TIDMMEQI
M&G Equity Investment Trust P.L.C.
Third Interim Results
31 March 2010
Performance during the period
On a net asset value (NAV) basis, each Package Unit produced a positive total return of 33.7%
over the nine months to 31 March 2010. This was below the 37.4% positive total return on the
FTSE All-Share Index over the same period.
The Company's revenue earnings per Package Unit were 2.92p. During the review period, the
Company declared three quarterly dividends of 1.25p per Income Share, making a total of
3.75p. This represents no change compared to the same period last year despite the pressure on
market dividends caused by many companies cutting payouts in the wake of the recession. 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 positive total return of 28.9%.
In its penultimate year before wind-up, the Company is being managed with a view to capital
preservation. Approximately GBP20m or 10% of the Company's assets were switched from equities
into gilts in February 2010. A cautious strategy to both bond and equity selection resulted in
the Company lagging the rise in the equity market in the third quarter, however upward
progress was maintained.
Income statement (unaudited)
For the nine months ended For year ended
31 March 2010 31 March 2009 30 June 2009
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ------ -------- -------- ------- -------- ------- --------
Net gains /
(losses) on - 40,328 40,328 - (49,324) (49,324) - (36,811) (36,811)
investments
Income 6,302 - 6,302 7,327 - 7,327 10,431 - 10,431
Investment (325) (759) (1,084) (325) (757) (1,082) (417) (974) (1,391)
management fee
Other expenses (195) - (195) (172) - (172) (210) - (210)
------- ------- ------ ------- ------- ------- ------ -------- --------
Net return
before finance 5,782 39,569 45,351 6,830 (50,081) (43,251) 9,804 (37,785) (27,981)
costs and tax
Finance costs: - (7,533) (7,533) - (8,380) (8,380) - (11,737) (11,737)
Appropriations
Finance costs: (7,791) - (7,791) (8,479) - (8,479) (10,625) - (10,625)
Dividends
Finance costs: (665) (1,550) (2,215) (756) (2,412) (3,168) (982) (2,939) (3,921)
Interest
payable and
similar
charges
------- ------- ------ ------- ------- ------- ------ -------- --------
Net return on
ordinary (2,674) 30,486 27,812 (2,405) (60,873) (63,278) (1,803) (52,461) (54,264)
activities
before tax
Tax on
ordinary (52) 52 - (62) 62 - (90) 90 -
activities
------- ------- ------ ------- ------- ------- ------ -------- --------
Net return on
ordinary (2,726) 30,538 27,812 (2,467) (60,811) (63,278) (1,893) (52,371) (54,264)
activities
after tax
------- ------- ------ ------- ------- ------- ------ -------- --------
Return per
Zero Dividend - 21.96p 21.96p - (18.41)p (18.41)p - (11.53)p (11.53)p
Preference
Share
Revenue
earnings / 2.92p - 2.92p 3.50p (0.10)p 3.40p 5.09p (0.10)p 4.99p
return per
Income Share
Return per - - - - (12.06)p (12.06)p - (12.06)p (12.06)p
Capital Share
Total return
per Package 2.92p 21.96p 24.88p 3.50p (30.57)p (27.07)p 5.09p (23.69)p (18.60)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 (Capital) shareholders' funds (unaudited)
for the nine months ended 31.03.10 31.03.09
GBP'000 GBP'000
---------- ----------
Capital return on ordinary activities after tax 30,538 (60,811)
Losses offset against Income shares 2 172
(Gains) / losses offset against Zero Dividend Preference (30,540) 39,955
Shares
---------- ----------
Net movement in net assets attributable to Equity - (20,684)
shareholders
Opening net assets attributable to Equity shareholders - 20,684
---------- ----------
Closing net assets attributable to Equity shareholders - -
---------- ----------
Balance sheet
(unaudited)
As at 31.03.10 31.03.09 30.06.09
GBP'000 GBP'000 GBP'000
------- ------- -------
Fixed assets
Portfolio of investments - 152,020 166,476
------- ------- -------
Current assets
Portfolio of investments 200,938 - -
Debtors 1,389 8,114 1,967
Cash at bank and short term deposits 4,215 2,116 696
------- ------- -------
206,542 10,230 2,663
------- ------- -------
Total financial assets 206,542 162,250 169,139
Creditors: Amounts falling due within one year
7.376% Debenture 2011 (39,987) - -
Share classes defined as a liability:
Zero Dividend Preference Shares (159,216) - -
Income Shares (6,044) - -
Other creditors (1,295) (6,435) (354)
------- ------- -------
Total assets less current liabilities - 155,815 168,785
Creditors: Amounts falling after more than one
year:
7.376% Debenture 2011 - (39,973) (39,977)
Share classes defined as liability:
Zero Dividend Preference Shares - (107,646) (120,038)
Income Shares - (8,196) (8,770)
------- ------- -------
- (155,815) (168,785)
------- ------- -------
Net assets attributable to Equity (Capital) - - -
shareholders
------- ------- -------
Total Share Capital and Reserves attributable to Equity (Capital)
shareholders comprise:
------- ------- -------
Called up share capital 1,737 1,717 1,725
Share premium account 35,085 35,032 35,039
Capital redemption reserve 486 486 486
Special reserve 7,242 7,242 7,242
Capital reserve - Investment holding gains / - - -
(losses)
- Other capital (44,550) (44,477) (44,492)
reserves
------- ------- -------
Net assets attributable to Equity (Capital) - - -
shareholders
-------- ------- --------
The net assets attributable to all shareholders at the period end are
GBP165,260,000 (2009: GBP115,842,000). This equates to the total financial assets of
the Company of GBP206,542,000 (2009: GBP162,250,000) less the debenture outstanding
of GBP39,987,000 (2009: GBP39,973,000) and other creditors of GBP1,295,000 (2009:
GBP6,435,000).
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 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 Condensed Financial Statements have been prepared in accordance with the
Statement: Half Yearly Financial Reports issued by the Accounting Standards
Board.
As at 31.03.10 31.03.09 30.06.09
-------- -------- --------
Net asset value per Zero 91.66p 62.71p 69.61p
Dividend Preference Share
Net asset value per Income 3.48p 4.77p 5.08p
Share
Net asset value per Capital - - -
Share
Net asset value per Package 95.14p 67.48p 74.69p
Unit
Cash flow
statement
(unaudited)
For the nine months ended For the year ended
31.03.10 31.03.09 30.06.09
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ------ -------- -------- -------
Net cash inflow
from operating 5,381 9,619 11,561
activities
Servicing of
finance
Dividends paid (7,791) (8,479) (10,625)
(non-equity)
Annual monitoring (3) (3) (3)
fee paid
Interest paid on (1,475) (1,894) (3,370)
Debenture Stock
------- ------- -------
(9,269) (10,376) (13,998)
Financial
investment
Capital - 705 705
distributions
Purchase of (44,895) (42,027) (62,207)
investments
Sale of 51,195 56,796 76,641
investments
------- ------ -------
6,300 15,474 15,139
Financing
Partial repayment - (14,000) (14,000)
of Debenture Stock
Cost of early
partial redemption - (648) (648)
of Debenture Stock
Repurchase of
Package Units - (461) (461)
(including related
costs)
Issue of Package
Units (including 1,108 711 1,306
related costs)
------- ------ -------
(1,108) (14,398) (13,803)
------- ------- -------
Net increase / 3,520 319 (1,101)
(decrease) in cash
------- ------- -------
Notes to the Financial Statements
1. Principal activity
The Company was incorporated on 3 January 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.
In accordance with the Company's Articles of Association, the Company shall have
a planned life to 8 March 2011 and the Directors are required to convene a
general meeting of the Company to be held on 8 March 2011 at which a resolution
will be proposed requiring the Company to be wound up voluntarily unless the
Board has been released from its obligations to do so by a special resolution of
the Company. The Board is reviewing the options available for the future of the
Company. As it is probable that the Company will not continue in the foreseeable
future in its current legal form, the financial statements have been prepared on
a break up basis rather than a going concern basis. As a consequence, all assets
and liabilities are classified as current; investments continue to be stated at
bid price which is a reasonable estimation of their fair value with no provision
for impairment; and the costs of winding up the Company are not expected to be
material at this stage and therefore no accrual has been made for them. The
comparative figures are on a going concern basis.
During the period, the Company 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, note 10 to the
financial statements disclose the portion of the Capital Reserves that is
Investment Holding Gain or Loss.
3. Investments: At fair value through profit or loss
Nine months ended Year ended
31.03.10 31.03.09 30.06.09
Capital Capital Capital
GBP'000 GBP'000 GBP'000
------- ------- -------
Realised losses on sales of investments (5,504) (26,299) (30,110)
Increase in investment holding gains /
(losses) 45,832 (23,730) (7,406)
Capital distributions - 705 705
------- ------- -------
Net gains / (losses) on investments 40,328 (49,324) (36,811)
------- ------- -------
4. Income
Nine months ended Year ended
31.03.10 31.03.09 30.06.09
Revenue Revenue Revenue
Income from investments GBP'000 GBP'000 GBP'000
------- ------- -------
Interest on debt
securities 1,224 1,298 1,684
Property Income dividends 115 45 92
Overseas dividends - 7 7
Stock dividends 347 - 258
UK dividends 4,586 5,831 8,211
------- ------- -------
6,272 7,181 10,252
------- ------- -------
Other income
------- ------- -------
Bank interest 7 22 21
Deposit interest - 85 85
HM Revenue & Customs interest - 10 10
Underwriting commission 23 29 63
------- ------- -------
30 146 179
------- ------- -------
------- ------- -------
Total income 6,302 7,327 10,431
------- ------- -------
Total income comprises:
------- ------- -------
Dividends 5,048 5,883 8,568
Interest 1,231 1,415 1,800
Other income 23 29 63
------- ------- -------
6,302 7,327 10,431
------- ------- -------
5.
Investment
management
fee
Nine months to 31.03.10 Nine months to 31.03.09
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ----------- ----------- ------------ ----------- -------
Investment
management
fee 325 759 1,084 325 757 1,082
------------ ----------- ----------- ------------ ----------- -------
Year ending 30.06.09
Revenue Capital Total
GBP'000 GBP'000 GBP'000
------------ ----------- ---------
Investment
management
fee 417 974 1,391
------------ ---------- ---------
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 0.75% per
annum, of the mid market value of the Company's total assets less its current
liabilities at the beginning of the relevant month.
In certain circumstances a performance related fee may be payable at the end of
the Company's financial year. The conditions and basis upon which such a fee is
paid are disclosed in the Company's Annual Report and Financial Statements.
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
Nine months Year ended
ended
31.03.10 31.03.09 30.06.09
Revenue Revenue Revenue
Dividends (payable to Income Shareholders) GBP'000 GBP'000 GBP'000
------- ------- -------
Fourth interim 2009: 2p paid 18 September
2009 (2008: 2p) 3,449 3,418 3,418
Special Dividend: 0.45p paid 19 September
2008 - 769 769
First interim 2010: 1.25p paid 18 December
2009 (2008: 1.25p) 2,171 2,146 2,146
Second interim 2010: 1.25p paid 19 March
2010 (2009: 1.25p) 2,171 2,146 2,146
Third interim 2009: 1.25p paid 19 June 2009
(2008: 1.2p) - - 2,146
------- ------- -------
7,791 8,479 10,625
------- ------- -------
On 18 May 2010 the Board declared a third interim dividend of 1.25p (2009:
1.25p) per Income Share totalling GBP2,171,000 (2009: GBP2,146,000), payable on 18
June 2010 to Income Shareholders on the register at the close of business on 28
May 2010. The ex-dividend date is 26 May 2010.
All dividends are payable to holders of Income Shares and Package Units.
8. Earnings / returns per share
As at 31.03.10 31.03.09 30.06.09
a) Return per Zero Dividend ------- ------- -------
Preference Share
Appropriations GBP7,533,000 GBP8,380,000 GBP11,737,000
Gains / (losses) offset against
Zero Dividend Preference Shares
(note 8c) GBP30,540,000 GBP(39,955,000) GBP(31,515,000)
------- ------- -------
Net capital return attributable to
Zero Dividend Preference
shareholders GBP38,073,000 GBP(31,575,000) GBP(19,778,000)
Weighted average shares in issue
during the period 173,336,176 171,523,584 171,579,496
------- ------- -------
Return per share 21.96p (18.41)p (11.53)p
------- ------- -------
b) Revenue earnings per ------- ------- -------
Income Share
Net revenue return on
ordinary activities after
tax GBP(2,726,000) GBP(2,467,000) GBP(1,893,000)
Finance costs: Dividends GBP7,791,000 GBP8,479,000 GBP10,625,000
------- ------- -------
Revenue return
attributable to Income
shareholders GBP5,065,000 GBP6,012,000 GBP8,732,000
Weighted average shares
in issue during the
period 173,336,176 171,523,584 171,579,496
------- ------- -------
Revenue earnings per
share 2.92p 3.50p 5.09p
------- ------- -------
------- ------- -------
Capital return
attributable to Income
Shareholders (note 8c) GBP(2,000) GBP(172,000) GBP(172,000)
Weighted average shares
in issue during the
period 173,336,176 171,523,584 171,579,496
------- ------- -------
Capital return per Income
share - (0.10)p (0.10)p
------- ------- -------
c) Return per Capital ------- ------- -------
Share
Net capital return on
ordinary activities after
tax GBP30,538,000 GBP(60,811,000) GBP(52,371,000)
Losses offset against
Income Shares GBP2,000 GBP172,000 GBP172,000
(Gains) / losses offset
against Zero Dividend GBP(30,540,000) GBP39,955,000 GBP31,515,000
Preference Shares
------- ------- -------
Net capital return
attributable to Capital
shareholders - GBP(20,684,000) GBP(20,684,000)
Weighted average shares
in issue during the
period 173,336,176 171,523,584 171,579,496
------- ------- -------
Return per share - (12.06)p (12.06)p
------- ------- -------
d) Income & Growth Units and Package units
The earnings and returns per Package Unit are calculated by reference to their
component shares.
9. Share capital (equity and non-equity)
31.03.10 31.03.09 30.06.09
Allotted, called up and fully paid: GBP'000 GBP'000 GBP'000
------- ------- -------
173,701,139 (2009: 171,651,139) Zero Dividend
Preference Shares of 1p each 1,737 1,717 1,725
173,701,139 (2009: 171,651,139) Income Shares of
1p each 1,737 1,717 1,725
173,701,139 (2009: 171,651,139) Capital Shares
of 1p each 1,737 1,717 1,725
------- ------- -------
During the period, the Company issued 1,250,000 shares of each class at an issue
price of 76.24p per Zero Dividend Preference Share, 9.72p per Income Share and
5.12p per Capital Share. The issue price was at a premium of 1% to the Net Asset
Value of the Package Units.
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 GBP38,850,000 (2009: same) consisting
of 1,295,000,000 (2009: same) shares of each class.
10. Capital and reserves attributable to all shareholders
As at 31.03.10 31.03.09 30.06.09
GBP'000 GBP'000 GBP'000
------- ------- -------
Called up share capital 5,211 5,150 5,174
Share premium account 142,207 140,566 141,137
Capital redemption reserve 1,463 1,463 1,463
Zero Dividend Preference Shares appropriation
reserve 104,852 93,962 97,319
Special reserve 25,007 25,007 25,007
Capital reserves - Investment holding
gains / (losses) 1,833 (60,323) (43,999)
- Other capital
reserves (121,357) (98,179) (106,063)
Revenue reserve 6,044 8,196 8,770
------- ------- -------
Net assets attributable to all shareholders 165,260 115,842 128,808
------- ------- -------
Zero Dividend Preference Shares 159,216 107,646 120,038
Income Shares 6,044 8,196 8,770
------- ------- -------
Total non-equity shares 165,260 115,842 128,808
Capital Shares (equity) - - -
------- ------- -------
Net assets attributable to all shareholders 165,260 115,842 128,808
------- ------- -------
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 investment holding gains in respect of
such securities currently included within Capital Reserves may be regarded as
distributable under Company Law.
11. Abridged results
The abridged balance sheet for the year ended 30 June 2009 is based on financial
statements which carry an audit report that is unqualified and includes no
matters of adverse comment.
J. P. McClelland
Secretary
[HUG#1417217]
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