UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-23709
Monachil Credit Income Fund
(Exact name of registrant as specified in charter)
c/o Monachil Capital Partners LP
1 Sound Shore Drive, Suite 303
Greenwich, CT 06830
212-375-6708
(Address of principal executive offices) (Zip code)
Joseph McNeila
c/o Monachil Capital Partners LP
1 Sound Shore Drive, Suite 303
Greenwich, CT 06830
212-375-6708
(Name and address of agent for service)
With Copies to:
David Baum | Martin H. Dozier | |
Alston & Bird LLP | Alston & Bird LLP | |
The Atlantic Building | One Atlantic Center | |
950 F Street NW | 1201 West Peachtree Street | |
Washington, D.C. 20004 | Atlanta, GA 30309 | |
Tel: (202) 239-3300 | Tel: (404) 881-7000 | |
Fax: (202) 239-3333 | Fax: (404) 881-7777 |
Date of fiscal year end: December 31
Date of reporting period: December 31, 2022
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
ITEM 1.(a) REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
For the Period December 5, 2022 Through December 31, 2022
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![[MISSING IMAGE: lg_monachil-4clr.jpg]](https://capedge.com/proxy/N-CSR/0001104659-23-031055/lg_monachil-4clr.jpg)
PERFORMANCE SUMMARY
December 31, 2022
in the Monachil Credit Income Fund and the Morningstar LSTA Leverage Loans Index
For the Period December 5, 2022 through December 31, 2022
![[MISSING IMAGE: lc_loansindex-bw.jpg]](https://capedge.com/proxy/N-CSR/0001104659-23-031055/lc_loansindex-bw.jpg)
| | | | | | Cumulative Return as of 12/31/22 Since the Fund’s Inception on December 5, 2022 | | |
| | Monachil Credit Income Fund | | | | 0.91% | | |
| | Morningstar LSTA Leverage Loans Index | | | | 0.30% | | |
| ![]() | | | taitweller.com | |
Shareholders of Monachil Credit Income Fund
| | | ![]() | | |
| | | | TAIT, WELLER & BAKER LLP | |
| Philadelphia, Pennsylvania March 1, 2023 | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2022
| Principal Amount1 | | | | | | Value | | ||||||
| | | | FIXED INCOME SECURITIES – 78.94% | | | ||||||||
| | | | | | | LUXEMBOURG – 63.22% | | | |||||
| | $ | 8,700,000 | | | | AAFS Securitisation SA 15.00%, 9/26/25 | | | | $ | 9,126,525 | | |
| | | | RECEIVABLE CLAIMS PORTFOLIO – 15.72% | | |||||||||
| | | 10,091 | | | | Pool of Trade Receivables Purchase Deed No. 43 1/27/2023 | | | | | 8,046 | | |
| | | 195,858 | | | | Pool of Trade Receivables Purchase Deed No. 44 2/3/2023 | | | | | 156,168 | | |
| | | 14,031 | | | | Pool of Trade Receivables Purchase Deed No. 45 2/7/2023 | | | | | 11,188 | | |
| | | 73,537 | | | | Pool of Trade Receivables Purchase Deed No. 46 2/14/2023 | | | | | 58,635 | | |
| | | 78,637 | | | | Pool of Trade Receivables Purchase Deed No. 47 2/16/2023 | | | | | 62,701 | | |
| | | 72,326 | | | | Pool of Trade Receivables Purchase Deed No. 48 2/23/2023 | | | | | 53,858 | | |
| | | 346,629 | | | | Pool of Trade Receivables Purchase Deed No. 49 2/28/2023 | | | | | 276,386 | | |
| | | 9,941 | | | | Pool of Trade Receivables Purchase Deed No. 50 2/2/2023 | | | | | 7,920 | | |
| | | 81,886 | | | | Pool of Trade Receivables Purchase Deed No. 51 3/8/2023 | | | | | 64,614 | | |
| | | 80,212 | | | | Pool of Trade Receivables Purchase Deed No. 52 3/10/2023 | | | | | 63,953 | | |
| | | 178,265 | | | | Pool of Trade Receivables Purchase Deed No. 53 3/16/2023 | | | | | 137,521 | | |
| | | 177,622 | | | | Pool of Trade Receivables Purchase Deed No. 54 3/2/2023 | | | | | 131,662 | | |
| | | 123,415 | | | | Pool of Trade Receivables Purchase Deed No. 55 3/2/2023 | | | | | 98,136 | | |
| | | 322,255 | | | | Pool of Trade Receivables Purchase Deed No. 56 3/5/2023 | | | | | 248,057 | | |
| | | 71,523 | | | | Pool of Trade Receivables Purchase Deed No. 57 2/19/2023 | | | | | 55,138 | | |
| | | 319,810 | | | | Pool of Trade Receivables Purchase Deed No. 58 3/12/2023 | | | | | 254,993 | | |
| | | 106,700 | | | | Pool of Trade Receivables Purchase Deed No. 59 3/12/2023 | | | | | 81,747 | | |
| | | 333,167 | | | | Pool of Trade Receivables Purchase Deed No. 60 3/19/2023 | | | | | 250,532 | | |
| | | 105,150 | | | | Pool of Trade Receivables Purchase Deed No. 61 2/20/2023 | | | | | 83,837 | | |
CONSOLIDATED SCHEDULE OF INVESTMENTS — Continued
As of December 31, 2022
| Principal Amount1 | | | | | | Value | | ||||||
| | | | RECEIVABLE CLAIMS PORTFOLIO (Continued) | | |||||||||
| | | 104,103 | | | | Pool of Trade Receivables Purchase Deed No. 62 3/20/2023 | | | | $ | 83,003 | | |
| | | 102,372 | | | | Pool of Trade Receivables Purchase Deed No. 63 3/27/2023 | | | | | 81,623 | | |
| | | | | | | | | | | | 2,269,717 | | |
| | | | | | | TOTAL FIXED INCOME SECURITIES (Cost $12,707,824) | | | | | 11,396,242 | | |
| | | | | | | U.S. GOVERNMENT – 16.53% | | | | | | | |
| | | | | | | U.S. TREASURY BILL – 16.53% | | | | | | | |
| | | 1,000,000 | | | | 0.00%, 1/12/2023 | | | | | 999,132 | | |
| | | 500,000 | | | | 0.00%, 2/9/2023 | | | | | 498,006 | | |
| | | 500,000 | | | | 0.00%, 2/23/2023 | | | | | 496,991 | | |
| | | 400,000 | | | | 0.00%, 6/15/2023 | | | | | 391,936 | | |
| | | | | | | TOTAL U.S. GOVERNMENT (Cost $2,389,316) | | | | | 2,386,065 | | |
| | | | | | | TOTAL INVESTMENTS – 95.47% (Cost $15,097,140) | | | | | 13,782,307 | | |
| | | | | | | Other Assets in Excess of Liabilities – 4.53%2 | | | | | 653,253 | | |
| | | | | | | TOTAL MEMBER’S EQUITY – 100.00% | | | | $ | 14,435,560 | | |
|
CONSOLIDATED SCHEDULE OF INVESTMENTS — Continued
As of December 31, 2022
Sale Contracts | | | Counterparty | | | Currency Exchange | | | Settlement Date | | | Currency Amount Sold | | | Notional Value | | | Value at December 31, 2022 | | | Unrealized Appreciation (Depreciation) | | ||||||||||||
Euro | | | Alpha FX | | | EUR per USD | | | February 9, 2023 | | | | | (1,400,000) | | | | | $ | (1,493,240) | | | | | $ | (1,502,863) | | | | | $ | (9,623) | | |
Euro | | | Alpha FX | | | EUR per USD | | | February 9, 2023 | | | | | (656,291) | | | | | | (700,000) | | | | | | (704,511) | | | | | | (4,511) | | |
Euro | | | Alpha FX | | | EUR per USD | | | February 9, 2023 | | | | | (1,200,000) | | | | | | (1,279,920) | | | | | | (1,288,168) | | | | | | (8,248) | | |
Euro | | | Alpha FX | | | EUR per USD | | | February 9, 2023 | | | | | (7,380,000) | | | | | | (7,871,508) | | | | | | (7,922,233) | | | | | | (50,725) | | |
Euro | | | Alpha FX | | | EUR per USD | | | February 17, 2023 | | | | | (100,000) | | | | | | (106,660) | | | | | | (107,407) | | | | | | (747) | | |
Euro | | | Alpha FX | | | EUR per USD | | | February 17, 2023 | | | | | (200,000) | | | | | | (213,320) | | | | | | (214,814) | | | | | | (1,494) | | |
| | | | | | | | | | | | | | | | | | | $ | (11,664,648) | | | | | $ | (11,739,995) | | | | | $ | (75,347) | | |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 2022
| Assets: | | | | | | | |
| Investments, at value (cost $15,097,140) | | | | $ | 13,782,3071 | | |
| Foreign currency, at value (cost $319,423) | | | | | 322,991 | | |
| Cash | | | | | 353,223 | | |
| Cash deposited with broker | | | | | 182,276 | | |
| Receivables: | | | | | | | |
| Dividends and interest | | | | | 126,617 | | |
| Prepaid organization and offering costs | | | | | 313,597 | | |
| Total assets | | | | | 15,081,011 | | |
| Liabilities: | | | | | | | |
| Payables: | | | | | | | |
| Unrealized depreciation on forward foreign currency exchange contracts | | | | | 75,347 | | |
| Payable to counterparty | | | | | 194,810 | | |
| Advisory fees | | | | | 14,339 | | |
| Deferred offering costs | | | | | 166,998 | | |
| Incentive fees payable | | | | | 21,880 | | |
| Chief Compliance Officer fees | | | | | 2,137 | | |
| Trustees’ fees and expenses | | | | | 9,000 | | |
| Reserve held for pool of trade receivables | | | | | 76,023 | | |
| Accrued other expenses | | | | | 84,917 | | |
| Total liabilities | | | | | 645,451 | | |
| Net Assets | | | | $ | 14,435,560 | | |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES — Continued
As of December 31, 2022
| Components of Net Assets: | | | | | | | |
| Paid-in capital | | | | $ | 14,353,793 | | |
| Total distributable earnings (deficit) | | | | | 81,767 | | |
| Net Assets | | | | $ | 14,435,560 | | |
| Maximum Offering Price per Share: | | | | | | | |
| Class I Shares | | | | | | | |
| Shares Outstanding | | | | | | | |
| Net assets applicable to shares outstanding | | | | $ | 14,435,560 | | |
| Shares of common stock issued and outstanding | | | | | 1,441,257 | | |
| Net asset value per share | | | | $ | 10.02 | | |
CONSOLIDATED STATEMENT OF OPERATIONS
For the Period December 5, 2022* Through December 31, 2022
| Investment Income: | | | | | | | |
| Interest | | | | $ | 142,488 | | |
| Total investment income | | | | | 142,488 | | |
| Expenses: | | | | | | | |
| Offering costs | | | | | 135,372 | | |
| Incentive fees | | | | | 21,880 | | |
| Advisory fees | | | | | 14,339 | | |
| Shareholder reporting fees | | | | | 13,479 | | |
| Legal fees | | | | | 11,479 | | |
| Trustees’ fees and expenses | | | | | 9,000 | | |
| Fund administration fees | | | | | 4,701 | | |
| Custody fees | | | | | 4,389 | | |
| Auditing fees | | | | | 3,000 | | |
| Transfer agent fees and expenses | | | | | 2,173 | | |
| Chief Compliance Officer fees | | | | | 2,137 | | |
| Fund accounting fees | | | | | 1,581 | | |
| SEC fees | | | | | 1,543 | | |
| Total expenses, before waivers | | | | | 225,073 | | |
| Less: Advisory fees waived | | | | | (14,339) | | |
| Other expenses absorbed | | | | | (168,778) | | |
| Net Expenses | | | | | 41,956 | | |
| Net investment income (loss) | | | | | 100,532 | | |
| Realized and Unrealized Gain (Loss) on Investments | | | | | | | |
| Net realized gain (loss) on: | | | | | | | |
| Investments | | | | | 38,006 | | |
| Foreign currency transactions | | | | | (94,916) | | |
| Net realized gain (loss) | | | | | (56,910) | | |
| Net change in unrealized appreciation/depreciation on: | | | | | | | |
| Investments | | | | | 351,025 | | |
| Forward contracts | | | | | (75,347) | | |
| Foreign currency translations | | | | | (193,911) | | |
| Net change in unrealized appreciation/depreciation | | | | | 81,767 | | |
| Net realized and unrealized gain (loss) on investments | | | | | 24,857 | | |
| Net increase (decrease) in net assets resulting from operations | | | | $ | 125,389 | | |
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
| | | For the Period December 5, 2022* Through December 31, 2022 | | |||
Increase (Decrease) in Net Assets from: | | | | | | | |
Operations: | | | | | | | |
Net investment income (loss) | | | | $ | 100,532 | | |
Net realized gain (loss) on investments | | | | | (56,910) | | |
Net change in unrealized appreciation/depreciation on investments | | | | | 81,767 | | |
Net increase (decrease) in net assets resulting from operations | | | | | 125,389 | | |
Distributions to Shareholders: | | | | | | | |
Distributions | | | | | | | |
Class I | | | | | (102,401) | | |
Total distributions to shareholders | | | | | (102,401) | | |
Capital Transactions: | | | | | | | |
Sale of Shares | | | | | | | |
Class I | | | | | 101,000 | | |
Capital issued in connection with reorganization of private fund (Note 1) | | | | | | | |
Class I | | | | | 14,311,572 | | |
Reinvested Distributions | | | | | | | |
Class I | | | | | — | | |
Shares Repurchased | | | | | | | |
Class I | | | | | — | | |
Net increase (decrease) in net assets from capital transactions | | | | | 14,412,572 | | |
Total increase (decrease) in net assets | | | | | 14,435,560 | | |
Net Assets: | | | | | | | |
Beginning of period | | | | | — | | |
End of period | | | | $ | 14,435,560 | | |
Capital Share Transactions: | | | | | | | |
Sale of Shares | | | | | | | |
Class I | | | | | 1,441,257 | | |
Net increase in capital share transactions | | | | | 1,441,257 | | |
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Period December 5, 2022* Through December 31, 2022
| Increase (Decrease) in Cash: | | | | | | | |
| Cash flows provided by (used for) operating activities: | | | | | | | |
| Net increase (decrease) in net assets resulting from operations | | | | $ | 125,389 | | |
| Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities | | | |||||
| Sales of short-term investments, net | | | | | 733,242 | | |
| Increase in foreign currency | | | | | (182,703) | | |
| Cash transfered from Wolf River INV, LLC ( See Note 1) | | | | | 72,745 | | |
| Decrease in dividends and interest receivable | | | | | 51,148 | | |
| Decrease in due from Advisor | | | | | 57,258 | | |
| Increase in prepaid organization and offering costs | | | | | (313,597) | | |
| Increase in payable to counterparty | | | | | 194,810 | | |
| Decrease in advisory fees | | | | | (118,051) | | |
| Increase in deferred offering costs | | | | | 166,998 | | |
| Increase in incentive fees payable | | | | | 21,880 | | |
| Increase in Chief Compliance Officer fees | | | | | 2,137 | | |
| Increase in Trustees’ fees & expenses | | | | | 9,000 | | |
| Decrease in reserve held for pool of trade receivables | | | | | (43,212) | | |
| Increase in accrued expenses | | | | | 69,500 | | |
| Net realized gain (loss) | | | | | (38,006) | | |
| Net change in unrealized appreciation/depreciation | | | | | (271,638) | | |
| Net cash provided by (used for) operating activities | | | | | 536,900 | | |
| Cash flows provided by (used for) financing activities: | | | | | | | |
| Proceeds from sales of shares | | | | | 101,000 | | |
| Cost of shares redeemed | | | | | — | | |
| Dividends paid to shareholders, net of reinvestments | | | | | (102,401) | | |
| Net cash provided by (used for) financing activities | | | | | (1,401) | | |
| Net increase (decrease) in cash | | | | | 535,499 | | |
| Cash: | | | | | | | |
| Beginning of period | | | | | — | | |
| End of period | | | | $ | 535,499 | | |
| End of Period Cash Balances: | | | | | | | |
| Cash | | | | | 353,223 | | |
| Cash deposited with broker for securities sold short | | | | | 182,276 | | |
| End of Period | | | | $ | 535,499 | | |
| Supplemental disclosure of cash flow information and non-cash activities | | | | | | | |
| Capital issued in connection with reorganization of private fund (Note 1) | | | | | 14,311,572 | | |
CONSOLIDATED FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period.
| | | For the Period December 5, 2022* through December 31, 2022 | | |||
Net asset value, beginning of period | | | | $ | 10.00 | | |
Income from Investment Operations: | | | | | | | |
Net investment gain | | | | | 0.07 | | |
Net realized and unrealized gain (loss) on investments | | | | | 0.02 | | |
Total from investment operations | | | | | 0.09 | | |
Less Distributions: | | | | | | | |
From return of capital | | | | | (0.07) | | |
From net realized gains | | | | | — | | |
Total distributions | | | | | (0.07) | | |
Net asset value, end of period | | | | $ | 10.02 | | |
Total return | | | | | 0.91%1 | | |
Ratios and Supplemental Data: | | | | | | | |
Net Assets, end of period (in thousands) | | | | $ | 14,436 | | |
Gross investment income (loss) to average net assets | | | | | (7.73)%2 | | |
Net investment income (loss) to average net assets | | | | | 9.41%2 | | |
Ratio of gross expenses to average net assets | | | | | 21.06%2 | | |
Ratio of net expenses to average net asets | | | | | 3.93%2 | | |
Portfolio turnover rate | | | | | 0%1 | | |
Notes to Consolidated Financial Statements
December 31, 2022
Notes to Consolidated Financial Statements — Continued
December 31, 2022
Notes to Consolidated Financial Statements — Continued
December 31, 2022
Notes to Consolidated Financial Statements — Continued
December 31, 2022
Notes to Consolidated Financial Statements — Continued
December 31, 2022
Notes to Consolidated Financial Statements — Continued
December 31, 2022
| Cost of investments | | | | $ | 15,097,140 | | |
| Gross unrealized appreciation | | | | $ | 100,064 | | |
| Gross unrealized depreciation | | | | | (1,414,897) | | |
| Net unrealized appreciation on investments | | | | $ | (1,314,833) | | |
| Increase (Decrease) | | |||
| Paid-in Capital | | | Total Distributable Earnings | |
| $43,622 | | | $(43,622) | |
| Undistributed ordinary income | | | | $ | — | | |
| Undistributed long-term capital gains | | | | | — | | |
| Tax accumulated earnings | | | | | — | | |
| Accumulated capital and other losses | | | | | — | | |
| Unrealized appreciation on investments | | | | | (1,314,833) | | |
| Total accumulated earnings | | | | $ | (1,314,833) | | |
Distribution paid from: | | | 2022 | | |||
Ordinary income | | | | $ | — | | |
Net long-term capital gains | | | | | — | | |
Return of Capital | | | | $ | 102,401 | | |
Total distributions paid | | | | $ | 102,401 | | |
Notes to Consolidated Financial Statements — Continued
December 31, 2022
Monachil Credit Income Fund | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | ||||||||||||
Assets | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed Income Securities | | | | $ | — | | | | | $ | — | | | | | $ | 11,396,242 | | | | | $ | 11,396,242 | | |
U.S. Government | | | | | — | | | | | | 2,386,065 | | | | | | — | | | | | | 2,386,065 | | |
Total Investments | | | | | — | | | | | | 2,386,065 | | | | | | 11,396,242 | | | | | | 13,782,307 | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | |
Other Financial Instruments* | | | | | | | | | | | | | | | | | | | | | | | | | |
Forward Foreign Currency Contracts | | | | | — | | | | | | 75,347 | | | | | | — | | | | | | 75,347 | | |
Total Other Financial Instruments | | | | $ | — | | | | | $ | 75,347 | | | | | $ | — | | | | | $ | 75,347 | | |
Notes to Consolidated Financial Statements — Continued
December 31, 2022
| | | Fixed Income Securities | | |||
Balance as of December 2, 2022 | | | | $ | 11,319,268 | | |
Transfers into Level 3 | | | | | — | | |
Transfers out of Level 3 | | | | | — | | |
Total realized gain/(loss) | | | | | 38,006 | | |
Total unrealized appreciation/(depreciation) | | | | | 100,107 | | |
Included in other comprehensive income | | | | | — | | |
Net purchases | | | | | 1,154,132 | | |
Net sales | | | | | (69,500) | | |
Return of Capital | | | | | (1,145,771) | | |
Balance as of December 31, 2022 | | | | $ | 11,396,242 | | |
| | | Fair Value as of December 31, 2022 | | | Valuation Techniques | | | Unobservable Input | | | Inputs | | ||||||
Assets | | | | | | ||||||||||||||
Luxembourg – Notes | | | | $ | 9,126,525 | | | | Market Approach | | | Estimated liquidation value | | | | | N/A | | |
Receivable Claims Portfolio | | | | $ | 2,269,717 | | | | Cost plus FX | | | Estimated liquidation value | | | | | N/A | | |
| | | Asset Derivatives | | | Liability Derivatives | | ||||||||||||
Derivatives not designated as hedging instruments | | | Statement of Asset and Liabilities Location | | | Value | | | Statement of Asset and Liabilities Location | | | Value | | ||||||
Foreign exchange contracts | | | Unrealized appreciation on forward foreign currency exchange contracts | | | | | — | | | | Unrealized depreciation on forward foreign currency exchange contracts | | | | | 75,347 | | |
Total | | | | | | | $ | — | | | | | | | | $ | 75,347 | | |
Notes to Consolidated Financial Statements — Continued
December 31, 2022
Derivatives not designated as hedging instruments | | | Forward Foreign Currency Exchange Contracts | | | Total | | ||||||
Foreign exchange contracts | | | | $ | (75,347) | | | | | $ | (75,347) | | |
Total | | | | $ | (75,347) | | | | | $ | (75,347) | | |
Derivatives not designated as hedging instruments | | | | | | Notional Value | | |||
Foreign exchange contracts | | | Short forward foreign currency exchange contracts | | | | $ | (11,664,648) | | |
Description/Financial Instrument/ Statement of Assets and Liabilities Category | | | Counterparty | | | Gross Amounts Recognized in Statement of Assets and Liabilities | | | Amounts Not Offset in Statement of Assets and Liabilities | | | | | | | | ||||||||||||
| Financial Instruments* | | | Cash Collateral** | | | Net Amount | | ||||||||||||||||||||
Unrealized depreciation on forward foreign currency exchange contracts – liability payable | | | Alpha FX | | | | $ | 75,347 | | | | | $ | — | | | | | $ | — | | | | | $ | 75,347 | | |
Notes to Consolidated Financial Statements — Continued
December 31, 2022
Fund Information (Unaudited)
December 31, 2022
Fund Information (Unaudited) — Continued
December 31, 2022
Fund Information (Unaudited) — Continued
December 31, 2022
FUND MANAGEMENT (Unaudited)
December 31, 2022
| | NAME, ADDRESS AND YEAR OF BIRTH | | | | POSITION(S) HELD WITH THE FUND | | | | LENGTH OF TIME SERVED | | | | PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS | | | | NUMBER OF PORTFOLIOS IN FUND COMPLEX* OVERSEEN BY TRUSTEE | | | | OTHER DIRECTORSHIPS HELD BY TRUSTEES | | |
| | Thomas G. Knipper Year of Birth: 1957 | | | | Trustee | | | | Since June 2022 | | | | Retired; Independent Consulting, financial services organizations (March 2021 – March 2022); Vice President and Chief Compliance Officer, Ameritas Investment Partners, a registered investment advisor (1995 − March 2021). | | | | 1 | | | | Trustee, Investment Managers Series Trust II (a registered investment company with 26 portfolios) | | |
| | Margaret E. Wyrwas Year of Birth: 1958 | | | | Trustee | | | | Since June 2022 | | | | Retired; Chief Marketing Officer and Managing Director, AQR Capital Management (2012 – 2015) | | | | 1 | | | | Director, PanAgora Asset Management, Inc. (financial services firm) (2018 – present); Harvard Business School Alumni Board (2017 – 2023) | | |
FUND MANAGEMENT (Unaudited) — Continued
December 31, 2022
| | NAME, ADDRESS AND YEAR OF BIRTH | | | | POSITION(S) HELD WITH THE FUND | | | | LENGTH OF TIME SERVED | | | | PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS | | | | NUMBER OF PORTFOLIOS IN FUND COMPLEX* OVERSEEN BY TRUSTEE | | | | OTHER DIRECTORSHIPS HELD BY TRUSTEES | | |
| | Ali Meli^ Year of Birth: 1981 | | | | Trustee, Chairman of the Board, President and Chief Executive Officer | | | | Since June 2021 | | | | Founder and Managing Partner, Monachil Capital Partners (financial services firm) (2019 – Present); Partner, Goldman Sachs Group (financial services firm) (2004 – 2019) | | | | 1 | | | | None | | |
| | Joseph McNeila Year of Birth: 1963 | | | | Treasurer, Chief Financial Officer, and Secretary | | | | Since June 2022 | | | | President, Chief Financial Officer and Chief Operating Officer, Monachil Capital Partners (financial services firm) (2021 to present); Managing Director, Goldman Sachs (2018 – 2021); Partner, Copper Street Capital LLP (financial services firm) (2015 to 2018) | | | | N/A | | | | N/A | | |
| | Erik Dolan Year of Birth: 1974 | | | | Chief Compliance Officer | | | | Since June 2022 | | | | Director, ACA Foreside; (2022 – Present); Director, Foreside (2021 – 2022); Director, Alaric Compliance Services (2019 – 2021); Director, MSRB (2016 – 2019) | | | | N/A | | | | N/A | | |
| | Ronak Patel Year of Birth: 1992 | | | | Assistant Treasurer | | | | Since June 2022 | | | | Controller, Monachil Capital Partners (2022 – Present); Director of Finance and Operations, Antler VC (2019 – 2022); Fund Accountant, The Beekman Group (2017 – 2019); Fund Accountant, SS&C Technologies (2016 – 2017) | | | | N/A | | | | N/A | | |
FUND MANAGEMENT (Unaudited) — Continued
December 31, 2022
| | NAME, ADDRESS AND YEAR OF BIRTH | | | | POSITION(S) HELD WITH THE FUND | | | | LENGTH OF TIME SERVED | | | | PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS | | | | NUMBER OF PORTFOLIOS IN FUND COMPLEX* OVERSEEN BY TRUSTEE | | | | OTHER DIRECTORSHIPS HELD BY TRUSTEES | | |
| | Kat Sirontenko Year of Birth: 1981 | | | | Assistant Secretary | | | | Since June 2022 | | | | Investor Relations Associate, Monachil Capital Partners (2022 – Present); Investor Relations Associate, Eagle Point Credit Management (2017 – 2022); Marketing Specialist (2016 – 2017) and Sales Service Associate (2012 – 2016), Legg Mason Global Asset Management | | | | N/A | | | | N/A | | |
Privacy Policy
(Unaudited)
| | FACTS | | | | WHAT DOES MONACHIL CREDIT INCOME FUND DO WITH YOUR PERSONAL INFORMATION? | | |
| | Why? | | | | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. | | |
| | What? | | | | The types of personal information we collect and share depend on the product or service you have with us. This information can include: • Social Security number • Assets • Retirement Assets • Transaction History • Checking Account Information • Purchase History • Account Balances • Account Transactions • Wire Transfer Instructions When you are no longer our customer, we continue to share your information as described in this notice. | | |
| | How? | | | | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information, the information Monachil Credit Income Fund chooses to share and whether you can limit this sharing. | | |
| | Reasons we can share your personal information | | | | Does Monachil Credit Income Fund Share? | | | | Can you limit this sharing? | | |
| | For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | | | | Yes | | | | No | | |
| | For our marketing purposes – to offer our products and services to you | | | | No | | | | We do not share. | | |
| | For joint marketing with other financial companies | | | | No | | | | We do not share. | | |
| | For our affiliates’ everyday business purposes – information about your transactions and experiences | | | | No | | | | We do not share. | | |
| | For our affiliates’ everyday business purposes – information about your creditworthiness | | | | No | | | | We do not share. | | |
| | For nonaffiliates to market to you | | | | No | | | | We do not share. | | |
| | Questions? | | | | Call (855) 552-5520 | | | | | | |
Privacy Policy — Continued
(Unaudited)
| | Who we are | | | | | | |
| | Who is providing this notice? | | | | Monachil Credit Income Fund | | |
| | What we do | | | | | | |
| | How does Monachil Credit Income Fund protect my personal information? | | | | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. Our service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic personal information. | | |
| | How does Monachil Credit Income Fund collect my personal information? | | | | We collect your personal information, for example, when you: • open an account • provide account information • give us your contact information • make deposits or withdrawals from your account • make a wire transfer • tell us where to send money • tells us who receives the money • show your government-issued ID • show your driver’s license | | |
| | Why can’t I limit all sharing? | | | | Federal law gives you the right to limit only: • sharing for affiliates’ everyday business purposes-information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing. | | |
| | Definitions | | | | | | |
| | Affiliates | | | | Companies related by common ownership or control. They can be financial and nonfinancial companies. • Monachil Credit Income Fund does not share with our affiliates for marketing purposes. | | |
| | Nonaffiliates | | | | Companies not related by common ownership or control. They can be financial and nonfinancial companies. • Monachil Credit Income Fund does not share with nonaffiliates so they can market to you. | | |
| | Joint marketing | | | | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • Monachil Credit Income Fund does not jointly market. | | |
ITEM 1.(b) Not applicable.
ITEM 2. CODE OF ETHICS.
a) The Registrant has adopted a code of ethics (the “Code of Ethics”) that applies to the Registrant’s principal executive officer and principal financial officer.
(b) No information needs to be disclosed pursuant to this paragraph.
(c) The Registrant has made no amendments to its Code of Ethics during the period covered by the report to members presented in Item 1 hereto.
(d) The Registrant has not granted a waiver or an implicit waiver from a provision of its Code of Ethics during the period covered by the report to members presented in Item 1 hereto.
(e) Not applicable.
(f)
(1) Code of Ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto.
(2) Not applicable.
(3) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the Board of Trustees has designated Thomas G. Knipper as an audit committee financial expert. Mr. Knipper is considered an Independent Trustee of the Fund.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
(a) The aggregate fees billed for the fiscal year for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $8,500 for 2022.
Audit-Related Fees
(b) The aggregate fees billed for the fiscal year for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $0 for 2022. The fees listed in item 4 (b) are related to out-of-pocket expenses in relation to the annual audit of the registrant.
Tax Fees
(c) The aggregate fees billed for the fiscal year for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $1,500 for 2022.
All Other Fees
(d) The aggregate fees billed in the fiscal year for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $3,0001 for 2022.
1 Fees for the Seed Audit dated October 5, 2022
(e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Registrant's Audit Committee must pre-approve the audit and non-audit services of the Auditors prior to the Auditor's engagement.
(e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal year of the registrant was $0 for 2022.
(h) The registrant's audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. No such services were provided.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item (a) of this form. |
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
PROXY VOTING POLICIES AND PROCEDURES
I. STATEMENT OF POLICY
Proxy voting is an important right of shareholders, and the Adviser must undertake reasonable care and diligence to ensure that such rights are properly and timely exercised. When the Adviser has discretion to vote its Clients’ proxies, it will vote those proxies according to its Clients’ best interests to maximize shareholder value and in accordance with these policies and procedures. For purposes of this policy, “proxies” are deemed to include the exercise of voluntary corporate actions, class actions and other rights.
II. PROXY VOTING PROCEDURES
The CCO, a Delegate or a third party retained by the Adviser to assist in coordinating and voting proxies will:
A. | determine which accounts managed by the Adviser hold the security to which the proxy relates; |
B. | determine whether any material conflict of interest exists that would inhibit the Adviser’s ability to vote the proxies objectively and in the best interest of the Client(s); and |
C. | complete the proxy form and mail or electronically submit it in a timely and appropriate manner. |
To determine whether a material conflict of interest exists, the Adviser should attempt to consider all factors related to a proxy vote that could affect the value of the investment. If a material conflict of interest exists, the Adviser will give the Client(s) the opportunity to vote the proxies themselves.
III. VOTING GUIDELINES
Absent specific voting guidelines from Clients, the Adviser will vote proxies in the best interest of each particular Client, which may result in different voting results for proxies for the same issuer.
For other proposals, the Adviser should determine whether a proposal is in its Clients’ best interests and may consider the following factors, among others:
A. | whether the proposal was recommended by management and the Adviser's opinion of management; |
B. | whether the proposal acts to entrench existing management; and |
C. | whether the proposal fairly compensates management for past and future performance. |
The Adviser may refrain from voting a proxy (a) if the Adviser determines it is not in the best interest(s) of its Client(s), (b) if the security is not held as of the record date or (c) if the Adviser determines there is insufficient benefit to voting the proxy.
IV. RECORDKEEPING
The CCO, a delegate, or a third party retained by the Adviser will maintain files relating to the Adviser’s proxy voting procedures in an easily accessible place, and Clients may obtain such files from the Adviser by submitting a written request. The party responsible for maintaining such files will keep a record of each proxy statement received, how the Adviser voted each proxy, and any document the Adviser created that was material to its voting decision or that memorializes such decision.
V. CLASS ACTION LAWSUITS
From time to time, securities held in the accounts of Clients will be the subject of class action lawsuits. The Adviser has no obligation to determine if securities held by the Client are subject to a pending or resolved class action lawsuit. It also has no duty to evaluate a Client's eligibility or to submit a claim to participate in the proceeds of a securities class action settlement or verdict. Furthermore, the Adviser has no obligation or responsibility to initiate litigation to recover damages on behalf of Clients who may have been injured because of actions, misconduct, or negligence by corporate management of issuers whose securities are held by Clients.
Where the Adviser receives written or electronic notice of a class action lawsuit, settlement, or verdict directly relating to a Client account, it will forward all notices, proof of claim forms, and other materials, to the Client. Electronic mail is acceptable where appropriate if the Client has authorized contact in this manner.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio Manager(s) or Management Team Members
The following table provides biographical information about the members of Monachil Capital Partners LP (the “Investment Manager”) who are primarily responsible for the day-to-day portfolio management of Monachil Credit Income Fund as of December 31, 2022:
Name of Portfolio Management Team Member | Title | Length of Time of Service to the Fund | Business Experience During the Past 5 Years | Role of Portfolio Management Team Member |
Ali Meli | Trustee, Chairman of the Board, President and Chief Executive Officer | Since June 2021 | Founder and Managing Partner, Monachil Capital Partners (financial services firm) (2019 – Present); Partner, Goldman Sachs Group (financial services firm) (2004 – 2019) | Lead Portfolio Manager |
Christopher Pryor | Portfolio Manager | Since June 2021 | Head of Corporate Investments at Fifteen Group from April 2017 to January 2019. Investment banker at Marlin & Associates from November 2015 to January 2017 | Portfolio Management |
(a)(2) Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest
The following table reflects information regarding accounts for which the portfolio manager has day-to-day management responsibilities (other than the Fund). Accounts are grouped into three categories: (i) registered investment companies, (ii) other pooled investment accounts, and (iii) other accounts. Information is shown as of December 31, 2022:
Name of Portfolio Management Team Member | Number of Accounts and Total Value of Assets for Which Advisory Fee is Performance-Based: | Number of Other Accounts Managed and Total Value of Assets by Account Type for Which There is No Performance-Based Fee: | ||||
Name
| Registered investment companies | Other pooled investment vehicles | Other accounts | Registered investment companies | Other pooled investment vehicles | Other accounts |
Ali Meli | Zero Accounts | 2 Accounts $33.5M | Zero Accounts | Zero Accounts | Zero Accounts | Zero Accounts |
Christopher Pryor | Zero Accounts | 2 Accounts $33.5M | Zero Accounts | Zero Accounts | Zero Accounts | Zero Accounts |
Conflicts of Interest
The Investment Manager and Portfolio Managers may manage multiple funds and/or other accounts, and as a result may be presented with one or more of the following actual or potential conflicts:
The management of multiple funds and/or other accounts may result in the Investment Manager or Portfolio Manager devoting unequal time and attention to the management of each fund and/or other account. The Investment Manager seeks to manage such competing interests for the time and attention of a Portfolio Manager by having the Portfolio Manager focus on a particular investment discipline. Most other accounts managed by a Portfolio Manager are managed using the same investment models that are used in connection with the management of the Fund.
If the Investment Manager or Portfolio Manager identifies a limited investment opportunity which may be suitable for more than one fund or other account, a fund may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible funds and other accounts. To deal with these situations, the Investment Manager has adopted procedures for allocating portfolio transactions across multiple accounts.
The Investment Manager has adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
(a)(3) Compensation Structure of Portfolio Manager
Compensation of the Portfolio Manager
Mr. Meli has ownership and financial interests in, and may receive compensation and/or variable profit distributions from, the Investment Manager based on the Investment Manager’s financial performance, such as its overall revenues and profitability. Mr. Pryor’s compensation is not tied to the Fund’s performance, except to the extent that the fee paid to the Investment Manager impacts the Investment Manager’s financial performance.
(a)(4) Disclosure of Securities Ownership
Portfolio Management Team’s Ownership of Shares
Name of Portfolio Manager: | Dollar Range of Shares Beneficially Owned by Portfolio Manager: |
Ali Meli | Over $1,000,000 |
Christopher Pryor | None |
(b) Not Applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17CFR 229.407), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
(a)(1)
(a)(3) Not applicable.
(a)(4) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) | Monachil Credit Income Fund |
By (Signature and Title)* | /s/ Ali Meli | |
Ali Meli, President | ||
(Chief Executive Officer) |
Date | March 10, 2023 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Ali Meli | |
Ali Meli, President | ||
(Chief Executive Officer) |
Date | March 10, 2023 |
By (Signature and Title)* | /s/ Joseph McNeila | |
Joseph McNeila, Treasurer | ||
(Principal Financial Officer) |
Date | March 10, 2023 |
* Print the name and title of each signing officer under his or her signature.