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M&G CREDIT INCOME INVESTMENT TRUST PLC 2022 Interim Results

Directive transparence : information réglementée

23/09/2022 08:00

M&G Credit Income Investment Trust plc (MGCI)
2022 Interim Results

23-Sep-2022 / 07:00 GMT/BST
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

Half Year Report and unaudited Condensed Financial

Statements for the six months ended 30 June 2022

 

Copies of the Half Year Report can be obtained from the following website:

www.mandg.co.uk/creditincomeinvestmenttrust

 

The Directors present the results of the Company for the period ended 30 June 2022.

 

 

 

Financial highlights

 

Key data

As at

30 June 2022

(unaudited)

As at

31 December 2021

(audited)

Net assets (£’000)

136,679

143,759

Net asset value (NAV) per Ordinary Share

                                   95.49p

101.44p

Ordinary Share price (mid-market)

                                 98.0p

99.5p

Premium/(Discount) to NAV[a]

                                       2.6%

(1.9)%

Ongoing charges figure[a]

1.20%

1.10%

 

Return and dividends per Ordinary Share

Six months ended

 30 June 2022

(unaudited)

Year ended

31 December 2021

(audited)

Capital return

(5.2)p

1.5p

Revenue return

1.8p

2.7p

NAV total return[a]

(3.4)%

4.3%

Share price total return[a]

1.1%

13.0%

Total dividends declared

1.78p

4.04p

 

[a] Alternative performance measure.

 

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 invests primarily in Sterling denominated Debt Instruments. Where the Company invests in assets not denominated in Sterling, it is generally the case that these assets are 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.

The Company’s portfolio comprises 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:

 

Rating

Secured Debt Instruments

(% of Gross Assets) [a]  

Unsecured Debt Instruments

(% of Gross Assets)

AAA

5%

                                              5%[b]  

AA/A

4%

3%

BBB

3%

2%

Below investment grade

2%

1%

 

[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.

The Company typically invests directly, but it also invests indirectly through collective investment vehicles which are managed 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 managed primarily on an ungeared basis although the Company may, from time to time, be geared tactically through the use of borrowings. Borrowings will 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 the 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 Financial Conduct Authority (FCA).

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. The Company is mainly invested in private debt instruments. This part of the portfolio generally includes 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. Fixed rate instruments will often be hedged in order to protect the portfolio from adverse changes in interest rates. Shareholders can expect their returns from this part of the portfolio to come from a combination of interest income and capital movements.

Investment process

The investment process for the Company consists principally of three stages: the decision to invest, monitoring and ongoing engagement and finally divestment.

 

Investment decision-making is undertaken by the Investment Manager, based on extensive research and credit analysis by the Investment Manager’s large and  experienced teams of 135 in-house analysts who specialise in public and private debt markets. This rigorous in depth analysis is fundamental to understanding the risk and return profile of potential investments. 

 

Regular monitoring is carried out to ensure that continued holding of an investment remains appropriate. This includes monitoring the performance of investments by fund managers, analysts and internal control and governance processes. The Investment Manager engages with relevant stakeholders on any issues which may, potentially, affect an investment’s ability to deliver sustainable performance in line with those expectations.

 

At some point, the Investment Manager may decide to divest from an investment (or the investment may complete in line with agreed terms, including pre- payment), although typically, private investments are held to their full maturity. Divestment can occur for a variety of reasons including; the investment being no longer suitable for the investment mandate, the outcome  of engagement being unsatisfactory or as a result of the investment team’s valuation assessment. Investment decision making is only undertaken by the fund managers designated by the Investment Manager.

 

As part of the investment process, full consideration is given to sustainability risks, which are set out in more detail on pages 35 to 36 of the Annual Report and audited financial statements for the year ended 31 December 2021.

 

Chairman’s statement

Performance

Your Company performed robustly through a very difficult period for bond and equity markets. It was the worst first half of the year for developed market equities in over fifty years, whilst sovereign and corporate U.S. and European bonds experienced record losses. The Company’s NAV total return for the half year to 30 June 2022 was -3.4% which compared favourably to the performance of fixed income indices such as the ICE BofA Sterling and Collateralised Index (-14.17%) and the ICE BofA European Currency Non-Financial High Yield 2% Constrained Index (-15.25%).

The beginning of 2022 had already been dominated by sharply higher inflation in developed economies prior to the Russian invasion of Ukraine. However, the invasion greatly compounded the global inflation problem given the economic importance of both countries in food and energy supply chains. A combination of the conflict, inflation and higher official rates drove government bond yields higher and saw credit spreads move wider over the first quarter. Our Investment Manager continued to hedge interest rate risk and maintain low duration which negated the effect of rising risk-free rates. That said, the wider credit spreads lead to modestly negative portfolio returns.

The second quarter saw market sentiment vary between growth and inflation concerns. The combination of growth concerns and an uncertain path for monetary policy saw both investment grade and high yield credit spreads continue to sell off notably as the quarter progressed, which impacted valuations and saw most government and credit indices end the period with sharply negative year-to-date returns. The low duration and investment grade credit quality of your Company’s portfolio contributed to its significant outperformance of the relevant indices.

 

Share buybacks and discount management

Your board remains committed to seek to ensure that the Ordinary Shares trade close to NAV in normal market conditions through buybacks and issuance of Ordinary Shares. Since the start of the year, the Company has undertaken a number of share buybacks and share issuances pursuant to the ‘zero discount’ policy initially announced on 30 April 2021. The first quarter saw the share price trade at a discount to NAV although it moved to trade at a premium from mid-April until the period end. The Company issued a net 1,415,000 shares from treasury in order to satisfy demand in the market. The Company’s Ordinary Share price traded at an average discount to NAV of 0.5% during the period ended 30 June 2022. On 30 June 2022 the Ordinary Share price was 98p, representing a 2.6% premium to NAV as at that date. As at 30 June 2022, 1,607,749 shares were held in treasury with an additional net 650,000 shares repurchased since the period end.

 

Dividends

Your Company is currently paying three, quarterly interim dividends at an annual rate of SONIA plus 3%, calculated by reference to the adjusted opening NAV as at 1 January 2022. In addition your Company will pay a variable, fourth interim dividend to be determined after the year end, which will take into account the net income over the whole financial year and, if appropriate, any capital gains, together with the board’s view of the ability of the portfolio to deliver our longer-term objectives. The Company paid dividends of 0.82p and 0.96p per Ordinary Share in respect of the quarters to 31 March 2022 and 30 June 2022 respectively.

Your Company’s Investment Manager continues to believe that an annual total return, and thus ultimately a dividend yield, of SONIA plus 4% will continue to be achievable although there can be no guarantee that this will occur in any individual year.

 

Outlook

Even though the Company’s year-to-date NAV total return has been affected by the volatility in credit markets, our Investment Manager believes that current market conditions provide a good opportunity to position the portfolio to deliver increased yield over the longer term. Your board notes that this was also achieved with great success after the market setback in 2020.

 

Your Company’s portfolio (including irrevocable commitments) is now 62% invested in private (not listed) assets, with an additional investment of some 12% in illiquid publicly listed assets which are intended to be held to maturity. Whilst our Investment Manager will continue to grow the private asset portion of the portfolio in line with the Company’s longer term strategy, it currently sees opportunity to add public bonds into the portfolio at yields that are attractive, relative to the target return of the Company. The Investment Manager recently drew £4 million of the Company’s available £25 million revolving credit facility in order to take advantage of the pronounced volatility and enhanced returns available in the public bond market. Subsequently, a further £1 million was drawn down.

 

Your board believes that the Company remains well positioned to achieve its return and dividend objectives, as set out above in the section entitled ‘Dividends’.

 

 

 

David Simpson

Chairman

 

22 September 2022

 

 

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, looking in particular at the performance and composition of the portfolio built in accordance with the Company’s investment policy.

So far 2022 has been one of the worst years on record for bond markets. In fact, financial markets ended the first half of the year with nearly all asset classes (public bonds, sovereign bonds, equities) suffering material losses. The market narrative thus far and one set to extend through the remainder of the year can best be characterised in one word– inflation. 2021 saw extraordinary demand for goods and services as countries emerged from winter lockdowns with record levels of household savings accumulated during 2020 as consumers stockpiled spending firepower. At the same time, ongoing measures to contain the spread of the Covid-19 virus had caused disruption to global supply chains which resulted in a shortage of available goods and commodities. These simultaneous supply and demand shocks created considerable upwards inflationary pressure. Additionally, the post-pandemic reaction of central banks was to allow inflation temporarily to overshoot their well-established long term target of 2% in order to boost economic growth and reduce unemployment. This confluence of factors saw 2022 begin with inflation across developed economies already at multi-year highs, albeit with a path of interest rate hikes plotted to bring this supposedly “transitory” inflation under control. However, inflation has proved more entrenched and persistent than anticipated, confirming the fears of many market participants - that central banks had fallen behind the curve (i.e. not raising interest rates at a pace fast enough to keep up with inflation). The situation was greatly exacerbated following Russia’s shocking invasion of neighbouring Ukraine in February. Economic damage from the war in Ukraine has been a significant factor in the slowdown in global growth in 2022 and has greatly compounded the global inflation problem. Fuel and food prices have increased rapidly, hitting vulnerable populations in low-income countries hardest. The end result is an inflation problem far starker than previously forecast and populations facing a cost of living crisis that has crushed consumer confidence and seen companies slash profit guidance for 2022.

Against this backdrop, central banks have been forced to embark on more aggressive paths of monetary policy normalisation despite the risk of leading economies into stagflation or recession. Market expectations of future official interest rate increases have changed substantially since the start of the year both in the magnitude and timing of the expected rate rises, with multiple increases now anticipated across major markets throughout the remainder of the year, alongside a faster run-down of asset purchase programmes. Market sentiment has become split between growth and inflation concerns, driving volatility in government bond markets as investors grapple with constantly changing forward guidance and an uncertain outlook. The combination of growth concerns and an uncertain path for monetary policy has seen both investment grade and high yield credit spreads sell off (widen) notably in the first half of the year, significantly decreasing bond valuations.

 

Portfolio positioning

We entered the year with the Company’s portfolio relatively defensively positioned, as credit spreads remained at levels where, in our opinion, investors were not being compensated adequately for taking on risk. Simply put, bond valuations looked expensive in the context of the prevailing economic headwinds and heightened macroeconomic uncertainty. In light of this, portfolio activity in the early part of the year saw us sell down BBB and BB bonds that offered very little spread over risk free rates. We redeployed proceeds into a handful of credit specific public opportunities as well as adding further private exposure via a senior secured term loan to the UK’s leading and only full-service provider of temporary traffic lights and related products. Investor concerns over inflation had already caused credit spreads to widen notably prior to Russia’s invasion of Ukraine, and the economic implications of the invasion accelerated the sell off. With bond returns beginning to look attractive again, we reduced holdings in AAA cash proxy ABS and redeployed proceeds into higher yielding, BBB-rated public bonds with good credit fundamentals. We were able to purchase these bonds at valuations which appeared attractive relative to historical levels. In our opinion, the most compelling risk-adjusted returns were to be found in Real Estate Investment Trusts, banking and insurance subordinated debt and hybrid bonds. Our flexibility in being able to invest across different markets and fixed income asset classes saw us add selectively in investment grade dollar credit which, given the more aggressive path of interest rate hikes signalled by the Federal Reserve, looked cheap on a relative value basis (vs sterling credit). We hedged our US rate exposure using 30 year Treasury futures, in accordance with the wider portfolio strategy of running with low interest rate sensitivity (duration). In line with the Company’s core investment objective we have continued to increase the portfolio’s allocation to private assets over the period. These assets are not immune to the headwinds faced by public bonds but typically provide greater stability of capital via stronger structural protections, particularly during times of market stress. Private debt can also be an important diversifier to returns available in public fixed income markets. £5.6m (c.3% of NAV) was invested into a diverse range of private opportunities during the first half of the year, including a facility for a leading provider of high end audio systems; a bilateral real estate loan for the acquisition and refurbishment of an office block in London Victoria; and the mezzanine tranche in a regulatory capital transaction backed by a diversified portfolio of UK small and medium enterprise business loans.

Outlook

It is now clear that inflation is more embedded and broad-based than previously forecast and can no longer be considered transitory. We believe contributors such as rent and wage growth along with structural factors in the economy are supportive of persistently higher inflation for the foreseeable future. In the UK, the fastest rate of real wage destruction since 1997 has contributed to political and worker unrest, with forecasts predicting the fall in mean disposable income will be the worst for at least a century. Soaring energy prices are creating unprecedented challenges for businesses already facing a convergence of input cost pressures, whilst simultaneously impairing household finances, affecting both sides of the supply-demand dynamic. Businesses will need to adapt to a new operating environment where margins are squeezed by higher input costs and consumer demand is lower as inflation diminishes household purchasing power.

At a global level, geopolitical developments remain central to the economic outlook given the inextricable link with the path of inflation. The economic implications of the ongoing Russia-Ukraine war are widespread, whilst tensions between China and the U.S. over Taiwan continue to escalate. The consequences of both situations should see an acceleration in the trend toward deglobalisation, which will only serve to create additional inflationary pressure. There is also a risk of EU political fragmentation on issues such as the relationship with Russia, particularly given the uneven distribution of economic vulnerability amongst member states, which could create dissent within the bloc and complicate the path of future policy.

Central banks continue to ramp up their hawkish rhetoric, with policy makers from Europe and the U.S. unequivocal in their message that fighting inflation is the primary mandate and they will do what is required to bring it under control. Uncertainty being the nemesis of markets means the lack of clarity over future monetary policy should see volatility in both sovereign and corporate bond markets continue for some time whilst seeking to achieve that goal. In the short to medium term it is difficult to foresee a return to the type of ultra-loose monetary policy that has underpinned the financial system in developed markets over the past decade or so. Undoubtedly, a prolonged period of higher all-in bond yields and wider credit spreads would be attractive for income investors, albeit selectivity and detailed credit analysis will remain key.

Although credit spreads have widened out notably since the start of the year, in our opinion the market isn’t fully pricing in the toxic cocktail of restrictive financing conditions, lower corporate profitability, and an extended period of low or no growth. In the current environment we favour going up in credit quality rather than reaching for yield. We have been opportunistically purchasing recent public new issues which were attractively priced to secondary curves, with some issuers paying up to meet financing needs and to manage future debt profiles.

 

The predominantly floating rate nature of our underlying portfolio and low modified duration means the Company is well positioned for a rising interest rate environment, or one in which rates remain elevated. We expect current market conditions to provide attractive opportunities to deploy capital as we continue to be both patient and selective in our approach.

 

 

 

M&G Alternatives Investment Management Limited

22 September 2022

 

 

 

 

Portfolio analysis

 

Top 20 holdings

 

 

 

As at 30 June 2022

Percentage of portfolio of investments   

(including cash on deposit and derivatives)  

M&G European Loan Fund

11.92

Delamare Finance FRN 2.5112% 19 Feb 2029

1.73

Westbourne 2016 1 WR Senior Var. Rate 30 Sep 2023

1.69

Hall & Woodhouse Var. Rate 30 Dec 2023

1.63

Lewisham Var. Rate 12 Feb 2023

1.56

PE Fund Finance III Var. Rate 16 Dec 2022

1.51

RIN II FRN 3.3377% 10 Sep 2030

1.50

Millshaw SAMS No. 1 Var. Rate 15 Jun 2054

1.49

Hammond Var. Rate 28 Oct 2025

1.41

Atlas 2020 1 Trust Var. Rate 30 Sep 2050

1.38

Finance for Residential Social Housing 8.569% 4 Oct 2058

1.38

Income Contingent Student Loans 1 2002-2006 FRN 2.76% 24 Jul 2056

1.36

Regenter Myatt Field North Var. Rate 31 Mar 2036

1.35

Signet Excipients Var. Rate 20 Oct 2025

1.32

Luminis 4.9268% 23 Sep 2025

1.21

Gongga 5.6849% 2 Aug 2025

1.20

CIFC European Funding Var. Rate 23 Nov 2034

1.20

Citibank FRN 0.01% 25 Dec 2029

1.19

Pumpkin Finance Var. Rate 15 Dec 2031

1.17

Dragon Finance FRN 1.8303% 13 Jul 2023

1.13

Total

38.33

Source: State Street.

 

Geographical exposure

 

As at 30 June 2022

Percentage of portfolio of investments   

(excluding cash on deposit and derivatives)  

United Kingdom

54.85%

United States

9.39%

European Union

7.51%

Australia

2.59%

France

2.45%

Other

23.21%

Source: M&G and State Street as at 30 June 2022

 

Portfolio overview

 

As at 30 June 2022

% 

Public

40.86

Asset-backed securities

19.72

Bonds

21.14

Private

59.35

Asset-backed securities

7.38

Bonds

2.11

Investment funds

11.92

Loans

23.82

Private placements

2.21

Other

11.91

Derivatives

(0.21)

Debt derivatives

0.25

Forwards

(0.46)

Total

100.00

Source: State Street.

 

Credit rating breakdown

 

As at 30 June 2022

%

Unrated

(0.21)

Derivatives

(0.21)

Cash and investment grade

74.12

 

 

AAA

5.70

AA+

0.17

AA

3.54

AA-

0.97

A+

1.61

A

1.78

A-

2.69

BBB+

8.89

BBB

18.21

BBB-

21.26

M&G European Loan Fund (ELF) (see note)

9.30

Sub-investment grade

26.09

BB+

3.73

BB

4.05

BB-

3.24

B+

5.20

B

4.40

B-

1.68

CCC+

0.47

CCC-

0.45

D

0.25

M&G European Loan Fund (ELF) (see note)

2.62

Total

100.00

Source: State Street.

 

Note: ELF is an open-ended fund managed by M&G that 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 2022

Company description

M&G European Loan Fund

11.92%

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. The fund's objective is to create attractive levels of current income for investors while maintaining relatively low volatility of NAV. (Private)

 

Delamare Finance FRN 2.5112% 19 Feb 2029

1.73%

Floating-rate, senior tranche of a CMBS secured by the sale and leaseback of 33 Tesco superstores and 2 distribution centres. (Public)

 

Westbourne 2016 1 WR Senior Var. Rate 30 Sep 2023

1.69%

Westbourne provides working capital finance to SMEs in the UK. The company is focused on small borrowers and has employed an advanced technology platform for the application, underwriting and monitoring of loans. (Private)

 

Hall & Woodhouse Var. Rate 30 Dec 2023

1.63%

 

Bilateral loan to a regional UK brewer that manages a portfolio of 219 freehold and leasehold pubs. (Private)

 

Lewisham Var. Rate 12 Feb 2023

1.56%

Senior secured, fixed-rate term loan funding the costs of acquiring and developing a site in Lewisham to provide 758-bed purpose-built student accommodation and 67 affordable housing units. (Private)

 

PE Fund Finance III Var. Rate 16 Dec 2022

1.51%

Senior secured commitment providing NAV facility financing to a private equity firm investing in debt and equity special situations across Europe. (Private)

RIN II FRN 3.3377% 10 Sep 2030

1.50%

 

Mixed CLO (AAA). Consists primarily of senior secured infrastructure finance loans managed by RREEF America L.L.C. (Public)

 

Millshaw SAMS No. 1 Var. Rate 15 Jun 2054

1.49%

Floating-rate, single tranche of an RMBS backed by shared-appreciation mortgages. (Public)

 

Hammond Var. Rate 28 Oct 2025

1.41%

Secured, bilateral real estate development loan backed by a combined portfolio of 2 office assets leased to an underlying roster of global corporate tenants. (Private)

 

Atlas 2020 1 Trust Var. Rate 30 Sep 2050

1.38%

Floating-rate, senior tranche of a bilateral RMBS transaction backed by a pool of Australian equity release mortgages. (Private)

 

Finance for Residential Social Housing 8.569% 4 Oct 2058

1.38%

 

High grade (AA/Aa3), fixed-rate bond backed by cash flows from housing association loans. (Public)

 

Income Contingent Student Loans 1 2002-2006 FRN 2.76% 24 Jul 2056

1.36%

 

Floating-rate, mezzanine tranche of a portfolio comprising of income- contingent repayment student loans originally advanced by the UK Secretary of State for Education. (Public)

 

Regenter Myatt Field North Var. Rate 31 Mar 2036

1.35%

 

PFI (Private Finance Initiative) floating-rate, amortising term loan relating to the already completed refurbishment and ongoing maintenance of residential dwellings and communal infrastructure in the London borough of Lambeth. (Private)

 

Signet Excipients Var. Rate 20 Oct 2025

1.32%

Fixed-rate loan secured against 2 large commercial premises in London, currently leased to 2 FTSE listed UK corporations. (Public)

 

Luminis 4.9268% 23 Sep 2025

1.21%

 

Floating-rate, mezzanine tranche of a regulatory capital transaction backed by a portfolio of predominantly revolving facilities extended to blue chip corporates in the Americas and EMEA. (Private)

Gongga 5.6849% 2 Aug 2025

1.20%

Structured Credit trade by Standard Chartered referencing a US$2bn portfolio of loans to companies domiciled in 36 countries. (Private)

 

CIFC European Funding Var. Rate 23 Nov 2034

1.20%

 

Mixed CLO (AAA) backed by a portfolio of senior loan obligations, mezzanine loan obligations and high yield bonds managed by CIFC Asset Management Europe Ltd. (Public)

 

Citibank FRN 0.01% 25 Dec 2029

1.19%

Floating-rate, mezzanine tranche of a regulatory capital transaction backed by a portfolio of loans to large global corporates, predominantly in North America. (Private)

 

Pumpkin Finance Var. Rate 15 Dec 2031

1.17%

Senior secured, floating rate facility granted within the context of the UK Government’s CBILS scheme to support UK small businesses through the COVID pandemic. (Private)

 

Dragon Finance FRN 1.8303% 13 Jul 2023

1.13%

Floating-rate, subordinated tranche of a securitisation of the sale and leaseback of 10 supermarket sites sponsored by J Sainsbury plc (“Sainsbury’s”). (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

The principal risks faced by the Company during the remaining six months of the year can be divided into various areas as follows:

Market risk;

Credit risk;

Investment management performance risk;

Liquidity risk;

Dividend policy risk;

Operational risk;

Regulatory, legal and statutory risk: changes in laws, government policy or regulations;

Sustainability risk; and

Russia – Ukraine risk.

 

 

These are consistent with the principal risks described in more detail in the Company’s Annual Report and Financial Statements for the year ended 31 December 2021, which can be found in the Strategic Report on pages 18 to 24 and in note 13 on pages 97 to 101 and which are available on the website at: www.mandg.co.uk/creditincomeinvestmenttrust

 

Since the writing of the Annual Report and Financial Statements, the geo-political and macro-economic environment has been impacted by commodity price inflation in Europe, influenced by tactical constraints in flows of natural gas from Russia. The key mitigants and controls remain in place for 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.

 

In assessing the going concern basis of accounting, the Directors have also considered the Russian invasion of Ukraine 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 the Investment Manager


M&G Alternatives Investment Management Limited, as Investment Manager, is a related party to the Company.  The management fee due 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 8.

 
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 £16,101,058 and represented 11.92% of the Company’s investment portfolio.

The Directors of the Company are related parties. The Chairman receives an annual fee of £43,000, the Chairman of the Audit Committee receives an annual fee of £37,500 and each non-executive Director receives an annual fee of £32,250.

 

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 Financial Reporting Standard 104 (Interim Financial Reporting) and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

 

this Interim management report, together with the Chairman’s statement, Investment Manager’s report and the 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 during the six months ended 30 June 2022 and their impact on the condensed set of financial statements; and a description of the principal risks 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 during the six months ended 30 June 2022 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 22 September 2022 and the above responsibility statement was signed on its behalf by:

 

David Simpson

Chairman

22 September 2022

 

 

 

 

Condensed financial statements (unaudited)

 

 

Condensed income statement

 

 

 

Six months ended

 

Six months ended

Year ended

 

 

30 June 2022

 

30 June 2021

 

31 December 2021

 

 

(unaudited)

 

(unaudited)

 

(audited)

 

Note

Revenue

Capital

Total

 

Revenue

Capital

Total

 

Revenue

Capital

Total

 

 

£’000

£’000

£’000

 

£’000

£’000

£’000

 

£’000

£’000

£’000

Net (losses)/gains on investments

7

(5,875)

(5,875)

 

541

541

 

(545)

    (545)

Net (losses)/gains on derivatives

7

(1,164)

(1,164)

 

     

     2,428

2,428

 

2,837

2,837

Net currency gains/ (losses)

 

216

(278)

(62)

 

      (36)

(140)

(176)

 

(51)

(145)

(196)

Income

3

3,174

3,174

 

2,735

2,735

 

5,565

5,565

Investment management fee

 

(487)

(487)

 

(451)

(451)

 

(965)

(965)

Other expenses

 

(351)

(351)

 

(254)

(254)

 

(548)

(548)

Net return on ordinary activities before finance costs and taxation

 

2,552

(7,317)

(4,765)

 

1,994

2,829

4,823

 

4,001

2,147

6,148

Finance costs

5

(57)

(57)

 

(61)

(61)

 

(122)

(122)

Net return on ordinary activities before taxation

 

2,495                 

(7,317)

(4,822)

 

1,933

2,829

4,762

 

3,879

2,147

6,026

Taxation on ordinary activities

 

 

 

Net return attributable to Ordinary Shareholders after taxation

 

2,495

           (7,317)

(4,822)

 

1,933

 2,829

4,762

 

3,879

2,147

6,026

Net return per Ordinary Share (basic and diluted)

2

1.77p

(5.19)p

(3.42)p

 

1.34p

1.96p

3.30p

 

2.70p

1.49p

4.19p

 

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 2022

 

As at 30 June 2021

 

As at 31 December

 

 

(unaudited)

 

(unaudited)

 

2021 (audited)

 

Note

£’000

£’000

 

£’000

£’000

 

£’000

£’000

Non-current assets

 

 

 

 

 

 

 

 

 

Investments at fair value through profit or loss

7

 

135,398

 

 

139,439

 

 

139,501

Current assets

 

 

 

 

 

 

 

 

 

Derivative financial assets held at fair value through profit or loss

7

 

 

 

 

631

 

Receivables

8

1,534

 

 

1,798

 

 

1,241

 

Cash and cash equivalents

8

4,221

 

 

           6,944

 

 

3,473

 

 

 

5,755

 

 

8,742

 

 

5,345

 

Current liabilities

 

 

 

 

 

 

 

 

 

Derivative financial liabilities held at fair value through profit or loss

7

(293)

 

 

(408)

 

 

 

Payables

8

(4,181)

 

 

(1,476)

 

 

(1,087)

 

 

 

(4,474)

 

 

(1,884)

 

 

(1,087)

 

Net current assets

 

 

1,281

 

 

6,858

 

 

4,258

Net assets

 

 

136,679

 

 

146,297

 

 

143,759

Capital and reserves

 

 

 

 

 

 

 

 

 

Called up share capital

9

 

1,447

 

 

1,447

 

 

1,447

Share premium

 

 

42,257

 

 

42,217

 

 

42,217

Special distributable reserve

 

 

97,027

 

 

97,296

 

 

95,670

Capital reserve

9

 

(5,473)

 

 

4,313

 

 

3,473

Revenue reserve

 

 

1,421

 

 

1,024

 

 

952

Total shareholders’ funds

 

 

136,679

 

 

146,297

 

 

143,759

Net Asset Value per Ordinary Share (basic and diluted)

2

 

95.49p

 

 

102.04p

 

 

101.44p

 

The accompanying notes form an integral part of these condensed financial statements.

Approved and authorised for issue by the Board of Directors on 22 September 2022 and signed on its behalf by:

 

 

David Simpson

Chairman

Company registration number: 11469317

 

22 September 2022

 

 

Condensed statement of changes in equity

Six months ended 30 June 2022 (unaudited)

 

Called up Ordinary Share

capital

Share premium

Special distributable reserve

Capital reserve

Revenue reserve

Total

 

Note

£’000

£’000

£’000

£’000

£’000

£’000

Balance at 31 December 2021

 

1,447

42,217

95,670

3,473

952

143,759

Ordinary Shares issued from treasury

 

40

2,681

2,721

Purchase of Ordinary Shares to be held in treasury

 

(1,324)

(1,324)

Net return attributable to shareholders

 

(7,317)

2,495

(4,822)

Dividends paid

6

(1,629)

(2,026)

(3,655)

Balance at 30 June 2022

 

1,447

42,257

97,027

(5,473)

1,421

136,679

 

Six months ended 30 June 2021 (unaudited)

 

Called up Ordinary Share

capital

Share premium

Special distributable reserve

Capital reserve

Revenue reserve

Total

 

Note

£’000

£’000

£’000

£’000

£’000

£’000

Balance at 31 December 2020

 

1,447

42,217

98,499

3,349

1,116

146,628

Purchase of Ordinary Shares to be held in treasury

 

 

 

(1,203)

(1,203)

Net return attributable to shareholders

 

2,829

1,933

4,762

Dividends paid

6

 

(1,865)

(2,025)

(3,890)

Balance at 30 June 2021

 

1,447

42,217

97,296

4,313

1,024

146,297

 

Year ended 31 December 2021 (audited)

Note

Called up Ordinary Share

capital

Share premium

Special distributable reserve

Capital reserve

Revenue reserve

Total

 

 

£’000

£’000

£’000

£’000

£’000

£’000

Balance at 31 December 2020

 

1,447

42,217

98,499

3,349

1,116

146,628

Purchase of Ordinary Shares to be held in treasury

 

(2,829)

(2,829)

Net return attributable to shareholders

 

2,147

3,879

6,026

Dividends paid

6

       (2,023)

(4,043)

(6,066)

Balance at 31 December 2021

 

1,447

42,217

95,670

3,473

        952

143,759

 

 

 

 

 

 

 

 

 

The accompanying notes form an integral part of these condensed financial statements.

 

Condensed cash flow statement

 

 

Note

Six months ended

Six months ended

Year ended

 

30 June 2022

30 June 2021

31 December 2021

 

(unaudited)

(unaudited)

(audited)

 

£’000

£’000

£’000

Cash flows from operating activities

 

 

 

 

Net (loss)/profit before finance costs and taxation

 

(4,765)

4,823

6,148

Adjustments for:

 

 

 

 

Net losses/(gains) on investments

7

5,875

(541)

545

Net losses/(gains) on derivatives

7

1,164

(2,428)

(2,837)

(Increase)/decrease in receivables

 

(293)

133

104

Increase/(decrease) in payables

 

                                  517

(165)

130

Purchases of investments[a]

7

(21,608)

(19,439)

(42,088)

Sales of investments[a]

7

22,173

22,437

43,210

Net cash inflow/(outflow) from operating activities

 

3,063

                             4,820

5,212

Financing activities

 

 

 

 

Finance costs

5

(57)

(61)

(122)

Ordinary Shares issued from treasury

 

2,721

-

                                    -

Purchase of Ordinary Shares to be held in treasury

 

(1,324)

(1,203)

(2,829)

Dividend paid

6

(3,655)

(3,890)

(6,066)

Net cash (outflow)/inflow from financing activities

 

                             (2,315)

                             (5,154)

(9,017)

Increase/(decrease) in cash and cash equivalents

 

748

(334)

(3,805)

Cash and cash equivalents at the start of the period/year

 

3,473

7,278

7,278

Increase/(decrease) in cash and cash equivalents as above

 

748

(334)

                                     (3,805)

Cash and cash equivalents at the end of the period/year

8

4,221

6,944

3,473

 

 

[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 July 2022 ‘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 year ended 31 December 2021.

In the current period the Company has started reissuing shares held in Treasury. Where Ordinary Shares held in Treasury shares are subsequently reissued, the sales proceeds up to the purchase price of the shares will be transferred to the special distributable reserve or capital reserve and the excess of the sales proceeds over the purchase price will be transferred to the share premium.

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 (NAV)

 

Six months ended

Six months ended

Year ended

30 June 2022

30 June 2021

31 December 2021

Revenue return

 

 

 

Revenue return attributable to Ordinary Shareholders (£’000)

2,495

1,933

3,879

Weighted average number of shares in issue during the period/year

141,027,443

144,490,744

143,757,774

Revenue return per Ordinary Share (basic and diluted)

1.77p

1.34p

2.70p

Capital return

 

 

 

Capital return attributable to Ordinary Shareholders (£’000)

(7,317)

2,829

2,147

Weighted average number of shares in issue during the period/year

141,027,443

144,490,744

143,757,774

Capital return per Ordinary Share (basic and diluted)

(5.19)p

1.96p

1.49p

Net return

 

 

 

Net return per Ordinary Share (basic and diluted)

(3.42)p

3.30p

4.19p

NAV per Ordinary Share

 

 

 

Net assets attributable to Ordinary Shareholders (£’000)

136,679

146,297

143,759

Number of shares in issue at period/year end

143,138,022

143,367,771

141,723,022

NAV per Ordinary Share

95.49p

102.04p

101.44p

 

3 Income

 

 

Six months ended

Six months ended

Year ended

30 June 2022

30 June 2021

31 December 2021

£’000

£’000

£’000

Income from investments

 

 

 

Interest income from Debt Instruments

2,809

2,421

4,936

Distributions from investment funds

306

260

521

Management fee rebate

51

51

105

 

3,166

2,732

5,562

Other income

 

 

 

Interest from cash and cash equivalents

8

                                 3

                                  3

 

3,174

2,735

5,565

 

4 Expenses

There were no Non-audit fees payable to the auditor as of 30 June 2022. Non-audit fees (including VAT) payable to the auditor in respect of the agreed upon procedures on the Half Year Report as of 30 June 2021 were £12,600. The agreed upon procedures did not constitute an audit engagement or a review of the Half Year Report.

 

5 Finance costs

 

Six months ended

Six months ended

Year ended

 

30 June 2022

30 June 2021

31 December 2021

 

£’000

£’000

£’000

Commitment fee

37

37

75

Arrangement fees

6

6

13

Legal fees

14

18

34

 

57

61

122

 

On 19 October 2020 the Company entered into a £25 million revolving credit facility agreement with State Street Bank International GmbH. On 18 October 2021 the Company renewed the credit facility on the existing terms, with the new credit facility expiring on 17 October 2022. As at 30 June 2022 no amounts were drawn down.

 

Subsequent to the period end on 6 July 2022, £4 million was drawn down from the revolving credit facility agreement, and a further £1 million was drawn down on 13 September 2022. Both were at a daily rate of SONIA plus a spread of 1.25%.

 

6 Dividends

 

Six months ended

Six months ended

Year ended

 

30 June 2022

30 June 2021

31 December 2021

 

£’000

£’000

£’000

Revenue

 

 

 

2020 fourth interim interest distribution of 0.77p

1,114

1,114

2021 first interim interest distribution of 0.63p

911

911

2021 second interim interest distribution of 0.71p

1,017

2021 third interim interest distribution of 0.70p

1,001

2021 fourth interim interest distribution of 0.67p

941

2022 first interim interest distribution of 0.77p

1,085

 

2,026

2,025

4,043

Capital

 

 

 

2020 fourth interim dividend of 1.18p

1,706

1,706

2021 first interim dividend of 0.11p

159

159

2021 second interim dividend of 0.05p

72

2021 third interim dividend of 0.06p

                                86

2021 fourth interim dividend of 1.11p

1,558

2022 first interim dividend of 0.05p

71

 

1,629

1,865

2,023

             

 

On 26 July 2022 the Board declared a second interim dividend of 0.96p per Ordinary Share for the year ended 31 December 2022, which was paid on 26 August 2022 to Ordinary Shareholders on the register on 5 August 2022. The ex-dividend date was 4 August 2022.

 

In accordance with FRS 102, Section 32, ‘Events After the End of the Reporting Period’, the 2022 second interim dividend has not been included as a liability in this condensed set of financial statements.

 

7 Investments held at fair value through profit or loss (FVTPL)

 

 

 

As at

As at

As at

 

30 June 2022

30 June 2021

31 December 2021

 

£’000

£’000

£’000

Opening valuation

140,132

140,316

140,316

Analysis of transactions made during the period/year

 

 

 

Purchases at cost

24,185

18,769

40,734

Sale proceeds

(22,173)

(23,023)

(43,210)

(Losses)/gains on investments

(7,039)

2,969

                       2,292

Closing valuation

135,105

139,031

140,132

Closing cost

141,583

138,251

139,848

Closing investment holding (losses)/gains

(6,478)

780

284

Closing valuation

135,105

139,031

140,132

 

The Company received £22,173,000 from investments sold in the six month period ended 30 June 2022 (six months ended 30 June 2021: £23,023,000). The book cost of these investments when they were purchased was £22,209,000 (six months ended 30 June 2021: £21,836,000). 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 2022

30 June 2021

31 December 2021

 

£’000

£’000

£’000

Gains on investments

 

 

 

 

Net (losses)/gains on investments

(5,875)

541

(545)

Net (losses)/gains on derivatives

(1,164)

2,428

2,837

Net (losses)/gains on investments

(7,039)

2,969

                       2,292

           

 

 

As at

As at

As at

 

30 June 2022

30 June 2021

31 December 2021

 

£’000

£’000

£’000

Closing valuation

 

 

 

Investments at fair value through profit or loss

135,398

139,439

139,501

Derivative financial (liabilities)/assets held at fair value through profit or loss

(293)

(408)

631

Closing valuation

135,105

139,031

140,132

 

8 Receivables, Cash and cash equivalents and Payables

 

As at

As at

As at

 

30 June 2022

30 June 2021

31 December 2021

 

£’000

£’000

£’000

Receivables

 

 

 

Sales for future settlement

586

Accrued income

1,380

1,128

1,108

Prepaid expenses

23

33

53

Management fee rebate

131

51

80

Total receivables

1,534

1,798

1,241

Cash and cash equivalents

 

 

 

Cash at bank

3,670

1,302

2,526

Amounts held at futures clearing houses

551

1,041

345

Cash on deposit

-

4,601

                       602

Total cash and cash equivalents

4,221

6,944

3,473

Payables

 

 

 

Purchases for future settlement

2,577

684

Expenses payable and deferred income

344

351

314

Management fee payable

1,258

438

771

Other payables

2

3

2

Total payables

4,181

1,476

1,087

 

9 Called up share capital

 

 

As at 30 June 2022

As at 30 June 2021

As at 31 December 2021

 

Number of shares

Nominal value £’000

Number of shares

Nominal value £’000

Number of shares

Nominal value £’000

Ordinary Shares of 1p

 

 

 

 

 

 

Ordinary Shares in issue at the beginning of the period/year

141,723,022

1,417

144,605,771

1,446

144,605,771

1,446

Ordinary Shares issued during the period/ year

                                     2,765,000

                     28

                   -

                   -

                   -

  •  

Purchase of Ordinary Shares held in treasury

(1,350,000)

(14)

(1,238,000)

(12)

(2,882,749)

(29)

Ordinary Shares in issue at the end of the period/year

143,138,022

1,431

143,367,771

1,434

141,723,022

1,417

Treasury Shares (Ordinary Shares of 1p)

 

 

 

 

 

 

Treasury Shares at the beginning of the period/year

3,022,749

30

140,000

1

140,000

1

Ordinary Shares issued from treasury during the period/year

(2,765,000)

(28)

Purchase of Ordinary Shares held in treasury

1,350,000

14

1,238,000

12

2,882,749

29

Treasury Shares at the end of the period/year

1,607,749

16

1,378,000

13

3,022,749

30

Total Ordinary Shares in issue and in treasury at the end of the period/year

144,745,771

1,447

144,745,771

1,447

144,745,771

1,447

 

The analysis of the capital reserve is as follows:

 

 

Six months ended 30 June 2022

Six months ended 30 June 2021

Year ended 31 December 2021

 

Realised capital reserve £’000

Investment holding (losses) £’000

Total capital reserve £’000

Realised capital reserve £’000

Investment holding (losses) £’000

Total capital reserve £’000

Realised capital reserve £’000

Investment holding (losses) £’000

Total capital reserve £’000

Capital reserve at the beginning of the period/year

3,189

284

3,473

1,290

2,059

3,349

1,290

2,059

3,349

(Losses)/gains on realisation of investments at fair value

(277)

(277)

4,248

4,248

4,067

4,067

Realised currency losses during the period/year

(278)

(278)

(140)

(140)

(145)

(145)

Movement in unrealised losses

(6,762)

(6,762)

(1,279)

(1,279)

(1,775)

(1,775)

Dividends paid

(1,629)

(1,629)

(1,865)

(1,865)

(2,023)

(2,023)

Capital reserve at the end of the period/year

1,005

(6,478)

(5,473)

3,533

780

4,313

3,189

284

3,473

 

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', 2022.

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, amounts outstanding at the period end are shown in note 8.

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 £16,101,058 (30 June 2021: £17,458,741) and represented 11.92% (30 June 2021: 12.16%) of the Company’s investment portfolio.

The Directors of the Company are related parties. For further details of the annual fees payable to the Directors, please refer to the Related party disclosure and transactions with the Investment Manager section above.

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 levels stated below.

 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).

 Level 3: significant unobservable inputs (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 2022

As at 30 June 2021

As at 31 December 2021

 

Level 1 £’000

Level 2 £’000

Level 3 £’000

Total £’000

Level 1 £’000

Level 2 £’000

Level 3 £’000

Total £’000

Level 1 £’000

Level 2 £’000

Level 3 £’000

Total £’000

Financial assets at FVTPL

 

 

 

 

 

 

 

 

 

 

 

 

Debt Instruments

47,723

71,574

119,297

60,039

61,941

121,980

54,382

67,599

121,981

Investment in funds

16,101

16,101

17,459

17,459

17,520

17,520

Derivatives

338

65

403

151

151

667

667

Financial liabilities at FVTPL

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives

(696)

(696)

(238)

(321)

(559)

(36)

-

(36)

Net fair value

338

63,193

71,574

135,105

(238)

77,328

61,941

139,031

(36)

72,569

67,599

140,132

 

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 £2,812,000 (30 June 2021: £4,821,000) at the period/year end.

 

As at

30 June 2022

£’000 

As at

30 June 2021

£’000 

As at

31 December 2021

£’000 

Bayswater RD Mercury Var. Rate 31 May 2024

1,293

2,235

1,862

Project Grey Var. Rate 30 Apr 2025 (Senior)

642

Project Grey Var. Rate 30 Apr 2025 (Junior)

371

Intu (SGS) Finco Limited Var. Rate 31 Mar 2024

229

229

Bayswater RD Mercury Var. Rate 1 May 2024

137

201

173

Kaveh Ventures LLC Var. Rate 22 Mar 2024

82

323

163

Jamshid Ventures Var. Rate 23 Jul 2023

58

328

125

Lewisham Var. Rate 12 Feb 2023

519

Greensky Var. Rate 11 Dec 2023

476

Harmoney Warehouse No 2 Var. Rate 31 Dec 2026

301

Sonovate Var. Rate 12 Apr 2022

280

Valentine Senior Var. Rate 7 Mar 2022

133

133

Alchemy Copyrights Var. Rate 16 Dec 2022

109

Bread Holdings Var. Rate 1 Sep 2028

72

Gate 1 Var. Rate 4 Jun 2022 (Junior)

21

Gate 1 Var. Rate 4 Jun 2022 (Senior)

4

-

 

2,812

4,821

2,866

 

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 financial information for the six months ended 30 June 2022 and 30 June 2021 has not been reviewed or audited by the Company's auditors.

The figures and financial information for the year ended 31 December 2021 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.



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.: 189995
EQS News ID: 1448725

 
End of Announcement EQS News Service

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