New name, same tried-and-tested approach

F&C Investment Trust 4 April 2019 Review
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F&C Investment Trust

New name, same tried-and-tested approach

Investment trusts

4 April 2019

Price

700.0p

Market cap

£3,806m

AUM

£4,101m

NAV*

695.7p

Premium to NAV

0.6%

NAV**

701.0p

Discount to NAV

0.1%

*Excluding income. **Including income. As at 2 April 2019.

Yield

1.6%

Ordinary shares in issue

543.7m

Code

FCIT

Primary exchange

LSE

AIC sector

Global

Benchmark

FTSE All-World

Share price/discount performance

Three-year performance vs index

52-week high/low

741.0p

616.0p

737.9p

626.9p

**Including income.

Gearing

Gross*

9%

Net*

7%

*As at 28 February 2019.

Analysts

Mel Jenner

+44 (0)20 3077 5720

Sarah Godfrey

+44 (0)20 3681 2519

F&C Investment Trust is a research client of Edison Investment Research Limited

F&C Investment Trust (FCIT) recently changed its name from Foreign & Colonial Investment Trust (FRCL). However, there is no change to the objective of generating long-term growth in capital and income, or the strategy of investing in listed and private companies across the globe, using both internal and external managers. While 2018 proved to be a tricky, more volatile period for investors than 2017, with a sharp correction in world markets in the last quarter of the year, FCIT modestly outperformed its FTSE All-World benchmark in both NAV and share price terms, helped by its private equity exposure. Manager Paul Niven acknowledges that the investment cycle is mature, but believes there is potential for further share price appreciation, as the US has adopted a more dovish stance towards monetary policy and equity valuations are now looking more attractive following the Q418 market sell-off.

12 months ending

Share price
(%)

NAV
(%)

FTSE All-
World (%)

FTSE All-
Share (%)

FTSE World-
ex-UK (%)

31/03/15

21.7

20.2

19.2

6.6

19.9

31/03/16

0.3

0.0

(0.5)

(3.9)

0.4

31/03/17

32.5

31.0

33.1

22.0

33.6

31/03/18

12.7

5.9

2.9

1.2

2.7

31/03/19

12.1

8.9

10.7

6.4

11.3

Source: Refinitiv. Note: All % on a total return basis in pounds sterling.

The market opportunity

While macroeconomic uncertainties continue, such as the US-China trade dispute and protracted Brexit negotiations, the significant pullback in global equity markets in Q418 has led to more reasonable equity valuations. The world market is trading on a forward P/E multiple of 14.5x, which is a 7% premium to its 10-year average compared with a c 20% premium in September 2018.

Why consider investing in F&C Investment Trust?

Longest-established investment trust.

Distribution paid every year since FCIT’s launch in 1868.

Dividend growth in each of the last 48 consecutive years.

Broad global equity exposure – both listed and private companies.

Increased shareholder demand; now trading close to NAV.

Long-term record of double-digit NAV and share price total returns.

Meaningful re-rating

FCIT has experienced a meaningful re-rating. Its shares now regularly trade close to NAV compared with a c 15% discount in mid-2016 following the Brexit vote, and average discounts between 0.3% and 8.3% over the last one, three, five and 10 years. The board no longer employs a hard discount control policy, but would repurchase shares in response to a sustained widening of the discount. FCIT has a progressive dividend policy; the FY18 annual distribution was 5.8% higher year-on-year, and has compounded at a 5.5% average annual rate over the last 10 years. Gearing of up to 20% of NAV is permitted (7% net gearing at end-February 2019).

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

FCIT’s investment objective is to secure long-term growth in capital and income through investing primarily in an internationally diversified portfolio of listed equities, as well as unlisted securities and private equity, with the use of gearing. FCIT’s benchmark is the FTSE All-World Index.

2 April 2019: Issuance of fixed rate senior unsecured private placement notes (funding expected on 27 June 2019 – see page 8).

12 March 2019: 12-month results ending 31 December 2018. NAV TR -3.3% versus benchmark TR -3.4%. Share price TR -0.6%. Announcement of 2.8p per share fourth interim dividend (+3.7% year-on-year).

5 December 2018: Announcement of 2.8p per share third interim dividend (+3.7% year-on-year).

9 November 2018: Company’s name changed from Foreign & Colonial Investment Trust to F&C Investment Trust (ticker now FCIT not FRCL).

Forthcoming

Capital structure

Fund details

AGM

May 2019

Ongoing charges

0.65%

Group

BMO Global Asset Mgmt (BMO)

Interim results

July 2019

Net gearing

7%

Manager

Paul Niven

Year end

31 December

Annual mgmt fee

Tiered (see page 8)

Address

Exchange House, Primrose Street London EC2A 2NY

Dividend paid

Aug, Nov, Feb, May

Performance fee

None

Launch date

March 1868

Trust life

Indefinite

Phone

+44 (0)800 136 420

Continuation vote

None

Loan facilities

See pages 7–8

Website

fandc-investment-trust

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

FCIT pays dividends quarterly. The 2018 total dividend of 11.0p represents the 48th consecutive annual increase.

Renewed annually, FCIT has authority to purchase up to 14.99% and allot up to 5% of issued share capital.

Shareholder base (as at 29 March 2019)

Strategy allocation (including private equity, as at 28 February 2019)

Top 10 holdings (as at 28 February 2019)

Portfolio weight %

Company

Country

Sector

28 February 2019

28 February 2018*

Amazon

US

Consumer services

2.0

1.9

Microsoft

US

Technology

1.8

1.5

PE Investment Holdings 2018

Global

Private equity

1.7

N/A

Alphabet**

US

Technology

1.3

1.1

Anthem

US

Healthcare

1.2

0.9

UnitedHealth Group

US

Healthcare

1.1

1.0

Boeing

US

Industrials

1.1

N/A

Facebook

US

Technology

1.0

0.9

Comcast

US

Consumer services

0.8

N/A

Pfizer

US

Healthcare

0.8

N/A

Top 10 (% of holdings)

12.8

10.3

Source: F&C Investment Trust, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in end-February 2018 top 10. **Parent of Google.

Market outlook: More reasonable equity valuations

Exhibit 2 (LHS) shows the performance of UK and world markets, in sterling terms, over the last decade. While UK shares kept pace with overseas equities until late 2015, investors holding shares in international equities have enjoyed materially higher total returns in recent years. This may be due to both the Brexit overhang and better growth opportunities available outside our home market. Equities across the globe suffered significant weakness in Q418 due to the US central bank’s commitment to tightening monetary policy and an escalation in the US-China trade dispute; the pullback has led to more reasonable equity valuations. During 2018, on a forward P/E multiple basis, global equities (led by the dominant US market) reached a c 20% premium to their 10-year average. They are now more reasonably priced, albeit still trading at a premium, led by the US, emerging markets and Europe. While macro uncertainties exist, including the ongoing US-China trade dispute and Brexit negotiations, lower equity valuations could provide an attractive entry point for investors looking to invest for the medium to long term.

Exhibit 2: Equity performances and valuations (last 10 years)

Performance of world and UK indices (£-adjusted)

Datastream indices forward P/E valuations (x)

 

Last

High

Low

10-year
average

Last as % of
average

Europe

12.8

15.5

7.6

12.2

105

UK

12.5

15.7

8.5

12.6

99

US

16.8

19.0

11.3

15.2

111

Japan

12.9

23.7

10.5

14.4

89

Emerging markets

12.1

13.6

9.1

11.5

106

World

14.5

16.3

9.8

13.5

107

Source: Refinitiv, Edison Investment Research. Note: Valuation data as at 1 April 2019.

Fund profile: Oldest investment trust

Launched in 1868, FCIT is the oldest investment trust. On 9 November 2018, the company’s name was officially changed from Foreign & Colonial Investment Trust to F&C Investment Trust (former ticker FRCL). Reflecting low manager turnover, current lead manager Paul Niven (since 2014) is only the 11th since the fund’s launch, and the third since 1969. FCIT has a distinguished dividend history, having paid a distribution every single year since launch, and the annual payment has increased for the last 48 consecutive years. Along with holding a broad selection of listed companies, the trust has invested in private equity since 1942.

Niven aims to generate long-term growth in capital and income, and attractive risk-adjusted returns, from a portfolio that is widely diversified by geography and sector (there are no limits on geographic or sector exposures for publicly listed equities). The trust is benchmarked against the FTSE All-World index, and while the manager is benchmark aware, he is not constrained by the index allocations. A maximum 5% of the portfolio, at the time of investment, may be invested in unlisted securities (excluding private equity) and requires prior board approval. Shareholder approval would be required to increase FCIT’s private equity exposure above 20%. At the time of investment, a maximum 10% of the portfolio is permitted in a single investment, and up to 5% may be in funds managed by BMO Global Asset Management (subject to board approval). Gearing in either sterling or foreign currencies is permitted up to a maximum 20% of NAV (net gearing was 7% at end-February 2019). Data from FCIT shows that a £100 investment made when the trust was launched in 1868 would now be worth c £12m.

The fund manager: Paul Niven

The manager’s view: Potential for cycle to be extended

Niven highlights that we are late in the investment cycle, given most of the developed equity markets troughed more than a decade ago following the global financial crisis. However, he says that the backdrop has changed over the last few months as the US Federal Reserve (Fed) has indicated that it has reviewed its stance on raising interest rates, after heightened levels of stock market volatility in H218, as the Fed raised interest rates and tightened liquidity. The manager suggests that the central bank’s more dovish stance could extend the market cycle through 2019, and maybe even into the following year. Niven expects another year of positive earnings growth in 2019, albeit at a lower rate than in 2018, and believes that the stock market correction at the end of 2018 has reduced many of investors’ valuation concerns. He says that stocks are now reasonably valued, and are broadly pricing in the macro risks, such as the US-China trade dispute. However, the manager does expect further bouts of stock market volatility, although he believes there is potential for upside surprises in 2019. In terms of individual regions, compared to 12 months ago, he does not see any standout opportunities. European valuations look reasonable, but growth in this area has been disappointing, and the valuation discount between emerging and developed markets has narrowed, although Niven suggests that the US ‘is still pretty interesting’. He expects growth stocks to continue to lead markets higher into the end of the cycle, and suggests that he could allocate more capital to FCIT’s newly established in-house US equity growth strategy.

Asset allocation

Investment process: Diversified global exposure

The manager aims to generate long-term growth in capital and income from a portfolio of securities that is diversified by both geography and sector. He believes that FCIT’s c 8% allocation to private equity is a key feature of the trust, helping to reduce risk and limit the volatility of returns, and over the long term this asset class has produced superior total returns compared with equities. While FCIT is benchmarked against the FTSE All-World index, the manager does not follow its allocations (geographic divergences are shown in Exhibit 4). As illustrated in Exhibit 3, Niven has inputs from both BMO’s specialist teams and third-party managers; strategy allocations are regularly reviewed, and adjusted when deemed appropriate.

Current portfolio positioning

Exhibit 3 shows FCIT’s strategy allocations (from mid-2018, UK exposure is now included within Europe, having previously been separate). In recent years, exposure to the UK has declined from c 30% to the current c 5% level. The manager explains that the move to a pan-European strategy brings a higher focus via a reduction in the number of stocks in the combined portfolio; in addition, BMO’s pan-European strategy total returns have exceeded those of the individual UK and European portfolios. During FY18, the manager closed FCIT’s multi-manager global strategy (launched in 2014), as it was not adding value after taking costs into consideration (the global income and smaller companies strategies remain in place). The closure has led to increased portfolio concentration and lower costs. FCIT’s multi-manager strategy was c 8% of the fund (c £250–300m), and the proceeds were: allocated into the global smaller companies portfolio; funded a BMO US growth strategy that was launched in December 2018 to complement external manager T Rowe Price’s portfolio; added to an existing BMO US value strategy; and the manager paid off some of the trust’s short-term debt. The in-house US growth and value strategies allow increased flexibility without allocating more to the external managers; Niven believes that it is appropriate to diversify FCIT’s US exposure.

The manager has initiated a £100m long sterling hedge (in two tranches). He explains that the vast majority of FCIT’s assets are non-sterling, which brings a risk for shareholders if there is a good Brexit outcome and sterling rallies. The position was initiated in November 2018, when sterling was very weak versus the US dollar (exchange rate of c $1.275) due to concerns about a ‘hard’ Brexit. Niven believes that there are still four possible Brexit outcomes: a deal in the next few months, another referendum, a general election or no deal. He says that if sterling weakens further, he will increase the trust’s exposure to the currency.

Exhibit 3: FCIT strategy allocations (as at 31 December 2018)

Strategy

Primary manager

Approach

% allocated*

Holdings

Active share (%)**

Regional

US growth

T. Rowe Price

Growth

19.6

121

70

US value

Barrow Hanley

Value

16.3

45

82

Europe

BMO Global Asset Management

Fundamental quality value

14.4

41

88

Japan

BMO Global Asset Management

Quality GARP*

8.6

52

72

Emerging markets

LGM

Long-term quality

10.0

36

97

Global

Income

BMO Global Asset Management

Systematic income GARP***

11.1

60

90

Smaller companies

BMO Global Asset Management

Core quality growth

5.5

76

97

Private equity

Funds

HarbourVest/Pantheon

Fund of funds

4.3

16

N/A

Direct

BMO Global Asset Management

Direct

3.6

25

N/A

Source: F&C Investment Trust, Edison Investment Research. Note: *Excludes 6.6% in ‘other’ investments. **Active share is a measure of how a portfolio differs from an index (0% is full index replication and 100% is no overlap with the benchmark). ***GARP is growth at a reasonable price.

Niven explains that FCIT’s private equity exposure is diversified, with broadly 40% in North America, 40% in Europe and 20% in the rest of the world. During FY18, historic holdings HarbourVest and Pantheon realised £69m from maturing investments and delivered a 20.1% return, while the trust’s newer direct private equity investments also performed strongly, despite their relative immaturity, including life sciences fund Syncona (c 8% of the private equity exposure), which appreciated by 34% over the year. The manager says that there was close to £200m in new commitments in FY18 spread across primary and secondary funds and co-investments. Looking across all of FCIT’s new direct private equity commitments, 28% were made in 2016, 15% in 2017 and 57% in 2018. Niven says there is potential for the trust’s private equity exposure to increase from the current level of c 8% (historical range of 5% to 15%).

Exhibit 4: Geographic weightings (including private equity, % unless stated)

Portfolio end-February 2019

Portfolio end-February 2018

Change (pp)

Index weight

Active weight vs index (pp)

Trust weight/
index weight (x)

North America

52.8

48.8

4.0

56.6

(3.8)

0.9

Europe inc-UK

22.2

24.7

(2.5)

19.6

2.7

1.1

Emerging markets

11.3

12.7

(1.4)

10.1

1.2

1.1

Japan

9.2

10.4

(1.2)

8.0

1.2

1.1

Developed Pacific

2.3

2.9

(0.6)

5.6

(3.3)

0.4

Liquidity

2.2

0.5

1.7

0.0

2.2

N/A

100.0

100.0

100.0

Source: F&C Investment Trust, Edison Investment Research

In terms of FCIT’s geographic exposure, while the weighting to North America has risen over the 12 months to end-February 2019, the trust retains a modest underweight exposure versus the benchmark FTSE All-World index. Pan-European exposure has been reduced, as the manager believes that there are better investment opportunities available in other regions.

Performance: Solid medium- and long-term record

As shown in Exhibit 5 (RHS), FCIT has delivered solid absolute returns over three, five and 10 years, with average annual NAV and share price returns in ranges of 12.7–14.7% and 14.5–18.7% respectively. In FY18, the trust generated a NAV total return of -3.3% and a share price total return of -0.6%, which were modestly ahead of the benchmark’s -3.4% total return. The outperformance of FCIT’s share price compared with its NAV led to a decline in the discount (Exhibit 6). During FY18, the standout performing asset was private equity with a 19.7% return, building on its long-term record of outperformance. In terms of regional strategies, the US and emerging markets outperformed their respective performance benchmarks (the US was the only region in positive territory), while the European (which now includes the UK) and Japanese strategies underperformed. Within the US, both growth manager T Rowe Price and value manager Barrow Hanley outperformed their respective growth and value performance benchmarks. FCIT’s combined global strategies modestly underperformed their underlying benchmark during FY18.

Exhibit 5: Investment trust performance to 31 March 2019

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three, five and 10-year performance figures annualised.

Exhibit 6: Performance attribution in FY18

Exhibit 7: NAV total return performance relative to benchmark over three years

Source: F&C Investment Trust, Edison Investment Research. Note: *Debt at market value. **Dividends reinvested.

Source: Refinitiv, Edison Investment Research.

Exhibits 7 and 8 show FCIT’s relative performance. It has performed broadly in line with its benchmark in NAV terms over the last one, three, five and 10 years, while its share price has outperformed over these periods, particularly over three and five years. The trust has strongly outperformed the FTSE All-Share index over three, five and 10 years in both NAV and share price terms, highlighting the potential benefits of investing overseas.

Exhibit 8: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to blended benchmark*

(1.0)

0.2

(1.8)

1.2

10.3

13.6

1.5

NAV relative to blended benchmark*

(0.4)

(1.1)

(1.4)

(1.6)

(0.4)

1.0

(2.0)

Price relative to FTSE All-World

(1.0)

0.2

(1.8)

1.2

10.3

13.6

7.8

NAV relative to FTSE All-World

(0.4)

(1.1)

(1.4)

(1.6)

(0.4)

1.0

4.0

Price relative to FTSE All-Share

(0.3)

0.4

(1.9)

5.4

27.4

51.9

35.6

NAV relative to FTSE All-Share

0.4

(0.9)

(1.5)

2.4

15.0

35.0

30.8

Price relative to FTSE World ex-UK

(0.9)

0.2

(1.2)

0.7

9.4

11.0

4.7

NAV relative to FTSE World ex-UK

(0.3)

(1.0)

(0.9)

(2.2)

(1.2)

(1.3)

1.0

Source: Refinitiv, Edison Investment Research. Note: Data to end-March 2019. Geometric calculation. *Benchmark prior to 1 January 2013 was a composite of 40% FTSE All-Share and 60% FTSE World ex-UK indices (now FTSE All-World index).

Discount: Significant re-rating – trading close to NAV

As part of FCIT’s 150th anniversary celebrations, it has increased its engagement with existing and potential investors. This includes a programme with schools and other educational establishments, aiming to attract the next generation of investors. These efforts appear to have been successful, as the trust has continued to re-rate, and now regularly trades close to NAV, having traded at a c 15% discount following the UK’s European referendum. Until recently it had not traded at a premium since 1995.

During FY18, the trust reissued 100k shares from treasury (Exhibit 1); this was the first issuance since 1959, and the first time that it was undertaken at a premium (so far in FY19, a further 1.4m shares have been reissued – c 0.25% of the end-FY18 share base). There were no share repurchases in 2018 (the first year since 2002 that there were no buybacks) and, while there is no longer a hard discount control policy, the board is committed to buying back shares in response to a sustained widening of the discount.

FCIT’s current 0.1% discount to cum-income NAV compares with the range of a 1.4% premium to a 3.1% discount over the last 12 months, and average discounts of 0.3%, 5.1%, 6.5% and 8.3% over the last one, three, five and 10 years respectively.

Exhibit 9: Share price premium/discount to NAV (including income) over three years (%)

Source: Refinitiv, Edison Investment Research

Capital structure and fees

FCIT is a conventional investment trust with one class of share in issue. There are currently 543.7m ordinary shares in issue, with a further 18.1m held in treasury. At end-FY18, FCIT had the following debt: ¥6.6bn at 2.50% and $80m at 4.00% (maturing in 2019); €72m at 1.69% (2022); £25m at 2.80% (2028); £50m at 3.16% (2031); £75m at 2.92% (2048 – taken out in H118); and a £0.6m 4.25% perpetual debenture. The trust also has a £100m (with the option of a further £100m) revolving credit facility, which expires in December 2019; it is currently undrawn. Following a series of refinancings, the trust’s weighted average cost of debt has declined over the last five years from 7.10% to 2.85% at end-FY18.

On 2 April 2019, FCIT announced the issuance of fixed rate senior unsecured private placement notes in four tranches (funding date expected on 27 June 2019): €42m with a seven-year tenor (coupon of 0.93%); £57m with a 23-year tenor (coupon of 2.59%); £37m with a 30-year tenor (coupon of 2.69%); and £20m with a 40-year tenor (coupon of 2.72%). The notes offer a mix of medium- and long-dated fixed rate unsecured financing, which the board considers to be at attractive rates and will lead to a greater balance in FCIT’s debt maturity profile. Proceeds from the sale of the notes will be used for refinancing of existing debt, investment, and other general corporate purposes. The weighted average interest payable on the newly issued notes will be less than 2.3% and the weighted average interest on all structural borrowings following the transaction is expected to be c 2.5%.

FCIT is permitted to gear up to 20% of NAV; at end-February 2019, net gearing was 7%, which is at the lower end of the c 6% to c 16% range since 2008.

In FY18, the trust’s ongoing charges declined from 0.79% to 0.65%, which was helped by maturing private equity exposure (resulting in reduced fees to external managers) and a lower allocation to funds. Effective from 1 January 2019, FCIT’s management charges have reduced from a flat fee of 0.365% of market cap to a tiered structure (0.35% on the first £3bn market cap, 0.30% between £3bn and £4bn, and 0.25% above £4bn). In FY18, FCIT’s total costs (including interest expense and transaction charges) were 1.01%, 5bp lower than 1.06% in FY17.

Dividend policy and record

FCIT has a progressive dividend policy; its annual distribution has increased for the last 48 consecutive years, and it has paid a dividend every year since the trust was launched in 1868. The proposed 11.0p dividend per share for FY18 (c 1.15x covered) is 5.8% higher than 10.4p per share paid in FY17, which compares to a 2.1% UK inflation rate over the period. Over the last 10 years, the trust’s annual distribution has compounded at an average annual rate of 5.5%, which is meaningfully higher than the 2.3% pa average rate of UK inflation. Following the final FY18 dividend payment, FCIT has revenue reserves c 1.2x the annual distribution.

Peer group comparison

Exhibit 10 shows the 13 members of the AIC Global sector with less than 25% UK exposure. FCIT is the second-largest trust, with a market cap more than double the selected peer group average. Its NAV total returns are below average over the periods shown; ranking eighth, ninth, seventh and seventh over one, three, five and 10 years respectively. However, data from FCIT suggest that the trust has better risk-adjusted returns compared with the majority of its peers. Its ongoing charge is in line with the mean, it has an above average level of gearing, and its dividend yield is modestly below the selected peer group average.

Exhibit 10: Selected peer group as at 1 April 2019*

% unless stated

Market cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount (cum-fair)

Ongoing charge

Perf.
fee

Net gearing

Dividend yield

F&C Investment Trust

3,767.7

8.5

51.5

81.4

255.4

(0.8)

0.7

No

107

1.6

Alliance Trust

2,494.3

8.3

49.9

74.8

221.4

(5.7)

0.6

No

105

1.8

Bankers Trust

1,082.6

8.8

55.3

76.3

253.5

(2.2)

0.5

No

103

2.2

BMO Global Smaller Companies

788.4

3.1

40.4

67.1

379.9

(3.8)

0.6

No

103

1.1

British Empire

809.6

4.6

60.0

56.5

176.7

(9.3)

0.9

No

108

1.8

Edinburgh Worldwide

533.1

18.6

87.0

111.6

402.2

1.7

0.8

No

108

2.3

EP Global Opportunities

131.7

3.4

40.7

50.3

175.6

(4.5)

0.9

No

100

1.8

Law Debenture Corporation

707.3

4.3

36.1

40.8

252.7

(6.9)

0.4

No

104

3.2

Manchester & London

139.2

16.9

85.7

103.4

136.8

(6.4)

1.0

No

100

2.9

Martin Currie Global Portfolio

222.7

18.1

56.9

82.9

293.3

(0.9)

0.7

Yes

100

1.6

Mid Wynd International

208.3

11.5

55.9

91.4

305.7

1.2

0.7

No

100

1.1

Monks

1,831.9

9.9

75.0

91.3

257.8

1.9

0.5

No

105

0.2

Scottish Mortgage

7,577.7

14.1

95.3

150.4

596.8

2.2

0.4

No

108

0.6

Average

1,561.1

10.0

60.7

82.9

285.2

(2.6)

0.7

104

1.7

FCIT rank in sector (13 trusts)

2

8

9

7

7

5

8

4

8

Source: Morningstar, Edison Investment Research. Note: *Performance as at 29 March 2019 based on ex-par NAV. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

There are eight independent, non-executive directors on FCIT’s board: Simon Fraser (appointed in September 2009, chairman since May 2010); Sir Roger Bone (appointed in March 2008, senior independent director since November 2011); Jeffrey Hewitt (appointed in September 2010); Sarah Arkle and Nicholas Moakes (both appointed in March 2011); Francesca Ecsery (appointed in August 2013); Edward Knapp (appointed in July 2016); and Beatrice Hollond (appointed in September 2017). At the time of the May 2019 AGM, Fraser will have served nine years as chairman, and has announced his decision to retire at some point during this year. Led by the senior independent director, the board is undertaking a search for a new chairman.


General disclaimer and copyright

This report has been commissioned by F&C Investment Trust and prepared and issued by Edison, in consideration of a fee payable by F&C Investment Trust. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by F&C Investment Trust and prepared and issued by Edison, in consideration of a fee payable by F&C Investment Trust. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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