1st Quarter Results

10/20/2009, 5:34 PM (Source: GlobeNewswire)
M&G High Income Investment Trust P.L.C.
First Interim Results
31 August 2009


Performance during the period

The Company's revenue earnings per Package Unit were 1.46p. In respect of the review period,
the Company declared an interim dividend of 1.20p per Income Share which was unchanged from
the amount declared at the same stage last year. On a net asset value (NAV) basis, each
Package Unit produced a total return of 11.7% over the three months to 31 August 2009. This
was 1.4% below the 13.1% total return on the FTSE All-Share Index over the same period. The
FTSE 350 Higher Yield Index returned 12.7% over the same period. At the period end, the
Package Unit mid-market price was at an 8.6% discount to the NAV and on a mid-market price
basis each Package Unit delivered a total return of 9.6%.

The under-performance over the period was a continuation of the defensive performance of both
the Company's bond and equity portfolios. The equity market was focused on economic recovery
in this period and although our bond portfolio rose, it lagged the stronger returns from
equities. Our equity portfolio performed in line with the All Share Index over this period.


Income statement (unaudited)

For the three months ended For year ended
31 August 2009 31 August 2008 31 May 2009
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
-------- -------- ------ -------- -------- ------- -------- ------- --------
Net gains /
(losses) on - 20,936 20,936 - (3,853) (3,853) - (8,160) (8,160)
investments
Income 3,078 - 3,078 1,108 - 1,108 7,248 - 7,248
Investment (159) (324) (483) (58) (118) (176) (373) (758) (1,131)
management fee
Other expenses (46) - (46) (39) - (39) (176) - (176)
------- ------- ------ ------- ------- ------- ------ -------- --------
Net return
before finance 2,873 20,612 23,485 1,011 (3,971) (2,960) 6,699 (8,918) (2,219)
cost and tax
Finance costs: - (2,818) (2,818) - (659) (659) - (5,779) (5,779)
Appropriations
Finance costs: (491) - (491) (1,499) - (1,499) (6,779) - (6,779)
Dividends
------- ------- ------ ------- ------- ------- ------ -------- --------
Net return on
ordinary 2,382 17,794 20,176 (488) (4,630) (5,118) (80) (14,697) (14,777)
activities
before tax
Tax on
ordinary - - - - - - - - -
activities
------- ------- ------ ------- ------- ------- ------ -------- --------
Net return on
ordinary 2,382 17,794 20,176 (488) (4,630) (5,118) (80) (14,697) (14,777)
activities
after tax
------- ------- ------ ------- ------- ------- ------ -------- --------
Return per
Zero Dividend - 1.43p 1.43p - 1.23p 1.23p - 5.21p 5.21p
Preference
Share
Revenue
earnings / 1.46p 9.06p 10.52p 1.89p (1.87)p 0.02p 6.04p (9.98)p (3.94)p
return per
Income Share
Return per - - - - (6.78)p (6.78)p - (3.27)p (3.27)p
Capital Share
Total return
per Income and 1.46p 9.06p 10.52p 1.89p (8.65)p (6.76)p 6.04p (13.25)p (7.21)p
Growth Unit
Total return
per Package 1.46p 10.49p 11.95p 1.89p (7.42)p (5.53)p 6.04p (8.04)p (2.00)p
Unit


The total column of this statement is the profit and loss account of
the Company. The revenue return and capital return columns are
supplementary to this and are prepared under the guidance published
by the Association of Investment Companies.

All items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the period.

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.

The Company's Zero Dividend Preference and Income shares meet the
definition of a liability under FRS 25 and therefore Capital shares
are the Company's only equity shares. This does not affect the
rights and benefits of each class. The breakdown of the net assets
attributable to shareholders in terms of the share capital and
reserves is given in note 10.



Reconciliation of movements in equity shareholders' funds (unaudited)


For the three months ended 31.08.09 31.08.08
£000 £000
---------- ----------
Return on ordinary activities after tax 20,176 (5,118)
Net revenue return on ordinary activities (2,382) 488
after tax
Net (gains) / losses attributable to (17,794) 1,001
Income Shareholders
---------- ----------
Net movement in net assets attributable - (3,629)
to Equity shareholders
Opening net assets attributable to Equity - 3,629
shareholders
---------- ----------
Closing net assets attributable to Equity - -
shareholders
---------- ----------




Balance sheet (unaudited)
As at 31.08.09 31.08.08 31.05.09

£000 £000 £000
------- ------- -------
Fixed assets
Portfolio of investments 223,051 66,997 198,335
------- ------- -------
Current assets
Debtors 2,220 744 2,353
Cash at bank and short-term deposits 1,217 1,351 3,842
------- ------- -------
3,437 2,095 6,195
------- ------- -------
Total financial assets 226,488 69,092 204,530
Creditors: Amounts falling due within (894) (160) (1,644)
one year
------- ------- -------
Total assets less current liabilities 225,594 68,932 202,886
[a]
Creditors: Amounts falling after more
than one year
Share classes defined as liability:
Zero Dividend Preference Shares (121,815) (30,326) (119,243)
Income Shares (103,779) (38,606) (83,643)
------- ------- -------
Net assets attributable to Equity - - -
shareholders
------- ------- -------



Total Share Capital and Reserves attributable to Equity
shareholders comprise (unaudited)
------- ------- -------
Capital shares - - -
------- ------- -------

[a] Total assets less current liabilities represents the net assets
attributable to all shareholders.

The net assets attributable to shareholders have been calculated in
accordance with the Company's Articles of Association and the net
asset values (per share) applicable to each class of shareholding as
shown below.

The Company's Zero Dividend Preference and Income shares meet the
definition of a liability under FRS 25 and therefore Capital shares
are the Company's only equity shares. This does not affect the
rights and benefits of each class. The breakdown of the net assets
attributable to shareholders in terms of the share capital and
reserves is given in note 10.

The Condensed Financial Statements have been prepared in accordance
with the Statement: Half Yearly Financial Reports issued by the
Accounting Standards Board.



As at 31.08.09 31.08.08

Net asset value per
Zero Dividend 62.01p 56.63p
Preference Share
Net asset value per 52.82p 72.09p
Income Share
Net asset value per - -
Capital Share
Net asset value per 52.82p 72.09p
Income & Growth Unit
Net asset value per 114.83p 128.72p
Package Unit


Cash flow statement (unaudited)
For the three For the year
months ended ended

31.08.09 31.08.08 31.05.09
£000 £000 £000 £000 £000 £000
-------- -------- ------ -------- -------- -------
Net cash
inflow from 2,750 1,584 4,866
operating
activities
Servicing of
finance
Dividends
paid (1,884) (1,499) (5,426)
(non-equity)
Financial
investment
Capital - 297 298
distributions
Purchase of (29,182) (3,775) (37,665)
investments
Sale of 25,937 1,930 34,921
investments
------- ------ -------
(3,245) (1,548) 2,446
Financing
Repurchase of
Package Units
(including (286) - (1,596)
related
costs)
Shares issued - - 6,046
for cash
Share issue - - (416)
costs
------- ------ -------
(286) - 4,038
------- ------- -------
Net
(decrease) / (2,625) (1,463) 1,028
increase in
cash
------- ------- -------




Notes to the Condensed Financial Statements


1. Principal activity

The Company was incorporated on 23 December 1996 and is a split
capital investment trust company. The affairs of the Company have
been conducted with the objective of enabling it to seek HM Revenue &
Customs approval as an investment trust for the purposes of Section
842 of the Income and Corporation Taxes Act 1988.

2. Accounting policies

The interim financial statements have been prepared in accordance
with the historical cost convention, as modified by the revaluation
of investments, in accordance with applicable United Kingdom
Accounting and Financial Reporting Standards, and the Statement of
Recommended Practice: 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' (SORP) issued by the
Association of Investment Companies (AIC) in January 2009.

During the period, the company has adopted the AIC SORP issued in
January 2009 resulting in the reclassification of Capital Shares
(being the most sub-ordinate of the share classes) as equity, in
accordance with FRS 25. The Zero Dividend Preference Shares and
Income Shares continue to meet the definition of a liability under
FRS 25 and have been treated as such. This has resulted in
presentational changes to the Balance Sheet. In addition, the capital
reserves have been reclassified as Capital Reserves - Investment
holding gains and Other capital gains.



3. Investments: At fair value through profit or loss
31.08.09 31.08.08 31.05.09
Capital Capital Capital
£000 £000 £000
------- ------- -------
Realised gains / (losses) on sales of
investments 517 164 (5,729)
Increase in unrealised appreciation /
(depreciation) 20,419 (4,314) (2,729)
Capital distributions - 297 298
------- ------- -------
Net gains / (losses) on investments 20,936 (3,853) (8,160)
------- ------- -------


4. Income

31.08.09 31.08.08 31.05.09
Revenue Revenue Revenue
Income from investments £000 £000 £000
------- ------- -------
Interest on debt securities 358 85 839
Property Income dividends 40 - 40
Overseas dividends - - 33
Stock dividends 74 - 261
UK dividends 2,573 995 6,012
------- ------- -------
3,045 1,080 7,185
------- ------- -------



Other income
------- ------- -------
Bank interest 1 23 43
HM Revenue & Customs interest [a] - 5 5
Underwriting commission 32 - 15
------- ------- -------
33 28 63
------- ------- -------
------- ------- -------
Total income 3,078 1,108 7,248
------- ------- -------
Total income comprises:
------- ------- -------
Dividends 2,687 995 6,346
Interest 359 113 887
Other income 32 - 15
------- ------- -------
3,078 1,108 7,248
------- ------- -------


[a] Interest in relation to the VAT recoverable.



5. Investment management fee


31.08.09 31.08.08
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
------------ ----------- ----------- ------------ ----------- -----------
Investment
management
fee 159 324 483 58 118 176
------------ ----------- ----------- ------------ ----------- -----------

31.05.09
Revenue Capital Total
£'000 £'000 £'000
------------ ----------- -----------
Investment
management
fee 373 758 1,131
------------- ------------ ------------


The Company's investment manager is M&G Investment Management Limited
(MAGIM). The investment management contract between the Company and
MAGIM may be terminated by either party giving not less than one
year's written notice of termination, although in certain
circumstances it may be terminated with immediate effect.

MAGIM receives an annual fee, payable monthly in advance, equal to
the following tiered rates per annum of the mid market value of the
Company's total assets less its current liabilities at the beginning
of the relevant month.

1% on the first £75m
0.9% on the next £125m
0.8% on the excess over £200m


6. Finance costs: Appropriations

This constitutes an appropriation of reserves in respect of the
premium to issue proceeds payable to holders of Zero Dividend
Preference Shares on redemption. The appropriation for the year
represents the increase in redemption value of the amounts originally
subscribed.


7. Finance costs: Dividends


31.08.09 31.08.08 31.05.09
Revenue Revenue Revenue
Dividends (payable to Income £000 £000 £000
Shareholders)
------- ------- -------
Fifth interim: 0.25p paid 25 August
2009 (2008: 0p) 491 - -
Fourth interim: 2.2p paid 22 August
2008 (2007: 2.2p) - 1,178 1,178
Special Dividend: 0.6p paid 22
August 2008 (2007: nil) - 321 321
First interim: 1.2p paid 25 November
2008 (2007: 1.2p) - - 643
Second interim: 2.2p paid 25
February 2009 (2008: 1.2p) [a] - - 1,178
Special Dividend: 0.9p paid 25
February 2009 (2008: 0.6p) [a] - - 482
Third interim: 1.2p paid 22 May 2009
(2008: 1.2p) - - 1,624
Fourth interim: 1.0p payable 25
August 2009 (2008: 2.2p) [a] - - 1,353
------- ------- -------
491 1,499 6,779
------- ------- -------

[a] This is a change in the distribution pattern of dividend
payments, with a second quarterly dividend of 2.20p and a special
dividend of 0.90p reflecting the decision of the Board to pay out the
majority of the current revenue reserves ahead of the rollover of M&G
Income Investment Company Limited into the Company. The ex-dividend
date for both dividends was 29th October 2008 and they were paid to
Income Shareholders on the register at the close of business on 31
October 2008. Also on 19 March 2009 the Board declared a fourth
interim dividend of 1.0p per Income Share, in respect of the year
ending 31 May 2009, representing substantially all of the revenue
reserves of the Company before the rollover of M&G Recovery
Investment Company Limited completed. This dividend was paid on 25
August 2009 to Income Shareholders on the register at the close of
business on 27 March 2009. The ex-dividend date was 25 March 2009.
The dividends were also paid to holders of Income & Growth Units and
Package Units.

On 14 October 2009 the Board declared a first interim dividend of
1.2p (2008: 1.2p) per Income Share totalling £2,357,000 (2008:
£643,000), payable on 25 November 2009 to Income Shareholders on the
register at the close of business on 23 October 2009. The ex-dividend
date is 21 October 2009.

The dividend will also be payable to holders of Income & Growth Units
and Package Units.


8. Earnings / returns per share

31.08.09 31.08.08 31.05.09
a) Return per Zero
Dividend Preference ------- ------- -------
Share
Appropriations £2,818,000 £659,000 £5,779,000
Weighted average shares
in issue during the
period 196,492,328 53,552,179 110,848,036
------- ------- -------
Return per share 1.43p 1.23p 5.21p
------- ------- -------

31.08.09 31.08.08 31.05.09

b) Revenue earnings per ------- ------- -------
Income Share
Net revenue return on
ordinary activities
after tax £2,382,000 £(488,000) £(80,000)
Finance costs:
Dividends £491,000 £1,499,000 £6,779,000
------- ------- -------
Revenue return
attributable to
shareholders £2,873,000 £1,011,000 £6,699,000
Weighted average shares
in issue during the
period 196,492,328 53,552,179 110,848,036
------- ------- -------
Revenue earnings per
share 1.46p 1.89p 6.04p
------- ------- -------
------- ------- -------
Capital return
attributable to Income
Shareholders (note 8c) £17,794,000 £(1,001,000) £(11,068,000)
Weighted average shares
in issue during the
period 196,492,328 53,552,179 110,848,036
------- ------- -------
Capital return per
Income share 9.06p (1.87)p (9.98)p
------- ------- -------

31.08.09 31.08.08 31.05.09
c) Return per Capital ------- ------- -------
Share
Net capital return on
ordinary activities
after tax £17,794,000 £(4,630,000) £(14,697,000)
(Gains) / losses offset
against Income Shares £(17,794,000) 1,001,000 £11,068,000
------- ------- -------
Net capital return
attributable to Capital
shareholders - £(3,629,000) £(3,629,000)
Weighted average shares
in issue during the
period 196,492,328 53,552,179 110,848,036
------- ------- -------
Return per share - (6.78)p (3.27)p
------- ------- -------


d) Package units

The earnings and returns per Package Unit are calculated by reference
to its component shares.


9. Share capital (equity and non-equity)


31.08.09 31.08.08 31.05.09
Allotted, called up and fully paid: £000 £000 £000
------- ------- -------
196,448,306 (2008: 53,552,179) Zero
Dividend Preference Shares of 1p each 1,964 536 1,967
196,448,306 (2008: 53,552,179) Income
Shares of 1p each 1,964 536 1,967
196,448,306 (2008: 53,552,179)
Capital Shares of 1p each 1,964 536 1,967
------- ------- -------

During the period the Company repurchased and cancelled 300,000
Package Units at an average cost of 91p per Package Unit costing
£286,000.

The Company's Zero Dividend Preference and Income Shares meet the
definition of a liability under FRS 25 and therefore the Capital
Shares comprise the Company's equity shares.

The Company has authorised share capital of £29,850,000 (2008: same)
consisting of 995,000,000 (2008: same) shares of each class.


10. Capital and reserves attributable to shareholders


31.08.09 31.08.08 31.05.09
As at £000 £000 £000
------- ------- -------
Called up share capital 5,893 1,607 5,902
Share premium account 135,743 - 135,743
Capital redemption reserve 15,615 15,555 15,606
Zero Dividend Preference Shares
appropriation reserve 25,765 19,252 23,230
Special reserve 36,713 37,170 36,716
Capital reserves -
Investment holding gains/(losses) 19,707 (2,297) (712)
-
Other capital reserves (18,778) (4,501) (16,153)
Revenue reserve 4,936 2,146 2,554
------- ------- -------
Net assets attributable to
shareholders 225,594 68,932 202,886
------- ------- -------


Zero Dividend Preference Shares 121,815 30,326 119,243
Income Shares 103,779 38,606 83,643
------- ------- -------
Total non-equity shares 225,594 68,932 202,886
Capital Shares (equity) - - -
------- ------- -------
Net assets attributable to
shareholders 225,594 68,932 202,886
------- ------- -------





























Under the terms of the Company's Articles of Association sums
standing to the credit of the Special Reserve are available for
distribution only by way of redemption or purchase of any of the
Company's own shares. The Company may only distribute accumulated
'realised' profits.

The Institute of Chartered Accountants of England and Wales has
issued guidance (TECH 01/08), stating that profits arising out of a
change in fair value of assets, recognised in accordance with the
Accounting Standards may be distributed provided the relevant assets
can be readily converted into cash. Securities listed on recognised
stock exchanges are generally regarded as being readily convertible
into cash and hence unrealised profits in respect of such securities
currently included within Investment holding gains may be regarded as
distributable under Company Law.


11. Abridged results

The abridged balance sheet for the year ended 31 May 2009 is based on
financial statements which carry an audit report that is unqualified
and includes no matters of adverse comment.



Portfolio of investments
As at 31 August 2009

Oil & gas producers 14.52
BP 16,493 7.31
Royal Dutch Shell 'B' 16,267 7.21

Chemicals 1.00
Johnson Matthey 1,920 0.85
Yule Catto 343 0.15

Mining 2.60
Anglo American 3,635 1.61
Lonmin 2,243 0.99

Aerospace & defence 0.25
BAE Systems 568 0.25

Construction & materials 0.75
Low & Bonar 1,028 0.46
Marshalls 462 0.20
Morgan Sindall 212 0.09

Electronic & electrical equipment 0.30
Halma 491 0.22
Renishaw 187 0.08

General industrials 0.40
Smith (D.S.) 900 0.40

Industrial engineering 0.71
IMI 122 0.05
Vitec Group 1,478 0.66

Support services 4.92
Acal 111 0.05
Bunzl 2,080 0.92
Davis Service Group 2,285 1.01
De La Rue 715 0.32
Electrocomponents 1,440 0.64
Filtrona 2,426 1.08
Hays 948 0.42
Premier Farnell 247 0.11
Smiths News 844 0.37

Beverages 1.35
Diageo 3,047 1.35

Food producers 3.94
Tate & Lyle 1,930 0.86
Unilever 6,949 3.08

Personal goods 0.83
PZ Cussons 1,864 0.83

Tobacco 3.73
British American Tobacco 6,671 2.96
Imperial Tobacco 1,729 0.77

Pharmaceuticals & biotechnology 10.31
AstraZeneca 8,680 3.85
BTG 1,053 0.47
GlaxoSmithKline 13,524 5.99

Food & drug retailers 0.95
Booker Group 695 0.31
Sainsbury (J.) 1,440 0.64

General retailers 2.14
Halfords Group 2,604 1.15
Home Retail Group 1,503 0.67
Kingfisher 188 0.08
NEXT 352 0.16
Topps Tiles 182 0.08

Media 3.09
British Sky Broadcasting Group 1,479 0.66
Daily Mail & General Trust 'A' (non-voting) 952 0.42
Pearson 1,786 0.79
Reed Elsevier 2,747 1.22

Travel & leisure 1.06
Compass Group 342 0.15
Ladbrokes 983 0.44
William Hill 1,059 0.47

Fixed line telecommunications 2.09
BT Group 2,167 0.96
Cable & Wireless 2,548 1.13

Mobile telecommunications 5.28
Vodafone Group 11,901 5.28

Electricity 0.59
Scottish & Southern Energy 1,330 0.59

Gas, water & multi-utilities 4.69
Centrica 2,846 1.26
National Grid 2,649 1.17
Northumbrian Water Group 593 0.26
Pennon Group 210 0.09
Severn Trent 2,130 0.94
United Utilities 2,183 0.97

Banks 6.32
HSBC Holdings 14,266 6.32

Non-life insurance 0.89
Jardine Lloyd Thompson Group 415 0.18
RSA Insurance Group 1,609 0.71

Life insurance 3.53
Aviva 1,933 0.86
Friends Provident 386 0.17
Legal & General Group 1,049 0.46
Prudential 2,997 1.33
Standard Life 1,601 0.71

Real estate investment trusts 2.86
Alpha Pyrenees Trust 109 0.05
Great Portland Estates 718 0.32
Land Securities Group 2,704 1.20
Segro 2,918 1.29

Financial services 1.50
Close Brothers Group 2,421 1.07
F&C Asset Management 34 0.01
London Stock Exchange 180 0.08
Provident Financial 766 0.34

Equity investment instruments 0.36
Blackrock Commodities Income Investment Trust 531 0.23
Ecofin Water & Power Opportunities 290 0.13
Ecofin Water & Power Opportunities (Subscription 4 -
Shares)

Software & computer services 1.79
Sage Group 4,035 1.79

Non-convertible preference shares 2.20
Aviva 8.75% Cum. Irrd. Pref. 1,530 0.68
General Accident 8.875% Cum. Irrd. Pref. 758 0.34
Lloyds Banking Group 6.475% Non-cum. Irrd. Pref. 457 0.20
Lloyds Banking Group 9.25% Non-cum. Irrd. Pref. 1,240 0.55
Lloyds Banking Group 9.75% Non-cum. Irrd. Pref. 244 0.11
Royal & Sun Alliance 7.375% Cum. Irrd. Pref. 227 0.10
Standard Chartered 7.375% Non-cum. Irrd. Pref. 504 0.22

'AAA' credit rated bonds 5.95
Finland (Republic of) 9.375% 2010 673 0.30
Treasury 4.75% 2010 3,814 1.69
Treasury 4.75% 2015 4,832 2.14
Treasury 5% 2012 4,100 1.82

'AA' credit rated bonds 0.71
BP Capital Markets 5.75% 2010 409 0.18
GE Capital UK Funding FRN 2010 697 0.31
Land Securities Capital Markets Var. Rate 2013 506 0.22

'A' credit rated bonds 2.53
E.ON International Finance 6.375% 2012 545 0.24
France Telecom 5% 2016 313 0.14
France Telecom 7.5% 2011 769 0.34
France Telecom 8% 2017 309 0.14
HSBC Holdings Var. Rate 2018 1,088 0.48
London Merchant Securities 6.5% 2026 253 0.11
London Stock Exchange Var. Rate 2016 805 0.36
National Grid Gas 6% 2017 544 0.24
UBS London 6.375% 2016 1,077 0.48

'BBB' credit rated bonds 3.36
Anheuser-Busch InBev 6.5% 2017 1,083 0.48
AXA Var. Rate Perp. 553 0.24
British Telecommunications Var. Rate 2016 800 0.35
Compass 7% 2014 391 0.17
Deutsche Telekom 7.125% 2012 927 0.41
DWR Cymru Financing Var. Rate 2036 744 0.33
Imperial Tobacco Finance 5.5% 2016 497 0.22
Imperial Tobacco Finance 6.25% 2018 509 0.23
Kingfisher 5.625% 2014 303 0.13
Rentokil Initial 5.75% 2016 195 0.09
Sutton Bridge Financing 8.625% 2022 306 0.14
Thames Water Utilities Finance 4.75% 2010 307 0.14
WPP Group 6% 2017 960 0.43

Bonds with no credit rating 1.37
Blue Circle Industries 10.75% 2013 580 0.26
Brixton 5.25% 2015 578 0.26
Heineken 7.25% 2015 851 0.38
John Lewis 6.375% 2012 738 0.33
Shaftesbury 8.5% 2024 308 0.14

Total investments 223,051 98.87
Net other assets 2,543 1.13
Net assets attributable to all shareholders 225,594 100.00



The interim report will not be advertised in the press, but copies
are available from the registered office,
Laurence Pountney Hill, London, EC4R 0HH.

J. P. McClelland
Secretary
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