Bottom Line: Memories prompt M&G caution

IT IS one of the advantages of age that Paddy Linaker, who will retire as M&G Group's managing director next July, can still remember the withdrawal plans that were briefly popular in the early 1970s.

Low interest rates encouraged investment firms to provide their clients with a high quasi-income by allowing them to draw down their capital, safe in the knowledge that it would soon be replaced by endlessly rising stock markets. Everything was fine until share prices fell off a cliff, leaving many with serious losses.

Plus ca change . . . Much the same forces lie behind the popularity this year of high-income funds offered by Hypo, Foreign & Colonial and others. Cautious M&G has stayed out of this area.

Mr Linaker may be proved right in the end, but M&G sales are suffering. In the year to September, the group's net sales of unit trusts amounted to only pounds 92m. This is a shame, because M&G seems to be having a sparkling run of investment performance.

The 29 per cent rise in annual pre-tax profits to pounds 50.9m looks a little modest when M&G's funds under management have risen by 45 per cent to nearly pounds 12.5bn. But a 15p final that raises the total dividend by 25 per cent to 25p should help to keep shareholders happy.

Barclays de Zoete Wedd is looking for pounds 69m next year. Well worth a buy.