The best and worst: Trust investors shielded from cuts - UK Income Growth Investment Funds

MOST investors with money in income-oriented investment trusts have been shielded from dividend cuts despite reduced pay-outs from some of the companies the trusts invest in, according to David McFadyen, an analyst with the investment trust broker Olliff & Partners.

Many trusts have deep reserves that can be called on when the stream of dividends from underlying investments is under threat.

Dunedin Income Growth has protected its dividend partly by moving more heavily into gilts. This means its assets have not grown as quickly as those of some competitors, denting its share price.

There was heavy buying of the trust's shares in April 1992 for its personal equity plan investors. This pushed the price up so that it was relatively high at the beginning of the 12- month period up to the beginning of this month.

TR City of London, a favourite with small investors, invests mainly in larger companies. Shares in larger companies have lagged behind those of small companies in the last six months.

TR City still ranks first in the UK income growth sector over 10 years, with a profit of nearly 650 per cent.

Fleming Income & Capital is a split-level trust. Packaged units, combining the capital, income and zero-dividend preference shares, are traded in their own right, but Anthony Nutt, the trust's manager, says it is unfair to compare them with ordinary shares of conventional trusts. Thirty per cent of each unit is made up of non-dividend paying zeros.

Equity Consort, managed by NM Rothschild Asset Management, has two classes of share but is not a split capital trust. The ordinary shares receive a third of the trust's capital and income and the deferred shares two thirds.

----------------------------------------------------------------- UK INCOME GROWTH INVESTMENT TRUSTS ----------------------------------------------------------------- The best pounds 1 Value & Income . . . . . . . . . . . .162.66 2 Equity Consort . . . . . . . . . . . .153.14 3 BZW Convertible . . . . . . . . . . . 133.53 4 Morgan Grenfell Equity Income . . . . 132.66 5 Investors Capital . . . . . . . . . . 129.38 The worst 9 Equity Consort-Deferred . . . . . . . 124.04 10 TR City of London . . . . . . . . . .123.00 11 Fleming Inc & Cap Units . . . . . . .119.24 12 Lowland . . . . . . . . . . . . . . .118.94 13 Dunedin Income Growth . . . . . . . .111.90 ----------------------------------------------------------------- The chart shows the value of pounds 100 invested over 12 months to 1 July, shares valued on mid-market price basis, net income reinvested ----------------------------------------------------------------- Source: Micropal -----------------------------------------------------------------