Strong record of capital and dividend growth

Finsbury Growth & Income Trust 10 December 2018 Review
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Finsbury Growth & Income Trust

Strong record of capital and dividend growth

Investment trusts

10 December 2018

Price

755.0p

Market cap

£1,344m

AUM

£1,367m

NAV*

742.5p

Premium to NAV

1.7%

NAV**

744.7p

Premium to NAV

1.4%

*Excluding income. **Including income. As at 6 December 2018.

Yield

2.0%

Ordinary shares in issue

178.0m

Code

FGT

Primary exchange

LSE

AIC sector

UK Equity Income

Benchmark

FTSE All-Share

Share price/discount performance

Three-year performance vs index

52-week high/low

854.0p

721.0p

849.8p

715.5p

**Including income.

Gearing

Gross*

2.8%

Net*

2.8%

*As at 31 October 2018.

Analysts

Mel Jenner

+44 (0)20 3077 5720

Sarah Godfrey

+44 (0)20 3681 2519

Finsbury Growth & Income Trust is a research client of Edison Investment Research Limited

Finsbury Growth & Income Trust (FGT) has a distinguished track record of outperformance – its NAV total returns are above those of the FTSE All-Share index benchmark over one, three, five and 10 years. It also ranks first over these periods when comparing its performance with that of its 10 larger-cap peers in the AIC UK Equity Income sector. Manager Nick Train highlights the trust’s 7.7% dividend growth in FY18, which was fully covered by revenue. He says this growth rate is very encouraging compared to the much lower levels of UK inflation and interest rates, and illustrates the strong cash flow being generated by portfolio companies, which he argues should continue to support FGT’s annual distributions.

12 months ending

Share price
(%)

NAV
(%)

FTSE All-Share
(%)

FTSE 350
(%)

MSCI World
(%)

30/11/14

11.2

12.3

4.7

4.8

14.5

30/11/15

9.7

9.2

0.6

0.4

3.9

30/11/16

9.3

9.0

9.8

9.7

25.0

30/11/17

22.0

22.4

13.4

13.1

14.8

30/11/18

5.3

5.5

(1.5)

(1.4)

6.8

Source: Thomson Datastream. Note: All % on a total-return basis in pounds sterling.

Investment strategy: Very concentrated portfolio

Train runs a very concentrated fund of c 25 primarily UK-listed companies. He seeks quality firms, trading at a discount to their perceived intrinsic value, that he can ‘hold forever’. The manager is only invested in four of the 10 available sectors (consumer goods, financials, consumer services and technology), and holdings tend to fall into one of three themes: global consumer brands; owners of media/software intellectual property; and capital market proxies. Gearing of up to 25% of NAV is permitted, and up to 10% may be held in cash (although the manager prefers to remain fully invested); at end-October, net gearing was 2.8%.

Market outlook: Volatility offers potential opportunity

Global equities, including shares of companies listed in the UK, have experienced higher levels of volatility in 2018 compared with a particularly benign period in 2017. Investor concerns include the US/China trade dispute and rising US interest rates, along with uncertainty around Brexit, which is affecting sentiment and spending decisions. However, UK corporate earnings have remained robust, meaning that share price weakness has resulted in more attractive equity valuations. This environment may provide an opportunity for active managers with a disciplined approach to stock selection and a longer-term investment horizon.

Valuation: Regularly trades close to NAV

FGT is trading at a 1.4% premium to cum-income NAV, which is towards the high end of the range of the last five years (1.6% premium to a 1.5% discount). The board actively issues shares when there are unfulfilled buy orders in the market. As a result of strong investor demand, in FY18 the number of shares in issue increased by 22.0%. FGT has a progressive dividend policy, aiming to grow the annual distribution at a rate higher than UK inflation; its current yield is 2.0%.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

FGT’s investment objective is to achieve capital and income growth and provide shareholders with a total return above that of the FTSE All-Share Index. It invests principally in the securities of UK-quoted companies, but up to a maximum of 20%, at the time of acquisition, can be invested in non-UK quoted companies. FTSE 100 companies normally represent 50–100% of the portfolio, with at least 70% usually invested in FTSE 350 companies.

25 September 2018: announcement of second interim dividend of 8.1p (+9.5% year-on-year).

21 May 2018: six-month results to 30 March 2018. NAV TR +2.1% versus benchmark TR -2.3%. Share price TR +2.8%.

14 March 2018: announcement of first interim dividend of 7.2p (+5.9% year-on-year).

31 January 2018: announcement that John Allard and Vanessa Renwick have retired as independent non-executive directors, with immediate effect.

Forthcoming

Capital structure

Fund details

AGM

January 2019

Ongoing charges

0.68% (H118)

Group

Frostrow Capital

Final results

December 2018

Net gearing

2.8%

Manager

Lindsell Train

Year end

30 September

Annual mgmt fee

Tiered (see page 7)

Address

25 Southampton Buildings,

London, WC2A 1AL

Dividend paid

May, November

Performance fee

None

Launch date

January 1926

Trust life

Indefinite

Phone

+44 (0)20 3008 4910

Continuation vote

None

Loan facilities

£75m (see page 7)

Website

www.finsburygt.com

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

Two dividends paid annually in May and November. The dividend is expected to rise over the longer term.

Renewed annually, the trust has the authority to purchase up to 14.99% and allot up to 10% of issued share capital.

Shareholder base (as at 31 October 2018)

Portfolio exposure by geography (as at 31 October 2018)

Top 10 holdings (as at 31 October 2018)

Portfolio weight %

Company

Country

Sector

31 October 2018

31 October 2017

Diageo

UK

Consumer goods

10.4

10.0

RELX

UK

Consumer services

9.9

9.6

Unilever

UK

Consumer goods

9.9

9.6

London Stock Exchange

UK

Financials

8.4

8.1

Hargreaves Lansdown

UK

Financials

8.1

7.4

Mondelēz International

US

Consumer goods

8.0

5.7

Burberry Group

UK

Consumer goods

7.1

7.1

Schroders

UK

Financials

6.8

6.3

Heineken

Netherlands

Consumer goods

5.6

6.1

Sage Group

UK

Technology

5.0

5.9

Top 10 (% of holdings)

79.2

75.8

Source: Finsbury Growth & Income Trust, Edison Investment Research, Bloomberg, Morningstar

Market outlook: Valuations looking more attractive

Exhibit 2 (left-hand side) shows the performance of UK and global equities (in sterling terms) over the last five years. While overseas equities have outperformed over the period, until the recent stock market decline, UK investors had also enjoyed a decent average annual total return. Global stock markets have returned to a more normal level of share price volatility after a particularly benign period in 2017; investor concerns include the risks to economic growth due to trade frictions and rising interest rates. Within the UK there is also uncertainty over Brexit, which is causing delays to both individual and corporate spending decisions. Weakness in the UK stock market has led to more attractive equity valuations as, so far, corporate earnings have remained robust. Looking at the valuation of the Datastream UK index (table below), compared to around six months ago, the forward P/E multiple has declined by two-and-a-half points; UK stocks are now trading at a discount to their 10-year average rather than a higher than 10% premium, which may provide an opportunity for skilled stock pickers taking a longer-term view.

Exhibit 2: Market performance and valuation

Performance of indices (last five years – £ adjusted)

Valuation metrics (Datastream UK index, as at 7 December 2018)

 

Last

High

Low

10-year
average

Last as % of
average

P/E 12 months forward (x)

11.3

16.1

7.4

12.5

91

Price to book (x)

1.4

2.1

1.2

1.7

83

Dividend yield (%)

4.3

5.9

2.7

3.5

124

Return on equity (%)

11.8

14.8

2.5

9.6

123

Source: Thomson Datastream, Edison Investment Research

Fund profile: Concentrated fund with long-term focus

FGT was launched in 1926 and is listed on the Main Market of the London Stock Exchange. Since 2000, the trust has been managed by Nick Train, a co-founder of specialist investment manager Lindsell Train, who aims to generate long-term growth in capital and income from a concentrated portfolio of c 25 equities. The trust is primarily invested in UK-listed companies, although 20% (at the time of acquisition) may be held in firms listed overseas. Position sizes are usually at least 1% of the portfolio unless they are being built or disposed of. Typically, securities in FTSE 100 companies and comparable stocks listed on an overseas exchange will represent between 50% and 100% of the portfolio, while securities in FTSE 350 companies and their overseas equivalents will represent at least 70%. Gearing of up to 25% of NAV is permitted (2.8% at end-October 2018), and 10% may be held in cash, although the manager prefers to stay fully invested. A key feature of FGT is its low portfolio turnover, which averages c 5% pa, implying a typical holding period of 20 years. The trust is benchmarked against the FTSE All-Share index, which it has outperformed over the last one, three, five and 10 years. Over time, FGT has grown significantly, due to capital appreciation and share issuance to meet ongoing investor demand; assets under management are now c £1.4bn versus £64m in 2000. The manager regularly invests his own money in the trust; this has continued during the period of increased stock market volatility in recent months, as Train says that it is important for a fund manager to have ‘skin in the game’.

The fund manager: Nick Train

The manager’s view: Focus on companies, not the macro

While 2018 has generally been a tough year for active portfolio managers, due to an increase in stock market volatility, Train is encouraged by the level of merger and acquisition (M&A) activity so far this year. He says that data from Bloomberg show the level of announced deals is greater than in 2017, which itself was a period of high M&A volumes. The manager notes that a lot of deal newsflow has been in the US, where the stock market has been relatively buoyant, unlike in the UK where political concerns have kept M&A activity somewhat depressed. However, he notes that there have recently been two deals announced in the biotech sector, which may signal a pickup in bid activity in the coming year if the UK political environment stabilises.

Train says there are macroeconomic issues that may cause investors to question whether wealth creation is sustainable, such as Brexit, international politics and rising interest rates. However, he stresses the importance of focusing on individual companies, noting that almost without exception, the businesses represented in FGT’s portfolio are delivering good news and encouraging trading statements. The manager believes that this is far more important than worrying about short-term macro issues. As an example, Train is encouraged to note that in the 12 months ending June 2018, global shipments of Scotch whisky were 12% higher year-on-year, compared with a 5% increase in the 12 months to June 2017. He says that demand for Scotch whisky and other premium spirits remains strong in Asia, particularly in China, confirming the long-term trend of rising wealth in emerging markets. The manager comments that this environment is very positive for FGT’s top holding, Diageo, which is the world’s largest Scotch whisky producer. Train also highlights the significant appreciation in the share prices of football clubs in August 2018, including FGT holding Manchester United, after Amazon won a package of Premiership football rights; he says this illustrates the value embedded in companies that own the most-watched entertainment/content.

The manager highlights FGT’s long-term dividend growth record (the FY18 total distribution will be 7.7% higher year on year, in line with the c 7–8% increases in each of the last five years). He says that in FY01, the year he was appointed the trust’s manager, the annual dividend was 3.2p and has now grown to 15.3p – nearly a fivefold increase. Train considers this to be the best long-term measure of the wealth generated for FGT’s shareholders, and he is hopeful that this steady pace of value creation can continue.

Asset allocation

Investment process: Fundamental and long-term approach

Train seeks to generate long-term growth in capital and income from a concentrated portfolio of c 25 high-quality companies with strong brands or franchises that he can ‘hold forever’. He has an unconstrained approach, investing in just four of the 10 industry sectors (consumer goods, financials, consumer services and technology, see Exhibit 3). There are three broad themes within the portfolio: global consumer brands, owners of media/software intellectual property, and capital market proxies. FGT’s portfolio has an active share above 90% – this is a measure of how a portfolio differs from its benchmark, with 0% representing full index replication, and 100% no commonality.

The manager defines quality companies as having the following characteristics:

durability, companies that can prosper through multiple business cycles;

high return on equity, firms with sustainable long-term earnings growth; and

low capital intensity with high free cash flow generation.

Train aims to buy stocks that are trading at a discount to his estimate of their intrinsic worth. Long-term portfolio turnover of c 5% pa is very low compared with the industry average. The most recent addition to the portfolio was football club Manchester United in 2017; this was the first new holding since spirits producer Rémy Cointreau was added in 2015. There have been three complete disposals in 2018 (Dr Pepper Snapple and Fidessa, which were taken over, and Kraft Heinz). Portfolio companies have been established on average for c 150 years, and c 50% of holdings are majority family-owned.

Current portfolio positioning

Train runs a very concentrated portfolio; at end-October 2018, FGT’s top 10 positions made up nearly 80% of the portfolio (Exhibit 1). In terms of sector exposure (Exhibit 3), over the last 12 months technology exposure has reduced by 3.2pp, with modest increases across the other three sectors in which the trust is invested. In aggregate, the six sectors where FGT has no exposure make up nearly half of the benchmark.

Exhibit 3: Portfolio sector exposure vs FTSE All-Share index (% unless stated)

Portfolio end-
October 2018

Portfolio end-
October 2017

Change
(pp)

Index
weight

Active weight
vs index (pp)

Trust weight/
index weight (x)

Consumer goods

47.3

46.2

1.1

14.1

33.2

3.4

Financials

26.3

25.0

1.3

25.4

0.9

1.0

Consumer services

21.4

20.6

0.8

11.2

10.2

1.9

Technology

5.0

8.2

(3.2)

0.9

4.2

5.9

Utilities

0.0

0.0

0.0

2.7

(2.7)

0.0

Telecommunications

0.0

0.0

0.0

2.9

(2.9)

0.0

Basic materials

0.0

0.0

0.0

7.6

(7.6)

0.0

Healthcare

0.0

0.0

0.0

9.8

(9.8)

0.0

Industrials

0.0

0.0

0.0

10.8

(10.8)

0.0

Oil & gas

0.0

0.0

0.0

14.7

(14.7)

0.0

100.0

100.0

100.0

Source: Finsbury Growth & Income Trust, Edison Investment Research

In keeping with the manager’s strategy of adding to FGT’s positions during periods of individual share price weakness, Train has been actively buying shares in Schroders, which has performed poorly in 2018 along with other asset managers such as Jupiter and Standard Life Aberdeen. In October, Schroders formally announced a partnership with Lloyds Banking Group to bolster its wealth management operations. It will take a 49.9% stake in a financial planning joint venture in return for a 19.9% stake in its UK wealth management business. Schroders will also manage £67bn of Scottish Widows assets when Lloyds’ contract with Standard Life Aberdeen comes to an end. Train welcomes the news, believing the deal is a significant transaction for both parties, offering the potential for larger inflows, while confirming the value of Schroders’ brand name and expertise. He holds two lines of Schroders stock within FGT’s portfolio, voting and non-voting shares. The position in the non-voting shares was initiated earlier in 2018 when they were trading at a wide discount to the voting shares. The manager explains that the non-voting shares offer the same dividend and economic interest as the voting shares, but as they were trading at a discount, they offered a higher dividend yield.

Train has also been building up FGT’s position in Mondelēz International, whose share price has been weak for most of this year. He says the traditional US packaged food companies have struggled due to low volumes and pricing pressure, as in the 21st century people want fresh food with provenance, rather than the processed, packaged food that was popular in the last century. However, he is encouraged by Mondelēz’s product portfolio – a significant percentage of revenues are generated from chocolate, confectionery and snacking, which are less affected by sluggish volume growth and competition from own-label products. He says the firm’s two core product lines, Cadbury and Oreos, are ‘fantastic global brands’. In addition, unlike its peers, the majority of Mondelēz’s sales are generated outside the US, giving it exposure to higher-growth markets. The manager believes that the company’s share price had been unduly punished by investors, and he notes that the stock’s performance has recently improved.

Performance: Very strong investment track record

Over the 12 months to 30 November, FGT’s NAV and share price total returns of +5.5% and +5.3% respectively are ahead of the benchmark’s -1.5% total return. Train notes the superior performance of classic defensive stocks within the portfolio, such as Diageo, RELX and Unilever, during the period of increased stock market volatility in recent months.

Exhibit 4: Investment trust performance to 30 November 2018

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three, five and 10-year performance figures annualised.

FGT has an enviable performance track record. It has outperformed the FTSE All-Share index over all periods shown (with the exception of the last three months) in both NAV and share price terms. Its 10-year record is particularly notable, outperforming the benchmark by an average of more than 10pp a year.

Exhibit 5: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to FTSE All-Share

3.0

(1.1)

5.1

6.9

14.6

32.7

122.7

NAV relative to FTSE All-Share

2.8

(1.1)

5.1

7.0

14.8

33.5

103.7

Price relative to FTSE 350

3.0

(1.1)

5.1

6.8

14.8

33.2

125.2

NAV relative to FTSE 350

2.8

(1.1)

5.1

6.9

15.0

34.0

106.0

Price relative to MSCI World

(0.0)

(3.4)

(5.6)

(1.4)

(8.3)

(5.9)

59.9

NAV relative to MSCI World

(0.2)

(3.4)

(5.6)

(1.3)

(8.2)

(5.4)

46.2

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-November 2018. Geometric calculation.

Exhibit 6: NAV total return performance relative to benchmark over 10 years

Source: Thomson Datastream, Edison Investment Research

Discount: Active discount/premium control mechanism

In 2004, FGT’s board introduced a discount control mechanism, repurchasing shares when the discount reaches 5% (no shares have been bought back since FY10), while issuing shares at a small premium when there are unfulfilled buy orders in the market. So far in FY19, 4.3m shares (2.5% of the end-FY18 share base) have been issued, raising gross proceeds of £32.7m. In FY18, FGT’s share count increased by 22.0%, reflecting very healthy demand for its shares. The trust is currently trading at a 1.4% premium to cum-income NAV, near the top end of a narrow range of a 1.6% premium to a 1.5% discount over the last five years. Over the last one, three and five years, FGT has traded at average premiums of 0.6%, 0.5% and 0.5% respectively.

Exhibit 7: Share price premium/discount to NAV (including income) over three years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

FGT is a conventional investment trust, with one class of share; there are 178.0m ordinary shares in issue. The trust has a £75m multicurrency revolving credit facility with Scotiabank Europe (plus a further £25m facility if required), with an interest rate of three-year Libor +1.05% pa, maturing in October 2019. Net gearing was 2.8% at end-October 2018. Lindsell Train receives an annual fee of 0.450% pa of FGT’s market capitalisation up to £1bn, reducing to 0.405% pa above £1bn (no performance fee is payable). Frostrow Capital is the trust’s Alternative Investment Fund Manager and is paid 0.150% pa of FGT’s market capitalisation up to £1bn, reducing to 0.135% pa above £1bn. In FY17, FGT’s ongoing charges were 0.71%, which was 3bp lower versus 0.74% in FY16. In H118, ongoing charges were 0.68%.

Dividend policy and record

FGT pays semi-annual dividends in May and October. The trust has a progressive distribution policy, aiming to grow annual dividends at a rate higher than UK inflation. The FY18 dividend of 15.3p per share is 7.7% higher year on year, broadly in line with the 7.8% five-year compound annual growth rate. Befitting a trust with a focus on capital growth as well as income, FGT’s current 2.0% dividend yield is below its UK Equity Income selected peer group average (Exhibit 8).

Peer group comparison

FGT is a constituent of the AIC UK Equity Income sector. This is a relatively large group made up of 24 funds, so in Exhibit 8 we show the 11 largest trusts, which have market caps greater than £300m. The trust has a solid record of outperformance; its NAV total return ranks first out of the selected peer group over all periods shown: +7.8pp versus the mean over one year (the only fund to have delivered a positive return over this period), +22.4pp over three years, +40.5pp over five years and +198.2pp over 10 years. Due to its active discount control mechanism, FGT usually trades close to its NAV (on average the peers trade at a 4.3% discount), its ongoing charge is in line with the peer group average, and it has a lower-than-average level of gearing. In keeping with its mandate to generate both capital growth and income, FGT’s dividend yield is around half the peer group average.

Exhibit 8: Selected peer group as at 7 December 2018*

% unless stated

Market
cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount
(ex-par)

Ongoing
charge

Perf.
fee

Net
gearing

Dividend
yield

Finsbury Growth & Income

1,343.8

0.9

36.6

68.1

427.9

0.6

0.7

No

102

2.0

City of London

1,381.5

(6.6)

12.0

28.1

193.3

1.4

0.4

No

111

4.7

Diverse Income Trust

351.5

(7.4)

8.9

36.7

(1.0)

1.1

No

100

3.5

Dunedin Income Growth

352.9

(6.9)

18.7

17.5

174.3

(7.0)

0.6

No

116

5.6

Edinburgh Investment Trust

1,194.4

(8.6)

2.8

32.2

195.4

(8.3)

0.6

No

109

4.6

JPMorgan Claverhouse

378.1

(9.3)

12.3

24.7

190.8

(1.6)

0.8

No

103

4.1

Lowland

350.6

(9.3)

14.6

22.6

337.1

(6.8)

0.6

Yes

113

4.2

Merchants Trust

483.3

(8.0)

12.7

14.4

170.8

(0.8)

0.6

No

118

5.7

Murray Income Trust

473.4

(3.9)

21.6

24.3

185.5

(8.8)

0.7

No

105

4.6

Perpetual Income & Growth

754.5

(9.3)

(3.5)

17.6

195.2

(11.3)

0.7

No

114

4.5

Temple Bar

775.7

(7.0)

19.2

18.0

226.7

(3.9)

0.5

No

107

3.8

Average (11 funds)

712.7

(6.9)

14.2

27.6

229.7

(4.3)

0.7

109

4.3

Trust rank in selected peer group

2

1

1

1

1

2

4

10

11

Source: Morningstar, Edison Investment Research. Note: *Performance data to 6 December 2018. TR=total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

There are six non-executive directors on FGT’s board. Anthony Townsend (chairman) re-joined the board on 1 February 2005 and assumed his current role on 30 January 2008. Neil Collins has served on the board since 30 January 2008, David Hunt since 6 July 2006 and Simon Hayes since 29 June 2015. The two most recently appointed directors are Kate Cornish-Bowden and Lorna Tilbian, who both joined the board on 26 October 2017.

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Finsbury Growth & Income Trust and prepared and issued by Edison, in consideration of a fee payable by Finsbury Growth & Income Trust. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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