M&G Strategic Corporate Bond Fund Interim Long Report and unaudited Financial Statements for the six months ended 28 February 2021 Contents Authorised Corporate Director’s Report ...... 1 Authorised Corporate Director’s Responsibilities ... 4 Directors’ statement ...... 5 Authorised Corporate Director’s Report, including the financial highlights and financial statements and notes ...... 6 Other regulatory disclosures ...... 35 Glossary ...... 36
Interim Long Report and unaudited Financial Statements • February 2021 Authorised Corporate Director’s Report
The Authorised Corporate Director (ACD) of M&G Directors of the ACD Strategic Corporate Bond Fund presents its Interim C Dobson (non executive director), S A Fitzgerald, Long Report and unaudited Financial Statements for P R Jelfs, M McGrade (non executive director), the six months ended 28 February 2021. LJMumford Please note that we have included an explanation of key Investment manager investment terminology in the ‘Glossary’ (at the back of M&G Investment Management Limited, this report). 10 Fenchurch Avenue, London EC3M 5AG, UK Telephone: +44 (0)20 7626 4588 Company information (Authorised and regulated by the Financial Conduct Authority) This Open-Ended Investment Company (OEIC) is an Investment Company with Variable Capital (ICVC) Registrar incorporated under the Open-Ended Investment SS&C Financial Services Europe Ltd, Companies Regulations 2001. It is authorised and SS&C House, St. Nicholas Lane, Basildon, regulated by the Financial Conduct Authority (FCA) Essex SS15 5FS, UK under the Financial Services and Markets Act 2000. The (Authorised and regulated by the Financial Conduct Company is a UCITS (Undertakings for Collective Authority) Investment in Transferable Securities) scheme as Depositary defined in the Collective Investment Schemes NatWest Trustee & Depositary Services Limited, sourcebook, as issued (and amended) by the FCA. House A, Floor 0, 175 Glasgow Road, Gogarburn, The Company was authorised on 12 June 2009 and the EdinburghEH121HQ,UK fund was launched on 1 September 2009. (Authorised and regulated by the Financial Conduct The Company’s principal activity is to carry on business Authority) as an OEIC. Independent auditor A shareholder is not liable for the debts of the Company Ernst & Young LLP and will never be liable to make any further payment to Atria One, 144 Morrison Street, Edinburgh EH3 8EX, UK the Company after paying the purchase price of the shares. Annual value assessment Co-fund managers An annual assessment report is available which shows Richard Woolnough & Ben Lord are employed by M&G the value provided to investors in each of M&G’s UK- FA Limited which is an associate of M&G Securities based funds. The assessment report evaluates whether Limited. M&G’s charges are justified in the context of the overall ACD service delivered to its investors. The report can be found at www.mandg.co.uk/valueassessment M&G Securities Limited, 10 Fenchurch Avenue, London EC3M 5AG, UK Telephone: 0800 390 390 (UK only) Important information (Authorised and regulated by the Financial Conduct Investors will benefit from a reduction in the annual Authority. M&G Securities Limited is a member of the charge starting from 15 February 2021. The reduction in Investment Association and of The Investing and Saving annual charge varies across the M&G funds and the Alliance) detail was communicated in the shareholder letter dated 15 January 2021.
Interim Long Report and unaudited Financial Statements• February 2021 1 Authorised Corporate Director’s Report
The World Health Organisation declared the COVID-19 outbreak a pandemic on 11 March 2020.
Global financial markets have been reacting to the outbreak. All markets have incurred increased volatility and uncertainty since the onset of the pandemic.
The ACD has also noted the operational risks that are posed to the Company and its service providers due to global and local movement restrictions that have been enacted by various governments.
The COVID-19 pandemic is an unprecedented event and the eventual impact on the global economy and markets will largely depend on the scale and duration of the outbreak. The ACD will continue to monitor this situation.
2 Interim Long Report and unaudited Financial Statements• February 2021 Authorised Corporate Director’s Report
Investor information Swiss paying agent and representative: Société Générale, Paris, Zurich Branch, Talacker 50, The Prospectus, Instrument of Incorporation, Key 8021 Zurich, Switzerland 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. Customer services and administration for non-UK clients: M&G Securities Limited, c/o RBC I&TS, 14, Porte de France, L-4360 Esch-sur-Alzette, Grand Duchy of Luxembourg
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: +352 2605 9944
Email: [email protected]
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.
Interim Long Report and unaudited Financial Statements• February 2021 3 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 fund 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.
4 Interim Long Report and unaudited Financial Statements• February 2021 Authorised Corporate Director’s Report
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 13 April 2021
Interim Long Report and unaudited Financial Statements• February 2021 5 M&G Strategic Corporate Bond Fund Authorised Corporate Director’s Report
Investment objective Investment approach The fund aims to provide a higher total return (the The fund is diversified across a range of investment combination of capital growth and income), net of the grade debt securities from a variety of sectors and ongoing charge figure, than the average return of the IA geographies. The fund’s investment approach is based Sterling Corporate Bond Sector, over any five-year on the principle that returns from corporate bond period. markets are driven by a combination of macroeconomic, asset class, sector, geographic and stock-level factors. As different factors dominate returns at different Investment policy stages of the economic cycle, the manager applies a At least 70% of the fund is invested, directly or flexible investment approach, changing the blend of indirectly through derivatives, in investment grade duration and credit exposure in the portfolio to weight corporate debt securities. These securities can be them appropriately. issued by companies from anywhere in the world, The fund manager has the freedom to take a high- including emerging markets. These securities can be conviction approach when selecting credits for the denominated in any currency. fund. Individual credit selection is carried out with the Other investments may include: assistance of an in-house team of credit analysts to • below investment grade and unrated corporate complement the fund manager’s views. debt securities;
• debt securities issued or guaranteed by Benchmark governments and their agencies, public Benchmark: IA Sterling Corporate Bond sector. authorities, quasi-sovereigns and supranational The benchmark is a target which the fund seeks to bodies; outperform. The sector has been chosen as the fund’s • asset-backed securities; and benchmark as the fund is a constituent of the sector. • other transferable securities, cash, and near cash, The benchmark is used solely to measure the fund’s directly or via collective investment schemes performance and does not constrain the fund‘s (including funds managed by M&G). portfolio construction.
The fund aims to hedge any non-sterling assets to The fund is actively managed. sterling. The fund manager has complete freedom in choosing Derivatives may be used for investment purposes, which investments to buy, hold and sell in the fund. efficient portfolio management and hedging. The benchmark is shown in the share class currency.
Risk profile The fund invests in fixed income securities, or bonds, issued by UK companies. It is primarily subject to the price volatility of the UK bond market as well as the performance of individual issuers. It is also influenced by developments in the broader global bond market. In addition, the fund is subject to fluctuations in currency exchange rates.
6 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Authorised Corporate Director’s Report
The fund’s focus is on high-quality corporate bonds, Performance against objective securities that are normally traded with relative ease. Between 1 September 2020 (the start of the review Up to 20% of the fund may be invested in other fixed period) and 1 March 2021, the M&G Strategic Corporate income investments, such as government bonds, which Bond Fund delivered a positive total return (the are typically highly liquid assets, or high yield corporate combination of income and growth of capital) across all bonds, which are higher risk assets that could ofitssterlingshareclasses. potentially experience a degree of illiquidity in times of Fund performance was also ahead of the average market distress. return from the fund’s benchmark, the IA Sterling The fund’s exposure to debt securities may be gained Corporate Bond Sector, which was 0.9% over the same through the use of derivatives. In association with the period. use of derivatives, including those instruments not Over five years, the fund generated an annualised traded through an exchange, collateral is deposited, in positive total return across all its share classes. order to mitigate the risk that a counterparty may However in three from four of its share classes, it did default on its obligations or become insolvent. lag the benchmark, where the average return was Portfolio diversification is key in managing liquidity and 5.1% pa in sterling. Therefore the fund did not meet the default risks as well as reducing market risk. The fund’s objective of providing a higher total return pa, net of the risks are measured and managed as an integral part of ongoing charge figure, than the average return of the IA the investment process. Sterling Corporate Bond Sector, over any five-year period. The following table shows the risk number associated with the fund and is based on Sterling Class ‘A’ shares. For the performance of each share class, please refer
Low risk High risk to the ‘Long-term performance by share class’ table in the ‘Financial highlights’ section of this report. Typically lower rewards Typically higher rewards Performance review 1234 567 During the period under review, investor sentiment moved from positive to being more cautious as the summer months gave way to an autumn marked by The above number: rising concerns regarding a second peak in the • is based on the rate at which the value of the fund infection rate of COVID-19, and how this may dim the has moved up and down in the past and is based outlook for the global economy, amongst other things. on historical data so may not be a reliable indicator This anxiety combined with a noisy build-up to the US ofthefutureriskprofileofthefund. presidential election to generally weaken investor appetite by the end of September and into what is a • is not guaranteed and may change over time and traditionally mixed October. the lowest risk number does not mean risk free. There were two important drivers of investor sentiment • has not changed during this period. during the winter months and to the end of the period under review: news of COVID-19 vaccines being rolled Investment review out from December 2020 onwards, and the US presidential election reaching closure as Joe Biden As at 1 March 2021, for the six months ended defeated Donald Trump with room to spare. In general, 28 February 2021 risky assets responded to these key drivers with price gains as the year came to an end.
Interim Long Report and unaudited Financial Statements • February 2021 7 M&G Strategic Corporate Bond Fund Authorised Corporate Director’s Report
Overall, it was a positive period for corporate bonds global economy can weigh on the value of bonds issued around this period – especially those issued by US by these types of companies. companies. European and UK corporate bonds fared One of the key drivers of a bond fund’s performance is well as these markets continued to enjoy a boost from its ability to adjust the portfolio’s sensitivity to changes central banks buying their bonds (which increased their in interest rates, known as ‘duration’ and measured in prices). years. Being shorter duration means that a fund is However, it was a mixed start to 2021, with some signs relatively less sensitive to changes in interest rates than of volatility starting to emerge as modest changes took longer duration funds. The fund has a shorter duration place in the prices of many assets. Commodities, position compared to the iBoxx Sterling Corporate including oil and silver, did well, the former largely Index (a corporate bond index comprising liquid bonds because of announced cuts to output by Saudi Arabia developed by financial information provider Markit), and in the coming months. Developed countries’ socanlosemoneyasthepricesofmajorgovernment stockmarkets generally stuttered, although specific bonds rise (and yields fall). Equally, the fund can make companies saw sharp spikes in their stockmarket values money when the prices of major government bonds fall because of social media-influenced buying by retail (and yields rise), such as in January and February 2021. investors. Bond yields, which move inversely to bond prices, refer Returns from major government bond markets fell as to the interest received from a fixed interest security, yields (which move inversely to bond prices) rose on US which is usually expressed annually as a percentage Treasuries, UK gilts, and German bunds. Some investors based on the investment’s cost, its current market value lost 3% on long-dated US Treasuries (maturing in or its face value. The higher the yield on a bond, the 15 years or above) on expectations that a significantly higher the risk of default -- that is, the risk that the larger fiscal stimulus - as the Democrats now controlled issuer will fail to pay the interest or repay the full the Senate - could lead to higher inflation. February amount borrowed. saw a similar pattern of selling behaviour, as some During the period under review, portfolio duration investors sold their positions in major government stayed around 5.0 years, roughly 2.8 years underweight bonds – particularly UK gilts – on the perceived threat the iBoxx Sterling Corporate Index. In our view, interest of rising inflation over the coming years. rates have little room to move lower in the period ahead Turning to fund performance over the period under and may even start to rise should inflation expectations review, the biggest contribution to positive returns continue to build momentum. came mainly from credit selection, as holdings in Investment activities corporate bonds issued by Kraft Heinz, Next, and UK While we continue to favour the investment opportunity insurers Aviva, Axa and Legal & General added to provided by holding good quality corporate bonds, we returns. There was also a turnaround in the are aware that valuations are rising all the time. In this performance of bonds issued by Gatwick in the period, regard, we have continued to trim credit risk and sold with lots of talk about potentially easing lockdown sectors facing tough challenges in the months ahead. restrictions by the summer 2021 being a positive for the By contrast, we are running greater risk in covered travel sector. The bonds reversed earlier losses to post bonds (packaged loans collateralised against a pool of strong gains towards the end of the period under assets, where investors get access to the collateral if review. the issuer fails to pay), which are of generally higher Detractors to performance came in the form of oil and credit quality. energy companies’ bonds, so Exxon Mobil, Shell and Some examples of corporate bonds that we have sold Engie. Typically, a weak and uncertain outlook for the in the period under review include US dollar bonds
8 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Authorised Corporate Director’s Report
issued by Vodafone and Orange, and some high-quality sterling bonds issued by Apple and Microsoft. We have added US dollar bonds issued by Boeing and Exxon Mobil during this time, some senior secured bonds issued by New York Life and an AAA bond issued by the European Investment Bank. In light of another political crisis in Italy, we reduced (in January) portfolio risk by selling both Italian corporate bonds and a small holding of sterling-denominated BTPs (Italian government bonds).
Outlook The portfolio has remained fairly stable in the period under review, with a few changes around credit allocation – that is, paying attention to the risk of default (or non-payment of interest or principal) of the bonds we invest in – although we are mindful of rising valuations in many sectors despite a less-than-clear economic outlook. In terms of duration, we continue to back the valuation signal, which says in a rising bond yield environment – as investors gear up for potentially higher inflation – we should be relatively prudent when it comes to holding too much interest rate exposure within the fund. Finally, we continue to use our company’s strong credit research teams in helping us seek what we view as attractive corporate bonds issued by well-run companies at relatively decent prices.
Richard Woolnough & Ben Lord Co-fund managers
Employees of M&G FA Limited which is an associate of M&G Securities Limited. 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 Report is likely to perform. If you wish to obtain financial advice as to whether an investment is suitable for your needs, you should consult a Financial Adviser.
Interim Long Report and unaudited Financial Statements • February 2021 9 M&G Strategic Corporate Bond Fund Investments
Portfolio statement
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income 1,910,183 93.09 93.36
Debt securities 1,894,664 92.33 93.01
‘AAA’ credit rated bonds 293,626 14.31 6.46
£94,802 Broadgate Financing 4.949% 05/04/2031 107 0.01
£1,683,602 Charter Mortgage Funding 2018-1 FRN 0.5106% 12/06/2055 1,682 0.08
£2,777,443 Charter Mortgage Funding 2020-1 FRN 0.6495% 2,778 0.14 16/01/2057
€8,000,000 DNB Boligkreditt 0.01% 08/10/2027 7,024 0.34
£4,766,000 Economic Master Issuer 2020-1 FRN 0.519% 25/06/2072 4,779 0.23
£4,693,518 Elvet Mortgages 2020-1 FRN 0.9034% 22/03/2065 4,716 0.23
£10,363,000 European Bank for Reconstruction & Development FRN 10,761 0.52 1.0491% 20/11/2025
£20,000,000 European Investment Bank 3.75% 07/12/2027 23,901 1.16
£5,000,000 European Investment Bank FRN 0.3888% 12/03/2026 5,043 0.25
£5,000,000 European Investment Bank FRN 1.0491% 08/09/2025 5,191 0.25
£30,000,000 European Investment Bank FRN 1.0492% 18/01/2027 31,433 1.53
£1,097,540 Friary No. 4 FRN 0.4734% 21/01/2050 1,099 0.05
£3,455,761 Friary No. 6 FRN 0.7698% 21/11/2067 3,486 0.17
£3,979,000 Gemgarto 2021-1 FRN 1% 16/12/2067 3,981 0.19
£776,084 Hawksmoor Mortgage Funding 2019-1 FRN 1.0996% 778 0.04 25/05/2053
£2,970,000 Hops Hill No. 1 FRN 1% 27/05/2054 2,981 0.15
€4,000,000 Johnson & Johnson 0.65% 20/05/2024 3,564 0.17
US$1,000,000 Johnson & Johnson 3.55% 01/03/2036 827 0.04
£10,000,000 Kreditanstalt fuer Wiederaufbau 1% 15/12/2022 10,151 0.49
£15,000,000 Kreditanstalt fuer Wiederaufbau 1.375% 15/12/2025 15,606 0.76
£8,100,000 Lanark Master Issuer FRN 0.6198% 22/12/2069 8,136 0.40
£3,520,000 Lanark Master Issuer FRN 0.8198% 22/12/2069 3,543 0.17
£5,000,000 Leeds Building Society FRN 0.5892% 15/01/2025 5,064 0.25
£4,100,000 National Australia Bank FRN 0.5489% 04/02/2025 4,144 0.20
£12,500,000 Nationwide Building Society FRN 0.4492% 24/02/2031 12,511 0.61
£17,500,000 Nationwide Building Society FRN 0.5992% 10/01/2025 17,735 0.86
£6,634,390 Offa No. 1 FRN 1.2906% 14/06/2050 6,643 0.32
£2,772,000 Orbita Funding 2020-1 FRN 0.6294% 17/03/2027 2,772 0.14
10 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘AAA’ credit rated bonds (continued)
£4,605,000 PCL Funding IV FRN 1.099% 15/09/2024 4,622 0.23
£1,500,000 Permanent Master Issuer FRN 0.6317% 15/07/2058 1,507 0.07
£6,406,962 Residential Mortgage Securities 32 FRN 1.3043% 6,464 0.32 20/06/2070
£20,250,000 Royal Bank of Canada FRN 0.519% 30/01/2025 20,426 1.00
£10,000,000 Royal Bank of Canada FRN 0.6287% 03/10/2024 10,126 0.49
£5,000,000 Santander FRN 0.599% 12/02/2027 5,068 0.25
£9,000,000 Santander FRN 0.649% 12/11/2024 9,133 0.45
£6,300,000 Santander FRN 0.779% 12/02/2024 6,401 0.31
£4,000,000 Silverstone Master Issuer FRN 0.5214% 21/01/2070 4,012 0.20
£475,000 Silverstone Master Issuer FRN 0.576% 21/01/2070 477 0.02
£5,889,000 Stratton Mortgage Funding 2021-1 FRN 1% 25/09/2051 5,889 0.29
£5,000,000 Twin Bridges 2021-1 FRN 1% 12/03/2055 5,000 0.24
£5,746,000 Wellcome Trust 2.517% 07/02/2118 6,816 0.33
€2,500,000 Yorkshire Building Society 0.01% 13/10/2027 2,179 0.11
£5,000,000 Yorkshire Building Society FRN 0.6291% 21/11/2024 5,070 0.25
‘AA’ credit rated bonds 163,029 7.94 11.37
US$10,000,000 Apple 2.65% 08/02/2051 6,539 0.32
US$7,000,000 Apple 2.8% 08/02/2061 4,533 0.22
US$10,000,000 Apple 4.65% 23/02/2046 9,004 0.44
£10,000,000 Deutsche Bahn Finance 1.375% 07/07/2025 10,278 0.50
€5,000,000 Exxon Mobil 0.142% 26/06/2024 4,365 0.21
€2,500,000 Exxon Mobil 0.835% 26/06/2032 2,153 0.10
US$20,000,000 Exxon Mobil 4.227% 19/03/2040 16,333 0.80
US$2,500,000 Exxon Mobil 4.327% 19/03/2050 2,067 0.10
£4,101,000 Federal National Mortgage Association 5.375% 07/12/2028 5,352 0.26
£250,000 Grosvenor UK Finance 6.5% 29/09/2026 306 0.01
£10,000,000 Land Securities Capital Markets 2.375% 29/03/2027 10,449 0.51
£5,000,000 Land Securities Capital Markets 2.399% 08/02/2029 5,213 0.25
£5,000,000 MassMutual Global Funding II 1.375% 15/12/2026 5,099 0.25
£7,069,000 Metropolitan Life Global Funding I 0.625% 08/12/2027 6,787 0.33
Interim Long Report and unaudited Financial Statements • February 2021 11 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘AA’ credit rated bonds (continued)
US$5,000,000 Microsoft 2.675% 01/06/2060 3,260 0.16
£15,000,000 New York Life Global Funding 0.75% 14/12/2028 14,387 0.70
£4,840,000 New York Life Global Funding 1.25% 17/12/2026 4,893 0.24
£12,500,000 SNCF Réseau 4.83% 25/03/2060 21,486 1.05
£5,000,000 SNCF Réseau 5.25% 07/12/2028 6,492 0.32
£8,571,000 Svensk Exportkredit 0.125% 15/12/2025 8,385 0.41
£5,000,000 UK Treasury 0.625% 22/10/2050 4,076 0.20
£8,000,000 University of Oxford 2.544% 08/12/2117 9,423 0.46
US$2,000,000 Walmart 6.5% 15/08/2037 2,149 0.10
‘A’ credit rated bonds 117,790 5.74 6.30
£4,000,000 Anglian Water Services Financing 2.75% 26/10/2029 4,384 0.21
£6,500,000 Bank of America 2.3% 25/07/2025 6,892 0.34
US$15,000,000 BP Capital Markets America 3.633% 06/04/2030 11,944 0.58
US$6,946,000 Cloverie Var. Rate 5.625% 24/06/2046 5,756 0.28
£2,100,000 Housing Finance 5% 30/09/2027 2,448 0.12
£3,888,357 Housing Finance 8.625% 13/11/2023 4,643 0.23
US$2,000,000 Legrand France 8.5% 15/02/2025 1,834 0.09
€1,123,476 Ludgate Funding FRN BB 0.309% 01/01/2061 924 0.04
£5,000,000 Notting Hill Genesis 3.25% 12/10/2048 5,773 0.28
£2,500,000 Orbit Capital 3.375% 14/06/2048 2,966 0.14
€12,000,000 Philip Morris International 1.875% 06/11/2037 11,065 0.54
£3,000,000 Places for People 3.625% 22/11/2028 3,411 0.17
£32,445,000 Shell International Finance 1.75% 10/09/2052 26,935 1.31
£1,250,000 SLM Student Loan Trust FRN 0.5849% 15/12/2039 1,159 0.06
£2,731,000 Southern Housing 3.5% 19/10/2047 3,279 0.16
£2,000,000 T.H.F.C Funding No. 3 5.2% 11/10/2043 2,959 0.14
£11,060,000 Toyota Motor Credit 0.75% 19/11/2026 10,850 0.53
£600,000 Trafford Centre Finance FRN 0.7623% 28/07/2038 498 0.02
£1,000,000 UNITE (USAF) II 3.374% 30/06/2023 1,039 0.05
£3,500,000 Wales & West Utilities Finance 5.75% 29/03/2030 4,697 0.23
12 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘A’ credit rated bonds (continued)
US$2,000,000 Willow No. 2 Var. Rate 4.25% 01/10/2045 1,546 0.08
£2,500,000 Yorkshire Building Society 3.5% 21/04/2026 2,788 0.14
‘BBB’ credit rated bonds 1,202,354 58.59 58.74
£3,000,000 3i 5.75% 03/12/2032 3,999 0.19
€3,000,000 Altria 3.125% 15/06/2031 3,026 0.15
US$2,424,000 Altria 3.4% 06/05/2030 1,847 0.09
US$10,000,000 Altria 3.4% 04/02/2041 6,594 0.32
US$6,000,000 Altria 3.875% 16/09/2046 4,063 0.20
US$5,000,000 Altria 4% 04/02/2061 3,273 0.16
US$3,476,000 Altria 5.375% 31/01/2044 2,952 0.14
US$4,000,000 Altria 5.8% 14/02/2039 3,512 0.17
US$7,500,000 Altria 5.95% 14/02/2049 6,732 0.33
US$911,000 Altria 6.2% 14/02/2059 831 0.04
£4,000,000 America Movil 4.948% 22/07/2033 5,219 0.25
£2,500,000 Anglian Water Services Financing 4.5% 22/02/2026 2,832 0.14
£5,000,000 Anglo American Capital 3.375% 11/03/2029 5,411 0.26
US$1,220,000 Anglo American Capital 3.95% 10/09/2050 924 0.04
US$2,000,000 Anglo American Capital 5.625% 01/04/2030 1,763 0.09
US$2,500,000 Anheuser-Busch InBev Worldwide 4.9% 01/02/2046 2,112 0.10
US$9,000,000 Anheuser-Busch InBev Worldwide 5.45% 23/01/2039 8,216 0.40
US$15,000,000 Anheuser-Busch InBev Worldwide 5.55% 23/01/2049 13,786 0.67
US$15,000,000 Anheuser-Busch InBev Worldwide 5.8% 23/01/2059 14,514 0.71
£3,000,000 Annington Funding 3.685% 12/07/2034 3,441 0.17
£2,812,000 Annington Funding 3.935% 12/07/2047 3,410 0.17
£5,000,000 Aroundtown 3% 16/10/2029 5,261 0.26
€2,000,000 Assicurazioni Generali Var. Rate 5.5% 27/10/2047 2,105 0.10
US$5,000,000 AT&T 3.55% 15/09/2055 3,196 0.16
£9,967,000 AT&T 4.375% 14/09/2029 11,714 0.57
£5,000,000 Aviva Var. Rate 4% 03/06/2055 5,382 0.26
£7,000,000 Aviva Var. Rate 4.375% 12/09/2049 7,739 0.38
Interim Long Report and unaudited Financial Statements • February 2021 13 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘BBB’ credit rated bonds (continued)
£4,000,000 Aviva Var. Rate 5.125% 04/06/2050 4,655 0.23
£15,000,000 Aviva Var. Rate 6.125% 14/11/2036 18,023 0.88
£4,000,000 Aviva Var. Rate 6.875% 20/05/2058 6,016 0.29
£8,500,000 AXA Var. Rate 5.453% Perpetual 9,777 0.48
£21,000,000 AXA Var. Rate 5.625% 16/01/2054 26,295 1.28
£15,000,000 AXA Var. Rate 6.6862% Perpetual 18,314 0.89
£2,500,000 Bank of America 8.125% 02/06/2028 3,517 0.17
£36,000,000 BAT International Finance 2.25% 09/09/2052 26,518 1.29
£8,000,000 BAT International Finance 4% 23/11/2055 8,209 0.40
£10,000,000 BAT International Finance 5.75% 05/07/2040 13,240 0.64
US$6,000,000 Bayer 6.65% 15/02/2028 5,419 0.26
US$10,000,000 Bayer US Finance 4.625% 25/06/2038 8,381 0.41
US$8,000,000 Bayer US Finance 4.7% 15/07/2064 6,467 0.31
US$12,000,000 Bayer US Finance 4.875% 25/06/2048 10,475 0.51
£5,000,000 BNP Paribas 1.875% 14/12/2027 5,105 0.25
US$4,543,000 BNP Paribas 4.625% 13/03/2027 3,729 0.18
US$1,000,000 Boeing 3.625% 01/02/2031 752 0.04
US$8,000,000 Boeing 5.805% 01/05/2050 7,258 0.35
US$8,000,000 Boeing 5.93% 01/05/2060 7,336 0.36
£5,114,000 BP Capital Markets Var. Rate 4.25% Perpetual 5,412 0.26
£9,000,000 BPCE 5.25% 16/04/2029 11,086 0.54
£4,000,000 British Telecommunications 3.125% 21/11/2031 4,328 0.21
US$12,000,000 British Telecommunications 9.625% 15/12/2030 13,557 0.66
£5,000,000 BUPA Finance 1.75% 14/06/2027 5,068 0.25
£2,000,000 BUPA Finance 4.125% 14/06/2035 2,138 0.10
£6,000,000 BUPA Finance 5% 08/12/2026 6,883 0.34
£10,000,000 Cadent Finance 2.125% 22/09/2028 10,369 0.51
£1,667,000 Channel Link Enterprises Finance 3.848% 30/06/2050 1,823 0.09
£10,000,000 Channel Link Enterprises Finance Var. Rate 3.043% 9,905 0.48 30/06/2050
£5,892,000 Citigroup 4.5% 03/03/2031 7,150 0.35
14 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘BBB’ credit rated bonds (continued)
£7,000,000 CK Hutchison Group Telecom Finance 2% 17/10/2027 7,100 0.35
£9,000,000 CK Hutchison Group Telecom Finance 2.625% 17/10/2034 9,212 0.45
£5,489,000 Cooperatieve Rabobank 4.625% 23/05/2029 6,518 0.32
£3,785,000 CPUK Finance 3.69% 28/08/2028 4,085 0.20
£6,000,000 CPUK Finance 7.239% 28/02/2024 6,899 0.34
£5,131,079 Delamare Finance 5.5457% 19/02/2029 5,892 0.29
US$9,370,000 Deutsche Telekom International Finance 8.75% 15/06/2030 10,149 0.49
US$5,000,000 Dow Chemical 5.55% 30/11/2048 4,807 0.23
£1,083,000 DP World 4.25% 25/09/2030 1,226 0.06
US$14,414,000 DuPont de Nemours 5.319% 15/11/2038 13,044 0.64
US$10,000,000 DuPont de Nemours 5.419% 15/11/2048 9,319 0.45
US$8,000,000 Électricité de France 4.5% 04/12/2069 6,164 0.30
US$5,600,000 Électricité de France 6% 22/01/2114 5,434 0.26
£7,600,000 Électricité de France 6% 23/01/2114 12,433 0.61
US$1,626,000 Enel Finance International 3.5% 06/04/2028 1,278 0.06
US$500,000 Energy Transfer Operating 4.9% 15/03/2035 384 0.02
US$1,000,000 Energy Transfer Operating 6.125% 15/12/2045 813 0.04
US$7,143,000 Energy Transfer Operating 6.5% 01/02/2042 6,127 0.30
€14,630,000 ENGIE 5.95% 16/03/2111 23,858 1.16
US$4,000,000 Eni 4.75% 12/09/2028 3,359 0.16
£2,000,000 Eversholt Funding 3.529% 07/08/2042 2,182 0.11
£9,626,000 Gatwick Funding 2.875% 05/07/2049 8,796 0.43
£19,000,000 Gatwick Funding 3.125% 28/09/2039 18,642 0.91
£10,000,000 Gatwick Funding 3.25% 26/02/2048 9,737 0.47
£1,356,000 Gatwick Funding 4.625% 27/03/2034 1,583 0.08
£3,000,000 Gatwick Funding 6.125% 02/03/2026 3,566 0.17
£227,386 General Electric 6.44% 15/11/2022 238 0.01
US$4,000,000 General Motors 5.15% 01/04/2038 3,369 0.16
US$5,000,000 General Motors 6.6% 01/04/2036 4,849 0.24
£3,781,000 Grainger 3% 03/07/2030 3,958 0.19
Interim Long Report and unaudited Financial Statements • February 2021 15 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘BBB’ credit rated bonds (continued)
£2,110,680 Greene King Finance 4.0643% 15/03/2035 2,245 0.11
£1,916,910 Greene King Finance 5.318% 15/09/2031 2,145 0.10
£8,000,000 Hammerson 6% 23/02/2026 8,728 0.43
£7,000,000 Hammerson 7.25% 21/04/2028 8,145 0.40
£2,185,000 Heathrow Funding 2.75% 13/10/2029 2,232 0.11
£980,000 Heathrow Funding 2.75% 09/08/2049 923 0.04
£12,792,000 Heathrow Funding 6.75% 03/12/2026 16,044 0.78
£6,000,000 Heathrow Funding 7.075% 04/08/2028 7,881 0.38
£690,455 Highbury Finance 7.017% 20/03/2023 748 0.04
US$1,525,000 Imperial Brands Finance 3.5% 26/07/2026 1,180 0.06
£23,750,000 Imperial Brands Finance 4.875% 07/06/2032 28,401 1.38
£11,250,000 Imperial Brands Finance 5.5% 28/09/2026 13,502 0.66
£7,133,000 Informa 3.125% 05/07/2026 7,470 0.36
£6,500,000 InterContinental Hotels 2.125% 24/08/2026 6,474 0.32
£1,223,000 InterContinental Hotels 3.375% 08/10/2028 1,285 0.06
£2,500,000 Intesa Sanpaolo 2.5% 15/01/2030 2,546 0.12
US$1,000,000 Kinder Morgan 5.05% 15/02/2046 813 0.04
US$3,500,000 Kinder Morgan Energy Partners 5.8% 15/03/2035 3,123 0.15
US$3,000,000 Kinder Morgan Energy Partners 6.95% 15/01/2038 2,873 0.14
£4,500,000 KPN 5% 18/11/2026 5,168 0.25
£15,000,000 KPN 5.75% 17/09/2029 18,216 0.89
£4,638,000 LafargeHolcim Sterling Finance 3% 12/05/2032 4,984 0.24
£4,667,000 Leeds Building Society Var. Rate 3.75% 25/04/2029 4,895 0.24
£7,000,000 Legal & General Var. Rate 5.125% 14/11/2048 8,036 0.39
US$2,000,000 Legal & General Var. Rate 5.25% 21/03/2047 1,589 0.08
£8,000,000 Legal & General Var. Rate 5.375% 27/10/2045 9,145 0.45
£23,000,000 Legal & General Var. Rate 5.5% 27/06/2064 27,627 1.35
£15,000,000 Lloyds Bank 7.625% 22/04/2025 18,718 0.91
£350,000 Lloyds Bank 11.75% Perpetual 724 0.03
£7,500,000 Lloyds Banking 2.25% 16/10/2024 7,796 0.38
16 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘BBB’ credit rated bonds (continued)
£18,000,000 Lloyds Banking Var. Rate 1.875% 15/01/2026 18,374 0.90
£1,562,000 Logicor Financing 2.75% 15/01/2030 1,621 0.08
£1,750,000 Longstone Finance 4.896% 19/04/2031 2,010 0.10
€1,123,475 Ludgate Funding FRN CB 0.559% 01/01/2061 899 0.04
US$2,500,000 LYB International Finance III 3.625% 01/04/2051 1,761 0.09
US$1,488,000 LYB International Finance III 3.8% 01/10/2060 1,037 0.05
US$3,250,000 McDonald‘s 6.3% 15/10/2037 3,293 0.16
US$3,000,000 McDonald‘s 6.3% 01/03/2038 3,037 0.15
£28,000,000 Mexico (United Mexican States) 5.625% 19/03/2114 32,683 1.59
£2,845,040 Mitchells & Butlers Finance 5.574% 15/12/2030 3,195 0.16
£2,908,110 Mitchells & Butlers Finance FRN 0.6426% 15/12/2033 2,496 0.12
£1,000,000 Mondelēz International 3.875% 06/03/2045 1,165 0.06
£1,750,000 Mondelēz International 4.5% 03/12/2035 2,152 0.10
US$2,000,000 Nationwide Building Society Var. Rate 4.125% 18/10/2032 1,575 0.08
£10,000,000 Natwest Var. Rate 2.875% 19/09/2026 10,617 0.52
£3,100,000 Natwest Var. Rate 3.125% 28/03/2027 3,333 0.16
US$10,000,000 Natwest Var. Rate 4.892% 18/05/2029 8,372 0.41
€899,447 Newgate Funding FRN 0% 15/12/2050 712 0.03
£12,500,000 Next 3.625% 18/05/2028 13,584 0.66
£9,000,000 Next 4.375% 02/10/2026 10,135 0.49
£6,000,000 Pearson Funding 3.75% 04/06/2030 6,506 0.32
US$3,000,000 RELX Capital 7.5% 15/05/2025 2,615 0.13
US$1,000,000 Reynolds American 6.15% 15/09/2043 878 0.04
US$2,000,000 Security Capital 7.7% 15/06/2028 1,789 0.09
£1,000,000 Severn Trent 1.3% 11/07/2022 1,259 0.06
£5,000,000 Severn Trent Utilities Finance 3.625% 16/01/2026 5,589 0.27
£2,500,000 Severn Trent Utilities Finance 6.25% 07/06/2029 3,412 0.17
£2,888,000 Society of Lloyd‘s Var. Rate 4.875% 07/02/2047 3,294 0.16
£4,750,000 South West Water Finance 5.875% 16/07/2040 7,122 0.35
£6,738,000 Southern Water Services Finance 2.375% 28/05/2028 6,932 0.34
Interim Long Report and unaudited Financial Statements • February 2021 17 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘BBB’ credit rated bonds (continued)
£6,224,000 Southern Water Services Finance 3% 28/05/2037 6,588 0.32
£5,445,000 SP Transmission 2% 13/11/2031 5,593 0.27
£3,500,000 SSE 8.375% 20/11/2028 5,194 0.25
£10,000,000 SSE Var. Rate 3.74% Perpetual 10,587 0.52
US$4,500,000 Stora Enso 7.25% 15/04/2036 4,349 0.21
£2,000,000 Student Finance 2.6663% 30/09/2024 2,008 0.10
US$10,000,000 Telefónica Emisiones 7.045% 20/06/2036 10,168 0.50
£11,599,086 Tesco Property Finance 4 5.8006% 13/10/2040 15,282 0.74
£19,559,773 Tesco Property Finance 5 5.6611% 13/10/2041 25,638 1.25
£2,000,000 Thames Water Utilities Finance 2.375% 22/04/2040 1,979 0.10
£5,000,000 Thames Water Utilities Finance 2.625% 24/01/2032 5,243 0.26
£1,250,000 Thames Water Utilities Finance 3.375% 21/07/2021 2,123 0.10
£5,000,000 Thames Water Utilities Finance 3.5% 25/02/2028 5,571 0.27
£10,000,000 Thames Water Utilities Finance 4.375% 03/07/2034 12,436 0.61
£7,500,000 Thames Water Utilities Finance 6.75% 16/11/2028 10,152 0.49
£544,000 Vodafone 3% 12/08/2056 542 0.03
US$4,327,000 Vodafone 5.125% 19/06/2059 3,883 0.19
£3,000,000 Volkswagen Financial Services 1.875% 03/12/2024 3,069 0.15
£2,000,000 Volkswagen Financial Services 4.25% 09/10/2025 2,250 0.11
£1,100,000 Volkswagen International Finance 3.375% 16/11/2026 1,204 0.06
£20,000,000 Volkswagen International Finance 4.125% 17/11/2031 23,531 1.15
£4,000,000 Walgreens Boots Alliance 3.6% 20/11/2025 4,341 0.21
£5,000,000 Wells Fargo 2% 28/07/2025 5,181 0.25
£7,728,000 Wells Fargo 2.125% 24/09/2031 7,886 0.38
£5,000,000 Wells Fargo 3.5% 12/09/2029 5,682 0.28
£3,000,000 Wells Fargo 4.875% 29/11/2035 3,894 0.19
£5,000,000 Wells Fargo Bank 5.25% 01/08/2023 5,510 0.27
£5,000,000 Welltower 4.5% 01/12/2034 6,008 0.29
£5,000,000 Welltower 4.8% 20/11/2028 5,890 0.29
£468,000 Whitbread 2.375% 31/05/2027 461 0.02
18 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘BBB’ credit rated bonds (continued)
£417,000 Whitbread 3% 31/05/2031 407 0.02
£962,000 Wm Morrison Supermarkets 2.5% 01/10/2031 1,001 0.05
£1,000,000 Wm Morrison Supermarkets 4.75% 04/07/2029 1,219 0.06
£4,148,000 WPP Finance 2.875% 14/09/2046 3,854 0.19
£9,994,000 WPP Finance 3.75% 19/05/2032 11,087 0.54
£1,289,000 Yorkshire Building Society Var. Rate 3% 18/04/2025 1,360 0.07
‘BB’ credit rated bonds 106,091 5.17 4.51
US$1,613,000 Charter Communications Operating / Charter 1,048 0.05 Communications Operating Capital 3.85% 01/04/2061
£3,050,000 Daily Mail & General Trust 6.375% 21/06/2027 3,497 0.17
US$2,000,000 Ford Motor 4.75% 15/01/2043 1,457 0.07
US$10,000,000 Ford Motor Credit 4.389% 08/01/2026 7,565 0.37
£2,500,000 Ford Motor Credit 4.535% 06/03/2025 2,679 0.13
£8,000,000 H.J. Heinz Finance 6.25% 18/02/2030 10,114 0.49
US$6,000,000 HCA 5.5% 15/06/2047 5,388 0.26
£2,500,000 John Lewis 4.25% 18/12/2034 2,466 0.12
£16,000,000 Kraft Heinz Foods 4.125% 01/07/2027 17,753 0.87
US$4,000,000 Kraft Heinz Foods 4.625% 01/10/2039 3,225 0.16
US$3,524,000 Kraft Heinz Foods 4.875% 01/10/2049 2,948 0.14
£4,000,000 Lloyds Banking Var. Rate 7.625% Perpetual 4,335 0.21
£3,367,000 Lloyds Banking Var. Rate 7.875% Perpetual 4,233 0.21
£688,956 Marston‘s Issuer Var. Rate 1.348% 15/10/2027 633 0.03
£2,800,000 Marston‘s Issuer Var. Rate 5.1774% 15/07/2032 2,751 0.13
£1,117,802 Mitchells & Butlers Finance 6.013% 15/12/2028 1,202 0.06
£921,000 Nationwide Building Society Var. Rate 5.875% Perpetual 1,009 0.05
US$6,601,000 Natwest 6% 19/12/2023 5,366 0.26
£2,932,000 Natwest Var. Rate 3.622% 14/08/2030 3,129 0.15
US$2,244,000 Natwest Var. Rate 3.754% 01/11/2029 1,709 0.08
€5,000,000 Telecom Italia 5.25% 17/03/2055 5,368 0.26
£3,543,000 Thames Water Utilities Finance 2.875% 03/05/2027 3,663 0.18
£5,000,000 Thames Water Utilities Finance Var. Rate 5.75% 13/09/2030 5,284 0.26
Interim Long Report and unaudited Financial Statements • February 2021 19 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Fixed income (continued)
Debt securities (continued)
‘BB’ credit rated bonds (continued)
£4,000,000 Time Warner Cable 5.25% 15/07/2042 5,094 0.25
US$1,160,000 Time Warner Cable 5.5% 01/09/2041 1,001 0.05
£2,500,000 Time Warner Cable 5.75% 02/06/2031 3,174 0.16
‘B’ credit rated bonds 5,847 0.29 0.00
£4,808,000 INTU Finance 4.25% 17/09/2030 2,727 0.14
£5,500,000 INTU Finance 4.625% 17/03/2028 3,120 0.15
‘CCC’ credit rated bonds 3,159 0.15 0.00
£7,000,000 Intu Metrocentre Finance 4.125% 06/12/2023 3,159 0.15
Bonds with no credit rating 2,768 0.14 5.63
€103,500 Codere Finance Luxembourg 9.25% 2020a 00.00
£500,180 Intu Metrocentre 1% 23/12/2023 500 0.03
2,267,000 Telereal Securitisation 1.3657% 10/12/2031 2,268 0.11
Debt derivatives 15,519 0.76 0.35
Credit default swaps 0 0.00 0.00
Interest rate swaps 5,955 0.29 0.02
£20,000,000 Pay 0.275% Receive VAR Mar 2070 4,334 0.21
£10,000,000 Pay 0.536% Receive VAR Sep 2049 959 0.05
£10,000,000 Pay 0.652% Receive VAR Sep 2049 662 0.03
Interest rate futures 9,564 0.47 0.33
(294) 10 Year US Treasury Note June 2021 342 0.02
(993) 10 Year US Treasury Ultra June 2021 1,313 0.06
(215) Euro-BUXL 30 Years Bond March 2021 2,267 0.11
(1,049) UK Long Gilt Bond June 2021 1,950 0.10
(800) US Long Treasury Bond June 2021 1,417 0.07
(660) US Ultra Treasury Bond June 2021 2,275 0.11
Currency 13,521 0.66 1.00
Forward currency contracts 13,521 0.66 1.00
€1,637,021 Bought for £1,435,710 (expires 07.04.21) (12) 0.00
€(31,115,120) Sold for £28,123,183 (expires 07.04.21) 1,057 0.05
€(26,232,898) Sold for £23,752,809 (expires 10.03.21) 944 0.05
20 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Investments
Portfolio statement (continued)
Holding as at 28.02.21 as at 28.02.21 as at 31.08.20 £‘000 % %
Currency (continued)
Forward currency contracts (continued)
€(25,662,901) Sold for £22,543,134 (expires 05.05.21) 208 0.01
US$20,676,005 Bought for £14,750,288 (expires 07.04.21) 95 0.01
US$174,301,170 Bought for £12,531,252 (expires 10.03.21) (15) 0.00
US$(210,382,831) Sold for £156,064,676 (expires 07.04.21) 5,014 0.24
US$(181,837,504) Sold for £134,965,550 (expires 10.03.21) 4,387 0.21
US$(154,763,458) Sold for £112,951,188 (expires 05.05.21) 1,843 0.09
Portfolio of investments 1,923,704 93.75 94.36
Cash equivalents 113,979 5.55 4.83
‘AAA’ rated money market fundsb 113,979 5.55 4.83
113,979,264 Northern Trust Global Fund - Sterling 113,979 5.55
Total portfolio 2,037,683 99.30 99.19
Net other assets / (liabilities) 14,405 0.70 0.81
Net assets attributable to shareholders 2,052,088 100.00 100.00 All securities are on an official stock exchange listing except where referenced. a Unlisted/unquoted. b Uncommitted surplus cash is placed into ‘AAA’ rated money market funds with the aim of reducing counterparty risk.
Interim Long Report and unaudited Financial Statements • February 2021 21 M&G Strategic Corporate Bond Fund Investments
Portfolio transactions
for the six months to 28.02.21 29.02.20 £’000 £’000
Total purchases 395,684 439,127
Total sales 664,826 512,312
Purchases and sales exclude the cost and proceeds of ‘AAA’ rated money market funds.
22 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond 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 February 2004 = 100, plotted monthly back the original amount you invested. Chart date 1 March 2021
The following chart and tables reflect the key financial 300 information of a representative share class, Sterling 250 Class ‘A’ (Accumulation) shares. As different share classes have different attributes, for example charging 200 structures and minimum investments, please be aware that their performance may be different. For more 175 information on the different share classes in this fund 140 please refer to the Prospectus for M&G Strategic CorporateBondFund,whichisavailablefreeofcharge 120 either from our website at www.mandg.co.uk/ 100 prospectuses or by calling M&G Customer Relations. 90 04 05 06 07 08 09 10 11 1213 14 15 16 17 1819 20 21 Fund level performance Sterling Class ‘A’ (Accumulation) shares* IA Sterling Corporate Bond sector* Fund net asset value 28.02.21 31.08.20 31.08.19 Source: Morningstar, Inc. and M&G £’000 £’000 £’000 * Income reinvested
Fund net asset value (NAV) 2,052,088 2,349,125 2,666,362 To give an indication of the performance of the fund, the following table shows the compound rate of return, per annum, over the period. Calculated on a price to price basis with income reinvested.
Interim Long Report and unaudited Financial Statements • February 2021 23 M&G Strategic Corporate Bond Fund Financial highlights
Long-term performance by share class To give an indication of the performance of the fund, the following table shows the compound rate of return, per annum, over the period. Calculated on a price to price basis with income reinvested.
Share Six Three Five Since class a months years years launch 01.09.20 01.03.18 01.03.16 %b %pa %pa %pa
Sterlingc
Class ‘A’ +2.9 +3.5 +4.8 +5.8d
Class ‘I’ +3.2 +4.0 +5.3 +4.6e
Class ‘PP’ +3.2 n/a n/a +6.1f
Class ‘R’ +3.0 +3.8 +5.0 +4.4e
Class ‘X’ +2.9 +3.5 +4.7 +5.7d
a On 1 September 2009 the M&G Strategic Corporate Bond Fund de- merged from M&G Investment Funds (1) to become the M&G Strategic Corporate Bond Fund. b Absolute basis. c Price to price with income reinvested. d 20 February 2004, the launch date of the merging fund. e 3 August 2012, the launch date of the share class. f 8 April 2019, the launch date of the share class.
24 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Financial highlights
Operating charges and portfolio • Ongoing charges from underlying funds: Ongoing transaction costs charges on holdings in underlying funds that are We explain below the payments made to meet the not rebated. From 1 August 2019 charges from ongoing costs of investing and managing the fund, underlying funds (excluding Investment Trust comprising operating charges and portfolio transaction Companies and Real Estate Investment Trusts) will costs. be rebated.
Operating charges The operating charges paid by each share class of the Operating charges include payments made to M&G and fund are shown in the following performance tables. to providers independent of M&G: These charges do not include portfolio transaction costs or any entry and exit charges (also known as initial • Annual charge: Charge paid to M&G covering the and redemption charges). The charging structures of annual cost of M&G managing and administering share classes may differ, and therefore the operating the fund and the costs of third parties providing charges may differ. services to the fund. From 1 August 2019, this charge rolls all costs that make up the operating Operating charges are in line with the ongoing charges charges into one annual charge. shown in the Key Investor Information Document, other For every £1 billion of a fund’s net asset value, a than where there have been extraordinary legal or tax discount of 0.02% will be applied to that fund’s expenses, or an estimate has been used for the annual charge (up to a maximum of 0.12%). ongoing charge because a material change has made the operating charges unreliable as an estimate of • Extraordinary legal and tax expenses: Costs that future charges. specifically relate to legal or tax claims that are both exceptional and unforeseeable. Such expenses are Portfolio transaction costs uncommon, and would not be expected in most years. Portfolio transaction costs are incurred by funds when Although they result in a short-term cost to the fund, buying and selling investments. These costs vary generally they can deliver longer term benefits for depending on the types of investment, their market investors. capitalisation, country of exchange and method of execution. They are made up of direct and indirect • Investment management: Charge paid to M&G for portfolio transaction costs: investment management of the fund. From 1 August 2019 this charge forms part of the annual • Direct portfolio transaction costs: Broker charge. execution commission and taxes.
• Administration: Charge paid for administration • Indirect portfolio transaction costs: ‘Dealing services in addition to investment management – spread’ – the difference between the buying and any surplus from this charge will be retained by selling prices of the fund’s investments; some M&G. From 1 August 2019 this charge is rolled into types of investment, such as fixed interest the annual charge. securities, have no direct transaction costs and only the dealing spread is paid. • Oversight and other independent services: Charges paid to providers independent of M&G for Investments are bought or sold by a fund when services which include depositary, custody and changes are made to the investment portfolio and in audit. From 1 August 2019 these charges will be response to net flows of money into or out of the fund paid by M&G and rolled into the annual charge. from investors buying and selling shares in the fund.
Interim Long Report and unaudited Financial Statements • February 2021 25 M&G Strategic Corporate Bond Fund Financial highlights
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. As the fund invests mainly in fixed interest securities, the direct transaction costs paid on other investments are too small to be reflected in the table below. To give an indication of the indirect portfolio dealing costs the table 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.
Portfolio transaction costs
as at 28.02.21 31.08.20 31.08.19 Averagea Indirect portfolio %%% % transaction costs
Average portfolio 0.89 1.00 0.95 0.95 dealing spread
a Average of first three columns.
26 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond 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 20 February 2004. represent an annual rate except for the ‘Return after Change in NAV per Six months Year to Year to operating charges’ which is calculated as a percentage share to 28.02.21 31.08.20 31.08.19 UK p UK p UK p of the opening net asset value per share (NAV). ‘Dilution adjustments’ are only in respect of direct portfolio Opening NAV 127.13 124.00 116.14 transaction costs. Return before operating 4.32 4.50 9.22 charges
Sterling Class ‘A’ Income share Operating charges (0.71) (1.37) (1.36) performance Return after operating 3.61 3.13 7.86 The share class was launched on 20 February 2004. charges
Change in NAV per Six months Year to Year to Distributions (1.01) (2.63) (3.13) share to 28.02.21 31.08.20 31.08.19 Retained distributions 1.01 2.63 3.13 UK p UK p UK p Closing NAV 130.74 127.13 124.00 Opening NAV 75.24 75.78 73.71 Direct transaction costs UK p UK p UK p Return before operating 2.56 2.71 5.73 charges Costs before dilution 0.00 0.00 0.00 adjustments Operatingcharges (0.43) (0.83) (0.85) Dilution adjustmentsa 0.00 0.00 0.00 Return after operating 2.13 1.88 4.88 charges Total direct transaction costs 0.00 0.00 0.00
Distributions (1.01) (2.42) (2.81) Performance and charges % % %
Closing NAV 76.36 75.24 75.78 Direct portfolio transaction 0.00 0.00 0.00 costsb Direct transaction costs UK p UK p UK p Operating chargesc 1.09 1.11 1.15 Costs before dilution 0.00 0.00 0.00 adjustments Return after charges +2.84 +2.52 +6.77
Dilution adjustmentsa 0.00 0.00 0.00 Distribution yield 1.91 1.81 2.37
Total direct transaction costs 0.00 0.00 0.00 Other information
Performance and charges % % % Closing NAV (£’000) 631,427 641,781 741,788
Direct portfolio transaction 0.00 0.00 0.00 Closing NAV (%) 30.77 27.32 27.82 costsb Number of shares 482,946,339 504,809,308 598,199,270 Operating chargesc 1.10 1.11 1.15 Highest share price (UK p) 133.35 128.13 124.00 Return after charges +2.83 +2.48 +6.62 Lowest share price (UK p) 126.90 109.15 113.22 Distribution yield 2.73 2.92 3.47
Other information
Closing NAV (£’000) 59,531 271,104 283,620
Closing NAV (%) 2.91 11.54 10.64
Number of shares 77,962,768 360,323,814 374,286,543
Highest share price (UK p) 78.37 77.67 76.51
Lowest share price (UK p) 75.10 65.63 71.21
Interim Long Report and unaudited Financial Statements • February 2021 27 M&G Strategic Corporate Bond Fund Financial highlights
Sterling Class ‘I’ Income share Sterling Class ‘I’ Accumulation share performance performance The share class was launched on 3 August 2012. The share class was launched on 3 August 2012.
Change in NAV per Six months Year to Year to Change in NAV per Six months Year to Year to share to 28.02.21 31.08.20 31.08.19 share to 28.02.21 31.08.20 31.08.19 UK p UK p UK p UK p UK p UK p
Opening NAV 1,113.43 1,115.75 1,079.93 Opening NAV 1,428.69 1,386.61 1,292.17
Return before operating 37.99 40.09 84.11 Return before operating 48.59 50.54 103.03 charges charges
Operating charges (3.41) (6.73) (7.09) Operating charges (4.39) (8.46) (8.59)
Return after operating 34.58 33.36 77.02 Return after operating 44.20 42.08 94.44 charges charges
Distributions (14.98) (35.68) (41.20) Distributions (14.94) (36.39) (41.50)
Closing NAV 1,133.03 1,113.43 1,115.75 Retained distributions 14.94 36.39 41.50
Direct transaction costs UK p UK p UK p Closing NAV 1,472.89 1,428.69 1,386.61
Costs before dilution 0.01 0.03 0.03 Direct transaction costs UK p UK p UK p adjustments Costs before dilution 0.01 0.04 0.04 Dilution adjustmentsa 0.00 0.00 0.00 adjustments
Total direct transaction costs 0.01 0.03 0.03 Dilution adjustmentsa 0.00 0.00 0.00
Performance and charges % % % Total direct transaction costs 0.01 0.04 0.04
Direct portfolio transaction 0.00 0.00 0.00 Performance and charges % % % costsb Direct portfolio transaction 0.00 0.00 0.00 Operating chargesc 0.60 0.61 0.65 costsb
Return after charges +3.11 +2.99 +7.13 Operating chargesc 0.60 0.61 0.65
Distribution yield 2.73 2.92 3.47 Return after charges +3.09 +3.03 +7.31
Other information Distribution yield 2.31 2.31 2.86
Closing NAV (£’000) 453,312 465,654 561,538 Other information
Closing NAV (%) 22.09 19.82 21.06 Closing NAV (£’000) 792,721 844,107 959,319
Number of shares 40,008,761 41,821,396 50,328,285 Closing NAV (%) 38.63 35.93 35.98
Highest share price (UK p) 1,162.08 1,145.99 1,126.52 Number of shares 53,820,675 59,082,588 69,184,295
Lowestshareprice(UKp) 1,111.88 969.07 1,044.63 Highest share price (UK p) 1,501.22 1,439.24 1,386.54
Lowest share price (UK p) 1,426.63 1,223.91 1,261.45
28 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond 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.
Change in NAV per Six months Year to Year to Change in NAV per Six months Year to Year to share to 28.02.21 31.08.20 31.08.19 share to 28.02.21 31.08.20 31.08.19 UK p UK p UK p UK p UK p UK p
Opening NAV 99.54 99.61 100.00 Opening NAV 108.25 104.90 100.00
Return before operating 3.40 3.57 0.58 Return before operating 3.68 3.83 5.10 charges charges
Operating charges (0.23) (0.45) (0.04) Operating charges (0.25) (0.48) (0.20)
Return after operating 3.17 3.12 0.54 Return after operating 3.43 3.35 4.90 charges charges
Distributions (1.34) (3.19) (0.93) Distributions (1.21) (2.91) (1.72)
Closing NAV 101.37 99.54 99.61 Retained distributions 1.21 2.91 1.72
Direct transaction costs UK p UK p UK p Closing NAV 111.68 108.25 104.90
Costs before dilution 0.00 0.00 0.00 Direct transaction costs UK p UK p UK p adjustments Costs before dilution 0.00 0.00 0.00 Dilution adjustmentsa 0.00 0.00 0.00 adjustments
Total direct transaction costs 0.00 0.00 0.00 Dilution adjustmentsa 0.00 0.00 0.00
Performance and charges % % % Total direct transaction costs 0.00 0.00 0.00
Direct portfolio transaction 0.00 0.00 0.00 Performance and charges % % % costsb Direct portfolio transaction 0.00 0.00 0.00 Operating charges 0.45 0.46 0.46 costsb
Return after charges +3.18 +3.13 +0.54 Operating chargesc 0.45 0.46 0.56
Distribution yield 2.73 2.92 3.47 Return after charges +3.17 +3.19 +4.90
Other information Distribution yield 2.41 2.46 3.01
Closing NAV (£’000) 33,278 41,005 20,839 Other information
Closing NAV (%) 1.62 1.75 0.78 Closing NAV (£’000) 1,819 1,819 1,370
Number of shares 32,827,763 41,192,157 20,921,967 Closing NAV (%) 0.09 0.08 0.05
Highest share price (UK p) 103.95 102.37 100.54 Number of shares 1,628,383 1,680,584 1,306,170
Lowest share price (UK p) 99.42 86.58 99.66 Highest share price (UK p) 113.80 109.04 104.90
Lowest share price (UK p) 108.11 92.67 100.00
Interim Long Report and unaudited Financial Statements • February 2021 29 M&G Strategic Corporate Bond 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.
Change in NAV per Six months Year to Year to Change in NAV per Six months Year to Year to share to 28.02.21 31.08.20 31.08.19 share to 28.02.21 31.08.20 31.08.19 UK p UK p UK p UK p UK p UK p
Opening NAV 110.24 110.75 107.46 Opening NAV 140.37 136.57 127.59
Return before operating 3.76 3.97 8.36 Return before operating 4.77 4.97 10.15 charges charges
Operating charges (0.48) (0.94) (0.97) Operatingcharges (0.61) (1.17) (1.17)
Return after operating 3.28 3.03 7.39 Return after operating 4.16 3.80 8.98 charges charges
Distributions (1.48) (3.54) (4.10) Distributions (1.29) (3.24) (3.77)
Closing NAV 112.04 110.24 110.75 Retained distributions 1.29 3.24 3.77
Direct transaction costs UK p UK p UK p Closing NAV 144.53 140.37 136.57
Costs before dilution 0.00 0.00 0.00 Direct transaction costs UK p UK p UK p adjustments Costs before dilution 0.00 0.00 0.00 Dilution adjustmentsa 0.00 0.00 0.00 adjustments
Total direct transaction costs 0.00 0.00 0.00 Dilution adjustmentsa 0.00 0.00 0.00
Performance and charges % % % Total direct transaction costs 0.00 0.00 0.00
Direct portfolio transaction 0.00 0.00 0.00 Performance and charges % % % costsb Direct portfolio transaction 0.00 0.00 0.00 Operating chargesc 0.85 0.86 0.90 costsb
Return after charges +2.98 +2.74 +6.88 Operating chargesc 0.85 0.86 0.90
Distribution yield 2.73 2.92 3.47 Return after charges +2.96 +2.78 +7.04
Other information Distribution yield 2.06 2.06 2.62
Closing NAV (£’000) 7,811 7,800 9,682 Other information
Closing NAV (%) 0.38 0.33 0.36 Closing NAV (£’000) 4,583 4,512 4,214
Number of shares 6,971,186 7,075,672 8,742,268 Closing NAV (%) 0.22 0.19 0.16
Highest share price (UK p) 114.96 113.63 111.82 Number of shares 3,170,616 3,214,728 3,085,515
Lowest share price (UK p) 110.06 96.05 103.88 Highest share price (UK p) 147.37 141.42 136.58
Lowest share price (UK p) 140.14 120.38 124.47
30 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Financial highlights
Sterling Class ‘X’ Income share Sterling Class ‘X’ Accumulation share performance performance The share class was launched on 20 February 2004. The share class was launched on 20 February 2004.
Change in NAV per Six months Year to Year to Change in NAV per Six months Year to Year to share to 28.02.21 31.08.20 31.08.19 share to 28.02.21 31.08.20 31.08.19 UK p UK p UK p UK p UK p UK p
Opening NAV 75.16 75.70 73.63 Opening NAV 124.02 120.97 113.29
Return before operating 2.57 2.70 5.72 Return before operating 4.23 4.39 9.01 charges charges
Operating charges (0.42) (0.83) (0.85) Operating charges (0.70) (1.34) (1.33)
Return after operating 2.15 1.87 4.87 Return after operating 3.53 3.05 7.68 charges charges
Distributions (1.01) (2.41) (2.80) Distributions (0.99) (2.56) (3.05)
Closing NAV 76.30 75.16 75.70 Retained distributions 0.99 2.56 3.05
Direct transaction costs UK p UK p UK p Closing NAV 127.55 124.02 120.97
Costs before dilution 0.00 0.00 0.00 Direct transaction costs UK p UK p UK p adjustments Costs before dilution 0.00 0.00 0.00 Dilution adjustmentsa 0.00 0.00 0.00 adjustments
Total direct transaction costs 0.00 0.00 0.00 Dilution adjustmentsa 0.00 0.00 0.00
Performance and charges % % % Total direct transaction costs 0.00 0.00 0.00
Direct portfolio transaction 0.00 0.00 0.00 Performance and charges % % % costsb Direct portfolio transaction 0.00 0.00 0.00 Operating chargesc 1.09 1.11 1.15 costsb
Return after charges +2.86 +2.47 +6.61 Operating chargesc 1.09 1.11 1.15
Distribution yield 2.73 2.92 3.47 Return after charges +2.85 +2.52 +6.78
Other information Distribution yield 1.91 1.81 2.37
Closing NAV (£’000) 20,995 21,529 23,897 Other information
Closing NAV (%) 1.02 0.92 0.90 Closing NAV (£’000) 46,611 49,814 60,095
Number of shares 27,517,761 28,643,507 31,569,260 Closing NAV (%) 2.27 2.12 2.25
Highest share price (UK p) 78.31 77.59 76.43 Number of shares 36,544,785 40,165,447 49,677,863
Lowest share price (UK p) 75.03 65.56 71.13 Highest share price (UK p) 130.09 125.00 120.97
Lowest share price (UK p) 123.79 106.48 110.45
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.
Interim Long Report and unaudited Financial Statements • February 2021 31 M&G Strategic Corporate Bond Fund Financial statements and notes
Financial statements Statement of total return
2021 2020
for the six months to 28 and 29 February £’000 £’000 £’000 £’000
Income
Net capital gains/(losses) 44,990 9,395
Revenue 29,118 42,414
Expenses (8,575) (10,529)
Net revenue/(expense) before taxation 20,543 31,885
Taxation (38) (38)
Net revenue/(expense) after taxation 20,505 31,847
Total return before distributions 65,495 41,242
Distributions (22,521) (34,705)
Change in net assets attributable to shareholders from 42,974 6,537 investment activities
Statement of change in net assets attributable to shareholders
2021 2020
for the six months to 28 and 29 February £’000 £’000 £’000 £’000
Opening net assets attributable to shareholders 2,349,125 2,666,362
Amounts received on issue of shares 16,038 29,824
Amounts paid on cancellation of shares (371,395) (230,174)
(355,357) (200,350)
Dilution adjustments 1,731 867
Change in net assets attributable to shareholders from 42,974 6,537 investment activities (see above)
Retained distributions on Accumulation shares 13,613 19,966
Unclaimed distributions 21
Closing net assets attributable to shareholders 2,052,088 2,493,383
The opening net assets attributable to shareholders for 2021 differs to the closing position in 2020 by the change in net assets attributable to shareholders for the second half of the comparative financial year.
32 Interim Long Report and unaudited Financial Statements • February 2021 M&G Strategic Corporate Bond Fund Financial statements and notes
Financial statements Balance sheet
as at 28 February 2021 31 August 2020 £’000 £’000
Assets
Fixed assets
Investments 1,923,731 2,217,381
Current assets
Debtors 23,617 47,378
Cash and bank balances 11,961 39,616
Cash equivalents 113,979 113,500
Total assets 2,073,288 2,417,875
Liabilities
Investment liabilities (27) (791)
Creditors
Overdrawn positions at futures clearing houses and (1,159) (13,818) collateral manager
Distribution payable (3,613) (6,028)
Other creditors (16,401) (48,113)
Total liabilities (21,200) (68,750)
Net assets attributable to shareholders 2,052,088 2,349,125
Interim Long Report and unaudited Financial Statements • February 2021 33 M&G Strategic Corporate Bond Fund Financial statements and notes
Notes to the financial statements Accounting policies There are no material events that have been identified that may cast significant doubt on the Company’s ability to continue as a going concern until at least 30 April 2022. 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 until at least 30 April 2022 and considers liquidity, declines in global capital markets, investor intention, known redemption levels, expense projections, key service provider’s operational resilience, and the impact of COVID-19.
The interim financial statements have been prepared on the same basis as the audited financial statements for the year ended 31 August 2020. They are prepared under the historical cost convention, as modified by the revaluation of investments, 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.
Distribution policy In determining the amount available for distribution to Income shares, the annual charge, annual management charge and administration charge are offset against capital, increasing the amount available for distribution whilst restraining capital performance to an equivalent extent.
34 Interim Long Report and unaudited Financial Statements • February 2021 Other regulatory disclosures
Swiss investor information For funds registered in Switzerland we are required by FINMA to disclose the Total Expense Ratio (TER).
For these funds the TERs are the same as the operating charges disclosed in the fund’s financial highlights section under ‘Performance and charges’.
Interim Long Report and unaudited Financial Statements • February 2021 35 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.
36 Interim Long Report and unaudited Financial Statements • February 2021 Glossary
Credit selection The process of evaluating a fixed income Diversification The practice of investing in a variety of assets. security, also called a bond, in order to ascertain the ability of This is a risk management technique where, in a well- the borrower to meet its debt obligations. This research seeks diversified portfolio, any loss from an individual holding should to identify the appropriate level of default risk associated with be offset by gains in other holdings, thereby lessening the investing in that particular bond. impact on the overall portfolio.
Credit spread The difference between the yield of a Dividend Dividends represent a share in the profits of a corporate bond, a fixed income security issued by a company, company and are paid out to the company’s shareholders at and a government bond of the same life span. Yield refers to set times of the year. the income received from an investment and is expressed as a Duration A measure of the sensitivity of a fixed income percentage of the investment’s current market value. security, also called a bond, or bond fund to changes in Default When a borrower does not maintain interest interest rates. The longer a bond or bond fund’s duration, the payments or repay the amount borrowed when due. more sensitive it is to interest rate movements.
Defaulted bond When a bond issuer does not maintain Duration risk The longer a fixed income security, also called a interest payments or repay the amount borrowed when due. bond, or bond fund’s duration, the more sensitive and therefore at risk it is to changes in interest rates. Default risk Risk that a debtholder will not receive interest and full repayment of the loan when due. Emerging economy or market Economies in the process of rapid growth and increasing industrialisation. Investments in Derivatives Financial instruments whose value, and price, are emerging markets are generally considered to be riskier than dependent on one or more underlying assets. Derivatives can those in developed markets. be used to gain exposure to, or to help protect against, expected changes in the value of the underlying investments. Equities Shares of ownership in a company. Derivatives may be traded on a regulated exchange or traded Exchange traded Usually refers to investments traded on an over the counter. exchange, such as company shares on a stock exchange. Developed economy/market Well-established economies Ex-dividend, ex-distribution or XD date The date on which with a high degree of industrialisation, standard of living and declared distributions officially belong to underlying investors. security. Exposure The proportion of a fund invested in a particular Dilution adjustments The dilution adjustment is used to share/fixed income security, sector/region, usually expressed protect ongoing investors against the transaction charges as a percentage of the overall portfolio. incurred in investing or divesting in respect of creations and cancellations. The dilution adjustment is made up of the direct Fixed income security A loan in the form of a security, usually and indirect transaction charges. In the financial statements issued by a government or company, which normally pays a the direct transaction charges as a percentage of average fixed rate of interest over a given time period, at the end of NAV will be disclosed. This percentage will take account of which the initial amount borrowed is repaid. Also referred to those direct transaction charges that have been recovered as a bond. through the dilution adjustment leaving a percentage that just Floating rate notes (FRNs) Securities whose interest represents the costs incurred in portfolio management. (income) payments are periodically adjusted depending on the Distribution Distributions represent a share in the income of change in a reference interest rate. the fund and are paid out to Income shareholders or Foreign exchange The exchange of one currency for another, reinvested for Accumulation shareholders at set times of the or the conversion of one currency into another currency. year (monthly, quarterly, half-yearly or annually). They may Foreign exchange also refers to the global market where either be in the form of interest distributions or dividend currencies are traded virtually around the clock. The term distributions. foreign exchange is usually abbreviated as ‘forex’ and Distribution yield Expresses the amount that is expected to occasionally as ‘FX’. be distributed by the fund over the next 12 months as a percentage of the share price as at a certain date. It is based on the expected gross income less the ongoing charges.
Interim Long Report and unaudited Financial Statements • February 2021 37 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.
38 Interim Long Report and unaudited Financial Statements • February 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.
Interim Long Report and unaudited Financial Statements • February 2021 39 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.
40 Interim Long Report and unaudited Financial Statements • February 2021 Glossary
Triple A or AAA rated The highest possible rating a fixed Volatility The degree to which a given security, fund, or index income security, also called a bond, can be assigned by credit rapidly changes. It is calculated as the degree of deviation rating agencies. Bonds that are rated AAA are perceived to from the norm for that type of investment over a given time have the lowest risk of default. Default means that a company period. The higher the volatility, the riskier the security tends or government is unable to meet interest payments or repay to be. the initial investment amount at the end of a security’s life. Warrant A security issued by a company that gives the holder UCITS Stands for Undertakings for Collective Investment in the right to buy shares in that company at a specified price Transferable Securities. This is the European regulatory and within a certain timeframe. framework for an investment vehicle that can be marketed Yield This refers to either the interest received from a fixed across the European Union and is designed to enhance the income security or to the dividends received from a share. It is single market in financial assets while maintaining high levels usually expressed as a percentage based on the investment’s of investor protection. costs, its current market value or its face value. Dividends Unconstrained The term used to describe the mandate of a represent a share in the profits of the company and are paid fund whereby the manager has the freedom to invest out to a company’s shareholders at set times of the year. according to his or her own strategy, not being obliged to Yield (equity) Refers to the dividends received by a holder of allocate capital according to the weightings of any index, for company shares and is usually expressed annually as a example. percentage based on the investment’s cost, its current market Underlying value The fundamental value of a company, value or face value. Dividends represent a share in the profits reflecting both tangible and intangible assets, rather than the of the company and are paid out to a company’s shareholders current market value. at set times of the year.
Underlying yield Refers to the income received by a managed Yield (bonds) This refers to the interest received from a fixed fund, and is usually expressed annually as a percentage based income security and is usually expressed annually as a on the fund’s current value. percentage based on the investment’s cost, its current market value or its face value. Underweight If a portfolio is ‘underweight’ a stock, it holds a smaller proportion of that stock than the comparable index or Yield (income) Refers to the income received from an sector. investment and is usually expressed annually as a percentage based on the investment’s cost, its current market value or Unit trust A type of managed fund, whose value is directly face value. linked to the value of the fund’s underlying investments.
Unit/share type Type of units/shares held by investors in a trust or fund (unit/share types differ by features such as whether income is to be paid out as cash or reinvested on the payment date).
Unlisted/unquoted stocks Shares of ownership in companies that are not listed on a public exchange, known as private companies.
Valuation The worth of an asset or company based on its current price.
Volatile When the value of a particular share, market or sector swings up and down fairly frequently and/or significantly, it is considered volatile.
M&G Securities Limited is authorised and regulated by the Financial Conduct Authority and provides investment products. The Company’s registered office is 10 Fenchurch Avenue, London EC3M 5AG. Registered in England: No. 90776.
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