Invest your moneywith someone youcan trustInvestment Trusts fromFidelity International

Contents

Important informationPlease be aware that the value of investments can go down as well as up soinvestors may get back less than they invest. Past performance is not a reliableindicator of future results. Depending where funds are invested, the followingmay apply:

Overseas investments are subject to currency fluctuations. Investment trusts cangear through the use of bank loans or overdrafts and this can be achievedthrough the use of derivatives. Their use may lead to higher volatility in the netasset value and share price. Some investment trusts may invest more heavilythan others in smaller companies, which can carry a higher risk because theirshare prices may be more volatile than those of larger companies. Someinvestment trusts are able to invest some or all of their assets in developingoverseas markets, which carry a higher risk than investing in larger, establishedmarkets. Investments in emerging markets are likely to experience greater risesand falls in value and there may be trading difficulties. Fidelity does not giveadvice. If you’re unsure of the suitability of an investment for you, you shouldspeak to an authorised financial adviser.

3 Innovation you can trust

4 150 years of investment trusts

5 Fidelity Asian Values PLC – ignoring the noise

7 Fidelity China Special Situations PLC – investing in China’snew growth drivers

9 Fidelity European Values PLC – focusing on strong and sustainabledividend payers

11 Fidelity Japan Trust PLC – bottom-up researchand local knowledge

13 Fidelity Special Values PLC – Looking at UK markets differently

15 Investment Trust features

16 Our global expertise

17 Find out more...

Jobs that don’t exist yetIt is quite scary but exciting to learn that the World EconomicForum estimates that 65 per cent of children today will end upin jobs that don’t even exist yet. 1

This might seem like a strange notion, but it is easier toput into context when you consider that the two largestlisted companies in the United States are both technologycompanies: Apple, founded in 1976 and Amazon founded in1994. In China, the companies with the largest market-capsare even younger; Tencent was founded in 1998 and Alibaba,one year later in 1999.

Together, these four companies are valued in trillions ofdollars and employ legions of staff globally, often doing jobswhich didn’t exist when Jobs, Wozniak and Wayne foundedApple in the mid-70s.

Although what we now recognise as the internet can traceits history back to the 1960s, it did not really developcommercially until the 1990s. However, within just a few years,professional positions such as ‘web designer’ became soubiquitous that they have become recognised as essentialfunctions in almost all businesses. A ‘Social Media Manager’is now a common position, but would not have beenunderstood by many firms as recently as ten years ago.

1 – World Economic Forum ‘The future of jobs’ report – January 2016

In good companyAs my colleague, Claire Dwyer discusses in the followingarticle, the first investment trust company, Foreign & Colonial,was set up in 1868. 150 years on, investment trusts continue toprovide investors with a way of accessing exciting investmentopportunities across different sectors from traditional equitiesand bonds to solar or wind power plants, or even online peer-to-peer lending.

The way that people access and research investmenttrusts has also changed dramatically. The vast majority ofprivate investors can now find and deal in listed investmenttrusts, in real time, online using services such as Fidelity’snew Investment Finder service - fidelity.co.uk . Investmentcompanies themselves have been improving their onlinepresence, and Fidelity’s investment trusts recently launched anew website - fidelityinvestmenttrusts.com - designed to bemore easily read on tablet or mobile device, with a wealth ofinteractive and online video content.

Innovative ideasOf course, innovation is not just about the technology thatsupports it - it is about ideas. Fidelity’s investment trusts, likeothers, continue to reinvent themselves. Many have increasedthe amount of their portfolio that can be invested in unlistedcompanies, i.e. those that have not yet been listed on a stockexchange, investing in newer ideas at an earlier stage in acompany’s development.

Innovation youcan trustAlex Denny, Head of Investment Trusts at Fidelity International talksabout reinvention, and why it’s important to keep innovating in oneof the world’s oldest investment sectors

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“...investment trusts continue toprovide investors with a way ofaccessing exciting investmentopportunities across differentsectors...”

Alex Denny joined Fidelityin 2005 and moved to theInvestment Trust team in2012. He has played a keyrole in developing Fidelity’sinvestment trust distributionproposition, through PersonalInvesting and FundsNetwork.

Alex is also a trustee of the national charityMARINElife.

We are also determined to deliver good value for money andin finding new ways of doing so. For example, the introductionof performance-related variable management fees, wherethe ongoing fee for an investment trust is discounted if itis not delivering consistent outperformance. This providesinvestors with protection, and should give them confidencethat Fidelity is putting its money where its mouth is. Similarly,the introduction of tiered fees by some companies is providingnew economies of scale, ensuring that investors do not paymore than they need to as assets under management growwith strong continued performance.

Fidelity’s range of trustsAt Fidelity, we are very keen to ensure that we allocate ourbest individual managers and strongest strategies to theinvestment trusts that we look after. Over the past 25 years,we at Fidelity have sought to build a range of investment trusts

that provide investors with access to equity markets aroundthe world. Whether you want to invest in the rapidly changingand developing markets of Asia, increasingly recognised asthe engine of global economic growth, or the well-establishedmarkets of Europe, home to some of the world’s most well-knownbrands and companies, we have something to offer you.

We have made several changes in recent years becausewe wish to continue to deliver on shareholders expectationsand surpass them, most recently with Fidelity JapanTrust PLC expanding its remit to invest across the entireJapanese market. We want to make sure we continue tomake best use of the structure, and to allow our managersto do so. I firmly believe we, and other managers, willcontinue to innovate and investment trusts will still be anexcellent way of accessing different asset classes aroundthe world in the decades, or even centuries, to come.

Built to lastWhat a year was 1868. The last public hanging in theUK. Thomas Edison’s application for his first patent.In the US, the adoption of the 14th amendment,guaranteeing citizenship to freed slaves.

It was also the year that saw the launch of the firstever pooled investment fund, the Foreign & ColonialInvestment Trust.

Fast forward 150 years and the Trust continues tothrive, with over £4bn of investors’ capital deployed incompanies across the globe.2

Conceived with the aim of providing the ‘investor ofmoderate means the same advantage as the largecapitalist in diminishing risk in Foreign & Colonial stocks’the idea of the vehicle was initially met with more thana little scepticism.

Investment in risky emerging markets - like the US -raised eyebrows. The Economist meanwhile, declaredthe Trust’s promises “far too sanguine to ever beperformed”.3

History tells quite a different story however and the 400investment companies and £182bn in total assets thatmake up the investment companies sector today givea sense of the vehicle’s entrenched popularity amonginvestors.4

Claire Dwyer joined theInvestment Trusts team atFidelity in 2018 from our UKPersonal Investing businesswhere she led investmentproposition. Prior to thisshe worked at CambridgeAssociates and Mondrian

Investment Partners. She has a specialinterest in alternative investments and holdsthe Chartered Alternative Investment Analystdesignation.

“The 320 investment companiesand £169bn in total assetsthat make up the InvestmentCompanies’ sector today give asense of the vehicle’s entrenchedpopularity among investors.”

2 Daily Telegraph – March 2018

3 The Economist – April 2018

4 The Association of Investment Companies – May 2018

Among the many appealing features of the investmenttrust is its independent board of directors which isresponsible for safeguarding shareholder interests.Shareholders have the right to vote at annual generalmeetings (AGMs) and have their say on the re-electionof the directors.

Then there is the fact that investment trusts have a fixednumber of shares, enabling managers to buy and sellassets at opportune moments rather than being forcedto sell in the event of clients leaving the fund as unit trustmanagers are required to. Attractive, too, is the relativestability of the underlying capital base.

As shares in investment trusts are traded on a stockexchange, like any other listed company, their shareprice will fluctuate from day to day reflecting supplyand demand.

In today’s world, the sorts of clients who hold investmenttrusts in their portfolio varies considerably - many aresaving for retirement or investing on behalf of theirchildren - with regular savings into an ISA or SIPP,among the most popular ways of building up savings.

Please note, the value of tax savings and eligibility toinvest in an ISA, Junior ISA or SIPP depend on personalcircumstances and all tax rules may change. You will nothave access to your pension savings until the age of 55.

150 years ofInvestment Trusts

Claire Dwyer, Associate Director, Investment Trusts atFidelity International on the secrets of the vehicle’senduring appeal.

To best effectSo how best might you go about integrating into yourportfolio this vehicle which has so effectively stood thetest of time?

The number one priority in constructing yourinvestment portfolio should be making sure youare well diversified geographically, between assetclasses and, within a country or asset class, betweenindividual investments. The leaders of the packone year are sometimes the best performers insubsequent years, but sometimes not. It is difficult,impossible even, to predict which way things will goand getting it wrong is often the difference betweena stellar or disastrous year.

Investment trusts can be an invaluable tool inachieving a sufficiently diverse portfolio, by specificexposure to alternative asset classes like infrastructureand property, for instance. By employing themeffectively you may be able to reduce the overall riskof your portfolio, without having to give up too muchby way of returns.

Trusts can also be an effective means of adding anew style of investment thinking to your portfolio.In running Fidelity Special Values PLC, Alex Wrightemploys a contrarian investment approach whichthrives on volatility and uncertainty. His focus ison under-appreciated stocks with the potential forpositive change.

Dale Nicholls, in managing Fidelity China SpecialSituations PLC, has created a portfolio of around 140small and medium sized companies likely to thrive inChina’s new economy. The closed end structure of thevehicle allows for some gearing which is achievedthrough both bank debt and derivative products. It alsoallows the manager to get exposure to unlisted namesahead of their initial public offerings.

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Fidelity AsianValues PLCIgnoring the noiseNitin Bajaj, Portfolio Manager of Fidelity Asian Values,explains his investment process and why he focuseson stocks and not news stories

T he investment philosophy which underpins Fidelity Asian Values PLC is quitesimple. I try to buy good businesses, run by good people, and buy them at a goodprice. I don’t tend to pay much attention to the latest newspaper headlines and

macroeconomic noise, as I think my time is much better spent focusing on things I cancontrol, namely buying businesses that meet my quality and value criteria.

It is important for shareholders in the trust to understand and appreciate the philosophyI follow, because the extent of our success over the next five years will be largely drivenby the hard work that we put in. Stock markets will go up and down, but to make money,I believe you need a good philosophy, stay true to that, and be willing to put in the timeand effort to implement it effectively.

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How I manage money is more or less the way mostpeople manage their personal finances. If you werebuying a company today, you would want to buy

a good business, then you would want to hire the bestpeople to run it for you, and finally you would want tobuy it at the best possible price. I just try to do that in thestock market.

It is easier said than done, because finding good businessesis not that easy. It requires an immense amount of hard workfrom Fidelity’s analyst team and it requires an immenseamount of patience from me, because we look at companyafter company after company, and it is only one out ofperhaps 15 or 20 that meets our strict criteria.

What does this mean in practice? Well, let’s say I want tobuy a major toothpaste business in India; whether or notwe will make money over the next five years is going tobe driven largely by how the toothpaste market in Indiaevolves, and how the company, performs within thatmarket versus its competitors.

The questions we need to consider are: why is it thatthe majority of Indians get up every morning and usethat toothpaste? Is it the brand? Is it the research anddevelopment? Is it the management team? Is it thesales network? What allows them to dominate? Until weunderstand these factors, we don’t know whether it is agood business or a bad business. If we don’t understandthis, I’m not investing, I’m speculating.

Nitin Bajaj has been PortfolioManager of Fidelity AsianValues PLC since 1 April 2015and Fidelity Funds AsianSmaller Companies Fundsince 1 September 2013. Nitinjoined Fidelity International in2003 as a research analyst,

following four years working with KPMG in India asa business analyst. In 2007, he was promoted toAssistant Portfolio Manager for the Fidelity GlobalSpecial Situations Fund in the UK, before movingto Fidelity’s Mumbai office to manage two of thecompany’s domestic Indian equity funds, whichwere available to local Indian investors.

Trust Profile

Objective To achieve long-term capital growththrough investment principally in thestockmarkets of the Asian Region(excluding Japan).

Style Bias Small-cap value

Morningstar Rating ★★★★★

AIC Category Asia Pacific – Excluding Japan

Exchange Ticker FAS

Ongoing Costs (ex-Portfolio transactioncosts)

0.97% (estimated)

The second equally important thing is good people.By this I mean good business people; people who can runa business well, who can take market share and who cangenerate a lot of cash, as well as people who then treatthat cash in the way it should be treated, which is for thebenefit of shareholders. A lot of our time is therefore spenton understanding management; we interview them, we talkto their competitors, we talk to their ex-employees, just tounderstand how they think.

The third thing, which is probably the hardest thing to do,is to buy the business at a good price. When you find thesegood businesses and you find these great managers runningthese businesses, it is extremely seductive, you want tobuy them, but a good business is not necessarily a goodinvestment. A good business is a good investment if boughtat the right price. It requires a lot of patience to uncover ahidden gem no one else has found.

Capital preservation is paramount. I have an obsession withnot losing money. When our analysts come to me, I alwaystell them it is their job to make money; it is my job not tolose money. I am always looking for ways a company’sstock price could go down, so I am pessimistic by nature.By challenging the thesis behind an investment, we hopeto form a balanced view and make a good decision.

The opportunity set for the trust over the next five yearsis huge, as there are over 17,000 listed companies in Asia.I believe the only reason we will not make money is if wedon’t work hard enough, and the team work very hard,

so the opportunity is there. In running the trust, I amsupported by a large locally-based analyst team across theregion, and that is the key competitive advantage of FidelityInternational. Looking ahead, I believe the philosophy willwork, and if we work hard and don’t get complacent, thetrust should do well for shareholders.

“A good business is not necessarilya good investment. A goodbusiness is a good investmentif bought at the right price”

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Fidelity ChinaSpecial Situations PLCInvesting in China’s newgrowth driversDale Nicholls, Portfolio Manager of Fidelity China SpecialSituations, explains how a fast-growing middle class isincreasingly driving stock market returns in China

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C hina is recognised as being a major driver of growth and investment performance,not just in Asia, but in the wider world. The sheer size of China’s economy,its continued growth and ever-increasing global importance, mean investors

increasingly consider exposure to China when building a balanced investment portfolio.

Since its launch in 2010, Fidelity China Special Situations PLC has offered directexposure to China’s growth story, predominantly through a portfolio of small andmid-sized companies. As Portfolio Manager it is my job to try to identify and invest incompanies that are best placed to capitalise on China’s incredible transformation.

Iam fortunate to be able to call on Fidelity’s extensive,locally-based, analyst team to find these future winnersthrough a portfolio of over 100 carefully selected

underlying investments.

From my point of view, the drivers of performance ofFidelity China Special Situations PLC have always been– and will always be – the individual stocks that we investin. Many of the stocks I own play into the growth anddevelopment of the domestic consumer. The rise of themiddle class, its tremendous spending power, increasingaspirations and the way they consume, underpin a numberof the portfolio’s investments. Relative to the developedworld, many categories of goods and services in Chinaremain underpenetrated, and this creates unparalleledgrowth potential for companies in such industries as theinternet, e-commerce, healthcare and consumer.

The consumption story in China rolls on and will remaina key theme in China over the next decade. This is also anatural development of the fast-growing middle class, but it’salso aligned with the government’s goals of trying to bringabout a more sustainable growth model that is less relianton investment and more reliant on consumption. Governmentpolicies look set to continue supporting this trend.

The portfolio has the ability to invest up to 10% of thecompany in unlisted stocks. The team have been able touncover a number of private equity opportunities that havebeen added to the portfolio, but always with a view to thempublicly listing within the next couple of years. We have had

Dale Nicholls took over asPortfolio Manager of FidelityChina Special SituationsPLC on 1 April 2014. Dalehas 20 years of investmentexperience, and joinedFidelity as a researchanalyst in 1996. Dale initially

focused on Japan and managed Japanese sectorfunds from 1999. He was subsequently appointedPortfolio Manager of the Fidelity Pacific Fund in2003, which focuses on small and mid-caps in theAsia Pacific region with a significant tilt towardsChinese stocks. Dale has a Bachelor of Businessdegree from Queensland University of Technology.

Trust Profile

Objective The investment objective of theCompany is to achieve long-termcapital growth from an activelymanaged portfolio made upprimarily of securities issuedby companies listed in Chinaand Chinese companies listedelsewhere. The Company mayalso invest in listed companies withsignificant interests in China.

Style Bias Unconstrained – small/mid-capvalue and growth

Morningstar Rating ★★★★

AIC Category Single Country – Asia

Exchange Ticker FCSS

Ongoing Costs (ex-Portfolio transactioncosts)

1.22% (estimated)

some real successes here in the past – most notably withour investment in the online e-commerce platform companyAlibaba, that we held as an unlisted holding for nearly threeyears before its record-breaking US$25 billion initial publicoffering. Successes of that magnitude will be rare, but thereare a lot of opportunities in China in the unlisted space and itis a valuable area we continue to explore.

Of course, investing in China is not without risk, and thebiggest concern for me is the build-up in debt over the lastdecade. There has been significant investment spendingin China, but much of this has been debt-driven. The majorissue is that while debt has increased, the magnitude ofnon-performing loans on banks’ balance sheets has notbeen kept in check. While the banks are slowly makingadequate provisions, the process is going to take some timewhich negatively impacts the outlook for Chinese banks.

Over the next few years, I am hoping we will see morereform from the government within its State-OwnedEnterprises (SOEs). Many SOEs have amazing assets,but are often under-earning, as their focus is often to provide‘national service’ rather than to realise profit. We are slowlyseeing a change in mentality here, and if we do see morereform, there is great potential for selected companies toimprove returns, which should translate into an upwardmovement in their share price.

While there are certainly opportunities in this space, it isworth noting that the core of the portfolio is still very muchfocused on private companies, with a preference for smaller

and medium-sized firms. This area is less well known by themarket, so there is more mispricing. The more mispricedthey are, the more potential upside for these investments.Identifying small and mid-caps allows us to really makethe most of our information advantage from the team wehave on the ground in Shanghai and Hong Kong, whoare constantly out there looking for new ideas. This researchcapability is unmatched and helps us identify ideas whichhaven’t really been discovered or are not so well understoodby the market.

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“The sheer size of China’s economy, itscontinued growth and ever-increasing globalimportance, mean investors increasinglyconsider exposure to China when buildinga balanced investment portfolio”

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Fidelity EuropeanValues PLCFocusing on strong andsustainable dividend payersSam Morse, Portfolio Manager of Fidelity European Values,explains why companies that can sustainably grow dividendstend to reward investors over time

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The approach I take to managing Fidelity European Values PLC is to look beyondthe economic and political noise and concentrate on the real-life progress oflisted businesses across this large and diverse region. In running the Trust I focus

on researching and investing in stocks I believe can grow their dividends consistently,irrespective of the prevailing economic backdrop. History shows that these companiestend to outperform the market over the longer-term.

Companies with the cushion of a healthy and growing dividend also tend to be resilientduring periods of macroeconomic uncertainty. By investing in solid and sustainabledividend-paying stocks, I believe Fidelity European Values PLC provides core defensiveexposure to European equities.

European equities have underperformed recently as stockmarkets have been impacted by weak economic dataand concerns over the pace of interest rate increasesin the US. The valuation of the European stock marketremains high and I believe that this and expectations forcontinued earnings expansion leaves the market vulnerableto earnings disappointments and geo-political shocks.Markets have been aided by liquidity injections from globalcentral banks and may be impacted by liquidity withdrawalas 2018 unfolds, particularly if this happens more quicklythan expected. In such circumstances my hope is that myconcentration on fundamentally strong businesses will helpperformance of the Trust.

Since the launch of Fidelity European Values over26 years ago, Europe has witnessed its fair shareof political and economic upheaval. It’s important

to note though, that however significant changes mightbe on the political stage, the corporate sector carries onregardless.

I am naturally cautious and I am not inclined to take largebets against the market in individual sectors or countries,preferring instead to focus on companies which I believewill be able to outperform their competition over thelonger-term. My process is therefore built from the bottomup, looking at individual businesses, but keeping an eye onthe wider market to avoid unexpected pitfalls.

On this basis I look to build a portfolio of 50-60 attractivelyvalued companies, with strong balance sheets and a trackrecord in cash generation, which have the potential to growdividends consistently on a three to five-year view. This typeof company offers a good combination of fundamentalvalue and therefore downside protection, as well as goodgrowth prospects likely to be identified by the market infuture. Historic data shows that companies of this naturetend to outperform, however the trick is to identify thosefuture dividend growers before they have done so - andimportantly, before the rest of the market. This requires timeand discipline from me and our analyst team in Londonand throughout Europe.

Company Changes

At the last Annual General Meeting shareholdersapproved proposals by the Board of the Trustto amend the investment objective to achievinglong-term growth in both capital and income,rather than just capital growth. This change wasto acknowledge my focus on dividend income aswell as capital growth and did not relate to anychange in investment approach. A lower 0.75%management fee on assets over £400m took effectfrom April 2018 which represents a useful savingfor shareholders.

Trust Profile

Objective The Company aims to achieve longterm growth in both capital andincome by predominantly investingin equities (and their relatedsecurities) of continental Europeancompanies.

Style Bias Large-cap growth

Morningstar Rating ★★★★★

AIC Category Europe

Exchange Ticker FEV

Ongoing Costs (ex-Portfolio transactioncosts)

0.88% (estimated)

“I focus on researching andinvesting in stocks I believecan grow their dividendsconsistently, irrespective of theprevailing economic backdrop”

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Sam Morse joined Fidelityin 1990 and spent sevenyears with the company asa research analyst, coveringpan-European retail stocks,and then as a portfoliomanager, running fundsincluding the Fidelity Income

Plus Fund, the Fidelity Growth & Income Fund andthe Fidelity MoneyBuilder Growth Fund. He thenleft Fidelity to be Head of UK Equities at M&G. Samreturned to Fidelity in 2004 to manage UK equitiesfor institutional clients. He managed the FidelityMoneyBuilder Growth Fund from December 2006for three years before becoming Portfolio Managerfor the Fidelity European Fund, which he continuesto run today. He assumed responsibility for FidelityEuropean Values PLC in January 2011.

Naturally the continuing process of Brexit represents anadditional uncertainty at present. While the first stage ofnegotiations focused on the UK’s financial liability hasconcluded, the more complex discussions about tradingrelationships in the future are only getting started. It is quitepossible that the arrangements will vary by sector, andthey may yet fail to be agreed in their entirety.

Clearly there is potential for more geo-political shocksto come. How all this plays out is anyone’s guess. I’vealways felt trying to predict these cycles or time the marketis something of a mug’s game. So I remain focused onthe individual companies we see before us, aiming tooutperform across the full market cycle.

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Fidelity JapanTrust PLCUsing research and localknowledge to find winningcompanies, large or smallNicholas Price, Portfolio Manager of Fidelity Japan Trust PLCtalks about the trust’s focus on growth and why it was time toring in the changes

In May 2018, Fidelity Japan Trust PLC adopted its new name, changing from FidelityJapanese Values PLC, which it had been called for the previous twenty-four years. Thenew name coincides with a change of its investment policies to allow greater investment

into large companies, moving away from its previous exclusive focus on small-companies.

This change in name and policy really reflects an evolution, not revolution in the trust. Itreflects more closely my own ‘growth at reasonable price’ investment style and approach- which involves identifying companies whose growth prospects are being under-appreciated or are not fully recognised by other investors. These companies may exist inall areas of the market and, when I identify them, it would be a shame to exclude themfrom an investment portfolio based on size alone.

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That said, my investment process often naturally leadsme to focus on medium-sized and smaller companies,where lower levels of analyst coverage creates more

frequent or greater mispriced growth opportunities.

It was an insatiable sense of curiosity that first led me toFidelity and into fund management. My eyes were openedby Peter Lynch, an American investor and former Fidelityemployee, and specifically his book, ‘One Up on WallStreet’, that got me hooked on the world of investing. Itreally highlighted the importance of company researchand turning over a lot of stones every day to find newinvestment ideas.

I have a deep interest in understanding how culturaldifferences shape the way in which companies are run acrossthe globe. In many ways, this naturally led me to Japan,as companies are very different from those in the West,their various management styles and business models.

I was born in the UK, but have been based in Tokyo formore than 20 years. I’m fluent in Japanese, having studiedat Keio University, and this is a huge advantage whenmeeting the key decision-makers at the companies I investin and scouting for new ideas on the ground in Japan.

For me, it’s all about joining the dots between differentideas and forming a new line of enquiry. It may soundodd, but it’s similar to how I would link disparate historicalevents to figure out the connections behind them when Iwas a university student.

Nicholas Price joined FidelityInvestments Japan in 1993and spent six years as aresearch analyst covering theretail, banking, brokerage,consumer electronics andpharmaceuticals sectors.In 1999, Nicholas was

promoted to portfolio manager, running Japaneseequity mandates for domestic institutions. He nowmanages a number of Japanese equity portfolioson behalf of both domestic and overseas clients,including the FF Japan Aggressive Fund. Nicholasgraduated from Cambridge University with an MAin History and studied Japanese at Keio University.

Trust Profile

Objective The Company aims to achieve longterm capital growth by investingpredominantly in equities and theirrelated securities of Japanesecompanies.

Style Bias Mid-cap growth

Morningstar Rating ★★★★

AIC Category Japan

Exchange Ticker FJV

Ongoing Costs (ex-Portfolio transactioncosts)

0.95% (estimated)

“I’m looking to invest in companieswhose growth prospects are being under-appreciated or are not fully recognised byother investors. This naturally leads me tofavour medium-sized and smaller companies”

I focus on gathering multiple information sources: fromattending industry conferences to visiting universityprofessors, and talking to unlisted companies or consultingsenior management. You just need to keep researching untilyou gain reasonable conviction in the investment thesis.

I can’t over-emphasise the importance of research in myinvestment process. I remember a few years ago standingin a room with a bunch of nappies lined up and glasses ofblue liquid - just like in old TV ads.

The nappies were made by a range of Japanese, Chineseand US manufacturers. For a long time, everyone sellingnappies into China had been doing very well and then themarket changed.

While some companies making nappies were still doingwell, others started lagging behind. So I went to visitShanghai with one of our analysts and went to baby shopsand supermarkets.

We were told that the Chinese consumer felt that nappiesmade in China by Japanese companies were inferior tothose made in Japan and exported from there to China.We decided to test this out and discovered that theChinese consumer was absolutely right; nappies made inChina were of a lower quality than those made here inJapan. We were therefore able to identify which nappycompanies were likely to fare better - based (forgive thepun) on bottom-up research.

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Being a portfolio manager isn’t as glamorousas some may think – Nick Price tests nappiesto ensure he focuses on the right companies.

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Fidelity SpecialValues PLCLooking at UKmarkets differentlyAlex Wright, Portfolio Manager of Fidelity SpecialValues, explains the benefits of contrarian investing

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Over the past few years, the board and I have worked together to develop FidelitySpecial Values PLC, continuing its history as an actively managed, contrarianinvestment trust which we hope is appealing to both existing and potential

investors alike.

I focus on unloved companies where things can improve, and invest in companies of all sizes.I hope, in doing so, to position the company as the investment of choice for those seekingexposure to UK-listed companies, but with the benefit of investing up to 20% of the portfolioin listed companies on overseas exchanges, in order to enhance shareholder returns.

My investment style is very much in keeping withFidelity Special Values’ heritage and history– that of value contrarian investing, looking for

companies whose potential for share price growth orrecovery has been overlooked by the market.

As a contrarian, I’m drawn to unfashionable stocks that areout of favour and trade on cheap valuations. I’m lookingfor potential positive change that others haven’t seen yet.I also look to invest in only companies where I understandthe potential downside risk, to limit the possibility of losses.

Investing against the tide is a psychologically difficult thingto do. Humans are social animals, and behave sociallywhen making investment decisions. It takes a particularmindset and a highly disciplined approach to executea contrarian investment process successfully.

Central to the long-term success of our approach have beencompany research and making full use of the insight andexpertise of our large team of analysts. Fidelity’s philosophyis to base investment decisions on company fundamentalssuch as competitive position, management strength, growthopportunities, valuation and so on. Overarching trends in theeconomy (top-down factors) play a supplementary ratherthan primary role in our investment decisions.

Our investment team spend many thousands of hoursmeeting company management, speaking to suppliers,competitors and customers in order to build up a pictureof the true state of a company’s fundamentals. It is thiswork that allows us to form a view of the company’s future

Alex Wright joined Fidelity in2001 as a research analystand has covered a numberof sectors across the marketcap spectrum, both in theUK as well as in developedand emerging Europe. Hehas been Portfolio Manager

of Fidelity UK Smaller Companies Fund since itslaunch in February 2008. He took over responsibilityfor the company’s portfolio on 1 September 2012and was also appointed as Manager of FidelitySpecial Situations Fund in 2013. Alex has a BSc(Economics) from Warwick University, where hegraduated with First Class Honours, and he is alsoa CFA Charterholder.

Trust Profile

Objective The investment objective of FidelitySpecial Values PLC is to achievelong term capital growth primar-ily through investment in equities(and their related securities) of UKcompanies which the InvestmentManager believes to be underval-ued or where the potential has notbeen recognised by the market.

Style Bias Mid-cap value

Morningstar Rating ★★★★

AIC Category UK All Companies

Exchange Ticker FSV

Ongoing Costs (ex-Portfolio transactioncosts)

0.92% (estimated)

profitability and ultimately decide whether we considerit an attractive investment for our shareholders.

Ideally, I want to invest in companies that are exceptionallycheap on relevant measures, or which have some kind ofasset that should prevent their share prices falling belowa certain level. This can be anything from inventory tointellectual property that gives a margin of safety.

I look for companies where I believe perception by thewider market may shift due to changes in the company’scompetitors or market, a new product line or an expansioninto new business areas. I also impose a strict selldiscipline on myself once the recovery has taken place.

Within the investment trust structure, I am able to takepositions in smaller and less liquid companies; its closed-ended structure and stable pool of assets allow me toestablish larger weights, which would not be possibleif I had to worry about flows into and out of the fund.The relative illiquidity of holdings can sometimes maketheir share prices more volatile, but I am not a forcedseller in downward markets (indeed I often view them asopportunities to buy more shares at good value), and Ibelieve in the long-term rewards of smaller companies.

Within the trust, I can also use gearing to enhance long-term capital growth – and to take advantage of shifts inmarket valuations. I use Contracts for Difference to gear,as these represent the most flexible and cost-effectiveoption, and also occasionally to short stocks if I feel theyare significantly overvalued.

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“As a contrarian, I’m drawn tounfashionable stocks that areout of favour and trade on cheapvaluations. I’m looking for potentialpositive change that others haven’tseen yet”

Premium

Positive Sentiment

NAV Share price

Negative Sentiment

Discount

NAV Share price

Discount

Improving Sentiment

NAV Share price

Public limited company (PLC)Unlike funds such as OEICs, investment trusts are publiclimited companies (PLCs). By buying their shares, youbecome a shareholder in the company, to whom the boardand manager of the company are accountable. Like otherPLCs, their shares trade on the London Stock Exchange.Each trust must hold an Annual General Meeting forshareholders and publish an annual report and accounts.

Independent boardAs a PLC, each investment trust must have a board of directors,independent of the fund manager, to make sure the trust isbeing managed in the best interests of its shareholders.

Long-term viewInvestment trusts have a fixed number of shares,so managers have a stable base of capital to invest.This gives them a high level of control and the flexibilityto build a long-term strategy.

GearingInvestment trusts have the ability to borrow additional moneyto invest, known as gearing. This can enhance potentialinvestment returns, but gearing can also increase theinvestment risk of a trust, so while gearing can boost gains,it can also magnify losses. All our investment trusts have theability to use bank loans, bank overdrafts and derivative

How discounts and premiums compareDiscounts and premiums can vary for a range of reasons.For example, in rising markets, discounts tend to getsmaller because investors generally feel confident andexpect prices to rise further. Demand for an investmenttrust’s shares can push a price discount closer to the netasset value of the trust as illustrated below or, in rarercases, even result in investors paying a premium abovenet asset value. Conversely, in falling markets, investorstend to feel less confident about future prices, so discountscan get larger as markets fall, making investment trustshare prices cheaper than an equivalent OEIC or unittrust. Some investors may therefore view a discount asan opportunity to buy into a market at a lower cost.

instruments such as Contracts for Difference (CFDs) toincrease their exposure to stocks. CFDs are used as a way ofgaining exposure to the price movements of shares withoutbuying the underlying shares directly. The use of gearingand derivative instruments by investment trusts may increasethe level of volatility in the net asset value and share price.

DividendsInvestment trusts may pay out the profits they have madefrom their investments as dividends. They can also hold backprofits in good times, to help boost dividends when marketconditions are tougher. With Fidelity’s Investment Trusts,dividends can be taken as income or automatically reinvestedto buy more shares in your chosen investment trusts.

Discounts and premiumsLike other PLCs whose shares trade on the London StockExchange, an investment trust’s share price will be drivenby demand. This means its shares can trade at more thanthe value of its underlying investments (at a ‘premium’) orless (at a ‘discount’). This is an important difference fromOEICs and unit trusts, which simply track the value of theirunderlying portfolio (or ‘net asset value’, NAV).

Some investors view trusts that trade at a discount as abuying opportunity. But investment trusts will try to limithow far their share price falls below the net asset value,on behalf of their existing investors.

Discounts and premiums can compound the effect of risingand falling markets on an investment trust price and, ifthere is also gearing within the trust, gains or losses canbe magnified still further, which may suit investors with ahigher risk appetite. Of course, it’s important to rememberthat you need to take several factors into account whenchoosing an investment trust, not just price discountsand premium. In addition to the risk that the market as awhole will rise or fall, you need to consider how the trust’sportfolio will perform against the market, what the currentdiscount or premium is and where it might be heading,whether the manager can successfully manage the fundto provide positive returns in the future, and what extravolatility or risk will be created by the trust’s gearing.

InvestmentTrust featuresInvestment trusts offer a unique range offeatures that many experienced investorshave come to value

The potential effect of a market recovery

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Our globalexpertiseFidelity’s global network of investmentprofessionals gives you access to compellingopportunities, wherever they are in the world

Investing successfully across world markets requiresinsight, resources and connections to identify the bestopportunities. Fidelity has the global access you need.

We have a network of over 400 investment professionalsacross the UK, Europe, Japan, China and Asia.

Although there is no guarantee of future results, usingon-the-ground, first-hand research, we are able to assesscompanies in depth to find those that we believe havethe ability to deliver better-than-average returns tolong-term investors.

Our investment trust managers all use a “bottom-up”approach – trying to identify companies that will delivermarket-beating investment returns using our key informationadvantage – our investment experts. This means theyseek out companies that, for various reasons, may beundervalued, out of favour or overlooked by most otherinvestors, or which simply have fundamental qualitieswhich means they can deliver on their growth potential.

Fidelity has a long history of helping people meet theirfinancial goals. We have a reputation for developinginnovative investment products and we pride ourselves onproviding clear information to help you make investmentdecisions. For more information on our investment trusts,visit fidelityinvestmenttrusts.com

Please remember that Fidelity Personal Investing onlyprovides information and guidance on products andservices and does not give investment advice. If you areunsure of the suitability of an investment, you may wish tocontact a financial adviser.

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Source: Fidelity International, 31 December 2018. Data is unaudited. ¹ Portfolio Managers include equity, fixed income, real estate, multi asset and derivatives teams.² Fixed Income Research includes quantitative/credit analysts.3 Other Research includes derivatives and quantitative experts. 4 Includes Equity Research Support Resources. 5 1 Analyst who covers both Equity (in Japan) and Fixed Income (inAsia) is listed under Fixed Income.

Fidelity – Global Investment Resources

Pan Europe and Americas83 Portfolio Managers¹67 Equity Research25 Fixed Income Research²15 Traders14 Multi Asset Research5 Real Estate Research2 Other Research³

Japan9 Portfolio Managers¹12 Equity Research5

Asia Pacific (ex Japan)36 Portfolio Managers¹

15 Traders

47 Equity Research

11 Fixed Income Research²

1 Other Research³

Emerging Markets

Europe

Global

United Kingdom

Sector and Country

United States

128 Portfolio Managers184 Research Professionals36 Equity Research Support30 Traders33 Divisional Management411 Total Investment

Resources 4

Get in touch with us

Email & Messaging

• For all Fidelity account related enquiries please log in tofidelity.co.uk and send us a secure message

• For shareholders on the main register, please email:shareholderenquiries@capita.co.uk

• For accounts held within another platform or distributor,please contact them directly

How to find information aboutFidelity’s investment trusts andhow to invest in them

Find outmore…

Visit our websitefidelityinvestmenttrusts.com

On our website, you can find:

• Monthly factsheets on each trust includingthe portfolio mix, charges and up-to-datecommentary from the portfolio manager

• Current share price and past performance

• Daily factsheets, providing you with daily NAV,share prices, discount and gearing information

• Downloadable annual and interim reports

• Video updates and interviews with the portfoliomanagers, giving their current views on themarkets and their preferred areas to invest.

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Important information

If you choose to invest through Fidelity Personal Investing,then before you invest please ensure you have readthe Key Features Document which include the clientterms. Please also read the individual factsheets andKey Information Document (KID) relevant to your chosenfund(s). These documents give you all the informationyou need to know about Fidelity, including details ofthe objective, investment policy, risks, charges and pastperformance associated with the fund(s). Instructions onhow to access these documents can be found atfidelity.co.uk/doingbusiness.

Investors should note that the views expressed may nolonger be current and may have already been acted upon.

By Phone

• Shareholders on the main register:0871 664 0300 Monday to Friday 8.30am to 5.30pm

• Fidelity Personal Investing Clients:0800 414161 Monday to Friday 8am to 6pm andSaturdays 9am to 6pm

• Fidelity/FundsNetwork Advised Clients:0800 358 4060 Monday to Friday 9am to 6pm

• Fidelity/FundsNetwork Advisers:0800 414181 Monday to Friday 8.30am to 6pm

By Post

Company SecretaryFidelity International Investment TrustsCompany SecretaryBeach Gate, Millfield LaneLower Kingswood, TadworthSurrey KT20 6RP

Company RegistrarsLink Asset Services34 Beckenham RoadKent BR3 4TU

Morningstar ratings as at February 2019. Datasource: © 2019 Morningstar, Inc. All Rights Reserved. Morningstar Category™ Asian Values PLC in Asia ex Japan Equity; China Special Situations PLC in China Equity; European ValuesPLC in Europe ex-UK Large-Cap Equity; Fidelity Japan Trust PLC in Japan equity exposure Special Values PLC in UK Flex-Cap Equity. Issued by Financial Administration Services Limited, authorised and regulated by the FinancialConduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM0319/23260/SSO/0819

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