esvl montreux may 2012 screen

M&G European Strategic Value Fund

May 2012

2

Fund facts

• Fund managers: Richard Halle

Daniel White

• Launch date: 1 February 2008

• Fund size: €133 million

• Benchmark: MSCI Europe Index

• Fund manager objective: “Long term total return by investing in

undervalued European equities”

• Performance record Top quartile since inception

Source: M&G as at 31 March 2012 Ratings as at 31 March 2012 and should not be taken as a recommendation


3

50

60

70

80

90

100

110

2008 2009 2010 2011 2012

M&G European Strategic Value Fund MSCI Europe Morningstar Europe Large Cap Value Equity Sector

Performance

Source: Morningstar Pan-European database, as at 31 March 2012, bid to bid with net income reinvested Euro A class, calculated in Euros.

Rebased to 100 as at 01 February 2008 (launch).

Fund performance since launch

…. 1st quartile since inception of the fund

Reb

as

ed

to

10

0

Pan-European database

4

Fund style since inception

Source: Morningstar Style Box ®. Latest data available. * Select value strategy funds in the Morningstar Europe Large-Cap Value Equity sector

Morningstar style box

Value Core Growth

Large

Mid

Small


Peer group funds*

5

Fund style since inception

Source: Morningstar Style Box ®. As at 31st March 2012

Morningstar style box

Value Core Growth

Large

Mid

Small

Consistent value style since launch


M&G European Strategic Value Fund historic style bias

6

M&G European Strategic Value Fund Building upon the expertise of the Global Equities Team

7 PCR team members (Equities)

9 Investment Specialists (Equities)

M&G Equities Investment Team

M&G Global Equities Team

22 investment professionals

Equity Research

Investment Specialists

Fund Manager Assistants

(FMAs)

6 FMAs (Equities)

Equities Dealing Team

Portfolio Construction

& Risk

Head of Equity

Research: James Alexander

11 Analysts

Head of Dealing:

Daniel Riches

5 Dealers


Lead Fund Manager: Richard Halle

Co-Fund Manager: Daniel White

M&G European

Strategic Value Fund

Susanne Grabinger

M&G European


James Doogan

Adam Jones

Source: M&G as at 20 March 2012.

M&G European


Jonathan Morris

Ritu Vohora

Dave Fishwick

Head of Macro and

Equity Investment

David McGillveray

Head of

Investment

Oversight

Gary Cotton

Chief Executive

- Equities

Arvind Sabharwal

Director of Investment

- Equities

7

• Fund manager since launch (February 2008)

• Joined M&G in 1999 as an equity analyst

• Fund Manager for various institutional mandates on a

European Value strategy since 2001

• CFA charterholder

Lead Fund Manager



May 2012

Richard Halle, Fund Manager

9

• Why European Value now?

• The M&G European Strategic Value proposition

• Opportunities for the European Value Investor

Agenda

10

Investing in Europe now?

Source: Front covers of Focus, Economist, Liberation and various pictures of Angela Merkel

11

9

10

11

12

13

14

15

0

1

2

3

4

5

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

Year

Source: M&G, DataStream, European market inc UK, 29 February 2012. * ROE – Return on Equity

European market

Tre

nd

RO

E E

uro

pe

an

Co

mp

an

ies

Pri

ce

/Bo

ok

Eu

rop

ea

n E

qu

itie

s

Long-term average

Price/Book Trend ROE*

European equities are attractively priced Price to book valuation in Europe

12

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Higher dispersion and better valuation signals

Lower dispersion and poorer valuation signals

Valuation dispersion

Source: SocGen, as at 29 February 2012. *Dispersion is defined as standard deviation of Price to Book ratios of the European market

Sta

nd

ard

de

via

tio

n f

rom

ave

rag

e d

isp

ers

ion

*

European equities valuation dispersion

Dispersion between cheapest and most expensive

13




Agenda

14 Source: M&G Investment Management, backtest as of end of April 2012.

2.7%

1.0%

-0.3%

-1.8%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Three-year average annualised excess returns since 1988

Price to Book Quartiles

Value investing: the theory

Cheapest Most Expensive

Buy the cheapest stocks in order to outperform

15

Investment process

0%

25%

50%

75%

100%

Au

tos

Ba

nk

s

Ba

sic

Ma

teri

als

Co

nsu

me

r S

erv

ices

He

alt

hca

re

Ind

us

tria

ls

Insu

ran

ce

Me

dia

Oil &

Ga

s

Fin

an

cia

l S

erv

ice

s

Sta

ple

s

Tec

hn

olo

gy

Tele

co

ms

Uti

liti

es

Objective: to identify stocks in the cheapest quartile

Cheapest

Most Expensive

Adjusted

price-

to-book

Investment

Universe

Stage 1: Strict screening process

16

Investment process

Financial

Strength

Business

Durability

Management

Behaviour

Covenants

Goodwill &

intangible

assets

Debt maturity

Hidden asset

values Contingent

liabilities

Pension

liabilities

Operating

leases

Working

capital

Industry Structure

Competitive Dynamics Value Chain

Business Model

sustainability Entry barriers Return on

capital profile

Product

Lifecycle

Bargaining

Power

Dividend Policy

Capital Allocation

Corporate Governance

Poison Pills

Attitude

Track record

Experience

Objective: to exclude stocks with material barriers

to mean reversion

Stage 2: Fundamental analysis

17

Fundamental analysis

Adjusted

price-to-book 0.88x 0.76x

Financial

strength

Undervalued property assets

Manageable level of fixed charge cover

Dangerously low level of fixed charge

cover

Business

durability

Best in class retailer

Strong organic growth in difficult market

Weak performance

Unclear strategy

Management

behaviour

Family controlled

Conservative management

CFO recently departed due to poor

performance

Aggressive international expansion

Retailers

Source: M&G, as at April 2011 (at time of purchase).

Add value by excluding poor businesses

http://www.signetjewelers.com/sj/pages/home

18

Fundamental analysis

0

20

40

60

80

100

120

140

Apr-2011 Jul-2011 Oct-2011 Jan-2012 Apr-2012

Hornbach

Praktiker

Performance – Hornbach and Praktiker

Hornbach – purchased in April 2011

Source: M&G, Datastream as at 20th April 2012

Ind

exed

to

100

at

tim

e o

f p

urc

has

e Financial strength

Business durability

Management behaviour

+18.2%

-81.0%

19

Investment process

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Stock detracted from performance of fund Stock added to performance of fund

+1.6% +7%

Top 20 (19%) Bulk of Portfolio of 116 stocks (81%)

Source: Xamin, investment returns (gross of fees) relative to MSCI Europe as at 31 December 2011

… successful implementation of process

Process drives returns …

Value added by stock relative to MSCI Europe Index (since inception)

20




Agenda

21

The current €uro crisis creates investment opportunities

1. Valuations matter

2. Europe is not one homogenous mess

3. European economy ≠ European equities

22

Breakdown of the fund

18%

57%

25% Hard Currency

Europe Focused

Global Businesses

Source: M&G, as at 31st March 2012

2. Europe is not one

homogenous mess

1. Valuations matter


23

Fund characteristics

Source: Leverage from Style Research as at 31 March 12, Price to book and Price to Earnings (PE) for fund from factset, for MSCI Europe from Bloomberg as at 20th April 2012,

as at market rebased to 100

Price to Book PE Leverage

Market Fund

1.4

9.8 1.0

13.0

28% valuation discount to the market

127%

107%

24

Value investing in real life

25

Conclusion

• Market environment remains poor, but

– Valuations matter

– Europe is not one homogenous economy

– European economy ≠ European equities

• It is a wonderful time to construct a European value portfolio

Prices may fluctuate and you may not get back your original investment.

This document is designed for investment professionals’ use only, not for onward distribution to any other person or entity. For Switzerland: Distribution of this document in

or from Switzerland is not permissible with the exception of the distribution to qualified investors according to the Swiss Collective Investment Schemes Act, the Swiss

Collective Investment Schemes Ordinance and the respective Circular issued by the Swiss supervisory authority ("Qualified Investors"). Supplied for the use by the initial

recipient (provided it is a Qualified Investor) only.

In Spain 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 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.

The collective investment schemes referred to in this document (the "Schemes") are open-ended investment companies with variable capital, incorporated in England and Wales.

In the Netherlands, all funds referred to, with the exception of M&G Investment Funds (2), M&G Investment Funds (5), M&G Investment Funds (9) and the M&G Dynamic Allocation Fund,

are registered with the Dutch regulator, the AFM.

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 prospectus, Key Investor Information Document (KIID), annual report and subsequent semi-annual report, are available free of charge, in paper form, from the ACD:

M&G Securities Limited, Laurence Pountney Hill, London, EC4R 0HH, GB, or one of the following: M&G International Investments Limited, German branch, Bleidenstraße 6-10, D-60311

Frankfurt am Main, the German paying agent J.P. Morgan AG, Junghofstraße 14, D-60311 Frankfurt am Main, the Austrian paying agent, Raiffeisen Bank International A.G., Am

Stadtpark 9, A-1030 Wien, the Luxembourg paying agent, J.P. Morgan Bank Luxembourg S.A., European Bank & Business Center, 6 c route de Treves, 2633 Senningerberg,

Luxembourg, the Danish paying agent, Nordea Bank Danmark A/S Issuer Services, Securities Services, Hermes Hus, Helgeshøj Allé 33, Postbox 850, DK-0900, Copenhagen C,

Denmark, Allfunds Bank, Calle Estafeta, No 6 Complejo Plaza de la Fuente, La Moraleja 28109, Alcobendas, Madrid, M&G International Investments Limited, 34 Avenue Matignon,

75008, Paris, France or from the French centralising agent of the Fund: RBC Dexia Investors Services Bank France. For Switzerland: Please refer to M&G International Investments Ltd.,

Bleidenstraße 6-10, D-60311 Frankfurt am Main or, for Sweden, from the paying agent, Skandinaviska Enskilda Banken AB (publ), Sergels Torg 2, 106 40 Stockholm, Sweden. For Italy,

they can also be obtained from one of the appointed paying agents, details of which can be found by visiting the contact section on the following website: www.mandg-investments.it.

Before subscribing you should read the prospectus, which includes investment risks relating to these funds.

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

Services Authority and registered with the CNMV in Spain.

Past performance is not a guide to future performance. Performance stats are quoted gross of Italian tax on capital gains

27

Appendix

28


%

Source: Morningstar, Inc (Pan-European Marketed database) as at 31st March 2012. Figures in Euros, bid to bid, net income reinvested.

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

2008 2009 2010 2011 YTD 2012

M&G ESVL €A MSCI Europe EUR Europe Large-Cap Value Equity sector avg

Performance in each calendar year since launch

29

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Valuations matter

Source: Datastream as at 14th February 2012

Book value is much less volatile than earnings

European companies, yearly change

Book Value Growth Earnings Growth

30 Source: Morgan Stanley as at 05th October 2011, Interbrand, “Top 100 Brands 2010”

European economy ≠ European equities

% Revenues of European companies in Europe

50

55

60

65

70

75

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

39 of 100 Most Valuable Brands are European

Developed Europe

54%

North America,

15%

Others, 2%

Emerging Markets,

29%

% Revenues of European companies

31 Source: Bloomberg & Company Data, as at 31st December 2011; *EV/tonne: Enterprise Value per tonne cement produced

0

50

100

150

200

250

300

Ce

mex

Re

pla

ce

men

tC

ost

He

ide

lberg

Ce

men

t

Ho

lcim

La

farg

e

Ita

lcem

enti

Buzzi

1. Valuations matter Stock example: Buzzi

Cement Capacity US$ EV/ tonne*

32

2. Europe is not one homogenous mess Stock Example: Hornbach

Source: Bloomberg, as at 31st December 2011, valuation as at 14th February 2012

HORNBACH`s Market Share in Germany

4.9% 5.3% 5.6%

6.1% 6.7%

7.1% 7.6% 7.7%

8.1% 8.3% 8.5% 8.7% 8.9%

1998 2000 2002 2004 2006 2008 2010

Germany

Other AAAEurope

Other Europe

Revenue by Geography

Valuation

Hornbach Home Depot

PE 11 18

Price to Book 1.3 4

33


North America and Oceania

42% Middle East, Africa and

Asia 29%

Europe 29%

Source: Bloomberg FY 2010, valuation as at 14th February2012; EV/EBITDA: Enterprise Value/EBITDA (earnings before interest, tax, depreciation and amortization)

Stock Example: BIC

0

2

4

6

8

10

12

BIC P&G ColgateE

V /E

BIT

DA

Revenue Valuation

34

9

10

11

12

13

14

15

16

17

18

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

US EU

Stock example: Valeo Valuations matter

Source: Bloomberg, as at 14th February 2012, Auto sales USA and Europe in units: Redburn as at 14th February 2012; EV/EBITDA: Enterprise Value/ EBITDA (earnings before interest, tax,

depreciation and amortization)

Valeo 2012

PE 7.2

Price to Book 1.2

EV/EBITDA (inc

Pension) 2.9

Dividend Yield 3.6

USA and European auto sales

un

its s

old

, m

illio

ns

35

Stock example: Millennium & Copthorne

14%

11%

17%

7% 11%

31%

9%

New York Regional US

London Rest of Europe

Singapore Rest of Asia

Source: Millennium & Copthorne Hotels Annual Report 2010, Bloomberg as at 18th January 2012

0

0.5

1

1.5

2

2.5

3

3.5

Millenium Hyatt Wyndham StarwoodP

rice t

o B

oo

k

European economy ≠ European equities

Assets Split Valuation

36

7

8

9

10

11

12

13

14

15

Jan-11 Jul-11 Jan-12

UBS

• Financial strength

– One of the strongest core tier 1 capital

ratios in the industry

– Diversified funding with surplus long

term liquidity

– Limited exposure to peripheral

European banks & sovereigns

• Business durability

– Strong wealth management franchise

with high ROE

– Investment bank is undergoing

extensive restructuring

• Management behaviour

– Significant amount of management

change

Sha

re p

rice

in E

UR

Buy discipline UBS – purchased September 2011

Financial strength

Business durability


Initiated Position

Source: M&G, Datastream as at 16th March 2012

37

70

80

90

100

110

120

130

Jan-11 Jul-11 Jan-12

Morrison Sainsbury


– ~100% freehold property portfolio

– Modest balance sheet gearing

– Fully funded pension obligation


– Number 4 UK Food retailer

– High degree of vertical integration

– Not expanded aggressively into

non-food unlike competitors


– Conservative & disciplined track

record

Inde

xed

to 1

00 a

t tim

e of

sw

itch

Buy discipline Financial strength

Business durability


Switch to Morrison

Morrisons – purchased in February 2011


38

0

10

20

30

40

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Signet


– Renegotiation of debt covenant

removed outstanding barrier to

mean reversion


– US & UK jewellery retailer

– Market leading position in US

where significant capacity exiting

the market


– Conservative approach to store

expansion has put Signet in

stronger position versus

competitors

Buy discipline Financial strength

Business durability


Initiated

position

Signet – purchased June 2009

Launch of the Fund

on Feb 1st 2008


Sha

re p

rice

in E

UR

39

2.5

7.5

12.5

17.5

22.5

2006

2007

2008

2009

2010

2011

2012

Buy discipline Electrolux – purchased February ‘08 to March ‘09


Financial strength

Business durability


Sha

re p

rice

in E

UR

Initiated Position

Launch of the Fund

on Feb 1st 2008


– Reasonably strong balance sheet

(almost debt free by FY2009)


– Restructuring program removed

main barrier to mean reversion

(previously high cost production

versus competitors)

– Falling steel price provided strong

raw material tail wind


– Strong track record in

restructuring, cost cutting and

margin improvement

40

0

1

2

3

4

5

6

7

8

9

10

11

12


Bank of Ireland

Sell discipline Bank of Ireland

Source: M&G, Datastream as at 16th March 2012; NAMA: National Asset Management Agency

Financial strength

Business durability


Initiated Position

Launch of the Fund

on Feb 1st 2008

Sold

• Bought September 2009,

sold February 2010

• Still in cheapest quartile

when sold

• New disclosure on NAMA

assets indicated financial

barrier to mean reversion

Sha

re p

rice

in E

UR

41

0

1

2

3

4


Erdemir

Sell Discipline Erdemir


Financial strength

Business durability


Initiated Position

Launch of the Fund

on Feb 1st 2008

Sold

• Bought February 2008, sold

June 2008

• Fundamentals still looked

solid

• Screening process

highlighted fact that

valuation was no longer

attractive

Sha

re p

rice

in E

UR

Prices may fluctuate and you may not get back your original investment.

This document is designed for investment professionals’ use only, not for onward distribution to any other person or entity. For Switzerland: Distribution of this document in

or from Switzerland is not permissible with the exception of the distribution to qualified investors according to the Swiss Collective Investment Schemes Act, the Swiss

Collective Investment Schemes Ordinance and the respective Circular issued by the Swiss supervisory authority ("Qualified Investors"). Supplied for the use by the initial

recipient (provided it is a Qualified Investor) only.

In Spain 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 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.

The collective investment schemes referred to in this document (the "Schemes") are open-ended investment companies with variable capital, incorporated in England and Wales.

In the Netherlands, all funds referred to, with the exception of M&G Investment Funds (2), M&G Investment Funds (5), M&G Investment Funds (9) and the M&G Dynamic Allocation Fund,

are registered with the Dutch regulator, the AFM.

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 prospectus, Key Investor Information Document (KIID), annual report and subsequent semi-annual report, are available free of charge, in paper form, from the ACD:

M&G Securities Limited, Laurence Pountney Hill, London, EC4R 0HH, GB, or one of the following: M&G International Investments Limited, German branch, Bleidenstraße 6-10, D-60311

Frankfurt am Main, the German paying agent J.P. Morgan AG, Junghofstraße 14, D-60311 Frankfurt am Main, the Austrian paying agent, Raiffeisen Bank International A.G., Am

Stadtpark 9, A-1030 Wien, the Luxembourg paying agent, J.P. Morgan Bank Luxembourg S.A., European Bank & Business Center, 6 c route de Treves, 2633 Senningerberg,

Luxembourg, the Danish paying agent, Nordea Bank Danmark A/S Issuer Services, Securities Services, Hermes Hus, Helgeshøj Allé 33, Postbox 850, DK-0900, Copenhagen C,

Denmark, Allfunds Bank, Calle Estafeta, No 6 Complejo Plaza de la Fuente, La Moraleja 28109, Alcobendas, Madrid, M&G International Investments Limited, 34 Avenue Matignon,

75008, Paris, France or from the French centralising agent of the Fund: RBC Dexia Investors Services Bank France. For Switzerland: Please refer to M&G International Investments Ltd.,

Bleidenstraße 6-10, D-60311 Frankfurt am Main or, for Sweden, from the paying agent, Skandinaviska Enskilda Banken AB (publ), Sergels Torg 2, 106 40 Stockholm, Sweden. For Italy,

they can also be obtained from one of the appointed paying agents, details of which can be found by visiting the contact section on the following website: www.mandg-investments.it.

Before subscribing you should read the prospectus, which includes investment risks relating to these funds.

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

Services Authority and registered with the CNMV in Spain.

Past performance is not a guide to future performance. Performance stats are quoted gross of Italian tax on capital gains

esvl montreux may 2012 screen

Business

respective

laurence pountney

route de treves

french centralising

appointed

austrian paying

danish paying

nordea bank