Policy changes to M&G Optimal Income Fund

• GB00B1H05155 - M&G Optimal Income A Acc GBP 

SUMMARY OF CHANGES

From the Effective Date, the Company will amend the Fund's investment policy to remove its ability to invest up to 20% of the Fund in equities in order to clarify the Fund's focus on debt securities (also known as fixed income or bonds). As a result of the removal, the Company will increase the minimum amount the Fund must invest in debt securities from 50% to 70% of the Fund.

In addition to the above, the Fund's target benchmark will change to Bloomberg Global Aggregate Index GBP-hedged and the Fund's investment objective will be amended to reflect this change.

There will be no material change to the Fund's liquidity and risk profile, and no immediate changes to the Fund's portfolio as a result of the changes.

REMOVAL OF EQUITIES FROM THE FUND'S INVESTMENT UNIVERSE

The Fund was originally launched in 2006 with the aim of providing a combination of capital growth and income based on exposure to optimal income streams in investment markets, with a minimum of 50% of its portfolio invested in debt securities and up to 20% of its portfolio equities. Since then, the Fund's investment has evolved considerably and the significance of equities as a source of returns for the Fund has decreased, with equity exposure declining steadily over time and representing less than 1% of the Fund's portfolio over the past three years.

The Company believe that the change will clarify the Fund's focus on fixed income and make its strategy easier to understand for investors. Though the Fund will no longer be able to actively invest in equities, there may be a circumstances when it could hold equity assets as a result of corporate actions or restructuring. Some equities could also remain in the Fund's portfolio on the Effective Date, and as such the fund manager will seek to sell these assets to the extent possible and when deemed in policyholders interests.

CHANGE OF TARGET BENCHMARK TO BLOOMBERG GLOBAL AGGREGATE INDEX GBP-HEDGED

The Fund's performance is assessed against a ‘composite’ target benchmark made up of three equally-weighted indices as follows:

• ⅓ Bloomberg Global Treasury Index GBP hedged - representing global government bonds;
• ⅓ Bloomberg Global Aggregate Corporate Index GBP hedged - representing global corporate bonds; and
• ⅓ Bloomberg Global High Yield Index GBP hedged - representing global high yield bonds, i.e. those issued by companies with low credit rating and considered to be at higher risk of default than investment grade bonds. Default means that a bond issuer is unable to meet interest payments or repay the initial amount borrowed at the end of a security's life.

From the Effective Date, the Bloomberg Global Aggregate Index GBP hedged index will replace the above composite target benchmark for the Fund.

For further information and comparison of the changes, please see the Appendix in the M&G Notification opposite.

The changes will take effect automatically and policyholders do not need to take any action. We recommend that policyholders seek the advice of their usual financial adviser before making any investment decisions.

For more information regarding The M&G Group, please visit: https://group.mandg.com