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M&G Global Emerging Markets Fund

a sub-fund of M&G Investment Funds (7)

Annual Short Report January 2020For the year ended 31 January 2020

2

Fund information

1

Important information

On 8 April 2019 M&G Global Emerging Markets Fund launched SterlingClass ‘PP’ (Accumulation) shares.

As mentioned in the shareholder letter on 17 June 2019, we havemade changes to the way we charge for M&G funds based in the UK,starting on Thursday 1 August 2019. The annual charge should besimpler to understand and easier to compare with other fund charges.We have combined all the charges that make up the current ongoingcharge figure (OCF) into a single annual charge. Only exceptionalitems such as unforeseen legal and tax expenses, also known asextraordinary expenses, will be excluded from the annual charge. Tofind out the new annual charge and the OCF which are shown in theKey Investor Information Document (KIID) for the share class(es) youare invested in, visit our website www.mandg.co.uk

On 5 August 2019 M&G Global Emerging Markets Fund launchedSterling Class ‘PP’ (Income) shares.

On 29 November 2019 the investment objective and policy of the M&G Global Emerging Markets Fund were changed.

On 6 December 2019 M&G Global Emerging Markets Fund launchedSterling Class ‘I-H’ (Accumulation), Sterling Class ‘I-H’ (Income), SterlingClass ‘PP-H’ (Accumulation) and Sterling Class ‘PP-H’ (Income) shares.

Investment objective up to 28 November 2019

The fund aims to maximise long term total return (the combination ofcapital growth and income) by investing in emerging market countries.

The Authorised Corporate Director (ACD) of M&G Investment Funds (7)presents its Annual Short Report for M&G Global Emerging MarketsFund which contains a review of the fund’s investment activities andinvestment performance during the period. The ACD’s Annual Long Report and audited Financial Statements for M&G InvestmentFunds (7), incorporating all the sub-funds and a Glossary of terms is available free of charge either from our website atwww.mandg.co.uk/reports or by calling M&G Customer Relations on 0800 390 390.

From June 2020, we will be publishing an annual value assessmentwhich will be available to investors, including an assessment of ourcharges and services, and how we compare to our competitors. If youhave any questions regarding the value assessment please contactM&G Customer Relations on 0800 390 390.

ACDM&G Securities Limited, 10 Fenchurch Avenue, London EC3M 5AGTelephone: 0800 390 390

(Authorised and regulated by the Financial Conduct Authority. M&G Securities Limited is a member of the Investment Associationand of The Investing and Saving Alliance (formerly Tax IncentivisedSavings Association))

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Fund information

3

Investment approachThe fund employs a bottom-up stock picking approach to identifycompanies whose long-term prospects are, in the fund manager’sopinion, being undervalued. The fund’s approach incorporates threeelements: return on capital, valuations and corporate governance.

It is the core belief of the fund manager that company-specific factors,in particular their profitability (which is measured in terms of return oncapital), drive share prices over the long run. The fund’s country andsector exposure is not influenced by top-down views.

BenchmarkBenchmark: MSCI Emerging Markets Index.

The fund is actively managed. The benchmark is a target which thefund seeks to outperform. The index has been chosen as the fund’starget benchmark as it best reflects the scope of the fund’s investmentpolicy. The target benchmark is used solely to measure the fund’sperformance and does not constrain the fund’s portfolio construction.

Investment policy up to 28 November 2019

The fund will invest mainly in the securities of companies domiciled inor conducting the major part of their economic activity in emergingmarket countries.* Exposure to these securities may be gainedthrough the use of derivatives. The fund may invest across a widerange of geographies, sectors and market capitalisations. The fundmay also invest in other assets including collective investmentschemes, other transferable securities, cash and near cash, deposits,warrants, money market instruments and derivatives.

* The current reference point for defining emerging market countries are those

included within the MSCI Emerging Markets Index and/or those included in the

World Bank definition of developing economies as updated from time to time.

Investment objective from 29 November 2019

The fund aims to provide a higher total return (the combination ofcapital growth and income), net of the ongoing charge figure, than thatof the MSCI Emerging Markets Index over any five-year period.

Investment policy from 29 November 2019

At least 80% of the fund is invested directly in equity securities andequity-related securities of companies across any sector and marketcapitalisation that are incorporated, domiciled or do most of theirbusiness in emerging market countries.

The fund may also invest in other transferable securities directly andvia collective investment schemes (including funds managed by M&G).

The fund may also hold cash and near cash for liquidity purposes.

Derivatives may be used for efficient portfolio management andhedging.

Investment review

6

Fund information

5

As at 3 February 2020, for the year ended 31 January 2020

Performance against objective

Between 1 February 2019 (the start of the review period) and 3 February 2020, all share classes of the M&G Global EmergingMarkets Fund produced a small positive total return (the combinationof income and growth of capital).*

The fund’s returns were behind its benchmark, the MSCI EmergingMarkets Index, which returned 4.6% over the 12-month period.

Over the longer term of five years, the fund has delivered healthypositive returns in all of its share classes. However, as these are behindthe returns from the benchmark (which was 7.7% p.a.), the fund hasfailed to meet its objective.

* For the performance of each share class, please refer to the ‘Long-term

performance by share class’ table in the ‘Fund performance’ section of the Annual

Long Report and audited Financial Statements for M&G Investment Funds (7).

To give an indication of the performance of the fund, the following tableshows the compound rate of return, per annum, over the period forSterling Class ‘A’ (Accumulation) shares. Calculated on a price to pricebasis with income reinvested.

Long-term performance

One Three Five Since year years years launch 01.02.19 03.02.17 03.02.15 % [a] % p.a. % p.a. % p.a.

Sterling [b] Class ‘A’ +0.3 +3.0 +6.5 +10.2 [c]

[a] Absolute basis.

[b] Price to price with income reinvested.

[c] 5 February 2009, the launch date of the fund.

Please note past performance is not a guide to future performanceand the value of investments, and the income from them, will fluctuate.This will cause the fund price to fall as well as rise and you may notget back the original amount you invested.

Risk profile

The fund invests mainly in company shares issued by companieslocated in emerging markets. It is, therefore, subject to the pricevolatility of the global stockmarket and the performance of individualissuers. The fund is also subject to fluctuations in currencyexchange rates.

The fund’s focus is on emerging markets, and hence it may be morevolatile compared to a fund that invests mainly in the securities ofcompanies in developed countries. The reasons for this greatervolatility include: the financial infrastructure in emerging markets istypically less mature, the regulatory systems and disclosure standardsare less developed and adverse market and political circumstancesare more likely to occur in these markets.

Portfolio diversification is key in managing liquidity and default risks aswell as reducing market risk. The fund’s risks are measured andmanaged as an integral part of the investment process.

Please note that the risk management policies are set out in full in thefinancial statements and notes sections of the Annual Long Reportand audited Financial Statements of M&G Investment Funds (7).

The following table shows the risk number associated with the fundand is based on Sterling Class ‘A’ shares.

The above number:

• is based on the rate at which the value of the fund has moved up and down in the

past and is based on historical data so may not be a reliable indicator of the future

risk profile of the fund.

• is not guaranteed and may change over time and the lowest risk number does not

mean risk free.

• has not changed during this period.

Low risk High risk

Typically lower rewards Typically higher rewards

1 2 3 4 5 6 7

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Investment review

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At the sector level, information technology was the standout performer,supported by an improving outlook for the sector. Consumerdiscretionary stocks also outperformed.

In contrast, materials fell, dragged down by worries about the impactof coronavirus on future demand for commodities. Financials andindustrials underperformed as well.

Against this background, the fund made a modest gain, but lagged thebenchmark, with weakness among our energy and financial stocksholding back relative performance.

UK-listed oil producer Tullow Oil was a notable detractor as thecompany’s share price plunged following a series of issues includingdisappointing exploration results, lower output forecasts caused byoperational problems in its major oil field in Ghana and the resignationof the chief executive. Given these difficulties and the company’s high levels of debt, we lost confidence in the business and sold ourentire holding.

Our large allocation to financials also proved costly as worries aboutthe health of the global economy weighed heavily on financial stocksduring the period. In South Korea, our holdings in lenders HanaFinancial and Shinhan Financial declined, while Absa, a South Africanfinancial group, and Banco Bradesco, a Brazilian bank, were amongthe laggards too.

Our holding in Mexican conglomerate Alfa was the biggest singledetractor. Mexico’s stockmarket has been under pressure lately amidconcerns about the government’s economic policies and lacklustreeconomic growth. Shares in Alfa, which has automotive, foodpackaging and energy businesses, retreated when the companyreported a steep fall in quarterly profits and revenues.

Chinese internet search company Baidu was another detractor. Thecompany’s shares declined after it reported its first quarterly loss sincebecoming public in 2005. Investors were also disappointed by thewarning that a weak economic environment and tighter advertisingregulations could have a negative impact on performance.

In addition, not holding any shares in large-index constituent Alibabahurt relative returns as the Chinese e-commerce firm’s share pricejumped after its secondary listing in Hong Kong.

Investment performance

There was plenty for investors to worry about during the review period:the protracted trade war between the US and China, slowing globaleconomic growth, geopolitical tensions, social unrest, and theoutbreak of the coronavirus in China. Despite this turbulent backdrop,share prices of emerging market companies (equities) rose in the 12 months. However, they failed to keep up with developed marketequities, particularly those in the US, where stockmarkets climbed to record highs.

The US-China tariff battle was arguably the biggest influence onmarkets as investors reacted to each twist and turn in the year-longdispute. In May and August, concerns about escalating trade tensionsand a global economic recession triggered share price falls. Towardsthe end of the period, equities rallied as the world’s two largesteconomies reached an interim trade deal.

Investor confidence was also lifted by the efforts of policymakersaround the world to counter slowing economic activity. The US FederalReserve (Fed) made a dramatic change of direction and cut interestrates three times in 2019. Central banks across emerging marketsfollowed the Fed’s lead and lowered borrowing costs to support theireconomies. Policymakers in Brazil, India, Mexico, South Korea andTurkey were among those that cut interest rates, in some cases to thelowest ever level.

At the end of the period, the optimistic mood was punctured by thecoronavirus and concerns about its impact on global economicgrowth. Although share prices retreated, they ended the period inpositive territory.

There was a wide dispersion of performance between differentmarkets. Russia’s stockmarket was one of the leading performers,supported by rising oil prices. The country is also considered to berelatively insulated from US-China trade tensions, given its limitedreliance on exports.

Taiwan’s stockmarket was buoyed by robust performance frominformation technology stocks. Share prices in Egypt and Greece also rallied.

On the other hand, Argentina’s stockmarket declined when the left-wing opposition won the presidential election, while anti-inequalityprotests weighed on Chile’s stockmarket. South Africa’s stockmarketlagged amid concerns about the country’s economic outlook andpower shortages.

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Investment review

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In Taiwan, the stakes in Casetek, a manufacturer of casings for tablets,and financial services firm Cathay Financial were sold as we sawbetter opportunities elsewhere. Oil company Ophir Energy left theportfolio following a takeover bid.

On the other hand, we invested in three new Chinese stocks. The firstwas Ping An Insurance (Group) Company of China, a Chinesepersonal financial services provider that we believe is well placed tobenefit from rising demand for insurance as wealth increases.

We also bought shares in Nine Dragons Paper, the largest paper andpackaging firm in China. The stock has been hurt by concerns aboutfalling packaging prices, trade tariffs and the weakeningmacroeconomic backdrop. However, we believe the company haspotential to increase its market share and is attractively valued.

China Mobile, the largest Chinese telecommunications firm, alsojoined the portfolio. Following a period of intense price competition,we believe the outlook for the Chinese telecoms market is improving.We also think China Mobile is well positioned to benefit from thedevelopment of 5G networks. The company is in a strong financialposition and has an attractive dividend yield, in our view.

In Pakistan, we started positions in two financial companies, HabibBank and United Bank. In our view, these banks are operating in astructurally attractive market that has considerable growth potential.

These purchases increased our allocation in financials, which iscurrently the largest above-index weighting position in the portfolio. At present, we see value in the economically sensitive parts of themarket – we also have relatively large weightings in industrials andinformation technology.

Another newcomer was Dubai-based ports operator DP World. Themarket is concerned about a potential decline in container shippingvolumes, but in our view, the company is a quality operator and recentacquisitions should contribute to revenue growth.

In addition, we continued to build our stakes in some recentpurchases – notably Russian food retailer X5 and Silicon MotionTechnology, a leading developer of controllers for NAND memory usedin smartphones and PCs.

These detractors outweighed significant gains from some of ourBrazilian and Chinese stocks. In China, our shares in plastic pipemanufacturer China Lesso and sportswear retailer Li Ning more thandoubled in the period (in sterling terms).

We classified Li Ning as an ‘internal change’ company as it wasimplementing changes to improve its performance. These includedclosing down or reforming unprofitable stores, improving its productrange and increasing e-commerce activities. As this turnaroundstrategy started to deliver positive results such as higher profits,investors became enthusiastic about Li Ning’s prospects and thestock rallied.

Investors were also impressed by China Lesso’s robust results. Thestock has been supported too by optimism about its building materialsand interior decoration business and the potential to benefit from urbaninfrastructure projects and construction of natural gas pipelines.

In Brazil, our holdings in Cosan, a conglomerate with interests in fueldistribution and sugar production, and housebuilder Cyrela BrazilRealty were among the leading contributors. Brazil’s stockmarketclimbed to record levels during the period, as investor sentiment towardthe country was lifted by improving economic data, lower interest ratesand progress with reform of Brazil’s costly pension system.

Meanwhile, in Russia, our holdings in oil company Lukoil and financial group Sberbank added value as the country’s stockmarketoutperformed.

Investment activities

During the review period, we sold a number of holdings that weconsidered to be fully valued after good share price performance andreinvested the proceeds in new opportunities. We also disposed ofsome smaller positions in companies where we no longer hadconfidence in their prospects.

In Brazil, we sold our entire stakes in sugar producer Cosan, softwarecompany TOTVS and housebuilders Cyrela Brazil Realty and MRVEngenharia following impressive share price gains. As a result of thesesales, we now have a below-index weight in Brazil.

In China, we closed our position in sportswear retailer Li Ning after thecompany’s transformation strategy started to deliver results and theshare price more than doubled. We also sold all our shares in Chinesesolar glass firm Xinyi Solar, after significant share price appreciation.

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Investment review

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Portfolio statement

as at 31 January 2020 2020 2019Holding $’000 % %

EQUITIES 838,348 98.67 97.97 Brazil 45,872 5.40 11.07 2,685,453 Banco Bradesco Preference Shares 21,074 2.48

3,964,876 CCR 17,489 2.06

2,712,028 Cogna Educacao 7,309 0.86

Canada 6,981 0.82 1.02 839,996 First Quantum Minerals 6,981 0.82

China 175,450 20.65 21.64 [a]

149,744 Baidu ADR 18,817 2.21

20,270,000 China Construction Bank 15,525 1.83

14,175,300 China Lesso 18,393 2.16

20,750,000 China Petroleum & Chemical 11,031 1.30

10,262,000 China Railway Signal & Communication 4,967 0.58

12,225,000 CNOOC 18,664 2.20

43,211,000 Greatview Aseptic Packaging 17,132 2.02

1,081,185 HollySys Automation Technologies 16,542 1.95

16,260,500 PICC Property & Casualty 17,562 2.07

1,172,000 Ping An Insurance Group Company of China 13,382 1.57

705,647 Trip.com ADR 23,435 2.76

Hong Kong 54,525 6.42 6.58 1,053,200 AIA 10,541 1.24

528,000 China Mobile 4,363 0.51

18,219,000 Far East Horizon 16,182 1.90

33,100,652 First Pacific 10,397 1.23

14,766,000 Lenovo 9,751 1.15

3,450,000 Nine Dragons Paper 3,291 0.39

India 19,165 2.25 1.62 912,217 ICICI Bank 6,721 0.79

7,875,798 NTPC 12,444 1.46

Indonesia 20,155 2.37 1.68 36,573,500 Bank Mandiri 20,155 2.37

Mexico 74,775 8.80 5.53 21,361,259 Alfa 16,128 1.90

992,887 Banco Santander Mexico ADR 7,179 0.85

7,680,249 Fibra Uno Administracion REIT 12,755 1.50

3,495,324 Grupo Financiero Banorte 21,515 2.53

6,991,754 Orbia Advance 17,198 2.02

Pakistan 9,849 1.16 0.00 3,217,479 Habib Bank 3,248 0.38

6,038,638 United Bank 6,601 0.78

Outlook

After a period of reasonable gains from emerging market equities, webelieve the prospects for the asset class remain promising. At anaggregate level, we think they look attractively valued, particularlycompared to developed markets such as the US, which climbed tonew record highs in 2019 and trade at expensive valuations.

Investors’ recent caution about emerging market equities has been inlarge part related to the trade tensions between the US and China.However, now that the two nations have reached an initial tradeagreement, investors might be encouraged to take a closer look atdeveloping economies which could benefit from a more positiveeconomic backdrop.

We believe that share prices ultimately reflect corporate performance;encouragingly, there are signs that the performance of emergingmarket corporates is improving. For the past few years, earnings growthat emerging market companies has lagged that of developed marketfirms, especially US companies. We think this helps explain whyemerging markets have underperformed developed markets lately.

However, earnings at emerging market companies are expected topick up in the coming year and exceed those of developed marketcompanies. If correct, we think this trend could help emerging marketcompanies outperform.

Within the asset class, we believe there remains a strong case for a‘value’ approach. In our view, the lofty valuations of high-quality‘growth’ stocks are not justified by their underlying performance –investors have been paying very high prices for stocks that could easilyfail to deliver, in our view.

As a result, we think there are some very attractive opportunities to befound among the cheaper stocks in the market. We believe there areplenty of firms which are delivering good operational performance buthave arguably been overlooked because of macroeconomic concerns.

We will continue to apply our disciplined stockpicking approach to findout-of-favour companies that we believe are being underappreciatedby the market.

Michael BourkeFund manager

An employee of M&G FA Limited (formerly M&G Limited) which is an associate ofM&G Securities Limited.

Please note that the views expressed in this Report should not be taken as arecommendation or advice on how the fund or any holding mentioned in the Reportis likely to perform. If you wish to obtain financial advice as to whether an investmentis suitable for your needs, you should consult a Financial Adviser.

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Investment review

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CASH EQUIVALENTS 11,996 1.41 0.45 ‘AAA’ rated money market funds [b] 11,996 1.41 0.45 11,996,000 Northern Trust Global Fund - US dollar 11,996 1.41

SHARE CLASS HEDGING 1 0.00 0.00 Forward currency contracts for share class hedging 1 0.00 0.00 £171,561 Bought for $224,671 (expires 12.02.20) 1 0.00

£(470)Sold for $617 (expires 12.02.20) 0 0.00

Total portfolio 850,345 100.08 98.42Net other assets / (liabilities) (644) (0.08) 1.58

Net assets attributable to shareholders 849,701 100.00 100.00

All securities are on an official stock exchange listing except where referenced.

[a] The comparative sector weightings have been re-analysed to reflect changes to

the sector classifications.

[b] Uncommitted surplus cash is placed into ‘AAA’ rated money market funds with the

aim of reducing counterparty risk.

Philippines 11,352 1.34 0.66 502,373 GT Capital 6,671 0.79 74,112,000 Metro Pacific Investments 4,681 0.55

Russia 67,350 7.93 5.99 4,707,433 Etalon GDR 10,851 1.28 182,537 Lukoil ADR 18,884 2.22 1,829,064 Sberbank of Russia ADR 29,603 3.49 214,979 X5 Retail GDR 8,012 0.94

Singapore 0 0.00 0.86 1,027,756 Ezion Warrants 24/04/2020 0 0.00 24,880,366 Ezion Warrants 16/04/2023 0 0.00

South Africa 43,480 5.12 6.07 1,316,313 Absa 12,186 1.44 1,277,737 Barloworld 8,010 0.94 1,947,329 Imperial Logistics 6,660 0.78 840,874 Motus 4,597 0.54 2,392,142 Sanlam 12,027 1.42

South Korea 127,341 14.99 14.66 633,395 Hana Financial 17,644 2.08 45,852 Hyundai Motor 4,809 0.57 1,360,956 Samsung Electronics 64,402 7.58 51,535 Samsung Fire & Marine Insurance 9,124 1.07 1,057,271 Samsung Heavy Industries 5,899 0.69 775,176 Shinhan Financial 25,463 3.00

Taiwan 105,841 12.46 11.78 1,324,000 Catcher Technology 10,694 1.26 6,030,982 Chicony Electronics 17,149 2.02 3,821,535 Delta Electronics 18,090 2.13 405,000 eMemory Technology 4,351 0.51 358,566 Silicon Motion Technology ADR 16,964 2.00 3,141,000 Taiwan Semiconductor Manufacturing 33,272 3.91 5,976,000 TECO Electric & Machinery 5,321 0.63

Turkey 21,950 2.58 2.84 10,042,034 Hacı Ömer Sabancı 16,531 1.94 1,649,923 Koç 5,419 0.64

United Arab Emirates 11,727 1.38 0.00 837,671 DP World 11,727 1.38

United Kingdom 25,756 3.03 4.09 2,284,411 Petrofac 10,600 1.25 1,790,739 Standard Chartered 15,156 1.78

United States 16,779 1.97 1.88 [a]

3,090,012 Kosmos Energy 16,779 1.97

Portfolio of investments 838,348 98.67 97.97

Portfolio statement (continued)

as at 31 January 2020 2020 2019Holding $’000 % %

Portfolio statement (continued)

as at 31 January 2020 2020 2019Holding $’000 % %

Investment review

15

Financial highlightsFund performance

16

Please note past performance is not a guide to future performanceand the value of investments, and the income from them, will fluctuate.This will cause the fund price to fall as well as rise and you may notget back the original amount you invested.

The following chart and tables reflect the key financial information ofa representative share class, Sterling Class ‘A’ (Accumulation) shares.As different share classes have different attributes, for examplecharging structures and minimum investments, please be aware thattheir performance may be different. For more information on thedifferent share classes in this fund please refer to the Prospectus forM&G Investment Funds (7), which is available free of charge eitherfrom our website at www.mandg.co.uk/prospectuses or by calling M&G Customer Relations.

Fund level performance

Fund net asset value

2020 2019 2018as at 31 January $’000 $’000 $’000

Fund net asset value (NAV) 849,701 1,055,650 2,979,840

Performance since launch

To give an indication of how the fund has performed since launch, thechart below shows total return of Sterling Class ‘A’ (Accumulation)shares.

120

110

100

140

200

180

160

350

230

260

300

902009 2010 2011 2012 2013 2014 2015 2016 2018 20192017 2020

February 2009 = 100, plotted monthly Chart date 3 February 2020

MSCI Emerging Markets Index*

* Income reinvested Source: Morningstar, Inc. and M&G

Sterling Class ‘A’ (Accumulation) shares*

Top ten portfolio transactions

for the year to 31 January 2020

Largest purchases $’000

Orbia Advance 15,687

Ping An Insurance Group Company of China 13,912

DP World 12,553

Silicon Motion Technology ADR 10,096

Greatview Aseptic Packaging 8,623

ICICI Bank 8,271

Metro Pacific Investments 6,618

Alfa 6,272

United Bank 6,134

NTPC 6,077

Other purchases 77,826

Total purchases 172,069

Largest sales $’000

Cosan 27,873

Li-Ning 24,623

Xinyi Solar 24,597

China Lesso 21,832

Cyrela Brazil Realty 20,288

Taiwan Semiconductor Manufacturing 20,173

Samsung Electronics 13,277

MRV Engenharia 12,893

TOTVS 11,369

Axis Bank 8,994

Other sales 187,845

Total sales 373,764

Purchases and sales exclude the cost and proceeds of ‘AAA’ rated money market

funds.

Financial highlightsOperating charges and portfolio transaction costs

18

Financial highlightsFund performance

17

We explain below the payments made to meet the ongoing costs ofinvesting and managing the fund, comprising operating charges andportfolio transaction costs.

Operating charges

Operating charges include payments made to M&G and to providersindependent of M&G:

• Annual charge:Charge paid to M&G covering the annual cost ofM&G managing and administering the fund and the costs of thirdparties providing services to the fund. From 1 August 2019, thischarge rolls all costs that make up the operating charges into oneannual charge.

For every £1 billion of a fund’s net asset value, a discount of0.02% will be applied to that fund’s annual charge (up to amaximum of 0.12%).

• Extraordinary legal and tax expenses: Costs that specificallyrelate to legal or tax claims that are both exceptional andunforeseeable. Such expenses are uncommon, and would not beexpected in most years. Although they result in a short-term costto the fund, generally they can deliver longer term benefits forinvestors.

• Investment management: Charge paid to M&G for investmentmanagement of the fund. From 1 August 2019 this charge formspart of the annual charge.

• Administration: Charge paid for administration services inaddition to investment management – any surplus from this chargewill be retained by M&G. From 1 August 2019 this charge is rolledinto the annual charge.

• Share class hedging: Charge paid to M&G for currency hedgingservices to minimise exchange rate risk for the share class. From1 August 2019 this charge is rolled into the annual charge.

• Oversight and other independent services: Charges paid toproviders independent of M&G for services which includedepositary, custody and audit. From 1 August 2019 these chargeswill be paid by M&G and rolled into the annual charge.

• Ongoing charges from underlying funds: Ongoing charges onholdings in underlying funds that are not rebated. From 1 August2019 charges from underlying funds (excluding Investment TrustsCompanies and Real Estate Investment Trusts) will be rebated.

To give an indication of how the fund has performed during the periodthe table below shows the performance of Sterling Class ‘A’(Accumulation) shares.

All ‘Performance and charges’ percentages represent an annual rateexcept for the ‘Return after operating charges’ which is calculated asa percentage of the opening net asset value per share (NAV). ‘Dilutionadjustments’ are only in respect of direct portfolio transaction costs.

Historic yields for the current year are calculated as at 14 February 2020.

Sterling Class ‘A’ Accumulation share performanceThe share class was launched on 5 February 2009.

for the year to 31 January 2020 2019 2018Change in NAV per share UK p UK p UK p

Opening NAV 288.15 299.87 263.97

Return before operating charges and after directportfolio transaction costs 12.09 (6.86) 40.80

Operating charges (4.88) (4.86) (4.90)

Return after operating charges 7.21 (11.72) 35.90

Distributions (5.80) (3.78) (1.56)

Retained distributions 5.80 3.78 1.56

Closing NAV 295.36 288.15 299.87

Direct portfolio transaction costs UK p UK p UK p

Costs before dilution adjustments 0.30 0.33 0.30

Dilution adjustments [a] (0.14) (0.29) (0.22)

Total direct portfolio transaction costs 0.16 0.04 0.08

Performance and charges % % %

Direct portfolio transaction costs [b] 0.05 0.01 0.03

Operating charges [c] 1.62 1.74 1.74

Return after operating charges +2.50 -3.91 +13.60

Historic yield 1.71 1.30 0.41

Effect on yield of charges offset against capital 0.00 0.00 0.00

Other information

Closing NAV ($’000) 294,224 361,952 415,364

Closing NAV percentage of total fund NAV (%) 34.63 34.29 13.94

Number of shares 75,890,033 95,673,173 97,816,094

Highest share price (UK p) 321.52 299.04 305.89

Lowest share price (UK p) 281.59 255.70 262.63

[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 thecomparative and current year figures.

20

Financial highlightsOperating charges and portfolio transaction costs

19

These charges do not include portfolio transaction costs or any entryand exit charges (also known as initial and redemption charges). Thecharging structures of share classes may differ, and therefore theoperating charges and performance fees may differ.

Once the annual charge has been operational for twelve months,operating charges will be in line with the ongoing charges shown inthe Key Investor Information Document, other than where there havebeen extraordinary legal or tax expenses, or an estimate has beenused for the ongoing charge because a material change has madethe operating charges unreliable as an estimate of future charges.

Portfolio transaction costs

Portfolio transaction costs are incurred by funds when buying andselling investments. These costs vary depending on the types ofinvestment, their market capitalisation, country of exchange andmethod of execution. They are made up of direct and indirect portfoliotransaction costs:

• Direct portfolio transaction costs: Broker execution commissionand taxes.

• Indirect portfolio transaction costs: ‘Dealing spread’ – thedifference between the buying and selling prices of the fund’sinvestments; some types of investment, such as fixed interestsecurities, have no direct transaction costs and only the dealingspread is paid.

Investments are bought or sold by a fund when changes are made tothe investment portfolio and in response to net flows of money into orout of the fund from investors buying and selling shares in the fund.

To protect existing investors, portfolio transaction costs incurred as aresult of investors buying and selling shares in the fund are recoveredfrom those investors through a ‘dilution adjustment’ to the price theypay or receive. The table below shows direct portfolio transaction costspaid by the fund before and after that part of the dilution adjustmentrelating to direct portfolio transaction costs. To give an indication of theindirect portfolio dealing costs the table also shows the averageportfolio dealing spread.

Further information on this process is in the Prospectus, which isavailable free of charge on request either from our website atwww.mandg.co.uk/prospectuses or by calling M&G Customer Relations.

Portfolio transaction costs

for the year to 31 January 2020 2019 2018 Average [a]

Direct portfolio transaction costs [b] % % % %

Broker commission 0.04 0.04 0.05 0.04

Taxes 0.06 0.06 0.06 0.06

Costs before dilution adjustments 0.10 0.10 0.11 0.10

Dilution adjustments [c] (0.05) (0.09) (0.08) (0.07)

Total direct portfolio transaction costs 0.05 0.01 0.03 0.03

as at 31 January 2020 2019 2018 Average [a]

Indirect portfolio transaction costs % % % %

Average portfolio dealing spread 0.24 0.22 0.17 0.21

[a] Average of first three columns.

[b] As a percentage of average net asset value.

[c] In respect of direct portfolio transaction costs. Please see the section above this

table for an explanation of dilution adjustments.

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M&G Global Emerging Markets Fund

a sub-fund of M&G Investment Funds (7)

Annual Short Report January 2020For the year ended 31 January 2020