February 2016
Returns in euros (rebased to 100 as at 12 July 2004) Phil Cliff s performance track record Ten years of excellent returns in European equities 400 Threadneedle (July 04 August 07) Pan European Accelerando Fund: 76.2% Occam (September 08 October 11) European Focus Fund: -0.4% M&G (April 12 Present) Pan European Dividend Fund: 50.3% 350 MSCI Europe Index: 61.5% MSCI Europe Index: -11.5% MSCI Europe Index: 44.4% Quartile ranking 1 : 1 Quartile ranking 2 : 1 Quartile ranking 3 : 1 300 250 200 Career annualised returns*: Phil Cliff s funds: 10.2% pa MSCI Europe Index: 7.5% pa Career cumulative return: 164% MSCI Europe Index cumulative return: 106% 150 100 *Phil Cliff combined performance of the following funds and periods: Threadneedle Pan European Focus RN EUR (formerly the Pan European Accelerando fund) from 12 July 2004 to 16 August 2007, Liontrust Pan European Fund A EUR (formerly the Occam European Focus fund) from 8 September 2008 to 3 October 2011 and M&G Pan European Dividend EUR A from 2 April 2012 to 31 January 2016. Annualised returns over period whilst managing funds. Source: M&G, Morningstar Inc., Pan European database, 31 January 2016, euro A class shares, net income reinvested, price to price. Quartiles Morningstar peer groups: 1) Large Cap Growth, 2) Large Cap Blend, 3) Europe Equity Income
Fund facts Fund manager: Phil Cliff Deputy fund manager: Sam Ford Fund manager tenure: Since 2 April 2012 Fund size: 98 million Comparative index: MSCI Europe Index Yield objective: Yield premium to the European average Distribution objective: Increase annual distributions over the long term Performance objective: Total return (combination of income and capital growth) Copyright 2015 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The Morningstar Rating is an assessment of a fund s past performance based on both return and risk which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision. Source: M&G, 31 January 2016. Ratings: Morningstar Inc., as at 31 December 2015 and should not be taken as recommendations
Best performing fund in the peer group over one year 6 months % 1 year % 3 years % pa Manager tenure from 02 Apr 12 % pa -12.3-0.4 10.3 11.2 MSCI Europe Index -13.4-4.9 8.7 10.0 Morningstar Europe Equity Income sector average -11.9-4.9 8.2 9.0 Quartile ranking (Percentile) 3 (65) 1 (1) 2 (28) 1 (24) Source: Morningstar Inc., Pan European database, 31 January 2016, euro A class shares, net income reinvested, price to price
A core fund, not a high-yield value strategy Style map: vs European equity income funds > 1bn Source: Morningstar Direct, as at end December 2015. Pan European Marketed Database. Primary share class in sector. Top 6 by AUM at dates shown
A core fund consistent with other mainstream funds Style map: vs European equity funds* (ex. small cap) Source: Morningstar Direct, as at end December 2015. Pan European Marketed Database. Primary share class in sector. *Sectors used: Europe Equity Income, Europe Large-Cap Value, Europe Large-Cap Blend, Europe Large-Cap Growth, Europe Mid-Cap and Europe Flex-cap. Top 10 by AUM at dates shown
Sam Ford Biography Joined M&G in 2014 as a dedicated analyst to the Income team and was appointed deputy fund manager of the M&G Pan European Dividend Fund, M&G Dividend Fund and M&G Extra Income Fund in February 2015 Prior to M&G, Sam worked at Alliance Trust, most recently as an investment manager with the Global Equities team He graduated from the University of Strathclyde with a masters degree (merit) in chemical and process engineering and is a CFA charterholder
Sam Ford, Deputy Fund Manager February 2016
Dividend ( ) Focus on dividend growth Dividends and share prices go hand in hand 30 25 20 15 10 5 0 Dividend (stock yielding 6%, no growth) Dividend (stock yielding 4%, 10% growth) The power of long-term compounding Source: M&G, 2016. Illustrative figures only
Returns Dividend investing works in Europe Consistent dividend growth has historically led to excellent total returns Returns of European Dividend Achievers vs MSCI Europe Index and Non-dividend Payers (euros) 250% 200% Dividend achievers 207% 150% 100% 50% 0% -50% MSCI Europe 53% Non-dividend payers -55% -100% A compelling way to build wealth for your clients Source: European Dividend Achievers compiled by Societe Generale and M&G, Datastream, 31 December 2015. Ten years of stable or rising dividends, minimum market cap 1bn, minimum daily traded liquidity 2m
An efficient and disciplined investment process Screening Investable universe Portfolio construction Eliminating stocks from the European universe of 2,700 stocks Focus on dividend-paying companies Focus on stocks with sufficient liquidity (market cap > 1 billion) Identifying stocks we would like to own at some point Long-term growth prospects Cashflow generation Capital discipline Confidence in management Constructing a portfolio designed to perform in different market conditions Picking stocks from three sources of dividends Position size determined by conviction ~800 stocks ~170 stocks 30-40 stocks Understanding the potential for future dividend growth is central to the process Source: M&G, 2016
Three sources of dividends Sources of dividends Characteristics Stock examples Typical fund weighting Quality Disciplined companies with reliable growth 35 45% Assets Asset-backed cyclical companies 25 45% Rapid growth Structural growth driven by geography or product line 20 30% The importance of having a balance: well placed to perform in different market conditions Source: M&G, 31 January 2016
Fund weighting Three sources of dividends 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Quality Assets Rapid growth Sale at right price Cash We see more attractive valuations outside quality Source: M&G, 31 December 2015
Kone Rapid growth Manufacture, installation and service of elevators and escalators Dividend per share 1980 2014 Oligopolistic global market Structural trends support growth: health & safety, urbanisation Huge capacity in emerging market service footprint Potential to close margin gap with industry leader Otis Strong cashflow generation and premium ROIC Negative working capital/low capex requirement Long-term dividend progression backed by compounding growth at high rates of return Source: Kone company presentation, 25 September 2015
Concentrated portfolio : top 10 holdings Stock Country Bucket Fund % Novartis Switzerland Quality 4.8 Nordea Sweden Assets 4.7 RELX Netherlands Quality 4.3 Intesa Sanpaolo Italy Assets 4.1 BAE Systems UK Quality 4.0 BAT UK Quality 3.6 Aviva UK Assets 3.5 Bpost Belgium Quality 2.9 BP UK Quality 2.9 Bayer Germany Rapid growth 2.8 Backing conviction: 40 stocks moving to a more concentrated best ideas portfolio Source: M&G, 31 January 2016
Sector breakdown Absolute fund weighting Relative fund weighting* Information technology 2.6% Healthcare 11.6% Consumer staples 6.1% Consumer discretionary 19.7% Consumer discretionary Financials Cash Industrials Materials 2.9% 2.8% 2.4% 8.0% 7.9% Energy 5.4% Energy Information technology -1.1% -1.7% Materials 8.7% Industrials 14.1% Cash 2.9% Financials 29.0% Healthcare Utilities Telecommunications Consumer staples -2.4% -4.2% -5.1% -9.6% Source: M&G, 31 January 2016. *Relative to MSCI Europe Index
Country breakdown Absolute fund weighting Relative fund weighting* Germany 12.0% Netherlands 4.3% Norway 0.9% Belgium 2.9% US 1.7% Switzerland Spain 8.6% 2.2% Austria 2.2% Italy 5.9% Portugal 2.8% France 2.1% Sweden 7.2% Cash 2.9% Finland 7.0% UK 37.3% UK Finland Cash Sweden Portugal Italy Austria US Belgium Norway Netherlands Ireland Germany Spain Denmark Switzerland France -12.8% 0.0% -0.5% -0.6% -1.8% -2.6% -3.0% -5.8% 7.1% 5.4% 2.9% 2.8% 2.6% 2.4% 2.0% 1.5% 0.6% Source: M&G, 31 January 2016. *Relative to MSCI Europe Index
Dividend announcements in 2015 15%+ 5-15% <5% Strong dividend growth across the portfolio Special dividend / Interest distribution Andritz 100% DS Smith 14% BAT 4% Dunelm Nordea 44% Aurelius 14% Arkema 4% Jupiter Intesa Sanpaolo 40% WPP 12% Roche 3% P2P Global Investments Allianz 29% SCA 11% GlaxoSmithKline 3% Aurelius Essentra 19% Infineon 11% Sanofi 2% Hiscox Sampo 18% Prudential 10% Melrose RELX 16% SES 10% Banca IFIS 16% Hugo Boss 8% Inchcape 16% Bayer 7% Hiscox 7% Novartis 6% Solvay 6% Abertis 5% Melrose 5% Jupiter 5% Source: M&G, 31 December 2015
Annual distribution (cents per share) Yield premium and rising income IBES dividend yield since March 2012* Euro distribution and total return under Phil Cliff** 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 75 70 65 60 55 50 45 40 +19% 2014 2015 +4% 2016 180 160 140 120 100 80 60 Total return (rebased to 100 at 2 April 2012) MSCI Europe Index Annual distribution*** Total return Source: *Style Research, 31 January 2016. **M&G, Morningstar Inc., Pan European database, 31 January 2016, euro A class shares, net income reinvested, price to price. Phil Cliff s tenure commenced on 2 April 2012. *** Annual distribution for financial years ending 31 January. Please note, euro A income share class launched on 18 July 2013. The fund distributes income on a semi-annual basis (payment dates end September and end March). The IBES dividend yield is an estimated/forecast yield and differs from the fund s historic yield, which is 3.93% as at 31 January 2016 (euro A income share class). The historic yield reflects distributions declared over the past twelve months as a percentage of the mid-market price, as at the date shown. It does not include any preliminary charge and investors may be subject to tax on their distributions.
Summary Dividend investing works in Europe Robust dividend growth across our holdings Backing our convictions with a concentrated portfolio A core fund aiming to outperform with the tailwind of dividend investing
The fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash. The value of investments will fluctuate, which will cause fund prices to fall as well as rise and investors may not get back the original amount they invested. For Investment Professionals only. Not for onward distribution. No other persons should rely on any information contained within. 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 (9) reg. no 930, M&G Investment Funds (12) reg. no 1415, 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. 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 from the ACD: M&G Securities Limited, Laurence Pountney Hill, London, EC4R 0HH, GB, or Allfunds Bank, Calle Estafeta, No 6 Complejo Plaza de la Fuente, La Moraleja, 28109, Alcobendas, Madrid. Before subscribing investors should read the Prospectus, which includes investment risks relating to these funds. The information contained herein is not a substitute for independent advice. This financial promotion is published by M&G International Investments Ltd. Registered Office: Laurence Pountney Hill, London EC4R 0HH, authorised and regulated by the Financial Conduct Authority in the UK and has 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.