M&G Global Macro Bond Fund Annual Long Report and audited Financial Statements for the year ended 31 October 2015

Annual Long Report and audited Financial Statements for the year ended 31 October 2015

Contents Please note that we have now included a glossary at the back of this report. M&G Global Macro Bond Fund Authorised Corporate Director s Report Page 1 Directors Statement Page 2 Depositary s Responsibilities and Report Page 3 Independent Auditor s Report Page 4 Authorised Corporate Director s Report and Financial statements and notes Page 5 Other regulatory disclosures Page 27 Glossary Page 28

Authorised Corporate Director s Report The Authorised Corporate Director (ACD) of M&G Global Macro Bond Fund presents its Annual Long Report and audited Financial Statements for the year ended 31 October 2015. Company information This Open-Ended Investment Company (OEIC) is an Investment Company with Variable Capital (ICVC) incorporated under the Open-Ended Investment Companies Regulations 2001. It is authorised and regulated by the Financial Conduct Authority (FCA) under the Financial Services and Markets Act 2000. The Company is a UCITS (Undertakings for Collective Investment in Transferable Securities) scheme as defined in the Collective Investment Schemes sourcebook, as issued (and amended) by the FCA. The Company was authorised on 26 January 2009 and the fund was launched on 1 May 2009. The Company s principal activity is to carry on business as an OEIC. A shareholder is not liable for the debts of the Company and will never be liable to make any further payment to the Company after paying the purchase price of the shares. Fund manager Jim Leaviss is employed by M&G Limited which is an associate of M&G Securities Limited. ACD M&G Securities Limited, Laurence Pountney Hill, London EC4R 0HH, UK Telephone: 0800 390 390 (UK only) (Authorised and regulated by the Financial Conduct Authority. M&G Securities Limited is a member of the Investment Association (formerly the Investment Management Association) and of the Tax Incentivised Savings Association.) Directors of the ACD W J Nott (Chief Executive), G N Cotton, P R Jelfs, M Lewis, G W MacDowall, L J Mumford Investment manager M&G Investment Management Limited, Laurence Pountney Hill, London EC4R 0HH, UK Telephone: +44 (0)20 7626 4588 (Authorised and regulated by the Financial Conduct Authority) Registrar International Financial Data Services (UK) Limited, IFDS House, St. Nicholas Lane, Basildon, Essex SS15 5FS, UK (Authorised and regulated by the Financial Conduct Authority) Depositary National Westminster Bank Plc, Trustee & Depositary Services, Younger Building, 3 Redheughs Avenue, Edinburgh EH12 9RH, UK (Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) Independent auditor Ernst & Young LLP Ten George Street, Edinburgh EH2 2DZ, UK Notes to shareholders From 1 November 2015, a new accounting standard, Financial Reporting Standard 102 (FRS 102), will be adopted. Under FRS 102, a fund needs to identify its functional currency which is defined as being the currency that best reflects the primary economic environment in which it operates. When assessing the primary economic environment of a fund, numerous factors can be taken into consideration. As a result, we have concluded that some of our funds functional currencies should change. With effect from 1 November 2015, M&G Global Macro Bond Fund has a functional currency of US dollar and changed its base currency from sterling to US dollar. It is important to emphasise that this change has no impact on your fund s return profile. The prices of share classes will continue to be published in the currency in which they are currently denominated and Income share distributions will continue to be paid in this currency too. In future, accounting information in these reports will be presented in US dollar. M&G is a member of the Investment Association (formerly Investment Management Association) and of the Tax Incentivised Savings Association. The instrument of Incorporation can be inspected at our offices or at the office of the Depositary. Investor information The Prospectus, Instrument of Incorporation, Key Investor Information Documents as well as the latest Annual or Interim Investment Report and Financial Statements are available free of charge on request from the following addresses. The Instrument of Incorporation can also be inspected at our offices or at the office of the Depositary. Customer Relations 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 Relations and administration for non-uk clients: M&G International Investments Limited, mainbuilding, Taunusanlage 19, 60325 Frankfurt am Main, Germany 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: +49 69 1338 6767 Email: iocs@mandg.co.uk 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. ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015 1

Authorised Corporate Director s Report Investor information (continued) Austrian paying and information agent: Raiffeisen Bank International AG, Am Stadtpark 9, 1030 Wien, Austria Belgian financial agent: RBC Investor Services Belgium, Rogier Tower +10/43 Rogierplein 11 Place Rogier, B-1210 Brussel, Belgium Danish representative agent: Nordea Bank Danmark A/S, Issuer Services, Postboks 850, 0900 Copenhagen C, Denmark French centralising agent: RBC Investor Services, Bank France S.A., 105 rue Réaumur, 75002 Paris, France German paying and information agent: J.P. Morgan AG, Junghofstraße 14, 60311 Frankfurt am Main, Germany Irish facilities agent: BNY Mellon Fund Services (Ireland) Limited, Guild House, Guild Street, IFSC, Dublin 1, Ireland Italian paying agents: Allfunds Bank, S.A., Via Santa Margherita 7, 20121 Milano, Italy Banca Monte dei Paschi di Siena S.p.A., Piazza Salimbeni 3, 53100 Siena, Italy Banca Sella Holding S.p.A., Piazza Gaudenzio Sella 1, 13900 Biella, Italy BNP PARIBAS Securities Services, Via Ansperto 5, 20123 Milano, Italy RBC Investor Services Bank S.A., Milan Branch Via Vittor Pisani 26, 20124 Milano, Italy State Street Bank S.p.A., Via Ferrante Aporti 10, 20125 Milano, Italy Société Générale Securities Services S.A., Via Benigno Crespi 19A - MAC 2, 20159 Milano, Italy Luxembourg paying and information agent: J.P. Morgan Bank Luxembourg S.A., European Bank & Business Center, 6 c route de Trèves, 2633 Senningerberg, Luxembourg Swedish paying agent: Skandinaviska Enskilda Banken AB (publ), Sergels Torg 2, 106 40 Stockholm, Sweden Swiss paying agent: JP Morgan Chase Bank, National Association, Columbus, Zurich Branch, Dreikönigstrasse 21, 8002 Zürich, Switzerland Swiss representative: Carnegie Fund Services S.A., 11, rue du Général-Dufour, 1204 Genève, Switzerland Authorised Corporate Director s Responsibilities The ACD is required to prepare annual and interim long and short reports for the Company. It must ensure that the financial statements, contained in the Long Report are prepared in accordance with the Investment Association (formerly the Investment Management 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 and the net capital 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. 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. G W MACDOWALL } Directors L J MUMFORD 14 December 2015 Portuguese distributor: Best - Banco Electrónico de Serviço Total, S.A., Praça Marquês de Pombal, no. 3-3º, 1250-161, Lisboa, Portugal Spanish representative: Allfunds Bank, S.A., Calle Estafeta, No 6 Complejo Plaza de la Fuente, La Moraleja 28109, Alcobendas, Madrid, Spain 2 ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015

Depositary s Responsibilities and Report Statement of the Depositary s Responsibilities In respect of the financial statements of the Company The Depositary is under a duty to take into custody and to hold the property of the Company. Under the Regulations relating to Reports, it is the duty of the Depositary to enquire into the conduct of the Authorised Corporate Director in the management of the Company in each accounting period and report thereon to shareholders in a report which shall contain the matters prescribed by the Regulations. Report of the Depositary To the shareholders of M&G Global Macro Bond Fund for the year ended 31 October 2015 The Depositary is responsible for the safekeeping of all of the property of the Company (other than tangible moveable property) which is entrusted to it and for the collection of revenue that arises from that property. It is the duty of the Depositary to take reasonable care to ensure that the Company is managed in accordance with the Financial Conduct Authority s Collective Investment Schemes sourcebook (COLL), as amended, the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228), as amended ( the OEIC Regulations ), the Company s Instrument of Incorporation and Prospectus, in relation to the pricing of, and dealings in, shares in the Company; the application of revenue of the Company; and the investment and borrowing powers applicable to the Company. Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Company, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Company, acting through the Authorised Corporate Director: has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Company s shares, and the application of the Company s revenue in accordance with COLL and, where applicable, the OEIC Regulations, the Instrument of Incorporation and Prospectus of the Company, and has observed the investment and borrowing powers and restrictions applicable to the Company. Edinburgh National Westminster Bank Plc 14 December 2015 Trustee and Depositary Services ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015 3

Independent Auditor s Report Independent auditor s report to the shareholders of M&G Global Macro Bond Fund We have audited the financial statements of the M&G Global Macro Bond Fund (the Company) for the year ended 31 October 2015 which comprise the Statement of Total Return, Statement of Change in Net Assets attributable to shareholders, Balance Sheet and the related notes 1 to 12 and the distribution table. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Company s members, as a body, pursuant to Paragraph 4,5,12 of the rules of the Collective Investment Schemes sourcebook of the Financial Conduct Authority. Our audit work has been undertaken so that we might state to the Company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Authorised Corporate Director and Auditor As explained more fully in the Authorised Corporate Director s responsibilities statement set out on page 2, the Authorised Corporate Director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authorised Corporate Director; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report and accounts to identify material inconsistencies with the audited financial statements to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on the financial statements In our opinion the financial statements: give a true and fair view of the financial position of the Company at 31 October 2015 and of the net revenue and the net losses on the scheme property of the Company for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice. Opinion on other matters prescribed by the rules of the Collective Investment Schemes sourcebook of the Financial Conduct Authority In our opinion: the financial statements have been properly prepared in accordance with the Statement of Recommended Practice relating to Authorised Funds, the rules of the Collective Investment Schemes sourcebook of the Financial Conduct Authority and the Instrument of Incorporation; the information given in the Authorised Corporate Director s report for the financial year for which the financial statements are prepared is consistent with the financial statements; there is nothing to indicate that proper accounting records have not been kept or that the financial statements are not in agreement with those records; and we have received all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit. Edinburgh Ernst & Young LLP 14 December 2015 Statutory Auditor The financial statements are published at www.mandg.co.uk/reports, which is a website maintained by M&G Securities Limited and M&G Financial Services Limited (M&G). The maintenance and integrity of the M&G website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Annual report contained in this document has been extracted and translated from the Accounts of the Company which were produced in English and on which Ernst & Young LLP expressed the opinion reproduced/translated above. Ernst & Young LLP express no opinion as to whether the contents have been properly extracted from the accounts on which they expressed their opinion or the accuracy of the translations made. 4 ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015

Authorised Corporate Director s Report Investment objective The Fund s objective is to maximise long term total return (the combination of income and growth of capital). Investment policy The Fund invests mainly in debt instruments on a global basis which include, but are not limited to, variable rate securities, fixed interest securities, sovereign debt and corporate debt. The Fund s exposure to debt instruments may be gained through the use of derivatives. The Fund may also invest in other assets including collective investment schemes, money market instruments, cash and near cash, deposits, other transferable securities and derivatives. The following table shows the risk number associated with the fund and is based on Sterling Class X shares. Low risk Typically lower rewards The above number: High risk Typically higher rewards 1 2 3 4 5 6 7 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. Investment approach The M&G Global Macro Bond Fund is a flexible global bond fund. Its investment approach is driven primarily by the fund manager s views on macroeconomic factors such as economic growth, interest rates and inflation. This assessment determines the asset classes in which he believes the fund should invest in order to achieve the objective of maximising long-term total return. It also influences the portfolio s mix of interest rate risk, credit risk and currency exposure, as well as the subsequent holdings. The fund is classified in the IA Global Bond sector in the UK and the Morningstar Global Bond as well as the Morningstar Global Bond - EUR Hedged sectors in Europe. As such, its returns will include a higher degree of currency risk than domestic fixed interest funds. Risk profile The fund is a flexible bond fund which invests in a range of fixed income securities from anywhere in the world and in any currency. The fund is therefore subject to the price volatility of global bond markets and fluctuations in currency exchange rates. There are no restrictions on the amount of government bonds, investment grade bonds or high yield bonds that can be held within the portfolio. While government and investment grade bonds are generally highly liquid assets that are normally traded with relative ease, high yield corporate bonds are higher risk assets that could potentially experience a degree of illiquidity in times of market distress. The fund s exposure to fixed income securities may be gained through the use of derivatives. In association with the use of derivatives, including those instruments not traded through an exchange, collateral is deposited with a range of counterparties, in order to mitigate the risk that a counterparty may default on its obligations or become insolvent. Portfolio diversification is key in managing liquidity and default risks as well as reducing market risk. The fund s risks are measured and managed as an integral part of the investment process. The risk management policies are set out in note 2 to the aggregated financial statements for M&G Global Macro Bond Fund. Investment review As at 2 November 2015, for the year ended 31 October 2015 Investment performance The M&G Global Macro Bond Fund produced a positive total return (the combination of income and growth of capital) in its euro unhedged share classes over the 12 months under review. All other share classes produced a negative return over the same period. While economic conditions in developed countries generally continued to improve, interest rates and inflation remained low during the 12 months under review. Significant declines in the price of oil and other commodities notably contributed to subdued inflation, while a newly launched economic stimulus programme from the European Central Bank (ECB) helped to hold down interest rates. Such a backdrop for inflation and interest rates tends to favour sentiment towards bonds. In turn, most areas of the global bond markets delivered positive returns in the first half of the review period. (Bonds are loans that are extended by an investor to an issuing entity such as a company or government in exchange for regular interest payments. Bonds issued by companies are referred to as corporate bonds, while those issued by governments are called government bonds ). Government bond markets generally continued to record gains during the remainder of the period. In the eurozone, for example, demand for government bonds was boosted by the ECB s stimulus measures, which included using its own funds to buy these assets as a way of injecting money into the economy. As a consequence, government bond prices were pushed upwards. In addition, the performance of government bonds in major developed countries often benefited from the effects of several international developments that worried investors. These included Western economic sanctions against Russia because of its stance in a Ukrainian civil war, renewed concerns over the solvency of the Greek government, and a deceleration of China s economy that led to bouts of higher volatility in global stockmarkets. The uncertainties caused by such factors often lead investors to favour holding safe-haven assets such as bonds issued by the US, UK and German governments. ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015 5

Authorised Corporate Director s Report Investment review (continued) Investment performance (continued) During the summer of 2015, investors increasingly expected that the strengthening US economy might lead the Federal Reserve (Fed) to raise interest rates. At the same time, the slower Chinese economy prompted some concerns that the outlook for global economic growth might be adversely affected. This consideration weighed on the performance of corporate bonds as these assets tend to be less favoured when economic growth forecasts are moderated. Partly as a result, corporate bond returns lagged those of their government bond counterparts. Indeed, some segments of the former, such as areas of the high yield bond market, recorded declines against this background. US high yield bonds registered among the lowest returns, as many US high yield bond issuers are oil- and energy-related companies that faced the particular headwind of falling oil prices. (High yield bonds are fixed income securities issued by companies with a low credit rating. They therefore pay a higher rate of interest than their more highly rated counterparts to compensate investors for the greater possibility that the issuer might be unable to meet its obligations, or in other words, default.) This theme also hampered the returns of emerging bond markets, as many emerging countries are producers of oil and other commodities, meaning that cheaper prices reduce their export revenues. Furthermore, sentiment towards emerging market bonds typically weakens against expectations that US interest rates might rise. In this environment, areas of the emerging bond markets declined in value during the period. With its diversified global portfolio, the fund s performance was helped by its allocations to government bonds, in addition to areas of the corporate bond markets that performed well. However, we also maintained smaller exposures to high yield and emerging market bonds, which weighed on the fund s returns. In currency markets, the US dollar generally performed well against other developed and emerging market currencies, supported by the relative strength of the US economy and investors anticipation that the Fed is likely to be the first major central bank to raise interest rates. The euro fell notably against the US dollar, as one knock-on effect of the ECB s stimulus activity was to dampen demand for the single currency. Given the marked appreciation of the US dollar versus the euro and sterling, the variance in returns between the fund s different share classes was also sizeable. Investment activities Actively managing the fund s allocations to the various areas of the global bond markets, based on where we assess the best relative value can be found, is one of the key drivers of its long-term returns. After the solid performance of government bonds in 2014 and first quarter of 2015, we considered that the very low yields available from these assets lacked value. (Bond yields refer to the interest received from a fixed interest security, which is usually expressed annually as a percentage based on the investment s cost, its current market value or its face value. Typically they move inversely to bond prices.) Importantly, we thought the possibility remained open that the Fed might increase interest rates later in the year as the US economy continued to strengthen. The fund was positioned, therefore, to be less sensitive to the prospect of interest rates rising, a strategy known as holding short duration. As interest rates remained unchanged, however, the fund s performance was held back to an extent by this stance. Within the government bond markets, our preferred areas of investment included inflation-linked bonds, also known as index-linked bonds. (These are fixed income securities where both the value of the loan and the interest payments are adjusted in line with inflation over the life of the security.) In our view, these assets had become oversold on a selective basis as investor demand for them waned in the low inflation environment. Among the fund s purchases were inflation-linked bonds from the UK and US governments. In the corporate bond markets, while maintaining a broad diversity of holdings, we took steps to reduce the fund s overall allocation to this area against factors such as the Greek debt crisis and China s declining economic performance. In Europe, for example, we felt that after performing well in the first quarter of 2015, investment grade (high quality) corporate bonds offered less upside potential against this background. However, after their subsequent underperformance, we added back exposure to these assets as the review period drew to a close in the belief that they had become attractively priced once again. Similarly, we raised the fund s investments in the US high yield bond market having reduced its allocation there earlier in the year. Throughout the period, the fund maintained relatively small exposures to emerging market bonds and currencies as we held concerns about China s changing outlook and lower commodity prices. In addition, an appreciating US dollar typically reduces demand for emerging market bonds. The fund s overall currency positioning remained largely allocated to the US dollar, as we expect the currency to be supported by factors such as the relative strength of the US economy and the likelihood that the Fed will be the first major central bank to raise interest rates. Outlook A number of key global economic themes continue to influence sentiment among bond investors, including possible US interest rate rises, the potential expansion of economic stimulus by the ECB, and slower economic growth in emerging markets. Among developed regions, despite some softer data being announced in recent months, we believe that economic growth in countries such as the US and UK should continue at a healthy pace. Importantly, for example, unemployment in both economies continues to fall and there are signs that wage growth is picking up as a consequence. In the eurozone, meanwhile, the slow recovery under way should continue to be supported by the monetary policies of the ECB. Against this backdrop, we continue to feel that positioning the portfolio to be less sensitive towards possible interest rate rises is the right investment strategy for the fund. We believe that valuations are more attractive in the corporate bond markets relative to government bonds, and retain a larger allocation to the former area. Elsewhere, while we have been wary of emerging market bonds, the sharp depreciation of emerging market currencies has potentially left some more attractive value to be found. We are therefore closely monitoring this area for investment opportunities on a carefully selective basis. 6 ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015

Authorised Corporate Director s Report Investment review (continued) Classification of investments Outlook (continued) We maintain a favourable outlook for the US dollar and hold a large allocation to the currency, with other smaller exposures that consist mainly of the euro, sterling and Scandinavian currencies. As always, we will continue to monitor closely the global bond and currency markets to determine the best relative value opportunities for the fund in the prevailing economic conditions. Jim Leaviss Fund manager An employee of M&G 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. AAA credit rated bonds AA credit rated bonds A credit rated bonds BBB credit rated bonds BB credit rated bonds B credit rated bonds Bonds with no credit rating Credit default swaps % of the fund value (net assets attributable to shareholders) 4,16% 2,52% 0,28% 3,41% 1,11% 0,10% 9,26% 9,84% 9,75% 15,81% 13,58% 17,70% 17,48% 22,45% 25,30% 32,65% Forward currency contracts Interest rate futures contracts AAA rated money market funds [a] -0,14% -0,09% -0,03% 1,90% 0,00% 0,46% Forward currency contracts for share class hedging -0,14% -0,15% [a] Uncommitted surplus cash is placed into AAA rated money market funds with the aim of reducing counterparty risk. 31 October 2015 31 October 2014 Source: M&G ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015 7

Authorised Corporate Director s Report Fund statistics Please note past performance is not a guide to future performance and 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 not get back the original amount you invested. Performance since launch To give an indication of how the fund has performed since launch, the graph below shows total return of Sterling Class X (Accumulation) shares. 240 220 200 180 160 140 120 110 100 October 1999 = 100, plotted monthly Chart date 2 November 2015 99 01 03 05 07 09 11 13 15 Sterling Class X (Accumulation) shares* * Net income reinvested Source: M&G Distribution dates and fund facts Distribution type xd payment First interim 01.02.16 31.03.16 Second interim 03.05.16 30.06.16 Third interim 01.08.16 30.09.16 Final 01.11.16 31.12.16 Final distribution Ongoing charges Inc Acc figure [b] 31.12.15 [a] 02.11.15 [a] 31.10.15 31.10.14 Euro % % Class A 2,4965 2,5346 1,39 1,40 Class A-H 1,9950 2,0328 1,42 1,43 Class B 0,8213 0,9381 1,85 1,90 Class B-H 0,6402 0,6480 1,92 1,93 Class C 4,5967 4,6086 0,80 0,80 Class C-H 3,7098 3,7472 0,82 0,83 Singapore dollar % % Class A-H 1,9957 1,9988 1,42 [c] n/a Class C-H 3,3933 3,4261 0,82 [c] n/a Sterling p p % % Class A 0,0980 0,1608 1,40 1,40 Class A-H 0,1508 0,1632 1,42 [c] n/a Class I 0,2968 0,3112 0,80 0,80 Class I-H 0,2772 0,2776 0,82 [c] n/a Class R 0,2112 0,2176 1,15 1,15 Class R-H 0,2092 0,2096 1,17 [c] n/a Class X 0,1120 0,1608 1,40 1,40 Class X-H 0,1604 0,1620 1,42 [c] n/a Swiss franc % % Class A n/a 2,1000 1,40 1,40 Class A-H n/a 2,0036 1,41 1,42 Class C n/a 3,7620 0,79 0,80 Class C-H n/a 3,5923 0,82 0,83 US dollar % % Class A 2,7287 2,7675 1,40 1,40 Class A-H n/a n/a 1,41 [d] 1,43 Class C 3,9122 3,9132 0,80 0,80 Class C-H n/a n/a 0,81 [d] 0,83 [a] The date on which the final distribution will be paid to Income shareholders and credited to Accumulation shareholders. [b] The ongoing charges figure is the ratio of the relevant annualised total disclosable costs of each share class from the most recent reporting period to the average net asset value for that share class over the same period. [c] The ongoing charges figure shown here is an estimate of the charges, as the share class has not been in existence for a full financial year. [d] To 7 August 2015. Income accrued from interest-bearing securities is distributed on an effective yield basis. 8 ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015

Authorised Corporate Director s Report Fund statistics The following table shows the compound rate of return, per annum, over the period. Calculated on a price to price basis with income reinvested. Fund performance Net asset value Net asset value Net asset value per share as at per share as at % change 31.10.15 31.10.14 Inc Acc Inc Acc Inc Acc Euro % % Class A 12,9081 13,1615 11,7803 11,9402 +9,57 +10,23 Class A-H 10,6031 10,8122 10,7837 10,9355-1,67-1,13 Class B 10,1347 12,9053 n/a 11,7661 n/a +9,68 Class B-H 9,8995 10,6044 n/a 10,7748 n/a -1,58 Class C 13,2667 13,4694 12,1126 12,1462 +9,53 +10,89 Class C-H 11,0476 11,0755 n/a 11,1342 n/a -0,53 Singapore dollar SGD SGD SGD SGD % % Class A-H 9,8955 9,9153 n/a n/a n/a n/a Class C-H 9,8947 9,9285 n/a n/a n/a n/a Sterling p p p p % % Class A 72,91 105,24 72,88 104,71 +0,04 +0,51 Class A-H 98,78 98,93 n/a n/a n/a n/a Class I 108,11 113,70 108,08 112,58 +0,03 +0,99 Class I-H 98,76 99,04 n/a n/a n/a n/a Class R 104,13 107,30 104,01 106,54 +0,12 +0,71 Class R-H 98,77 98,97 n/a n/a n/a n/a Class X 73,21 105,19 73,19 104,65 +0,03 +0,52 Class X-H 98,77 98,93 n/a n/a n/a n/a Swiss franc CHF CHF CHF CHF % % Class A n/a 10,6922 n/a 10,7430 n/a -0,47 Class A-H n/a 10,2134 n/a 10,4164 n/a -1,95 Class C n/a 10,8887 n/a 10,8800 n/a +0,08 Class C-H n/a 10,3473 n/a 10,4902 n/a -1,36 US dollar $ $ $ $ % % Class A 14,3222 14,3492 n/a 14,8656 n/a -3,47 Class A-H n/a n/a n/a 10,9721 n/a n/a Class C 11,3554 11,3935 n/a 11,7338 n/a -2,90 Class C-H n/a n/a n/a 11,1584 n/a n/a Long-term performance [a] one year three years five years since 03.11.14 02.11.12 02.11.10 launch % [b] % p.a. % p.a. % p.a. Euro [c] Class A +9,3 +5,6 n/a +7,4 [d] Class A-H -1,4 +0,7 n/a +2,1 [d] Class B +8,7 +5,1 n/a +6,8 [d] Class B-H -1,9 +0,2 n/a +1,6 [d] Class C +9,9 +6,3 n/a +8,0 [d] Class C-H -0,8 +1,3 n/a +2,7 [d] Singapore dollar [c] Class A-H n/a n/a n/a -0,7 [e] Class C-H n/a n/a n/a -0,6 [e] Sterling [f] Class A -0,5 +1,4 +2,6 +4,9 [g] Class A-H n/a n/a n/a -1,0 [e] Class I -0,0 +1,9 n/a +3,2 [d] Class I-H n/a n/a n/a -0,8 [e] Class R -0,3 +1,6 n/a +2,0 [h] Class R-H n/a n/a n/a -0,9 [e] Class X -0,5 +1,4 +2,6 +4,9 [i] Class X-H n/a n/a n/a -1,0 [e] Swiss franc [c] Class A -1,5 +2,0 n/a +2,2 [j] Class A-H -2,2 +0,4 n/a +0,7 [j] Class C -1,0 +2,6 n/a +2,8 [j] Class C-H -1,7 +0,8 n/a +1,1 [j] US dollar [c] Class A -3,7 +0,3 +2,2 +5,7 [k] Class C -3,1 +0,9 n/a +3,4 [d] [a] On 30 April 2009 the M&G Global Macro Bond Fund de-merged from M&G Investment Funds (4) to become the M&G Global Macro Bond Fund. [b] Absolute basis. [c] Price to price with gross income reinvested. [d] 16 December 2011, the launch date of the share class. [e] 7 August 2015, the launch date of the share class. Absolute basis. [f] Price to price with net income reinvested. [g] 15 October 1999, the end of the initial offer period of the predecessor unit trust. [h] 3 August 2012, the launch date of the share class. [i] 15 October 1999. All performance data prior to 1 October 2002 (the launch date of the share class) has been calculated by reference to a conversion factor due to a change of the nominated share class. [j] 28 September 2012, the launch date of the share class. [k] 1 May 2009, the launch date of the share class. Single year performance (5 years ending October) From 01.11.14 01.11.13 01.11.12 01.11.11 01.11.10 To 31.10.15 31.10.14 31.10.13 31.10.12 31.10.11 % % % % % Sterling Class X +0,1 +0,6 +4,0 +6,0 +3,2 Source: Morningstar, Inc., bid to bid with net income reinvested. ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015 9

Authorised Corporate Director s Report Fund statistics Prices Calendar Income shares Accumulation shares year Highest Lowest Highest Lowest Euro (gross) Class A 2011 [a] n/a n/a 10,1634 10,0000 2012 n/a n/a 11,3402 10,0760 2013 11,2539 [b] 10,7712 [b] 11,6238 10,8236 2014 12,1430 10,8268 12,3079 10,9119 2015 [c] 13,7573 12,2398 13,9625 12,4059 Class A-H 2011 [a] n/a n/a 10,1290 9,9179 2012 n/a n/a 10,7717 10,0267 2013 11,4265 [b] 10,5665 [b] 11,7674 10,6207 2014 11,0772 10,2690 11,2325 10,3783 2015 [c] 11,5175 10,6092 11,6949 10,7909 Class B 2011 [a] n/a n/a 10,1615 9,9993 2012 n/a n/a 11,2860 10,0734 2013 n/a n/a 11,5462 10,7111 2014 n/a n/a 12,1185 10,7879 2015 [c] 10,2044 [d] 9,8421 [d] 13,7336 12,2147 Class B-H 2011 [a] n/a n/a 10,1272 9,9172 2012 n/a n/a 10,7161 10,0243 2013 n/a n/a 11,6940 10,5102 2014 n/a n/a 11,0620 10,2431 2015 [c] 10,0000 [d] 9,8928 [d] 11,4974 10,5907 Class C 2011 [a] n/a n/a 10,1634 10,0000 2012 n/a n/a 11,3986 10,0760 2013 n/a n/a 11,7104 10,9549 2014 12,4986 [e] 11,5060 [e] 12,5330 11,0572 2015 [c] 14,1619 12,5986 14,2401 12,6333 Class C-H 2011 [a] n/a n/a 10,1311 9,9189 2012 n/a n/a 10,8436 10,0297 2013 n/a n/a 11,8605 10,7399 2014 n/a n/a 11,4436 10,5475 2015 [c] 11,2074 [f] 11,0607 [f] 11,9344 11,0289 Singapore dollar (gross) SGD SGD SGD SGD Class A-H 2015 [c] [g] 10,0066 9,9029 10,0063 9,9027 Class C-H 2015 [c] [g] 10,0088 9,9068 10,0088 9,9135 Sterling (net) p p p p Class A 2010 68,10 60,88 93,36 82,12 2011 68,42 63,17 95,53 87,42 2012 72,01 67,73 101,92 94,57 2013 78,73 71,00 111,73 100,94 2014 74,89 69,25 107,59 99,22 2015 [c] 78,05 71,80 112,24 103,48 Class A-H 2015 [c] [g] 100,18 98,80 100,18 98,80 Class I 2011 [a] 101,39 99,24 101,37 99,23 2012 106,90 100,38 108,66 100,36 2013 116,81 105,36 119,18 107,61 2014 111,10 102,78 115,73 106,51 2015 [c] 115,85 106,51 120,94 111,70 Class I-H 2015 [c] [g] 100,18 98,89 100,18 98,90 Prices (continued) Calendar Income shares Accumulation shares year Highest Lowest Highest Lowest Sterling (net) p p p p Class R 2012 [h] 102,79 100,00 103,31 100,00 2013 112,39 101,34 113,31 102,31 2014 106,89 98,85 109,49 100,89 2015 [c] 111,42 102,56 114,31 105,47 Class R-H 2015 [c] [g] 100,18 98,84 100,17 98,84 Class X 2010 68,39 61,14 93,32 82,09 2011 68,71 63,44 95,49 87,38 2012 72,32 68,02 101,88 94,53 2013 79,06 71,29 111,67 100,89 2014 75,20 69,53 107,53 99,17 2015 [c] 78,37 72,10 112,18 103,43 Class X-H 2015 [c] [g] 100,18 98,80 100,18 98,80 Swiss franc (gross) CHF CHF CHF CHF Class A 2012 [i] n/a n/a 10,1952 9,9757 2013 n/a n/a 10,8402 9,8546 2014 n/a n/a 11,0371 9,9127 2015 [c] n/a n/a 11,3353 9,5427 Class A-H 2012 [i] n/a n/a 10,2672 10,0000 2013 n/a n/a 11,2258 10,1281 2014 n/a n/a 10,6997 9,8858 2015 [c] n/a n/a 11,0972 10,2005 Class C 2012 [i] n/a n/a 10,2011 9,9836 2013 n/a n/a 10,8824 9,9272 2014 n/a n/a 11,1889 10,0024 2015 [c] n/a n/a 11,4936 9,6768 Class C-H 2012 [i] n/a n/a 10,2798 10,0000 2013 n/a n/a 11,2483 10,1513 2014 n/a n/a 10,7854 9,9492 2015 [c] n/a n/a 11,2066 10,3337 US dollar (gross) $ $ $ $ Class A 2010 n/a n/a 13,0762 11,3562 2011 n/a n/a 13,6040 12,2842 2012 n/a n/a 14,5400 13,0137 2013 n/a n/a 14,8846 14,2899 2014 n/a n/a 15,1770 14,7451 2015 [c] 14,5181 [f] 14,3310 [f] 14,8099 14,3308 Class A-H 2011 [a] n/a n/a 10,1325 9,9209 2012 n/a n/a 10,8000 10,0327 2013 n/a n/a 11,8046 10,6514 2014 n/a n/a 11,2665 10,4140 2015 [j] n/a n/a 11,7177 10,7953 Class C 2011 [a] n/a n/a 10,0659 10,0000 2012 n/a n/a 11,3533 10,0881 2013 n/a n/a 11,6793 11,2027 2014 n/a n/a 11,9461 11,5835 2015 [c] 11,5156 [f] 11,3681 [f] 11,7285 11,3788 10 ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015

Authorised Corporate Director s Report Class C-H 2011 [a] n/a n/a 10,1311 9,9209 2012 n/a n/a 10,8623 10,0322 2013 n/a n/a 11,8889 10,7596 2014 n/a n/a 11,4658 10,5706 2015 [j] n/a n/a 11,9532 11,0222 [a] From 16 December 2011 (the launch date of the share class). [b] From 12 July 2013 (the launch date of the Income shares). [c] To 2 November 2015. [d] From 11 September 2015 (the launch date of the Income shares). [e] From 8 August 2014 (the launch date of the Income shares). [f] From 7 August 2015 (the launch date of the Income shares). [g] From 7 August 2015 (the launch date of the share class). [h] From 3 August 2012 (the launch date of the share class). [i] [j] Fund statistics Prices (continued) Calendar Income shares Accumulation shares year Highest Lowest Highest Lowest US dollar (gross) $ $ $ $ From 28 September 2012 (the launch date of the share class). To 7 August 2015 (the closure of the share class). Income Interest income Calendar Distributed Reinvested year Interims Final Total Euro (gross) Class A 2012 n/a n/a n/a 17,4375 2013 1,9940 3,3797 5,3737 11,0232 2014 8,1811 1,4934 9,6745 9,7572 2015 [a] 5,2910 2,4965 7,7875 7,8548 Class A-H 2012 n/a n/a n/a 16,0340 2013 1,9149 3,2681 5,1830 10,4322 2014 7,8616 1,3409 9,2025 9,2138 2015 [a] 4,4603 1,9950 6,4553 6,5217 Class B 2012 n/a n/a n/a 12,3979 2013 n/a n/a n/a 5,4613 2014 n/a n/a n/a 4,0389 2015 [a] n/a 0,8213 0,8213 1,2566 Class B-H 2012 n/a n/a n/a 11,4514 2013 n/a n/a n/a 4,9106 2014 n/a n/a n/a 3,7960 2015 [a] n/a 0,6402 0,6402 0,8454 Class C 2012 n/a n/a n/a 22,9567 2013 n/a n/a n/a 17,7927 2014 n/a 3,2412 3,2412 16,7771 2015 [a] 11,3830 4,5967 15,9797 16,1232 Class C-H 2012 n/a n/a n/a 21,5443 2013 n/a n/a n/a 17,1586 2014 n/a n/a n/a 15,9231 2015 [a] n/a 3,7098 3,7098 13,5881 Singapore dollar (gross) Class A-H 2015 [a] n/a 1,9957 1,9957 1,9988 Class C-H 2015 [a] n/a 3,3933 3,3933 3,4261 Income (continued) Interest income Calendar Distributed Reinvested year Interims Final Total Sterling (net) p p p p Class A 2010 1,0260 0,3500 1,3760 1,8672 2011 0,7100 0,1740 0,8840 1,2220 2012 0,6300 0,3080 0,9380 1,2996 2013 0,4180 0,1780 0,5960 0,8468 2014 0,4220 0,0708 0,4928 0,7036 2015 [a] 0,2168 0,0980 0,3148 0,5004 Class A-H 2015 [a] n/a 0,1508 0,1508 0,1632 Class I 2012 1,1696 0,5840 1,7536 1,7026 2013 1,0180 0,3968 1,4148 1,4428 2014 1,0016 0,2368 1,2384 1,2800 2015 [a] 0,7544 0,2968 1,0512 1,0976 Class I-H 2015 [a] n/a 0,2772 0,2772 0,2776 Class R 2012 n/a 0,4780 0,4780 0,4940 2013 0,7572 0,2996 1,0568 1,0820 2014 0,7536 0,1540 0,9076 0,9236 2015 [a] 0,5016 0,2112 0,7128 0,7320 Class R-H 2015 [a] n/a 0,2092 0,2092 0,2096 Class X 2010 1,0280 0,3520 1,3800 1,8672 2011 0,7140 0,1740 0,8880 1,2212 2012 0,6116 0,3100 0,9216 1,2983 2013 0,4208 0,1704 0,5912 0,9604 2014 0,4236 0,0716 0,4952 0,7044 2015 [a] 0,2400 0,1120 0,3520 0,5052 Class X-H 2015 [a] n/a 0,1604 0,1604 0,1620 Swiss franc (gross) Class A 2012 n/a n/a n/a 1,4160 2013 n/a n/a n/a 10,2082 2014 n/a n/a n/a 8,9274 2015 [a] n/a n/a n/a 6,2689 Class A-H 2012 n/a n/a n/a 1,1864 2013 n/a n/a n/a 10,4100 2014 n/a n/a n/a 8,7410 2015 [a] n/a n/a n/a 6,1972 Class C 2012 n/a n/a n/a 1,9320 2013 n/a n/a n/a 16,4276 2014 n/a n/a n/a 15,5858 2015 [a] n/a n/a n/a 12,3498 Class C-H 2012 n/a n/a n/a 1,8596 2013 n/a n/a n/a 16,3515 2014 n/a n/a n/a 16,0421 2015 [a] n/a n/a n/a 12,6443 US dollar (gross) Class A 2010 n/a n/a n/a 32,3415 2011 n/a n/a n/a 22,9729 2012 n/a n/a n/a 23,0736 2013 n/a n/a n/a 14,6463 2014 n/a n/a n/a 12,9580 2015 [a] n/a 2,7287 2,7287 8,6054 Class A-H 2012 n/a n/a n/a 16,2793 2013 n/a n/a n/a 10,7012 2014 n/a n/a n/a 9,0959 2015 [a] n/a n/a n/a 4,2485 ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015 11

Authorised Corporate Director s Report Fund statistics Income (continued) Interest income US dollar (gross) Class C 2012 n/a n/a n/a 23,0794 2013 n/a n/a n/a 18,5473 2014 n/a n/a n/a 17,1627 2015 [a] n/a 3,9122 3,9122 13,7612 Class C-H 2012 n/a n/a n/a 21,6227 2013 n/a n/a n/a 17,5754 2014 n/a n/a n/a 15,7211 2015 [a] n/a n/a n/a 9,5426 [a] Up to final: ex-distribution date 2 November 2015; payment date 31 December 2015. Yield Calendar Distributed Reinvested year Interims Final Total Distribution yield as at 02.11.15 Inc Acc Euro % % Class A 1,31 1,30 Class A-H 1,31 1,31 Class B 0,80 0,80 Class B-H 0,80 0,80 Class C 1,91 1,90 Class C-H 1,92 1,92 Singapore dollar % % Class A-H 1,27 1,27 Class C-H 1,86 1,86 Sterling % % Class A 1,30 1,30 Class A-H 1,30 1,30 Class I 1,90 1,90 Class I-H 1,91 1,91 Class R 1,55 1,55 Class R-H 1,55 1,55 Class X 1,30 1,30 Class X-H 1,30 1,30 Swiss franc % % Class A n/a 1,30 Class A-H n/a 1,32 Class C n/a 1,95 Class C-H n/a 1,92 US dollar % % Class A 1,30 1,30 Class C 1,90 1,90 Distribution yield: The distribution yield reflects the amounts that may be expected to be distributed over the next twelve months as a percentage of the mid-market price of the fund as at the date shown. It is based on a snapshot of the portfolio on that date. It does not include any preliminary charge and investors may be subject to tax on distributions. The distribution yield and the underlying yield will always be the same figure. Net assets Value per share Number of shares Year ended Inc Acc Inc Acc Euro Class A Oct 2013 10,9061 10,9594 89.800 11.936.300 Oct 2014 11,7803 11,9402 788.580 17.359.568 Oct 2015 12,9081 13,1615 2.286.470 24.696.735 Class A-H Oct 2013 10,8705 10,9254 1.150.100 10.987.200 Oct 2014 10,7837 10,9355 396.092 4.272.486 Oct 2015 10,6031 10,8122 584.635 3.527.733 Class B Oct 2013 n/a 10,8539 n/a 2.713.200 Oct 2014 n/a 11,7661 n/a 2.798.716 Oct 2015 10,1347 12,9053 3.000 3.856.847 Class B-H Oct 2013 n/a 10,8212 n/a 2.133.500 Oct 2014 n/a 10,7748 n/a 872.206 Oct 2015 9,8995 10,6044 3.008 716.868 Class C Oct 2013 n/a 11,0821 n/a 1.879.700 Oct 2014 12,1126 12,1461 13.592 7.454.217 Oct 2015 13,2667 13,4694 325.914 13.737.698 Class C-H Oct 2013 n/a 11,0571 n/a 17.330.800 Oct 2014 n/a 11,1342 n/a 8.257.277 Oct 2015 11,0476 11,0755 12.678 4.037.319 Singapore dollar SGD SGD Class A-H Oct 2015 9,8955 9,9153 4.501 4.500 Class C-H Oct 2015 9,8947 9,9285 4.502 4.501 Sterling p p Class A Oct 2013 72,99 104,14 571.792.876 166.066.899 Oct 2014 72,88 104,71 420.929.751 82.091.544 Oct 2015 72,91 105,24 23.957.214 39.415.936 Class A-H Oct 2015 98,78 98,93 55.005 20.000 Class I Oct 2013 108,23 111,43 60.456.500 51.956.500 Oct 2014 108,08 112,58 147.998.572 131.134.596 Oct 2015 108,11 113,70 204.933.140 169.004.357 Class I-H Oct 2015 98,76 99,04 20.035 30.030 Class R Oct 2013 104,16 105,74 709.000 956.000 Oct 2014 104,01 106,54 744.879 949.085 Oct 2015 104,13 107,30 733.853 1.011.670 Class R-H Oct 2015 98,77 98,97 20.025 20.020 Class X Oct 2013 73,29 104,08 5.990.314 5.067.267 Oct 2014 73,19 104,65 6.177.881 4.405.757 Oct 2015 73,21 105,19 5.709.515 4.610.673 Class X-H Oct 2015 98,77 98,93 20.015 20.010 Swiss franc CHF CHF Class A Oct 2013 n/a 10,0847 n/a 1.500 Oct 2014 n/a 10,7430 n/a 10.890 Oct 2015 n/a 10,6922 n/a 13.366 Class A-H Oct 2013 n/a 10,4226 n/a 51.500 Oct 2014 n/a 10,4164 n/a 13.065 Oct 2015 n/a 10,2135 n/a 51.435 Class C Oct 2013 n/a 10,1506 n/a 500 Oct 2014 n/a 10,8800 n/a 500 Oct 2015 n/a 10,8887 n/a 8.569 Class C-H Oct 2013 n/a 10,5029 n/a 165.500 Oct 2014 n/a 10,4902 n/a 7.000 Oct 2015 n/a 10,3473 n/a 18.162 12 ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015

Authorised Corporate Director s Report Fund statistics Net assets (continued) US dollar $ $ Class A Oct 2013 n/a 14,7899 n/a 4.908.200 Oct 2014 n/a 14,8656 n/a 5.876.695 Oct 2015 14,3222 14,3492 1.034 6.359.927 Class A-H Oct 2013 n/a 10,9549 n/a 1.566.200 Oct 2014 n/a 10,9721 n/a 549.512 Oct 2015 n/a n/a n/a n/a Class C Oct 2013 n/a 11,6054 n/a 554.800 Oct 2014 n/a 11,7338 n/a 335.073 Oct 2015 11,3554 11,3935 1.304 474.148 Class C-H Oct 2013 n/a 11,0747 n/a 251.700 Oct 2014 n/a 11,1584 n/a 53.692 Oct 2015 n/a n/a n/a n/a Total net asset value of fund Year ended Oct 2013 1.238.472.000 Oct 2014 1.159.895.000 Oct 2015 1.043.078.000 Operating charges and portfolio transaction costs We explain below the payments made to meet the ongoing costs of investing and managing the fund, comprised of operating charges and portfolio transaction costs. Operating charges Value per share Number of shares Year ended Inc Acc Inc Acc Operating charges include payments made to M&G and to providers independent of M&G: Investment management: Charge paid to M&G for investment management of the fund (also known as Annual Management Charge). Administration: Charge paid to M&G for administration services in addition to investment management any surplus from this charge will be retained by M&G. Share class hedging: Charge paid to M&G for currency hedging services to minimise exchange rate risk for the share class. Oversight and other independent services: Charges paid to providers independent of M&G for services which include depositary, custody and audit. Operating charges do not include portfolio transaction costs or any entry and exit charges (also known as initial and redemption charges). The charging structures of share classes may differ, and therefore the operating charges may differ. For this fund there is no difference between operating charges and ongoing charges figures. Portfolio transaction costs Portfolio transaction costs are incurred by funds when buying and selling investments. These costs vary depending on the types of investment, their market capitalisation, country of exchange, method of execution and the quality of research provided. They are made up of direct and indirect portfolio transaction costs: Direct portfolio transaction costs: Broker execution commission, taxes, and costs of research from brokers and other research providers. Indirect portfolio transaction costs: Dealing spread the difference between the buying and selling prices of the fund s investments; some types of investment, such as fixed interest securities, have no direct transaction costs and only the dealing spread is paid. Investments are bought or sold by a fund when changes are made to the investment portfolio and in response to net flows of money into or out of the fund from investors buying and selling shares in the fund. 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. The table below shows direct portfolio transaction costs paid by the fund before and after that part of the dilution adjustment relating to direct portfolio transaction costs. 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. Direct portfolio transaction costs [a] Three year 31.10.15 31.10.14 31.10.13 average % % % % Broker commission 0,00 0,00 0,00 0,00 Taxes 0,00 0,00 0,00 0,00 Costs before dilution adjustments 0,00 0,00 0,00 0,00 Dilution adjustments [b] 0,00 0,00 0,00 0,00 Total direct portfolio transaction costs 0,00 0,00 0,00 0,00 [a] As a percentage of average net asset value. [b] In respect of direct portfolio transaction costs. Operating charges are the same as the ongoing charges shown in the Key Investor Information Document, other than where an estimate has been used for the ongoing charge because a material change has made the operating charges unreliable as an estimate of future charges. ANNUAL LONG REPORT AND AUDITED FINANCIAL STATEMENTS October 2015 13