F&C Investment Trust Annual Financial Report

F&C Investment Trust plc (‘F&C’/the ‘Company’) today announces its results for the year ended 31 December 2024.

• F&C’s share price was 1,108 pence representing a total return of +16.9%, against its benchmark, the FTSE All-World Index, of +19.3%.

• F&C’s Net Asset Value (‘NAV’) total return of +21.0%, with debt at market value, ahead of the benchmark.

• The Company has delivered a total shareholder return of 212.2% over the ten-year period to the end of 2024, equivalent to 12.1% per annum which compares with a return of 200.2% (equivalent to 11.6% per annum) from our benchmark index.

• The final dividend will be 4.8 pence per share, subject to shareholder approval, and will bring the total dividend for the year to 15.6 pence per share. This will be a 6.1% increase and the 54th consecutive annual increase.

Commenting on the markets, Paul Niven, Fund Manager said:

“Despite a volatile and rapidly changing market backdrop, our consistent approach has served shareholders very well over the long term.”

Chairman’s Statement

Dear Shareholder,

2024 was another strong year for global equity markets with US equities rising by more than 25%. This was the first time since the late 1990s that US investors have enjoyed successive annual gains of greater than 20%. As was the case in 2023, the US outperformed both analysts’ expectations and other major equity markets. The so-called ‘Magnificent Seven’ US mega-cap technology stocks delivered returns well in excess of the broader market. Indeed, this collection of exceptional companies, which include Nvidia, Microsoft and Amazon, delivered a 67% dollar-based gain on the year, pushing the market weight of these companies in the US index to new highs.

US equity market performance was driven by better-than-expected economic data and, as the year progressed, initial fears of recession gave way to robust US growth, while inflation fell to levels which enabled central banks to begin cutting interest rates. While the scale of resultant interest rate cuts was below initial expectations, the combination of strong earnings growth in the US, declining inflation and interest rates, alongside ongoing optimism over the impact of Artificial Intelligence (‘AI’) propelled equity markets to new record highs. Furthermore, despite uncertainty over policy, the election of Donald Trump as US President for a second term, with promises of corporate tax cuts and deregulation, gave further impetus to investor risk appetite in the final part of the year.

The picture was more mixed outside of the US. While the global economy avoided a recession over the year, there was reasonable dispersion across regions. Sluggish economic data, along with lower inflation in Europe and the UK, led to an easing of interest rate policy by the European Central Bank and the Bank of England.

Our Net Asset Value (‘NAV’) total return, taking debt at market value, of +21.0% outperformed the return from our benchmark index of +19.3%. Our share price and our NAV total returns exceeded those delivered from our closed ended peers in 2024. Indeed, both our returns exceed that of our open and closed ended peers over one, three, five and ten years. This outperformance, over all these periods is unique in our closed ended sector. As a diversified global investment trust, designed to provide consistency in terms of performance outcome, it is pleasing to report these strong and consistent returns for shareholders. Furthermore, as our NAV total return has also exceeded that of our market benchmark over one, three, five and ten years, we believe that this is a strong proof statement on the effectiveness of our investment approach.

Although our share price and NAV reached new record highs, in common with many of our peers in the investment trust sector we saw a widening in our share price discount to NAV in 2024. Our discount moved from 5.9% at the start of the year, to end the year at 9.2%. This detracted from shareholder returns, resulting in a share price total return of +16.9%, lower than our NAV total return of +21.0%. Our NAV, with debt at market value, rose from 1,022.1p to 1,219.6p per share and our share price rose from 962p to 1,108p. We bought back 5.3% of our issued share capital, a total of 27.3m shares. We remain committed towards our objective of achieving a sustainably low deviation between our share price and NAV, as well as reducing the volatility of the discount.

Performance from our underlying listed strategies was strong over the year, with each component of our portfolio delivering a gain in absolute terms. Performance was particularly strong in North America, Japan and from our Global Focus strategy, which has exposure to quality growth stocks. While we were relatively underweight compared to the benchmark index to some of the Magnificent Seven stocks, overall our listed portfolio modestly outperformed its benchmark index. The decision by our Fund Manager to reduce our allocations to emerging markets and Europe in the first half of 2024 served us well as both regions underperformed the broader benchmark over the year. While our private equity portfolio produced respectable absolute returns over the year, performance lagged that of the listed global equity benchmark.

As our investment portfolio has significant investments in US assets the modest decline in sterling (of -1.8%) against the US dollar was beneficial to returns. In a year where markets rose strongly, our gearing added value over the year.

Following our re-admission to the FTSE100 index in 2022, I am pleased to report that we not only maintained this position, but we actually rose within the index, cementing our position as one of the UK’s leading listed companies. As noted in our 2023 Annual Report, we have previously been a FTSE100 constituent, but this current period is the longest that we have remained in the index.

Contributors to total returns in 2024 (%)
Portfolio return(1)	19.1
Management fees	(0.3)
Interest and other expenses	(0.5)
Share buybacks	0.5
Change of value of debt	0.6
Gearing/other	1.6
NAV total return	21.0
Change in share price discount	(4.1)
Share price total return	16.9
FTSE All-World total return	19.3

Outlook

2024 saw a continuation of many of the market themes from 2023. Performance from the Magnificent Seven sent US equities to record highs and to record levels of market concentration. It is noteworthy that recent equity market gains have been fuelled by such a small number of companies. However, there are expectations for a broadening out of returns across equity markets over the coming year.

The forecast for economic growth remains mixed for 2025. In the US, inflation is now expected to remain above target for longer, with jobs and underlying activity still showing strong readings. This is likely to leave only limited room for the Federal Reserve to cut interest rates from current levels. In Europe and the UK, signs of slowing economic growth means central banks are expected to cut rates over the coming year.

Equity markets, particularly the US, appear to be valued with little room for disappointment. Whilst there is investor enthusiasm for an expansionary policy mix that includes tax cuts and extra fiscal spending from the new US administration, investors continue to be concerned over potential tariffs and the route the new US administration will pursue regarding foreign policy. These could act as headwinds for global growth and investor sentiment in 2025. Furthermore, the current dominance of a small cohort of leading companies may face challenges from a number of areas including increased competition or regulatory challenges.

Our robust corporate structure and long-term perspective on investment opportunities is one of our great strengths. Our long-dated senior notes provide fixed, low-cost borrowings from which we can fund investments. Our dividend, rising for a fifty-fourth consecutive year, is fully covered. We continue to hold significant revenue reserves, which should help us to continue to meet our objective of delivering above inflation increases in the dividend over the coming years. Our Private Equity portfolio, mainly focused on mid-market opportunities, remains well positioned, after a relatively fallow period, to benefit from future growth. Realisations in our portfolio managed by Columbia Threadneedle Investments increased in 2024 and we hope to see that continue into 2025. Our recent Growth and Venture Capital investments remain in the early stages of their investment programmes, but we remain optimistic over longer-term prospects there. There are many reasons for caution and indeed recent events relating to potential lower cost advances in AI illustrate the potential for both market volatility and shocks but, equally, the backdrop for financial markets does appear positive for the coming years. Regardless of potential short-term volatility, we remain resolutely focused on long-term opportunities.