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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 91.60 | 93.20 | 96.60 | 41,219 | 08:52:52 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | -716k | -2.57M | -0.0182 | -50.33 | 129.82M |
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M&G Credit Income Investment Trust plc (MGCI)
M&G Credit Income Investment Trust plc: Half Year Report
29-Sep-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No
596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
LEI: 549300E9W63X1E5A3N24
M&G Credit Income Investment Trust plc
Half Year Report and unaudited Condensed Financial
Statements for the six months ended 30 June 2020
Copies of the Half Year Report can be obtained from the following website:
www.mandg.co.uk/creditincomeinvestmenttrust [1]
Company highlights
Company summary
M&G Credit Income Investment Trust plc (the "Company") was incorporated on 17 July 2018 as a public company
limited by shares. Admission to the London Stock Exchange's (LSE) main market for listed securities and
dealings in its Ordinary Shares commenced on 14 November 2018. The Company is an investment trust within the
meaning of section 1158 of the Corporation Tax Act (CTA) 2010.
Key dates
Period end 30 June 2020
First interim dividend: Payment date 28 May 2020
Second interim dividend: Payment date 28 August 2020
Future dividend timetable
Payment date
Third interim November 2020
Fourth interim February 2021
First interim May 2021
Second interim August 2021
Financial highlights
Key data as at as at
30 June 2020 31 December 2019
(unaudited) (audited)
Net assets (GBP'000) 140,733 132,232
Net asset value (NAV)
per Ordinary Share 97.23p 101.72p
Mid-market price
per Ordinary Share 101.00p 106.00p
Premium to NAV[a] 3.88% 4.21%
Ongoing charges figure[a] 0.92%[b] 0.93%[c]
Return per Ordinary six months ended period[c] ended
Share
30 June 2020 31 December 2019
(unaudited) (audited)
Capital return (3.2)p 2.7p
Revenue return 1.4p 2.6p
NAV total return[a] (2.0)% 5.6%
Mid-market price (2.3)% 8.2%
total return[a]
First interim 0.85p 2.09p
dividend
Second interim 0.77p 1.65p
dividend[d]
Total dividends 1.62p 3.74p
declared
[a] Alternative Performance Measures.
[b] From 1 January 2020.
[c] From the date of Initial Public Offering (IPO) 14 November 2018.
[d] Paid after the period end. Please see note 7 for further information.
Investment objective and policy
Investment objective
The Company aims to generate a regular and attractive level of income with low asset value volatility.
Investment policy
The Company seeks to achieve its investment objective by investing in a diversified portfolio of public and
private debt and debt-like instruments ("Debt Instruments"). Over the longer term, it is expected that the
Company will be mainly invested in private Debt Instruments, which are those instruments not quoted on a
stock exchange.
The Company operates an unconstrained investment approach and investments may include, but are not limited
to:
* Asset-backed securities, backed by a pool of loans secured on,
amongst other things, residential and commercial mortgages,
credit card receivables, auto loans, student loans, commercial
loans and corporate loans;
* Commercial mortgages;
* Direct lending to small and mid-sized companies, including
lease finance and receivables financing;
* Distressed debt opportunities to companies going through a
balance sheet restructuring;
* Infrastructure-related debt assets;
* Leveraged loans to private equity owned companies;
* Public Debt Instruments issued by a corporate or sovereign
entity which may be liquid or illiquid;
* Private placement debt securities issued by both public and
private organisations; and
* Structured credit, including bank regulatory capital trades.
The Company will invest primarily in Sterling denominated Debt Instruments. Where the Company invests in
assets not denominated in Sterling, it is generally expected that these assets will be hedged back to
Sterling.
Investment restrictions
There are no restrictions, either maximum or minimum, on the Company's exposure to sectors, asset classes or
geography. The Company, however, achieves diversification and a spread of risk by adhering to the limits and
restrictions set out below.
Once fully invested, the Company's portfolio will comprise a minimum of 50 investments.
The Company may invest up to 30% of Gross Assets in below investment grade Debt Instruments, which are those
instruments rated below BBB- by S&P or Fitch or Baa3 by Moody's or, in the case of unrated Debt Instruments,
which have an internal M&G rating below BBB-.
The following restrictions will also apply at the individual Debt Instrument level which, for the avoidance
of doubt, does not apply to investments to which the Company is exposed through collective investment
vehicles:
Secured Debt Unsecured Debt
Instruments Instruments
Rating
(% of Gross Assets) (% of Gross Assets)
[a]
AAA 5% 5[b]
AA/A 4% 3%
BBB 3% 2%
Below investment 2% 1%
grade
[a] Secured Debt Instruments are secured by a first or secondary fixed and/or floating charge.
[b] This limit excludes investments in G7 Sovereign Instruments.
For the purposes of the above investment restrictions, the credit rating of a Debt Instrument is taken to be
the rating assigned by S&P, Fitch or Moody's or, in the case of unrated Debt Instruments, an internal rating
by M&G. In the case of split ratings by recognised rating agencies, the second highest rating will be used.
It is expected that the Company will typically invest directly, but it may also invest indirectly through
collective investment vehicles which are expected to be managed or advised by an M&G Entity. The Company may
not invest more than 20% of Gross Assets in any one collective investment vehicle and not more than 40% of
Gross Assets in collective investment vehicles in aggregate. No more than 10% of Gross Assets may be
invested in other investment companies which are listed on the Official List.
Unless otherwise stated, the above investment restrictions are to be applied at the time of investment.
Borrowings
The Company is expected to be managed primarily on an ungeared basis although the Company may, from time to
time, be geared tactically through the use of borrowings. Borrowings would principally be used for
investment purposes, but may also be used to manage the Company's working capital requirements or to fund
market purchases of Shares. Gearing represented by borrowing will not exceed 30% of the Company's Net Asset
Value, calculated at the time of draw down, but is typically not expected to exceed 20% of the Company's Net
Asset Value.
Hedging and derivatives
The Company will not employ derivatives for investment purposes. Derivatives may however be used for
efficient portfolio management, including for currency hedging.
Cash management
The Company may hold cash on deposit and may invest in cash equivalent investments, which may include
short-term investments in money market type funds ("Cash and Cash Equivalents").
There is no restriction on the amount of Cash and Cash Equivalents that the Company may hold and there may
be times when it is appropriate for the Company to have a significant Cash and Cash Equivalents position.
For the avoidance of doubt, the restrictions set out above in relation to investing in collective investment
vehicles do not apply to money market type funds.
Changes to investment policy
Any material change to the Company's investment policy set out above will require the approval of
Shareholders by way of an ordinary resolution at a general meeting and the approval of the UK Listing
Authority.
Investment strategy
The Company seeks to achieve its investment objective by investing in a diversified portfolio of public and
private debt and debt-like instruments of which at least 70% is investment grade. Over the longer term, it
is expected that the Company will be mainly invested in private debt instruments. This part of the portfolio
may include debt instruments which are nominally quoted but are generally illiquid. Most of these will be
floating rate instruments, purchased at inception and with the intention to be held to maturity or until
prepaid by issuers; shareholders can expect their returns from these instruments to come primarily from the
interest paid by the issuers.
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 generally be sold at market prices when suitable
opportunities arise. These instruments may 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.
Chairman's statement
Performance
Your Company's net asset value (NAV) per Ordinary Share at its launch on 14 November 2018, being the gross proceeds of the Initial Public Offering (IPO) less the IPO expenses, was 98.38p. The opening NAV on 1 January 2020 was 101.72p per Ordinary Share and the NAV on 30 June 2020 was 97.23p per Ordinary Share. Including dividends paid, the NAV total return was 3.5% since launch although the NAV total return for the half year to 30 June was -2.0%, reflecting the fall in asset values due to the COVID-19 pandemic. Having started the year with a positive outlook, supported by central bank monetary policy and benign economic conditions, the first quarter of 2020 will be remembered for the human and economic costs of the COVID-19 pandemic. As the full force of the virus became apparent governments around the world put their populations and economies into lockdown. Equity and bond markets fell sharply, with the 10-year US Treasury and UK Gilt yields falling to new all-time lows. Public corporate bond credit spreads widened significantly and private debt markets effectively closed. Credit and equity markets recovered strongly during the second quarter, although not fully to pre-COVID-19 levels. The Company was defensively positioned going into the sell-off which allowed our Investment Manager to benefit from the market weakness by purchasing attractively priced public corporate bonds and then realising gains as the market recovered. Private debt markets re-opened in the latter part of the period, beginning to provide attractive opportunities at the spread levels anticipated when the Company was first conceived. 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 and diversification for holders. On 4 June 2020, given the favourable opportunities arising from the market dislocation due to the COVID-19 pandemic and the reopening of the private debt markets, the Company announced that it had placed a further 14,745,770 Ordinary Shares at an issue price of 97.0p per Ordinary Share, raising GBP14.2m net of expenses. This represented a premium to the last published NAV (adjusted for the payment of the first quarter dividend) of 1.98%. Between the placing and the date of this report GBP9.3m has been invested in a number of attractive private opportunities. The Company will continue to issue new shares at a premium to NAV when appropriate opportunities arise. The Company's Ordinary Share price traded at an average premium to NAV of 3.62% during the period from IPO to 30 June 2020. On 30 June 2020 the Ordinary Share price was 101p, representing a 3.88% premium to NAV as at that date. Dividends Your Company is currently paying quarterly dividends for 2020 at an annual rate of LIBOR plus 2.75% and has accordingly paid dividends of 0.85p and 0.77p per Ordinary Share in respect of the quarters to 31 March 2020 and 30 June 2020 respectively. The Company has a preference to pay dividends from income and prior capital gains. Following the fall in capital value of the Company as a result of the COVID-19 market dislocation, the Company's Investment Manager completed a detailed review of each investment and has expressed its confidence to the Board that the outlook for the portfolio remains strong. On the basis of this and on the need to make decisions that are right for the Company's shareholders over the longer term, your Board has determined that it remains appropriate to pay dividends at a rate of LIBOR plus 2.75% per annum. To date, this has required partial distributions from special reserves. Your Directors have chosen to apply the 'streaming' regime to that part of each dividend which was covered by the Company's interest income, net of expenses. Accordingly, of the first dividend declared in the period, the Company designated 0.72p per Ordinary Share as an interest distribution and 0.13p per Ordinary Share as a dividend to shareholders. Of the second dividend declared in respect of the period, the Company designated 0.63p per Ordinary Share as an interest distribution and 0.14p per Ordinary Share as a dividend to shareholders. The Company uses the average daily three-month LIBOR as its reference for the purposes of its targeted dividend rate. Portfolio Manager In May 2020, the Company announced that Jeremy Richards planned to retire from full time employment and that Adam English, (then Deputy Fund Manager), had been appointed as Fund Manager. The Board is grateful to Jeremy for his work on the portfolio since inception and is delighted that Adam has been appointed as Fund Manager. Adam has been managing credit portfolios at M&G, alongside Jeremy, for over 20 years having joined the business in 1999. The Board has worked closely with Adam and the wider investment team since the launch of the Company and has full confidence in Adam's ability to continue to build the portfolio in line with the investment mandate. Outlook The Investment Manager's prudent approach to capital deployment throughout 2019 and the start of 2020 meant that the Company was well positioned coming into the crisis. We are now in a robust position to deploy capital into the increasing number of attractive private debt opportunities that are currently being presented. We are, of course, carefully monitoring the performance of all of our underlying issuers in these uncertain times. Our Investment Manager continues to believe that a total return, and thus ultimately a dividend yield, of LIBOR plus 4% is achievable over the longer term, based on its long experience of credit markets through the cycle. Our Investment Manager's annual management fee is being kept at the current level of 50 basis points (bps) per annum of your Company's NAV for the time being instead of the originally agreed increase to 70bps. Credit markets currently reflect an unprecedented level of government stimulus which has made it increasingly hard to find long term value in public markets. That said, we have a strong portfolio and our Investment Manager remains confident that it will continue to find attractive opportunities, particularly in private assets. David Simpson Chairman 28 September 2020 Investment manager's report We are pleased to provide commentary on the factors that have impacted our investment approach since the start of the year with particular reference to the performance and shape of the portfolio as we have sought to build it in accordance with the mandate agreed at IPO. The first half of 2020 has seen the Company navigate a unique set of economic circumstances. The shock to credit markets caused by the spread of the COVID-19 virus and the ensuing response from governments and central banks has presented investors with a number of challenges. However, such a significant market event has inevitably created opportunities and the Company has been well positioned to take advantage of those that have arisen. Whilst asset valuations have been notably affected, resulting in the NAV of 97.23p per Ordinary Share as at 30 June 2020 being below the NAV at launch, the Investment Manager has been able to use this period of market dislocation to reposition the portfolio by increasing credit exposure and yield. For the period ended 30 June 2020, the Company has declared dividend payments of 1.62p per Ordinary Share (of which 0.85p per Ordinary Share was paid in May 2020 and 0.77p per Ordinary Share was paid in August 2020). As at the period end, the annualised dividend yield was 3.23%. This is equivalent to an annual rate of 2.75% over LIBOR on the opening NAV adjusted for the final interim dividend in respect of last year. The mid-market price total return from 1 January to 30 June 2020 was -2.3%, whilst the NAV total return for the same period was -2.0%. As market conditions have changed throughout the period, our bottom-up, investment-by-investment approach has enabled us to respond accordingly. With a team of more than 100 credit analysts covering both the public and private markets, we are well placed to review opportunities as and when they arise. Leveraging this resource, our fund managers have continued to seek the right investment opportunities for the portfolio. Portfolio activity and positioning The year began with a continuation of the trend seen throughout 2019, as low government bond yields and tight corporate credit spreads meant attractive assets were scarce to find. The Company maintained its cautious positioning with a large holding in high grade asset-backed securities (ABS) and covered bonds. In the last week of February 2020, there were signs that COVID-19 concerns had begun to impact credit markets, with the pandemic truly taking hold of financial markets in March 2020. The speed with which credit spreads moved wider was extraordinary, causing a depreciation in the value of debt instruments across all sectors, regardless of credit quality or duration. As a result, the NAV of the Company declined. However, this dislocation presented attractive opportunities in the public markets. We were able to use existing cash holdings alongside proceeds from the sale of ABS and covered bonds to redeploy into mispriced longer dated, fixed rate investment grade and high yield corporate bonds. Private transactions were put on hold, with almost all lenders and borrowers awaiting some semblance of market stabilisation and the establishment of a "new normal" before re-engaging. Following the unprecedented fiscal and monetary policy measures implemented by governments and central banks around the world, by the end of the second quarter investor confidence recovered and markets retraced many of the losses that occurred during the initial onset of the pandemic. As liquidity in the ABS market improved, we were able to continue adding credit risk to the portfolio and increase the yield by switching
into longer dated, fixed rate bonds. During the period, the public market was flooded with new issuance as
companies enhanced liquidity and bolstered balance sheets. The Company was able to add attractively priced
new issues, particularly in the BBB-rated space and we continued to add names from the secondary market
where, in our opinion, investor sentiment had led to valuations becoming misaligned relative to underlying
credit fundamentals.
The second quarter also saw the reopening of the private credit markets. The pent up supply of private deals
and improved market conditions brought borrowers back to the market, leading to an increased volume of
attractive opportunities. As at 30 June 2020, the private asset portion of the portfolio had increased to
30.97% (versus 27.41% at 31 December 2019) with an additional investment of 7.1% in Private Assets
transacted after the period end, or committed to be drawn down beyond the date of this report. Further
commitments of GBP4.9m (c. 3.4%) since the period end are expected to take the Company's overall private asset
exposure to approximately 41.5%. There is currently a strong deal pipeline of private opportunities. The
Company's largest holding, the M&G European Loan Fund (ELF), was not immune from the fall in asset prices at
the end of March which was reflected in the sharp decline in the ELF's NAV at the end of the first quarter.
That NAV has now recovered much of that loss, but it should be noted that this is a long-term holding,
intended to provide a steady and attractive stream of income. ELF paid two scheduled dividends during the
period which were consistent with levels seen historically.
In June 2020 the Company raised an additional GBP14.2m (net of expenses) via placing of Ordinary shares. The
money raised was initially invested in a variety of public corporate bonds that were offering good relative
value, but is being redeployed into private assets as the current pipeline is invested. After the end of the
period, the Company entered into an unsecured lending facility with State Street Bank International GmbH. It
is intended that this will be used to provide liquidity for investing when it is unattractive to sell
existing holdings. The facility would be particularly useful when a significant number of private
investments are due to settle within a short period.
Outlook
There remain many risks on the horizon as we enter the second half of the year, most notably the upsurge of
the pandemic in some countries alongside heightened geopolitical risks (particularly surrounding
US-China-Hong Kong relations, and Brexit). After such a strong recovery in risk assets during the second
quarter, the market seems largely to have ignored these risks. We have become cautious about how much
further credit spreads will be able to tighten in public markets and so continue to adopt a measured
approach by adding risk only where we are sufficiently compensated for doing so. Our focus as we enter the
second half of the year is on opportunities in the private markets where we are seeing higher yielding
opportunities benefiting from robust balance sheets and/or strong security enhancements.
M&G Alternatives Investment Management Limited
28 September 2020
Portfolio Analysis
Top 20 Holdings
Percentage of portfolio of
investments
(including cash on deposit and
derivatives)
as at 30 June 2020
M&G European Loan Fund 9.53
Delamare Finance 1.3066% 19 Feb 1.65
2029
Hall & Woodhouse 30 Dec 2023 1.59
Warwick Finance Residential 1.45
Mortgages Number One Var. Rate
21 Sep 2049
RIN II 1.9598% 10 Sep 2030 1.43
NewDay Partnership Funding 1.41
0.8191% 15 Dec 2027
Project Driver 26 Oct 2023 1.37
Paragon Mortgages No 25. 0.9423% 1.32
15 May 2050
Sonovate Limited Var. Rate 12 1.28
Apr 2021
Westbourne 2016 1 WR Senior Var. 1.21
Rate 30 Sep 2023
Gate 2 Var. Rate 4 Jun 2021 1.12
Marston's Issuer 1.7074% 15 Oct 1.12
2031
Asia-Pacific Mtge Securitisation 1.11
A1 Prvt
Gongga 4 Jun 2021 1.09
Leeds Building Society 3.75% 25 1.08
Apr 2029
Ripon Mortgages 1.4561% 20 Aug 1.07
2056
LPG 4.45% 21 May 2024 1.03
Iliad 2.375% 17 Jun 2026 0.99
Kennedy Wilson Europe Real 0.98
Estate 3.95% 30 Jun 2022
NewRiver REIT 3.5% 7 Mar 2028 0.96
Total 32.79
Source: State Street.
Geographical exposure
as at 30 June 2020 Percentage of portfolio of investments
(excluding cash on deposit and derivatives)
United Kingdom 56.72%
United States 7.83%
France 6.93%
Germany 3.39%
Netherlands 3.17%
Other 21.96%
100.00
Source: M&G and State Street as at 30 June 2020
Portfolio overview
as at 30 June 2020 %
Cash on deposit 2.83
Public 66.88
Asset-backed securities 24.57
Bonds 42.31
Private 30.97
Asset-backed securities 3.64
Bonds 0.77
Investment funds 9.53
Loans 10.53
Private placements 1.03
Other 5.47
Derivatives (0.68)
Debt derivatives (0.08)
Forwards (0.60)
Portfolio of investments 100.00
Source: State Street.
Credit rating breakdown
as at 30 June 2020 %
Unrated (0.68)
Derivatives (0.68)
Cash and investment grade 80.05
Cash on deposit 2.83
AAA 8.68
AA+ 3.13
AA 5.46
AA- 1.51
A+ 0.23
A 2.54
A- 1.07
BBB+ 12.82
BBB 14.99
BBB- 19.36
M&G European Loan Fund (ELF) (see note) 7.43
Sub-investment grade 20.63
BB+ 4.38
BB 3.64
BB- 4.06
B+ 1.59
B 3.13
B- 0.94
CCC+ 0.79
M&G European Loan Fund (ELF) (see note) 2.10
Portfolio of investments 100.00
Source: State Street.
Note: ELF is an open-ended fund managed by M&G which invests in leveraged loans issued by, generally,
substantial private companies located in the UK and Continental Europe. ELF is not rated and the Investment
Manager has determined an implied rating for this investment, utilising rating methodologies typically
attributable to collateralised loan obligations. On this basis, 78% of the Company's investment in ELF has
been ascribed as being investment grade, and 22% has been ascribed as being sub-investment grade. These
percentages have been utilised on a consistent basis for the purposes of determination of the Company's
adherence to its obligation to hold no more than 30% of its assets in below investment grade securities.
Top 20 holdings %
as at 30 June 2020 Company Description
M&G European Loan Fund Open-ended fund managed by M&G
which invests in leveraged loans
issued by, generally,
substantial private companies
9.53% located in the UK and
Continental Europe. The fund's
objective is to create
attractive levels of current
income for investors while
maintaining relatively low
volatility of NAV. (Private)
Delamare Finance 1.3066% 19 Feb Floating-rate, senior tranche of
2029 a CMBS secured by the sale and
leaseback of 33 Tesco
superstores and 2 distribution
centres. (Public)
1.65%
Hall & Woodhouse 30 Dec 2023 Bilateral loan to a regional UK
brewer that manages a portfolio
of 219 freehold and leasehold
pubs. (Private)
1.59%
Warwick Finance Residential High grade ABS (AAA), UK RMBS.
Mortgages Mezzanine tranche of
securitisation backed by
portfolio of UK non-conforming
residential mortgages originated
Number One Var. Rate 21 Sep by Co-operative Bank. (Public)
2049
1.45%
RIN II 1.9598% 10 Sep 2030 Mixed CLO (AAA). Consists
primarily of senior secured
infrastructure finance loans
managed by RREEF America L.L.C.
1.43% (Public)
NewDay Partnership Funding High grade ABS (AAA). UK credit
0.8191% 15 Dec 2027 card. Securitisation of a
portfolio of designated consumer
credit card, store card and
instalment credit accounts
1.41% initially originated or acquired
by NewDay Ltd in the UK.
(Public)
Project Driver 26 Oct 2023 Senior term loan to a provider
of hire purchase financing on
used domestic motor vehicles to
consumers in the UK. (Private)
1.37%
Paragon Mortgages No 25. High grade ABS (AAA). UK RMBS.
0.9423% 15 May 2050 Five-year revolving
securitisation of a portfolio of
UK buy-to-let mortgages in
England and Wales, originated
1.32% and serviced by Paragon.
(Public)
Sonovate Limited Var. Rate 12 Bilateral loan to a company
Apr 2021 providing companies in the
recruitment industry with an
integrated service that
incorporates placement
1.28% management, invoicing and
financing. (Private)
Westbourne 2016 1 WR Senior Westbourne provides working
Var. Rate 30 Sep 2023 capital finance to SMEs in the
UK. The company is focused on
small borrowers and has employed
an advanced technology platform
1.21% for the application,
underwriting and monitoring of
loans. (Private)
Gate 2 Var. Rate 4 Jun 2021 Senior loan secured against a
portfolio of three high-quality
office and residential projects
in a prime location in central
1.12% London. (Private)
Marston's Issuer 1.7074% 15 Oct Marston's PLC is a leading
2031 independent brewing and pub
retailing business. Marston's
Issuer PLC operates as a special
purpose entity on behalf of
1.12% Marstons PLC, formed for the
purpose of issuing debt
securities to repay existing
credit facilities, refinance
indebtedness, and for
acquisition purposes. (Public)
Asia-Pacific Mtge Private warehouse facility
Securitisation A1 Prvt financing an Australian non-bank
lender's portfolio of Australian
mortgages for non-resident
borrowers. (Private)
1.11%
Gongga 4 Jun 2021 Regulatory capital trade by a
major international bank
referencing a US$2bn portfolio
of loans to companies domiciled
1.09% in 36 countries. (Private)
Leeds Building Society 3.75% 25 Leeds Building Society provides
Apr 2029 financial services. The company
offers savings accounts,
mortgages, life cover and home
insurance services to customers
1.08% in the United Kingdom. This is a
subordinated, fixed-to-floating
callable bond. (Public)
Ripon Mortgages 1.4561% 20 Aug High grade ABS (AA+/AAA). UK
2056 RMBS. The portfolio comprises
buy-to-let loans originated by
Bradford and Bingley and
Mortgage Express, secured
1.07% against residential properties
located in England and Wales.
(Public)
LPG 4.45% 21 May 2024 Private placement (PP) note from
a business support services
company which operates across 4
divisions: LPG (liquefied
1.03% petroleum gas), Retail & Oil,
Technology and Healthcare.
(Private)
Iliad 2.375% 17 Jun 2026 Iliad SA is a French provider of
telecommunication services
including fixed and mobile
national telephony services,
0.99% dial-up and high speed DSL and
TV internet access, prepaid
phone cards and internet hosting
services. Fixed, callable bond.
Senior unsecured. (Public)
Kennedy Wilson Europe Real Kennedy Wilson Europe Real
Estate 3.95% 30 Jun 2022 Estate Limited provides real
estate services. The company
focuses on investment management
brokerage, research, auction,
0.98% sales, research and development
property services. Fixed,
callable bond. Senior unsecured.
(Public)
NewRiver REIT 3.5% 7 Mar 2028 NewRiver REIT PLC operates as a
real estate investment trust
investing in retail properties
throughout the United Kingdom.
0.96% Fixed, callable bond. Senior
unsecured. (Public)
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.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as follows:
* Market risk and credit risk;
* Investment management performance risk;
* Liquidity risk;
* Operational risk;
* Dividend policy risk; and
* Regulatory, legal and statutory risk: changes in laws,
government policy or regulations.
The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and
Financial Statements for the period ended 31 December 2019. A detailed explanation can be found in the
Strategic Report on pages 13 to 15 and in note 13 on pages 67 to 69 of the Annual Report and Financial
Statements which are available on the website at:
https://www.mandg.co.uk/investor/funds/credit-income-investment-trust/gb00bfyyl325/.
The Board is continually reviewing the societal and economic impacts of governmental responses to the
COVID-19 pandemic and considers this to be a major ongoing risk event which has the potential to affect the
likelihood of occurrence and materiality of impact of the Company's principal risks on its net asset value
and performance. The pandemic has triggered, and may continue to trigger, increased volatility in terms of
global risk asset valuations as well as presenting operational challenges for the Company's service
providers as they respond to various limitations on free movement of staff imposed by governments across the
world. The Board continues to receive regular reporting from the Company's major service providers and does
not anticipate a fall in the level of service. The duration and ultimate impact of the pandemic is not
presently possible to predict and the Board will continue to monitor and report on material developments on
an ongoing basis.
For further information on the impact of COVID-19 on the Company's principal risks and uncertainties, please
refer to the Chairman's statement and the Investment Manager's report.
The Investment Manager and the Company's other third-party service providers have implemented appropriate
business continuity plans and remain fully operational whilst their staff work from home.
Notwithstanding the overarching impact of COVID-19, in the view of the Board, the principal risks facing the
Company since the previous report remain unchanged and these principal risks and uncertainties are equally
applicable to the remaining six months of the financial year as they were to the six months under review.
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.
In assessing the going concern basis of accounting, the Directors have also considered the COVID-19 pandemic
and the impact this may have on the Company's investments and the Company's NAV.
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.
Related party disclosure and transactions with Investment Manager
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 and 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 GBP13,163,135 and represented 9.53% of the Company's investment
portfolio.
The Directors of the Company are related parties. The Chairman receives an annual fee of GBP40,000, the
Chairman of the Audit Committee receives an annual fee of GBP35,000 and non-executive Director receives an
annual fee of GBP30,000. Mark Hutchinson is employed by M&G as Chair of Private Assets and has agreed to waive
his fees.
There are certain situations where the Company undertakes purchase and sale transactions with other M&G
managed funds. All such transactions are subject to the provisions of M&G's fixed income dealing procedures
and prior approval by senior fixed income managers authorised by M&G to approve such trades. Trades are
conducted on liquidity and pricing terms which at the relevant time are no worse than those available to the
Company from dealing with independent third parties.
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 2020 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 2020 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 Half Year Report and unaudited condensed set of financial statements were approved by the Board of
Directors on 28 September 2020 and the above responsibility statement was signed on its behalf by:
David Simpson
Chairman
28 September 2020
Condensed income statement
six months ended period from period from
30 June 2020 17 July 2018 to 30 17 July 2018 to 31
June 2019 December 2019
(unaudited)
(unaudited)
(audited)
Note 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 5 - (1,661) (1,661) - 2,842 2,842 - 3,593 3,593
(losses) /
gains on
investments
Net losses 5 - (2,701) (2,701) - (1,105) (1,10 - (221) (221)
on 5)
derivatives
Net 44 141 185 2 66 68 (19) (78) (97)
currency
gains /
(losses)
Income 3 2,451 - 2,451 2,144 - 2,144 4,530 - 4,530
Investments (355) - (355) (350) - (350) (678) - (678)
management
fee
Other (294) - (294) (396) - (396) (706) - (706)
expenses
Net return 1,846 (4,221) (2,375) 1,400 1,803 3,203 3,127 3,294 6,421
on ordinary
activities
before
taxation
Taxation on - - - - - - (1) - (1)
ordinary
activities
Net return 1,846 (4,221) (2,375) 1,400 1,803 3,203 3,126 3,294 6,420
attributabl
e to
Ordinary
Shareholder
s after
taxation
Net return 2 1.40p (3.20)p (1.80)p 1.20p 1.55p 2.75p 2.55p 2.69p 5.24p
per
Ordinary
Share
(basic and
diluted)[a]
[a] Return figures have been calculated using weighted average shares for the period 1 January 2020 to 30
June 2020, for the period 14 November 2018 to 30 June 2019 and also for the period 14 November 2018 to 31
December 2019.
The total column of this statement represents the Company's profit and loss account. The "Revenue" and
"Capital" columns represent supplementary information provided under guidance issued by the Association of
Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
The Company has no other comprehensive income and therefore the net return on ordinary activities after
taxation is also the total comprehensive income for the period.
The accompanying notes form an integral part of these condensed financial statements.
Condensed statement of financial position
as at 30 June as at 30 June as at 31
2020 2019 December 2019
(audited)
(unaudited) (unaudited)
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current
assets
Investments 5 135,227 120,868 126,793
at fair
value
through
profit or
loss
Current
assets
Derivative 5 - - 523
financial
assets held
at fair
value
through
profit or
loss
Receivables 6 1,080 1,363 1,092
Cash and 6 11,362 12,792 4,877
Cash
Equivalents
12,442 14,155 6,492
Current
liabilities
Derivative 5 (944) (558) -
financial
liabilities
held at
fair value
through
profit or
loss
Payables 6 (5,992 (2,733) (1,053)
)
Total (6,936 (3,291) (1,053)
current )
liabilities
Net current 5,506 10,864 5,439
assets
Net assets 140,733 131,732 132,232
Capital and
reserves
Called up 1,447 1,300 1,300
share
capital
Share 42,208 28,229 28,229
premium
Special 9 98,831 99,000 99,000
distributab
le reserve
Capital (2,669) 1,803 1,968
reserve
Revenue 916 1,400 1,735
reserve
Total 140,733 131,732 132,232
shareholder
s' funds
Net Asset 2 97.23p 101.33p 101.72p
Value per
Ordinary
Share
(basic and
diluted)
The accompanying notes form an integral part of these condensed financial statements.
Approved and authorised for issue by the Board of Directors on 28 September 2020 and signed on its behalf
by:
David Simpson
Chairman
Company registration number: 11469317
28 September 2020
Condensed statement of changes in equity
six months Note Called Share Special Capital Revenue Total
ended 30 up distrib
June 2020 utable
premium reserve reserve GBP'000
Ordinary
(unaudited) reserve
GBP'000 GBP'000 GBP'000
Share
capital GBP'000
GBP'000
Balance at 1,300 28,229 99,000 1,968 1,735 132,2
31 December 32
2019
Ordinary 147 13,979 - - - 14,12
Shares 6
issued
during the
period
Net return - - - (4,221) 1,846 (2,37
attributable 5)
to
shareholders
Dividends - - (169) (416) (2,665) (3,25
paid 0)
Balance at 1,447 42,208 98,831 (2,669) 916 140,7
30 June 2020 33
period from Note Called Share Special Capital Revenue Total
17 July 2018 up distrib
to 30 June utable
2019
premium reserve reserve GBP'000
Ordinary
reserve
(unaudited)
GBP'000 GBP'000 GBP'000
Share
capital GBP'000
GBP'000
Balance at - - - - - -
17 July 2018
Initial - (1,592) - - - (1,59
public 2)
offering
cost
Ordinary 1,300 128,839 - - - 130,1
Shares 39
issues
during the
period
Cancellation 9 - (99,000 99,000 - - -
of share )
premium
Cancellation - (18) - - - (18)
of share
premium
costs
Net return - - - 1,803 1,400 3,203
attributable
to
shareholders
Balance at 1,300 28,229 99,000 1,803 1,400 131,7
31 December 32
2020
period from Note Called Share Special Capital Revenue Total
17 July 2018 up distrib
to 31 utable
December
2019 premium reserve reserve GBP'000
Ordinary
reserve
(audited) GBP'000 GBP'000 GBP'000
Share
capital GBP'000
GBP'000
Balance at - - - - - -
17 July 2018
Initial - (1,592) - - - (1,59
public 2)
offering
cost
Ordinary 1,300 128,839 - - - 130,1
Shares 39
issues
during the
period
Cancellation 9 - (99,000 99,000 - - -
of share )
premium
Cancellation - (18) - - - (18)
of share
premium
costs
Net return - - - 3,294 3,126 6,420
attributable
to
shareholders
Dividends - - - (1,326) (1,391) (2,71
paid 7)
Balance at 1,300 28,229 99,000 1,968 1,735 132,2
31 December 32
2019
The accompanying notes form an integral part of these condensed financial statements.
Condensed cash flow statement
period
from 17
July 2018
period from to 31
17 July December
2018 2019
six months ended
to 30 June (audited)
2019
30 June 2020
GBP'000
(unaudited)
(unaudited)
GBP'000
Note GBP'000
Cash flows from
operating
activities
Net (loss) / profit (2,375) 3,203 6,421
before taxation
Adjustments for:
Losses/(gains) on 5 1,661 (2,842) (3,593)
investments
Losses on 5 2,701 1,105 221
derivatives
Decrease/(increase) 50 (1,363) (1,092)
in receivables
(Decrease)/increase (341) 620 1,053
in payables
Overseas - - (1)
withholding tax
suffered
Purchases of (43,731) (129,022) (167,659)
investments [a]
Sales of 37,644 12,562 43,715
investments [a]
Net cash outflows
from operating
activities
(4,391) (115,737) (120,935)
Financing
activities
Issue of Ordinary 14,126 130,139 130,139
Shares
Initial public - (1,592) (1,592)
offering costs
Cancellation of - (18) (18)
share premium costs
Ordinary dividend 7 (2,665) - (1,391)
paid
Interest 7 (585) - (1,326)
distribution paid
Net cash inflow
from financing
activities
10,876 128,529 125,812
Increase in Cash
and Cash
Equivalents
6,485 12,792 4,877
Cash and Cash 4,877 - -
Equivalents at the
start of the period
Increase in Cash 6,485 12,792 4,877
and Cash
Equivalents as
above
Cash and Cash 6 11,362 12,792 4,877
Equivalents at the
end of the 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 Accounting policies
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 United Kingdom
Accounting Standards, including Financial Reporting Standard 104 (FRS 104) Interim Financial Reporting
issued by the Financial Reporting Council and the Statement of Recommended Practice (SORP) issued by the
Association of Investment Companies (AIC) in October 2019 "Financial Statements of Investment Trust
Companies and Venture Capital Trusts".
The annual Financial Statements have been prepared in accordance with the Financial Reporting Standard 102
(FRS 102) and the AIC SORP.
The accounting policies applied to this condensed set of financial statements are consistent with those
applied in the Annual Report and Financial Statements for the period ended 31 December 2019.
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.
All values are recorded to nearest thousands, unless otherwise stated.
2 Returns and net asset value
period from period from
six months ended 17 July 2018 to 17 July 2018
30 June 2020 to
30 June 2019
31 December
2019
Revenue return
Revenue return 1,846 1,400 3,126
attributable to
Ordinary
Shareholders
(GBP'000)
Weighted 131,782,457[a] 116,639,258[b] 122,606,191[c]
average number
of shares in
issue during
the period
Revenue return 1.40p[a] 1.20p[b] 2.55p[c]
per Ordinary
Share (basic
and diluted)
Shares in issue 144,745,771 130,000,001 130,000,001
at period end
Revenue 1.28p 1.08p 2.40p
available for
dividend
Capital return
Capital return (4,221) 1,803 3,294
attributable to
Ordinary
Shareholders
(GBP'000)
Weighted 131,782,457 [a] 116,639,258[b] 122,606,191[c]
average number
of shares in
issue during
the period[a]
Capital return (3.20)p[a] 1.55p[b] 2.69p[c]
per Ordinary
Share (basic
and diluted)
Net return
Net return per (1.80)p 2.75p 5.24p
Ordinary Share
(basic and
diluted)
NAV per
Ordinary Share
Net assets 140,733 131,732 132,232
attributable to
shareholders
(GBP'000)
Number of 144,745,771 130,000,001 130,000,001
shares in issue
at period end
Par value of 1,447 1,300 1,300
shares in issue
(GBP'000)
NAV per 97.23p 101.33p 101.72p
Ordinary Share
[a] Return figures have been calculated using a weighted average shares for the period 1 January 2020 to 30
June 2020.
[b] Return figures have been calculated using a weighted average shares for the period 14 November 2018
(date of IPO) to 30 June 2019.
[c] Return figures have been calculated using a weighted average shares for the period 14 November 2018
(date of IPO) to 31 December 2019.
3 Income
period from period from
six months 17 July 2018 17 July 2018
ended 30 to to
June 2020
30 June 2019 31 December
GBP'000 2019
GBP'000
GBP'000
Income from
investments
Interest income from 2,180 1,748 3,865
Debt Instruments
Distributions from 227 240 444
investment funds
Management fee rebate 36 36 74
2,443 2,024 4,383
Other income
Interest from Cash 8 120 147
and Cash Equivalents
2,451 2,144 4,530
4 Expenses
Non-audit fees (including VAT) payable to the auditor in respect of the agreed upon procedures on the
interim as of 30 June 2020 are GBP12,000 (30 June 2019: GBP21,000). The agreed upon procedures did not
constitute an audit engagement or a review of the Half Yearly Report.
5 Investments held at fair value through profit or loss (FVTPL)
as at as at as at
30 June 2020 30 June 2019 31 December
2019
GBP'000 GBP'000
GBP'000
Opening valuation 127,316 - -
Analysis of
transactions made
during the period
Purchases at cost 49,011 131,135 167,659
Sale proceeds (37,682) (12,562) (43,715)
(Losses)/gains on (4,362) 1,737 3,372
investments
Closing valuation 134,283 120,310 127,316
Closing cost 135,973 118,396 125,083
Closing investment (1,690) 1,914 2,233
holding (losses)/gains
Closing valuation 134,283 120,310 127,316
The Company received GBP37,682,000 from investments sold in the period. The book cost of these investments
when they were purchased was GBP38,477,000. These investments have been revalued over time and until they were
sold any unrealised gains/losses were included in the fair value of the investments.
as at as at as at
30 June 2020 30 June 2019 31 December 2019
GBP'000 GBP'000 GBP'000
Gains on investments
Net realised
(losses)/gains on
disposal of
investments
(1,661) 2,842 3,593
Net losses on (2,701) (1,105) (221)
derivatives
Net (losses)/gains on (4,362) 1,737 3,372
investments
as at as at as at
30 June 2020 30 June 2019 31 December 2019
GBP'000 GBP'000 GBP'000
Closing valuation
Investments at fair
value through profit
or loss
135,227 120,868 126,793
Derivative financial
(liabilities)/assets
held at fair value
through profit or
loss (944) (558) 523
Closing valuation 134,283 120,310 127,316
6 Receivables, Cash and Cash Equivalents and Payables
as at as at as at
30 June 2020 30 June 2019 31 December 2019
GBP'000 GBP'000 GBP'000
Receivables
Sales for future 38 - -
settlement
Accrued income 990 1,299 1,005
Prepaid expenses 12 28 13
Management fee rebate 40 36 74
Total 1,080 1,363 1,092
Cash and Cash
Equivalents
Cash at bank 5,809 1,168 2,411
Amounts held at 962 631 60
futures clearing
houses
Cash on deposit 4,591 10,993 2,406
Total 11,362 12,792 4,877
Payables
Purchases for future 5,280 2,113 -
settlement
Expenses payable 343 192 308
Management fee 318 350 678
payable
Other payables 51 78 67
Total 5,992 2,733 1,053
7 Dividends
six months period from 17 July
ended 2018 to
30 June 2020 31 December 2019
GBP'000 GBP'000
Revenue
2019 first interim - 1,391
interest distribution of
1.07p
2019 second interim 1,729 -
interest distribution of
1.33p
2020 first interim 936 -
interest distribution of
0.72p
2,665 1,391
Capital
2019 first interim - 1,326
dividend of 1.02p
2019 second interim 416 -
dividend of 0.32p
2020 first interim 169 -
dividend of 0.13p
585 1,326
On 28 July 2020, the Board declared a second interim dividend of 0.77p per Ordinary Share for the year ended
31 December 2020 (0.63p as an interest distribution and 0.14p as an ordinary dividend) totalling GBP1,115,000
which was paid on 28 August 2020 to Ordinary Shareholders on the register on 7 August 2020. The ex-dividend
date was 6 August 2020.
In accordance with FRS 102, Section 32, 'Events After the End of the Reporting Period', the 2020 second
interim dividend has not been included as a liability in this condensed set of financial statements.
8 Called up share capital
as at 30 June as at 30 June as at 31 December
2020 2019 2019
Number of Number of Number of
shares shares shares
GBP'000 GBP'000 GBP'000
Ordinary
Shares of
1p
Ordinary
Shares in
issue at
the
beginning 130,000,0 1,300 - - - -
of the 01
period
Ordinary
Shares
issued
during
the 14,745,77 147 130,000,0 1,300 130,000,0 1,300
period 0 01 01
Ordinary
Shares in
issue at
the end
of the 144,745,7 1,447 130,000,0 1,300 130,000,0 1,300
period 71 01 01
The analysis of the capital reserve is as follows:
six months ended period from period from
30 June 2020 17 July 2018 to 30 June 2019 17 July 2018 to 31
December 2019
Realised Investment Total Realised Investment Total Realised Investment Total
capital holding capital capital holding capital capital holding capital
reserve gains reserve reserve gains reserve reserve gains reserve
GBP'000 GBP'000 GBP'00 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Capital
reserve at the
beginning of
the period
(265) 2,233 1,968 - - - - - -
(Losses)/gains
on realisation
of investments
at fair value
(439) - (439) (177) - (177) 1,139 - 1,139
Realised
currency
gains/(losses)
during the
year 141 - 141 66 - 66 (78) - (78)
Movement in
unrealised
(losses)/gains
- (3,923) (3,923) - 1,914 1,914 - 2,233 2,233
Dividends paid (416) - (416) - - - (1,326) - (1,326)
Closing (979) (1,690) (2,669) (111) 1,914 1,803 (265) 2,233 1,968
balance
The above split in capital reserve is shown in accordance with provisions of the Statement of Recommended
Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts', 2019.
9 Special distributable reserve
The share premium of GBP99,000,001 was cancelled on 12 February 2019 and transferred to the special
distributable 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 special distributable reserve,
taking into account the Company's investment objective. The ordinary dividend of 0.13p from the May 2020 XD
date was paid out of the special distributable reserve.
10 Related party transactions
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 and 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 GBP13,163,135 (30 June 2019: GBP11,009,000) and represented 9.53%
(30 June 2019: 8.38%) of the Company's investment portfolio.
The Directors of the Company are related parties. The Chairman receives an annual fee of GBP40,000, the
Chairman of the Audit Committee receives an annual fee of GBP35,000 and non-executive Director receives an
annual fee of GBP30,000. Mark Hutchinson is employed by M&G as Chair of Private Assets and has agreed to waive
his fees.
11 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, spread premium, credit ratings etc.); or
· Level 3: significant unobservable input (including the Company's own assumptions in determining the fair
value of investments, discounted cashflow model or single broker quote).
The financial assets measured at FVTPL are grouped into the fair value hierarchy as follows:
as at 30 June 2020 as at 30 June 2019 as at 31 December
2019
Level Level Level Total Level Level Level Total Level Level Level Total
1 2 3 1 2 3 1 2 3
GBP'000 GBP'000 GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial
assets at
FVTPL
Debt - 99,46 22,59 122,0 - 103,6 6,186 109,8 - 96,06 16,70 112,7
Instruments 5 9 64 73 59 8 6 74
Investment - 13,16 - 13,16 - 11,00 - 11,00 - 14,01 - 14,10
in funds 3 3 9 9 9 9
Financial
liabilities
at FVTPL
Derivatives (107) (837) - (944) (267) (291) - (558) 154 369 - 523
Net fair (107) 111,7 22,59 134,3 (267) 114,3 6,186 120,3 154 110,4 16,70 127,3
value 91 9 83 91 10 56 6 16
Valuation techniques for Level 3
The debt investments within the Company utilise a number of valuation methodologies such as a discounted
cash flow model, which will use the relevant credit spread and underlying reference instrument to calculate
a discount rate. Unobservable inputs typically include spread premiums and internal credit ratings.
Some debt instruments are valued at par and are monitored to ensure this represents fair value for these
instruments. On a monthly basis these instruments are assessed to understand whether there is any evidence
of market price movements, including impairment or any upcoming refinancing.
In addition, some are priced by a single broker quote, which is typically the traded broker, who provides an
indicative mark.
12 Capital commitments
There were outstanding unfunded investment commitments of GBP3.72m at the end of the period.
as at as at as at
30 June 2020 30 June 2019 31 December
2019
GBP'000 GBP'000
GBP'000
Gate 1 Var. Rate 4 Jun 167 269 223
2022 (Junior)
Gate 1 Var. Rate 4 Jun 165 319 245
2022 (Senior)
Gate 2 Var. Rate 4 Jun 94 - 275
2021
Gate 2 Var. Rate 4 Jun - 566 -
2022
Lewisham Var. Rate 12 2,004 - -
Feb 2023
Microfinance - - 774
Enhancement Var. Rate
8 Nov 2024
Sonovate Limited Var. 560 383 560
Rate 12 Apr 2021
Valentine Senior Var. 133 - -
Rate 7 Mar 2020
Westbourne 2016 1 WR 597 1,807 598
Senior Var. Rate 30
Sep 2023
3,720 3,344 2,675
13 Half Year Report
The financial information contained in this Half Year Report does not constitute statutory accounts as
defined in section 434 - 436 of the Companies Act 2006.
The auditor has reviewed the financial information for the period from 17 July 2018 to 30 June 2019 pursuant
to the Auditing Practices Board guidance on Review of Interim Financial Information. The financial
information for the six months ended 30 June 2020 has not been reviewed or audited by the Company's
auditors.
The figures and financial information for the period ended 31 December 2019 have been extracted from the
latest published audited financial statements, which have been filed with the Registrar of Companies. The
report of the Auditor on those accounts was unqualified and did not contain a statement under sections
498(2) or (3) of the Companies Act 2006.
Company information
Directors (all non-executive)
David Simpson (Chairman)
Richard Boléat (Chairman of the Audit Committee, Senior Independent Director)
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
Herbert Smith Freehills LLP*
Exchange House, Primrose Street London EC2A 2EG
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: 0371 664 0300
(calls are charged at the standard geographical rate and will vary by provider. Calls outside the UK will be
charge at the applicable international rate.)
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
Banker
State Street Bank International GmbH
Breinner Straße 59, 0333 Munich, Germany
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/investor/funds/credit-income-investment-trust/gb00bfyyl325 [2]
*Authorised and regulated by the Financial Conduct Authority
Alternative performance measures
Net Asset Value (NAV) per Ordinary Share
The NAV, also described as shareholders' funds, is the value of the Company's assets less its liabilities.
The NAV per ordinary share is calculated by dividing the NAV by the number of Ordinary Shares in issue.
Ongoing charges
Ongoing charges represent the total of the investment management fee and all other operating expenses
(excluding certain non-recurring items), expressed as a percentage of the average net assets (of the
Company) over the reporting period.
six months ended period[a] ended
30 June 2020 31 December 2019
GBP'000 GBP'000
Ongoing charges are calculated
with reference to the
following figures:
Investment management fee 355 678
Other expenses 294 706
Total expenses for the period 649 1,384
Annualised expenses 1,188 1,157
Average net assets over the 129,332 124,401
period
Ongoing charges 0.92% 0.93%[a]
[a] From the date of Initial Public Offering (IPO) 14 November 2018.
Premium / discount to NAV
The premium is the amount by which the share price of an investment trust exceeds the NAV per Ordinary
Share. The discount is the amount by which the NAV per Ordinary Share exceeds the share price of an
investment trust. The premium / discount is normally expressed as a percentage of the NAV per Ordinary
Share.
Total return
Total return is the return to shareholders that measures the combined effect of any dividends paid in the
period, together with the increase or decrease in the share price or NAV per share.
Mid-market price total return
Total return to shareholders, on a mid-market price basis, assuming all dividends received were reinvested,
without transaction costs, into the shares of the Company at the time the shares were quoted ex-dividend.
as at as at
30 June 2020 31 December 2019
Opening mid-market price 106.00p 100.00p
Dividends paid 2.50p 2.09p
Effect of dividends 0.02p 0.06p
reinvested
Closing mid-market price 101.00p 106.00p
Adjusted closing 103.52p 108.15p
mid-market price
Mid-market price total (2.3)% 8.2%
return
NAV total return
Total return on NAV per share assuming dividends paid by the Company were reinvested into the shares of the
Company at the NAV per share at the time the shares were quoted ex-dividend.
as at as at
30 June 2020 31 December 2019
Opening NAV per share 101.72p 98.38p
Dividends paid 2.50p 2.09p
Effect of dividends reinvested (0.03)p 0.04p
Closing NAV per share 97.23p 101.72p
Adjusted closing NAV per share 99.70p 103.85p
NAV total return (2.0)% 5.6%
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.
Callable bond: A bond that can be redeemed (in other words, called) by the issuer before its maturity date.
The price at which the issuer buys back the bond is normally higher than its issue price. A bond is usually
called when interest rates fall, so that the issuer can refinance its debt at the new, lower interest rates.
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.
Collateralised loan obligation (CLO): A debt security backed by a pool of loans, usually loans taken out by
companies, known as corporate loans. The investor receives the regular payments of the underlying loans and
in exchange takes on the risk that one or more borrowers will default (fail to make the payments). CLOs are
actively managed instruments, in which the managers buy and sell individual bank loans in the underlying
collateral pool.
Commercial mortgage-backed security (CMBS): A debt security secured by a loan (mortgage) on a commercial
property. A CMBS can provide liquidity to real estate investors and to commercial lenders.
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.
Debt instrument: A formal contract that a government, a business or an individual can use to borrow money.
Debt instruments outline the detailed conditions of the loan, such as the amount and schedule of payment of
interest, the length of time before the principal is paid back, or any guarantees (collateral) that the
borrower offers. Any type of debt can be a debt instrument from bonds and loans to credit cards.
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.
NAV total return: A measure showing how the net asset value (NAV) per share has performed over a period of
time, taking into account both capital returns and dividends paid to shareholders.
The AIC shows NAV total return as a percentage change from the start of the period. It assumes that
dividends paid to shareholders are reinvested at NAV at the time the shares are quoted ex-dividend.
NAV total return shows performance which isn't affected by movements in discounts and premiums. It also
takes into account the fact that different investment companies pay out different levels of dividends.
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.
Official List: The Official List (or UKLA Official List) is the list maintained by the Financial Conduct
Authority (acting in its capacity as the UK Listing Authority) in accordance with Section 74(1) of the
Financial Services and Markets Act 2000 (the Act) for the purposes of Part VI of the Act.
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 debt instruments: These instruments not traded on a stock exchange and typically issued to small
groups of institutional investors.
Public debt instruments: These instruments 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.
Residential mortgage-backed security (RMBS): A debt security secured by a number of loans (mortgages) on
residential properties. This risk of one individual borrower failing to keep up with mortgage payments
(defaulting) is mitigated by the fact that the instrument pools many mortgages. As demand for residential
property is high, these instruments offer a comparatively higher rate of interest than other debt
securities.
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.: 85025
EQS News ID: 1137456
End of Announcement EQS News Service
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(END) Dow Jones Newswires
September 29, 2020 02:00 ET (06:00 GMT)
1 Year M&g Credit Income Invest... Chart |
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