food delivery firm Delivery Hero and Mexican personal product manufacturer Kimberly-Clark de Mexico were added to following increased conviction and share price weakness. Brazilian healthcare provider Intermédica was scaled up to better reflect its quality and size after a secondary equity offering was announced.

Other sales activity saw the Company's sole UAE holding, DP World, eliminated in July 2020 following the announcement of a privatisation offer at a 29% premium by its largest shareholder. Russian retailer Magnit was sold to allow for opportunities elsewhere in Russia and CP All was reduced due to lower optimism for growth in Thailand. In Latin America, the position in Brazilian software company Linx was sold following a merger, while some positions with long tenures in the Company exited: Brazilian bank, Itaú, (10 years), Mexican bank Inbursa (12 years) and Mexican telecoms company América Móvil (13 years).

At the end of the period there were 95 holdings in the Company, with 17 new positions and 18 sold.

Genesis Investment Management, LLP

August 2021

Statement of Directors' Responsibilities

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union to meet the requirements of applicable law and regulations.

Under company law the Directors must not approve the financial statements unless they are satisfied that taken as a whole, they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

· assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies (Guernsey) Law, 2008. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The work carried out by the auditor does not include consideration of the maintenance and integrity of the website and, accordingly , the auditor accepts no responsibility for any changes that have occurred to the accounts when they are presented on the website.

The Directors who hold office at the date of approval of this Directors' Report confirm that so far as they are aware, there is no relevant audit information of which the Company's auditor is unaware, and that each Director has taken all the steps he/she ought to have taken as a Director to make himself or herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Responsibility statement of the Directors in respect of the Annual Report

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

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

· the strategic report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal and emerging risks and uncertainties that the Company faces.

The Directors consider 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.

There were no instances where the Company is required to make disclosures in respect of Listing Rule 9.8.4 during the financial period under review.

For and on behalf of the Board

Hélène Ploix

28 October 2021

Statement of Financial Position

as at 30 June 2021

	2021	2020
	$'000	$'000
Assets
Current assets
Financial assets at fair value through profit or loss	1,679,935	1,205,287
Amounts due from brokers	379	15,541
Dividends receivable	2,062	2,809
Other receivables and prepayments	213	212
Cash and cash equivalents	26,926	16,530
Total Assets	1,709,515	1,240,379
Liabilities
Current Liabili ti es
Amounts due to brokers	-	1,474
Capital gains tax payable	7,688	1,739
Payables and accrued expenses	2,752	1,412
Total Liabilities	10,440	4,625
Total Net Assets	1,699,075	1,235,754
Equity
Share premium	6,291	6,291
Capital reserve	1,642,118	1,178,583
Revenue account	50,666	50,880
Total Equity	1,699,075	1,235,754
Net Asset Value per Participating Preference Share*	$13.99	$10.17

*  Calculated on a closing number of 121,466,754 Participating Preference Shares in issue (2020: 121,466,754).

The Financial Statements were approved by the Board of Directors of the Company on 28 October 2021 and signed on its behalf by:

Hélène Ploix   Russell Edey

Statement of Comprehensive Income Statement

for the year ended 30 June 2021

	2021			2020
	Capital	Revenue		Capital	Revenue
	Reserve	Account	Total	Reserve	Account	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Income/(loss)
Net change in financial assets at fair value through profit or loss	482,914	-	482,914	(56,342)	-	(56,342)
Net exchange losses	(487)	-	(487)	(1,316)	-	(1,316)
Dividend income	-	28,819	28,819	-	23,467	23,467
Securities lending income	-	33	33	-	206	206
Interest income	-	29	29	-	346	346
Total income/(loss)	482,427	28,881	511,308	(57,658)	24,019	(33,639)
Expenses
Management fees	(11,160)	(2,790)	(13,950)	(9,193)	(2,299)	(11,492)
Custodian fees	-	(925)	(925)	-	(928)	(928)
Transaction costs	(1,095)	-	(1,095)	(1,675)	-	(1,675)
Directors' fees and expenses	-	(313)	(313)	-	(415)	(415)
Administration fees	-	(330)	(330)	-	(292)	(292)
Audit fees	-	(48)	(48)	-	(47)	(47)
Legal and professional fees	(967)	(103)	(1,070)	-	(138)	(138)
Other expenses	5	(241)	(236)	-	(204)	(204)
Total operating expenses	(13,217)	(4,750)	(17,967)	(10,868)	(4,323)	(15,191)
Operating profit(loss)	469,210	24,131	493,341	(68,526)	19,696	(48,830)
Finance costs
Bank charges	-	(2)	(2)	-	(4)	(4)
Total finance costs	-	(2)	(2)	-	(4)	(4)
Taxation
Capital gains tax	(5,675)	-	(5,675)	4,506	-	4,506
Withholding taxes	-	(3,694)	(3,694)	-	(2,099)	(2,099)
Total taxation	(5,675)	(3,694)	(9,369)	4,506	(2,099)	2,407
Profit/(loss) after tax for the year attributable to Participating Preference Shares	463,535	20,435	483,970	(64,020)	17,593	(46,427)
Total comprehensive income/(loss)	463,535	20,435	483,970	(64,020)	17,593	(46,427)
Earnings/(losses) per Participating Preference share (basic and diluted)*	$3.81	$0.17	$3.98	$(0.53)	$0.15	$(0.38)

* Calculated on an average number of 121,466,754 Participating Preference Shares in issue (2020: 121,466,754).

The total column of this statement represents the Company's Statement of Profit or Loss and Other Comprehensive Income prepared in accordance with IFRS. The supplementary information on the allocation between the revenue account and capital reserve is presented under guidance published by the AIC.

S t a teme n t of   Chan ge s   in Equi ty

for   the year ended   30 June 2021

	2021
	Share	Capital	Revenue
	Premium	Reserve	Account	Total
	$'000	$'000	$'000	$'000
Balance at the beginning of the year	6,291	1,178,583	50,880	1,235,754
Total comprehensive income	-	463,535	20,435	483,970
Dividends paid in the year	-	-	(20,649)	(20,649)
Balance at the end of the year	6,291	1,642,118	50,666	1,699,075

	2020
	Share	Capital	Revenue
	Premium	Reserve	Account	Total
	$'000	$'000	$'000	$'000
Balance at the beginning of the year	6,921	1,242,603	56,366	1,305,260
Total comprehensive (loss)/income	-	(64,020)	17,593	(46,427)
Dividends paid in the year	-	-	(23,079)	(23,079)
Balance at the end of the year	6,921	1,178,583	50,880	1,235,754

S t a teme n t of   Cash Flows

for   the year ended   30 June 2021

	2021	2020
	$'000	$'000
Operating activities
Dividends and interest received	29,595	23,516
Securities lending income received	33	206
Taxation paid	(3,420)	(1,994)
Purchase of investments	(318,603)	(467,672)
Proceeds from sale of investments	340,557	482,709
Bank charges paid	(2)	(4)
Operating expenses paid	(16,628)	(15,323)
Net cash inflow from operating activities	31,532	21,438
Financing activities
Dividends paid	(20,649)	(23,079)
Net cash outflow from operating activities	(20,649)	(23,079)
Effect of exchange losses on cash and cash equivalents	(487)	(1,316)
Net increase/(decrease) in cash and cash equivalents	10,396	(2,957)
Net cash and cash equivalents at the beginning of the year	16,530	19,487
Net cash and cash equivalents at the end of the year	26,926	16,530
Comprising:
Cash and cash equivalents	26,926	16,530

N o te s   t o t h e   Finan c ial   S t a teme nts

for the year ended 30 June 2021

1.  General

Fidelity Emerging Markets Limited (formerly Genesis Emerging Markets Fund Limited) (the 'Company') was incorporated in Guernsey on 7 June 1989 and commenced activities on 19 September 1989. The Company is an Authorised Closed-Ended Investment Scheme as defined by the Authorised Closed-Ended Investment Schemes Rules (2008) (and, as such, is subject to ongoing supervision by the Guernsey Financial Services Commission). The Company is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

The Company's registered office is 1st Floor, Les Echelons Court, Les Echelons, South Esplanade, St. Peter Port, Guernsey, GY1 6JB, Channel Islands.

These financial statements were approved by the Board of Directors and authorised for issue on 28 October 2021.

2.  Summary of Significant Accounting Policies

(a)  Basis of Preparation

The principal accounting policies applied in the preparation of these financial statements on a going concern basis are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

The Company's financial statements, which give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company, have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), the IFRS Interpretations Committee and interpretations approved by the International Accounting Standards Committee ('IASC') that remain in effect and the Companies (Guernsey) Law, 2008.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS may require management to make critical accounting judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from the estimates.

Valuations use observable data to the extent practicable. Changes in any assumptions could affect the reported fair value of the financial instruments. The determination of what constitutes observable requires significant judgement by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

New standards, amendments and interpretations

IAS 1 and IAS 8 Amendments: Definition of Material.

IAS 9, IAS 39 and IAS 7 Amendments: Interest Rate Benchmark Reform. These will be effective for the financial statements for the year ending 31 March 2022.

Standard issued but not yet effective

At the date of authorisation of the financial statements, the following standards and interpretations were assessed to be relevant and are all effective for annual periods beginning on or after 1 January 2021:

LIBOR

With LIBOR expected to be discontinued after the end of 2021, this being part of the loan facility interest calculation, a new reference rate will be implemented upon renewal of the loan facility in March 2022.

There are no other accounting standards, amendments, or interpretations effective, that have or will have material impact on these financial statements. Furthermore, the Company has not been an early adopter of any such standards, amendments, and interpretations to existing standards prior to their effective date.

The Directors expect that the adoption of the standards listed above will have either no impact or that any impact will not be material on the financial statements of the Company in future periods.

Early adoption of standards

The Company did not early adopt any new or amended standards/interpretations for the year ended 30 June 2021.

(b) Financial Instruments

Classification

(i) Assets

The Company classifies its investments based on both the Company's business model for managing those financial assets and the contractual cash flow characteristics of the financial assets. The portfolio of financial assets is managed and performance is evaluated on a fair value basis. The Company is primarily focused on fair value information and uses that information to assess the assets' performance and to make decisions. The Company has not taken the option to irrevocably designate any equity securities as fair value through other comprehensive income. The contractual cash flows of the Company's debt securities are solely principal and interest, however, these securities are neither held for the purpose of collecting contractual cash flows nor held both for collecting contractual cash flows and for sale. The collection of contractual cash flows is only incidental to achieving the Company's business model's objective. Consequently, all investments are measured at fair value through profit or loss.

(ii) Liabilities

Derivative contracts that have a negative fair value are presented as derivative financial liabilities at fair value through profit or loss. As such, the Company classifies all of its investment portfolio as financial assets or liabilities at fair value through profit or loss. The Company's policy requires the Manager and the Board of Directors to evaluate the information about these financial assets and liabilities on a fair value basis together with other related financial information.

Recognition/derecognition

The Company recognises a financial asset or a financial liability when, and only when, it becomes a party to the contractual provisions of the instrument.

Regular-way purchases and sales of investments are recognised on their trade date, the date on which the Company commits to purchase or sell the investment. Investments are derecognised when the rights to cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

The Company derecognises a financial liability when the obligation under the liability is discharged, cancelled or expires.

Measurement

Financial assets and financial liabilities are measured initially at fair value being the transaction price. Transaction costs incurred to acquire financial assets at fair value through profit or loss are expensed in the Statement of Comprehensive Income. Transaction costs include fees and commissions paid to agents, advisers, brokers and dealers. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets or financial liabilities at fair value through profit or loss' category are presented in the Statement of Comprehensive Income in the year in which they arise.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Securities listed on active markets are valued based on their last traded price for valuation and financial statement purposes.

In the normal course of business, the Company utilises Participatory notes ('P Notes') to gain access to markets that otherwise would not be allowable as a foreign investor. P Notes are issued by banks or broker-dealers and allow the Company to gain exposure to local shares in foreign markets. They are valued based on the last price of the underlying equity at the valuation date.

The Company's investment in other funds ('Investee Funds') are subject to the terms and conditions of the respective Investee Fund's offering documentation. The investments in Investee Funds are primarily valued based on the latest available redemption price for such units in each Investee Fund, as determined by the Investee Funds' administrators. The Company reviews the details of the reported information obtained for the Investee Funds and considers the liquidity of the Investee Fund or its underlying investments, the value date of the net asset value provided, any restrictions on redemptions and the basis of the Investee Funds' accounting. If necessary, the Company makes adjustments to the net asset value of the Investee Funds to obtain the best estimate of fair value.

The Company may make adjustments to the value of a security if it has been materially affected by events occurring before the Company's NAV calculation but after the close of the primary markets on which the security is traded. The Company may also make adjustment to the value of its investments if reliable market quotations are unavailable due to infrequent trading or if trading in a particular security was halted during the day and did not resume prior to the Company's NAV calculation.

Amortised cost measurement

Loans and receivables are carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Financial liabilities, are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, as well as through the amortisation of these liabilities.

(c) Foreign Currency Translation

Functional and Presentation Currency

The books and records of the Company are maintained in the currency of the primary economic environment in which it operates (its functional currency). The Directors have considered the primary economic environment of the Company and considered the currency in which the original capital was raised, past distributions have been made and ultimately the currency in which capital would be returned on a break up basis. The Directors have also considered the currency to which underlying investments are exposed.

On balance, the Directors believe that US dollars best represent the functional currency of the Company. The financial statements, results and financial position of the Company are also expressed in US dollars which is the presentation currency of the Company and have been rounded to the nearest thousand unless otherwise stated.

Transactions and Balances

Transactions in currencies other than US dollars are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period monetary items and non-monetary assets and liabilities that are fair valued and are denominated in foreign currencies are retranslated at rates prevailing at the end of the reporting period. Gains and losses arising on translation are included in the Statement of Comprehensive Income for the year. Foreign exchange gains and losses relating to cash and cash equivalents are presented in the Statement of Comprehensive Income within 'Net exchange gains or losses'. Foreign exchange gains and losses relating to financial assets at fair value through profit or loss are presented in the Statement of Comprehensive Income within 'Net change in financial assets at fair value through profit or loss'.

(d) Recognition of Dividend and Interest Income

Dividends arising on the Company's investments are accounted for on an ex-dividend basis, gross of applicable withholding taxes. Deposit interest and interest on short-term paper is accrued on a day-to-day basis using the effective interest method. Dividends and interest income are recognised in the Statement of Comprehensive Income.

(e) Dividend Distribution

Dividend distributions are at the discretion of the Board of Directors. A dividend is recognised as a liability in the period in which it is approved at the Annual General Meeting of the shareholders and is recognised in the Statement of Changes in Equity.

(f) Cash and Cash Equivalents

Cash comprises current deposits with banks. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

Bank overdrafts are accounted for as short term liabilities on the Statement of Financial Position and the interest expense is recorded using the effective interest rate method. Bank overdrafts are classified as other financial liabilities.

(g) Due To and Due From Brokers

Amounts due to brokers are payables for securities purchased that have been contracted for but not yet delivered on the Statement of Financial Position date. Amounts due from brokers include receivables for securities sold that have been contracted for but not yet delivered on the Statement of Financial Position date.

These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment for amounts due from brokers. A provision for impairment of amounts due from brokers is established when there is objective evidence that the Company will not be able to collect all amounts due from the relevant broker. Significant financial difficulties of the broker, probability that the broker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from brokers is impaired.

(h) Segment Reporting

Operating Segments are reported in a manner consistent with the internal reporting used by the chief operating decision maker ('CODM'). The CODM, who is responsible for allocation of resources and assisting performance of the operating segments, has been identified as the Directors of the Company, as the Directors are ultimately responsible for investment decisions.

(i) Expenses

All expenses are accounted for on an accruals basis and are charged to the Statement of Comprehensive Income. Expenses are allocated wholly to revenue with the following exceptions:

· Management fees are allocated 20% to revenue and 80% to the capital, in line with the Board's expected long-term split of revenue and capital return from the Company's investment portfolio.

· Expenses which are incidental to the purchase or sale of an investment are charged to capital.

(j) Taxation

The Company currently incurs withholding taxes imposed by certain countries on investment income and capital gains taxes upon realisation of its investments. Such income or gains are recorded gross of withholding taxes and capital gains taxes in the Statement of Comprehensive Income. Withholding taxes and capital gains taxes are shown as separate items in the Statement of Comprehensive Income.

In accordance with IAS 12, 'Income taxes', the Company is required to recognise a tax liability when it is probable that the tax laws of foreign countries require a tax liability to be assessed on the Company's capital gains sourced from such foreign country, assuming the relevant taxing authorities have full knowledge of all the facts and circumstances. The tax liability is then measured at the amount expected to be paid to the relevant taxation authorities, using the tax laws and rates that have been enacted or substantively enacted by the end of the reporting period. There is sometimes uncertainty about the way enacted tax law is applied to offshore investment funds. This creates uncertainty about whether or not a tax liability will ultimately be paid by the Company. Therefore, when measuring any uncertain tax liabilities, management considers all of the relevant facts and circumstances available at the time that could influence the likelihood of payment, including any formal or informal practices of the relevant tax authorities.

(k) Share Capital

Participating Preference Shares have no fixed redemption date and do not automatically participate in the net income of the Company but are entitled to receive dividends. They are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds net of tax.

(l) Purchase of Own Shares

The cost of purchases of the Company's own shares is shown as a reduction in Shareholders' Funds. The Company's net asset value and return per Participating Preference Share are calculated using the number of shares outstanding after adjusting for purchases.

(m) Securities Lending

The Company participates in securities lending transactions with third party investment companies. JPMorgan Chase Bank N.A. acts as the securities lending agent (the 'Lending Agent') providing the securities lending services, record keeping services and serves as securities custodian, maintaining custody of all Company-owned listed investments. Under the terms of its lending agreement, the Company receives compensation in the form of fees, 20% of which are commissions payable to the Lending Agent for their services. The Company continues to receive dividends on the securities loaned and any gains and losses that occur during the term of the loan will be accounted for by the Company.

Income earned from the securities lending agreement is recognised on the Company's Statement of Comprehensive Income on an accruals basis and shown net of the commissions paid to the Lending Agent.

3.  Earnings/(Losses) Per Share

Basic earnings/(losses) per share are calculated by dividing the profit/(loss) for the year by the weighted average number of Participating Preference Shares in issue during the year.

	2021	2020
	$'000	$'000
Capital return/(loss)	463,535	(64,020)
Revenue return	20,435	17,593
Profit/(loss) after tax for the year attributable to Participating Preference Shares	483,870	(46,427)
Weighted average number of Participating Preference Share outstanding	121,466,754	121,466,754
Capital earnings/(losses) per Participating Preference Share	$3.81	($0.53)
Revenue earnings per Participating Preference Share	$0.17	$0.15
Basic earnings/(losses) per Participating Preference Share - basic and diluted	$3.98	($0.38)

4.  Capital Reserve

The capital reserve as at 30 June 2021 consists of the following accumulated amounts:

	2021	2020
	$'000	$'000
Realised gains on investments sold	1,201,991	1,132,546
Unrealised appreciation on revaluation of investments	503,269	89,800
Exchange losses	(8,824)	(8,337)
Transfer to share premium	(27)	(27)
Expenses charged to capital	(54,291)	(35,399)
	1,642,118	1,178,583

All gains and losses derived from the sale, realisation or transfer of investments, and any other sums which in the opinion of the Directors are of a capital nature are applied to the capital reserve.

5.  Related Parties and Other Material Agreements

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Related parties also include key management personnel and entities under common control of the Manager.

(a)  GIML's remuneration and terms of appointment

Under the Management Agreement, the Investment Manager is entitled to receive a management fee from the Fund, payable monthly in arrears equal to 0.90% (2020: 0.90%) per annum, calculated and accrued on the Net Asset Value of the Fund as at each weekly Valuation Day, except for investments in Investee Funds, where the Investment Manager will absorb the expenses of the management of such funds to a maximum of 1% per annum of the value of the Fund's holding in the relevant fund at the relevant time. Genesis related investment companies, refer to note 9(f), do not pay a separate management fee to GIML. The management fee for the financial year ended 30 June 2021 was $13,950,000 (2020: $11,492,000).

GIML ceased to act as manager to the Company on 4 October 2021, however, in accordance with the notice of termination and under the terms of the management agreement, it will receive a management fee until 31 October 2021.

(b)  Fidelity's remuneration and terms of appointment

On  4 October 2021, FIL Investment Services (UK) Limited was appointed as Manager (`the Manager') to the Company and has delegated the role of Investment Manager to FIL Investments International (`the Investment Manager'), both the Manager and Investment Manager are part of the FIL Group of companies, `Fidelity'. Under the Investment Management Agreement (`the IMA'), the Manager is entitled to receive a Management Fee of 0.6% per annum of the Net Asset Value of the Company.

The Management Fee is calculated and charged daily and payable monthly in arrears.

Under the terms of the IMA, the Manager has waived its entitlement to receive a Management Fee for a period of nine months from its date of appointment.

No Management Fee is payable by the Company in respect of the Company's holdings in collective investment schemes or investment trusts managed or advised by the Manager or Fidelity.

(c)  Administration fees

The Administrator is entitled to receive a fee, payable monthly, based on the Net Asset Value of the Company and time incurred. Administration fees for the year were $330,000 and charged by JP Morgan Administration Services (Guernsey) Limited (2020: $292,000).

(d)  Custodian fee

Under   the Custodian Agreement, the Custodian to the Company is entitled to receive a fee payable monthly, based on the Net Asset Value of the Company. All custody services are performed by JP Morgan Chase Bank.

The Company also reimburses the charges and expenses of other organisations with whom securities are held. The total of all Custodian fees for the year represented approximately 0.05% (2020: 0.08%) per annum of the average Net Assets of the Company. Custodian fees for the year were $925,000 (2020: $928,000).

(e)  Securities lending fees

The Company generated gross income of $41,000 (2020: $257,000) from securities lending transactions during the year. Commissions amounting to $8,000 (2020: $51,000) were paid to JPMorgan Chase Bank N.A. during the year in respect of these transactions of which none were outstanding at the year end.

(f)  Directors' fees and expenses

Included in Directors' fees and expenses are Directors' fees for the year of $280,000 (2020: $260,000). Also included are travelling, hotel and other expenses which the Directors are entitled to when properly incurred by them in travelling to, attending and returning from meetings and while on other business of the Company.

There were no transactions between the Company and such related parties during the year and there were no outstanding balances between these entities at 30 June 2021.

6.  Dividend

	2021	2020
	$'000	$'000
Dividends paid
2020 final dividend of 17.0¢ (2019: 19.0¢) per Participating Preference Share	20,649	23,079
	20,649	23,079
Dividend proposed
2021 final dividend of 18.0¢ (2020: 17.0¢) per Participating Preference Share	16,398	20,649
	16,398	20,649

The dividend proposed in respect of the year ended 30 June 2021 is subject to shareholder approval at the forthcoming AGM. In accordance with the accounting policy of the Company, this dividend will be reflected in the financial statements for the year ending 30 June 2022.

7.  Events After Reporting Date

On 6 September 2021, the Company launched a tender offer to buy back up to 25% of its issued share capital. As a result of the tender offer, on 22 October 2021, the Company re-purchased 30,366,688 Participating Preference Shares for cancellation. The resultant number of shares in issue is 91,100,066 Participating Preference Shares.

On 4 October 2021, FIL Investment Services (UK) Limited was appointed as Manager to the Company and has delegated the role of Investment Manager to FIL Investments International, both the Manager and Investment Manager are part of the FIL Group of companies, (`Fidelity').

On 28 October 2021, the Board proposed that a dividend of 18.0¢ per Participating Preference Share be paid on 17 December 2021 subject to shareholder approval at the AGM to be held on 8 December 2021.

There were no other significant events to disclose since the reporting date.

8.  Annual Results

This Annual Results announcement does not constitute the Company's statutory accounts for the years ended 30 June 2021 and 30 June 2020 but is derived from those accounts. Statutory accounts for the year ended 30 June 2020 have been delivered to the Guernsey Financial Services Commission. The statutory accounts for the year ended 30 June 2021 and the year ended 30 June 2020 both received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report.

9.  Availability of Annual Report  

A copy of the Annual Report will shortly be submitted to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

A copy of the Annual Report will also be available for download from the Company's website www.fidelity.co.uk/emergingmarkets

For further information, please contact:

Natalia De Sousa

FIL Investments International

01737 837846

J.P. Morgan Administration Services (Guernsey) Limited

Company Secretary

01481758 620

29 October 2021

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