FIDELITY SPECIAL VALUES PLC
Preliminary Announcement of Unaudited Interim Results
for the six months ended 28 February 2003
INTERIM REPORT
PERFORMANCE
During the first six months of the year the fully diluted net asset value of
our ordinary shares has fallen by 14.5% to 204.26p per share, a decline just a
little bit more than that of our benchmark (the FTSE All Share Index) which
fell by 14.0%. Over the period the market was weak and during February 2003 we
increased our borrowings by �5m, taking them to �25m because we felt that the
pessimism was overdone and that there were good investment opportunities for
our Manager to take advantage of. Although the portfolio itself outperformed
the benchmark, the net asset value slightly under-performed it, the gearing
being responsible for the difference.
The share price fell by 18.3% as the premium at which the shares sold in
relation to the net asset value narrowed from 6.0% to 1.8%.
MARKET REVIEW
At the beginning of this period markets were weak, suffering as they were from
a series of corporate scandal announcements in the United States. Investor
confidence in management integrity and the reporting of profits was badly
shaken by these revelations and the resulting weakness of US stock markets
affected markets in the rest of the world. By the beginning of October, markets
had fallen so far that a recovery took place in the weeks leading up to
Christmas. Since then, however, the prospect of war in Iraq made investors very
cautious and so the weakness of stock markets resumed. Until the war with Iraq
is finally over, it will not be possible to tell how much of the weakness was
caused by the fear of war and how much by the fear of another recession in the
United States.
PORTFOLIO MANAGER'S REPORT
There were no major changes at sector level during the period. The Manager
increased the Company's exposure to the shares of selected companies in the
non-life insurance sector, where the pricing environment continues to look
attractive. Insurance underwriters Wellington Underwriting performed well,
while Amlin's share price was boosted by news of a strong rise in premiums.
Elsewhere in the financial sector, the Company's holding in the French bank
Credit Lyonnais, which became the subject of intense takeover speculation
towards the end of 2002, was a strong contributor to overall performance. The
theme of corporate activity continued into early 2003 with the battle for food
retailer Safeway, the Company's largest holding.
Investments were made in some of the more high growth sectors, such as
biotechnology, support services and technology but reduced in the more
defensive sectors, such as tobacco and food producers. Paradoxically, the
current environment of uncertainty has thrown up a large number of undervalued
opportunities.
OUTLOOK
At the moment the UK's economy appears to be in rather better shape than those
of the other G7 countries. Although inflation has risen a little recently -
influenced by certain short term factors - the prospects for low inflation
remain good. Unemployment is low and the public sector is booming, aided and
abetted by massive increases in the Government's expenditures.
Investors' confidence however remains fragile, concerned as it is by the global
geopolitical situation generally and by the war in Iraq specifically, about the
global economy in the light of doubts about the American economy, about
consumer expenditure in the UK and about the effect of the increases in
taxation and regulation on corporate profits in the UK. At the time of writing
the worst of the war in Iraq appears to be over and investors can now focus on
economic and financial matters. Share prices have declined a long way over the
last three years, investors' expectations are low and the US Government is
taking strong measures to enhance growth in the US economy. Given these points,
we - both board and management - have assumed a rather more positive view about
the prospects of making money from a portfolio of carefully selected shares -
as our decision to increase our borrowings demonstrates.
By order of the Board
Fidelity Investments International
10 April 2003
Enquiries: Barbara Powley - Fidelity Investments International 01737 836883
FIDELITY SPECIAL VALUES PLC
Statement of Total Return (incorporating the revenue account)
For the six months ended 28 February 2003
for the six months ended for the year ended for the six months
ended
28.02.03 31.08.02 28.02.02
Unaudited audited unaudited
revenue capital total revenue capital total revenue capital total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Losses on - (15,912) (15,912) - (14,511) (14,511) - (4,841) (4,841)
investments
Dividend 1,282 - 1,282 3,595 - 3,595 1,291 - 1,291
income
Interest 35 - 35 149 - 149 101 - 101
income
Underwriting 7 - 7 15 - 15 4 - 4
Commission
income
Investment (623) - (623) (1,404) - (1,404) (630) - (630)
management fee
Other expenses (200) - (200) (388) - (388) (158) - (158)
Exchange gains - 61 61 - (163) (163) - (2) (2)
/(losses)
Net return/ 501 (15,851) (15,350) 1,967 (14,674) (12,707) 608 (4,843) (4,235)
(loss) before
finance costs
and taxation
Interest (715) - (715) (1,409) - (1,409) (682) - (682)
payable
(Loss)/return (214) (15,851) (16,065) 558 (14,674) (14,116) (74) (4,843) (4,917)
on ordinary
activities
before tax
Tax on (10) - (10) (9) - (9) 5 - 5
ordinary
activities
(Loss)/return (224) (15,851) (16,075) 549 (14,674) (14,125) (69) (4,843) (4,912)
on ordinary
activities
after tax for
the period,
attributable
to equity
shareholders
Dividends (11) - (11) (600) - (600) (11) - (11)
Transferred (235) (15,851) (16,086) (51) (14,674) (14,725) (80) (4,843) (4,923)
from reserves
(Loss)/return
per ordinary
share
Basic (0.52)p (36.87)p (37.39)p 1.39p (37.08)p (35.69)p (0.18)p (12.60) (12.78)
p p
Fully-diluted - - - 1.35p (36.16)p (34.81)p - - -
These accounts have been prepared in accordance with the AITC Statement of
Recommended Practice (SORP) issued in December 1995.
FIDELITY SPECIAL VALUES PLC
Balance Sheet
As at 28 February 2003
28.02.03 31.08.02 28.02.02
audited unaudited
unaudited
�'000 �'000 �'000
Fixed assets
Investments 117,616 125,652 126,081
Current assets
Debtors 369 446 2,896
Cash at bank 947 1,917 583
1,316 2,363 3,479
Creditors- amounts falling due
within one year
Other creditors (1,273) (2,640) (1,237)
Net current assets/(liabilities) 43 (277) 2,242
Total assets less current 117,659 125,375 128,323
liabilities
Creditors - amounts falling due
after more than one year
Fixed rate unsecured loan (25,000) (20,000) (20,000)
Total net assets 92,659 105,375 108,323
Capital and reserves
Called up share capital 10,919 10,526 9,920
Share premium account 40,595 37,731 31,482
Capital redemption reserve 404 404 404
Other reserves
Warrant exercise reserve 1,741 1,586 1,586
Warrant reserve 928 970 971
Capital reserve - realised 66,803 69,265 63,048
Capital reserve - unrealised (29,777) (16,388) (340)
Revenue reserve 1,046 1,281 1,252
Total equity shareholders' funds 92,659 105,375 108,323
Net asset value per ordinary
share
Basic 212.15p 250.28p 272.99p
Fully-diluted 204.26p 238.87p 259.11p
FIDELITY SPECIAL VALUES PLC
Cash Flow Statement
For the six months ended 28 February 2003
28.02.03 31.08.02 28.02.02
unaudited audited unaudited
�'000 �'000 �'000
Operating activities
Investment income received 937 2,424 946
Underwriting commission received 7 15 4
Deposit interest received 23 117 83
Investment management fee paid (651) (1,412) (649)
Directors' fees paid (34) (59) (33)
Other cash payments (178) (334) (52)
Net cash inflow from operating 104 751 299
activities
Returns on investments and
servicing of finance
Interest paid (714) (1,376) (668)
Net cash outflow from servicing (714) (1,376) (668)
of finance
Taxation
UK income tax recovered - 9 9
Tax recovered - 9 9
Financial investment
Purchase of investments (41,184) (78,730) (35,724)
Exchange gains/(losses) 59 (163) (2)
Disposal of investments 32,965 61,925 24,080
Net cash outflow from financial (8,160) (16,968) (11,646)
investment
Equity dividend paid (600) (950) (950)
Net cash outflow before financing (9,370) (18,534) (12,956)
Financing
Exercise of warrants 151 816 817
Fixed rate 6.42% unsecured loan - 10,000 10,000
drawn down
Fixed rate 4.91% unsecured loan 5,000 - -
drawn down
Repayment of fixed rate 5.65% - (4,000) (4,000)
unsecured loan
Repayment of fixed rate 5.9704% - (6,000) (6,000)
unsecured loan
Issue of ordinary shares 3,249 10,222 3,309
Net cash inflow from financing 8,400 11,038 4,126
Decrease in cash (970) (7,496) (8,830)
The figures and financial information for the year ended 31 August 2002 have
been extracted from the latest published accounts of the Company and do not
constitute the statutory accounts for that year. Those accounts have been
delivered to the Registrar of Companies and included the report of the
auditors, which was unqualified and did not contain a statement under either
section 237(2) or 237(3) of the Companies Act 1985.
Copies of the interim report will be posted to shareholders as soon as
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
END