REG-Fidelity Emerging Markets Ltd: Half-year Report
13/03/2025 07:15
Fidelity Emerging Markets LimitedHalf Year Report for the six months ended 31
December 2024
Highlights
* During the six months ended 31 December 2024, Fidelity Emerging Markets
Limited reported a share price total return of +1.2% and Net Asset Value
Return (NAV) of -0.3%
* The benchmark index, the MSCI Emerging Markets Index, returned +1.0% over
the same period
* Stock picking in India in aggregate was the most notable driver of
performance over the six months
* The short book also contributed positively during the review period and full
calendar year
* The portfolio remains overweight to the financials, consumer discretionary
and consumer staples sectors
Financial Highlights
31 December 2024 30 June 2024
Assets
USD
Gross Asset Exposure 1 $1,073.5m $1,177.3m
Equity Shareholders’ Funds $677.7m $753.4m
NAV per Participating Preference Share 2 $9.77 $10.09
Gross Gearing 2,3 58.4% 56.3%
Net Gearing 2,4 1.0% 4.3%
GBP
Gross Asset Exposure 1,5 £857.2m £940.7m
Equity Shareholders’ Funds 5 £541.1m £596.0m
NAV per Participating Preference Share 2,5 £7.80 £7.98
Participating Preference Share Price and Discount Data
Participating Preference Share Price at the period end £6.95 £7.03
Discount to NAV per Participating Preference Share at period end 2 10.9% 11.9%
Number of Participating Preference Shares in issue 69,334,702 74,646,287
Earning for the six months ended 31 December 2024 2023
Revenue Earnings per Participating Preference Share 6 $0.17 $0.06
Capital (Loss)/Earnings per Participating Preference Share 6 ($0.37) $0.23
Total (Loss)/Earnings per Participating Preference Share 6 ($0.20) $0.29
Ongoing charges ratio 2 0.84% 0.82%
1 The value of the portfolio exposed to market price movements.
2 Alternative Performance Measure
3 Gross Asset Exposure less Equity Shareholders’ Funds expressed as a
percentage of Equity Shareholders’ Funds.
4 Net Market Exposure less Equity Shareholders’ Funds expressed as a
percentage of Equity Shareholders’ Funds.
5 The conversion from USD to GBP is based on exchange rates prevailing at the
reporting dates.
6 Calculated based on weighted average number of participating preference
shares in issue during the period.
Contacts
For further information please contact:
George Bayer
Company Secretary
george.bayer@fil.com
FIL Investments International
Chairman’s Statement
I am pleased to present your Company’s Half Year Report covering the six
months ended 31 December 2024.
Overview
While a great deal has gone on in the world in the period under review, there
were three principal events – two of them emanating from the US – that
most affected investors in emerging markets during the period. The first was
at the start of August, as concerns grew over the likelihood of a US
recession. This caused a sharp sell-off in technology stocks globally, with
effects felt across emerging as well as developed markets. While the recession
fears ebbed with a larger-than-expected interest rate cut from the Federal
Reserve in September, the announcement of a stimulus package by the Chinese
government the same month had more impact for EM investors, given how long
China had remained in the post-Covid doldrums.
November saw Donald Trump win the US presidential election, combined with a
Republican sweep in both houses of Congress. Given the incoming president’s
‘America first’ agenda, the result caused an immediate sell-off in EM
stocks as market participants looked ahead to the spectre of renewed trade
tariffs.
Against this backdrop, net asset value (‘NAV’) total return performance
for the six months ended 31 December 2024 was marginally negative, at -0.3%.
While this was slightly behind the +1.0% sterling return of the Company’s
benchmark, the MSCI Emerging Markets Total Return Index (‘the Index’), the
share price total return per Participating Preference Share again outperformed
the Index, rising by 1.2%.
The Company now has a three-year track record under the management of the team
at Fidelity (appointed with effect from 4 October 2021), although both NAV
and share price returns over this period are behind the Index, largely owing
to a legacy overweight position in Russia in the period leading up to the
country’s invasion of Ukraine in February 2022. As stated in previous
reports, the value of Russian holdings in the portfolio at the time of
suspension of international trading in such securities has been written down
to zero. However, there was some good news during the period under review as a
liquidity opportunity allowed for the disposal of one of the holdings. From 31
March 2022 (just after the invasion) to 31 December 2024, the Company’s NAV
total return was 7.4% versus an Index return of 6.6%, and we look forward to
this outperformance being reflected in our three-year track record – an
important yardstick for many investors – in the near future. Furthermore,
while the last six months of 2024 saw broadly flat returns, the Company
outperformed strongly for the full calendar year, with NAV and share price
total returns of 14.7% and 15.4% respectively versus an Index total return of
9.4%.
These positive returns speak to the uniqueness of Fidelity’s investment
process, with its ability to hold short as well as long positions being a key
differentiating factor. While the core of the approach is to invest in well
financed, well managed businesses that can drive growth, the ability to make
money from identifying those at risk of disruption is a great advantage
against the current fractured geopolitical backdrop. Both the long and the
short book contributed positively to relative performance in Q4 2024 and for
the calendar year as a whole, although the impact was negative in the more
volatile third quarter of the year.
Outlook
While at the time of writing, the imposition or increase of US tariffs on
cross-border trade is dominating the news agenda, there are reasons to believe
that the year ahead may see a continuation of the recovery in emerging
markets. As your Portfolio Managers, Nick Price and Chris Tennant, point out
in their review of the period, valuations across their investment universe are
at multi-decade lows relative to developed markets, and particularly relative
to the US. Many EM economies remain robust, having avoided the fiscal excesses
of the West in response to the Covid-19 pandemic, with monetary policy
headroom and less dollar-denominated debt than has historically been the case,
which will be beneficial if the domestic inflationary effects of President
Trump’s trade tariffs cause US interest rates to remain higher for longer.
Meanwhile, there is considerable strength in EM companies’ balance sheets,
and many are returning capital to shareholders.
However, the ramifications of a trade war must not be ignored, particularly in
China – by far the largest market in the EM universe – although the impact
may be far-reaching across both developed and emerging markets. For this
reason, and in a world where seven stocks now make up more than 20% of the
entire world stock market, it is more important than ever for investors to be
selective. The amount of investors’ capital globally that is passively
tracking indices has become very high, and as in the US, that leads to a
handful of dominant companies and countries, as size becomes its own reward.
Homogeneity is not the same as stability, and if investors want to build an
‘anti-fragile’ portfolio, they need to own things that others don’t.
Emerging markets are a good way to diversify into some stocks that are less
correlated with the US S&P 500 Index, which is increasingly prevalent in
global investors’ portfolios, but differentiation within emerging markets is
also important. At 31 December 2024, your Company’s 10 largest holdings
made up 49% of the gross portfolio but only 16% of the index. Combining this
active approach with Fidelity’s deep research resources and full investment
toolkit allowing short as well as long positions, your Board believes the
Company remains well placed to achieve its objective of delivering long-term
capital growth for shareholders.
Discount management
During the period under consideration, the Company’s discount to NAV
narrowed slightly from 11.9% to 10.9%, which is not inconsiderable in an
environment of generally widening investment trust discounts. Your Board
continues to focus on building awareness of the strength and differentiation
of Fidelity’s approach, as well as keeping costs in check – at 0.84%, our
ongoing charges are the second lowest in our AIC Global Emerging Markets peer
group, well below the average of 1.0%. However, we also recognise the
importance to investors of taking direct action to limit the discount, and as
such we have continued the programme of share buybacks launched in November
2023, repurchasing 5,311,585 shares (c 7.1% of the total at the start of the
Half Year) between 1 July and the end of December 2024. Since then, a further
654,576 shares have been bought back, and at the latest practicable date
(6 March 2025), the discount to NAV stood at 9.9%. As well as having
completed a tender offer for 14.99% of the shares in March 2024, I would
remind shareholders of the performance conditional tender offer (for up to 25%
of shares then in issue) that will take place should the Company’s NAV total
return fail to exceed the benchmark over the five years ending on
30 September 2026.
2024 AGM and final dividend
The Company held its Annual General Meeting (‘AGM’) on 10 December 2024.
The other directors and I thank you for your approval of all resolutions
presented at the meeting. We particularly appreciate the level of shareholder
support and engagement evidenced by more than 39 million shares – a turnout
approaching 60% – being voted. Recent news headlines have underlined the
importance of shareholder enfranchisement as a key advantage of the investment
trust structure, and it is gratifying to see such a high level of engagement
even when there is no extraordinary business to be considered.
At the AGM, shareholders approved the final dividend of $0.20 (15.74p) per
Participating Preference Share, a 5.3% increase on the $0.19 (15.27p) paid in
respect of FY23. The dividend was paid on 13 December 2024.
Shareholders should note that the Board will review the final dividend payment
for FY25 later in the year based on dividend receipts from the companies held
in the portfolio.
Heather Manners
Chairman
12 March 2025
Portfolio Managers’ Half Year ReviewMacroeconomic Review
Emerging markets pulled back in the last six months of 2024 and underperformed
developed markets. It was a mixed period for the asset class. Markets globally
sold off in early August as concerns about a US recession emerged and the yen
carry trade unwound. The backdrop was more supportive for emerging markets
over September as the Fed started to ease policy and China announced stimulus
measures. The underperformance of emerging markets was largely concentrated in
the fourth quarter of the year. Emerging markets retreated in October in
advance of the US election and remained under pressure in November and
December, as concerns around higher tariffs and a stronger dollar weighed on
sentiment, and investors rotated into US equities.
Portfolio performance: Six months to 31 December 2024
Over the six months ending 31 December 2024, the net asset value (‘NAV’)
total return of Fidelity Emerging Markets Limited was -0.3%, while the share
price increased by 1.2%. This was relative to a 1.0% increase for the
benchmark index (all figures are stated on a total return basis, in GBP
terms). The portfolio’s underperformance relative to the index followed a
strong first half of the year, which meant the portfolio outperformed the
index over the calendar year. While the long book detracted, the short book
contributed to performance.
Top five contributors and detractors, six months ending 31 December 2024
Order Security Country Relative (%) Actual CRR (bps)
Top 5
1 MakeMyTrip India 5.06 154
2 Headhunter Group Russia 0.00 111
3 Naspers South Africa 6.63 86
4 PPC South Africa 1.51 72
5 Lundin Gold Canada 1.58 59
Bottom 5
1 Kaspi.KZ Kazakhstan 4.77 (127)
2 Inter & Co Brazil 2.10 (109)
3 Alkhorayef Water & Power Technologies Saudi Arabia 2.21 (72)
4 Short Position – name withheld United States (1.03) (58)
5 Axis Bank India 2.63 (58)
Source: Fidelity International, 31 December 2024.
Underweight exposure to mainland China detracted following stimulus
announcement
China was the largest driver of underperformance over the period. Positioning
was a headwind as the underweight exposure to mainland China detracted after
the September stimulus announcement prompted a stock market rally, although
the position in Naspers, a holding company for China’s Tencent, partly
offset this (the portfolio’s small overweight exposure to China is achieved
through positions in mainland China, Hong Kong, and Naspers). Stock picking in
China/Hong Kong was also a headwind as names not held detracted from
performance.. The lack of exposure to electric vehicle and smartphone maker
Xiaomi hurt performance as it rallied after releasing a new electric vehicle,
as did the underweight position in food delivery business Meituan after
indications of traction in its revenue per delivery (we initiated a small
position in the company towards the end of the year).
Exposure to Brazil and Kazakhstan detracted
The exposure to Brazil detracted as concerns about the country’s fiscal
deficit and rising interest rates weighed on performance. Several of the
portfolio’s Brazilian financials positions derated, including Inter & Co,
the holding company for digital bank Banco Inter. We think that higher rates
will have a limited impact on Inter’s fundamentals and expect net interest
margins will keep expanding and the cost of risk to remain benign given a
tight labour market. While the fiscal and interest rate backdrop has
deteriorated, the broader macro picture is more positive, with unemployment at
decade lows, GDP growth robust, and credit quality positive, creating a
relatively strong backdrop for the financials we hold, although we did trim
exposure to more rate sensitive names during the period.
Positioning in Kazakhstan also detracted. We have a pair trade in Kazakhstan
financials, with a long position in Kazakhstan’s ecommerce and payments
platform Kaspi.KZ and a short position in a Kazakh bank, which plays an
important role in reducing the portfolio’s country risk. Kaspi.KZ initially
sold off after the publication of a short report (to which the company issued
a robust rebuttal) and was later impacted by local currency weakness.
Fundamentals for Kaspi.KZ remain robust, and the company announced the
acquisition of Turkish ecommerce business Hepsiburada later in the year, which
should expand its addressable market. The bank that we have a short position
in rallied despite continuing to exhibit weak fundamentals, a performance
trajectory we expect to reverse over time.
Other notable detractors include Indian private bank Axis Bank, which
underperformed peers. We shifted some funds from Axis Bank to higher quality
peer HDFC Bank over the period. Also weak was Saudi water utility Alkhorayef
Water & Power Technologies, which corrected following a period of strong
performance after indications of weak execution, prompting us to reduce the
position size.
Stock picking in India was a key driver of performance
Stock picking in India in aggregate was the most notable driver of
performance. The lead contributor was Indian online travel agent MakeMyTrip.
The company has a dominant share of the Indian travel market, and with a
market cap of only $13bn, we expect can be 2-3 times the size it is today as
it catches up with international peers. MakeMyTrip has a significant growth
runway ahead of it over the next decade as the penetration of online travel
and hotel spending increases. While valuations are relatively high, they are
more reasonable than that of consumer peers in India given its superior growth
trajectory. Given the strong share price performance we took profit in the
stock at year end. Several short positions in Indian businesses also
contributed as overvalued small caps corrected at the end of the year.
Materials stocks also supported returns. South African cement producer PPC
rallied as the outlook for local construction improved after the election
outcome. The company is an attractive self-help story where a new management
team with a track record of generating robust margins should drive better
execution. The gold price was the driver for other strong performers, Lundin
Gold and Pan African Resources, with Lundin continuing to execute
exceptionally well and Pan African outperforming the sector given its
depressed valuations.
Short book contributed to performance
The short book contributed to performance. While short positions in China
detracted during the rally in September, these stocks gave up almost all their
gains in the subsequent months. The period exemplified how our disciplined
approach to bet-sizing (where short positions are capped at 100bps) means we
do not need to cover shorts at the most painful point. The most successful
short was an Asian battery maker suffering from market oversupply that sold
off with the local market. It has been pleasing to see a positive contribution
from the short book in what has been a relatively challenging period for
shorting given the consistent outperformance of crowded shorts.
The position in Russian online recruiter Headhunter Group contributed after
the position was partly disposed of after the identification of a liquidity
opportunity.
Portfolio positioning as of 31 December 2024
In the portfolio’s long book, we look for well capitalised businesses with
underlevered balance sheets. Although the long book remains quality focused, a
deliberate search for value remains central to our thinking. The ability to
venture further down the market cap spectrum also provides exposure to
companies benefiting from excellent structural growth drivers. In aggregate,
the long book displays positive style tilts to growth, quality, and value
characteristics, and is underweight size, given the midcap bias. When
identifying ideas for the short book, we look for companies with a
fundamentally negative outlook that also have several red flags around their
balance sheets.
Regional positioning
The exposure to China is highly active. The portfolio is overweight the
consumer given this is where policy stimulus is being directed, whether it be
trade-in subsidies, rate cuts, or measures designed to stabilise house prices.
Consumers also have significant excess savings, which will likely be spent
when confidence returns. Positions here are centred around internet businesses
such as Tencent (including through a position in Naspers), Alibaba, and PDD,
sportswear business Anta Sports, white goods maker Haier Smart Home, and
online travel company Trip.com. These companies trade at attractive valuations
and most show positive momentum in returning capital to shareholders.
Elsewhere in China, we are underweight banks, where stimulus will have a
negative effect, given rate cuts and measures that allow borrowers to
refinance loans and encourage banks to lend to bankrupt developers.
Given the derating in China, the focus has been on increasing the quality of
holdings, adding for example positions in companies like leading battery maker
CATL, digital truck broker Full Truck Alliance, and auto glass maker Fuyao
Glass, which benefit from strong moats in their respective industries. We also
have several short positions in the market, for example in bankrupt property
developers, or indebted producers of commodities in oversupply.
We see opportunities in the rest of Asia, too. Despite some recent cyclical
headwinds, India remains a long-term structural growth story. Exposure to the
Indian market is predominantly via financials, which trade on more attractive
valuations than the broader market, and we hold leading private banks HDFC and
ICICI, as well as SME lender Five Star Business Finance. We also have select
exposure to the consumer through online travel business MakeMyTrip and
motorcycle business Eicher Motors. We hold short positions in India, for
example in businesses suffering from deteriorating market structures but
trading at extended valuations.
Elsewhere in Asia, there is exposure to ASEAN through Indonesia, where we hold
consumer and financials names, and frontier market Vietnam, where the main
exposure is to IT services business FPT, which benefits from a higher skilled
workforce and lower costs than peers.
While the portfolio has an underweight exposure to South Korea and Taiwan, we
have core positions in semiconductor and memory names. The focus here has been
diversifying the exposure beyond index heavyweight TSMC and adding smaller
positions in Artificial Intelligence (AI) beneficiaries such as Elite
Material, which has a dominant position in the copper-clad laminate used in
the server industry, and ASIC design house Alchip, which should benefit from
increased investment in custom silicon. We see ample opportunities to take out
short positions in technology stocks that have rallied on excitement around AI
despite having little tangible revenue exposure to the theme. We also hold
short positions in Asian battery makers suffering from oversupply.
The exposure to Latin America has been carefully managed. A widening fiscal
deficit and rising interest rates in Brazil are a headwind but we still see
opportunities to generate alpha in the market. High conviction positions
include fintechs like Nu Bank and Inter & Co and the bank BTG Pactual which is
shifting its business from more volatile areas like sales and trading to
wealth and asset management, and which we expect to generate robust returns on
equity even in a weaker macro backdrop. In Mexico the market has also derated,
largely down to political volatility both north and south of the border. Here
we have limited exposure to domestic names that are at risk of a weaker
currency and tariffs. Positions include Grupo Mexico, the holding company for
high quality, low-cost copper producer Southern Copper, and tortilla maker
Gruma, which is relatively insulated from any increase in tariffs given its
localised production bases in the US.
In EMEA, South Africa is enjoying an improving economic backdrop and a
market-friendly election outcome. The largest exposure is to Naspers, but we
also hold financials like direct-to-consumer insurer Outsurance Group, which
is replicating the success it has had locally in Australia, as well as FMCG
business Tiger Brands, which is an attractive turnaround story. Turkey is a
relatively new area of focus following its return to monetary orthodoxy,
positions here include airport operator Tav and hard discount retailer Bim.
Our work on scoping out the opportunity set in the Turkish market is ongoing
and we carried out a successful research trip to the country earlier this
year. Central and eastern Europe continues to offer up interest value
opportunities in the financials space – here we hold Greece’s Piraeus
Financial and Hungary’s OTP Bank. We continue to explore opportunities in
the Middle East market while remaining cognisant of valuations and liquidity.
Recent additions include Emaar Development, a UAE property developer
benefiting from higher expat demand, and which offers an attractive dividend
yield. Given high retail ownership and extended valuations there are ample
opportunities for shorting in the market.
Sector positioning
At a sector level, the portfolio’s largest overweight exposure is to
consumer companies. The consumer discretionary exposure is predominantly
through China names, including internet, sportwear, white goods, and online
travel companies. Here the focus is on companies that will benefit from a
recovery in consumer confidence, and which are returning capital to
shareholders. Beyond China, our exposure includes staples businesses in South
Africa and Mexico. There are also several short positions in companies across
markets that are exposed to competitive threats or operate in deteriorating
market structures, including retailers and electric vehicle makers.
Financials remains another significant overweight. The exposure is not overly
geared to any one interest-rate scenario given uncertainty surrounding the
inflation outlook. The financials exposure can broadly be broken into three
buckets. The first is to fintechs in Kazakhstan and Brazil which are growing
their customer bases and taking market share. The second is to structural
growth stories such as Indian private banks, which benefit from the same
demographic drivers as consumer companies, but without the lofty valuations.
And finally, we see many value opportunities, particularly in central and
eastern European markets such as Hungary, Georgia, and Greece.
Our positioning in the commodities space is selective. The majority of the
exposure is to copper, where we see attractive supply-demand drivers over the
medium term given the tailwind of electrification and a constrained supply
backdrop. While the copper price has been weaker recently, this has largely
been sentiment driven and fundamentals remain attractive. We also have
exposure to gold, which should benefit as central banks shift their FX
reserves into the precious metal. Again, there are ample opportunities to take
short positions in this market, and the long positions in gold miners are
paired with short positions in structurally challenged peers. We also have
short positions in iron ore miners, which will continue to grapple with
structurally weak demand from China. We have a bearish outlook for oil given
the market is reasonably well supplied and demand remains weak, particularly
in China, and there is limited exposure to oil in the portfolio.
OutlookEmerging markets are well placed
The backdrop for global inflation and interest rates is fundamental to the
outlook for emerging markets. There are signs of a very strong US economy
which may well sustain the dollar strength we experienced in 2024. An increase
in tariffs will likely be inflationary, although the response from China and
others will be key, with an RMB devaluation an offsetting deflationary force,
for example. There are other factors at play, too. Artificial intelligence may
start playing a deflationary role, while any resolution of the Ukraine war
could see energy prices fall. Emerging markets are in general far better
placed to deal with these higher rates than Europe given the broadly better
fiscal backdrop. Given that rates should remain more elevated than recent
history, we continue to think that some form of value exposure (without
compromising on quality) has a role to play in actively managed portfolios.
China is key
China is an important part of the puzzle. The extent to which we will see a
rebound in 2025 or further malaise is not clear. We are watching closely the
enduring impact of a property bubble and signs of price stabilisation. Return
of capital while patchy is improving, but we have lower visibility of
cashflows than in developed markets. In addition, many industries in China
have a deluge of overcapacity. Bond yields in China have collapsed as domestic
investors put money in the bond market, and while this has yet to feed into
negative performance for banks, this sector faces net-interest margin
compression and, at some point, a very negative credit cycle. We have started
to see developments around tariffs and are closely watching China’s
reaction, including the potential for further stimulus or currency
devaluation. An escalation of geopolitical tensions is also possible.
Real-world impact of AI is being closely monitored
Elsewhere, dispersion is very broad, which offers the potential to unlock
attractive shareholder returns. In Latin America, the market has derated
significantly, obscuring the fact there are many attractive companies that are
relatively insulated from higher interest rates and trade tensions, while the
EMEA region is home to some interesting value opportunities among financials
and consumer stocks. Looking to Asia, we expect that demand for chip makers
and memory plays in Taiwan and Korea will remain robust given the AI arms race
is a battle no-one can afford to lose. We are closely watching too the
potential real-world impact of AI, as technological progress drives innovation
and creates opportunities for consumers of AI but also has the potential to
render obsolete or severely impair existing business models.
Utilise full toolkit to reduce risk
Although the emerging market universe is trading at multi-decade lows relative
to developed markets, bouts of stronger performance can result in rapid
re-rating, underlining the importance of active management and disciplined
position sizing. Against an uncertain backdrop we take a prudent approach to
managing country exposures and make use of the full toolkit in the investment
company, using, for example, pair trades and index positions to reduce country
risk. In the long book there is a continued emphasis on owning well
capitalised businesses that are returning capital to shareholders – quality
characteristics that should offer support in what will likely remain a more
volatile backdrop.
Nick PriceChris Tennant
Portfolio Managers
12 March 2025
Spotlight on the Top 5 Holdings
as at 31 December 2024
The top five holdings comprise 33.2% of the Company’s Net Assets.
Taiwan Semiconductor Manufacturing
Industry: Information Technology
Country: Taiwan
% of Net Assets 10.8%
TSMC is a pre-eminent Taiwanese semiconductor foundry with leading-edge
technology, which reinforces the company’s competitive position and ability
to generate incremental return on invested capital. The company has built a
technological moat over the past three decades and occupies an especially
dominant position at the forefront of the industry as competitors have dropped
from the race due to technical hurdles and the barrier of high required
capital expenditures. TSMC’s ability to hire the best talent while
continuously improving its know-how keeps it ahead of the competition and able
to generate cashflow to feed back into investing in R&D and capacity.
Naspers
Industry: Financials
Country: India
% of Net Assets 7.8%
Naspers is a global internet and entertainment group and one of the world’s
largest technology investors. It is a South African holding company
specialising in internet investments and operates in more than 120 countries
and markets with long-term growth potential. It runs some of the world’s
leading internet, video entertainment, and media platforms. The company owns a
sizeable stake in Tencent, the Chinese multinational technology and
entertainment conglomerate. Naspers operates in various sectors, including
online classifieds, food delivery, payments, travel, education, health, and
social and internet platforms.
MakeMyTrip
Industry: Consumer Discretionary
Country: India
% of Net Assets 5.9%
MakeMyTrip is the largest online travel agency in India. The company has a
leading share in air ticketing and dominant market share in bus ticketing. It
also has a strong and growing presence in hotels. The company has a long
growth runaway given low penetration of airlines and hotels in India along
with improving air connectivity and infrastructure. The company is benefiting
from rising income levels and increasing internet penetration in the country.
Trip.com’s ownership and board presence are likely to give further impetus
to international growth, improve strategic decision making and the competitive
position of the company.
HDFC Bank
Industry: Financials
Country: India
% of Net Assets 4.5%
HDFC Bank is the best run bank in India with a focus on non-mortgage retail
lending. It has an excellent history of balancing growth and shareholder
returns. Its conservative capital management practices enable it to
continually invest across the cycle. Its leading-edge technology reinforces
its competitive position and ability to generate incremental returns on
invested capital.
Kaspi.KZ
Industry: Financials
Country: Kazakhstan
% of Net Assets 4.2%
Kaspi.KZ is the dominant consumer finance, e-commerce, and payments platform
in Kazakhstan. It provides interconnected technology and products and services
that help people to pay, shop, and manage their finances. Its ecosystem
connects consumers and merchants, enabling digital payments, e-commerce, and
financial services. The company’s gateway to its ecosystem is the mobile
app, which is powered by the company’s proprietary technology and enables
users to navigate between interconnected products and services. Kaspi.KZ
serves customers in Kazakhstan and Azerbaijan.
Twenty Largest Investments
as at 31 December 2024
The Asset Exposures shown below measure the exposure of the Company’s
portfolio to market price movements in the shares and equity linked notes
owned or in the shares underlying the derivative instruments. The Fair Value
is the value the portfolio could be sold for and is the value shown on the
Statement of Financial Position. Where a contract for difference (“CFD”)
is held, the fair value reflects the profit or loss on the contract since it
was opened and is based on how much the share price of the underlying shares
has moved (in effect, the unrealised gain or loss on the exposed positions).
Where the Company only holds shares, the Fair Value and Asset Exposure will be
the same.
Asset Exposure Fair value
Long Exposures – shares unless otherwise stated $’000 % 1 $’000
Taiwan Semiconductor Manufacturing 73,486 10.8 61,500
(shares, options and long CFD)
Information Technology
Naspers (shares and long CFD) 52,881 7.8 44,704
Consumer Discretionary
MakeMyTrip (option and long CFD) 40,145 5.9 (768)
Consumer Discretionary
HDFC (shares and long CFD) 30,760 4.5 24,421
Financials
Kaspi.KZ 28,608 4.2 28,608
Financials
ICICI (shares and long CFD) 25,821 3.8 2,826
Financials
Groupo Mexico (long CFD) 20,219 3.0 (446)
Materials
Samsung Electronics (option and long CFD) 20,161 3.0 (423)
Information Technology
Piraeus Financial Holdings 20,009 3.0 20,009
Financials
Five-Star Business Finance 18,663 2.8 18,663
Financials
Bank Central Asia 18,202 2.7 18,202
Financials
TBC Bank Group (long CFD) 16,283 2.4 (8)
Financials
FPT 15,145 2.2 15,145
Information Technology
ANTA Sports Products (option and long CFD) 14,395 2.1 (977)
Consumer Discretionary
Trip.com Group 14,375 2.1 (683)
Consumer Discretionary
Inter 14,168 2.1 14,168
Financials
Nu Holdings (option and long CFD) 13,897 2.1 (687)
Financials
PPC 13,863 2.0 13,863
Materials
Tencent (option and long CFD) 13,548 2.0 (106)
Communication Services
Auto Partner 13,298 2.0 13,298
Consumer Discretionary
Twenty largest long exposures 477,927 70.5 271,309
Other long exposures 517,508 76.4 350,823
Total long exposures before long futures and hedges 995,435 146.9 622,132
Add: long future contracts
Hang Seng China Enterprises Index 23,611 3.5 209
Total long futures contracts 23,611 3.5 209
Less: hedging exposures
MSCI Emerging Markets Index (future) (140,077) (20.7) 5,233
Total hedging exposures (140,077) (20.7) 5,233
Total long exposures after the netting of hedges 878,969 129.7 627,574
Add: short exposures
Short CFDs (58 holdings) 159,307 23.5 1,954
Short futures (12 holdings) 31,800 4.7 1,465
Short options (2 holdings) 3,447 0.5 713
Total short exposures 194,554 28.7 4,132
Gross Asset Exposure 2 1,073,523 158.4
Forward currency contracts 629
Portfolio Fair Value 3 632,335
Net current assets (excluding derivative assets and liability ies) 45,331
Total Net Assets 677,666
1 Asset Exposure expressed as a percentage of Net Assets.
2 Gross Asset Exposure comprises market exposure to investments of
$632,011,000 plus market exposure to derivative instruments of $441,512,000.
3 Portfolio Fair Value comprises investments of $632,011,000 plus derivative
assets of $13,984,000 less derivative liabilities of $13,660,000 (per the
Statement of Financial Position below).
Interim Management ReportPrincipal and Emerging Risks and Uncertainties, Risk
Management
In accordance with the AIC Code, the Board has in place a robust process for
identifying, evaluating and managing the principal risks and uncertainties
faced by the Company, including those that could threaten its business model,
future performance, solvency or liquidity. The Board, with the assistance of
the Manager, has developed a risk matrix which, as part of the risk management
and internal controls process, identifies the key existing and emerging risks
and uncertainties faced by the Company. The list of risks includes: volatility
of emerging markets and market risk; investment performance risk; changing
investor sentiment; cybercrime and information security risk; level of
discount to net asset value risk; lack of market liquidity risk; business
continuity and event management risk; gearing risk; foreign currency exposure
risk; environmental, social and governance (ESG) risk and key person risk.
Full details of these risks and how they are managed are set out on pages 22
to 24 of the Company’s Annual Report for the year ended 30 June 2024 which
is available on the Company’s website at
www.fidelity.co.uk/emergingmarkets. The Audit and Risk Committee continues to
identify new emerging risks and take any necessary action to mitigate their
potential impact. The risks identified are placed on the Company’s risk
matrix and graded appropriately. This process, together with the policies and
procedures for the mitigation of existing and emerging risks, is updated and
reviewed regularly in the form of comprehensive reports considered by the
Audit and Risk Committee. The Board determines the nature and extent of any
risks it is willing to take in order to achieve its strategic objectives.
The Manager also has responsibility for risk management for the Company. It
works with the Board to identify and manage the principal and emerging risks
and uncertainties and to ensure that the Board can continue to meet its
Corporate Governance obligations.
Key emerging issues that the Board has identified include; rising geopolitical
tensions, including contagion of the Ukraine crisis or tensions between China
and Taiwan into the wider region or an increase in tensions in the South China
Sea; rising inflation and the so-called cost of living crisis impacting demand
for UK-listed shares; and climate change, which is one of the most critical
emerging issues confronting asset managers and their investors. Macro and ESG
considerations, including climate change have been included into the
Company’s investment process. The Board continues to monitor these issues.
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, the 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.
Transactions with the Alternative Investment Fund Manager and Related Parties
The Alternative Investment Fund Manager (“AIFM”) has delegated the
Company’s investment management to FIL Investments International.
Transactions with the AIFM and related party transactions with the Directors
are disclosed in Note 12.
Going Concern
In accordance with provision 35 of the 2019 AIC Code of Corporate Governance,
the Directors have assessed the prospects of the Company over a longer period
than the twelve month period required by the “Going Concern” basis. The
Company is an investment fund with the objective of achieving long-term
capital growth by investing in emerging markets. The Board considers long-term
to be at least five years, and accordingly, the Directors believe that five
years is an appropriate investment horizon to assess the viability of the
Company, although the life of the Company is not intended to be limited to
this or any other period.
The Directors have considered the Company’s investment objective, risk
management policies, liquidity risk, credit risk, capital management policies
and procedures, the nature of its portfolio and its expenditure and cash flow
projections. In preparing the Financial Statements, the Directors have
measured the impacts of the war in Ukraine and how the conflict has increased
the risk for business continuity as well as the impact of climate change
risks. The Board has considered the impact of regulatory changes and how this
may affect the Company.
The Board has also assessed the ongoing risks posed on the Company by
continued evolving variants of COVID such as 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. 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 Fidelity and other key service providers confirming that they continued
to service the Company in line with service level agreements and have suitable
and robust business continuity arrangements in place.
The Directors, having considered the liquidity of the Company’s portfolio of
investments (being mainly securities which are readily realisable) and the
projected income and expenditure, are satisfied that the Company is
financially sound and has adequate resources to meet all of its liabilities
and ongoing expenses and can continue in operational existence for a period of
at least twelve months from the date of this Half Year Report.
Accordingly, the Financial Statements of the Company have been prepared on a
going concern basis.
Responsibility Statement
In accordance with Chapter 4 of the Disclosure Guidance and Transparency
Rules, the Directors confirm that to the best of their knowledge:
• the condensed set of financial statements contained within the Half Year
Report has been prepared in accordance with IAS 34 ‘Interim Financial
Reporting’ and gives a true and fair view of the assets, liabilities,
financial position and return of the Company;
• the Half Year Report includes a fair review of the development and
performance of the Company and important events that have occurred during the
first six months of the financial year and their impact on the condensed
financial statements;
• the Half Year Report includes a description of the principal risk and
uncertainties for the remaining six months of the financial year; and
• the Half Year Report includes a fair review of the information concerning
related party transactions.
The Half Year Report has not been audited or reviewed by the Company’s
Independent Auditor.
For and on behalf of the Board
Heather Manners
Chairman
12 March 2025
Statement of Comprehensive Income
for the six months ended 31 December 2024
Six months ended 31 December 2024 unaudited Year ended 30 June 2024 audited Six months ended 31 December 2023 unaudited
Note Revenue $’000 Capital $’000 Total $’000 Revenue $’000 Capital $’000 Total $’000 Revenue $’000 Capital $’000 Total $’000
Revenue
Investment income 4 10,127 – 10,127 19,284 – 19,284 9,449 – 9,449
Derivative income 4 15,830 – 15,830 19,711 – 19,711 7,656 – 7,656
Other income 4 361 – 361 1,252 – 1,252 596 – 596
Total Income 26,318 – 26,318 40,247 – 40,247 17,701 – 17,701
Net (losses)/gains on investments at fair value through profit or loss – (9,533) (9,533) – 81,553 81,553 – 39,483 39,483
Net (losses)/gains on derivative instruments – (14,304) (14,304) – 35,890 35,890 – (15,667) (15,667)
Net foreign exchange losses – (1,108) (1,108) – (1,569) (1,569) – (522) (522)
Total income and gains/(losses) 26,318 (24,945) 1,373 40,247 115,874 156,121 17,701 23,294 40,995
Expenses
Management fees 5 (447) (1,789) (2,236) (935) (3,741) (4,676) (469) (1,875) (2,344)
Other expenses (828) – (828) (1,631) – (1,631) (860) – (860)
Profit/(loss) before finance costs and taxation 25,043 (26,734) (1,691) 37,681 112,133 149,814 16,372 21,419 37,791
Finance costs 6 (11,672) – (11,672) (21,566) – (21,566) (10,201) – (10,201)
Profit/(loss) before taxation 13,371 (26,734) (13,363) 16,115 112,133 128,248 6,171 21,419 27,590
Taxation (1,095) 289 (806) (2,060) (123) (2,183) (1,022) (270) (1,292)
Profit/(loss) after taxation for the period attributable to Participating Preference Shares 12,276 (26,445) (14,169) 14,055 112,010 126,065 5,149 21,149 26,298
Earnings/(loss) per Participating Preference Share (basic and diluted) 7 $0.17 ($0.37) ($0.20) $0.16 $1.29 $1.45 $0.06 $0.23 $0.29
The total column of this statement represents the Company’s Statement of
Other Comprehensive Income prepared in accordance with IFRS. The supplementary
information on the allocation between the revenue account and the capital
reserve is presented under guidance published by the AIC.
The Company does not have any other comprehensive income. Accordingly the
profit/(loss) after taxation for the period is also the total comprehensive
income for the period.
All the profit/(loss) and total comprehensive income is attributable to the
equity shareholders of the Company. There are no minority interests.
No operations were acquired or discontinued in the period and all items in the
above statement derive from continuing operations.
Statement of Changes in Equity
for the six months ended 31 December 2024
Note Share premium account $’000 Capital reserve $’000 Revenue reserve $’000 Total equity $’000
Six months ended 31 December 2024 (unaudited)
Total equity at 30 June 2024 6,291 695,822 51,333 753,446
(Loss)/profit after taxation for the period – (26,445) 12,276 (14,169)
Participating Preference Shares repurchased into Treasury 9 – (47,508) – (47,508)
Dividend paid to shareholders 8 – – (14,103) (14,103)
Total equity at 31 December 2024 6,291 621,869 49,506 677,666
Year ended 30 June 2024
(audited)
Total equity at 30 June 2023 6,291 735,860 54,583 796,734
Profit after taxation for the year – 112,010 14,055 126,065
Repurchase and cancellation of the Company’s own shares 9 – (127,125) – (127,125)
Participating Preference Shares repurchased into Treasury 9 – (24,923) – (24,923)
Dividend paid to shareholders 8 – – (17,305) (17,305)
Total equity at 30 June 2024 6,291 695,822 51,333 753,446
Six months ended 31 December 2023 (unaudited)
Total equity at 30 June 2023 6,291 735,860 54,583 796,734
Profit after taxation for the period – 21,149 5,149 26,298
Participating Preference Shares repurchased into Treasury 9 – (4,827) – (4,827)
Dividend paid to shareholders 8 – – (17,305) (17,305)
Total equity at 31 December 2023 6,291 752,182 42,427 800,900
Statement of Financial Position
as at 31 December 2024
Note 31 December 2024 unaudited $’000 30 June 2024 audited $’000 31 December 2023 unaudited $’000
Non-current assets
Financial assets at fair value through profit and loss 10 632,011 696,753 768,579
Current assets
Derivative assets 10 13,984 25,399 12,766
Amounts held at futures clearing houses and brokers 44,876 44,952 28,400
Other receivables 2,007 8,083 1,989
Cash at bank 1,751 8,794 16,435
62,618 87,228 59,590
Current liabilities
Derivative liabilities 10 13,660 11,857 21,013
Other payables 3,303 18,678 6,256
16,963 30,535 27,269
Net current assets 45,655 56,693 32,321
Net assets 677,666 753,446 800,900
Equity
Share premium account 6,291 6,291 6,291
Capital reserve 621,869 695,822 752,182
Revenue reserve 49,506 51,333 42,427
Total Equity Shareholders’ Funds 677,666 753,446 800,900
Net asset value per Particpating Preference Share 11 $9.77 $10.09 $8.85
Statement of Cash Flows
for the six months ended 31 December 2024
Six months ended 31 December 2024 unaudited $’000 Year ended 30 June 2024 audited $’000 Six months ended 31 December 2023 unaudited $’000
Operating activities
Cash inflow from investment income 11,060 24,168 13,179
Cash inflow from derivative income 11,719 9,769 3,890
Cash inflow from other income – 20 20
Cash outflow from taxation paid (1,096) (2,060) (1,022)
Cash outflow from the purchase of investments (372,144) (695,450) (242,310)
Cash inflow from the sale of investments 417,342 854,047 276,557
Cash outflow from net proceeds from settlement of derivatives 5,809 23,436 (5,742)
Cash outflow from amounts held at futures clearing houses and brokers 76 (26,742) (10,190)
Cash outflow from operating expenses (3,194) (6,217) (3,231)
Net cash inflow from operating activities 69,572 180,971 31,151
Financing activities
Cash outflow from CFD interest paid (10,675) (18,527) (8,599)
Cash outflow from short CFD dividends paid (1,280) (2,726) (1,539)
Cash outflow from dividends paid to shareholders (14,103) (17,305) (17,305)
Cash outflow from repurchase of participating preference shares into treasury (49,449) (22,982) (4,808)
Cash outflow from repurchase and cancellation of Participating Preference Shares – (127,125) –
Net cash outflow from financing activities (75,507) (188,665) (32,251)
Net decrease in cash at bank (5,935) (7,694) (1,100)
Cash at bank at the start of the period 8,794 18,057 18,057
Effect of foreign exchange movements (1,108) (1,569) (522)
Cash at bank at the end of the period 1,751 8,794 16,435
Notes to the Financial Statements
for the six months ended 31 December 2024
1. Principal Activity
Fidelity Emerging Markets 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 and Guidance, 2021 (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 at Level 3, Mill Court La Charroterie, St
Peter Port, Guernsey GY1 1EJ, Channel Islands.
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.
2. Publication of Non-statutory Accounts
The financial statements in this Half Year Report have not been audited by the
Company’s Independent Auditor. The financial information for the year ended
30 June 2024 is extracted from the latest published annual report of the
Company which was delivered to the Guernsey Financial Services Commission.
3. Accounting Policies(i) Basis of Preparation
The interim financial statements for the six months ended 31 December 2024
have been prepared in accordance with International Accounting Standard 34,
‘Interim Financial Reporting’. The interim financial statements should be
read in conjunction with the annual financial statements for the year ended 30
June 2024, which 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.
(ii) Going Concern
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for at least twelve months from
the date of approval of these financial statements. In making their assessment
the Directors have reviewed the income and expense projections, the liquidity
of the investment portfolio, stress testing performed and considered the
Company’s ability to meet liabilities as they fall due. Accordingly, the
Directors consider it appropriate to adopt the going concern basis of
accounting in preparing these financial statements.
4. Income
Six months ended 31 December 2024 unaudited $’000 Year ended 30 June 2024 audited $’000 Six months ended 31 December 2023 unaudited $’000
Investment income
UK dividends 367 362 325
Overseas dividends 9,758 18,900 9,109
UK and overseas scrip dividends – 15 15
Interest on bonds 2 7 –
10,127 19,284 9,449
Derivative income
Dividends received on long CFDs 9,504 8,489 2,325
Interest received on CFDs 740 2,114 1,014
Option Income 5,586 9,108 4,317
15,830 19,711 7,656
Other income
Interest income from cash and cash equivalents and collateral 361 1,232 576
Fee rebate – 20 20
361 1,252 596
Total income 26,318 40,247 17,701
5. Management Fees
Revenue $’000 Capital $’000 Total $’000
Six months ended 31 December 2024 (unaudited)
Management fees 447 1,789 2,236
Year ended 30 June 2024 (audited)
Management fees 935 3,741 4,676
Six months ended 31 December 2023 (unaudited)
Management fees 469 1,875 2,344
Under the Investment Management Agreement (‘IMA’), Fidelity International
is entitled to receive a Management Fee of 0.60% per annum of the Net Asset
Value of the Company. Fees will be payable monthly in arrears and calculated
on a daily basis.
Management fees incurred by collective investment schemes or investment
companies managed or advised by the Investment Manager are reimbursed.
6. Finance Costs
Revenue $’000 Capital $’000 Total $’000
Six months ended 31 December 2024 (unaudited)
Dividends paid on short CFDs 975 – 975
Interest paid on CFDs 10,697 – 10,697
11,672 – 11,672
Year ended 30 June 2024 (audited)
Dividends paid on short CFDs 3,081 – 3,081
Interest paid on CFDs 18,485 – 18,485
21,566 – 21,566
Six months ended 31 December 2023 (unaudited)
Dividends paid on short CFDs 1,517 – 1,517
Interest paid on CFDs 8,684 – 8,684
10,201 – 10,201
7. Earnings/(Loss) per Participating Preference Share
Six months ended 31 December 2024 unaudited Year ended 30 June 2024 audited Six months ended 31 December 2023 unaudited
Revenue earnings per Participating Preference Share $0.17 $0.16 $0.06
Capital (loss)/earnings per Participating Preference Share ($0.37) $1.29 $0.23
Total (loss)/earnings per Participating Preference Share – basic and diluted ($0.20) $1.45 $0.29
The earnings/(loss) per Participating Preference Share is based on the
profit/(loss) after taxation for the period divided by the weighted average
number of Participating Preference Shares in issue during the period, as shown
below:
Six months ended 31 December 2024 unaudited $’000 Year ended 30 June 2024 audited $’000 Six months ended 31 December 2023 unaudited $’000
Revenue profit after taxation for the period 12,276 14,055 5,149
Capital (loss)/profit after taxation for the period (26,445) 112,010 21,149
Total (loss)/profit after taxation for the period attributable to Participating Preference Shares (14,169) 126,065 26,298
Number Number Number
Weighted average number of Participating Preference Shares in issue 71,877,832 86,936,701 90,985,735
8. Dividend Paid to Shareholders
Six months ended 31 December 2024 Unaudited $’000 Year ended 30 June 2024 audited $’000 Six months ended 31 December 2023 unaudited $’000
Dividend Paid
Dividend of 20 cents pence per ordinary share paid for the year ended 30 June 2024 14,103 – –
Dividend of 19 cents pence per ordinary share paid for the year ended 30 June 2023 – 17,305 17,305
No dividend has been declared in respect of the six months ended 31 December
2024 (six months ended 31 December 2023: none).
9. Share Capital
31 December 2024 Number of shares 30 June 2024 Number of shares 31 December 2023 Number of shares
Authorised
Founder shares of no par value 1,000 1,000 1,000
Issued
Participating Preference Shares held outside Treasury
Beginning of the year 74,646,287 91,100,066 91,100,066
Repurchase and cancellation of the Company’s own Participating Preference Shares – (13,531,881) –
Participating Preference Shares repurchased into Treasury (5,311,585) (2,921,898) (637,175)
End of the period 69,334,702 74,646,287 90,462,891
Participating Preference Shares held in Treasury*
Beginning of the period 2,921,898 – –
Participating Preference Shares repurchased into Treasury 5,311,585 2,921,898 637,175
End of the period 8,233,483 2,921,898 637,175
Total Participating Preference Shares 77,568,185 77,568,185 91,100,066
* The ordinary shares held in Treasury carry no rights to vote, to receive a
dividend or to participate in a winding up of the Company.
The Board of Directors is mindful that the Company’s shares have traded at a
discount to NAV for some time, and frequently deliberates appropriate discount
control mechanisms to address the imbalance between the demand and supply of
the Company’s shares. The Board intends to continue using its buyback
programme to address the discount to NAV with the ambition that it may
ultimately be maintained in single digits in normal market conditions on a
sustainable basis.
The costs associated with the repurchase of the shares of $47,508,000 were
charged to the capital reserve for the year ended 31 December 2024.
The Company may issue an unlimited number of Shares of no par value.
Founder Shares
All of the Founder Shares were issued on 6 June 1989. The Founder Shares were
issued at $1 each par value.
The Founder Shares are not redeemable. At the Extraordinary General Meeting of
the Company on 30 October 2009 and in accordance with The Companies
(Guernsey) Law, 2008 it was approved that each Founder Share be redesignated
as no par value shares.
The Founder Shares confer no rights upon holders other than at general
meetings, on a poll, every holder is entitled to one vote in respect of each
Founder Share held.
10. Fair Value Hierarchy
The Company is required to disclose the fair value hierarchy that classifies
its financial instruments measured at fair value at one of three levels,
according to the relative reliability of the inputs used to estimate the fair
values.
Classification Input
Level 1 Valued using quoted prices in active markets for identical assets
Level 2 Valued by reference to inputs other than quoted prices included in level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly
Level 3 Valued by reference to valuation techniques using inputs that are not based on observable market data
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset. The table below sets out the Company’s fair value hierarchy:
31 December 2024 (unaudited) Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000
Financial assets at fair value through profit or loss
Investments in equity securities 621,157 – – 621,157
Equity linked notes – 6,377 – 6,377
Investee funds – – 4,477 4,477
Derivative instrument assets – Futures contracts 7,257 – – 7,257
Derivative instrument assets – Options 1,178 90 – 1,268
Derivative instrument assets – CFDs – 4,830 – 4,830
Derivative instrument assets – forward currency contract – 629 – 629
629,592 11,926 4,477 645,995
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities – Futures contracts 351 – – 351
Derivative instrument liabilities – Options 1,262 448 – 1,710
Derivative instrument liabilities – CFDs – 11,599 – 11,599
1,613 12,047 – 13,660
30 June 2024 (audited) Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000
Financial assets at fair value through profit or loss
Investments in equity securities 686,519 – 506 687,025
Equity linked notes – 4,555 – 4,555
Debt instruments – 316 – 316
Investee funds – – 4,857 4,857
Derivative instrument assets – Futures contracts 268 – – 268
Derivative instrument assets – Options 6,412 11 – 6,423
Derivative instrument assets – CFDs – 18,344 – 18,344
Derivative instrument assets – forward currency contracts – 364 – 364
693,199 23,590 5,363 722,152
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities – Futures contracts 1,889 – – 1,889
Derivative instrument liabilities – Options 1,198 2,007 – 3,205
Derivative instrument liabilities – CFDs – 6,763 – 6,763
3,087 8,770 – 11,857
31 December 2023 (unaudited) Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000
Financial assets at fair value through profit or loss
Investments in equity securities 760,349 – 810 761,159
Equity linked notes – 2,334 – 2,334
Investee funds – – 5,086 5,086
Derivative instrument assets – Futures contracts 429 – – 429
Derivative instrument assets – CFDs – 12,337 – 12,337
760,778 14,671 5,896 781,345
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities – Futures contracts 6,791 – – 6,791
Derivative instrument liabilities – Options 200 42 – 242
Derivative instrument liabilities – CFDs – 13,980 – 13,980
6,991 14,022 – 21,013
As the key input into the valuation of Level 3 investments is official
valuation statements from the Investee Fund, we do not consider it appropriate
to put forward a sensitivity analysis on the basis that insufficient value is
likely to be derived by the end users of this report.
The following table summarises the change in value associated with Level 3
financial instruments carried at fair value for the six months ended 31
December 2024, year ended 30 June 2024 and for the six months ended 31
December 2023:
31 December 2024 $’000 30 June 2024 $’000 31 December 2023 $’000
Opening balance 5,363 6,115 6,115
Sales (1,057) (8,384) (4,178)
Realised losses (9,105) (19,431) (8,900)
Net change in unrealised gains 9,276 27,063 12,859
Closing balance 4,477 5,363 5,896
The Company’s holdings in Russian securities have been fair valued at nil as
at 31 December 2024 (year ended 30 June 2024: nil, six month ended 31 December
2023: nil) as a result of trading being suspended on international stock
exchanges. These Russian securities have a carrying cost of $90,932,976 as at
30 June 2024 (year ended 30 June 2024: $90,932,976, six month ended
31 December 2023: $90,932,976).
The Company’s policy is to recognise transfers in and transfers out at the
end of each accounting year.
11. Net Asset Value per Participating Preference Share
31 December 2024 unaudited 30 June 2024 audited 31 December 2023 unaudited
Net assets $677,666,000 $753,446,000 $800,900,000
Participating Preference Shares in issue 69,334,702 74,646,287 90,462,891
Net Asset Value per Participating Preference Share $9.77 $10.09 $8.85
12. Transactions with the Manager and Related Parties
FIL Investment Services (UK) Limited is the Company’s Alternative Investment
Fund Manager and has delegated portfolio management to FIL Investment
Management International. Both companies are Fidelity group companies.
Details of the current fee arrangements are given in Note 5 above. During the
period, management fees of $2,236,000 (year ended 30 June 2024: $4,676,000 and
six months ended 31 December 2023: $2,344,000) were payable to the Manager.
Amounts payable at the reporting date are included in other payables.
At the date of this report, the Board consisted of five non-executive
Directors all of whom are considered to be independent by the Board. None of
the Directors has a service contract with the Company.
From 1 July 2024, the Chairman receives an annual fee of £52,000 (until 30
June 2024: £50,000), the Chairman of the Audit Committee and Senior
Independent Director receive an annual fee of £39,500 (until 30 June 2024:
£38,000) and the other Directors receive an annual fee of £37,500 (until 30
June 2024: £36,000). The Directors received for the last financial years
fees totalling £205,829 (2023: £221,115).
The following members of the Board hold Participating Preference Shares in the
Company at the date of this report: Heather Manners 10,000 shares, Torsten
Koster 15,000 shares, Dr Simon Colson 4,416 shares, Katherine Tsang 8,000
shares and Mark Little 2,850 shares.
The financial information contained in this Half-Yearly Results Announcement
does not constitute statutory accounts as defined in section 435 of the
Companies Act 2006. The financial information for the six months ended 31
December 2024 and 31 December 2023 has not been audited or reviewed by the
Company’s Independent Auditor.
The information for the year ended 30 June 2024 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies, unless otherwise stated. The report of the Auditor on
those financial statements contained no qualification or statement under
sections 498(2) or (3) of the Companies Act 2006.
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
A copy of the Half-Yearly Report will shortly be submitted to the National
Storage Mechanism and will be available for inspection at
www.morningstar.co.uk/uk/NSM
The Half-Yearly Report will also be available on the Company's website at
www.fidelity.co.uk/emergingmarkets where up to date information on the
Company, including daily NAV and share prices, factsheets and other
information can also be found.
END
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