Sunday 8 May 2016

Finsbury Growth & Income Trust - Interim Results

Established in 1926 as the Scottish Cities Investment Trust with assets of £100,000, the trust has recently celebrated its 90th anniversary

This trust is not the highest yielder but is the top UK Income Trust in its sector in terms of net asset value and share price performance over five and ten years, its returns far outstripping those of the FTSE All-Share index. The sum of £1,000 invested 10 years ago would now be worth £2,689 compared to one of my higher yielding trusts (5.4% currently), Dunedin Income Growth which returned just £1,424 over the same period.

Train took over management of the trust in 2000 when assets were valued at £64m - net assets today have increased over tenfold to £780m. His approach is based on that of Warren Buffett’s and involves building a concentrated portfolio of “quality” companies that have strong brands and/or powerful market franchises.

He holds shares for the long term regardless of short-term volatility, aiming for them to double or more in value over time. This results in extremely low portfolio turnover, over the past 15 years average turnover has been under 6% p.a.

Top five portfolio holdings are: Unilever 10.1%, Relx 9.5%, Diageo 8.5%, Sage Group 6.8% and Heineken 6.5%.


The trust has recently announced results for the half year to end March 2016 (link via Investegate). Share price total return is 9.9% compared to 3.5% return for the FTSE All Share.

3 Yr Performance -v- FTSE All Share
(click to enlarge)

Commenting on his portfolio, manager Nick Train said :

I think it reasonable, if mildly embarrassing, to claim that I have only had three investment ideas for the Company in a decade and a half. And because those three strategic ideas make up the whole portfolio and remain critical for future performance I review them here.
“If a company’s products taste good: buy the shares”. For a long-term investor this simple proposition has proven remarkably successful. Owning shares in great tasting brands – IRN-BRU, Cadbury or, my own favourite, Marmite – has been a great way to get rich slowly. Diageo has been a dull share for several years now, understandably given an array of pesky and continuing setbacks. But surely over the next 20 years people will continue to enjoy Johnnie Walker, Captain Morgan, Baileys, Guinness and its many more iconic brands? That predictability – in a world shareholders will agree is highly unpredictable – is unusual and valuable.
“People will never be bored of being informed or entertained”. We like companies that own proprietary business information – the sort without which professionals cannot do their jobs – or beloved entertainment formats. For example scientists and lawyers around the world have little option but to subscribe to Relx’s services or risk being ill-informed. Similarly we’re fascinated by the reach of MailOnline, owned by Daily Mail of course. It is currently receiving 220 million global unique browsers every month and is one of the UK’s few world-leading Internet properties.


The trust has declared a first interim dividend of 6.1p (2015 5.5p), an increase of 10.9%. This substantial increase is designed to reduce the disparity between the interim and final dividends. I have pencilled in an estimated final dividend of 6.6p for later in the year which would give a forward yield of 2.2%.

I have been leaning more towards passive index funds over the past year or so, however Train is possibly one of a handful of managers worth paying a little extra to look after a modest portion ~3.5% of my investments. Of course, such a concentrated strategy is not without risk. Around two thirds of the trust's portfolio is focused on consumer-related shares and whilst these have out performed in recent times, there is always the prospect of reversion to mean at some point in the cycle.

For the time being however, I am happy to remain a holder, particularly having recently sold my individual shares in Unilever.

As always, be sure to DYOR if thinking of acquiring the trust for your own portfolio.


  1. Thank you for the write up diy investors.

    I have this Investment Trust and it has served me really well. If you consider all the media news over the last year, some of it apocalyptic, and the the Trust is still able to pull off a 10% dividend increase remarkable.
    The manager Nick Train deserves his salary.
    Kind regards
    Louis Gunn

    1. Louis,

      Good to hear from you again.

      They are reducing the gap between interim and final dividend so the interim increase is higher than it would otherwise have been and there may well be little increase in the final dividend. I expect the net effect for the whole year will be around 5% or so.

      So far as salary - the management charges to the trust for last year were £3.8m and the total dividends paid to shareholders was £12m. I do not mind paying a little over the odds for a consistently better return than my low cost trackers - lets hope the manager can keep it going for another 15 yrs!