M&G Index Tracker Fund

M&G Index Tracker Fund a sub-fund of M&G Investment Funds (2) Interim Short Report November 2020 For the six months ended 30 November 2020 M&G Index Tracker Fund Fund information The Authorised Corporate Director (ACD) of M&G Investment Funds (2) Investment objective and policy presents its Interim Short Report for M&G Index Tracker Fund which The fund is designed to track the FTSE All-Share Index. The fund manager contains a review of the fund’s investment activities and investment has full discretionary investment management powers within the confines performance during the period. The ACD’s Interim Long Report and of this investment objective of the fund. unaudited Financial Statements for M&G Investment Funds (2), incorporating all the sub-funds and a Glossary of terms is available free of charge either from our website at www.mandg.co.uk/reports or by calling Investment approach M&G Customer Relations on 0800 390 390. The M&G Index Tracker Fund is a UK fund that broadly replicates the FTSE An annual assessment report is available which shows the value provided to All-Share Index*. The fund holds nearly all of the companies in the index investors in each of M&G’s UK-based funds. The assessment report and closely matches the weight that each represents in the FTSE All-Share evaluates whether M&G’s charges are justified in the context of the overall Index. service delivered to its investors. The report can be found at * FTSE® International. FTSE is a joint trademark of the London Stock Exchange www.mandg.co.uk/valueassessment. Limited and the Financial Times Limited and is used by FTSE International Limited under licence. The FTSE All-Share Index is calculated by FTSE International Limited. ACD FTSE International Limited does not sponsor, endorse or promote these products. All copyright in the index values and constituent lists rests with FTSE International M&G Securities Limited, Limited. M&G Securities Limited has obtained full licence from FTSE International 10 Fenchurch Avenue, London EC3M 5AG Limited to use such copyright in the creation of this product. Telephone: 0800 390 390 (Authorised and regulated by the Financial Conduct Authority. M&G Benchmark Securities Limited is a member of the Investment Association and of The Benchmark: FTSE All-Share Index. Investing and Saving Alliance (formerly Tax Incentivised Savings The index is a constraining benchmark for the fund. Association)) 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 Important information benchmark's constituents. The World Health Organisation declared the COVID-19 outbreak a For unhedged and hedged share classes, the benchmark is shown in the pandemic on 11 March 2020. share class currency. Global financial markets have been reacting to the outbreak. All markets have incurred increased volatility and uncertainty since the onset of the Risk profile pandemic. The fund is designed to track the performance of the FTSE All-Share Index, The ACD has also noted the operational risks that are posed to the which represents a broad spread of UK company shares. Its performance, Company and its service providers due to global and local movement therefore, reflects the price volatility of the UK stockmarket and the restrictions that have been enacted by various governments. performance of individual companies. The COVID-19 pandemic is an unprecedented event and the eventual The fund holds nearly all of the companies in the index and closely matches impact on the global economy and markets will largely depend on the scale the weight that each represents in the FTSE All-Share Index. The fund’s risks and duration of the outbreak. The ACD will continue to monitor this are measured and managed as an integral part of the investment process. situation. 1 2 M&G Index Tracker Fund Fund information Risk profile 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. 3 4 M&G Index Tracker Fund Investment review As at 1 December 2020, for the six months ended Price swings – This is a dilution adjustment within the share price, which 30 November 2020 aims to protect existing shareholders from a dilution in performance resulting from deals placed to buy or sell shares. This pricing method has Performance against objective the effect of moving the single price up or down from the mid-price. Most of The M&G Index Tracker Fund is designed to track the FTSE All-Share Index. the fund’s apparent underperformance was due to a price swing at the start Between 1 June 2020 (the start of the review period) and 1 December and end of the period under review. 2020, the fund’s Sterling Class ‘A’, ‘C’ and ‘I’ shares produced a total return Fund charges – The fees we charge for managing the fund, as well as the (the combination of income and growth of capital) of 6.4%, 6.7% and 6.5%, costs incurred when we buy and sell underlying investments, will mean the respectively in sterling terms. Meanwhile, the fund’s benchmark, the FTSE fund’s return after charges is below that of the index (which does not reflect All-Share Index, produced a total return of 7.5% over the same period. the costs of investing). For the performance of each share class, please refer to the ‘Long-term Timing – This reflects the fact that the fund is priced at midday while the performance by share class’ table in the ‘Financial highlights’ section of the index is priced at close of business day. Interim Long Report and unaudited Financial Statements for M&G Tracking difference – This refers to the difference in performance, positive Investment Funds (2). or negative, due to the fund not fully replicating the composition of the To give an indication of the performance of the fund, the following table index. shows the compound rate of return, per annum, over the period for Sterling As the fund tracks the index, its overall performance can largely be Class ‘A’ (Accumulation) shares. Calculated on a price to price basis with explained by market developments over the period under review. It is worth income reinvested. noting that, in a global economy, the fates of individual markets are often Long-term performance closely connected to each other. As a result, the performance and prospects of the UK stockmarket tend to be affected by developments around the Six Three Five Since months years years launch world. 01.06.20 01.12.17 01.12.15 Against the backdrop of the coronavirus pandemic, the UK stockmarket % [a] %pa %pa %pa was volatile for much of the period under review. Ongoing measures from Sterling [b] Class 'A' +6.4 -0.5 +4.0 +4.3 [c] the government and the Bank of England to provide support were welcomed by investors, while promising results from a number of vaccine [a] Absolute basis. projects led to strong gains towards the end of the period under review. [b] Price to price with income reinvested. Following heavy falls in spring 2020 due to the emergence and spread of [c] 27 February 1998, the launch date of the predecessor unit trust. COVID-19, global stockmarkets rallied in early summer, with sentiment boosted by huge monetary and fiscal stimulus. Signs that the rate of Please note past performance is not a guide to future performance and the infection may be slowing, the partial easing of lockdown restrictions in value of investments, and the income from them, will fluctuate. This will certain parts of the global economy and hopeful reports of a vaccine or cause the fund price to fall as well as rise and you may not get back the treatment for the virus provided further support. original amount you invested. As the summer progressed, a lack of progress in the Brexit negotiations Performance review dampened sentiment, leading to weakness in the domestic stockmarket. Meanwhile, a resurgence of COVID-19 in several countries, including the There are several factors that can result in the fund underperforming or UK, led to the imposition of localised restrictions, which threatened to derail outperforming the benchmark index over specific periods. the economic recovery and further weighed on investor sentiment. 5 6 M&G Index Tracker Fund Investment review Performance review Turning to individual stocks, leading performers included mining firms Rio In early November, the UK entered its second lockdown with the aim of Tinto, Glencore and Anglo American, as well as Ferguson, an Anglo- curbing a second wave of the virus. Against a backdrop of pandemic- American multinational plumbing and heating products distributor. In related economic damage and the UK’s imminent departure from the contrast, significant detractors over the six months included European Union (EU), the Bank of England added to an already pharmaceutical company GlaxoSmithKline, British American Tobacco and considerable bond-buying stimulus, increasing it by a greater-than- energy firm BP. expected £150 billion, which was well received by investors.

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