Final Results

FIDELITY SPECIAL VALUES PLC

Preliminary Announcement of Unaudited Results

for the year ended 31 August 2004

Please note that past performance is not a guide to future returns. The value
of investments can go down as well as up, and may be affected by exchange rate
fluctuations.

CHAIRMAN'S STATEMENT

Ten Years' Performance: NAV: 95.5p to 341.94p: + 258.0%

This annual report marks the tenth anniversary of the formation of Fidelity
Special Values in the autumn of 1994. It has been a topsy-turvy ten years for
the stock market but I am proud to be able to report a remarkably good one for
your Company. Since its formation the net asset value has risen by no less than
258.0%, a compound rate of return of about 14% per annum. Our benchmark, the
FTSE All Share Index, on the other hand more than doubled (+110%) before it
peaked in 1999 - thereafter falling - and at our year end it was over 30% lower
than that peak. The table below illustrates these results:

         Net Asset  Change      Change     Benchmark    Change      Change    
         Value p    since       since                   since       since     
         share*     previous    launch     (FTSE All    previous    launch    
                    period                 Share Index) period                
                                                                              
Launch   95.5p                             1,560                              
                                                                              
31 Aug   191.44p    +100.5%     +100.5%    3,208        +105.6%     +105.6%   
1999                                                                          
                                                                              
31 Aug   341.94p    +78.6%      +258.0%    2,214        -31.0%      +41.9%    
2004                                                                          

While it is indeed a remarkable performance that Anthony Bolton and his
Fidelity colleagues have produced, it should be remembered there are times when
the performance is not quite so stellar and indeed that can be seen from the
table. Although we achieved our primary objective of capital growth during our
first five years, our net asset value performance trailed the benchmark by a
little bit; there will be times in the future when that happens again. But the
second five years has proved to be quite outstanding - with an increase in the
net asset value of just under 80% at a time when the market itself declined by
some 30%. That truly does fulfil our goal of making money for shareholders over
the longer term and shows that it can be done in difficult times. During the
last ten years we have been able to report, on nine out of ten occasions,
increases in the annual net asset value. I believe that this performance stems
in part from having had a consistent team (both Manager and Board) throughout
the period.

I am sure shareholders would like to join the Directors, all of whom are
shareholders, in congratulating the Manager and his colleagues for this
performance and in thanking them for it.

The Year's Performance: NAV: 285.93p to 341.94p: + 19.6%

This last year proved to be one of those nine years, with our net asset value
increasing from the 285.93p per share reported last year to 341.94p per share
at 31 August 2004. That is an increase of 19.6% and it compares with an
increase in our benchmark of 7.2%. In fact, as is often the case it was a tale
of two halves, the net asset value having risen by 20.5% in the first half but
declining slightly - by 0.7% - in the second half.

Of the 56p increase in the net asset value per share, 23p was the result of
superior stock selection and is the main reason why we performed rather better
than the stock market. Our gearing of course helped, as it always will when we
are making money - adding circa 9p per share.

During the course of the year your company participated in the reconstruction
of two investment trusts, Govett Strategic Trust and The Derby Trust. In both
cases the arrangements for their respective shareholders included the option of
receiving ordinary shares of Fidelity Special Values, should any shareholder
wish to do so. A number of them did and as a consequence we issued 9,351,136
shares to a number of Govett Strategic Trust shareholders and 2,806,948 to The
Derby Trust shareholders. It is important to say that it was a condition of our
part of these arrangements that our own net asset value benefited and I can
report that it did so to the tune of approximately 1.5p per share. We would
like to welcome all new shareholders to the Company, including those former
shareholders of Govett Strategic Trust and The Derby Trust and we trust that
your faith in Fidelity Special Values will be rewarded.

To add to the 12,158,084 shares issued above, we also issued 2,462,790 for cash
in the market at a premium to net asset value and finally, 3,309,360 shares in
satisfaction of warrantholders' subscriptions. In all therefore we issued
17,930,234 shares bringing the total number of shares in issue to 63,419,923.
We were able to do all of this without affecting the premium rating of the
Company's shares. That was a matter of great concern to your Board at the time
and is something we continue to monitor carefully.

Dividend: 1.40p per share

Your Board is recommending a dividend of 1.40p per share to shareholders,
which, if approved, will be paid on 13 December 2004 to those on the register
on 5 November 2004. As you will see later in the report, your Board has laid
out a number of its policies in writing, one of which is the dividend policy.
In summary it says that in general the amount of the dividend will be
determined by what is earned each year and that is the case for this year.

Corporate Governance:

Governance: Your Board has devoted a considerable amount of time during this
past year to the matter of corporate governance. There are now new Listing
Rules for investment trusts and companies and there is the new Combined Code.
To add to this the Association of Investment Trust Companies, of which your
Company is a member, has produced a code specially for investment trusts, which
we have used as the basis of our own corporate governance schedule. This can be
found on the Fidelity Special Values website, which in turn can be found on the
Fidelity website at www.fidelity.co.uk. Our Corporate Governance report
highlights those areas of either the AITC Code of Corporate Governance© or the
Combined Code where we have deemed it sensible and appropriate to explain a
different approach to that suggested in either code. In particular, being a
small Board with a Chairman who has to be independent under the Listing Rules
for investment trusts, we do not regard it as necessary or appropriate to have
a senior independent director, the Chairman being de facto that person. We
agree with and have followed the AITC's Code on the matter of directors'
tenure. We have not yet undertaken an appraisal of the Board but we will do so
during the course of this year.

Directorate: One of the decisions that the Board made in respect of the
appointment and the re-election of Directors is that each Director should stand
for re-election every year. It gives shareholders a chance to vote on each
Director annually. As a consequence of this and as part of the Board evaluation
process, each of the independent Director's candidacies is considered with a
robust examination as to whether they have performed their duties during the
year in an independent manner - the ultimate test for independent status. The
criteria we use for such examination is set out in our Corporate Governance
section of the Annual Report. I can confirm that such an examination has been
undertaken and that all four of the non-Fidelity directors are regarded as
independent.

During the course of the year the Board decided that James Laurenson, a
chartered accountant by training and an experienced investment trust man,
should take on the role as Chairman of the Audit Committee. He is well
qualified to do this and is therefore an appropriate choice.

Although we believe it to be an effective Board that is working well with the
necessary skills to undertake its responsibilities, in reviewing the Board and
its composition, we have concluded that it would be beneficial to add a new
non-executive, independent director to it. We are in the process of looking for
and appointing one. This appointment will be subject to shareholder approval at
the Annual General Meeting in 2005.

Very sadly the growing pressures of his duties at Fidelity has meant that Simon
Haslam will be stepping down as a Director of the Company, which he will do by
resigning at the conclusion of the AGM. It is sad because he is an outstanding
Director and I have no doubt that the workings of the Board have benefited
enormously from his contribution and I would like to thank Simon for this. We
will be appointing a replacement for Simon subsequent to the AGM and a further
announcement will be made at that time.

Directors' Fees: The changes to corporate governance, to the Listing Rules, to
new accounting standards and other matters, have resulted in a considerable
increase in the work load and in the risks of being a director of an investment
trust company. We anticipate that these burdens will continue to increase in
the years to come. As a consequence the Board has determined that there should
be a new structure to the Directors' fees. The new basis is explained in the
Remuneration Report together with a table showing the details of future
payments. Shareholders are being asked to approve a new limit of £150,000 on
the overall amount that can be paid in Directors' fees at the AGM (Resolution
13).

Manager Evaluation: The new Listing Rules require that boards of directors of
investment trust companies carry out a formal evaluation of the manager
annually and report to shareholders on the outcome with a justification for the
manager remaining in situ. Two observations should be made about this, namely
that (i) the Board monitors the performance of Fidelity at every Board and
Committee meeting and always has and (ii) the Board monitors all aspects of
Fidelity's management of the Company, not just the net asset value track
record. The criteria for the annual evaluation are set out in the Corporate
Governance report in the Annual Report.

As I mentioned earlier, the track record of the NAV, considered over five and
ten years, is excellent. The Board reviewed all other aspects of the management
of the Company and I can report to you that that performance too was of a high
standard. Importantly, the Board reviewed the quality of the team that manages
our affairs; it is very good. As a consequence of this I can report that the
Board had no difficulty in concluding that it is in shareholders' interests
that Fidelity Investments International remains as the Manager of the Company.

Board Policies: Your Board believes that it would be helpful to shareholders
and indeed in keeping with the modern spirit of transparency if it were to
spell out in the Annual Report its major policies. Therefore we have laid out
nine policies in the Annual Report covering amongst others, our investment
goal, dividends, investment policy and gearing. I hope that this proves helpful
to shareholders.

Annual General Meeting: The Annual General Meeting of the Company will be held
this year at 11.30am on 9 December at Fidelity's offices at 25 Cannon Street,
near St Paul's Cathedral. May I repeat what I said last year and what is
written in our corporate governance statement, namely that 'the Annual General
Meeting is the pivotal point in the relationship between the Board of Directors
and shareholders and is the occasion when the Board accounts for itself in
general meeting'. We do therefore encourage as many shareholders as possible to
attend - both individual and institutional - as it gives you the chance to air
your views, hear other shareholders' views or ask any questions you may wish in
front of the body of shareholders. Following the formal meeting Anthony Bolton
will review the past year and look at the prospects for the current one.

Every three years we ask shareholders whether they wish the Company to continue
in business as an investment trust company - the continuation vote. One of our
resolutions this year therefore is a proposal that Fidelity Special Values does
indeed continue in business. Clearly in its first ten years, the Company has
performed well and your Board believes that it will continue to do so. We
therefore recommend that shareholders vote in favour of continuation.

Outlook: Encouraging for our portfolio

In re-reading last year's comments on the outlook for the year just ended, I am
minded to say much the same things again - namely that the global outlook is
much dependent on the economy of the United States and increasingly on that of
China; that the European Union continues to be a drag on global economic
growth; and that our own economy continues to do remarkably well despite Mr
Brown's largesse and stealth taxation and despite rather higher interest rates.

However, the new big factor in the outlook is that of the price of oil. A year
ago, as I write, the price of a barrel of Brent crude oil stood at under US$30;
today it stands at around US$50. Much the same is true for a lot of other
commodity prices, steel, copper etc. Quite what the economic effect of these
much higher prices will be depends largely on how the various central banks
handle the situation. If they do as they did in 1973 and 1974 then there could
be a large increase in the rate of inflation at both producer as well as
consumer levels. If however, the central banks are concerned to restrain the
emergence of inflation - which is certainly the case in the UK and in Euroland
but less certainly so in the United States - then these increases will act more
like a tax increase and will depress economic activity. Even the emergence of
higher inflation must eventually result in higher interest rates and thence
lesser economic activity. So either way the higher oil and other commodity
prices are not good for economic growth in the shorter term. In the longer run,
however, the higher oil price will lead to more investment in finding new
sources of oil and in energy conservation - both good for the longer term, just
as it did after 1981.

So the circumstances of the moment would seem likely to result in a squeeze on
corporate profit margins. Not only are input prices rising but there are the
burdens of the costs of rising regulation and taxation, not to mention the
problems that many companies face in funding pension liabilities. It all seems
to add up to a period of lacklustre economic and corporate profits growth and
one that therefore is not conducive to the re-emergence of another bull market
of the scale of 1975-2000. However, even in markets that move sideways - to
describe markets that drift - there are always good opportunities to make
money. In the last five years, during which the market has fallen, our team has
managed to increase the net asset value. Without making any shorter term
forecast, I can say that the Board continues to have confidence in the ability
of Fidelity to find stocks and shares that will make money for shareholders
over the next five years.

Alex Hammond-Chambers

Chairman

27 October 2004

Enquiries: Barbara Powley - Fidelity Investments International

01737 836883

Issued by Fidelity Investments International. Authorised and regulated by the
Financial Services Authority.

CB19997

 

FIDELITY SPECIAL VALUES PLC

STATEMENT OF TOTAL RETURN (unaudited)

(incorporating the revenue account) of the Company for the year ended 31 August
2004

                               2004                            2003             
                                                                                
                      Revenue  Capital    Total       Revenue  Capital  Total   
                                                                                
                      £'000    £'000      £'000       £'000    £'000    £'000   
                                                                                
Gains on investments  -        30,404     30,404      -        23,027   23,027  
                                                                                
Dividends             5,362    -          5,362       3,766    -        3,766   
                                                                                
Interest from         83       -          83          20       -        20      
securities                                                                      
                                                                                
Other income          146      -          146         70       -        70      
                                                                                
Investment management (2,238)  -          (2,238)     (1,458)  -        (1,458) 
fee                                                                             
                                                                                
Other expenses        (434)    -          (434)       (408)    -        (408)   
                                                                                
Exchange (losses)/    -        (43)       (43)        -        48       48      
gains                                                                           
                                                                                
Net return before     2,919    30,361     33,280      1,990    23,075   25,065  
finance costs and                                                               
taxation                                                                        
                                                                                
Interest payable      (1,965)  -          (1,965)     (1,560)  -        (1,560) 
                                                                                
Return on ordinary    954      30,361     31,315      430      23,075   23,505  
activities before tax                                                           
ation                                                                           
                                                                                
Tax on ordinary       (68)     -          (68)        (31)     -        (31)    
activities                                                                      
                                                                                
Return on ordinary    886      30,361     31,247      399      23,075   23,474  
activities after tax                                                            
ation for the year                                                              
attributable to                                                                 
equity shareholders                                                             
                                                                                
Dividends             (890)    -          (890)       (466)    -        (466)   
                                                                                
Transfer (from)/to    (4)      30,361     30,357      (67)     23,075   23,008  
reserves                                                                        
                                                                                
Return per ordinary                                                             
share                                                                           
                                                                                
Basic                 1.55p*   52.98p     54.53p      0.91p    52.64p   53.55p  
                                                                                
Fully-diluted         -        -          -           0.85p    48.79p   49.64p  

The revenue column of this 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.

* Returns per ordinary share are based on the weighted average number of
ordinary shares in issue during the year, being 57,306,860. The number of
shares in issue at the year end was 64,419,923.

BALANCE SHEET (unaudited)

as at 31 August 2004

                                                2004          2003         
                                                                           
                                                £'000         £'000        
                                                                           
Fixed assets                                                               
                                                                           
Investments                                     251,138       160,678      
                                                                           
Current assets                                                             
                                                                           
Debtors - amounts falling due within one year   3,470         2,060        
                                                                           
Cash at bank                                    1,007         1,677        
                                                                           
                                                4,477         3,737        
                                                                           
Creditors - amounts falling due within one year                            
                                                                           
Fixed rate unsecured loans                      (20,000)      -            
                                                                           
Other creditors                                 (5,758)       (3,191)      
                                                                           
                                                (25,758)      (3,191)      
                                                                           
Net current (liabilities)/assets                (21,281)      546          
                                                                           
Total assets less current liabilities           229,857       161,224      
                                                                           
Creditors - amounts falling due after more than                            
one year                                                                   
                                                                           
Fixed rate unsecured loans                      (13,000)      (25,000)     
                                                                           
Total net assets                                216,857       136,224      
                                                                           
Capital and reserves                                                       
                                                                           
Called up share capital                         15,855        11,373       
                                                                           
Share premium account                           87,923        44,611       
                                                                           
Capital redemption reserve                      404           404          
                                                                           
Other reserves                                                             
                                                                           
Other non-distributable reserve                 5,152         1,742        
                                                                           
Warrant reserve                                 -             928          
                                                                           
Capital reserve - realised                      82,169        62,519       
                                                                           
Capital reserve - unrealised                    24,144        13,433       
                                                                           
Revenue reserve                                 1,210         1,214        
                                                                           
Total equity shareholders' funds                216,857       136,224      
                                                                           
Net asset value per ordinary share:                                        
                                                                           
Basic                                           341.94p       299.46p      
                                                                           
Fully-diluted                                   341.94p       285.93p      

 

 

 

CASH FLOW STATEMENT (unaudited)

for the year ended 31 August 2004

                                            2004               2003        
                                                                           
                                            £'000              £'000       
                                                                           
Operating activities                                                       
                                                                           
Investment income received                  2,903              2,387       
                                                                           
Underwriting commission received            17                 9           
                                                                           
Deposit interest received                   134                57          
                                                                           
Investment management fee paid              (2,080)            (1,382)     
                                                                           
Directors' fees paid                        (64)               (61)        
                                                                           
Other cash payments                         (468)              (256)       
                                                                           
Net cash inflow from operating activities   442                754         
                                                                           
Returns on investments and servicing of                                    
finance                                                                    
                                                                           
Interest paid                               (1,905)            (1,544)     
                                                                           
Net cash outflow from servicing of finance  (1,905)            (1,544)     
                                                                           
Financial investment                                                       
                                                                           
Purchase of investments                     (194,565)          (90,221)    
                                                                           
Exchange (losses)/gains                     (49)               48          
                                                                           
Disposals of investments                    175,578            78,514      
                                                                           
Net cash outflow from financial investment  (19,036)           (11,659)    
                                                                           
Equity dividend paid                        (457)              (600)       
                                                                           
Net cash outflow before financing           (20,956)           (13,049)    
                                                                           
Financing                                                                  
                                                                           
Exercise of warrants                        3,309              151         
                                                                           
Fixed rate 4.91% unsecured loan drawn down  -                  5,000       
                                                                           
Fixed rate 5.655% unsecured loan drawn down 8,000              -           
                                                                           
Issue of ordinary shares                    8,495              7,658       
                                                                           
Cash element from issue of shares to        931                -           
shareholders of Govett Strategic and Derby                                 
Trust                                                                      
                                                                           
Issue costs relating to issue of shares to  (454)              -           
shareholders of Govett Strategic and Derby                                 
Trust                                                                      
                                                                           
Net cash inflow from financing              20,281             12,809      
                                                                           
Decrease in cash                            (675)              (240)       

The above statements have been prepared on the basis of the accounting policies
as set out in the most recently published set of annual financial statements.

The figures for the year to 31.08.03 have been extracted from the accounts for
the year ended 31.08.03 which have been delivered to the Registrar of Companies
and on which the Auditors gave an unqualified report.

The annual report and accounts will be posted to shareholders in November 2004.
Copies will also be available from the Company's registered office at
Beechgate, Millfield Lane, Tadworth, Surrey KT20 6RP.