M&G Overview & Performance

Michael McLintock, Will Nott, Simon Pilcher and Grant Speirs

M&G
Agenda g

M&G Group overview M&G Retail M&G Fixed Income M&G Group Financials

Michael McLintock Will Nott Simon Pilcher Grant Speirs

M&Gs strategic priorities

People

Performance

Sales & profits

M&G Group overview

191bn FUM invested in equities, fixed income and property*

83bn external funds

Manage g g global assets predominantly on behalf of UK and p y

European investors

Pre tax profit of 177m (2009 results) Pre-tax

122m (H1 2010)

*as at 30 September 2010

M&G Group

Devolved business structure with centralised support

M&G Investments

Retail 102m PBT

Will Nott

Equities

Fixed Income 43m PBT

Simon Pilcher

PruPIM*

PPM** South Africa

Shared services including Risk, Compliance, Operations

*Prudential Property Investment Management y g **Prudential Portfolio Managers South Africa

Our market-leading position

Net UK retail sales
2nd quarter 2007 2nd quarter 2008 4th quarter 2008 3rd quarter 2010

TOP TEN NET RETAIL SALES Second Quarter 2007 (m) Invesco Perpetual Schroder New St N Star SWIP Artemis Jupiter BlackRock Bl kR k Standard Life M&G Investec

1,143.6 779.4 657.1 657 1 547.0 365.3 357.1 342.3 342 3 250.7 247.8 224.4

TOP TEN NET RETAIL S S O SALES Second Quarter 2008 (m) BlackRock Invesco Perpetual SWIP M&G Jupiter Mellon First State Halifax Threadneedle Martin Currie

879.2 813.9 571.3 571 3 410.9 256.9 240.5 226.4 226 4 156.8 141.1 133.0

TOP TEN NET RETAIL SALES Fourth Quarter 2008 (m) M&G Invesco Perpetual Jupiter J it SWIP BNY Mellon BlackRock Cazenove Neptune Schroder First State

1,003.9 765.2 468.7 468 7 458.5 356.9 301.9 171.3 171 3 166.6 130.2 128.3

TOP TEN NET RETAIL S S O SALES Third Quarter 2010 (m) M&G BlackRock Standard Life Inv St d d Lif I BNY Mellon First State Invesco Perpetual Schroder SWIP HSBC AXA

1,282.5 1,032.3 760.0 760 0 567.2 520.3 357.8 291.5 291 5 260.2 250.5 245.4

8 consecutive quarters at number 1 for gross and net UK Retail sales

Source: Pridham Report

2nd largest UK retail fund manager

UK retail FUM bn Jan 2008 UK retail FUM bn end September 2010
36.0

40 35 30 25 20 15 10 5 0

26.5 19.4 13.2 11.8 11.7

40 35 30 25 20 15 10 5 0

25.6 21.6 17.4 17 4 17.2 17 2 16.3 14.5 14.5 13.0

12.2

10.3

10

7.7

6.9

6.8

119% growth in FUM in under 3 years

Source: IMA

In ve sc o
7

In ve sc o

Pe rp et ua l M &G Fi de l it y Ju Th pi te re r ad Sc ne ot ed t is h le W id ow s St .J L& am G es 'P la ce Sc hr od er Bl s ac kR oc k

Pe rp et ua l Fi de lit y Sc Ju ot pi t is te h r W id ow s

M Th &G re ad ne ed le Sc hr Ca od er pi ta s Fi na nc e

Bl

ac kR oc k

L& G

How have we achieved this position?

Strength across key asset classes in the UK g y
Est. net sales year ending Sept 10 (m)
1,000 900 800 700 600 500 400 300 200 100 0

907.8 712.9

415.7

382.7 192.0 172.3 162.7 125.1 119.1 107.4

M&G Recovery Fund

SWIP UK Enhanced Equity

BlackRock SWIP Foundation Collective Growth Investment Funds UK Equity Tracker

Prudential UK Growth

L&G (N) T racker UK T racker T rust

AXA Framlington BlackRock UK JOHCM UK UK Select Special Situations Opportunities Fund Opportunities Fund

Newton Income Fund

Number 1 money taker in UK equities

Source: Lipper FMI - Lipper FundFile as at end-September 2010. Figures in GBP. M&G data sourced internally and based on UK retail sales only pp pp p g y y (excluding internal flows).

How have we achieved this position?

Strength across key asset classes in the UK g y
Est. net sales year ending Sept 10 (m)
500 450 400 350 300 250 200 150 100 50 0
Newton Global Higher Income Aberdeen World Equity M&G Global Basics St James's Place Fund Worldwide Opportunties Unit Trust M&G Global Dividend Fund Sarasin EquiSar Global Thematic Vanguard FTSE Schroder QEP Developed World Global Active Value ex-U.K. Equity Index Fund Neptune Global Equity Fund Jupiter Merlin Worldwide Portfolio

443.7 396.6 396 6 330.5 294.4 251.3 208.3 207.1 160.2 148.4 107.7

Number 1 money taker in global equities

Source: Lipper FMI - Lipper FundFile as at end-September 2010 Figures in GBP. M&G data sourced internally and based on UK retail sales only end September 2010. GBP (excluding internal flows).

How have we achieved this position?

Strength across key asset classes in the UK g y
Est. net sales year ending Sept 10 (m) 1,200 1,100 1061.1 1007.7 1,000 900 783.1 800 700 600 500 390.9 400 300 200 100 0
M&G Strategic M&G Optimal L&G Dynamic Henderson All Corporate Income Fund Bond Stocks Credit Bond

380.8

371.3

344.6

281.8

267.1

266.6

243.5

229.1

226.7

223.4

215.8

Santander Sterling Corporate Bond

Aviva Investors Corporate Bond

SWIP Sterling Credit Advantage

L&G High Income

IP Tactical Bond Fund

Henderson Fidelity Standard Life Strategic Bond Strategic Bond Select Income

Henderson Long Dated Credit

Fidelity Moneybuild Income

Cazenove Strategic Bond

Number 1 money taker in Fixed Interest

Please note that LV= Short Dated Corporate Bond and LV= Medium and Long Dated Corporate Bond have been removed from the top selling fund list as the majority of the funds estimated net sales over the latest year are sourced from internal seed capital.

Source: Lipper FMI - Lipper FundFile as at end-September 2010 Figures in GBP *UK IMA fixed income sectors consists of the IMA Corporate Bond 2010. GBP. UK Bond, IMA Strategic Bond, IMA High Yield and IMA UK Gilts sectors. M&G data sourced internally and based on UK retail sales only (excluding internal flows).

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How have we achieved this position?

Strength across key asset classes in the UK g y
Est. net sales year ending Sept 10 (m) 800 755.3 722.7
700 600 500 400 300 200 100 0 M&G Property SWIP Property T hreadneedle Ignis UK L&G UK Aviva Investors Schroder Skandia Portfolio T rust UK Property Property Fund Property T rust Property Global Property Property Fund T rust Securities Fund Clerical Medical UK Property Aviva Investors Asia Pacific Property

223.0

219.4

214.3

188.2 109.4 107.9 97.9 88.9

Number 1 money taker in Property

Source: Lipper FMI - Lipper FundFile as at end-September 2010 Figures in GBP. M&G data sourced internally and based on UK retail sales only end September 2010. GBP (excluding internal flows).

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M&G Fixed Income

One of the largest fixed income investors in Europe
2006: 15% of top 40 UK pension funds 2009: 70% of top 40 UK p p pension funds

Dynamic and innovative investment approach

Pioneer new investment products and thinking

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How have we achieved this position?

Investment-led Stable team with low turnover Strong identity around culture and brand Single fund management centre Focus on organic growth

13

M&G Group
Recognition for our investment leading proposition g gp p

Outstanding Investment House (UK)

14

M&G Retail
Will Nott, CEO M&G Securities

15

M&G Retail fund performance

Long term performance remains strong g p g
Rolling 3 year Retail fund performance
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

62% retail funds above median

over 3 years

Top quartile

60% equity funds above median

Upper quartile

over 3 years

Lower quartile Bottom quartile

67% retail fixed income funds

above median over 3 years

Investment performance is fundamental to success

Source: M&G management information

S0 O 8 -0 N 8 -0 D 8 -0 J- 8 0 F- 9 09 M -0 A 9 -0 M 9 -0 J- 9 0 J- 9 0 A 9 -0 S- 9 0 O 9 -0 N 9 -0 D 9 -0 J- 9 1 F- 0 10 M -1 A 0 M 10 -1 J- 0 1 J- 0 1 A 0 -1 S- 0 10

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M&G Retail today

Transformation of the Retail business since 2000

M&G Retail net sales 2000 end Sept 2010 (bn) ( )

8

7.3
7 6

5.1
Sa ales bn
5

4 3

2.4 1.7 06 0.6 0.2

2003 2004 2005 2006

2.1

2 1

1.8

0.1
0

0.2
2001

0.3
2002

2000

2007

2008

2009

YTD 2010

Source: M&G management information

17

Transformation of M&G Retails asset base

Strong growth despite a challenging external environment gg p g g
40
M&G Retail external FUM bn Growth of M&G Retail external FUM 2001 end Sept 2010 (bn)

30

19.9bn FUM Nov-07

35.9bn FUM Sep -10

20

10

0 Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10
Source: M&G management information

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Improving the diversification of the business

By country y y
FUM UK vs. International 2001 FUM UK vs. International 2005 FUM UK vs. International to 30/9/10
INTERNATIONAL INTERNATIONAL

UK

UK

UK

Total FUM 11.5bn

Total FUM 13.9bn

Total FUM 35.9bn

Expansion into Europe diversifying the asset base

Source: M&G management information 2001 and 2005 data as at end Dec

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Improving the diversification of the business

By asset class y
FUM by asset class 2001 FUM by asset class 2005 FUM by asset class 2010 to 30/9/10 Property Multi Asset

Multi Asset

t Multi Asset

Property erty

Bond

Equity

Bond

Equity

Equity Bond

Total FUM 11.5bn

Total FUM 13.9bn

Total FUM 35.9bn

Strong growth in fixed income assets

Source: M&G management information 2001 and 2005 data as at end Dec

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Looking ahead
Significant prospects for future g g p p growth

Size of Fund market

(FUM at end 2009)

M&G Retail Market share

UK Europe

481bn

4.9%

4,118bn

0.1%

Opportunities for M&G Retail even without underlying market growth

Source: IMA, EFAMA

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Opportunities for asset managers

European distribution is opening up p p g p

We have to work together to identify ways in which we can raise standards and transparency across Europe
Financial Secretary to the Treasury, Nov 2010

The issue of restoring trust will be dependent on creating more transparency in the industry
FT January 2010

Transparency and being open and honest with clients is a crucial differentiator for asset managers
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M&G Fixed Income

Simon Pilcher, CEO Fixed Income

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M&G Fixed Income

Using management of internal assets as a platform for external growth g g p g

Internal g Deliver outstanding investment returns to in-house capital through investment in innovative d tt ti f the and attractive areas of th capital markets

Institutional

Utilise skills developed p primarily for internal client to build new business streams and diversify revenues di if

Active fund management, particularly credit

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M&G Fixed Income

A broad and growing client base g g

256 mandates 224 clients

22 have two mandates 6 have three mandates or more

Other clients from 26 countries - sovereign wealth g

funds, insurance companies and local governments

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M&G Fixed Income

Performance is a key component of success y p
Institutional All Stocks Corporate Bond Fund
20 18
90

Rolling 3 year return and tracking error (to 30 June 2010) High
100

June 2010

16
80

14 12 10 8 6 4
30 70

June 2007
Getting the risk/return blend right

The roller coaster

60

Return

50

40

2
20

All the benefits of passive p management, but with active fees

Low returns / high volatility

0 1 year 2 years Fund 3 years Benchmark 5 years

10

1.7% p.a.

2.0% p.a.

1.7% p.a.

1.1% p.a.

Low

10

20

30

40

50

60

70

80

90

100

Risk

High

100% of mandates ahead of benchmark in 3 years to Sept 2010

Sources: M&G, Mercer MPA, 30 June 2010

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M&G Fixed Income

Net sales history y
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2003 2004 2005 2006 2007 2008 2009 Ytd Q3 2009 Ytd Q3 2010

M&G Fixed Income net sales 2003 end Sept 2010 (bn)

Sources: M&G, management information

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M&G Fixed Income

Growth in external revenues
M&G Fixed Income revenues 2006 2009 m

120

M&G Fixed Income rev venues m

100 80 60 40 20 0 2006

2007

2008

2009

Internal
Sources: M&G, management information

External

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M&G Fixed Income

Innovation enhances reputation, builds trust and helps to g p , p grow client base

Social Housing Real Estate Debt Fund Secured Property Income Fund

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Secured Property Income Fund

What makes long lease property so attractive? g p p y

Pension schemes need inflation-linked income L d t d bonds are naturall iinvestments b t Long dated b d t t t but:

index-linked Government bonds are very expensive increased supply of Government bonds may impact returns conventional corporate bonds offer no direct inflation protection

Long lease property can offer:

predictable cash flows long duration increasing inflation-linked income f security of owning the underlying real estate potential for capital gain

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Secured Property Income Fund

Example of long term bond-like income from property p g p p y

Let to Tesco Property Nominees Ltd with guarantee from Tesco Plc, rated A25 year lease with Tesco responsible for insurance and all repairs Rent increases annually li k d t RPI with a fl R ti ll linked to ith floor of 2% and f d cap of 5% for first 5 years and 0% to 5% thereafter Adjoins larger retail park with 26 leading retailers Tesco pay 20.50 per sq.ft but rents next door are 40-42.00 per sq.ft. p q Tesco planning consent is open A1 with food but next door is open A1 non food

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M&G Group Financials

Grant Speirs, Group Finance Director

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M&G Group
Consistently strong net flows; exceptional in 2009 and 2010 y g ; p
16000 14000 12000 10000 8000 6000 4000 2000 0
1,169 184 2,517 1,587 416 1,345 3,104 2,720 2,998 2 998 2,238 1,312 2,095 7,517 5,700 5,117 5,962 5,400 1,093

M&G Group net sales 2003 end Sept 2010 (bn)

2003

2004

2005

2006

2007

2008

2009

Ytd Q3 2009 Ytd Q3 2010

Retail

Institutional

Sources: M&G, management information

33

M&G Group
Record FUM levels
200,000 180,000 160,000 160 000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 20 000 0
De c03 M ar -0 4 Ju n04 Se p04 De c04 M ar -0 5 Ju n05 Se p05 De c05 M ar -0 6 Ju n06 Se p06 De c06 M ar -0 7 Ju n07 Se p07 De c07 M ar -0 8 Ju n08 Se p08 De c08 M ar -0 9 Ju n09 Se p09 De c09 M ar -1 0 Ju n10 Se p10

June 2007 previous record i d 168bn

September 2010 new record 191bn

Internal

External Institutional

External Retail

Despite FTSE All Share level being 16% lower

Sources: M&G, management information

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M&G Group
Focus on growing higher margin external FUM g g g g

FUM

Average net fee rates g

External Retail* Retail

46bn

87 bps

External
External Institutional 37bn 36 bps

Internal
Sources: M&G, management information

108bn

11 bps

* Retail fees are gross annual management charges less rebates and commission payments

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M&G Group
Strong growth in p gg profits: outperforming markets p g
M&G Group profit history 2003 end Jun 2010 (m)
250

200

43 28 12

150

27 3

100

24 26 13 80 51 134 96 75 175 185 165 119

50

0 2003 2004 2005 2006 2007 2008 2009 H1 2009 H1 2010

Underlying profit

Performance Related Fees/Carried Interest

FTAS*

UCP**

* Full year average FTAS index rebased to 2003 (closing price adjusted for dividends and splits) ** Average Sterling Corporate & Collateralised All Stocks TR Index (UCP0) Index rebased to 2003
Sources: M&G, management information; Bloomberg

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Cost: Income ratio

Good cost discipline through the cycles p g y
100 90 80 70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 H1 2009 H1 2010 75 70

Cost to income ratio 2005 end June 2010

Excellent profit margins in

comparison to our peers
65 63

65

62

60

M&G Schroders Aberdeen Henderson F&C Gartmore

36.7% 25.0% 22.7% 27.6% 27.0% 24.5%

36% of current cost base

is i variable i bl

Scaleable business operating platform generates operational efficiencies

Sources: M&G, management information, full year 2009 competitor data Morgan Stanley research

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2nd largest UK retail fund manager

UK retail FUM bn Jan 2008 UK retail FUM bn end September 2010
36.0

40 35 30 25 20 15 10 5 0

26.5 19.4 13.2 11.8 11.7

40 35 30 25 20 15 10 5 0

25.6 21.6 17.4 17 4 17.2 17 2 16.3 14.5 14.5 13.0

12.2

10.3

10.0

7.7

6.9

6.8

119% growth in FUM in under 3 years

Source: IMA

In ve sc o

In ve sc o

Pe rp et ua l M &G Fi de l it y Ju Th pi te re r ad Sc ne ot ed t is h le W id ow s St .J L& am G es 'P la ce Sc hr od er Bl s ac kR oc k

Pe rp et ua l Fi de lit y Sc Ju ot pi t is te h r W id ow s

M Th &G re ad ne ed le Sc hr Ca od er pi ta s Fi na nc e

Bl

ac kR oc k

L& G