Part of the M&G Group

Responsible Property InvestmentStrong foundations

2

AboutM&G Real Estate

ContentsChief Executive’s statement 3

RPI at M&G Real Estate 4

Our industry involvement 5

Ensuring portfolio resilience 6

Interview: Chris Perkins, Head of Business Space Team 8

Case study: Portfolio resilience 9

Driving environmental improvements 10

Case study: Energy management 13

Building strong relationships 14

Responsibility in our own operations 16

Target progress 18

Advisor’s statement 19

M&G Real Estate is a top 25 global real estate fund manager. We form part of the M&G Group of Companies, the asset management arm of Prudential plc in the UK and Europe. We have considerable knowledge and experience in delivering excellent property fund management results for our investors.

This report provides an update on the progress we have made during 2012/13 in implementing our Responsible Property Investment (RPI) strategy and a summary of our activities. For more detailed information, please see our website: www.mandg.com/realestate

Report scopeThis report covers the period 1 April 2012 to 31 March 2013, and data is correct as at 31 March 2013, unless stated otherwise. All data is provided by M&G Real Estate, unless stated otherwise. Where this is different for any reason, it is clearly stated.

The report relates largely to our UK operations, where 83% of our properties are held. Where data is provided from our overseas assets and operations, this is made clear. As in previous years we have complied with the Global Reporting Initiative G3 Guidelines to Level C and have also used the Construction and Real Estate Supplement to report our performance. We have also complied with the INREV Sustainability Reporting Recommendations and the EPRA Best Practice Reporting Guidelines. Alongside this report, our Supplementary Performance Report 2013, available online, provides more detailed commentary on data presented in this document as well other supplementary information.

£16.6bnworldwideAssets under management

3,500occupiersWe have 3,500 property occupiers across the UK, Europe, North America and Asia

Cover: Chiswick Green, London. A BREEAM Excellent building held in the M&G Property Portfolio.Photo: Craig Auckland/fotohaus

9.5%

6.0%

4.1%

19.3%

20.9%

11.0%

29.2%

Standard retail £3.2bn

Retail warehouse £1.8bn

Shopping centres £3.5bn

Cash £0.7bn

Offices £4.8bn

Industrial £1.6bn

Other £1.0bn

Assets under management

3

Welcome

Increasingly and quite rightly, investors are questioning us on how we address sustainability risks across our portfolios. A robust, evidence-based response is a reasonable expectation and this annual report is an established and integral part of the way we share information.

It is my great pleasure to introduce our 2013 Responsible Property Investment (RPI) report, the first under our new name of M&G Real Estate. As PRUPIM, we reported on our RPI performance for a full decade, from 2002 to 2012, so it is appropriate to reflect a little on how far we have come both as a business and as an industry.

The last decade has been one of rapid evolution for RPI. Far from fading away as some predicted, sustainability has risen steadily up the corporate and investment agendas. We are increasingly being asked by investors how we address sustainability risks across our portfolios. This is something we very much welcome as we were alert to the potential risks presented by sustainability before many others in the sector and, as the results presented within this report demonstrate, we are reaping the rewards of this foresight.

We have made good progress against our targets and this year I am pleased to report that we have again achieved a further reduction in carbon emissions. This has largely been achieved by reducing energy consumption through good asset management, reducing costs for our occupiers whilst reducing our environmental impacts.

As a global fund manager we have active responsible property investment initiatives in place across our European, North American and Asian portfolios in addition to the UK. For example, in 2013 we submitted the Asian portfolio to the Global Real Estate Sustainability Benchmark for analysis against its peers. We are looking to secure Green Mark status for one of our assets in Singapore and are collecting data on our managed assets to improve operational performance. I look forward to being able to report on the performance of our Asian portfolio as well as our other non-UK funds in 12 months’ time.

Having come so far in ten years we have to consider where we might be in 2023. There are clear risks such as maintaining energy security and supply and the incidence of extreme weather events. These risks have direct consequences for real estate assets. The less obvious risks lie perhaps within regulatory and legislative change at both national and international levels and in changing occupier requirements and expectations. We need to ensure that we are able to address these and other future challenges, while continuing to protect and enhance performance for our clients.

Industry leaders such as ourselves have an important role to play by engaging at the heart of the debate to ensure the power of industry and the markets is harnessed to generate positive change. I fully expect M&G Real Estate to be a leading contributor to the sustainability agenda in 2023 very much as it is now.

I hope you enjoy reading this report. Our sustainability team and I welcome your feedback.

Alex Jeffrey

2012/13 highlights

11%reduction in CO

211% reduction in CO

2 emissions

at UK offices and shopping centres , saving occupiers £430,000

GreenLeasesRolled out Green Leases to our managed office portfolios and worked with Marks & Spencer to include Green Lease Memoranda of Understanding at their stores

76%Submitted 76% of funds under management to the Global Real Estate Sustainability Benchmark

Alex JeffreyChief Executive

4

Responsible Property Investment at M&G Real Estate

Ensuring portfolio resilienceConsidering sustainability risks in stock selection and asset management to protect long-term returns Page 6

Driving environmental improvementsIncreasing efficiency to reduce operating costs, carbon emissions and the use of natural resources Page 10

Building strong relationshipsUnderstanding the needs of our occupiers to maximise occupancy rates and enhance performance Page 14

Responsibility in our own operationsApplying the highest standards of conduct to our own business practices and relationships with suppliers Page 16

Governance of our RPI StrategyM&G Real Estate’s Sustainability Operations Committee meets three times a year, with representatives from across the business, to provide strategic direction and oversight of our RPI strategy across all business activities. The committee, chaired by the RPI Director, is responsible for ensuring that the strategy effectively delivers our vision of being a leading sustainable real estate fund manager, and that it is consistent with our overall business objectives.

M&G Real Estate is also represented on M&G’s Responsible Investment Advisory Committee, which is jointly chaired by our Chief Executive, Alex Jeffrey. Members from all relevant business units meet twice a year to oversee M&G’s responsible investment strategy and to co-ordinate its response to the UNPRI survey.

At M&G Real Estate, Responsible Property Investment (RPI) principles are embedded in our investment approach.

Our sector-leading approach to RPI enables us to manage and respond to the growing range of environmental and social issues that can impact property values, helping us protect and enhance fund and asset performance for our clients. Our strategy focuses on four areas:

Nina ReidDirector,

Responsible Property

Investment

5

Our industry involvement

Responsible Property Investment has evolved rapidly in the last ten years and M&G Real Estate has played a significant role in this process.

Ten years of industry leadership in RPIOver the ten years since our first report we have used our knowledge and experience as a major fund manager to support and help shape the RPI agenda, ensuring it reflects the operational requirements and opportunities presented by the market.

Having played an instrumental role in the early development of sustainable property appraisal tools ten years ago our contribution continues. In the last 12 months our sustainability team has contributed to the work of the Better Buildings Partnership, including its Chairmanship, the Green Construction Board and the sustainability committees of the British Council of Shopping Centres, British Property Federation and Investment Property Forum. We have maintained our active support of the Institutional Investors Group on Climate Change and United Nations Environment Programme Finance Initiative (UNEP FI), Nina Reid having authored the second edition of the UNEPFI publication RPI: What the leaders are doing, which featured two case studies from our business. We remain signatories of the United Nations Principles for Responsible Investment and have contributed to the development of their real estate questionnaire.

Developing performance measurementA major industry development in the last ten years has been the increase in sustainability and environmental benchmarking systems. We see these as positive and have supported their development

We have worked with Global Real Estate Sustainability Benchmark, IPD EcoPAS, UNPRI and Global Reporting Initiative’s Construction and Real Estate Sector Supplement to support industry and portfolio benchmarking systems that are fit for purpose.

Our work with other investors and stakeholders on IPD EcoPAS has enabled the industry to move a step closer to being able to track any link between environmental performance and investment performance. We are also supporting the work of the Green Construction Board to provide a clearer picture of the potential impact and efficacy of energy efficiency regulations such as Minimum Energy Performance Standards.

We remain firm in our support of these organisations and initiatives. It is only through the active engagement of key participants such as ourselves that the market will develop an efficient response to the challenges posed by climate change and the sustainability agenda.

6

Ensuringportfolio resilience

What we have been doing

Embedding sustainability into investment processesM&G Real Estate supported early research to investigate how sustainability risks might feed into fund performance and we continue to support projects in this area today. This early work enabled us to make real progress in embedding into our business models practical policies that reduce our environmental impacts and mitigate risks, helping to make our portfolios resilient to change.

We set four targets in our 2012 report for driving further progress in ensuring portfolio resilience:

• contributing data to IPD EcoPAS

• strengthening sustainability within our acquisitions due diligence processes including providing internal training

• working with our fund and asset managers on implementing our RPI strategy across all our assets under management

• continuing to assess the impact of the proposed Minimum Energy Performance Standards on our funds.

We are pleased to have made good progress against each of these targets.

Benchmarking our RPI performance against our peers both at a corporate level and at a fund level is important in enabling us to demonstrate achievements and good practice and to assess our progress. During the reporting period, we submitted seven funds to the IPD EcoPAS survey, and were pleased to be presented with the 2013 Sustainability Data Submission Award for the quality of our responses to the survey which entailed collating some 18,000 separate items of information.

In 2013, we submitted six funds to the Global Real Estate Sustainability Benchmark (GRESB) including, for the first time, the M&G Asia Property Fund and the Prudential Asset Share Fund. The inclusion of this latter fund generated a significant increase in the value of funds under management covered by the GRESB survey: it was the biggest single UK non-listed fund submitted in 2013, and we were pleased that it scored in the top quartile of all GRESB scores. Three more funds ranked in the upper-middle quartile of all GRESB scores. We continue to engage with GRESB, providing feedback to assist with the continuing development of the survey.

Our acquisition Due Diligence questionnaire has been updated this year to capture a number of specific sustainability issues. This has streamlined the process of collecting environmental and sustainability information on potential acquisitions and ensures our Investment and Fund managers have information on potential sustainability risks early in the transaction process.

Systematically identifying and managing environmental, social and economic risks in the stock we buy and hold ensures that funds have resilience to growing regulation, as well as physical and societal changes. By integrating these considerations into stock selection and asset management, we can protect long-term returns.

76%by value of funds under management submitted to GRESB in 2013

7fundssubmitted to IPD EcoPAS in 2013

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Our active asset management plans and the close working relationship between the Asset Teams, Property Managers and the RPI team enable sustainability measures to be embedded within management plans. No-cost and low-cost measures and quick wins are standard items within asset plans and have delivered energy savings across our assets again in 2012/13.

Anticipating minimum energy performance standards With almost two thousand Energy Performance Certificates (EPCs) across our portfolios we have a significant challenge in understanding and mitigating the potential impact of Minimum Energy Performance Standards on our UK funds. We have worked with our Asset Management and Property Management teams over the last 12 months to implement a number of measures to address this. These include:

• A fund-by-fund analysis of the risks posed (for full details, see the case study on page 9)

• Investment in software to support the analysis of potential improvements

• Inclusion of EPC risk as a specific item within all asset management plans.

Maintaining staff awareness To ensure that M&G Real Estate teams remain abreast of the latest developments, we reviewed the sustainability module of the new staff induction e-learning package, and rewrote it to cover recently-introduced legislation and changes to our internal processes. The induction training is delivered to all new joiners within three months of their start date.

For existing staff, the sustainability team delivered a series of briefings, updating Fund, Asset and Investment Managers on key policy issues and legislative changes, including the proposed new Minimum Energy Performance Standards, Green Leases, and carbon targets. The updates also covered the changes made to our internal processes and procedures.

Through these twin approaches, we ensure that all staff are aware of the risks and opportunities and of their role in managing sustainability issues.

Activity outside the UKOur European Portfolio has 22 assets in six countries across continental Europe. Working across such a range of jurisdictions means that ensuring portfolio resilience requires clarity on a much broader range of environmental risks.

For our French assets Grenelle 2 was the most significant change in 2012 in terms of environmental regulation. Under Grenelle 2, as from 13 July 2013 all commercial property leases on premises larger than 2,000m2 must have an environmental addendum that includes terms on sharing data, regular monitoring of environmental performance and a programme to improve environmental performance. Part of our programme for 2013/14 will be to build on our experience of rolling out environmental clauses in our leases on the UK portfolio to ensure these clauses are working for our French assets.

We have also commissioned Bureau Veritas to conduct an environmental and regulatory review of our European portfolio to ensure exposure to current and proposed legal requirements is understood and any risks mitigated. As part of this, environmental assessments are being conducted on six assets to ensure their sustainability credentials add value within the asset management and leasing strategies, and to ensure that our asset management teams in Paris and Frankfurt are able to identify potential risks and manage them appropriately.

Focus for next yearWe have set the following targets to achieve by 31 March 2014 to drive further progress:

• Ensure opportunities to identify and mitigate EPC risks are embedded within our asset management processes

• Carry out two embodied carbon assessments for proposed development or refurbishment projects and share the results with industry

• Continue to contribute data to IPD EcoPAS.

8

InterviewChris Perkins, Head of Business Space Team

What are the main changes you’ve seen over the years?Since the introduction of a responsible property investment strategy at M&G Real Estate, over ten years ago, I have seen a great deal of change both in our approach and in the importance of sustainability and corporate responsibility to our clients. In the early stages, we were focussing predominantly on operational issues in property management, such as reducing the environmental impact of our portfolio. Today, as we move to focus on our role as real estate fund managers, our approach has evolved into one of understanding and managing the risks that environmental, social and economic issues represent for the funds that we manage. This means thinking about sustainability throughout the investment process, from global strategy through to asset management.

How has M&G Real Estate sought to address these issues? Increasingly, to support this approach we are embedding sustainability into our day to day procedures – for example, we have a Sustainability Questionnaire which must be completed on all our assets. By answering a number of relatively simple questions on each asset, our asset managers are able to understand key RPI risks at each property. This questionnaire has been in place for a few years now, and this year we have amended and updated it. This has made sure it remains relevant as sustainability issues have changed, and also that it reflects some of the other industry questionnaires so that data collection is more efficient. Another recent development is a review of our acquisitions due diligence procedure. We have updated our standard information requests to ensure that key sustainability information is now gathered early in the transaction process. This helps us to identify and understand potential sustainability risks at an early stage which is critical to managing risk and ensuring a smooth transaction process.

Of course, we continue to work closely with our property managers to ensure that our assets are run efficiently and that opportunities are taken wherever possible to improve

environmental performance. This has enabled us to make significant cost savings for our occupier clients whilst improving the resilience of our funds to sustainability risks.

How do you see external pressures changing over the next few years? Given the increasing amount of legislation and regulation around sustainability, not just in the UK, but affecting other parts of our global portfolio, it’s evident that pressure on property as an asset class isn’t going to go away. At the moment for example we are putting measures in place to address the impact on our funds if, as anticipated, minimum energy performance standards are imposed from 2018. We are finding that the proposals are already affecting the market as EPC ratings of assets on the market are more thoroughly interrogated.

And it’s not just legislative pressure: our investors are increasingly asking to see evidence of our commitment to responsible property investment including examples of how we are putting it into practice. They also want to know that we are contributing to industry benchmarks such as GRESB. Indeed, the National Association of Pension Funds’ Responsible Investment Guide 2013 recommends their members ‘allocate a material weighting to sustainability issues’ when scrutinising real estate investment managers and our experience is that sustainability is now a key element within investor RFPs.

Having over a decade of sustainability reporting puts us in a very strong position to respond to these types of question. We have an excellent record of our performance and can demonstrate our achievements and our actions in a clear, meaningful way. However, we are very aware that this agenda is growing for both our investor and occupier clients and we remain vigilant in ensuring our own strategies evolve and remain aligned with the interests of all our stakeholders.

Chris Perkins heads up the Business Space Team at M&G Real Estate which comprises 20 Investment Management, Asset Management and Development Management professionals.

Here, he explains how responsible property investment has risen up the agenda both at M&G Real Estate and more widely in the field of real estate fund management.

9

Case studyPortfolio resilience

Ensuring our portfolios are resilient to the risks presented by sustainability means understanding what those risks are, monitoring the portfolio to identify areas of weakness and having systems in place to resolve them. This case study illustrates how we have addressed one such risk.

A key risk this year has been the potential introduction of Minimum Energy Performance Standards. The 2011 Energy Act contains provisions for powers to ensure that from April 2018 it will be unlawful to rent out a residential or business premise that does not reach a minimum energy efficiency standard; the intention is that the minimum standard would be an Energy Performance Certificate (EPC) rated E.

Although the regulation has not been finalised it represents a clear potential risk and evidence is already emerging of the value of properties with Energy Performance Certificates rated F and G being affected. An added complication has emerged as EPC ratings generated in the early days of the scheme are held to be less accurate than more recent ratings.

To ensure our portfolios are prepared for and resilient to these changes, we have been undertaking a risk analysis on a fund-by-fund basis. This case study outlines the method of our approach and the findings generated by the first fund which we reviewed.

Prior to the review, the fund had a relatively small proportion of managed assets rated F and G (6% by rental value), and a relatively large proportion of managed assets without an EPC rating (a total of 51%). We then commissioned EPCs for all managed assets which did not previously have them, and recommissioned EPCs for all managed assets rated F and G prior to 2010.

As a result, the proportion of the fund’s managed assets without EPC ratings fell from 51% to 3% by value, while at the same time the proportion of assets rated F and G actually fell from 6% to 4%. This demonstrated the value of recommissioning the older EPCs, and by filling in the gaps in our knowledge of the ‘unknowns’ in the fund, has given us a more robust basis for rolling out an active asset management strategy to mitigate further EPC risk across this fund and the rest of our UK portfolio.

Building on what we have learnt from the review, we are currently carrying out a similar exercise for our other UK funds and have invested in diagnostic software which supports this process by providing costed options for improving EPC ratings.

In 2014 we will continue this work, ensuring that opportunities to identify and mitigate EPC risks are embedded within our asset management processes.

EPCs pre-fund review (by ERV)

EPCs post-fund review (by ERV)

Unknown

2%4%5%

51%

12%

15%

11%

B C D

E F G

Unknown

B C D

E F G

1%3%8%

36%

2%3%

29%

20%

A

10

Drivingenvironmental improvements

What we have been doingWe work closely with our property managers to continually improve the environmental performance of our assets.

Improving energy performanceWe continue to focus on delivering reductions in the energy consumed by our managed portfolio and delivered a reduction of 11% in carbon emissions at our UK shopping centre portfolio, compared to 2010/11, and a reduction of 11% at 20 of our largest multi-let offices. The improved energy performance across both asset classes represents a saving of £430,000 in our occupiers’ energy bills compared to 2010/11. Our primary focus remains on good management practices, such as better control of building management systems, and low- and no-cost measures with short payback periods, such as upgrading lighting systems. Our asset and property managers are tasked with ensuring that energy efficiency is a key factor in planned maintenance programmes. Each of the eight assets with the largest energy consumption now has its own energy management strategy, individually tailored to the building’s characteristics. For details of how we are managing energy at our UK shopping centre portfolio, see page 13.

In our US and Canadian portfolio, energy performance also improved compared to 2011/12, with a reduction of 2% in carbon emissions. Here, our asset managers have rolled out a GreenGuide for sustainable property operations – a guidebook of ten areas of sustainable operational best practices for asset managers to share with third party property managers. The GreenGuide is applicable across all asset classes and aims to reduce their energy, water, waste and overall carbon footprint.

In a similar way to how our UK assets are managed, the GreenGuide provides practical and low- and no-cost guidance on how to operate properties in environmentally responsible ways, whilst ensuring optimal building performance, reducing energy and operational expenses, and ultimately driving asset value. Asset managers are required to incorporate its sustainability principles into the regular management of their assets, report on operating assets’ sustainable performance, and include specific initiatives in the Annual Strategic Plans for each asset. This set of guidelines has been communicated to all property and asset managers, and is currently being implemented throughout our US and Canadian portfolio.

Refurbishments are an important opportunity to improve a building’s energy performance, and we have achieved some significant enhancements. For example, when Sygnus Court in Maidenhead became vacant, the introduction of new technologies raised the EPC rating from C to B, enabling the property to compete with nearby, newer, buildings.

Diverting waste from landfillWith the cost of sending waste to landfill continuing to rise, it is important to maximise the amount of waste our portfolio sends for recycling. Working closely with their waste contractors, our UK shopping centres have increased the amount

Driving environmental improvements at our assets reduces operating costs, carbon emissions and the use of natural resources. This helps attract and retain tenants and ensure that we appropriately manage environmental risks.

11%reductionin CO

2 emissions from UK

shopping centres

11%reductionin CO

2 emissions from large

multi-let UK offices

11

they divert from landfill to 87%, saving our occupiers over £650,000 in landfill taxes. An improvement in performance at our ISO14001 managed offices saw 70% of waste diverted from landfill – over 1,000 tonnes. Best practice processes are shared between properties, and frequent reviews of waste streams take place. The co-operation of our occupiers is vital in ensuring that waste streams are separated, and their education is an integral and ongoing part of our engagement programme. At Cwmbran Shopping, in south Wales, for example, a reuse scheme enables occupiers to offer surplus office or shop furniture to fellow occupiers, while the composting of green waste at the centre creates the growing medium used for the centre’s flower displays.

Reducing water consumptionAbsolute water consumption at our UK managed portfolio decreased by 3% at ISO14001 offices and 5% at shopping centres. Simple measures – such as installing motion detectors to urinals, or replacing taps with more efficient models – have a cumulative effect, and by closely monitoring consumption, our property managers can act quickly to repair leaks. Building on the water audits carried out, we will be rolling out improved metering, so we can continue to improve the quality of our water data.

Encouraging green travelWith more than 114 million visits in 2012/13, it is important that our UK shopping centres continue to promote alternatives to travelling by car. During the year, all of the centres revised their travel plans, and ensured that straightforward travel guides are now easily accessible on their webpages, highlighting rail, bus, cycle and walking options to visitors.

For example, at Cwmbran Shopping, the green travel plan is easy to find in the centre’s web site, with a link on its home page. The plan itself clearly outlines various methods of transport, with helpful links for public transport information and local cycle routes and parking.

Verifying our performanceWe have a strong environmental management programme in place at our UK portfolio, with ISO accreditation of nearly 777,000m2 of floor space – covering all nine shopping centres, as well as 27 large multi-let office buildings where we have the greatest degree of management control. Together, these 36 buildings account for more than three quarters of the carbon emissions under our control in the UK.

In the US and Canada, we are working with our portfolio managers to achieve the Leadership in Energy and Environmental Design (LEED) certification on all our managed assets. Six properties, with a total floor area of nearly 210,000m2 are now certified to either LEED Gold or Silver standard. Further, all five of the buildings in the US are also Energy Star certified, not only making them more attractive to potential occupiers, but also delivering the added benefits of higher rental rates and increased asset value.

In mainland Europe, we have over 23,000m2 of floor space with BREEAM certification, and in France, a further 8,800m2 is certified to Haute Qualité Environnementale,

Carbon emissions (like-for-like portfolio) – tonnes CO

2

Absolute energy consumption (UK, North America, Europe) – MWh

Waste by disposal route (UK shopping centres and ISO14001 offices)

40,000

30,000

20,000

10,000

Multi-let offices (20)

02009/2010

2010/2011

2011/2012

2012/2013

Shopping centres (9)

250

150

200

100

50

Electricity

02009/2010

2010/2011

2011/2012

2012/2013

DHC/Steam

Gas/Fuels

Oil

16,000

12,000

8,000

4,000

Waste diverted from landfill

02009/2010

2010/2011

2011/2012

2012/2013

Waste to landfill

12

the green building standard in France. We have commissioned Bureau Veritas to conduct an environmental and regulatory review of our European portfolio to ensure exposure to current and proposed legal requirements is understood and any risks mitigated. As part of this, environmental assessments are being conducted on six assets to ensure their sustainability credentials add value within the asset management and leasing strategies.

In Singapore, one of the assets in the M&G Asia Property Fund will be submitted for the Building and Construction Authority’s Green Mark accreditation. Compass Point, a 25,000m2 shopping mall in Sengkang New Town, will undergo a programme of asset enhancement, with the aim of achieving platinum level status on completion.

Improving monitoringDetailed and robust energy consumption data is increasingly important both to meet our legislative reporting requirements and to ensure that we can closely monitor asset performance and understand the best ways to improve energy efficiency. Better understanding of where and when energy is consumed can lead to significant opportunities to reduce energy consumption, and with this in mind, we have put in place an ambitious programme to install automated metering on the properties that consume the greatest proportion of energy in our UK portfolio, and will be rolling this installation out in the coming year. A trial project is taking place in 2013 to install over 100 sub-meters to plant and equipment in our largest-consuming asset, Manchester Arndale. Live data will be continually monitored, analysed and reported, highlighting where unnecessary operation can be halted, and where further investigation should be carried out. The monitoring project is predicted to save over 13% in electricity costs and 5% in gas costs, paying for itself within three years. This project builds on the successes that the centre’s efficiency programme has already achieved by implementing low- and no-cost measures including reducing out-of hours lighting, turning off unnecessary feature lighting, optimising boiler operation and delivering environmental awareness training to all operational staff.

Focus for next yearWe have set the following targets to achieve by 31 March 2014 to drive further progress:

• Reduce CO2 intensity by 7% against 2012/13 baseline at landlord-controlled areas

of UK shopping centres

• Reduce CO2 intensity by 5% against 2012/13 baseline at landlord-controlled areas

of 24 large multi-let offices (ISO accredited)

• Reduce water consumption at UK shopping centres by 6% against 2012/13 baseline, normalised by footfall

• Reduce water consumption at 24 large multi-let offices (ISO accredited) by 2% against 2012/13 baseline, normalised by average m2 of floor space let

• Ensure at least 90% of waste from UK shopping centres is diverted from landfill

• Ensure at least 80% of waste from ISO14001 offices is diverted from landfill.

Cra

ig A

uckl

and/

foto

haus

13

Case studyEnergy management in shopping centres

Our nine UK shopping centres together account for a quarter of all the energy consumed in our UK portfolio, making them one of M&G Real Estate’s most significant material environmental impacts. This, in addition to the high degree of management control we have at the properties, makes them a prime target for our energy management activities.

In the last four years alone our efforts to ensure energy efficiency across this group of assets has saved over 22 million kWh compared to a 2008/9 baseline figure, equating to over 12,000 tonnes of carbon. This has saved our occupiers £1,950,000 from their energy bills over the course of this period, at a time when it is important for retailers to reduce their outgoings.

In 2012/13, we continued to work with our property and facilities managers to ensure that we maintain the improvement. As part of our overarching energy policy, individual energy strategies were formulated for each asset, with targets set at individual property level.

We continue to implement low- and no- cost measures to deliver efficiency improvements, including adjusting timings to align with operating hours, carrying out additional checks on the Building Management Systems to ensure optimum operation.

At the same time, consideration is given to upgrading existing technologies as part of the planned preventative maintenance programme. Our Asset Managers and Property Managers work together to consider the best options for each property, including upgrading lighting and using more energy efficient filters in air handling units, amongst others.

At The Mall at Cribbs Causeway, for example, we implemented a number of measures including the installation of a local voltage reduction unit to the lighting in the car parks, retrofitting LED lighting to service roads, the bus station, car parks and main mall areas, and installing motion sensors on ‘back of house’ lighting. Initial results show a 25% reduction in electricity consumption and the likely payback period for the capital spend will be around five years.

Equally important is ensuring that the site management teams have timely access to good quality consumption data. This remains an industry-wide challenge but our project to roll out automated metering will undoubtedly improve the robustness of our energy consumption data. Together with the necessary training to understand and act upon the information received, this will ensure that action is taken quickly to identify and resolve unexplained spikes in demand and opportunities for major longer term improvements in efficiency are taken.

This type of active management provides a more cost effective operation for our tenants and more resilient, future proofed assets for our funds.

22m kWhenergy savedsince 2008/9

£1,950,000reduction in energy billssince 2008/9

Tailoredenergy strategiesin place at key assets

14

Buildingstrong relationships

What we have been doingDeveloping occupier relationshipsWe actively seek to identify and understand occupier needs through a number of engagement programmes such as our Key Occupier Relationship Management programme. This structured programme of regular meetings focuses on promoting and embedding proactive and positive dialogue with retail occupiers. It has developed over a number of years following feedback from retail occupiers that they value having a direct relationship with us. We also actively engage with various occupier and industry groups, including the Property Managers Association, the RealService Best Practice Group and the British Property Federation to keep up to date with best practice. Through the RealService Best Practice Group we participate in a number of annual service performance benchmarking programmes which allows us confidentially to compare our customer service performance with best practice.

We believe that directly engaging with our occupiers is key to understanding and responding to their needs. Building on an independent survey of 20 key retail occupiers, our customer relationship management team visited all our UK shopping centres to conduct a customer survey focusing on our property management across our retail portfolio. A similar exercise was carried out by e-survey for the office portfolio and during 2013 the survey will be delivered to all occupiers of all properties where there is a service charge. The survey included questions relating to environmental issues, and the results have been gathered and are being analysed. Initial feedback indicates that 71% of respondents from the office portfolio rate their overall satisfaction as an occupier as ‘Good’ or ‘Excellent’, and 76% feel that they have sufficient engagement with the Facilities Manager regarding environmental initiatives. Our property managers will use this information to develop action plans for addressing the issues raised.

Green leasesWe are continuing to integrate green clauses both in leases and through Memoranda of Understanding (MoUs). In 2012, we amended our standard lease form for offices in our largest portfolio, the Prudential Asset Share Fund. Green clauses are now included by default in all new office leases.

The adoption of green leases in retail properties was also an area of focus in 2012. We have been working with the British Property Federation to develop an industry-wide template for green clauses which we can also incorporate into our shopping centre standard lease.

Where possible, we encourage further engagement with our occupiers and we were delighted to sign five green MoUs with Marks & Spencer, covering more than 6,500m2 of floor space at our retail parks. The MoUs, based on the industry standard developed by the Better Buildings Partnership with input from M&G Real Estate, include clauses that facilitate sharing of energy and water consumption data to enable both landlord and occupier to make savings, and encourage a joint approach to investing in fitting out the asset to the benefit of both parties.

By having active relationships with our occupiers, we can better understand their business needs and property requirements, helping to maximise occupancy rates and enhance performance. Local support is important to the long-term success of buildings and development projects, and to ensure this we must develop good relationships with visitors and communities.

92%of shopping centre occupiers agree: “Environmental issues are important to my business”

100%of occupiers of assets with a service charge will be invited to participate in a customer satisfaction survey

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Eco events Over the course of the year, our UK shopping centres welcomed over 114 million visitors. By hosting events to help their visitors understand their own environmental impacts our centres can be an important influence on behaviour.

At Manchester Arndale, the Manchester Carbon Literacy Project’s three day ‘Carbon Active’ event was launched in March 2013. The project, which went on to win the Climate Week Award for Best Community Initiative, aims to deliver a day’s carbon literacy training to everyone living, working or studying in Manchester. Carbon Active engaged shoppers in activities that helped them to better understand climate change and find out more about accessing Manchester Carbon Literacy. There was an indoor vegetable garden, local school children in a “low carbon classroom” teaching adults about climate change, bicycles powering an eco home exhibit, a giant board game (invented and staffed by children) and a chance to try out Manchester Carbon Literacy learning on line. There was also a Carbon Lounge staffed by climate change experts and ‘Doctor Carbon’ with his surgery for ‘poorly’ homes that leak energy.

At our largest multi-let offices, we encouraged environmental awareness by promoting participation in Earth Hour. This global movement raises awareness of environmental impacts by switching off non-essential lights for an hour on an evening in March. Posters and meetings ensured our tenants were informed, and on the evening of 23 March, the lights were switched off across 19 office buildings (some 440,000m2 of space), providing a clear demonstration of our commitment to minimising our environmental impacts.

Focus on investor relationshipsOur relationships with investors are of course as important as those with our occupiers, although they are different. Investors are increasingly concerned with RPI issues and we have seen a significant increase in the number of queries coming through relating to how sustainability is addressed within our portfolios. We are pleased to be able to respond positively to all such queries and increasing our investor stakeholder engagement is one of our targets for 2013/14.

Focus for next yearWe have set the following targets to achieve by 31 March 2014 to drive further progress:

• Engage with our existing key investors to ensure they are aware of our RPI strategy and approach and to better understand their priorities in this area.

• Engage with our key occupiers to ensure they are aware of our RPI strategy and approach and to better understand their priorities in this area.

• Hold at least one tenant engagement event at a retail asset and one at an office asset.

76%of office occupiers happy with engagement on environmental initiatives

“ Environmental meetings are very informative”

“ Communications are the right length and pitched correctly for all audiences”

Office occupiers

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Responsibilityin our own operations

What we have been doing

Engaging with our employeesGood communication with our employees is important, and we commission regular independent surveys to measure employee engagement. The results of our last survey, run in 2012, indicated that a total of 89% of respondents agreed that it is important to have an RPI strategy. However, as the results also suggested that a fairly sizeable minority of M&G Real Estate staff did not understand the role of their business area in delivering our RPI policy, we delivered a training programme tailored to each of the relevant groups at their team meetings. Our induction programme was updated and rolled out to all new and recent starters, and our intranet pages were refreshed and relaunched, ensuring that all employees have access to relevant information. We will be able to measure the degree of our success when the survey next takes place, in 2014.

Volunteering and Charitable GivingWe encourage all our staff to get engaged in their local communities, with paid time off to volunteer. In 2012/13, three teams chose to volunteer as a team-building activity, and together with individuals who volunteered, a total of 13% of staff gave their time. Activities are diverse, ranging from carrying out environmental improvements, to volunteering at the Paralympics.

As Foundation Partners of LandAid, the property industry’s charity, we are committed to raising £10,000 a year to support their valuable mission to help the young and disadvantaged to achieve their potential and thrive within their local community. Our staff have been actively involved, taking part in Fun Runs, bake sales and prize raffles.

Following our transition to M&G Real Estate we will be working more closely with M&G, linking with its Charitable Donations Committee. Our staff will continue to draw on M&G’s match-funding support when they are fundraising or giving time to support charities other than LandAid. In 2012/13, for example, 21 M&G Real Estate staff raised funds for a total of 15 charities, and including the match-funding supplied by M&G, over £26,000 was donated.

Reducing our environmental impactsWe continue to be independently accredited to the ISO14001 standard for Environmental Management Systems, covering our Head Office operations, and as part of our commitment to seek continual improvement in our environmental performance, have instituted a number of changes this year.

To reduce energy consumption, we continued our awareness campaign amongst staff, encouraging them to switch off. As a result, energy consumption at City Place

We believe we should apply the highest standards of conduct to our own business practices. By driving environmental improvements in our own offices we can reduce our own impacts and operating costs. Through engagement with our staff we can improve satisfaction, and attract and retain employees. Working in partnership with our suppliers and joint venture partners we can ensure that their operations are in line with our standards and principles.

9%reductionin energy consumption at our head office

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28 daysvolunteering by M&G Real Estate staff

£36,000donated to charityStaff fundraising, corporate donations and match-funding gathered over £36,000 for 16 charities

7offices worldwideOur reach is truly global, with offices in London, France, Germany, Luxembourg, Japan, Korea and Singapore

House in 2012/13, normalised by headcount, fell by 9% compared to the previous year. We hope to continue this downward trend, with interventions such as altering the daylight control light settings.

To reduce paper consumption, our Board meetings set the tone by moving towards becoming paperless, and by expecting all meetings that report to the Board to do the same. These cultural shifts are supported by the introduction of new technologies such as tablet computers. In 2012/13, we worked to gather information on the amount of paper that was consumed across the business, and we have set ourselves a reduction target for 2013/14 to further focus attention on paper consumption. We will be introducing ‘follow-me’ printing technology, which requires users to authenticate print commands, and should reduce uncollected printing jobs – and therefore the generation of waste paper – dramatically.

Ways of workingThe expansion of our business in Europe and Asia prompted a review, led by our Chief Operating Officer, of the way M&G Real Estate works. Covering aspects as diverse as utilising new technologies to improve efficiency, to facilitating better global collaboration, the outputs of the review have already begun to impact on the need to travel by promoting the use of video conferencing for meetings and reducing the amount of paper consumed by encouraging all Board meetings to be paper-free.

Integral to the changes in our business this year has been our transition to become M&G Real Estate. More than just a rebranding exercise, we consider this a reflection of our close relationship with M&G Investments. Through a number of seminars and workshops we have sought to ensure that all employees understand the culture and values that underpin the M&G brand and how this aligns with the business objectives of M&G Real Estate.

Focus for next yearWe have set the following targets to achieve by 31 March 2014 to drive further progress:

• Review M&G Real Estate’s community investment and volunteering policies to ensure they reflect our new fund management identity

• Reduce absolute paper consumption at our head office by 15% compared to 2012/13 levels

• Reduce energy consumption at our head office by 5% compared to 2012/13 levels, normalised by headcount.

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2012/13target progress

Targets

Contribute data to IPD EcoPAS

* Review and strengthen the existing processes to consider sustainability within acquisition due diligence processes

Develop our approach to implementing our RPI strategy on assets outside the UK

Continue to assess the impact of the proposed ban on letting properties with an energy performance rating of F and G by 2018 on our funds

Update sustainable development and refurbishment frameworks

Reduce CO2 intensity by 6% against 2010/11 baseline for UK shopping centres

Reduce CO2 intensity by 6% against 2010/11 baseline for 21 of our largest UK multi-let offices (ISO14001 accredited)

Review the overarching energy management strategy for the whole PRUPIM portfolio

Develop energy management strategies for our eight top consuming properties

Reduce water consumption at UK shopping centres by 6% against a 10/11 baseline (absolute consumption)

Reduce water consumption at 25 of our largest UK multi-let offices (ISO14001 accredited) by 6% against a 10/11 baseline (absolute consumption)

Ensure at least 87% of waste from UK shopping centres is diverted from landfill

Ensure at least 60% of waste from 25 of our largest UK multi-let offices (ISO14001 accredited) is diverted from landfill

Develop green lease clauses for UK shopping centre leases

Put in place green building management groups or ensure environmental performance is an item on tenant meetings for all ISO14001-accredited offices

Ensure eight UK shopping centres hold sustainability events to promote environmental initiatives to visitors

Build on the success of the 2012 shopping centre occupier environmental workshop by delivering a similar event for occupiers of UK retail parks

Undertake a customer survey, targeting our largest UK retail, office and industrial properties, including questions on environmental issues

Roll out green lease clauses to all UK multi-let offices by 1 January 2013

Reduce energy consumption at our London head office by 2.5%, normalised by headcount, compared to 2011/12

Ensure the action plan generated by the outputs of our 2012 staff survey is implemented and the plan’s success is measured

Maximise awareness of M&G Real Estate’s volunteering policy and opportunities to volunteer

Instigate an internal working group to examine ‘new ways of working’

Achieved Part achieved Not achieved Not applicable *This target has been fully achieved since the end of the reporting period

In 2012, we set 23 targets to achieve by 31 March 2013 (unless stated otherwise), to drive progress. As the table shows, we fully achieved 73% (16 out of 22), partially achieved 23% (5 out of 22) and did not achieve 5% (1 out of 22). One target was superseded and we have marked it as ‘not applicable’. For full details of progress against each target, please see our Supplementary Performance Report, available online at www.mandg.com /realestate Our targets for 2013/14 are highlighted in each section of this report.

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Advisor’sstatement

Upstream’s observations and recommendations are based on independent analysis of documents, interviews and/or other secondary evidence provided by M&G Real Estate and relevant third parties. Reasonable efforts were made to check the quality, accuracy and credibility of all available information but site visits or audits on primary data (eg meter readings and invoices) were not performed. Consequently, this Statement does not represent formal assurance or verification of the content of M&G Real Estate’s 2013 Responsible Property Investment Report.

Summary of target performance M&G Real Estate aimed to accomplish 23 targets by 31 March 2013. Upstream independently assessed M&G Real Estate’s achievement on a sample of eight from the 23 targets. These are spread across the company’s material impacts.

We assessed seven of the eight selected targets as fully achieved (87% of the sample) and one as partially achieved (13% of the sample). Overall, we found that our independent review results matched the internal assessment carried out by M&G Real Estate for the sample of targets.

Observations and recommendationsPositive progress made on assessing the impact of the proposed ban on letting properties with an energy performance rating of F and G by 2018. This has led to a stronger understanding of the impacts of this legislative change on M&G Real Estate’s funds and a strategic response.

Significant annual carbon reduction of over 10% achieved across a like-for-like portfolio. We commend M&G Real Estate’s robust data collection and validation process, particularly the cautious approach taken where data uncertainties do arise.

We recommend M&G Real Estate continues to expand its tenant engagement beyond the ISO14001-accredited offices by implementing green building groups in other properties.

M&G Real Estate has begun a programme of employee engagement, looking at ‘new ways of working’. We recommend carrying out a material impact assessment to ensure that these initiatives focus on the most significant impact areas.

Lora BrillAssociate DirectorUpstream Sustainability Services, Jones Lang LaSalle

This Statement, prepared by Jones Lang LaSalle’s Upstream Sustainability Services (Upstream), provides M&G Real Estate’s stakeholders with an external assessment of the company’s progress on sustainability targets.

M&G Real Estate is the trading name of Prudential Property Investment Managers Limited. Prudential Property Investment Managers Limited forms part of the M&G Group of companies. Prudential Property Investment Managers Limited is an indirect subsidiary of Prudential plc, a company incorporated and with its corporate head office in the United Kingdom. Prudential plc and its affiliated companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America. Prudential Property Investment Managers Limited is registered in England and Wales under number 3852763 with its registered office at Laurence Pountney Hill, London EC4R 0HH. SEP 13 / W44703

Part of the M&G Group

How to contact us City Place House

55 Basinghall Street London EC2V 5DU

+44 (0)20 7548 6600

www.mandg.com/realestate