Half-year Report

Date: 30 July 2018

Contact: Paul Niven - Fund Manager

0207 011 4385

F&C Investment Business Limited

FOREIGN & COLONIAL INVESTMENT TRUST PLC

Unaudited Statement of Results

for the half-year ended 30 June 2018

SUMMARY OF UNAUDITED RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2018

· Our share price was 693.0 pence representing a total return of 8.0%

· Our net asset value total return was 3.7% which compares with 2.1% from our benchmark, the FTSE All-World Index

· Our share price discount to NAV narrowed to just 0.2%; the lowest discount level for over twenty years

· The first interim dividend will be 2.7 pence per share while another above-inflation rise is planned for the 2018 total dividend. This will mark the 48th consecutive annual increase

Chairman's Statement

Markets and performance

In our 150th year I am pleased to report further outperformance. Our shareholder and Net Asset Value ("NAV") returns exceeded the benchmark: total shareholder return was 8.0% and NAV return 3.1% versus 2.1% from the benchmark FTSE All-World Index. Our share price discount to NAV narrowed to just 0.2% over the first half, the lowest discount level for over twenty years. This starts to meet our long-held aspiration of seeing the Company's shares trading at or close to NAV. There were no buybacks in the period. Year on year, the share price total return was 20.3%.

While positive corporate earnings and a generally robust global economy supported sentiment for much of the period, rising US inflation and worries over Federal Reserve rate tightening weighed on global equity markets as the period progressed. There were also increasing worries about the prospect of a full-blown trade war, especially after the Trump administration unveiled planned tariffs of a variety of foreign imports. The threat of retaliation from China and other nations prompted fears of escalation, with negative repercussions for the global economy and corporate earnings.

With regard to earnings, the US again led globally, with upgrades to expectations helping to drive returns. Indeed, optimism over the outlook took equity markets markedly higher in the early part of the period with accelerating gains driving the US and UK indices to new record highs before a reappraisal of prospects led to a tempering of enthusiasm and, following a sharp setback, more modest returns.

It was, once again, the so-called 'disruptors' which produced a large portion of market gains. Amazon, for example, posted spectacular gains of over 45% in the first six months of the year, closing the gap on Apple in the race to be the first US company to reach a value of $1 trillion. Gains in these growth stocks, the key drivers of this long bull market, were supplemented by strong returns from oil companies as the crude price rallied in response to renewed sanctions on Iran and concerns over a reduction in supply. By contrast, it was a poor period for performance of banks, with European exposure particularly weak as disappointing economic data, concerns relating to Italian politics and ongoing woes of Deutsche Bank (not held by the portfolio but down by over 40%) weighed on sentiment.

Within our portfolio North American strategies produced the strongest returns in both absolute and relative terms. Gains from US growth stocks, of 14.9%, led to a return of 8.8% from this region. Only our private equity holdings, posting returns of 9.6% in the first half, exceeded this regional gain. Both these areas benefited from a modest decline in sterling versus the US dollar which, after early gains, fell back as sentiment on the ongoing Brexit negotiations continued to weigh.

Other areas of the portfolio generally exceeded market comparators but produced more muted returns. Our European exposure eked out a gain of 0.3%, ahead of market losses there while our UK exposure produced a return of 3.2%, ahead of the 1.6% gain from the market. Elsewhere, our Global Strategies outperformed, buoyed by a 6.4% gain from Small Cap exposure while Emerging Markets lagged developed market returns, suffering from strength in the US dollar, rising US interest rates and concerns over trade. Our exposure here declined by 3.3%, falling by less than market comparators. Japan lagged market returns and also declined in value by 2.2% over the period.

Globally, interest rates now appear to be on a rising path with the US Federal Reserve hiking to 2% and the European Central Bank indicating their intention to cap their bond-buying programme by year-end. Even in the UK, which has seen a marked slowdown in growth and some rise in inflation, the Bank appears more balanced with regards to their intentions on future rates rises. Against this backdrop, we took advantage of attractive borrowing rates to secure a 30 year private placement, borrowing £75m at a rate of 2.92%. Our gearing level rose modestly to end the period at 6.8%.

*Debt at market value

Source: F&C

Income and Dividends

Our net revenue return per share rose 7.5%, to 7.78p, in the first six months of the year on the equivalent period of 2017. We benefited from a rise in special dividends, which rose to £3.9m, from £2.1m in the comparative period of 2017.

We paid a third interim dividend of 2.7p per share for the year ended 31 December 2017 in February 2018 and a final dividend of 2.7p in May. The first interim dividend of 2.7p for 2018 will be paid on 1 August. It is the intention of the Board to deliver another real rise in dividends for 2018. This will mark the forty-eighth consecutive rise in annual dividends from your Company.

150th Anniversary and beyond

Your Company celebrated its 150th anniversary in March of this year. A key feature of its success over time has been its steadfast focus on the longer term.

To ensure this milestone is celebrated in keeping with these values and in a meaningful way for all shareholders, we have taken the opportunity to undertake a wide range of activities designed to strengthen its position in the future financial landscape. These include financial education across schools and universities as we reach out to the next generation of investors.

Change of Name and branding of the savings plans

Following shareholder approval in April, the Directors will change the legal name of your Company to "F&C Investment Trust PLC" later in the year. In deciding on this change, and in keeping with our focus on the future, we took into consideration its identification and ease of access on platforms and other digital media.

Our Fund Manager, F&C Asset Management, recently announced their intention to transition their remaining F&C branded products and funds to their parent company brand later in the year; that is to say, to the "BMO" (Bank of Montreal) brand that has appeared on much of their literature over the past three years. Their savings plans, through which many of our shareholders invest, will also align to the BMO brand.

Outlook

Our current assessment is that, while risks and concerns over issues such as trade and the impact of rising interest rates abound, the fundamental backdrop remains broadly supportive for equity investment. Selectivity within our strategies will again be needed and it will remain important to adopt a diversified approach as risks rise. Over the longer-term our strategies are typically focused on businesses with sustainable business franchises supported by strong cash flow generation and attractive valuations against growth prospects. This selective approach should continue to offer attractive returns against other assets, where valuations appear particularly extended. Your Company remains well positioned to withstand any short-term volatility and to continue to deliver long-term growth in capital and income.

Simon Fraser

Chairman

27 July 2018

Source: F&C

*Represents the geographic exposure of the portfolio, including underlying exposures in private equity and fund holdings

UNAUDITED CONDENSED INCOME STATEMENT

The total column is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY

 UNAUDITED CONDENSED BALANCE SHEET

UNAUDITED CONDENSED STATEMENT OF CASH FLOWS

 UNAUDITED NOTES ON THE CONDENSED ACCOUNTS

1 Results

The results for the six months to 30 June 2018 and 30 June 2017 constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 31 December 2017; the report of the Auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The condensed financial statements shown for the year ended 31 December 2017 are an extract from those accounts.

2 Accounting policies

These condensed financial statements have been prepared on a going concern basis in accordance with the Companies Act 2006, FRS 102, Interim Financial Reporting (FRS 104) and the revised Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (SORP), issued by the AIC in November 2014 and updated in February 2018.

The accounting policies applied for the condensed set of financial statements are set out in the Company's annual report for the year ended 31 December 2017.

3 Income

4 Fees and other expenses and interest payable and similar charges

* Including reimbursement in respect of services provided by sub-managers

The primary related party transaction is with the Manager, F&C Investment Business Limited. The Manager receives remuneration of 0.365% per annum of the market capitalisation of the Company, calculated at each month end date on a pro-rata basis. The fee is adjusted for fees earned by the Manager in respect of investment holdings managed or advised by the Manager. Variable fees payable in respect of third party sub-managers are also reimbursed. The services provided by the Manager remain unchanged from those disclosed within the accounts for the year ended 31 December 2017. The level of variable fees payable in respect of third party sub-managers and private equity managers remain unchanged since the year end.

5 Taxation

The taxation charge of £4,333,000 (30 June 2017: £4,442,000) relates to irrecoverable overseas taxation.

6 Net return per share

Net return per ordinary share attributable to ordinary shareholders reflects the overall performance of the Company in the period. Net revenue recognised in the first six months is not indicative of the total likely to be received in the full accounting year.

7 Dividends

The Directors have declared a first interim dividend in respect of the year ending 31 December 2018 of 2.70p per share, payable on 1 August 2018 to all shareholders on the register at close of business on 6 July 2018. The amount of this dividend will be £14,639,000 based on 542,180,712 shares in issue at 5 July 2018. This amount has not been accrued in the results for the half-year ended 30 June 2018.

8 Investments

Fair value hierarchy

The Company's Investments as disclosed in the balance sheet are valued at fair value.

The fair value as at the reporting date has been estimated using the following fair value hierarchy:

Level 1 includes investments and derivatives listed on any recognised stock exchange or quoted on the AIM market in the UK and quoted open-ended funds.

Level 2 includes investments for which the quoted price has been suspended, forward exchange contracts and other derivative instruments.

Level 3 includes investments in private companies or securities, whether invested in directly or through pooled Private Equity vehicles, for which observable market data is not specifically available.

The analysis of the valuation basis for financial instruments based on the hierarchy is as follows:

There were no derivative investments held in the period (half-year ended 30 June 2017 and year ended 31 December 2017: same) and no investments held which are valued in accordance with level 2.

9 Loans and Debenture

10 Other creditors falling due within one year

11 Share capital

No shares were repurchased either during the period or since 30 June 2018 up to 27 July 2018. Shares held in treasury have no voting rights and no right to dividend distributions and are excluded from the calculations of earnings per share and net asset value per share.

12 Net asset value per ordinary share

Net asset value per share (with the debenture stock and long-term loans at market value) at 30 June 2018 was 694.34p (30 June 2017: 634.88p and 31 December 2017: 675.78p). The market value of debenture stocks at 30 June 2018 was £429,000 (30 June 2017 and 31 December 2017: £429,000). The market value of the long-term loans at 30 June 2018 was £325,012,000 (30 June 2017: £248,382,000 and 31 December 2017: £245,595,000) based on the equivalent benchmark gilts or relevant commercially available current debt.

13 Reconciliation of net return before taxation to cash flows from operating activities

14 Going concern

The Company's investment objective, strategy and policy are subject to a process of regular Board monitoring and are designed to ensure that the Company is invested mainly in readily realisable, listed securities and that the level of borrowings is restricted. The Company retains title to all assets held by the Custodian and agreements cover its borrowing facilities. Cash is held with banks approved and regularly reviewed by the Manager and the Board.

The Directors believe that; the Company's objective and policy continue to be relevant to investors; the Company operates within a robust regulatory environment; and the Company has sufficient resources and arrangements to continue operating within its stated policy for the 12 month period commencing from the date of this report. Accordingly, the financial statements have been drawn up on the basis that the Company is a going concern.

15 Report and accounts

The half-yearly report and accounts will be posted to shareholders and made available on the internet at www.foreignandcolonial.com shortly. Copies may be obtained during normal business hours from the Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY.

Legal Entity Identifier: 213800W6B18ZHTNG7371

By order of the Board

F&C Investment Business Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

27 July 2018

Directors' Statement of Principal Risks and Uncertainties

Most of the Company's principal risks and uncertainties are market related and no different from those of other investment trusts investing primarily in listed equities. They are described in more detail under the heading "Principal risks and future prospects" within the strategic report in the Company's annual report for the year ended 31 December 2017 and have not changed materially since the date of that report.

The risks include: having an inappropriate strategy in relation to investor needs; failure on the part of the Manager to continue to operate effectively; unfavourable markets or inappropriate asset allocation, sector and stock selection, currency exposure and use of gearing and derivatives leading to investment underperformance; and errors, fraud or control failures at service providers, or loss of data through cyber-threats or business continuity failure. During the period the Company put in place the necessary steps to comply with the General Data Protection Regulation ("GDPR").

Directors' Statement of Responsibilities in Respect of the Half-Yearly Financial Report

In accordance with Chapter 4 of the Disclosure and Transparency Rules, the Directors confirm that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards on a going concern basis and gives a true and fair view of the assets, liabilities, financial position and net return of the Company;

· the half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

· the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

· the half-yearly report includes a fair review of the related party transactions that have taken place in the first six months of the financial year.

On behalf of the Board

Simon Fraser

Chairman

27 July 2018