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M&G Income Inv. Co (MIV)

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Thursday 20 March, 2008

M&G Income Inv. Co

Third Interim Results


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                                                                 


      
                                                                                                                                                                                                                                                              

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