Interim Results

FIDELITY SPECIAL VALUES PLC Preliminary Announcement of Unaudited Interim Results for the six months ended 28 February 2006 INTERIM REPORT Shareholder returns: NAV +15.8% to 533.9p per share During the six month review period, the net asset value of our ordinary shares has risen by 15.8% to 533.9p per share, achieving the Company's goal of capital growth. The return also was higher than that of the stock market as measured by our benchmark (the FTSE All Share Index), which rose by 11.2%. The share price rose by 15.3% to 521.25p (total return figures, which include the effect of dividends, are shown in the interim report). The UK market made steady progress during the period. Small and medium-sized companies continued to outperform their larger counterparts. At sector level, industrials, non-life insurance and mining were among the best performers. Conversely, the healthcare and oil & gas sectors, the latter adversely affected by a fall in the oil price, lost money over the six month review period. Robust market performance was, however, slightly at odds with economic data. Although healthy corporate earnings and increasing merger and acquisitions activity had a positive effect on the UK stockmarket, consumer confidence remained generally fragile. Slowing economic growth in the UK economy saw the Chancellor cutting his forecasts, while the Bank of England held interest rates at 4.5% as inflation slowed (in spite of remaining above the Bank's 2.0% target). Despite the economy expanding by 0.6% during the final three months of 2005 (exceeding analysts' forecasts), economic growth of 1.8% for 2005 as a whole was the lowest since 1992, and its weakness pressured companies into trimming their labour costs. However, the economy has recently been showing signs of recovery, with an improving housing market and a stronger forecast for consumer spending underpinning the revival. Analysis of NAV movement --> Pence % NAV at 31 August 2005 461.23 Impact of: Stockmarket +56.75 +12.30 Stock selection +11.30 +2.45 Share issues - - Gearing +9.67 +2.10 Other, including costs -5.06 -1.10 NAV at 28 February 2006 533.89 During the six month review period, investment in the oil & gas producers sector remained the portfolio's largest commitment; fortunately the lacklustre performance in the sector in general was countered by the Manager's prudent stock selection which added value. Among the Company's other positions were investments in media, pharmaceutical & biotechnology and travel & leisure. Conversely, at the end of the review period, the portfolio had no investments in the general industrials, tobacco and aerospace & defence sectors. Investment in FTSE 100 companies continued to rise during the period; given the strength of small and medium-sized companies over recent years, the Manager was able to identify attractively valued prospects within the larger segment of the market. Meanwhile, a proportion of the Company's portfolio continues to be invested outside of the UK stockmarket; the Manager continues to discover selected opportunities in Europe and the Asia Pacific region. Borrowings: £40 million The total borrowings of the Company did not increase during the period under review, remaining at £40 million, which represented approximately 11.5% of the shareholders' funds at 28 February 2006. Although it is the Board's policy under normal circumstances to have a gearing level of between 15% and 20%, towards the end of March, against a cautious view on the market, the Manager acquired a put option which gives the Company the rights, for three months, to sell £91 million worth of FTSE100 shares at 5% below the then Index levels. Simultaneously, the Manager has also sold investments in the market with the effect that the net gearing level at today's date has reduced to around zero. Outlook Prospects of an early cut in interest rates in the UK appear to have diminished following the release of the minutes of the 9 February Monetary Policy Committee meeting of the Bank of England. The recent pick-up in economic activity and a recovery in the housing market are among the indicators that suggest interest rates might remain on hold in the short term. Meanwhile, merger and acquisition activity continues to gather pace. At portfolio-specific level, the Manager sees value in large-cap stocks, which have become increasingly attractive on a valuation basis. However, the number of stocks that meet the Manager's investment criteria has fallen. This, in part, reflects that fact that the range of valuations has been compressed; low valued stocks have generally been re-rated upwards while the premium of more highly valued stocks has fallen. Although the Manager focuses on stock picking rather than taking a top-down macroeconomic approach to managing the Company's portfolio, it believes that after three years, the bull market in the UK has now entered its final stage. In addition, there are still risks in Middle Eastern instability and avian influenza. Against this backdrop, the Manager is searching for lower risk stocks that exhibit superior quality, higher growth or that have an above average return on capital. By order of the Board Fidelity Investments International 4 May 2006 Enquiries: Miss Tracey A Bennett - Fidelity Investments International 01737 836883 Mr Stephen Westwood - Fidelity Investments International 020 7961 4477 CB26997 FIDELITY SPECIAL VALUES PLC Income Statement for the six months for the year for the six months ended ended ended 28.02.06 31.08.05 28.02.05 unaudited audited unaudited restated (2) revenue capital total revenue capital total revenue capital total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gains on - 50,947 50,947 - 75,213 75,213 - 43,941 43,941 investments Dividend income 2,439 - 2,439 7,818 - 7,818 2,420 - 2,420 Interest income 116 - 116 209 - 209 153 - 153 Underwriting 7 - 7 30 - 30 5 - 5 commission income Investment (2,082) - (2,082) (3,441) - (3,441) (1,611) - (1,611) management fee Other expenses (241) - (241) (460) - (460) (238) - (238) Exchange (losses) (2) 5 3 2 (28) (26) - (11) (11) /gains Net return before 237 50,952 51,189 4,158 75,185 79,343 729 43,930 44,659 finance costs and taxation Interest payable (1,074) - (1,074) (2,246) - (2,246) (1,154) - (1,154) (Loss)/return on (837) 50,952 50,115 1,912 75,185 77,097 (425) 43,930 43,505 ordinary activities before taxation Taxation on 7 - 7 (126) - (126) 17 - 17 ordinary activities* (Loss)/return on (830) 50,952 50,122 1,786 75,185 76,971 (408) 43,930 43,522 ordinary activities after taxation for the period (Loss)/return per (1.27p) 77.96p 76.69p 2.76p 116.02p 118.78p (0.64p) 68.37p 67.73p ordinary share 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. All revenue and capital items in the Income Statement derive from continuing operations. No operations were acquired or discontinued in the year. * This relates to overseas taxation only. Reconciliation of Movements in Shareholders' Funds called-up share capital other capital capital revenue total share premium redemption non-distributable reserve reserve reserve equity capital account reserve reserve realised unrealised £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening 15,855 87,923 404 5,152 82,169 24,144 1,210 216,857 shareholders' funds as previously stated: 1 September 2004 Effect of prior - - - - - - 888 888 year adjustment as a result of a change in accounting policy regarding the treatment of proposed dividends Opening 15,855 87,923 404 5,152 82,169 24,144 2,098 217,745 shareholders' funds as restated: 1 September 2004 Net recognised - - - - 30,854 44,331 - 75,185 gains for the year Issue of ordinary 484 7,135 - - - - - 7,619 shares Revenue after - - - - - - 1,786 1,786 taxation Dividend paid - - - - - - (896) (896) Closing 16,339 95,058 404 5,152 113,023 68,475 2,988 301,439 shareholders' funds as restated: 31 August 2005 Effect of changing - - - - - (833) - (833) prices from middle market to bid market at 1 September 2005 Net recognised - - - - 36,881 14,071 - 50,952 gains for the period Revenue after - - - - - - (830) (830) taxation Dividend paid - - - - - - (1,797) (1,797) Closing 16,339 95,058 404 5,152 149,904 81,713 361 348,931 shareholders' funds: 28 February 2006 Balance Sheet 28.02.06 31.08.05 29.02.04 unaudited audited unaudited restated (2) £'000 £'000 £'000 Fixed assets Investments held at fair value through 384,930 338,982 306,298 profit or loss Current assets Debtors 3,515 9,604 3,450 Amounts held at futures clearing houses - 147 - and brokers Cash at bank 5,528 3,026 895 9,043 12,777 4,345 Creditors - amounts falling due within one year Other creditors (5,042) (10,320) (3,287) Net current assets 4,001 2,457 1,058 Total assets less current liabilities 388,931 341,439 307,356 Creditors - amounts falling due after more than one year Fixed rate unsecured loans (40,000) (40,000) (40,000) Total net assets 348,931 301,439 267,356 Capital and reserves Called up share capital 16,339 16,339 16,301 Share premium account 95,058 95,058 94,462 Capital redemption reserve 404 404 404 Other non-distributable reserve 5,152 5,152 5,152 Capital reserve - realised 149,904 113,023 96,979 Capital reserve - unrealised 81,713 68,475 53,264 Revenue reserve 361 2,988 794 Total equity shareholders' funds 348,931 301,439 267,356 Net asset value per ordinary share: 533.89p 461.23p 410.02p Cash Flow Statement 28.02.06 31.08.05 28.02.05 unaudited audited unaudited £'000 £'000 £'000 Operating activities Investment income received 1,081 3,990 1,193 Underwriting commission 7 30 5 received Interest received 117 147 100 Investment management fee paid (2,920) (2,377) (1,532) Directors' fees paid (49) (74) (30) Other cash payments (99) (385) (136) Net cash (outflow)/inflow from (1,863) 1,331 (400) operating activities Returns on investments and servicing of finance Interest paid (1,088) (2,235) (1,159) Net cash outflow from returns (1,088) (2,235) (1,159) on investments and servicing of finance Taxation Overseas taxation recovered 27 81 - Taxation recovered 27 81 - Financial investment Purchase of investments (132,286) (206,753) (107,810) Disposal of investments 139,362 196,025 96,177 Net cash inflow/(outflow)from 7,076 (10,728) (11,633) financial investment Equity dividend paid (1,797) (896) (896) Net cash inflow/(outflow)before 2,355 (12,447) (14,088) financing Financing Fixed rate 5.435% unsecured - 27,000 27,000 loan drawn down Fixed rate 7.82% unsecured loan - (10,000) (10,000) repaid Fixed rate 6.42% unsecured loan - (10,000) (10,000) repaid Issue of ordinary shares - 7,619 6,976 Net cash inflow from financing - 14,619 13,976 Increase/(decrease)in cash 2,355 2,172 (112) 1. The results for the six months to 28 February 2006 and 28 February 2005, which are unaudited, constitute non-statutory financial statements within the meaning of s240 of the Companies Act 1985. The figures and financial information for the year ended 31 August 2005 are extracted from the latest published accounts and have been restated as disclosed below. These accounts, on which the auditors gave an unqualified report, have been delivered to the Registrar of Companies. 2. Prior year adjustments and restatements caused by accounting policy changes 28.02.06 31.08.05 Shareholders' Shareholders' funds funds £'000 £'000 Opening balance as previously stated: 1 September 299,642 216,857 Effect of prior year adjustment as a result of a 1,797 888 change in accounting policy regarding the treatment of proposed dividends ______________ ____________ Opening balance as restated: 1 September 301,439 217,745 Effect of changing prices from middle market to (833) - bid market at 1 September 2005 Issue of ordinary shares - 7,619 Other recognised gains for the period 50,952 75,185 Revenue after taxation (830) 1,786 Dividend paid (1,797) (896) Closing balance as restated: 348,931 301,439 3. These interim financial statements have been prepared on the basis of the accounting policies set out in the Company's annual report and accounts dated 31 August 2005 except as stated below: UK GAAP is converging with International Financial Reporting Standards ("IFRS") and the following key changes have been made as a result of the introduction of Financial Reporting Standards ("FRS") 26 and 21. FRS26: "Financial Instruments: Measurement" requires that quoted investments are measured at fair value which is deemed to be bid price. The Company's investments have accordingly been revalued to bid price but no adjustments have been made to the prior period's results as the Company has taken advantage of paragraph 108D of the Standard and disclosed the effect of valuing the investments at bid price as shown in the Reconciliation of Movements in Shareholders' Funds. FRS21: "Events after the Balance Sheet Date" states that dividends declared and approved by the Company after the balance sheet date should not be recognised as a liability of the Company at the balance sheet date. Prior year results have accordingly been restated, 4. The Statement of Total Return is now called the Income Statement and the total column, as opposed to the revenue column, is now the profit and loss account of the Company. 5. The Reconciliation of Movements in Shareholders' Funds has been introduced as a new primary statement. The dividends paid by the Company are now reported through this statement. 6. These financial statements have been prepared in accordance with the AITC Statement of Recommended Practice ("SORP") issued in January 2003 and revised in December 2005 and the changes to the accounting policies as set out above. 7. Returns per ordinary share are based on the net revenue loss on ordinary activities after taxation of £830,000 (31.08.05: return £1,786,000; 28.02.05: loss £408,000) and the capital appreciation in the period of £ 50,952,000 (31.08.05: appreciation £75,185,000; 28.02.05: appreciation £ 43,930,000) and on 65,356,053 ordinary shares (31.08.05: 64,801,722; 28.02.05: 64,251,041) being the weighted average number of ordinary shares in issue during the period. The interim report and financial statements will be posted to shareholders as soon as is practicable. Copies will also be available to the public at the Company's registered office, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.

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