Fidelity Special Values PLC — Annual Report 2022

Nov 11, 2022

Fidelity Special Values PLC

| Annual Report 2022

FIDELITY SPECIAL VALUES PLC

Annual Report for the year ended 31 August 2022

Investment Objective and Overview

Fidelity Special Values PLC aims to achieve long term capital growth primarily through investment in equities (and their related financial instruments) of UK companies which the Investment Manager believes to be undervalued or where the potential has not been recognised by the market.

The Company aims to achieve long term capital growth for Shareholders by investing in 'special situations'. It aims to seek out underappreciated companies primarily listed in the UK, but may invest up to 20% of total net assets outside of UK companies.

It is an actively managed contrarian investment Company that thrives on volatility and uncertainty. Supported by an extensive research team, the Portfolio Manager looks to invest in

out-of-favour companies, having spotted potential triggers for positive change believed to have been missed by others.

By building a portfolio of stocks that are at different stages of their recovery process, the intention is to deliver outperformance across different market environments.

During the year, the Company's net asset value per ordinary share total return decreased by 4.4%

and the share price total return by 13.5%, whilst the FTSE All-Share Index (Benchmark Index) increased by 1.0%. Until April 2022, the Company's shares mostly traded at a premium and the Board authorised the issue of 11,070,000 shares in the reporting year to meet demand. Since then, there has been turmoil in the markets and shares having been trading at a discount.

Andy Irvine, Chairman

At a Glance

The Company's net asset value per ordinary share decreased by 4.4% and the share price by 13.5%, whilst the Benchmark Index increased by 1.0% (all performance data on a total return basis).

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

1 Includes reinvested income.

2 Alternative Performance Measures (see page 81).

3 Special dividend from the substantial income generated for the year ended 31 August 2019.

-13 27

As at 31 August 2022

Shareholders' Funds

£922.6m

Market Capitalisation

£844.3m

Capital Structure Ordinary Shares of 5 pence each

324,098,920

Summary of the key aspects of the Investment Policy

The investment approach is flexible, with positions in large, medium and smaller sized companies, across all industries. The Company may make limited investments in companies outside of the UK.

The Company may also invest in other transferable securities, collective investment schemes, money market instruments, cash and deposits, and is also able to use derivatives for efficient portfolio management and investment purposes.

The Company is able to gear the portfolio and the Board takes the view that long term returns for Shareholders can be enhanced by the use of gearing in a carefully considered and monitored way.

Financial Highlights

	2022	2021
Assets at 31 August
Shareholders' funds	£922.6m	£954.1m
Net Asset Value ("NAV") per ordinary share1	284.67p	304.79p
Dividends for the year to 31 August
Final dividend proposed per ordinary share	5.45p	4.50p
Interim dividend paid per ordinary share	2.30p	2.17p
Total dividends for the year	7.75p	6.67p
Share price and discount data for the year ended 31 August
Share price at the year end	260.50p	308.50p
Share price: year high	315.00p	309.00p
Share price: year low	250.00p	169.00p
(Discount)/Premium at year end1	(8.5%)	1.2%
Premium: year high	2.1%	3.1%
Discount: year high	(10.7%)	(12.3%)
Ongoing Charges for the year ended 31 August1, 2	0.69%	0.76%

1 Alternative Performance Measures (see pages 80 and 81).

2 Ongoing Charges (excluding finance costs and taxation) expressed as a percentage of the average net asset values for the year (prepared in accordance with guidance issued by the Association of Investment Companies ("AIC")). A definition of Ongoing Charges is in the Glossary of Terms on page 93.

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

1 Includes reinvested income.

Sources: Fidelity and Datastream. Past Performance is not a guide to future returns.

Contents

Chairman's Statement Read more on pages 02 to 05

Portfolio Manager's Review Read more on pages 06 to 09

Spotlight on the Top 10 Holdings Read more on pages 10 and 11

Ten Year Record Read more on page 18

Strategy

Chairman's Statement	02
Portfolio Manager's Review	06
Spotlight on the Top 10 Holdings	10
Portfolio Listing	12
Distribution of the Portfolio	16
Ten Year Record	18
Summary of Performance Charts	19
Attribution Analysis	21
Strategic Report	22
ESG and Sustainable Investing at Fidelity International	30
ESG in the Investment Process	32

Governance

Board of Directors	36
Directors' Report	37
Corporate Governance Statement	41
Directors' Remuneration Report	45
Statement of Directors' Responsibilities	48
Report of the Audit Committee	49

Financial

Independent Auditor's Report	51
Income Statement	57
Balance Sheet	58
Statement of Changes in Equity	59
Cash Flow Statement	60
Notes to the Financial Statements	61
Alternative Performance Measures	80
Financial Calendar	82

Information for Shareholders

Notice of Meeting	83
Shareholder Information	87
Data Protection	89
Alternative Investment Fund Manager's Disclosure	90
Glossary of Terms	92

Chairman's Statement

I have pleasure in presenting the Annual Report of Fidelity Special Values PLC for the year ended 31 August 2022.

Andy Irvine, Chairman

£922.6m

(As at 31 August 2022) Shareholders' Funds

-4.4%

(Year ended 31 August 2022) Net Asset Value per Ordinary Share total return

-13.5%

(Year ended 31 August 2022) Share Price total return

+1.0%

(Year ended 31 August 2022) Benchmark Index total return

The year under review has been overshadowed by Russia's invasion of Ukraine. The ongoing ramifications of this tragic war are being felt by people, businesses and economies around the world. It has been a particularly challenging environment for investors to navigate with high degrees of volatility and uncertainty. Most notably, high inflation, rising interest rates, the spiralling cost of living and an energy crisis have had significant effects on returns.

While the economic outlook remains challenging and this may persist for some time, there is room for optimism for stock pickers looking to invest in opportunities others have overlooked. Fidelity Special Values PLC is run with a contrarian, value-style approach. It looks for 'special situations', predominantly in UK companies, with a welldiversified portfolio across sectors, including small and mid-cap companies. This provides ample opportunity for the many research ideas employed to bear fruit over time as others in the market come to recognise the value of previously unloved stocks.

The Portfolio Manager, Alex Wright, who recently completed ten years at the helm of the Company, explains in his review why he believes UK equities are attractively valued relative to other international markets. He sees great potential in unloved stocks and sectors. Though the environment is uncertain, he believes that these markets will provide attractive investment opportunities. For example, the current environment of higher inflation and interest rates is beneficial for banks and he has been adding to names in the sector where positive earnings have bucked wider trends.

Performance

The Company's performance for the reporting year has lagged the Benchmark Index (FTSE All-Share Index), with a net asset value ("NAV") return of -4.4% and a share price return of -13.5%. In comparison, the Benchmark Index returned +1.0%. However, both the NAV and share price performance over three, five and ten years remains ahead of the Index as can be seen from the chart on the Financial Highlights page. The year end marked ten years of Alex's tenure as Portfolio Manager and performance over this period has been very strong with a NAV return of +183.3% and a share price return of +208.9%, compared to a Benchmark Index return of +92.7%. (All performance data on a total return basis). Alex is to be congratulated on achieving this remarkable performance over his tenure.

Outlook

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

At the time of writing, the UK Government had announced a series of fiscal measures to kick-start UK economic growth. Markets have reacted negatively so far. Gilt yields have risen sharply and sterling has been under pressure against the euro and the dollar. There is significant

scepticism as to whether these measures will work as intended. It is against this backdrop that the Company and its investee companies operate. There will doubtless be further periods of heightened volatility in the share price and Shareholders would do well to take a long term view of the investment horizon. The investment strategy of the Company remains resolute.

OTHER MATTERS

Discount/Premium and Share Repurchases/Issues

Under the Company's discount management policy, the Board seeks to maintain the discount in single digits in normal market conditions and will repurchase shares to help stabilise the share price discount.

The Board will approve the issuance of shares if the Company's shares are trading at a sufficient level of premium to ensure that it adds value for Shareholders and that the issue of shares is not dilutive. Issuing shares increases the size of the Company, making it more liquid and allowing costs to be spread over a larger pool of assets.

Over the reporting year, the Company's shares traded between a premium of 2.1% and a discount of 10.7% and closed at a discount of 8.5% at the year ended 31 August 2022. The peer group average discount as at that date was 10.4%.

Until April 2022, the Company's shares mostly traded at a premium and in order to meet demand, the Company issued a total of 11,070,000 ordinary shares from its block listing facilities. In order to ensure that the Company was able to meet demand for shares, it acquired a block listing from the UK Listing Authority for 30,000,000 shares which was effective from 7 February 2022. Since the end of the reporting year and as at the date of this Annual Report, the Company has not issued any further shares.

The Company did not carry out any share repurchases in the reporting year.

The Board continues to monitor the level of the Company's discount/premium closely and will take action when it believes that it will be effective and to the benefit of Shareholders.

Gearing

The Board has agreed with the Portfolio Manager that if he is able to find attractive opportunities in the market, then the Company's gearing should be allowed to rise. Combined with Alex's contrarian and value-focused investment philosophy, and also making good use of the Company's structural advantages over its openended counterparts, this should continue to add value for Shareholders over the long term.

It is the current intention of the Board that, in normal market conditions, the Portfolio Manager will maintain net gearing in the range of 0% to 25%. The Company remained within these levels throughout the reporting year. The maximum level of gross gearing allowed is 40%.

Dividend

The Board's policy is to pay dividends twice yearly in order to smooth the dividend payments for the Company's financial year. The Company's revenue return for the year to 31 August 2022 was 9.42 pence per share (2021: 7.22p), and an interim dividend of 2.30 pence per share was paid on 22 June 2022 (2021: 2.17p).

The Board recommends a final dividend of 5.45 pence per share for the year ended 31 August 2022 (2021: 4.50 pence) for approval by Shareholders at the Annual General Meeting ("AGM") on 14 December 2022. The interim and final dividends (total of 7.75 pence) represent an increase of 1.08 pence (16.2%) over the 6.67 pence paid for the year ended 31 August 2021. Post the pandemic, the Company returned to paying dividends entirely from the revenue earned in the prior year and is doing the same for this year's dividend.

The final dividend will be payable on 11 January 2023 to Shareholders on the register at close of business on 2 December 2022 (ex-dividend date 1 December 2022).

Board of Directors

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

As part of the Board's succession plan, I will retire as Chairman of the Board and as a Non-Executive Director at the AGM on 14 December 2022. I am pleased to say that Dean Buckley will succeed me as Chairman of the Board and Nigel Foster will succeed Dean as Senior Independent Director at the same time.

Following a formal recruitment process, I am pleased to welcome Ominder Dhillon to the Board as a Non-Executive Director with effect from 23 June 2022. Ominder is a Non-Executive Director for The City of London Investment Trust plc and a Senior Advisor to IC Research, a fintech institutional market intelligence platform. He is also a Trustee to a UK charity, Facing History & Ourselves. He has more than 29 years' experience of asset management covering institutional, wholesale and retail channels. Being newly appointed, Ominder will stand for election at the AGM on 14 December 2022.

In accordance with the UK Corporate Governance Code for Directors of FTSE 350 companies, all Directors, with my exception, are subject to annual re-election at the AGM on 14 December 2022. The Directors' biographies can be found on page 36, and, between them, they have a wide range of appropriate skills and experience to form a balanced Board for the Company.

Chairman's Statement continued

Continuation Vote

In accordance with the Company's Articles of Association, the Company is subject to a continuation vote every three years. The next such vote is at this year's AGM on 14 December 2022.

The Company's performance record has been strong since it launched on 17 November 1994. An investment of £1,000 at launch would have returned £21,300 as at 31 August 2022 (with dividends reinvested). Although the one year NAV and share price returns have underperformed the Benchmark Index, performance over three and five years remains strong and well ahead of the Benchmark Index. In addition, the prospects of the Company over a five year investment horizon can be found in the Viability Statement on page 27. Therefore, your Board recommends that Shareholders vote in favour of the continuation. (All performance data is on a total returns basis).

Final Thoughts

Having served for over six years as Chairman and twelve years as a Non-Executive Director, I shall retire from the Board at the conclusion of the AGM on 14 December 2022. It has been such a privilege to serve on your Board and be part of a great team of Non-Executive Directors and Managers, past and present. As a team, we have all worked together to promote the success of the Company for the benefit of the investors.

I would like to thank all of our loyal Shareholders for investing in the Company, and my fellow Directors and the team at Fidelity for all the outstanding support I have been given. I look forward to seeing the Company going from strength to strength.

Meanwhile, I hope to see some of you at our AGM on 14 December 2022. Details of the Company's AGM are on the next page.

Andy Irvine Chairman 3 November 2022

Annual General Meeting – Wednesday, 14 December 2022 at 11.30 am

The AGM of the Company will be held at 11.00 am on Wednesday, 14 December 2022 at 4 Cannon Street, London EC4M 5AB (nearest tube stations are St Paul's or Mansion House) and virtually via the online Lumi AGM meeting platform. Full details of the meeting are given in the Notice of Meeting on pages 83 to 86.

For those shareholders who would prefer not to attend in person or for whom travel is not convenient, we will livestream the formal business and presentations of the meeting online.

Alex Wright, the Portfolio Manager, will be making a presentation to shareholders highlighting the achievements and challenges of the year past and the prospects for the year to come. He and the Board will be very happy to answer any questions that shareholders may have. Copies of his presentation can be requested by email at investmenttrusts@fil.com or in writing to the Secretary at FIL Investments International, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.

Properly registered shareholders joining the AGM virtually will be able to vote on the proposed resolutions. Please see Note 8 to the Notes to the Notice of Meeting on page 85 for details on how to vote virtually. Investors viewing the AGM online will be able to submit live written questions to the Board and the Portfolio Manager and we will answer as many of these as possible at an appropriate juncture during the meeting.

Further information and links to the Lumi platform may be found on the Company's website www.fidelity.co.uk/ specialvalues. On the day of the AGM, in order to join electronically and ask questions via the Lumi platform, shareholders will need to connect to the website https://web.lumiagm.com.

Please note that investors on platforms such as Fidelity Personal Investing, Hargreaves Lansdown, Interactive Investor or AJ Bell Youinvest will need to request attendance at the AGM in accordance with the policies of your chosen platform. They may request that you submit electronic votes in advance of the meeting. If you are unable to obtain a unique IVC and PIN from your nominee or platform, we will also welcome online participation as a guest. Once you have accessed https://web.lumiagm.com from your web browser on a tablet or computer, you will need to enter the Lumi Meeting ID which is 110-440-023. You should then select the 'Guest Access' option before entering your name and who you are representing, if applicable. This will allow you to view the meeting and ask questions but you will not be able to vote.

Portfolio Manager's Review

Alex Wright was appointed as Portfolio Manager of Fidelity Special Values PLC on 1 September 2012. He joined Fidelity in 2001 as a research analyst and covered a number of sectors across the market cap spectrum, both in the UK and developed and emerging Europe. He became a portfolio manager in 2007, launching the Fidelity UK Smaller Companies Fund in 2008. He is also Portfolio Manager of Fidelity Special Situations Fund.

Question

It has now been 10 years since you took on stewardship of the Company, delivering impressive returns for shareholders. What has stood out to you during that time?

Answer

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

The past decade has been a highly unusual one, both from a political and an economic perspective. Few would have predicted the UK leaving the EU, Donald Trump becoming US president or the COVID-19 pandemic and subsequent lockdowns; all events that had substantial effects on the stock markets in which your Company invests. The past decade has also proved to be historically unusual, in sofaras we have experienced a prolonged period of very subdued inflation, low interest rates and modest and volatile economic growth. This environment has very much favoured growth companies, at the expense of the attractively valued companies with lower downside potential in which we seek to invest. Despite this challenging environment, over the last ten years the Company recorded a NAV total return of +183.3%, and a share price total return of +208.9%, which compares to a total return of +92.7% for the FTSE All Share Index (the Company's Benchmark Index).

Stock selection rather than any big sector or top-down decisions has been the key driver of performance. By targeting unloved stocks on depressed valuations and leveraging Fidelity International's ("Fidelity") research resources, we have managed to unearth investments that have generated outsized gains, while limiting losses when turnarounds have not worked out. Investors tend to dislike companies where something has gone wrong and those going through a period of uncertainty, but things are never quite as black or white as they appear. Our analysts use their sector expertise and wide networks to conduct thorough due diligence and assess the likelihood of a recovery. Even small changes can have a very big positive effect on the share prices of such companies.

Meanwhile, by maintaining a broadly diversified portfolio across sectors and holdings, we have been able to be patient and wait for these recoveries to come through, slowly adding to our positions as our conviction increased, and recycling capital into new investment opportunities as the positive change narrative became more widely recognised. We have also used the Company's flexible and low-cost gearing to take advantage of what have been surprisingly frequent periods of high volatility, buying when others were selling because of unusual political or economic events. Over time, this contrarian mindset has been handsomely rewarded in the Company's performance.

Question

How has the Company performed in the period under review?

Answer

Despite outperformance in the second half of the period, the Company recorded a NAV total return of -4.4% overall, lagging the Benchmark Index return of +1.0%. The period was marked by increased market volatility, as investors attempted to come to terms with mounting inflationary pressures, interest rate rises and the increased likelihood of a recession, factors that added significant uncertainty to the outlook at both the macro and micro level. The macro economic uncertainty was also reflected in a significant widening in discounts across the Company's peer group and investment trusts generally, which saw the Company's shares trade at a discount to its NAV from April onwards and was reflected in a disappointing share price total return of -13.5% for the reporting year.

In an environment of rising living costs, the overweight exposure to the consumer discretionary sector, which we have reduced materially, hurt relative returns. Motoring and cycling specialist Halfords Group featured among the key detractors, as it warned of the effects of rising inflation and declining consumer confidence. Nevertheless, we have been encouraged by the strength of its car servicing business which continues to gain market share and should prove resilient as cash strapped customers opt for cheaper repair and maintenance providers. The small position in Studio Retail Group also hurt returns after the online catalogue company experienced supply chain and working capital issues, and failed to secure an emergency £25 million loan from lenders forcing the company into administration. In an environment of sharply rising oil and gas prices, our underweight exposure to the energy sector detracted. While we remain sceptical that oil prices will remain at these levels longer term, we have a much more positive view on the prospects for gas prices. As a result, we have deliberately skewed our portfolio towards gas producers such as OMV and Energean in preference over BP and Shell whose forays into renewables could result in significantly lower future returns on capital. As defensive stocks performed better against a backdrop of increasing volatility, the underweight stance in large-cap names in consumer staples and health care also held back relative performance.

On a more positive note, our largest holding, outsourcing group Serco Group, upgraded its profit forecasts reflecting robust revenues generation and a healthy contract pipeline supported by stronger demand for immigration services from governments in the UK and Australia. Imperial Brands, whose latest results suggested progress in its repositioning strategy, was another notable contributor. We added to both positions in March 2022 when these defensive holdings had sold-off heavily despite having

little or no exposure to the war in Ukraine. These trades show the benefit of an active strategy and an analyst team that can highlight opportunities fast. Merger and acquisition ("M&A") activity continued to be a major driver of performance, with both power generation company ContourGlobal and consultancy firm RPS Group among the top contributors. The former agreed to be acquired by US private equity group Kohlberg Kravis Roberts (KKR) and the latter recently received a takeover bid from Canadian engineering group WSP Global.

Question

The Company performed exceptionally well last year. Why has this year been more difficult to navigate?

Answer

As is well documented, the near-term outlook is very uncertain as economies worldwide grapple with sharply rising prices and slowing growth prospects. At the same time, elevated levels of inflation make it more difficult for central banks to react as they have previously, with many continuing to highlight the need for interest rate rises. This narrative has driven sentiment to depressed levels with many expecting this policy response to lead to a recession, while conversely a few sectors have been boosted by the prevailing constrained supply/demand conditions.

This has caused a huge divergence in performance between different parts of the market. So, in a market that has risen modestly in absolute terms, some companies have lost a lot of value whereas others, such as oil and gas producers, utilities and banks have gained meaningfully. In this risk-off environment, sectors seen as the most at risk such as housebuilders, leisure companies and retailers have seen sharp and often indiscriminate sell-offs. Our bias to small and mid-caps, areas typically less well covered and thus richer in opportunities, has been a meaningful headwind. Whilst a cyclical downturn is likely to result in earnings downgrades, many stocks have already sold-off heavily and reflect very pessimistic scenarios. While the Company has lagged its Benchmark Index, it has proved significantly more resilient than its peer group, thanks to its value bias.

Question

What level of M&A activity are you seeing on the portfolio compared to last year?

Answer

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Despite the increased volatility, the value in the UK market continues to be recognised by both private equity and trade acquirers. Unlike IPOs which have all but stopped, bids have continued unabated this year. The differential in

Portfolio Manager's Review continued

valuations between UK stocks and global peers, especially US companies, has been a key factor driving this trend. While US valuations have come down of late, so have UK valuations, with sterling's recent weakness making those valuations even more attractive to overseas acquirers. Against this backdrop, nine of our holdings have been the subject of bids over the past twelve months. The largest holding to be bid for was ContourGlobal, an international power producer, which received an all-cash offer at a 36% premium to the prevailing share price. Three of the bids - aerospace equipment supplier Meggitt, property development company U+I Group and consultancy firm RPS Group - have involved premiums in excess of 70%, highlighting the value on offer. These holdings have either been through temporary difficulties or were not on investors' radars for various reasons but had good franchises, and medium to long-term growth potential, making them attractive to acquirers.

Question

Inflation continues to soar, both in the UK and globally. How are you positioning the portfolio to protect it from rising inflation?

Answer

As we did during the COVID pandemic, when the outlook was highly uncertain, we are continuing to spend a lot of time meeting the companies we invest in to understand how the inflationary environment is affecting them, how flexible they can be with cost, and how resilient their balance sheets are. We are also drawing on the wider Fidelity network, both globally and across industries, to see how some of the wider trends could impact the portfolio. As highlighted, many stocks have sold-off significantly, and our valuation work is helping us to get a sense of how much pessimism is already being priced in. This work has given us the conviction to increase our positions in some stocks, but also sell ones where we see the risk of disappointment.

An area that we have trimmed is our consumer exposure. We reduced our exposure to housebuilders on concerns that momentum in the residential market will slow. We have also cut our exposure to areas more susceptible to demand slowdown such as big-ticket items and advertising. Overall, we are now significantly less overweight consumer discretionary stocks, with a preference for less economically sensitive areas, smaller ticket items and self-help stories.

On the flip side, there are areas that should prove more resilient in an environment of rising inflation and slowing economic growth. Take the Company's largest holding, outsourcer Serco Group; their work for governments around the world is highly resilient as they proved during the COVID pandemic when they won new contracts. Recent

trading upgrades have been strong and highlighted their growing and defensive and inflation protected cashflows.

Sector wise, our largest exposure is to financials, where banks and insurers make up respectively around 14% and 11% of the Company. Over the period, we have meaningfully added to banks, a move partly funded by a small reduction in the life insurance exposure which remains a large overweight position. There has been a small increase in the non-life insurance exposure where the pricing cycle looks very interesting, and stocks were attractively valued. The higher interest rate environment is a boon to the banking sector (and also the insurance sector) and profits from banks are now materially larger than they were in 2019. Take NatWest Group, now a top ten holding; its earnings estimates for 2023 have more than doubled over the last two years and are still being upgraded. This is a compelling story in an environment where markets are seeing earnings downgrades and fears of more to come. While markets are concerned about an increase in provisions, we believe the ability of banks to weather the downturn is much higher and both corporate and consumer balance sheets are stronger than they would be in a typical recession. We also added to AIB Group, which is well-placed to capitalise on the consolidation of the Irish banking industry; Barclays, which was trading at crisis-like levels; and Close Brothers Group, a conservative, well-managed, returns-focused niche lender. While the latter will not benefit from rising rates (as it has no current account business), the stock had underperformed and was trading below book value. Both Barclays and Close Brothers also benefit from some counter-cyclical revenues (i.e., revenues are strongest when there is high volatility) - the former through its investment banking business and the latter through its retail brokerage arm.

Anecdotally, we have also been selectively adding to staples (still a meaningful underweight position) as some key raw materials such as palm oil have started to come off. This should start to alleviate the big margin problem staples have been suffering from. Indeed, more generally, we are looking for companies that have been punished because they have not passed on cost increases, but where we believe they can over time.

Question

Where do you see UK valuations heading compared to the US and Europe?

Answer

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

UK equities are very attractively valued both on a standalone basis and compared to other markets. They trade at meaningful discounts to European, and especially US equities, and these discounts remain particularly wide in an historical context. This has not only been reflected

in continually strong M&A activity by private equity and corporate acquirers, but we have also seen more companies buying back their own shares, a reflection that companies themselves believe their shares offer good value and this is a good use of cash. We estimate that a little under half of the portfolio is made up of companies that are either buying back their shares or considering doing so.

While the near term outlook is uncertain, these valuation levels and the large divergence in performance between different parts of the market creates good opportunities to make attractive returns from UK stocks in the next three to five years. In our opinion, the UK market with its higher dividends offers a better prospective return than from many other asset classes, including global equities.

Question

Could the next decade be a better environment for value strategies?

Answer

The last decade has been marked by consistently low interest rates, subdued inflation and moderate growth. With a low cost of capital and low discount rates, some growth companies had reached astronomical valuations compared to where they had historically traded. This backdrop has been a strong headwind for value style investing which focuses on lower rated companies where cash flows and earnings are much shorter dated. The current environment of higher, likely stickier, inflation, rising interest rates and economic volatility is more representative of the longer term pattern seen over the last 100 years. It may feel uncomfortable for many investors who have only really experienced low interest rates, but looking through history, this is what one should expect. In such an environment, investors need to be valuation sensitive, agile and constantly looking for new ideas, which does favour the value style of investing.

Question

Since early September 2022, we have had multiple changes at the top of the UK Government, both in personnel and policy, which has resulted in an extremely volatile UK pound and gilt market. What can Shareholders expect over the next twelve months?

Answer

The September mini-budget underscored the Government's priority of countering slowing economic activity and rising inflation with increased spending and tax cutting measures

designed to boost growth. The initial reaction from markets was sceptical, with concerns about the cost of these latest measures further weighing on bond yields and the pound. With various U-turns and uncertainty in these policies causing further confusion and nervousness among market participants, the emphasis from the Government has shifted to appeasing nervous market participants, given the effects on household mortgage bills, for example. In the meantime, despite the Government's intervention to limit household fuel bills, the near term economic outlook is uncertain. Many indicators point to a slowdown particularly for the consumer as inflation takes its toll. The unpredictable demand picture combined with continued supply chain pressures are adding to the volatility, and we are starting to see that emerge in company earnings.

Whilst this sounds relatively bleak, many of the most affected areas of the market have sold-off heavily and some stocks are starting to look interesting. After years of being relatively unloved, the UK market started the year looking to be good value, and now looks even cheaper. Meanwhile, portfolio holdings trade on even cheaper valuations for businesses that have healthy balance sheets and can grow and generate good returns. A cyclical downturn would affect some of these businesses, but we think a degree of negativity is being priced in and over time that should lead to attractive returns. Despite the volatility, the value in the UK market continues to be recognised by both private equity and trade acquirers.

When uncertainty is rife, this typically results in more opportunities to pick up very attractively valued stocks. Companies that can hold up well in a recessionary environment should prove to be good investments. In this environment, we need to be agile and constantly look for new ideas, and this certainly plays to Fidelity's strengths in fundamental research. The Company is well diversified with over 100 holdings spread across different market caps and sectors, with exposure to both cyclical and defensive businesses. While the Company has a larger weight than the Benchmark Index in stocks that earn their revenues in sterling, nearly two-thirds of the portfolio's earnings are in other currencies, which gives a good hedge against potential further moves in sterling.

While we are on the lookout for such opportunities, we are proceeding cautiously, and the Company's gearing is relatively low at around 4% when netting out holdings that have received cash bids where we have a high conviction that these bids will go through. This leaves us with plenty of dry powder to reinvest should more opportunities arise.

Alex Wright

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Portfolio Manager 3 November 2022

Spotlight on the Top 10 Holdings as at 31 August 2022

(Based on Asset Exposure expressed as a percentage of Net Assets. Asset Exposure comprises the value of direct equity investments plus market exposure to derivative instruments.)

Industry Industrial Support Services

Serco Group

Serco Group is a well-managed public outsourcing company with systems and culture that encourages financial transparency. It has a strong balance sheet. Serco has performed strongly since the onset of the pandemic, resulting in significant earnings upgrades and better long term growth prospects given its closer relationships with governments. Its improved geographical and sector diversification means that growth is more sustainable than in the past, while its larger footprint allows the company to tap into whichever markets are growing the fastest. Performance through COVID highlights Serco's resilience in downturns (government work is highly resilient). Its growing, defensive and inflation protected, cashflows deserve a higher multiple in the current environment.

Industry Tobacco

Imperial Brands

% of Net Assets 3.7%

Tobacco company Imperial Brands is well into its two-year repositioning programme and is expected to enter the acceleration phase in the next fiscal year. It operates in markets that show consistent value growth and is well positioned for further share gains and growth in the US, which is its largest market. Imperial's cash generation has been consistently strong and share buybacks are likely to increase. While lagging its peers, Imperial is developing a range of less harmful products and making good progress. The company offers limited downside as earnings are unlikely to fall materially given its strong pricing in tobacco, very attractive dividends and its low valuations.

Industry Life Insurance

Aviva

% of Net Assets 3.2%

Aviva is a composite insurer that provides life and non-life insurance and asset management services. It is one of a number of insurers with strong positions in pensions and retirement income that are held in the portfolio. The life insurance sector offers an attractive combination of cheap valuations, attractive dividend yields, strong demand/supply fundamentals and growing earnings. The pandemic has demonstrated the resilience, lower cyclicality and improved solvency of these businesses. Under a new CEO, Aviva has been significantly restructured with disposals of non-core operations outside of the UK, Ireland and Canada. These actions have strengthened the balance sheet and reduced market sensitivity and leverage.

ContourGlobal

% of Net Assets 3.0%

ContourGlobal, an international power generation company, has highly contracted cash flows and an attractive growth pipeline. 95% of its revenues are contracted for a weighted average of nine years with 80% of its earnings linked to inflation. The company has recently agreed to a £1.75 billion takeover offer from US private equity firm Kohlberg Kravis Roberts (KKR).

Industry Industrial Support Services

DCC

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

DCC is a fuel-to-medical products conglomerate which has grown earnings consistently, largely driven by mergers and acquisitions. It has a high-quality business and a long track record of generating attractive returns. Armed with a healthy balance sheet, the company has a broad acquisition opportunity set in a highly fragmented market. DCC is a long term compounder that is focused on investing in businesses that generate high returns on capital, with strong cash conversion and low capital intensity.

Industry Banks

NatWest Group

NatWest Group has made significant strides in repositioning itself. It is now a smaller, mostly UKfocused, bank with good retail and commercial banking franchises. NatWest's cost cutting programme appears to be progressing well, and the group looks set to improve profitability with management intent on returning capital to shareholders. The group should be able to continue increasing its mortgage market share and improving its consumer/credit card offering. While the UK is likely to enter a recession, the bank is well positioned to benefit from rising interest rates.

Industry Life Insurance

Sanofi

Sanofi, a pharmaceutical major, has a small but interesting late stage drug pipeline with five to six strong potential candidates. The share price does not reflect the upside potential and given the nature of the products, one or two winners could be significant enough to be game changing. While the markets are in a wait and watch mode, currently the share price does not reflect the potential upside. Its key drug, Dupixent, remains the visible growth driver with significant sales potential in the medium term, with competitive risks falling away.

Phoenix Group Holdings

Phoenix Group Holdings, a leading UK insurer, is a well-run company with an experienced management team and strong regulatory relationships. It dominates the UK closed fund consolidator market where it has a proven track record of successful mergers and acquistions and synergy delivery. Compared to its peers, Phoenix has low sensitivity to adverse movements in areas such as interest rates, equities, inflation and currency, and as such their impact is relatively benign on solvency and cash generation.

Barclays

Barclays has the most diversified profile of the UK listed banks. Its investment bank provides some counter-cyclical revenues (i.e. strongest revenues when there is high volatility), counterbalancing its UK retail and international consumer operations across the cycle. Barclays has the highest pre-provision profit to loans and can withstand an elevated cost of risk. Barclays capital position has improved over the years, and allowing for increasingly attractive distributions. From a valuation perspective, the stock is one of the cheapest among the UK banks.

Industry Life Insurance

Legal & General Group

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

% of Net Assets 2.7%

Portfolio Listing as at 31 August 2022

The Asset Exposures shown below and on pages 13 to 15 measure exposure to market price movements as a result of owning shares and derivative instruments. The Fair Value is the actual value of the portfolio as reported in the Balance Sheet. 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 share has moved.

	Asset Exposure		Fair Value
	£'000	%1	£'000
Long Exposures - shares unless otherwise stated
Serco Group – Industrial Support Services	42,251	4.6	42,251
Imperial Brands – Tobacco	34,458	3.7	34,458
Aviva (long CFD) – Life Insurance	29,404	3.2	(1,461)
ContourGlobal – Electricity	27,939	3.0	27,939
DCC – Industrial Support Services	27,893	3.0	27,893
NatWest Group (shares and long CFD) – Banks	27,160	2.9	7,933
Sanofi (long CFD) – Pharmaceuticals & Biotechnology	27,086	2.9	(847)
Phoenix Group Holdings – Life Insurance	26,942	2.9	26,942
Barclays – Banks	26,005	2.8	26,005
Legal & General Group (long CFD) – Life Insurance	25,319	2.7	(1,826)
AIB Group (long CFD) – Banks	25,222	2.7	(245)
Mitie Group – Industrial Support Services	24,985	2.7	24,985
C&C Group (shares and long CFD) – Beverages	20,738	2.2	17,388
Roche Holdings – Pharmaceuticals & Biotechnology	20,631	2.2	20,631
Spire Healthcare Group – Health Care Providers	19,948	2.2	19,948
Meggitt – Aerospace & Defense	19,128	2.1	19,128
Ryanair Holdings (shares and long CFDs) – Travel & Leisure	18,932	2.1	2,120
OMV – Oil, Gas & Coal	18,882	2.1	18,882
AstraZeneca – Pharmaceuticals & Biotechnology	18,777	2.0	18,777
Hellenic Telecommunications Organisation – Telecommunications Service Providers	17,456	1.9	17,456
Ericsson – Telecommunications Equipment	16,309	1.8	16,309
Close Brothers Group – Banks	15,578	1.7	15,578
Morgan Advanced Materials – Electronic & Electrical Equipment	15,286	1.7	15,286
Wilmington – Media	14,255	1.6	14,255
Redde Northgate – Industrial Transportation	14,112	1.5	14,112
Shell – Oil, Gas & Coal	13,139	1.4	13,139
Kingfisher (long CFD) – Retailers	13,044	1.4	(1,338)
Glenveagh Properties (shares and long CFD) – Household Goods & Home Construction	12,334	1.3	11,648
Babcock International Group – Aerospace & Defense	12,234	1.3	12,234
H&T Group – Finance & Credit Services	11,255	1.2	11,255
Conduit Holdings – Non–Life Insurance	10,852	1.2	10,852
Just Group – Life Insurance	10,752	1.2	10,752

	Asset Exposure		Fair Value
	£'000	%1	£'000
Marks & Spencer Group – Retailers	10,519	1.1	10,519
Keller Group – Construction & Materials	10,398	1.1	10,398
Cairn Homes – Household Goods & Home Construction	10,057	1.1	10,057
Energean – Oil, Gas & Coal	9,968	1.1	9,968
Essentra – Industrial Support Services	9,839	1.1	9,839
SBM Offshore – Oil, Gas & Coal	9,497	1.0	9,497
Standard Chartered – Banks	9,358	1.0	9,358
TBC Bank Group – Banks	9,043	1.0	9,043
Origin Enterprises (shares and long CFD) – Food Producers	8,864	1.0	8,135
PZ Cussons – Personal Care, Drug & Grocery Stores	8,787	1.0	8,787
RPS Group – Industrial Support Services	8,308	0.9	8,308
Coats Group – General Industrials	8,244	0.9	8,244
Victrex – Chemicals	7,972	0.9	7,972
Pearson (long CFD) – Media	7,949	0.9	(22)
Sage Group – Software & Computer Services	7,530	0.8	7,530
Midwich Group – Industrial Support Services	7,479	0.8	7,479
Entain – Travel & Leisure	7,260	0.8	7,260
Ten Entertainment Group – Travel & Leisure	7,179	0.8	7,179
West African Resources – Precious Metals & Mining	6,990	0.8	6,990
Secure Trust Bank – Banks	6,854	0.7	6,854
XPS Pensions Group – Investment Banking & Brokerage Services	6,824	0.7	6,824
Kaspi.kz – Banks	6,665	0.7	6,665
Bank of Georgia Group – Banks	6,554	0.7	6,554
Halfords Group – Retailers	6,478	0.7	6,478
J D Weatherspoon – Travel & Leisure	6,391	0.7	6,391
BW Energy – Oil, Gas & Coal	6,376	0.7	6,376
Bakkavor Group – Food Producers	6,273	0.7	6,273
Central Asia Metals (long CFD) – Industrial Metals & Mining	6,121	0.7	(536)
Lancashire Holdings – Non–Life Insurance	5,814	0.6	5,814
Inchcape – Industrial Support Services	5,710	0.6	5,710
ME Group International – Leisure Goods	5,645	0.6	5,645
Finsbury Food Group – Food Producers	5,492	0.6	5,492
National Grid – Gas, Water & Multi–Utilities	5,434	0.6	5,434
Smart Metering Systems – Industrial Support Services	5,402	0.6	5,402
Endeavour Mining – Precious Metals & Mining	5,394	0.6	5,394
Sherborne Investors Guernsey – Investment Banking & Brokerage Services	5,297	0.6	5,297
Base Resources – Industrial Metals & Mining	5,189	0.6	5,189

Portfolio Listing continued

	Asset Exposure £'000	%1	Fair Value £'000
Wentworth Resources (shares and long CFDs) – Oil, Gas & Coal	5,084	0.6	4,088
PetroTal – Oil, Gas & Coal	5,011	0.5	5,011
Dubai Electricity & Water Authority – Electricity	4,780	0.5	4,780
Biffa – Waste & Disposal Services	4,719	0.5	4,719
Norcros – Construction & Materials	4,653	0.5	4,653
IG Design Group – Personal Care, Drug & Grocery Stores	4,603	0.5	4,603
Premier Miton Group – Investment Banking & Brokerage Services	4,079	0.4	4,079
John Wood Group – Oil, Gas & Coal	3,917	0.4	3,917
Kenmare Resources (long CFD) – Industrial Metals & Mining	3,724	0.4	(144)
Forterra – Construction & Materials	3,413	0.4	3,413
Brickability Group – Construction & Materials	3,412	0.4	3,412
Boohoo Group – Retailers	2,928	0.3	2,928
Jadestone Energy – Oil, Gas & Coal	2,884	0.3	2,884
Gemfields Group (shares and long CFD) – Precious Metals & Mining	2,853	0.3	2,703
AfriTin Mining – Industrial Metals & Mining	2,557	0.3	2,557
TT Electronics – Technology Hardware & Equipment	2,547	0.3	2,547
Euromoney Institutional Investor – Industrial Support Services	2,473	0.3	2,473
Indivior – Pharmaceuticals & Biotechnology	1,918	0.2	1,918
Jubilee Platinum – Precious Metals & Mining	1,888	0.2	1,888
Brooks MacDonald Group – Investment Banking & Brokerage Services	1,574	0.2	1,574
Tharisa – Industrial Metals & Mining	1,494	0.2	1,494
Permanent TSB Group Holdings (long CFD) – Banks	1,445	0.2	(19)
Trian Investors 1 – Closed End Investments	1,405	0.2	1,405
Smiths News – Industrial Support Services	1,268	0.1	1,268
The Fulham Shore – Travel & Leisure	1,176	0.1	1,176
Adler Group – Real Estate Investment & Services	1,156	0.1	1,156
RHI Magnesita – Chemicals	1,119	0.1	1,119
Staffline Group – Industrial Support Services	1,039	0.1	1,039
Tyman – Construction & Materials	1,010	0.1	1,010
Worsley Investors – Closed End Investments	656	0.1	656
Hostmore (shares and long CFD) – Travel & Leisure	646	0.1	564
Rainbow Rare Earths – Industrial Metals & Mining	603	0.1	603
TVC Holdings – Unlisted Investment	274	–	274
EUROAPI (long CFD) – Pharmaceuticals & Biotechnology	222	–	(8)
Marwyn Value Investors – Closed End Investments	174	–	174
Rank Group – Travel & Leisure	121	–	121
Unbound Group (shares and long CFD) – Closed End Investments	115	–	59
Sylvania Platinum – Precious Metals & Mining	104	–	104

	Asset Exposure		Fair Value
	£'000	%1	£'000
Zegona Communications – Telecommunications Service Providers	66	–	66
McColl's Retail Group – Personal Care, Drug & Grocery Stores	–	–	–
Studio Retail Group – Retailers	–	–	–
Gross Asset Exposure2 (110 holdings)	1,014,570	110.0

Portfolio Fair Value 826,500

Fair Value and Asset Exposure of Investments as at 31 August 2022

	2022			2021 Asset Exposure
	Fair Value	Asset Exposure
	£'000	£'000	%1	£'000	%1
Investments (Note 10 – see page 68)	835,672	835,672	90.6	886,710	93.0
Long CFDs (Note 11 – see page 69)	(9,172)	178,898	19.4	206,266	21.6
	826,500	1,014,570	110.0	1,092,976	114.6
Cash at bank2	2,014	(186,056)	(20.2)	(205,459)	(21.5)
Fidelity Institutional Liquidity Fund	78,436	78,436	8.5	61,780	6.4
Other net current assets (excluding derivative assets and
liabilities)	15,649	15,649	1.7	4,793	0.5
Shareholders' Funds	922,599	922,599	100.0	954,090	100.0

The Company uses gearing through the use of long CFD positions. Gross gearing as at 31 August 2022 was 10.0% (2021: 14.6%) – see Note 18 on page 79 for further details.

1 Asset Exposure is expressed as a percentage of Shareholders' Funds.

2 The asset exposure column for cash at bank has been adjusted to assume the Company traded direct holdings rather than exposure being gained through long CFD positions. The amount is derived by taking the cost of the shares underlying the long CFDs when the contracts were opened less the cash at bank balance at the year end.

Distribution of the Portfolio as at 31 August 2022

The table below and on the next page details the Distribution of the Portfolio based on Asset Exposure which measures the exposure of the portfolio to market price movements as a result of owning shares and derivative instruments.

			2022 Asset		2021 Asset
Shares and derivative instruments	UK	Overseas	Exposure1	Index2	Exposure1
	%	%	%	%	%
Financials
Banks	14.2	0.2	14.4	8.6	9.6
Life Insurance	10.0	–	10.0	2.5	11.6
Investment Banking & Brokerage Services	1.9	–	1.9	2.5	4.7
Non-life Insurance	0.6	1.2	1.8	0.8	1.0
Finance & Credit Services	1.2	–	1.2	1.5	0.7
Closed End Investments	0.3	–	0.3	6.5	0.9
	28.2	1.4	29.6	22.4	28.5
Industrials
Industrial Support Services	14.8	–	14.8	3.2	15.0
Aerospace & Defense	3.4	–	3.4	1.8	4.0
Construction & Materials	2.5	–	2.5	1.4	2.8
Electronic & Electrical Equipment	1.7	–	1.7	0.9	1.9
Industrial Transportation	1.5	–	1.5	1.0	1.9
General Industrials	0.9	–	0.9	1.8	0.6
Industrial Engineering	–	–	–	0.6	–
	24.8	–	24.8	10.7	26.2
Consumer Discretionary
Travel & Leisure	4.6	–	4.6	2.7	4.7
Retailers	3.5	–	3.5	1.4	8.5
Media	2.5	–	2.5	3.1	4.3
Household Goods & Home Construction	2.4	–	2.4	1.1	6.4
Leisure Goods	0.6	–	0.6	0.1	0.5
Consumer Services	–	–	–	1.5	–
Personal Goods	–	–	–	0.4	–
	13.6	–	13.6	10.3	24.4
Consumer Staples
Tobacco	3.7	–	3.7	4.2	1.8
Food Producers	2.3	–	2.3	0.5	1.7
Beverages	2.2	–	2.2	4.0	1.6
Personal Care, Drugs & Grocery Stores	1.5	–	1.5	7.4	–
	9.7	–	9.7	16.1	5.1

			2022		2021
			Asset		Asset
Shares and derivative instruments	UK %	Overseas %	Exposure1 %	Index2 %	Exposure1 %
Health Care
Pharmaceuticals & Biotechnology	2.2	5.1	7.3	10.5	5.6
Health Care Providers	2.2	–	2.2	0.1	2.1
Medical Equipment & Services	–	–	–	0.6	–
	4.4	5.1	9.5	11.2	7.7
Energy
Oil, Gas & Coal	4.3	3.8	8.1	11.5	6.4
	4.3	3.8	8.1	11.5	6.4
Basic Materials
Industrial Metals & Mining	2.0	0.3	2.3	6.7	1.9
Precious Metals & Mining	1.1	0.8	1.9	0.2	1.7
Chemicals	1.0	–	1.0	0.7	0.7
	4.1	1.1	5.2	7.6	4.3
Utilities
Electricity	3.0	0.5	3.5	0.9	2.0
Gas, Water & Multi-utilities	0.6	–	0.6	2.6	0.5
Waste & Disposal Services	0.5	–	0.5	0.1	–
	4.1	0.5	4.6	3.6	2.5
Telecommunications
Telecommunications Service Providers	–	1.9	1.9	2.0	4.4
Telecommunications Equipment	1.8	–	1.8	0.1	1.5
	1.8	1.9	3.7	2.1	5.9
Technology
Software & Computer Services	0.8	–	0.8	1.4	1.0
Technology Hardware & Equipment	0.3	–	0.3	0.1	–
	1.1	–	1.1	1.5	1.0
Real Estate
Real Estate Investment & Services	–	0.1	0.1	0.5	2.6
Real Estate Investment Trusts	–	–	–	2.5	–
	–	0.1	0.1	3.0	2.6
Total Asset Exposure	96.1	13.9	110.0	100.0	114.6
Total Asset Exposure – 2021	103.0	11.6			114.6

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

1 Asset Exposure is expressed as a percentage of Shareholders' Funds.

2 The FTSE All-Share Index which is the Company's Benchmark Index.

FINANCIAL

GOVERNANCE

STRATEGY

Ten Year Record as at 31 August 2022

As at 31 August	2022	2021	2020	2019	2018	2017	2016	2015	2014	2013
Capital
Shareholders' funds (£m)	922.6	954.1	579.5	698.7	725.0	673.5	578.3	537.3	519.2	478.5
NAV per ordinary share (p)1,2	284.67	304.79	199.81	252.99	271.98	254.63	217.94	201.61	192.29	176.79
Share price (p)1	260.50	308.50	181.60	251.50	276.00	246.50	196.25	197.50	180.20	168.00
(Discount)/premium to NAV (%)2	(8.5)	1.2	(9.1)	(0.6)	1.5	(3.2)	(10.0)	(2.0)	(6.3)	(5.0)
Revenue
Revenue return per ordinary share (p)1,2	9.42	7.22	4.81	8.65	5.70	5.33	4.15	3.39	3.10	3.40
Dividends per ordinary share (p)1	7.75	6.67	5.80	7.253	5.00	4.60	3.70	3.35	3.30	3.25
Ongoing charges (costs of running the Company) (%)2	0.69	0.76	0.98	0.97	1.04	1.06	1.10	1.10	1.12	1.21
Gearing2
Gross gearing (%)4	10.0	14.6	14.0	2.5	10.4	9.1	15.5	23.8	21.0	24.8
Net gearing (%)5	10.0	14.6	14.0	2.5	6.6	0.9	7.9	9.4	6.4	14.0
Performance Total Returns
NAV (%)2	-4.4	+56.2	-18.5	-4.9	+8.7	+19.1	+9.9	+7.3	+10.7	+44.8
Share price (%)2	-13.5	+73.8	-25.4	-6.9	+14.0	+28.1	+1.1	+12.4	+9.2	+63.1
Benchmark Index (%)	+1.0	+26.9	-12.6	+0.4	+4.7	+14.3	+11.7	-2.3	+10.3	+18.9

1 Figures prior to 2015 have been restated to reflect the five for one sub-division of ordinary shares which took place on 29 June 2015.

2 Alternative Performance Measures.

3 Includes a special dividend of 1.50 pence per ordinary share.

4 Gross gearing is the total of: long exposures, plus short exposures and less exposures hedging the portfolio, expressed as a percentage of Shareholders' Funds.

5 Net gearing is the total of: long exposures, less short exposures and less exposures hedging the portfolio, expressed as a percentage of Shareholders' Funds.

Sources: Fidelity and Datastream.

Past performance is not a guide to future returns.

Dividends per ordinary share for ten years to 31 August 2022

Summary of Performance Charts

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

STRATEGY

Sources: Fidelity and Datastream.

Summary of Performance Charts continued

Total return performance relative to the Benchmark Index for ten years to 31 August 2022

Share price (discount)/premium to NAV for ten years to 31 August 2022 (%)

Attribution Analysis

Analysis of change in NAV total return for the year ended 31 August 2022
Impact of:
Index	+1.0
Stock selection	-5.4
Gearing	-0.1
Share Issues	+0.2
Operational Costs	-0.7
Cash	+0.6
NAV total return for the year ended 31 August 2022	-4.4

Sector contributors and detractors as at 31 August 2022 (in absolute terms)

Top 5 Sector Contributors	%	Bottom 5 Sector Detractors	%
Oil, Gas & Coal	+2.8	Retailers	-3.5
Electricity	+0.9	Travel & Leisure	-1.9
Tobacco	+0.8	Construction & Materials	-1.0
Media	+0.6	Real Estate Investment & Services	-0.9
Pharmaceuticals & Biotechnology	+0.4	Electronic & Electrical Equipment	-0.7

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Stock contributors and detractors as at 31 August 2022 (in absolute terms)

Top 5 Stock Contributors %		Bottom 5 Stock Detractors	%
Shell	+1.8	Halfords Group	-1.1
Serco Group	+1.1	Adler Group	-0.8
ContourGlobal	+0.9	C&C Group	-0.7
Imperial Brands	+0.8	Morgan Advanced Materials	-0.7
Kosmos Energy	+0.5	Studio Retail Group	-0.7

Bottom 5 Stock Detractors	96
Halfords Group	-1.1
Adler Group	-0.8
C&C Group	-0.7
Morgan Advanced Materials	-0.7
Studio Retail Group	-0.7

Source: Fidelity.

GOVERNANCE

STRATEGY

Strategic Report

The Directors have pleasure in presenting the Strategic Report of the Company. The Chairman's Statement and the Portfolio Manager's Review on pages 2 to 9 form part of the Strategic Report.

Business and Status

The Company carries on business as an investment company and has been accepted as an approved investment trust by HM Revenue & Customs under Sections 1158 and 1159 of the Corporation Tax Act 2010, subject to the Company continuing to meet eligibility conditions. The Directors are of the opinion that the Company has conducted its affairs in a manner which will satisfy the conditions for continued approval.

The Company is registered as an investment company under Section 833 of the Companies Act 2006 and its ordinary shares are listed and traded on the London Stock Exchange. It is not a close company and has no employees.

Objective

The Company's objective is to achieve long term capital growth primarily through investment in equities (and their related financial instruments) of UK companies which the Investment Manager believes to be undervalued or where the potential has not been recognised by the market.

Strategy

In order to achieve this objective, the Company operates as an investment company and has an actively managed portfolio of special situation investments, consisting primarily of UK listed companies. It has the benefit of investing up to 20% of the portfolio in listed companies on overseas exchanges in order to enhance Shareholder returns. As an investment company, it is able to gear the portfolio and the Board takes the view that long term returns for Shareholders can be enhanced by using gearing in a carefully considered and monitored way.

As part of the strategy, the Board has delegated the management of the portfolio and certain other services to the Manager (FIL Investment Services (UK) Limited). The Portfolio Manager aims to achieve a total return on the Company's assets over the longer term in excess of the equivalent return on the FTSE All-Share Index, the Company's Benchmark Index. The stock selection approach adopted by the Portfolio Manager is considered to be well suited to achieving this objective. The Board recognises that investing in equities is a long term process and the Company's returns will vary from year to year.

The Company's objective, strategy and principal activity have remained unchanged throughout the year ended 31 August 2022.

Investment Management Philosophy, Style and Process

Fidelity International's ("Fidelity") distinctive investment approach is "bottom up" stock picking – investing in companies on the basis of their underlying strengths, facilitated by extensive research capabilities. Fidelity's analysts evaluate companies, meet their management and speak to suppliers, competitors and customers in order to build up a picture of the true state of a company's fundamentals. This first-hand research is fundamental to Fidelity's ability to form a view of a company's future profitability and ultimately for the Portfolio Manager to decide if

he considers it an attractive investment for our Shareholders. The Portfolio Manager works closely with the Fidelity analyst team and also has access to a wide range of research produced by third parties.

Investment Policy

The Company seeks to meet its investment objective through investment in a diversified portfolio of securities and instruments issued by or related primarily to UK companies.

The Company will have a blend of investments in larger, medium and smaller sized companies and be guided by a contrarian philosophy.

The Portfolio Manager has a contrarian style which focuses on significant valuation anomalies in stocks which are out of favour with other investors, yet show potential for change. The Portfolio Manager believes these opportunities exist across the market capitalisation spectrum, and the investment approach is flexible, with positions in large, medium and smaller sized companies. The proportions in each size category may vary over time, as investment opportunities are selected on a bottom up basis.

Investments typically have the following characteristics:

• Unrecognised potential for positive change: The Portfolio Manager wants to see evidence of the company embarking upon a period of positive change. Once this change begins to be recognised by the market, there is potential for substantial upside.
• Limited downside risk: The Portfolio Manager invests in companies where market expectations are low. They will have some asset or characteristic that should prevent significant falls in the share price.

The Benchmark of the Company against which performance is measured is the FTSE All-Share Index.

The Company may invest directly in the shares of companies or indirectly through equity-related instruments (such as derivative contracts, warrants or convertible bonds) and in debt instruments. The Company may also invest in unquoted securities, subject to the investment restrictions set out on page 23.

Derivatives

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The Company may utilise derivative instruments, including indexlinked notes, CFDs, covered options and other equity-related derivative instruments as a tool to meet the investment objective of the Company.

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

• As an alternative form of gearing to bank loans or bonds, the Company will purchase long CFDs that achieve an equivalent effect to bank gearing but normally at lower financing costs.
• To hedge equity market risks where the Portfolio Manager considers that suitable protection can be purchased to limit the downside of a falling market at a reasonable cost; and

• By taking short exposures on stocks that the Portfolio Manager considers to be over-valued.

The Company will not undertake any naked shorts.

Gearing

The Company may use gearing to enhance long term capital growth. The maximum level of gross gearing is 40%. Within this limit the Portfolio Manager has the discretion to use a range of instruments for gearing, such as debt and CFDs, depending on the relative cost and availability of those instruments. It is the current intention of the Board that, in normal market circumstances, the Portfolio Manager will maintain net gearing in the range of 0% to 25%. Both gross and net gearing are defined in the Glossary of Terms on page 93. The level of gearing is considered by the Board at each of its meetings.

Investment Restrictions

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

• No single investment (excluding cash and cash equivalents), nor the aggregate investment in any one company, shall represent more than 10% of the Company's portfolio, measured as at the time of investment.
• No more than 20% of the portfolio will be invested in companies listed on overseas exchanges.
• The Company will not invest more than 5% of its gross assets in unquoted securities.
• The Company will not invest more than 15% of its gross assets at the time of investment in listed investment companies (including listed investment trusts), including no more than 10% of its gross assets at the time of investment in funds that do not have stated policies to invest no more than 15% of their gross assets in other listed closed-ended investment funds.

Performance

The Company's performance for the year ended 31 August 2022 and a summary of the year's activities and indications of trends and factors that may impact the future performance of the Company are included in the Chairman's Statement and the Portfolio Manager's Review on pages 2 to 9. The Portfolio Listing, the Distribution of the Portfolio, the Ten Year Record, the Summary of Performance Charts and the Attribution Analysis are set out on pages 12 to 21.

Dividends and Results

The portfolio is managed actively in pursuit of capital growth. Hence, in any one year the dividend income received from investments will vary according to which stocks are owned during the reporting period and so will the dividend that will be paid. In order to continue to qualify as an investment company, the Company is required by Section 1159 of the Corporation Tax Act 2010 to distribute sufficient net income so that it retains no more than 15% of its net income in any reporting year.

The Company's results for the year ended 31 August 2022 are set out in the Income Statement on page 57. The revenue return was 9.42 pence and the capital loss was 23.00 pence, giving a total loss of 13.58 pence per ordinary share.

The Board recommends that a final dividend of 5.45 pence per ordinary share be paid on 11 January 2023 to Shareholders who appear on the register as at the close of business on 2 December 2022 (ex-dividend date 1 December 2022). This is in addition to the interim dividend of 2.30 pence per ordinary share paid to Shareholders on 22 June 2022.

Key Performance Indicators

The key performance indicators ("KPIs") used to determine the performance of the Company and which are comparable to those reported by other investment companies are set out in the tables below.

Shareholder Total Returns

Share price total return for the year ended 31 August	1 year (%)	3 years (%)	5 years (%)
Fidelity Special Values PLC1	-13.5	+12.2	+19.1
Short term savings rate2	+0.1	+1.1	+2.3
Benchmark Index3	+1.0	+12.0	+17.8
Peer group4	-26.3	+8.8	+7.9

Net Asset Value ("NAV") Total Returns

NAV per ordinary share total return for the year ended 31 August	1 year (%)	3 years (%)	5 years (%)
Fidelity Special Values PLC1	-4.4	+21.8	+25.8
Benchmark Index3	+1.0	+12.0	+17.8
Peer group4	-14.1	+7.8	+6.8

Discount

Discount as at 31 August	2022 (%)	2019 (%)	2017 (%)
Fidelity Special Values PLC1	8.5	0.6	3.2
Peer group4	10.4	8.3	10.6

Ongoing charges

Ongoing charges for the year	2022	2019	2017
ended 31 August 5	(%)	(%)	(%)
Fidelity Special Values PLC1	0.69	0.97	1.06

1 Alternative Performance Measures.

2 UK Interbank 3 month bid rate (banks or building societies).

3 FTSE All-Share Index.

4 AIC UK All Companies sector.

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5 Defined in the Glossary of Terms on page 93.

Sources: Fidelity and Datastream.

Strategic Report continued

In addition to the KPIs set out on the previous page, the Board also monitors the factors contributing to investment results, as set out in the Attribution Analysis on page 21. Long term performance is also monitored and is set out in the Ten Year Record and the Summary of Performance Charts on pages 18 to 20.

Principal Risks and Uncertainties and Risk Management

As required by provisions 28 and 29 of the 2018 UK Corporate Governance Code, the Board has a robust ongoing 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 Alternative Investment Fund Manager (FIL Investment Services (UK) Limited/ 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 that the Company faces. The Audit Committee continues to identify any new emerging risks and take any action necessary 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 Committee. The Board determines the nature and extent of any risks it is willing to take in order to achieve its strategic objectives.

A key emerging issue that the Board has identified is climate change. It is one of the most critical emerging issues confronting asset managers and their investors. The Board notes that the Manager has integrated ESG considerations, including climate change, into the Company's investment process. Further details are on pages 32 to 35. The Board will continue to monitor how this may impact the Company as a risk, the main risk being the impact on investment valuations.

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 UK corporate governance obligations.

The Board considers the following as the principal risks faced by the Company.

Principal Risks	Description and Risk Mitigation
Market, Economic and Political Risks	The principal market related risks are market downturn, interest rate movements and market shocks, such as the post pandemic UK economy recovery and volatility from the war in Ukraine. The Company may also be impacted by concerns over global economic growth and major political events affecting the UK market and economy and the consequences of this. Inflation continues to trend higher across most economies, driven by a combination of increased demand, as the pandemic restrictions are lifted, and global labour shortages in some sectors and supply chain shortages. The economic impact from the war in Ukraine is significant. Russia and Ukraine are both significant net exporters of oil, natural gas and a variety of soft commodities, and supply limitations are fuelling global inflation and economic instability. This is leading to prolonged cost-of-living crisis risks and potentially impacting investors' risk appetite.
	The UK GDP growth forecast has been downgraded following the deteriorating economic outlook. UK inflation is expected to outpace average earnings and tax increases may be required to combat this rising inflation. Additional risks to the UK economy remain with proposals by the British Government to overwrite parts of the Northern Ireland protocol which risks breaching international law and possible retaliatory action by the EU, at a sensitive time for the UK economy.
	COVID continues to be a global pandemic with the potential for severe market and economic impacts. The risk of the likely effects of the ongoing pandemic on the markets is somewhat mitigated by the Company's investment trust structure which means no forced sales need to take place to deal with any redemptions. Therefore, investments can be held over a longer time horizon.
	The Company's portfolio is made up mainly of listed securities. The Portfolio Manager's success or failure to protect and increase the Company's value against the above background is core to the Company's continued success. The investment philosophy of stock-picking and investing in attractively valued companies should outperform the Benchmark Index over time.
	The Board reviews market, economic and political risks and legislative changes at each Board meeting.
	Risks to which the Company is exposed to in the market risk category are included in Note 17 to the Financial Statements on pages 72 to 78 together with summaries of the policies for managing these risks.

Principal Risks	Description and Risk Mitigation
Cybercrime and Information Security Risks	The operational risk from cybercrime is significant. Cybercrime threats evolve rapidly and consequently the risk is regularly re-assessed and the Board receives regular updates from the Manager in respect of the type and possible scale of cyberattacks. The Manager's technology team has developed a number of initiatives and controls in order to provide enhanced mitigating protection to this ever increasing threat. The risk is frequently re-assessed by Fidelity's information security teams and has resulted in the implementation of new tools and processes, including improvements to existing ones. Fidelity has established a dedicated cybersecurity team which provides regular awareness updates and best practice guidance. Risks are increased due to the pandemic and from the Russia/Ukraine conflict. These primarily relate to phishing, remote access threats, extortion and denial of services attacks. The Manager has dedicated detect and respond resources specifically to monitor the cyber threats associated with COVID and cyber activity following the Russian invasion of Ukraine. There are a number of mitigating actions in place including, control strengthening, geo-blocking, and phishing mitigants, combined with enhanced resilience and recovery options.
Investment Performance Risk (including the use of derivatives and gearing)	The Board relies on the Portfolio Manager's skills and judgement to make investment decisions based on research and analysis of individual stocks and sectors. The Board reviews the performance of the asset value of the portfolio against the Company's Benchmark Index and its competitors and also considers the outlook for the market with the Portfolio Manager at each Board meeting. The emphasis is on long term investment performance as there is a risk for the Company of volatility of performance in the shorter term. Derivative instruments are used to protect and enhance investment returns. There is a risk that the use of derivatives may lead to higher volatility in the NAV and the share price than might otherwise be the case. The Board has put in place policies and limits to control the Company's use of derivatives and exposures. Further details on derivative instruments risk is included in Note 17 to the Financial Statements on pages 72 to 78. The Company gears through the use of long CFDs which are currently cheaper than bank loans and provide flexilibility. The principal risk is that the Portfolio Manager fails to use gearing effectively, resulting in a failure to outperform in a rising market or underperform in a falling market. The Board regularly considers the level of gearing and gearing risk and sets limits within which the Manager must operate.
Environmental, Social and Governance ("ESG") Risk	There is a risk that the value of the assets of the Company are negatively impacted by ESG related risks, including climate change risk. Fidelity has embedded ESG factors in its investment decision making process. ESG integration is carried out at the fundamental research analyst level within its investment teams, primarily through Fidelity's Proprietary Sustainability Rating which is designed to generate a forward-looking and holistic assessment of a company's ESG risks and opportunities based on sector-specific key performance indicators across 127 individual and unique sub-sectors. The Portfolio Manager is also active in analysing the effects of ESG when making investment decisions. The Board continues to monitor developments in this area and reviews the positioning of the portfolio considering ESG factors. Further detail on ESG considerations in the investment process and sustainable investment is on pages 30 to 35.
Competition Risk	Threats facing the Company are loss of Shareholders if the demand for investment trusts declines, and the demand for passive funds and active ETFs (Exchange-Traded Funds) continue to increase. ESG funds offered by competitors may pose competition threats with funds or companies that may offer higher ESG credentials, especially for younger investors. The Board reviews the strategic direction of the Company on an ongoing basis to ensure that it offers a relevant product to Shareholders. It also regularly reviews the Shareholder profile of the Company with the Company's broker. ESG factors are imbedded into the Portfolio Manager's investment decision process.
Regulatory Risk	The Company may be impacted by changes in legislation, taxation, regulation or other external influence that require changes to the business. These are monitored at each Board meeting and managed through active engagement with regulators and trade bodies by the Manager.

Strategic Report continued

Principal Risks	Description and Risk Mitigation
Key Person and Operational Support Risks	The Portfolio Manager, Alex Wright, has a differentiated style in relation to his peers. This style is intrinsically linked with the Company's investment philosophy and strategy and, therefore, the Company has a key person dependency on him. Fidelity has succession plans in place for its portfolio managers which have been discussed with the Board and provides some assurance in this regard. There is a Co Portfolio Manager who works alongside the Portfolio Manager and has extensive experience in the markets and companies and shares a common investment approach and complementary investment experience with the Portfolio Manager. There is also a risk that the Manager has inadequate succession plans for other key operational individuals. The loss of the Portfolio Manager or key individuals could lead to potential performance, operational or regulatory issues. The Manager identifies key dependencies which are then addressed through succession plans, particularly for portfolio managers.
Business Continuity Risk	Investment team key activities, including portfolio managers, analysts and trading/support functions, are performing well despite the operational challenges posed when working from home during the pandemic, and more recently, from the rail strikes. With variants of COVID continuing to evolve, it is evident that although the pandemic is being tackled by vaccines, risks remain. There continues to be increased focus from financial services regulators around the world on the contingency plans of regulated financial firms. The risks following Russia's invasion into Ukraine, specifically regarding the potential loss of power and or broadband services, are increasingly stable as work transfer recovery options are established for business-critical activities. The Manager carries on reviewing its business continuity plans and operational resilience strategies on an ongoing basis. The Manager 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. There has not
	been any significant changes to Fidelity's control environment as a result of the pandemic and 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. Specific risks posed by the pandemic continue to ease with increasing levels of staff returning to routine office-based working, albeit under hybrid working arrangements which allows greater flexibility on remote working as part of the new operating model. The Company's other third party service providers, principally the Registrar, Custodian and Depositary, have also confirmed the implementation of similar measures to ensure no business disruption and that they continue to manage their operational risk and have appropriate business continuity plans in place. The Registrar, Custodian and Depositary are all subject to a risk-based
	program of internal audits by the Manager. In addition, service providers' own internal control reports are received by the Board on an annual basis and any concerns raised are investigated. Risks associated with these services are generally rated as low, although the financial consequences could be serious, including reputational damage to the Company.
Discount Control Risk	Due to the nature of investment companies, the price of the Company's shares and its discount to NAV are factors which are not totally within the Company's control. The Board has a discount management policy in place and some short term influence over the discount may be exercised by the use of share repurchases at acceptable prices and within the parameters set by the Board. The demand for shares can be influenced through good performance and an active investor relations program. The Company's share price, NAV and discount volatility are monitored daily by the Manager and the Company's Broker and considered by the Board on a regular basis.

Continuation Vote

A continuation vote takes place every three years. There is a risk that Shareholders do not vote in favour of continuation during periods when performance of the Company's NAV and share price is poor. At the AGM held on 12 December 2019, 99.90% of Shareholders voted in favour of the continuation of the Company. The next continuation vote will take place at this year's AGM on 14 December 2022 and the Directors expect the vote to be passed.

Viability Statement

In accordance with provision 31 of the 2018 UK Corporate Governance Code, 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 trust with the objective of achieving long term capital growth. 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.

In making an assessment on the viability of the Company, the Board has considered the following:

• The ongoing relevance of the investment objective in prevailing market conditions;
• The Company's level of gearing;
• The Company's NAV and share price performance;
• The principal and emerging risks and uncertainties facing the Company and their potential impact, as set out on pages 24 to 26;
• The future demand for the Company's shares;
• The Company's share price premium/discount to the NAV;
• The liquidity of the Company's portfolio;
• The level of income generated by the Company; and
• Future income and expenditure forecasts.

The Company's performance for the five year reporting period to 31 August 2022 was well ahead of the Benchmark Index, with a NAV total return of 25.8% and a share price total return of 19.1% compared to the Benchmark Index total return of 17.8%. The Board regularly reviews the investment policy and considers whether it remains appropriate. 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 based on the following considerations:

• The Investment Manager's compliance with the Company's investment objective and policy, its investment strategy and asset allocation;

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• The fact that the portfolio comprises sufficient readily realisable securities which can be sold to meet funding requirements if necessary;
• The Board's discount management policy; and
• The ongoing processes for monitoring operating costs and income which are considered to be reasonable in comparison to the Company's total assets.

In preparing the Financial Statements, the Directors have considered the impact of climate change, particularly in the context of the climate change risk identified within the ESG Risk on page 25. The Board has also considered the impact of regulatory changes and how this may affect the Company.

In addition, the Directors' assessment of the Company's ability to operate in the foreseeable future is included in the Going Concern Statement which is included in the Directors' Report on page 37. The Company is also subject to a continuation vote at this year's AGM on 14 December 2022 and the Board expect that Shareholders will vote in favour of continuation.

PROMOTING THE SUCCESS OF THE COMPANY

Under Section 172(1) of the Companies Act 2006, the Directors of a company must act in a way they consider, 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 matters) to the likely consequences of any decision in the long term; the need to foster relationships with the Company's 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 Trust, the Company has no employees or physical assets, and a number of the Company's functions are outsourced to third parties. The key outsourced function is the provision of investment management services by the Manager, but other professional service providers support the Company by providing administration, custodial, banking and audit services. The Board considers the Company's key stakeholders to be the existing and potential shareholders, the external appointed Manager (FIL Investment Services (UK) Limited) and other thirdparty professional service providers. The Board considers that the interest of these stakeholders is aligned with the Company's objective of delivering long term capital growth to investors, in line with the Company's stated objective and strategy, while providing the highest standards of legal, regulatory and commercial conduct.

The Board, with the Portfolio Manager, sets the overall investment strategy and reviews this at an annual strategy day which is separate from the regular cycle of board meetings. In order to ensure good governance of the Company, the Board has set various limits on the investments in the portfolio, whether in the maximum size of individual holdings, the use of derivatives, the level of gearing and others. These limits and guidelines are regularly monitored and reviewed and are set out on pages 22 and 23.

Strategic Report continued

The Board places great importance on communication with shareholders. The Annual General Meeting provides the key forum for the Board and the Portfolio Manager to present to the shareholders on the Company's performance and future plans and the Board encourages all shareholders to attend in person or virtually and raise any questions or concerns. The Chairman and other Board members are available to meet shareholders as appropriate. Shareholders may also communicate with Board members at any time by writing to them at the Company's registered office at FIL Investments International, Beech Gate, Millfield Lane, Tadworth, Surrey KT20 6RP or via the Company Secretary in writing at the same address or by email at investmenttrusts@fil.com. The Portfolio Manager meets with major shareholders, potential investors, stock market analysts, journalists and other commentators throughout the year. These communication opportunities help inform the Board in considering how best to promote the success of the company over the long term.

The Board seeks to engage with the Manager and other service providers and advisers in a constructive and collaborative way, promoting a culture of strong governance, while encouraging open and constructive debate, in order to ensure appropriate and regular challenge and evaluation. This aims to enhance service levels and strengthen relationships with service providers, with a view to ensuring shareholders' interests are best served, by maintaining the highest standards of commercial conduct while keeping cost levels competitive.

Whilst the Company's direct operations are limited, the Board recognises the importance of considering the impact of the Company's investment strategy on the wider community and environment. The Board believes that a proper consideration of Environmental, Social and Governance ("ESG") issues aligns with the investment objective to deliver long-term capital growth, and the Board's review of the Manager includes an assessment of their ESG approach, which is set out in detail on pages 30 to 35.

In addition to ensuring that the Company's investment objective was being pursued, key decisions and actions taken by the Directors during the reporting year, and up to the date of approval of this report, have included:

• The decision to pay an interim dividend of 2.30 pence per share and a final dividend of 5.45 pence per share (a total of 7.75 pence per share), to maintain the 13 year track record of increasing dividends, while retaining funds for reinvestment, consistent with the objective of long term capital growth;
• The raising of £33,672,000 from share issuances, at a premium to net asset value, in order to satisfy investor demand over the year, and also serving the interests of current Shareholders by reducing costs per share and helping to further improve liquidity;
• The decision to hold a hybrid AGM in 2022 in order to make it more accessible to those investors who prefer not to attend in person;
• As part of the Board's succession plans, the appointment of Ominder Dhillon to the Board with effect from 23 June 2022; and

• As part of the Board's succession planning, the decision to appoint Dean Buckley as Chairman when Andy Irvine steps down at the AGM on 14 December 2022. In preparation, Mr Buckley has worked closely with the Chairman over the last few months.

Board Diversity

The Board's overriding intention is to ensure that it is made up of the best combination of people in order to achieve long term capital growth for the Company's Shareholders from an actively managed portfolio of investments. To this effect, the Board, as part of its succession plan, will continue to appoint individuals who, together as a Board, will aim to ensure the continued optimal promotion of the Company in the marketplace. In terms of diversity, there were two female and four male Directors on the Board as at 31 August 2022. The Board's composition meets the target of 33% of women on FTSE 350 company boards set by the Hampton-Alexander Review which aims to increase the number of women on FTSE 350 boards. The Board also meets the recommendations of the Parker Review Committee for each FTSE 250 company to have at least one director from an ethnic minority background by 2024 so as to improve the ethnic and cultural diversity of UK company boards. When Andy Irvine steps down from the Board on 14 December 2022, the Board will also meet the FCA targets on diversity which are effective for accounting periods commencing 1 April 2022 that at least 40% of the Board members are women, one of the senior Board positions is held by a woman and at least one Director is from an ethnic minority background. The Board considers the position of Chairman of the Audit Committee as a senior Board position. This is held by a female Director.

Environmental, Social and Governance ("ESG") in the Investment Process

The Board has contracted with Fidelity to provide the Company with investment management and administrative services. The Board believes that ESG considerations are an important input into the assessment of the value of its investments. The investment universe is undergoing significant structural change and is likely to be impacted by increasing regulation as a result of climate change and other social and governance factors. The Board is committed to reviewing how the Manager applies ESG factors in the investment process. The Fidelity group of companies (including the Manager and Investment Manager) sets out its commitment to responsible investing, and provides a copy of its detailed Responsible Investing at www.fidelity.co.uk/responsibleinvesting. Further information on Fidelity International's approach to ESG in the investment process and sustainable investing can be found on pages 30 to 35 and are part of this Strategic Report.

Socially Responsible Investment

The Manager's primary objective is to produce superior financial returns for the Company's Shareholders. It believes that high standards of corporate social responsibility ("CSR") make good business sense and have the potential to protect and enhance investment returns.

Corporate Engagement

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The Board believes that the Company should, where appropriate, take an active interest in the affairs of the companies in which it invests and that it should exercise its voting rights at their general meetings. It delegates the responsibility for corporate engagement and Shareholder voting to the Manager who updates the Board on issues and activities. These activities are reviewed regularly by the Manager's corporate governance team.

Streamlined Energy and Carbon Reporting (SECR)

As an investment company with all its activities outsourced to third parties, the Company's own direct environmental impact is minimal. The Company has no premises, consumes no electricity, gas or diesel fuel and consequently does not have a measurable carbon footprint. The Company is categorised as a low energy user (less than 40MWH) under the Streamlined Energy & Carbon Reporting regulations and therefore is not required to disclose any energy and carbon information in this Annual Report.

Future Developments

Some trends likely to affect the Company in the future are also common to many investment companies together with the impact of regulatory change and emerging risks. The factors likely to affect the Company's future development, performance and positions are set out in the Chairman's Statement and the Portfolio Manager's Review on pages 2 to 9.

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By Order of the Board FIL Investments International Secretary 3 November 2022

ESG and Sustainable Investing at Fidelity International ("Fidelity/FIL")

Fidelity has developed an approach to sustainable investing that is built on integrated ESG analysis, engagement and collaboration. It believes that each of these elements complements each other and increases the likelihood of success and enhances the returns for the Company's shareholders.

Companies are rated across three core areas, each with underlying factors

06

05

Climate assessment scale

Integration of the assessment within Fidelity's broader climate change strategy

Achieving or enabling net zero	Aligning to a net zero path	High transition potential to net zero	Low transition potential to net zero	No evidence of transition potential to net zero
Issuers already have current emissions intensity performance at, or close to, net zero emissions or issuers are critical enablers to the transition to net zero through the products they provide	Issuers have committed to robust targets in line with a net zero emissions trajectory with an appropriate governance and investment plan to achieve that goal	Issuers have demonstrated a commitment towards achieving net zero and are proposing or implementing credible plans to achieve this goal	Issuers demonstrate some level of climate awareness but fall short of credible commitments to achieve carbon reduction objectives	Issuers show no indication or willingness to align emissions and business model to a global net zero world
Eligible to a Net Zero portfolio	Eligible to a Net Zero portfolio	Continued investment and engagement/voting	Continued investment and engagement/voting	No additional purchases and ultimately divestment

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STRATEGY

ESG in the Investment Process

Fidelity International ("Fidelity") has embedded Environmental, Social and Governance ("ESG") factors in its investment decision making for a number of years. Fidelity has been a signatory to the United Nations Principles for Responsible Investment (UNPRI) since 2012 and submits an annual report detailing how it incorporates ESG into its investment analysis. As a founding signatory to the Net Zero Asset Managers Initiative, Fidelity has committed to halving the carbon footprint of its investment portfolios by 2030, from a 2020 baseline, starting with equity and corporate bond holdings; and to reach net zero for holdings by 2050.

ESG integration at Fidelity is carried out at the fundamental research analyst level within its investment teams, primarily through the implementation of the Fidelity Proprietary Sustainability Rating. This rating was established in 2019 and is designed to generate a forward-looking and holistic assessment of a company's ESG risks and opportunities, based on sector specific key performance indicators across 127 individual and unique sub-sectors. A breakdown of the ratings of the companies in the portfolio using MSCI and Fidelity's own proprietary ratings is on the next page. In addition, Fidelity's portfolio managers are also active in analysing the effects of ESG factors when making investment decisions. ESG analysis complements financial analysis to provide a complete view of every company that is researched and monitored.

Fidelity's approach to integrating ESG factors into its investment analysis includes the following activities:

• In-depth research.
• Company engagement.
• Active ownership.
• Collaboration within the investment industry.

In addition to Fidelity's Sustainability Ratings, Fidelity has developed a proprietary Climate Rating, which is an important part of its plans to reach net zero emissions across its portfolios. It utilises its fundamental research capabilities to identify climate related risks, net zero investments and targets for transition engagement within the Fidelity investment universe. It assesses which companies are in the best position to transition to net zero, or have a positive trajectory towards transition. The Climate Rating is designed to complement the broader Sustainability Ratings, which score companies across a range of environmental, social and governance criteria.

Although Fidelity's analysts have overall responsibility for analysing the environmental, social and governance performance of the companies in which it invests, it has a dedicated Sustainable Investing Team working closely with the investment teams and responsible for consolidating Fidelity's approach to stewardship, engagement, including thematic engagement, ESG integration and the exercise of its votes at general meetings.

The Sustainable Investing Team has a key role in assisting the investment teams with ESG integration which includes:

• Implementing Fidelity's proxy voting guidelines.
• Engagement with investee companies on ESG issues, utilising Fidelity's corporate access research capabilities and investment scale to improve corporate behaviour, including at company meetings.
• Working closely with the investment team globally across all asset classes in integrating ESG into analysis and decisionmaking.
• Providing internal ESG reporting including analyst reports, portfolio manager reviews and industry analysis.
• Co-ordinating and responding to specific client queries on ESG topics.
• Publishing client reporting on ESG integration and proxy voting.
• Maintaining a thorough understanding of current ESG themes and trends around the world.
• Attending external seminars and conferences focusing on trending ESG issues and ESG integration.
• Providing ESG training to the investment team and across the business.

During 2021, Fidelity introduced its sustainable investing voting principles and guidelines. These seek to provide a clear overview of Fidelity's voting approach, promote improved corporate behaviours and reduce risk, include environmental and social factors, increase clarity of votes to issuers and clients and meet current market best practices and stewardship expectations. Examples of the policy include voting against companies not meeting key criteria on climate change and against management in developed markets with less than 30% female representation at board level.

Fidelity's investment approach involves bottom-up research. As well as studying financial results, the portfolio managers and analysts carry out additional qualitative analysis of potential investments. They examine the business, customers and suppliers and visit the companies in person to develop a view of every company in which Fidelity invests. ESG factors are embedded in this research process.

Examples of ESG factors that Fidelity's investment teams may consider as part of its company and industry analysis include:

• Corporate governance (e.g. Board structure, executive remuneration).
• Shareholder rights (e.g. election of directors, capital amendments).
• Changes to regulation (e.g. greenhouse gas emissions restrictions, governance codes).
• Physical threats (e.g. extreme weather, climate change, water shortages).
• Brand and reputational issues (e.g. poor health and safety record, cyber security breaches).
• Supply chain management (e.g. increase in fatalities, lost time injury rates, labour relations).

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

• Work practices (e.g. observation of health, safety and human rights provisions and compliance with the provisions of the Modern Slavery Act).

Fidelity operates analyst training and development programmes which include modules on ESG themes, topics and strategies and attendance at external seminars on the trending ESG issues in the market globally as well as conferences to explore new ways of integrating ESG into the investment process across all asset classes.

Fidelity uses a number of external research sources around the world that provide ESG-themed reports and it subscribes to an external ESG research provider and rating agency to supplement its organic analysis. Fidelity receives reports that include company specific and industry specific research as well as ad hoc thematic research looking at particular topics. The ESG ratings are industry specific and are calculated relative to industry peers and Fidelity uses these ratings in conjunction with its wider analysis. Fidelity's sources of ESG research are reviewed on a regular basis.

The ESG ratings and associated company reports are included on Fidelity's centralised research management system. This is an integrated desktop database, so that each analyst has a firsthand view of how each company under their coverage is rated according to ESG factors. In addition, ESG ratings are included in the analyst research notes which are published internally and form part of the investment decision. The external research vendor also provides controversy alerts which include information on companies within its coverage which have been identified to have been involved in a high-risk controversy that may have a material impact on the company's business or its reputation.

Fidelity International - Setting standards for its business

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Sustainability built from the ground up

We apply the same KPIs to our own business that we use for the companies in which we invest. And we expect to improve upon our own ESG standards, just as we would expect from others.

ESG in the Investment Process continued

ESG ASSESSMENT

The charts below show a breakdown of the underlying stocks in the Company's portfolio using MCSI and Fidelity's own ESG ratings. In the first chart, MSCI rates issuers on a AAA to CCC scale according to their exposure to industry specific ESG key issues and their ability to manage those issues relative to peers. In the second chart, Fidelity's analysts rate stocks in their coverage universe on a five scale rating from A (best) to E (worst) and are based on the net asset value of holdings excluding cash, liquidity funds, derivatives and ETFs, and rebased to 100%.

MSCI ESG Ratings (distribution by holdings)

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Fidelity ESG Ratings (distribution by holdings)

Sources: Fidelity International and MSCI ESG Research as at 31 August 2022. Benchmark Index: FTSE All-Share Index.

CARBON EMISSIONS ASSESSMENT

The chart below demonstrates the carbon footprint of the Company's portfolio compared to that of the Benchmark Index.

Sources: Fidelity and MSCI ESG Research as at 31 August 2022. Benchmark Index: FTSE All-Share Index.

Carbon Intensity: Represents the Company's CO2e normalised by sales in US dollars and allows for comparison between companies of different sizes.

Carbon Emissions: Provides a normalised snapshot of the Company's contribution to carbon emissions (per million US dollars invested).

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Carbon Data Source: Data provided by ISS ESG. All rights in the information provided by Institutional Shareholder Services Inc. and its affiliates (ISS) reside with ISS and/or its licensors. ISS makes no express or implied warranties of any kind and shall have no liability for any errors, omissions or interruptions in or in connection with any data provided by ISS.

Board of Directors

Andy Irvine Chairman (since 5 July 2016)

Appointed 15 April 2010

M N

Andy Irvine is a past Non-Executive Director of BlackRock North American Income Trust plc, a past Chairman of Montanaro European Smaller Companies PLC and of Jones Lang La Salle Scotland and a past Non-Executive Director of Securities Trust of Scotland PLC. He has over 35 years' experience in commercial property development and investment. He is also a past Chairman of Celtic Rugby Limited, a past Chairman of the British and Irish Lions Limited and a past President of the Scottish Rugby Union.

Claire Boyle

Chairman of the Audit Committee (since 12 December 2019) Appointed 24 June 2019

A M N

Claire Boyle is a Non-Executive Director and Chair of the Audit Committee of Aberdeen Japan Investment Trust PLC. She is Chairman of the Life Science REIT plc and also a Non-Executive Director of The Monks Investment Trust PLC. She was a Partner at Oxburgh Partners LLP with responsibility for the European Equity Hedge Fund and, prior to that, a European Equity Fund Manager at American Express Asset Management. She started her investment career with Robert Fleming Investment Management. She is a Fellow of the Institute of Chartered Accountants, having worked in fraud investigations at Coopers & Lybrand.

Dean Buckley

Senior Independent Director (since 12 December 2019) Appointed 3 November 2015

A M N

Dean Buckley is a Non-Executive Director of Alliance Trust PLC and Baillie Gifford & Co Limited. He is Chairman of Evelyn Partners Fund Solutions Limited (previously Smith & Williamson Fund Administration Limited). He is also Senior Independent Director, Chairman of the Audit Committee and the Remuneration Committee of JPMorgan Asia Growth & Income plc. He was previously a Non-Executive Director of Saunderson House Ltd and Chief Executive Officer at Scottish Widows Investment Partnership. Prior to this, he held several positions at HSBC Bank plc, including Chief Executive Officer for HSBC Asset Management UK and Middle East and Chief Investment Officer for HSBC Asset Management, European equities, and held a number of senior Fund Manager positions at Prudential Portfolio Managers. He is a Fellow of the Institute of Actuaries.

Ominder Dhillon Appointed 23 June 2022

A M N Ominder Dhillon is a Non-Executive Director of The City of London Investment

Trust plc. He is a Senior Advisor to IC Research and a Trustee to a UK charity, Facing History & Ourselves. He has more than 29 years' experience of asset management covering institutional, wholesale and retail channels. Until January 2020, he was Global Head of Institutional Distribution at M&G Investments and prior to that, Managing Director of Global Business Development at sustainable and impact investment specialist Impax Asset Management. Prior to Impax, he was Head of UK & Ireland Institutional Distribution at Fidelity International, Director Institutional Business Development at Scottish Widows Investment Partnership and a Director and Portfolio Manager at John Morrell & Associates Limited.

Nigel Foster Appointed 1 September 2015

A M N

Nigel Foster has over 41 years' experience in the investment management industry. Prior to joining the Board, he was a Managing Director at BlackRock where he headed all market facing activities, including trading and capital markets for the EMEA region. He was also Global Head of Derivatives at BlackRock and predecessor firms for 27 years. He has led a number of prominent financial rescues and is the author of "The Derivatives Game", a book that traces the story of derivatives from ancient times to the present day.

Alison McGregor Appointed 1 January 2020

Alison McGregor is Chair of The Malcolm Group. She is a Non-Executive Director of Scottish Power Energy Network Holdings and Beatson Cancer Charity. She is a past Non-Executive Director of the Confederation of British Industries and past Co-Chair of the Scottish Apprenticeship Advisory Board. In 2017, she was awarded the Scotland Corporate Leader of the Year Award and in 2018, the Women in Banking and Finance UK award for Achievement. She was the CEO of HSBC Scotland from 2014 to 2018, the Chair of CBI Scotland and a Non-Executive Director of Scottish Enterprise.

All Directors are Non-Executive Directors and all are independent.

Committee membership key

A Audit M Management Engagement N Nomination Committee Chair

Directors' Report

The Directors have pleasure in presenting their report together with the audited Financial Statements of the Company for the year ended 31 August 2022.

The Company was incorporated in England and Wales as a public limited company on 27 September 1994 under the name of Fidelity Special Values PLC with the registered number 2972628 and commenced business as an investment trust on 17 November 1994.

MANAGEMENT COMPANY

FIL Investment Services (UK) Limited ("FISL") is the Company's appointed Alternative Investment Fund Manager (the "AIFM"/ "Manager"). FISL, as the Manager, has delegated the portfolio management of assets and the role of company secretary to FIL Investments International.

The Alternative Investment Fund Management and Secretarial Services Agreement (the "Management Agreement") will continue unless and until terminated by either party giving to the other not less than six months' notice in writing. However, it may be terminated without compensation if the Company is liquidated pursuant to the procedures laid down in the Articles of Association of the Company. The Management Agreement may also be terminated forthwith as a result of a material breach of the Agreement or on the insolvency of the Manager or the Company. In addition, the Company may terminate the Agreement by sixty days' notice if the Manager ceases to be a subsidiary of FIL Limited.

The Board reviews the Management Agreement at least annually and details are included in the Corporate Governance Statement on page 43.

Management Fee

Since 1 January 2021, the management fee is a single fee of 0.60% of net assets.

Fees for the reporting year were £5,607,000 (2021: £5,098,000) and are disclosed in Note 4 on page 64.

The Board

All Directors served on the Board throughout the year ended 31 August 2022, with the exception of Ominder Dhillon who was appointed to the Board on 23 June 2022. A brief description of all serving Directors as at the date of this Annual Report is shown on page 36 and indicates their qualifications for Board membership.

In line with the Board's succession plan, Andy Irvine will not be seeking re-election at the AGM on 14 December 2022.

Directors' and Officers' Liability Insurance

In addition to benefits under the Manager's global Directors' and Officers' liability insurance arrangements, the Company maintains additional insurance cover for its Directors under its own policy as permitted by the Companies Act 2006.

Going Concern Statement

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. 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 continue in operational existence for the foreseeable future. The Board has therefore concluded that the Company has adequate resources to continue to adopt the going concern basis for the period to 30 November 2023 which is at least twelve months from the date of approval of the Financial Statements. This conclusion also takes into account the Board's assessment of the ongoing risks from evolving variants of COVID, the war in Ukraine and significant market events, as set out in the Business Continuity Risk in the Strategic Report on page 26. The prospects of the Company over a period longer than twelve months can be found in the Viability Statement on page 27.

Accordingly, the Financial Statements of the Company have been prepared on a going concern basis.

The Company is subject to a continuation vote at this year's AGM on 14 December 2022, and the Directors expect this vote to be passed.

Auditor's Appointment

A resolution to reappoint Ernst & Young LLP as Auditor to the Company will be proposed at the AGM on 14 December 2022.

Disclosure of Information to the Company's Auditor

As required by Section 418 of the Companies Act 2006, each Director in office as at the date of this Annual Report confirms that:

• a) so far as each Director is aware, there is no relevant audit information of which the Company's Auditor is unaware; and
• b) each Director has taken all the steps that ought to have been taken as a Director to make himself/herself aware of any audit information, and to establish that the Company's Auditor is aware of that information.

Articles of Association

Any amendments to the Company's Articles of Association must be made by special resolution.

Corporate Governance

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The Corporate Governance Statement on pages 41 to 44 forms part of this report.

Registrar, Custodian and Depositary Arrangements

The Company has appointed Link Group as its Registrar to manage the Company's share register, JPMorgan Chase Bank as its Custodian, which is primarily responsible for safeguarding the Company's assets, and J.P. Morgan Europe Limited as its

Directors' Report continued

Depositary, which is primarily responsible for oversight of the custody of investment funds and the protection of investors' interests. Fees paid to these service providers are disclosed in Note 5 on page 65.

Share Capital

The Company's issued share capital comprises ordinary shares of 5 pence each and are fully listed on the London Stock Exchange. As at 31 August 2022, the share capital of the Company was 324,098,920 shares (2021: 313,028,920). No shares were held in Treasury (2021: nil).

Premium/Discount Management: Enhancing Shareholder Value

The Board actively manages the Company's level of premium/ discount. If the Company is trading at a discount, it seeks to maintain the discount in single digits in normal market conditions. The Board seeks authority from Shareholders each year to issue shares at a premium or to repurchase shares at a discount to the NAV either for cancellation or for holding in Treasury. The Board will exercise these authorities if deemed to be in the best interests of Shareholders at the time.

Share Issues

The Company issued a total of 11,070,000 ordinary shares from its block listing facility during the year to 31 August 2022 (2021: 24,024,913 issued from Treasury and block listing facilities). Since the year end and as at the date of this Annual Report, no further ordinary shares have been issued.

The authorities to issue shares and to disapply pre-emption rights expire at the AGM on 14 December 2022 and resolutions to renew these authorities will be put to Shareholders at this AGM.

Share Repurchases

The Company did not repurchase any ordinary shares into Treasury or for cancellation in the year to 31 August 2022 (2021: 1,025,473 ordinary shares purchased into Treasury). Since the year end and as at the date of this Annual Report, no further shares have been repurchased into Treasury or for cancellation.

The authority to repurchase shares expires at the AGM on 14 December 2022 and a resolution to renew the authority to purchase shares, either for cancellation or to buy into Treasury, will be put to Shareholders at the forthcoming AGM.

Substantial Share Interests

As at 31 August 2022 and 30 September 2022, notification had been received that the Shareholders listed in the table below held more than 3% of the voting share capital of the Company.

Shareholders	31 August 2022	30 September 2022
Fidelity Platform Investors	19.71	19.63
Evelyn Partners	10.10	10.13
Hargreaves Lansdown	7.00	6.98
Interactive Investor	6.90	6.89
RBC Brewin Dolphin	6.69	6.66
Rathbones	6.65	6.58
Investec Wealth & Investment	3.71	3.67
AJ Bell	3.04	3.13

An analysis of Shareholders as at 31 August 2022 is detailed in the table below.

Shareholders as at 31 August 2022	% of voting share capital
Private Shareholders1	89.34
Institutions	8.07
Insurance	1.25
Pension	0.89
Other	0.45

1 Includes Fidelity Platform Investors (19.71%).

Additional Information Required in the Directors' Report

Information on proposed dividends, financial instruments and disclosure on Streamlined Energy and Carbon Reporting (SECR) is set out in the Strategic Report on pages 22 to 29.

Responsibility as an Institutional Shareholder

The Board has adopted the Manager's Principles of Ownership in relation to investments. These Principles include the pursuit of an active investment policy through portfolio management decisions, voting on resolutions at general meetings and maintaining a continuing dialogue with the management of investee companies. Fidelity International is a signatory to the UK Stewardship Code which sets out the responsibilities of institutional Shareholders and agents. Further details of the Manager's Principles of Ownership and voting may be found at www.fidelity.co.uk.

Relations with Shareholders

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Communication with Shareholders is given a high priority by the Board and it liaises with the Manager and the Company's broker who are in regular contact with the Company's major institutional investors to canvass Shareholder opinion and to communicate its views to Shareholders. All Directors are made aware of Shareholders' concerns and the Chairman, the Senior Independent Director and, where appropriate, other Directors, are available to meet with Shareholders to discuss strategy and governance. The Board regularly monitors the Shareholder profile of the Company and receives regular reports from the Manager on meetings attended with Shareholders and any concerns raised in such meetings. The Board aims to provide the maximum opportunity for dialogue between the Company and Shareholders. If any Shareholder wishes to contact a member of the Board directly, they should either email the Company Secretary at investmenttrusts@fil.com or in writing at FIL Investments International, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP. The Company Secretary will attend to any enquiries promptly and ensure that they are directed to the Chairman, Senior Independent Director or the Board as a whole, as appropriate.

The Board encourages all Shareholders to attend the Company's AGM on 14 December 2022 at which they will have the opportunity to meet and address questions to the Chairman, other members of the Board, the Portfolio Manager and representatives of the Manager.

Alex Wright, the Portfolio Manager, will be making a presentation to Shareholders highlighting the achievements and challenges of the year past and the prospects for the year to come. For those Shareholders who would prefer not to attend in person, we will live-stream the formal business and presentations of the meeting online. Further details of how to join virtually are in Note 8 in the Notes to the Notice of Meeting on page 85.

The Notice of Meeting on pages 83 to 86 sets out the business of the AGM and the special business resolutions are explained more fully on the next page. A separate resolution is proposed on each substantially separate issue including the Annual Report and Financial Statements. The Notice of Meeting and related papers are sent to shareholders at least 20 working days before the AGM.

Voting Rights in the Company's Shares

Every person entitled to vote on a show of hands has one vote. On a poll every Shareholder who is present in person or by proxy or representative has one vote for every ordinary share held. At general meetings, all proxy votes are counted and, except where a poll is called, proxy voting is reported for each resolution after it has been dealt with on a show of hands. The proxy voting results are disclosed on the Company's page of the Manager's website at www.fidelity.co.uk/specialvalues.

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ANNUAL GENERAL MEETING

THIS SECTION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the action you should take, you should seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets Act 2000.

The AGM of the Company will be held at 11.00 am on Wednesday, 14 December 2022 at 4 Cannon Street, London EC4M 5AB and virtually via the online Lumi AGM meeting platform. Full details of the meeting are given in the Notice of Meeting on pages 83 to 86.

For those Shareholders who would prefer not to attend in person or for whom travel is not convenient, we will live-stream the formal business and presentations of the meeting online.

Alex Wright, the Portfolio Manager, will be making a presentation to Shareholders highlighting the achievements and challenges of the year past and the prospects for the year to come. He and the Board will be very happy to answer any questions that Shareholders may have. Copies of his presentation can be requested by email at investmenttrusts@fil.com or in writing to the Secretary at FIL Investments International, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.

Properly registered Shareholders joining the AGM virtually will be able to vote on the proposed resolutions. Please see Note 8 to the Notes to the Notice of Meeting on page 85 for details on how to vote virtually. Investors viewing the AGM online will be able to submit live written questions to the Board and the Portfolio Manager and we will answer as many as possible at an appropriate juncture during the meeting.

Further information and links to the Lumi platform may be found on the Company's website www.fidelity.co.uk/specialvalues. On the day of the AGM, in order to join electronically and ask questions via the Lumi platform, Shareholders will need to connect to the website https://web.lumiagm.com.

We urge Shareholders to vote and make use of the proxy form provided. Please note that investors on platforms such as Fidelity Personal Investing, Hargreaves Lansdown, Interactive Investor or AJ Bell Youinvest will need to request attendance at the AGM in accordance with the policies of your chosen platform. They may request that you submit electronic votes in advance of the meeting. If you are unable to obtain a unique IVC and PIN from your nominee or platform, we will also welcome online participation as a guest. Once you have accessed https://web. lumiagm.com from your web browser on a tablet or computer, you will need to enter the Lumi Meeting ID which is 110-440-023. You should then select the 'Guest Access' option before entering your name and who you are representing, if applicable. This will allow you to view the meeting and ask questions but you will not be able to vote.

Directors' Report continued

Fidelity Platform Investors - Voting at AGMs

If you hold your shares in the Company through the Fidelity Platform, then Fidelity passes on to you the right to vote on the proposed resolutions at the Company's AGM. Fidelity Platform Investors are advised to vote online via the Broadridge Service (a company that specialises in investor voting facilities). Investors can sign up to this facility via their Fidelity Investor Account.

Proxy Voting

Link Group, the Registrar, introduced a paperless proxy voting process in 2018. However, for ease of voting this year, we are sending a paper Proxy Form to all Shareholders who hold shares on the main share register. This will assist Shareholders to vote in advance of the meeting should they decide not to attend in person.

If you have sold, transferred or otherwise disposed of all your shares in the Company, you should pass this document, together with any accompanying documents, as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for onward transmission to the purchaser or transferee.

At the AGM on 14 December 2022, resolutions will be proposed relating to the items of business set out in the Notice of Meeting on pages 83 and 84, including the items of special business summarised below.

Authority to Allot Shares

Resolution 12 is an ordinary resolution and provides the Directors with a general authority to allot securities in the Company up to an aggregate nominal value of £1,624,949. If passed, this resolution will enable the Directors to allot a maximum of 32,498,980 ordinary shares which represents approximately 10% of the issued ordinary share capital of the Company (including Treasury shares) as at 3 November 2022 and to impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with Treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter. The Directors would not intend to use this power unless they considered that it was in the interests of Shareholders to do so. Any shares issued would be at NAV per share or at a premium to NAV per ordinary share.

Authority to Disapply Pre-Emption Rights

Resolution 13 is a special resolution disapplying pre-emption rights and granting authority to the Directors, without the need for further specific Shareholder approval, to make allotments of equity securities or sale of Treasury shares for cash up to an aggregate nominal value of £1,624,494 (including Treasury shares) (approximately 10% of the issued ordinary share capital of the Company as at 3 November 2022 and equivalent to 32,498,920 ordinary shares).

Authority to Repurchase Shares

Resolution 14 is a special resolution which renews the Company's authority to purchase up to 14.99% (48,582,428) of ordinary shares in issue (excluding Treasury shares) on 3 November 2022 either for immediate cancellation or for retention as Treasury shares at the determination of the Directors. Once shares are

held in Treasury, the Directors may only dispose of them in accordance with the relevant legislation by subsequently selling the shares for cash or by cancelling the shares. Purchases of ordinary shares will be at the discretion of the Directors and within guidelines set from time to time by them in the light of prevailing market conditions. Purchases will only be made in the market at prices below the prevailing NAV per ordinary share.

Continuation Vote

Resolution 15 is an ordinary resolution regarding the continuation of the Company as an investment trust for a further three years. The Directors expect this continuation vote to pass.

Recommendation: The Board considers that each of the resolutions is likely to promote the success of the Company and is in the best interests of the Company and its Shareholders as a whole. The Directors unanimously recommend that you vote in favour of the resolutions as they intend to do in respect of their own beneficial holdings.

By Order of the Board FIL Investments International Secretary 3 November 2022

Corporate Governance Statement

"Corporate governance" is the process by which the Board of Directors of a company look after Shareholders' interests and by which it endeavours to enhance those interests (often referred to as "shareholder value"). Shareholders hold the Directors responsible for the stewardship of a company's affairs, delegating authority to the Directors to manage the Company on their behalf and holding them accountable for its performance.

This report, which forms part of the Directors' Report, explains how the Directors of Fidelity Special Values PLC (the "Company") deal with that responsibility, authority and accountability.

Corporate Governance Codes

The Board follows the principles and provisions of the UK Corporate Governance Code (the "UK Code") issued by the Financial Reporting Council (the "FRC") in July 2018 and the AIC's Code of Corporate Governance (the "AIC Code") issued by the Association of Investment Companies (the "AIC") in February 2019. The AIC Code addresses the principles and provisions of the UK Code. The FRC has confirmed that investment companies which report against the AIC Code will meet their obligations under the UK Code and paragraph 9.8.6 of the Listing Rules. This statement, together with the Statement of Directors' Responsibilities on page 48, set out how the principles have been applied.

The AIC Code can be found on the AIC's website at www.theaic. co.uk and the UK Code on the FRC's website at www.frc.org.uk.

Statement of Compliance

The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Code for the year under review and up to the date of this report, except in relation to the UK Code provisions relating to the role of the chief executive, executive directors' remuneration, and the need for an internal audit function. The Board considers that these provisions are not relevant to the position of the Company, as it is an externally managed investment company and has no executive directors, employees or internal operations. All of its day to day management and administrative functions are delegated to the Manager.

The Corporate Governance of an Investment Trust Company

The corporate governance of most investment companies is different from most other commercial companies in one important respect: they do not employ their own people as management but instead the services of a fund management company. This affects the way investment companies are governed but not the purpose of their governance. Given that the Manager's business is not dedicated solely to the interests of investment companies and their Shareholders, investment company boards must be largely independent of management. However, the Board must have knowledge and experience of both fund management and investment company management. The Company was established and is managed and promoted by its Manager, which is therefore one of the main reasons some Shareholders choose to invest in the Company's shares. It follows that it is an important aspect of the corporate governance of the Company that its Manager should be party to the responsibility, authority and accountability to those investing in their management.

The Corporate Governance policies and Modus Operandi of Fidelity Special Values PLC

The corporate governance of any investment company, while following the guidelines of the UK Code and AIC Code, will vary in certain respects depending on its own circumstances. The Board of the Company has considered its own circumstances and determined its own corporate governance policies and modus operandi.

In this section we have outlined the corporate governance policies and modus operandi through the following three aspects of corporate governance: Responsibility, Authority and Accountability. It is, first of all, important that Shareholders have confidence in the Board of Directors, whom they hold responsible and accountable for the Company's affairs.

In determining the guidelines for the composition of the Board, the Directors believe that Board members, including the Chairman, are independent of management, and that within the Board there is understanding and experience of investment management, investment company management, the investment objective of the Company, marketing, general business experience and finally of Fidelity's investment philosophy and its operations.

The Directors recognise that any individual employed by or materially associated with the Manager cannot be regarded as independent. All Directors are independent and considered to be free from any business or other relationship which could materially interfere with the exercise of their independent judgement. Details of the Directors' current business associations are set out on page 36. In addition, all Directors are able to allocate sufficient time to the Company to discharge their responsibilities fully and effectively. The Board follows a procedure of notification of any interests that may arise as part of considering any potential conflicts.

All of the Directors are Non-Executive. Each Director's individual independence, including that of the Chairman, has been assessed and confirmed, taking into consideration:

• integrity, commitment, intelligent challenge;
• independence of mind and character;
• experience and knowledge of investment trusts, of the investment business generally and of Fidelity;
• financial literacy;

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• conflicts of interest; and
• performance as a Director.

Corporate Governance Statement continued

	Regular Board Meetings	Audit Committee Meetings	Management Engagement Committee Meetings	Nomination Committee Meetings
Andy Irvine	5/5	n/a	1/1	1/1
Claire Boyle	5/5	3/3	1/1	1/1
Dean Buckley	5/5	3/3	1/1	1/1
Ominder Dhillon1	1/1	1/1	n/a	n/a
Nigel Foster	5/5	3/3	1/1	1/1
Alison McGregor	5/5	3/3	1/1	1/1

1 Appointed on 23 June 2022.

Figures indicate those meetings for which each Director was eligible to attend and attended in the year. Regular Board meetings exclude ad hoc meetings for formal approvals.

The Board considers the tenure of each Director annually. A Director may serve more than nine years, provided that such Director is considered by the Board to continue to be independent and provides experience that remains relevant. In addition, each Director is subject to annual re-election, or election if newly appointed, by Shareholders.

The Board meets regularly to discharge its duties effectively and the table above gives the attendance record for the meetings held during the reporting year.

Responsibility

Under Section 172(1) of the Companies Act, the Directors have a duty to promote the success of the Company for the benefit of our Shareholders. This includes having regard (amongst other matters) to the likely consequences of any decision in the long term, fostering relationships with the Company's stakeholders and the desirability of the Company in maintaining a reputation for high standards of business conduct. Further details on promoting the success of the Company can be found in the Strategic Report on pages 27 and 28.

Authority

The Board is furnished by Shareholders with the authority to manage the Company on their behalf, in order to discharge the responsibilities outlined above. The Board, being independent of the Manager, carries out its duties through Board meetings and Board appointed Committee meetings. The most important aspect of Directors' duties concerns the management of the Company's portfolio of assets and of the risk profile of its balance sheet. While the day-to-day investment management is delegated to the Manager, there are certain decisions retained and made by the Directors, including the payment of dividends, the share issue and share repurchase guidelines and the derivatives and gearing policies.

In structuring Board meetings, the Directors try to concentrate as much as possible of their regular Board meetings on (i) investment matters (including strategy, investment policy, gearing and derivatives policies, portfolio and stock reviews, portfolio

turnover, monitoring performance etc); and (ii) Shareholder value matters (including monitoring the premium or discount, share issues and share repurchases and the marketing of the Company). The Chairman is responsible for the promotion of a culture of openness and debate, for ensuring that the Directors receive accurate, timely and clear information and for ensuring that there is adequate time available for the discussion of agenda items, particularly strategic issues.

The Board meets regularly with the Company's Broker to discuss Shareholder value and investor relation matters. The Portfolio Manager and Manager meet with the larger Shareholders on a regular basis and reports back to the Board on those meetings. The Chairman, when required, also attends some of these meetings. Key representatives of the Manager attend each Board meeting, enabling the Board to discuss business matters further.

BOARD COMMITTEES

The Board has three Committees, as set out below and on the next page, through which it discharges certain of its corporate governance responsibilities. These are the Audit Committee, the Management Engagement Committee and the Nomination Committee. Terms of reference of each Committee are available on the Company's pages of the Manager's website at www.fidelity.co.uk/specialvalues.

Audit Committee

The Audit Committee consists of Claire Boyle as Chairman, Dean Buckley, Ominder Dhillon, Nigel Foster and Alison McGregor. Full details of the Audit Committee are disclosed in the Report of the Audit Committee on pages 49 and 50.

Management Engagement Committee Composition

The Management Engagement Committee is chaired by Andy Irvine and consists of all the Directors.

Role and Responsibilities

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It is charged with reviewing and monitoring the performance of the Manager and for ensuring that the terms of the Company's

Management Agreement remains competitive and reasonable for Shareholders. It meets at least once a year and reports to the Board, making recommendations where appropriate.

Manager's Reappointment

Ahead of the AGM on 14 December 2022, the Committee has reviewed the performance of the Manager and the current fee basis and also that of its peers. The Committee noted the Company's NAV and share price performance over the reporting year and also over five years and over the Portfolio Manager's tenure compared to the returns of the Benchmark Index. The Committee also noted the commitment, quality and continuity of the team responsible for the Company and concluded that it was in the interests of Shareholders that the appointment of the Manager should continue. Details of the fee structure for the reporting year ended 31 August 2022 can be found in the Directors' Report on page 37.

Nomination Committee

Composition

The Nomination Committee is chaired by Andy Irvine and consists of all the Directors.

Role and Responsibilities

The Committee meets at least once a year and reviews the composition, size and structure of the Board. The Committee is responsible for succession planning and it is charged with nominating new Directors for consideration by the Board, and in turn for approval by Shareholders.

In respect of new Directors, the Board believes that it is important in the search for and recommendation of a candidate to the Board that it is carried out by all of the Committee members who are all independent Directors. The Committee carries out its candidate search from the widest possible pool of talent based on the benefits of having a diverse range of skills, knowledge, experience, perspectives and background, including gender. External consultants are used to identify potential candidates and to assist the Board in recruiting new independent Non-Executive Directors. This was the case for the recruitment of Ominder Dhillon through the services of Cornforth Consultancy who has no connection with the Company.

Upon appointment, each Director is provided with all relevant information regarding the Company and receives an induction on the investment operation and administration functions of the Company, together with a summary of their duties and responsibilities. Directors are encouraged to keep up to date and attend training courses on matters which are directly relevant to their involvement with the Company. They also receive regular briefings from, amongst others, the AIC, the Company's Auditor and the Company Secretary, regarding any proposed developments or changes in law or regulations that could affect the Company and/or the Directors.

The Committee also considers the election and re-election of Directors ahead of each AGM. For the forthcoming AGM, it has considered the performance and contribution of each Director and concluded that each Director seeking election and re-election has been effective and continues to demonstrate commitment to their role. This has been endorsed by the Board

which recommends their reappointment by Shareholders at the forthcoming AGM. The terms and conditions of appointment of Directors are available for inspection at the registered office of the Company.

As part of the election and re-election process, and other than every third year when an external evaluation is undertaken, a Board evaluation process is undertaken ahead of the AGM which takes the form of written questionnaires and one to one discussions. The process is considered to be constructive in terms of identifying areas for improving the functioning and performance of the Board and its Committees and action is taken on the basis of the results.

As a FTSE 350 Company and in accordance with provision 21 of the 2018 UK Corporate Governance Code, the Board carried out an externally facilitated evaluation in 2020. The next external evaluation will take place in 2023.

Accountability

Given that the Shareholders entrust the Board of Directors with the management of the Company's affairs, it is necessary that the Board accounts for itself to Shareholders. The process of accountability involves providing all the necessary information for Shareholders to make judgements about the Board's stewardship and performance through a full and informative annual financial report, a half-yearly financial report, the presentation of the Company's results and future prospects at the AGM and accessibility to the Board at any time via the Company Secretary.

The AGM is the occasion when the Board accounts for itself in a public meeting. It regards any bona fide issue that any Shareholder raises as one that should be put to all Shareholders at the AGM so that all those attending can hear any concerns expressed in an open forum and make their own judgement. The AGM provides Shareholders with an opportunity to vote on certain issues that are not ultimately delegated to the Board. This includes the election and re-election of Directors every year in addition to the normal matters of approving the financial statements, the appointment of the Company's Auditor, the issue of new shares and the repurchase of shares. Your Board has an established policy that enables Shareholders to decide whether they wish to continue the Company's existence by putting a "continuation vote" before Shareholders at every third AGM. The next continuation vote will take place at this year's AGM on 14 December 2022. The Board expect this vote to pass.

Directors' Remuneration

The Board determines the level of Directors' fees and full details are disclosed in the Directors' Remuneration report on pages 45 and 46.

Senior Independent Director

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Dean Buckley is the Senior Independent Director and fulfils the role as a sounding board for the Chairman, intermediary for the other Directors as necessary and acts as a channel of communication for Shareholders in the event that contact through the Chairman is inappropriate. Nigel Foster will succeed Mr Buckley as the Senior Independent Director when he takes over as Chairman of the Board on 14 December 2022.

Corporate Governance Statement continued

Company Secretary

The Board has access to the advice and services of the Company Secretary. The Company Secretary is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Directors also have the ability to take independent professional advice, if necessary, at the Company's expense.

Supply of Information

The Board meeting papers are the key source of regular information for the Board, the contents of which are determined by the Board and contain sufficient information on the financial condition of the Company. The Board receives this information in a timely manner and of a quality appropriate to enable it to discharge its duties.

Risk Management and Internal Controls

The Board is responsible for the Company's systems of risk management and internal controls and for reviewing their effectiveness. The review takes place at least once a year. Such systems are designed to manage rather than eliminate risk of failure to achieve business objectives and can only provide reasonable, but not absolute, assurance against material misstatement or loss.

The Board determines the nature and extent of any risks it is willing to take in order to achieve its strategic objectives. It is responsible for the design, implementation and maintenance of controls and procedures to safeguard the assets of the Company although these tasks have been delegated on a day-to-day basis to the Manager. The system extends to operational and compliance controls and risk management. Clear lines of accountability have been established between the Board and the Manager. The Manager provides regular reports on controls and compliance issues to the Audit Committee and the Board. In carrying out its review, the Audit Committee has regard to the activities of the Manager, the Manager's compliance and risk functions and the work carried out by the Company's Auditor relevant to the Company's audit. It also includes consideration of internal controls covered in similar reports issued by the other service providers.

The Board, assisted by the Manager, has undertaken a rigorous risk and controls assessment. The process also assists in identifying any new emerging risks and the action necessary to mitigate their potential impact. The Board confirms that there is an effective ongoing process in place to identify, evaluate and manage the Company's principal business and operational risks, and that it has been in place throughout the year ended 31 August 2022 and up to the date of this report. This process is in accordance with the FRC's "Risk Management, Internal Control and Related Financial Business Reporting" guidance.

The Board has reviewed the need for an internal audit function and has determined that the systems and procedures employed by the Manager, which are subject to inspection by the Manager's internal and external audit processes, provide sufficient assurance that a sound system of internal controls is maintained to safeguard shareholders' investments and the Company's assets. An internal audit function, specific to

the Company, is therefore considered unnecessary. The Audit Committee meets the Manager's internal audit representative at least once a year. It receives a summary of the Manager's externally audited internal controls report on an annual basis.

Whistle-Blowing Procedure

Part of the Managers' role in ensuring the provision of a good service pursuant to the Management Agreement, includes the ability for employees of Fidelity to raise concerns through a workplace concerns escalation policy (or "whistle-blowing procedure"). Fidelity has advised the Board that it is committed to providing the highest level of service to its customers and to applying the highest standards of quality, honesty, integrity and probity. The aim of the policy is to encourage employees and others working for Fidelity to assist the Company in tackling fraud, corruption and other malpractice within the organisation and in setting standards of ethical conduct. This policy has been endorsed accordingly by the Board.

Bribery Act 2010

The Company is committed to carrying out business fairly, honestly and openly. The Board recognises the benefits this has to reputation and business confidence. The Board, the Manager, the Manager's employees and others acting on the Company's behalf, are expected to demonstrate high standards of behaviour when conducting business.

The Board acknowledges its responsibility for the implementation and oversight of the Company's procedures for preventing bribery, and the governance framework for training, communication, monitoring, reporting and escalation of compliance together with enforcing action as appropriate. The Board has adopted a zero tolerance policy in this regard.

Criminal Finances Act 2017

The Company is subject to the Criminal Finances Act 2017 and follows a zero tolerance policy to tax evasion and its facilitation. The Directors are fully committed to complying with all legislation and appropriate guidelines designed to prevent tax evasion and the facilitation of tax evasion in the jurisdictions in which the Company, its service providers, counterparties and business partners operate.

On Behalf of the Board

Andy Irvine Chairman 3 November 2022

Directors' Remuneration Report

Chairman's Statement

The Directors' Remuneration Report for the year ended 31 August 2022 has been prepared in accordance with the Large & Medium–sized Companies & Groups (Accounts & Reports) (Amendment) Regulations 2013 (the "Regulations"). As the Board is comprised entirely of Non–Executive Directors and has no chief executive officer and employees, many parts of the Regulations, in particular those relating to chief executive officer pay and employee pay, do not apply and are therefore not disclosed in this report.

An ordinary resolution to approve the Directors' Remuneration Report will be put to Shareholders at the AGM on 14 December 2022. The Company's Auditor is required to audit certain sections of this report and where such disclosures have been audited, the specific section has been indicated as such. The Auditor's opinion is included in its report on pages 51 to 56.

At last year's AGM, the Company's Articles of Association were updated to amend the aggregate cap on total Directors' fees of £200,000 per annum to a new aggregate fee cap of £250,000 per annum. As a result, the Remuneration Policy below has been updated to reflect this and an ordinary resolution will be put to shareholders for approval of the revised Remuneration Policy at the AGM on 14 December 2022. No other changes have been made. Normally the Remuneration Policy would be subject to a biding vote at every third AGM. A binding vote means that if it is not successful, the Board will be obliged to revise the policy and seek further Shareholder approval at a General Meeting specially convened for that purpose.

Directors' Remuneration

The annual fee structure since 1 September 2022 is as follows: Chairman – £43,000 (2021: £41,000); Chairman of the Audit Committee – £34,000 (2021: £31,750); and Director – £29,000 (2021: £27,000). Prior to this, fees had remained unchanged since 1 September 2018. Levels of remuneration are reviewed to ensure that they remain competitive and sufficient to attract and retain the quality of Directors needed to manage the Company successfully.

THE REMUNERATION POLICY

The Company's Articles of Association limit the aggregate fees payable to the Directors to a total of £250,000 per annum. Subject to this overall limit, it is the Board's policy to determine the level of Directors' fees having regard to the time spent by them on the Company's affairs; the level of fees payable to non–executive directors in the industry generally; the requirement to attract and retain individuals with suitable knowledge and experience; and the role that individual Directors fulfil. Other than fees and reasonable out–of–pocket expenses incurred in attending to the affairs of the Company, the Directors are not eligible for any performance related pay or benefits, pension related benefits, share options, long term incentive schemes, or other taxable benefits. The Directors are not entitled to exit payments and are not provided with any compensation for loss of office. Directors' fees are paid monthly in arrears. Directors do not serve a notice period if their appointment were to be terminated. The level of Directors' fees is determined by the whole Board. Directors do not vote on their own individual fees.

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The Board reviews the Company's Remuneration Policy and implementation on an annual basis. Reviews are based on information provided by the Company's Manager, and research from third parties and it includes information on the fees of other similar investment trusts.

As a FTSE 350 company, and in accordance with provision 21 of the 2018 UK Corporate Governance Code, the Board is required to carry out an externally facilitated evaluation every third year of its performance. This also includes input into the appropriate level of Directors' fees from an independent source.

No Director has a service contract with the Company. New Directors are provided with a letter of appointment which, amongst other things, provides that their appointment is subject to the Companies Act 2006 and the Company's Articles of Association. Copies of the Directors' letters of appointment are available at each of the Company's Annual General Meetings and can be obtained from the Company's registered office.

The Company's remuneration policy will apply to new Board members, who will be paid the equivalent amount of fees as current Board members.

Voting on the Remuneration Policy

The Remuneration Policy (the "Policy"), as set out in last year's Annual Report, was approved at the AGM held on 14 December 2020 with 99.27% of votes cast in favour, 0.45% of votes cast against and 0.28% of votes withheld. The current Policy, as set out above, has been followed throughout the year ended 31 August 2022 and up to the date of this report. The next vote will be put to shareholders at the AGM on 14 December 2022, and the votes cast will be disclosed on the Company's website at: www.fidelity.co.uk/specialvalues.

Voting on the Directors' Remuneration Report

The Directors' Remuneration Report for the year ended 31 August 2021 was approved at the AGM held on 14 December 2021 with 99.57% of votes cast in favour, 0.21% of votes cast against and 0.22% of votes withheld.

The Directors' Remuneration Report for the year ended 31 August 2022 will be put to Shareholders at the AGM on 14 December 2022, and the votes cast will be disclosed on the Company's pages of the Manager's website at: www.fidelity.co.uk/ specialvalues.

Directors' Remuneration Report continued

Single Total Figure of Directors' Remuneration

The single total aggregate Directors' remuneration for the year ended 31 August 2022 was £164,429 (2021: £161,538). This includes expenses incurred by Directors in attending to the affairs of the Company and are considered by HMRC to be a taxable expense. Information on individual Directors' fees and taxable Directors' expenses are disclosed in the table below.

2023	2022	2022	2022	2021	2021	2021
Projected	Fees	Taxable Expenses	Total	Fees	Taxable Expenses	Total
Fees	(Audited)	(Audited)	(Audited)	(Audited)	(Audited)	(Audited)
(£)	(£)	(£)	(£)	(£)	(£)	(£)
Remuneration of Directors
Andy Irvine1 12,370	41,000	2,611	43,611	41,000	–	41,000
Claire Boyle 34,000	31,750	367	32,117	31,750	–	31,750
Dean Buckley2 38,619	27,000	566	27,566	27,000	–	27,000
Ominder Dhillon3 29,000	5,123	–	5,123	n/a	n/a	n/a
Nigel Foster 29,000	27,000	–	27,000	27,000	–	27,000
Nicky McCabe4 n/a	n/a	n/a	n/a	7,788	–	7,788
Alison McGregor 29,000	27,000	2,012	29,012	27,000	–	27,000
Total 171,989	158,873	5,556	164,429	161,538	–	161,538

1 Retiring on 14 December 2022.

2 To be appointed as Chairman on 14 December 2022.

3 Appointed on 23 June 2022.

4 Retired on 14 December 2020.

The fees for 2023 are higher than the current reporting year due to the completion of the crossover between Directors' retirements and appointments from the Board. This is part of the Board's succession planning.

Five year change comparison in Directors' Remuneration

The table below sets out the change in Directors' fees over the last five years.

	2022	2017	Change (%)
Chairman	41,000	38,750	+5.8%
Audit Committee Chair	31,750	30,000	+5.8%
Director	27,000	25,500	+5.9%

Expenditure on Directors' Remuneration and Distributions to Shareholders

The table below shows the total amount paid out in Directors' remuneration and distributions to Shareholders. The projected Directors' remuneration for the year ending 31 August 2023 is disclosed in the table above.

	31 August 2022 £	31 August 2021
		£
Expenditure on Directors' Remuneration:
Fees and taxable expenses	164,429	161,538
Distribution to Shareholders:
Dividend payments	21,590,000	17,386,000

Performance

The Company aims to achieve long term capital growth primarily through investment in equities (and their related financial instruments) of UK companies which the Investment Manager believes to be undervalued or where the potential has not been recognised by the market. The graph below shows the performance of the NAV per ordinary share and share price against the FTSE All-Share Index over ten years to 31 August 2022.

Total return performance for the ten years to 31 August 2022

Directors' Interests in Ordinary Shares

Although there is no requirement for the Directors to hold shares in the Company, shareholdings by Directors are encouraged. The interests of the Directors' in the ordinary shares of the Company are shown in the table below. All of the shareholdings are beneficial. The Portfolio Manager also holds shares in the Company.

Directors' Shareholdings (Audited)

	31 August 2022	31 August 2021	Change during year
Andy Irvine1	250,000	250,000	–
Claire Boyle	7,466	7,466	–
Dean Buckley	50,000	50,000	–
Ominder Dhillon1	–	n/a	–
Nigel Foster	75,000	75,000	–
Alison McGregor	20,000	20,000	–

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

1 Appointed on 23 June 2022.

All Directors' shareholdings remained unchanged at the date of this report.

On Behalf of the Board

Andy Irvine Chairman 3 November 2022

Statement of Directors' Responsibilities

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

Company law requires the Directors to prepare Financial Statements for each financial period. Under that law, the Directors have elected to prepare the Financial Statements in accordance with UK Generally Accepted Accounting Practice (UK Accounting Standards and applicable law), including Financial Reporting Standard FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland ("FRS 102"). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the reporting period.

In preparing these Financial Statements the Directors are required to:

• Select suitable accounting policies in accordance with Section 10 of FRS 102 and then apply them consistently;
• Make judgements and estimates that are reasonable and prudent;
• Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• State whether applicable UK Accounting Standards, including FRS 102, have been followed, subject to any material departures disclosed and explained in the Financial Statements; and
• Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Directors' Report, a Corporate Governance Statement and a Directors' Remuneration Report which comply with that law and those regulations.

The Directors have delegated the responsibility for the maintenance and integrity of the corporate and financial information included on the Company's pages of the Manager's website at www.fidelity.co.uk/specialvalues to the Manager. Visitors to the website need to be aware that legislation in the UK governing the preparation and dissemination of the Financial Statements may differ from legislation in their jurisdictions.

The Directors confirm that to the best of their knowledge:

• The Financial Statements, prepared in accordance with UK Generally Accepted Accounting Practice, including FRS 102, give a true and fair view of the assets, liabilities, financial position and loss of the Company;
• The Annual Report, including 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 risks and uncertainties it faces; and
• The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

The Statement of Directors' Responsibility was approved by the Board on 3 November 2022 and signed on its behalf by:

Andy Irvine Chairman

Report of the Audit Committee

I am pleased to present the formal report of the Audit Committee (the "Committee") to Shareholders.

The primary responsibilities of the Committee are to ensure the integrity of the Company's financial reporting, the appropriateness of the risk management and internal controls processes and the effectiveness of the independent audit process for the year ended 31 August 2022. This report details how we carry out this role.

Composition and Meetings

The members of the Committee are myself as Chairman, Dean Buckley, Ominder Dhillon, Nigel Foster and Alison McGregor. All Committee members are independent Non-Executive Directors, and their skills and experience are set out on page 36. The Committee considers that collectively the members have sufficient recent and relevant sector and financial experience to fully discharge their responsibilities.

The Committee met three times during this reporting year. The Committee invites the Company's Auditor and personnel from the Manager's financial, risk and internal audit functions to attend and report to the Committee on relevant matters. During the year, I also met privately with the Auditor to raise any issues without management present. After each Committee meeting, I report to the Board on the main items discussed at the meeting.

Ahead of each AGM, the Committee's performance is evaluated as part of the overall Board evaluation as reported on page 43.

Role and Responsibilities of the Audit Committee

The Committee's authority and duties are defined in its terms of reference, which were reviewed during the year and are available on the Company's pages of the Manager's website at www.fidelity.co.uk/specialvalues. The principal activities carried out during the year were:

• Financial Reporting: We considered the Company's financial reports, including the significant accounting issues and the appropriateness of the accounting policies adopted. We considered and are satisfied that, taken as a whole, the 2022 Annual Report is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, business model and strategy. We considered the ongoing impact of the pandemic and the Ukraine war and reviewed the assessment of the Company as a going concern and also its viability over a five year time frame. We reviewed the revenue that has been recognised and the liquidity of the portfolio.
• Internal Audit: We considered the scope of the internal audit of the Manager and the subsequent findings from this work, receiving regular reports from the internal audit function of the Manager. The Committee also monitored progress in the implementation of the Manager's internal audit recommendations;
• Risk and Internal Control: During one of the Committee meetings, we considered the key existing and emerging risks facing the Company and the adequacy and effectiveness of the internal controls and risk management processes. This included a review of the Manager's business continuity plans and operational resilience strategies in order to continue to meet regulatory obligations and also continuing to serve and support investors and the Board. The Company's third party service providers also continue to implement similar measures to ensure that there is no disruption in service. The Committee received sufficient assurance that the Manager's and third party service providers measures have continued to work effectively since the pandemic; and
• External Auditor: we considered the independence, effectiveness and fees of the Auditor, as detailed later in this report.

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Report of the Audit Committee continued

Significant issues considered by the Committee during the year

The Annual Report and Financial Statements are the responsibility of the Board and the Statement of Directors' Responsibilities can be found on page 48. The Audit Committee advises the Board on the form and content of the Annual Report and Financial Statements, any issues which may arise in relation to these and any specific areas which require judgement.

Summarised below are the most significant issues which were considered by the Committee in respect of these Financial Statements and how these issues were addressed.

Recognition of Investment Income

Investment income is recognised in accordance with accounting policy Note 2 (e) on pages 61 and 62. The Manager provided detailed revenue forecasts and the Committee reviewed and sought explanations for any significant variances to these forecasts. The Committee also considered the allocation of special dividends between revenue and capital and the reasons for the classification of these special dividends. The Committee reviewed the internal audit and compliance monitoring reports received from the Manager, including an additional internal controls report ("AAF" report) prepared by PricewaterhouseCoopers LLP ("PwC") on behalf of the Manager, to satisfy itself that adequate systems were in place for properly recording the Company's investment income. The Committee also reviewed the reports provided by the Auditor on its work on the recognition of investment income.

Valuation, existence and ownership of investments (including derivatives and unlisted investments)

The valuation of investments (including derivatives) is in accordance with accounting policy Notes 2 (k) and 2 (l) on pages 62 and 63. The Committee took comfort from the Depositary's regular oversight function that investment related activities were conducted in accordance with the Company's investment policy. The Committee received reports from the Manager, the Depositary and an additional AAF report prepared by PwC on behalf of the Manager which concluded that the controls around the valuation, existence and ownership of investments operate effectively. Unlisted investments are appraised by the Manager's Fair Value Committee ("FVC") in accordance with UK GAAP and International Private Equity and Venture Capital Valuation Guidelines. The Committee received information from the FVC and it reviewed and approved the proposed valuation methodologies for all unlisted investments. The Committee also reviewed the reports provided by the Auditor on its work on the valuation, existence and ownership of the Company's investments, including derivatives and unlisted investments.

The Company confirms that it has complied with the September 2014 Competition and Markets Authority Order in relation to the performance and appointment of the Auditor, as set out below.

Independence and Effectiveness of the Audit Process

Ernst & Young LLP acted as the Company's Auditor for the year ended 31 August 2022.

With regard to the independence of the Auditor, the Committee reviewed:

• The Auditor's arrangements for any conflicts of interest;
• The fact that no non-audit services were provided to the Company during the reporting year and as at the date of this report; and
• The statement by the Auditor that it remains independent within the meaning of the regulations and their professional standards.

With regard to the effectiveness of the audit process, the Committee reviewed:

• The fulfilment by the Auditor of the agreed audit plan, including the audit team and approach to significant risks;
• The audit findings report issued by the Auditor on the audit of the Annual Report and Financial Statements for the year ended 31 August 2022; and

• Feedback from the Manager on the audit of the Company.

The Committee concluded that the Auditor continues to remain independent and the audit process remains effective.

Auditor's Appointment and Audit Tenure

Ernst & Young LLP was appointed as the Company's Auditor on 30 November 2015 following a formal audit tender process in 2015. The Committee has reviewed the Auditor's independence and the effectiveness of the audit process prior to recommending its reappointment for a further year. The Auditor is required to rotate audit partners every five years and this is the first year that the current Audit Partner, Ashley Coups, has been in place. The Committee will continue to review the Auditor's appointment each year to ensure that the Company continues to receive an optimal level of service. There are no contractual obligations that restricts the Company's choice of auditor.

Audit Fees

Fees paid to the Auditor for the audit of the Company's Financial Statements are disclosed in Note 5 on page 65. The audit fee for the reporting year was £46,500 (2021: £28,500).

Claire Boyle

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Chairman of the Audit Committee 3 November 2022

Independent Auditor's Report to the Members of Fidelity Special Values PLC

Opinion

We have audited the Financial Statements of Fidelity Special Values PLC (the Company) for the year ended 31 August 2022 which comprise the Income Statement, the Statement of Changes in Equity, the Balance Sheet, the Cash Flow Statement and the related Notes 1 to 20, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" (United Kingdom Generally Accepted Accounting Practice).

In our opinion, the Financial Statements:

• give a true and fair view of the Company's affairs as at 31 August 2022 and of its loss for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the UK, including the FRC's Ethical Standard as applied to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

The non-audit services prohibited by the FRC's Ethical Standard were not provided to the Company and we remain independent of the Company in conducting the audit.

Conclusions relating to going concern

In auditing the Financial Statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the Financial Statements is appropriate. Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included:

• Confirmation of our understanding of the Company's going concern assessment process and engagement with the Directors and the Company Secretary to determine if all key factors were considered in their assessment.

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• Inspection of the Directors' assessment of the going concern, including the revenue and expense forecast, for the period to 30 November 2023 which is at least 12 months from the date the Financial Statements were authorised for issue. In preparing the revenue and expense forecast, the Company has concluded that it is able to continue to meet its ongoing costs as they fall due.
• Reviewing the factors and assumptions, including the impact of the COVID-19 pandemic and the Russia/Ukraine conflict, as applied to the revenue and expense forecast. Considering the appropriateness of the methods used to calculate the forecast and determine, through testing of the methodology and calculations, that the methods utilised were appropriate to be able to make an assessment of going concern for the Company.
• Consideration of the mitigating factors included in the revenue and expense forecast that are within the control of the Company, including a review of the Company's assessment of the liquidity of investments held and evaluating the Company's ability to sell investments in order to cover the working capital requirements should its revenue decline significantly.
• Assessing the impact of the continuation vote on the going concern basis of preparation, considering the current and historical performance of the Company to establish voting patterns, obtaining views of the Company's Broker on their assessment of expected voting intentions to ascertain the likely outcome of the vote, and reviewing and challenging the Manager's assessment of the outcome of the continuation vote.
• Reviewing the Company's going concern disclosures included in the Annual Report in order to assess that the disclosures were appropriate and in conformity with the reporting standards.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period to 30 November 2023 which is at least twelve months from the date the Financial Statements were authorised for issue.

In relation to the Company's reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors' statement in the Financial Statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company's ability to continue as a going concern.

Independent Auditor's Report to the Members of Fidelity Special Values PLC continued

Overview of our audit approach

Key audit matters	• Risk of incomplete or inaccurate revenue recognition, including the classification of special dividends as revenue or capital items in the Income Statement • Risk of incorrect valuation or ownership of the investment portfolio
Materiality	• Overall materiality of £9.23m which represents 1% of the net asset value of the Company as at 31 August 2022.

An overview of the scope of our audit

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the Company. This enables us to form an opinion on the Financial Statements. We take into account size, risk profile, the organisation of the Company and effectiveness of controls, including controls and changes in the business environment when assessing the level of work to be performed. All audit work was performed directly by the audit engagement team.

Climate change

There has been increasing interest from stakeholders as to how climate change will impact the Company. The Company has determined that the impact of climate change could affect the Company's investments and their valuations and potentially shareholder returns. These are explained on page 25 in the principal and emerging risks section, which form part of the "Other information," rather than the audited Financial Statements. Our procedures on these disclosures therefore consisted solely of considering whether they are materially inconsistent with the Financial Statements, or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated.

Our audit effort in considering climate change was focused on the adequacy of the Company's disclosures in the Financial Statements as set out in Note 2(a) and the conclusion that there was no further impact of climate change to be taken into account. In line with FRS 102 investments are valued at fair value, which for the Company are quoted bid prices for investments in active markets at the balance sheet date. Investments which are unlisted are priced using market-based valuation approaches. All investments therefore reflect the market participants view of climate change risk on the investments held by the Company. We also challenged the Directors' considerations of climate change in their assessment of viability and associated disclosures.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Risk	Our response to the risk	Key observations communicated to
		the Audit Committee
Risk of incomplete or inaccurate revenue recognition, including the classification of special dividends as revenue or capital items in the	We performed the following procedures: • Walked through the revenue recognition and classification of special dividends processes and obtained an understanding of the design and implementation of the	The results of our procedures identified no material misstatement in relation to the risk of incomplete or
Income Statement Refer to the Report of the Audit Committee (page 50); Accounting policies (pages 61 and 62); and Note 3 of the Financial Statements (page 64). The Company has reported revenue of £38.01 (2021: £28.15m). During the year, the Company received special dividends amounting to £1.75m (2021: £2.02m), of which £1.38m (2021: £0.29m) was classified as revenue and £0.37m (2021: £1.73m) as capital. There is a risk of incomplete or inaccurate recognition of revenue through failure to recognise proper income entitlements or to apply an appropriate accounting treatment. In addition to the above, the Directors are required to exercise judgement in determining whether income received in the form of special dividends should be classified as 'revenue' or 'capital' in the Income Statement.	controls; • For a sample of dividends received, we recalculated the income by multiplying the investment holdings at the ex-dividend date, traced from the accounting records, by the dividend rate as agreed to an independent data vendor. We agreed the amounts received to bank statements and, where applicable, we also agreed the exchange rates to an external source; • To test completeness of recorded income, we tested that all expected dividends for a sample of investee companies had been recorded as income with reference to investee company announcements obtained from an independent data vendor; • For all dividends accrued at the year end, we reviewed the investee company announcements to assess whether the obligation arose prior to 31 August 2022. We agreed the dividend rate to corresponding announcements made by the investee company, recalculated the amount receivable and agreed the subsequent cash receipts to post-year end bank statements where applicable; and • Identified the special dividends greater than our testing threshold and assessed the appropriateness of the Company's classification by reviewing the rationale for the distribution of the special dividends received and agreed with the allocation to	inaccurate revenue recognition, including incorrect classification of special dividends as revenue or capital items in the Income Statement.

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Independent Auditor's Report to the Members of Fidelity Special Values PLC continued

Risk Our response to the risk Key observations

Risk of incorrect valuation or ownership of the investment portfolio

Refer to the Report of the Audit Committee (page 50); Accounting Policies (pages 62 and 63); and Notes 10 and 11 of the Financial Statements (pages 68 and 69).

The valuation of the investment portfolio as at the year-end was £826.50m (2021: £885.52m), including £835.40m (2021: £886.44m) of listed investments, £0.27m (2021: £0.27m) of unlisted investments and £(9.17m) (2021: £(1.19m) of net derivatives.

The valuation of the assets held in the investment portfolio is the key driver of the Company's net asset value and total return. Incorrect investment pricing, including incorrect application of exchange rates, or failure to maintain proper legal title to the investments held by the Company could have a significant impact on the portfolio valuation and return generated for shareholders.

The fair value of the listed investments and derivatives is determined using quoted market prices at close of business on the reporting date. We performed the following procedures:

• Walked through the investment valuation process to obtain an understanding of the design and implementation of the controls;
• For all listed investments in the portfolio, we compared the market prices and exchange rates applied to an independent pricing vendor and recalculated the valuations as at the year-end. For net derivatives we compared the market prices of the underlying instrument to an independent pricing vendor and agreed cost price to the Brokers' confirmations;
• We inspected the stale pricing report to identify prices that have not changed and verified whether the quoted price is a valid fair value;
• For the unlisted investments, we obtained and assessed the valuation papers to support the valuation of the investments as at the year-end; and
• We compared the Company's investment holdings at 31 August 2022 to independent confirmation received directly from the Company's Custodian and Depositary. We agreed all open year-end derivative positions to confirmations received independently from the Company's Brokers.

communicated to the Audit Committee

The results of our procedures identified no material misstatement in relation to the risk of incorrect valuation or ownership of the investment portfolio.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the Financial Statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Company to be £9.23million (2021: £9.54million), which is 1% (2021: 1%) of the Company's net asset value. We believe that net assets provides us with materiality aligned to the key measure of the Company's performance.

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the Company's overall control environment, our judgement was that performance materiality was 75% (2021: 75%) of our planning materiality, namely £6.92m (2021: £7.16m). We have set performance materiality at this percentage due to our past experience of the audit that indicates a lower risk of misstatements, both corrected and uncorrected.

Given the importance of the distinction between revenue and capital for investment trusts, we have also applied a separate testing threshold for the revenue column of the Income Statement of £1.52m (2021: £1.10m) being 5% (2021: 5%) of revenue profit before tax.

Reporting threshold

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An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.46m (2021: £0.48m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

Other information

The other information comprises the information included in the Annual Report other than the Financial Statements and our Auditor's report thereon. The Directors are responsible for the other information contained within the Annual Report.

Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements, or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the Financial Statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and the Directors' Report for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements; and
• the Strategic Report and Directors' Reports have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or Directors' Report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

• the Financial Statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of Directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Corporate Governance Statement

We have reviewed the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified for our review by the Listing Rules.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the Financial Statements or our knowledge obtained during the audit:

• Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 37;
• Directors' explanation as to its assessment of the Company's prospects, the period this assessment covers and why the period is appropriate set out on page 27;
• Director's statement on whether it has a reasonable expectation that the Company will be able to continue in operation and meets its liabilities set out on page 37;
• Directors' statement on fair, balanced and understandable set out on page 48;
• Board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 24;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out on page 44; and
• The section describing the work of the Audit Committee set out on page 49.

Independent Auditor's Report to the Members of Fidelity Special Values PLC continued

Responsibilities of Directors

As explained more fully in the Directors' responsibilities statement set out on page 48, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Company and management.

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the most significant are FRS 102, the Companies Act 2006, the Listing Rules, the UK Corporate Governance Code, the Association of Investment Companies' Code and Statement of Recommended Practice, and Section 1158 of the Corporation Tax Act 2010, and The Companies (Miscellaneous Reporting) Regulations 2018.
• We understood how the Company is complying with those frameworks through discussions with the Audit Committee and Company Secretary and review of Board minutes and the Company's documented policies and procedures.
• We assessed the susceptibility of the Company's Financial Statements to material misstatement, including how fraud might occur by considering the key risks impacting the Financial Statements. We identified a fraud risk with respect to the incomplete or inaccurate revenue recognition through incorrect classification of special dividends as revenue or capital items in the Income Statement. Further discussion of our approach is set out in the section on key audit matters above.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved review of the reporting to the Directors with respect to the application of the documented policies and procedures and review of the Financial Statements to ensure compliance with the reporting requirements of the Company.

A further description of our responsibilities for the audit of the Financial Statements is located on the Financial Reporting Council's website at https://www.frc.org.uk/ auditorsresponsibilities. This description forms part of our Auditor's report.

Other matters we are required to address

• Following the recommendation from the Audit Committee, we were appointed by the Company on 30 November 2015 to audit the Financial Statements for the year ending 31 August 2016 and subsequent financial periods.

The period of total uninterrupted engagement including previous renewals and reappointments is 7 years, covering the years ending 31 August 2016 to 31 August 2022.

• The audit opinion is consistent with the additional report to the Audit Committee.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Ashley Coups

Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Senior Statutory Auditor For and on behalf of Ernst & Young LLP Statutory Auditor London 3 November 2022

Income Statement

for the year ended 31 August 2022

		Year ended 31 August 2022			Year ended 31 August 2021
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on investments	10	–	(64,441)	(64,441)	–	252,899	252,899
(Losses)/gains on long CFDs	11	–	(14,992)	(14,992)	–	55,323	55,323
Investment and derivative income	3	37,135	–	37,135	27,890	–	27,890
Other interest	3	877	–	877	257	–	257
Investment management fees	4	(5,607)	–	(5,607)	(5,098)	–	(5,098)
Other expenses	5	(838)	–	(838)	(669)	–	(669)
Foreign exchange gains/(losses)		–	5,874	5,874	–	(720)	(720)
Net return/(loss) on ordinary activities before finance costs and taxation		31,567	(73,559)	(41,992)	22,380	307,502	329,882
Finance costs	6	(1,243)	–	(1,243)	(378)	–	(378)
Net return/(loss) on ordinary activities before taxation		30,324	(73,559)	(43,235)	22,002	307,502	329,504
Taxation on return/(loss) on ordinary activities	7	(196)	–	(196)	(406)	–	(406)
Net return/(loss) on ordinary activities after taxation for the year		30,128	(73,559)	(43,431)	21,596	307,502	329,098
Return/(loss) per ordinary share	8	9.42p	(23.00p)	(13.58p)	7.22p	102.74p	109.96p

The Company does not have any other comprehensive income. Accordingly the net return/(loss) on ordinary activities after taxation for the year is also the total comprehensive income for the year and no separate Statement of Comprehensive Income has been presented.

The total column of this statement represents the Income Statement of the Company. The revenue and capital columns are supplementary and presented for information purposes as recommended by the Statement of Recommended Practice issued by the AIC.

No operations were acquired or discontinued in the year and all items in the above statement derive from continuing operations.

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Balance Sheet as at 31 August 2022 Company number 2972628

	Notes	2022 £'000	2021 £'000
Fixed assets
Investments	10	835,672	886,710
Current assets
Derivative instruments	11	28	1,968
Debtors	12	10,940	6,674
Amounts held at futures clearing houses and brokers		8,190	40
Cash and cash equivalents		80,450	63,780
		99,608	72,462
Current liabilities
Derivative instruments	11	(9,200)	(3,161)
Other creditors	13	(3,481)	(1,921)
		(12,681)	(5,082)
Net current assets		86,927	67,380
Net assets		922,599	954,090
Capital and reserves
Share capital	14	16,205	15,651
Share premium account	15	238,442	205,466
Capital redemption reserve	15	3,256	3,256
Other non-distributable reserve	15	5,152	5,152
Capital reserve	15	629,078	702,637
Revenue reserve	15	30,466	21,928
Total Shareholders' funds		922,599	954,090
Net asset value per ordinary share	16	284.67p	304.79p

The Financial Statements on pages 57 to 79 were approved by the Board of Directors on 3 November 2022 and were signed on its behalf by:

Andy Irvine Chairman

Statement of Changes in Equity

for the year ended 31 August 2022

	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other non– distributable reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total Share– holders' funds £'000
Total Shareholders' funds at 31 August 2021		15,651	205,466	3,256	5,152	702,637	21,928	954,090
New ordinary shares issued	14	554	33,118	–	–	–	–	33,672
Costs associated with the issue of new ordinary shares		–	(142)	–	–	–	–	(142)
Net (loss)/return on ordinary activities after taxation for the year		–	–	–	–	(73,559)	30,128	(43,431)
Dividends paid to Shareholders	9	–	–	–	–	–	(21,590)	(21,590)
Total Shareholders' funds at 31 August 2022		16,205	238,442	3,256	5,152	629,078	30,466	922,599
Total Shareholders' funds at 31 August 2020		14,501	144,306	3,256	5,152	394,572	17,718	579,505
New ordinary shares issued	14	1,150	61,259	–	–	–	–	62,409
Costs associated with the issue of new ordinary shares		–	(123)	–	–	–	–	(123)
Issue of ordinary shares from Treasury	14	–	24	–	–	2,383	–	2,407
Repurchase of ordinary shares into Treasury	14	–	–	–	–	(1,820)	–	(1,820)
Net return on ordinary activities after taxation for the year		–	–	–	–	307,502	21,596	329,098
Dividends paid to Shareholders	9	–	–	–	–	–	(17,386)	(17,386)
Total Shareholders' funds at 31 August 2021		15,651	205,466	3,256	5,152	702,637	21,928	954,090

The Notes on pages 61 to 79 form an integral part of these Financial Statements.

Cash Flow Statement for the year ended 31 August 2022

	Year ended	Year ended
Notes	31.08.22 £'000	31.08.21 £'000
Operating activities
Investment income received	25,034	17,825
Net derivative income	9,133	7,930
Interest received	493	24
Underwriting commission received	–	16
Investment management fee paid	(5,597)	(5,059)
Directors' fees paid	(157)	(163)
Other cash payments	(618)	(567)
Net cash inflow from operating activities before finance costs and taxation 20	28,288	20,006
Finance costs paid	(1,186)	(378)
Overseas taxation suffered	(783)	(348)
Net cash inflow from operating activities	26,319	19,280
Investing activities
Purchases of investments	(359,829)	(378,229)
Sales of investments	347,076	305,611
Receipts on long CFDs	73,743	91,127
Payments on long CFDs	(80,763)	(28,938)
Movement on amounts held at futures clearing houses and brokers	(8,150)	820
Net cash outflow from investing activities	(27,923)	(9,609)
Net cash (outflow)/inflow before financing activities	(1,604)	9,671
Financing activities
Dividends paid 9	(21,590)	(17,386)
Net proceeds from issue of shares	34,132	64,356
Costs associated with the issue of new ordinary shares	(142)	(123)
Repurchase of ordinary shares	–	(1,820)
Net cash inflow from financing activities	12,400	45,027
Net increase in cash and cash equivalents	10,796	54,698
Cash and cash equivalents at the beginning of the year	63,780	9,802
Effect of movement in foreign exchange	5,874	(720)
Cash and cash equivalents at the end of the year	80,450	63,780
Represented by:
Cash at bank	2,014	2,000
Amount held in Fidelity Institutional Liquidity Fund	78,436	61,780
	80,450	63,780

Notes to the Financial Statements

1 Principal Activity

Fidelity Special Values PLC is an Investment Company incorporated in England and Wales with a premium listing on the London Stock Exchange. The Company's registration number is 2972628, and its registered office is Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP. The Company has been approved by HM Revenue & Customs as an Investment Trust under Section 1158 of the Corporation Tax Act 2010 and intends to conduct its affairs so as to continue to be approved.

2 Accounting Policies

The Company has prepared its Financial Statements in accordance with UK Generally Accepted Accounting Practice ("UK GAAP"), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", issued by the Financial Reporting Council ("FRC"). The Financial Statements have also been prepared in accordance with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts ("SORP") issued by the Association of Investment Companies ("AIC"), in July 2022.

a) Basis of accounting –The Financial Statements have been prepared on a going concern basis and under the historical cost convention, except for the measurement at fair value of investments and derivative instruments. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence up to 30 November 2023 which is at least twelve months from the date of approval of these Financial Statements. In making their assessment the Directors have reviewed income and expense projections, reviewed the liquidity of the investment portfolio and considered the Company's ability to meet liabilities as they fall due. This conclusion also takes into account the Director's assessment of the ongoing risks as disclosed in the Going Concern Statement on page 37 and their consideration of the upcoming continuation vote at the AGM on 14 December 2022. The Directors recommend that the shareholders vote in favour of the continuation of the Company.

In preparing these Financial Statements the Directors have considered the impact of climate change risk as a principal and an emerging risk as set out on page 24 and on page 25, and have concluded that there was no further impact of climate change to be taken into account as the investments are valued based on market pricing. In line with FRS 102 investments are valued at fair value, which for the Company are quoted bid prices for investments in active markets at the balance sheet date. Investments which are unlisted are priced using market-based valuation approaches. All investments therefore reflect the market participants' view of climate change risk on the investments held by the Company.

The Company's Going Concern Statement in the Directors' Report on page 37 takes account of all events and conditions up to 30 November 2023 which is at least twelve months from the date of approval of these Financial Statements.

b) Significant accounting estimates and judgements – The Directors make judgements and estimates concerning the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events, and are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The judgements required in order to determine the appropriate valuation methodology of level 3 financial instruments have a risk of causing an adjustment to the carrying amounts of assets. These judgements include making assessments of the possible valuations in the event of a listing or other marketability related risks.

c) Segmental reporting – The Company is engaged in a single segment business and, therefore, no segmental reporting is provided.

d) Presentation of the Income Statement – In order to reflect better the activities of an investment company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been prepared alongside the Income Statement. The net revenue return after taxation for the year is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 1159 of the Corporation Tax Act 2010.

e) Income – Income from equity investments is accounted for on the date on which the right to receive the payment is established, normally the ex-dividend date. Overseas dividends are accounted for gross of any tax deducted at source. Amounts are credited to the revenue column of the Income Statement. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend foregone is recognised in the revenue column of the Income Statement. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital column of the Income Statement. Special dividends are treated as a revenue receipt or a capital receipt depending on the facts and circumstances of each particular case. Underwriting commission is recognised when the issue takes place and is credited to the revenue column of the Income Statement.

Derivative instrument income received from dividends on long contracts for difference ("CFDs") is accounted for on the date on which the right to receive the payment is established, normally the ex-dividend date. The amount net of tax is credited to the revenue column of the Income Statement.

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Notes to the Financial Statements continued

2 Accounting Policies continued

Interest received on CFDs, bank deposits, collateral and money market funds is accounted for on an accruals basis and credited to the revenue column of the Income Statement. Interest received on CFDs represents the finance costs calculated by reference to the notional value of the CFDs.

f) Investment management fees and other expenses – Investment management fees and other expenses are accounted for on an accruals basis and are charged as follows:

• Investment management fees are allocated in full to revenue; and
• All other expenses are allocated in full to revenue with the exception of those directly attributable to share issues or other capital events.

g) Functional currency and foreign exchange – The functional and reporting currency of the Company is UK sterling, which is the currency of the primary economic environment in which the Company operates. Transactions denominated in foreign currencies are reported in UK sterling at the rate of exchange ruling at the date of the transaction. Assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the Balance Sheet date. Foreign exchange gains and losses arising on translation are recognised in the Income Statement as a revenue or a capital item depending on the nature of the underlying item to which they relate.

h) Finance costs – Finance costs comprise interest on bank overdrafts and collateral and finance costs paid on CFDs, which are accounted for on an accruals basis. Finance costs are charged in full to the revenue column of the Income Statement.

i) Taxation – The taxation charge represents the sum of current taxation and deferred taxation.

Current taxation is taxation suffered at source on overseas income less amounts recoverable under taxation treaties. Taxation is charged or credited to the revenue column of the Income Statement, except where it relates to items of a capital nature, in which case it is charged or credited to the capital column of the Income Statement. Where expenses are allocated between revenue and capital any tax relief in respect of the expenses is allocated between revenue and capital returns on the marginal basis using the Company's effective rate of corporation tax for the accounting period. The Company is an approved Investment Trust under Section 1158 of the Corporation Tax Act 2010 and is not liable for UK taxation on capital gains.

Deferred taxation is the taxation expected to be payable or recoverable on timing differences between the treatment of certain items for accounting purposes and their treatment for the purposes of computing taxable profits. Deferred taxation is based on tax rates that have been enacted or substantively enacted when the taxation is expected to be payable or recoverable. Deferred tax assets are only recognised if it is considered more likely than not that there will be sufficient future taxable profits to utilise them.

j) Dividend paid – Dividends payable to equity Shareholders are recognised when the Company's obligation to make payment is established.

k) Investments – The Company's business is investing in financial instruments with a view to profiting from their total return in the form of income and capital growth. This portfolio of investments is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided on that basis to the Company's Board of Directors. Investments are measured at fair value with changes in fair value recognised in profit or loss, in accordance with the provisions of both Section 11 and Section 12 of FRS 102. The fair value of investments is initially taken to be their cost and is subsequently measured as follows:

• Listed investments are valued at bid prices, or last market prices, depending on the convention of the exchange on which they are listed; and
• Unlisted investments are not quoted, or are not frequently traded, and are stated at the best estimate of fair value. The Manager's Fair Value Committee ('FVC'), which is independent of the Portfolio Manager's team, meets quarterly to determine the fair value of unlisted investments.

The FVC provide a recommendation of fair values to the Board using market-based approaches such as multiples, industry valuation benchmarks and available market prices. Consideration is given to the cost of the investment, recent arm's length transactions in the same or similar investments and the financial performance of the investment since purchase. This pricing methodology is subject to a detailed review and appropriate challenge by the Directors.

2 Accounting Policies continued

In accordance with the AIC SORP, the Company includes transaction costs, incidental to the purchase or sale of investments, within (losses)/gains on investments in the capital column of the Income Statement and has disclosed these costs in Note 10 on page 68.

l) Derivative instruments – When appropriate, permitted transactions in derivative instruments are used. Derivative transactions into which the Company may enter include long and short CFDs, futures, options and warrants. Derivatives are classified as other financial instruments and are initially accounted for and measured at fair value on the date the derivative contract is entered into and subsequently measured at fair value as follows:

• Long CFDs the difference between the strike price and the value of the underlying shares in the contract;
• Futures the difference between the contract price and the quoted trade price; and
• Options valued based on similar instruments or the quoted trade price for the contract.

Where transactions are used to protect or enhance income, if the circumstances support this, the income and expenses derived are included in net income in the revenue column of the Income Statement. Where such transactions are used to protect or enhance capital, if the circumstances support this, the income and expenses derived are included: for long CFDs, as gains or losses on long CFDs, and for short CFDs, futures and options as gains or losses on short CFDs, futures and options in the capital column of the Income Statement. Any positions on such transactions open at the year end are reflected on the Balance Sheet at their fair value within current assets or current liabilities.

m) Debtors – Debtors include securities sold for future settlement, amounts receivable on settlement of derivatives, accrued income, taxation recoverable, amounts receivable for issue of shares and other debtors and prepayments incurred in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business, if longer) they are classified as current assets. If not, they are presented as non-current assets. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.

n) Amounts held at futures clearing houses and brokers – These are amounts held in segregated accounts as collateral on behalf of brokers and are carried at amortised cost.

o) Cash and cash equivalents – Cash and cash equivalents may comprise cash at bank and money market funds which are short term, highly liquid and are readily convertible to a known amount of cash. These are subject to an insignificant risk of changes in value.

p) Other creditors – Other creditors include securities purchased for future settlement, finance costs payable, investment management fees and other creditors and expenses accrued in the ordinary course of business. If payment is due within one year or less (or in the normal operating cycle of the business, if longer) they are classified as current liabilities. If not, they are presented as non-current liabilities. They are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.

q) Capital reserve – The following are accounted for in the capital reserve:

• Gains and losses on the disposal of investments and derivative instruments;
• Changes in the fair value of investments and derivative instruments held at the year end;
• Foreign exchange gains and losses of a capital nature;
• Dividends receivable which are capital in nature; and
• Costs of repurchasing or issuing ordinary shares.

Technical guidance issued by the Institute of Chartered Accountants in England and Wales in TECH 02/17BL, guidance on the determination of realised profits and losses in the context of distributions under the Companies Act 2006, states that changes in the fair value of investments which are readily convertible to cash, without accepting adverse terms at the Balance Sheet date, can be treated as realised. Capital reserves realised and unrealised are shown in aggregate as capital reserve in the Statement of Changes in Equity and the Balance Sheet. At the Balance Sheet date, the portfolio of the Company consisted of investments listed on a recognised stock exchange and derivative instruments contracted with counterparties having an adequate credit rating, and the portfolio was were considered to be readily convertible to cash, with the exception of the level 3 investments which had unrealised investment holding losses of £9,389,000 (2021: gains of £181,000).

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Notes to the Financial Statements continued

3 Income

	Year ended	Year ended
	31.08.22	31.08.21
	£'000	£'000
Investment income
UK dividends	20,437	13,392
UK scrip dividends	85	–
Overseas dividends	6,684	6,114
Overseas scrip dividends	23	–
Underwriting commission	–	16
	27,229	19,522
Derivative income
Dividends received on long CFDs	9,906	8,368
Investment and derivative income	37,135	27,890
Other interest
Interest received on long CFDs*	384	233
Interest received on bank deposits, collateral and money market funds	493	24
	877	257
Total income	38,012	28,147

Special dividends of £372,000 (2021: £1,730,000) have been recognised in capital during the year.

* Due to negative interest rates during the reporting year, the Company has received interest on some of its long CFD positions.

4 Investment Management Fees

	Year ended 31.08.22 £'000	Year ended 31.08.21 £'000
Portfolio management services	5,607	5,065
Non-portfolio management services*	–	33
Investment management fees	5,607	5,098

* Includes company secretarial, fund accounting, taxation, promotional and corporate advisory services.

FIL Investment Services (UK) Limited is the Company's Alternative Investment Fund Manager and has delegated portfolio management to FIL Investments International ("FII"). Both companies are Fidelity group companies.

From 1 January 2021, FII charges portfolio management fees at an annual rate of 0.60% of net assets and the fee for non-portfolio management services of £100,000 per annum is no longer charged. Prior to this date, the portfolio management fees were charged on a tiered fee basis of 0.85% on the first £700 million of nets assets and 0.75% of net assets in excess of £700 million.

5 Other Expenses

	Year ended 31.08.22 £'000	Year ended 31.08.21 £'000
AIC fees	21	21
Custody fees	42	32
Depositary fees	71	56
Directors' expenses	6	2
Directors' fees1	159	162
Legal and professional fees	95	89
Marketing expenses	191	106
Printing and publication expenses	115	94
Registrars' fees	70	57
Fees payable to the Company's Independent Auditor for the audit of the Financial Statements2	46	29
Sundry other expenses	22	21
Other expenses	838	669

1 Details of the breakdown of Directors' fees are disclosed in the Directors' Remuneration Report on page 46.

2 The VAT payable on audit fees is included in sundry other expenses.

6 Finance Costs

	Year ended 31.08.22 £'000	Year ended 31.08.21 £'000
Interest paid on long CFDs	1,231	370
Interest on bank overdrafts and collateral	12	8
	1,243	378

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Notes to the Financial Statements continued

7 Taxation on Return/(Loss) on Ordinary Activities

	Year ended 31.08.22	Year ended 31.08.21
	£'000	£'000
a) Analysis of the taxation charge for the year
Overseas taxation	196	406
Taxation charge for the year (see Note 7b)	196	406

b) Factors affecting the taxation charge for the year

The taxation charge for the year is lower than the standard rate of UK corporation tax for an investment trust company of 19% (2021: 19%). A reconciliation of the standard rate of UK corporation tax to the taxation charge for the year is shown below:

	Year ended 31.08.22 £'000	Year ended 31.08.21 £'000
Net (loss)/return on ordinary activities before taxation	(43,235)	329,504
Net (loss)/return on ordinary activities before taxation multiplied by the standard rate of UK corporation tax of 19% (2021: 19%) Effects of:	(8,215)	62,606
Capital losses/(gains) not taxable*	13,976	(58,425)
Income not taxable	(5,173)	(3,657)
Excess management expenses	(588)	(524)
Overseas taxation	196	406
Total taxation charge for the year (see Note 7a)	196	406

* The Company is exempt from UK taxation on capital gains as it meets the HM Revenue & Customs criteria for an investment company set out in Section 1159 of the Corporation Tax Act 2010.

c) Deferred taxation

A deferred tax asset of £16,119,000 (2021: £16,893,000), in respect of excess expenses of £64,476,000 (2021: £67,571,000) available to be set off against future taxable profits has not been recognised as it is unlikely that there will be sufficient future taxable profits to utilise these expenses.

In the Spring Budget of 2021, the UK Government announced that from 1 April 2023 the corporation tax rate would increase to 25%. This rate has been substantively enacted at the balance sheet date and has therefore been applied to calculate the unrecognised deferred tax asset for the current year.

8 Return/(Loss) per Ordinary Share

	Year ended 31.08.22	Year ended 31.08.21
Revenue return per ordinary share	9.42p	7.22p
Capital (loss)/return per ordinary share	(23.00p)	102.74p
Total (loss)/return per ordinary share	(13.58p)	109.96p

The return/(loss) per ordinary share is based on the net return/(loss) on ordinary activities after taxation for the year divided by the weighted average number of ordinary shares held outside Treasury during the year, as shown below:

	£'000	£'000
Net revenue return on ordinary activities after taxation	30,128	21,596
Net capital (loss)/return on ordinary activities after taxation	(73,559)	307,502
Net total (loss)/return on ordinary activities after taxation	(43,431)	329,098

	Number	Number
Weighted average number of ordinary shares held outside Treasury	319,869,879	299,297,599

9 Dividends Paid to Shareholders

	Year ended 31.08.22 £'000	Year ended 31.08.21 £'000
Dividends paid
Interim dividend of 2.30 pence per ordinary share paid for the year ended 31 August 2022	7,454	–
Final dividend of 4.50 pence per ordinary share paid for the year ended 31 August 2021	14,136	–
Interim dividend of 2.17 pence per ordinary share paid for the year ended 31 August 2021	–	6,603
Final dividend of 3.70 pence per ordinary share paid for the year ended 31 August 2020	–	10,783
	21,590	17,386
Dividends proposed
Final dividend proposed of 5.45 pence per ordinary share for the year ended 31 August 2022	17,663	–
Final dividend proposed of 4.50 pence per ordinary share for the year ended 31 August 2021	–	14,109
	17,663	14,109

The Directors have proposed the payment of a final dividend of 5.45 pence per ordinary share for the year ended 31 August 2022 which is subject to approval by Shareholders at the Annual General Meeting on 14 December 2022 and has not been included as a liability in these Financial Statements. The dividend will be paid on 11 January 2023 to Shareholders on the register at the close of business on 2 December 2022 (ex-dividend date 1 December 2022).

Notes to the Financial Statements continued

10 Investments

	2022 £'000	2021 £'000
Listed investments	835,398	886,438
Unlisted investments	274	272
Total investments at fair value	835,672	886,710
Opening book cost	726,247	635,740
Opening investment holding gains/(losses)	160,463	(71,977)
Opening fair value	886,710	563,763
Movements in the year
Purchases at cost	361,407	375,614
Sales - proceeds	(348,004)	(305,566)
(Losses)/gains on investments	(64,441)	252,899
Closing fair value	835,672	886,710
Closing book cost	813,135	726,247
Closing investment holding gains	22,537	160,463
Closing fair value	835,672	886,710

The Company received £348,004,000 (2021: £305,566,000) from investments sold in the year. The book cost of these investments when they were purchased was £274,519,000 (2021: £285,107,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

Investment transaction costs

Transaction costs incurred in the acquisition and disposal of investments, which are included in the (losses)/gains on investments above, were as follows:

	Year ended 31.08.22 £'000	Year ended 31.08.21 £'000
Purchases transaction costs	1,544	1,570
Sales transaction costs	195	157
	1,739	1,727

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

The portfolio turnover rate for the year was 42.8% (2021: 45.9%).

11 Derivative Instruments

	Year ended	Year ended
	31.08.22	31.08.21
	£'000	£'000
(Losses)/gains on long CFD positions closed	(7,013)	62,189
Movement in investment holding losses on long CFDs	(7,979)	(6,866)
	(14,992)	55,323

	2022 Fair value £'000	2021 Fair value £'000
Derivative instruments recognised on the Balance Sheet
Derivative instrument assets	28	1,968
Derivative instrument liabilities	(9,200)	(3,161)
	(9,172)	(1,193)

	Fair value £'000	2022 Asset exposure £'000	Fair value £'000	2021 Asset exposure £'000
At the year end the Company held the following derivative instruments
Long CFDs	(9,172)	178,898	(1,193)	206,266

12 Debtors

	2022 £'000	2021 £'000
Securities sold for future settlement	924	–
Amounts receivable on settlement of derivatives	7	–
Accrued income	8,711	5,430
Overseas taxation recoverable	1,273	686
UK income tax recoverable	–	37
Amounts receivable for issue of shares	–	460
Other debtors and prepayments	25	61
	10,940	6,674

13 Other Creditors 2022 £'000 2021 £'000 Securities purchased for future settlement 2,774 1,304 Finance costs payable 57 – Creditors and accruals 650 617 3,481 1,921

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Notes to the Financial Statements continued

14 Share Capital

		2022		2021
	Number of		Number of
	shares	£'000	shares	£'000
Issued, allotted and fully paid ordinary shares of 5 pence each
Held outside Treasury
Beginning of the year	313,028,920	15,651	290,029,480	14,501
Ordinary shares repurchased into Treasury	–	–	(1,025,473)	(51)
Ordinary shares issued out of Treasury	–	–	1,025,473	51
New ordinary shares issued	11,070,000	554	22,999,440	1,150
End of the year	324,098,920	16,205	313,028,920	15,651
Held in Treasury*
Beginning of the year	–	–	–	–
Ordinary shares repurchased into Treasury	–	–	1,025,473	51
Ordinary shares issued out of Treasury	–	–	(1,025,473)	(51)
End of the year	–	–	–	–
Total share capital	324,098,920	16,205	313,028,920	15,651

* Ordinary shares held in Treasury carry no rights to vote, to receive a dividend or to participate in a winding up of the Company.

During the year, 11,070,000 new ordinary shares (2021: 22,999,440 new ordinary issued) were issued. The premium received in the year on the issue of new ordinary shares of £33,118,000 (2021: £61,259,000) was credited to the share premium account. In the year to 31 August 2021, 1,025,473 ordinary shares were also issued out of Treasury. £24,000 was credited to the share premium account and £2,383,000 was credited to the capital reserve.

No ordinary shares were repurchased and held in Treasury during the year (2021: 1,025,473). The cost of repurchasing these shares in the year to 31 August 2021 of £1,820,000 was charged to the capital reserve.

15 Capital and Reserves

	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other non– distributable reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total Share– holders' funds £'000
At 1 September 2021	15,651	205,466	3,256	5,152	702,637	21,928	954,090
Losses on investments (see Note 10)	–	–	–	–	(64,441)	–	(64,441)
Losses on long CFDs (see Note 11)	–	–	–	–	(14,992)	–	(14,992)
Costs associated with the issue of new ordinary shares	–	(142)	–	–	–	–	(142)
Foreign exchange gains	–	–	–	–	5,874	–	5,874
New ordinary shares issued	554	33,118	–	–	–	–	33,672
Revenue return on ordinary activities after taxation for the year	–	–	–	–	–	30,128	30,128
Dividends paid to Shareholders (see Note 9)	–	–	–	–	–	(21,590)	(21,590)
At 31 August 2022	16,205	238,442	3,256	5,152	629,078	30,466	922,599
At 1 September 2020	14,501	144,306	3,256	5,152	394,572	17,718	579,505
Gains on investments (see Note 10)	–	–	–	–	252,899	–	252,899
Gains on long CFDs (see Note 11)	–	–	–	–	55,323	–	55,323
Foreign exchange losses	–	–	–	–	(720)	–	(720)
New ordinary shares issued	1,150	61,259	–	–	–	–	62,409
Costs associated with the issue of new ordinary shares	–	(123)	–	–	–	–	(123)
Issue of ordinary shares from Treasury	–	24	–	–	2,383	–	2,407
Repurchase of ordinary shares into Treasury	–	–	–	–	(1,820)	–	(1,820)
Revenue return on ordinary activities after taxation for the year	–	–	–	–	–	21,596	21,596
Dividends paid to Shareholders (see Note 9)	–	–	–	–	–	(17,386)	(17,386)
At 31 August 2021	15,651	205,466	3,256	5,152	702,637	21,928	954,090

The capital reserve balance at 31 August 2022 includes investment holding gains of £22,537,000 (2021: gains of £160,463,000) as detailed in Note 10 above. The revenue and capital reserves are distributable by way of dividend. See Note 2 (q) above for further details.

Notes to the Financial Statements continued

16 Net Asset Value per Ordinary Share

The calculation of the net asset value per ordinary share is based on the following:

	2022	2021
Total Shareholders' funds	£922,599,000	£954,090,000
Ordinary shares held outside of Treasury at year end	324,098,920	313,028,920
Net asset value per ordinary share	284.67p	304.79p

It is the Company's policy that shares held in Treasury will only be reissued at net asset value per ordinary share or at a premium to net asset value per ordinary share and, therefore, shares held in Treasury have no dilutive effect.

17 Financial Instruments

Management of risk

The Company's investing activities in pursuit of its investment objective involve certain inherent risks. The Board confirms that there is an ongoing process for identifying, evaluating and managing the risks faced by the Company. The Board with the assistance of the Manager, has developed a risk matrix which, as part of the internal control process, identifies the risks that the Company faces. Principal risks identified are market, economic and political, cybercrime and information security, investment performance (including the use of derivatives and gearing), environmental, social and governance ("ESG"), competition, regulatory, key person and operational support, business continuity and discount control. Risks are identified and graded in this process, together with steps taken in mitigation, and are updated and reviewed on an ongoing basis. These risks and how they are identified, evaluated and managed are shown in the Strategic Report on pages 24 to 26.

This note refers to the identification, measurement and management of risks potentially affecting the value of financial instruments. The Company's financial instruments may comprise:

• Equity shares and bonds held in accordance with the Company's investment objective and policies;
• Derivative instruments which comprise CFDs, futures and options on listed stocks and equity indices; and
• Cash, liquid resources and short term debtors and creditors that arise from its operations.

The risks identified arising from the Company's financial instruments are market price risk (which comprises interest rate risk, foreign currency risk and other price risk), liquidity risk, counterparty risk, credit risk and derivative instrument risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below. These policies are consistent with those followed last year.

MARKET PRICE RISK Interest rate risk

The Company finances its operations through its share capital and reserves. In addition, the Company has gearing through the use of derivative instruments. The Board imposes limits to ensure gearing levels are appropriate. The Company is exposed to a financial risk arising as a result of any increases in interest rates associated with the funding of the derivative instruments.

17 Financial Instruments continued

Interest rate risk exposure

The values of the Company's financial instruments that are exposed to movements in interest rates are shown below:

	2022 £'000	2021 £'000
Exposure to financial instruments that bear interest
Long CFDs - exposure less fair value	188,070	207,459
Exposure to financial instruments that earn interest
Amounts held at futures clearing houses and brokers	8,190	40
Cash and cash equivalents	80,450	63,780
	88,640	63,820
Net exposure to financial instruments that bear interest	99,430	143,639

Due to negative interest rates during the reporting year, the Company has received interest on some of its long CFD positions.

Foreign currency risk

The Company does not carry out currency speculation. The Company's net return/(loss) on ordinary activities after taxation for the year and its net assets can be affected by foreign exchange movements because the Company has income and assets which are denominated in currencies other than the Company's functional currency which is UK sterling. The Company can also be subject to short term exposure to exchange rate movements, for example, between the date when an investment is purchased or sold and the date when settlement of the transaction occurs.

Three principal areas have been identified where foreign currency risk could impact the Company:

• Movements in currency exchange rates affecting the value of investments and derivative instruments;
• Movements in currency exchange rates affecting short term timing differences; and
• Movements in currency exchange rates affecting income received.

The portfolio management team monitor foreign currency risk but it is not the Company's policy to hedge against currency risk.

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Notes to the Financial Statements continued

17 Financial Instruments continued

Currency exposure of financial assets

The currency exposure profile of the Company's financial assets is shown below:

Currency	Investments held at fair value £'000	Long exposure to derivative instruments1 £'000	Debtors2 £'000	Cash and cash equivalents3 £'000	2022 Total £'000
Euro	69,765	71,606	316	–	141,687
US dollar	6,665	–	117	39,679	46,461
Swiss franc	20,631	–	376	–	21,007
Swedish krona	16,309	–	–	–	16,309
Australian dollar	12,179	–	–	–	12,179
Norwegian krone	6,377	–	–	–	6,377
Emirati dirham	4,780	–	–	–	4,780
South African rand	2,711	142	–	–	2,853
Danish krone	–	–	71	–	71
Canadian dollar	–	–	–	33	33
UK sterling	696,255	107,150	18,250	40,738	862,393
	835,672	178,898	19,130	80,450	1,114,150

1 The exposure to the market of long CFDs.

2 Debtors include amounts held at futures clearing houses and brokers.

3 Cash and cash equivalents are made up of £2,014,000 cash at bank and £78,436,000 held in Fidelity Institutional Liquidity Fund.

Currency	Investments held at fair value £'000	Long exposure to derivative instruments1 £'000	Debtors2 £'000	Cash and cash equivalents3 £'000	2021 Total £'000
Euro	66,994	56,536	76	2	123,608
US dollar	13,088	–	77	13,036	26,201
Swiss franc	21,802	–	275	–	22,077
Swedish krona	14,353	–	–	–	14,353
Australian dollar	13,967	–	–	–	13,967
Norwegian krone	4,753	–	–	–	4,753
South African rand	3,351	84	–	–	3,435
Danish krone	–	–	71	–	71
UK sterling	748,402	149,646	6,215	50,742	955,005
	886,710	206,266	6,714	63,780	1,163,470

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

1 The exposure to the market of long CFDs.

3 Cash and cash equivalents are made up of £2,000,000 cash at bank and £61,780,000 held in Fidelity Institutional Liquidity Fund.

² Debtors include amounts held at futures clearing houses and brokers.

17 Financial Instruments continued

Currency exposure of financial liabilities

The Company finances its investment activities through its ordinary share capital and reserves. The Company's financial liabilities comprise other creditors. The currency profile of these financial liabilities is shown below:

Currency	Other creditors £'000	2022 Total £'000
Swiss franc	2,141	2,141
Euro	6	6
UK sterling	1,334	1,334
	3,481	3,481

	Other	2021
Currency	creditors £'000	Total £'000
Norwegian krone	13	13
UK sterling	1,908	1,908
	1,921	1,921

Other price risk

Other price risk arises mainly from uncertainty about future prices of financial instruments used in the Company's business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Board meets quarterly to consider the asset allocation of the portfolio and the risk associated with particular industry sectors within the parameters of the investment objective. The Portfolio Manager is responsible for actively monitoring the existing portfolio selected in accordance with the overall asset allocation parameters described above and seeks to ensure that individual stocks also meet an acceptable risk/reward profile. Other price risks arising from derivative positions, mainly due to the underlying exposures, are estimated using Value at Risk and Stress Tests as set out in the Company's internal Risk Management Process Document.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with financial liabilities. The Company's assets mainly comprise readily realisable securities and derivative instruments which can be sold easily to meet funding commitments if necessary. Short term flexibility is achieved by the use of a bank overdraft, if required.

Liquidity risk exposure

At 31 August 2022, the undiscounted gross cash outflows of the financial liabilities were all repayable within one year and consisted of derivative instrument liabilities of £9,200,000 (2021: £3,161,000) and other creditors of £3,481,000 (2021: £1,921,000).

Notes to the Financial Statements continued

17 Financial Instruments continued

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 Manager employs, 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 by evaluating derivative instrument credit risk exposure.

For derivative transactions, collateral is used to reduce the risk of both parties to the contract. All collateral amounts are held in UK sterling and are managed on a daily basis for all relevant transactions. At 31 August 2022, there was no amounts held by brokers in a segregated collateral account on behalf of the Company, to reduce the credit risk exposure of the Company (2021: £2,120,000). In the year to 31 August 2021, this collateral comprised: J.P. Morgan Securities plc £1,270,000 and HSBC Bank plc £850,000. £8,190,000 (2021: £40,000), shown as amounts held at futures clearing houses and brokers on the Balance Sheet was held by the Company, in a segregated collateral account, on behalf of the brokers, to reduce the credit risk exposure of the brokers. This collateral comprised of: J.P. Morgan Securities plc £5,140,000 (2021: £nil), HSBC Bank plc £3,050,000 (2021: £nil) in cash and UBS AG £nil (2021: £40,000) in cash.

Credit risk

Financial instruments may be adversely affected if any of the institutions with which money is deposited suffer insolvency or other financial difficulties. All transactions are carried out with brokers that have been approved by the Manager and are settled on a delivery versus payment basis. Limits are set on the amount that may be due from any one broker and are kept under review by the Manager. Exposure to credit risk arises on unsettled security transactions and derivative instrument contracts and cash at bank.

Derivative instrument risk

The risks and risk management processes which result from the use of derivative instruments, are set out in a documented Risk Management Process Document. Derivative instruments are used by the Manager for the following purposes:

• To gain unfunded long exposure to equity markets, sectors or single stocks. Unfunded exposure is exposure gained without an initial flow of capital;
• To hedge equity market risk using derivatives with the intention of at least partially mitigating losses in the exposures of the Company's portfolio as a result of falls in the equity market; and
• To position short exposures in the Company's portfolio. These uncovered exposures benefit from falls in the prices of shares which the Portfolio Manager believes to be over-valued. These positions, therefore, distinguish themselves from other short exposures held for hedging purposes since they are expected to add risk to the portfolio.

RISK SENSITIVITY ANALYSIS

Interest rate risk sensitivity analysis

Based on the financial instruments held and interest rates at 31 August 2022, an increase of 1.00% in interest rates throughout the year, with all other variables held constant, would have increased the Company's net loss on ordinary activities after taxation for the year and decreased the net assets of the Company by £994,000 (2021: decreased the net return and decreased the net assets by £1,436,000). A decrease of 1.00% in interest rates throughout the year would have had an equal but opposite effect.

Foreign currency risk sensitivity analysis

Based on the financial instruments held and currency exchange rates at 31 August 2022, a 10% strengthening of the UK sterling exchange rate against foreign currencies, with all other variables held constant, would have increased the Company's net loss on ordinary activities after taxation for the year and decreased the net assets of the Company by £22,692,000 (2021: decreased the net return and decreased the net assets by £18,950,000). A 10% weakening of the UK sterling exchange rate against foreign currencies, with all other variables held constant, would have decreased the Company's net loss on ordinary activities after taxation for the year and increased the net assets of the Company by £27,734,000 (2021: increased the net return and increased the net assets by £23,161,000).

17 Financial Instruments continued

Other price risk– exposure to investments sensitivity analysis

Based on the listed investments held and share prices at 31 August 2022, an increase of 10% in share prices, with all other variables held constant, would have decreased the Company's net loss on ordinary activities after taxation for the year and increased the net assets of the Company by £83,540,000 (2021: increased the net return and increased the net assets by £88,644,000). A decrease of 10% in share prices would have had an equal and opposite effect.

An increase of 10% in the valuation of unlisted investments held at 31 August 2022 would have decreased the Company's net loss on ordinary activities after taxation for the year and increased the net assets of the Company by £27,000 (2021: increased the net return after taxation and increased the net assets by £27,000). A decrease of 10% in the valuation would have had an equal and opposite effect.

Other price risk - net exposure to derivative instruments sensitivity analysis

Based on the derivative instruments held and share prices at 31 August 2022, an increase of 10% in the share prices underlying the derivative instruments, with all other variables held constant, would have decreased the Company's net loss on ordinary activities after taxation for the year and increased the net assets of the Company by £17,890,000 (2021: increased the net return and increased the net assets by £20,627,000). A decrease of 10% in share prices would have had an equal and opposite effect.

Fair Value of Financial Assets and Liabilities

Financial assets and liabilities are stated in the Balance Sheet at values which are not materially different to their fair values. As explained in Notes 2 (k) and (l) above, investments and derivative instruments are shown at fair value.

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 valuation techniques used by the Company are explained in Notes 2 (k) and (l) above. The table below sets out the Company's fair value hierarchy:

Financial assets at fair value through profit or loss	Level 1 £'000	Level 2 £'000	Level 3 £'000	2022 Total £'000
Investments	835,224	–	448	835,672
Derivative instrument assets	–	28	–	28
	835,224	28	448	835,700
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities	–	(9,200)	–	(9,200)

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Notes to the Financial Statements continued

17 Financial Instruments continued

Financial assets at fair value through profit or loss	Level 1 £'000	Level 2 £'000	Level 3 £'000	2021 Total £'000
Investments	885,753	–	957	886,710
Derivative instrument assets	–	1,968	–	1,968
	885,753	1,968	957	888,678
Financial liabilities at fair value through profit or loss
Derivative instrument liabilities	–	(3,161)	–	(3,161)

The table below sets out the movements in level 3 financial instruments during the year:

	Year ended 31.08.22 £'000	Year ended 31.08.21 £'000
Beginning of the year	957	897
Sales - proceeds	(716)	(95)
Sales - gains	278	14
Transfer into level 3 at cost - Studio Retail Group and McColl's Retail Group*	9,499	–
Movement in investment holding (losses)/gains	(9,570)	141
End of the year	448	957

* Financial instruments are transferred into level 3 on the date they are suspended, delisted or when they have not traded for thirty days.

Marwyn Value Investors

Marwyn Value Investors is a closed-ended fund incorporated in the United Kingdom. The fund is highly illiquid and the valuation at 31st August 2022 is based on the indicative bid price in the absence of a last trade price. As at 31 August 2022, its fair value was £174,000 (2021: £685,000).

TVC Holdings

TVC Holdings is an unlisted investment holding company incorporated in Ireland. The valuation at 31 August 2022 is based on the last trade price and the company's financial report. As at 31 August 2022, its fair value was £274,000 (2021: £272,000).

Studio Retail Group

Studio Retail Group operates as a multi-channel retail company. On 14 February 2022, the company suspended from trading on the London Stock Exchange and will be appointing administrators. As at 31 August 2022, its fair value was £nil.

McColl's Retail Group

McColl's Retail Group owns and operates convenience and news agent stores. The company suspended trading on 6 May 2022 after appointing administrators. As at 31 August 2022, its fair value was £nil.

18 Capital Resources and Gearing

The Company does not have any externally imposed capital requirements. The financial resources of the Company comprise its share capital and reserves, as disclosed in the Balance Sheet on page 58 and any gearing, which is managed by the use of derivative instruments. Financial resources are managed in accordance with the Company's investment policy and in pursuit of its investment objective, both of which are detailed in the Strategic Report on page 22. The principal risks and their management are disclosed in the Strategic Report on pages 24 to 26 and in Note 17 above.

18 Capital Resources and Gearing continued

The Company's gearing at the year end is set out below:

	2022 Asset exposure		2021
				Asset exposure
	£'000	%1	£'000	%1
Investments	835,672	90.6	886,710	93.0
Long CFDs	178,898	19.4	206,266	21.6
Total asset exposures	1,014,570	110.0	1,092,976	114.6
Shareholders' funds	922,599		954,090
Gearing2		10.0		14.6

1 Asset exposure to the market expressed as a percentage of Shareholders' funds.

2 Gearing is the amount by which Asset Exposure exceeds Shareholders' funds expressed as a percentage of Shareholders' funds.

19 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 and the role of company secretary to FIL Investments International ("FII"). Both companies are Fidelity group companies.

Details of the current fee arrangements are given in the Directors' Report on page 37 and in Note 4 above. During the year, fees for portfolio management services of £5,607,000 (2021: £5,065,000), and fees for non-portfolio management services of £nil (2021: £33,000) were payable to FII. Non-portfolio management fees include company secretarial, fund accounting, taxation, promotional and corporate advisory services. At the Balance Sheet date, fees for portfolio management services of £484,000 (2021: £474,000) were accrued and included in other creditors. FII also provides the Company with marketing services. The total amount payable for these services during the year was £191,000 (2021: £106,000). At the Balance Sheet date, marketing services of £13,000 (2021: £13,000) were accrued and included in other creditors.

Disclosures of the Directors' interests in the ordinary shares of the Company and Director's fees and taxable expenses relating to reasonable travel expenses payable to the Directors are given in the Directors' Remuneration Report on pages 46 and 47. In addition to the fees and taxable expenses disclosed in the Directors' Remuneration Report, £17,000 (2021: £16,000) of Employers' National Insurance contributions were paid by the Company. At the Balance Sheet date, Directors' fees of £15,000 (2021: £13,000) were accrued and payable.

20 Reconciliation of Net Return/(Loss) on Ordinary Activities before Finance Costs and Taxation to Net Cash Inflow from Operating Activities before Finance Costs and Taxation

	Year ended 31.08.22 £'000	Year ended 31.08.21 £'000
Net total (loss)/return on ordinary activities before finance costs and taxation	(41,992)	329,882
Net capital loss/(return) on ordinary activities before finance costs and taxation	73,559	(307,502)
Net revenue return on ordinary activities before finance costs and taxation	31,567	22,380
Scrip dividends	(108)	–
Increase in debtors	(3,208)	(2,392)
Increase in other creditors	37	18
Net cash inflow from operating activities before finance costs and taxation	28,288	20,006

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Alternative Performance Measures

Discount/Premium

The discount/premium is considered to be an Alternative Performance Measure. It is the difference between the NAV of the Company and the share price and is expressed as a percentage of the NAV. Details of the Company's discount/premium are on the Financial Highlights page and are both defined in the Glossary of Terms on pages 92 and 93.

Gearing

Gearing is considered to be an Alternative Performance Measure. See Note 18 on pages 78 and 79 for details of the Company's gearing.

Net Asset Value ("NAV") per Ordinary Share

The NAV per Ordinary Share is considered to be an Alternative Performance Measure. See the Balance Sheet on page 58 and Note 16 on page 72 for further details.

Ongoing Charges

Ongoing charges are considered to be an Alternative Performance Measure. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of management fees and other expenses expressed as a percentage of the average net assets throughout the year.

	2022	2021
Investment management fees (£'000)	5,607	5,098
Other expenses (£'000)	838	669
Ongoing charges (£'000)	6,445	5,767
Average net assets (£'000)	934,785	759,198
Ongoing charges ratio	0.69%	0.76%

Revenue, Capital and Total Returns per Share

Revenue, capital and total returns per share are considered to be Alternative Performance Measures. See the Income Statement on page 57 and Note 8 on page 67 for further details.

Total Return Performance

Total return performance is considered to be an Alternative Performance Measure. NAV per ordinary share total return includes reinvestment of the dividend in the NAV of the Company on the ex-dividend date. Share price total return includes the reinvestment of the net dividend in the month that the share price goes ex-dividend.

The tables below provide information relating to the NAVs and share prices of the Company, the impact of the dividend reinvestments and the total returns for the years ended 31 August 2022 and 31 August 2021.

2022	Net asset value per ordinary share	Share price
31 August 2021	304.79p	308.50p
31 August 2022	284.67p	260.50p
Change in year	-6.6%	-15.6%
Impact of dividend reinvestment	+2.2%	+2.1%
Total return for the year	-4.4%	-13.5%

2021	Net asset value per ordinary share	Share price
31 August 2020	199.81p	181.60p
31 August 2021	304.79p	308.50p
Change in year	+52.5%	+69.9%
Impact of dividend reinvestment	+3.7%	+3.9%
Total return for the year	+56.2%	+73.8%

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Financial Calendar

The key dates in the Company's calendar are:

31 August 2022 – Financial Year End

November 2022 – Announcement of the annual results for the year ended 31 August 2022

November 2022 – Publication of the Annual Report

1 December 2022 – Ex-Dividend Date

2 December 2022 – Dividend Record Date

14 December 2022 – Annual General Meeting

11 January 2023 – Payment of Final Dividend

28 February 2023 – Half-Year End

April 2023 – Announcement of the Half-Yearly Results for the six months to 28 February 2023

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

April 2023 – Publication of the Half-Yearly Report

May 2023 – Ex-Dividend and Dividend Record Date

June 2023 – Payment of Interim Dividend

Notice of Meeting

Notice is hereby given that the Annual General Meeting of Fidelity Special Values PLC will be held 4 Cannon Street, London EC4M 5AB and virtually via the Lumi AGM meeting platform on Wednesday, 14 December 2022 at 11.00 am for the following purposes:

• 1. To receive and adopt the Annual Report and Financial Statements for the year ended 31 August 2022.
• 1. To declare that a final dividend for the year ended 31 August 2022 of 5.45 pence per ordinary share be paid to Shareholders on the register as at close of business on 2 December 2022.
• 1. To re-elect Mrs Claire Boyle as a Director.
• 1. To re-elect Mr Dean Buckley as a Director.
• 1. To elect Mr Ominder Dhillon as a Director.
• 1. To re-elect Mr Nigel Foster as a Director.
• 1. To re-elect Mrs Alison McGregor as a Director.
• 1. To approve the Directors' Remuneration Report (excluding the section headed "The Remuneration Policy" set out on page 45) for the year ended 31 August 2022.
• 1. To approve the Remuneration Policy as stated in the Directors' Remuneration Report on page 45.
• 1. To reappoint Ernst & Young LLP as Auditor of the Company to hold office until the conclusion of the next general meeting at which financial statements are laid before the Company.
• 1. To authorise the Directors to determine the Auditor's remuneration.

To consider and, if thought fit, pass the following special business resolutions of which Resolutions 12 and 15 will be proposed as ordinary resolutions and Resolutions 13 and 14 as special resolutions.

Authority to Allot Shares and Disapply Pre-Emption Rights

Resolutions 12 and 13 will, if approved, authorise the Directors to allot a limited number of new ordinary shares (or to sell any ordinary shares which the Company elects to hold in Treasury) for cash without first offering such shares to existing ordinary Shareholders pro rata to their existing holdings. The limit set by the Board is 10% of the number of ordinary shares of the Company (including Treasury shares) in issue on 3 November 2022. The Directors will only issue new ordinary shares, or dispose of ordinary shares held in Treasury, under this authority in order to take advantage of opportunities in the market as they arise and only if they believe it is advantageous to the Company's Shareholders to do so. Any ordinary shares held in Treasury would be re-issued at net asset value ("NAV") per ordinary share or at a premium to NAV per ordinary share. This would ensure that the net effect of repurchasing and then re-issuing the ordinary shares would enhance NAV per ordinary share.

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

• 1. THAT the Directors be and they are hereby generally and unconditionally authorised in accordance with Section 551 of the Companies Act 2006 (the "Act") to exercise all the powers of the Company to allot shares in the Company or to grant rights to subscribe for or to convert any securities into shares in the Company ("relevant securities") up to an aggregate nominal amount of £1,624,494 (approximately 10% of the aggregate nominal amount of the issued share capital of the Company (including Treasury shares) as at 3 November 2022) and so that the Directors may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with Treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter, such authority to expire at the conclusion of the next Annual General Meeting ("AGM") of the Company or the date 15 months after the passing of this resolution, whichever is the earlier, but so that this authority shall allow the Company to make offers or agreements before the expiry of this authority which would or might require relevant securities to be allotted after such expiry as if the authority conferred by this resolution had not expired. All previous unexpired authorities are revoked, but without prejudice to any allotment of shares or grant of rights already made, offered or agreed to be made pursuant to such authorities.
• 1. THAT, subject to the passing of Resolution 12, as set out above, the Directors be and they are hereby authorised, pursuant to Sections 570-573 of the Act to allot equity securities (as defined in Section 560 of the Act) for cash pursuant to the authority given by the said Resolution 12 and/or to sell ordinary shares held by the Company as Treasury shares for cash, as if Section 561 of the Act did not apply to any such allotment or sale, provided that this power shall be limited:
  2. a) to the allotment of equity securities or sale of Treasury shares up to an aggregate nominal amount of £1,624,494 (approximately 10% of the aggregate nominal amount of the issued share capital of the Company (including Treasury shares) as at 3 November 2022); and
  3. b) by the condition that allotments of equity securities or sales of Treasury shares may only be made pursuant to this authority at a price of not less than the NAV per ordinary share,

and this power shall expire at the conclusion of the next AGM of the Company or the date 15 months after the passing of this Resolution, whichever is the earlier, save that this authority shall allow the Company to make offers or agreements before the expiry of this authority, and the Directors may allot equity securities in relation to such an offer or agreement as if the authority conferred by this Resolution had not expired.

Notice of Meeting continued

Authority to Repurchase Shares

Resolution 14 is a special resolution which, if approved, will renew the Company's authority to purchase up to 14.99% of the number of ordinary shares in issue (excluding Treasury shares) on 3 November 2022 either for immediate cancellation or for retention as Treasury shares, at the determination of the Board. Once shares are held In Treasury, the Directors may only dispose of them in accordance with the relevant legislation by subsequently selling the shares for cash or cancelling the shares. Purchases of ordinary shares will be at the discretion of the Board and within guidelines set from time to time by the Board in the light of prevailing market conditions. Purchases will only be made in the market at prices below the prevailing NAV per ordinary share, thereby resulting in an increased NAV per ordinary share.

• 1. THAT the Company be and is hereby generally and unconditionally authorised in accordance with Section 701 of the Companies Act 2006 (the "Act") to make market purchases (within the meaning of Section 693 of the Act) of ordinary shares of 5 pence each ("the shares") in the capital of the Company provided that:
  2. a) the maximum number of shares hereby authorised to be purchased shall be 48,582,428;
  3. b) the minimum price which may be paid for a share is 5 pence;
  4. c) the maximum price (excluding expenses) which may be paid for each share is the higher of:
     • i) 5% above the average of the middle market quotations for the shares as derived from the London Stock Exchange Official List for the five business days immediately preceding the day of purchase; and
     • ii) the higher of the price of the last independent trade and the highest current independent purchase bid on the London Stock Exchange at the time the purchase is carried out;
  5. d) the authority hereby conferred shall expire at the conclusion of the next AGM of the Company unless such authority is renewed prior to such time; and
  6. e) the Company may make a contract to purchase shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of shares pursuant to any such contract.

Continuation of the Company

Resolution 15 is an ordinary resolution that relates to the continuation of the Company.

1. THAT the Company continues to carry on business as an investment trust.

By Order of the Board

FIL Investments International

Secretary 3 November 2022

Notes to the Notice of Meeting:

• 1. A member of the Company entitled to attend and vote at the Annual General Meeting may appoint a proxy or proxies to attend and to speak and vote instead of him. A member may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that member. A proxy need not be a member of the Company. To appoint a proxy via the share portal at www.signalshares.com, you will need to log in to your share portal account or register if you have not previously done so. To register you will need your Investor Code which can be found on your Form of Proxy.
• 1. A Form of Proxy is enclosed and must be returned to the Registrar at the address on the form to arrive not later than 11.00 am on Monday, 12 December 2022. Completion and return of the form of proxy will not prevent a shareholder from subsequently attending the meeting and voting in person if they so wish.
• 1. To be effective, the instrument appointing a proxy, and any power of attorney or other authority under which it is signed (or a copy of any such authority certified notarially or in some other way approved by the Directors), must be deposited with the Company's Registrar, PXS 1, Link Group, Central Square, 29 Wellington Street, Leeds LS1 4DL not less than 48 hours before the time for holding the meeting or adjourned meeting or, in the case of a poll taken more than 48 hours after it is demanded, not less than 24 hours before the time appointed for the taking of the poll at which it is to be used.
• 1. In the case of joint holders, the vote of the senior who tenders the vote shall be accepted to the exclusion of the votes of the other joint holders and for this purpose, seniority shall be determined by the order in which the names stand in the Register of Members.
• 1. To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be received by the issuer's agent RA10 by 11.00 am on Monday, 12 December 2022. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer's agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST

Personal Members or other CREST sponsored members and those CREST Members who have appointed voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and systems timings please refer to the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5) of the Uncertificated Securities Regulations 2001. In any case your proxy form must be received by the Company's Registrar no later than 11.00 am on Monday, 12 December 2022.

• 1. Proxymity Voting If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by no later than 11.00 am on Monday, 12 December 2022 in order to be considered valid. Before you can appoint a proxy via this process, you will need to have agreed to Proxymity's associated terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy.
• 1. All members are entitled to attend and vote at the AGM and ask questions. The right to vote at the meeting will be determined by reference to the Register of Members as at close of business on Monday, 12 December 2022. Shareholders are urged to vote using the proxy form provided or electronically where permitted by your nominee or platform.
• 1. The Company is pleased to be able to offer facilities for shareholders to attend, ask questions and vote at the AGM electronically in real time should they wish to do so. The details are set out below.

In order to join the AGM electronically and ask questions via the platform, shareholders will need to connect to the following site: https://web.lumiagm.com. Lumi is available as a mobile web client, compatible with the latest browser versions of Chrome, Firefox, Edge and Safari and can be accessed using any web browser, on a PC or smartphone device.

Once you have accessed https://web.lumiagm.com from your web browser on a tablet or computer, you will be asked to enter the Lumi Meeting ID which is 110-440-023. You will then be prompted to enter your unique 11 digit Investor Code ("IVC") including any leading zeros and 'PIN'. Your PIN is the last 4 digits of your IVC. This will authenticate you as a shareholder.

Your IVC can be found on your share certificate or as detailed on your proxy form. Signal Shares users (www.signalshares.com) will find this under 'Manage your account' when logged in to the Signal Shares portal. You can also obtain this by contacting Link, our Registrar, by calling +44 (0) 371 277 1020*.

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Access to the AGM will be available from 30 minutes before the meeting start time, although the voting functionality will not be enabled until the Chairman of the meeting declares the poll open. During the AGM, you must ensure you are connected to the internet at all times in order to vote when the Chairman commences polling on the Resolutions. Therefore, it is your responsibility to ensure connectivity for the duration of the AGM via your wi-fi. A user guide to the Lumi platform is available on the Company's pages of the Manager's website at: www.fidelity.co.uk/specialvalues.

If you wish to appoint a proxy other than the Chairman of the meeting and for them to attend the virtual meeting on your behalf, please submit your proxy appointment in the usual way before contacting Link Group on +44 (0) 371 277 1020* in order to obtain their IVC and PIN. It is suggested that you do this as soon as possible and at least 48 hours (excluding non-business days) before the meeting.

If your shares are held within a nominee / platform and you wish to attend the electronic meeting, you will need to contact your nominee as soon as possible. Your nominee will need to present a corporate letter of representation to Link Group, the Registrar, as soon as possible and at least 72 hours (excluding non-business days) before the meeting, in order that they can obtain for you your unique IVC and PIN to enable you to attend the electronic meeting.

If you are unable to obtain a unique IVC and PIN from your nominee or platform, we will also welcome online participation as a guest. Once you have accessed https:// web.lumiagm.com from your web browser on a tablet or computer, you will need to enter the Lumi Meeting ID which is 110-440-023. You should then select the 'Guest Access' option before entering your name and who you are representing, if applicable. This will allow you to view the meeting and ask questions but you will not be able to vote.

* Lines are open from 9.00 a.m. to 5.30 p.m. Monday to Friday, excluding public holidays in England and Wales. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the UK will be charged at the applicable international rate.

1. Any person to whom this notice is sent who is a person nominated under Section 146 of the Companies Act 2006 to enjoy information rights (a "Nominated Person") may, under an agreement between him and the member by whom he was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he may, under any such agreement, have a right to give instructions to the member as to the exercise of voting rights. The statement of the rights of members in relation to the appointment of proxies in Note 1 above does not apply to Nominated Persons. The right described in that paragraph can only be exercised by members of the Company.

Notice of Meeting continued

• 1. If the Chairman, as a result of any proxy appointments, is given discretion as to how the votes which are the subject of those proxies are cast and the voting rights in respect of those discretionary proxies, when added to the interests in the Company's securities already held by the Chairman, result in the Chairman holding such number of voting rights that he has a notifiable obligation under the Disclosure and Transparency Rules, the Chairman will make the necessary notifications to the Company and the Financial Conduct Authority. As a result, any member holding 3% or more of the voting rights in the Company who grants the Chairman a discretionary proxy in respect of some or all of those voting rights and so would otherwise have a notification obligation under the Disclosure and Transparency Rules, need not make separate notification to the Company and the Financial Conduct Authority.
• 1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that to be entitled to attend and vote at the AGM (and for the purpose of determining the number of votes they may cast), members must be entered on the Register of Members by close of business on Monday, 12 December 2022. If the meeting is adjourned then, to be so entitled, members must be entered on the Register of Members by close of business on the day two days before the time fixed for the adjourned meeting, or, if the Company gives notice of the adjourned meeting, at any other time specified in that notice.
• 1. As at 3 November 2022 (the latest practicable date prior to the publication of this document), the Company's issued share capital consisted of 324,098,920 ordinary shares carrying one vote each. The number of shares held by the Company in Treasury was nil. Therefore, the total number of shares with voting rights in the Company was 324,098,920.
• 1. Any corporation which is a member can appoint one or more corporate representative who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares.
• 1. Shareholders and any proxies or representatives they appoint understand that by attending the meeting they are expressly agreeing that they are willing to receive any communications, including communications relating to the Company's securities, made at the meeting.
• 1. It is possible that, pursuant to requests made by members of the Company under Section 527 of the Companies Act 2006, the Company may be required to publish on its website a statement setting out any matter relating to the audit of the Company's accounts (including the Auditor's report and the conduct of the audit) that is to be laid before the AGM or any circumstance connected with an Auditor of the Company ceasing to hold office since the previous meeting at which the Annual Report and Financial Statements were laid. The Company may not require the Shareholders requesting any such website publication to pay its expenses in complying with such requests. Where the Company is required to place a statement on a website under Section 527 of the Companies Act 2006, it must forward the statement to the

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Company's Auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the AGM includes any statement that the Company has been required under Section 527 of the Companies Act 2006 to publish on its website.

• 1. No Director has a service contract with the Company. Registered office: Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.
• 1. A copy of this notice and other information required by Section 311A of the Companies Act 2006 is published on the Company's website at www.fidelity.co.uk/specialvalues.

Registered office: Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.

Shareholder Information

Investing in Fidelity Special Values Plc

Fidelity Special Values PLC is a company listed on the London Stock Exchange and you can buy its shares through a platform, stockbroker, share shop or bank. Fidelity also offers a range of options, so that you can invest in the way that is best for you. Details of how to invest and the latest Key Information Document can be found on the Company's pages of the Manager's website at: www.fidelity.co.uk/specialvalues.

CONTACT INFORMATION

Shareholders and Fidelity's Platform Investors should contact the appropriate administrator using the contact details given below and in the next column. Links to the websites of major platforms can be found online at: www.fidelityinvestmenttrusts.com.

Shareholders on the main share register

Contact Link Group, Registrar to Fidelity Special Values PLC, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL.

Email: enquiries@linkgroup.co.uk

Telephone: 0371 664 0300 (calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open 9:00 – 17:30, Monday to Friday excluding public holidays in England and Wales).

Details of individual shareholdings and other information can also be obtained online from the Registrar's Share Portal at www.signalshares.com. Shareholders are able to manage their shareholding online by registering for the Share Portal, a free and secure online access service. Facilities include:

Account Enquiry – Shareholders can access their personal shareholding, including share transaction history, dividend payment history and obtain an up-to-date shareholding valuation.

Amendment of Standing Data – Shareholders can change their registered postal address and add, change or delete dividend mandate instructions. Shareholders can also download forms such as change of address, stock transfer and dividend mandates as well as buy and sell shares in the Company.

Should you have any queries in respect of the Link Share Portal, contact the helpline on 0371 664 0391 (calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open 9:00 – 17:30, Monday to Friday excluding public holidays in England and Wales).

Fidelity Platform Investors

Contact Fidelity, using the freephone numbers given below, or by writing to: UK Customer Service, Fidelity, PO Box 391, Tadworth, Surrey KT20 9FU.

Website: www.fidelity.co.uk

Private investors: call free on 0800 41 41 10, 9:00 – 18:00, Monday to Saturday.

Financial advisers: call free on 0800 41 41 81, 8:00 – 18:00, Monday to Friday.

General enquiries

General enquiries should be made to the Secretary, at the Company's registered office: FIL Investments International, Investment Trusts, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.

Telephone: 01737 836347

Email: investmenttrusts@fil.com

Website: www.fidelityinvestmenttrusts.com

If you hold Fidelity Special Values PLC shares in an account provided by Fidelity International, you will receive a report every six months detailing all of your transactions and the value of your shares.

ShareGift

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

You may donate your shares to charity free of charge through ShareGift. Further details are available at www.sharegift.org.uk.

Shareholder Information continued

Managers and Advisors

Alternative Investment Fund Manager	Banker and Custodian	Lawyer
(the AIFM/Manager)	JPMorgan Chase Bank (London Branch)	Dickson Minto W.S.
FIL Investment Services (UK) Limited	125 London Wall	Broadgate Tower
Beech Gate	London	20 Primrose Street
Millfield Lane	EC2Y 5AJ	London
Lower Kingswood		EC2A 2EW
Tadworth	Depositary
Surrey	J.P. Morgan Europe Limited	Registrar
KT20 6RP	25 Bank Street	Link Group
	London	10th Floor, Central Square
Investment Manager, Secretary and	E14 5JP	29 Wellington Street
Registered Office		Leeds
FIL Investments International	Financial Adviser and Stockbroker	LS1 4DL
Beech Gate	Winterflood Securities
Millfield Lane	The Atrium Building
Lower Kingswood	Cannon Bridge
Tadworth	25 Dowgate Hill
Surrey	London
KT20 6RP	EC4R 2GA
Email: investmenttrusts@fil.com
	Independent Auditor
	Ernst & Young LLP
	25 Churchill Place
	London

Company Information

The Company was launched on 17 November 1994. The original subscription price was £1 for each ordinary share of 25 pence each. Following the sub-division of ordinary shares on a five for one basis on 29 June 2015, the Company's share capital now comprises ordinary shares of 5 pence each and the restated original subscription price is 20 pence for each ordinary share.

E14 5EY

The Company is a member of The Association of Investment Companies (the "AIC") from whom general information on investment trusts can be obtained by telephoning 020 7282 5555 (email: enquiries@theaic.co.uk).

Price Information

The share price of Fidelity Special Values PLC is published daily in the Financial Times under the heading "Investment Companies". It is also published in The Times and The Daily Telegraph. Price and performance information is also available at: www.fidelity.co.uk/specialvalues

Investors can also obtain current price information by telephoning Fidelity for free on 0800 41 41 10 or FT Cityline on 0905 817 1690 (voice activated service) (calls charged at 60p per minute on a per second basis from a BT landline. Charges from other telephone networks may vary). The Reuters code for Fidelity Special Values PLC is FSV.L, the SEDOL is BWXC7Y9 and the ISIN is GB00BWXC7Y93.

Net Asset Value ("NAV") Information

The Company's NAV is calculated and released to the London Stock Exchange on a daily basis.

UK Capital Gains Tax

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

All UK individuals under present legislation are permitted to have £12,300 of capital gains in the current tax year 2022/2023 (2021/2022: £12,300) before being liable for capital gains tax. Capital gains tax is charged at 10% and 20% dependent on the total amount of taxable income.

Data Protection

General Data Protection Regulation ("GDPR")

What personal data is collected and how it is used

The Company is an investment trust which is a public limited company and has certain regulatory obligations such as the requirement to send documents to its shareholders, for example, the Annual Report and other documents that relate to meetings of the Company. The Company will, therefore, collect shareholders' personal data such as names, addresses and identification numbers or investor codes and will use this personal data to fulfil its statutory obligations.

Any personal data collected will be kept securely on computer systems and in some circumstances on paper. Personal information is kept secure in line with Fidelity's Information Security policies and standards. If you are unhappy with how we have used your personal data, you can complain by contacting the UK Data Protection Officer at Fidelity International, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.

Sharing personal data

In order to assist the Company in meeting its statutory requirements, the Company delegates certain duties around the processing of this data to its third party service providers, such as the Company's Registrar and Printers. The Company has appointed Fidelity to undertake marketing activities for the Company and their privacy statement can be found on the Company website at https://investment-trusts.fidelity.co.uk/security-privacy/

The Company's agreements with the third party service providers have been updated to be compliant with GDPR requirements. The Company confirms to its shareholders that their data will not be shared with any third party for any other purpose, such as for marketing purposes. In some circumstances, it may be necessary to transfer shareholders' personal data across national borders to Fidelity Group entities operating in the European Economic Area ("EEA"). Where this does occur, the European standard of protections will be applied to the personal data that is processed. Where personal data is transferred within the Fidelity group but outside of the EEA, that data will subsequently receive the same degree of protection as it would in the EEA.

Retention period

We will keep the personal data for as long as is necessary for these purposes and no longer than we are legally permitted to do so.

Requesting access, making changes to personal data and other important information

Shareholders can access the information that the Company holds about them or ask for it to be corrected or deleted by contacting Fidelity's UK Data Protection Officer, Fidelity International, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.

Alternative Investment Fund Manager's Disclosure

In compliance with the Alternative Investment Fund Managers Directive ("AIFMD"), the Board has appointed FIL Investment Services (UK) Limited ("FISL") as the Company's Alternative Investment Fund Manager ("AIFM"). FISL has delegated the portfolio management and company secretarial function to FIL Investments International. Details of the Management Agreement can be found in the Directors' Report on page 37.

The table below discloses information required by the Alternative Investment Fund Managers Regulations 2013.

Function	AIFM Role and Responsibility	AIFMD Disclosure
Investment management	The AIFM provides portfolio management of assets and investment advice in relation to the assets of the Company. It has delegated this function to FIL Investments International. The Board remains responsible for setting the investment strategy, investment policy and investment guidelines and the AIFM operates within these guidelines.	Details of the Company's investment objective, policy and strategy, including investment limits, are on pages 22 and 23.
Risk management	The AIFM has a responsibility for risk management for the Company which is in addition to the Board's corporate governance responsibility for risk management. The Company has a Risk Management Process Document which demonstrates that risk management is separated functionally and hierarchically from operating units and demonstrates independence safeguards. The Manager maintains adequate risk management systems in order to identify, measure and monitor all risks at least annually under the AIFMD. The Manager is responsible for the implementation of various risk activities such as risk systems, risk profile, risk limits and testing. The Board, as part of UK corporate governance, remains responsible for the identification of significant risks and for the ongoing review of the Company's risk management and internal control processes.	The AIFM has an ongoing process for identifying, evaluating and managing the principal risks faced by the Company and this is regularly reviewed by the Board. The Board remains responsible for the Company's system of risk management and internal controls and for reviewing its effectiveness. Further details can be found in the Strategic Report on pages 24 to 26 and in Note 17 to the Financial Statements on pages 72 to 78.
Valuation of illiquid assets	The AIFMD requires the disclosure of the percentage of the Alternative Investment Fund's assets which are subject to special arrangements arising from their illiquid nature and any new arrangements for managing the liquidity of the Company.	As at the date of this report, none of the Company's assets were subject to special arrangements arising from its illiquid nature.

Function	AIFM Role and Responsibility	AIFMD Disclosure
Leverage	The Company uses leverage to increase its exposure primarily to UK companies and currently holds derivative instruments. The AIFM has set maximum levels of leverage that are reasonable. It has implemented systems to calculate and monitor compliance against these limits and has ensured that the limits have been complied with at all times. There are two methods of calculating leverage – the Gross Method which does not reduce exposure for hedging; and the Commitment Method which does reduce exposure for hedging.	The maximum leverage limits are 1.80 for the Gross Method of calculating leverage and 1.50 for the Commitment Method. At 31 August 2022, actual leverage was 1.21 for the Gross Method and 1.19 for the Commitment Method.
Liquidity management	The AIFM, in consultation with the Board, maintains a liquidity management policy which is considered at least annually.	No new arrangements for managing the liquidity of the Company have been made. Further details can be found in Note 17 on page 75.
Remuneration of the AIFM	The AIFM operates under the terms of Fidelity International's Global Remuneration Policy Statement. This ensures that the AIFM complies with the requirements of the FCA's Remuneration Code (SYSC19A); the AIFM Remuneration Code (SYSC19B); and the BIPRU Remuneration Code (SYSC19C).	Details of Fidelity International's Global Remuneration Policy can be found at www.fidelityinternational. com/global/remuneration/default.page

EU Securities Financing Transactions Regulations ("SFTR")

The following disclosures relate to contracts for difference ("CFDs") held by the Company which may be considered Total Return Swaps under the SFTR, which came into force on 12 January 2016.

As at 31 August 2022, all CFDs were contracted bilaterally with open maturities:

Broker	Fair Value £'000	Percentage of Net Assets	Collateral held by the broker £'000	Collateral held by the Company £'000
HSBC Bank plc (UK)	(3,876)	(0.42%)	–	3,050
UBS AG (UK)	(66)	(0.01%)	–	–
J.P. Morgan plc (UK)	(5,229)	(0.57%)	–	5,140
Goldman Sachs International Ltd (UK)	(1)	(0.00%)	–	–

At 31 August 2022, there was no collateral held by the broker on behalf of the Company. The total return for the year ended 31 August 2022 from CFDs was a loss of £5,933,000.

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Glossary of Terms

AAF Report

A report prepared in accordance with the Audit and Assurance Faculty guidance issued by the Institute of Chartered Accountants in England and Wales.

AIC

The Association of Investment Companies ("AIC"). The Company is a member of the AIC.

AIF

Alternative Investment Fund ("AIF"). The Company is an AIF.

AIFM

Alternative Investment Fund Manager ("AIFM"). The Board has appointed FIL Investment Services (UK) Limited to act as the Company's AIFM (the Manager).

AIFMD

The Alternative Investment Fund Managers' Directive ("AIFMD") is a European Union Directive implemented on 22 July 2014.

Alternative Performance Measures

The Company uses the following Alternative Performance Measures which are all defined in this Glossary of Terms:

• Discount/Premium;
• Gearing;
• Net Asset Value (NAV) per Ordinary Share;
• Ongoing Charges;
• Revenue, Capital and Total Returns; and
• Total Return Performance (Net Asset Value Total Return or Share Price Total Return).

Asset Exposure

The value of an underlying security or instrument to which the Company is exposed, whether through direct or indirect investment (including the economic value of the exposure in the underlying asset of derivatives).

Benchmark Index

FTSE All-Share Index against which the performance of the Company is measured.

Block Listing

A facility that allows the Company to issue new ordinary shares to meet demand in the market over a period of time.

Capital Gains Tax (CGT)

The tax that may be payable if shares are sold at a profit.

Collateral

Assets provided as security for the unrealised gain or loss under a contract for difference.

Contract For Difference (CFD)

A contract for difference is a derivative. It is a contract between the Company and an investment house at the end of which the parties exchange the difference between the opening price and the closing price of an underlying asset of the specified financial instrument. It does not involve the Company buying or selling the underlying asset, only agreeing to receive or pay the movement in its share price. A contract for difference allows the Company to gain access to the movement in the share price by depositing a small amount of cash known as collateral. The Company may reason that the asset price will rise, by buying ("long" position) or fall, by selling ("short" position). If the Company holds long positions, dividends are received and interest is paid. If the Company holds short positions, dividends are paid and interest is received.

Corporation Tax

The UK tax the Company may have to pay on its profits. As an investment trust company, the Company is exempt from UK corporation tax on its capital gains and does not pay tax on any UK dividends. It can also offset expenses against any taxable income, and consequently it is tax efficient for the Company.

Custodian

An entity that holds (as intermediary) the Company's assets, arranges the settlement of transactions and administers income, proxy voting and corporate actions. The Company's Custodian is JPMorgan Chase Bank.

Depositary

An entity that oversees the custody, cash arrangements and other AIFM responsibilities of the Company. J.P.Morgan Europe Limited act as the Company's Depositary.

Derivatives

Financial instruments (such as futures, options and contracts for difference) whose value is derived from the value of an underlying asset or other financial instrument.

Discount

If the share price of the Company is lower than the net asset value per ordinary share, the Company's shares are said to be trading at a discount. It is shown as a percentage of the net asset value per ordinary share.

Fair Value

Job No: 47862 Proof Event: 17 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

The fair value is the best measure of the realisable value of the investments, including derivatives, at a point in time and is measured as:

• Listed and AIM quoted investments valued at bid prices or last market prices as available, otherwise at published price quotations;
• Unlisted investments valued using an appropriate valuation technique in the absence of an active market;
• Contracts for difference valued as the difference between the settlement price of the contract and the value of the underlying shares in the contract (unrealised gains or losses); and

• Futures and options – valued at the quoted trade price for the contract.

Fidelity International (Fidelity)

FIL Limited and its subsidiary group companies including FIL Investment Services (UK) Limited and FIL Investments International which act as AIFM, Secretary and Investment Manager.

Futures

Agreements to buy or sell a stated amount of an asset at a specific future date and a pre-agreed price.

Gearing

The economic exposure of the portfolio to its underlying assets in excess of total net assets. It represents the additional exposure to the market above Shareholders' Funds. The Company uses two measures of gearing (Gross Gearing and Net Gearing) which are both defined in this Glossary of Terms

Gross Asset Exposure

The value of the portfolio to which the Company is exposed, whether through direct or indirect investment (including the economic value of the exposure in the underlying asset of the derivatives. It is the sum total of all Asset Exposures.

Gross Gearing

Gross Asset Exposure in excess of Shareholders' funds.

Hedging

A strategy aimed at minimising or eliminating the risk or loss through adverse movements normally involving taking a position in a derivative such as a future or an option.

Investment Manager

FIL Investments International.

Manager

FIL Investment Services (UK) Limited is the appointed Manager under the Alternative Investment Fund Managers' Directive ("AIFMD"), and has delegated the portfolio management of assets to FIL Investments International.

Net Assets or Net Asset Value (NAV)

Also described as "Shareholders' funds", net assets represent the total value of the Company's assets less the total value of its liabilities. For valuation purposes it is common to express the net asset value on a per ordinary share basis.

Net Asset Value per Ordinary Share

The net asset value divided by the number of ordinary shares in issue.

Net Gearing

Net Market Exposure in excess of Shareholders' funds.

Net Market Exposure

Net Market Exposure is the total of all long exposures, less short exposures and less exposures hedging the portfolio.

Ongoing Charges

Total operational expense (excluding finance costs and taxation) incurred by the Company as a percentage of the average daily net asset values for the reporting year.

Options

An option is a contract which gives the right but not the obligation to buy or sell an underlying asset at an agreed price on or before an agreed date. Options may be calls (buy) or puts (sell) and are used to gain or reduce exposure to the underlying asset on a conditional basis.

Portfolio Manager

Alex Wright is the appointed Portfolio Manager of the Company and is responsible for managing the Company's assets.

Pre-Emption Rights

Section 561 of the Companies Act 2006 provides that a company offering a new issue of shares must first make an offer of these shares, on the same or more favourable terms, in proportion to the nominal value held to existing Shareholders. At each Annual General Meeting, the Board seeks Shareholder approval to disapply pre-emption rights provision, up to 10% of the Company's issued share capital.

Premium

If the share price of the Company is higher than the net asset value per ordinary share, the Company's shares are said to be trading at a premium. The premium is shown as a percentage of the net asset value per ordinary share.

Registrar

An entity that manages the Company's Shareholder register. The Company's Registrar is Link Group.

Reserves

• Share premium account represents the amount by which the proceeds from the issue of ordinary shares has exceeded the cost of those ordinary shares. It is not distributable by way of dividend and it cannot be used to fund share repurchases.
• Capital redemption reserve maintains the equity share capital of the Company and represents the nominal value of shares repurchased and cancelled. It is not distributable by way of dividend and it cannot be used to fund share repurchases.
• Other non-distributable reserve represents amounts transferred from the warrant reserve. It is not distributable by way of dividend and it cannot be used to fund share repurchases.
• Capital reserve represents realised gains or losses on investments and derivatives sold, unrealised increases and decreases in the fair value of investments and derivatives held and other income and costs recognised in the capital column of the Income Statement. It can be used to fund repurchases and issuance of shares from Treasury and it is distributable by way of dividend.

Glossary of Terms continued

• Revenue reserve represents retained revenue surpluses recognised through the revenue column of the Income Statement. It is distributable by way of dividend.

Return

The return generated in a given period from investments:

• Revenue Return reflects the dividends and interest from investments and other income net of expenses, finance costs and taxation;
• Capital Return reflects the return on capital, excluding any revenue return; and
• Total Return reflects the aggregate of revenue and capital returns.

Shareholders' Funds

Shareholders' funds are also described as net asset value and represent the total value of the Company's assets less the total value of its liabilities as shown in the balance sheet.

Total Return Performance

The return on the share price or net asset value per ordinary share taking into account the rise and fall of share prices and the dividends paid to Shareholders. Any dividends received by the Shareholder are assumed to have been reinvested for additional shares (for share price total return) or in the Company's assets (for net asset value total return).

Treasury Shares

Ordinary shares of the Company that have been repurchased by the Company and not cancelled but held in Treasury. These shares do not receive dividends, have no voting rights and are excluded from the net asset value per ordinary share calculation.

To find out more about Fidelity Special Values PLC, visit out new website www.fidelity.co.uk/specialvalues where you can read articles and watch videos on the Company.

www.fidelityinvestmenttrusts.com

Fidelity, Fidelity International, the Fidelity International logo and symbol are trademarks of FIL Limited

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Job No: 47862 Proof Event: 16 Black Line Level: 2 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: FSV Annual Report 2022 T: 0207 055 6500 F: 020 7055 6600

Fidelity Special Values PLC

| Annual Report 2022