Fidelity Emerging Markets reports 99.3% share price return

Fidelity Emerging Markets Limited (LON:FEML) has announced its Final Results for the year ended 30 June 2026

Performance Highlights 

• Share price total return of +99.3% and NAV total return of +92.3% significantly outperforms the benchmark total return of +48.2%
• Five-year performance comfortably clears hurdle for conditional tender offer
• Enhanced investment tool kit adds significant value
• The Board has announced a final dividend of $0.33 per Participating Preference Share.

Financial Highlights

1 The value of the portfolio exposed to market price movements.

2 Alternative Performance Measure – refer below and to the Glossary of Terms.

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 year.

Chairman‘s Statement

I am pleased to present your Company’s 37th annual report. As we reach the fifth anniversary of Fidelity’s appointment as manager, it is gratifying to be able to report a fourth successive year in which Fidelity Emerging Markets Limited (‘the Company’)’s net asset value (‘NAV’) total returns have beaten the Company’s benchmark, the MSCI Emerging Markets Total Return Index (‘the Index’), and a third year of strong absolute returns in both the NAV and the share price. While NAV performance can be seen as the best measure of a fund manager’s skill, the share price arguably represents investors’ recognition of that skill. Your Board and I are delighted that the Company’s share price total return has outperformed its NAV total return for a third year in a row, with both outperforming the Index. This is a resounding vindication of your Portfolio Managers, Nick Price and Chris Tennant, and their broad and flexible investment approach, not just an output of an increasingly positive period for emerging markets as a whole. Over the 12 months under review the performance has been truly stellar, and the Board and I would like to congratulate the Portfolio Managers and their team on these results and thank them for their efforts. In fact, performance has been so strong that your Company ranked in the top 10 of all investment trusts (over 200 of them) for NAV and share price total return performance over both one and three years to 30 June 2026, ahead of all peers in the Association of Investment Companies’ (AIC) Global Emerging Markets sector.

Overview

During the 12-month period to 30 June 2026, the Company’s NAV total return was 92.3% in GBP terms, compared with 48.2% for the Index. The share price total return was 99.3% – effectively doubling investors’ money – while the discount to NAV narrowed from 10.5% at the beginning of the period to 7.4% at the end, spending most of the year in single figures. Performance was strong across the whole period, despite continued geopolitical tensions, including the war in Iran, which has put considerable upward pressure on energy prices – and inflation more broadly – throughout much of the world.

I noted in my Chairman’s Statement in last year’s annual report that sentiment towards emerging markets appeared to have turned a corner after a long period in which US equities had been preeminent. The return from the Index in the period under review is further evidence of this; indeed, it is roughly double the 25.8% total return of the S&P 500 index (Net Total Return, GBP), the main US benchmark. However, I firmly believe that it would be wrong for investors to conclude that such strong relative and absolute performance mean further upside is limited. After 18 years in a consolidation pattern, emerging markets are only just stepping into the spotlight on the world stage, having played second fiddle ever since the global financial crisis.

The magnitude of your Company’s outperformance in the year under review is testament both to the Portfolio Managers’ skill in stock picking and their full deployment of the broad investment toolkit available to them. (For a full explanation of the toolkit, please see above) It is particularly notable that in a strongly positive year for the market as a whole, the short positions in the portfolio still added value, accounting for around a quarter of the excess return versus the Index. Yield enhancement strategies (selling Options to generate income) and the allocation to small- and mid-sized companies – a notable differentiating factor versus peers – also contributed. The ability to take such positions is a key advantage of the closed-end structure, while the execution of the strategy is greatly facilitated by the research efforts of Fidelity’s large team of locally based emerging markets analysts, as well as derivatives and risk management specialists.

The portfolio continues to include Russian assets which are currently valued at zero given the inability to trade them. Any future resolution of the conflict and relaxation of applicable sanctions could therefore provide an uplift to NAV if those assets were able to recover realisable value. Further details can be found below.

The Portfolio Managers’ report on the following pages contains a wealth of detail on the contributors to absolute and relative performance in the period under review. However, I would draw attention particularly to the very high active share (a measure of how much the portfolio differs from the Index) and the skill with which the team has managed volatility in semiconductors. With the rapid development of artificial intelligence (‘AI’) technologies continuing to dominate the headlines, having appropriate exposure to large index constituents such as Korea’s SK Hynix and Taiwan Semiconductor Manufacturing Company has been essential. Yet AI, with its associated need for large-volume data storage and power, is not just a technology story; it is also a resources story, and your Portfolio Managers’ stock picking within the materials and industrials sectors has also contributed steadily to returns while the majority of investors have been more narrowly focused on IT.

Due diligence trip

In April 2026, your Board was fortunate to have the opportunity to visit Hong Kong and China with Fidelity’s team. In September 2025, Nick Price relocated from London to Hong Kong, which is a hub for Fidelity International’s activity in Asia. With Asia representing around 80% of the emerging markets universe by market capitalisation, it is an important part of the opportunity set, and it was good to see Nick in his new home and meet the large team of locally based analysts. During the trip, we were able to see the investment team working together, and to hear from them and some of the Company’s key holdings about their confidence in the future. We also had an extensive meeting with the risk management team – the largest outside the UK – and were both encouraged and reassured by the robustness and highly detailed nature of their processes.

Dividend

The Board is recommending a final dividend of $0.33 per Participating Preference Share for the year ended 30 June 2026 (2025: $0.26) for approval by shareholders at the Annual General Meeting (‘AGM’) to be held on 1 December 2026. As ever, I would highlight that the Board does not have a fixed dividend policy, because income is an output rather than an aim of the investment process, and therefore no guarantee can be offered as to the level of any future dividends.

Board composition

As noted in the half-year report, Katherine Tsang completed nine years’ service (the recommended maximum under the AIC Code of Corporate Governance) in July 2026, and as such she intends to stand down at the 2026 AGM. A search has been completed to find a suitably qualified individual to succeed her, the Board is pleased to announce the appointment of Dr Shefaly Yogendra and a separate announcement in relation to this appointment will be made shortly. There have been no other changes to the Board of Directors in the period under review.

Discount management

The discount to NAV narrowed during the year, beginning at 10.5% and ending at 7.4%, as noted above. After narrowing steadily between July and October 2025 to around 6%, the discount remained broadly between 5% and 10% for the remainder of the period.

The Board remains committed to using share repurchases to help reduce the volatility of discount to NAV. Any share repurchases are completed at prices, which are accretive to NAV for ongoing shareholders. During the year under review, we bought back 8,527,914 shares in the market (excluding the c.25% of shares in issue repurchased from Strathclyde Pension Fund in November 2025), representing 13.2% of shares in issue at the start of the period. At the AGM on 1 December 2026, we will seek to renew the existing annual authority to repurchase up to 14.99% of our Participating Preference Shares.

It is gratifying that although the pace of regular buybacks has remained virtually unchanged compared with the previous year, strong performance has meant that total assets and market capitalisation have both risen substantially. This greater scale supports liquidity and helps maintain the Company’s relevance to wealth managers and other investors for whom market liquidity is an important consideration. Fidelity has also seen increased engagement from wealth managers during the year.

We are pleased to be a popular choice among retail investors. Retail investors represented 18.2% of the shareholder base on 30 June 2026, compared with 4.1% on 30 June 2025, and the Company featured on several investment trust best-selling lists during the period. The Board welcomes this broadening of the shareholder base and the increased participation of retail investors. Fidelity has continued to raise the Company’s profile through its marketing, media, social media and distribution activity. The Board will continue to support activity aimed at attracting new investors, broadening demand for the Company’s shares and, over time, supporting a narrower discount.

Extraordinary General Meetings

The Company held two Extraordinary General Meetings during the financial year. The first, in October 2025, approved the Strathclyde Repurchase, which was covered in detail in last year’s Chairman’s Statement. The repurchase increased NAV per share by approximately 4.5%.

The second EGM was held in May 2026 after 63% of the share buyback authority granted at the 2025 AGM had been used. Shareholders approved a renewed authority to repurchase up to 6,201,500 shares, representing 14.99% of the shares in issue at the latest practicable date. The resolution was approved by 100% of votes cast, on a turnout of 71%.

Annual General Meeting

This year’s AGM will be held on 1 December 2026 at 8:30 a.m. at the registered office of the Company, Level 3, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 1EJ. The Notice of the AGM, containing full details of the business to be conducted at the meeting. Your attention is also drawn to the Corporate Governance section of the Directors’ Report where resolutions relating to special business are explained. 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 for institutional shareholders via the CREST system, CREST messages must be received by the issuer’s agent (ID number 3RA50) not later than 8:30 a.m. on 29 November 2026. 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.

Articles of Incorporation

The Board is proposing to replace article 17 of the articles of incorporation relating to the determination of net asset value and the definition of the “Valuation Day”. These changes simplify these provisions and will allow the Directors to make amendments to the timing and methodology of determining the net asset value without updating the articles. They will allow the timing to be regularised with the UK time zone to make the process of determining and reporting more efficient. However, it is intended to continue to release the net asset value on a daily basis and there is no current intention to change the methodology for the calculation.

A full tracked version of all the changes proposed to the Articles is available at https://investment-trusts.fidelity.co.uk/fidelity–emerging-markets. The principal changes proposed to the Articles are set out in more detail in the Directors’ Report.

Outlook

One of the relative headwinds facing emerging markets in recent years has been investor appetite, which has been far more focused on developed markets, most particularly the US. While in the long-term stock market performance is driven mainly by corporate earnings, in the short term it may be driven by momentum, as the weight of money pushes share prices up (or down). However, to anyone suspecting that they may have missed the boat after such a stellar year for your Company and its investment universe, I would point out two things. First, UK investors have in fact continued to pull money out of emerging markets funds in aggregate during the year under review: figures from the Investment Association (the industry body for UK investment managers) show that a net £882m was withdrawn from global emerging markets funds between July 2025 and June 2026, despite six months of positive net flows between October and March. Meanwhile, the North America sector (which is overwhelmingly US rather than Canada) saw net inflows of over £500m. Despite the net outflows from emerging markets, your Board remains confident that emerging markets are at the foothills of what can be achieved over the coming years. The second thing is that emerging markets as a group are on a far sounder economic footing than most large developed markets, which are beset by geopolitical tensions, groaning under the weight of enormous government debt and battling food and energy price inflation, all of this while struggling to generate meaningful economic growth or productivity gains. While developed markets are still reaping the whirlwind of Covid-era stimulus, emerging markets have gone through the economic pain of the pandemic and are leaner, fitter and more self-sufficient as a result. So even after a standout year in the markets, I would venture that the best is yet to come from the huge and diverse opportunity set in which your Company invests.

It is, however, an inescapable truth that markets can go down as well as up. This is one of the reasons why Nick, Chris and the team deploy such a broad set of tools, including the ability to take short positions, as well as ensuring that the Company’s holdings are well diversified across countries, themes and sectors. The resulting portfolio looks genuinely different from the majority of peers and is arguably better positioned to offer a degree of downside protection should a period of market consolidation or retrenchment occur.

Following the five-year performance conditional tender offer calculation date on 30 September 2026, I can confirm that the Company’s NAV total return outperformed the Index over the relevant five-year period and, as a result, the 25% tender offer will not proceed. It is pleasing to see this result and the sustained performance, discipline and rigour of the investment process over a longer performance period. Your Board plans to renew the conditional tender offer on the same terms. The new five year review period will be 1 July 2026 to 30 June 2031, this period has been adjusted slightly to align with the Company’s financial year end.

The Company has committed to hold a continuation vote every five years. This allows shareholders the opportunity to decide on the long-term future of the Company. The next continuation vote will take place at this year’s AGM on Tuesday, 1 December 2026. Given the strong performance of the Company your Board unanimously recommends that shareholders vote in favour of continuation.

Heather Manners , Chairman

5 October 2026