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F&C Investment Trust - Annual Financial Report

Summary of Results

In the most challenging year since the Global Financial Crisis, FCIT delivered a share price total return of -0.6%, better than the benchmark's -3.4%

Net asset value (NAV) total return of -3.3% with debt at market value

Annual dividend per share up 5.8% to 11.0p, well above the 2.1% rise in the Consumer Price Index; the 48th consecutive annual increase and now over 150 years of annual payments

 Discount narrowed to 1.5% at the year end and for much of the second half the shares traded at a premium resulting in the first issue of shares since 1959

 Ongoing Charges declined from 0.79% to 0.65% helped by a switch out of Global Multi-Manager funds portfolio and a new tiered fee arrangement with its Manager

 10-year share price total return of 247.5%, equivalent to 13.3% per annum

The Chairman's Statement

Dear Shareholder,

After enjoying several years of double digit returns, our 150th anniversary year turned out to be the most challenging for equity markets since the Global Financial Crisis. Despite these headwinds our total shareholder return of -0.6% was better than the -3.4% from the FTSE All-World Index, which we use as our benchmark. Our Net Asset Value ("NAV") total return, with debt at market value, was -3.3%.

Our NAV per share with debt at market value fell from 675.8 pence to 642.9 pence per share and our share price declined from 647 pence to 633 pence. These had both reached record highs during the year, but a change in sentiment led the US to joining other markets in ending down and resulted in a fall in the value of most of our investment portfolios. Despite the turn in sentiment our US investment portfolio performed relatively well. This, along with good relative returns from our Emerging Markets exposure and very strong absolute gains from our Private Equity portfolio, which is strategically positioned to provide higher returns than the listed equity portfolios over the longer term, helped in our modest outperformance of the benchmark.

A focus on the longer term

While our one-year performance numbers are important, our overriding investment objective centres on the delivery of longer term growth of capital and income rather than the short-term. I am pleased to say that over ten years the share price total return is 247.5% which is equivalent to 13.3% per annum. Over twenty years it is 406.9%, which equates to 8.4% per annum. Dividend growth has also been strong, with an annualised rise of 5.5% in payments over the past decade and 7.1% over the past twenty years.

Earnings and Dividends

It was another good year for our income. This rose to £87.9m, helped in part by £3.9m of special dividends, with Net Revenue Return per share up to 12.8 pence per share from 11.7 pence per share in 2017. Subject to shareholder approval at the Annual General Meeting ("AGM"), shareholders will receive a final dividend of 2.8 pence per share on 8 May 2019 bringing the total dividend for the year to 11.0 pence. This rise of 5.8% compares with the 2.1% rise in the Consumer Price Index. This adds to our long record of rises in real terms; will be our forty-eighth consecutive annual dividend increase; and, remarkably, will add to our record of paying a dividend in each year since 1868.

The total dividend proposed for the year is fully covered by earnings, and we remain confident that your Company will continue to deliver sustainable real rises in dividend per share to shareholders. After payment of the final dividend our revenue reserve will continue to exceed one year's worth of dividends.

Further improvement in the Company's rating

Our 150th anniversary year saw our long-held aspiration of the Company's shares trading at or close to NAV per share being reached and our first issue of shares since 1959. We started the year on a discount of 4.3% but, due to improved investor demand, this narrowed to 1.5% by its end. Our average discount was 1.3% and for much of the second half of the year our share price traded at a premium to NAV. The share issue was made in November and took the form of a resale of shares that had been held in treasury as part of our progressive discount control strategy announced in May 2015.

This issuance is believed to be the first that the Company has made at a premium to NAV in its 150-year history. Adherence to a discount control policy for nearly twenty years and the narrowing of the discount more recently has helped to enhance returns for continuing shareholders. For the first time since 2002, no shares were bought back. Nevertheless, we are firmly committed to the use of buybacks in normal market conditions for the benefit of shareholders in the event of a re-emergence of the discount.


The future political and economic environment is perhaps even more uncertain than ever with only a few weeks until we are expected to leave the European Union but still no clarity as to how we are going to do so. Globally, as well, there are question marks on the major trading relationships between China and the US. Additionally the speed with which technology is disrupting traditional industries continues to accelerate.

While this extraordinary uncertainty presents considerable risks, it also creates significant opportunities for new economic activity and new companies. While traditional global trade routes are under threat, new ones are developing. Through its diversified approach to investing around the world in both private and public companies both new and old, F&C Investment Trust is well positioned to take advantage of these opportunities while weathering the storms. For over 150 years the Company has endured rapid inflation as well as deflation, world wars as well as economic booms and busts but by taking a long-term approach to prudent risk taking across a well diversified portfolio of stocks and shares it has continued to deliver for its individual shareholders. I have great confidence that it will continue to do so in the years ahead.

Simon Fraser


11 March 2019

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