For Investment Professionals only M&G Property Portfolio

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1 For Investment Professionals only M&G Property Portfolio Investing responsibly. \ I " f I f I

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3 Investing responsibly 3 Our approach to Responsible Property Investment M&G Real Estate has a Responsible Property Investment (RPI) strategy which seeks to ensure that our activities enrich the lives of the people and communities we operate in and by doing so creates value for our investors, society and the environment. Our RPI strategy has four focus areas: socio-economic benefit; environmental excellence; health, wellbeing and occupier experience; smart, secure and connected. Our approach is underpinned by strong foundations Enrich the lives of people and communities by creating and managing world-class places delivering positive value for our investors, society and the environment ENVIRONMENTAL EXCELLENCE SMART, SECURE AND CONNECTED SOCIO-ECONOMIC BENEFIT HEALTH, WELLBEING AND OCCUPIER EXPERIENCE Enhance and transform Being at the forefront of identifying and influencing the drivers of change and shaping our investment strategies accordingly, we will aim to deliver performance for our investors in the long term. Safeguard and future-proof Combining innovation with best-in-class management, we will set the bar for exceptional workplaces, homes and leisure destinations which have enduring appeal and benefit local communities and economies around the world.

4 4 M&G Property Portfolio Implementing the RPI strategy in the M&G Property Portfolio The M&G Property Portfolio s (Fund) Authorised Corporate Director, M&G Securities, has appointed M&G Real Estate to act as the property manager. M&G Real Estate has proactively implemented a sector-leading approach to RPI for over five years and seeks to ensure activities across the portfolio enrich the lives of the people and communities it is present in. As part of the development of the corporate RPI Strategy, M&G Real Estate have developed a complementary strategy for the Fund. Against each of the four key impact areas, fund specific 2020 objectives have been set to drive Fund RPI performance, as well as progress towards the overall M&G Real Estate RPI vision. The strategy and objectives will help drive the already strong performance of the Fund, compared to peers, in the Global Real Estate Sustainability Benchmark (GRESB) (see page 12 for details), which we recognise is an increasingly important sustainability benchmark for investors. Fund managers worked closely with the M&G Real Estate RPI team to set strategy and objectives and continue to meet quarterly to review performance. The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance. The Fund invests mainly in one type of asset. It is therefore more vulnerable to market changes for that specific type of asset. This type of Fund can carry a higher risk and can experience bigger price gains and falls when compared to a fund which invests in more types of assets. If significant numbers of investors withdraw their investments from the Fund at the same time, the manager may be forced to dispose of property investments. This may result in a less than favourable price being obtained in the market.

5 Investing responsibly Fund RPI objectives Environmental excellence Secure green building certification for 15% of assets in the Fund (by value) Achieve a 20% reduction in energy intensity and associated GHG emissions* Achieve a 10% reduction in water intensity (excluding sub-metered for tenant use)* Divert 100% of waste from landfill; promote and increase recycling and reuse Health, wellbeing and occupier experience Reach 500,000 people by our health, wellbeing and inclusivity programmes Ensure ongoing improvements in our occupier engagement strategy Ensure an exceptional standard of safety and security in all the working environments we control Smart, secure and connected Socio-economic benefit Implement twelve community programmes aimed at benefiting people who work, visit or live near these assets Complete socio-economic study to understand the impact of our investment activities. Within this report, we provide some examples of the initiatives that we have already undertaken, or are planned, to deliver these goals. We hope you enjoy reading this report and finding out more about our updated strategy. As always, we welcome any feedback you may have. Fiona Rowley Co-Fund Manager Justin Upton Co-Fund Manager Develop a framework of digital and physical connectivity initiatives for consideration in our asset planning process Refresh our Urban Connectivity Research and utilise findings as part of our investment appraisal * For landlord procured utilities. Based on an indexed trend compared to a 2012/13 baseline. Performance will be monitored annually against an annual target 2.5% reduction for the like-for-like Tier 1 portfolio.

6 6 M&G Property Portfolio Environmental excellence Driving environmental improvements at our assets reduces operating costs, carbon emissions and the use of natural resources. This helps attract and retain occupiers, and ensures that we appropriately manage environmental risks. The Fund has procured the services of a third party environmental data specialist, Verco Advisory Services (Verco), to collect environmental data (energy, carbon, water, waste) on the assets in the portfolio. This independent analysis of data ensures robust and accurate reporting of data and allows us to measure and validate performance against our targets. Data qualifying notes and the underlying asset level data is available on request. Green building certification To provide independent verification of our commitment to building and managing sustainable buildings, we use internally recognized environmental ratings where appropriate standards are available. At UK development projects where we are responsible for delivery, we target minimum BREEAM* New Construction or Refurbishment ratings. The majority of the portfolio consists of standing assets for which no certification existed at acquisition; currently 13% of assets in the Fund (based on March 2018 valuations) have a green building certification. We are committed to enhancing asset value and also to improving the environmental performance of our portfolio, and accordingly, we continue to investigate and identify candidate assets to receive green building certifications, focusing on our standing assets. Once identified, we then undertake a gap analysis under the guidance of a third-party green building consultant. As a result, we have identified one asset to gain the BREEAM In-Use rating during 2018; achieving this rating would mean 15% of the Fund s assets under management (as at March 2018) are green building certified. Green certification of the Fund s assets 85% 13% Source: M&G Real Estate as at end March % Certified assets 2018 planned No certification * BREEAM is a Green Building Certification Scheme which provides an independent assessment of the sustainability of buildings. For more information see:

7 Investing responsibly 7 Driving energy and greenhouse gas (GHG) reduction We seek to drive energy efficiency across all assets in the portfolio. To this end, we have been implementing a programme of LED lighting replacements as we undertake refurbishment works and when we upgrade lighting at properties. So far, we have commenced or completed projects at ten of the Fund s assets (one of which has since been sold). By installing energy saving lighting we will deliver energy savings. This will benefit our occupiers by reducing occupational costs as well as reducing the carbon emissions of our assets. Portfolio environmental performance Like for like portfolio energy and greenhouse gas emissions MSCI AC World 20,000 15,000 10,000 5,000 0 Electricity (MwH) Gas (MwH) GHG (tonnes CO2e) Waste diverted from landfill 99% in 2016, 2017 and 2018 Source: M&G Real Estate as at 31 March Energy Performance Certificate (EPC) data We monitor the EPC ratings of all units in the portfolio. This not only provides a measure of the energy performance of the portfolio, it also enables it to manage any risk posed to the portfolio by the introduction of Minimum Energy Efficiency Standards legislation. This means letting any building with an EPC level below E is illegal with effect from April The chart below shows a breakdown of EPCs that are covered by the new legislation (i.e. excluding Scottish assets and units with leases under 6 months or over 99 years). 70% of the portfolio s managed assets are rated A, B or C. The chart below does not include the retail asset Wales Designer Outlet, as we do not monitor and report using open market rental value (88% of its floor area is rated E or better). We continue to monitor the EPC ratings of new assets as they are acquired or developed. EPC ratings as a proportion of ERV (as at 21 June 2018) 20% 1% 2% 6% 3% 41% 27% A B C D E F G Source: M&G Real Estate as at

8 8 M&G Property Portfolio Smart, secure and connected Smart physical and digital infrastructure is crucial to the competitiveness and success of countries, cities and buildings, as well as positively benefitting inhabitants. Understanding connectivity solutions means we can more effectively identify investment opportunities and future-proof investments. We believe that assets and cities that are well-connected in terms of their digital and physical infrastructure are good places to invest as they are more attractive to occupiers and are better future-proofed. Our recent Urban Connectivity research aimed to identify attractive locations among 64 European cities that are best placed from a connectivity perspective to offer sustainable property fundamentals and superior pricing opportunities. The research also ranks those cities in terms of connectivity from best to worst. We are now starting to incorporate these rankings into our investment process. The full report European Connectivity Rankings is available on our website. realestate/european-urban-connectivity-ranking/ Many of the factors we see as an indicator of good connectivity at a city level can also work at an asset level. This is important as we have the opportunity to proactively influence the connectivity of an asset through active asset management initiatives, such as the installation of electric vehicle charging points. It is our aim to have delivered, by 2025, enhanced digital and physical connectivity at our assets through the development of a framework of activities. Case study: Alder Castle, London, UK Overlooking the historic London Wall, Alder Castle combines the unique experience of the City with calm green open spaces. In 2017, the asset underwent an extensive refurbishment of the common parts and three office floors totalling 36,000 sq ft. Environmental excellence Alder Castle has been certified for its environmental credentials. In 2017, elements of the building were refurbished and subsequently achieved a BREEAM Refurbishment Very Good rating. A range of initiatives helped to achieve these ratings including LED lighting throughout, good provision of daylight and sky views and the highest possible public transport accessibility rating. Smart, secure and connected The office benefits from excellent transport links with six underground and over ground stations all located within close proximity; Alder Castle is ideally situated to access the Elizabeth Line ( Crossrail ) when it opens. Occupiers also benefit from an excellent mobile voice/ data coverage from the four main operators. Health, wellbeing and occupier experience We have also installed secure cycle storage facilities, with showers, changing rooms and lockers for occupier use. Occupiers and visitors are provided a unique outlook, with striking views across to St Paul s Cathedral. External decked roof terraces at the 3rd and 5th floors offer occupiers a further stimulating and productive working environment. The building is located in close proximity to outdoor seated areas with landscaped gardens and trees, with the shopping and leisure amenities of Cheapside and St Paul s being easily accessible.

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10 10 M&G Property Portfolio Health, wellbeing and occupier experience Considering health, wellbeing and experiential factors in how we design and manage buildings enables the occupiers of our properties to have happy productive employees and our retail destinations to attract customers. Occupier experience and engagement We are committed to creating a strong relationship based on integrity, team spirit and customer focus with all our occupiers. By proactively developing relationships with occupiers, we can better understand their business needs and property requirements, which helps us to maximise occupancy rates and to enhance the returns of our assets. We have designed a Customer Occupier Experience Strategy to ensure that we put our occupiers at the heart of everything that we do. We have been conducting a full review of our occupier strategy to ensure that we remain best-in-class and the landlord of choice. Health and wellbeing We believe that if people enjoy being in our buildings, this could lead to high occupancy levels and higher rents. We are reviewing a range of opportunities that may enhance the experience of those who work in and visit our buildings, implementing actions that enhance customer service, promote physical and mental wellbeing and remove barriers to ensure our places are accessible and inclusive to all. We have designed the Fund s first asset using the WELL Building Standard : The Grid, in Glasgow, Scotland is the first building in Scotland to be registered to pursue this accreditation. Our vision is for The Grid to be Scotland s healthiest office building, enhancing the wellbeing of its occupiers. For example, the multiple shared amenity spaces located throughout the building offer occupiers places to play, relax and interact with others. Our Front of House project will ensure that occupiers at all our large multi-let offices and their visitors benefit from a consistently high standard of service from their reception teams. We will be rolling out community engagement programmes at these buildings in due course.

11 Investing responsibly 11 Socio-economic benefit We can create positive socio-economic outcomes by developing high quality places where people want to be. Through proactive participation in communities, we are able to support jobs, skills development and economic growth. At our shopping centers and retail parks, we support neighbouring communities through a huge range of activities, by providing space to community groups and to enable charity fundraising. Our ambition is to build on these numerous individual activities and bring them together into a more structured programme to ensure that we are playing an active role in the largest communities in which we operate. As part of this, we will be increasing our community engagement activities at large offices and sharing best practice globally. Alongside our 2020 objectives, there are ten strong foundations we believe must be in place to deliver our RPI objectives. The table below provides a summary of these for the M&G Property Portfolio. The table shows the 10 strong foundations we believe must be in place to deliver and embed our RPI aspirations: Strong foundations 1 Investor reporting & engagement 2 Risk management 3 Acquisitions 4 Asset planning & prioritisation 5 Leasing 6 Monitoring & guidance 7 Property management 8 Development & refurbishment 9 Supply chain management 10 Employee engagement The Fund participates annually in the Global Real Estate Sustainability Benchmark and is committed to maintaining its 5-star rating (see section below for further details). To minimise long-term exposure to material ESG risk by embedding consideration of these into investment decision making. Material RPI issues are integrated into acquisition due diligence processes, which ensures risks and opportunities have been appraised and priced accordingly. Annual asset plans incorporate measures to manage and/or improve RPI performance. Actions will be prioritised according to each asset s RPI impact and our ability as the landlord to influence this. Encourage occupiers to sign up to our green lease clauses. Implement the M&G cluster munitions policy and not let to companies involved in the production, distribution or use of cluster munitions. Management systems and processes provide clear guidance on how to implement the RPI objectives and report progress against them. Global data management platform is in place to gather and report key environmental metrics. Processes are certified to the ISO14001 International Standard for Environmental Management Systems. Third party property managers have sustainability requirements integrated into their contracts and Service Level Agreements. Annual KPIs are set and are monitored regularly to ensure that property managers and their supply chain are ensuring the delivery of RPI initiatives and targets. When undertaking new development or major refurbishments opportunities to enhance sustainability performance are implemented as part of the design and construction process. RPI standards and requirements are provided to suppliers as appropriate to their services. Monitoring is in place to ensure that contractual requirements are adhered to. All employees understand their role in the delivery of our RPI Strategy through training and briefings, and receive regular updates on the RPI performance of portfolios and assets they work on.

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13 Investing responsibly 13 Case study: Shopping centres, UK Many of the portfolio s shopping centres are situated in the hearts of towns and cities and all play an integral part in the local community and civic life. Our shopping centre teams are taking action to enhance customer service capabilities, provide information to shoppers to enhance their experience, promote health and wellbeing and support charities and community groups. Health, wellbeing and occupier experience Customer service capabilities are being enhanced by working with our property managers who are providing training opportunities for centre staff to better understand and therefore support people s needs, such as helping customers with dementia or autism and their carers. The centres supported Mental Health Awareness Week in May The centres supported this campaign with a range of events and initiatives often run in collaboration with local community groups and organisations. Events included de-stress cafes, yoga classes and stress workshops. Centre teams will review further opportunities to promote health and wellbeing action to staff, occupiers and visitors. A further way we can enhance people s enjoyment is by designing places that are accessible and serve the needs of everyone who wants to use them. At three of our shopping centres we are seeking to invest in the refurbishment of toilet facilities that meet the Changing Places requirements for people who cannot use standard accessible toilets. Providing facilities with more space and the right equipment enables people to get out and about and enjoy activities that many of us take for granted. We are also rolling out improvements to toilet signage, highlighting the message that not every disability is visible, to help people without obvious disabilities to feel comfortable using accessible facilities without fear of criticism or embarrassment. Socio-economic benefit By being an active participant in local communities, we believe we can make a positive contribution to the people who live or work in them. At our shopping centres, we support a huge range of activities, such as charity fundraising, providing space to community groups, and hosting Christmas lunches for the elderly. Arts and culture events and programmes can foster community linkages and encourage local community involvement and engagement. At the Fund s shopping centre asset, Fremlin Walk, in Maidstone, England we hosted a broad spectrum of events ranging from a local theatre group flash mob, opera society performance, and Rock Choir event for the Cancer Research Race for Life campaign. At another of the Fund s assets, Ayr Central, in Scotland, the centre team supported, amongst many initiatives, a local community festival celebrating the life of Robert Burns.

14 14 M&G Property Portfolio GRESB 2017 Results Management and Policy We actively participate in the Global Real Estate Sustainability Benchmark (GRESB) survey that ranks funds in terms of sustainability. In 2017, the Fund participated in the survey for the sixth successive year. Each year we focus on improving the performance of the Fund in GRESB. To this end, we have developed an action plan to help us improve our performance, with key actions to be undertaken in 2018 shown below performance of M&G Property Portfolio Fund '\_ '\_ '\_ '\_ '\_. '\_... '\_ "- ' '\_ '\_."'..._..... "".,.LJ '\_ Implementation and Measurement This Entity Peer Group Avg. Peer Group GRESB Average X Europe 80 GRESB Green Star 100 GRESB Average 63 Peer Average Implementation and 74 Measurement GRESB Average 60 Peer Average Management and Policy GRESB Average 72 Peer Average Participation and score nd out of Peer comparison 2016 Diversified Office/Retail Europe Non-listed 2017 Ratings should not be taken as a recommendation GRESB Improvement: key focus areas Areas for improvement Actions Objective Increase the % of technical building assessments. Increase the % of environmental data gathered at assets. Continue to drive energy and water reduction assets and increase diversion from landfill. Increase % of buildings with a green building rating. Continue occupier engagement programme. Undertake assessments at the largest assets where this has not yet been completed. Ensure data is gathered from assets where landlord purchased. Seek to increase data provision from tenants. Ensure energy and water reductions at our largest consuming assets (Tier 1). Seek to increase % of waste diverted from landfill/recycled. Pilot BREEAM In-Use certification for at least one asset. Review occupier engagement programmes and undertake improvements. Review survey feedback and seek to make improvements. Reduce energy and water consumption and improve waste management. Improve monitoring and guidance. Reduce energy and water consumption and improve waste management. Enhance asset planning and prioritisation. Improve green certification rating. Improve occupier engagement.

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16 Contact Financial advisers * Discretionary For your protection calls may be recorded or monitored. * Calls cost 5p per minute, plus your phone company s access charge. INVESTMENTS For financial advisers 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 Conduct Authority in the UK and provides ISAs and other investment products. The company s registered office is Laurence Pountney Hill, London EC4R 0HH. Registered in England No SEP 18 / W314303