HIIT wind-up questions

RELEVANT ONLY TO CLIENTS WHO HAVE INVESTED THROUGH AN M&G ISA.

Investors through The M&G ISA were recently sent a brochure with details of the options available to them and how to instruct M&G on what to do with their investment.

This page includes some additional questions and answers which both sets of investors may find also useful. 

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1. GENERAL QUESTIONS2. M&G FUND OPTIONS3. JPM ELECT4. TRANSFERRING TO JPM ELECT5. OVERSEAS INVESTORS

1. GENERAL QUESTIONS

Q1: What are the options at wind-up?

  1. The M&G UK Income Distribution 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 UK Income Distribution 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

The Board of HIIT has chosen JPMorgan Elect (“JPM Elect”) as an alternative option for investors in HIIT who wish to remain invested in a closed-ended investment trust. However, if you wanted to move your investment to JPM Elect, we previously informed you that you needed to start the transfer process by 31 December 2016 to guarantee that this could be completed before the wind-up date. If you have not already started the process, it is unlikely there will be sufficient time to complete the transfer before wind-up. If it cannot be completed in time, your investment will be moved into M&G UK Income Distribution Fund R Income Shares to maintain its ISA status – please refer to the information contained in section 4 for details.

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.

Q2: What do I need to do?

The brochure sent to you recently includes all the necessary information on the action you need to take. Please note that we must receive your instructions no later than 5pm on Thursday 2 March 2017. If we haven’t received valid instructions from you by that date, we will move your investment to M&G UK Income Distribution Fund R Income Shares.

Q3: 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.

Q4: 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.

Q5: 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.

However, if you wanted to move your investment to JPM Elect, we previously informed you that you needed to start the transfer process by 31 December 2016 to guarantee that this could be completed before the wind-up date. If you have not already started the process, it is unlikely there will be sufficient time to complete the transfer before wind-up. If it cannot be completed in time, your investment will be moved into M&G UK Income Distribution Fund R Income Shares to maintain its ISA status – please refer to the information contained in section 4 for details.

If you still want to move your investment into a different closed-ended investment trust (including JPM Elect) 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. If you wish to move your units to another ISA Manager (in-specie), such a transfer must be initiated by you through your new ISA Manager. They must in turn instruct M&G before 22 February 2017 in order for us to transfer your holding of Package and/or Income and Growth Units before the last dealing date. If you wish to transfer your ISA to another provider in cash, we must receive the valid instruction from your new ISA Manager no later than 12 noon on 1 March 2017.

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.

Q6: What should I do if I want to take cash?

You can find out how to choose cash in the brochure sent to you recently.

Please note, 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.

Q7: Can I choose any of the options?

You were recently sent a brochure with full details of the various options available to you.

Please note that if you wished to move your investment to JPMorgan Elect plc (“JPM Elect”), we previously informed you that you needed to start the transfer process by 31 December 2016 to guarantee that this could be completed before the wind-up date. If you have not already started the process, it is unlikely there will be sufficient time to complete the transfer before wind-up. If it cannot be completed in time, your investment will be moved into M&G UK Income Distribution Fund R Income Shares to maintain its ISA status – please refer to the information contained in section 4 for details.

Q8: What happens if I do nothing?

If you do not tell us which option you prefer, your investment will be automatically moved into the M&G UK Income Distribution Fund to maintain its ISA status. For more information on this fund, visit the fund page.

Q9: Are there any tax implications?

The options offered to you, as detailed in the brochure, include some which allow you to preserve the ISA status of your investment.

Q10: 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 are set out in the Circular sent to you in January.

Q11: Can I split my investment between an M&G fund and JPM Elect?

If you have transferred 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.

Q12: 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.

Q13 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 watch this short video made by the HIIT fund manager, Richard Hughes.

Q14: 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 17 March 2017. During its life, it has been used as a consolidation vehicle for several UK investment trusts and two Guernsey investment companies when they came to the ends of their respective fixed lives. 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 UK Income Distribution Fund. Further details of this fund, as well as the other M&G funds being offered, can be found here.

Q15: Is JPMorgan 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 UK Income Distribution 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 UK Income Distribution Fund will be the automatic option for HIIT shareholders who do not choose another option. The fund manager of the M&G UK Income Distribution 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

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 brochure and Circular sent to you in January contain full details of the share class offered. For full details of charges please refer to the funds’ Key Information for Investors Documents (KIIDs).

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3. JPM ELECT

Q1: Why did the Board of HIIT select JPMorgan 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.

However, we previously informed you that you needed to start the transfer process by 31 December 2016 to guarantee that this could be completed before the wind-up date. If you have not already started the process, it is unlikely there will be sufficient time to complete the transfer before wind-up. If it cannot be completed in time, your investment will be moved into M&G UK Income Distribution Fund R Income Shares to maintain its ISA status – please refer to the information contained in section 4 for details.

*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?

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. We previously informed you that you needed to start the transfer process by 31 December 2016 to guarantee that this could be completed before the wind-up date. If you have not already started the process, it is unlikely there will be sufficient time to complete the transfer before wind-up. If it cannot be completed in time, your investment will be moved into M&G UK Income Distribution Fund R Income Shares to maintain its ISA status – please refer to the information contained in section 4.

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4. TRANSFERRING TO JPM ELECT

We wrote to ISA investors in HIIT in November 2016 to advise them that if they wished to move into the JPMorgan Elect investment trust, they needed to start the transfer process by 31 December 2016 to guarantee that this could be completed before the wind-up date. If you invest in HIIT through the M&G ISA and have not already started the process, it is unlikely there will be sufficient time to complete the transfer before wind-up. If it cannot be completed in time, your investment will be moved into M&G UK Income Distribution Fund R Income Shares to maintain its ISA status – please refer to the information contained in Section 4 for details and read the brochure for details of the other options available to you.

Q1: 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.

Q2: 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.

Q3: 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.

Q4: 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 (including 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.

Q5: 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.

Q6: 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.

Q7: 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.

Q8: 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.

Q9: 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. 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. Please refer to the brochure for full details.

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.

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