M&G Index Tracker Fund

M&G Index Tracker Fund a sub-fund of M&G Investment Funds (2) Annual Short Report May 2021 For the year ended 31 May 2021 M&G Index Tracker Fund Fund information The Authorised Corporate Director (ACD) of and local movement restrictions that have been enacted by M&G Investment Funds (2) presents its Annual Short Report for various governments. M&G Index Tracker Fund which contains a review of the fund’s investment activities and investment performance during the Investment objective and policy up to period. The ACD’s Annual Long Report and audited Financial 27 May 2021 Statements for M&G Investment Funds (2), incorporating all the sub-funds and a Glossary of terms is available free of charge The fund is designed to track the FTSE All-Share Index. The fund either from our website at www.mandg.co.uk/reports or by calling manager has full discretionary investment management powers M&G Customer Relations on 0800 390 390. within the confines of this investment objective of the fund. An annual assessment report is available which shows the value Investment objective from 28 May 2021 provided to investors in each of M&G’s UK-based funds. The assessment report evaluates whether M&G’s charges are justified The fund aims to track the performance of the FTSE All-Share in the context of the overall service delivered to its investors. The Index, gross of the ongoing charge figure (OCF). The return report can be found at www.mandg.co.uk/valueassessment received by shareholders will be reduced by the effects of charges. ACD Investment policy from 28 May 2021 M&G Securities Limited, 10 Fenchurch Avenue, London EC3M 5AG, UK The fund aims to be invested in the constituents of the Index. The Telephone: 0800 390 390 (UK only) fund typically invests directly. (Authorised and regulated by the Financial Conduct Authority. The fund may also invest in other transferable securities, cash and M&G Securities Limited is a member of the Investment near cash for liquidity purposes, directly and via collective Association and of The Investing and Saving Alliance) investment schemes (including funds managed by M&G). Important information The fund may hold other transferable securities and other financial instruments where these are held as a consequence of Investors will benefit from a reduction in the annual charge having invested in an Index constituent. The fund can invest in starting from 15 February 2021. The reduction in annual charge securities joining or likely to join the index. varies across the M&G funds and the detail was communicated in the shareholder letter dated 15 January 2021. The fund may use derivatives for efficient portfolio management and hedging only. On 28 May 2021 the investment objective, policy, approach and benchmark for M&G Index Tracker Fund were changed. Investment approach up to 27 May 2021 The World Health Organisation declared the COVID-19 outbreak a The M&G Index Tracker Fund is a UK fund that broadly replicates pandemic on 11 March 2020. the FTSE All-Share Index*. The fund holds nearly all of the The COVID-19 pandemic has been an unprecedented event. After companies in the index and closely matches the weight that each an initial period of increased market volatility and uncertainty, represents in the FTSE All-Share Index. there has been a marked recovery in global markets, bolstered by * FTSE® International. FTSE is a joint trademark of the London Stock supportive economic policies from governments and positive Exchange Limited and the Financial Times Limited and is used by FTSE news on vaccines for COVID-19. International Limited under licence. The FTSE All-Share Index is calculated by FTSE International Limited. FTSE International Limited does The ACD continues to monitor the ongoing operational risks that not sponsor, endorse or promote these products. All copyright in the index values and constituent lists rests with FTSE International Limited. are posed to the Company and its service providers due to global M&G Securities Limited has obtained full licence from FTSE International Limited to use such copyright in the creation of this product. 1 2 M&G Index Tracker Fund Fund information Investment approach from 28 May 2021 The fund is passively managed. The Index is used as a target benchmark as the fund aims to track the returns of the Index The fund is designed to track the FTSE All-Share Index. The Index gross of the ongoing charge figure . represents the performance of small, medium and large companies listed on the London Stock Exchange’s main market. Although the fund's holdings will be predominantly or entirely comprised of benchmark constituents, the weights held in the ThefundusesastratifiedsamplingmethodtotracktheIndexand fund may deviate from the weights of the benchmark's therefore may not hold all the Index constituents. constituents. The fund will normally hold all of the largest securities in the Index, For unhedged and hedged share classes, the benchmark is shown as well as a selection of the remaining smaller securities to ensure in the share class currency. that the fund’s capitalisation, sector and industry weights are in line with the Index weightings. Risk profile Using a stratified sampling method may affect the fund’s ability to The fund is designed to track the performance of the FTSE track the Index. There are many factors which do not affect the All-Share Index, which represents a broad spread of UK company Index, but do impact on the fund’s performance, such as shares. Its performance, therefore, reflects the price volatility of transaction costs, expenses and illiquidity of any security. Cash the UK stockmarket and the performance of individual companies. flows, including income and distributions, into and out of the fund may also have an impact on performance as the fund rebalances, The fund holds nearly all of the companies in the index and closely due to the dealing spreads and broker commission incurred. In matches the weight that each represents in the FTSE All-Share addition, the Index constituents are not fixed, it rebalances Index. The fund’s risks are measured and managed as an integral quarterly, and it may take time for the fund to reflect any changes. part of the investment process. The tracking method (combining the stratified sampling technique Please note that the risk management policies are set out in full in and the use of derivatives when required for short term efficient the financial statements and notes sections of the Annual Long portfolio management purposes) does not introduce any Report and audited Financial Statements of M&G Investment counterparty risk. Funds (2). The tracking error between the performance of the fund (gross of OCF) and that of the Index is anticipated to be up to 0.3% per annum under normal circumstances. Benchmark up to 27 May 2021 Benchmark: FTSE All-Share Index. The index is a constraining benchmark for the fund. The fund is passively managed and aims to track the return of the index. The fund's holdings are therefore unlikely to significantly deviate from the benchmark's constituents. For unhedged and hedged share classes, the benchmark is shown in the share class currency. Benchmark from 28 May 2021 Benchmark: FTSE All-Share Index. 3 4 M&G Index Tracker Fund Fund information The following table shows the risk number associated with the fund and is based on Sterling Class ‘A’ shares. Low risk High risk Typically lower rewards Typically higher rewards 123456 7 The above number: • is based on the rate at which the value of the fund has moved up and down in the past and is based on historical data so may not be a reliable indicator of the future risk profile of the fund. • is not guaranteed and may change over time and the lowest risk number does not mean risk free. • has changed during this period. From 1 June 2020 to 23 July 2020 the risk number was 5. 5 6 M&G Index Tracker Fund Investment review As at 1 June 2021, for the year ended 31 May 2021 pricing method has the effect of moving the single price up or down from the mid-price. Much of the fund’s apparent Performance against objective underperformance was due to a price swing at the start and end The M&G Index Tracker Fund is designed to track the FTSE All- of the period under review. Share Index. Between 1 June 2020 (the start of the review period) and 1 June 2021, the fund’s Sterling Class ‘A’ and Class ‘C’ shares Fund charges – The fees we charge for managing the fund, as produced a total return (the combination of income and growth of well as the costs incurred when we buy and sell underlying capital) of 21.4% and 21.9%, respectively in sterling terms. The investments, will mean the fund’s return after charges is below fund’s benchmark, the FTSE All-Share Index, produced a total that of the index (which does not reflect the costs of investing). return of 22.4% over the same period. Timing – This reflects the fact that the fund is priced at midday For the performance of each share class, please refer to the while the index is priced at close of business day. ‘Long-term performance by share class’ table in the ‘Financial Tracking difference – This refers to the difference in performance, highlights’ section of the Annual Long Report and audited positive or negative, due to the fund not fully replicating the Financial Statements for M&G Investment Funds (2). composition of the index. To give an indication of the performance of the fund, the following As the fund tracks the index, its overall performance can largely table shows the compound rate of return, per annum, over the be explained by market developments during the period under period for Sterling Class ‘A’ (Accumulation) shares.

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