M&G Income Allocation Fund Webcast

March 2015

Neil Brown, Director of Global Retail Sales Management

2

Fund facts

Source: M&G, 28 February 2015.*ISIN is for euro accumulation A share class

M&G Income Allocation Fund

Launch: November 2013

Fund manager: Steven Andrew, since launch

Deputy manager: Juan Nevado

Fund size: €1,108 million

Sector: Morningstar EUR Moderate Allocation Global Sector

ISIN: GB00BBCR3283*

3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Performance and distribution since launchM&G Income Allocation Fund

Total return* and capital-only performance

+21.9%

*The combination of income and growth of capital

Distrib

utio

n in

cen

ts pe

r sha

re

+17.0%

Distribution in cents per share (rhs)

Source: Morningstar Inc., 28 February 2015. Euro A class shares, price to price. *Total return: accumulation shares, net income reinvested. Capital-only: income shares, capital-only, income distributed and not reinvested. Both series are rebased to 100 as at 7 November 2013. Source of distributions: M&G, euro A Inc share class

Nov-1

3

Dec-1

3

Jan-

14

Feb-1

4

Mar

-14

Apr-1

4

May

-14

Jun-

14

Jul-1

4

Aug-1

4

Sep-1

4

Oct-14

Nov-1

4

Dec-1

4

Jan-

15

Feb-1

592

96

100

104

108

112

116

120

124

Total return (lhs) Capital-only (lhs)

Re

ba

sed

to 1

00

4

Delivering a growing income streamPast performance of a UK-based fund with a similar investment approach

Estimated Delivered

Average income yield* (annual) 4% 4.3%**

Annualised capital gain† 2-4% 5.3%

Annualised volatility 4-10% 6.0%‡

*4% is an estimated gross yield and represents the fund’s total distribution over 12 months as a percentage of the average share price before UK tax. Please note that this is not guaranteed and may be revised in the future. The ongoing charge is taken from investments held in the fund’s portfolio and not from the income these investments produce. Please note the fund’s delivered average income yield differs from the fund’s historic yield, which is 3.34% as at 28 February 2015 (sterling A class shares). The average income yield represents the fund’s total distribution over 12 months as a percentage of the average share price before UK tax. The historic yield reflects distributions declared over the past 12 months as a percentage of the mid-market price, as at the date shown. Both the delivered average income yield and historic yield do not include any preliminary charges and investors may be subject to tax on their distributions.

Source: M&G, Morningstar Inc., 28 February 2015. **Figure as at 9 March 2015. †Capital gain calculated as the performance of the income share class. ‡Annualised volatility calculated from 1 December 2010

This UK-based fund is not available to European investors. European investors can invest in the euro share class of the M&G Income Allocation Fund. Both funds are managed by Steven Andrew. The UK fund may invest in physical property, while the European version, being UCITS, may not. The UK-based fund has a minimum exposure of 70% to sterling, while the European version has a minimum exposure of 70% to euros. These are internal guidelines and are subject to change. The past performance of the UK-based fund has been included purely to illustrate the fund manager's investment approach for an existing fund. The provision of this information should not be taken as a recommendation or advice regarding the UK-based fund. Please note the differences between the UK- based fund and the M&G Income Allocation Fund. The UK-based fund is not registered for sale or distribution outside the UK.

5

Steven AndrewBiography

• Steven joined M&G in 2005 as a member of the Portfolio Strategy & Risk team, before moving to the Multi Asset team, where he helped to formulate asset allocation strategies for M&G’s multi-asset fund range

• In November 2010, he was appointed manager of the M&G Episode Income Fund. Three years later, he became manager of the M&G Income Allocation Fund upon its launch

• Prior to joining M&G, Steven worked at F&C Asset Management, Merrill Lynch and the Bank of England

• He graduated from the University of London in 1987 with a degree in financial economics

M&G Income Allocation Fund

Steven Andrew, Fund Manager

March 2015

7

Agenda

Why multi asset for income?

Investment philosophy and market views

Fund positioning

8

Why multi-asset for income

Source: Datastream, Bloomberg, M&G, 28 February 2015

Traditional sources of income

Risks of seeking income from a single asset class are low returns and high volatility

Asset class yields

1999

1999

2000

2000

2001

2001

2002

2003

2003

2004

2004

2005

2006

2006

2007

2007

2008

2008

2009

2010

2010

2011

2011

2012

2013

2013

2014

2014

0%

1%

2%

3%

4%

5%

6%

7%

8%

European corporate bonds German 10-year bundsMSCI World Index (dividend yield) Cash (euribor)

9

Why multi-asset for incomeCombining the benefits of different sources of income

Risk of capital volatility and loss

Static coupon

Potential for regularly accruing income

Bonds

−−+

Risk of capital volatility and loss

Dividend uncertainty and calendar effects

Potential for growing distributions

Equity

−−+

Asset allocation aims to mitigate volatility and

offer potential to generate capital return+

Potential for regularly accruing income+Potential for growing distributions+Multi-

asset

10

Proposition: income and capital growth

• Designed to use the flexibility of multi-asset investing to generate:

*4% is a gross estimated yield and represents the fund’s total distribution over 12 months as a percentage of the average share price before tax. Please note that this is not guaranteed and may be revised in the future. The ongoing charge is taken from investments held in the fund’s portfolio and not from the income these investments produce. **This is approximately half the volatility of equities over the long term

M&G Income Allocation Fund

Uses a similar investment approach as a current UK fund with a 4-year track record

Income yield of 4%* pa distributed monthly

Capital growth of 2% to 4% pa over the long term

And volatility between 4% and 10% pa over the long term**

11

Delivering a growing income streamPast performance of a UK-based fund with a similar investment approach

This UK-based fund is not available to European investors. European investors can invest in the EUR share class of the M&G Income Allocation Fund. Both funds are managed by Steven Andrew. The UK fund may invest in physical property, while the European version, being UCITS, may not. The UK-based fund has a minimum exposure of 70% to GBP, while the European version has a minimum exposure of 70% to EUR. These are internal guidelines and are subject to change. The past performance of the UK-based fund has been included purely to illustrate the fund manager's investment approach for an existing fund. The provision of this information should not be taken as a recommendation or advice regarding the UK-based fund. Please note the differences between the UK- based fund and the M&G Income Allocation Fund. The UK-based fund is not registered for sale or distribution outside of the UK.

Capital performance and income distributions since launch*

Nov-1

0

Mar

-11

Jun-

11

Oct-11

Jan-

12

May

-12

Sep-1

2

Dec-1

2

Apr-1

3

Aug-1

3

Nov-1

3

Mar

-14

Jul-1

4

Oct-14

Feb-1

580

85

90

95

100

105

110

115

120

125

130

NA

V p

er

sha

re

2011 in-come

£41.96

2012 in-come£45.37

2013 in-come£47.85

Gross income distribution per £1,000 invested

This is gross of the 10% dividend tax charged to UK investors

Capital growth+24.9%

Source: M&G, Bloomberg, 28 February 2015, sterling A Income class shares, price to price.*12 November 2010. Gross income distribution is the total distribution over 12 months as a percentage of the current share price before UK tax

12

Agenda

Why multi asset for income

Investment philosophy and market views

Fund positioning

13

Building blocks of our investment strategy

Source: M&G

A robust, repeatable approach

M&G Multi Asset team

Strategic assessment

Assets prices

Fundamental analysis

Tactical assessment

Investors’ behaviour

Market volatility

Portfolio construction

Correlation analysis

Fund’s objectives

14

Valuation signals are clear

Source: Datastream, Bloomberg, 28 February 2015. Equity proxy is MSCI World; cash proxy is EURIBOR 3 months. World Government proxy is The BofA Merrill Lynch Global Government Index. All data is inflation-adjusted

Equities offer compelling earnings yield relative to fixed income

Safer assets are expensive

Dec-9

0-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Re

al y

ield

s

World equity

World government bonds

World real yields

GBP cash

15

Is Europe in recession?

Source: Bloomberg, 28 February 2015

Business confidence is improving – PMIs Italy: Consumer confidence and unemployment change

80

85

90

95

100

105

110

115

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0Consumer confidence (index, lhs)

Unemployment rate (12m %pt change, in-

verted on rhs)

Mar

-12

Aug-1

2

Dec-1

2

Apr-1

3

Sep-1

3

Jan-

14

May

-14

Sep-1

4

Feb-1

540

42

44

46

48

50

52

54

56

58

Italy Spain France EuroZone Germany

16

Q1 19

90

Q1 19

91

Q1 19

92

Q1 19

93

Q1 19

94

Q1 19

95

Q1 19

96

Q1 19

97

Q1 19

98

Q1 19

99

Q1 20

00

Q1 20

01

Q1 20

02

Q1 20

03

Q1 20

04

Q1 20

05

Q1 20

06

Q1 20

07

Q1 20

08

Q1 20

09

Q1 20

10

Q1 20

11

Q1 20

12

Q1 20

13

Q1 20

14

Q1 20

15

-100

-50

0

50

100

150

200 -4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Oil price fallingWhat are the implications for US consumers?

Oil price fall likely to boost consumption

Oil price (% yoy, inverted lhs)

Oil price and US consumer spending growth

Source: Datastream, 31 January 2015

US consumer spending(% yoy, rhs)

17

Market views

Source: M&G, February 2015

M&G Multi Asset team

Overweight equities versus underweight bond exposure

Within equities, favouring Europe vs US

Within fixed income, favouring credit vs mainstream government bonds

US dollar exposure still attractive

18

Agenda

Why multi asset for income?

Investment philosophy and market views

Fund positioning

19

0%

5%

10%

15%

20%

25%

30%

35%

40%

Current portfolioM&G Income Allocation Fund

Source: M&G, 28 February 2015. *This is mainly diversified securities such as real estate, convertible bonds and preferred shares

Allocation ranges NeutralityEquity 10-50% 30%Fixed income 40-80% 60%Other 0-20% 10%Currency Min. 70% in EUR

Neutrality Current allocationRange

Global equity Global fixed interest

0%

10%

20%

30%

40%

50%

60%

Other*

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20

Fund positioningM&G Income Allocation Fund

Source: M&G, 28 February 2015

Equity exposure, 47.4%

Europe UK United States Asia ex Japan Canada Japan Emerging markets

0%

3%

6%

9%

12%

15%

18%

15.5%

12.5%

7.1%

5.2%

3.2%2.4%

1.5%

February 2015 Portfolio MSCI AC World

Average forward P/E 13.5x 16.5x

21

Fund positioningM&G Income Allocation Fund

Source: M&G, 28 February 2015.*Only includes fixed income exposure above 1.3% and excludes cash

Fixed income exposure, 44.2%*

US

30-

yrs

Ger

man

y 30

-yrs

Bra

zil 5

-yrs

Col

ombi

a 10

-yrs

Mex

ico

25-y

rsS

outh

Afri

ca 2

2-yr

sN

ew Z

eala

nd 1

0-yr

s

Chi

le 5

-yrs

Aus

tralia

10-

yrs

Phi

lippi

nes

10-y

rsU

S c

orpo

rate

bon

dsU

K c

orpo

rate

bon

dsE

urop

ean

corp

orat

es

0%

2%

4%

6%

8%

5.0%4.5%

3.1% 3.0% 3.0% 2.9%2.0% 2.0% 1.8%

1.3%

6.1%5.5%

3.1%

Mainstream CreditNon-mainstream government bonds

22

Fund positioning: targets

Source: M&G, 28 February 2015

M&G Income Allocation Fund

Currency exposure outside the euro

US doll

ar

Hong

Kong

dolla

r

Colom

bia p

eso

Mex

ican

peso

Pound

ste

rling

Canad

a do

llar

New Z

ealan

d do

llar

Chile

peso

Brazil

ian re

al

Philipp

ines

peso

Austra

lia d

ollar

0%

1%

2%

3%

4%

5%

6%

5.0%

3.0% 2.9%2.5% 2.5% 2.5% 2.5%

2.0%1.5% 1.3%

1.0%

23

Diversified sources of income

Source: M&G, 9 March 2015. *Expected income for the next 12 months

M&G Income Allocation Fund

Asset class Average yieldAsset allocation

(Weight, %)Contribution to total

income*

Equity 3.8% 49% 1.9%

Corporate bonds 4.7% 16% 0.8%

Mainstream government bonds 1.9% 10% 0.2%

Non-mainstream government bonds 5.6% 18% 1.0%

Cash 7%

Total 4.0% 100% 3.8%

24

Summary

• Overweight equities. Exposure to companies that pay a growing dividend

• Underweight fixed income

• Overweight in USD, underweight in EUR and GBP

• A solution for investors seeking a growing income

• Potential to deliver a growing income stream of 4% pa* and capital growth of 2% to 4% pa

• A top-down approach that provides a regular, growing and diversified income stream

Philosophy

Positioning

*4% is an estimated gross yield and represents the fund’s total distribution over 12 months as a percentage of the average share price before UK tax. Please note that this is not guaranteed and may be revised in the future. The ongoing charge is taken from investments held in the fund’s portfolio and not from the income these investments produce.

25

The fund may invest more than 35% in securities issued by any one or more of the governments listed in the fund prospectus. Such exposure may be combined with the use of derivatives in pursuit of the fund objective. It is currently envisaged that the fund’s exposure to such securities may exceed 35% in the governments of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, New Zealand, Singapore, Sweden, Switzerland, UK, USA although these may vary subject only to those listed in the prospectus.

The value of stockmarket investments will fluctuate, which will cause fund prices to fall as well as rise and investors may not get back the original amount invested . For Investment Professionals and Institutional Investors only. Not for onward distribution. No other persons should rely on any information contained within. For Switzerland: Distribution of this document in or from Switzerland is not permissible with the exception of the distribution to Qualified Investors according to the Swiss Collective Investment Schemes Act, the Swiss Collective Investment Schemes Ordinance and the respective Circular issued by the Swiss supervisory authority ("Qualified Investors"). Supplied for the use by the initial recipient (provided it is a Qualified Investor) only. In Spain the M&G Investment Funds are registered for public distribution under Art. 15 of Act 35/2003 on Collective Investment Schemes as follows: M&G Investment Funds (1) reg. no 390, M&G Investment Funds (2) reg. no 601, M&G Investment Funds (3) reg. no 391, M&G Investment Funds (5) reg. no 972, M&G Investment Funds (7) reg. no 541, M&G Investment Funds (8) reg. no 1100, M&G Investment Funds (9) reg. no 930, M&G Investment Funds (14) reg. no 1243, M&G Global Dividend Fund reg. no 713, M&G Dynamic Allocation Fund reg. no 843, M&G Global Macro Bond Fund reg. no 1056 and M&G Optimal Income Fund reg. no 522. The collective investment schemes referred to in this document (the "Schemes") are open-ended investment companies with variable capital, incorporated in England and Wales. In the Netherlands, all funds referred to, are registered with the Dutch regulator, the AFM. This information is not an offer or solicitation of an offer for the purchase of investment shares in one of the Funds referred to herein. Purchases of a Fund should be based on the current Prospectus. The Instrument of Incorporation, Prospectus, Key Investor Information Document, annual or interim Investment Report and Financial Statements, are available free of charge, in paper form, from the ACD: M&G Securities Limited, Laurence Pountney Hill, London, EC4R 0HH, GB, or one of the following: M&G International Investments Limited, German branch, mainBuilding, Taunusanlage 19, 60325 Frankfurt am Main, the German paying agent J.P. Morgan AG, Junghofstraße 14, D-60311 Frankfurt am Main, the Austrian paying agent, Raiffeisen Bank International A.G., Am Stadtpark 9, A-1030 Wien, the Luxembourg paying agent, J.P. Morgan Bank Luxembourg S.A., European Bank & Business Center, 6 c route de Treves, 2633 Senningerberg, Luxembourg, the Danish paying agent, Nordea Bank Danmark A/S Issuer Services, Securities Services, Hermes Hus, Helgeshøj Allé 33, Postbox 850, DK-0900, Copenhagen C, Denmark, Allfunds Bank, Calle Estafeta, No 6 Complejo Plaza de la Fuente, La Moraleja, 28109, Alcobendas, Madrid, M&G International Investments Limited, the French branch, or from the French centralising agent of the Fund: RBC Dexia Investors Services Bank France. For Switzerland: Please refer to M&G International Investments Switzerland AG, Bahnhofstrasse 100, 8001 Zurich, for Sweden, from the paying agent, Skandinaviska Enskilda Banken AB (publ), Sergels Torg 2, 106 40 Stockholm, Sweden. For Italy, they can also be obtained on the website: www.mandgitalia.it. Before subscribing investors should read the Prospectus, which includes investment risks relating to these funds. This financial promotion is issued by M&G International Investments Ltd. In Switzerland it is created by M&G Securities Limited (registered in England No. 90776). Both are authorised and regulated by the Financial Conduct Authority in the UK and have their registered offices at Laurence Pountney Hill, London EC4R 0HH. Registered in England No. 90776. M&G International Investments Ltd is registered in England, No. 4134655 and has a branch located in France, 6 rue Lamennais 34, Paris 75008, registered on the Trade Register of Paris, No. 499 832 400 and a branch in Spain, with corporate domicile at Plaza de Colón 2, Torre II Planta 14, 28046, Madrid, Spain, registered with the Commercial Registry of Madrid under Volume 32.573, sheet 30, page M-586297, inscription 1, CIF W8264591B and registered with the CNMV under the number 79. In Switzerland, the financial promotion is published by M&G International Investments Switzerland AG, Bahnhofstrasse 100, 8001 Zurich, authorised and regulated by the Swiss Federal Financial Market Supervisory Authority. Past performance is not a guide to future performance. Performance stats are quoted gross of Italian tax on capital gains.