M&G Equities Investment Fund for Charities (Charifund) Interim Long Report and unaudited Financial Statements for the six months ended 30 April 2021 Contents Manager’s Report...... 1 Directors’ statement ...... 3 M&G Equities Investment Fund for Charities (Charifund) Report, including the financial highlights and financial statements and notes...... 4 Other regulatory disclosures ...... 24 Appendix ...... 25 Glossary...... 28
Interim Long Report and unaudited Financial Statements • April 2021 Manager’s Report
The Manager of The M&G Equities Investment Fund for Advisory committee Charities (Charifund) presents its Interim Long Report The members of the committee, which acts as a and unaudited Financial Statements for the six months consultative committee to M&G Securities Limited, are: ended 30 April 2021. D S S Chichester (Chairman), B S Bostrom, SMCorbettLVO,AFGibbs, Fund information G A Prescott BA FCA, N C Talbot Rice The fund is an authorised unit trust, regulated as a Investment adviser Charity Authorised Investment Fund and a non-UCITS M&G Investment Management Limited retail scheme as defined in the FCA Regulations under 10 Fenchurch Avenue, London EC3M 5AG, UK number 1086838. The fund is also a Common (Authorised and regulated by the Financial Conduct Investment Fund under the Charities Act 2011 and a Authority) charity registered with the Charity Commission for Registrar England and Wales under number 249958. SS&C Financial Services Europe Ltd, Charifund qualifies as an alternative investment fund SS&C House, St. Nicholas Lane, Basildon, Essex under the Alternative Investment Fund Managers SS15 5FS, UK Directive. (Authorised and regulated by the Financial Conduct Authority) M&G Securities Limited (the Manager) is authorised by SS&C Financial Services Europe Ltd act as the the FCA as Alternative Investment Fund Manager while administrators for Charifund. M&G Investment Management Limited is the investment adviser. Trustee A unitholder is not liable for the debts of the fund and NatWest Trustee & Depositary Services Limited is the will not be liable to make any further payment to the Trustee of the fund and for the purposes of the fund after paying the purchase price of the units. Alternative Investment Fund Managers Directive (AIFMD) they are also the Depositary. Charities registered in England, Scotland, Wales and Northern Ireland can invest in Charifund. NatWest Trustee & Depositary Services Limited, House A, Floor 0, 175 Glasgow Road, Gogarburn, Fund manager EdinburghEH121HQ,UK Michael Stiasny (Authorised by the Prudential Regulation Authority and Michael Stiasny is employed by M&G FA Limited, which regulated by the Financial Conduct Authority and the is an associate of M&G Securities Limited. Prudential Regulation Authority) Manager Independent auditor M&G Securities Limited Ernst & Young LLP Atria One, 144 Morrison Street, Edinburgh EH3 8EX, UK 10 Fenchurch Avenue, London EC3M 5AG, UK Telephone: 020 7626 4588 (Authorised and regulated by the Financial Conduct Annual value assessment Authority) An annual assessment report is available which shows Directors of the Manager the value provided to investors in each of M&G’s UK C Dobson (non executive director), S A Fitzgerald, based funds. The assessment report evaluates whether P R Jelfs, M McGrade (non executive director), M&G’s charges are justified in the context of the overall LJMumford service delivered to its investors. The report can be found at www.mandg.co.uk/valueassessment
Interim Long Report and unaudited Financial Statements • April 2021 1 Manager’s Report
Important information The World Health Organisation declared the COVID- 19 outbreak a pandemic on 11 March 2020.
The COVID-19 pandemic has been an unprecedented event. After an initial period of increased market volatility and uncertainty, there has been a marked recovery in global markets, bolstered by supportive economic policies from governments and positive news on vaccines for COVID-19.
The ACD continues to monitor the ongoing operational risks that are posed to the Company and its service providers due to global and local movement restrictions that have been enacted by various governments.
Investor information The Prospectus and Trust Deed as well as the latest Annual or Interim Long Report and Financial Statements areavailablefreeofchargeonrequestfromthe following address. The Trust Deed can also be inspected at our offices or at the office of the Trustee. Customer services and administration M&G Charity Team PO Box 9038, Chelmsford CM99 2XF, UK Telephone: 0800 917 4472
If you need more information about investing, please contact us direct. Alternatively, if you wish to obtain advice as to whether this investment is suitable for your needs, you should consult a financial adviser.
If you would like a list of financial advisers in your area, please visit www.unbiased.co.uk
We can answer your questions and take your instructions between 9.00am and 5.00pm Monday to Friday. For security purposes, and to improve the quality of our service, we may record and randomly monitor telephone calls.
If you already invest with us, please quote your M&G holding reference number (shown on your income vouchers or statements) when you contact the M&G Charity Team. Please note that M&G Securities Limited does not offer investment advice or make any recommendations regarding investments.
2 Interim Long Report and unaudited Financial Statements • April 2021 Manager’s Report
Directors’ statement The report is signed in accordance with the requirements of the Collective Investment Schemes sourcebook, as issued and amended by the Financial Conduct Authority.
M&G Securities Limited 21 May 2021
Interim Long Report and unaudited Financial Statements • April 2021 3 Manager’s Report
Charitable objective The fund typically invests in a well-diversified portfolio of high-yielding UK stocks. The yield premium attached The fund‘s charitable objective will be to further the to the fund means that there is a bias toward good charitable purposes of the Charities that directly or value, out of favour stocks (i.e. those stocks which the indirectly hold units in the fund from time to time. portfolio manager considered to be undervalued by the market). The emphasis on yield helps to identify shares Investment objective that are relatively cheap and to avoid those that are expensive. From the universe of high yielding stocks, The fund has three aims: the manager identifies companies that are competitive, • To provide an annual yield above that available with a strong business franchise and that have from the FTSE All-Share Index; attractive dividend growth prospects. • To provide an income stream that increases every year; Benchmarks • To provide a level of capital growth, net of the The fund is actively managed. The target benchmarks ongoing charge figure, that is higher than inflation and comparator benchmark do not constrain the fund‘s over any ten-year period, as measured by the UK portfolio construction. Retail Prices Index (RPI). • Target There is no guarantee that the fund will achieve its investment objective over this, or any other, period and Yield: FTSE All-Share Index investors may not get back the original amount they Capital growth: UK Retail Prices Index (RPI) invested. The benchmarks are targets which the fund seeks to outperform. The target yield and capital growth level Investment policy referenced in the investment objective have been chosen as they are achievable targets given the fund’s At least 70% of the fund is invested in equity securities investment policy. and equity-related securities of companies across any sectors and market capitalisations, that are • Comparator incorporated, domiciled, listed or do most of their Total return: FTSE All-Share Index business in the United Kingdom. The fund’s performance can be measured against the The fund may also invest in other transferable comparator benchmark. The index has been chosen as securities, including the shares of non-UK companies, the fund’s comparator benchmark as it best reflects the cash and near cash directly or via collective investment scope of the fund’s investment policy. schemes (including funds managed by M&G).
Companies involved in the production of tobacco are excluded from the investment universe. Risk profile The fund invests mainly in the shares of UK-listed Derivatives may be used for efficient portfolio dividend paying companies. A portion of the fund may management and hedging. also be invested in the shares of dividend paying companies listed overseas. It is therefore, subject to the Investment approach price volatility of the UK and overseas stockmarkets and the performance of individual companies. The fund may The fund employs a disciplined approach to investment also be subject to fluctuations in currency exchange which concentrates on the analysis and selection of rates. individual companies.
4 Interim Long Report and unaudited Financial Statements • April 2021 Manager’s Report
The fund’s focus is on good-quality companies with dividend payments after widespread cancellations in attractive dividend growth prospects. However dividend 2020, this year’s distribution has been stabilised distributions from the fund’s holdings are not without recourse to Charifund’s reserves, which guaranteed and may vary. currently represent 13% of last year’s 67.00p payout. We are aiming to at least match this figure from the Diversification across industries and market fund’s income in 2021. The income reserve will provide capitalisation is key in managing liquidity risk and us with flexibility to manage the income as we navigate reducing market risk. a landscape that continues to improve, but remains The fund’s risks are measured and managed as an uncertain. The annual rate of inflation, as measured by integral part of the investment process. the Retail Prices Index (RPI), was 2.9% in April 2021, The following table shows the risk number associated while the Consumer Prices Index (CPI) was 1.5%, below with the fund and is based on Income units. the government’s 2.0% target.
Low risk High risk As at 4 May 2021, Charifund’s net historic yielda of 4.40% was 55% higher than the yield of 2.84% on the Typically lower rewards Typically higher rewards benchmark FTSE All-Share Index. Notably, Charifund’s yield maintains its position as one of the highest 123 4567 distributing funds in the charities UK equity funds peer group (Source: Morningstar, Inc.). The above number: Despite last year’s setback, Charifund’s longer term • is based on the rate at which the value of the fund performance remains sound. Since inception in 1960, has moved up and down in the past and is based Charifund has delivered an annualised total return of on historical data so may not be a reliable indicator 12.5% against 10.7% by the FTSE All-Share Index (FT ofthefutureriskprofileofthefund. 30 Index prior to April 1962). Over the longer term, the • is not guaranteed and may change over time and fund has outperformed the index over three, seven and the lowest risk number does not mean risk free. 10 years, and is slightly behind over one and five years.
• has not changed during this period. Charifund aims to protect investors’ capital from the erosive effect of inflation over a rolling 10-year period, which it has achieved with an outperformance of 0.1% Investment review pa. In addition, the fund’s capital performance has As at 4 May 2021, for the six months ended 30 April outstripped inflation since launch in 1960 and over time 2021 periods shorter than 10 years. Meanwhile, Charifund’s Fund performance total return exceeds inflation over the 10-year time Over the six months under review, Charifund produced span, by 5.2% pa. a capital return of 30.8%, which was ahead of the a The historic yield reflects distributions declared over the past 12 months as a percentage of the mid-market price, as at the date shown. The level of capital return of 24.2% from the benchmark FTSE All- any income earned by the fund will fluctuate. Share Index. With income reinvested, Charifund’s total return over the period was 33.8% compared with the 26.2% total return from the FTSE All-Share Index.
Quarterly distributions of 11.50p and 21.50p per Income unit were declared, making a total distribution of 33.00p per Income unit for the half year. This was in line with last year’s distribution by the same stage, and follows a 19.3% decline in the full-year distribution for 2020. So far, assisted by a partial recovery in company
Interim Long Report and unaudited Financial Statements • April 2021 5 Manager’s Report
Market background would support the economic recovery. Sterling finished The coronavirus remained a dominant theme over the the period at US$1.39. six months under review: despite a second national All UK company sizes gained over the six months, with lockdown and renewed government restrictions, the UK smaller companies outperforming their large-cap, and stockmarket rallied strongly in November 2020, thanks to a lesser extent mid-cap, counterparts. Investors’ to positive news on a vaccine for COVID-19. Regulatory anticipation of a recovery in the domestic economy in approval in the UK for a number of vaccines swiftly the second half of 2021 supported smaller companies, followed, boosting investor sentiment. From December, while sterling’s relative strength against the US dollar the rapid rollout of a national inoculation programme weighed on gains among larger companies, with against the virus provided additional cheer, although greater international revenue exposure. this was dampened somewhat by the emergence of some highly infectious strains of the virus. Factors affecting performance Charifund delivered a strong performance to complete Early in the period, investors also welcomed the result the first half of the reporting year comfortably ahead of of the US presidential election, which was ultimately the FTSE All-Share Index. Normally, Charifund’s seen as a supportive outcome for markets and global defensive portfolio could be expected to lag in strong trade. A source of uncertainty for many months, the UK market conditions; however, it was boosted by a and European Union continued trade negotiations up to recovery in dividend payments, a rally from oversold the wire, finally securing a last-minute deal at the end of levels by more economically sensitive sectors of the 2020. economy, and through a below-market exposure to The new year saw early optimism fade somewhat due larger companies as they were held back by the impact to the emergence of further virulent mutations of the of a strengthening pound on their overseas revenues. virus, together with the imposition of a third population Sector allocation added value, mainly as a result of a lockdown and renewed business restrictions in the UK. below-market position in more defensive consumer In late February, concerns about higher inflation, fuelled staples companies. Stock selection also added value, by hopes of a rapid economic recovery in the near term, particularly from the fund’s positions in consumer areas caused bond yields to rise sharply and investors to lose such as media and travel, as well as housebuilders, their appetite for risk. March saw more positive industrials and technology. sentiment emerge, buoyed by President Biden’s Some performance was surrendered through US$1.9 trillion relief package in the US. Meanwhile, in Charifund’s exposure to overseas holdings and the UK, the prime minister laid down a roadmap out of preference shares (approximately 14% of the portfolio), the third lockdown, which would see most restrictions as the former were affected by adverse currency moves lifted by June; and in the Budget the chancellor and the latter as their fixed coupon element means they extended the government’s support measures for the have bond-like attributes, and bonds were weak. In economy. addition, some of the more defensive areas of the Following a challenging 2020, the picture for dividends market underperformed, where the fund is exposed for has improved a little recently; many companies have their income-generating properties, such as telecoms, resumed payments and some have made additional pharmaceutical manufacturers and utility companies. payments to compensate for those missed last year. The main contributors to performance at the stock level This favourable trend should continue, in our view, on came from across the market capitalisation spectrum. the back of an expected pickup in economic activity. Within the larger company category, two resources Sterling stood at around US$1.30 at the end of October giants, BP and Rio Tinto, added value reflecting soaring 2020 and reached a high of US$1.42 in February due to commodity prices as OPEC restricted oil production and expectations that the UK’s rapid rollout of the vaccine demand for raw materials has increased from China. Within medium-sized companies, notably shares in
6 Interim Long Report and unaudited Financial Statements • April 2021 Manager’s Report
Micro Focus rose after the software firm signed a major store freeholds through inflation-linked long-dated agreement with Amazon Web Services to modernise leases to Tesco, Sainsbury’s and Morrisons. their mainframe applications and use of AWS cloud. There were a number of complete sales and notably in Within smaller companies, newspaper group Reach the overseas segment following outperformance and a (formerly Trinity Mirror) announced good results, while decline in yields last year. At the same time this allowed logistics business Wincanton issued a strong trading thefundtotakeadvantageofthemoreattractiveyields update. on offer in the UK following the market’s relative The main detractors were predominantly larger underperformance in 2020. Within the larger UK companies and included three utilities, National Grid, segment of the portfolio, complete sales also reflected Pennon and United Utilities. Further value was lost a decline in yields after good performance and these through a below-market position in miner BHP. In included bicycle plus auto parts retailer Halfords and addition, not holding miners Anglo American and housebuilder Countryside Properties. In addition, we Glencore, oil major Royal Dutch Shell ‘A’ shares plus completed selling down BT as the telecoms group will banking group Barclays acted as a further dampener on not be paying a dividend until 2022. the fund’s performance. In other activity, we reduced oil major Royal Dutch Shell Key changes to the portfolio in preference to BP, which has a more attractive yield Fund activity has begun to turn from mitigating the plus a better management and strategy for taking the effect of dividend cuts to once again taking advantage company forward in terms of pivoting towards green of income and valuation opportunities. There are still energy and becoming carbon-neutral by 2050. risks from the pandemic given the impact of rolling Some of the proceeds from these sales were recycled lockdowns, but we are starting to see some degree of into holdings on more attractive yields, including normality return to the market and corporate behaviour. pharmaceutical manufacturer GlaxoSmithKline, Accordingly, new positions were established in Conduit, housebuilder Persimmon, and student accommodation Devro, Schroders and Supermarket Income REIT (real plus build-to-rent residential property developer Watkin estate investment trust). Conduit is a start-up Jones. Furthermore we added to packaging business reinsurance company which raised more than DS Smith and broadcaster ITV, as we believe both will £800 million through an IPO (initial public offering). This return to paying dividends again and they remain will enable the company to deploy capital and take attractively valued. advantage of significant price hardening in a difficult Outlook insurance market for the incumbents which have The UK economy is starting to show signs of weathered massive losses. Devro is a leading improvement in the manufacturing and construction manufacturer of collagen casing products (mainly sectors, despite having effectively been in lockdown sausage casings) and the shares are on half the since November 2020. Economic activity has been valuation of the company’s closest peer, giving them an assisted by the successful vaccine rollout and steps by attractive yield of around 5% and reflecting a companies to adapt to COVID-19 restrictions and the substantial programme of capital expenditure, the new post-Brexit environment. benefit of which is starting to come through. Asset manager Schroders is a compelling long-term Barring unforeseen setbacks, the UK could see most investment in our view, with a good management pandemic-related restrictions lifted by June. Given the strategy, attractive yield and an enviable record of huge increase in household savings during the past dividend payments. Supermarket Income REIT is an year, there is expected to be a significant rise in income investment trust, seeking to capitalise on the consumer spending as the restrictions are lifted, shift to online shopping from a portfolio of grocery resulting in a rapid recovery in the economy in the second half of the year. Encouragingly, these trends
Interim Long Report and unaudited Financial Statements • April 2021 7 Manager’s Report
might allow the economy to return to its pre-pandemic size by the middle of next year. Naturally, there is always the potential for unexpected disappointments and the route back to growth may not follow a linear path.
Despite a strong recovery from the lows of last March, the UK equity market remains relatively attractively valued versus its global peers and bonds. Meanwhile, domestic corporate earnings forecasts appear to have regained their positive momentum after last year’s declines and there has been a resumption in company dividend payments, providing further support for share prices. Encouragingly, merger and acquisition activity has picked up, indicating that the corporate sector has recognised the opportunity in the UK; many IPOs and fund raisings have been oversubscribed, indicating the depth of market support at current levels. As matters stand, the backdrop bodes relatively well for the UK market, particularly as Brexit has now been accomplished and a trade deal agreed.
Benefits of Charifund Charities derive considerable benefit from investing in Charifund for the equity portion of their portfolio. First, by investing via a collective investment scheme, charities are able to minimise their administrative burden. Second, investing in a fund with a clear, consistent strategy and comprising more than 100 holdings limits risk. Third, Charifund has no initial charge and the annual management fee is low at only 0.47%, which compares favourably with other similar funds. Fourth, no minimum restrictions apply to the size of a holding, so that all qualifying charities, whatever their size, can gain access to Charifund on equal terms. Finally, Charifund’s Advisory Committee consists of external investment professionals of long standing.
Michael Stiasny
Fund manager
Michael Stiasny is employed by M&G FA Limited, which is an associate of M&G Securities Limited. The fund’s investment portfolio and details of portfolio transactions are set out on pages 9 to 16. Please note that the views expressed in this Report should not be taken as a recommendation or advice as to how Charifund or any holding mentioned is likely to perform. If a charity wishes to obtain financial advice as to whether an investment is suitable for its needs, it should consult a financial adviser.
8 Interim Long Report and unaudited Financial Statements • April 2021 Investments
Portfolio statement
Holding as at 30.04.21 as at 30.04.21 as at 31.10.20 £’000 % %
Equities 983,916 100.61 101.07
Software & computer services 19,703 2.02 0.59
United Kingdom 19,703 2.02 0.59
2,100,000 Micro Focus 10,815 1.11
3,291,907 Moneysupermarket.com 8,888 0.91
Telecommunication service providers 31,299 3.20 3.77
United Kingdom 31,299 3.20 3.77
22,970,200 Vodafone 31,299 3.20
Pharmaceuticals & biotechnology 104,457 10.68 13.57
United Kingdom 75,901 7.76 9.77
489,703 AstraZeneca 37,428 3.83
2,869,850 GlaxoSmithKline 38,473 3.93
France 4,944 0.51 0.68
65,000 Sanofi 4,944 0.51
Switzerland 0 0.00 0.41
United States 17,139 1.75 1.88
215,000 AbbVie 17,139 1.75
Japan 6,473 0.66 0.83
270,000 Takeda Pharmaceutical 6,473 0.66
Banks 81,104 8.29 7.30
United Kingdom 66,160 6.76 5.96
700,000 Close Brothers 11,025 1.13
5,210,000 HSBC 23,588 2.41
38,000,000 Lloyds Banking 17,220 1.76
18,750 Nationwide Building Society 10.25% CCD Non-cum. Irrd. Pref. 3,464 0.35
7,100,000 Standard Chartered 7.375% Non-cum. Irrd. Pref. 9,287 0.95
1,100,000 StandardChartered8.25%Non-cum.Irrd.Pref. 1,576 0.16
Canada 9,602 0.98 0.85
140,000 Bank of Montreal 9,602 0.98
Singapore 5,342 0.55 0.49
330,000 DBS 5,342 0.55
Interim Long Report and unaudited Financial Statements • April 2021 9 Investments
Portfolio statement (continued)
Holding as at 30.04.21 as at 30.04.21 as at 31.10.20 £’000 % %
Equities (continued)
Investment banking & brokerage services 46,898 4.80 4.10
United Kingdom 43,511 4.45 4.06
850,000 Ashmore 3,405 0.35
2,800,000 Brewin Dolphin 9,310 0.95
350,000 Intermediate Capital 7,472 0.76
1,057,534 Jupiter Fund Management 2,752 0.28
2,000,000 Lloyds Banking 9.25% Non-cum. Irrd. Pref. 3,190 0.33
151,600 Schroders 3,889 0.40
4,000,000 Standard Life Aberdeen 11,044 1.13
1,983,117 XPS Pensions 2,449 0.25
Guernsey 3,387 0.35 0.04
9,408,227 Duke Royaltya 3,387 0.35
Equity investment instruments 38,551 3.94 4.42
United Kingdom 32,288 3.30 4.13
7,537,520 Aberforth Split Level Income Trust 6,060 0.62
3,200,000 Ecofin Global Utilities and Infrastructure Trust 5,952 0.61
800,000 Honeycomb Investment Trust 7,640 0.78
8,000,000 Middlefield Canadian Income Trusts 8,120 0.83
400,000 Princess Private Equity 4,516 0.46
Guernsey 0 0.00 0.29
United States 6,263 0.64 0.00
5,542,798 SDCL Energy Efficiency Income Trust 6,263 0.64
Non-equity investment instruments 173 0.02 0.02
United Kingdom 0 0.00 0.02
Guernsey 173 0.02 0.00
1,467,858 EF Realisationb 173 0.02
Life insurance 85,835 8.78 8.41
United Kingdom 85,835 8.78 8.41
5,500,000 Aviva 21,874 2.24
3,000,000 Aviva 8.375% Cum. Irrd. Pref. 4,710 0.48
1,050,000 Aviva 8.75% Cum. Irrd. Pref. 1,701 0.17
3,790,718 Chesnara 10,538 1.08
10 Interim Long Report and unaudited Financial Statements • April 2021 Investments
Portfolio statement (continued)
Holding as at 30.04.21 as at 30.04.21 as at 31.10.20 £’000 % %
Equities (continued)
Life insurance (continued)
United Kingdom (continued)
7,300,000 Legal & General 19,805 2.03
1,950,000 Phoenix 13,872 1.42
990,000 St. James‘s Place 13,335 1.36
Non-life insurance 65,457 6.69 7.53
United Kingdom 53,308 5.45 6.26
150,000 Admiral 4,703 0.48
5,240,195 Direct Line Insurance 14,966 1.53
6,500,000 General Accident 7.875% Cum. Irrd. Pref. 9,035 0.92
9,000,000 General Accident 8.875% Cum. Irrd. Pref. 14,310 1.46
4,500,000 RSA Insurance 7.375% Cum. Irrd. Pref. 5,827 0.60
1,751,713 Sabre Insurance 4,467 0.46
Finland 00.000.37
Switzerland 6,819 0.70 0.90
23,000 Zurich Insurance 6,819 0.70
United States 5,330 0.54 0.00
1,000,000 Conduit 5,330 0.54
Realestateinvestment&services 10,537 1.08 1.01
United Kingdom 4,873 0.50 0.94
1,980,830 Palace Capital 4,873 0.50
Guernsey 5,664 0.58 0.07
10,405,894 Grit Real Estate Income 5,099 0.52
2,075,804 Worsley Investors 565 0.06
Realestateinvestmenttrusts 52,850 5.40 5.29
United Kingdom 47,020 4.80 4.57
1,450,000 British Land REIT 7,467 0.76
1,480,360 Home REIT 1,665 0.17
750,000 McKay Securities 1,703 0.17
6,450,000 NewRiver REIT 6,514 0.67
4,160,401 PRS REIT 3,994 0.41
2,895,049 Regional REIT 2,423 0.25
Interim Long Report and unaudited Financial Statements • April 2021 11 Investments
Portfolio statement (continued)
Holding as at 30.04.21 as at 30.04.21 as at 31.10.20 £’000 % %
Equities (continued)
Real estate investment trusts (continued)
United Kingdom (continued)
5,450,000 Standard Life Investment Property Income Trust 3,968 0.41
1,767,000 Supermarket Income Reit 1,988 0.20
2,500,000 Target Healthcare REIT 2,955 0.30
3,860,925 Urban Logistics REITa 5,907 0.60
6,419,925 Warehouse REITa 8,436 0.86
Guernsey 0 0.00 0.72
United States 5,830 0.60 0.00
5,830,000 Channel Islands Property Fund 5,830 0.60
Automobiles & parts 1,462 0.15 0.61
Finland 1,462 0.15 0.61
55,000 Nokian Renkaat 1,462 0.15
Household goods & home construction 30,076 3.08 2.06
United Kingdom 30,076 3.08 2.06
278,000 Persimmon 8,660 0.89
1,066,512Vistry 13,075 1.34
3,490,000 Watkin Jonesa 8,341 0.85
Personal goods 9,516 0.97 2.14
United Kingdom 9,516 0.97 1.28
225,000 Unilever 9,516 0.97
Denmark 00.000.86
Media 51,566 5.27 4.38
United Kingdom 51,566 5.27 4.38
9,290,000 ITV 11,148 1.14
9,000,000 Reach 19,755 2.02
895,085 STV 3,088 0.31
1,800,000 WPP 17,575 1.80
Retailers 12,152 1.24 1.37
United Kingdom 12,152 1.24 1.37
1,250,000 DFS Furniture 3,344 0.34
12 Interim Long Report and unaudited Financial Statements • April 2021 Investments
Portfolio statement (continued)
Holding as at 30.04.21 as at 30.04.21 as at 31.10.20 £’000 % %
Equities (continued)
Retailers (continued)
United Kingdom (continued)
1,629,976 SCS 4,417 0.45
243,780 WH Smith 4,391 0.45
Travel & leisure 15,715 1.61 0.96
United Kingdom 15,715 1.61 0.96
410,000 Go-Ahead 5,014 0.51
4,000,000 Marston‘s 3,870 0.40
2,300,000 National Express 6,831 0.70
Food producers 10,637 1.09 0.51
United Kingdom 10,637 1.09 0.51
2,540,000 Devro 5,207 0.53
683,898 Tate & Lyle 5,430 0.56
Personal care, drug & grocery stores 6,496 0.66 0.52
United Kingdom 6,496 0.66 0.52
2,950,000 Tesco 6,496 0.66
Construction & materials 1,103 0.11 0.08
United Kingdom 1,103 0.11 0.08
1,300,000 Kier 1,103 0.11
Electronic & electrical equipment 4,130 0.42 0.47
United Kingdom 4,130 0.42 0.47
1,400,000 Morgan Advanced Materials 4,130 0.42
General industrials 13,363 1.37 1.13
United Kingdom 13,363 1.37 1.13
3,192,336 DS Smith 13,363 1.37
Industrial engineering 6,360 0.65 0.84
United Kingdom 6,360 0.65 0.84
400,000 IMI 6,360 0.65
Industrial support services 24,419 2.50 2.19
United Kingdom 24,419 2.50 2.19
9,000,000 Connect 3,474 0.36
630,000 Electrocomponents 6,703 0.69
Interim Long Report and unaudited Financial Statements • April 2021 13 Investments
Portfolio statement (continued)
Holding as at 30.04.21 as at 30.04.21 as at 31.10.20 £’000 % %
Equities (continued)
Industrial support services (continued)
United Kingdom (continued)
900,000 PayPoint 5,409 0.55
2,200,000 SThree 8,833 0.90
Industrial transportation 11,076 1.13 0.94
United Kingdom 11,076 1.13 0.94
2,600,000 Wincanton 11,076 1.13
Industrial materials 8,444 0.86 0.35
Finland 8,444 0.86 0.35
300,000 UPM-Kymmene 8,444 0.86
Industrial metals & mining 59,074 6.04 5.73
United Kingdom 59,074 6.04 5.73
170,000 BHP 3,720 0.38
1,550,000 Central Asia Metalsa 4,232 0.43
840,000 Rio Tinto 51,122 5.23
Chemicals 11,253 1.15 1.10
United Kingdom 11,253 1.15 1.10
1,000,000 Synthomer 5,010 0.51
267,703 Victrex 6,243 0.64
Non-renewable energy 32,033 3.28 3.93
United Kingdom 17,422 1.78 2.57
8,927,548 Diversified Gas & Oil 10,945 1.12
500,000 Royal Dutch Shell 6,477 0.66
France 14,611 1.50 1.36
456,000 TOTAL 14,611 1.50
Electricity 30,052 3.07 3.19
United Kingdom 30,052 3.07 3.19
2,114,813 Drax 8,561 0.87
1,475,000 SSE 21,491 2.20
Gas, water & multi-utilities 58,464 5.98 8.02
United Kingdom 53,640 5.49 7.48
2,957,031 National Grid 26,690 2.73
14 Interim Long Report and unaudited Financial Statements • April 2021 Investments
Portfolio statement (continued)
Holding as at 30.04.21 as at 30.04.21 as at 31.10.20 £’000 % %
Equities (continued)
Gas, water & multi-utilities (continued)
United Kingdom (continued)
920,000 Pennon 9,389 0.96
1,840,000 United Utilities 17,561 1.80
France 4,824 0.49 0.54
450,000 Engie 4,824 0.49
Fixed line telecommunications 4,120 0.42 0.76
United States 4,120 0.42 0.76
100,000 Verizon Communications 4,120 0.42
Oil & gas producers 45,541 4.66 3.78
United Kingdom 45,541 4.66 3.49
15,035,000 BP 45,541 4.66
Norway 00.000.29
Total portfolio 983,916 100.61 101.07
Net other assets / (liabilities) (5,931) (0.61) (1.07)
Net assets attributable to unitholders 977,985 100.00 100.00
All securities are on an official stock exchange listing except where referenced. a AIM quoted. b Delisted.
Interim Long Report and unaudited Financial Statements • April 2021 15 Investments
Top ten portfolio transactions for the six months to 30 April 2021
Largest purchases £’000
UPM-Kymmene 5,625
Moneysupermarket.com 5,435
Conduit 5,000
Devro 4,599
Schroders 3,856
GlaxoSmithKline 3,447
Direct Line Insurance 3,177
Tesco 3,170
Duke Royaltya 2,800
Lloyds Banking 2,543
Other purchases 19,374
Total purchases 59,026
a AIM quoted.
Largest sales £’000
Royal Dutch Shell 8,815
Pandora 7,873
BT 6,604
Pennon 4,143
Nokian Renkaat 3,770
AstraZeneca 3,380
Wincanton 3,313
Roche 3,306
Sampo 3,238
Countryside Properties 3,022
Other sales 42,674
Total sales 90,138
Purchases and sales exclude the cost and proceeds of ‘AAA’ rated money market funds.
16 Interim Long Report and unaudited Financial Statements • April 2021 Financial highlights
Fund performance Long-term performance
Please note past performance is not a guide to future Six Three Five Since performance and the value of investments, and the months years years launch as at 02.11.20 01.05.18 03.05.16 01.03.60 income from them, will fluctuate. This will cause the 4May2021 % % % % fund price to fall as well as rise and a charity may not Charifund Income unitsa +30.8 -5.1 +9.5 +2,991.7 get back the original amount it invested. FTSE All-Share Indexb +24.2 -4.3 +16.6 +3,704.2
Fund level performance Charifund +33.8 +11.2 +41.0 +131,823.8 Accumulation unitsac Fund net asset value as at 30.04.21 31.10.20 31.10.19 £’000 £’000 £’000 FTSE All-Share Indexbc +26.2 +6.8 +40.1 +49,463.7
Fund net asset value (NAV) 977,985 775,483 1,136,627 a Price to price basis. b FT 30 Index prior to April 1962. Performance since launch c Income reinvested. To give an indication of how the fund has performed since launch, the graph below shows the capital return Single year performance (5 years ending of Income units. For a more detailed view of how April) Income units and Accumulation units have performed From 01.05.20 01.05.19 01.05.18 01.05.17 01.05.16 since launch please see the Appendix section at the To 30.04.21 30.04.20 30.04.19 30.04.18 30.04.17 back of this report. %%%%% Charifunda +25.1 -14.9 +3.6 +7.7 +15.6 March 1960 = 100, plotted annually Chart date 4 May 2021 FTSE All- +25.9 -16.7 +2.6 +8.2 +20.1 Share Indexb 7,000 5,000 a Price to price with income reinvested. b FTSE All-Share Index 3,000 2,000 Source: Morningstar, Inc. 1,500 1,000 Past performance is not a guide to future performance. 700 500 The value of stockmarket investments, and the income
300 from them, will fluctuate. This will cause the fund unit 200 price to fall as well as rise and a charity may not receive 150 back the amount it originally invested. 100 70 50 Operating charges and portfolio 61 65 6973 77 81 85 89 93 97 01 05 09 13 17 21 transaction costs Price (Income units) Weexplainbelowthepaymentsmadetomeetthe Gross income FTSE All-Share Index* ongoing costs of investing and managing the fund, UK Retail Prices Index comprising operating charges and portfolio transaction
Source: Morningstar, Inc. and M&G * FT 30 prior to April 1962 costs.
To give an indication of the performance of the fund, Operating charges the following table shows the absolute return over the Operating charges include payments made to M&G and period. to providers independent of M&G:
Interim Long Report and unaudited Financial Statements • April 2021 17 Financial highlights
• Annual charge: Charge paid to M&G covering the Portfolio transaction costs annual cost of M&G managing and administering Portfolio transaction costs are incurred by funds when the fund and the costs of third parties providing buying and selling investments. These costs vary services to the fund. This charge rolls all costs that depending on the types of investment, their market make up the operating charges into one annual capitalisation, country of exchange and method of charge. execution. They are made up of direct and indirect For every £1 billion of a fund’s net asset value, a portfolio transaction costs: discount of 0.02% will be applied to that fund’s • Direct portfolio transaction costs: Broker annual charge (up to a maximum of 0.12%). execution commission and taxes. • Extraordinary legal and tax expenses: Costs that • Indirect portfolio transaction costs: ‘Dealing specifically relate to legal or tax claims that are both spread’ – the difference between the buying and exceptional and unforeseeable. Such expenses are selling prices of the fund’s investments; some uncommon, and would not be expected in most years. types of investment, such as fixed interest Although they result in a short-term cost to the fund, securities, have no direct transaction costs and generally they can deliver longer term benefits for only the dealing spread is paid. investors. Investments are bought or sold by a fund when • Investment management: Charge paid to M&G for changes are made to the investment portfolio and in investment management of the fund. This charge response to net flows of money into or out of the fund forms part of the annual charge. from investors buying and selling units in the fund. • Oversight and other independent services: To protect existing investors, portfolio transaction costs Charges paid to providers independent of M&G for incurred as a result of investors buying and selling units services which include depositary, custody and in the fund are recovered from those investors through audit. These charges will be paid by M&G and a ‘dilution adjustment’ to the price they pay or receive. rolled into the annual charge. The table below shows direct portfolio transaction • Ongoing charges from underlying funds: Ongoing costs paid by the fund before and after that part of the charges on holdings in underlying funds that are dilution adjustment relating to direct portfolio not rebated. Charges from underlying funds transaction costs. To give an indication of the indirect (excluding Investment Trust Companies and Real portfolio dealing costs the table also shows the average Estate Investment Trusts) will be rebated. portfolio dealing spread.
The operating charges paid by each unit type of the Further information on this process is in the Prospectus, fund are shown in the following performance tables. which is available free of charge on request either from These charges do not include portfolio transaction our website at www.mandg.co.uk/prospectuses or by costs or any entry and exit charges (also known as initial calling M&G Customer Relations. and redemption charges).
Operating charges are in line with the ongoing charges shown in the Key Investor Information Document, other than where there have been extraordinary legal or tax expenses, or an estimate has been used for the ongoing charge because a material change has made the operating charges unreliable as an estimate of future charges.
18 Interim Long Report and unaudited Financial Statements • April 2021 Financial highlights
Direct Sixmonthsto Year to Year to Averagea portfolio 30.04.21 31.10.20 31.10.19 transaction %%% % costsb
Broker commission 0.01 0.02 0.01 0.01
Taxes 0.00 0.00 0.00 0.00
Costs before dilution 0.01 0.02 0.01 0.01 adjustments
Dilution adjustmentsc (0.01) (0.01) 0.00 0.00
Total direct portfolio 0.00 0.01 0.01 0.01 transaction costs
as at 30.04.21 31.10.20 31.10.19 Averagea Indirect portfolio % % % % transaction costs
Average portfolio 0.49 0.70 0.38 0.52 dealing spread a Average of first three columns. b As a percentage of average net asset value. c In respect of direct portfolio transaction costs. Please see the section above this table for an explanation of dilution adjustments.
Interim Long Report and unaudited Financial Statements • April 2021 19 Financial highlights
Specific unit type performance Accumulation unit performance The unit type was launched on 25 November 1975. The following tables show the performance of each unit type. All ‘Performance and charges’ percentages Change in NAV Sixmonthsto Year to Year to represent an annual rate except for the ‘Return after per unit 30.04.21 31.10.20 31.10.19 UK p UK p UK p operating charges’ which is calculated as a percentage of the opening net asset value per unit (NAV).‘Dilution Opening NAV 20,464.68 26,214.96 23,985.45 adjustments’ are only in respect of direct portfolio Return before operating 6,832.66 (5,643.23) 2,379.91 charges transaction costs. Operating charges (58.83) (107.05) (150.40) Historic yields for the current year are calculated as at 14 May 2021. Return after operating 6,773.83 (5,750.28) 2,229.51 charges Income unit performance Distributions (520.88) (1,150.00) (1,354.00) The unit type was launched on 1 March 1960. Retained distributions 520.88 1,150.00 1,354.00
Change in NAV Sixmonthsto Year to Year to Closing NAV 27,238.51 20,464.68 26,214.96 per unit 30.04.21 31.10.20 31.10.19 UK p UK p UK p Direct transaction costs UK p UK p UK p
Opening NAV 1,152.70 1,556.43 1,501.72 Costs before dilution 1.52 4.08 2.35 adjustments Return before operating 384.01 (330.56) 146.98 a (0.95) (1.96) (0.87) charges Dilution adjustments
Operating charges (3.29) (6.17) (9.27) Total direct transaction 0.57 2.12 1.48 costs Return after operating 380.72 (336.73) 137.71 charges Performance and charges % % % Direct portfolio transaction 0.00 0.01 0.01 Distributions (33.00) (67.00) (83.00) costsb Closing NAV 1,500.42 1,152.70 1,556.43 Operating chargesc 0.52 0.52 0.60 Direct transaction costs UK p UK p UK p Return after charges +33.10 -21.94 +9.30 Costs before dilution 0.09 0.24 0.14 Historic yield 4.01 4.95 4.89 adjustments Other information Dilution adjustmentsa (0.05) (0.11) (0.05) Closing NAV (£‘000) 100,493 67,831 137,608 Total direct transaction 0.04 0.13 0.09 costs Closing NAV (%) 10.28 8.75 12.11
Performance and charges % % % Number of units 368,936 331,451 524,923
Direct portfolio transaction 0.00 0.01 0.01 Highest unit price (UK p) 27,414.25 28,311.26 26,596.53 costsb Lowest unit price (UK p) 20,684.53 18,050.47 22,430.53 Operating chargesc 0.52 0.52 0.60 a In respect of direct portfolio transaction costs. Return after charges +33.03 -21.63 +9.17 b As a percentage of average net asset value. c Following the change in charging structure, you may see variances Historic yield 4.38 5.12 5.15 between the comparative and current year figures. Other information
Closing NAV (£‘000) 877,492 707,652 999,019
Closing NAV (%) 89.72 91.25 87.89
Number of units 58,483,027 61,391,053 64,186,699
Highest unit price (UK p) 1,531.74 1,680.98 1,615.89
Lowest unit price (UK p) 1,165.33 1,062.47 1,404.54
20 Interim Long Report and unaudited Financial Statements • April 2021 M&G Equities Investment Fund for Charities (Charifund) Financial statements and notes
Financial statements Statement of total return
2021 2020
for the six months to 30 April £’000 £’000 £’000 £’000
Income
Net capital gains/(losses) 231,295 (198,798)
Revenue 23,811 23,795
Expenses (2,173) (2,321)
Net revenue/(expense) before taxation 21,638 21,474
Taxation (292) (322)
Net revenue/(expense) after taxation 21,346 21,152
Total return before distributions 252,641 (177,646)
Distributions (21,753) (23,220)
Change in net assets attributable to unitholders from 230,888 (200,866) investment activities
Statement of change in net assets attributable to unitholders
2021 2020
for the six months to 30 April £’000 £’000 £’000 £’000
Opening net assets attributable to unitholders 775,483 1,136,627
Amounts received on issue of units 20,634 31,797
Amounts paid on cancellation of units (51,067) (114,289)
(30,433) (82,492)
Dilution adjustments 207 263
Change in net assets attributable to unitholders from investment 230,888 (200,866) activities (see above)
Retained distributions on Accumulation units 1,840 2,184
Closing net assets attributable to unitholders 977,985 855,716
The opening net assets attributable to unitholders for 2021 differs to the closing position in 2020 by the change in net assets attributable to unitholders for the second half of the comparative financial year.
Interim Long Report and unaudited Financial Statements • April 2021 21 M&G Equities Investment Fund for Charities (Charifund) Financial statements and notes
Financial statements Balance sheet
as at 30 April 2021 31 October 2020 £’000 £’000
Assets
Fixed assets
Investments 983,916 783,786
Current assets
Debtors 8,336 3,147
Cash and bank balances 00
Total assets 992,252 786,933
Liabilities
Creditors
Bank overdrafts (1,551) (552)
Distribution payable (12,574) (10,436)
Other creditors (142) (462)
Total liabilities (14,267) (11,450)
Net assets attributable to unitholders 977,985 775,483
22 Interim Long Report and unaudited Financial Statements • April 2021 M&G Equities Investment Fund for Charities (Charifund) Financial statements and notes
Notes to the financial statements Accounting policies There are no material events that have been identified that may cast significant doubt on the Fund’s ability to continue as a going concern for at least the next twelve months from the date these financial statements are authorised for issue. The Manager believes that the Fund has adequate resources to continue in operational existence for the foreseeable future and, following consideration of the impact of COVID-19 they continue to adopt the going concern basis in preparing the financial statements. The Manager has made an assessment of the fund‘s ability to continue as a going concern which is made as at the date of issue of these financial statements and considers liquidity, declines in global capital markets, investor intention, known redemption levels, expense projections, key service provider’s operational resilience, and the impact of COVID-19.
The interim financial statements have been prepared on the same basis as the audited annual financial statements for the year ended 31 October 2020. They are prepared in accordance with both Charities (Accounts and Reports) Regulations 2008 and the Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Association in May 2014 (2014 SORP) and amended in June 2017.
Distribution policy In order to conduct a controlled dividend flow to unitholders, distributions will be at the fund manager’s discretion, up to the maximum of the distributable income available at the end of the year. The fund is permitted to retain in reserves up to 15% of the current year’s income.
In determining the amount available for distribution to Income units, the annual charge, annual management charge and administration charge are offset against capital, increasing the amount available for distribution whilst restraining capital performance to an equivalent extent.
Interim Long Report and unaudited Financial Statements • April 2021 23 Other regulatory disclosures
Liquidity The Manager’s policy is that the fund should normally be close to fully invested (i.e. with liquidity of 5% or less) but this is subject to the need to retain liquidity for the purpose of effecting the redemption of units and the efficient management of the Scheme in accordance with its objective. There may, therefore, be occasions when there will be higher levels of liquidity, for example following the issue of units or the realisation of investments. Higher liquidity levels may also arise when the fund’s asset allocation policy is changed or when the Manager believes that market conditions warrant it.
24 Interim Long Report and unaudited Financial Statements • April 2021 Appendix
Income and prices Income units Accumulation units Distributed Reinvested Highest Lowest Highest Lowest UK p UK p UK p UK p UK p UK p
Calendar year
1960 1.104 – 54.40 48.00 – –
1961 2.396 – 62.20 50.30 – –
1962 2.271 – 56.20 49.00 – –
1963 2.667 – 63.40 52.30 – –
1964 3.062 – 68.40 59.40 – –
1965 3.520 – 64.90 57.60 – –
1966 3.750 – 71.20 56.10 – –
1967 3.979 – 78.90 58.80 – –
1968 4.062 – 109.40 76.10 – –
1969 4.583 – 115.20 83.40 – –
1970 5.229 – 96.40 77.40 – –
1971 5.500 – 125.90 83.70 – –
1972 6.050 – 156.50 127.10 – –
1973 6.850 – 156.20 99.70 – –
1974 7.900 – 109.40 58.70 – –
1975 8.800 – 116.80 58.00 116.10 111.30
1976 9.900 10.054 127.10 86.40 131.00 94.80
1977 11.100 12.399 156.30 103.40 180.80 113.40
1978 12.900 15.697 163.00 132.00 205.50 160.40
1979 14.800 19.717 175.00 139.00 237.10 190.00
1980 17.100 25.123 174.50 145.00 271.30 208.30
1981 17.800 29.152 183.30 146.40 301.40 245.70
1982 18.300 33.355 185.40 159.10 359.80 283.30
1983 18.940 38.325 225.00 176.00 490.00 348.90
1984 20.300 44.992 279.80 224.20 660.90 488.40
1985 21.700 52.030 322.20 279.10 818.30 659.20
1986 24.000 61.841 416.40 311.20 1,127.20 790.40
1987 27.000 73.978 628.90 401.80 1,757.60 1,133.30
1988 30.000 87.037 538.20 469.70 1,592.10 1,359.70
1989 36.900 113.459 632.80 500.30 1,995.50 1,517.60
1990 41.600 136.471 620.80 464.90 2,009.40 1,596.00
1991 42.640 151.461 580.60 456.60 2,133.80 1,630.70
1992 42.888 166.000 568.70 436.30 2,351.20 1,752.80
Interim Long Report and unaudited Financial Statements • April 2021 25 Appendix
Income and prices Income units Accumulation units Distributed Reinvested Highest Lowest Highest Lowest UK p UK p UK p UK p UK p UK p
1993 36.500 154.199 764.60 562.00 3,344.90 2,324.00
1994 38.315 170.789 794.70 633.80 3,505.50 2,838.30
1995 43.214 204.338 753.40 630.70 3,650.80 2,944.40
1996 45.565 228.452 807.90 714.40 4,220.60 3,589.00
1997 48.755 259.692 1,002.00 794.50 5,431.00 4,151.10
1998 50.600 284.146 1,141.60 882.50 6,407.60 5,016.80
1999 51.950 306.5517 1,116.90 976.60 6,604.40 5,661.70
2000 52.986 329.0723 1,173.12 893.20 7,516.40 5,482.30
2001 54.320 353.9856 1,195.82 957.95 7,808.91 6,314.46
2002 54.830 375.6189 1,177.75 911.04 8,046.08 6,414.88
2003 56.200 407.6273 1,072.50 833.96 8,059.09 5,968.15
2004[a] 57.100 437.2672 1,224.97 1,061.85 9,691.60 8,011.39
2005 58.965 474.5043 1,388.46 1,206.75 11,507.14 9,690.14
2006 63.530 534.8294 1,615.19 1,374.86 13,967.84 11,510.87
2007 70.720 621.2436 1,705.06 1,406.16 14,982.85 12,710.57
2008 74.650 688.7661 1,468.39 883.39 13,273.06 8,265.93
2009 57.020 563.8150 1,077.91 763.16 11,061.29 7,457.84
2010 57.130 598.0791 1,159.24 989.26 12,539.72 10,398.66
2011 57.700 635.7143 1,200.08 1,020.50 13,259.44 11,416.06
2012 61.710 716.1321 1,210.42 1,065.86 14,525.36 12,408.15
2013 63.580 776.7108 1,446.52 1,217.64 18,096.97 14,612.10
2014 66.500 850.5127 1,499.27 1,332.43 19,358.36 17,265.22
2015 69.000 923.0000 1,561.06 1,377.93 20,859.07 18,667.43
2016 71.000 994.5000 1,573.14 1,285.24 22,424.31 17,890.70
2017 74.750 1,101.0000 1,642.99 1,443.53 24,554.13 20,921.20
26 Interim Long Report and unaudited Financial Statements • April 2021 Appendix
Income and prices Income units Accumulation units Distributed Reinvested Highest Lowest Highest Lowest UK p UK p UK p UK p UK p UK p
Financial year
2018 79.000 1,222.0000 1,663.22 1,498.65 25,758.47 23,010.73
2019 83.000 1,354.0000 1,615.89 1,404.54 26,596.53 22,430.53
2020 67.000 1,150.0000 1,680.98 1,062.47 28,311.26 18,050.47
2021b 33.000 520.8800 1,531.74 1,165.33 27,414.25 20,684.53 a Prior to 6 April 2004 income from UK equities was reported gross of tax to take account of the fact that the fund recovered the recoverable tax credit directly. Since this date the tax credit is no longer recoverable and, therefore, income is now reported net of the tax credit. b To 30 April 2021. Please note that with effect from 29 September 2014 the fund adopted a fully swinging single price model.
Please note past performance is not a guide to future performance and the value of investments, and the income from them, will fluctuate. This will cause the fund price to fall as well as rise and a charity may not receive back the original amount it invested.
Interim Long Report and unaudited Financial Statements • April 2021 27 Glossary
Accumulation shares A type of share where distributions are Comparative sector A group of funds with similar investment automatically reinvested and reflected in the value of the objectives and/or types of investment, as classified by bodies shares. such as the Investment Association (IA) or Morningstar™. Sector definitions are mostly based on the main assets a fund Accumulation units A type of unit where distributions are should invest in, and may also have a geographic focus. automatically reinvested and reflected in the value of the units. Sectors can be the basis for comparing the different Asset Anything having commercial or exchange value that is characteristics of similar funds, such as their performance or owned by a business, institution or individual. charging structure.
Asset allocation Apportioning a portfolio’s assets according Consumer Prices Index (CPI) An index used to measure to risk tolerance and investment goals. inflation, which is the rate of change in prices for a basket of goods and services. The contents of the basket are meant to Asset class Category of assets, such as cash, company be representative of products and services we typically spend shares, fixed income securities and their sub-categories, as our money on. well as tangible assets such as real estate. Convertible bonds Fixed income securities that can be Bond A loan in the form of a security, usually issued by a exchanged for predetermined amounts of company shares at government or company, which normally pays a fixed rate of certain times during their life. interest over a given time period, at the end of which the initial amount borrowed is repaid. Corporate bonds Fixed income securities issued by a company. They are also known as bonds and can offer higher Bond issue A set of fixed income securities offered for sale to interest payments than bonds issued by governments as they the public by a company or government. If the bonds are sold are often considered more risky. for the first time, it is called a ‘new issue’. Coupon The interest paid by the government or company that Bottom-up selection Selecting stocks based on the has raised a loan by selling bonds. attractiveness of a company. Credit The borrowing capacity of an individual, company or Bunds Fixed income securities issued by the German government. More narrowly, the term is often used as a government. synonym for fixed income securities issued by companies. Capital Refers to the financial assets, or resources, that a Credit default swaps (CDS) Are a type of derivative, namely company has to fund its business operations. financial instruments whose value, and price, are dependent Capital growth Occurs when the current value of an on one or more underlying assets. CDS are insurance-like investment is greater than the initial amount invested. contracts that allow investors to transfer the risk of a fixed income security defaulting to another investor. Capital return The term for the gain or loss derived from an investment over a particular period. Capital return includes Credit rating An independent assessment of a borrower’s capital gain or loss only and excludes income (in the form of ability to repay its debts. A high rating indicates that the credit interest or dividend payments). rating agency considers the issuer to be at low risk of default; likewise, a low rating indicates high risk of default. Standard & Cash equivalents Deposits or investments with similar Poor’s, Fitch and Moody’s are the three most prominent credit characteristics to cash. rating agencies. Default means that a company or government Charity Authorised Investment Fund (CAIF) An investment is unable to meet interest payments or repay the initial entity that is both a registered charity and an authorised investment amount at the end of a security’s life. investment fund. The CAIF must comply with charity law as Credit rating agency A company that analyses the financial well as financial services laws and regulations, and is usually strength of issuers of fixed income securities and attaches a treated as a registered charity for tax purposes. rating to their debt. Examples include Standard & Poor’s and Moody’s.
Credit risk Risk that a financial obligation will not be paid and a loss will result for the lender.
28 Interim Long Report and unaudited Financial Statements • April 2021 Glossary
Credit selection The process of evaluating a fixed income Diversification The practice of investing in a variety of assets. security, also called a bond, in order to ascertain the ability of This is a risk management technique where, in a well- the borrower to meet its debt obligations. This research seeks diversified portfolio, any loss from an individual holding should to identify the appropriate level of default risk associated with be offset by gains in other holdings, thereby lessening the investing in that particular bond. impact on the overall portfolio.
Credit spread The difference between the yield of a Dividend Dividends represent a share in the profits of a corporate bond, a fixed income security issued by a company, company and are paid out to the company’s shareholders at and a government bond of the same life span. Yield refers to set times of the year. the income received from an investment and is expressed as a Duration A measure of the sensitivity of a fixed income percentage of the investment’s current market value. security, also called a bond, or bond fund to changes in Default When a borrower does not maintain interest interest rates. The longer a bond or bond fund’s duration, the payments or repay the amount borrowed when due. more sensitive it is to interest rate movements.
Defaulted bond When a bond issuer does not maintain Duration risk The longer a fixed income security, also called a interest payments or repay the amount borrowed when due. bond, or bond fund’s duration, the more sensitive and therefore at risk it is to changes in interest rates. Default risk Risk that a debtholder will not receive interest and full repayment of the loan when due. Emerging economy or market Economies in the process of rapid growth and increasing industrialisation. Investments in Derivatives Financial instruments whose value, and price, are emerging markets are generally considered to be riskier than dependent on one or more underlying assets. Derivatives can those in developed markets. be used to gain exposure to, or to help protect against, expected changes in the value of the underlying investments. Equities Shares of ownership in a company. Derivatives may be traded on a regulated exchange or traded Exchange traded Usually refers to investments traded on an over the counter. exchange, such as company shares on a stock exchange. Developed economy/market Well-established economies Ex-dividend, ex-distribution or XD date The date on which with a high degree of industrialisation, standard of living and declared distributions officially belong to underlying investors. security. Exposure The proportion of a fund invested in a particular Dilution adjustments The dilution adjustment is used to share/fixed income security, sector/region, usually expressed protect ongoing investors against the transaction charges as a percentage of the overall portfolio. incurred in investing or divesting in respect of creations and cancellations. The dilution adjustment is made up of the direct Fixed income security A loan in the form of a security, usually and indirect transaction charges. In the financial statements issued by a government or company, which normally pays a the direct transaction charges as a percentage of average fixed rate of interest over a given time period, at the end of NAV will be disclosed. This percentage will take account of which the initial amount borrowed is repaid. Also referred to those direct transaction charges that have been recovered as a bond. through the dilution adjustment leaving a percentage that just Floating rate notes (FRNs) Securities whose interest represents the costs incurred in portfolio management. (income) payments are periodically adjusted depending on the Distribution Distributions represent a share in the income of change in a reference interest rate. the fund and are paid out to Income shareholders or Foreign exchange The exchange of one currency for another, reinvested for Accumulation shareholders at set times of the or the conversion of one currency into another currency. year (monthly, quarterly, half-yearly or annually). They may Foreign exchange also refers to the global market where either be in the form of interest distributions or dividend currencies are traded virtually around the clock. The term distributions. foreign exchange is usually abbreviated as ‘forex’ and Distribution yield Expresses the amount that is expected to occasionally as ‘FX’. be distributed by the fund over the next 12 months as a percentage of the share price as at a certain date. It is based on the expected gross income less the ongoing charges.
Interim Long Report and unaudited Financial Statements • April 2021 29 Glossary
Foreign exchange (FX) strategy Currencies can be an asset Income yield Refers to the income received from an class in its own right, along with company shares, fixed income investment and is usually expressed annually as a percentage securities, property and cash. Foreign exchange strategy can based on the investment’s cost, its current market value or therefore be a source of investment returns. face value.
Forward contract A contract between two parties to buy or Index An index represents a particular market or a portion of sell a particular commodity or financial instrument at a pre- it, serving as a performance indicator for that market. determined price at a future date. Examples include forward Income shares A type of share where distributions are paid currency contracts. out as cash on the payment date. Fundamentals (company) A basic principle, rule, law, or the Income units A type of unit where distributions are paid out like, that serves as the groundwork of a system. A company’s as cash on the payment date. fundamentals pertain specifically to that company, and are factors such as its business model, earnings, balance sheet Index tracking A fund management strategy that aims to and debt. match the returns from a particular index.
Fundamentals (economic) A basic principle, rule, law, or the Index-linked bonds Fixed income securities where both the like, that serves as the groundwork of a system. Economic value of the loan and the interest payments are adjusted in fundamentals are factors such as inflation, employment, line with inflation over the life of the security. Also referred to economic growth. as inflation-linked bonds.
Futures A futures contract is a contract between two parties Inflation The rate of increase in the cost of living. Inflation is to buy or sell a particular commodity or financial instrument at usually quoted as an annual percentage, comparing the a predetermined price at a future date. Futures are traded on a average price this month with the same month a year earlier. regulated exchange. Inflation risk The risk that inflation will reduce the return of Gilts Fixed income securities issued by the UK government. an investment in real terms.
Government bonds Fixed income securities issued by Initial public offering (IPO) The first sale of shares by a governments, that normally pay a fixed rate of interest over a private company to the public. given time period, at the end of which the initial investment is Interest rate risk The risk that a fixed income investment will repaid. lose value if interest rates rise. Hedging A method of reducing unnecessary or unintended Interest rate swap An agreement between two parties to risk. swap a fixed interest payment with a variable interest payment High water mark (HWM) The highest level that a fund’s NAV over a specified period of time. (net asset value) has reached at the end of any 12-month Investment Association (IA) The UK trade body that accounting period. represents fund managers. It works with investment High yield bonds Fixed income securities issued by managers, liaising with government on matters of taxation and companies with a low credit rating from a recognised credit regulation, and also aims to help investors understand the rating agency. They are considered to be at higher risk of industry and the investment options available to them. default than better quality, ie higher-rated fixed income Issuer An entity that sells securities, such as fixed income securities but have the potential for higher rewards. Default securities and company shares. means that a company or government is unable to meet interest payments or repay the initial investment amount at the Investment grade bonds Fixed income securities issued by a end of a security’s life. company with a medium or high credit rating from a recognised credit rating agency. They are considered to be at Historic yield The historic yield reflects distributions declared lower risk from default than those issued by companies with over the past 12 months as a percentage of the share price, as lower credit ratings. Default means that a company or at the date shown. government is unable to meet interest payments or repay the initial investment amount at the end of a security’s life.
30 Interim Long Report and unaudited Financial Statements • April 2021 Glossary
Issuer An entity that sells securities, such as fixed income Open-ended investment company (OEIC) A type of managed securities and company shares. fund, whose value is directly linked to the value of the fund’s underlying investments. Leverage When referring to a company, leverage is the level of a company’s debt in relation to its assets. A company with Options Financial contracts that offer the right, but not the significantly more debt than capital is considered to be obligation, to buy or sell an asset at a given price on or before leveraged. It can also refer to a fund that borrows money or a given date in the future. uses derivatives to magnify an investment position. Over-the-counter (OTC) Whereby financial assets are traded Liquidity A company is considered highly liquid if it has plenty directly between two parties. This is in contrast to exchange of cash at its disposal. A company’s shares are considered trading, which is carried out through exchanges set up highly liquid if they can be easily bought or sold since large specifically for the purpose of trading. OTC is also known as amounts are regularly traded. off-exchange trading.
Long position Refers to ownership of a security held in the Overweight If a fund is ‘overweight’ a stock, it holds a larger expectation that the security will rise in value. proportion of that stock than the comparable index or sector.
Macroeconomic Refers to the performance and behaviour of Payment date The date on which distributions will be paid by an economy at the regional or national level. Macroeconomic the fund to investors, usually the last business day of the factors such as economic output, unemployment, inflation and month. investment are key indicators of economic performance. Physical assets An item of value that has tangible existence, Sometimes abbreviated to ‘macro’. for example, cash, equipment, inventory or real estate. Maturity The length of time until the initial investment Physical assets can also refer to securities, such as company amount of a fixed income security is due to be repaid to the shares or fixed income securities. holder of the security. Portfolio transaction cost The cost of trading, such as Modified duration A measure of the sensitivity of a fixed brokerage, clearing, exchange fees and bid-offer spread as income security, called a bond, or bond fund to changes in well as taxes such as stamp duty. interest rates. The longer a bond or bond fund’s duration, the Preference shares Preference shares are a loan to a company more sensitive it is to interest rate movements. that may be traded in the same way as ordinary shares, but Monetary easing When central banks lower interest rates or generally have a higher yield and pay dividends on fixed dates. buy securities on the open market to increase the money in Preference shares have varying characteristics as to the circulation. treatment of the principal and the dividend payment, which includes ranking them above ordinary shares when it comes to Monetary policy A central bank’s regulation of money in dividend payments. circulation and interest rates. Principal The face value of a fixed income security, which is Monetary tightening When central banks raise interest rates the amount due back to the investor by the borrower when the or sell securities on the open market to decrease the money in security reaches the end of its life. circulation. Private placement An offer of sale of securities to a relatively Morningstar™ A provider of independent investment small number of investors selected by the company, generally research, including performance statistics and independent investment banks, mutual funds, insurance companies or fund ratings. pension funds. Near cash Deposits or investments with similar Property Expense Ratio (PER) Property expenses are the characteristics to cash. operating expenses that relate to the management of the Net asset value (NAV) A fund’s net asset value is calculated property assets in the portfolio. These include: insurance and by taking the current value of the fund’s assets and rates, rent review and lease renewal costs and maintenance subtracting its liabilities. and repairs, but not improvements. They depend on the level of activity taking place within the fund. The Property Expense Ongoing Charge Figure The ongoing charge figure Ratio is the ratio of property expenses to the fund’s net asset represents the operating costs investors can reasonably value. expect to pay under normal circumstances.
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Real yield The return of an investment, adjusted for changes Short-dated corporate bonds Fixed income securities issued in prices in an economy. by companies and repaid over relatively short periods.
Retail Prices Index (RPI) A UK inflation index that measures Short-dated government bonds Fixed income securities the rate of change in prices for a basket of goods and services issued by governments and repaid over relatively short in the UK, including mortgage payments and council tax. periods.
Risk The chance that an investment’s return will be different Sovereign debt Debt of a government. Also referred to as to what is expected. Risk includes the possibility of losing government bonds. some or all of the original investment. Sub-investment grade bonds Fixed income securities issued Risk management The term used to describe the activities by a company with a low rating from a recognised credit rating the fund manager undertakes to limit the risk of a loss in a agency. They are considered to be at higher risk from default fund. than those issued by companies with higher credit ratings. Default means that a company or government is unable to Risk premium The difference between the return from a risk- meet interest payments or repay the initial investment amount free asset, such as a high-quality government bond or cash, at the end of a security’s life. and the return from an investment in any other asset. The risk premium can be considered the ‘price’ or ‘pay-off’ for taking Suspended Temporarily halting the trading of a listed security on increased risk. A higher risk premium implies higher risk. on the stock exchange. It can be voluntary (requested by the issuing company) or imposed by regulators. Typically, trading Risk-free asset An asset that notionally carries no risk of suspensions are introduced ahead of important news nonpayment by the borrower such as a high-quality fixed announcements, following technical glitches, or due to income security issued by a government or cash. regulatory concerns. Risk/reward ratio A ratio comparing the expected returns of Swing pricing Swing pricing is a method of protecting long- an investment with the amount of risk undertaken. term shareholders in the fund from bearing the costs of Safe-haven assets Refers to assets that investors perceive to transactions carried out by shorter-term investors. When be relatively safe from suffering a loss in times of market investors buy or sell shares in the fund, the fund manager has turmoil. to buy or sell underlying securities to either invest the cash obtained from investors, or to provide them with cash in Security Financial term for a paper asset – usually a share in exchange for their shares. Swing pricing essentially adjusts a company or a fixed income security also known as a bond. the fund shares’ daily price to take into account the costs of Share class Each M&G fund has different share classes, such buying or selling the underlying securities held by the fund. as A, R and I. Each has a different level of charges and This ensures that transaction costs such as brokerage fees minimum investment. Details on charges and minimum and administrative charges are borne by those investors who investments can be found in the Key Investor Information trade shares in the fund, not by those who remain invested in Documents. the fund. (Also see dilution adjustment).
Share class hedging Activities undertaken in respect of Top-down investing An investment approach that analyses hedged shares to mitigate the impact on performance of economic factors, ie surveys the ‘big picture’, before selecting exchange rate movements between the fund’s currency which companies to invest in. The top-down investor will look exposure and the investor’s chosen currency. at which industries are likely to generate the best returns in certain economic conditions and limit the search to that area. Short position A way for a fund manager to express his or her view that the market might fall in value. Total return The term for the gain or loss derived from an investment over a particular period. Total return includes Short selling This often refers to the practice whereby an income (in the form of interest or dividend payments) and investor sells an asset they do not own. The investor borrows capital gains. the asset from someone who does own it and pays a fee. The investor must eventually return the borrowed asset by buying Treasuries Fixed income securities issued by the US it in the open market. If the asset has fallen in price, the government. investor buys it for less than they sold it for, thus making a profit. The contrary may also occur.
32 Interim Long Report and unaudited Financial Statements • April 2021 Glossary
Triple A or AAA rated The highest possible rating a fixed Volatility The degree to which a given security, fund, or index income security, also called a bond, can be assigned by credit rapidly changes. It is calculated as the degree of deviation rating agencies. Bonds that are rated AAA are perceived to from the norm for that type of investment over a given time have the lowest risk of default. Default means that a company period. The higher the volatility, the riskier the security tends or government is unable to meet interest payments or repay to be. the initial investment amount at the end of a security’s life. Warrant A security issued by a company that gives the holder UCITS Stands for Undertakings for Collective Investment in the right to buy shares in that company at a specified price Transferable Securities. This is the European regulatory and within a certain timeframe. framework for an investment vehicle that can be marketed Yield This refers to either the interest received from a fixed across the European Union and is designed to enhance the income security or to the dividends received from a share. It is single market in financial assets while maintaining high levels usually expressed as a percentage based on the investment’s of investor protection. costs, its current market value or its face value. Dividends Unconstrained The term used to describe the mandate of a represent a share in the profits of the company and are paid fund whereby the manager has the freedom to invest out to a company’s shareholders at set times of the year. according to his or her own strategy, not being obliged to Yield (equity) Refers to the dividends received by a holder of allocate capital according to the weightings of any index, for company shares and is usually expressed annually as a example. percentage based on the investment’s cost, its current market Underlying value The fundamental value of a company, value or face value. Dividends represent a share in the profits reflecting both tangible and intangible assets, rather than the of the company and are paid out to a company’s shareholders current market value. at set times of the year.
Underlying yield Refers to the income received by a managed Yield (bonds) This refers to the interest received from a fixed fund, and is usually expressed annually as a percentage based income security and is usually expressed annually as a on the fund’s current value. percentage based on the investment’s cost, its current market value or its face value. Underweight If a portfolio is ‘underweight’ a stock, it holds a smaller proportion of that stock than the comparable index or Yield (income) Refers to the income received from an sector. investment and is usually expressed annually as a percentage based on the investment’s cost, its current market value or Unit trust A type of managed fund, whose value is directly face value. linked to the value of the fund’s underlying investments.
Unit/share type Type of units/shares held by investors in a trust or fund (unit/share types differ by features such as whether income is to be paid out as cash or reinvested on the payment date).
Unlisted/unquoted stocks Shares of ownership in companies that are not listed on a public exchange, known as private companies.
Valuation The worth of an asset or company based on its current price.
Volatile When the value of a particular share, market or sector swings up and down fairly frequently and/or significantly, it is considered volatile.
M&G Securities Limited is authorised and regulated by the Financial Conduct Authority and provides investment products. The Company’s registered office is 10 Fenchurch Avenue, London EC3M 5AG. Registered in England: No. 90776.
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