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Unique fund structure offering income and growth

F&C Managed Portfolio Growth 27 October 2017 Review
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F&C Managed Portfolio Trust

Unique fund structure offering income and growth

Investment trusts

 

27 October 2017

FMPI; FMPG

Price

141.0p; 196.0p

Market cap

£60m; £68m

AUM

£61m; £68m

NAV*

136.2p; 195.3p

Premium(+)/discount(-) to NAV

+3.5%; +0.4%

NAV**

137.4p; 195.3p

Premium(+)/discount(-) to NAV

+2.6%; +0.4%

*Excluding income. **Including income. As at 25 October 2017.

Yield

3.9%; 0.0%

Ordinary shares in issue

42.3m; 34.6m

Code

FMPI; FMPG

Primary exchange

LSE

AIC sector

Global Equity Income; Global

FMPI one-year performance

FMPG one-year performance

FMPI gearing

Net gearing*

5.3%

FMPG gearing

Net cash*

2.8%

*As at 30 September 2017.

Analysts

Mel Jenner

+44 (0)20 3077 5720

Sarah Godfrey

+44 (0)20 3681 2519

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

F&C Managed Portfolio Trust (FMPT) is an investment trust with a differentiated structure. It consists of two listed investment portfolios: an income portfolio (FMPI) and a growth portfolio (FMPG). A unique feature of FMPT is that income generated by FMPG is transferred to FMPI in exchange for capital, boosting the income prospects of FMPI and the potential capital growth prospects for FMPG. Although both listed portfolios are benchmarked against the FTSE All-Share index, the manager follows an unconstrained investment approach, with each portfolio generally holding c 40 investment companies. Both FMPI and FMPG have outperformed the benchmark over one, three and five years (to 30 September) and since they were launched in April 2008. FMPI’s annual dividend has increased every year since 2012; its current yield is 3.9%.

12 months ending

FMPI share price (%)

FMPI NAV (%)

FMPG share price (%)

FMPG NAV (%)

FTSE All-Share (%)

30/09/13

20.5

20.3

23.5

24.0

18.9

30/09/14

9.9

5.8

10.7

6.8

6.1

30/09/15

0.5

0.9

4.7

4.1

(2.3)

30/09/16

11.7

14.5

9.6

12.7

16.8

30/09/17

15.9

12.6

20.0

18.3

11.9

Note: Twelve-month rolling discrete total return performance.

Investment strategy: Income and growth options

Manager Peter Hewitt has more than 30 years’ investment experience. For FMPT he constructs two portfolios, each invested in c 40 closed-end funds, aiming to generate an attractive level of income with some capital growth (FMPI) or capital growth (FMPG). Funds are selected on a bottom-up basis and the manager is keen to preserve capital in periods of tougher stock market performance. Gearing of up to 20% of total assets is permitted. At end-September 2017, FMPI had net gearing of 5.3% and FMPG had a net cash position of 2.8%.

Market outlook: Strong corporate earnings

Global equities have experienced a meaningful re-rating since early 2016, so future share price appreciation is likely to be driven by corporate earnings growth rather than by a further expansion in valuation multiples. So far in 2017, earnings estimate revisions in aggregate have been positive, reversing the declines experienced in recent years. Investors looking to gain diversified exposure to global equities may be rewarded by considering actively managed portfolios, with good investment track records, offering the potential of income or capital growth.

Valuation: Active discount management

Renewed annually, FMPI and FMPG have the authority to repurchase up to 14.99% and issue up to 10% of shares outstanding, aiming to ensure that their shares trade close to NAV. FMPT’s unique structure means that FMPG does not pay a dividend, while FMPI has a current dividend yield of 3.9%, which compares favourably to the current 3.7% yield of the FTSE All-Share index. The manager notes a good level of income at FMPI, and is hoping for another dividend increase in FY18.

Exhibit 1: FMPI at a glance

Investment objective and fund background

Recent developments

F&C Managed Portfolio Trust Income Portfolio (FMPI) aims to provide an attractive level of income, with the potential for income and capital growth from a diversified portfolio of investment companies. Underlying investment exposure is across a range of regions and sectors – the focus is on offering an income yield above the benchmark FTSE All-Share index.

6 September 2017: Announcement of first interim dividend of 1.30p per share versus 1.25p in the prior year.

31 July 2017: Final results for 12 months ending 31 May 2017. NAV TR +24.5% versus benchmark TR +24.5%.

8 June 2017: Announcement of fourth interim dividend of 1.70p per share versus 1.60p in the prior year.

8 March 2017: Announcement of third interim dividend of 1.25p per share versus 1.20p in the prior year.

Forthcoming

Capital structure

Fund details

AGM

September 2018

Ongoing charges

1.12%

Group

BMO Global Asset Mgmt (BMO)

Interim results

January 2018

Net gearing

5.3%

Manager

Peter Hewitt

Year end

31 May

Annual mgmt fee

0.65% (see page 9)

Address

6th Floor, Quartermile 4, 7 Nightingale Way Edinburgh, EH3 9EG

Dividend paid

Quarterly

Performance fee

Yes (see page 9)

Launch date

April 2008

Trust life

Indefinite

Phone

+44 (0)131 718 1000

Continuation vote

2018, then five-yearly

Loan facilities

£7m (FMPT)

Website

fcmanagedportfolio.co.uk

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

Dividends are paid quarterly in October, January, April and July.

Renewed annually, the ability to repurchase up to 14.99% and allot up to 10% per year.

Shareholder base (as at 31 August 2017)

Portfolio look-through exposure by geography (as at 30 September 2017)

Top 10 holdings (as at 30 September 2017)

Portfolio weight %

Trust

AIC sector

30 September 2017

30 September 2016*

Murray International Trust

Global Equity Income

4.2

3.8

Law Debenture Corporation

Global

3.6

3.4

European Assets Trust

European Smaller Companies

3.3

N/A

BB Biotech

Sector Specialist: Biotech & Healthcare

3.3

N/A

Secure Income REIT

Property Specialist

3.3

N/A

Invesco Perpetual UK Smaller Companies

UK Smaller Companies

3.3

N/A

Princess Private Equity Holding

Private Equity

3.2

N/A

City of London Investment Trust

UK Equity Income

3.2

3.4

Henderson International Income Trust

Global Equity Income

3.1

3.1

Temple Bar Investment Trust

UK Equity Income

3.1

N/A

Top 10

33.6

33.4

Source: F&C Managed Portfolio Trust Income Portfolio, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in September 2016 top 10.

Exhibit 2: FMPG at a glance

Investment objective and fund background

Recent developments

F&C Managed Portfolio Trust Growth Portfolio (FMPG) aims to provide capital growth from a diversified portfolio of investment companies. Underlying investment exposure is across a range of regions and sectors aiming to maximise total returns, primarily through capital growth. FMPG is benchmarked against the FTSE All-Share index.

31 July 2017: Final results for 12 months ending 31 May 2017. NAV TR +26.4% versus benchmark TR +24.5%.

19 January 2017: Interim results for six months ending 30 November 2016. NAV TR +10.0% versus benchmark TR +9.6%.

Forthcoming

Capital structure

Fund details

AGM

September 2018

Ongoing charges

1.08%

Group

BMO Global Asset Mgmt (BMO)

Interim results

January 2018

Net cash

2.8%

Manager

Peter Hewitt

Year end

31 May

Annual mgmt fee

0.65% (see page 9)

Address

6th Floor, Quartermile 4, 7 Nightingale Way Edinburgh, EH3 9EG

Dividend paid

None

Performance fee

Yes (see page 9)

Launch date

April 2008

Trust life

Indefinite

Phone

+44 (0)131 718 1000

Continuation vote

2018, then five-yearly

Loan facilities

£7m (FMPT)

Website

fcmanagedportfolio.co.uk

Dividend policy and history

Share buyback policy and history (financial years)

No dividends paid – net income is reallocated to the income portfolio in exchange for capital.

Renewed annually, the ability to repurchase up to 14.99% and allot up to 10% per year.

Shareholder base (as at 31 August 2017)

Portfolio look-through exposure by geography (as at 30 September 2017)

Top 10 holdings (as at 30 September 2017)

Portfolio weight %

Trust

AIC sector

30 September 2017

30 September 2016*

Monks Investment Trust

Global

4.3

3.0

Polar Capital Technology Trust

Sector Specialist: Tech Media & Telecom

3.7

3.5

Scottish Mortgage Investment Trust

Global

3.2

3.0

Syncona

Flexible Investment

3.2

N/A

Allianz Technology Trust

Sector Specialist: Tech Media & Telecom

3.2

N/A

Worldwide Healthcare Trust

Sector Specialist: Biotechnology & Healthcare

3.1

N/A

Baillie Gifford Japan Trust

Japan

2.8

N/A

Templeton Emerging Markets

Global Emerging Markets

2.8

N/A

Personal Assets Trust

Flexible Investment

2.7

N/A

RIT Capital Partners

Flexible Investment

2.6

2.9

Top 10

31.6

30.5

Source: F&C Managed Portfolio Trust Growth Portfolio, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in September 2016 top 10.

Market outlook: Time to be more selective

Global equities have continued to move higher in recent months as investors have focused on the broad improvement in corporate earnings and yields on other asset classes, such as bonds and cash, have remained unappealing. In an environment where earnings multiples are higher than average (Exhibit 3, right-hand side) and further share price appreciation is likely to be driven by corporate earnings rather than re-rating, investors looking for exposure to global equities may wish to consider actively managed, widely diversified portfolios, with good performance track records, which offer the opportunity to benefit from higher income or capital growth.

Exhibit 3: Market performance and valuation

Performance of indices over 10 years (£ terms)

Valuation metrics of Datastream indices (24 October 2017)

 

Last

High

Low

10-year average

Last as % of average

UK

P/E 12 months forward (x)

14.4

15.6

7.4

12.1

119

Price to book (x)

1.6

2.5

1.2

1.7

94

Dividend yield (%)

3.6

6.6

2.7

3.5

101

Return on equity (%)

8.7

21.2

2.5

10.3

84

World

P/E 12 months forward (x)

15.9

16.0

8.8

13.1

121

Price to book (x)

2.2

2.5

1.1

1.8

124

Dividend yield (%)

2.3

4.6

2.0

2.7

88

Return on equity (%)

10.8

16.9

4.7

11.0

98

Source: Thomson Datastream, Edison Investment Research

Fund profile: Dual portfolio structure – income/growth

FMPT aims to provide income and growth, via portfolios of investment companies that are diversified by sector, geography and manager, which spreads investment risk. The trust has more than 14,000 individual shareholders, the majority of whom have smaller investment portfolios and/or regular savings plans. FMPT comprises two distinct portfolios (both listed in London): FMPI aims to provide an attractive level of income and potential for capital growth, and FMPG aims to generate capital growth. A unique feature is that any net income generated by FMPG is transferred to FMPI in exchange for capital. Since launch, FMPT has been managed by Peter Hewitt at F&C (a wholly owned subsidiary of Bank of Montreal), who has more than 30 years’ investment experience. FMPI and FMPG are benchmarked against the FTSE All-Share index, although the manager follows an unconstrained investment approach as there are no limits on sector or geographic exposure. Each portfolio generally holds c 40 investment companies, the majority of which invest in equities, giving access to a very broad range of underlying investments. At the time of purchase, no single holding in FMPI’s and FMPG’s portfolios may exceed 15% of total assets, and a maximum of 20% in each portfolio may be invested in other F&C funds. The use of derivatives is permitted for efficient portfolio management, which includes protection against market falls. Gearing of up to 20% of FMPI’s and FMPG’s NAV is permitted; at end-September 2017, FMPI had net gearing of 5.3% and FMPG had a net cash position of 2.8%.

The fund manager: Peter Hewitt
The manager’s view: Remains cautiously optimistic

Following a period of re-rating of global equities, Hewitt remains cautiously optimistic. He believes that the outlook for equities is better than for other asset classes such as bonds or cash. However, he says that as equity valuations are above historical averages, their returns are likely to be more modest going forward than those experienced since early 2016. The manager is encouraged by the strength of corporate earnings, which should be the driver of share prices going forward, rather than a further expansion in valuation multiples. Earnings growth is particularly robust in Europe, where the economic recovery has lagged other developed regions, and also in Asia Pacific. Hewitt says that earnings growth remains strong in the US, and if President Trump is able to lower corporate taxes, this will provide additional support to the US equity market.

The manager acknowledges that there has been a multi-year equity bull market following the global financial crisis, suggesting that a stock market correction is possible. In such a case, he would be looking to invest, given the strong corporate earnings environment. So far in 2017, earnings estimate revisions have been positive. This follows a three-to-four year period when estimates started out too high and had to be revised downwards.

Two major themes represented in both the income and growth portfolios are technology and biotech, which the manager believes have secular growth characteristics. He notes that within the US stock market, the five largest companies are now all in the technology sector and are continuing to deliver strong results. However, he is currently more bullish on the biotech sector, suggesting that pricing concerns have faded into the background, which favours both biotech and the broader healthcare industry, while biotech company fundamentals are currently very strong.

Asset allocation
Investment process: Focus on growth and capital preservation

The manager has an unconstrained investment approach, aiming to preserve capital in more difficult markets, while growing capital when equity markets are buoyant. If his outlook is cautious, he is able to raise the portfolios’ cash exposures or invest in lower beta investments, and has the ability to increase gearing when he has an optimistic outlook. Both FMPI and FMPG have a bias to global and overseas exposure and meaningful weights in sectors with long-term growth potential, such as technology. Within each portfolio, some positions are held as a hedge against weak equity markets, such as infrastructure assets in FMPI and absolute return-focused, multi-asset trusts in FMPG. Meeting the management of investment companies is a key part of the investment process and is used to supplement third-party, closed-end fund research. Hewitt seeks managers with an ability to consistently outperform their respective benchmarks and also the returns from the FTSE All-Share index. While holdings are selected on a bottom-up basis, the manager is able to draw on F&C’s multi-manager team to help form his views on the macro environment.

Current portfolio positioning

Exhibit 4: FMPI’s and FMPG’s look-through geographic exposure (% unless stated)

FMPI

Portfolio end-September 2017

Portfolio end- September 2016

Change (pts)

FMPG

Portfolio end- September 2017

Portfolio end- September 2016

Change (pts)

UK

39.0

46.0

(7.0)

UK

28.0

32.0

(4.0)

North America

14.0

17.0

(3.0)

North America

24.0

23.0

1.0

Europe

13.0

12.0

1.0

Europe

18.0

17.0

1.0

Far East & Pacific

11.0

12.0

(1.0)

Far East & Pacific

10.0

8.0

2.0

Cash

8.0

0.0

8.0

Japan

5.0

5.0

0.0

Fixed interest

6.0

9.0

(3.0)

Cash

5.0

5.0

0.0

Japan

3.0

2.0

1.0

Fixed interest

3.0

4.0

(1.0)

China

2.0

1.0

1.0

China

2.0

2.0

0.0

Russia

2.0

0.0

2.0

South America

2.0

1.0

1.0

South America

1.0

1.0

0.0

Other

2.0

2.0

0.0

Other

1.0

0.0

1.0

Africa

1.0

1.0

0.0

100.0

100.0

100.0

100.0

Source: F&C Managed Portfolio Trust Growth Portfolio, Edison Investment Research

Over the last 12 months, both FMPI and FMPG have meaningfully reduced their UK exposure (Exhibit 4, on a look-through basis). Within FMPI, the UK weighting includes alternatives, such as infrastructure assets, as well as equity exposure. FMPI’s holdings have a higher cash weighting and modestly higher exposure in Russia. FMPG has increased its exposure to the Far East & Pacific.

FMPI: over the last several months, the manager has participated in three IPOs: BB Healthcare Trust (December 2016); Impact Healthcare REIT (March 2017); and Jupiter Emerging & Frontier Income Trust (May 2017). Other new additions to the portfolio are Civitas Social Housing, GCP Asset Backed Income Fund (asset-backed debt) and HICL Infrastructure. Recent sales are City Merchants High Yield Trust (UK high income), Honeycomb Investment Trust and Ranger Direct Lending (both direct lending), Mercantile Investment Trust (UK small and mid-cap), and Standard Life UK Smaller Companies Trust (convertible). The manager had already sold the position in Ranger Direct Lending before its meaningful price decline in April 2017.

FMPG: there is just one new position in recent months; Henderson UK Smaller Companies Investment Trust (HSL). HSL invests in high-quality companies with growth potential. Following another year of outperformance (ending 31 May 2017), the trust has now beaten its Numis Smaller Companies Index (ex-investment companies) benchmark in 13 of the last 14 financial years and its total annual dividends have increased for the last eight consecutive years. Recent sales are Fundsmith Emerging Equities Trust, Gabelli Value Plus Trust (North America), Mercantile Investment Trust (UK small and mid-cap) and Strategic Equity Capital (UK small companies).

Performance: Strong record of relative outperformance
FMPI

FMPI’s NAV total return of +24.5% in FY17 (ending 31 May 2017) was in line with the benchmark; its share price total return was +28.8%. Returns over the period were boosted by the weakness of the pound, which enhanced the value of overseas assets to sterling-based investors. Two of the best-performing investments were private equity trusts: NB Private Equity Partners (+58%) and Princess Private Equity Holding (+59%). Both trusts benefited from narrowing discounts. The comparative laggards were mainly trusts investing outside of equities, which are financed by debt with the intention of increasing income, such as GCP Infrastructure Investments (+10%), Carador Income (+14%) and CQS New City High Yield Fund (+15%). Over the last nine financial years, FMPI has outperformed the benchmark in seven years, performed in line in one and only underperformed in one year.

Exhibit 5: FMPI’s performance to 30 September 2017

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

Price, NAV and benchmark total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three- and five-year performance figures annualised. SI is since inception on 16 April 2008.

Exhibit 6 shows FMPI’s relative returns; it has outperformed its FTSE All-Share benchmark over one, three and five years and since inception, in both NAV and share price terms.

Exhibit 6: FMPI’s share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

SI

Price versus FTSE All-Share

1.7

(1.5)

(0.0)

3.5

1.8

6.9

14.5

NAV versus FTSE All-Share

0.2

0.3

0.1

0.6

1.9

2.7

11.3

Price versus FTSE All-Share Eq Invt Instr

2.7

(1.4)

(2.8)

(0.9)

(8.8)

(6.9)

2.0

NAV versus FTSE All-Share Eq Invt Instr

1.2

0.4

(2.6)

(3.7)

(8.7)

(10.5)

(0.9)

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-September 2017. Geometric calculation.

Exhibit 7: FMPI’s NAV total return performance relative to benchmark over five years

Source: Thomson Datastream, Edison Investment Research

FMPG

FMPG outperformed the benchmark in FY17; its NAV and share price total returns of 26.4% and 26.8% respectively compared to the 24.5% total return on the FTSE All-Share index. As with FMPI, absolute returns were boosted by sterling weakness. The two largest contributors to performance were Polar Capital Technology Trust and Allianz Technology Trust, which both appreciated by more than 70% and were closely followed by FMPG’s largest position, Monks Investment Trust (+68%). Relative detractors in the portfolio included Sanditon Investment Trust (-4%) and BH Macro (+6%), which struggled during a period of strong equity returns as a result of their long/short investment strategies. Over the last nine financial years, FMPG has outperformed the benchmark in seven years, while it underperformed in just two years.

Exhibit 8: FMPG’s performance to 30 September 2017

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

Price, NAV and benchmark total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three- and five-year performance figures annualised. SI: since inception on 16 April 2008.

FMPG’s strong relative performance in recent months has led to an improvement in its long-term performance track record. It has now outperformed the benchmark since inception as well as over the last one, three and five years, in both NAV and share price terms.

Exhibit 9: FMPG’s share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

Since inception

Price versus FTSE All-Share

0.7

(1.1)

4.4

7.2

7.7

16.8

4.3

NAV versus FTSE All-Share

(0.1)

0.7

4.0

5.7

8.6

13.9

3.6

Price versus FTSE All-Share Eq Invt Instr

1.6

(0.9)

1.6

2.6

(3.5)

1.8

(7.2)

NAV versus FTSE All-Share Eq Invt Instr

0.8

0.8

1.1

1.2

(2.7)

(0.7)

(7.7)

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-September 2017. Geometric calculation.

Exhibit 10: FMPG’s NAV performance relative to benchmark over five years

Source: Thomson Datastream, Edison Investment Research

Discount: FMPI and FMPG both trade close to NAV

FMPT’s board aims to maintain FMPI’s and FMPG’s share price discounts to NAV below 5% (in normal market conditions), although in practice they are both kept around NAV. In order to manage a discount or premium, it has the authority, renewed annually, to buy back up to 14.99% of shares of each portfolio in issue and allot up to 10% of new shares. As shown in Exhibits 1 and 2, so far in FY18 both FMPI and FMPG have had modest allotments, and no shares have been repurchased.

FMPI’s current 2.6% share price premium to cum-income NAV compares to a range over the last 12 months of a 4.4% premium to a 2.6% discount. It is lower than the average premiums of the last one, three and five years of 1.0%, 1.0% and 0.5% respectively.

Exhibit 11: FMPI’s share price premium/discount to NAV (inc. income) over three years (%)

Source: Thomson Datastream, Edison Investment Research

FMPG’s current 0.4% share price premium to cum-income NAV compares to a range over the last 12 months of a 3.2% premium to a 3.2% discount. Over the last one, three and five years FMPG has traded at an average 0.1% premium, 0.5% premium and 0.1% discount respectively.

Exhibit 12: FMPG’s share price premium/discount to NAV (inc. income) over three years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

At 27 October, FMPI had 42.3m ordinary shares in issue, with a further 0.2m shares held in treasury, and FMPG had 34.6m ordinary shares in issue and no shares held in treasury. To lock in the low level of interest rates, in February 2017, FMPT entered into a £5m five-year loan facility with Royal Bank of Scotland at a fixed rate of 2.03%, replacing a £5m unsecured revolving credit facility. The loan is fully drawn down by FMPI. FMPT also entered into a £2m two-year unsecured revolving credit facility with Royal Bank of Scotland. Gearing of up to 20% of NAV is permitted at both FMPI and FMPG; at end-September 2017, FMPI had 5.3% net gearing and FMPG had 2.8% net cash.

F&C is paid an annual management fee of 0.650% pa of total assets in each portfolio, payable quarterly in arrears, which is reduced to 0.325% pa on any investments that are managed by F&C. The management fee is split 60:40 between capital and revenue for FMPI and 80:20 respectively for FMPG. A 10% performance fee is payable on the excess total return of FMPI and FMPG versus the benchmark total return and is capped at 0.35% of the total assets of the relevant portfolio. For more details regarding the performance fee, please see our March 2017 initiation report. In FY17, FMPI’s ongoing charge was 1.12%, which was a modest 3bp increase versus the prior year; FMPG’s ongoing charge was 1.08%, a 1bp reduction year-on-year.

Shareholders have the opportunity to convert their income shares into growth shares and vice versa annually in October. This is subject to certain minimum and maximum thresholds; to date the minimum limit has not been achieved and so there have been no conversions.

Dividend policy and record

FMPI pays dividends quarterly in October, January, April and July. In FY17, the annual dividend of 5.45p was 4.8% higher than in FY16, ahead of the 3.9% compound annual growth rate of the last five years; as in FY16, it was 1.08x covered by revenue. At the end of FY17, the revenue reserve was c 50% of the annual dividend cost, providing a buffer for future years if there is a lower level of portfolio income. The first interim dividend of 1.30p for FY18 has been declared, up 4% year-on-year. The board intends to pay three interim dividends of at least 1.30p for FY18, with the fourth interim dividend dependent on the amount of income generated over the period. FMPI’s current dividend yield of 3.9% compares favourably to the 3.7% yield of the FTSE All-Share index.

Peer group comparison

FMPI and FMPG are classified within the AIC Global Equity Income and Global sectors respectively. These two sectors contain a wide range of peers with differing mandates and geographic exposures. In Exhibit 13, we highlight a selection of closed-end funds that invest in collective vehicles, although we remain mindful that they have different investment strategies. FMPI lags the peer group averages over the periods shown, while FMPG is ahead of the average over one year. Like the majority of the peers, FMPI and FMPG are trading close to their net asset values. Both portfolios have average ongoing charges. Enhanced by the income transferred from FMPG, FMPI has the highest dividend yield in the peer group, 2.2pp above the average.

Exhibit 13: Selected peer group (as at 24 October 2017)

% unless stated

Market cap £m

NAV TR 1 Year

NAV TR 3 Year

NAV TR 5 Year

Discount (ex-par)

Ongoing charge

Perform. fee

Net gearing

Dividend yield (%)

F&C Managed Portfolio Income

59.9

15.3

36.7

68.7

2.9

1.1

Yes

105

3.9

F&C Managed Portfolio Growth

67.8

20.5

47.6

87.9

(0.8)

1.1

Yes

97

0.0

British Empire

826.7

15.7

53.7

75.9

(10.8)

0.9

No

105

1.6

JPMorgan Elect Managed Growth

263.9

17.7

51.8

105.3

(2.2)

0.6

No

100

1.4

Miton Global Opportunities

71.1

21.1

62.6

89.4

1.3

1.3

No

106

0.0

Seneca Global Inc & Growth Trust

77.9

15.4

42.8

73.7

2.1

1.6

No

104

3.5

Simple average (6 trusts)

227.9

17.6

49.2

83.5

(1.3)

1.1

103

1.7

FMPI rank in peer group

6

6

6

6

1

3

2

1

FMPG rank in peer group

5

2

4

3

4

4

6

5

Source: Morningstar, Edison Investment Research. Note: Performance data to 23 October. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

The four directors on FMPT’s board were appointed on 22 February 2008; they are all non-executive and independent of the manager. They are Richard Martin (chairman of the board and the nomination committee), David Harris (senior independent director), Colin McGill (chairman of the audit committee) and Alistair Stewart (chairman of the remuneration committee). The directors have backgrounds in finance, law and accountancy.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by F&C Managed Portfolio Trust and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street,

Sydney , NSW 2000,

Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by F&C Managed Portfolio Trust and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street,

Sydney , NSW 2000,

Australia

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