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Fidelity Special Values PLC Interim / Quarterly Report 2023
4736_ir_2023-05-09_431ea1d9-a3de-4212-8120-094b1d252088.pdf
Interim / Quarterly Report
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FIDELITY SPECIAL VALUES PLC
Half-Yearly Report for the six months ended 28 February 2023
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.
Job No: 49264 Proof Event: 14 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Fidelity FSV Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
In what has been a testing period for the market at times, I am pleased to say that the Company's performance in the six month reporting period was a net asset value total return of +10.4% and a share price total return of +13.1%, compared to the FTSE All-Share Index (Benchmark Index) return of +8.7%.
Dean Buckley, Chairman
2 Fidelity Asian Values PLC half-yearly report 2023
Contents
Portfolio Manager's Half-Yearly Review Read more on pages 04 to 07
Net Asset Value per Ordinary Share as at 28 February
Ordinary Share Price as at 28 February
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Directors' Reports
| At a Glance | 02 |
|---|---|
| Financial Highlights | 03 |
| Portfolio Manager's Half-Yearly Review | 04 |
| Twenty Largest Investments | 08 |
| Interim Management Report and | |
| Directors' Responsibility Statement | 11 |
Financial Statements
| Income Statement | 14 |
|---|---|
| Statement of Changes in Equity | 16 |
| Balance Sheet | 18 |
| Cash Flow Statement | 19 |
| Notes to the Financial Statements | 20 |
Information for Shareholders
| Shareholder Information | 28 |
|---|---|
| Financial Calendar | 29 |
| Directory | 30 |
| Data protection | 31 |
| Glossary of Terms | 32 |
At a Glance
Six months ended 28 February 2023
Net Asset Value per Ordinary Share total return1,2
+10.4%
(28 February 2022: -4.5%)
FTSE All-Share Index (Benchmark Index) total return1
+8.7%
(28 February 2022: +2.4%)
1 Includes reinvested income.
2 Alternative Performance Measures. See Glossary of Terms on page 32.
As at 28 February 2023
Shareholders' Funds
£1,000.0m
Market Capitalisation
£936.6m
Capital Structure Ordinary Shares of 5 pence each
324,098,920
Summary of the key aspects of the Investment Policy
Ordinary Share Price total return1,2
+13.1%
(28 February 2022: -4.7%)
Interim Dividend per Ordinary Share
2.53p
(28 February 2022: 2.30p)
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.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Financial Highlights
| 28 February 2023 |
31 August 2022 |
|
|---|---|---|
| Assets | ||
| Shareholders' funds | £1,000.0m | £922.6m |
| Net Asset Value ("NAV") per ordinary share1 | 308.56p | 284.67p |
| Share price and discount data | ||
| Share price at period end | 289.00p | 260.50p |
| Share price: period high2 | 290.00p | 315.00p |
| Share price: period low2 | 234.00p | 250.00p |
| Discount at period end1 | (6.3%) | (8.5%) |
| (Discount: period low)/Premium: period high2 | (2.8%) | 2.1% |
| Discount: period high2 | (10.3%) | (10.7%) |
1 Alternative Performance Measures. See Glossary of Terms on page 32.
Past performance is not a guide to future returns.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 2 For the six month period to 28 February 2023 and for the year to 31 August 2022.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
DIRECTORS' REPORTS
Portfolio Manager's Half-Yearly Review
Performance
In the six month reporting period to 28 February 2023, the net asset value ("NAV") per ordinary share return of +10.4% and the share price return of +13.1% outperformed the FTSE All-Share Index (the Company's Benchmark Index) return of +8.7% (all on a total return basis). This report seeks to summarise the reporting period, highlight the key drivers of performance, and set out the Portfolio Manager's views looking ahead.
Stock Market and Portfolio Review
UK equities advanced during the period despite an uncertain economic outlook. The positive performance was mostly driven by blue chip stocks, with the FTSE 100 Index reaching an all-time high in February 2023, surpassing its previous record from May 2018. However, returns from medium and smaller companies were more subdued and they continued to lag their larger counterparts. At a sector level, returns were largely driven by holdings in energy, mining and financials, which have benefited from rising energy prices, higher inflation and interest rates. Consumer discretionary stocks were also bolstered by an improvement in sentiment from depressed levels, amid better than expected holiday spending and optimism around China's broader reopening following a lifting of its COVID-related restrictions. Selected industrials, especially aerospace and defence companies, were also able to benefit from the current backdrop. For value investors, it was a particularly satisfying period, with value outperforming growth by seven percentage points.
Despite the positive headline returns, share prices proved to be particularly volatile. The period started with a sharp sell-off as investors were concerned about the Bank of England's monetary policy tightening path
and the poor economic outlook. An un-costed plan by Liz Truss's newly formed government in its 'mini-budget', to increase spending and implement tax cuts in a bid to boost growth and counter slowing activity further spooked market participants. Shares recovered in October 2022, after Truss was replaced by Rishi Sunak as Prime Minister, and with the new Chancellor Jeremy Hunt reversing most of the unfunded tax-cutting proposals following weeks of market and political pressure. Tentative signs of moderating inflationary pressures in the US bolstered expectations of a slowdown in the US Federal Reserve's monetary policy tightening cycle which also soothed investors' concerns, as did an easing of the stringent COVID-19 control policy in China, which boosted hopes of a recovery in demand. However, markets turned somewhat cautious in December 2022 as global central banks reaffirmed their commitment to bringing inflation down, as it remained well above their target levels, and economic data showed clear signs of slowing growth.
2023 kicked off on a positive note, building on the markets' resilient performance in 2022. Having started the year thinking that the end of interest rate rises was in sight, market participants became increasingly concerned that rates may have further to climb, after a string of economic reports and company results showed that many Western economies were performing better than expected. While inflation remained high, price pressures seemed to ease and the BoE was relatively dovish in its commentary as it announced a 0.5% rate hike in February 2023, the fourth time it has raised rates during the period, to the current level of 4.0%.
Over the period, the Company's NAV outperformed the return of the FTSE All-Share Index. The outperformance was primarily
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
driven by our long-standing overweight stance in financials. Irish lender AIB Group was the leading contributor as its shares benefited from an improved outlook for interest income in an environment of rising rates. The group reported strong annual profits and robust loan growth, while it also announced higher dividends. Also within financials, reinsurance underwriter Conduit Holdings was another strong performer. It posted an impressive start to 2023 with a significant rise in premiums, and stated that it expected this 'exceptional pricing environment' to continue, reflecting a fundamental re-pricing of risk and an imbalance in the supply and demand of capital. Conduit is one of the few operators in the industry with capital available to deploy, which should allow for strong growth and profitability.
Meanwhile, designer and manufacturer of gift packaging and stationery IG Design's interim results highlighted a profit recovery and progress in the turnaround of its America's business. Its outlook statement highlighted a strong order book for 2023, coupled with stable customer relationships. Our view is that the business has significant recovery potential following several issues over the last two years, many of which should prove to be temporary.
Mergers and acquisitions ("M&A") activity also remained a strong theme within the Company's portfolio, despite the economic uncertainty. Oilfield and engineering services group John Wood Group was a beneficiary, as it received four unsolicited buyout proposals from US private equity group Apollo Global Management, all of which the company rejected, citing undervaluation of its stock. A smaller holding, Wentworth Resources, also accepted a takeover bid from its operational partner in December.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 Conversely, after a strong performance last year, government outsourcer Serco was a detractor from performance, despite reiterating its expectations for profits to be in line with previous forecasts. Over 2022, the business grew by 10%, excluding COVID contracts and currency effects. It also recently reported that one of its biggest and most profitable contracts (worth close to \$700 million) had been renewed for another five years. The Company has a large exposure to the outsourcing sector, where many companies have benefited from self-help and a stable demand environment, which has allowed their businesses to grow. They also benefit from having a degree of inflation protection in their contracts, which is particularly helpful in the current environment.
Shares in pharmaceutical group Roche Holdings also fell after the company warned that profits in 2023 will decline, as falling demand for its COVID therapy and diagnostics kits is likely to weaken sales. While this year was always going to prove more challenging after strong pandemic-related demand, the medium term outlook for the company remains strong with solid underlying growth and a broad drugs pipeline. Consequently, we have increased our holding in Roche whilst exiting our smaller position in AstraZeneca, given the former's relatively more attractive risk/ reward profile.
In the energy sector, the underweight stance in BP and Shell proved unhelpful over the review period after they announced a shift in their strategies alongside annual results. Both companies are allowing oil production to fall and using cash profits to invest in highly competitive renewable power industries, where future profitability is uncertain and likely lower than in their existing oil operations.
Portfolio Manager's Half-Yearly Review continued
However, both announced a partial strategic U-turn and said they would invest more in oil production and less in renewables. We, on the other hand, prefer smaller, overseas-listed oil and gas producers because they trade on more attractive valuations, their focus is on maintaining or growing their oil and gas production and their profits are used to reward shareholders via dividends and buybacks.
Among other detractors, a small oil and gas producer and recent addition to the portfolio, Ithaca Energy, underperformed following the Government's decision to increase the windfall tax on profits made from extracting UK oil and gas. Nevertheless, we took advantage of the share price weakness and increased our position in the company. Ithaca Energy has acquired and developed an attractive portfolio of long-life oil and gas assets. The latter is of particular interest given the stronger longer term outlook for European gas prices in the wake of Western sanctions on Russia. Ithaca has a strong balance sheet, offers a very generous dividend yield of more than 20%, and has a clear distribution policy to pay a fixed percentage of its cash flows as dividends.
Use of Gearing
During the review period, we continued to use contracts for difference (CFDs) to gear the Company's portfolio of long exposures and to eliminate some of the currency exposure for those holdings listed outside of the UK. Overall, there was a meaningful reduction in the Company's gearing level over the reporting period. Gearing stood at 5.3% at the end of February 2023 (compared to 10.0% at the end of August 2022). This reflects the completion of bids for five of the Company's holdings: ContourGlobal, Meggitt, RPS Group, Biffa and Euromoney Institutional Investor. Since the end of the reporting period, gearing has increased
back to around 10%, as market volatility in March presented us with new investment opportunities across a number of sectors.
Outlook
We remain selective and favour companies with lower levels of debt and the resilience to navigate uncertainty. Current valuations have priced in a weaker economic environment, which is likely to remain challenging in the near term, especially for those corporates and consumers in need of refinancing their debts.
Financials form the biggest part of the Company's portfolio, primarily banks and insurers. Higher interest rates have allowed banks to significantly improve their profitability at a time where earnings in many industries are under pressure, yet many investors continue to avoid them because they are scarred from the 2008 global financial crisis. However, UK and Irish banks have become far higher quality businesses since the changes to the regulatory environment over the past decade. They have strengthened their balance sheets, trimmed bloated cost bases, and pulled back from riskier lending. Furthermore, they are subject to robust regulatory frameworks, transparent accounting practices and have diversified deposit structures. Some of these attributes were absent from several smaller regional US banks and at Credit Suisse, leading to recent negative headlines and outcomes for investors in these companies.
Our holdings within the sector are diversified in terms of geographic and banking model exposure, with idiosyncratic factors driving their growth. For example, our largest holding, AIB Group, is not only an interest rate story but is also the beneficiary of an improvement in Ireland's banking market, where the number of competing groups has recently shrunk from
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five to three. The rising rate environment is also positive for life insurers, where we have a meaningful overweight position. Their earnings have proved resilient during the pandemic and should continue to benefit from an acceleration in the pace of pension fund re-risking.
Ongoing value in some defensive areas remain, such as tobacco or hidden defensives, for example, Government outsourcer Serco. However, we steer clear of crowded areas comprising expensively valued dollar-earning companies and other consumer staples.
The relative attractiveness of UK valuations versus other markets and the large divergence in performance between different parts of the market continue to create good opportunities for attractive returns from UK stocks on a three-to-five-year view. The smaller end of the market cap spectrum is particularly rich in investment opportunities given the lack of research coverage. For us, this has always been a big structural overweight, and the Company's portfolio currently has a mid and small cap exposure at around 60%. Smaller companies have incurred severe deratings over the past year as they are thought to be more cyclical and thus more susceptible to an economic slowdown or recession. However, in our opinion, some of the share price falls have been indiscriminate.
The attractive valuations in the UK have not gone unnoticed and after several months of limited activity there has been a recent uptick in M&A activity with private equity approaches for several UK companies, including our holding in John Wood Group. It demonstrates that valuations for UK stocks are low enough to maintain interest levels even in an uncertain market.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 In our opinion, the UK market with its high dividends and low valuations offers better prospective returns than many other asset classes, including global equities.
Alex Wright
Portfolio Manager 27 April 2023
Twenty Largest Investments
as at 28 February 2023
The Asset Exposures shown below and on the next page measure exposure to market price movements as a result of owning shares, corporate bonds 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.
| Fair | |||
|---|---|---|---|
| Asset Exposure | Value | ||
| £'000 | %1 | £'000 | |
| Long Exposures – shares unless otherwise stated | |||
| AIB Group (corporate bond and long CFD) | |||
| Banks | 42,513 | 4.3 | 4,701 |
| Serco Group | |||
| Industrial Support Services | 37,618 | 3.8 | 37,618 |
| NatWest Group | |||
| Banks | 37,284 | 3.7 | 37,284 |
| Imperial Brands | |||
| Tobacco | 36,439 | 3.6 | 36,439 |
| Phoenix Group Holdings | |||
| Life Insurance | 35,572 | 3.6 | 35,572 |
| Aviva | |||
| Life Insurance | 33,617 | 3.4 | 33,617 |
| DCC | |||
| Industrial Support Services | 33,058 | 3.3 | 33,058 |
| Sanofi (long CFD) | |||
| Pharmaceuticals & Biotechnology | 32,819 | 3.3 | 454 |
| Barclays | |||
| Banks | 32,075 | 3.2 | 32,075 |
| Roche Holdings | |||
| Pharmaceuticals & Biotechnology | 31,672 | 3.2 | 31,672 |
| Mitie Group | |||
| Industrial Support Services | 27,772 | 2.8 | 27,772 |
| OMV | |||
| Oil, Gas & Coal | 25,578 | 2.5 | 25,578 |
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| Fair | |||
|---|---|---|---|
| Asset Exposure | |||
| £'000 | %1 | £'000 | |
| Ryanair Holdings (shares and long CFD) | |||
| Travel & Leisure | 22,883 | 2.3 | 2,895 |
| Spire Healthcare Group | |||
| Health Care Providers | 20,636 | 2.0 | 20,636 |
| Babcock International Group | |||
| Aerospace & Defense | 19,035 | 1.9 | 19,035 |
| C&C Group (shares and long CFD) | |||
| Beverages | 17,928 | 1.8 | 15,038 |
| Legal & General Group (long CFD) | |||
| Life Insurance | 17,779 | 1.8 | (250) |
| Conduit Holdings | |||
| Non-Life Insurance | 17,293 | 1.7 | 17,293 |
| Ithaca Energy | |||
| Oil, Gas & Coal | 16,496 | 1.6 | 16,496 |
| Close Brothers Group | |||
| Banks | 16,273 | 1.6 | 16,273 |
| Twenty largest long exposures | 554,340 | 55.4 | 443,256 |
| Other long exposures | 498,488 | 49.9 | 463,146 |
| Gross Asset Exposure (102 holdings) |
1,052,828 | 105.3 |
| Portfolio Fair Value | 906,402 | ||
|---|---|---|---|
1 Asset Exposure is expressed as a percentage of Shareholders' Funds.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 See the next page for details of the Fair Value and Asset Exposure of Investments.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Fair Value and Asset Exposure of Investments
as at 28 February 2023
| Fair | |||
|---|---|---|---|
| Value | Asset Exposure | ||
| £'000 | £'000 | %1 | |
| Investments | 904,659 | 904,659 | 90.5 |
| Long CFDs | 1,743 | 148,169 | 14.8 |
| 906,402 | 1,052,828 | 105.3 | |
| Cash at bank2 | 2,868 | (143,558) | (14.4) |
| Fidelity Institutional Liquidity Fund | 86,573 | 86,573 | 8.7 |
| Other net current assets (excluding derivative assets | |||
| and liabilities) | 4,187 | 4,187 | 0.4 |
| Shareholders' Funds | 1,000,030 | 1,000,030 | 100.0 |
The Company uses gearing through the use of long CFD positions. Gross gearing as at 28 February 2023 was 5.3% (31 August 2022: 10.0% and 28 February 2022: 6.9%).
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 period end. .
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Interim Management Report and Directors' Responsibility Statement
Board Changes
Andy Irvine stepped down as Chairman of the Board and as a non-executive Director at the conclusion of the Annual General Meeting ("AGM") held on 14 December 2022. He was replaced as Chairman by Dean Buckley and Nigel Foster replaced Mr Buckley as Senior Independent Director at the same time.
Discount Management and Share Repurchases
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 out over a larger pool of assets.
Over the reporting period, the Company's shares traded at a discount ranging from 2.8% to10.3% with an average discount of 6.3%. The peer group average discount as at 28 February 2023 was 9.8%.
In the reporting period, the Company did not issue any shares or carry out any share repurchases and this remains the case up until the date of this report.
The Board continues to monitor the level of the Company's discount closely and will take action when it believes to do so will be effective and to the benefit of Shareholders.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Interim 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 six months to 28 February 2023 was 3.04 pence per share.
The Board has declared an interim dividend of 2.53 pence per share which is 10.0% higher than the 2.30 pence per share paid as the interim dividend in 2022. This will be paid on 21 June 2023 to Shareholders on the register on 12 May 2023 (ex-dividend date 11 May 2023). Shareholders should note that the Board will review the final dividend payment later in the year based on dividend receipts from the companies held in the portfolio. However, based on current forecasts, the Board would hope to maintain at least the same level of dividend as paid in the prior year and would intend to pay it entirely from the revenue earned in the reporting period.
Principal Risks and Uncertainties
The Board, with the assistance of the Manager (FIL Investment Services (UK) Limited), has developed a risk matrix which, as part of the risk management and internal controls process, identifies the key existing and emerging risks and uncertainties faced by the Company.
The Board considers that the principal risks and uncertainties faced by the Company continues to fall into the following categories: 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. Information on each of these risks is given in the Strategic Report section of the Annual Report for the year ended ## Interim Management Report and Directors' Responsibility Statement continued
31 August 2022, a copy of which can be found on the Company's pages of the Manager's website at www.fidelity.co.uk/specialvalues.
While the principal risks and uncertainties are the same as those at the previous year end, the uncertainty continues to be heightened by the ongoing Russia and Ukraine conflict dominating political risks and industry concerns. There is geopolitical and economic uncertainty, in addition to events currently being faced globally such as the various crisis situations in energy, the cost of living, rising inflation, food supply and the threat of cyberattacks on critical infrastructure. More recently, the collapse of Silicon Valley Bank and the buyout of Credit Suisse by UBS Group has caused turmoil in the global banking sector and volatility in the markets. The quantum of risks continues to change and the Board remains vigilant in monitoring such risks.
Climate change continues to be a key emerging issue, as well as a principal risk, that is 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. The Board will continue to monitor how this may potentially impact the Company, the main risk being the impact on investment valuations and shareholder returns.
Investors should be prepared for market fluctuations and remember that holding shares in the Company should be considered to be a long term investment. Risks are mitigated by the investment trust structure of the Company which means that no forced sales need to take place to deal with any redemptions. Therefore, investments in the Company's portfolio can be held over a longer time horizon.
The Manager has appropriate business continuity and operational plans in place to ensure the uninterrupted provision of services, including investment team key activities, including those of portfolio managers, analysts and trading/support functions. It reviews its operational resilience strategies on an ongoing basis and continues to take all reasonable steps in meeting its regulatory obligations and to assess operational risks, the ability to continue operating and the steps it needs to take to serve and support its clients, including the Board.
The Company's other third party service providers also have similar measures to ensure that business disruption is kept to a minimum.
Transactions with the Manager and Related Parties
The Manager has delegated the Company's portfolio management and company secretariat services to FIL Investments International. Transactions with the Manager and related party transactions with the Directors are disclosed in Note 13 to the Financial Statements on page 27.
Going Concern Statement
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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, 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 can continue in
operational existence for a period of at least twelve months from the date of this Half-Yearly Report.
This conclusion also takes into account the Board's assessment of the ongoing risks from the war in Ukraine, significant market events and regulatory changes and continued evolving variants of COVID.
Accordingly, the Financial Statements of the Company have been prepared on a going concern basis.
Continuation votes are held every three years and the next continuation vote will be put to shareholders at the AGM in 2025.
By Order of the Board FIL Investments International 27 April 2023
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.
The Directors confirm to the best of their knowledge that:
- a) the condensed set of Financial Statements contained within the Half-Yearly Report has been prepared in accordance with the Financial Reporting Council's Standard: FRS 104: Interim Financial Reporting; and
- b) the Portfolio Manager's Half-Yearly Review on pages 4 to 7 and the Interim Management Report on pages 11 to 13, include a fair review of the information required by DTR 4.2.7R and 4.2.8R.
In line with previous years, the Half-Yearly Report has not been audited by the Company's Independent Auditor.
The Half-Yearly Report was approved by the Board on 27 April 2023 and the above responsibility statement was signed on its behalf by Dean Buckley, Chairman.
Income Statement
for the six months ended 28 February 2023
| Six months ended 28 February 2023 unaudited |
|||||
|---|---|---|---|---|---|
| Notes | Revenue £'000 |
Capital £'000 |
Total £'000 |
||
| Gains/(losses) on investments | – | 52,800 | 52,800 | ||
| Gains/(losses) on long CFDs | – | 34,556 | 34,556 | ||
| Investment and derivative income | 4 | 13,700 | – | 13,700 | |
| Other interest | 4 | 1,438 | – | 1,438 | |
| Investment management fees | 5 | (2,806) | – | (2,806) | |
| Other expenses | (459) | – | (459) | ||
| Foreign exchange (losses)/gains | – | (2,131) | (2,131) | ||
| Net return/(loss) on ordinary activities | |||||
| before finance costs and taxation | 11,873 | 85,225 | 97,098 | ||
| Finance costs | 6 | (1,996) | – | (1,996) | |
| Net return/(loss) on ordinary activities before taxation |
9,877 | 85,225 | 95,102 | ||
| Taxation on return/(loss) on ordinary activities |
7 | (8) | – | (8) | |
| Net return/(loss) on ordinary activities after taxation for the period |
9,869 | 85,225 | 95,094 | ||
| Return/(loss) per ordinary share | 8 | 3.04p | 26.30p | 29.34p |
The Company does not have any other comprehensive income. Accordingly the net return/(loss) on ordinary activities after taxation for the period is also the total comprehensive income for the period 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 period and all items in the above statement derive from continuing operations.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
| Year ended 31 August 2022 | Six months ended 28 February 2022 | |||||
|---|---|---|---|---|---|---|
| audited unaudited |
||||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| – | (64,441) | (64,441) | – | (48,464) | (48,464) | |
| – | (14,992) | (14,992) | – | (2,563) | (2,563) | |
| 37,135 | – | 37,135 | 9,107 | – | 9,107 | |
| 877 | – | 877 | 181 | – | 181 | |
| (5,607) | – | (5,607) | (2,806) | – | (2,806) | |
| (838) | – | (838) | (470) | – | (470) | |
| – | 5,874 | 5,874 | – | 687 | 687 | |
| 31,567 | (73,559) | (41,992) | 6,012 | (50,340) | (44,328) | |
| (1,243) | – | (1,243) | (309) | – | (309) | |
| 30,324 | (73,559) | (43,235) | 5,703 | (50,340) | (44,637) | |
| (196) | – | (196) | (32) | – | (32) | |
| 30,128 | (73,559) | (43,431) | 5,671 | (50,340) | (44,669) | |
| 9.42p | (23.00p) | (13.58p) | 1.80p | (15.95p) | (14.15p) | |
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Statement of Changes in Equity
for the six months ended 28 February 2023
| Share |
|---|
| capital |
| £'000 |
| 16,205 |
| – |
| – |
| 16,205 |
| 15,651 |
| 554 |
| – |
| – |
| – |
| 16,205 |
| 15,651 |
| 528 |
| – |
| – |
| 16,179 |
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
| Total | Other non | Capital | Share | ||
|---|---|---|---|---|---|
| Shareholders' | Revenue | Capital | distributable | redemption | premium |
| funds | reserve | reserve | reserve | reserve | account |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| 922,599 | 30,466 | 629,078 | 5,152 | 3,256 | 238,442 |
| 95,094 | 9,869 | 85,225 | – | – | – |
| (17,663) | (17,663) | – | – | – | – |
| 1,000,030 | 22,672 | 714,303 | 5,152 | 3,256 | 238,442 |
| 954,090 | 21,928 | 702,637 | 5,152 | 3,256 | 205,466 |
| 33,672 | – | – | – | – | 33,118 |
| (142) | – | – | – | – | (142) |
| (43,431) | 30,128 | (73,559) | – | – | – |
| (21,590) | (21,590) | – | – | – | – |
| 922,599 | 30,466 | 629,078 | 5,152 | 3,256 | 238,442 |
| 954,090 | 21,928 | 702,637 | 5,152 | 3,256 | 205,466 |
| 32,201 | – | – | – | – | 31,673 |
| (44,669) | 5,671 | (50,340) | – | – | – |
| (14,136) | (14,136) | – | – | – | – |
| 927,486 | 13,463 | 652,297 | 5,152 | 3,256 | 237,139 |
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Balance Sheet
as at 28 February 2023 Company number 2972628
| 28.02.23 | 31.08.22 | 28.02.22 | ||
|---|---|---|---|---|
| unaudited | audited | unaudited | ||
| Fixed assets | Notes | £'000 | £'000 | £'000 |
| Investments | 10 | 904,659 | 835,672 | 775,792 |
| Current assets | ||||
| Derivative instruments | 10 | 2,631 | 28 | 1,355 |
| Debtors | 4,942 | 10,940 | 5,844 | |
| Amounts held at futures clearing houses and | ||||
| brokers | 425 | 8,190 | 10,530 | |
| Cash and cash equivalents | 89,441 | 80,450 | 145,625 | |
| 97,439 | 99,608 | 163,354 | ||
| Current liabilities | ||||
| Derivative instruments | 10 | (888) | (9,200) | (10,507) |
| Other creditors | (1,180) | (3,481) | (1,153) | |
| (2,068) | (12,681) | (11,660) | ||
| Net current assets | 95,371 | 86,927 | 151,694 | |
| Net assets | 1,000,030 | 922,599 | 927,486 | |
| Capital and reserves | ||||
| Share capital | 11 | 16,205 | 16,205 | 16,179 |
| Share premium account | 238,442 | 238,442 | 237,139 | |
| Capital redemption reserve | 3,256 | 3,256 | 3,256 | |
| Other non-distributable reserve | 5,152 | 5,152 | 5,152 | |
| Capital reserve | 714,303 | 629,078 | 652,297 | |
| Revenue reserve | 22,672 | 30,466 | 13,463 | |
| Total Shareholders' funds | 1,000,030 | 922,599 | 927,486 | |
| Net asset value per ordinary share | 12 | 308.56p | 284.67p | 286.62p |
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Cash Flow Statement
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 for the six months ended 28 February 2023
| six months | year | six months | |
|---|---|---|---|
| ended | ended | ended | |
| 28.02.23 | 31.08.22 | 28.02.22 | |
| unaudited | audited | unaudited | |
| £'000 | £'000 | £'000 | |
| Operating activities | |||
| Investment income received | 15,650 | 25,034 | 10,686 |
| Net derivative income | 3,479 | 9,133 | 2,858 |
| Interest received | 1,438 | 493 | 47 |
| Investment management fee paid | (2,831) | (5,597) | (2,839) |
| Directors' fees paid | (91) | (157) | (77) |
| Other cash payments | (416) | (618) | (376) |
| Net cash inflow from operating activities before finance | |||
| costs and taxation | 17,229 | 28,288 | 10,299 |
| Finance costs paid | (1,925) | (1,186) | (309) |
| Overseas taxation incurred | 51 | (783) | (57) |
| Net cash inflow from operating activities | 15,355 | 26,319 | 9,933 |
| Investing activities | |||
| Purchases of investments | (210,375) | (359,829) | (126,137) |
| Sales of investments | 192,392 | 347,076 | 184,319 |
| Receipts on long CFDs | 47,093 | 73,743 | 35,710 |
| Payments on long CFDs | (23,445) | (80,763) | (30,314) |
| Movement on amounts held at futures clearing houses and | |||
| brokers Net cash inflow/(outflow) from investing activities |
7,765 13,430 |
(8,150) (27,923) |
(10,490) 53,088 |
| Net cash inflow/(outflow) before financing activities | 28,785 | (1,604) | 63,021 |
| Financing activities | |||
| Dividends paid | (17,663) | (21,590) | (14,136) |
| Net proceeds from issue of shares | – | 34,132 | 32,273 |
| Cost associated with the issue of new ordinary shares | – | (142) | – |
| Net cash (outflow)/inflow from financing activities | (17,663) | 12,400 | 18,137 |
| Net increase in cash and cash equivalents | 11,122 | 10,796 | 81,158 |
| Cash and cash equivalents at the beginning of the | |||
| period | 80,450 | 63,780 | 63,780 |
| Effect of movement in foreign exchange | (2,131) | 5,874 | 687 |
| Cash and cash equivalents at the end of the period | 89,441 | 80,450 | 145,625 |
| Represented by: | |||
| Cash at bank | 2,868 | 2,014 | 27,953 |
| Amount held in Fidelity Institutional Liquidity Fund | 86,573 | 78,436 | 117,672 |
| 89,441 | 80,450 | 145,625 | |
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 Publication of Non-statutory Accounts
The Financial Statements in this Half-Yearly Report have not been audited by the Company's Independent Auditor and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006 (the "Act"). The financial information for the year ended 31 August 2022 is extracted from the latest published Financial Statements of the Company. Those Financial Statements were delivered to the Registrar of Companies and included the Independent Auditor's Report which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Act.
3 Accounting Policies
(i) Basis of Preparation
The Company prepares its Financial Statements on a going concern basis and in accordance with UK Generally Accepted Accounting Practice ("UK GAAP") and FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland, issued by the Financial Reporting Council. The Financial Statements are also 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. FRS 104: Interim Financial Reporting has also been applied in preparing this condensed set of Financial Statements. The accounting policies followed are consistent with those disclosed in the Company's Annual Report and Financial Statements for the year ended 31 August 2022.
(ii) Going Concern
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for a period of at least twelve months from the date of approval of these Financial Statements. Accordingly, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements. This conclusion also takes into account the Directors' assessment of the risks faced by the Company as detailed in the Interim Management Report on pages 11 and 12.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
4 Income
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
| Six months | Year | Six months | |
|---|---|---|---|
| ended | ended | ended | |
| 28.02.23 | 31.08.22 | 28.02.22 | |
| unaudited | audited | unaudited | |
| £'000 | £'000 | £'000 | |
| Investment income | |||
| UK dividends | 10,736 | 20,437 | 6,148 |
| UK scrip dividends | – | 85 | 85 |
| Interest on securities | 109 | – | – |
| Overseas dividends | 2,234 | 6,684 | 1,828 |
| Overseas scrip dividends | – | 23 | 23 |
| 13,079 | 27,229 | 8,084 | |
| Derivative income | |||
| Dividends received on long CFDs | 621 | 9,906 | 1,023 |
| Investment and derivative income | 13,700 | 37,135 | 9,107 |
| Other interest | |||
| Interest received on long CFDs* | – | 384 | 134 |
| Interest received on bank deposits, collateral and | |||
| money market funds | 1,438 | 493 | 47 |
| 1,438 | 877 | 181 | |
| Total income | 15,138 | 38,012 | 9,288 |
* Due to negative interest rates during the reporting period, the Company received interest on some of its long CFD positions.
No special dividends have been recognised in capital during the period (year ended 31 August 2022: £372,000 and six months ended 28 February 2022: £286,000).
Notes to the Financial Statements continued
5 Investment Management Fees
| Six months | Year | Six months | |
|---|---|---|---|
| ended | ended | ended | |
| 28.02.23 | 31.08.22 | 28.02.22 | |
| unaudited | audited | unaudited | |
| £'000 | £'000 | £'000 | |
| Investment management fees | 2,806 | 5,607 | 2,806 |
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.
FII charges investment management fees at an annual rate of 0.60% of net assets.
6 Finance Costs
| Six months | Year | Six months | |
|---|---|---|---|
| ended | ended | ended | |
| 28.02.23 | 31.08.22 | 28.02.22 | |
| unaudited | audited | unaudited | |
| £'000 | £'000 | £'000 | |
| Interest paid on CFDs* | 1,995 | 1,231 | 307 |
| Interest on bank overdrafts and collateral | 1 | 12 | 2 |
| 1,996 | 1,243 | 309 |
* Increased compared to prior periods due to an increase in interest rates.
7 Taxation on Return/(Loss) on Ordinary Activities
| Six months | Year | Six months | |
|---|---|---|---|
| ended | ended | ended | |
| 28.02.23 | 31.08.22 | 28.02.22 | |
| unaudited | audited | unaudited | |
| £'000 | £'000 | £'000 | |
| Overseas taxation | 8 | 196 | 32 |
| Total taxation charge for the period | 8 | 196 | 32 |
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
| Six months | Year | Six months | |
|---|---|---|---|
| ended | ended | ended | |
| 28.02.23 | 31.08.22 | 28.02.22 | |
| unaudited | audited | unaudited | |
| Revenue return per ordinary share | 3.04p | 9.42p | 1.80p |
| Capital return/(loss) per ordinary share | 26.30p | (23.00p) | (15.95p) |
| Total return/(loss) per ordinary share | 29.34p | (13.58p) | (14.15p) |
8 Return/(Loss) per Ordinary Share
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 The return/(loss) per ordinary share is based on the net return/(loss) on ordinary activities after taxation for the period divided by the weighted average number of ordinary shares held outside of Treasury during the period, as shown below:
| £'000 | £'000 | £'000 | |
|---|---|---|---|
| Net revenue return on ordinary activities after taxation |
9,869 | 30,128 | 5,671 |
| Net capital return/(loss) on ordinary activities after taxation |
85,225 | (73,559) | (50,340) |
| Net total return/(loss) on ordinary activities after taxation |
95,094 | (43,431) | (44,669) |
| Number | Number | Number | |
| Weighted average number of ordinary shares held outside of Treasury during the period |
324,098,920 | 319,869,879 | 315,639,997 |
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
DIRECTORS' REPORTS
DIRECTORS' REPORTS
Notes to the Financial Statements continued
9 Dividends Paid to Shareholders
| Six months | Year | Six months | |
|---|---|---|---|
| ended | ended | ended | |
| 28.02.23 | 31.08.22 | 28.02.22 | |
| unaudited | audited | unaudited | |
| £'000 | £'000 | £'000 | |
| Final dividend of 5.45 pence per ordinary share | |||
| paid for the year ended 31 August 2022 | 17,663 | – | – |
| 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 | 14,136 |
| 17,663 | 21,590 | 14,136 |
The Company has declared an interim dividend for the six month period to 28 February 2023 of 2.53 pence per ordinary share (2022: 2.30 pence). The interim dividend will be paid on 21 June 2023 to Shareholders on the register at 12 May 2023 (ex-dividend date 11 May 2023). The total cost of this interim dividend, which has not been included as a liability in these Financial Statements, is £8,200,000 (2022: £7,454,000). This amount is based on the number of ordinary shares in issue held at the date of this report.
10 Fair Value Hierarchy
The Company is required to disclose the fair value hierarchy that classifies its financial instruments measured at fair value at one of three levels, according to the relative reliability of the inputs used to estimate the fair values.
| Classification | Input |
|---|---|
| Level 1 | Valued using quoted prices in active markets for identical assets |
| Level 2 | Valued by reference to inputs other than quoted prices included in level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly |
| Level 3 | Valued by reference to valuation techniques using inputs that are not based on observable market data |
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset. The valuation techniques used by the Company are as disclosed in the Company's Annual Report for the year ended 31 August 2022 (Accounting Policies Notes 2 (k) and 2 (l) on pages 62 and 63.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
10 Fair Value Hierarchy continued
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 The table below sets out the Company's fair value hierarchy:
| 28 February 2023 (unaudited) | Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|---|---|---|---|---|
| Financial assets at fair value through profit or | ||||
| loss | ||||
| Investments | 896,737 | 7,426 | 496 | 904,659 |
| Derivative instrument assets | – | 2,631 | – | 2,631 |
| 896,737 | 10,057 | 496 | 907,290 | |
| Financial liabilities at fair value through profit or loss |
||||
| Derivative instrument liabilities | – | (888) | – | (888) |
| Level 1 | Level 2 | Level 3 | Total | |
| 31 August 2022 (audited) | £'000 | £'000 | £'000 | £'000 |
| Financial assets at fair value through profit or loss |
||||
| 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) |
| Level 1 | Level 2 | Level 3 | Total | |
| 28 February 2022 (unaudited) | £'000 | £'000 | £'000 | £'000 |
| Financial assets at fair value through profit or loss |
||||
| Investments | 775,353 | – | 439 | 775,792 |
| Derivative instrument assets | – | 1,355 | – | 1,355 |
| 775,353 | 1,355 | 439 | 777,147 | |
| Financial liabilities at fair value through profit or loss |
||||
| Derivative instrument liabilities | – | (10,507) | – | (10,507) |
Notes to the Financial Statements continued
11 Share Capital
| 28 February 2023 unaudited |
31 August 2022 audited |
28 February 2022 unaudited |
|||||
|---|---|---|---|---|---|---|---|
| Number of shares |
£'000 | Number of shares |
£'000 | Number of shares |
£'000 | ||
| Issued, allotted and fully paid ordinary shares of 5 pence each | |||||||
| Held outside of Treasury | |||||||
| Beginning of the period | 324,098,920 | 16,205 | 313,028,920 | 15,651 | 313,028,920 | 15,651 | |
| New ordinary shares | |||||||
| issued | – | – | 11,070,000 | 554 | 10,565,000 | 528 | |
| End of the period | 324,098,920 | 16,205 | 324,098,920 | 16,205 | 323,593,920 | 16,179 | |
| Total share capital | 324,098,920 | 16,205 | 324,098,920 | 16,205 | 323,593,920 | 16,179 |
During the period, no new ordinary shares were issued (year ended 31 August 2022: 11,070,000 shares and six months to 28 February 2022: 10,565,000 shares). The premium received on the issue of new ordinary shares for the year ended 31 August 2022 (£33,118,000) and six month period to 28 February 2022 (£31,673,000) was credited to the share premium account. At 28 February 2023, no shares were held in Treasury.
12 Net Asset Value per Ordinary Share
The calculation of the net asset value per ordinary share is based on the total Shareholders' funds divided by the number of ordinary shares held outside of Treasury.
| 28.02.23 unaudited |
31.08.22 audited |
28.02.22 unaudited |
|
|---|---|---|---|
| Total Shareholders' funds | £1,000,030,000 | £922,599,000 | £927,486,000 |
| Ordinary shares held outside of Treasury at period end |
324,098,920 | 324,098,920 | 323,593,920 |
| Net asset value per ordinary share | 308.56p | 284.67p | 286.62p |
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. Since 3 December 2020, there have been no shares held in Treasury.
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
13 Transactions with the Manager and Related Parties
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 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 fee arrangements are given in Note 5 above. During the period, fees payable to FII for portfolio management services were £2,806,000 (year ended 31 August 2022: £5,607,000 and six months ended 28 February 2022: £2,806,000). At the Balance Sheet date, fees for portfolio management services of £459,000 (year ended 31 August 2022: £484,000 and six months ended 28 February 2022: £441,000) were accrued and included in other creditors.
FII also provides the Company with marketing services. The total amount payable for these services during the period was £134,000 (year ended 31 August 2022: £191,000 and six months ended 28 February 2022: £142,000). At the Balance Sheet date, marketing services of £nil (year ended 31 August 2022: £13,000 and six months ended 28 February 2022: £16,000) were accrued and included in other creditors.
As at 28 February 2023, the Board consisted of five Non-Executive Directors (as shown in the Directory on page 30), all of whom are considered to be independent. None of the Directors have a service contract with the Company. The Chairman receives an annual fee of £43,000, the Chairman of the Audit Committee an annual fee of £34,000 and each other Director an annual fee of £29,000.
As at the date of this report, the following members of the Board held ordinary shares in the Company: Dean Buckley 50,000 shares, Nigel Foster 81,000 shares, Claire Boyle 7,466 shares, Ominder Dhillon nil shares and Alison McGregor 30,000 shares.
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 on 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 on the next page. 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: [email protected]
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 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 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 mandate forms 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 KT20 9FU.
Website: www.fidelity.co.uk
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
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: [email protected]
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: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 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.
FINANCIAL CALENDAR 2023/2024
| 28 February 2023 | Half-Yearly Period End | |
|---|---|---|
| April 2023 | Announcement of Half-Yearly Results | |
| May 2023 | Publication of Half-Yearly Report | |
| 11 May 2023 | Ex-Dividend Date | |
| 12 May 2023 | Dividend Record Date | |
| 21 June 2023 | Payment of Interim Dividend | |
| 31 August 2023 | Financial Year End | |
| November 2023 | Publication of Annual Report | |
| December 2023 | Ex-Dividend and Dividend Record Dates | |
| December 2023 | Annual General Meeting | |
| January 2024 | Payment of Final Dividend |
Directory
Board of Directors
Dean Buckley (Chairman) Claire Boyle (Chairman of the Audit Committee) Ominder Dhillon Nigel Foster (Senior Independent Director) Alison McGregor
Alternative Investment Fund Manager (AIFM/the Manager)
FIL Investment Services (UK) Limited Beech Gate Millfield Lane Lower Kingswood Tadworth Surrey KT20 6RP
Investment Manager, Secretary and Registered Office
FIL Investments International Beech Gate Millfield Lane Lower Kingswood Tadworth Surrey KT20 6RP Email: [email protected]
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
Winterflood Investment Trusts The Atrium Building Cannon Bridge 25 Dowgate Hill London EC4R 2GA
Independent Auditor
Ernst & Young LLP 25 Churchill Place London E14 5EY
Lawyer
Simmons & Simmons LLP 1 Ropemaker Street London EC2Y 9SS
Registrar
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Link Group 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL
General Data Protection Regulation ("GDPR")
What personal data is collected and how is it 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, 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's 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
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 Personal data will be kept for as long as is necessary for these purposes and no longer than 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.
Glossary of Terms
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 Ordinary 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.
Collateral
Asset 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.
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
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
Financial instruments (such as futures, options and contracts for difference) whose value is derived from the value of an underlying asset.
If the share price of the Company is lower than the net asset value per ordinary share, the Company is said to be trading at a discount. The discount is shown as a percentage of the net asset value per ordinary share.
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, 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.
Future
An agreement to buy or sell a fixed amount of an asset at a fixed future date and a fixed price.
Gearing
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 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 AIFMD. It has delegated the portfolio management of assets to the Investment Manager.
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
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
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.
Glossary of Terms continued
Ongoing Charges
Total operating expenses (excluding finance costs and taxation) incurred by the Company as a percentage of the average daily net asset values for the reporting year.
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. 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.
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 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 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 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.
- Revenue reserve represents retained revenue surpluses recognised through the revenue column of the Income Statement. It cannot be used to fund share repurchases. 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 return.
Shareholders' Funds
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
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 in additional shares (for share price total return) or the Company's assets (for net asset value total return).
Treasury Shares
Job No: 49264 Proof Event: 9 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Special Values Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600 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 per ordinary share calculation.
To find out more about Fidelity Special Values PLC visit our website at www.fidelity.co.uk/specialvalues where you can read articles and watch videos on the Company.
Job No: 49264 Proof Event: 14 Black Line Event: 0 Park Communications Ltd Alpine Way London E6 6LA Customer: Fidelity Project Title: Fidelity FSV Half Year Rpt 2023 T: 0207 055 6500 F: 020 7055 6600
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