HIIT wind-up questions

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1. GENERAL QUESTIONS2. M&G FUND OPTIONS3. JPM ELECT4. TRANSFERRING TO JPM ELECT FOR M&G ISA INVESTORS5. TRANSFERRING TO JPM ELECT FOR NON M&G-ISA INVESTORS6. OVERSEAS INVESTORS

1. GENERAL QUESTIONS

Q1: I have just received a letter from you. Why are you contacting me now?

If you have received a letter from us, it is because you invest in the M&G High Income Investment Trust plc (HIIT) through the M&G ISA.

The Board of HIIT recently announced the different options that investors in the trust will have when the trust is wound up on 17 March 2017. The options include moving your investment into an M&G open-ended fund, moving your investment into another closed-ended investment trust, or electing to receive cash for your shares.

As an M&G ISA investor, we want to give you as much time as possible to consider what you may want to do, while allowing sufficient time for your request to be processed prior to wind-up. If you want to move into one of the three M&G funds or receive cash for your shares or units, these options can be chosen closer to the time the trust will be wound up. You will be receiving forms in January to allow you to make your choice.

However, if you want to move into the closed-ended investment trust, you will have to transfer your units in HIIT to another ISA manager. As this is a long process, you need to act earlier if this is what you want to do. Specifically, if you already know that you want to move into the closed-ended investment trust, we strongly recommend that you instruct another ISA provider to begin the transfer process no later than 31 December 2016. This is to ensure there is sufficient time to complete the transfer process and for your new ISA provider to move you to the closed-ended investment trust. You will not be able to hold shares in the closed-ended investment trust in the M&G ISA.

Q2: What are the options at wind-up?

  1. The M&G Extra Income Fund* (which is an open-ended fund, also known as an OEIC), which has similar investment objectives to those of HIIT, is invested in many of the same assets as HIIT, and is run by the same manager as HIIT, Richard Hughes. The M&G Extra Income Fund will be the automatic option for HIIT shareholders who do not choose one of the other alternative options. Find out more
  2. M&G Strategic Corporate Bond Fund (OEIC) run by Richard Woolnough. Find out more
  3. M&G Dividend Fund (OEIC), run by Phil Cliff. Find out more
  4. Taking cash
  5. Moving your investment into another closed end investment trust, JPMorgan Elect plc (JPM Elect)** If you invest in HIIT through the M&G ISA, you will first need to transfer your units in HIIT to a third party provider before you choose this option.

Whilst your investment is being transferred it will be out of the market for a short period of time and will not lose or gain in value.

*The name of this fund will change to "M&G UK Income Distribution Fund" on 16 December 2016.

**This option is subject to JPM Elect shareholders approving a proposal to issue new shares in connection with HIIT’s wind-up scheme.

Q3: What do I need to do now?

We will send you full details of your options and how to tell us which option you want, around the end of January 2017.

If you hold an M&G ISA and you want to stay with M&G, you don’t need to take any action right now. You will receive full details around the end of January 2017.

If you hold an M&G ISA and you want to move your investment into JPM Elect, you need to take action very soon to transfer your units in HIIT to another ISA manager. This is because only shares in M&G funds can be held in the M&G ISA: you need to move to another ISA manager to hold shares in JPM Elect.

Specifically, if you already know that you want to move into JPM Elect, we strongly recommend that you instruct another ISA provider to begin the transfer process no later than 31 December 2016. This is to ensure there is sufficient time to complete the transfer process and for your new ISA provider to move you to JPM Elect when HIIT winds up.

Q4: I hold an M&G ISA. Why can’t I hold another investment trust within my ISA?

Only shares in M&G funds can be held in the M&G ISA. JPM Elect is not an M&G fund so you cannot hold it in your M&G ISA.

Q5: Should I move to another closed-ended investment trust or to an open-ended investment company?

See the comparison table which explains the differences between an open-ended fund, (also known as an Open-ended Investment Company or OEIC) and a closed-ended investment trust. M&G cannot provide investment advice, so you should speak to a financial adviser about what type of investment will suit you.

Q6: Can I move into another closed-ended investment trust?

The Board of HIIT has chosen JPM Elect as an alternative option for investors in HIIT who wish to remain invested in a closed ended investment trust. If you wish to move your investment to JPM Elect when HIIT is wound up, please see Section 4 if you invest through the M&G ISA, and Section 5 if your investment is not through an ISA.

If you want to move your investment into a different closed ended investment trust (other than JPM Elect) there are several ways to do this. If you are unsure which of these ways is right for you, please seek advice from a financial adviser.

  • If you hold HIIT shares within an M&G ISA and want to keep your ISA status, you can first choose to move your investment into one of the M&G funds at wind-up. Once the wind-up is complete, you can transfer your investment to another ISA manager which offers the investment trust of your choice.
  • Alternatively, you can transfer your units in HIIT to another ISA provider now. You can then move to the investment trust of your choice either before or after the wind-up. Please note that, due to the time it can take to transfer between ISA providers, you need to act soon if you want to transfer before wind-up. We strongly recommend that you instruct another ISA provider to begin the transfer process no later than 31 December 2016. You can of course sell your units in HIIT before the wind-up and reinvest the cash in another investment trust. Please note, the cash received from selling your units in HIIT will then be paid directly to you and will no longer form part of your M&G ISA.
  • If you do not hold shares or units in HIIT through the M&G ISA, you can select any of the options at wind-up (including cash) and subsequently move to the investment trust of your choice. Or you can at any point sell your shares in HIIT and reinvest the cash in another investment trust.

Q7: What should I do if I want to take cash?

When we write to you around the end of January 2017, information will be included about the different options available to you, including what to do if you want to receive cash for your shares or units.

Please note, if you have invested in HIIT through the M&G ISA, the cash you will receive from your units in HIIT at wind-up will be paid directly to you and will no longer form part of your M&G ISA.

You are of course free to sell your HIIT investment in advance of wind-up if you prefer. If you choose to sell before the wind-up date, the value you receive will depend on the price obtained in the market on that day.

Q8: Can I choose any of the options?

We will be sending all shareholders full details of the various options available to them, depending on the type of investment they have, in January 2017.

However, because M&G ISA investors cannot hold JPM Elect or any other investment trust in their M&G ISA, if you know you wish to move to JPM Elect, we strongly recommend that you instruct another ISA provider (who can support a transfer from HIIT into JPM Elect at wind-up) to begin the transfer process no later than 31 December 2016. This is to ensure there is sufficient time to complete the transfer process and for your new ISA provider to move you to JPM Elect.

Q9: What happens if I do nothing?

We will be sending you full details about your options and how to let us know which option you would prefer in January. If you do not tell us which option you prefer, your investment will be automatically moved into the M&G Extra Income Fund*. For more information on this fund, visit the fund page.

*The name of this fund will change to "M&G UK Income Distribution Fund" on 16 December 2016.

Q10: Are there any tax implications?

The M&G ISA investors will be offered options which allow them to preserve the ISA status of their investment.

For anyone who has shares or units in HIIT outside of the M&G ISA, details of the tax implications of the wind-up will be provided in the Circular in respect of the scheme. The exact implications of all options will depend on your individual circumstances. We cannot provide advice on your individual tax situation and recommend you seek your own tax advice.

Q11: Are there any costs associated with any of this?

As you would expect, there are some costs to winding up HIIT. The first £350,000 will be charged to HIIT, (this being an amount provided for by the HIIT Board to cover the costs of a simple wind-up without any investment options). This amounts to an average of approximately 0.14p per Package Unit or per Income & Growth unit. (If you invest in HIIT through the M&G ISA you will hold either Package Units, consisting of one zero dividend preference share, one income share and one capital share, or Income & Growth Units, consisting of one income share and one capital share.) Providing investment options will result in significant additional costs being incurred over £350,000; these will be met by M&G and JPMorgan Funds Limited.

M&G will not be charging investors for any costs related to the transfer of investments into M&G funds or to other ISA providers. Other ISA providers may charge additional fees. JPM Elect may charge further costs to investors moving into the trust, which will be set out in the Circular sent to you in January.

Q13: Can I split my investment between an M&G fund and JPM Elect?

If you transfer your units in HIIT to another ISA provider who offers both M&G funds and JPM Elect before the wind-up, you may be able to split your investment between these options. You will need to check this with your new ISA provider.

Q14: Is there any difference if I sell my HIIT shares or units now as opposed to waiting for wind-up?

If you sell (or transfer in cash) now, you will receive the market price for your HIIT shares or units. The market price is what other investors are willing to pay for your shares on that day, and shares could trade at a premium (above) or a discount (below) to the value of the assets owned by the trust, less dealing costs. It is likely that the market price will be different to the Net Asset Value for the shares or units, which may or may not be to your advantage.

If you choose to hold your shares or units until wind-up and then receive cash for them, you will get the Terminal Asset Value (‘TAV’) of your HIIT investment. The Terminal Asset Value is the per share value of the assets held within the fund on the day it is wound up.

Q15 What is happening to the assets in HIIT when it is wound up?

If you would like to know more about how HIIT is being managed as it approaches wind-up, and what will happen to the assets it holds, please see this short video made by the HIIT fund manager, Richard Hughes.

Q16: Why is M&G not offering another investment trust company at wind-up?

HIIT is the last investment trust managed by M&G. It was launched in 1997 with a fixed life of 20 years, scheduled to wind-up on 17th March 2017. During its life, it has been used as a consolidation vehicle for an earlier UK investment trust and two more recent Guernsey investment companies when they came to the ends of their respective fixed lives in October 2008, March 2009 and March 2011. Although we are not offering another closed-ended investment trust, we manage an open-ended fund with a very similar strategy and the same fund manager, the M&G Extra Income Fund*. Further details of this fund, as well as the other M&G funds being offered, can be found here.

*The name of this fund will change to "M&G UK Income Distribution Fund" on 16 December 2016.

Q17: Is JP Morgan taking over M&G?

No. The Board of HIIT have selected JPM Elect, a closed ended investment trust alongside the three M&G open-ended funds as options at wind-up for shareholders.

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2. M&G FUND OPTIONS

Q1: What are the M&G fund options?

M&G is offering three different open-ended funds at wind-up:

  1. The M&G Extra Income Fund*, which has similar investment objectives to those of HIIT through investment in a combination of UK equities and bonds. It is invested in many of the same assets as HIIT, and is run by the same manager as HIIT, Richard Hughes. The M&G Extra Income Fund will be the automatic option for HIIT shareholders who do not choose another option. The fund manager of the M&G Extra Income Fund and HIIT, Richard Hughes, has made a short video to explain their similarities and differences.
  2. M&G Strategic Corporate Bond Fund
  3. M&G Dividend Fund

*The name of this fund will change to "M&G UK Income Distribution Fund" on 16 December 2016.

Q2: What if I want other M&G funds at wind-up?

First choose one of the three M&G funds being offered at the wind-up of HIIT. Following wind-up, you may immediately switch into any other M&G funds.

Q3: What will be the terms for investment in the M&G funds?

There will be no entry or exit charge on the M&G funds, however all M&G funds have ongoing charges associated with them. The Circular which will be sent to you in January will contain full details of the share class offered and charges applied to them.

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3. JPM ELECT

Q1: Why did the Board of HIIT select JP Morgan Elect plc (JPM Elect) as the new closed-ended investment trust option?

Once HIIT is wound up, M&G will no longer run any closed-ended investment trusts. The HIIT Board, conscious that some shareholders may want to remain invested in a closed-ended trust, reviewed other closed-ended options and chose JPM Elect to be a closed-ended option to supplement the three M&G fund options which are also being offered to HIIT shareholders*. JPM Elect provides investors access to a number of different investment strategies, including one focussed on UK equity income, through a multi-share class structure. The Board of HIIT believes this will appeal to HIIT shareholders and unitholders who wish to remain in a closed-ended investment vehicle.

*This option is subject to JPM Elect shareholders approving a proposal to issue new shares in connection with HIIT's wind-up scheme.

Q2: Where can I find details of JPM Elect?

You can find information about JPM Elect on the company's website www.jpmelect.co.uk.

Q3: How do I choose to move my investment to JPM Elect at wind-up?

If you invest in HIIT through the M&G ISA, you will need to transfer units in HIIT to another ISA manager before the wind-up if you want to move your investment into JPM Elect. This is because only M&G funds can be held in M&G ISAs.

If you do not invest in HIIT through an M&G ISA, you need do nothing now. You will be sent full details of how to choose the JPM Elect option in January.

Please note that the JPM Elect option is subject to JPM Elect shareholders approving a proposal to issue new shares in connection with HIIT's wind-up scheme.

Q4: When are the shareholders of JPM Elect voting on the proposals?

It is anticipated that JPM Elect's shareholders will be sent transaction documentation at the same time as HIIT's shareholders (end of January 2017) and will also vote on the proposals at broadly the same as time as HIIT's shareholders vote (mid-March). Specific dates will however be finalised in due course.

Q5: What if JPM Elect plc shareholders vote 'no' to the proposals?

There will be no investment trust offering to roll into. Details of what happens in that eventuality will be provided in the Circular for the scheme.

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4. TRANSFERRING TO JPM ELECT FOR M&G ISA INVESTORS

Q1: What do I need to do if I want to move my investment into JPM Elect?

You will first need to transfer your units in HIIT to another ISA manager who is able to hold both HIIT and JPM Elect. Specifically, if you already know that you want to move into JPM Elect, we strongly recommend that you instruct another ISA provider to begin the transfer process no later than 31 December 2016. This is to ensure there is sufficient time to complete the transfer process and for your new ISA provider to move you to JPM Elect when HIIT winds up.

Please note, the JPM Elect option is subject to JPM Elect shareholders approving a proposal to issue new shares in connection with HIIT's wind-up scheme.

Q2: Where can I transfer my holding to?

You cannot transfer your units in HIIT to JPMorgan as it cannot accept holdings of M&G funds. You will need to choose a third party stocks and shares ISA provider which allows you to hold both an M&G investment trust (HIIT) and a JPMorgan investment trust (JPMorgan Elect plc) and is able to handle corporate actions such as a wind-up scheme.  We are currently working with an external party to provide details of some ISA managers who meet these criteria, which will be added to this website.  In the meantime, to avoid any delay, we would suggest that you also start your own research or seek financial advice.

Q3: How do I find another ISA provider?

We suggest you speak to a financial adviser. M&G cannot provide advice.

Q4: Can I transfer my holding to JPMorgan?

No. You cannot transfer your shares in HIIT to a JPMorgan ISA because you cannot hold an M&G fund in a JPM ISA. If you want to move your investment into JPM Elect you will need to transfer your shares to an ISA provider who allows you to hold both HIIT and JPM Elect shares or units.

Q5: Why can't I transfer to JPM Elect on the day of wind-up?

M&G are unable to support ISA transfers on the day of wind-up. The ISA transfer process is complex and can take up to 30 days to complete. It was therefore considered to be too high risk to offer to investors when the consequences of this not completing in time would mean risking our investors losing their ISA status.

Q6: How do I transfer my units in HIIT?

You will need to get in touch with the new provider and request their transfer forms. You will need to transfer your units in HIIT directly to the other provider (without selling them).

Q7: What does in-specie mean?

In-specie means investments are transferred to another provider without selling the underlying assets. In order to transfer an investment in cash, the underlying assets must be sold first. If you transfer in cash, you no longer hold HIIT shares whereas, if you transfer in-specie, you will still hold the same HIIT units but will hold these within another provider's ISA plan.

Q8: What is the difference between an in-specie and cash transfer?

An in specie transfer simply means that the units are transferred direct to another ISA provider. A cash transfer means that the units are sold and then the cash raised from the sale is transferred to another ISA provider.

Q9: What happens to my other M&G investments?

You can request to transfer only your units in HIIT and leave your other investments with M&G in the M&G ISA. Please note that all current year subscriptions into the M&G ISA (any subscriptions in other M&G funds made between 6 April 2016 and the date of transfer) will have to move to the other ISA manager.

Q10: When do I have to do this by?

Typically this process is complex and can take up to 30 days. To ensure that your transfer is completed in time you should instruct your new provider as soon as possible but we strongly recommend that you instruct your new provider to begin the transfer process no later than 31 December 2016. This is to ensure there is sufficient time to complete the transfer process and for your new ISA provider to move you to JPM Elect.

Q11: Why does a transfer take so long?

M&G cannot control transfers out as we are instructed by the new ISA manager and are bound by their timescales. This is an industry-wide standard. If you wish to obtain information on the status of your transfer, please contact your new provider.

Q13: What happens to my income distributions?

Any income distributions that are due after you transfer your holding will be sent by cheque to your registered address.

Q14: What happens to my income reinvestments?

If you normally have your income reinvested we will send it onto your new ISA manager to reinvest into your ISA. However some ISA managers have a minimum amount that they will accept, if your income payment is below that minimum we will need to send this payment by cheque to your registered address.

Q15: What happens to my regular savings?

Any regular savings you have in place with us will be cancelled following your transfer to another ISA provider. Please make sure that you also contact your bank to cancel the payment.

Q17: Can I split my elections between M&G and JPM Elect?

If you transfer your holding to another ISA provider who offers both M&G and JPM Elect in advance of the wind-up, you may be able to split your elections. You will need to check this with the new ISA provider.

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5. TRANSFERRING TO JPMORGAN ELECT FOR NON-M&G ISA INVESTORS

Q1: How do I get shares in JPM Elect at wind-up?

You will be sent details of the wind-up options, appropriate literature, Forms of Direction and Forms of Proxy around the end of January 2017.

Q2. If I hold ZDP / income / capital / package / income & growth units, can I get all the options?

Full details in respect of the available options to the various shareholders will be provided in the Circular in respect of the scheme.

Q3: Can I split my elections between M&G and JPM Elect?

If you hold your HIIT shares or units within another manager's ISA or through a platform which allows you to invest in the other M&G funds and JPM Elect, then you will be able to split your elections. If you hold your shares or units directly, then you will also be able to split your elections.

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6. OVERSEAS INVESTORS

Q1: I hold an M&G ISA but live outside of the UK (but not in the United States). What does this mean for me?

You can choose the M&G fund options. We will send you full details of your options and how to tell us which option you want, around the end of January 2017.

Q2: I hold an M&G ISA but live in the United States. What does that mean for me?

The funds have not been registered with the US Regulator, the Securities and Exchange Commission (SEC). Under SEC rules this means that we are unable to offer shares in these funds to US-domiciled investors. Consequently, you will receive cash in respect of the wind-up. This means that the cash proceeds will be paid directly to you and will no longer form part of your M&G ISA. You should consult your tax adviser as to your individual taxation position.

Q3: I invest in HIIT (not through the M&G ISA) but live outside of the UK.

We will send you full details of your options and how to tell us which option you want, around the end of January 2017. Options for overseas holders may be affected by laws of the relevant country.

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