M&GAnne Richards

M&G’s key capabilities

Rising to cyclical challenges

Adapting to structural change

The future

Agenda

M&G’s key investment capabilitiesM&G Group assets under management by asset class (%), 30 September 2016

Note: Asset class breakdown excludes assets from Prudential Investment Managers South Africa business. Cash not shown. Data as at 30 September 2016Source: M&G management information

Equities

Real Estate

Multi-asset

Alternatives

One of Europe’s leading bond managers with one of the largest credit analyst teams in UK / Europe

Unconstrained, conviction investing

Managing assets in the UK, continental Europe, Asia and North America

Top-down ‘macro’ approach, with a strong valuation framework

Full range of investment disciplines including real estate finance, direct lending and infrastructure equity investment

Fixed Income

Corporate bonds

Government bonds Asset backed securities

High yield Leveraged finance

Other private debt

19.1%

43.5%

6.4%0.7%

1.0%2.4%

10.0%

8.0%

2.5% 6.4%

Total AUM: £266bn

M&G’s investment expertise: supporting the needs of a diverse range of clients

21.3%

12.8%

43.5%

7.3%

12.3%

2.7%

30.8%

49.4%

1.5% 2.9%

5.0%

9.7%

0.6%

5.3%

40.7%

9.0%3.8%

8.5%

11.3%

2.9%

0.8%

17.7%

Internal AUM: £130bn Retail AUM: £62bn Institutional AUM: £74bn

M&G Group assets under management by client type and asset class (%), 30 September 2016

Corporate bonds

Government bonds Asset backed securities

High yield Leveraged finance

Other private debt

Alternatives

Equities

Real estate

Multi-asset

Note: Asset class splits exclude assets from Prudential Investment Managers South Africa business. Data as at 30 September 2016Source: M&G management information

M&G’s key capabilities

Rising to cyclical challenges

Adapting to structural change

The future

Agenda

The OEIC range is the major part of retail assets

21.3%

12.8%

43.5%

7.3%

12.3%

2.7%

30.8%

49.4%

1.5% 2.9%

5.0%

9.7%

0.6%

5.3%

40.7%

9.0%3.8%

8.5%

11.3%

2.9%

0.8%

17.7%

Internal AUM: £130bn Retail AUM: £62bn Institutional AUM: £74bn

Corporate bonds

Government bonds Asset backed securities

High yield Leveraged finance

Other private debt

Alternatives

Equities

Real estate

Multi-asset

M&G Group assets under management by client type and asset class (%), 30 September 2016

Note: Asset class splits exclude assets from Prudential Investment Managers South Africa business. Data as at 30 September 2016Source: M&G management information

A year ago only 36% of our open ended retail funds had above median performance over one year…

42%31% 27%

16%

22%

26% 32%

26%

24%32% 25%

28%

12% 11% 16%

30%

1 year - Sep 2015 3 year - Sep 2015 5 years - Sep 2015 Since fund managertenure - Sep 2015

M&G retail investment performance weighted by number of funds (%), 30 September 2015

Top quartile

Upper quartile

Lower quartile

Bottom quartile

50%

Note: Quartile ranking based on ranking of the funds within their respective IA or Morningstar sectorsSource: M&G management information; Morningstar, Inc. combined UK and Pan-European peer groups as at September 2015. Figures in GBP, bid to bid, net income reinvested.

…that has improved to 53% at the end of September 2016

42%

27% 31% 35%27% 26%

16% 19%

22%

20%

26%31%

32% 38%

26% 18%

24%

22%

32%21%

25% 20%

28%

24%

12%

31%

11% 13% 16% 16%

30%39%

1 year - Sep 2015 1 year - Sep 2016 3 year - Sep 2015 3 year - Sep 2016 5 years - Sep 2015 5 years - Sep 2016 Since fund managertenure - Sep 2015

Since fund managertenure - Sep 2016

Retail investment performance weighted by number of funds (%), 30 September 2015 and 30 September 2016

Top quartile

Upper quartile

Lower quartile

Bottom quartile

Shorter-term UK OEIC fund investment performance is improvingNote: Quartile ranking based on ranking of the funds within their respective IA or Morningstar sectorsSource: M&G management information; Morningstar, Inc. combined UK and Pan-European peer groups as at October 2016. Figures in GBP, bid to bid, net income reinvested.

50%

Pace of outflows from retail funds is slowing as investment performance improves

346

573

(361)

(1,136)(938)

(1,902)

(1,168)

(1,566)

(1,205)(1,076)

(1,209) (1,216)

(1,692)(1,531)

(885)

(605)

(260)

(1,149)

(429)(245)

(399)

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

1,000

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16

M&G Group retail net sales (£m), January 2015 – September 2015

Brexit effect

Fund outflows are stabilising

2016

Note: Data as at 30 September 2016Source: M&G management information

M&G Optimal Income Fund has led the recoveryin performance

Sector1 year 3 years 5 years Fund manager

tenure*Return %

p.a. Quartile Return % p.a. Quartile Return %

p.a. Quartile Return % p.a. Quartile

M&G Optimal Income Euro A-H (1.62) 4 3.36 2 5.8 1 7.12 1Morningstar EUR Cautious Allocation global sector average (0.04) 2.88 3.19 2.66

M&G Optimal Income Euro A-H 5.68 1 3.45 2 6.39 1 7.08 1Morningstar EUR Cautious Allocation global sector average 3.4 2.81 3.78 2.61

M&G Optimal Income Fund investment performance, 31 December 2015

The Fund has been positioned short duration, long investment grade and shorthigh yield credit The Fund has an excellent long-term performance track record with returns

exceeding 7% p.a. since inception

and 30 September 2016

*Fund manager tenure is 20 April 2007 for M&G Optimal Income Euro A-H share class. Note: Data as at 31 December 2015 and 30 September 2016. Source: M&G management information; Morningstar inc

Market environment has been testing for M&G’sequities style for some time

An unusually long period of underperformance by Value

Global value vs. quality stocks vs. 10 year US bond yields (%), 2002 – October 2016

55

60

65

70

75

80

85

90

95

100

105

1

2

2

3

3

4

4

5

5

6

6

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

US 10y yields (LHS) MSCI World Index - value vs quality (RHS)

Note: Data as at 11 October 2016Source: Barclays Research, MSCI, Datastream

M&G’s institutional client baseStrong performance across a range of metrics

A number of funds outperform against benchmark(%), five years to September 2016

100% 100%

Real Estate Fixed Income

M&G institutional pipeline (%), 30 September 2016

32%

9%

13%

46%

Real estate

Infrastructure

Real estate mortgages /debt

Other debt / privatefinance lending

~£4bn investment pipeline across a diverse range of strategies

£14bn

£74bn

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q3 2016

M&G institutional AUM (£bn), 2003 – Q3 2016

+14% CAGR

M&G institutional client base by geography (%), 30 September 2016

84%

4% 10%

1% 1%UK

US

Europe

Asia

RoW

Includes £3.5bn from third-party European insurance companies

Note: Data as at 30 September 2016. From 2012 onwards, Prudential Investment Managers South Africa assets under management are recorded on a proportional basis reflecting M&G’s revised shareholding. Source: M&G management information

M&G’s key capabilities

Rising to cyclical challenges

Adapting to structural change

The future

Agenda

Changing demand leads to strong growth prospects for alternatives, solutions and passives

Alternatives

Active specialties

Solutions

Active core

Passives3.7% 4.0%8% 10%11.0% 10.8%

58% 49% 39% 39%

6%8%

12% 13%

20%21% 23% 22%

7% 11% 11% 12%

2003 2008 2014 2015

Global AUM split by product (%), 2003 – 2015

$34T $43T $71T $71T

ETFs ETFs

Passives ex. ETFs Passives ex. ETFs42%

(24)%

51%

7%

23%

2016 - 2020

Estimated share of cumulative net flows

2016 – 2020

100%

Source: BCG Global Asset Management Market Sizing Database 2016; BCG Global Asset Management Benchmarking Database 2016; BCG analysis

Global asset management industry faces margin pressure with an increased focus on costs

33.6

27.926.8

29.0 29.1 28.8 28.928.1 27.7

20.3

18.0 18.6 18.9 19.0 18.6 18.2 17.5 17.3

40

36

31

35 3536

3738

37

15

20

25

30

35

40

45

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2007 2008 2009 2010 2011 2012 2013 2014 2015

Net revenues and costs / AUM (bps) and operating margins / net revenues (%), 2007 – 2015

(2.0)%

(2.4)%

CAGR

Bps %Net revenues (bps) Costs (bps) Operating margins (%)

Note: “Net revenues” represent management fees net of distribution costsSource: BCG Global Asset Management Benchmarking Database 2016

More complex distribution landscape

Expert institutions with embedded investors

vResearchPortfolio management

Mutual fundsSegregated mandatesPensions fundsSovereign wealth fundsManaged accounts etc.

Multi-asset solutions Platform wrap

Savings and investments market

End customers

Intermediated / institutional customers

Institutions incl DB pension investors and

wealth managers

Direct brokers Online financial marketplacesWealth managers

IFAs

HNW investor wealth

services

Mass market low-cost self investor

Mass market advised investor

Mass affluent advised investor / DC pension

investors

Mass market self-directed investor

Robo-advice investment models

Online self service Robo holistic finance

Reporting automationEnhanced content

Online access to research Platform robo advice

Source: M&G management information

Wave of regulatory development

Shadow banking - ETFs

UCITS V

FAMR

ICSD

Shadow banking –money market funds

PRIIPs

Shareholder rights

UCITS VI

AML (4th directive)

Benchmarks

Corporate governance

CSDR

Data protection

EMIR

Dodd-Frank

MiFID 2 / MiFIR

Sanctions

SLL

Shadow banking –securities financing

Asset management market study

CCP R&R

IORP II

Senior Managers Regime

Shadow banking –securitisation

FTT

Shadow banking –liquidity / leverage

GATCA

VAT review

Source: M&G management information

Developing new capabilities led by investor needs

Private debt Absolute return solutions Distressed debt Commercial real

estate debtLong lease real

estate

Infrastructure equity

Infrastructure debt Direct lending Private equity

Source: M&G management information

Strategy launched in October 2012

Current AUM of £1,950m

Consists of two co-mingled funds and three single investor funds

Targets:– UK RPI +2.5% p.a. on a five year rolling average

– Duration of 15 – 20 years

Invests in a range of assets with contractual links to UK inflation

Returns generated by credit risk and illiquidity premia

Risk mitigated by seniority, security and bespoke covenants

Clients predominantly UK pension funds seeking to match liabilities

M&G Inflation Opportunities Funds: overviewAlternative investments case study

Proven track record with all funds ahead of target returnsSource: M&G management information

M&G Inflation Opportunities Funds: portfolio overviewAlternative investments case study

M&G Inflation Opportunities Fund portfolio breakdown (%), 31 October 2016

Cash0.5%

Index-linked gilts

23.7%

Ground rents11.8%

Income strips15.8%

Infrastructure ex. solar power

1.5%

Local authorities

2.9%

Long lease property

28.2%

Private rental sector0.1%

Public corporates

2.6%

Private corporates

3.3% Social housing

5.9%

Solar power3.8%

Student accommodation for the Royal College of Music

Lightsource solar

Drax power station

Sainsbury’s superstore -Dulwich

Islington and Shoreditch housing association

Note: Data as at 31 October 2016Source: M&G management information

3.8%

12.4%

15.9%16.4%

12.8%11.7%

10.9%

1.4%

2.8%

4.0%4.8%

4.0% 4.3% 4.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

3 months 6 months YTD 1 year 2 years 3 years Since inception

M&G Inflation Opportunities Fund performance (%), 31 October 2016

M&G Inflation Opportunities Fund Estimated RPI +2.5%

M&G Inflation Opportunities Funds: performance updateAlternative investments case study

Note: Data as at 31 October 2016. Inception date is 1 October 2012. Fund returns are quoted net of fees and benchmark returns are gross of feesSource: M&G management information

M&G Inflation Opportunities Funds: NAV growthAlternative investments case study

£1.9bn

0.0

0.5

1.0

1.5

2.0

2.5

Dec

-12

Jan-

13

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep-

14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep-

15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Feb-

16

Mar

-16

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

M&G Inflation Opportunities strategy NAV growth (£bn), December 2012 – August 2016

+95% CAGR

Note: Data as at 30 September 2016Source: M&G management information

Development, integration and implementation of a new business operating model Creation of a Luxembourg ‘super’

management company structure Establishment of a European ex. UK

MiFID firm

Aladdin system implementation Website rebuild project to improve the

functionality and user experience of M&G’s websites Investment in marketing automation

software enabling data-driven marketing plans and customer analytics

Simplification and scalability are key to meeting industry-wide margin pressure

Data and digital Fund structures

Source: M&G management information

More emphasis on sub-advisory opportunities

Joint-product development opportunities

Digital distribution

Strategic partnerships

Brexit

Adapting distribution to meet increasingly complex customer channels

The regulatory tide shows no sign of turning

Shadow banking - ETFs

UCITS V

FAMR

ICSD

Shadow banking –money market funds

PRIIPs

Shareholder rights

UCITS VI

AML (4th directive)

Benchmarks

Corporate governance

CSDR

Data protection

EMIR

Dodd-Frank

MiFID 2 / MiFIR

Sanctions

SLL

Shadow banking –securities financing

Asset management market study

CCP R&R

IORP II

Senior Managers Regime

Shadow banking –securitisation

FTT

Shadow banking –liquidity / leverage

GATCA

VAT review

Engage constructively with regulators and policymakers

Regulatory trend is towards increased complexity and greater administrative burden

Moves towards harmonisation and increased transparency canbe helpful

Source: M&G management information

M&G’s key capabilities

Rising to cyclical challenges

Adapting to structural change

The future

Agenda

Asset management is a growth industry

37.3

59.463.9

71.4

101.7

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

110.0

2004 2007 2012 2015 2020 estimate

Global AUM (USD trillion), 2004 – 2020

+42%

Source: PwC analysis 2014; BCG Global Asset Management Market Sizing Database 2016

Right capabilities to meet customer demand

Investment performance that offers value for money and meetscustomer expectations

Distribution aligned to an evolving customer base

Careful management of costs

Investment in simplification and scalability

For M&G to succeed requires…

M&G has a competitive cost / income ratio by industry standards

M&G Group cost / income ratio vs. industry peers (%), 2015

52%57% 57%

61% 62% 63% 64% 67%73%

Amundi M&G BlackRock Man Group FranklinTempleton

Schroders Henderson Aviva Investors JPMorgan AssetManagement

Peer group Average: 62%

Source: M&G management information; company annual reports

Investing for growth will see the M&G cost / income ratio rise…

M&G Group cost / income ratio (%), 2008 – 2015

61%

65%

63%

61%

59%58%

59%

57%

2008 2009 2010 2011 2012 2013 2014 2015

…but it will remain below the peer group average over the medium-termSource: M&G management information

M&G has a tradition of developing creative investment ideas which meet client needs, and a proven ability to convert these ideas into assets

under management

The future