Further re Final Results

FIDELITY SPECIAL VALUES PLC ADDITIONAL DISCLOSURES TO THE PRELIMINARY RESULTS FOR THE YEAR TO 31 AUGUST 2008 Further to the voluntary disclosure of the Company's annual results for the year ended 31 August 2008 by way of a preliminary announcement dated 30 October 2008, in accordance with the Disclosure and Transparency Rules ("the Rules") 4.1.3 and 6.3.5(2) this announcement contains the text of the preliminary announcement dated 30 October 2008 together with the additional text in compliance with the Rules. The Company's annual report and financial statements for the year ended 31 August 2008 have been filed with the UK Listing Authority Document Disclosure team and are available on the Company's website at www.fidelity.co.uk/its CHAIRMAN'S STATEMENT The Financial Crisis: This year's statement is rather like describing the scene of a hurricane while it is still blowing but before it has blown out; something else seems to get blown over every passing moment. The course of events over the past few weeks has been unfolding with new drama almost on a day to day basis. It has made reporting on last year's results seem almost irrelevant. I will comment on them below but suffice it to say that, at the time of writing, the UK stockmarket has quite literally collapsed; it, as measured by the FTSE All-Share Index, our benchmark, has declined by circa 26% in just under 9 weeks since our year end and represents a stockmarket crash not experienced by many people working in the investment business today. It would be pointless of me to go into the detail of the events or indeed of the underlying causes of them as more than enough has been written about them in our newspapers and spoken about them on our television sets. The fact that it is ending up with the effective nationalisation of a number of our banks underlines how very serious a state of affairs it is; at times it has been a very frightening one too. Our financial system, which thrives and survives on trust and confidence, has been abused and discredited and has flirted with complete destruction. Hardly anyone involved in it can escape some sort of blame - whether it be large in the case of the Government, the banks, consultants and professional investors - or even the consumers who have increased their debts to unsustainable levels. Meanwhile, the stockmarket is being used by a number of professional investors, including many hedge fund managers, as a casino, forgetting the important concepts of prudence and preservation of capital and gambling with other people's money on short term share price movements for the sake of their performance fees. The consequence of enormous greed and some dishonesty within the financial sector is this horrendous financial hurricane. Before commenting on the results for the year below, which, I am afraid, are now of rather academic interest, I think it would be appropriate to bring shareholders up to date with the net asset value at the time of writing this statement on 29 October 2008. As I mentioned above the market, as measured by our benchmark, has declined by 26% since our year end; our own net asset value has fallen by 28.5% to 402.1p per share and our share price by 24% to 367.0p (where it stands on a discount of 8.7%). I should also make an important observation about very severe bear markets. The share prices of good, well managed, financially sound companies can fall just as far as those of bad companies because those investors needing to raise cash in such circumstances may have little other option but to sell their shareholdings in these companies. So the short term net asset value of a portfolio of good companies may not reflect the underlying performance of the companies invested in. In time however the good companies' share prices will reflect their quality and then outperform the market. The Results Summary and the Long Term Record contain the bare facts. The Year's Results: NAV: 562.1p - 10.9%; Share price: 481.5p - 18.7%; Benchmark: - 12.0%; Dividends: 17.0p (2007:7.5p) The net asset value declined by 68.6p from 630.7p to 562.1p per share, a fall of 10.9%. The causes behind it were, in summary, the fall in the UK stockmarket - it declined 12.0% - and our modest gearing; the combined effect of these were offset by the buying back of our own shares and our own portfolio management. In that respect shareholders will be aware that we have hedged the portfolio against stockmarket declines in the past. In recent times we have extended our hedging activity to include selling shares short and making other derivative investments. It should be noted that this has and continues to be on a relatively small scale. These portfolio activities, which added to our net asset value (+11.5p per share), have offset the effect of the bear market on our own net asset value. The selection of individual stocks and shares in the portfolio, however, detracted very slightly from our returns (-7.0p per share); we benefited from our exposure to oil and gas producers but our exposure to holdings in the banking and media more than offset such gains. The numerical details, reflecting all these factors, are contained in this Annual Report. The share price fared rather worse, declining by 110.5p or 18.7% from 592.0p to 481.5p. The uncertainties concerning the stockmarket meant that the discount of investment trust shares in general (to their underlying net asset value) widened and that of our own proved to be no exception; that normally happens during bear markets. Thus our discount at the end of our financial year had risen from 6.1% to 14.3%. During the last few weeks of ultra turbulent stockmarkets the discount has been very volatile and, as noted earlier, it stood at 8.7% at 29 October. Your Directors are keeping a close watch on it and maintain a policy of trying to keep a low discount during normal and stable times. The income earned from the portfolio continues to remain at a high level, in large part because we have had a large commitment to the shares of higher yielding, large capitalisation companies. Our net income amounted to £9.9 million (17.2p per share), a very large increase on the £4.4 million (6.9p per share) earned the year before; circa £2 million arose from much higher levels of income earned from the portfolio, while the management fee fell by approximately £1 million; £2.3 million of the increase is accounted for by the accrual for the recovery of VAT. The Directors are recommending to you the payment of a dividend of 17.0p per share payable on 18 December 2008, to shareholders on the share register on 14 November 2008. The ex dividend date is 12 November 2008. It is important to remember that the portfolio is managed for capital growth, so that the income earned each year will vary according to its make up. There will be years when the dividend rises and others when it falls. The Long Term Returns (over five years): NAV: + 97.0% Share price: + 60.2% Benchmark: + 38.9% Time and again we have made the point that we are in business to make money for shareholders over the longer term which we regard as being at least five years. Given the state of stockmarkets that hasn't been easy in recent times. However over the last five years to 31 August 2008 the net asset value has increased by 97.0%, the share price by 60.2% and the stockmarket by 38.9%, so at least that goal has been achieved. It is an important assessment that your Directors make each year because it is this record that we use in our annual assessment of our manager, Fidelity International. Both because of the long term record and because of the other aspects of its performance, the Board had no difficulty in concluding that Fidelity should remain as the manager of the Company. Outlook and Prospects: Uncertain in the shorter term; Optimistic in the longer term. There can be little doubt that we are at an historical watershed and that the future course of the global economy and of its stockmarkets will be quite different from that experienced in the last fifteen or so years. The economic fall-out from years of overindulgence is what we will have to live with; in the first instance it will be one of recession, possibly quite severe and on a world wide basis - most notably in the United States and in Europe, quite probably in Japan and just possibly in China and India. Thereafter there is likely to be an era rather similar to that experienced by Japan in the fifteen or so years following its financial collapse at the beginning of the 1990s - one of low economic growth, of deflation and low interest rates, of reduced company profits and cut dividends. We should be able to solve our own problems rather more quickly than the Japanese did but we do not have the benefit of the huge savings rate that they had and have. It will be a brave new world but, having said all of that, I believe there are reasons to be quite optimistic in the longer term - two important reasons in particular. Firstly - recessions are unfortunately a necessary evil in that, while they are unpleasant experiences, they clean up the economic system, causing poorly managed companies and businesses either to go out of business or to change their ways. From recessions emerge financially sounder and better managed companies and thence a much more sound economy with good growth potential. Secondly - crises are times of both great risk and great opportunity. The likely longer term consequences of our current financial crisis and its attendant recession include: * better economic and corporate management, * sounder banking practices, accompanied by much more regulation, * greater levels of personal savings and lower levels of consumer debt, * longer term horizons for business decisions, particularly investment decisions, * some very good investment opportunities. Tomorrow's investment world is likely to be very different from the past, focusing on longer term returns. Because economic growth is also likely to be low and slow and because valuations will be suppressed, investors will focus on growth companies (whether large, medium sized or small), investing will be about choosing the right sector by economic assessment (not from index weightings); because times will be tough it will also be about investing in companies with good management and sound finances, not about business models. The UK's economy is likely to be one of the less robust and so investment will have to focus increasingly on companies with significant overseas business, particularly on those exposed to the growth economies of the emerging market countries. Ultimately our prospects depend on ourselves. In that respect we have one of the leading investment management companies of the world, Fidelity, looking after our affairs; it has huge and talented resources; our portfolio manager Sanjeev Shah has made a good start relative to our benchmark and your Board is impressed with his calm and his confidence. Tracey Cousins, who acts as the Company Secretary, and her colleagues do a good job in supporting your Company. If I may be allowed to say so, I believe that you have an excellent Board of Directors with a good blend of experience - experience of your Company, of Fidelity, of sound investing and of stockmarkets, including crashes; experience is certainly the most important attribute of any board of directors at this time. Your Company is in good hands. Your Directors are of the view that, over the next five years, which is - to repeat - the time scale we use, the net asset value is likely to rise and, in turn, shareholders are likely to make money from this point in time. Share prices generally may not have reached lows in the stockmarket but excellent money making opportunities are being thrown up - once a long term time scale is taken into account. It is difficult to see opportunities during times of crisis but they are always there. I am sure that five years from now we will have identified them and, more importantly, profited from them. The Annual General Meeting: Thursday 11December at 11.30 am The Annual General Meeting will be held at Fidelity's offices at 25 Cannon Street (St Paul's or Mansion House tube stations) at 11.30am. It is the most important meeting that we, the Directors of your Company have each year and we do urge as many of you as possible to come and join us for the occasion. With stockmarkets in such a state of chaos, Sanjeev Shah's presentation to shareholders will be of particular interest. He took over the management of the portfolio from Anthony Bolton at the beginning of January and he has so far made a good start - relative to the performance of the market. In the eight months up until our year end the net asset value under his stewardship fell by 7.2% against a fall in the market of 12.7% - an outperformance of 6.3%. As shareholders know, each Director puts his or her name up for re-election each year. This year shareholders will be asked to approve for the first time the appointment of Ben Thomson who joined the Board earlier in the year. Ben is chairman of Noble Group, an Edinburgh based investment bank and is also a director of a number of other organisations, including other investment trust companies. He has already made a good and thought provoking contribution to the Board's governance and we are confident that he will make a considerable difference to the Company over the years. Alex Hammond-Chambers Chairman 30 October 2008 Manager's Review MANAGER'S REVIEW UK MARKET REVIEW • GDP growth decelerated during the second quarter of 2008, and the annual growth of 1.4% was the weakest since 1992. • Inflation rose to more than double the Bank of England's ("BoE") target, reaching 4.4% in July 2008. • The BoE reduced the base rate of interest three times by a quarter of a percentage point each to 5.00%. • The UK market declined over the review period, as the financial crisis deepened. The outlook for GDP growth deteriorated over the 12-month period; the Office for National Statistics revised downwards its second-quarter economic growth estimates from 0.2% to 0.0%, following a reassessment of activity in the production, construction and services industries. Indeed, the economy declined in the third quarter to the end of September. The UK stock market returned -8.7% during the year to 31 August 2008, as concerns about the wider impact of the financial market turmoil persisted. The fallout of the credit crisis prompted global central banks, including the BoE, to reduce interest rates and announce several measures to increase banking liquidity. Against a backdrop of tightening lending conditions, there were signs of deceleration in the housing market and consumer-related sectors, which held back returns from financial, property and retail stocks. Rising oil prices led to heightened inflationary pressures. On a positive note, takeover activity continued to support some stocks. Oil equipment services firms were the best performers, as they benefited from buoyant demand from the energy sector. Mining stocks also advanced due to persistent merger and acquisition speculation, notably BHP Billiton's unsolicited bid for Rio Tinto. During the period, sterling weakened against the dollar from $2.02 to $1.83. This improved the prospects for those companies with significant sales in the US. Since the year end the market has continued to decline, falling a further 26% at the time of writing. The main contributors to this decline have been the mining and bank shares. PORTFOLIO MANAGER'S REVIEW During the 12 months to 31 August 2008, the Company's portfolio returned -9.8% (total return basis), underperforming the FTSE All-Share Index at -8.7%. Since the start of the calendar year, I have had a relatively cautious view on the prospects for the stock market given the evolving financial crisis and the earnings risk to many global cyclical sectors. In early 2008 we hedged the value of approximately 20% of the Company's portfolio against market declines through investments in appropriate derivatives. This protection was closed during March after the market had declined by approximately 15%. The cautious view has also resulted in having a large exposure to defensive areas such as pharmaceuticals which has contributed positively to performance. The overall exposure to large capitalisation companies, at over 60%, has been the highest over a 14 year history, as I have been concerned that smaller companies in general would be less able to weather an economic downturn. Areas of the market where I saw a significant risk to earnings and valuations have been the global cyclical sectors, such as mining, energy and capital goods. As a result of the past strong economic growth and trend to globalisation, these sectors reached historic high earnings and valuations. Although this position hurt portfolio performance during the early part of the year, mining shares have now declined close to 70% from their peak. A key exposure since the start of the year has been to structural growth companies which are less impacted by the economic cycle. Companies in the media sector, such as Reed Elsevier and Pearson, have exhibited strong growth and have contributed positively to performance. Reed operates in more defensive areas such as healthcare and legal and has benefited from the shift to digital content. I have also had large exposure to stocks in the support service and leisure area which exhibit solid growth, such as XChanging and Compass. Both of these companies have been top 20 holdings and have added to performance. I have also been increasing my exposure to companies which are benefiting from the shift to online in their business model. Examples include gaming stocks and electrical distributors, such as Premier Farnell. As the financial crisis has evolved through the year, I have been increasing my exposure to both banks and non-bank financials, as several stocks were trading at less than their book value and they were under-owned by other investors. However, this proved to be too early in the case of banks, such as HBOS and RBOS which have detracted from performance HSBC, which remains the largest bank in the Company's portfolio, continues to fare relatively well. Longer term I believe the combined Lloyds-HBOS franchise will do well given its strengthened market position. Non bank financials such as Provident Financial and commercial property stocks have added to performance. Over the last 6 months I have started to increase my exposure gradually to some of the domestic cyclical sectors, such as housebuilders and general retail, given their derating. I have paid close attention to companies with strong balance sheets and sustainable long term franchises. OUTLOOK Given my relatively cautious view, the net borrowings have been kept at a low level for a large part of the year, however after the market decline since the Company's year end, I have decided to increase gearing marginally. I continue to have little exposure to global cyclical companies including miners and producers of capital goods. I do want to continue holding HSBC and the potential new Lloyds-HBOS merged company. In this environment of slowing economic growth, I continue to have exposure to structural growth companies. Interest rate sensitive stocks have already discounted much of the downside and some interesting opportunities are now appearing in the domestic cyclicals. The spread of valuations in the market has widened significantly and this should provide a better environment for picking mis-valued stocks. Overall as a contrarian investor I am beginning to find an increasing number of longer term investment opportunities. FIL Investments International 31 October 2008 Principal risks and uncertainties and risk management When considering the risks and uncertainties faced by shareholders it is important to remember that the Board regards the timescale to achieve the overriding objective as the long term. The longer the timescale the greater the influence of the underlying profits and dividends and the less the influence of valuations on share prices. It is why equities generally are likely to provide positive returns for investors over the longer term but not necessarily over the short term and why therefore the Board assumes a long term perspective in determining the objective, strategy, risks and KPIs. Subsidiary to the primary risk that shareholder value will not be enhanced, the Board has identified secondary risks, external and internal, that could impact this primary objective, as follows: External risks 1 Stockmarket Stockmarket risks include (i) the risk to profits when the economy performs poorly, corporate profits do not prosper and so share prices suffer for economic reasons and (ii) valuation risks, particularly during periods of excessive stockmarket speculation and gains. Markets may go down - even over extended periods of time. 2 Share price Although it is usually the case that the longer a share is owned the less the risk of losing money, share prices are volatile and for the short term shareholder, likely to want to sell in the near future, volatility is a risk. The Board does not regard volatility as a risk for the long term shareholder. 3 Discount The Board cannot control the discount at which the Company's share price trades to net asset value. However, it can influence this through its share buyback policy and through creating demand for shares through an active investor relations programme. Internal risks The internal risks that a shareholder assumes are the risks of mismanagement, whether in the form of poor portfolio management, poor governance, poor operations, poor financial management, poor compliance, poor administration etc. 1 Portfolio The risks of poor asset management are those of mismanaging the portfolio. The risks include poor stock selection, speculation in the shares of companies, speculation in derivatives, excessive concentration in any individual stockmarket, individual sector of the stockmarket or individual stock; investment in companies operating, wholly or in part, in a country whose currency declines severely; mismatching the currencies behind the assets and liabilities and/or borrowing at rates of interest higher than are likely to be earned by the underlying portfolio of assets. The Board of Directors does not believe that it is in shareholders' interests to manage the portfolio through formulaic volatility risk control constraints as it does not regard volatility as a risk for long term shareholders. The Board believes that most of the risks that might result in long term shareholder value not being enhanced are unquantifiable. The reduction of risk is best achieved by having appropriate diversification within the portfolio and to that end your Board reviews the portfolio with the Portfolio Manager on a regular basis. 2 Governance, operational, financial, compliance, administration etc While we believe that the likelihood of poor governance, operations, financial management, compliance, administration etc by other third party service providers is low, the financial consequences could be serious, including the loss of Section 842 status which allows the portfolio to be managed without incurring capital gains tax and any associated reputational damage to the Company and thence to the discount/premium at which its shares sell. Your Board is responsible for the Company's system of internal control and for reviewing its effectiveness. Details of this process are provided in the Corporate Governance Statement within this Annual Report. The financial instruments risks faced by the Company are shown in Note 18 to the financial statements on pages 49 to 53 of the annual report. Related parties Ms Nicky McCabe is an Executive Director of Moonray Investors, a division of FIL Investments International, a member of the FIL Limited Group of Companies. FIL Limited is the ultimate holding company of FIL Investments International. Ms McCabe has waived her entitlement to Director's fees. No Director has a contract of service with the Company and no contracts existed during or at the end of the financial period in which any Director was materially interested and which were significant in relation to the Company's business, except as disclosed above in relation to Ms McCabe's interests in the Management Agreement. There have been no other related party transactions requiring disclosure under Financial Reporting Standard ("FRS") 8. Statement of Directors' responsibilities The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial period. Under the law they have elected to prepare the financial statements in accordance with UK Generally Accepted Accounting Practice. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss for the period. In preparing these financial statements the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, including a Business Review, a Directors' Remuneration Report and a Corporation Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's pages of the Manager's website www.fidelity.co.uk/its. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in their jurisdictions. We confirm that to the best of our knowledge the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and the Directors' Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties it faces. Approved by the Board on 30 October 2008 and signed on its behalf. Alex Hammond-Chambers Chairman 30 October 2008 Proposed changes to the Company's Articles of Association An Extraordinary General Meeting was held in July to make various changes, in light of the Companies Act 2006, to the Company's Articles of Association. One of those changes provided a procedure for dispute resolution and limited any arbitration to the UK. It had come to the Board's attention that some shareholders regarded this provision as a dilution of shareholders' rights and therefore the Board had decided to remove this particular provision at the next shareholder meeting. Resolution 15 is a special resolution amending the Company's Articles of Association to remove the articles relating to dispute resolution, articles 142 to 144 inclusive. The full text of the resolutions is set out in the Notice of Meeting contained on pages 54 to 56 of the annual report and also set out below: Resolution 15 is a special resolution which relates to the amendments to the Articles of Association and to consider and, if thought fit, to pass the following resolution as a special resolution. 15. THAT Articles 142 to 144, inclusive, of the Company's Articles of Association be and are hereby removed and the subsequent revised Articles of Association of the Company, produced to the meeting and initialled by the Chairman of the meeting for the purposes of identification, be adopted in substitution for, and to the exclusion of, the existing Articles of Association. Independent Auditor's Report to the Members of Fidelity Special Values PLC We have audited the financial statements (the `'financial statements'') of Fidelity Special Values PLC for the year ended 31 August 2008 which comprise the income statement, the balance sheet, the reconciliation of movements in shareholders' funds, the cash flow statement, and Notes 1 to 20. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors' Remuneration Report that is described as having been audited. This report is made solely to the Company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR The Directors' responsibilities for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements and the part of the Directors' Remuneration Report to be audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors' Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the financial statements. The information given in the Directors' Report includes that specific information presented in the Chairman's Statement and Manager's Review that is cross-referenced from the Activities and Status section of the Directors' Report. In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed. We review whether the Corporate Governance Statement reflects the Company's compliance with the nine provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Company's corporate governance procedures or its risk and control procedures. We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Objective and Financial Calendar, Financial Summary, Chairman's Statement, Manager's Review, Forty Largest Investments, Distribution of the Portfolio, Summary of Performance, Attribution Analysis, Directors' Report, Corporate Governance Statement, and the unaudited part of the Directors' Remuneration Report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. BASIS OF AUDIT OPINION We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Company's financial statements and the part of the Directors' Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the Company's financial statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Company's financial statements and the part of the Directors' Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Company's financial statements and the part of the Directors' Remuneration Report to be audited. OPINION In our opinion: • the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Company's affairs as at 31 August 2008 and of its loss for the year then ended; • the financial statements and the part of the Directors' Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985; and • the information given in the Directors' Report is consistent with the financial statements. Grant Thornton UK LLP Registered Auditor Chartered Accountants London 30 October 2008 Enquiries: Mrs Tracey Cousins - FIL Investments International, Company Secretary 01737 836 883 Anne Read - FIL Investments International 020 7961 4409 CB35070 FIDELITY SPECIAL VALUES PLC Income Statement - audited - for the year ended 31 August 2008 2008 2007 revenue capital total revenue capital total £'000 £'000 £'000 £'000 £'000 £'000 (Losses)/gains on - (46,807) (46,807) - 49,999 49,999 investments Income - Franked investment 5,051 - 5,051 3,403 - 3,403 income - UK unfranked investment 60 - 60 8 - 8 income - UK scrip dividends 6,009 - 6,009 4,922 - 4,922 - Overseas scrip 275 - 275 - - - dividends - Overseas dividends 1,144 - 1,144 1,787 - 1,787 - Property income 197 - 197 - - - distribution - Deposit interest 632 - 632 1,301 - 1,301 - Income from Fidelity 352 - 352 342 - 342 Institutional Cash Fund plc - Other income 38 - 38 - - - Investment management fee (3,507) - (3,507) (4,577) - (4,577) VAT on investment 2,300 - 2,300 - - - management fee recoverable Other expenses (490) - (490) (461) - (461) Exchange (losses)/gains - (46) (46) 3 - 3 Net return/(loss) before 12,061 (46,853) (34,792) 6,728 49,999 56,727 finance costs and taxation Interest payable (2,033) - (2,033) (2,165) - (2,165) Net return/(loss) on 10,028 (46,853) (36,825) 4,563 49,999 54,562 ordinary activities before taxation Taxation on (loss)/return (121) - (121) (188) - (188) on ordinary activities* Net return/(loss) on 9,907 (46,853) (36,946) 4,375 49,999 54,374 ordinary activities after taxation for the year Return/(loss) per ordinary share Basic (1) 17.13p (81.03p) (63.90p) 6.91p 78.94p 85.85p 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 the 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 year. * This relates to overseas taxation only. FIDELITY SPECIAL VALUES PLC Balance Sheet - audited - as at 31 August 2008 2008 2007 £'000 £'000 Fixed assets Investments at fair value through profit or loss 331,312 383,826 Current assets Debtors 6,994 4,303 Amounts held at futures clearing houses and 1,573 2,018 brokers Fidelity Institutional Cash Fund plc 9,091 10,342 Cash at bank 14,994 19,269 32,652 35,932 Creditors - amounts falling due within one year Fixed rate unsecured loan (8,000) (5,000) Other creditors (9,707) (3,168) (17,707) (8,168) Net current assets 14,945 27,764 Total assets less current liabilities 346,257 411,590 Creditors - amounts falling due after more than one year Fixed rate unsecured loans (27,000) (35,000) Total net assets 319,257 376,590 Capital and reserves Called up share capital 14,198 14,926 Share premium account 95,058 95,058 Capital redemption reserve 2,545 1,817 Other non-distributable reserve 5,152 5,152 Capital reserve - realised 225,470 232,390 Capital reserve - unrealised (34,161) 21,733 Revenue reserve 10,995 5,514 Total equity shareholders' funds 319,257 376,590 Net asset value per ordinary share Basic 562.13p 630.75p FIDELITY SPECIAL VALUES PLC Reconciliation of Movements in Shareholders' Funds - audited - for the year ended 31 August 2008 called share capital other capital capital revenue total up premium redemption non-distributable reserve reserve reserve equity share account reserve reserve realised unrealised capital £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening shareholders' 16,339 95,058 404 5,152 193,393 44,001 3,576 357,923 funds: 1 September 2006 Net recognised capital - - - - 72,267 (22,268) - 49,999 gains/(losses) for the year Repurchase of ordinary (1,413) - 1,413 - (33,270) - - (33,270) shares Revenue after taxation - - - - - - 4,375 4,375 Dividend paid - - - - - - (2,437) (2,437) Closing shareholders' 14,926 95,058 1,817 5,152 232,390 21,733 5,514 376,590 funds: 31 August 2007 Net recognised capital - - - - 9,041 (55,894) - (46,853) gains/(losses) for the year Repurchase of ordinary (728) - 728 - (15,961) - - (15,961) shares Revenue after taxation - - - - - - 9,907 9,907 Dividend paid - - - - - - (4,426) (4,426) Closing shareholders' 14,198 95,058 2,545 5,152 225,470 (34,161) 10,995 319,257 funds: 31 August 2008 FIDELITY SPECIAL VALUES PLC Cash Flow Statement - audited - for the year ended 31 August 2008 2008 2007 £'000 £'000 Operating activities Investment income received 5,639 5,355 Deposit interest received 947 1,630 Investment management fee paid (3,704) (4,594) Directors' fees paid (108) (88) Other cash payments (620) (321) Net cash inflow from operating activities 2,154 1,982 Returns on investments and servicing of finance Interest paid (2,057) (2,165) Net cash outflow from returns on investments and (2,057) (2,165) servicing of finance Taxation Overseas taxation recovered 13 71 Net cash inflow from taxation 13 71 Financial investment Purchase of investments (318,920) (384,743) Disposal of investments 338,703 428,928 Net cash inflow from financial investment 19,783 44,185 Equity dividend paid (4,426) (2,437) Net cash inflow before use of liquid resources and 15,467 41,636 financing Net cash inflow/(outflow) from management of liquid 1,251 (10,342) resources Net cash inflow before financing 16,718 31,294 Financing Repurchase of ordinary shares (16,442) (32,788) 4.91% fixed rate unsecured loan repaid (5,000) - Net cash outflow from financing (21,442) (32,788) Decrease in cash (4,724) (1,494) 1. Return/(loss) per ordinary share 2008 2007 revenue capital total revenue capital total Basic 17.13p (81.03p) (63.90p) 6.91p 78.94p 85.85p Returns per ordinary share are based on the net revenue return on ordinary activities after taxation of £9,907,000 (2007: £4,375,000), the capital loss in the year of £46,853,000 (2007: return £49,999,000) and the total loss in the year of £36,946,000 (2007: return £54,374,000) and on 57,823,165 ordinary shares (2007: 63,335,764) being the weighted average number of ordinary shares in issue during the year. The above statements have been prepared on the basis of the accounting policies as set out in the annual financial statements to 31 August 2008. This preliminary statement, which has been agreed with the auditor, was approved by the Board on 30 October 2008. It is not the Company's statutory financial statements. The statutory financial statements for the financial year ended 31 August 2007 have been delivered to the Registrar of Companies. The statutory financial statements for the financial year ended 31 August 2008 have been approved and audited but have not yet been filed. The statutory financial statements for the financial years ended 31 August 2007 and 31 August 2008 received unqualified audit reports, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 237(2) and (3) of the Companies Act 1985. The annual report and financial statements will be posted to shareholders as soon as is practicable and in any event no later than 13 November 2008 and will be made available on www.fidelity.co.uk/its at that time.

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