Finsbury Growth & Income Trust

Finsbury Growth & Income Trust’s (FGT) good performance has continued during the last year with FGT outperforming its benchmark, the FTSE All-Share Index, by 7.6% and 6.9% in terms of price total return and NAV total return respectively. The fund has an experienced investment management team and uses a bottom-up strategy to invest in quality companies that are then held for the long term. There is a strong focus on businesses with strong franchises that are well managed, which are held for the long term. FGT maintains a focused portfolio of 25-30 stocks with low turnover (c 6% per annum), which is moderately geared and aims to have an above-average dividend yield. During the last 10 years, FGT has outperformed the FTSE All-Share by 178.0% and 117.5% in terms of price and NAV total return respectively.

Investment Strategy: Undervalued Quality UK-Listed Companies
FGT invests in large and medium-sized companies listed primarily on the UK equity markets. The manager subscribes to the Buffet doctrine and looks for long-term winners able to withstand economic down cycles. Typically these will have strong business franchises and sound management, will be acquired with patience when deemed to be underpriced and held with great conviction over the longer term (average annual portfolio turnover is just over 6%). The portfolio currently consists of 26 holdings. Between 50% and 100% of the portfolio is invested in FTSE 100 stocks and at least 70% invested in FTSE 350 stocks. FGT’s portfolio is not strongly correlated with any benchmark. FGT is mandated to be permanently geared. Net gearing is currently 5.2%, but can range between 5% and 20% of net assets.

Sector Outlook: Insulated From Economic Headwinds
The stock picking approach of Lindsell Train, the investment manager, looks to provide FGT with a portfolio of quality companies to be held over the long term. The current economic environment remains a headwind to business but, by design, FGT’s portfolio should be relatively resilient to harsh economic conditions.

Valuation: FGT Remains On Premium Rating
FGT’s discount management policy (repurchasing shares at discounts above 5% and issuing new shares at a 0.5% premium) continues to be effective and offers investors confidence that they will be able to enter and exit at valuations around this level. FGT’s current premium of 1.2% reflects a stronger rating than its three- and five-year discount averages of 0.5% and 1.9% respectively, but remains comparable. As such, we believe FGT may be of interest to investors looking for long-term value plays on the UK.

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