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. There is no guarantee the fund will achieve its objective.

M&G UK Residential Property Fund

Q4 2018

Key quarter-end figuresNet Asset Value (NAV)£629.6m

Leverage0.0%

Cash1.1%

Fund detailsFund managerAlex Greaves

Fund inception5 June 2013

Fund structureLuxembourg FCP-FIS

Status Open-ended

Investment styleCore/core plus

DenominationGBP

ValuationsQuarterly

Dealing daysQuarterly

Financial year end31 December

Initial minimum SubscriptionA units: £2,000,000B units: £20,000,000

Thames Quarter, Reading(Artist’s impression once scheme complete)

For Investment Professionals only

Risks associated with this fund• Where market conditions make it hard to sell the fund’s investments at a fair price to meet

investors’ redemption requests, the Board of the fund may temporarily defer redemption requests as provided for in the fund’s Prospectus.

• Real estate values can be affected by a number of factors beyond the fund’s control and may be subject to long-term cyclical trends that can give rise to volatility in values.

• Further information about the risks that apply when investing can be found in the fund’s prospectus.

Why invest in the UK Private Rented Sector (PRS)• Low correlations to equities, UK Gilts and UK commercial property• Defensive characteristics with improved capital preservation• A long-standing supply/demand imbalance in the housing market• One of the highest population growth rates in western Europe• PRS is the only growing tenure type in the residential sector• Scope for professional investors to add value through active management and economies

of scale

Investment objectiveTo invest only in real estate assets, mainly in residential real estate assets located in the UK, predominantly in the Private Rented Sector (PRS).

Investment strategyTo access sustainable and growing income streams derived from a research-based approach to the PRS, in areas with good transport networks, proximity to centres of strong economic activity and strong employment opportunities for the fund’s target demographic. To achieve this we either purchase standing investments or forward fund developments and target a long-term annual net return of 6%+, with an annual 3%+ distribution yield.

Fund performance

Annualised performance Current quarter

One year

Three years

Five years

Since inception

Fund 0.9% 4.2% 6.8% 9.4% 9.8%

12 months to 31 December 2018 2017 2016 2015 2014

Fund 4.2% 4.3% 12.1% 11.9% 14.8%

Past performance is not a guide to future performance.Source: M&G Real Estate as at 31 December 2018. Performance is shown net of fees.

Fund profile

M&G UK Residential Property Fund | Fund profile

Portfolio overviewNo. of schemes261

Average scheme size£23.6m1

No. of units2,8101

Occupancy rate97.9%2

Gross yield4.86%3

Net yield3.63%3

Estimate Rental Value (ERV)£13.9m3

Fund commentaryThe fund posted a total return of 0.86% for the quarter to 31 December 2018 comprising 0.49% income return and 0.37% capital return. Positive changes in investment value of more than 100bps (excluding capital expenditure and new acquisitions) were seen across seven out of the 26 assets in the fund’s portfolio. Positive movements were seen following construction progress at: Montrose Crescent, Wembley 8%, Britannia Music Site, Ilford 16.4%, Carmen Street 6.1%, The Forge 9.8%, Thames Quarter 6.3%, Arborfield 50.9%, and Colindale 27.2%. However, within the stabilised assets, although investment values were flat, there was minimal uplift in the vacant possession value compared to the previous quarter. The fund is invested in high-quality assets in strong and affordable locations. However, we are not expecting significant capital uplifts due to inherent political and economic uncertainty.

During the quarter the fund completed on two deals in the South West of England. The first transaction comprised an additional 52 units at the fund’s asset, Frederick House, in Bath for £15.2m. The second deal is to forward-fund the development of 300 new Built-to-Rent (BTR) homes at Castle Park View, Bristol, for £85.9m. Both deals provide further geographical diversification in line with the fund’s strategy of expanding its commitment to regional well-connected areas of the UK.

The fund continues to appraise potential investments and has a healthy pipeline of c.£1bn of assets, comprising almost 3,000 units, under consideration. Our focus over the long term is to develop a nationally diverse portfolio and to gain further exposure in regional cities such as Manchester, Brighton, Edinburgh, and Birmingham.

Past performance is not a guide to future performance.

Top 10 schemes*

Schemes City/town Region Units % of portfolio Value (£m)

Rehearsal Rooms London Inner London 173 11.6% £71.1

Montrose Crescent London Outer London 148 10.1% £62.0

The Green Crawley South East 227 9.3% £57.2

Carmen Street London Inner London 150 8.0% £49.0

Britannia Music Store London Inner London 206 6.1% £37.4

The Forge London Inner London 125 5.9% £36.2

The Astley Manchester North West 135 4.7% £28.6

Block F, Colindale Gardens London Outer London 186 4.5% £27.7

Thames Quarter Reading South East 315 4.4% £26.8

Frederick House Bath South West 97 4.3% £26.5

*Including developments

Awarded a GRESB green star score of 84/100 versus a peer average

of 77/100.

Geographical weightings – by value

Split – by unit type

Geographical weightings – by complete units

n London: 70.8%n South East: 18.2%n South West: 6.3%n North West: 4.7%

n London: 56.4%n South East: 31.0%n South West: 7.2%n North West: 5.4%

Energy performance certificate (EPC) ratings – by no. of units*

n B 47.2%n C 45.0%n D 7.2%n E 0.6%

n Studio apartment: 9.8%n 1 Bed apartment: 42.3%n 2 Bed apartment: 40.2%n 3 Bed apartment: 5.1%n 4 Bed apartment: 0.1%n 2 Bed House: 0.6%n 3 Bed house: 0.7%n 4 Bed house: 1.2%

*Operating and stabilising assets onlyMay not add up exactly to 100% due to rounding effects.

1Includes nine forward-funded developments2Operating assets by unit (excl. units for sale)3Operating assets only

G B * * * * * 2018

M&G UK Residential Property Fund | Fund profile

Investment and development activityThe new forward funded-development in central Bristol is adjacent to Castle Park and in close proximity to the city’s employment centres. As with other schemes in the portfolio, the development will include onsite management as well as communal facilities such as a sky lounge, fitness suite and a residents lounge. The scheme is expected to reach practical completion in March 2022. This deal and the acquisition of the additional units at Frederick House in Bath reflect the fund’s strategy of gaining further regional exposure in cities with strong economies. This is also backed by the lack of supply and the strong demand for housing in the South West region, providing scope for the fund to benefit from the potential for strong rental growth.

The final 32 units at The Green, Kilnwood were handed over in December 2018. Construction on the nine development assets is progressing well with four assets anticipated to reach practical completion in 2019; The Astley, Manchester, Montrose Crescent, Wembley, The Forge, Redclyffe Road and Carmen Street, Poplar. The development at The Astley in Manchester reached practical completion in January 2019. Marketing has been well received, the fund had a pre-let target of 20% and secured pre-lets equating to 27% with 37 units reserved as at 31 December 2018. The first residents moved in at the end of January.

Asset management activityLettings across the portfolio have been positive over the year with occupancy at 97.9%1. Rehearsal Rooms, Baker Street and Frederick House have just a few vacant units. The final handover of the additional 32 units, in December 2018, at The Green are slowly leasing up as marketing of the scheme continues, we expect this to pick up in spring.

As part of our asset management strategy, we aim to foster a sense of community and to encourage social well-being at our schemes. At the stabilised assets, events and activities play a key role in achieving community engagement. This has been a huge success over the year, evidenced by the increased organisation of activities by the residents themselves. Highlights include an event planner resident organised the Christmas and Halloween parties for the residents at Rehearsal Rooms. Other activities include weekly yoga classes and brunch clubs at Frederick House and The Green. Such activities help build a community environment and also help sustain the fund’s income stream.

We have improved the on-site management teams at the Built-to-Rent assets, taking staff in house improves customer service and saves costs. At Rehearsal Rooms two new resident service managers were hired during the year, with background in the hospitality and asset management sector. Security was taken in house with an on-site night time concierge hired, both hires have helped improve customer service at Rehearsal Rooms leading to a reduction in operational and management costs. After reviewing expenditure on reactive and

Arborfield, nr. Reading(Artist’s impression once scheme complete)

proactive maintenance at the assets, we hired maintenance operatives at Rehearsal Rooms and The Green. Given the positive feedback from residents as well as the operational cost savings, we have taken the decision to recruit an operative at each asset as the portfolio grows.

Market outlookThe economy has continued to grow at a relatively healthy rate of 0.4% (three-month period to October 2018). Economic activity is expected to be maintained at around this level through 2019, despite the continued uncertainty surrounding the UK’s withdrawal from the EU. The labour market remains buoyant, with employment rate at its highest since estimates began in 1971 and the unemployment rate close to its more-than-40-year low The tightness of the labour market is further demonstrated by the fact that job vacancies remain close to their recent high. As a result, real wage growth has risen to its highest level since before the global financial crisis. A combination of restrained inflation, currently at its target of 2%, steady economic growth and Brexit uncertainty suggests that the Bank of England will be under little pressure to increase interest rates in the immediate term, something that should help support the housing market.

UK house price growth has broadly stabilised at c.3.0% per annum according to the Office of National Statistics (ONS), still slightly ahead of the 10-year average of 2.6% per annum. The UK figure, however, masks some polarisation between the different regions. London has seen some slight falls in prices of 0.6% per annum, while, in contrast, Wales and the West Midlands are seeing price rises at rates 4-6%. London itself remains polarised, partly due to ongoing Brexit concerns, with prime Central London, in particular, being affected by weaker sentiment. It is likely that UK housing market activity will remain subdued while the economic and political landscape remains uncertain and this, in turn, will likely keep house price growth at muted levels.

Sentiment in the rental market is improving, rents rose by 1% per annum across the UK in December, according to the ONS. As has been the case with the wider sales market, it has been London that has been the main driver of the recent rental market slowdown. Rents in London are now rising by a mild, but positive, 0.2% per annum. We expect rents in London to strengthen further over the year as tenant demand continues to outstrip available supply. The other regions are generally still seeing relatively stronger rental growth and we expect major urban centres such as Reading in particular to continue to see healthy rises in rents. M&G Real Estate’s in house research forecasts rental growth of 3.3% per annum in Greater London (excluding Central London) and the South East over the next five years.

1As at 31 December 2018 (by unit excluding units for sale).

M&G UK Residential Property Fund | Fund profile

*Global real estate ranking according to PFR/IREI Global Real Estate Investment Manager Report 2018.

For Investment Professionals only. This document is confidential and designed to provide factual information about M&G UK Residential Property Fund FCP-FIS (“the fund”) for the sole and exclusive use of persons to whom it is addressed and may not be passed on to any other person, as further distribution will breach confidentiality and might be restricted or illegal in certain jurisdictions. This document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any share in the fund, nor shall this document or any part of it or the act of its distribution form the basis of, or be relied upon in connection with, any contract for the purchase of any such shares. The INREV NAV is provided for information purposes only. Redemption and Subscription prices are based on the fund NAV, which is calculated in accordance with the fund’s Prospectus. The Redemption and Subscription prices are the prices upon which Units in the fund are traded. Reference to real estate transactional activity in this document refers to activity undertaken on behalf of the English Limited Partnership (“ELP”) in which the fund invests. Notice to Investors in the European Economic Area. In relation to each member state of the EEA (each a “Member State”) which has implemented the Alternative Investment Fund Managers Directive (Directive (2011/61/EU)) (the “AIFMD”) (and for which transitional arrangements are not/no longer available), this document may only be distributed and interests in any fund referred to in this document may only be offered or placed in a Member State to the extent that: (1) such funds are permitted to be marketed to professional investors in the relevant Member State in accordance with AIFMD (as implemented into the local law/regulation of the relevant Member State); or (2) this document may otherwise be lawfully distributed and such interests may otherwise be lawfully offered or placed in that Member State (including at the initiative of the investor). In relation to each Member State of the EEA which, at the date of this document, has not implemented AIFMD, this document may only be distributed and interests may only be offered or placed to the extent that this document may be lawfully distributed and the interests may lawfully be offered or placed in that Member State (including at the initiative of the investor). Notice to Investors in Germany. Interests in any fund referred to in this document may in particular not be distributed or marketed in any way to German retail or semi-professional investors if said fund is not admitted for distribution to these investor categories by the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). The fund’s Prospectus contains a full statement of the restrictions applying as regards the persons to whom shares in the fund may be promoted. Shares in the fund are not registered under the US Securities Act of 1933 and are not available for investment in the United States or by US persons, except in certain limited circumstances. For distribution in Ireland. The distribution of this document in Ireland and the offering or purchase of interests in any fund referred to in this document is restricted to the party to whom it is addressed. Accordingly, it may not be reproduced in whole or in part, nor may its contents be distributed in writing or orally to any other third party and it may be read solely by the party to whom it is addressed and his/her professional advisers. Interest in any fund referred to in this document will not be offered or sold by any person: (a) otherwise than in conformity with the provisions of the European Communities (Markets in Financial Instruments) Regulations 2007, as amended; or (b) in any way which would require the publication of a prospectus under the Companies Act 2014 or any regulations made thereunder; or (c) in Ireland except in all circumstances that will result in compliance with all applicable laws and regulations in Ireland. Distribution in Switzerland. The distribution of Shares or Units (as relevant) in any fund referred to in this document (a “fund”) in Switzerland will be exclusively made to, and directed at, qualified investors (the “Qualified Investors”), as defined in the Swiss Collective Investment Schemes Act of 23 June 2006, as amended (“CISA”) and its implementing ordinance (the “Swiss Regulations”). Accordingly, the funds have not been and will not be registered with the Swiss Financial Market Supervisory Authority (“FINMA”). This document and/or any other offering materials relating to the Shares/Units may be made available in Switzerland solely to Qualified Investors. The Swiss Representative and Paying Agent of the fund is Société Générale, Paris, Zurich Branch, Talacker 50, P.O. Box 5070, 8021 Zurich (the “Representative”). Further information regarding each Fund, including (as relevant) the Prospectus, the Articles of Incorporation and the Financial Statements may be obtained free of charge from the Representative. For the purposes of the Swiss Regulations, the funds, the AIFM and their agents do not pay retrocessions as remuneration for distribution activity in respect of Shares/Units in Switzerland. For the purposes of the Swiss Regulations and in respect of distribution in Switzerland, the funds, the AIFM and their agents do not pay any rebates to reduce the fees or costs incurred by the investor and charged to each Fund. In respect of distribution in Switzerland, the place of performance and the place of jurisdiction are at the registered office of the Representative in Switzerland. Past performance is not a guide to future performance. The value of investments can fall as well as rise. Information given in this document has been obtained from, or based upon, sources believed by us to be reliable and accurate, although M&G does not accept liability for the accuracy of the contents. M&G does not offer investment advice or make recommendations regarding investments. Data may be held on servers outside the European Economic Area. This document is issued by M&G International Investments S.A., registered office 16, boulevard Royal, L-2449, Luxembourg and M&G Investment Management Limited, registered in England and Wales under number 936683 with its registered office at Laurence Pountney Hill, London EC4R 0HH. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority. For the purposes of AIFMD, M&G Luxembourg S.A. acts as alternative investment fund manager of any funds cited in this document. M&G Real Estate Limited is registered in England and Wales under number 3852763 with its registered office at Laurence Pountney Hill, London EC4R 0HH. M&G Luxembourg S.A., M&G International Investments S.A., M&G Investment Management Limited and M&G Real Estate Limited are indirect subsidiaries of Prudential plc of the United Kingdom. Prudential plc and its affiliated companies constitutes one of the world’s leading financial services groups and is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America.  JAN 19 / W341004_UK-EU

www.mandgrealestate.com

Stefan Cornelissen +31 (0)20 799 7680 stefan.cornelissen@mandg.co.uk

Ingo Matthey +49 69 1338 6716 ingo.matthey@mandg.com

Robert Heaney+46 7 0266 4424 robert.heaney@mandg.co.uk

Lucy Williams +44 (0)20 3977 1050 lucy.williams@mandg.com

Contact

Manuele De Gennaro+41 (0)43 443 8206 manuele.degennaro@mandg.com

About usM&G Real Estate, the property fund management arm of M&G, is a specialist investor in all major real estate sectors across the globe. We focus on generating long-term, income driven returns through active management and offer institutional investors exposure to real estate through both pooled vehicles and segregated mandates. • £33.1 billion of assets under management (as at 31 Dec 2018)• Top-30 global real estate investor*• Responsible for managing property investments for over

200 institutional investors• Invested in over 950 properties across 21 countries• £4.8 billion of transactions completed globally in 2018

We also have a dedicated Responsible Property Investment team that enables us to respond to the growing range of environmental and social issues that can impact property values. Nine of our funds (including the M&G UK Residential Property Fund) have been awarded Green Stars in the 2018 Global Real Estate Sustainability Benchmark (GRESB) Survey – meaning they are amongst the most highly ranked for sustainability globally.

Fund manager profileAlex is the lead fund manager and is responsible for setting investment strategy and for delivering outperformance. Alex heads the residential capability at M&G Real Estate and has built the team from inception, which comprises three investment managers and one asset manager. Between them they have more than 28 years’ experience and have secured a pipeline agreement with two housebuilders, and contracted various forward-funding deals. The team also benefits from the support of dedicated individuals within the research, development and construction, transaction management, and portfolio management teams.

Prior to joining M&G Real Estate, he spent seven years at Grainger with responsibility for the Schroders ResPut Fund and the Grainger Geninvest

JV with Genesis housing. He also set up Grainger’s Ramp platform and managed its partnership with Lloyds Banking Group for distressed borrowers.

Alex is a member of the Royal Institution of Chartered Surveyors (RICS), of the Investment Property Forum (IPF) and the deputy chair of British Property Federation Residential Committee.

Alex Greaves