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It has been my privilege to address the annual Catholic Charities Conference on a number of occasions. Some of the charities have large property portfolios as well as other financial assets. The subject matter is usually fairly evenly divided between God and Mammon and you can reckon on at least one inspirational speaker to prick your conscience and have you mentally promising to put more back into the community. My text for the day was The Death of Income. It was remarkable to see how much had changed in the past decade.

Charities and pension funds have had a tough time of it recently. Despite rising interest rates on both sides of the Atlantic, gilt yields have fallen and there is a downward yield curvefor both sterling and dollar sovereign debt. It is possible to find ordinary shares on high, seemingly safe yields but usually at the expense of capital performance. You only have to lookat the way the lower-yielding half of the FTSE 350 hascomprehensively outperformed high-yielding shares to realise, despite some switching into old economy stocks followingthe March correction, this is still a growth-driven market.

So, if you do need a higher income than that available in equity markets, how do you go about it? Total return has to be the name of the game although this will carry higher risk. In theory, taking capital out of a portfolio on a regular basis should achieve much the same result as pound cost averaging. There will be months when you sell on a market dip but other times when you need to liquidate fewer shares because prices are high. The real question is -what level of income can you reasonably take?

Most of the return for pension funds over the past quarter-century has been through capital growth. Income, whether generated by fixed-interest securities or dividends on ordinary shares, has been only a small part of the total returnfigure. These funds have come to expect double-digit returns on a consistent basis. There may be years that disappoint, but the overall trend is upwards – and at levels that trounce inflation. But it must be wrong to rely upon this continuing indefinitely. Market growth that exceeds a combination of inflation and economic expansion can only be achieved at the expense of share valuation ratings which cannot rise indefinitely, particularly if inflation remains low.

As it happens, 4 per cent is probably the highest net income you can reasonably achieve from a mixed portfolio, which allows some scope for capital appreciation. This is a very different situation to that which existed 10 years ago and highlights the problems faced by many income conscious investors, whether or not they are subject to tax. For creative income-seekers, zero dividend preference shares, which have had a tough time of it recently, are worth a glance. A gross yield redemption of 8.5 per cent is achievable from trusts that should not have any problem in meeting redemption requirements. Given that this return can be both net and gross if you are a taxpayer and able to take advantage of your annual capital gains tax allowance, it seems a sensible asset class to include in any portfolio where an income requirement is met through spending capital.

The internet was the subject of yet another conference. During the first quarter of the current year, the number of stock exchange trades executed over the internet more than doubled. Anyone ignoring this is in for a rude awakening. Jack Welsh, one of the most highly respected chief executives in the world, who heads General Electric, says: “Any company, old or new, that does not see this technology as literally as important as breathing, could be on its last breath.” That&#39s telling them.

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