Third Interim Results
20 Marzo 2008 - 4:24AM
UK Regulatory
M&G Income Investment Company Limited
Third Interim Results Announcement
20 March 2008
Performance during the period
The Company's revenue earnings per Package Unit were 0.90p. In respect of the
review period, the Company declared three monthly dividends of 0.18p per
Ordinary Share (0.36p per Package Unit) an increase of 5.9% on the amounts
declared at the same stage last year. On a net asset value (NAV) basis, each
Package Unit produced a total return of -16.8% over the three months to 31
January 2008. This was below the -12.8% total return on the FTSE All-Share
Index over the same period. At the period end the Package Unit market price was
at a 1.9% discount to the NAV and on a mid-market price basis each Package Unit
produced a total return of -11.1%.
The combination of the negative impact of gearing from both debt and Zero
Dividend shares and the underperformance of high yield and mid-cap stocks
resulted in this disappointing relative result. Tactically, for defensive
reasons, we have switched some of the Company's M&G High Yield Corporate Bond
Fund holding into short dated Gilts, given the short life of the Company. We
expect treasuries / cash to perform better than corporate bonds as the
re-pricing of risk continues.
While the equity market has been preoccupied with the global banking credit
crisis, dividend growth and corporate results have been generally positive. For
example BP, the Company's largest holding, increased its dividend by over 30%.
With UK economic policy beginning to follow the lead of the US (i.e. softening
UK rates), the steepening yield curve should begin to benefit financial stocks,
which the Company is fully weighted to.
Corporate activity, while at a slower pace, still continues and we have
recently seen our holding in Scottish & Newcastle bid for by Carlsberg and Emap
sold to private equity.
Although the UK economy will go through a period of slower growth, a relatively
full weighting in blue chip stocks with strong balance sheets, should see the
Company through this difficult period. The gearing of the fund does work both
ways and the UK equity portfolio is well positioned for a more positive period
in markets.
Income Statement (unaudited)
2008 2007
Revenue Capital Total Revenue Capital Total
for the three months ended 31 �'000 �'000 �'000 �'000 �'000 �'000
January
Net (losses) / gains on - (28,750) (28,750) - 4,215 4,215
investments
Income 1,835 - 1,835 2,021 - 2,021
Investment management fee (290) (193) (483) (338) (226) (564)
Other expenses (100) - (100) (72) - (72)
Profit / (loss) before 1,445 (28,943) (27,498) 1,611 3,989 5,600
finance costs and taxation
Finance costs: Appropriations - (2,344) (2,344) - (2,187) (2,187)
Finance costs: Dividends (3,903) - (3,903) (3,827) - (3,827)
Interest payable and similar (212) (141) (353) (220) (146) (366)
charges
Loss on ordinary activities (2,670) (31,428) (34,098) (2,436) 1,656 (780)
before taxation
Taxation - - - - - -
Loss for the period (2,670) (31,428) (34,098) (2,436) 1,656 (780)
Return per Zero Dividend - 0.99p 0.99p - 0.92p 0.92p
Share
Earnings / return per 0.45p (11.52)p (11.07)p 0.51p 0.60p 1.11p
Ordinary Share
Earnings / return per Package 0.90p (22.05)p (21.15)p 1.02p 2.12p 3.14p
Unit
The total column of this statement is the profit and loss account of the
Company, prepared in accordance with IFRS.
All items in the above statement derive from continuing operations. No
operations were acquired or discontinued during the period.
Each class of the Company's shares meets the definition of a liability and
therefore the Company has no equity shares. The (loss) / profit for the period
is attributable to the Ordinary Shareholders. There are no minority interests.
Statement Of Movements In Net Assets Attributable To
Shareholders (unaudited)
2008 2007
for the three months ended 31 �'000 �'000
January
Loss for the period (34,098) (780)
Add finance costs: 2,344 2,187
Appropriations
Net movement in fair value of (154) 185
swap
Net movement in net assets (31,908) 1,592
attributable to shareholders
Opening net assets attributable to 225,869 218,353
shareholders (all non-equity)
Closing net assets attributable to 193,961 219,945
shareholders (all non-equity)
Balance Sheet (unaudited)
31.01.2008 31.01.2007 31.10.2007
as at 31 January �'000 �'000 �'000
Non-current assets
Portfolio of investments 216,354 243,062 247,473
Current assets
Debtors 2,323 1,302 2,941
Cash at bank and short-term deposits 957 1,219 1,465
3,280 2,521 4,406
Total assets 219,634 245,583 251,879
Current liabilities (25,673) (894) (26,010)
Total assets less current liabilities 193,961 244,689 225,869
Non-current liabilities - (24,744) -
Net assets attributable to shareholders 193,961 219,945 225,869
(all non-equity)
Net Assets Attributable To Shareholders
(unaudited)
31.01.2008 31.01.2007 31.10.2007
as at 31 January �'000 �'000 �'000
Zero Dividend Shareholders 126,122 117,693 123,789
Ordinary Shareholders 67,839 102,252 102,080
Net assets attributable to shareholders 193,961 219,945 225,869
(all non-equity)
Net Asset Values Applicable to Each Class of Shareholding (unaudited)
as at 31 January 2008 2007
Net asset value per Zero Dividend 53.52p 49.69p
Shareholders
Net asset value per Ordinary Shareholders 24.86p 37.14p
Net asset value per Package Unit 103.24p 123.97p
Cash Flow Statement
(unaudited)
2008 2007
for the three months ended 31 �'000 �'000
January
Operating activities
Loss before taxation (34,098) (780)
Adjustments for:
Finance costs: Appropriations 2,344 2,187
Finance costs: Dividends 3,903 3,827
Interest payable and similar charges 353 366
Effective interest adjustments 39 42
Stock dividends (14) (59)
Investments held at fair value through profit
or loss:
Net losses / (gains) on investments 28,750 (4,215)
Capital distributions 410 -
Purchases of investments (20,434) (14,474)
Sales of investments 22,458 16,754
Decrease in other receivables 76 2
Increase / (decrease) in other payables 29 (21)
Net cash inflow from operating activities 3,816 3,629
before servicing of finance
Dividends paid (non-equity) (3,963) (3,871)
Annual monitoring fee paid (1) -
Interest paid on bank loan (360) (363)
Net decrease in cash and cash equivalents (508) (605)
Cash and cash equivalents at the start of the 1,465 1,824
period
Cash and cash equivalents at the end of the 957 1,219
period
Basis of accounting: These financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS), comprising
standards and interpretations approved by the International Accounting
Standards Board (IASB) and interpretations issued by the International
Financial Reporting Interpretations Committee of the IASB (IFRIC). The
financial statements are presented in pounds sterling and have been prepared
on a going concern basis under the historical cost convention except for the
measurement of investments at fair value.
The FSA Handbook has been amended to implement the Transparency Obligations
Directive (Disclosure and Transparency Rules) Instrument 2006 and as a result
the Company is now required to prepare its financial statements under IFRS.
Previously the financial statements were prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (UK GAAP) including the
Statement of Recommended Practice: 'Financial Statements of Investment Trust
Companies' (SORP) issued by the Association of Investment Companies in
December 2005.
First time adoption of IFRS: These are the first financial statements of the
Company to be prepared in accordance with IFRS. The date of transition to IFRS
for the Company is 1 October 2006. The adoption of IFRS and the retrospective
application of the IFRS accounting polices to the opening balance sheet as at
1 October 2006 and all subsequent periods has not resulted in any changes to
the opening or closing balance sheet or income statement. Presentational
changes have been made to the cash flow statement to reanalyse Dividends paid
to Ordinary Shareholders and Bank interest paid as financing activities; and
capital distributions, purchases of investments and sales of investments as
operating activities.
Kleinwort Benson (Channel Islands)
Fund Services Limited
Company Secretary
20 March 2008
END
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