M&G Global Dividend Fund Annual Long Report and audited Financial Statements for the year ended 31 March 2021 Contents Authorised Corporate Director’s Report ...... 1 Directors’ statement ...... 3 Depositary’s Responsibilities and Report ...... 4 Independent Auditor’s Report ...... 5 Authorised Corporate Director’s Report, including the financial highlights and financial statements and notes ...... 8 Other regulatory disclosures ...... 45 Glossary...... 46
Annual Long Report and audited Financial Statements • March 2021 Authorised Corporate Director’s Report
The Authorised Corporate Director (ACD) of Directors of the ACD M&G Global Dividend Fund presents its Annual Long C Dobson (non executive director), N M Donnelly*, Report and audited Financial Statements for the year S A Fitzgerald, P R Jelfs, ended 31 March 2021. M McGrade (non executive director), Please note that we have included an explanation of key LJMumford investment terminology in the ‘Glossary’ (at the back of * Resigned 30 June 2020. this report). Investment manager M&G Investment Management Limited, Company information 10 Fenchurch Avenue, London EC3M 5AG, UK This Open-Ended Investment Company (OEIC) is an Telephone: +44 (0)20 7626 4588 Investment Company with Variable Capital (ICVC) (Authorised and regulated by the Financial Conduct incorporated under the Open-Ended Investment Authority) Companies Regulations 2001. It is authorised and Registrar regulated by the Financial Conduct Authority (FCA) SS&C Financial Services Europe Ltd, under the Financial Services and Markets Act 2000. The SS&C House, St. Nicholas Lane, Basildon, Essex Company is a UCITS (Undertakings for Collective SS15 5FS, UK Investment in Transferable Securities) scheme as (Authorised and regulated by the Financial Conduct defined in the Collective Investment Schemes Authority) sourcebook, as issued (and amended) by the FCA.
The Company was authorised on 9 July 2008 and the Depositary fund was launched on 18 July 2008. NatWest Trustee & Depositary Services Limited, House A, Floor 0, 175 Glasgow Road, Gogarburn, The Company’s principal activity is to carry on business EdinburghEH121HQ,UK as an OEIC. (Authorised and regulated by the Financial Conduct A shareholder is not liable for the debts of the Company Authority) and will never be liable to make any further payment to the Company after paying the purchase price of the Independent auditor shares. Ernst & Young LLP Atria One, 144 Morrison Street, Edinburgh EH3 8EX, UK Fund manager Stuart Rhodes is employed by M&G FA Limited which is an associate of M&G Securities Limited. Annual value assessment An annual assessment report is available which shows ACD the value provided to investors in each of M&G’s UK- M&G Securities Limited, based funds. The assessment report evaluates whether 10 Fenchurch Avenue, London EC3M 5AG, UK M&G’s charges are justified in the context of the overall Telephone: 0800 390 390 (UK only) service delivered to its investors. The report can be (Authorised and regulated by the Financial Conduct found at www.mandg.co.uk/valueassessment Authority. M&G Securities Limited is a member of the Investment Association and of The Investing and Saving Alliance (formerly Tax Incentivised Savings Association))
Annual Long Report and audited Financial Statements • March 2021 1 Authorised Corporate Director’s Report
Important information Customer services and administration for Investors will benefit from a reduction in the annual non-UK clients: charge starting from 15 February 2021. The reduction in M&G Securities Limited, annual charge varies across the M&G funds and the c/oRBCI&TS,14,PortedeFrance, detail was communicated in the shareholder letter L-4360 Esch-sur-Alzette, dated 15 January 2021. Grand Duchy of Luxembourg
The World Health Organisation declared the COVID-19 Please remember to quote your name and M&G client outbreak a pandemic on 11 March 2020. reference and sign any written communication to M&G. Failure to provide this will affect your ability to transact The COVID-19 pandemic has been an unprecedented with us. event. After an initial period of increased market volatility and uncertainty, there has been a marked Telephone: +352 2605 9944 recovery in global markets, bolstered by supportive Email: [email protected] economic policies from governments and positive news For security purposes and to improve the quality of our on vaccines for COVID-19. service, we may record and monitor telephone calls. You The ACD continues to monitor the ongoing operational will require your M&G client reference. Failure to risks that are posed to the Company and its service provide this will affect your ability to transact with us. providers due to global and local movement restrictions that have been enacted by various governments. Swiss paying agent and representative: Société Générale, Paris, Zurich Branch, Talacker 50, 8021 Zurich, Switzerland Investor information The Prospectus, Instrument of Incorporation, Key Investor Information Documents, costs and charges illustration, the latest Annual or Interim Investment Report and Financial Statements as well as a list of purchases and sales are available free of charge on request from the following addresses. The Instrument of Incorporation can also be inspected at our offices or attheofficeoftheDepositary.
Customer services and administration for UK clients: M&G Securities Limited, PO Box 9039, Chelmsford CM99 2XG, UK
Please remember to quote your name and M&G client reference and sign any written communication to M&G. Failure to provide this will affect your ability to transact with us.
Telephone: 0800 390 390 (UK only)
For security purposes and to improve the quality of our service, we may record and monitor telephone calls. You will require your M&G client reference. Failure to provide this will affect your ability to transact with us.
2 Annual Long Report and audited Financial Statements • March 2021 Authorised Corporate Director’s Report
Authorised Corporate Director’s Responsibilities The Authorised Corporate Director (ACD) is required to prepare annual and interim long reports for the Company. The ACD must ensure that the financial statements, contained in this report, for the Company are prepared in accordance with the Investment Association Statement of Recommended Practice for Financial Statements of UK Authorised Funds (SORP) and UK Financial Reporting Standards, and give a true and fair view of the net revenue or expenses and net capital gains or losses for the accounting period, and the financial position at the end of that period.
The ACD is required to keep proper accounting records, and to manage the Company in accordance with the Collective Investment Schemes sourcebook, as issued (and amended) by the FCA, the Instrument of Incorporation and the Prospectus, and to take reasonable steps for the prevention and detection of fraud or other irregularities.
Directors’ statement This report has been prepared in accordance with the requirements of the Collective Investment Schemes sourcebook, as issued and amended by the Financial Conduct Authority.
M&G Securities Limited 14 May 2021
Annual Long Report and audited Financial Statements • March 2021 3 Depositary’s Responsibilities and Report
Statement of the Depositary’s The Depositary also has a duty to take reasonable care to ensure that the Company is managed in accordance Responsibilities and Report of the with the Regulations and the Scheme documents in Depositary to the Shareholders of relation to the investment and borrowing powers M&G Global Dividend Fund (‘the applicable to the Company. Company’) for the year ended Having carried out such procedures as we consider necessary to discharge our responsibilities as 31 March 2021 Depositary of the Company, it is our opinion, based on The Depositary must ensure that the Company is the information available to us and the explanations managed in accordance with the Financial Conduct provided, that in all material respects the Company, Authority’s Collective Investment Schemes sourcebook, acting through the AFM: the Open-Ended Investment Companies Regulations i) has carried out the issue, sale, redemption and 2001 (SI2001/1228) (the OEIC Regulations), as cancellation, and calculation of the price of the amended, the Financial Services and Markets Act 2000, Company’s shares and the application of the as amended, (together ‘the Regulations’), the Company’s income in accordance with the Company’s Instrument of Incorporation and Prospectus Regulations and the Scheme documents of the (together ‘the Scheme documents’) as detailed below. Company, and The Depositary must in the context of its role act ii) has observed the investment and borrowing powers honestly, fairly, professionally, independently and in the and restrictions applicable to the Company. interests of the Company and its investors.
The Depositary is responsible for the safekeeping of all custodial assets and maintaining a record of all other Edinburgh NatWest Trustee and assets of the Company in accordance with the 14 May 2021 Depositary Services Limited Regulations.
The Depositary must ensure that:
• the Company’s cashflows are properly monitored and that cash of the Company is booked into the cash accounts in accordance with the Regulations;
• the sale, issue, redemption and cancellation of shares are carried out in accordance with the Regulations;
• the value of shares in the Company is calculated in accordance with the Regulations;
• any consideration relating to transactions in the Company’s assets is remitted to the Company within the usual time limits;
• the Company’s income is applied in accordance with the Regulations; and
• the instructions of the Authorised Fund Manager (‘the AFM’) are carried out (unless they conflict with the Regulations).
4 Annual Long Report and audited Financial Statements • March 2021 Independent Auditor’s Report
Independent Auditor’s Report to We believe that the audit evidence we have obtained is sufficientandappropriatetoprovideabasisforour the shareholders of M&G Global opinion. Dividend Fund Conclusions relating to going concern Opinion In auditing the financial statements, we have concluded We have audited the financial statements of M&G that the Authorised Corporate Director’s (“the ACD”) Global Dividend Fund (“the Company”) for the year use of the going concern basis of accounting in the ended 31 March 2021 , which comprise the Statement preparation of the financial statements is appropriate. of Total Return, the Statement of Changes in Net Assets Based on the work we have performed, we have not Attributable to shareholders, the Balance Sheet, the identified any material uncertainties relating to events related notes and the Distribution Tables, and the or conditions that, individually or collectively, may cast accounting policies and distribution policies of the significant doubt on the Company’s ability to continue Company, which include a summary of significant as a going concern for a period of twelve months from accounting policies. The financial reporting framework when the financial statements are authorised for issue. that has been applied in their preparation is applicable law and United Kingdom Accounting Standards Our responsibilities and the responsibilities of the ACD including FRS 102 ‘The Financial Reporting Standard with respect to going concern are described in the applicable to the UK and Republic of Ireland’ (United relevant sections of this report. However, because not Kingdom Generally Accepted Accounting Practice). all future events or conditions can be predicted, this statement is not a guarantee as to the Company’s ability In our opinion, the financial statements: to continue as a going concern. • give a true and fair view of the financial position of the Company as at 31 March 2021 and of the net Other information revenue and the net capital gains on the scheme The other information comprises the information property of the Company for the year then ended; included in the annual report other than the financial and statements and our auditor’s report thereon. The ACD is responsible for the other information contained within • have been properly prepared in accordance with the Annual Report. United Kingdom Generally Accepted Accounting Practice including FRS 102 ‘The Financial Our opinion on the financial statements does not cover Reporting Standard applicable in the UK and the other information and, except to the extent Republic of Ireland’. otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. Basis for opinion Our responsibility is to read the other information and, We conducted our audit in accordance with in doing so, consider whether the other information is International Standards on Auditing (UK) (“ISAs (UK)”) materially inconsistent with the financial statements or and applicable law. Our responsibilities under those our knowledge obtained in the audit or otherwise standards are further described in the Auditor’s appears to be materially misstated. If we identify such responsibilities for the audit of the financial statements material inconsistencies or apparent material section of our report below. We are independent of the misstatements, we are required to determine whether Company in accordance with the ethical requirements this gives rise to a material misstatement in the financial that are relevant to our audit of the financial statements statements themselves. If, based on the work we have in the UK, including the Financial Reporting Council’s performed, we conclude that there is a material (the “FRC”) Ethical Standard, and we have fulfilled our misstatement of the other information, we are required other ethical responsibilities in accordance with these to report that fact. requirements.
Annual Long Report and audited Financial Statements • March 2021 5 Independent Auditor’s Report
We have nothing to report in this regard. In preparing the financial statements, the ACD is responsible for assessing the Company’s ability to Opinions on other matters prescribed by continue as a going concern, disclosing, as applicable, therulesoftheCollectiveInvestment matters related to going concern and using the going Schemes sourcebook of the Financial concern basis of accounting unless the ACD either Conduct Authority (the “FCA”) intends to wind up or terminate the Company or to In our opinion: cease operations, or has no realistic alternative but to do so. • the financial statements have been properly prepared in accordance with the Statement of Auditor’s responsibilities for the audit of Recommended Practice relating to Authorised the financial statements Funds, the rules of the Collective Investment Our objectives are to obtain reasonable assurance Schemes sourcebook of the Financial Conduct about whether the financial statements as a whole are Authority and the Instrument of Incorporation; and free from material misstatement, whether due to fraud • there is nothing to indicate that adequate or error, and to issue an auditor’s report that includes accounting records have not been kept or that the our opinion. Reasonable assurance is a high level of financial statements are not in agreement with assurance, but is not a guarantee that an audit those records; and conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. • the information given in the ACD’s report for the Misstatements can arise from fraud or error and are financial year for which the financial statements considered material if, individually or in the aggregate, are prepared is consistent with the financial they could reasonably be expected to influence the statements economic decisions of users taken on the basis of Matters on which we are required to report these financial statements. by exception Explanation as to what extent the audit We have nothing to report in respect of the following was considered capable of detecting matter in relation to which the Collective Investment Schemes sourcebook of the Financial Conduct irregularities, including fraud Irregularities, including fraud, are instances of non- Authority requires us to report to you if, in our opinion: compliance with laws and regulations. We design • we have not received all the information and procedures in line with our responsibilities, outlined explanations which, to the best of our knowledge above, to detect irregularities, including fraud. The risk and belief, are necessary for the purposes of our of not detecting a material misstatement due to fraud is audit higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, Responsibilities of the Authorised for example, forgery or intentional misrepresentations, Corporate Director (ACD) or through collusion. The extent to which our As explained more fully in the ACD’s responsibilities procedures are capable of detecting irregularities, statement set out on page 3, the ACD is responsible for including fraud is detailed below. However, the primary the preparation of the financial statements and for responsibility for the prevention and detection of fraud being satisfied that they give a true and fair view, and rests with both those charged with governance of the for such internal control as the ACD determines is entity and management. necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
6 Annual Long Report and audited Financial Statements • March 2021 Independent Auditor’s Report
Our approach was as follows: • Due to the regulated nature of the Company, the Senior Statutory Auditor considered the • We obtained an understanding of the legal and experience and expertise of the engagement team regulatory frameworks that are applicable to the to ensure that the team had the appropriate Company and determined that the most significant competence and capabilities, which included the are United Kingdom Generally Accepted use of specialists where appropriate, to identify Accounting Practice the Investment Management non-compliance with the applicable laws and Association’s Statement of Recommended regulations. Practice (“IMA SORP”), the FCA Collective Investment Schemes sourcebook, the OEIC A further description of our responsibilities for the audit Regulations, the Company’s Instrument of of the financial statements is located on the Financial Incorporation and the Prospectus. Reporting Council’s website at https://www.frc.org.uk/ auditorsresponsibilities. This description forms part of • We understood how the Company is complying our auditor’s report. with those frameworks through discussions with the ACD and the Company’s administrators and a Use of our report review of the Company’s documented policies and This report is made solely to the Company’s procedures shareholders as a body, pursuant to Paragraph 4.5.12 of • We assessed the susceptibility of the Company’s the rules of the Collective Investment Schemes financial statements to material misstatement, sourcebook of the Financial Conduct Authority. Our including how fraud might occur by considering audit work has been undertaken so that we might state the risk of management override, specifically to the Company’s shareholders those matters we are management’s propensity to influence revenue required to state to them in an auditor’s report and for and amounts available for distribution. We no other purpose. To the fullest extent permitted by law, identified a fraud risk with respect to the we do not accept or assume responsibility to anyone incomplete or inaccurate income recognition other than the Company and the Company’s through incorrect classification of special shareholders as a body, for our audit work, for this dividends and the resulting impact to amounts report, or for the opinions we have formed. available for distribution. We tested the appropriateness of management’s classification of material special dividends as either a capital or Edinburgh Ernst & Young LLP revenue return and incorporated unpredictability 14 May 2021 Statutory Auditor into the nature, timing and extent of our testing.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved review of the reporting to the ACD with respect to the application of the documented policies and procedures and review of the financial statements to test compliance with the reporting requirements of the Company
Annual Long Report and audited Financial Statements • March 2021 7 M&G Global Dividend Fund Authorised Corporate Director’s Report
Investment objective Benchmark The fund has three aims: Benchmark: MSCI ACWI Index.
• To deliver an income stream that increases every The fund is actively managed. The benchmark is a year. target which the fund seeks to outperform. The index has been chosen as the fund’s target benchmark as it • To deliver a yield above that available from the best reflects the scope of the fund’s investment policy. MSCI ACWI Index over any five-year period. The target benchmark is used solely to measure the • To deliver a higher total return (the combination of fund’s performance and income objective and does not income and growth of capital) than that of the constrain the fund‘s portfolio construction. MSCI ACWI Index over any five-year period. For unhedged share classes, the benchmark is shown in the share class currency. Investment policy At least 70% of the fund is invested in a range of global Risk profile equities. The fund may invest across a wide range of The fund invests globally in the shares of companies geographies, sectors and market capitalisations. The and is, therefore, subject to the price volatility of the fund may also invest in collective investment schemes, global stockmarket and the performance of individual other transferable securities, cash, near cash, other companies. The fund may also be subject to money market securities, warrants and derivatives. The fluctuations in currency exchange rates. The fund’s fund’s exposure to global equities may be gained focus is on shares of companies that have the potential through the use of derivatives. Derivatives may be used to grow their dividends over the long term. Income for efficient portfolio management. distributions from the fund’s holdings, however, are not guaranteed and may vary. Diversification across Investment approach industries and market capitalisation is key in managing The fund manager employs a bottom-up stockpicking liquidity risk and reducing market risk. The fund’s risks approach, driven by the fundamental analysis of are measured and managed as an integral part of the individual companies. The fund manager seeks to invest investment process. in companies with excellent capital discipline and the potential for long-term dividend growth. The fund manager believes rising dividends create upward pressure on the value of shares. Dividend yield is not the primary consideration for stock selection.
The fund manager aims to create a diversified portfolio with exposure to a broad range of countries and sectors. The fund manager selects stocks with different drivers of dividend growth to construct a portfolio that has the potential to cope in a variety of market conditions. The fund invests with a long-term view of typically three to five years. When attempting to grow distributions, the fund manager’s main focus is on delivering an increase in sterling terms.
8 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Authorised Corporate Director’s Report
The following table shows the risk number associated dividend suspensions. Not paying dividends became with the fund and is based on Sterling Class ‘A’ shares. more commonplace.
Low risk High risk That said, dividends did not come to an abrupt halt. Many of the fund’s holdings continued to pay and Typically lower rewards Typically higher rewards increase their dividends as a reflection of their cash- 123456 7 generative qualities and their confidence in long-term growth potential. The fund benefited from dividend increases across a variety of sectors and countries. The above number: In healthcare, Bristol Myers Squibb and Medtronic • is based on the rate at which the value of the fund delivered dividend growth in the typical 5-15% range, has moved up and down in the past and is based while Anthem and UnitedHealth raised their payments on historical data so may not be a reliable indicator by 19% and 16%, respectively. Enel, the Italian utility, ofthefutureriskprofileofthefund. accompanied a solid set of results with a 9% dividend • is not guaranteed and may change over time and increase, while Procter & Gamble and PepsiCo reported the lowest risk number does not mean risk free. mid-single-digit dividend growth in consumer staples.
• has changed during this period. From 1 April Dividend growth was by no means confined to 2020 to 25 June 2020 the risk number was 5. companies with defensive characteristics. (Defensive stocks are companies that tend to have stable earnings and are less affected by peaks and troughs in the Investment review economy.) In so-called cyclical sectors, which have As at 1 April 2021, for the period to 31 March 2021 greater economic sensitivity than their defensive counterparts, Lowe’s raised its dividend by 9% as the Distribution summary US home improvement retailer delivered better-than- Overthe12-monthreviewperiodto1April2021,the expected results. AIA, the Hong Kong-listed insurer, fund distributed income of 7.0998 pence per Sterling increased its full-year payment by 7%. Lundin Mining Class ‘A’ (Income) share. This is 0.15% higher than the provided the biggest boost with a 50% dividend distribution for the same period in the previous financial increase. year. The payout represented a yield (distributed income as a percentage of the share price as at 1 April Technology remained a source of solid dividend growth 2021) of 2.99% versus a yield of 1.74% for the MSCI as Microsoft and Visa reported increases of 10% and ACWI Index, the fund’s target benchmark. 7%, respectively.
We are pleased that the distribution for the fund has The fund was not immune to dividend cuts, however, as increased (albeit very slightly) compared to last year the global pandemic had a more damaging effect on against a difficult backdrop for dividends. (Dividends other holdings. Methanex (materials) lowered its represent a share in the profits of a company and are dividend as the methanol producer stepped up its paid out to the company’s shareholders at set times of efforts to strengthen the balance sheet. We understand the year.) COVID-19 and its knock-on effect on the the importance of retaining cash, particularly for a global economy had profound consequences for cyclical business, and we fully expect dividends to grow corporate cashflows and dividends. The pressure on when circumstances allow. St. James’s Place dividends as a result of the global pandemic was worse (financials), Imperial Logistics (industrials) and Motus than the financial crisis of 2008-09, not just due to the (consumer discretionary) took a similar course of action higher number of dividend cuts; the severity of cuts in in 2020. Imperial Brands and Treasury Wine Estates did 2020 led to a striking increase in the number of thesameinconsumerstaples.Webelievethatthese
Annual Long Report and audited Financial Statements • March 2021 9 M&G Global Dividend Fund Authorised Corporate Director’s Report
measures are temporary and we expect dividend income stream and providing a higher yield than the growth to resume at the appropriate time. We are MSCI ACWI Index. taking a pragmatic approach in these unprecedented Over five years, the fund’s sterling share classes have times. delivered positive total returns, albeit behind the MSCI Trinseo lowered its dividend after the US materials ACWI Index which returned 14.8% pa in sterling. company decided to prioritise debt reduction following Distributions have increased in each financial year an acquisition. Standard Life Aberdeen announced a during this time and the fund’s yield has been at a dividend cut in the new calendar year in response to consistent premium to the benchmark. Consequently, tough operating conditions, but remains committed to the fund has achieved two of its three objectives over long-term dividend growth from the rebased level. The this longer timeframe. investment case for both companies remains For the performance of each share class, please refer unchanged. to the ‘Long-term performance by share class’ table in While a dividend cut should never be taken lightly, the ‘Financial highlights’ section of this report. these disappointments were the exception rather than Performance review the rule in a 42-stock portfolio. The majority of holdings Global stockmarkets recovered strongly from their continued to deliver stable or rising dividends in an COVID-driven lows as the prospect of an economic extreme environment, as a result of which the fund recovery gained wider acceptance. In the initial stages, increased its distribution during the 12-month review the huge fiscal stimulus programmes announced by period, while maintaining a yield above that of the MSCI governments around the world provided comfort that ACWI Index. We are conscious that the combination of an economic disaster would be averted; more recently, a premium yield and rising income is important to many the rollout of vaccines has sparked optimism about a of our investors. We remain focused on meeting this path back to normal and the economy reopening. The objective. MSCI ACWI Index climbed to a record high. The US led The fund’s distribution and yield are shown in the the gains, closely followed by Asia Pacific ex Japan and ‘Specific share class performance’ tables in this report. emerging markets. Europe underperformed, held back The distribution is subject to a variety of influences, by a weak UK, while Japan was another notable laggard including changes in the market environment, in a rising market. movements in currency and changes in the fund’s tax Sector performance was mixed, reflecting two distinct status. Consequently, there is no guarantee that the market environments during the 12 months under fund will increase the income stream in every reporting review. The first half saw a market characterised by period. narrowness of leadership as ‘new economy’ stocks Performance against objective such as Amazon.com and Apple dominated the rally. Between 1 April 2020 (the start of the review period) This momentum proved short-lived, however, as and 1 April 2021, the M&G Global Dividend Fund sentiment in the financial markets took a dramatic turn delivered a positive total return (the combination of in November with the news of effective vaccines. An income and growth of capital) across all its share aggressive rotation into value ensued, with cyclical classes and outperformed its benchmark, the MSCI stocks leading the markets higher. (Cyclical companies ACWI Index, which returned 46.5% in sterling. The fund have greater economic sensitivity than their defensive therefore met its objective of outperforming its counterparts which tend to have stable earnings and benchmark over this short timeframe. The fund also are less affected by peaks and troughs in the economy.) delivered on its income objectives of increasing the Across both periods, defensive stocks struggled
10 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Authorised Corporate Director’s Report
against the headwind of rising bond yields. Utilities and Investment activities consumer staples brought up the rear. We made 12 new purchases and 13 complete sales over the 12-month period – a level of turnover consistent Against this backdrop, the fund generated a positive with our investment timeframe of three to five years. return and outperformed the MSCI ACWI Index. Stock The number of holdings fell to 42, but remained within selection was the key driver of excess return, with the our historic range of 40 to 50. strongest contribution coming from the materials, consumer discretionary and energy sectors. We bought Ørsted and Enel in the early part of the review period as part of our wish to capture the Trinseo and Methanex were the standout performers as structural growth trend in renewable energy. Ørsted, both stocks tripled their share price during the review the world leader in offshore wind power generation, is period. Trinseo, the materials company specialising in well placed for long-term growth as the market leader plastics, latex binders and synthetic rubber, benefited in the fastest-growing segment of renewable energy, from a recovery in end markets such as appliances and but we sold the stock in January after it doubled in automotive, and expects these positive trends to price. Enel, the Italian utility, has sustainability at the continue in 2021. The rally in Methanex shares was also core of its growth strategy, combining higher supported by strong fundamentals as the methanol investment in renewables with an acceleration in producer benefited from a resurgent methanol price. decarbonisation. The fund also added NextEra Energy, Pandora and Lowe’s outperformed in the consumer another utility with renewables exposure, at the end of discretionary sector after reporting better-than- the review period. The negative sentiment from rising expected results. Keyera and Gibson Energy added bond yields provided what we considered to be an value as the energy sector benefited from a swing in attractive entry point for a beneficiary of multi-decade sentiment. The midstream companies, which own and tailwinds without what we regard as the excessive operate pipelines and storage terminals, remain cash valuation attached to many of its clean energy peers. generative and are attractively valued, in our opinion. The fund’s exposure to consumer staples increased Shares of KLA Corp and Tokyo Electron doubled in with the new purchases of Procter & Gamble and Coca- price as semiconductors participated in the cyclical Cola. We sold Constellation Brands and Danone. The rally. fund’s healthcare weighting rose after we bought Novo Defensive stocks dominated the list of detractors in an Nordisk and Takeda Pharmaceutical in our efforts to environment of rising bond yields. Imperial Brands, strengthen the fund’s income stream. Johnson & PepsiCo and Colgate-Palmolive underperformed in Johnson was sold in its entirety. consumer staples, while Roche and Bristol Myers The fund’s exposure to technology declined following Squibb led the laggards in healthcare. All these stocks the sale of Samsung Electronics and Tokyo Electron. remain core holdings as a source of reliable growth. The sale of JPMorgan Chase contributed to a lower Not owning Apple and Tesla also provided a headwind weighting in financials, although we initiated new for the fund’s performance relative to the benchmark holdings in BlackRock and S&P Global towards the end (both stocks are constituents of the index). Apple is a of the review period. potential investment candidate because the technology The exposure to consumer discretionary fell after we company has paid rising dividends in recent years, but sold LVMH and Richemont in luxury goods, while we feel the valuation is demanding and we see more communications services moved to a zero position after attractive opportunities elsewhere. Tesla does not pay we exited Walt Disney. dividends and is therefore ineligible for our dividend The fund’s weighting in industrials increased after we growth approach. bought ABB and Siemens in the second half of the
Annual Long Report and audited Financial Statements • March 2021 11 M&G Global Dividend Fund Authorised Corporate Director’s Report
review period to diversify our exposure to the cyclical long-term growth credentials. The change in sentiment ‘assets’ bucket. Epiroc A and Vinci were sold in the first towardsgrowthstocks,whichhavetakenabackseatin half. We also bought Lundin Mining in materials, while the market rotation, may provide opportunities to add disposing of our holding in Martin Marietta after a new names in ‘rapid growth’. strong run in the shares. Dramatic swings in share prices, especially those driven Outlook by sentiment, often provide excellent entry points for A strong economic rebound is very much consensus in long-term growth companies. We have seen this market the financial markets, with pent-up demand pointing to behaviour before and we will see it again. Capitalising a pick-up in business and consumer spending, coupled on these pricing anomalies will ultimately determine with the full force of fiscal stimulus stoking economic future fund performance and we continue to believe activity. Judging from the latest reporting season, there that the majority of our holdings can sustain dividend is ample evidence to suggest that the corporate world growth at 5-15% over the long term. We believe the is in good shape: cashflows have recovered strongly fund is well placed to build on its track record of from the dark days of the pandemic and dividends are providingarisingincomestreamandweremain flowing freely once more. We believe the fund remains optimistic about the future. well positioned for this scenario of economic strength. Stuart Rhodes We have continued to manage position sizes in some of Fund manager
our extreme value situations following their strong rally, An employee of M&G FA Limited which is an associate of M&G Securities but we remain convinced that the undervaluation has Limited. not narrowed completely. From a valuation standpoint, Please note that the views expressed in this Report should not be taken as a recommendation or advice on how the fund or any holding mentioned in the we continue to have the greatest confidence in Report is likely to perform. If you wish to obtain financial advice as to selected cyclical stocks which continue to look whether an investment is suitable for your needs, you should consult a attractively priced to us, given the improvement we are Financial Adviser. seeing in the operating environment. The fund has plenty of torque should the economic recovery gather pace.
The flipside of economic growth is the spectre of inflation which has manifested itself in higher bond yields. Higher bond yields have weighed heavily on growth stocks as well as defensive stocks perceived as bond proxies. Valuation remains a critical aspect of our fundamental analysis to ensure that we do not overpay for the growth we seek.
We remain committed to our diversified approach to dividend investing, with its three buckets – ‘quality’, ‘assets’ and ‘rapid growth’ – providing different characteristics to help cope with different market conditions.
With this in mind, we have been active in our search for new ideas. The pressure from rising bond yields has created buying opportunities for selected ‘quality’ stocks where the perception of defensiveness belies
12 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Investments
Portfolio statement
Holding as at 31.03.21 as at 31.03.21 as at 31.03.20 £’000 % %
Equities 2,282,823 99.55 97.31
United Kingdom 322,497 14.06 13.91
11,686,216 Imperial Brands 175,293 7.64
4,028,851 St. James‘s Place 51,408 2.24
32,964,906 Standard Life Aberdeen 95,796 4.18
Denmark 70,513 3.07 2.12
502,146 Novo Nordisk 24,954 1.09
587,564 Pandora 45,559 1.98
France 00.004.45
Germany 35,184 1.53 0.00
292,844 Siemens 35,184 1.53
Italy 43,768 1.91 0.00
6,070,838 Enel 43,768 1.91
Norway 561 0.02 0.02
3,981,819 Prosafe 561 0.02
Sweden 0 0.00 0.61
Switzerland 189,838 8.28 7.57
2,231,771 ABB 49,358 2.15
1,074,853 Novartis 67,001 2.92
311,620 Roche 73,479 3.21
United States 1,077,004 46.97 48.38
149,417 Anthem 39,524 1.72
259,919 Arthur J. Gallagher & Co 23,724 1.03
285,700 Automatic Data Processing 39,000 1.70
44,510 BlackRock 24,230 1.06
1,167,529 Bristol-Myers Squibb 53,694 2.34
797,798 Cisco Systems 30,013 1.31
1,452,813 Coca-Cola 56,111 2.45
817,544 Colgate-Palmolive 47,150 2.06
286,593 KLA 66,020 2.88
346,620 Lowe‘s 47,858 2.09
504,289 Medtronic 43,541 1.90
6,326,514 Methanex 168,643 7.35
Annual Long Report and audited Financial Statements • March 2021 13 M&G Global Dividend Fund Investments
Portfolio statement (continued)
Holding as at 31.03.21 as at 31.03.21 as at 31.03.20 £’000 % %
Equities (continued)
United States (continued)
492,757 Microsoft 83,150 3.63
333,856 NextEra Energy 18,003 0.79
428,132 PepsiCo 44,340 1.93
375,059 Procter & Gamble 36,931 1.61
44,843 S&P Global 11,493 0.50
207,436 Travelers 23,214 1.01
3,584,353 Trinseo 166,275 7.25
85,853 UnitedHealth 23,322 1.02
199,735 Visa 30,768 1.34
Canada 292,986 12.78 7.24
11,588,014 Gibson Energy 143,903 6.28
8,024,555 Keyera 120,794 5.27
3,836,515 Lundin Mining 28,289 1.23
Japan 34,524 1.51 2.77
1,319,900 Takeda Pharmaceutical 34,524 1.51
Australia 107,954 4.71 4.41
8,237,279 Amcor 70,151 3.06
6,600,477 Treasury Wine Estates 37,803 1.65
Hong Kong 24,087 1.05 2.56
2,733,127 AIA 24,087 1.05
South Korea 0 0.00 0.99
Taiwan 40,222 1.75 1.25
2,691,000 Taiwan Semiconductor Manufacturing 40,222 1.75
South Africa 43,685 1.91 1.03
7,687,204 Imperial Logistics 17,731 0.78
6,013,644 Motus 25,954 1.13
Portfolio of investments 2,282,823 99.55 97.31
14 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Investments
Portfolio statement (continued)
Holding as at 31.03.21 as at 31.03.21 as at 31.03.20 £’000 % %
Cash equivalents 0 0.00 2.11
‘AAA’ rated money market fundsa 00.002.11
Total portfolio (notes 2c & 2d on pages 28 & 29) 2,282,823 99.55 99.42
Net other assets / (liabilities) 10,369 0.45 0.58
Net assets attributable to shareholders 2,293,192 100.00 100.00
All securities are on an official stock exchange listing except where referenced. a Uncommitted surplus cash is placed into ‘AAA’ rated money market funds with the aim of reducing counterparty risk.
Annual Long Report and audited Financial Statements • March 2021 15 M&G Global Dividend Fund Investments
Top ten portfolio transactions for the year to 31 March 2021
Largest purchases £’000
Imperial Brands 64,834
Novartis 64,204
Coca-Cola 60,656
Enel 58,509
Keyera 53,407
ABB 48,039
Procter & Gamble 43,303
KLA 43,205
Roche 37,820
Siemens 37,699
Other purchases 555,832
Total purchases 1,067,508
Largest sales £’000
Tokyo Electron 92,002
Visa 62,874
Martin Marietta Materials 61,056
Arthur J. Gallagher & Co 57,357
Microsoft 54,583
Danone 52,127
Ørsted 49,860
Lowe‘s 46,776
Pandora 43,532
Richemont 34,490
Other sales 623,125
Total sales 1,177,782
Purchases and sales exclude the cost and proceeds of ‘AAA’ rated money market funds.
16 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial highlights
Fund performance Performance since launch To give an indication of how the fund has performed Please note past performance is not a guide to future since launch, the chart below shows total return of performance and the value of investments, and the Sterling Class ‘A’ (Accumulation) shares. income from them, will fluctuate. This will cause the fund price to fall as well as rise and you may not get July 2008 = 100, plotted monthly back the original amount you invested. Chart date 1 April 2021 The following charts and tables reflect the key financial 450 400 information of a representative share class, Sterling 350 Class ‘A’ (Accumulation) shares. As different share 300 classes have different attributes, for example charging 250 structures and minimum investments, please be aware 200 that their performance may be different. For more information on the different share classes in this fund 150 please refer to the Prospectus for M&G Global Dividend 120 Fund, which is available free of charge either from our 100 website at www.mandg.co.uk/prospectuses or by 80 calling M&G Customer Relations. 75 08 09 10 11 12 13 14 1516 17 1819 20 21 Fund level performance Sterling Class ‘A’ (Accumulation) shares* MSCI ACWI Index** Fund net asset value as at 31.03.21 31.03.20 31.03.19 £’000 £’000 £’000 Source: Morningstar, Inc. and M&G * Income reinvested Fund net asset value (NAV) 2,293,192 1,686,990 2,403,771 ** Benchmark prior to 1 January 2012 was the FTSE World Index. Thereafter it is the MSCI ACWI Index
Annual Long Report and audited Financial Statements • March 2021 17 M&G Global Dividend Fund Financial highlights
Historic yield Distribution over ten years The chart below shows the historic yield of Sterling The chart below shows the annual distribution of Class ‘A’ (Income) shares against that of a comparator Sterling Class ‘A’ (Income) shares over 10 years. benchmark. Annual distribution over 10 years Historic yield comparison from July 2008, plotted monthly Chart date 1 April 2021 Chart date 1 April 2021 8.0 5.0 7.0 4.5 6.0
4.0 5.0
3.5 4.0
3.0 3.0 2.0 2.5 1.0
2.0 0.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1.5 Year ending March 08 09 10 11 12 13 14 1516 17 1819 20 21 Sterling Class ‘A’ (Income) shares Sterling Class ‘A’ (Income) shares yield MSCI ACWI Index yield
Source: Morningstar, Inc. and M&G
Historic yield: The historic yield reflects distributions declared over the past twelve months as a percentage of the mid-market price, as at the date shown. It does not include any preliminary charge and investors may be subject to tax on their distributions.
18 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial highlights
Long-term performance by share class • Annual charge: Charge paid to M&G covering the To give an indication of the performance of the fund, annual cost of M&G managing and administering the following table shows the compound rate of return, the fund and the costs of third parties providing per annum, over the period. Calculated on a price to services to the fund. From 1 August 2019, this price basis with income reinvested. charge rolls all costs that make up the operating charges into one annual charge. Share One Three Five Since For every £1 billion of a fund’s net asset value, a class year years years launch 01.04.20 03.04.18 01.04.16 discount of 0.02% will be applied to that fund’s %a %pa %pa %pa annual charge (up to a maximum of 0.12%).
Sterlingb • Extraordinary legal and tax expenses: Costs that Class ‘A’ +50.8 +10.6 +12.5 +10.6c specifically relate to legal or tax claims that are both
Class ‘I’ +51.5 +11.2 +13.2 +11.4c exceptional and unforeseeable. Such expenses are uncommon, and would not be expected in most years. Class ‘X’ +50.8 +10.6 +12.5 +10.6c Although they result in a short-term cost to the fund, MSCI ACWI +46.5 +14.0 +14.8 +11.5c generally they can deliver longer term benefits for Indexd investors. Class ‘PP’ +51.8 n/a n/a +9.4e • Investment management: Charge paid to M&G for MSCI ACWI +46.5 n/a n/a +13.8e Index investment management of the fund. From
Class ‘R’ +51.1 +11.0 +13.0 +10.7f 1 August 2019 this charge forms part of the annual charge. MSCI ACWI +46.5 +14.0 +14.8 +13.5f Index • Administration: Charge paid for administration a Absolute basis. services in addition to investment management – b Price to price with income reinvested. any surplus from this charge will be retained by c 18 July 2008, the launch date of the fund. d Benchmark prior to 1 January 2012 was the FTSE World Index. Thereafter M&G. From 1 August 2019 this charge is rolled into it is the MSCI ACWI Index. the annual charge. e 8 April 2019, the launch date of the share class. f 3 August 2012, the launch date of the share class. • Oversight and other independent services: Charges paid to providers independent of M&G for Operating charges and portfolio services which include depositary, custody and transaction costs audit. From 1 August 2019 these charges will be We explain below the payments made to meet the paid by M&G and rolled into the annual charge. ongoing costs of investing and managing the fund, • Ongoing charges from underlying funds: Ongoing comprising operating charges and portfolio transaction charges on holdings in underlying funds that are costs. not rebated. From 1 August 2019 charges from Operating charges underlying funds (excluding Investment Trust Operating charges include payments made to M&G and Companies and Real Estate Investment Trusts) will to providers independent of M&G: be rebated. The operating charges paid by each share class of the fund are shown in the following performance tables. These charges do not include portfolio transaction costs or any entry and exit charges (also known as initial and redemption charges). The charging structures of share classes may differ, and therefore the operating charges may differ.
Annual Long Report and audited Financial Statements • March 2021 19 M&G Global Dividend Fund Financial highlights
Operating charges are in line with the ongoing charges Portfolio transaction costs shown in the Key Investor Information Document, other than where there have been extraordinary legal or tax fortheyearto31March 2021 2020 2019 Averagea Direct portfolio transaction %%% % expenses, or an estimate has been used for the costsb ongoing charge because a material change has made Broker commission 0.04 0.03 0.02 0.03 the operating charges unreliable as an estimate of future charges. Taxes 0.03 0.04 0.02 0.03 Costs before dilution 0.07 0.07 0.04 0.06 Portfolio transaction costs adjustments Portfolio transaction costs are incurred by funds when Dilution adjustmentsc (0.04) (0.01) (0.02) (0.02) buying and selling investments. These costs vary Total direct portfolio 0.03 0.06 0.02 0.04 depending on the types of investment, their market transaction costs
capitalisation, country of exchange and method of as at 31 March 2021 2020 2019 Averagea execution. They are made up of direct and indirect Indirect portfolio % % % % portfolio transaction costs: transaction costs • Average portfolio dealing 0.12 0.18 0.08 0.13 Direct portfolio transaction costs: Broker spread execution commission and taxes. a Average of first three columns. • Indirect portfolio transaction costs: ‘Dealing b As a percentage of average net asset value. c In respect of direct portfolio transaction costs. Please see the section spread’ – the difference between the buying and above this table for an explanation of dilution adjustments. selling prices of the fund’s investments; some types of investment, such as fixed interest securities, have no direct transaction costs and only the dealing spread is paid.
Investments are bought or sold by a fund when changes are made to the investment portfolio and in response to net flows of money into or out of the fund from investors buying and selling shares in the fund.
To protect existing investors, portfolio transaction costs incurred as a result of investors buying and selling shares in the fund are recovered from those investors through a ‘dilution adjustment’ to the price they pay or receive. The table below shows direct portfolio transaction costs paid by the fund before and after that part of the dilution adjustment relating to direct portfolio transaction costs. To give an indication of the indirect portfolio dealing costs the table also shows the average portfolio dealing spread.
Further information on this process is in the Prospectus, which is available free of charge on request either from our website at www.mandg.co.uk/prospectuses or by calling M&G Customer Relations.
20 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial highlights
Specific share class performance Sterling Class ‘A’ Accumulation share The following tables show the performance of each performance share class. All ‘Performance and charges’ percentages The share class was launched on 18 July 2008. represent an annual rate except for the ‘Return after fortheyearto31March 2021 2020 2019 operating charges’ which is calculated as a percentage Change in NAV per share UK p UK p UK p of the opening net asset value per share (NAV). ‘Dilution Opening NAV 245.63 296.42 266.91 adjustments’ are only in respect of direct portfolio Return before operating 118.20 (46.30) 34.35 transaction costs. charges
Historic yields for the current year are calculated as at Operating charges (4.12) (4.49) (4.84) 9 April 2021. Return after operating 114.08 (50.79) 29.51 charges
Sterling Class ‘A’ Income share Distributions (6.41) (5.68) (4.11) performance Retained distributions 6.41 5.68 4.11 The share class was launched on 18 July 2008. Closing NAV 359.71 245.63 296.42 fortheyearto31March 2021 2020 2019 Change in NAV per share UK p UK p UK p Direct transaction costs UK p UK p UK p
Opening NAV 167.32 209.27 194.31 Costs before dilution 0.23 0.22 0.12 adjustments Return before operating 79.80 (31.69) 24.87 a (0.13) (0.03) (0.06) charges Dilution adjustments
Operating charges (2.83) (3.17) (3.50) Total direct transaction costs 0.10 0.19 0.06
Return after operating 76.97 (34.86) 21.37 Performance and charges % % % charges Direct portfolio transaction 0.03 0.06 0.02 costsb Distributions (7.10) (7.09) (6.41) Operating chargesc 1.32 1.46 1.66 Closing NAV 237.19 167.32 209.27 Return after charges +46.44 -17.13 +11.06 Direct transaction costs UK p UK p UK p Historic yield 1.71 2.18 1.34 Costs before dilution 0.16 0.16 0.09 adjustments Other information
a Dilution adjustments (0.09) (0.02) (0.05) Closing NAV (£’000) 222,444 206,764 265,988
Total direct transaction costs 0.07 0.14 0.04 Closing NAV (%) 9.70 12.26 11.06
Performance and charges % % % Number of shares 61,839,313 84,178,803 89,734,481
Direct portfolio transaction 0.03 0.06 0.02 Highest share price (UK p) 364.77 332.36 311.25 costsb Lowest share price (UK p) 239.06 224.36 264.49 Operating chargesc 1.31 1.46 1.66
Return after charges +46.00 -16.66 +11.00
Historic yield 2.94 4.00 2.98
Other information
Closing NAV (£’000) 518,573 214,634 365,458
Closing NAV (%) 22.61 12.72 15.20
Number of shares 218,630,792 128,280,917 174,635,779
Highest share price (UK p) 243.07 229.90 225.19
Lowest share price (UK p) 162.79 155.20 190.67
Annual Long Report and audited Financial Statements • March 2021 21 M&G Global Dividend Fund Financial highlights
Sterling Class ‘I’ Income share Sterling Class ‘I’ Accumulation share performance performance The share class was launched on 18 July 2008. The share class was launched on 18 July 2008.
fortheyearto31March 2021 2020 2019 fortheyearto31March 2021 2020 2019 Change in NAV per share UK p UK p UK p Change in NAV per share UK p UK p UK p
Opening NAV 182.16 226.50 208.73 Opening NAV 267.04 320.37 286.62
Return before operating 87.01 (34.59) 26.74 Return before operating 128.78 (50.40) 36.62 charges charges
Operating charges (1.91) (2.05) (2.06) Operating charges (2.84) (2.93) (2.87)
Return after operating 85.10 (36.64) 24.68 Return after operating 125.94 (53.33) 33.75 charges charges
Distributions (7.75) (7.70) (6.91) Distributions (8.66) (8.10) (6.78)
Closing NAV 259.51 182.16 226.50 Retained distributions 8.66 8.10 6.78
Direct transaction costs UK p UK p UK p Closing NAV 392.98 267.04 320.37
Costs before dilution 0.17 0.17 0.10 Direct transaction costs UK p UK p UK p adjustments Costs before dilution 0.25 0.24 0.13 Dilution adjustmentsa (0.10) (0.03) (0.05) adjustments
Total direct transaction costs 0.07 0.14 0.05 Dilution adjustmentsa (0.15) (0.04) (0.07)
Performance and charges % % % Total direct transaction costs 0.10 0.20 0.06
Direct portfolio transaction 0.03 0.06 0.02 Performance and charges % % % costsb Direct portfolio transaction 0.03 0.06 0.02 Operating chargesc 0.84 0.88 0.91 costsb
Return after charges +46.72 -16.18 +11.82 Operating chargesc 0.84 0.88 0.91
Historic yield 2.93 3.99 2.96 Return after charges +47.16 -16.65 +11.78
Other information Historic yield 2.12 2.86 2.05
Closing NAV (£’000) 664,485 626,047 851,380 Other information
Closing NAV (%) 28.98 37.11 35.42 Closing NAV (£’000) 656,252 566,517 825,142
Number of shares 256,056,095 343,670,255 375,886,902 Closing NAV (%) 28.62 33.58 34.33
Highest share price (UK p) 265.90 250.06 242.67 Number of shares 166,991,748 212,145,537 257,556,985
Lowest share price (UK p) 177.24 168.95 205.98 Highest share price (UK p) 398.44 360.98 335.29
Lowest share price (UK p) 259.91 243.90 284.06
22 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial highlights
Sterling Class ‘PP’ Income share Sterling Class ‘PP’ Accumulation share performance performance The share class was launched on 5 August 2019. The share class was launched on 8 April 2019.
fortheyearto31March 2021 2020 2019 fortheyearto31March 2021 2020 2019 Change in NAV per share UK p UK p UK p Change in NAV per share UK p UK p UK p
Opening NAV 78.52 100.00 n/a Opening NAV 80.93 100.00 n/a
Return before operating 37.55 (18.46) n/a Return before operating 39.07 (18.40) n/a charges charges
Operating charges (0.65) (0.43) n/a Operatingcharges (0.66) (0.67) n/a
Return after operating 36.90 (18.89) n/a Return after operating 38.41 (19.07) n/a charges charges
Distributions (3.35) (2.59) n/a Distributions (2.82) (2.66) n/a
Closing NAV 112.07 78.52 n/a Retained distributions 2.82 2.66 n/a
Direct transaction costs UK p UK p UK p Closing NAV 119.34 80.93 n/a
Costs before dilution 0.07 0.05 n/a Direct transaction costs UK p UK p UK p adjustments Costs before dilution 0.07 0.07 n/a Dilution adjustmentsa (0.04) (0.01) n/a adjustments
Total direct transaction costs 0.03 0.04 n/a Dilution adjustmentsa (0.04) (0.01) n/a
Performance and charges % % % Total direct transaction costs 0.03 0.06 n/a
Direct portfolio transaction 0.03 0.06 n/a Performance and charges % % % costsb Direct portfolio transaction 0.03 0.06 n/a Operating charges 0.65 0.66 n/a costsb
Return after charges +46.99 -18.89 n/a Operating chargesc 0.65 0.68 n/a
Historic yield 2.93 3.99 n/a Return after charges +47.46 -19.07 n/a
Other information Historic yield 2.29 3.10 n/a
Closing NAV (£’000) 123,346 136 n/a Other information
Closing NAV (%) 5.38 0.01 n/a Closing NAV (£’000) 12,187 701 n/a
Number of shares 110,060,619 173,697 n/a Closing NAV (%) 0.53 0.04 n/a
Highest share price (UK p) 114.83 107.74 n/a Number of shares 10,211,708 865,782 n/a
Lowest share price (UK p) 76.40 72.82 n/a Highest share price (UK p) 120.99 109.36 n/a
Lowest share price (UK p) 78.77 73.92 n/a
Annual Long Report and audited Financial Statements • March 2021 23 M&G Global Dividend Fund Financial highlights
Sterling Class ‘R’ Income share Sterling Class ‘R’ Accumulation share performance performance The share class was launched on 3 August 2012. The share class was launched on 3 August 2012.
fortheyearto31March 2021 2020 2019 fortheyearto31March 2021 2020 2019 Change in NAV per share UK p UK p UK p Change in NAV per share UK p UK p UK p
Opening NAV 128.27 159.89 147.71 Opening NAV 164.44 198.78 177.20
Return before operating 61.20 (24.33) 18.93 Return before operating 79.22 (31.02) 22.83 charges charges
Operating charges (1.75) (1.86) (1.86) Operating charges (2.27) (2.32) (2.25)
Return after operating 59.45 (26.19) 17.07 Return after operating 76.95 (33.34) 20.58 charges charges
Distributions (5.45) (5.43) (4.89) Distributions (4.80) (4.48) (3.70)
Closing NAV 182.27 128.27 159.89 Retained distributions 4.80 4.48 3.70
Direct transaction costs UK p UK p UK p Closing NAV 241.39 164.44 197.78
Costs before dilution 0.12 0.12 0.07 Direct transaction costs UK p UK p UK p adjustments Costs before dilution 0.16 0.15 0.08 Dilution adjustmentsa (0.07) (0.02) (0.04) adjustments
Total direct transaction costs 0.05 0.10 0.03 Dilution adjustmentsa (0.09) (0.02) (0.04)
Performance and charges % % % Total direct transaction costs 0.07 0.13 0.04
Direct portfolio transaction 0.03 0.06 0.02 Performance and charges % % % costsb Direct portfolio transaction 0.03 0.06 0.02 Operating chargesc 1.08 1.13 1.16 costsb
Return after charges +46.35 -16.38 +11.56 Operating chargesc 1.08 1.13 1.16
Historic yield 2.94 3.99 2.97 Return after charges +46.80 -16.86 +11.61
Other information Historic yield 1.91 2.57 1.82
Closing NAV (£’000) 11,008 8,638 12,301 Other information
Closing NAV (%) 0.48 0.51 0.51 Closing NAV (£’000) 21,301 14,665 17,046
Number of shares 6,039,238 6,734,138 7,693,298 Closing NAV (%) 0.93 0.87 0.71
Highest share price (UK p) 186.77 176.16 171.55 Number of shares 8,824,199 8,918,268 8,619,019
Lowest share price (UK p) 124.80 118.97 145.49 Highest share price (UK p) 244.77 222.39 207.07
Lowest share price (UK p) 160.04 150.20 175.61
24 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial highlights
Sterling Class ‘X’ Income share Sterling Class ‘X’ Accumulation share performance performance The share class was launched on 18 July 2008. The share class was launched on 18 July 2008.
fortheyearto31March 2021 2020 2019 fortheyearto31March 2021 2020 2019 Change in NAV per share UK p UK p UK p Change in NAV per share UK p UK p UK p
Opening NAV 167.39 209.36 194.39 Opening NAV 245.76 296.58 267.06
Return before operating 79.79 (31.73) 24.87 Return before operating 118.29 (46.31) 34.36 charges charges
Operating charges (2.78) (3.15) (3.49) Operating charges (4.14) (4.51) (4.84)
Return after operating 77.01 (34.88) 21.38 Return after operating 114.15 (50.82) 29.52 charges charges
Distributions (7.10) (7.09) (6.41) Distributions (6.42) (5.68) (4.11)
Closing NAV 237.30 167.39 209.36 Retained distributions 6.42 5.68 4.11
Direct transaction costs UK p UK p UK p Closing NAV 359.91 245.76 296.58
Costs before dilution 0.16 0.16 0.09 Direct transaction costs UK p UK p UK p adjustments Costs before dilution 0.23 0.22 0.12 Dilution adjustmentsa (0.09) (0.02) (0.05) adjustments
Total direct transaction costs 0.07 0.14 0.04 Dilution adjustmentsa (0.14) (0.03) (0.06)
Performance and charges % % % Total direct transaction costs 0.09 0.19 0.06
Direct portfolio transaction 0.03 0.06 0.02 Performance and charges % % % costsb Direct portfolio transaction 0.03 0.06 0.02 Operating chargesc 1.32 1.46 1.66 costsb
Return after charges +46.01 -16.66 +11.00 Operating chargesc 1.32 1.46 1.66
Historic yield 2.94 4.00 2.98 Return after charges +46.45 -17.14 +11.05
Other information Historic yield 1.71 2.18 1.34
Closing NAV (£’000) 46,180 35,680 48,064 Other information
Closing NAV (%) 2.01 2.12 2.00 Closing NAV (£’000) 17,416 13,208 18,392
Number of shares 19,460,728 21,315,456 22,957,221 Closing NAV (%) 0.76 0.78 0.77
Highest share price (UK p) 243.18 230.00 225.29 Number of shares 4,838,854 5,374,283 6,201,160
Lowest share price (UK p) 162.86 155.27 190.75 Highest share price (UK p) 364.97 332.54 311.42
Lowest share price (UK p) 239.19 224.49 264.64
a In respect of direct portfolio transaction costs. b As a percentage of average net asset value. c Following the change in charging structure, you may see variances between the comparative and current year figures.
Annual Long Report and audited Financial Statements • March 2021 25 M&G Global Dividend Fund Financial statements and notes
Financial statements Statement of total return
2021 2020
for the year to 31 March Note £’000 £’000 £’000 £’000
Income
Net capital gains/(losses) 5 749,888 (390,432)
Revenue 7 81,920 88,727
Expenses 8 (20,925) (24,913)
Net revenue/(expense) before taxation 60,995 63,814
Taxation 9 (9,336) (11,382)
Net revenue/(expense) after taxation 51,659 52,432
Total return before distributions 801,547 (338,000)
Distributions 10 (63,066) (65,788)
Change in net assets attributable to shareholders from 738,481 (403,788) investment activities
Statement of change in net assets attributable to shareholders
2021 2020
for the year to 31 March £’000 £’000 £’000 £’000
Opening net assets attributable to shareholders 1,686,990 2,403,771
Amounts received on issue of shares 750,556 87,509
Amounts paid on cancellation of shares (907,506) (425,242)
(156,950) (337,733)
Dilution adjustments 1,728 451
Change in net assets attributable to shareholders from 738,481 (403,788) investment activities (see above)
Retained distributions on Accumulation shares 22,941 24,283
Unclaimed distributions 26
Closing net assets attributable to shareholders 2,293,192 1,686,990
26 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial statements and notes
Financial statements Balance sheet
as at 31 March Note 2021 2020 £’000 £’000
Assets
Fixed assets
Investments 2,282,823 1,641,654
Current assets
Debtors 11 30,078 25,851
Cash and bank balances 12 17,280 18,807
Cash equivalents 0 35,590
Total assets 2,330,181 1,721,902
Liabilities
Creditors
Distribution payable (14,426) (13,692)
Other creditors 13 (22,563) (21,220)
Total liabilities (36,989) (34,912)
Net assets attributable to shareholders 2,293,192 1,686,990
Annual Long Report and audited Financial Statements • March 2021 27 M&G Global Dividend Fund Financial statements and notes
Notes to the financial statements 1 Statement of compliance The financial statements have been prepared in compliance with UK Financial Reporting Standard 102 (FRS 102) and in accordance with the Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Association in May 2014 and amended in June 2017.
2 Summary of significant accounting policies
a. Basis of preparation There are no material events that have been identified that may cast significant doubt on the Company’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 ACD believes that the Company 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 ACD 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 financial statements of M&G Global Dividend Fund are prepared on a going concern basis, under the historical cost convention as modified by the revaluation of certain financial assets and liabilities measured at fair value through profit or loss.
b. Functional and presentational currency The functional and presentational currency of M&G Global Dividend Fund is UK sterling.
c. Exchange rates Transactions in currencies other than the fund’s functional currency are translated at the rate of exchange ruling on the date of the transaction and where applicable assets and liabilities are translated into the fund’s functional currency at the rate of exchange ruling as at 12 noon on 31 March 2021 being the last business day of the accounting period.
d. Investments – recognition and valuation The provisions of both Section 11 and Section 12 of FRS 102 have been applied in full. All investments have been designated as fair value through profit and loss and recognised initially at fair value, which is normally the transaction price (excluding transaction costs and accrued interest).
At the end of the reporting period all investments have been measured at their fair value using the prices and the portfolio holdings determined at 12 noon on 31 March 2021, being the last valuation point of the accounting period, as this is not materially different from a valuation carried out at close of business on the balance sheet date.
Where separate bid and offer prices are available, the bid price is used for investment assets and the offer price for investment liabilities. Otherwise, the single price or most recent transaction price is used. Interest accrued is not included in the fair value. The methods of determining fair value for the principal classes of investment are:
• Equities and debt securities which are traded on an active market are included at the quoted price, which is normally the bid price, excluding any accrued interest in respect of bonds.
28 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial statements and notes
• Equities traded on the Alternative Investment Market (AIM), whose liquidity cannot be guaranteed, are included at their quoted bid price as this represents the most objective and appropriate method of valuation.
• Collective investment schemes operated by the ACD are included at either their cancellation price for dual priced funds or their single price for single priced funds.
• Collective investment schemes operated by another manager are included at either their bid price for dual priced funds or their single price for single priced funds.
• Other equities and debt securities which are unquoted or not actively traded on a quoted market are included at a value estimated by the ACD using an appropriate valuation technique, excluding any accrued interest in respect of bonds.
• Exchange traded futures and options are included at the cost of closing out the contract at the balance sheet date.
• Over the counter equity options, credit default swaps, interest rate swaps, asset swaps and inflation swaps are included at a value provided by Markit Valuations Limited, an independent credit derivative price provider. Their fair value excludes any accrued interest in respect of derivatives where the income is revenue in nature.
• Forward currency contracts, for share class hedging and investment, are included at a value determined by reference to current forward exchange rates for contracts with similar maturity profiles. e. Recognition of income and expenses • Dividends, including ordinary stock dividends, from equity investments are recognised when the security is quoted ex-dividend.
• Distributions from collective investment schemes are recognised when the scheme is priced ex- distribution.
• Interest income, including coupons from debt securities and bank interest is recognised on an accruals basis.
• Underwriting commission is recognised when the issue takes place.
• Revenue from derivatives is recognised on an accruals basis.
• Fee rebates from investing in other collective investment schemes are recognised on an accruals basis.
• Expenses are recognised on an accruals basis. f. Treatment of income and expenses • Any increases or decreases in the fair value of investments and gains and losses realised on sales of investments are treated as capital and recognised in net capital gains / (losses).
• The value of any enhancement to a stock dividend is treated as capital.
• Ordinary equity dividends, including ordinary stock dividends are treated as revenue.
• Special dividends, share buy backs or additional share issues may be treated as revenue or capital depending on the facts of each particular case.
Annual Long Report and audited Financial Statements • March 2021 29 M&G Global Dividend Fund Financial statements and notes
• Distributions from collective investment schemes are treated as revenue in nature, except for any element of equalisation, which represents the average amount of income included in the price paid for the collective investment scheme, which is treated as capital.
• Debt security interest comprises the coupon interest and the difference between the purchase price and the expected maturity price spread over its expected remaining life. This is treated as revenue with the difference adjusting the cost of the shares and treated as capital.
• Other interest income, such as bank interest is treated as revenue.
• Underwriting commission is treated as revenue, except where the fund is required to take up all or some of the shares underwritten, in which case a proportion of the commission received is deducted from the cost of the shares and treated as capital.
• The treatment of the income on derivative contracts depends upon the nature of the transaction. Both motive and circumstances are used to determine whether the returns should be treated as capital or revenue. Where positions are undertaken to protect or enhance capital, and the circumstances support this, the returns are recognised in net capital gains; similarly where the motives and circumstances are to generate or protect revenue, and the circumstances support this, the returns are included within net revenue before taxation. Where positions generate total returns it will generally be appropriate to apportion such returns between capital and revenue to properly reflect the nature of the transaction.
• Expenses relating to the purchase and sale of investments are treated as capital; all other expenses are treated as revenue.
• Rebates of charges from holdings in collective investment schemes are treated as revenue or capital in accordance with the underlying scheme’s distribution policy.
g. Tax Dividends and similar income receivable are recognised at an amount that includes any withholding tax but excludes irrecoverable tax credits. Any withholding tax suffered is shown as part of the tax charge.
Tax is accounted for at the appropriate rate of corporation tax with relief for double taxation taken where appropriate. The tax accounting treatment follows the principal amounts involved.
Deferred tax is recognised in respect of temporary timing differences that have originated but not reversed by the balance sheet date. Deferred tax is measured on a non-discounted basis, at the average rate of tax expected to apply in the period in which it expects the deferred tax to be realised or settled. A deferred tax asset is only recognised to the extent that it is more likely than not that the asset will be recovered.
Marginal tax relief has not been taken into account in respect of expenses offset against capital.
h. Allocation of returns to share classes The annual charge, annual management charge, any share class hedging returns and associated share class hedging charge are directly attributable to individual share classes. All other returns are apportioned to the fund’s share classes pro-rata to the value of the net assets of the relevant share class on the day that the income or expenses are recognised.
All available net revenue accounted for in accordance with the above policies and adjusted where relevant by any specific distribution policies set out in the notes to that fund’s financial statements, is distributed to holders of Income shares or retained and reinvested for holders of Accumulation shares. Should expenses and taxation together exceed revenue, there will be no distribution and the shortfall will be met from capital.
30 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial statements and notes
Distributions which have remained unclaimed by shareholders for more than six years are credited to the capital property of the fund.
3 Risk management policies The ACD is responsible for establishing, implementing and maintaining an adequate and documented risk management policy for identifying, measuring and managing all risks to which funds are or might be exposed.
The Company’s investment activities expose it to various types of risk which are associated with the financial instruments and markets in which it invests; market risk, credit risk and liquidity risk.
These financial statements are designed to enable users to evaluate the nature and extent of those risks and how they are managed.
The following risk management policies are applicable to the fund, with specific risk disclosures set out in notes 20 to 22 in this report. a. Market risk Market risk is the risk of loss resulting from fluctuations in the market value of positions in a fund’s portfolio attributable to changes in market variables, such as interest rates, exchange rates, equity and commodity prices or an issuer’s creditworthiness.
In relation to market risk, processes are applied that take account of the investment objective and policy of the fund. The fund is subject to an investment oversight process in accordance with the type and nature of the fund. In addition all funds are monitored for compliance within regulatory limits.
In measuring and monitoring market risk, the global exposure of a fund may be calculated using a ‘commitment’ approach or ‘Value at Risk’ (VaR) approach. b. Commitment approach The commitment approach is applied for funds investing only in traditional asset classes, namely equities, fixed income, money market instruments and collective investment schemes.
In addition, the approach is applied for funds which use or intend to use derivatives or instruments embedding derivatives, but only for efficient portfolio management purposes, or in a simple way not necessarily restricted to efficient portfolio management.
Under the commitment approach the global exposure of funds is measured and monitored using a commitment (adjusted notional) methodology.
Market risk is considered on a daily basis and forms the foundation of investment oversight analysis. This can include for each fund (but is not limited to) the analysis of factors such as fund concentration; style, geographical, industry and market capitalisation biases; active, systematic and specific risk measurements; active money; and beta characteristics. c. Value at Risk approach The Value at Risk (VaR) approach is a methodology for estimating the maximum potential loss due to market risk based on historic market volatilities and correlations. More particularly, the VaR approach gives a broad indication of the maximum potential loss at a given confidence level (probability), over a specific time period under normal market conditions.
Instrument and portfolio modelling techniques are based on market accepted practices and are subject to regular audit (back-testing). Market risk factors that are analysed include LIBOR / swap rates, government yield curves, equity prices, exchange rates, market volatility, credit spreads and credit default swap (CDS) spreads.
Annual Long Report and audited Financial Statements • March 2021 31 M&G Global Dividend Fund Financial statements and notes
The VaR model is based on a Monte Carlo process with actual VaR being reported on the basis of a 99% confidence interval over a one month period (20 business days). Risk factor history used in the Monte Carlo process is based on 250 business days. From the variance / covariance matrices, a parametric Monte Carlo scenario set of 5,000 simulations is derived and applied to the fund.
VaR does have limitations in its ability to present valid levels of risk in extreme market conditions. Accordingly, the Risk Analysis team also carries out monthly stress testing and scenario based analysis. Stress testing allows for extreme sets of market circumstances which may not be reflected in historical data sets thereby enabling further assessment of combinations of market movements which may cause serious damage to portfolio values. The key element to the scenario based analysis is challenging the correlation assumptions implicit within statistical based models such as VaR.
The stress test and scenario based analysis is customised for each fund type and the VaR analysis is produced on a daily basis.
The table below shows funds using the ‘commitment’ approach and those using the ‘Value at Risk (VaR)’ approach:
Fund Global exposure approach
M&G Global Dividend Fund Commitment
d. Liquidity risk Liquidity risk is the risk that a fund’s holdings cannot be sold, liquidated or closed out at limited cost in an adequately short time frame and that the ability of the scheme to comply at any time with its obligation to sell and redeem shares is thereby compromised.
The overall liquidity profile for the fund is reviewed and updated regularly. The liquidity profile takes into account investment, cashflow and market liquidity considerations.
Investment liquidity considerations include an assessment of asset class liquidity conditions, liquidity of underlying holdings, portfolio construction and concentration, the scale of individual stock ownership and the nature of the investment strategy.
Cashflow liquidity is managed in the fund on a daily basis using reports that include subscription and redemption information as well as the impact of trading, derivative lifecycle events and corporate action activity. In addition to the daily reporting, the fund managers are provided with reporting that highlights the impact of reasonably predictable events in the portfolio, including an allowance for the potential future exposures that might result from derivative exposures.
Market (or distribution-related) considerations include an assessment of asset demand, fund growth, client concentration and the persistency of the client base. Supplementary to this, market liquidity stress tests are carried out on a monthly basis for all sophisticated funds.
e. Credit risk For funds exposed to credit risk, the credit rating, yield and maturity of each interest bearing security is considered to determine if the yield fully reflects the risk. The capital value of interest-bearing securities within the funds will fall in the event of the default or perceived increased credit risk of an issuer.
The capital value of interest-bearing securities within a fund may also be affected by interest rate fluctuations such that when interest rates rise, the capital value of the interest-bearing securities is likely to fall and vice versa.
32 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial statements and notes
Funds investing in derivatives are exposed to counterparty risk. This is the risk that the other party to the transaction fails to fulfil their obligations, either by failing to pay or failing to deliver securities. To minimise this risk, carefully selected, financially strong and well-established counterparties are selected following a thorough due diligence review and collateral is posted daily (in the form of cash or high-quality government bonds). Derivative positions are valued on a mark-to-market basis (revalued to reflect prevailing market prices) daily and collateral moves from one counterparty to the other to reflect movements in the unrealised profit or loss. As a result, the maximum loss to the fund would be limited to that day’s price movements in affected derivatives contracts.
For funds in which they are used, credit default swaps are bought and sold in response to detailed credit research to take advantage of anticipated movements in credit spreads on individual stocks and baskets of securities. When a fund buys a credit default swap the default risk associated with the underlying security transfers to the counterparty. When a fund sells a credit default swap the fund assumes the credit risk of the underlying security.
4 Distribution policy In determining the amount available for reinvestment to Accumulation shares, all expenses with the exception of the annual charge, annual management charge, administration charge and overdraft interest are offset against capital, increasing the amount available for reinvestment whilst restraining capital performance to an equivalent extent. In determining the amount available for distribution to Income shares, all expenses with the exception of overdraft interest are offset against capital, increasing the amount available for distribution whilst restraining capital performance to an equivalent extent.
Marginal tax relief has not been taken into account in respect of expenses offset against capital.
In order to conduct a controlled dividend flow to shareholders, interim distributions will be at the fund manager’s discretion, up to the maximum of the distributable income available for the period.
5 Net capital gains / (losses)
2021 2020 for the year to 31 March £’000 £’000
Non-derivative securities 752,600 (391,717)
Currency gains/(losses) (2,712) 1,288
Transaction charges 0(3)
Net capital gains/(losses) 749,888 (390,432)
Annual Long Report and audited Financial Statements • March 2021 33 M&G Global Dividend Fund Financial statements and notes
6 Portfolio transactions and associated costs The following tables show portfolio transactions and their associated transaction costs. For more information about the nature of the costs please see the section on ‘Operating charges and portfolio transaction costs’ on pages 19 to 20.
2021 %of 2020 %of for the year to 31 March £’000 transaction £’000 transaction
a) Purchases
Equities
Equities before transaction costs 1,066,511 807,944
Commissions 408 0.04 345 0.04
Taxes 589 0.06 713 0.09
Total purchases after transaction costs 1,067,508 809,002
b) Sales
Equities
Equities before transaction costs 1,178,381 1,151,071
Commissions (432) 0.04 (511) 0.04
Taxes (167) 0.01 (149) 0.01
Total sales after transaction costs 1,177,782 1,150,411
c) Direct portfolio transaction costs
2021 %of 2020 %of £‘000 average NAV £‘000 average NAV
Commissions paid
Equities 840 0.04 856 0.03
Taxes paid
Equities 756 0.03 862 0.04
Total direct portfolio transaction costsa 1,596 0.07 1,718 0.07
d) Indirect portfolio transaction costs
%%
Portfolio dealing spreadb 0.12 0.18
a Costs before dilution adjustments. Please refer to the ‘Financial highlights’ section for the effect of dilution adjustments. b Average portfolio dealing spread at the balance sheet date.
34 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial statements and notes
7 Revenue
2021 2020 for the year to 31 March £’000 £’000
Bank interest 113
Dividends from equity investments: non-taxable 81,871 88,574
Dividends from equity investments: taxable 31
Interest distributions 35 131
Rebate of ongoing charges from underlying funds 10 8
Total revenue 81,920 88,727
8 Expenses
2021 2020 for the year to 31 March £’000 £’000
Payable to the ACD or associate
Annual charge 20,855 15,499
Annual management chargea 08,054
Administration chargea 01,244
20,855 24,797
Payable to the Depositary or associate
Depositary‘s charge (including VAT)a 033
Other expenses
Audit fee (including VAT)a 03
Interest payable 88 24
Legal fees 01
Safe custody chargea (18) 55
70 83
Total expenses 20,925 24,913 a The segregated charges shown above for annual management, administration, depositary, audit and safe custody are those paid by the fund up to and including 31 July 2019. As of 1 August 2019 these charges have been replaced by the single annual charge. Audit fees for the financial year ending 2021 were £9,000 (2020: £9,000) (including VAT), which are covered by the annual charge.
Annual Long Report and audited Financial Statements • March 2021 35 M&G Global Dividend Fund Financial statements and notes
9Taxation
2021 2020 for the year to 31 March £’000 £’000
a) Analysis of charge in the year
Corporation tax 00
Withholding tax 9,336 11,382
Deferred tax (note 9c) 00
Total taxation 9,336 11,382
b) Factors affecting taxation charge for the year
Net revenue/(expense) before taxation 60,995 63,814
Corporation tax at 20% 12,199 12,763
Effects of:
Dividends from equity investments: non-taxable (16,374) (17,715)
Current year expenses not utilised 4,175 4,952
Withholding tax 9,336 11,382
Total tax charge (note 9a) 9,336 11,382
c) Provision for deferred taxation
Provision at the start of the year 00
Deferred tax in profit and loss account (note 9a) 0 0
Provision at the end of the year 00
The fund has not recognised a deferred tax asset of £134,881,000 (2020: £130,706,000) arising as a result of having excess management expenses and interest distributions. We do not expect this asset to be utilised in the foreseeable future.
36 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial statements and notes
10 Distributions
2021 2020 for the year to 31 March Inca Accb Inca Accb Dividend distributions £’000 £’000 £’000 £’000
First interim 7,824 5,691 8,891 5,305
Second interim 7,465 5,735 8,851 4,709
Third interim 9,240 3,865 8,541 4,891
Final 14,426 7,650 13,692 9,378
Total net distributions 61,896 64,258
Income deducted on cancellation of shares 3,829 1,859
Income received on issue of shares (2,659) (329)
Distributions 63,066 65,788
Net revenue/(expense) per statement of total return 51,659 52,432
Expenses offset against capital 11,407 13,355
Undistributed income brought forward 01
Distributions 63,066 65,788 a Distributions payable on Income shares. b Retained distributions on Accumulation shares.
11 Debtors
2021 2020 as at 31 March £’000 £’000
Amounts receivable on issues of shares 288 163
Currency deals outstanding 6,153 1,288
Distributions receivable 011
Dividends receivable 5,273 3,919
Rebate of ongoing charges from underlying funds 0 1
Sales awaiting settlement 5,460 6,229
Withholding tax recoverable 12,904 14,240
Total debtors 30,078 25,851
12 Cash and bank balances
2021 2020 as at 31 March £’000 £’000
Cash held as bank balances 17,280 18,807
Total cash and bank balances 17,280 18,807
Annual Long Report and audited Financial Statements • March 2021 37 M&G Global Dividend Fund Financial statements and notes
13 Other creditors
2021 2020 as at 31 March £’000 £’000
Amounts payable on cancellation of shares 7,669 4,130
Annual charge payable 455 172
Currency deals outstanding 6,156 1,292
Expenses payable 0196
Purchases awaiting settlement 1,846 7,810
Payable to M&G (Lux) Global Dividend Fund 6,437 7,620
Total other creditors 22,563 21,220
14 Contingent assets, liabilities and outstanding commitments There were no contingent assets, liabilities or outstanding commitments at the balance sheet date (2020: same).
15 Shares in issue The following table shows each class of share in issue during the year. Each share class has the same rights on winding up however they may have different charging structures as set out in note 16.
Opening Movements Closing Share class 01.04.20 Issued Cancelled 31.03.21
Sterling
Class ‘A’ Income 128,280,917 138,949,582 (48,599,707) 218,630,792
Class ‘A’ Accumulation 84,178,803 1,118,101 (23,457,591) 61,839,313
Class ‘I’ Income 343,670,255 3,794,241 (91,408,401) 256,056,095
Class ‘I’ Accumulation 212,145,537 8,157,740 (53,311,529) 166,991,748
Class ‘PP’ Income 173,697 158,844,409 (48,957,487) 110,060,619
Class ‘PP’ Accumulation 865,782 254,991,812 (245,645,886) 10,211,708
Class ‘R’ Income 6,734,138 879,864 (1,574,764) 6,039,238
Class ‘R’ Accumulation 8,918,268 973,054 (1,067,123) 8,824,199
Class ‘X’ Income 21,315,456 423,466 (2,278,194) 19,460,728
Class ‘X’ Accumulation 5,374,283 87,661 (623,090) 4,838,854
38 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial statements and notes
16 Charging structure The table below sets out the charging structure for each class of share. The charging structure is the same for both Income and Accumulation shares of each class.
Annual chargea Annual chargea to 14.02.21 from 15.02.21 Share class % %
Sterling
Class ‘A’ 1.40 1.10
Class ‘I’ 0.90 0.70
Class ‘PP’ 0.70 0.60
Class ‘R’ 1.15 0.95
Class ‘X’ 1.40 1.10 a The amounts shown are the maximum annual charge. M&G will apply a discount of 0.02% for every £1 billion of a fund’s net asset value. This is assessed quarterly and implemented on a forward basis no later than 13 business days after quarter end.
17 Related parties M&G Securities Limited, as Authorised Corporate Director (ACD), is a related party and acts as principal on all the transactions of shares in the fund except with in specie transactions, where M&G Securities Limited acts as an agent. The aggregate monies received through issues, and paid on cancellations, are disclosed in the ‘Statement of change in net assets attributable to shareholders’ and note 10. Amounts due to / from M&G Securities Limited in respect of share transactions at the year end are disclosed in notes 11 and 13 where applicable.
Amounts paid to M&G Securities Limited in respect of the the annual charge are disclosed in note 8. Amounts due at the year end in respect of the annual charge are disclosed in note 13.
At the balance sheet date, shareholders from within M&G plc, of which M&G Securities Limited is a wholly owned subsidiary, have holdings totalling 1.85% (2020: 2.88%) of the fund’s shares.
18 Events after the balance sheet date There were no events after the balance sheet date to disclose.
19 Fair value analysis Financial instruments have been measured at their fair value and have been classified below using a hierarchy that reflects the significance of the inputs used in measuring their fair value:
Level 1: Unadjusted quoted price in an active market for an identical instrument This includes instruments such as publicly traded equities, highly liquid bonds (e.g. Government bonds) and exchange traded derivatives (e.g. futures) for which quoted prices are readily and regularly available.
Level 2: Valuation technique using observable market data This includes instruments such as over-the-counter (OTC) derivatives, debt securities, convertible bonds, mortgage- backed securities, asset-backed securities and open-ended funds which have been valued using models with observable market data inputs.
Annual Long Report and audited Financial Statements • March 2021 39 M&G Global Dividend Fund Financial statements and notes
Level 3: Valuation technique using unobservable inputs This refers to instruments which have been valued using models with unobservable data inputs. This includes single broker-priced instruments, suspended/unquoted securities, private equity, unlisted closed-ended funds and open- ended funds with restrictions on redemption rights. However no such financial instruments were held.
as at 31 March Assets Liabilities Assets Liabilities 2021 2021 2020 2020 Basis of valuation £’000 £‘000 £’000 £‘000
Level 1 2,282,823 0 1,641,654 0
Level2 0000
Level3 0000
2,282,823 0 1,641,654 0
In accordance with FRS 102 (22.4a) the shares in issue for each class meet the definition of a puttable instrument as the shareholders have the right to sell the shares back to the issuer. The shares in the fund may be issued and redeemed on any business day at the quoted price. These shares are not traded on an exchange. However, the price is observable and transactions within the fund take place regularly at that price. The shares in issue as detailed in note 15 meet the definition of a level 2 financial instrument ‘Valuation techniques using observable market data’.
20 Risk management policies The general risk management policies for the fund are set out in note 3 to the financial statements on pages 31 to 33.
21 Market risk sensitivity A five per cent increase in the value of the fund’s investment portfolio would have the effect of increasing the return and net assets by £114,141,000 (2020: £82,083,000). A five per cent decrease would have an equal and opposite effect.
40 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial statements and notes
22 Currency risk sensitivity and exposure A five per cent increase in the value of the fund’s currency exposure would have the effect of increasing the return and net assets by £99,271,000 (2020: £71,548,000)a. A five per cent decrease would have an equal and opposite effect.
2021 2020 as at 31 March £’000 £’000
Currency exposure in respect of the fund
Australian dollar 108,508 75,415
Canadian dollar 296,408 121,869
Danish krone 74,024 40,312
Euro 79,655 76,156
Hong Kong dollar 24,086 43,260
Japanese yen 35,916 45,629
Norwegian krone 561 314
Singapore dollar 01,586
Sterling 307,766 256,034
South African rand 43,814 17,842
South Korean won 016,796
Swedish krona 0 6,850
Swiss franc 203,287 144,119
Taiwan dollar 42,683 21,280
US dollar 1,076,484 819,528
Total 2,293,192 1,686,990 a Restated. 23 Dividend distribution tables This fund pays quarterly ordinary distributions and the following table sets out the distribution periods.
Quarterly distribution periods
Start End Xd Payment
First interim 01.04.20 30.06.20 01.07.20 31.08.20
Second interim 01.07.20 30.09.20 01.10.20 30.11.20
Third interim 01.10.20 31.12.20 04.01.21 28.02.21
Final 01.01.21 31.03.21 01.04.21 31.05.21
The following tables set out for each distribution the rates per share for both Group 1 and Group 2 shares.
Group 1 shares are those purchased prior to a distribution period and therefore their income rate is the same as the distribution rate.
Group 2 shares are those purchased during a distribution period and therefore their distribution rate is made up of income and equalisation. Equalisation is the average amount of income included in the purchase price of all Group
Annual Long Report and audited Financial Statements • March 2021 41 M&G Global Dividend Fund Financial statements and notes
2 shares and is refunded to the holders of these shares as a return of capital. Being capital it is not liable to Income Tax. Instead, it must be deducted from the cost of shares for Capital Gains Tax purposes. The tables below show the split of the Group 2 rates into the income and equalisation components.
Sterling Class ‘A’ Income shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.5745 0.9555 1.5300 1.5000
Second interim 0.5820 0.9480 1.5300 1.5000
Third interim 1.0692 0.4608 1.5300 1.5000
Final 1.4270 1.0828 2.5098 2.5893
Sterling Class ‘A’ Accumulation shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.3994 0.8992 1.2986 1.0418
Second interim 0.6694 0.6704 1.3398 0.9322
Third interim 0.2906 0.8257 1.1163 1.1389
Final 1.8453 0.8139 2.6592 2.5633
Sterling Class ‘I’ Income shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.6970 0.9695 1.6665 1.6267
Second interim 0.6985 0.9683 1.6668 1.6279
Third interim 0.7790 0.8918 1.6708 1.6298
Final 1.5020 1.2430 2.7450 2.8175
42 Annual Long Report and audited Financial Statements • March 2021 M&G Global Dividend Fund Financial statements and notes
Sterling Class ‘I’ Accumulation shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.8035 0.9868 1.7903 1.6583
Second interim 0.8401 0.9893 1.8294 1.5455
Third interim 0.9736 0.7097 1.6833 1.6418
Final 2.0239 1.3293 3.3532 3.2560
Sterling Class ‘PP’ Income shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.0892 0.6292 0.7184 n/a
Second interim 0.1992 0.5246 0.7238 0.6723
Third interim 0.5127 0.2087 0.7214 0.7004
Final 0.7888 0.3965 1.1853 1.2140
Sterling Class ‘PP’ Accumulation shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.2250 0.3635 0.5885 0.5500
Second interim 0.1183 0.4855 0.6038 0.5213
Third interim 0.4375 0.1303 0.5678 0.5459
Final 0.3972 0.6666 1.0638 1.0435
Sterling Class ‘R’ Income shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.5189 0.6542 1.1731 1.1473
Second interim 0.5895 0.5840 1.1735 1.1481
Third interim 0.6941 0.4805 1.1746 1.1487
Final 1.0635 0.8649 1.9284 1.9844
Annual Long Report and audited Financial Statements • March 2021 43 M&G Global Dividend Fund Financial statements and notes
Sterling Class ‘R’ Accumulation shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.3657 0.6202 0.9859 0.9145
Second interim 0.3727 0.6396 1.0123 0.8181
Third interim 0.5930 0.2988 0.8918 0.8882
Final 1.1662 0.7413 1.9075 1.8606
Sterling Class ‘X’ Income shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.3972 1.1334 1.5306 1.5019
Second interim 0.4242 1.1065 1.5307 1.5008
Third interim 0.4677 1.0630 1.5307 1.5007
Final 1.3049 1.2060 2.5109 2.5905
Sterling Class ‘X’ Accumulation shares
Ordinary distributions Group 2 Group 1 & 2 for the year Income Equalisation Distribution to 31 March 2021 2021 2021 2020 UK p UK p UK p UK p
First interim 0.4401 0.8592 1.2993 1.0393
Second interim 0.5480 0.7937 1.3417 0.9324
Third interim 0.7585 0.3585 1.1170 1.1395
Final 1.6424 1.0182 2.6606 2.5648
44 Annual Long Report and audited Financial Statements • March 2021 Other regulatory disclosures
Remuneration The amounts shown below reflect payments made in respect of the financial year 1 January 2020 to In line with the requirements of the Undertakings for 31 December 2020. Collective Investments in Transferable Securities
(UCITS) V, M&G Securities Limited is subject to a Fixed Variable remuneration policy which is consistent with the Remuneration Remuneration Total principles outlined in the European Securities and £000 £000 £000 Markets Authority guidelines on sound remuneration Senior Management 582 711 1,293 policies under the UCITS Directive. Other Identified Staff 7,524 22,054 29,577 The remuneration policy is designed to ensure that any relevant conflicts of interest can be managed appropriately at all times and that the remuneration of Swiss investor information employees is in line with the risk policies and objectives For funds registered in Switzerland we are required by of the UCITS funds managed by the UCITS FINMA to disclose the Total Expense Ratio (TER). Management Company. Further details of the For this fund the TERs are the same as the operating remuneration policy can be found here: https:// charges disclosed in the fund’s financial highlights www.mandgplc.com/our-business/mandg- section under ‘Performance and charges’. investments/mandg-investments-business-policies. The remuneration policy and its implementation is reviewed on an annual basis, or more frequently where required, and is approved by the M&G plc Board Remuneration Committee.
M&G Securities Limited is required under UCITS to make quantitative disclosures of remuneration. These disclosures are made in line with M&G’s interpretation of currently available guidance on quantitative remuneration disclosures. As market or regulatory guidance evolves, M&G may consider it appropriate to make changes to the way in which quantitative disclosures are calculated.
The ’Identified Staff’ of M&G Securities Limited are those who could have a material impact on the risk profile of M&G Securities Limited or the UCITS funds it manages and generally includes senior management, risk takers and control functions. ‘Identified Staff’ typically provide both UCITS and non-UCITS related services and have a number of areas of responsibility. Therefore, only the portion of remuneration for those individuals’ services which may be attributable to UCITS is included in the remuneration figures disclosed. Accordingly the figures are not representative of any individual’s actual remuneration.
Annual Long Report and audited Financial Statements • March 2021 45 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.
46 Annual Long Report and audited Financial Statements • March 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.
Annual Long Report and audited Financial Statements • March 2021 47 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.
48 Annual Long Report and audited Financial Statements • March 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.
Annual Long Report and audited Financial Statements • March 2021 49 Glossary
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.
50 Annual Long Report and audited Financial Statements • March 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.
Annual Long Report and audited Financial Statements • March 2021 51 60239_LR_310522