Fidelity Investment Trust Fidelity Special Values : Special Values PLC Half-Yearly Report for the six months ended 29 February 2024

The Company aims to achieve long-term capital growth for shareholders by investing in 'special situations'. It invests in companies primarily listed in the UK, but may invest up to 20% of total net assets outside of UK companies.

Contrarian stock-picking approach - The Portfolio Manager, Alex Wright, looks for unloved companies that are entering a period of positive change that the market has not yet recognised. He follows a highly disciplined investment

process that focuses first on evaluating downside risk and then on identifying positive change and potential upside. The focus is first and foremost on downside protection. Alex's philosophy is to base investment decisions on company fundamentals rather than top-down factors (market or macroeconomic drivers).

Leveraging Fidelity's global research platform - This contrarian approach is research intensive in order to identify and gain conviction in opportunities

that are out of favour with other investors. The depth of Fidelity's research ensures that there is a sufficient number of strong investment ideas to build a diversified portfolio at all points of the market cycle.

Performance - In the six month reporting period, the Company's net asset value total return was +4.0% and the share price total return was +4.8%, compared

to the FTSE All-Share Index (Benchmark) return of +3.9%.

Dean Buckley, Chairman

Portfolio Manager's Half-Yearly Review

Read more on pages 04 to 07

Net Asset Value per Ordinary Share as at 29 February 2024, 28 February 2023 and 28 February 2022

Ordinary Share Price as at

29 February 2024, 28 February 2023

and 28 February 2022

2024274.00p

At a Glance

Six months ended 29 February 2024

Net Asset Value per

Ordinary Share

total return1,2

+4.0%

(28 February 2023: +10.4%)

Ordinary Share Price

total return1,2

+4.8%

(28 February 2023: +13.1%)

FTSE All-Share Index

(Benchmark) total return1

+3.9%

(28 February 2023: +8.7%)

Interim Dividend per

Ordinary Share

3.24p

(28 February 2023: 2.53p)

As at 29 February 2024

Shareholders' Funds

£968.4m

Market Capitalisation

£888.0m

Capital Structure

Ordinary Shares of 5 pence each

324,098,920

Summary of the key aspects of the Investment Policy

The investment approach is flexible, with positions in large, medium and smaller sized companies, across all industries. The Company may make limited investments in companies outside of the UK.

The Company may also invest in other transferable securities, collective investment schemes, money market instruments, cash and deposits, and is also able to use derivatives for efficient portfolio management and investment purposes.

The Company is able to gear the portfolio and the Board takes the view that long-term returns for shareholders can be enhanced by the use of gearing in a carefully considered and monitored way.

DIRECTORS' REPORTS

Performance

In the six month reporting period to 29 February 2024, the Company recorded a net asset value ("NAV") per ordinary share return of +4.0% and a share price return of +4.8%, compared to a +3.9% return for the Benchmark FTSE All-Share Index (all on a total return basis). This report seeks to summarise the period, highlight the key drivers of performance and set out the Portfolio Manager's forward-looking views.

Stock Market and Portfolio Review UK equities advanced during the period despite persistent global challenges including geopolitical tensions, economic uncertainty, high borrowing costs and China's sluggish post pandemic economy. Nevertheless, the market narrative was supported by decelerating inflationary pressures that allowed the Bank of England ("BoE") to keep interest rates unchanged during the review period after fourteen successive rate hikes. This has led

to expectations that we may have reached the peak of rate increases, while improving economic data increased conviction in the soft-landing narrative, providing a tailwind for equities.

From a sector perspective, market gains were led by technology, industrials and consumer discretionary, while basic materials and consumer staples were the biggest detractors. While both the value and growth segments showed gains, the technology-led rally from November meant that growth outperformed over the period. Similarly, small cap stocks rebounded strongly following two years of significant underperformance.

The period started with UK equities posting gains in September as easing inflation prompted the BoE to keep its policy interest rate unchanged at 5.25%. The decision

to leave rates unchanged surprised the market, as previous expectations factored in a high likelihood of an imminent rate hike. Encouragingly, positive inflationary developments extended beyond the UK, with the eurozone and the US also reporting decelerating price pressures, which heightened investor optimism over a soft landing. By the end of November, markets had priced in a peak in current interest rates, with expectations of cuts in 2024, both at home and abroad.

However, equities started off 2024 on a weak note. This shift was underpinned by investors recalibrating their expectations for imminent and substantial interest rate cuts by major central banks. A desire for firmer evidence that inflation was under control and the lack of commitment on the timing of rate adjustments by central banks contributed to an atmosphere of uncertainty among market participants. Meanwhile, geopolitical concerns remained centre stage as a result of disruption of commercial shipping in the Red Sea, leading to some supply chain bottlenecks.

Economic indicators in the UK painted a mixed picture. Preliminary estimates revealed a 0.3% contraction in UK GDP (quarter-on-quarter) in the fourth quarter of 2023, driven by declines in both consumer and government spending. While this marked the second consecutive quarter of contraction (defined as a technical recession), nevertheless, GDP is estimated to have increased overall in 2023 but only by 0.1%. On a positive note, the preliminary data for January was more encouraging showing a 0.2% month-on-month GDP expansion. UK inflation has also fallen rapidly from its peak of more than 11% in late 2022 to just 3.4%

in February, but it is still above the Bank of England's 2% target and wage inflation remains stubbornly higher than the headline rate.

Meanwhile, shares in health and beauty products company PZ Cussons fell following the devaluation of Nigeria's currency, the naira, before the company's results announcement in February and this led to a reduction in its dividend and a paring back of profit forecasts. The company counts Nigeria as one of its four major markets, although it now only represents 15% of profits. PZ Cussons is undergoing a turnaround having reinvested in its core brands, professionalised the organisation and has started to simplify its operations.

Use of gearing

During the review period, we continued to use contracts for difference to gear the portfolio's long exposure and eliminate some of the currency exposure for those holdings listed outside the UK. Overall, there was a small reduction in the Company's gearing level over the period. Gearing remains low at 5.9% at the end of February (compared to 6.5% at the end of August 2023). While valuations are attractive and we are finding new ideas, we are conscious of the increased cost of borrowing and want to retain some dry powder to take advantage of opportunities and any short-term volatility.

Outlook

While there continues to be a degree of economic and geopolitical uncertainty, the attractiveness of UK valuations versus history and compared to other markets, as well as the large divergence in performance between different parts of the market, continue to create good opportunities for attractive returns from UK stocks on a three-to-five-year view. Their unloved status means we continue to find overlooked companies with good upside potential across industries and the market cap spectrum. What is more, the lack of interest

from other investors means that, despite our focus on attractive valuations, we do not have to compromise on quality.

While the value in the UK market is not being recognised by investors, it is being acknowledged by other market participants. Overseas corporates and private equity firms are seeing the value and are taking advantage of those attractive valuations. As noted previously, we have had a lot of success with M&A across the portfolio in the last six months. After a lull in the middle of last year, activity has picked up. The low valuations are also reflected in the substantial buyback activity among UK corporates.

From a portfolio perspective, we remain disciplined, taking profits in stocks that have performed well and where the risk/reward is no longer as attractive. We are particularly wary of stocks where fundamentals and margins have been strong, and a deterioration is not priced in. A stock we sold after strong returns was Marks & Spencer, where we felt the investment thesis had played out. The stock had doubled having taken market share in the clothing, home and food segments which had benefited from the exit of the likes of New Look, Arcadia and Debenhams, favourable weather conditions as well as a switch from shopping online back to shops after the pandemic. Market sentiment was becoming overwhelmingly positive and after such a strong run, we felt the risk/return was more skewed to the downside given a wide range of scenarios in a relatively weak economic environment. Elsewhere, higher interest rates have benefited sectors such as banks and life insurers, which had been shunned since the global financial crisis. While they continue to be well represented in our portfolios, we have