Annual Financial Report

LEI: 549300E9W63X1E5A3N24

M&G CREDIT INCOME INVESTMENT TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2025

AND

NOTICE OF ANNUAL GENERAL MEETING

M&G Credit Income Investment Trust plc announces its annual results for the year ended 31 December 2025 and the publication of its annual report and accounts for the same period, which includes the notice of Annual General Meeting.

Chairman’s statement

“Investor demand enabled your Company to issue 58.6 million Ordinary Shares between 1 January 2025 and 28 February 2026. We have subsequently resumed buybacks to protect the share price following the outbreak of war in the Middle East. The portfolio has proved extremely resilient and is well placed to benefit from future volatility.”

Performance

Your Company’s opening NAV on 1 January 2025 (adjusted for the last dividend for 2024) was 93.02p per Ordinary Share and its NAV on 31 December 2025 (adjusted for the last dividend for 2025) was 91.06p per Ordinary Share. Including dividends paid, the NAV total return for the year to 31 December 2025 was 6.21%, compared to our benchmark return of 8.54%.

The Investment Manager kept the portfolio defensively positioned throughout the year as it continues to believe (as it has for some time now), that credit spreads are not compensating investors for longer term corporate risk. Adding risk when it is expensive can significantly erode long-term portfolio gains. Your board supports the Investment Manager’s stance that it is essential to resist over-exuberance and herd mentality, focusing instead on credit fundamentals and rational, long-term value. In the short-term this strategic decision has seen portfolio activity concentrate on improving credit quality rather than chasing yield, which has contributed to underperformance relative to the SONIA+4% pa benchmark.

The Company’s NAV total return underperformed when compared with investment grade indices such as the ICE BofA Sterling Corporate and Collateralised Index (+7.10%) and the ICE BofA 1-3 Year BBB Sterling Corporate & Collateralized Index (+6.72%), whilst outperforming the ICE BofA European Currency Non-Financial High Yield 2% Constrained Index (+5.54%). (Please note: the Company’s NAV total return is calculated net of fees: on a gross basis the Company’s portfolio delivered higher returns than each of these comparable indices.)

Your Company’s portfolio (including irrevocable commitments) at year end was 46% invested in private (not listed) assets, with an additional approximately 8% invested in illiquid publicly listed assets which are intended to be held to maturity. The reduction in the private asset portion of the portfolio (as compared with 52% prior year-end) was driven by our share issuance outpacing private asset deployment. The Investment Manager was pleased with the diverse range of opportunities it saw during the year and expects to continue to grow the private asset portion of the portfolio over time, in line with the Company’s strategy. Having the flexibility to invest across all areas of the fixed income market is important to achieve the most attractive risk-adjusted returns for shareholders. 

Share issues and discount management

During the year, your Company increased its market capitalisation by £47.75 million as sustained demand for share issuance continued to support its growth. This helps to improve liquidity in your Company’s shares as well as reducing the ongoing charges ratio. Share issuance at an appropriate premium to NAV also underpins our Zero Discount Policy which seeks to ensure that Ordinary Shares trade close to NAV in normal market conditions.

Investor demand for new Ordinary Shares over the year was so great that it exceeded the authorities granted at the prior AGM. Accordingly, the board convened two additional general meetings during the year at which the necessary issuance authorities were renewed. The Company was also required to publish a new prospectus.

In March, the Company issued 6,647,969 new Ordinary Shares via a placing and retail offer, whilst an additional 46.1 million new Ordinary Shares were sold through follow-on tap issues over the period to 31 December 2025.

In accordance with the Board’s policy, issues of Ordinary Shares were made at prices not less than the then prevailing published NAV together with a premium intended to cover the costs of the relevant issue and to contribute to the costs of publishing the prospectus mentioned above.

The Company’s Ordinary Share price traded at an average premium to NAV of 1.9% during the year ended 31 December 2025. On 31 December 2025 the Ordinary Share price was 95.0p, representing a 2.2% premium to NAV as at that date.  Issuance continued during January and February 2026, during which a further 5,850,000 Ordinary Shares were issued. Following the commencement of war against Iran and the consequent market turmoil, the Ordinary Share price moved to a discount and your Company recommenced its buyback programme in order to honour the Zero Discount Policy. 250,000 Ordinary Shares have been repurchased as at 27 March 2026.

NAV Total Return and Dividends

While the SONIA + 4% benchmark provides a consistent reference point for assessing NAV total return, it has been rarely achieved by the Company in recent years. This reflects both the prevailing market environment and the Company’s investment approach, which prioritises income generation and lower asset value volatility over the pursuit of benchmark-matching total returns in all conditions.

Your Company paid four, quarterly interim dividends in respect of the year ended 31 December 2025 at the target annual rate of SONIA plus 4%, calculated by reference to the adjusted opening NAV as at 1 January 2025. These totalled 7.62p per Ordinary Share, which represented a trailing dividend yield of 8.02% on the Ordinary Share price as at 31 December 2025. Dividends paid exceeded the Company’s NAV total return, resulting in a small diminution in the NAV over the year.

This outcome reflects the mechanics of the Company’s dividend target. The Board’s policy is to distribute an annual dividend equivalent to SONIA plus 4%, calculated on the adjusted opening NAV. For 2025, this target translated into total dividends of 7.62p per Ordinary Share. While the portfolio generated a solid NAV total return of 6.21% for the year, this was modestly below the dividend target. As a result, the dividend distribution exceeded the total return generated, leading to a small reduction in the Company’s NAV over the period. This dynamic is consistent with the Company’s policy, which allows dividends to be paid from capital when appropriate.

Board changes

Three of your directors have served on the board since the Company’s IPO in 2018 and we wish to ensure an orderly change over the next two years as we each approach our nine-year term limit. As a result, Barbara Powley has decided not to seek re-election at the AGM in May. She will be sorely missed.

I am delighted, however, to say that Christiane Elsenbach joined the board on 26 February 2026. She spent her executive career in structured finance and private credit and serves on several charity boards. I encourage shareholders to come to our AGM, where you will be able to meet her as well as the rest of your board and your portfolio manager.

Barbara Powley’s role as Senior Independent Director will be assumed by Jane Routledge, and her role as chair of the Management Engagement Committee will be assumed by Richard Boléat.

Outlook

Markets have been volatile in the past weeks, driven by the Iran conflict, wider geopolitical concerns, the artificial-Intelligence related sell-off in software companies and adverse news around private credit in the US. Perhaps surprisingly, we have not yet seen a sell-off in public credit; and the Company’s portfolio has been insulated by its low duration from the effects of interest rate volatility.

The overall portfolio maintains a solid investment-grade profile with only approximately 20% in high-yield credit. The private portion of the portfolio has no direct software exposure, and software-related holdings across the remainder of the portfolio represent less than 2% of the portfolio. The portfolio continues to be invested principally in Europe and the UK with only a small exposure to the US. Recent events are expected to have had an immaterial impact upon the value of the Company’s portfolio.

Under these market conditions, and where credit valuations remain stretched, the Investment Manager believes it is more important than ever to maintain a patient and disciplined investment approach. The portfolio is shaped to be a net beneficiary of any future credit spread widening and market volatility and, while this may mean foregoing portfolio greater returns in the short term, in the Investment Manager’s opinion it is fundamental to driving strong performance over a longer term investment horizon. Should further market volatility give rise to attractive opportunities, we have access to a £40 million credit facility and a further £40 million invested in daily dealing ABS funds of AAA/AA underlying credit quality, which is ready to be reallocated.

David Simpson

Chairman

27 March 2026

Financial highlights

a Alternative performance measure. Further information can be found on pages 117 to 118 of the full Annual Report and Accounts.

b The total dividends declared in respect of each financial year equated to a dividend yield of SONIA +4% on the adjusted opening NAV.

Investment manager’s report

Market review

Early 2025 was marked by significant volatility and geopolitical uncertainty, driven primarily by the Trump administration’s aggressive trade policies. On 2 April, the ‘Liberation Day’ tariff announcement imposed a 10% baseline tariff on all imports, leading to fears of a global recession and a widening in credit spreads. This window of opportunity to add risk at what we considered more attractive levels was short lived, with tariffs temporarily suspended to allow for bilateral negotiations, which saw credit spreads retrace entirely. Economic growth slowed considerably, reflecting the impact of uncertain global trade policies and fluctuating market conditions. In another notable deviation from traditional policy, Germany announced an historic fiscal package and debt brake change to allow for higher defence and infrastructure spending.

The latter part of the year was largely positive for financial markets. Global stock markets continued to recover from the tariff-induced sell-off as trade tensions subsided, with gains also fuelled by strong corporate earnings, anticipation of Federal Reserve rate cuts, and continued enthusiasm around Artificial Intelligence (AI) and technology innovation. Despite the dramatic shift in trade relations, US growth remained resilient, with tariff-related inflation largely failing to materialise. Longer-term structural obstacles to growth continued to persist in the UK and Europe. Inflation generally cooled across the US, Europe, and UK from post-pandemic highs, driven by falling energy costs and slower goods price increases, though services inflation remained sticky. This allowed central banks to cut interest rates to varying degrees. Policy rate decisions from the Bank of England and Federal Reserve proved to be contested as inflation in the UK and US remained uncomfortably above targets. In spite of macro headwinds, sentiment was constructive to end the year, anchored by expectations of continued policy support and a gradual normalisation of inflation.

Despite the temporary, tariff-induced weakness, both investment grade and high yield credit spreads tightened meaningfully over the course of the year and the technical backdrop in fixed income remained robust. A combination of relatively high bond yields, a benign outlook for inflation, and the likelihood of lower interest rates remained appealing to both income and total return investors. As a result, demand for corporate bonds significantly exceeded supply, which kept volatility contained and credit spreads well-anchored with a bias to tightening.

Portfolio positioning

We entered the year defensively positioned (as we have been for some time on relative value concerns), and our primary focus remained on deploying capital into private assets, investing approximately £28 million across 20 new and existing facilities during the period. We continued to find attractive relative value in Regulatory Capital transactions and were also pleased to close two investment grade transactions in parts of the private market where we are often less active due to tighter pricing: Infrastructure and Private Placements. Other private transactions saw us allocate additional capital to existing securitisations in the portfolio and transact on a number of Direct Lending opportunities across a broad range of underlying sectors, including air pollution control, hospitality, and packaging solutions. As the Company raised capital via the issue of new Ordinary Shares (as detailed in the Chairman’s Statement), we invested proceeds into the M&G European Loan Fund, a cornerstone investment of the portfolio since launch, as well as the M&G Investment Grade ABS Fund, which has an underlying credit quality of AA. In the public market, we invested selectively in new issues where there was still what we considered to be a ‘decent’ credit spread on offer within the context of very expensive credit markets. Often, what we considered to be more attractive relative value was found by identifying expected survivors in embattled sectors such as UK water (SWS Finance), EU chemicals (Ineos), and Autos (Ford).

We prudently monitor the portfolio for signs of credit stress and have independent internal committees that oversee and approve amendments to private asset pricing where the credit profile of an investment may have changed. During the year, there were valuation adjustments to loans from two different private issuers as a result of internal credit rating downgrades, which are reflected in the Company’s latest published NAV. The portfolio currently has exposure to three issuers, amounting to 0.57% of the latest published NAV, which are either in technical default or at some stage of a restructuring process. These assets are already marked-to-market or, in respect of non-public market instruments, reserved against in your Company’s latest published NAV.

Outlook

The war in Iran represents the biggest risk to global supply chains since the Covid 19 pandemic, injecting a new and potentially long lasting shock into the global economy and creating heightened volatility in financial markets. Most global equity markets are either flirting with or have breached technical correction territory, however we have not yet seen a sell off in credit. Oil and natural gas prices have borne the brunt of price action, spiking drastically, with the inflationary implications causing a rout in government bond markets – at the time of writing UK 5-year gilts have just reached their highest level since 2008. Given the portfolio’s low duration, it has been well-insulated from the direct effects of this interest rate volatility. History suggests that geopolitical shocks very rarely leave a lasting dent on asset prices and are generally followed by rapid market recoveries, which perhaps explains the market’s rather sanguine outlook. By comparison, the sell off in both equity and credit post Liberation Day was far sharper and more panicked. In fact, investors have begun to behave as though the war is already approaching its end, despite there being no diplomatic agreement in sight. Equity and credit markets are currently pricing in a short conflict, which makes them particularly vulnerable to a longer term conflict that could trigger a major stagflationary shock.

Some of the current market volatility can also be attributed to concerns about private credit. Sectors with a high percentage of intangible assets have been selling off, driven by fears of Artificial Intelligence (‘AI’) as a disruptive technology-particularly in software-with credit and loan markets now demanding a risk premium for issuers perceived as being particularly vulnerable. Much of the volatility has been focussed on the US sub investment grade loan market. The majority of our portfolio is held in investment grade quality assets and continues to be invested principally in Europe and the UK, with only a small exposure to the US. The private portion of our portfolio has no direct software exposure, and software related holdings across the remainder of the portfolio represent less than 2% of portfolio value, including the indirect exposure via the M&G European Loan Fund. It is worth noting that credit opportunities frequently arise from sector specific cycles, even within broader economic expansions or periods of stability. For example, during the Commercial Real Estate Cycle (2022–2024), we achieved notable capital gains by investing in heavily discounted REIT debt when shifts in post Covid working trends caused distress in certain property types. Consequently, we view sector-specific weaknesses as potentially offering compelling opportunities to increase portfolio exposure at valuations significantly more attractive than those observed in the recent past.

Despite the global macro volatility and heightened risk environment, credit spreads remain anchored and still screen as expensive when viewed through an historical lens. Investors certainly are not being compensated for the myriad short and medium term uncertainties they must consider, or for the plausible scenario of a sustained energy supply disruption. Given the current market backdrop, we feel it is pertinent to re emphasise once again our investment approach: we allocate capital based on our assessment of relative value, backed by fundamental credit research and in depth analysis provided by a team of over 100 analysts. When we view credit as expensive (ie, spreads are tight-as they remain now), we position the portfolio to be a net beneficiary of any future credit spread widening or market volatility by maintaining a cautious stance and improving overall credit quality. We then remain patient and disciplined as we wait for attractive entry points to take on additional credit risk, which typically occur during periods of macro driven market volatility where dislocations emerge between credit fundamentals and valuations. This strategy has historically benefited portfolio performance. We currently have a significant amount of capital invested in AAA/AA ABS funds ready to be reallocated, as well as a £40 million credit facility, should this period of heightened volatility provide opportunities to add risk and enhance portfolio yield.

M&G Alternatives Investment Management Limited

27 March 2026

Portfolio analysis

Geographical exposure

Percentage of portfolio of investments

as at 31 December 2025 (2024)*

* Excluding cash on deposit and derivatives.

Source: M&G and State Street as at 31 December 2025

Portfolio overview