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M&G Income Inv. Co (MIV)

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Friday 11 January, 2008

M&G Income Inv. Co

Final Results


FINAL RESULTS M&G Income Investment Company Limited

Performance during the period.

The Company's revenue earnings per Package Unit were 6.24p, an increase of
12.6%. In respect of the year, the Company declared

eleven dividends of 0.17p per Ordinary Share (0.34p per Package Unit) and one
dividend of 1.07p per Ordinary Share (2.14p per

Package Unit). Total dividends were 2.94p per Ordinary Share (5.88p per Package
Unit), compared with 2.78p per Ordinary Share (5.56p

per Package Unit) in the previous year. This represents an increase of 5.8%,
which is ahead of the latest annualised increase in the UK's

rate of inflation of 4.2% as measured by the Retail Prices Index (RPI). As at
the year end, the yield on the Company's Package Units was

5.1%, compared with the yield of 2.8% on the FTSE All-Share Index.

On a net asset value (NAV) basis, each Package Unit produced a total return of
8.1% over the year to 31 October 2007. This was below

the return of 13.6% on the FTSE All-Share Index over the same period. Virtually
the entire shortfall occurred in the second half of the

year, an exceptionally challenging period for income fund managers.

This return is disappointing and reflects the convergence of several negative
factors. Firstly, high yield stocks underperformed the FTSE

All-Share Index by 4.2% in this period. Secondly, mid-cap stocks, where we are
overweight, underperformed large-cap stocks by 6.9%

in the last six months of the period. In both cases, this reflected a narrow
market driven by low yielding mining stocks, which fall outside

the Company's investment criteria and consequently the portfolio has little
exposure in this area. In contrast, higher yielding financial stocks were very
weak and we are fully weighted in this area. Thirdly, return was affected by
the dull performance of bonds over the period. The M&G High Yield Corporate
Bond Fund was up 1.7% and our portfolio of corporate bonds increased 2.2%,
notably better than the ML Sterling Non-Gilts All Stocks Index's return of
-0.4%, but well below the return from equities. This combination of events is
unusual and the fund is soundly based and well positioned to recover lost
ground particularly if bonds stabilise and should the strong relative
performance of mining stocks reverse.

The market price discount to NAV widened over the year from 6.5% to 8.5%, the
market price at the year end being 116.5p and the NAV

127.35p. On a mid-market price basis, the total return on the Company's Package
Units was 6.0%. The Company's gearing at the year end was 10.9% of total assets
less current liabilities, compared with 10.2% at the same time last year. In
line with the policy stated in the Company's Prospectus, there was no
investment in other split capital investment companies.

Income statement (audited)                                                                                         
                                                                                                                   
for the year ended 31                              2007                                         2006               
October                                                                                                            
                                                                                                                   
                                  Revenue       Capital          Total        Revenue        Capital          Total
                                                                                                                   
                                     £000          £000           £000           £000           £000           £000
                                                                                                                   
                           -------------- ------------- -------------- -------------- -------------- --------------
                                                                                                                   
Net gains on investments                -         9,749          9,749              -         26,935         26,935
                                                                                                                   
Income                             11,055             -         11,055         10,087              -         10,087
                                                                                                                   
Investment management fee         (1,338)         (892)        (2,230)        (1,233)          (822)        (2,055)
                                                                                                                   
Other expenses                      (287)             -          (287)          (295)              -          (295)
                                                                                                                   
                           -------------- ------------- -------------- -------------- -------------- --------------
                                                                                                                   
Net return before finance           9,430         8,857         18,287          8,559         26,113         34,672
costs and tax                                                                                                      
                                                                                                                   
Finance costs:                          -       (8,919)        (8,919)              -        (8,314)        (8,314)
Appropriations                                                                                                     
                                                                                                                   
Finance costs: Dividends          (8,036)             -        (8,036)        (7,704)              -        (7,704)
                                                                                                                   
Interest payable and                (883)         (589)        (1,472)          (881)          (587)        (1,468)
similar charges                                                                                                    
                                                                                                                   
                           -------------- ------------- -------------- -------------- -------------- --------------
                                                                                                                   
Net return on ordinary                551         (651) (140)                    (26)         17,212         17,186
activities before tax                                                                                              
                                                                                                                   
Tax on ordinary activities              -             -              -              -              -              -
                                                                                                                   
                           -------------- ------------- -------------- -------------- -------------- --------------
                                                                                                                   
Net return on ordinary                551         (651)          (140)           (26)         17,212         17,186
activities after tax                                                                                               
                                                                                                                   
                           -------------- ------------- -------------- -------------- -------------- --------------
                                                                                                                   
Return per Zero Dividend                -         3.78p          3.78p              -          3.50p          3.50p
Share                                                                                                              
                                                                                                                   
Earnings / return per               3.12p       (0.24)p          2.88p          2.77p          6.21p          8.98p
Income Share                                                                                                       
                                                                                                                   
Earnings / return per               6.24p         3.30p          9.54p 5.54p                  15.92p         21.46p
Package Unit                                                                                                       
                                                                                                                   

The total column of this statement is the profit and loss account of the
Company.

All revenue and capital items in the above statement derive from continuing
operations.

No operations were acquired or discontinued during the year.

A statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the above statement.

Statement of movements in net assets attributable to shareholders (audited)

For the year ended 31 October                          2007                            2006    
                                                                                               
                                                       £000                            £000    
                                                                                               
                                             --------------                  --------------    
                                                                                               
Return on ordinary activities                         (140)                          17,186    
after tax                                                                                      
                                                                                               
Add finance costs:                                    8,919                           8,314    
Appropriations                                                                                 
                                                                                               
Net movement in fair value of                           146                             406    
swap                                                                                           
                                                                                               
Repurchase of Package Units                         (1,409)                         (1,086)    
(including related costs)                                                                      
                                                                                               
                                             --------------                  --------------    
                                                                                               
Net movement in net assets                            7,516                          24,820    
attributable to shareholders                                                                   
                                                                                               
Opening net assets                                  218,353                         193,533    
attributable to shareholders                                                                   
(all non-equity)                                                                               
                                                                                               
                                             --------------                  --------------    
                                                                                               
Closing net assets                                  225,869                         218,353    
attributable to shareholders                                                                   
(all non-equity)                                                                               
                                                                                               
                                             --------------                  --------------    
                                                                                               
Balance sheet (audited)                                                                        
                                                                                               
As at 31 October                                      2007                             2006    
                                                                                               
                                                      £000                             £000    
                                                                                               
                                            --------------                   --------------    
                                                                                               
Fixed assets                                                                                   
                                                                                               
Portfolio of investments                           247,473                          240,433    
                                                                                               
                                            --------------                   --------------    
                                                                                               
Current assets                                                                                 
                                                                                               
Debtors                                              2,941                            2,258    
                                                                                               
Cash at bank and short-term                          1,465                            1,822    
deposits                                                                                       
                                                                                               
                                            --------------                   --------------    
                                                                                               
                                                     4,406                            4,080    
                                                                                               
                                            --------------                   --------------    
                                                                                               
Total financial assets                             251,879                          244,513    
                                                                                               
Other creditors: Amounts                          (26,010)                          (1,235)    
falling due within one year                                                                    
                                                                                               
                                            --------------                   --------------    
                                                                                               
Total assets less current                          225,869                          243,278    
liabilities                                                                                    
                                                                                               
Creditors: Amounts falling due                           -                         (24,925)    
after more than one year                                                                       
                                                                                               
                                            --------------                   --------------    
                                                                                               
Net assets attributable to                         225,869                          218,353    
shareholders (all non-equity)                                                                  
                                                                                               
                                            --------------                   --------------    
                                                                                               
Net assets attributable to                                                                     
Shareholders (audited)                                                                         
                                                                                               
As at 31 October                                      2007                             2006    
                                                                                               
                                                      £000                             £000    
                                                                                               
                                            --------------                   --------------    
                                                                                               
Zero Dividend Shareholders                         123,789                          115,490    
                                                                                               
Ordinary Shareholders                              102,080                          102,863    
                                                                                               
                                            --------------                   --------------    
                                                                                               
Net assets attributable to                         225,869                          218,353    
shareholders (all non-equity)                                                                  
                                                                                               
                                            --------------                   --------------    
                                                                                               
Net asset value per Zero                            52.53p                           48.76p    
Dividend Share                                                                                 
                                                                                               
Net asset value per Ordinary                        37.41p                           37.36p    
Share                                                                                          
                                                                                               
Net asset value per Package                        127.35p                          123.48p    
Unit                                                                                           
                                                                                               
Cash flow statement (audited)                                                                  
                                                                                               
for the year ended 31 October               2007           2007             2006           2006
                                                                                               
                                            £000           £000             £000           £000
                                                                                               
                                  -------------- --------------   -------------- --------------
                                                                                               
Net cash inflow from operating                            8,015                           7,967
activities                                                                                     
                                                                                               
Servicing of finance                                                                           
                                                                                               
Dividends paid (non-equity)              (8,009)                         (7,680)               
                                                                                               
Annual monitoring fee paid                   (5)                             (5)               
                                                                                               
Interest paid on bank loan               (1,443)                         (1,458)               
                                                                                               
                                  --------------                  --------------               
                                                                                               
                                                        (9,457)                         (9,143)
                                                                                               
Financial investment                                                                           
                                                                                               
Capital distributions                        185                           1,793               
                                                                                               
Purchases of investments                (61,356)                        (67,924)               
                                                                                               
Sales of investments                      63,665                          68,978               
                                                                                               
                                  --------------                  --------------               
                                                                                               
                                                          2,494                           2,847
                                                                                               
Financing                                                                                      
                                                                                               
Repurchase of Package Units                             (1,409)                         (1,086)
(including related costs)                                                                      
                                                                                               
                                                 --------------                  --------------
                                                                                               
Net increase in cash                                 (357)                                  585
                                                                                               
                                                 --------------                  --------------

Note

The results for 2006 are based on financial statements which carry an audit
report which is unqualified and includes no matters of adverse comment.

The 2007 figures have been extracted from the audited financial statements
which will carry an unqualified audit report with no matters of adverse
comment.

The Annual Report and Financial Statements will be posted to shareholders on or
before 25 January 2008 and the Annual General Meeting will be held at 12.10pm
on 26 February 2008 at Dorey Court, Admiral Park, St. Peter Port, Guernsey, GY1
3BG.

There will also be an additional presentation to shareholders unable to make
The Annual General Meeting. This will be held at Governor's House, Laurence
Pountney Hill, London EC4R 0HH on 28 February 2008, at 11.00am.

Kleinwort Benson (Channel Islands) Fund Services Limited

Company Secretary


                 

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