M&G Global Dividend Fund

May 2013

Kotaro Miyata, Investment Specialist

2

Agenda

• Dividend investing – our philosophy

• Understanding potential headwinds

• Putting the theory into practice

3

Dividend investing – our philosophy

Source: M&G, 30 April 2013

Div

ide

nd

(p

)

The power of long-term compounding

Div

ide

nd

(c

en

ts)

0

5

10

15

20

25

30

Dividend (stock yielding 6%, no growth) Dividend (stock yielding 4%, 10% growth)

Focus on dividend growth, not yield

4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

100

200

300

400

500

600

700

800

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

CWS Dividend McDonald's Dividend CWS Capital Return McDonald's Capital Return

Div

ide

nd

Pa

ym

en

ts (U

SD

) C

ap

ita

l re

turn

reb

ase

d t

o 1

00

(U

SD

)

Source: Datastream as at 31 December 2012

Dividend Yield

Dec 2002

California Water

Services Group (CWS)

4.7%

McDonald’s 1.5%

Dividend Payments and Capital Return since 2002, Rebased to 2002 figures

Quicker the growth, quicker the payback on your investment

Dividend investing – our philosophy Growth vs yield – an illustration

5

• Long-term dividend growth

requires disciplined growth in the

business

• Rising dividends create culture

of discipline

• Dividends shouldn’t be an

afterthought

– An integral part of good

company management

Dividend investing – our philosophy

Source: Mergent’s Dividend Achievers, 31 March 2013. US companies with a 25-year track record of consecutive dividend growth

US

dividend achievers

Capital discipline

6

Re

turn

(%

)

-0.2 %pa

1.8 %pa

8.2 %pa

11.4 %pa

-5.0

0.0

5.0

10.0

15.0

S&P500 CapitalReturn

S&P500 Total Return Dividend AchieversCapital Return

Dividend AchieversTotal Return

Dividend investing – our philosophy

Source: Mergent’s Dividend Achievers, 30 November 2012; Datastream, 31 December 2012. US companies with a 25-year track record of consecutive dividend growth

US annualised return: Capital growth vs. total return in USD (Dec 1999 – Dec 2012)

Dividends and share prices go hand in hand

Dividends and growth are not mutually exclusive

7

Agenda

• Dividend investing – our philosophy

• Understanding potential headwinds

• Putting the theory into practice

8

Understanding potential headwinds

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

MSCI AC World MSCI World High Dividend Yield

Re

turn

(%

)

Source: Datastream, 31 December 2012

Annual return (USD): MSCI World High Dividend Yield Index vs MSCI AC World Index

High yield strategies have a defensive bias, in dollars

9

Understanding potential headwinds

0

5

10

15

20

25

30

35

40

MSCI AC World MSCI World High Dividend Yield

Re

turn

(%

)

Source: Datastream, Bloomberg, 31 December 2012

Annual return (USD): MSCI World High Dividend Yield Index vs MSCI AC World Index

High yield strategies struggle to keep up in rising markets, in dollars

10

Understanding potential headwinds

The importance of having a balance

Mitigating the defensive bias by picking stocks from three distinct categories

Sources of

dividends

Quality

Assets

Rapid Growth

Company characteristics

Structural growth driven by geography

or product line

Asset-backed cyclical companies

Disciplined companies with reliable

growth

Typical fund

weighting

Source: M&G, 30 April 2013

50%-60%

20%-30%

10%-20%

11

Understanding potential headwinds Combining low beta with high beta

Source: Datastream, 30 April 2012. Rebased at 18 July 2008

0

50

100

150

200

250

Ju

l 08

Se

p 0

8

No

v 0

8

Ja

n 0

9

Mar

09

May 0

9

Jul 09

Se

p 0

9

No

v 0

9

Ja

n 1

0

Ma

r 1

0

Ma

y 1

0

Ju

l 10

Se

p 1

0

No

v 1

0

Ja

n 1

1

Ma

r 1

1

Ma

y 1

1

Ju

l 11

Se

p 1

1

No

v 1

1

Ja

n 1

2

Ma

r 1

2

Ma

y 1

2

Ju

l 12

Se

p 1

2

No

v 1

2

Ja

n 1

3

Ma

r 1

3

MSCI AC World Nestle Methanex Prudential

Re

ba

se

d to

10

0

Total return (USD): July 2008 – April 2013

12

Agenda

• Dividend investing – our philosophy

• Understanding potential headwinds

• Putting the theory into practice

13

Putting the theory into practice The challenge of changing market conditions

Va

lue

ad

de

d (

%)

Attribution by source of dividends since fund launch (18.07.08)

Source: Xamin, 31 March 2013. Investment returns (gross of fees) relative to MSCI AC World Index, calculated in sterling, *Fund launched on 18 July 2008

Diversified sources of performance

-4

-2

0

2

4

6

8

10

12

2008* 2009 2010 2011 2012 2013 YTD

Quality Assets Rapid Growth

14

Putting the theory into practice

M&G Global Dividend Fund: calendar year returns (USD)

A proven track record in both rising and falling markets

-40

-30

-20

-10

0

10

20

30

40

50

MSCI AC World M&G Global Dividend Fund

Re

turn

(%

)

Source: Bloomberg, 30 April 2013. US Dollar A class shares, net income reinvested , price to price. *Fund launched on 18 July 2008

Returns (USD): M&G Global Dividend Fund vs MSCI AC World Index

A fund designed to cope with all weathers

15

Summary

• Focus on dividend growth, not yield

• Creating a balanced portfolio to outperform in different

market conditions

• Dividend investing is an excellent way to build wealth

16

Appendix

17

• Inception: July 2008

• Fund manager: Stuart Rhodes

• Fund size: $10,053 million

• Benchmark: MSCI AC World Index

• Yield objective: Yield premium to the global average

• Performance objective: Total return (income and capital growth) in excess of the MSCI AC World Index

Fund facts

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An S&P Capital IQ fund grading represents an opinion only and should not be relied on when making an investment decision. Past performance is not indicative of future results. Currency exchange rates may affect the value of investments. Copyright

© 2012 by McGraw-Hill international (UK) Limited (S&P), a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved.

Source: M&G, 30 April 2013. Ratings as at 31 January 2013 and should not be taken as recommendation

M&G Global Dividend Fund

18

Performance in dollars YTD

%

1 year

%

3 years

% (pa)

Since launch

(18.07.08) %

p.a.

M&G Global Dividend Fund 9.6 13.3 11.3 7.4

MSCI AC World Index 6.6 11.2 8.4 3.8

Global Large-Cap Value Equity sector 7.1 10.4 6.2 1.4

M&G Global Dividend Fund Performance in dollars

Source: M&G, Morningstar, 31 March 2013. $US A class shares (Pan European database), net income reinvested, price to price

Top quartile in sector since launch

19

An efficient and disciplined investment process M&G Global Dividend Fund

Identifying stocks we

would like to own at

some point

• Long-term dividend track

record

• Long-term growth

prospects

Investable

universe

~200 stocks

Screening

Eliminating stocks from

the global universe of

15,000 stocks

• Focus on dividend-paying

companies

• Focus on stocks with

sufficient liquidity (market

cap >$1 billion)

~4,000 stocks

Portfolio

construction

Constructing a portfolio

that can outperform in

all market conditions

• Picking stocks from three

sources of dividends

• Position size determined

by conviction

Final portfolio ~50 stocks

20

Three sources of dividends

Source: M&G, 31 March 2013

Fu

nd

we

igh

tin

g

M&G Global Dividend Fund

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Quality

Assets

Rapid growth

Sale at right price

Cash

21

Regional breakdown

Source: M&G, 31 March 2013

M&G Global Dividend Fund

Fund

%

MSCI AC World Index

%

Relative

%

US & Canada 48.4 51.2 -2.8

Europe 26.5 15.3 11.1

UK 13.6 8.0 5.6

Japan 0.0 7.8 -7.8

Asia ex Japan 5.5 9.2 -3.7

Australia/NZ 4.2 3.4 0.8

Latin America 0.7 2.7 -2.0

EMEA 0.0 2.3 -2.3

Cash 1.1 0.0 1.1

22

Fund

%*

MSCI AC World

Index %

Relative

%

Materials 13.0 6.5 6.5

Financials 23.3 21.7 1.6

Health Care 12.4 10.0 2.4

Consumer Staples 11.9 10.8 1.1

Energy 10.9 10.0 0.9

Industrials 9.0 10.2 -1.2

Utilities 2.1 3.6 -1.5

Consumer Discretionary 8.8 11.0 -2.2

Telecommunications 0.0 4.4 -4.4

Information Technology 7.6 11.8 -5.4

Cash and near cash 1.0 0.0 1.0

Sector breakdown

Source: M&G, 30 April 2013. *Preliminary data

M&G Global Dividend Fund

23

Top 10 holdings M&G Global Dividend Fund

Source: M&G, 30 April 2013 *preliminary data

Stock Fund %*

Sanofi 3.5

Microsoft 3.4

Occidental Petroleum 3.2

Methanex 3.1

BAT 3.0

Johnson & Johnson 3.0

Roche Genusscheine 3.0

Novartis 2.9

DSM 2.9

UPS 2.9

24

M&G Global Dividend Fund

• Stuart joined M&G in 2004 as a global equity analyst working closely with Aled Smith on US equities

• He was appointed manager of the M&G Global Dividend Fund upon its launch in July 2008

• Stuart graduated from Bath University with a degree in business administration. He is a CFA

charterholder

Biographies

• Simon joined Prudential Portfolio Managers in 1997 and following Prudential’s acquisition of M&G in

1999 became a fund manager specialising in UK smaller companies

• After more than 10 years investing in UK smaller companies, Simon became the dedicated analyst for

the M&G Global Dividend Fund in August 2010; he was appointed deputy fund manager in April 2011

• Simon graduated from Durham University with a BA in economics. He is a CFA charterholder

• Kotaro joined M&G in October 2006 as an investment specialist and is responsible for the M&G

Global Dividend Fund, M&G Pan European Dividend Fund and M&G European Strategic Value Fund

• He was previously a fund manager at Invesco Asset Management where he was responsible for UK

and European equities

• Kotaro graduated from Oxford University with a degree in classics and holds the Securities Institute

Diploma

Stuart Rhodes, Fund Manager

Simon Bailey, Deputy Fund Manager

Kotaro Miyata, Investment Specialist

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