2. We go where the dividends grow Global Dividend Investing Joint Investment Forum, January 2011 Stuart Rhodes, Fund manager

3. 2 Breakdown of real equity returns by country (1970 – November 2010) Average annual real return (%) Dividends matter globally Source: SG Quantitative Research as at 30 November 2010 The importance of dividends Dividends account for the dominant part of total equity returns -4 -2 0 2 4 6 8 10 USCanadaUKGermanyFranceJapanAustralia Change in valuationDividend yieldDividend growth

4. 3 Taking a long-term view….. Contribution to total returns …..but you don’t have to wait a lifetime Source: GMO as at August 2010 Dividend yieldDividend growthChange in valuation 0 20 40 60 80 100 % 1 year time horizon5 year time horizon Breakdown of US real equity returns for every 1 year and 5 year period since 1871

5. 4 Three pillars of dividend investing DON’T separate income and growth DON’T be tempted by very high yields DON’T confine yourself to the UK

6. 5 Rising dividends help a company become better Companies need to grow to support a rising dividend stream Dividends regulate the amount of money available for growth Investment for growth is focused on the most profitable projects A key element of financial discipline An integral part of good company management

7. 6 US ‘dividend achievers’ Source: Mergent’s Dividend Achievers as at 30 November 2010 25 years of consecutive dividend increases

8. 7 Return (%) Long-term dividend growth = higher share prices Dividends and share prices go hand in hand Source: Mergent’s Dividend Achievers as at 30 November 2010; Bloomberg as at 31 December 2010. *US companies with a 25-year track record of consecutive dividend growth Capital growth vs. total return: US returns over 10 years to Oct 2010

9. 8 ADP 35 years of consecutive dividend growth ADP: dividends assuming 10% annual growth over 10 years Dividend per share (USD) Purchase price (July 2008) $42.29 $1.32 $3.53 Yield at purchase 3.1% Source: M&G, Bloomberg as at 31 December 2010 $25.22 in dividends over 10 years = 60% of initial investment

10. 9 Three pillars of dividend investing DON’T separate income and growth DON’T be tempted by very high yields DON’T confine yourself to the UK

11. 10 The pitfalls of high yield strategies High yield is not an automatic signal of value High yield is usually a sign of trouble High yield is often a reflection of limited potential Yield not to temptation

12. 11 The pitfalls of high yield strategies Companies under pressure

13. 12 J Sainsbury J Sainsbury: 10-year dividend track record and share-price performance Dividend per share (p) Share price (p) 393p 376p 14.3p 14.2p Source: Bloomberg as at 31 December 2010 Pukka returns? Yield 3.6% Be good to yourself: don’t focus on yield alone

14. 13 Focus on dividend growth Backing companies that understand shareholder value

15. 14 M&G Global Dividend Fund Source: M&G as at 31 March 2010. Market data from Standard & Poor’s (US), Citigroup (Japan), Evolution Securities (Europe) and Capita Registrars (UK). Increasing distribution in a difficult environment Stock selection is absolutely key Return (%) Dividend growth in 2010/2011E US Japan Europe UK M&G Global Dividend Fund -30 -20 -10 0 10 20 30 2009/20102010/2011E US Japan Europe UK M&G Global Dividend Fund

16. 15 M&G Global Dividend Fund Source: M&G as at 31 December 2010. UK, European data from Evolution Securities; US, Japan data from Societe Generale based on IBES consensus estimates. It will take time for dividends to recoup lost ground The power of long-term compounding returns Return (%) Dividend growth in 2010/2011E US Japan Europe UK M&G Global Dividend Fund -30 -20 -10 0 10 20 30 2009/20102010/2011E

17. 16 Three pillars of dividend investing DON’T separate income and growth DON’T be tempted by very high yields DON’T confine yourself to the UK

18. 17 The UK remains highly concentrated UK’s top dividend payers as % total market dividends Six stocks account for more than 40% of UK dividends % So where should investors look for dividends? Source: Citigroup as at 16 December 2010.

19. 18 Opportunities abroad US – America’s got talent World’s largest stockmarket 44% of the world by market cap High standards of financial discipline Home to many of the world’s best companies Long track record of dividend growth 90 ‘dividend achievers’ with uninterrupted dividend growth of 25 years or more Source: Mergent’s Dividend Achievers as at 31 August 2010

20. 19 Opportunities abroad Australia – Bonzer Strong equity culture Not just an economy tied to commodities Companies understand shareholder value One of the fastest rates of real dividend growth in the world since 1900 Favourable tax treatment Franking system allows investors to receive tax credits on dividends Source: Credit Suisse Global Investment Returns Sourcebook 2010

21. 20 Opportunities abroad Brazil – Carnival atmosphere Long-term economic growth Opportunity for companies to create value Favourable legal and tax system Law requires 25% of earnings to be paid as dividends No withholding tax on dividends Quality management teams Highest standards in emerging markets

22. M&G Global Dividend Fund Launched in July 2008 Fund size £808 million Source: M&G as at 29 December 2010. Rating as at 31 October 2010 and should not be taken as recommendation

23. 22 M&G Global Dividend Fund Region% US & Canada44.9 Europe18.3 UK8.9 Asia ex Japan8.8 Brazil7.0 Australia8.6 South Africa0.5 Source: M&G as at 30 November 2010. Figures exclude cash. Structurally underweight in Japan Regional split Geographic diversity

24. 23 M&G Global Dividend Fund Source: M&G, Morningstar as at 30 November 2010. Sterling A class shares, bid to bid, net income reinvested. *Average of nine Global Income funds in IMA Global Growth sector with continuous performance track records since 18 July 2008. Return (%) Performance since fund launch (18.07.08) Competitive returns versus UK equity income funds No. 1 global income fund since launch

25. 24 Summary DO remember: income and growth are NOT mutually exclusive DO focus on dividend growth DO look at stocks from a global perspective Dividend investing is an excellent way to build wealth

26. 25 For Investment Professionals only. Not for onward distribution. No other persons should rely on any information contained within. This Financial Promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Services Authority and provides investment products. The registered office is Laurence Pountney Hill, London, EC4R 0HH. Registered in England No. 90776