M&G unit trust sales soar after scrapping of charge

THE unit trust group, M&G, has reaped big rewards from abolishing the initial charge on its top- selling personal equity plan.

Group unit trust sales rose 147 per cent to pounds 574m in the six months to March after the charge was scrapped on the M&G Managed Income Fund PEP. This fund accounted for about two-thirds of the group's half- year PEP sales of pounds 304m.

With only a modest rise in redemptions, M&G's net sales of unit trusts rose from pounds 4m to pounds 308m. This gave the company a market share of nearly 13 per cent, against a negligible 0.4 per cent in the same period last year.

David Morgan, who will shortly succeed Paddy Linaker as managing director, said the January initiative on the Managed Income Fund had proved a success, but M&G had still to decide whether to abolish initial charges on other funds. The group had made determined efforts to improve its marketing.

Gill Clark, chief financial officer, said business levels remained much higher than the previous year, despite the sharp fall in the stock market in recent months, and she expected this to be sustained.

The rise in funds under management to pounds 14.1bn, 13 per cent up on the six months, enabled M&G to increase its interim pre-tax profits by 37 per cent to pounds 31.2m.

Annual revenue, based on the value of funds under management, climbed from pounds 18.5m to pounds 25.7m. Despite the abolition of the initial charge on the Managed Income Fund PEP, initial charge revenue increased slightly to pounds 8.9m.

The contribution from M&G's life insurance and pensions business increased by more than pounds 2m to pounds 7.3m. Lump-sum investments increased sharply, life insurance takings rising 186 per cent to pounds 120m and pension sales by 88 per cent to pounds 49m. M&G plans to change its method of accounting for life insurance later this year.

In March, M&G spent pounds 4.5m buying in 450,000 of its own shares for cancellation to improve earnings per share. Earnings rose by 35 per cent to 29.1p.

The interim dividend was increased by 30 per cent to 13p.