Fidelity Special Values PLC — Interim / Quarterly Report 2015

Feb 28, 2015

Fidelity Special Values PLC

Half-Yearly Report

For the six months ended 28 February 2015

Contents

Directors' Reports

The Investment Objective and Financial Highlights	1
Chairman's Statement	2
Portfolio Manager's Half-Yearly Review	5
Twenty Largest Investments	7
Principal Risks and Uncertainties	9
Related Party Transactions	9
Going Concern	9
Directors' Responsibility Statement	9

Financial Statements

Income Statement	10
Reconciliation of Movements in Shareholders' Funds	12
Balance Sheet	14
Cash Flow Statement	15
Notes to the Financial Statements	16
Information for Shareholders
Shareholder Information	22
Warning to Shareholders	24

Glossary of Terms 25

The Investment Objective and Financial Highlights

The investment objective of Fidelity Special Values PLC is to achieve long term capital growth from a portfolio of shares consisting primarily of UK-listed companies. The Company will have a blend of investments in larger, medium and smaller sized companies and be guided by a contrarian philosophy.

	28 February 2015	31 August 2014
Assets
Shareholders' funds	£529.0m	£519.2m
Net Asset Value ("NAV") per share	991.77p	961.43p
Share price and discount data
Share price at period end	894.00p	901.00p
Share price period high1	894.00p	964.00p
Share price period low1	807.00p	824.50p
Discount at period end2	9.6%	4.7%
Discount period high1,2	10.3%	8.2%
Discount period low1,2	3.9%	1.5%
Total returns (includes reinvested income)
for the six months to end February	2015	2014
NAV per share	+5.0%	+14.6%
Share price	+1.2%	+16.6%
FTSE All-Share Index3	+4.1%	+8.8%

¹ For the six month period to 28 February 2015 and for the year to 31 August 2014

² Discount is stated on an ex-income basis

³ The Company's Benchmark Index

Sources: Fidelity and Datastream

Past performance is not a guide to future returns

Chairman's Statement

RESULTS FOR THE SIX MONTHS TO 28 FEBRUARY 2015 NAV PER SHARE: +5.0% SHARE PRICE: +1.2% BENCHMARK INDEX: +4.1% (All figures on a total return basis which includes reinvested income)

PERFORMANCE

The net asset value ("NAV") of the Company has performed ahead of the market over the six month reporting period to 28 February 2015. The share price underperformed the Index due to a widening of the discount, and this is discussed in more detail in the discount section on page 3. The environment was a challenging one, with significant volatility in oil markets towards the end of the reporting period. The Company held limited positions in this sector, and was (and continues to be) underweight compared to the wider market. The impact the repricing of oil will have on global economic trends continues to be weighed up by capital markets, but on balance, it should provide attractive returns and therefore act as a stimulus to economic activity, which is usually seen as a positive factor for equity markets.

The Company has investments in a number of areas which should benefit from increasing consumer confidence in the UK, such as car dealerships and carpet retailers. These areas of the market have been out of favour for some time, and offer attractive valuations and opportunities for stock picking. The relatively predictable qualities of some of the largest companies in the market have proved very attractive to some investors, and as a result now have unappealingly high valuations. As usual, the Company's investment portfolio has a strong contrarian flavour, and is weighted towards unloved companies rather than those companies with the approval of consensus.

The valuation of the market today is at average levels compared to history, and with muted growth prospects, we will need strong stockpicking and risk management to drive an appreciation of the Company's NAV. We feel that the strategy in place is well aligned with the long term interests of the Company's Shareholders.

Total return (%)	1 year	3 years	5 years	Since launch
NAV per share	+1.4	+74.7	+91.0	+1,242.3
Share price	-5.3	+80.6	+89.5	+1,144.1
FTSE All-Share Index	+5.6	+36.4	+62.1	+361.8

The attribution analysis of the Company's NAV per share return for the six months to 28 February 2015 is detailed in the table below.

Attribution Analysis	pence
NAV as at 31 August 2014	961.43
Impact of Index	+39.35
Impact of Portfolio Management	+14.05
Operational Costs	-5.97
Share Repurchases	+0.93
Cash/Residual	+0.16
NAV (total return)	1,009.95
Dividend Paid	-16.50
Reinvestment Impact of Dividend
Paid	-1.68
NAV as at 28 February 2015	991.77

Chairman's Statement

OTHER MATTERS Discount Management and Share Repurchases

In the six months to 28 February 2015, the Company repurchased 665,000 ordinary shares at an average discount of 7.7%. These shares are held in Treasury.

During the period the shares traded within a discount range of 3.9% to 10.3% and as at 28 February 2015 the discount to net asset value was 9.6%.

Since the end of the reporting period and as at the date of this report, a further 40,000 ordinary shares have been repurchased and are held in Treasury.

The Board has recently reviewed its discount management policy. Previously the Board had no rigid premium management or discount control policy but undertook to issue or repurchase ordinary shares if deemed to be in the best interests of Shareholders at the time. Under the new policy the Board will seek to maintain the discount in single digits in normal market conditions and will also, subject to market conditions, consider repurchasing ordinary shares with the objective of stabilising the share price discount based on the cum income NAV within a single digit range.

Results and Interim Dividend

The Company's revenue return for the six months to 28 February 2015 was 2.94 pence per share. It has been the Board's policy to date to declare and pay dividends once a year at the time of the Annual General Meeting. This policy has been reviewed by the Board and it has concluded that in order to smooth the dividend payment throughout the year it would be appropriate in future to pay dividends twice yearly. As a result the Board has declared an interim dividend of 5.00

pence per share for the period to 28 February 2015, payable on 20 May 2015 to Shareholders on the register on 1 May 2015 (ex-dividend date 30 April 2015).

Proposed Sub-division of Shares

The Board is conscious that the Company's share price has increased substantially from its launch price of £1 per share in 1994 to a price of £9.25 per share as at close of business on 22 April 2015 and is aware that smaller investors, or investors who participate in monthly saving plans or dividend reinvestment schemes, have sometimes experienced difficulty fulfilling their order because of the high price at which the shares trade, resulting in a cash surplus that cannot be invested until sufficient funds have accumulated in their accounts to buy the next share.

As a result the Board is proposing a sub-division of shares on a five for one basis, for which Shareholder approval will be sought. Further details of this proposal can be found in the Circular that has been posted to all Shareholders with this Half-Yearly Report.

Investment Objective, Investment Policy and the Use of Derivatives

The Company is seeking to clarify and make changes to its investment objective and policy by:

• broadening the wording of the investment objective to make it clear that investments into companies can be made directly through stocks as well as via derivatives;
• clarifying the use of derivatives within the Company's investment policy. Derivatives are used principally in the following ways:
• (i) as an alternative form of gearing to bank loans or bonds. The Company will purchase long CFDs that achieve an equivalent effect

Chairman's Statement

to bank gearing but currently at lower financing costs;

• (ii) to hedge equity market risks where the Portfolio Manager considers that suitable protection can be positioned to limit the downside of a falling market at a reasonable cost; and
• (iii) to enhance the investment returns by taking short exposures on stocks that the Portfolio Manager considers to be over-valued; and
• changing the gross gearing limit from 130% to 140%, thereby allowing the Portfolio Manager the flexibility to manage the net gearing of the portfolio within a typical range of 100% to 120%.

Further details can be found in the Circular to Shareholders with this Half-Yearly Report.

General Meeting

A General Meeting will be held on Wednesday 20 May 2015 at 9.30 am to seek Shareholder approval for the proposed five for one sub-division of shares as well as for the changes to the Company's investment policy. Full details of these proposals, together with the Notice of Meeting, are set out in the accompanying Circular to Shareholders.

Lynn Ruddick

Chairman 23 April 2015

Portfolio Manager's Half-Yearly Review

The performance of the Company for the six months to 28 February 2015 has been encouraging, delivering a net asset value ("NAV") return of 5.0% compared to 4.1% for the Company's Benchmark Index, the FTSE All-Share Index. However, owing to an increase in the discount, the share price only rose by 1.2%. This is addressed in the Chairman's Statement. (All figures on a total return basis.) This report seeks to explain the reasons for the performance over the review period.

STOCK MARKET & PORTFOLIO REVIEW

The UK stock market recorded positive returns over the six month reporting period, rising by 4.1%. Overall, the outlook for the UK economy remained positive, and a pro-growth stance on the monetary policy from the world's major central banks provided support to stock prices. However, weak data and the spectre of deflation in the Eurozone, the UK's main trading partner, somewhat tempered investor sentiment. On the economic front, UK GDP grew by 2.6% in 2014, the fastest pace since 2007 and up from 1.7% in 2013. Meanwhile, following significant falls in the oil price, the annual rate of UK Consumer Price Index (CPI) inflation fell to 0% in February 2015, its lowest level since estimates for the measure began in 1988.

The review period was marked by bouts of volatility particularly in the latter half of 2014. Geopolitical issues, particularly the problems in the Middle East and Ukraine, in addition to uncertainty over the debt negotiations between Greece and the European Union, were among the main concerns. Worries over Scotland's independence referendum also led to some volatility in September 2014, but Scottish citizens ultimately voted to remain with the UK. On the upside, the recent policy actions by the European Central Bank that it would be purchasing €60 billion per month of sovereign, supranational

Total return performance for the six months to 28 February 2015

Prices rebased to 100 at 31 August 2014 Sources: Fidelity and Datastream

and private sector debt until at least September 2016 in order to meet its inflation objective, supported equity prices, whilst lowering the euro substantially versus other major currencies. On the domestic policy front, the Bank of England continued to maintain its quantitative easing programme at £375 billion and kept interest rates at 0.5%. Given the relatively strong economic recovery and falling inflation, the likelihood of an immediate increase in UK interest rates has somewhat receded.

In terms of performance, the Company's NAV rose during the review period, and outperformed its Benchmark Index. Several of our key holdings across a variety of sectors made noteworthy contributions to returns, driven by their positive growth outlook. At a stock level, the holding in the video-game publisher Electronic Arts was the biggest contributor as the company raised its annual guidance for both revenue and earnings. This company has proved to be an extremely profitable investment for the Company, driven by continued revenue and earnings growth, underpinned by a solid financial position. A

Portfolio Manager's Half-Yearly Review

positive earnings outlook also lifted the positions in global workplace provider Regus and interdeal broker ICAP. UDG Healthcare, which provides outsourced services to healthcare companies, was another notable contributor helped by its positive business momentum and a favourable currency environment.

On the downside, several of our holdings in the oil & gas sector suffered in the sell-off amid the sharp decline in oil prices. Notable among them was Premier Oil, whose shares were further affected by news that its partner Noreco decided to write-off its discoveries in the Huntington field in the UK Central North Sea. I have sold this position, but bought a number of out of favour oil companies with low costs of production and strong balance sheets. The holding in business process outsourcer Xchanging also fell due to a lower growth outlook for 2015 as a result of delays around acquisition integration.

In 2015, I have continued to avoid expensive sectors such as consumer staples, where valuations leave little room for error. A key sector for the Company is financials. The portfolio has shares in a range of businesses, including property, wealth management and insurance. However, the largest positions are in the banking sector. Lloyds Banking Group and Bank of Ireland have strong positions in domestic markets as yet unrecognised in their share prices, and HSBC and Citigroup have global businesses with significant strategic value that can be unlocked over time with management actions. This sector has underperformed the market over the last year,

which partly reflects a degree of wariness around political risks. In the case of banks, these are now 'priced in' and the improving economics in the sector more than justify an investment. More generally, we are including political risks arising from the UK election in our stock specific analysis and risk monitoring, though we are not able to add value for Shareholders by forecasting political outcomes.

OUTLOOK

Despite a period of strong recent performance in the equity market, there are still a large number of companies trading at attractive valuations which don't reflect the positive changes occurring at industry or company level. Compared to last year, more of these positions are found in the small-sized companies category, with fewer cheap stocks available among large and mid-sized companies. I have increased the Company's weighting to these smaller companies and expect these positions to drive performance over the medium term. I continue to run the FTSE 250 hedge which should afford some degree of protection should mid-sized companies come under pressure as political noise volume increases. However, the attractiveness of many stock specific opportunities in this area mean that I am content to run positions based on fundamental prospects and valuations. I feel better able to add value for Shareholders with this approach rather than forecasting political or macroeconomic outcomes.

Alex Wright

Portfolio Manager 23 April 2015

Twenty Largest Investments as at 28 February 2015

The table below and on page 8 details the Twenty Largest Investments of the Company, showing both the fair (or actual) value of the assets and liabilities and also the total exposure that the portfolio has to market price movements as a result of either owning the shares or holding derivative instruments.

Portfolio of investments including derivatives	Portfolio Exposure £'000	Portfolio Fair value £'000	Total Portfolio Exposure %
HSBC
Banks	25,059	25,059	4.6
DCC Support Services	23,568	12,190	4.3
Brewin Dolphin Financial Services	23,098	23,098	4.2
Citigroup Banks	22,191	22,191	4.0
Electronic Arts Leisure Goods	20,519	20,519	3.7
Royal Dutch Shell Oil & Gas Producers	19,374	19,374	3.5
Lloyds Banking Group Banks	16,292	4,351	3.0
ICAP Financial Services	15,393	15,393	2.8
Wolseley Support Services	15,248	15,248	2.8
UDG Healthcare Food & Drug Retailers	14,823	5,044	2.7
CLS Holdings Real Estate Investment & Services	14,721	14,721	2.7
Speedy Hire Support Services	13,875	13,875	2.5
Regus Support Services	13,825	13,825	2.5
Sanofi Pharmaceuticals & Biotechnology	13,735	3,041	2.5
Volkswagen Automobiles & Parts	12,827	2,578	2.3

Twenty Largest Investments as at 28 February 2015

Portfolio of investments including derivatives	Portfolio Exposure £'000	Portfolio Fair value £'000	Total Portfolio Exposure %
Pendragon General Retailers	11,884	11,884	2.2
Synthomer Chemicals	11,334	11,334	2.1
HomeServe Support Services	11,231	11,231	2.0
Carnival Travel & Leisure	10,639	10,639	1.9
Barclays Banks	10,545	1,041	1.9
Twenty Largest Investments including derivatives	320,181	256,636	58.2
Other Investments including derivatives1	228,266	260,900	41.8
Total Portfolio of Investments including derivatives	548,4472	517,5363	100.0

1 Included within other investments is a short future on the FTSE 250 Index which is a hedge position reducing Total Portfolio Exposure by £53,977,000. It has a negative fair value of £6,168,000

2 The total exposure of the portfolio to market price movements of £548,447,000 is made up of: exposure to fixed asset investments of £496,329,000 plus the exposure to derivative instruments of £52,118,000

3 The total fair value of the portfolio of investments of £517,536,000 is recognised in the Balance Sheet on page 14 and is made up of: fixed asset investments of £496,329,000 plus derivative assets of £36,764,000 and less derivative liabilities of £15,557,000

Interim Management Report

The Company is required to make the following disclosures in its Half-Yearly Report:

PRINCIPAL RISKS AND UNCERTAINTIES

The Board believes that the principal risks and uncertainties faced by the Company continue to fall into two broad categories. The first, external risks comprising of market, share price and discount control risks and the second, internal risks relating to investment management and governance, operational, financial, compliance, administration etc risks. Information on each of these risks is given in the Strategic Report in the Annual Report for the year ended 31 August 2014.

RELATED PARTY TRANSACTIONS

There have been no related party transactions during the six months to 28 February 2015, and therefore there is nothing to report on any material effect by such a transaction on the financial position or the performance of the Company.

GOING CONCERN

The Board receives regular reports from the Manager and the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the Financial Statements as outlined in the Annual Report for the year ended 31 August 2014.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm to the best of their knowledge that:

• a) the condensed set of Financial Statements contained within the Half-Yearly Financial Report has been prepared in accordance with the UK Accounting Standards Board's Statement 'Half-Yearly Financial Reports'; and gives a true and fair view of the assets, liabilities, financial position and net return of the Company as required by the UK Listing Authority Disclosure and Transparency Rules ("DTR") 4.2.4R; and
• b) the Interim Management Report (which incorporates the Chairman's Statement and the Portfolio Manager's Half-Yearly Review on pages 2 to 6) includes a fair review of the information required by DTR Rules 4.2.7R and 4.2.8R.

The Half-Yearly Financial Report has not been audited or reviewed by the Company's Independent Auditor.

The Half-Yearly Financial Report was approved by the Board on 23 April 2015 and the above responsibility statement was signed on its behalf by Lynn Ruddick, Chairman.

Income Statement

			six months ended
			28 February 2015
			unaudited
		revenue	capital	total
Notes		£'000	£'000	£'000
	Gains on investments	–	18,458	18,458
	Gains on long CFDs	–	15,594	15,594
	Losses on short CFDs, futures and warrants	–	(11,147)	(11,147)
2	Net income	4,842	–	4,842
2	Other interest	61	–	61
	Investment management fee	(2,469)	–	(2,469)
	Other expenses	(331)	–	(331)
	Exchange losses on other net assets	(3)	(186)	(189)
	Net return before finance costs and taxation	2,100	22,719	24,819
3	Finance costs	(455)	–	(455)
	Net return on ordinary activities before taxation	1,645	22,719	24,364
4	Taxation on return on ordinary activities	(69)	–	(69)
	Net return on ordinary activities after taxation for the period	1,576	22,719	24,295
5	Return per ordinary share – basic and diluted	2.94p	42.33p	45.27p

A Statement of Total Recognised Gains and Losses has not been prepared as there are no gains and losses other than those reported in this Income Statement.

The total column of this Income Statement is the profit and loss account of the Company.

All revenue and capital items in the above Statement derive from continuing operations. No operations were acquired or discontinued in the period.

These Financial Statements have been prepared in accordance with the Association of Investment Companies ("AIC") Statement of Recommended Practice ("SORP") issued in January 2009.

six months ended 28 February 2014		year ended 31 August 2014
unaudited (as restated)		audited
revenue	total	capital	revenue
£'000	£'000	£'000	£'000
–	32,699	32,699	–
–	14,597	14,597	–
–	(4,624)	(4,624)	–
5,397	15,305	–	15,305
35	93	–	93
(2,581)	(5,087)	–	(5,087)
(326)	(633)	–	(633)
–	(392)	(389)	(3)
2,525	51,958	42,283	9,675
(649)	(1,281)	–	(1,281)
1,876	50,677	42,283	8,394
(4)	2	–	2
1,872	50,679	42,283	8,396
3.46p	93.67p	78.15p	15.52p

Reconciliation of Movements in Shareholders' Funds

	share
	capital
	£'000
Six months ended 28 February 2015 (unaudited)
Opening Shareholders' funds: 1 September 2014	13,532
Repurchase of ordinary shares	–
Net return on ordinary activities after taxation for the period	–
Dividend paid to Shareholders	–
Closing Shareholders' funds: 28 February 2015	13,532
Year ended 31 August 2014 (audited)
Opening Shareholders' funds: 1 September 2013	13,532
Repurchase of ordinary shares	–
Net return on ordinary activities after taxation for the year	–
Dividend paid to Shareholders	–
Closing Shareholders' funds: 31 August 2014	13,532
Six months ended 28 February 2014 (unaudited)
Opening Shareholders' funds: 1 September 2013	13,532
Net return on ordinary activities after taxation for the period	–
Dividend paid to Shareholders	–
Closing Shareholders' funds: 28 February 2014	13,532

			other
			non	capital	share
total	revenue	capital	distributable	redemption	premium
equity	reserve	reserve	reserve	reserve	account
£'000	£'000	£'000	£'000	£'000	£'000
519,219	10,629	390,883	5,152	3,256	95,767
(5,620)	–	(5,620)	–	–	–
24,295	1,576	22,719	–	–	–
(8,886)	(8,886)	–	–	–	–
529,008	3,319	407,982	5,152	3,256	95,767
478,460	11,029	349,724	5,152	3,256	95,767
(1,124)	–	(1,124)	–	–	–
50,679	8,396	42,283	–	–	–
(8,796)	(8,796)	–	–	–	–
519,219	10,629	390,883	5,152	3,256	95,767
478,460	11,029	349,724	5,152	3,256	95,767
69,242	1,872	67,370	–	–	–
(8,796)	(8,796)	–	–	–	–
538,906	4,105	417,094	5,152	3,256	95,767

Balance Sheet

Company number 2972628

Notes		28.02.15 unaudited £'000	31.08.14 audited £'000	28.02.14 unaudited £'000
	Fixed assets
	Investments	496,329	458,879	491,092
	Current assets
	Derivative assets	36,764	26,742	45,325
	Debtors	701	7,582	4,353
	Amounts held at futures clearing houses and brokers	8,394	3,421	4,307
	Fidelity Institutional Liquidity Fund	6,603	27,584	–
	Cash at bank	2,000	2,743	7,253
		54,462	68,072	61,238
	Creditors
	Derivative liabilities	(15,557)	(5,803)	(5,349)
	Other creditors	(6,226)	(1,929)	(8,075)
		(21,783)	(7,732)	(13,424)
	Net current assets	32,679	60,340	47,814
	Total net assets	529,008	519,219	538,906
	Capital and reserves
7	Share capital	13,532	13,532	13,532
	Share premium account	95,767	95,767	95,767
	Capital redemption reserve	3,256	3,256	3,256
	Other non-distributable reserve	5,152	5,152	5,152
	Capital reserve	407,982	390,883	417,094
	Revenue reserve	3,319	10,629	4,105
	Total equity Shareholders' funds	529,008	519,219	538,906
8	Net asset value per ordinary share	991.77p	961.43p	995.60p

Cash Flow Statement

		six months ended 28.02.15 unaudited	year ended 31.08.14 audited	six months ended 28.02.14 unaudited
Note		£'000	£'000	£'000
	Operating activities
	Investment income received	6,421	8,907	2,975
	Net derivative income	421	2,421	537
	Deposit interest received	38	20	12
	Investment management fee paid	(2,301)	(5,040)	(2,492)
	Directors' fees paid	(74)	(139)	(69)
	Other cash payments	(264)	(901)	(273)
	Net cash inflow from operating activities	4,241	5,268	690
	Taxation recovered – overseas taxation	–	14	–
	Financial investments
	Purchase of investments	(108,100)	(291,210)	(149,637)
	Disposal of investments	97,620	285,767	139,000
	Net cash outflow from financial investments	(10,480)	(5,443)	(10,637)
	Derivative activities
	Receipts on Long CFDs	4,743	22,564	7,399
	Payments on short CFDs, futures and warrants	(563)	(4,061)	(2,567)
	Movements on amounts held at futures clearing houses and brokers	(4,973)	(3,421)	(4,307)
	Net cash (outflow)/inflow from derivative instruments	(793)	15,082	525
	Dividend paid to Shareholders	(8,886)	(8,796)	(8,796)
	Net cash (outflow)/inflow before use of liquid resources and financing	(15,918)	6,125	(18,218)
	Net cash inflow/(outflow) from management of liquid resources – Fidelity Institutional Liquidity Fund	20,981	(27,584)	–
	Net cash inflow/(outflow) before financing	5,063	(21,459)	(18,218)
	Net cash outflow from financing – repurchase of ordinary shares	(5,620)	(1,124)	–
9	Decrease in cash	(557)	(22,583)	(18,218)

1 ACCOUNTING POLICIES

The Half-Yearly Financial Statements have been prepared on the basis of the accounting policies set out in the Company's Annual Report and Financial Statements for the year ended 31 August 2014.

		six months	year	six months
		ended	ended	ended
		28.02.15 unaudited	31.08.14 audited	28.02.14 unaudited
				(as
				restated)
		£'000	£'000	£'000
2	INCOME
	Income from investments
	UK dividends	3,555	7,565	2,885
	UK scrip dividends	–	848	366
	Overseas dividends	1,260	787	226
	Overseas scrip dividends	–	1,320	639
		4,815	10,520	4,116
	Income/(expenses) from derivative instruments
	Dividends received on long CFDs	491	5,945	1,726
	Dividends paid on short CFDs	(464)	(1,160)	(445)
		27	4,785	1,281
	Net income	4,842	15,305	5,397
	Other interest
	Interest received on short CFDs	24	75	25
	Interest received on deposits and money market funds	37	18	10
		61	93	35
	Total net income and other interest	4,903	15,398	5,432

		six months ended	year ended	six months ended
		28.02.15	31.08.14	28.02.14
		unaudited	audited	unaudited (as restated)
		£'000	£'000	£'000
3	FINANCE COSTS
	Interest paid on long CFDs	455	1,281	649

Interest paid on long CFDs is categorised as 'Finance costs' in the Income Statement which is a change of accounting policy from how it was categorised in the Half-Yearly Report for the six months ended 28 February 2014 when it was categorised as part of 'Net income'. The effect of this change is to increase 'Net income' for the six months ended 28 February 2014 by £649,000 and to recognise finance costs of the same amount. There is no effect on the net return on ordinary activities after taxation for the period or the total net assets at 28 February 2014.

		six months	year	six months
		ended	ended	ended
		28.02.15	31.08.14	28.02.14
		unaudited	audited	unaudited
		£'000	£'000	£'000
4	TAXATION ON RETURN ON ORDINARY ACTIVITIES
	Analysis of the taxation charge/(credit) for the period
	Overseas taxation recovered	(51)	(14)	–
	Overseas taxation suffered	120	12	4
	Total taxation charge/(credit) for the period	69	(2)	4

		six months ended 28.02.15 unaudited	year ended 31.08.14 audited	six months ended 28.02.14 unaudited
5	RETURN PER ORDINARY SHARE	pence	pence	pence
	Revenue return per ordinary share	2.94p	15.52p	3.46p
	Capital return per ordinary share	42.33p	78.15p	124.46p
	Total return per ordinary share	45.27p	93.67p	127.92p

The return per ordinary share is based on the net return on ordinary activities after taxation for the period divided by the weighted average number of ordinary shares in issue held outside of Treasury during the period, as shown below:

£'000	£'000	£'000
1,576	8,396	1,872
		67,370
24,295	50,679	69,242
		number
53,666,857	54,107,586	54,128,896
	22,719 number	42,283 number

6 DIVIDENDS

The Company has declared an interim dividend for the six month period to 28 February 2015 of 5.00 pence per ordinary share to be paid on 20 May 2015 to Shareholders on the register at 1 May 2015 (ex dividend date 30 April 2015). The total cost of this interim dividend, which has not been included as a liability in these Financial Statements, is £2,665,000. This amount is based on the number of ordinary shares in issue, held outside of Treasury, at the date of this Report. As stated in the Chairman's Statement on page 3, dividends will be paid twice yearly.

The dividend payment of £8,886,000 shown in the Reconciliation of Movements in Shareholders' Funds for the six months ended 28 February 2015, is the final dividend of 16.50 pence per ordinary share paid for the year ended 31 August 2014 and was paid on 15 December 2014. The dividend payment of £8,796,000 shown in the Reconciliation of Movements in Shareholders' Funds for the six months ended 28 February 2014 and for the year ended 31 August 2014, is the final dividend of 16.25 pence per ordinary share paid for the year ended 31 August 2013, and was paid on 16 December 2013.

unaudited number of shares 54,128,896 – 54,128,896
–
–
–
£'000
13,532
–
13,532
–
–
–

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

8 NET ASSET VALUE PER ORDINARY SHARE

The net asset value per ordinary share is based on net assets of £529,008,000 (31 August 2014: £519,219,000 and 28 February 2014: £538,906,000) and on 53,339,896 (31 August 2014: 54,004,896 and 28 February 2014: 54,128,896) ordinary shares, being the number of ordinary shares in issue held outside of Treasury at the period end. It is the Company's policy that ordinary shares held in Treasury will only be reissued at a premium to net asset value per share and, therefore, the ordinary shares held in Treasury do not have a dilutive effect.

		six months ended 28.02.15 unaudited £'000	year ended 31.08.14 audited £'000	six months ended 28.02.14 unaudited £'000
9	RECONCILIATION OF NET CASH MOVEMENTS TO MOVEMENT IN NET FUNDS
	Net funds at the beginning of the period	30,327	25,715	25,715
	Decrease in cash	(557)	(22,583)	(18,218)
	(Decrease)/increase in Fidelity Institutional Liquidity Fund	(20,981)	27,584	–
	Foreign exchange movements	(186)	(389)	(244)
	Change in net funds	(21,724)	4,612	(18,462)
	Net funds at the end of the period*	8,603	30,327	7,253

*Net funds consist of amounts held in the Fidelity Institutional Liquidity Fund and cash at bank

six months	year	six months
ended	ended	ended
28.02.15	31.08.14	28.02.14
unaudited	audited	unaudited
£'000	£'000	£'000

10 INVESTMENT TRANSACTION COSTS

Investment transaction costs are incurred on the acquisition and disposal of investments. These costs are included in gains on investments in the capital column of the Income Statement.

Purchases transaction costs	321	1,209	712
Sales transaction costs	181	212	187
	502	1,421	899

11 UNAUDITED FINANCIAL STATEMENTS

The results for the six months ended 28 February 2015 and 28 February 2014, which are unaudited, constitute non-statutory accounts within the meaning of Section 435 of the Companies Act 2006. The figures and financial information for the year ended 31 August 2014 are extracted from the latest published Financial Statements. These Financial Statements, on which the Independent Auditor gave an unqualified report, have been delivered to the Registrar of Companies.

Shareholder Information

CONTACT INFORMATION

Private Investors: call free on: 0800 41 41 10, 9am to 6pm, Monday to Saturday.

Financial advisers: call free on: 0800 41 41 81, 8am to 6pm, Monday to Friday. www.fidelity.co.uk/its

Existing shareholders who have a specific query regarding their holding or need to provide updated information, for example a change of address, should contact the appropriate administrator.

Holders of ordinary shares

Capita Asset Services, Registrars to Fidelity Special Values PLC, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.

Telephone: 0871 664 0300 (calls cost 10p per minute plus network extras. Lines are open from 8.30am to 5.30pm, Monday to Friday). Email: shareholderenquiries@capita.co.uk.

Details of individual shareholdings and other information can also be obtained from the Registrars' website: www.capitaassetservices.com

Fidelity Share Plan investors

Fidelity Investment Trust Share Plan, PO Box 24035, 12 Blenheim Palace, Edinburgh EH7 9DD. Telephone: 0845 358 1107 (calls to this number are charged at 3.95p per minute from a BT landline. Other telephone providers' costs may vary).

Fidelity ISA investors

Fidelity, using the freephone numbers given opposite, or by writing to: UK Customer Service, Fidelity Worldwide Investment, Oakhill House, 130 Tonbridge Road, Hildenborough, Tonbridge, Kent TN11 9DZ. www.fidelity.co.uk/its

General enquiries should be made to Fidelity, the Investment Manager and Secretary, at the Company's registered office: FIL Investments International, Investment Trusts, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP. Telephone: 01732 36 11 44 Fax: 01737 83 68 92 www.fidelity.co.uk/its

FINANCIAL CALENDAR 2015

28 February	– Half-Yearly period end
April	– Announcement of Half-Yearly results
April	– Publication of Half-Yearly Report
20 May	– Interim dividend payment
31 August	– Financial year end
November	– Publication of Annual Report
December	– Annual General Meeting

Shareholder Information

BOARD, MANAGER AND ADVISORS

BOARD OF DIRECTORS

Lynn Ruddick (Chairman) Ben Thomson (Senior Independent Director) Sharon Brown (Chairman of the Audit Committee) Andy Irvine Douglas Kinloch Anderson Nicky McCabe

ALTERNATIVE INVESTMENT FUND MANAGER (AIFM/MANAGER)

FIL Investment Services (UK) Limited Oakhill House 130 Tonbridge Road Hildenborough Tonbridge Kent TN11 9DZ

PORTFOLIO MANAGER, SECRETARY AND REGISTERED OFFICE

FIL Investments International Beech Gate Millfield Lane Lower Kingswood Tadworth Surrey KT20 6RP

INDEPENDENT AUDITOR

Grant Thornton UK LLP Chartered Accountants and Registered Auditor 30 Finsbury Square London EC2P 2YU

LAWYER

Dickson Minto W.S. Broadgate Tower 20 Primrose Street London EC2A 2EW

BANKER AND CUSTODIAN

JPMorgan Chase Bank (London Branch) 125 London Wall London EC2Y 5AJ

DEPOSITARY

J.P.Morgan Europe Limited 25 Bank Street London E14 5JP

FINANCIAL ADVISER AND STOCKBROKER

Cenkos Securities plc 6,7,8 Tokenhouse Yard London EC2R 7AS

REGISTRAR

Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU

Warning to Shareholders

SHARE FRAUD WARNING

Share fraud includes scams where investors are called out of the blue and offered shares that often turn out to be worthless or non-existent, or an inflated price for shares they own. These calls come from fraudsters operating in 'boiler rooms' that are mostly based abroad.

While high profits are promised, those who buy or sell shares in this way usually lose their money.

The Financial Conduct Authority ("FCA") has found most share fraud victims are experienced investors who lose an average of £20,000, with around £200m lost in the UK each year.

PROTECT YOURSELF

If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company or research reports, you should take these steps before handing over any money:

• 1. Get the name of the person and organisation contacting you.
• 1. Check the FCA Register at www.fca.org.uk/register to ensure they are authorised.
• 1. Use the details on the FCA Register to contact the firm.
• 1. Call the FCA Consumer Helpline on 0800 111 6768 if there are no contact details on the Register or you are told they are out of date.
• 1. Search the FCA's website for a list of unauthorised firms and individuals to avoid doing business with.

6. REMEMBER: if it sounds too good to be true, it probably is!

If you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

REPORT A SCAM

If you are approached about a share scam you should tell the FCA using the share fraud reporting form at www.fca.org.uk/scams, where you can find out about the latest investment scams. You can also call the Consumer Helpline on 0845 606 1234.

If you have already paid money to share fraudsters you should contact Action Fraud on

0300 123 2040

AIF

Alternative Investment Fund. The Company is an AIF.

AIFM

An Alternative Investment Fund Manager under the AIFMD, being FIL Investment Services (UK) Limited to act as the Company's AIFM.

AIFMD

The Alternative Investment Fund Managers Directive is a European Union Directive that came into force on 22 July 2013.

BENCHMARK INDEX

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

CONTRACT FOR DIFFERENCE (CFD)

A Contract For Difference is a derivative. It is a contract between the Company and an investment bank for a fixed period at the end of which the parties exchange the difference between the opening price and the closing price of the 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 margin. 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.

DERIVATIVES

Financial instruments (such as futures, options and Contracts For Difference) whose value is derived from the value of an underlying asset.

DISCOUNT

If the share price of the Company is lower than the net asset value per share, the Company is said to be trading at a discount. The discount is shown as a percentage of the net asset value. The opposite of a discount is a premium.

FAIR VALUE

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

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

FUTURE

An agreement to buy or sell a stated fixed amount of an asset at a fixed future date and at a fixed price.

GEARING

Gearing describes the level of the Company's exposure and is expressed as a percentage of Shareholders' funds. It reflects the amount of exposure the Company uses to invest in the market. It can be obtained through the use of bank loans, bank overdrafts or derivatives, in order to increase the Company's exposure to investments. The Company uses two key measures of gearing:

• Gross gearing is the total of all long exposures, plus the total of all short exposures and less the total of all exposures hedging the portfolio, expressed as a percentage of Shareholders' funds (i.e. net asset value); and
• Net gearing is the total of all long exposures, less the total of all short exposures and less the total of all exposures hedging the portfolio, expressed as a percentage of Shareholders' funds (i.e. net asset value).

GROSS ASSETS

The total assets of the Company as determined in accordance with the Company's normal accounting policies.

HEDGING

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

LEVERAGE

Any method by which an AIFM increases the exposure of an AIF it manages whether through borrowing cash or securities, or leverage embedded in derivative positions or by any other means. Leverage is measured in terms of exposure and is expressed as a ratio of net asset value. There are two measures of calculating leverage:

• The Gross Method which does not reduce exposure for hedging;
• The Commitment Method which reduces exposure for hedging.

MANAGER

FIL Investments Services (UK) Limited, was appointed as the Manager in accordance with the AIFMD, and has delegated, inter alia, investment management of the Company to FIL Investments International.

NET ASSET VALUE (NAV)

Net asset value is also described as "Shareholders' funds", represents 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 share basis.

OPTION

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. An option may be a call option or a put option.

Where the Company is writing a call option, it is selling to the other party to the transaction (the option holder), the right to require the Company to sell the underlying asset to the option holder at the agreed price, but only if the option holder chooses to exercise the option. If it is a covered call option, this means that the Company has covered its obligation to sell the underlying asset on exercise because when it writes the option, it already owns the underlying asset.

If the Company writes a put option, it will have the obligation to buy the underlying asset at the agreed price from the option holder if the option holder exercises its right to exercise the option.

The Company could also buy either call options or put options (and be the option holder).

Options may therefore be used to gain or reduce exposure to the underlying asset on a conditional basis.

PREMIUM

If the share price of the Company is higher than the net asset value per share, the Company is said to be trading at a premium. The premium is shown as a percentage of the net asset value. The opposite of a premium is a discount.

RETURN

The return generated in a given period from the 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 returns; 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.

TOTAL PORTFOLIO EXPOSURE

The value of the portfolio of investments exposed to market price movements. It is made up of the fixed asset investments at fair value, plus the fair value of the underlying securities within the long Contracts For Difference, less the fair value of the underlying securities within the short Contracts For Difference, less the exposure value offset by the short FTSE 250 Index future hedge and plus the exposure value of the warrants.

TOTAL RETURN PERFORMANCE

The return on the share price or net asset value per 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 in additional shares (for share price total return) or 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 pay dividends, have no voting rights and are excluded from the net asset value calculation.

Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and symbol are trademarks of FIL Limited

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