This Circular is important and requires your immediate attention

Transcription

1 This Circular is important and requires your immediate attention If you are in any doubt as to the action to be taken please call your usual M&G contact or consult your financial adviser. For any operational enquiries contact our Customer Services Team by at or by telephone on or consult your financial adviser, if you have one, immediately. Information and notices of meetings to Shareholders relating to M&G Share Class Mergers for the following funds 1 1. M&G Asian Fund (a sub-fund of M&G Investment Funds (1), a UK authorised Open-Ended Investment Company) 2. M&G Global Select Fund (a sub-fund of M&G Investment Funds (1), a UK authorised Open-Ended Investment Company) 3. M&G Japan Fund (a sub-fund of M&G Investment Funds (1), a UK authorised Open-Ended Investment Company) 4. M&G Japan Smaller Companies Fund (a sub-fund of M&G Investment Funds (1), a UK authorised Open-Ended Investment Company) 5. M&G North American Dividend Fund (a sub-fund of M&G Investment Funds (1), a UK authorised Open-Ended Investment Company) 6. M&G North American Value Fund (a sub-fund of M&G Investment Funds (1), a UK authorised Open-Ended Investment Company) 7. M&G Pan European Select Fund (a sub-fund of M&G Investment Funds (1), a UK authorised Open-Ended Investment Company) 8. M&G Global High Yield Bond Fund (a sub-fund of M&G Investment Funds (2), a UK authorised Open-Ended Investment Company) 9. M&G Short Dated Corporate Bond Fund (a sub-fund of M&G Investment Funds (2), a UK authorised Open-Ended Investment Company) 10. M&G Emerging Markets Bond Fund (a sub-fund of M&G Investment Funds (3), a UK authorised Open-Ended Investment Company) 11. M&G European Corporate Bond Fund (a sub-fund of M&G Investment Funds (3), a UK authorised Open-Ended Investment Company) 12. M&G Episode Macro Fund (a sub-fund of M&G Investment Funds (5), a UK authorised Open-Ended Investment Company) 13. M&G Global Corporate Bond Fund (a sub-fund of M&G Investment Funds (5), a UK authorised Open-Ended Investment Company) 14. M&G European Strategic Value Fund (a sub-fund of M&G Investment Funds (7), a UK authorised Open-Ended Investment Company) 15. M&G Global Convertibles Fund (a sub-fund of M&G Investment Funds (7), a UK authorised Open-Ended Investment Company) 16. M&G Global Emerging Markets Fund (a sub-fund of M&G Investment Funds (7), a UK authorised Open-Ended Investment Company) 17. M&G Global Floating Rate High Yield Fund (a sub-fund of M&G Investment Funds (7), a UK authorised Open-Ended Investment Company) 18. M&G Pan European Dividend Fund (a sub-fund of M&G Investment Funds (7), a UK authorised Open-Ended Investment Company) 19. M&G Global Dividend Fund (a UK stand-alone authorised Open-Ended Investment Company) 20. M&G Global Macro Bond Fund (a UK stand-alone authorised Open-Ended Investment Company) 21. M&G Optimal Income Fund (a UK stand-alone authorised Open-Ended Investment Company) Dated 5 September For a more detailed list of the individual Share Classes please see Appendix 7.

2 Contents Letter to Shareholders 4 APPENDIX 1 COMPARISON OF THE MAIN FEATURES OF AN OEIC AND A SICAV 10 APPENDIX 2 COMPARISON OF THE GENERAL FEATURES OF THE MERGING AND RECEIVING FUNDS 12 APPENDIX 3 COMPARISON OF THE MERGING AND RECEIVING FUNDS 14 APPENDIX 3.1 M&G ASIAN FUND AND M&G (LUX) ASIAN FUND 14 Appendix Product features 14 Appendix Investment Objectives and Policies 15 APPENDIX 3.2 M&G GLOBAL SELECT FUND AND M&G (LUX) GLOBAL SELECT FUND 16 Appendix Product features 16 Appendix Investment Objectives and Policies 17 APPENDIX 3.3 M&G JAPAN FUND AND M&G (LUX) JAPAN FUND 18 Appendix Product features 18 Appendix Investment Objectives and Policies 18 APPENDIX 3.4 M&G JAPAN SMALLER COMPANIES FUND AND M&G (LUX) JAPAN SMALLER COMPANIES FUND 19 Appendix Product features 19 Appendix Investment Objectives and Policies 20 APPENDIX 3.5 M&G NORTH AMERICAN DIVIDEND FUND AND M&G (LUX) NORTH AMERICAN DIVIDEND FUND 21 Appendix Product features 21 Appendix Investment Objectives and Policies 21 APPENDIX 3.6 M&G NORTH AMERICAN VALUE FUND AND M&G (LUX) NORTH AMERICAN VALUE FUND 22 Appendix Product features 22 Appendix Investment Objectives and Policies 22 APPENDIX 3.7 M&G PAN EUROPEAN SELECT FUND AND M&G (LUX) PAN EUROPEAN SELECT FUND 23 Appendix Product features 23 Appendix Investment Objectives and Policies 24 APPENDIX 3.8 M&G GLOBAL HIGH YIELD BOND FUND AND M&G (LUX) GLOBAL HIGH YIELD BOND FUND 25 Appendix Product features 25 Appendix Investment Objectives and Policies 26 APPENDIX 3.9 M&G SHORT DATED CORPORATE BOND FUND AND M&G (LUX) SHORT DATED CORPORATE BOND FUND Appendix Product features 27 Appendix Investment Objectives and Policies 28 APPENDIX 3.10 M&G EMERGING MARKETS BOND FUND AND M&G (LUX) EMERGING MARKETS BOND FUND 29 Appendix Product features 29 Appendix Investment Objectives and Policies 30 APPENDIX M&G EUROPEAN CORPORATE BOND FUND AND M&G (LUX) EURO CORPORATE BOND FUND 31 Appendix Product features 31 Appendix Investment Objectives and Policies 32 APPENDIX M&G EPISODE MACRO FUND AND M&G (LUX) EPISODE MACRO FUND 33 Appendix Product features 33 Appendix Investment Objectives and Policies 34 APPENDIX 3.13 M&G GLOBAL CORPORATE BOND FUND AND M&G (LUX) GLOBAL CORPORATE BOND FUND 35 Appendix Product features 35 Appendix Investment Objectives and Policies 36 Page 27 2

3 APPENDIX 3.14 M&G EUROPEAN STRATEGIC VALUE FUND AND M&G (LUX) EUROPEAN STRATEGIC VALUE FUND 37 Appendix Product features 37 Appendix Investment Objectives and Policies 37 APPENDIX 3.15 M&G GLOBAL CONVERTIBLES FUND AND M&G (LUX) GLOBAL CONVERTIBLES FUND 38 Appendix Product features 38 Appendix Investment Objectives and Policies 39 APPENDIX 3.16 M&G GLOBAL EMERGING MARKETS FUND AND M&G (LUX) GLOBAL EMERGING MARKETS FUND 40 Appendix Product features 40 Appendix Investment Objectives and Policies 41 APPENDIX 3.17 M&G GLOBAL FLOATING RATE HIGH YIELD FUND AND M&G (LUX) GLOBAL FLOATING RATE HIGH YIELD FUND Appendix Product features 42 Appendix Investment Objectives and Policies 43 APPENDIX 3.18 M&G PAN EUROPEAN DIVIDEND FUND AND M&G (LUX) PAN EUROPEAN DIVIDEND FUND 44 Appendix Product features 44 Appendix Investment Objectives and Policies 45 APPENDIX 3.19 M&G GLOBAL DIVIDEND FUND AND M&G (LUX) GLOBAL DIVIDEND FUND 46 Appendix Product features 46 Appendix Investment Objectives and Policies 47 APPENDIX 3.20 M&G GLOBAL MACRO BOND FUND AND M&G (LUX) GLOBAL MACRO BOND FUND 48 Appendix Product features 48 Appendix Investment Objectives and Policies 49 APPENDIX 3.21 M&G OPTIMAL INCOME FUND AND M&G (LUX) OPTIMAL INCOME FUND 50 Appendix Product features 50 Appendix Investment Objectives and Policies 51 APPENDIX 4 SCHEME OF ARRANGEMENT FOR THE MERGER OF THE MERGING SHARE CLASSES OF THE MERGING FUNDS INTO THE RECEIVING FUNDS APPENDIX 5 CONSENTS AND CLEARANCES 57 APPENDIX 6 PROCEDURE FOR THE MEETING OF SHAREHOLDERS 59 APPENDIX 7 SHARE CLASS COMPARISON TABLE 60 APPENDIX 8 GLOSSARY

4 Letter to Shareholders 5 September 2018 M&G Securities Limited Laurence Pountney Hill London EC4R 0HH Dear Investor Information for Investors in the Merging Funds I am writing to you as an investor in one or more of the Merging Share Classes of the Merging Funds to tell you about our plans to merge them into corresponding share classes of the corresponding sub-funds of M&G (Lux) Investment Funds 1 (the M&G SICAV ), a société anonyme qualifying as société d investissement à capital variable ( SICAV ) (each sub-fund being a Receiving Fund and together the Receiving Funds ) as detailed in the table below: Merging Fund Receiving Fund Page numbers for comparison of Merging Fund and Receiving Fund (in Appendix 3) 1. M&G Asian Fund M&G (Lux) Asian Fund M&G Global Select Fund M&G (Lux) Global Select Fund M&G Japan Fund M&G (Lux) Japan Fund M&G Japan Smaller Companies Fund M&G (Lux) Japan Smaller Companies Fund M&G North American Dividend Fund M&G (Lux) North American Dividend Fund M&G North American Value Fund M&G (Lux) North American Value Fund M&G Pan European Select Fund M&G (Lux) Pan European Select Fund M&G Global High Yield Bond Fund M&G (Lux) Global High Yield Bond Fund M&G Short Dated Corporate Bond Fund M&G (Lux) Short Dated Corporate Bond Fund M&G Emerging Markets Bond Fund M&G (Lux) Emerging Markets Bond Fund M&G European Corporate Bond Fund M&G (Lux) Euro Corporate Bond Fund M&G Episode Macro Fund M&G (Lux) Episode Macro Fund M&G Global Corporate Bond Fund M&G (Lux) Global Corporate Bond Fund M&G European Strategic Value Fund M&G (Lux) European Strategic Value Fund M&G Global Convertibles Fund M&G (Lux) Global Convertibles Fund M&G Global Emerging Markets Fund M&G (Lux) Global Emerging Markets Fund M&G Global Floating Rate High Yield Fund M&G (Lux) Global Floating Rate High Yield Fund M&G Pan European Dividend Fund M&G (Lux) Pan European Dividend Fund M&G Global Dividend Fund M&G (Lux) Global Dividend Fund M&G Global Macro Bond Fund M&G (Lux) Global Macro Bond Fund M&G Optimal Income Fund M&G (Lux) Optimal Income Fund 50 All the Receiving Funds are sub-funds of the M&G SICAV which is subject to Part I of the Luxembourg law of 17 December 2010 on undertakings for collective investment, as amended (the 2010 Law ), and consequently qualifies as an Undertaking for Collective Investment in Transferable Securities ( UCITS ). Therefore, the Receiving Funds will be available to investors who require this feature. Investors in M&G European Strategic Value Fund and M&G Global Dividend Fund should note that their corresponding Receiving Funds will launch prior to the effective date, and will be available for investment from Thursday 20 September These will be managed in a similar way as their corresponding Merging Funds. Investors in M&G Emerging Markets Bond Fund and M&G Global Floating Rate High Yield Bond Fund should note that their corresponding Receiving Funds will launch prior to the effective date, and will be available for investment from Friday 21 September These will be managed in a similar way as their corresponding Merging Funds. Investors in M&G Optimal Income Fund should note that their corresponding Receiving Fund will be available for investment on Friday 7 September 2018, and will be managed in a similar way as their corresponding Merging Fund. 4

5 Investors in the Merging Funds not mentioned in the paragraphs above should note that their corresponding Receiving Fund will launch on the Effective Date and will be managed in a similar way as their corresponding Merging Funds. The terms used in this Circular are defined in the Glossary which can be found at the rear of the document at Appendix 8. Background to and reasons for the Mergers On 29 March 2017, the UK Government gave the European Union formal notice of its intention to leave the EU, following the UK referendum on EU membership in June Under the terms of the relevant EU Treaty, the earliest the UK can leave the EU will be 29 March Until then, all EU laws and regulations will continue to apply to trade between the UK and the EU, including the ability to passport financial services. This means that investment funds that are UCITS, including UK-domiciled OEICs, can be easily distributed across borders within the EU until at least March There is, however, uncertainty about the shape and detail of the future trading relationship between the UK and the EU after March 2019, which will require extensive negotiation between the UK, the EU and its member states. Given that uncertainty, we are taking action to ensure that European investors from outside the UK who wish to remain invested in M&G s fund strategies after the UK leaves the EU will still be able to do so, regardless of the outcome of these negotiations. After careful consideration of all the options, and having listened to feedback from our clients, we believe that the mergers are the most robust way of ensuring investors from outside the UK have continued access to these investment strategies through UCITS-qualifying funds. Structure of the Mergers and Meetings for your Fund In order to ensure that European investors from outside the UK have the opportunity to remain invested in M&G s fund strategies, the proposed Mergers are being structured in a way where only the non-sterling share classes in the Merging Funds (the Merging Share Classes ), which you are invested in, are being merged with their respective share classes in the Receiving Funds; meaning that they will be partial mergers. Proposing these partial mergers means ensuring that only investors in the Merging Share Classes are a part of the shareholder approval process. The ACD will continue to manage the Merging Funds in accordance with their Prospectus with the exception of the M&G European Strategic Value Fund, M&G Global Corporate Bond Fund and M&G Pan European Dividend Fund which will all be closed following their respective mergers, should the Mergers be approved at the Meetings. The complete list of Meetings is set out in Appendix 9. Your vote is required Each merger requires shareholder approval. This is done via a shareholder vote using what is known as an Extraordinary Resolution (a written proposal) at a meeting of shareholders (the Meeting ). Shareholders do not need to attend a Meeting unless they wish to and can instead vote using the Proxy Voting Forms supplied. The Proxy Voting Forms set out the Merging Share Classes in which you hold Shares, see enclosed. For more details on the Shares that you hold (including the specific share class) please contact the Customer Services Team using the details provided on page 1. The Notices of each Meeting and their dates and times are set out in Appendix 9. To be passed, each Extraordinary Resolution requires a majority in favour of not less than 75% of the total votes cast, so it is important that you exercise your right to vote. Some of the funds will hold two Meetings, and there is a possibility that one group of shareholders vote in favour of the proposal and the other group vote against. This may give rise to a situation where the Extraordinary Resolution that has passed would result in the migrating assets under management being insufficient to operate a viable fund. The minimum level of assets under management to meet viability varies by fund and would require review on a case by case basis. The Board of the M&G SICAV has a duty to ensure that the Receiving Funds will be viable. Although the Board currently believes this will be the case, it reserves the right not to launch one or more of the Receiving Funds if on the Effective Date any such Receiving Fund would have assets under management that are deemed to be unviable. In the unlikely event that the Board decides not to launch one or more of the Receiving Funds, the relevant merger will be cancelled, and Shareholders will be informed of the decision to cancel the Merger and their options. Before you make your decision, we recommend that you read the rest of this Circular, and in particular Appendices 1 to 3, as these contain important information about the differences between the Merging Funds and the Receiving Funds, and how the mergers will impact you, depending on which Merging Fund(s) you are currently invested in. 5

6 In the event that Shareholders do not pass the requisite Extraordinary Resolution, dealings in the relevant Existing Shares will continue as usual following the Meeting and the ACD will continue to manage the relevant Merging Fund including the Merging Share Class in question in accordance with the Prospectus of the Merging Fund. The ACD envisages that it would, however, consider further options for the Merging Share Class in question in due course. Further information in this document Details of the various consents to the Mergers are set out in Appendix 5. The procedure for the Meetings is set out in Appendix 6. The Extraordinary Resolutions to enable the mergers to go ahead are set out in each Notice of a Meeting of Shareholders in Appendix 9. If approved, the mergers will take place on the dates set out in Appendix 9 and will be binding on all shareholders in the Merging Share Classes at the Effective Date (whether or not they voted in favour of it, or voted at all). Details of the outcome of the Meetings will be available from Friday 5 October 2018 on our website com/brexitmergerdocumentation or can be obtained by contacting our Customer Services Team using the details provided on page 1. We encourage you to vote in favour of the Merger(s) relevant to you as we believe that the Mergers are in your best interests. A Proxy Voting Form for each Merging Fund in which you currently hold Shares is enclosed for your use. Please complete and return the enclosed Proxy Voting Form(s) in the pre-paid envelope provided to The M&G Group, c/o The Independent Scrutineer, Electoral Reform Services, Box 6352, London N1 1BR, or by courier using the address The M&G Group, c/c Electoral Reform Services, The Election Centre, 33 Clarendon Road, London N8 0NW, United Kingdom, to reach us no later than the relevant date and time set out in Appendix 9. Comparison of the Merging Funds and Receiving Funds Whilst the Merging Funds are UK-authorised OEICs, and subject to regulation by the Financial Conduct Authority (the FCA ), the Receiving Funds are sub-funds of a Luxembourg authorised SICAV subject to regulation by and the supervision of the Commission de Surveillance du Secteur Financier (the CSSF ). There will, therefore, be some minor differences as a result of the slightly different fund structures and different regulators. There will also be some differences between the investment objectives and investment policies of the Merging Funds and their corresponding Receiving Funds, full details of which can be found in Appendix 3. Some of the Receiving Funds investment objectives will also include specific return targets. Please see Appendices 1 to 3 for full details, including a table comparing the main features of OEICs to those of SICAVs. There will be no need to adjust the Merging Funds portfolios in preparation for the mergers taking place. In addition, the Receiving Funds will operate under a different pricing policy. The Merging Funds and the Receiving Funds are both single priced. However, the Receiving Funds will operate on a partial swinging single pricing basis, whilst the Merging Funds operate on a fully swinging single pricing basis. Please see Appendix 3 for full details. In some instances, the Receiving Fund will be valued in a different currency than that of the Merging Fund. In these instances, your New Shares may be named differently. For more information please see Appendix 3 for the Fund(s) relevant to you. Charges The Annual Management Charge for your New Shares will be the same as it was for your Existing Shares. You should note, however, that Luxembourg s taxe d abonnement (subscription tax) of 0.05% per annum (or 0.01% per annum for qualifying Luxembourg institutional investors as defined by Luxembourg law and regulations) on assets under management will contribute to a corresponding increase in the OCF of the Receiving Fund. The reduced size of the Receiving Fund is not expected to have a material impact on the OCF but in the worst case is forecast to increase by 0.02%. In total this may mean that the OCF could increase by 0.07%. Please see Appendix 3 for information by Share Class. If you believe that you qualify as an Institutional Investor (please refer to the Glossary in Appendix 8), you will need to contact us as soon as possible to complete the appropriate declaration, which will allow you to access the Receiving Funds 0.01% tax rate share class. Should the mergers be approved, following the Effective Date and subject to receipt of your declaration, you will be eligible to place instructions to move your investment to the 0.01% tax rate share class in the relevant Receiving Fund(s) you will hold. For detailed comparisons of the Merging Funds and their corresponding Receiving Funds, please refer to Appendix 3. 6

7 Details of the Mergers If the Mergers are approved, Shareholders will receive New Shares in the Receiving Funds, as set out in Appendix 7, in exchange for the transfer of the assets of the Merging Share Classes to the Receiving Funds on the terms set out in the Scheme in Appendix 4. Following the Effective Date of the Mergers, the Merging Share Classes will be closed to new investment from the relevant date and time set out in Appendix 9. Please refer to Appendix 7 for Share Class comparison details. You will not pay an initial charge for New Shares obtained as a result of the Scheme. Please also note that you will not have cancellation rights in respect of the New Shares which are issued to you under the Scheme. Shareholders who receive New Shares in exchange for their Existing Shares will be able to exercise their rights as shareholders in the Receiving Fund(s) from the second Business Day following the Effective Date for dealing in New Shares, and in accordance with the Receiving Funds supplements in the Prospectus. Dealing instructions received in respect of the Receiving Funds on the first Business Day following the Effective Date will be carried out at the valuation point on the second Business Day after the Effective Date. After the merger process has completed, Existing Shares in the Merging Share Classes will be cancelled and will cease to be of any value. In order to simplify the merger process, income accruing to Existing Shares will be allocated as follows: For Shares, income available for distribution in respect of the period from the Accounting Date to the Effective Date will be allocated to those Existing Shares and taken into account when calculating the number of New Shares to be issued to such Shares under the Scheme. For Income Shares, income available for distribution in respect of the period from the Accounting Date to the Effective Date will be distributed to Shareholders within 2 months of the Effective Date. All investors who currently hold their Existing Shares through the M&G Securities International Nominee Service will, after the Mergers, hold their New Shares directly on the Register of the relevant Receiving Fund(s). Under the current arrangements through the M&G Securities International Nominee Service, the legal title to the Existing Shares is held by M&G International Investments Nominees Limited (the Nominee) as nominee for the investors, while beneficial ownership is held by the underlying investors, and as part of the merger process the Nominee will transfer its ownership of their shares to the relevant investors. Further details of the Mergers are contained in the Schemes set out in Appendix 4. Merger Costs M&G will bear any costs associated with carrying out the Mergers, including any stamp duty or transfer taxes which may arise as a result of the transfer of property to the Receiving Funds. Any other taxes (e.g. income tax or capital gains tax on disposal of property) that would ordinarily be borne by the Merging Funds, even if incurred as a result of the Merger, will be borne by the Merging Funds. Please note that M&G will not, however, be responsible for, or pay, any investor s personal tax liability that results from the mergers. Taxation The tax consequences of the Mergers will vary depending on the law and regulations of your country of residence, citizenship or domicile. In particular, for Shareholders in some jurisdictions, a merger may be treated as involving a disposal of their Existing Shares under their domestic law, potentially triggering a tax liability. If you are in any doubt about your potential liability to tax, you should consult a tax adviser. Due to the different fund structure and jurisdiction, the tax treatment of the SICAV will differ to an OEIC. Specifically, a SICAV has access to fewer tax treaties compared to an OEIC. Depending on the investment strategy of the fund, this may lead to less favourable tax treatment on underlying investments. As mentioned above M&G will not be responsible for, or pay, any investor s personal tax liability that results from the Mergers. Luxembourg stamp duty or transfer taxes on the issue of New Shares will not be payable by Shareholders. Following the merger, you will hold New Shares in the Receiving Fund(s) which as sub-funds of a Luxembourg UCITS are subject to Luxembourg laws and regulations which implement Automatic Exchange of Information ( AEOI ). 7

8 Whilst information relating to your holding in the Merging Fund(s) already held by us will be used as far as possible by the Receiving Funds in order to fulfil their AEOI obligations, we may have to ask you to provide some additional documentation. In the same way as we may currently be required to report information about your account to HMRC, as the UK tax authority, if you are a tax resident in a reportable jurisdiction, we may have to report this information to the Luxembourg tax authorities, who will in turn share this with other tax authorities pursuant to international agreements to exchange financial account information. Managing your M&G investment 1. Dealing in Shares Before the Mergers If you do not wish to participate in the Merger(s) relevant to you, you may sell your Existing Shares in the Merging Funds until the relevant date and time set out in Appendix 9. We will not levy a charge for selling your Existing Shares. You may also switch free of charge to another fund within the M&G Fund Range, details of which can be obtained on our website at Any requests to buy or sell Existing Shares in the Merging Funds received by the relevant date and time set out in Appendix 9, will be dealt with as per our standard processes. However, requests received after this time will not be actioned. Please refer to the After the Mergers section below for details on how to deal in New Shares in the Receiving Funds. The processes for buying, selling and switching Existing Shares (before the date and time set out in Appendix 9) are set out in the Merging Funds Prospectuses, which are available on our website or can be obtained by contacting our Customer Services Team using the details provided on page 1. In the unlikely event that the Mergers are delayed for any of the Merging Share Classes, the ACD reserves the right (subject to the agreement of the Depositary and notifying the FCA) to suspend dealing in the affected Merging Fund(s). The M&G SICAV Board of Directors has a duty to ensure that the Receiving Funds are correctly valued for the purpose of dealing, and so will not recommence dealing until satisfied in this respect. After the Mergers Should the Mergers be approved, they will take place on the relevant date and time set out in Appendix 9 and will be binding on all Shareholders in the Merging Share Classes at the Effective Date (whether or not they voted in favour of it, or voted at all). Dealing in New Shares is expected to commence at the relevant date and time set out in Appendix 9, which will be the second business day following the Effective Date of the relevant Merger. We will notify you of the number and class of New Shares issued to you on the first Business Day following the Effective Date. You may send us instructions to deal in your New Shares before you receive notification confirming the allocation of New Shares to you, however, any instructions for the Receiving Funds will be carried out at the valuation point on the first day of dealing in New Shares, as set out in Appendix 9. Any subscriptions to the Receiving Funds will need to refer to the New Shares ISIN Codes provided in Appendix 7 and paid into the Receiving Funds respective subscription bank accounts. Details of these accounts can be found in the Scheme as set out in Appendix 4. The procedures for buying and selling New Shares within the Receiving Funds are otherwise the same as those for your Existing Shares in the Merging Funds. You will also be able to switch from and to share classes within the M&G SICAV Fund Range which are denominated in the same currency, and the process for switching will remain unchanged from that applicable to Existing Shares. Details can be found in the Receiving Funds supplements in the Prospectus. 2. Settlement mandates Any mandates which you have given in relation to redemptions and distributions for your Existing Shares will automatically apply to the New Shares issued to you following the mergers. If you do not want these mandates to be carried forward, please let us know. You may, of course, change them at any time. 8

9 3. M&G Account Numbers Your M&G Account Number(s) will not change. You will need to quote this number when communicating with M&G. Action to be taken We believe that the proposed Mergers are in the best interests of Shareholders, as they will ensure that investors in the Merging Share Classes have continued access to similar investment strategies through UCITS-qualifying funds, and we encourage you to vote in support of your respective Merger(s). Please complete and return the enclosed Proxy Voting Form(s) in the pre-paid envelope provided to The M&G Group, c/o The Independent Scrutineer, Electoral Reform Services, Box 6352, London N1 1BR, or by courier using the address The M&G Group c/o Electoral Reform Services, The Election Centre, 33 Clarendon Road, London N8 0NW, United Kingdom, to reach us no later than the relevant date and time set out in Appendix 9. Further information relating to the Mergers The following documents are available for inspection at the offices of M&G s Registered Address during normal office hours on any Business Day from the date of this Circular, up to and including on, the Effective Date, including on the day of the Meetings or up to and including the date of any adjourned Meeting: the Constituting Documents of each of the Merging Funds and the Receiving Funds; the Prospectuses of each of the Merging Funds and the M&G SICAV; the Key Investor Information Documents (KIIDs) relating to the M&G SICAV; the latest annual or semi-annual report of the Merging Funds. Copies of this Circular and the Prospectus and Key Investor Information Documents for the Receiving Funds are available from our website Further information If you require further information of an operational nature, please do not hesitate to contact our Customer Services Team by at csmandg@rbc.com or by telephone on We are open from 09:00 to 18:00 CET Monday to Friday. For your security and to improve the quality of our service we may record and monitor telephone calls. For any other enquiries please call your usual M&G contact. Thank you for your loyalty to M&G. Yours faithfully Jonathan Willcocks Global Head of Distribution for and on behalf of M&G Securities Limited (as Authorised Corporate Director of the Merging Funds) 9

10 Appendix 1 Comparison of the main features of an OEIC and a SICAV Legal structure and regulation OEIC SICAV Definition Open-ended investment company (UK-domiciled) Société d investissement à capital variable (investment company with variable capital) (Luxembourg-domiciled) Background Commonly used in the UK; similar structures also Commonly used in Western Europe, also in other used in other regions regions Legal structure/ UCITS Legal company structure introduced in the UK in Legal company structure introduced in 1997 as a flexible alternative to unit trusts Luxembourg in 1983 An OEIC can be established as an umbrella A SICAV can be established as an umbrella company with a number of sub-funds, or as a company with a number of sub-funds, or as a stand-alone fund stand-alone fund All the Merging Funds are OEICs Can issue a range of share class types which may be differentiated by fee structure, distributions and currency; including currency hedged or unhedged shares Can be established as a UCITS (Undertakings for Collective Investment in Transferable Securities) or retail non-ucits All Receiving Funds are sub-funds of an umbrella SICAV, M&G (Lux) Investment Funds 1 Can issue a range of share class types which may be differentiated by fee structure, distributions and currency; including currency hedged or unhedged shares Can be established as a UCITS (Undertakings for Collective Investment in Transferable Securities) or non-ucits Regulatory authority Financial Conduct Authority (FCA), in the UK Commission de Surveillance du Secteur Financier Local Regulatory Framework Corporate governance Role of Depositary Segregation of liability between sub-funds Financial Reporting and Accounting Standards The FCA Handbook, specifically, the Collective Investment Schemes sourcebook (COLL) (CSSF), in Luxembourg The Law of 17 December 2010 relating to undertakings for collective investment, as amended (the 2010 Law ) and CSSF circulars and regulations The Authorised Corporate Director (ACD) is A SICAV has a Board of Directors, which responsible for the day-to-day operation of the can delegate the investment management, OEIC administration and marketing functions to a management company A Depositary is responsible for the custody of fund assets The Depositary is also responsible for oversight of the ACD to ensure the interests of investors are protected The Depositary and ACD must be completely independent Legislation to allow the segregation of liability between sub-funds in an umbrella OEIC is provided for under UK law This means that assets in each sub-fund are ringfenced from others in the range A Depositary (Luxembourg-based) is responsible for the custody of fund assets and ensuring the interests of investors are maintained The Depositary is also responsible for oversight of the investment to ensure the interests of investors are protected Segregation of liability between sub-funds of the same SICAV is provided for under Luxembourg law This means that assets and liabilities in each sub-fund are ring-fenced from the assets and labilities of other sub-funds in the same SICAV Follows UK generally accepted accounting Follows Luxembourg generally accepted practice ( UK GAAP ), the Investment accounting practice ( Lux GAAP ) and the 2010 Association Statement of Recommended Law Practice ( IA SORP ) and COLL 10

11 Fund taxation Fund Level Investment Level OEIC The OEIC is in principle subject to UK corporation tax at 20% on investment income Interest income and property income is taxable. However, expenses can be deducted which often reduces the effective tax to nil Dividends received by a fund are not taxable SICAV A SICAV is not subject in Luxembourg to tax in its income, profits or gains all tax arises at the level of the investor Capital gains realised by the fund are exempt from tax OEIC funds may suffer transfer taxes and tax on SICAV funds may suffer transfer taxes and tax on foreign income and gains, levied by the country foreign income and gains, levied by the country where investments are held where investments are held Due to the wide range of tax treaties in place SICAV funds benefit from certain tax treaties with the UK, tax on investments is often reduced which can reduce the tax to be applied Other fund taxes None Taxe d abonnement of 0.05% per annum for retail investors and 0.01% for Institutional Investors, based on fund net asset value Investor taxation Income and capital gains Withholding tax on distributions OEIC SICAV Most investors are taxed only on the actual Most investors are taxed only on the actual distributions received, or on deemed investment distributions received, or on deemed investment returns from funds that are reported to them returns from funds that are reported to them There is no withholding tax on distributions from an OEIC There is no withholding tax on distributions from a SICAV Depending on the portfolio composition and strategy of the fund, there may be some differences in the post-tax return between an OEIC structure and a SICAV structure due to different access to double tax treaties. 11

12 Appendix 2 Comparison of the general features of the Merging and Receiving Funds This Appendix sets out a comparison of general features that are applicable to the Merging and Receiving Funds. Fund specific comparisons are set out from Appendix 3.1 to General Features Merging Funds Receiving Funds Domicile United Kingdom Luxembourg Type of Company UCITS, an open-ended investment company UCITS, a sub-fund of a Société d investissement with variable capital à capital variable Corporate Governance M&G Securities Limited as Authorised Corporate M&G SICAV Board of Directors who is delegating Director (ACD) part of its management responsibilities to: Annual accounting dates Annual and half-yearly reports issued by: M&G Securities Limited as Management Company prior to Monday 1 October 2018, and M&G Luxembourg S.A thereafter Please see details provided in the Product Please see details provided in the Product features table features table Annual reports: within 4 months Annual reports: within 4 months Half-yearly reports: within 2 months Half-yearly reports: within 2 months Valuation Point 13:00 CET 13:00 CET Dealing Cut-off 11:30 CET 13:00 CET Pricing methodology Fully swinging single pricing Partial swinging single pricing Under fully swinging single pricing, a fund Under partially swinging single pricing, a fund is priced at either creation or cancellation, is priced at NAV unless fund flows in or out of depending on net flows into or out of the fund the fund on any day cause dilution to exceed each day. Prices are swung automatically; they a predetermined threshold. If that threshold is do not depend on the size of flows. The price of exceeded the price will swing to either creation the Fund can, therefore, swing each day. or cancellation, depending on whether the Fund is in net inflow or outflow on the day Buying and selling shares Deals can be placed in the same manner quoting the ISIN code for the new Receiving Fund shares with subscriptions to be paid to the M&G SICAV settlement account Service Providers Investment Manager M&G Investment Management Limited M&G Investment Management Limited Fund Accounting & Pricing State Street Bank and Trust Company State Street Bank Luxembourg S.C.A. Registrar Registrar: Registrar: DST Financial Services Europe Ltd Sub-Registrar RBC Investor Services Bank S.A. (Luxembourg) None RBC Investor Services Bank S.A. (Luxembourg) Depositary National Westminster Bank Plc* with a State Street Bank Luxembourg S.C.A. delegation of safekeeping functions to State Street Bank and Trust Company Auditors Ernst & Young LLP Ernst & Young S.A. *From 28 September 2018 the Depositary of the Funds will be NatWest Trustee and Depositary Services Limited. 12

13 Fees and expenses The table below provides a high-level overview of the fees and expenses. For a detailed description please refer to the Prospectuses of the relevant Merging Fund and Receiving Fund. Each share class has an Ongoing Charges Figure (OCF), as detailed in the Product Features table below for each of the Funds, and as detailed in its relevant KIID. The OCF is intended to assist shareholders to ascertain and understand the impact of charges on their investment each year and to compare the level of those charges with the level of charges in other funds. The OCF excludes portfolio transaction costs and any initial charge or redemption charge, but will capture the effect of the various charges and expenses referred to below. As mentioned in the Letter to Shareholders on page 6, you should note that Luxembourg s taxe d abonnement (subscription tax) of 0.05% per annum (or 0.01% per annum for qualifying institutional investors) on assets under management will contribute to a corresponding increase in the OCF of the Receiving Fund. The reduced size of the Receiving Fund is not expected to have a material impact on the OCF but in the worst case is forecast to increase by 0.02%. In total this may mean that the OCF could increase by 0.07%. Merging Funds Receiving Funds Initial Charges Please see Appendix 3 for full details in the Please see Appendix 3 for full details in the Product Features table for each share class Product Features table for each share class Annual Management Charge Please see Appendix 3 for full details in the The Annual Management Charge will be Product Features table for each share class identical to that of the Merging Fund Performance Fee Share Class Hedging Fees 2 Depositary s Fees Not applicable Except for M&G Episode Macro Fund Please see Appendix 3 for full details in the Product Features table for each share class Not applicable Except for M&G (Lux) Episode Macro Fund For full details please see the relevant Prospectus For full details please see the relevant Prospectus Based on the Net Asset Value of the relevant Based on the Net Asset Value of the relevant share class, charged on a tiered scale as a share class, charged on a tiered scale as a variable rate not expected to exceed 0.055% p.a. variable rate not expected to exceed 0.06% p.a. Based on the Net Asset Value of the Fund, charged on a tiered scale as follows: % p.a. on the first 150m 0.005% p.a. from 150m to 650m Based on the Net Asset Value of the Receiving Fund charged on a tiered scale to the Receiving Fund and not expected to exceed 0.01% p.a % p.a. on the balance above 650m Custody Charges Based on the Net Asset Value of the Fund Based on the Net Asset Value of the Fund between % and 0.40% p.a. between % and 0.40% p.a. Custody Transaction Charges Between 4 and 75 per transaction Between 5 and 100 per transaction Administration Fees 0.15% of the Net Asset Value p.a. 0.15% of the Net Asset Value p.a. Other Expenses Other expenses may be charged, as detailed in Other expenses may be charged, as detailed in the Prospectus the Prospectus 2 This is only relevant for share classes that conduct share class hedging. Please see Product Features table / Appendix 7 for more information on your share class. Change of Management Company for the M&G SICAV As mentioned previously in this Circular, on 29 March 2017, the UK Government gave the European Union formal notice of its intention to leave the EU, following the UK referendum on EU membership in June After this date it is unknown if the UK s withdrawal from the EU will result in loss of access to the system of passporting for EU financial services; consequently, there remains a significant risk that MGSL will no longer be able to utilise the existing passporting rights through which it is able currently to manage funds and services domiciled outside the UK. In response to this risk and as a clear statement of M&G s intentions to continue its strong presence in Europe, M&G has undertaken a programme to establish and staff a Luxembourg-based corporate structure providing the necessary infrastructure to continue operations within the EU, namely M&G Luxembourg S.A. Consequently from Monday 1 October 2018 the management company for the Receiving Funds will change from M&G Securities Limited to M&G Luxembourg S.A. 13

14 Appendix 3 Comparison of the Merging and Receiving Funds A side by side comparison of the Merging Funds and their corresponding Receiving Funds appear below. There is no change in the investment strategy followed by the investment manager for any of these funds. In the event that there are to be any differences, these will be clearly indicated in the respective Funds tables below. As you review these tables, you will notice that the investment policies of the Receiving Funds may look different these differences are mostly driven by different or new regulatory requirements for disclosure, for example regarding the maximum exposure to certain asset types. Whilst these introduce new limits, they are fully aligned with the investment mandates of the Merging Funds and will not restrict any of their corresponding Receiving Fund s ability to deliver its objective. The investment policy of the Receiving Funds therefore does not introduce material differences to that of the Merging Funds and will reflect the way in which the Merging Funds are currently managed. In addition, when drafting the objectives for the Receiving Funds, we have also used the opportunity to include the reference to an appropriate market and time horizon. The tables also show a comparison of the applicable initial charges, redemption charges, AMC and OCF (please note that the OCF for the Share Classes of the Receiving Funds are estimated figures) as at Other than the information stated in the table below, share class features (such as minimum investment amounts, distribution frequency etc.) will be identical. Appendix 3.1 M&G Asian Fund and M&G (Lux) Asian Fund The M&G (Lux) Asian Fund is a newly established sub-fund of the M&G (Lux) Investment Funds 1, a Luxembourgauthorised SICAV. Appendix Product features A side by side comparison of the product features is set out in the following table. Please see Appendix 7 for a complete list of share classes. Product Features The Merging Fund The Receiving Fund Name M&G Asian Fund M&G (Lux) Asian Fund Valuation / Reference USD USD Currency Distribution Frequency of the fund Annually Annually Synthetic Risk Category 6 for all share classes of the fund, Category 6 for all share classes of the fund, except Reward Indicator as except for USD A and USD C which are 5 for USD A and USD C which are 5 at 21 June 2018 Annual Accounting Dates 31 August 31 March Income Distribution Dates Normally within 2 months of the end of the Normally within 1 month of the end of the relevant distribution period relevant distribution period Annual Management Charge A Share Classes % C Share Classes % A Share Classes % C Share Classes % Initial Charge A Share Classes % A Share Classes % Ongoing Charge Figure (OCF) C Share Classes % Euro A Share Class % Euro C Share Class % US Dollar A Share Class % US Dollar C Share Class % C Share Classes % Euro A Share Class % Euro C Share Class % US Dollar A Share Class % US Dollar C Share Class % 14

15 Appendix Investment Objectives and Policies A side by side comparison of the investment objectives and policies are set out in the following table. There is no change in the strategy followed by the investment manager of the M&G Asian Fund. However, we have taken the opportunity to update the investment objective of the receiving Fund to one aiming to deliver a long-term total return (the combination of capital growth and income). This better reflects the fact that the fund s investments may also generate income as well as capital growth. This is not expected to have any effect on the return profile of the strategy as the Merging Fund already holds companies that pay dividends. Furthermore, the Fund s performance is already reported on a total return basis. Investment Objectives and Policies The Merging Fund 3 The Receiving Fund Investment Objective Investment Policy The Fund s sole objective is long term capital growth. It invests wholly or mainly in a range of Asian (including Australasian) securities. When not wholly invested as above, the Fund may also invest in global securities with the exception of Japanese securities. 3 The Prospectus of the Merging Fund has a combined Investment Objective and Investment Policy The Fund aims to provide a higher total return (the combination of capital growth and income) than that of the Asia Pacific (excluding Japan) equity market over any five-year period. The Fund invests at least 80% of its Net Asset Value in the equity securities of companies that are domiciled in, or conducting the major part of their economic activity in, the Asia Pacific region (excluding Japan). The investment process of the Fund is based on the fundamental analysis of companies with a specific focus on their return on capital profile, their corporate governance practices and the valuation of the shares. The Fund may invest in China A-Shares via the Shanghai- Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect. The Fund may also invest in other assets including collective investment schemes, cash and near cash, deposits and warrants. The Fund may use derivative instruments for the purposes of hedging and efficient portfolio management. 15

16 Appendix 3.2 M&G Global Select Fund and M&G (Lux) Global Select Fund Appendix Product features A side by side comparison of the product features is set out in the following table. Please see Appendix 7 for a complete list of share classes. Product Features The Merging Fund The Receiving Fund Name M&G Global Select Fund M&G (Lux) Global Select Fund Valuation / Reference USD USD Currency Distribution Frequency Annually Annually of the fund Synthetic Risk Category 5 for all share classes of the fund Category 5 for all share classes of the fund Reward Indicator as at 21 June 2018 Annual Accounting Dates 31 August 31 March Income Distribution Dates Normally within 2 months of the end of the Normally within 1 month of the end of the relevant distribution period relevant distribution period Annual Management Charge A Share Classes % B Share Classes % A Share Classes % B Share Classes % C Share Classes % Initial Charge A Share Classes % Ongoing Charge Figure (OCF) B Share Classes - n/a C Share Classes % Euro A Share Class % Euro B Share Class % Euro C Share Class % US Dollar A Share Class % US Dollar C Share Class % C Share Classes % A Share Classes % B Share Classes % C Share Classes % Euro A Share Class % Euro B Share Class % Euro C Share Class % US Dollar A Share Class % US Dollar C Share Class % 16