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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| M&g Credit Income Investment Trust Plc | LSE:MGCI | London | Ordinary Share | GB00BFYYL325 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -3.00 | -3.16% | 92.00 | 92.20 | 96.20 | 92.00 | 92.00 | 92.00 | 253,429 | 16:35:21 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | -716k | -2.57M | -0.0182 | -50.55 | 130.39M |
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M&G Credit Income Investment Trust plc (MGCI)
Interim report
26-Sep-2019 / 08:00 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
LEI: 549300E9W63X1E5A3N24
M&G Credit Income Investment Trust plc
Interim Report and unaudited Condensed Financial Statements for the period
ended 30 June 2019 (covering the period from incorporation of the Company)
Copies of the Interim Report can be obtained from the following website:
www.mandg.co.uk/creditincomeinvestmenttrust [1]
Company Summary
M&G Credit Income Investment Trust plc was incorporated on 17 July 2018 as a
public company limited by shares. Admission to the stock exchange and
dealings in its Ordinary Shares commenced on 14 November 2018. M&G Credit
Income Investment Trust plc ("The Company") is an investment trust within
the meaning of section 1158 of the CTA 2010. The Company's investment
objective is to aim to generate a regular and attractive level of income
with low asset value volatility.
Key dates
Period end 30 June 2019
First interim dividend: Ex-dividend 25 July 2019
Share register close 26 July 2019
First pay date 23 August 2019
Annual General Meeting 30 March 2020
Future dividend timetable
Declaration date Ex-dividend date Payment date
Second interim January 2020 January 2020 February 2020
First interim April 2020 April 2020 May 2020
Second interim July 2020 July 2020 August 2020
Third interim October 2020 October 2020 November 2020
Fourth interim January 2021 January 2021 February 2021
Financial highlights
For the period[a] ended or as at 30 June 2019
Net asset value (NAV) per Ordinary Share 101.33p
Ordinary Share price (mid-market) 104.00p
Premium to NAV 2.63%
Net assets (GBP'000) 131,732
Capital return per Ordinary Share 1.55p
Revenue return per Ordinary Share 1.20p
First interim dividend per share 2.09p
Ongoing charges figure[b] 0.92%
[a] from the date of IPO,14 November 2018.
[b] Ongoing charges figure (as a percentage of shareholders' funds) is an
annualised rate calculated using average net assets over the period in
accordance with the Association of Investment Companies' (AIC) recommended
methodology.
Chairman's statement
I am pleased to present the first Interim Report for M&G Credit Income
Investment Trust plc (the "Company"). The Company, which was incorporated on
17 July 2018, raised GBP100 million pursuant to its Initial Public Offering
("IPO") and its Ordinary Shares commenced trading on the main market of the
London Stock Exchange on 14 November 2018.
Investment strategy overview
The Company aims to generate a regular and attractive level of income with
low asset value volatility by investing in a diversified portfolio of public
and private debt and debt-like instruments of which at least 70% will be
investment grade. The portfolio is diversified with respect to issuers and
sectors. The Company is targeting an annualised dividend yield of LIBOR plus
2.5% for the period from IPO to 31 December 2019 and LIBOR plus 4%
thereafter.
The Company intends, over time, to be invested mainly in private debt
instruments, which are those instruments not traded on a stock exchange and
are typically issued to a small group of institutional investors. This part
of the portfolio will include debt instruments which are nominally quoted
but are illiquid and rarely traded. Most of these will be floating rate
instruments, purchased at inception and with the intention to be held to
maturity; shareholders can expect their returns from these to come primarily
from the interest paid by the issuers. Our investment manager's size,
experience and reputation mean that it sees a high percentage of the
available market but it only invests in those instruments which it believes
are attractively priced: this takes time and depends upon market conditions.
The remainder of the Company's portfolio is invested in cash, cash
equivalents and quoted debt instruments, which are more readily available
and which can be sold when suitable private opportunities arise. These
instruments will also be traded to take advantage of market conditions.
Shareholders can expect their returns from this part of the portfolio to
come from a combination of interest income and capital movements.
Investment performance
The opening NAV per Ordinary Share, being the gross proceeds of the IPO less
the IPO expenses, was 98.38p.
Debt markets were volatile at the end of 2018, at the time of the Company's
IPO but recovered at the start of 2019. This period presented good
investment opportunities in public markets as the Company's investment
programme commenced. Our investment manager was able to take advantage of
investment grade corporate bonds performing strongly in the first quarter of
2019, with credit spreads tightening. High yield markets also made
significant gains. The improving market continued into the second quarter,
which put downward pressure on yields generally, amid falling expectations
for global economic growth. With investors maintaining confidence in the
major central banks to take action to prevent a slowdown, credit spreads
remained tight as investors chased yield.
In contrast, private market opportunities were fewer than our initial
projections and only 14.22% of the portfolio was invested in private
securities by the end of the period under review. The combination of reduced
spreads in the liquid public markets, and a higher proportion of the
portfolio than originally anticipated remaining invested in lower yielding
securities, resulted in a lower level of interest income than had originally
been expected.
Fortunately, as a consequence of the reduction in yields over the period,
higher than expected valuation growth has been achieved by the portfolio,
thereby compensating for the lower level of income. The NAV on 30 June 2019
was 101.33p per Ordinary Share: this represented a total return of 2.99%
since the Company's launch.
Share issuance and premium management
Your Directors believe that it is in the interests of shareholders for the
Company to increase its assets under management over time as this should
reduce its ongoing charges figure and provide greater market liquidity for
holders. The Company can do this by issuing additional Ordinary Shares or a
new class of C Shares. In each case, new shares will only be issued when our
investment manager has assured your Board of its confidence that suitable
investments can be made in a timely fashion using the proceeds of such share
issuance. The issue of new shares can also serve to manage the premium to
NAV per Ordinary Share at which the Company's shares trade by meeting excess
demand from investors that cannot be met by supply in the market. Ordinary
Shares will only be issued at a price which enhances the NAV of the existing
Ordinary Shares after all expenses.
On 31 January 2019, the Company announced that it had placed 25,000,000
additional Ordinary Shares in response to strong demand from the market, at
an issue price of 101p per Ordinary Share: this represented a premium to NAV
as at that date of 2.33%. The placing did not materially impact the
investment programme, which was still in its infancy.
By May 2019, the Ordinary Share price premium to NAV was again at levels
which your Directors considered high in light of the status of the
investment programme. Further issues of Ordinary Shares were undertaken in
May and June 2019 to satisfy market demand and to seek to manage the
premium. An additional 5,000,000 Ordinary Shares were issued at a premium to
the NAV of not less than 2%, thereby enhancing the NAV per Ordinary Share.
Our investment manager considered the aggregate proceeds raised through
these share issues manageable in executing the overall deployment programme
of the Company. Since mid-June 2019, the share issuance programme has been
paused until such time as our investment manager perceives there to be
better value to be found in adding to the portfolio.
The Company's Ordinary Share price traded at an average premium to NAV of
4.15% during the period from IPO to 30 June 2019. On 30 June 2019, the
Ordinary Share price was 104p, representing a 2.63% premium to NAV per
Ordinary Share as at that date.
Dividends
On 18 July 2019, the Company announced its first dividend of 2.09p per
Ordinary Share for the period from its IPO on 14 November 2018 to 30 June
2019, in line with the LIBOR plus 2.5% annualised dividend target. Your
Directors have chosen to apply the 'streaming' regime to that part of the
dividend payment which was covered by the Company's interest income, net of
expenses. Accordingly, the Company has designated 1.07p per Ordinary Share
as an interest distribution and 1.02p per Ordinary Share as a dividend. As a
result, the Company made use of capital reserves to support the dividend.
This reflected the investment performance of the Company's portfolio, where
capital growth was stronger than anticipated, but yields lower. The
Company's NAV per Ordinary Share as at 30 June 2019, adjusted for the
payment of the first dividend, was 99.24p, an increase of 0.87% from its
opening NAV of 98.38p per Ordinary Share at IPO.
The Company uses the average daily three-month LIBOR as its reference for
the purposes of its targeted dividend yield.
Your Board will continue to monitor the capacity of the Company to meet the
target dividend considering credit market conditions and the Company's
performance. While we anticipate that the Company will meet its dividend
target of LIBOR plus 2.5% for the period to 31 December 2019, your Board
believes that it may take longer than anticipated at IPO to achieve the
target of LIBOR plus 4% for the following years. Our investment manager
remains confident of achieving that target in due course as further private
assets are acquired and markets provide other attractive opportunities. If
it takes longer to ramp-up the portfolio to achieve the LIBOR plus 4%
dividend target, our investment manager's annual management fee will be
retained at the current level of 50 bps until the initial ramp-up period is
complete.
Outlook
The global economic outlook is uncertain as a result of a range of factors
such as Brexit, central bank policy and potential trade wars. This should
present buying opportunities for the Company.
David Simpson
Chairman
25 September 2019
Investment manager's report
The Company was launched on 14 November 2018 amid volatile market conditions
with market moves dominated by geopolitical events and macroeconomic
uncertainty. UK economic growth slowed at the end of 2018, mainly reflecting
softer global conditions and the wider Brexit uncertainties.
Increased risk aversion and volatility amid continuing trade tensions
between China and the US increased investors' appetite for safe haven
assets. As a result, government bond yields compressed whilst credit spreads
widened.
These circumstances created some attractive opportunities for the Company in
certain sectors of the public debt market. Banks, property companies and
insurers had all widened significantly and the Company made several
investments in these sectors at the start of the deployment programme.
At the end of 2018, the largest sectoral investment by the Company was in
asset-backed securities ("ABS") and comprised mostly AAA and some AA-rated
mortgage-backed floating rate bonds. These had widened to attractive levels
and were ideal interim investments being very low risk and easily tradeable.
In the private arena, the Company invested 7.12% in the M&G European Loan
Fund and executed one sterling-denominated private transaction with exposure
to telecoms infrastructure ground leases, and another listed but effectively
private US dollar deal for a tranched credit-linked note. By the end of 31
December 2018 approximately 60.83% of the proceeds raised at IPO was
invested.
Global markets recorded a strong start to 2019, recovering from their
disappointing performance in the previous quarter. The bulk of the gains
were recorded in the first two months of the year, with January particularly
strong as worries about faltering global economic growth dominated once
again. US job creation came to a near halt, with non-farm payrolls for the
month of February recording its weakest gain in more than a year, while in
Europe manufacturing activity across the eurozone was the worst in five
years. This slowdown in economic growth and generally muted inflation led to
dovish commentary by many central banks alluding that interest rates would
remain on hold for the time being. This, combined with better than expected
earnings for many companies in the final quarter of 2018, drove market
sentiment.
With 39.17% of the Company still held in cash, the priority was to get these
proceeds invested in appropriate assets as quickly as possible. This proved
to be harder than the previous quarter as investors returned from the
Christmas break with more confidence and more cash to put to work. This
greater appetite for risk combined with disappointing economic growth saw
bond yields decline and caused spreads to tighten quite sharply, especially
in the most attractive assets. In the credit markets, high yield bonds
recorded some of the best returns.
At the beginning of February 2019, the Company received a cash inflow of GBP25
million as a result of the placing to create an additional 25,000,000
ordinary shares. This had the effect of lowering the interest rate and
spread duration and also the weighted average life (WAL) of the portfolio.
The Company invested approximately GBP17 million (GBP12 million into public and
GBP5 million into private assets) during February which partially offset the
impact on the portfolio's spread duration and WAL.
The Company had some success in finding illiquid assets that lagged the
rally in credit markets, investing in senior floating rate tranches of
public securitisation and a property debenture. In terms of private debt
opportunities, the Company added to the leveraged loan exposure by deploying
a further GBP4 million into the M&G European Loan Fund in the first quarter of
2019 and completed on a GBP1 million mezzanine real estate loan transaction
yielding 7.10%.
The second quarter of 2019 was also positive for public bond markets,
rounding off a very strong start to the first half of the year. This was
despite significant volatility during May, caused by renewed trade war
concerns after US President Trump escalated disputes with China and Mexico.
Nervous investors sought safety in core government bonds with yields decline
meaningfully. This flight to safety, together with the prospect of lower
interest rates saw asset prices appreciate considerably as global bond
markets powered higher. Consequently, yields on 10-year government bonds in
Japan and Germany fell well below zero into negative territory and in the
US, 10-year yields returned to 2%, having traded at over 3% less than a year
ago. UK corporate bonds also delivered steady returns over the period,
notwithstanding spells of volatility in UK credit markets amid the ongoing
political uncertainty relating to Brexit.
Given the market backdrop it was not an easy quarter in which to
meaningfully increase the yield of the portfolio. As public bonds became
less attractive, the Company increasingly relied on private assets to
increase the yield, which takes more time. By the end of the period under
review, the cash position had been reduced to just under 8.37% and the
portfolio yield had been increased by around 30 bps to 3.48% in conditions
where market yields fell by about the same amount.
Since the Company started its investment programme, it has increased its
floating rate exposure and slightly reduced the spread duration, WAL and
modified duration with the sale of relatively longer dated fixed rate public
bonds that had performed well since purchase, thereby crystallising the
gains.
The Company was also able to close on a number of private transactions in
the second quarter of 2019 at attractive yields. Funding took place in the
period for a small and medium sized enterprise ("SME") funding platform loan
yielding 5.75% for the BBB- rated senior tranche and 11.5% for the B rated
mezzanine tranche. The Company also completed a private purchase related to
a Central London development finance project which is projected to provide
an IRR of around 9% across BBB- and B- tranches as well as GBP1.5 million of a
private receivables financing facility which offered LIBOR plus 4% for a BB+
rated credit.
Over the course of May and June 2019, the Company issued a further 5,000,000
Ordinary Shares through its tap issuance programme to take the total number
of shares in issue to 130,000,001, with a market capitalisation of GBP135.2
million as at 30 June 2019.
Based on the period from its IPO on 14 November 2018, the Company announced
its first interim dividend of 2.09p on 18 July 2019. The total return of the
portfolio since inception was 2.99% with capital appreciation of asset
values proving a more significant driver of performance during a period in
which yield compression and tightening credit spreads have created difficult
conditions in which to generate the levels of income forecast prior to the
Company's launch.
Outlook
With public corporate bond yields falling further, rather than chasing
yield, our inclination currently is to be defensive, and we have continued
to sell more of our longer dated fixed rate corporates to fund new shorter
dated floating investments, which will gradually increase the portfolio
yield and reduce the spread duration. There is a pipeline of new private
investments which, if fully realised, will utilise the remaining cash
holdings. The global outlook remains uncertain and the UK, in particular,
could be subject to considerable economic and political turbulence around
its prospective exit from the EU later this year. There remains substantial
liquidity in the portfolio, in the form of AAA-rated floating rate ABS to
take advantage of any opportunities should markets sell off.
M&G Alternatives Investment Management Limited
25 September 2019
Company statistics
Portfolio overview
as at 30 June 2019 %
Cash on deposit 8.37
Public 77.83
Asset backed securities 26.85
Bonds 50.98
Private 14.22
Bonds 0.79
Investment funds 8.38
Loans 5.05
Derivatives (0.42)
Debt derivatives (0.20)
Forwards (0.22)
Portfolio of investments 100.00
Geographical exposure
as at 30 June 2019 Percentage of portfolio investments
(excluding cash on deposit and derivatives)
United Kingdom 70.05%
Global 10.36%
France 4.14%
United States 3.36%
Netherlands 3.14%
Germany 3.09%
Sweden 1.31%
Italy 1.11%
Switzerland 0.96%
European Union 0.86%
Luxemburg 0.82%
Czech Republic 0.80%
100.00
Credit rating breakdown
as at 30 June 2019 %
Cash on deposit 8.37
Investment grade 66.64
AAA 18.74
AA+ 0.59
AA 4.97
AA- 1.23
A+ 0.27
A 3.10
A- 4.22
BBB+ 10.58
BBB 13.33
BBB- 9.61
Sub-investment grade 24.99
BB+ 5.19
BB 3.54
BB- 2.10
B+ 0.90
B 3.71
B- 0.84
CCC+ 0.75
Unrated 7.96
Portfolio of investments 100.00
Charges
as at 30 June 2019
Investment management charge [a] 0.50%
Ongoing charges figure 0.92%
[a] From January 2020 the annual investment management charge will increase
to 0.70%.
Top 10 holdings
as at 30 June 2019 %
M&G European Loan Fund 8.38
Brass NO 6 1% 16 Dec 2060 1.61
Warwick Finance Residential Mortgages No One 1% 21 Sep 2049 1.53
Silverstone Master Issuer 1% 21 Jan 2070 1.51
Newday Partnership Funding 2017-1 1% 15 Dec 2027 1.51
Marston's Issuer 1% 15 Oct 2031 1.34
Castell 2018-1 1% 25 Jan 2046 1.34
Charter Mortgage Funding 2018-1 1% 12 Jun 2055 1.27
Yorkshire Building Society 1% 13 Sep 2028 1.22
Paragon Mortgages No 25 1% 15 May 2050 1.20
Principal risks and uncertainties
Principal risks associated with the Company
The Directors have carried out a robust assessment of the principal risks
facing the Company, including those that would threaten its business model,
future performance, solvency and liquidity, and believe those principal
risks facing the Company are as summarised below along with, where
appropriate, the steps taken by the Board to monitor and mitigate such
risks.
Market risk and Credit risk
Market risk embodies the potential for both losses and gains and includes
foreign currency risk, interest rate risk and price risk. Market risk mainly
arises from uncertainty about future values of financial instruments
influenced by price, currency and interest rate movements. It represents the
potential gain or loss that the Company may suffer through holding market
positions in investments in the face of market movements.
Foreign currency risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in foreign
exchange rates. The Company is exposed to risks that the exchange rate of
its reporting currency relative to other currencies may change in a manner
that has an effect on the value of the portion of the Company's assets which
are denominated in currencies other than its own currency. Hedging
instruments are used by the Investment Manager to manage foreign currency
risk.
Interest rate risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. The Company's investments are in some cases subject to interest rate
risk. In relation to fixed rate obligations, when interest rates decline,
the values can be expected to rise, and, conversely, when interest rates
rise, the value of fixed-rate obligations can be expected to decline.
Hedging instruments are used by the Investment Manager to manage interest
risk.
Market price risk includes changes in market prices, other than those
arising from foreign currency or interest rate risk, which may affect the
value of investments, such as macroeconomic and geopolitical events and
trends and sectoral influences.
Because of its investment strategy, the Company is also materially exposed
to credit risk, which is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to discharge an
obligation. The main concentration to which the Company is exposed arises
from the Company's investments in debt securities. The Company's policy to
manage this risk is to invest at least 70% of the Company's assets in debt
securities that have a minimum credit rating of BBB- (or equivalent). Within
the above limit, the Company may also invest in unrated assets where a
rating is assigned by the Investment Manager using an internal methodology
that is based on the categorisations used by rating agencies. When new
investment opportunities arise, a detailed credit review is undertaken by
the Investment Manager. A fundamental qualitative and quantitative
assessment of both business and financial risk, supported by appropriate
financial modelling, alongside a review of corporate structure and issuance
document form the basis of the credit review. On an ongoing basis, the
Investment Manager monitors the Company's investments against a variety of
measures including financial performance and their progress against a
variety of covenants. The Company is also exposed to counterparty credit
risk on trading derivative products, cash and cash equivalents, amounts due
from brokers and other receivable balances.
As the Company invests in public and private debt and debt-like instruments,
it is regularly exposed to market risk and the value of the Company's
portfolio can fluctuate, particularly over the short term, in response to
developments in financial markets. The Board has put in place limits on the
Company's gearing, portfolio concentration, and the use of derivatives which
it believes to be appropriate to ensure that the Company's investment
portfolio is adequately diversified and to manage risk.
Investment Management Performance risk
Other than in respect of market risk, the performance of the Company's
portfolio of assets depends primarily on the investment strategy, asset
allocation and stock selection decisions taken by the Investment Manager
within the parameters and constraints imposed by the Company's investment
policy.
The Investment Manager applies a "three lines of defence" model for risk
management, incorporating the individual fund manager and line management,
independent risk and compliance functions and reporting structures, and
internal audit. Measures and tools such as volatility estimation, value at
risk analysis and stress testing are used in order better to understand risk
concentrations within the portfolio.
Liquidity risk
The Company invests in public and private debt instruments. Certain of these
investments may be difficult to value or realise (if at all). The market
price that is achievable for such investments may therefore be lower than
the carrying values of these assets as reflected in the Company's reported
Net Asset Value per Ordinary Share from time to time.
As the Company is closed-ended, it is not exposed to the same risks of
liquidity mismatch that are inherent in the management of portfolios owned
by open-ended funds. This enables the Company to invest in assets that have
limited or no secondary market liquidity or order to seek to capture the
additional yield that is generally available compared to more liquid
instruments.
Before the Company's fifth annual general meeting in 2024, the Board will
submit to Shareholders proposals to enable them to realise the value of
their Ordinary Shares; accordingly, the Board will put in place appropriate
arrangements to monitor the liquidity of the Company's investments.
Operational risk
In common with most other investment trusts, the Company has no executive
directors, no executive management and no employees. The Company delegates
key operational tasks to third-party service providers which are specialists
in their fields: the management of the Company's investment portfolio to the
Investment Manager, M&G Alternatives Investment Management Limited; the
preparation and maintenance of the Company's Financial Statements and
maintenance of its records to the Administrator and Company Secretary, State
Street Bank and Trust Company and Link Company Matters Limited,
respectively; the worldwide custody of the Company's assets to State Street
Bank and Trust Company; and the safekeeping and oversight services to State
Street Trustees Limited as Depositary.
Dividend policy risk
The Company has indicated that, subject to the usual performance, market and
working capital criteria, it intends to pay its shareholders regular
quarterly dividends from 2020 onwards and is targeting an annualised
dividend return of LIBOR plus 2.5% in respect of the period from initial
public offering to 31 December 2019, and LIBOR plus 4% thereafter. The level
of dividends that the Board will declare, and the extent that those
dividends comprise "streamed" income on the one hand and capital profits on
the other hand, will be dependent largely on the performance of the
Company's investment portfolio over time and the market conditions that
exist during relevant performance periods. Apart from asset selection and
market conditions, factors that may also affect performance include, inter
alia, the Company's level of gearing, its accounting policies, changes in
variable interest rates, the level of loan or bond prepayments and a change
in the tax treatment of the interest received by the Company.
Board risk oversight
The Board meets formally at least four times a year with the Investment
Manager to review, inter alia, the Company's strategy and performance, the
composition of the investment portfolio and the management of risk. In
relation to dividend policy, the Board closely monitors the Company's net
return forecast, including each component revenue and expense line item as
prepared by the Administrator and the Investment Manager, for each quarterly
Board meeting. These reports are discussed in detail to assess the
Investment Manager's level of confidence in the future performance profile
of the portfolio and to identify the risk of any dividend shortfall relative
to expectations. Additionally, the Board reviews the performance of its
third-party service providers and their risk control procedures on a regular
basis as well as the terms on which they provide services to the Company.
Going concern
In accordance with the latest guidance issued by the Financial Reporting
Council, the Directors have undertaken and documented a rigorous assessment
of whether the Company is a going concern. The Directors considered all
available information when undertaking the assessment.
The Directors believe that the Company has appropriate financial resources
to enable it to meet its day-to-day working capital requirements and the
Directors believe that the Company is well placed to continue to manage its
business risks.
The Directors consider that the Company has adequate resources to continue
in operational existence for the next 12 months. For this reason they
continue to adopt the going concern basis of accounting in preparing these
condensed financial statements.
Condensed income statement
period from 17 July
2018 to 30 June 2019
Note Revenue Capital Total
GBP'000 GBP'000 GBP'000
Net gains on investments 5 - 2,842 2,842
Net losses on derivatives 5 - (1,105) (1,105)
Net currency gains 2 66 68
Income 3 2,144 - 2,144
Investments management fee (350) - (350)
Other expenses 4 (396) - (396)
Net return on ordinary 1,400 1,803 3,203
activities before taxation
Taxation on ordinary - - -
activities
Net return attributable to 1,400 1,803 3,203
Ordinary Shareholders
Net return per Ordinary Share 2 1.20p 1.55p 2.75p
(basic and diluted)[a]
[a] Return figures have been calculated using weighted average shares for
the period 14 November 2018 to 30 June 2019.
All revenue and capital items in the above statement derive from continuing
operations.
The Company has no recognised gains and losses other than those shown above
and therefore no Statement of Comprehensive Income has been presented.
The accompanying notes form an integral part of these condensed financial
statements.
Condensed statement of financial position
as at 30 June 2019
Note GBP'000 GBP'000
Non-current assets
Investments at fair value 5 120,868
through profit or loss
Current assets
Other receivables 6 1,363
Cash and cash equivalents 6 12,792
14,155
Current liabilities
Derivative financial 5 (558)
liabilities held at fair value
through profit or loss
Other payables 6 (2,733)
Total current liabilities (3,291)
Net current assets 10,864
Total assets less current 131,732
liabilities
Net assets 131,732
Capital and reserves
Called up share capital 1,300
Share premium 28,229
Special distributable reserve 8 99,000
Capital reserve 1,803
Revenue reserve 1,400
Total shareholders' funds 131,732
Net Asset Value per Ordinary Share 2 101.33p
The accompanying notes form an integral part of these condensed financial
statements.
Approved and authorised for issue by the Board of Directors on 25 September
2019 and signed on its behalf by:
David Simpson
Chairman
Company registration number: 11469317
25 September 2019
Condensed statement of changes in equity
For the Note Called Share Special Capital Revenue Total
period from up distrib
17 July 2018 utable
to 30 June
2019 premium reserve reserve GBP'000
ordinary
reserve
GBP'000 GBP'000 GBP'000
share
capital GBP'000
GBP'000
Balance at - - - - - -
17 July 2018
Net return - - - 1,803 1,400 3,203
attributable
to share
holders
Ordinary 1,300 128,839 - - - 130,1
shares 39
issues
during the
period
Initial - (1,592) - - - (1,59
public 2)
offering
cost
Cancellation 8 - (99,000 99,000 - - -
of share )
premium
Cancellation - (18) - - - (18)
of share
premium
costs
Balance at 1,300 28,229 99,000 1,803 1,400 131,7
30 June 2019 32
The accompanying notes form an integral part of these condensed financial
statements.
Condensed cash flow statement
as at 30 June 2019
GBP'000
Cash flows from operating activities
Net profit before taxation 3,203
Adjustments for:
Gains on investments (2,842)
Losses on derivatives 1,105
Purchases of investments [a] (129,022)
Sales of investments [a] 12,562
Increase in other receivables (1,363)
Increase in other payables 620
Net cash outflows from operating activities (115,737)
Financing activities
Issue of Ordinary Shares 130,139
Initial public offering costs (1,592)
Cancellation of share premium costs (18)
Net cash inflow from financing activities 128,529
Increase in cash and cash equivalent 12,792
Cash and cash equivalent at the start of the -
period
Increase in cash as above 12,792
Cash and cash equivalents at the end of the 12,792
period
[a] Receipts from the sale of, and payments to acquire investment securities
have been classified as components of cash flows from operating activities
because they form part of the company's dealing operations.
The accompanying notes form an integral part of these condensed financial
statements.
Notes to the condensed financial statements
1 Significant accounting policies
The significant accounting policies are summarised below. They have all been
applied consistently throughout the period from 17 July 2018 (the date of
incorporation) to 30 June 2019.
a) Basis of accounting
The condensed financial statements have been prepared on a going concern
basis under the historical cost convention, modified to include certain
items at fair value, and in accordance with Financial Reporting Standard 104
(FRS 104) issued by the Financial Reporting Council and the Statement of
Recommended Practice: 'Financial Statements of Investment Trust Companies
and Venture Capital Trusts' (AIC SORP) issued by the Association of
Investment Companies in November 2014 and updated in January 2017 and
February 2018.
The annual Financial Statements will be prepared in accordance with
Financial Reporting Standard 102 (FRS 102) and the AIC SORP.
The functional and presentational currency of the Company is pounds sterling
because that is the currency of the primary economic environment in which
the Company operates.
b) Financial instruments
Financial assets and financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the instrument.
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the
Company after deducting all of its liabilities.
Financial assets and liabilities
All financial assets and liabilities are initially measured at the
transaction price (including transaction costs), except for those financial
assets classified as at fair value through profit or loss (FVTPL), which are
initially measured at fair value (which is normally the transaction price
excluding transaction costs), unless the arrangement constitutes a financing
transaction. If an arrangement constitutes a financing transaction, the
financial asset or financial liability is measured at the present value of
the future payments discounted at a market rate of interest for a similar
debt instrument.
Financial assets and liabilities are offset in the statement of financial
position only when there exists a legally enforceable right to set off the
recognised amounts and the Company intends either to settle on a net basis,
or to realise the asset and settle the liability simultaneously.
Debt instruments which meet the conditions of being 'basic' financial
instruments as defined in FRS 102.11.9 are subsequently measured at
amortised cost using the effective interest method.
Debt instruments that have no stated interest rate (and do not constitute
financing transaction) and are classified as payable or receivable within
one year are initially measured at an undiscounted amount of the cash or
other consideration expected to be paid or received, net of impairment.
With the exception of some hedging instruments, other debt instruments not
meeting conditions of being 'basic' financial instruments are measured at
FVTPL.
Commitments to make and receive loans which meet the conditions mentioned
above are measured at cost (which may be nil) less any impairment. They are
recorded and disclosed at the date of the legal commitment and recognised
upon funding.
Financial assets are derecognised only when (a) the contractual rights to
the cash flows from the financial asset expire or are settled, (b) the
Company transfers to another party substantially all of the risks and
rewards of ownership of the financial asset, or (c) the Company, despite
having retained some, but not all, significant risks and rewards of
ownership, has transferred control of the asset to another party.
Financial liabilities are derecognised only when the obligation specified in
the contract is discharged, cancelled or expires.
Equity instruments
Equity instruments issued by the Company are recorded at the fair value of
cash or other resources received or receivable, net of direct issue costs.
Derivative financial instruments
The Company uses derivative financial instruments to reduce exposure to
foreign exchange risk and interest rate movements. The Company does not hold
or issue derivative financial instruments for speculative purposes.
Derivatives are initially recognised at fair value at the date a derivative
contract is entered into and are subsequently remeasured to their fair value
at each reporting date. The resulting gain or loss is recognised in profit
or loss immediately. Derivative returns are recognised as revenue or capital
depending on their nature.
Fair value measurement
The best evidence of fair value is a quoted price for an identical asset in
an active market. When quoted prices are unavailable, the price of a recent
transaction for an identical asset provides evidence of fair value as long
as there has not been a significant change in economic circumstances or a
significant lapse of time since the transaction took place. If the market is
not active and recent transactions of an identical asset on their own are
not a good estimate of fair value, the fair value is estimated by using a
valuation technique.
c) Impairment of assets
Assets, other than those measured at fair value, are assessed for indicators
of impairment at each balance sheet date. If there is objective evidence of
impairment, an impairment loss is recognised in profit or loss as described
below.
Non-financial assets
An asset is impaired where there is objective evidence that, as a result of
one or more events that occurred after initial recognition, the estimated
recoverable value of the asset has been reduced. The recoverable amount of
an asset is the higher of its fair value less costs to sell and its value in
use.
Where indicators exist for a decrease in impairment loss previously
recognised for assets other than goodwill, the prior impairment loss is
tested to determine reversal. An impairment loss is reversed on an
individual impaired asset to the extent that the revised recoverable value
does not lead to a revised carrying amount higher than the carrying value
had no impairment been recognised.
d) Tax
Current tax is accounted for at the appropriate rate of corporation tax. The
tax accounting treatment follows the principal amounts involved.
Deferred tax is recognised in respect of all timing differences between the
treatment of certain items for tax and accounting purposes that have
originated but not reversed at the balance sheet date.
Due to the Company's status as an investment trust company and the intention
to continue meeting the conditions required to obtain approval in the
foreseeable future, the Company has not provided deferred tax on any capital
gains and losses arising on the revaluation or disposal of investments.
e) Recognition of income and expenses
Interest from debt securities is recognised as revenue by reference to the
coupon payable adjusted to spread any premium or discount on purchase over
its remaining life. Other interest income is recognised as revenue on an
accruals basis. Income from investment funds are recognised in revenue when
the right to receive it is established. Expenses not incidental to the
purchase or sale of investments are recognised on an accruals basis and
charged to revenue. Fees incurred in investment funds managed by M&G are
rebated and recognised as revenue or capital in accordance with the
underlying funds' distribution policy.
f) Foreign currency
Transactions in foreign currencies are recorded at the rate of exchange at
the date of the transaction. Assets and liabilities denominated in foreign
currencies at the balance sheet date are reported at the rates of exchange
prevailing at that date.
Other exchange differences are recognised in profit or loss in the period in
which they arise.
2 Returns and net asset value
period from
17 July 2018 to
30 June 2019
Revenue return
Revenue return attributable to Ordinary 1,400
Shareholders (GBP'000)
Weighted average number of shares in issue 116,639,258
during the period[a]
Revenue return per Ordinary Share (basic and 1.20p
diluted)
Shares in issue at the end of the period 130,000,001
Revenue available for dividend 1.08p
Capital return
Capital return attributable to Ordinary 1,803
Shareholders (GBP'000)
Weighted average number of shares in issue 116,639,258
during the period[a]
Capital return per Ordinary Share (basic and 1.55p
diluted)
Total return
Total return per Ordinary Share (basic and 2.75p
diluted)
Net Asset Value per Ordinary Share
Net assets attributable to shareholders (GBP'000) 131,732
Number of shares in issue at period end 130,000,001
Par value of shares in issue (GBP'000) 1,300
Net Asset Value per Ordinary Share 101,33p
[a] Return figures have been calculated using a weighted average shares for
the period 14 November 2018 (date of IPO) to 30 June 2019.
3 Income
period from
17 July 2018 to
30 June 2019
Revenue from investments
Interest income from debt instruments 1,748
Distributions from investment funds 240
Management fee rebate 36
2,024
Other revenue
Interest from cash and cash equivalents 120
2,144
4 Expenses
Non-audit fees payable to the auditor in respect of the interim review for
the period 17 July 2018 to 30 June 2019 are GBP17,500.
In addition, non-audit service fees of GBP68,000 were paid to the auditor in
the period in relation to the reporting accountant role for the Company's
IPO. Audit fees of GBP10,000 were paid to the auditor in the period for the
audit of the initial accounts, which were filed to support the declaration
of the Company's first dividend.
5 Investments and derivatives at fair value through profit or loss ("FVTPL")
as at
30 June 2019
GBP'000
Opening valuation -
Acquisitions at cost 131,135
Disposal proceeds (12,562)
Losses on disposal of investments and derivatives (177)
Disposals at cost (12,739)
Closing cost 118,396
Add: unrealised gains 1,914
Closing valuation 120,310
Investments at FVTPL 120,868
Derivative investments at FVTPL (558)
Closing valuation 120,310
Period from
17 July 2018 to
30 June 2019
GBP'000
Gains on investments and derivatives
Net realised gains on disposal of investments 370
Movement in unrealised gains on investments 2,472
Net gains on disposal of investments 2,842
Net realised losses on derivatives (547)
Movement in unrealised loss on derivatives (558)
Net losses on derivatives (1,105)
1,737
6 Other receivables, cash and cash equivalents and other payables
Period from
17 July 2018 to
30 June 2019
GBP'000
Other receivables
Accrued income 1,299
Prepaid expenses 28
Management fee rebate 36
1,363
Cash and cash equivalents
Cash at bank 1,168
Amounts held at futures clearing houses 631
Cash equivalents 10,993
12,792
Other payables
Purchases for future settlement 2,113
Expenses payable 192
Management fee payable 350
Other payables 78
2,733
7 Dividends
On 18 July 2019, the Board declared a first interim dividend of 2.09p per
Ordinary Share (1.07p as an interest distribution and 1.02p as an ordinary
dividend) totalling GBP2,717,000 which was paid on 23 August 2019 to Ordinary
Shareholders on the register on 26 July 2019. The ex-dividend date was 25
July 2019.
8 Special distributable reserve
The share premium balance of GBP99,000,001 has been cancelled and transferred
to the special reserve, in accordance with section 610 of the Companies Act
2006. The Company may, at the discretion of the Board, pay all or part of
any future dividends out of this distributable reserve, taking into account
the Company's investment objective.
9 Related parties
M&G Alternatives Investment Management Limited, as investment manager is a
related party to the Company. The management fee payable to the investment
manager for the period is disclosed in the condensed income statement, in
note 3 and amounts outstanding at the period end are shown in note 6.
The Company holds an investment in M&G European Loan Fund which is managed
by M&G Investment Management Limited. At the period end this was valued at
GBP11,009,000 and represented 8.38% of the Company's investment portfolio.
The Directors of the Company are related parties. Fees paid to Directors are
included in other expenses in the condensed income statement.
10 Fair value hierarchy
Under FRS 102 an entity is required to classify fair value measurements
using a fair value hierarchy that reflects the significance of the inputs
used in making the measurements. The fair value hierarchy shall have the
following levels:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities;
· Level 2: other significant observable inputs (including quoted prices
for similar investments, interest rates, prepayments, credit risk, etc.);
or
· Level 3: significant unobservable input (including the Company's own
assumptions in determining the fair value of investments).
The financial assets measured at FVTPL are grouped into the fair value
hierarchy as follows:
as at 30 June 2019
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at FVTPL
Debt securities - 103,673 6,186 109,859
Investment in funds - 11,009 - 11,009
Financial liabilities at
FVTPL
Derivatives (267) (291) - (558)
Net fair value (267) 114,391 6,186 120,310
11 Capital commitments
There were outstanding unfunded investment commitments of GBP3.3m at the end
of the period.
GBP'000
Westbourne 2016 1 WR Mezzanine 1% 30 Sep 2023 1,807
Gate 2 1% 04 Jun 2022 566
Sonovate Limited 1% 12 Apr 2021 383
Gate 1 1% 04 Jun 2022 (Senior) 319
Gate 1 1% 04 Jun 2022 (Junior) 269
3,344
12 Interim Report
The financial information contained in this Interim Report does not
constitute statutory accounts as defined in section 434 - 436 of the
Companies Act 2006. As this is the Company's first accounting period, annual
statutory financial statements have not yet been filed with the Registrar of
Companies. Initial accounts for the period to 31 March 2019 have been filed
with the Registrar of Companies.
The auditor has reviewed the financial information for the period 17 July
2018 to 30 June 2019 pursuant to the Auditing Practices Board guidance on
Review of Interim Financial Information. The review report of the auditor is
below.
The interim financial statements were authorised for issue in accordance
with a resolution of the Directors on 25 September 2019.
Independent auditor's review report
Independent auditor's review report to M&G Credit Income Investment Trust
plc ("The Company")
We have been engaged by the Company to review the condensed set of financial
statements in the interim financial report for the period 17 July 2018 to 30
June 2019, which comprises the Condensed Income Statement, the Condensed
Statement of Financial Position, the Condensed Statement of Changes in
Equity, the Condensed Cash Flow Statement and related notes 1 to 12. We have
read the other information contained in the interim financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Financial Reporting Council. Our work has been undertaken so
that we might state to the Company those matters we are required to state to
it in an independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our review work, for this report, or for the
conclusions we have formed.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the interim
financial report in accordance with the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (including Financial Reporting Standard 102 "The Financial
Reporting Standard applicable in the UK and Republic of Ireland"). The
condensed set of financial statements included in this interim financial
report have been prepared in accordance with Financial Reporting Standard
104 "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on the
condensed set of financial statements in the interim financial report based
on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Financial
Reporting Council for use in the United Kingdom. A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical
and other review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on Auditing (UK)
and consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim
financial report for the period 17 July 2018 to 30 June 2019 is not
prepared, in all material respects, in accordance with Financial Reporting
Standard 104 and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Edinburgh
United Kingdom
25 September 2019
Interim management report and statement of directors' responsibilities
Interim management report
The important events that have occurred during the period under review, the
key factors influencing the financial statements and the principal factors
that could impact the remaining six months of the financial period are set
out in the Chairman's statement and the investment manager's report above.
The principal risks and uncertainties facing the Company are detailed above.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with FRS 104 (Interim Financial Reporting) and give a true and
fair view of the assets, liabilities, financial position and return of the
Company; and
· the Interim Report and condensed set of financial statements include a
fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred since incorporation to
30 June 2019 and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for
the remaining six months of the period; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place since incorporation to 30
June 2019 and that have materially affected the financial position or
performance of the Company during that period; and any changes in the
related party transactions that could do so.
The Interim Report was approved by the Board of Directors and the above
responsibility statement was signed on its behalf by:
David Simpson
Chairman
25 September 2019
Company information
Directors (all non-executive)
David Simpson (Chairman)
Richard Boléat (Chairman of the Audit Committee)
Mark Hutchinson
Barbara Powley
AIFM and investment manager
M&G Alternatives Investment Management Limited (MAGAIM)
10 Fenchurch Avenue, London EC3M 5AG
Website: www.mandg.co.uk
Telephone: +44 (0) 800 390 390
Administrator
State Street Bank and Trust Company
20 Churchill Place, London E14 5HJ
Company secretary and registered office
Link Company Matters Limited
Beaufort House, 51 New North Road, Exeter EX4 4EP
Telephone: 01392 477 500
Broker
Winterflood Securities Limited
The Atrium, Cannon Bridge House, 25 Dowgate Hill,
London EC4R 2GA
Solicitors
Gowling WLG (UK) LLP
4 More London Riverside, London SE1 2AU
Auditor
Deloitte LLP
Saltire Court, 20 Castle Street, Edinburgh EH1 2DB
Registrar and transfer office
Link Asset Services
Shareholder Services Department
The Registry
34 Beckenham Road, Beckenham, Kent BR3 4TU
Telephone: 0871 664 0300
(calls will cost 12p per minute plus network charges)
Email: enquiries@linkgroup.co.uk
Website: www.linkassetservices.com
Depositary
State Street Trustees Limited
20 Churchill Place, London E14 5HJ
Custodian
State Street Bank and Trust Company
20 Churchill Place, London E14 5HJ
Association of Investment Companies (AIC)
The Company is a member of the AIC, which publishes
monthly statistical information in respect of member
companies. The AIC can be contacted on 020 7282 5555,
enquiries@theaic.co.uk or visit the website: www.theaic.co.uk
Company website
www.mandg.co.uk/creditincomeinvestmenttrust
Glossary
Asset: Anything having commercial or exchange value that is owned by a
business, institution or individual.
Asset Backed Security (ABS): A security whose income payments and value are
derived from and collateralised by a specified pool of underlying assets.
Asset class: Category of assets, such as cash, company shares, fixed income
securities and their sub-categories, as well as tangible assets such as real
estate.
Association of Investment Companies (AIC): The UK trade body that represents
investment managers. It works with investment managers, liaising with
government on matters of taxation and regulation, and also aims to help
investors understand the industry and the investment options available to
them.
Basis points (bps): A common unit of measure for interest rates and other
percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%,
or 0.0001, and is used to denote the percentage change in a financial
instrument.
Bond: A loan in the form of a security, usually issued by a government or
company, which normally pays a fixed rate of interest over a given time
period, at the end of which the initial amount borrowed is repaid.
Capital: Refers to the financial assets, or resources, that a company has to
fund its business operations.
Capitalisation: The total market value of all of a company's outstanding
shares.
CTA: Corporation Tax Act.
Closed-ended: A term used to describe an investment company whose capital is
fixed and whose shares are not generally redeemable at the option of a
holder.
Comparative sector: A group of Investment Companies with similar investment
objectives and/or types of investment, as classified by bodies such as the
AIC or Morningstar(TM). Sector definitions are mostly based on the main
assets an investment company should invest in, and may also have a
geographic focus. Sectors can be the basis for comparing the different
characteristics of similar investment companies, such as their performance
or charging structure.
Consumer Prices Index (CPI): An index used to measure inflation, which is
the rate of change in prices for a basket of goods and services. The
contents of the basket are meant to be representative of products and
services we typically spend our money on.
Convertible bonds: Fixed income securities that can be exchanged for
predetermined amounts of company shares at certain times during their life.
Corporate bonds: Fixed income securities issued by a company. They are also
known as bonds and can offer higher interest payments than bonds issued by
governments as they are often considered more risky.
Credit: The borrowing capacity of an individual, company or government. More
narrowly, the term is often used as a synonym for fixed income securities
issued by companies.
Credit Default Swaps (CDS): Are a type of derivative, namely financial
instruments whose value, and price, are dependent on one or more underlying
assets. CDS are insurance-like contracts that allow investors to transfer
the risk of a fixed income security defaulting to another investor.
Credit rating: An independent assessment of a borrower's ability to repay
its debts. A high rating indicates that the credit rating agency considers
the issuer to be at low risk of default; likewise, a low rating indicates
high risk of default. Standard & Poor's, Fitch and Moody's are the three
most prominent credit rating agencies. Default means that a company or
government is unable to meet interest payments or repay the initial
investment amount at the end of a security's life.
Credit spread: The difference between the yield of a corporate bond, a fixed
income security issued by a company, and a government bond of the same life
span. Yield refers to the income received from an investment and is
expressed as a percentage of the investment's current market value.
Default: When a borrower does not maintain interest payments or repay the
amount borrowed when due.
Derivatives: Financial instruments whose value, and price, are dependent on
one or more underlying assets. Derivatives can be used to gain exposure to,
or to help protect against, expected changes in the value of the underlying
investments. Derivatives may be traded on a regulated exchange or traded
over the counter.
Developed economy / market: Well-established economies with a high degree of
industrialisation, standard of living and security.
Dividend: Dividends represent a share in the profits of the company and are
paid out to a company's shareholders at set times of the year.
Emerging economy or market: Economies in the process of rapid growth and
increasing industrialisation. Investments in emerging markets are generally
considered to be riskier than those in developed markets.
Episode: A phase during which investors allow their emotions to affect their
decision making, which can cause financial markets to move irrationally.
Equities: Shares of ownership in a company.
Ex-dividend, ex-distribution or XD date: The date on which declared
distributions or dividends officially belong to underlying investors.
Exposure: The proportion of an investment company invested in a particular
share/fixed income security, sector/region, usually expressed as a
percentage of the overall portfolio.
Fixed income security: A loan in the form of a security, usually issued by a
government or company, which normally pays a fixed rate of interest over a
given time period, at the end of which the initial amount borrowed is
repaid.
Floating rate notes (FRNs): Securities whose interest (income) payments are
periodically adjusted depending on the change in a reference interest rate.
Gearing: Is a measure of financial leverage that demonstrates the degree to
which the Investment Trust's operations are funded by equity capital versus
creditor financing.
Gilts: Fixed income securities issued by the UK Government.
Government bonds: Fixed income securities issued by governments, that
normally pay a fixed rate of interest over a given time period, at the end
of which the initial investment is repaid.
Hard currency (bonds): Refers to bonds denominated in a highly traded,
relatively stable international currency, rather than in the bond issuer's
local currency. Bonds issued in a more stable hard currency, such as the US
dollar, can be more attractive to investors where there are concerns that
the local currency could lose value over time, eroding the value of bonds
and their income.
Hedging: A method of reducing unnecessary or unintended risk.
High yield bonds: Fixed income securities issued by companies with a low
credit rating from a recognised credit rating agency. They are considered to
be at higher risk of default than better quality, i.e. higher rated fixed
income securities but have the potential for higher rewards. Default means
that a company or government is unable to meet interest payments or repay
the initial investment amount at the end of security's life.
Index: An index represents a particular market or a portion of it, serving
as a performance indicator for that market.
Index-linked bonds: Fixed income securities where both the value of the loan
and the interest payments are adjusted in line with inflation over the life
of the security. Also referred to as inflation-linked bonds.
Inflation: The rate of increase in the cost of living. Inflation is usually
quoted as an annual percentage, comparing the average price this month with
the same month a year earlier.
Investment grade bonds: Fixed income securities issued by a company with a
medium or high credit rating from a recognised credit rating agency. They
are considered to be at lower risk from default than those issued by
companies with lower credit ratings. Default means that a company or
government is unable to meet interest payments or repay the initial
investment amount at the end of a security's life.
Investment trust: An investment trust is a form of collective investment
fund found mostly in the United Kingdom. Investment trusts are closed-end
funds and are constituted as public limited companies.
IRR: Internal Rate of Return.
IPO: Initial Public Offering. The process of offering shares of a private
corporation to the public.
Issuer: An entity that sells securities, such as fixed income securities and
company shares.
Leverage: When referring to a company, leverage is the level of a company's
debt in relation to its assets. A company with significantly more debt than
capital is considered to be leveraged. It can also refer to an investment
company that borrows money or uses derivatives to magnify an investment
position.
LIBOR: The three-month GBP London Interbank Borrowing Rate is the rate at
which banks borrow money from each other (in UK pounds) for a three-month
period.
Liquidity: A company is considered highly liquid if it has plenty of cash at
its disposal. A company's shares are considered highly liquid if they can be
easily bought or sold since large amounts are regularly traded.
Local currency (bonds): Refers to bonds denominated in the currency of the
issuer's country, rather than in a highly traded international currency,
such as the US dollar. The value of local currency bonds tends to fluctuate
more than bonds issued in a hard currency, as these currencies tend to be
less stable.
Long position: Refers to ownership of a security held in the expectation
that the security will rise in value.
Macroeconomic: Refers to the performance and behaviour of an economy at the
regional or national level. Macroeconomic factors such as economic output,
unemployment, inflation and investment are key indicators of economic
performance. Sometimes abbreviated to 'macro'.
Maturity: The length of time until the initial investment amount of a fixed
income security is due to be repaid to the holder of the security.
Mezzanine tranche: A generally small layer of corporate debt positioned
between the senior tranche (mostly AAA) and a junior tranche (unrated,
typically called equity tranche).
Modified duration: A measure of the sensitivity of a fixed income security,
also called a bond, or bond fund to changes in interest rates. The higher a
bond or bond fund's modified duration, the more sensitive it is to interest
rate movements.
Monetary policy: A central bank's regulation of money in circulation and
interest rates.
Morningstar(TM): A provider of independent investment research, including
performance statistics and independent Investment Company ratings.
Near cash: Deposits or investments with similar characteristics to cash.
Net Asset Value (NAV): An investment company's net asset value is calculated
by taking the current value of its assets and subtracting its liabilities.
Non-executive director (NED): A non-executive director is a member of a
company's board of directors who is not part of the executive team. A
non-executive director typically does not engage in the day-to-day
management of the organisation, but is involved in policymaking and planning
exercises.
Ongoing charges figure: The Ongoing charges figurenincludes charges for the
following items: management of the fund, administration services, services
provided by external parties which include depository, custody and audit, as
well as incorporating the ongoing charge figure from funds held in the
portfolio (taking into account any rebates).
Options: Financial contracts that offer the right, but not the obligation,
to buy or sell an asset at a given price on or before a given date in the
future.
Overweight: If an investment company is 'overweight' in a stock, it holds a
larger proportion of that stock than the comparable index or sector.
Payment date: The date on which dividends will be paid by the investment
company to investors.
Private: Refers to assets that are not listed on a recognised exchange.
Public: Refers to assets that are listed on a recognised exchange.
REIT (Real Estate Investment Trust): A REIT is a company that owns, operates
or finances income-producing real estate.
Retail Prices Index (RPI): A UK inflation index that measures the rate of
change of prices for a basket of goods and services in the UK, including
mortgage payments and council tax.
Securitise/Securitisation: The creation and issuance of tradeable
securities, such as bonds, that are backed by the income generated by an
illiquid asset or group of assets. By pooling a collection of illiquid
assets, such as mortgages, securities backed by the mortgages' income
payments can be packaged and sold to a wider range of investors.
Senior tranche: The highest tranche of a debt security, i.e. the one deemed
least risky. Any losses on the value of the security are only experienced in
the senior tranche once all other tranches have lost all their value. For
this relative safety, the senior tranche pays the lowest rate of interest.
Short position: A way for an investment manager to express his or her view
that the market might fall in value.
Short-dated corporate bonds: Fixed income securities issued by companies and
repaid over relatively short periods.
Short-dated government bonds: Fixed income securities issued by governments
and repaid over relatively short periods.
Spread duration: A measure of the portfolio's sensitivity to changes in
credit spreads.
Sub-investment grade bonds: Fixed income securities issued by a company with
a low rating from a recognised credit rating agency. They are considered to
be at higher risk from default than those issued by companies with higher
credit ratings. Default means that a company or government is unable to meet
interest payments or repay the initial investment amount at the end of a
security's life.
Swap: A swap is a derivative contract where two parties agree to exchange
separate streams of cashflows. A common type of swap is an interest rate
swap to hedge against interest rate risk.
Synthetic inflation-linked bonds: Refers to securities created using a
combination of assets to simulate the characteristics of inflation-linked
bonds. By buying inflation-linked government bonds and selling protection
against companies defaulting on their debts, using credit default swaps, the
combined synthetic investment will behave similarly to a physical
inflation-linked bond, had one been issued. Synthetic inflation-linked bonds
are usually created where a company does not have any inflation- linked
bonds in issue.
Tap issuance programme: A method of share issuance whereby the Company
issues shares over a period of time, rather than in one sale. A tap issue
allows the Company to make its shares available to investors when market
conditions are most favourable.
Total return: The term for the gain or loss derived from an investment over
a particular period. Total return includes income (in the form of interest
or dividend payments) and capital gains.
Valuation: The worth of an asset or company based on its current price.
Volatility: The degree to which a given security, investment company, fund,
or index rapidly changes. It is calculated as the degree of deviation from
the norm for that type of investment over a given time period. The higher
the volatility, the riskier the security tends to be.
Weighted Average Life (WAL): The asset-weighted average number of years to
final maturity of the portfolio, based on the final maturity for all
assets/exposures.
Yield: This refers to either the interest received from a fixed income
security or to the dividends received from a share. It is usually expressed
as a percentage based on the investment's costs, its current market value or
its face value. Dividends represent a share in the profits of a company and
are paid out to the company's shareholders at set times of the year.
Yield to maturity: The total return anticipated on the portfolio if the
underlying bonds are held until maturity.
ISIN: GB00BFYYL325, GB00BFYYT831
Category Code: IR
TIDM: MGCI
LEI Code: 549300E9W63X1E5A3N24
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited
reviews
Sequence No.: 21338
EQS News ID: 879677
End of Announcement EQS News Service
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=e623a0582ec745e49c6becfe86ecbedb&application_id=879677&site_id=vwd&application_name=news
(END) Dow Jones Newswires
September 26, 2019 02:00 ET (06:00 GMT)
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