CHOOSING YOUR INVESTMENT FUND.

Transcription

1 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND. This is an important document. Please keep it safe for future reference. INSURANCE. SAVINGS. INVESTMENT MANAGEMENT.

2 2 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND CHOOSING YOUR INVESTMENT FUND. This document is part of the information we provide to help you decide whether our pension plan is right for you. Like the accompanying Key Features, which explains the basics of the plan itself, this document explains the basics of investing in funds and the important things you need to know about them. You should read this document carefully and keep it safely with the Key Features. QUESTIONS AND ANSWERS. WHAT IS AN INVESTMENT FUND? When you invest in your Stakeholder pension plan you can put your money into one, or more investment funds (up to a maximum of 1). Each fund is divided into a number of units. Each time you make a payment into your plan we buy you some of these units in your chosen fund, or funds. Alternatively, rather than selecting funds, you can invest in one of our Lifestyle Profiles which are explained on page 18. We offer a range of funds managed by different investment management companies. We manage some of the funds; other investment management companies manage the rest. In this document we refer to the funds managed by us as internal funds, and those not managed by us as external funds. WHAT ARE INVESTMENT ASSETS? Assets are what the funds invest in. They have a significant effect on the performance of your investment. It s therefore important that you understand the differences between the main types of assets. There are four main types of asset and each has its own characteristics: Equities Fixed interest securities Commercial property It s generally a good idea to invest in a number of different assets within an asset type so that you do not rely on the performance of one individual asset. This strategy, called diversification, is basically what funds offer as they spread your investment across lots of assets. Many funds also invest in more than one type of asset to create even more diversification. Investing in a mix of funds is another good way to spread your investment. WHAT ARE EQUITIES? Equities are the asset commonly known as shares. Equities can achieve growth in two ways: Through increases in share prices. The share price reflects the underlying value of the company. Through dividends, which are regular payments made to shareholders generally based on the company s annual profits. Investing in equities is considered by many investment experts to be one of the best ways to achieve longterm growth. However, over the short term, the value of funds investing in equities can go up and down a lot. Share prices can also change dramatically in response to the activities and financial performance of individual companies, as well as being influenced by general market and economic conditions. WHAT ARE FIXED INTEREST SECURITIES? Fixed interest securities are more commonly known as bonds. They are essentially a loan, usually to a company, or sometimes a government. The company or government pays regular interest on the loan and pays back the original capital in full at a set date in the future. Your return from a fund investing in fixed interest securities comes from the interest the company or government pays and the market value of the securities. The value of funds investing in fixed interest securities can go up and down. They tend to go up and down less than funds investing in equities, although the potential returns are often lower. The value of bonds is particularly sensitive to changes in interest rates. As a rule, the value is more likely to fall when interest rates are rising.

3 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 3 If a fund invests in a corporate company that performs poorly, there is a risk that company will not be able to pay back the loan or the interest owed. Some companies offer more risky bonds paying high interest rates, known as sub-investment grade bonds, where the risk of non-payment is higher. Government bonds generally carry less risk than company bonds but as a result often pay less interest. WHAT IS COMMERCIAL PROPERTY? An investment in commercial property usually means that you are buying a share in the ownership of a number of buildings. These buildings might be office blocks, shopping units, retail warehouses, industrial units or leisure centres. Commercial property investments can provide growth in two ways: Through rises in the value of the property. Through rent paid by the tenants of the buildings. Property valuations are based on a valuer s opinion rather than fact, so they may be revised up or down from time to time. This can affect the value of a fund invested in commercial property. Commercial properties can sometimes be difficult to buy and sell quickly. It may be necessary for the fund manager to postpone meeting customer requests to withdraw money from a property fund until they can sell some of the buildings the fund invests in. WHAT IS A CASH INVESTMENT? Some funds keep a proportion of your money in cash. This is useful as it adds flexibility to your asset mix and aids stability. The growth potential for cash is low, so if your fund does include some cash element, it tends to account for only a small percentage of the total fund. Basically, cash generally offers the lowest risk of all asset types but also the lowest potential returns. WHAT ABOUT SPECIALIST INVESTMENT FUNDS? In addition to the risks and characteristics of the individual asset types, specialist investments have other features that are unique to where they invest. They usually invest in a particular market, country or region. They allow you to exploit the characteristics of a particular type of investment and tend to aim for high performance compared with more balanced funds. They are likely to be more risky than funds holding a very wide spread of assets. WHAT ABOUT OVERSEAS INVESTMENTS? Overseas investments allow you to take advantage of the growth potential of markets outside the UK. Currency values can have an effect on performance. This is because the value of funds holding overseas investments are often converted from local currency into pounds (sterling) so the value can fall if the pound strengthens against the local currency. WHAT HAPPENS WHEN I INVEST IN AN EXTERNAL FUND? When you invest in an external fund, we buy you units in a Legal & General fund that invests in the corresponding authorised fund. You don t hold units directly in the authorised fund. Authorised funds are explained in the What is an authorised fund? section below. Please bear in mind that we don t have any influence over how external fund managers manage their funds. WHAT IS AN AUTHORISED FUND? There are two types of authorised fund: A unit trust An Investment Company with Variable Capital, more commonly known as an Open-Ended Investment Company (OEIC). About unit trusts The fund manager sets up a trust and appoints an independent financial institution such as a bank to act as the trustee. The trustee is entrusted to look after the assets that the fund invests in and to monitor the fund manager, on behalf of the beneficiaries. The beneficiaries of a unit trust are the people who invest in it. About OEICs An OEIC is like a company, but not in the traditional sense as it s simply an arrangement for investment. The fund manager is usually the director of the company and investors receive shares in the company. An OEIC has an independent depositary, usually a financial institution like a bank, who is entrusted with the safekeeping of the assets that the fund invests in. A depositary is similar to the trustee of a unit trust. OEICs usually offer a number of different choices by using sub funds which have different investment aims. Because an OEIC has a number of sub funds, it may become necessary in exceptional circumstances for the liabilities of one sub fund to be met by all the other sub funds in the OEIC. Whilst this could affect the performance of your fund, you d never be personally responsible for any debts of the OEIC and would not be required to make further payments after investing. If you choose to invest in external funds there will be an External Funds Annual Management Charge (EFAMC), which is currently.15% a year. However, the Total Annual Management Charge will not exceed the maximum as set out in the Individual Stakeholder Key Features. LIFESTYLE PROFILES An alternative investment option to choosing a fund, or funds, is to choose a Lifestyle Profile. Please see page 18 for more information about Lifestyle Profiles.

4 4 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND FUND RISK RATINGS. HOW DO I ASSESS MY ATTITUDE TO RISK? Identifying your attitude to investment risk is very important. We ve created four attitude to risk categories to help you with the way you look at risk and investing your money minimal, cautious, moderate and high. We ve also put all the funds we offer into one of these four categories to make it easier for you to choose where to invest. THE RISK CATEGORIES We organise our funds into our four risk categories based on the risks we think they present to your money, assuming you ll keep your investment for at least five years. To help make it clearer, we ve shown our view of the fund risk ratings on the Spectrum of risk on page 6. This is basically a scale running through the four risk categories, from minimal up to high. Each fund is given a place within the scale so you can compare it easily to other funds. Our ratings have to be calculated without knowing your personal attitude to the different risks that exist. When you re looking at where to invest it s therefore important that you don t just rely on our rating. You need to decide how your view on them, combined with our risk rating, affects where you might want to invest. Your circumstances and outlook are unique, so it s this that should be influencing your investment decisions. If you ve got any doubts or questions, you should talk to your financial adviser. Page 6 shows a Spectrum of risk, so while two funds could be in the same risk category, they don t necessarily have the same level of risk. A fund near the top of one risk category might have a more similar risk profile to a fund near the bottom of the category above it than to funds lower down in its own category. You can look at risk categories both in terms of the type of investor for that category and the sorts of funds that are available. Minimal risk If you re only prepared to take minimal risk it s likely that your main concern is the security of your money. Other people with this attitude to risk often share a number of common traits. You prefer investing in banks and building society deposits. You tend to limit where you invest to these. You look for stability in the value of your investment. You view the security of your money as more important than the possibility of the buying power of your money reducing as a result of inflation. You re unlikely to invest in shares or property and prefer funds that didn t do this. Minimal risk funds tend to be cash or cash-like investments. Minimal risk doesn t mean there s no risk. Cautious risk If you ve got a cautious attitude to risk, it s likely that, when investing your money, you look for the security that your investment s value won t go up and down a lot. Other people with this attitude to risk often share a number of common traits. You re happy to invest in non-cash assets, such as fixed interest securities. You accept that the value of your investment isn t guaranteed and might go down as well as up. You re comfortable with some of your money being invested in shares, but not all of it, and some of it may be outside the UK. You accept that it s possible you may lose some of what you invested for the prospect of better growth. You ll probably want to spread your money across different types of investments, which should help to reduce the risk by balancing out one type of risk against another. Cautious risk funds tend to have a mix of investment types, or just fixed interest securities.

5 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 5 Moderate risk If you ve got a moderate attitude to risk, it s likely that you already have an interest in investing and are comfortable with the ups and downs of the stock market. Other people with this attitude to risk often share a number of common traits. You re happy to put a significant proportion of your money in shares or other unpredictable investment types. You accept that there s a real risk of losing your money, but this is balanced with the prospect of greater growth. You re likely not to mind investing outside the UK. You might have an interest in and knowledge of the stock market. You understand the general risks involved with investing. Moderate risk funds take risks to provide greater returns. They tend to contain higher risk fixed interest investments, shares and commercial property. These may be outside the UK. High risk If you re prepared to take high risk, it s likely that you re an experienced and knowledgeable investor, whose primary aim is to achieve the highest possible returns on your money, while accepting that this means taking substantial risks. Other people with this attitude to risk often share a number of common traits. You re happy to invest in funds in specialist areas or new markets, or both. You re looking for high returns on your money, and you re willing to take substantial levels of risk to achieve it. You accept that there s a real risk of losing your money, but this is balanced with the prospect of greater growth. You re attracted to new markets with substantial risk, or enjoy trying new types of investment. You accept that the value of your investment can change rapidly and by a large amount, possibly resulting in total loss of your money. You re experienced in investing in the stock markets, and probably already manage a range of your own investments. You understand the risks posed to your money when investing, particularly that your investment is very likely to regularly go up and down in value. High risk funds tend to be in specialised areas or in one or more countries outside the UK. We can t tell you where you should put your money. For some people, a mix of funds is the most appropriate option. Others prefer to invest only in one fund. There s no one best place to invest. Wherever you decide to put your money, you ll need to make sure it s in a fund or funds that you feel comfortable with.

6 6 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND SPECTRUM OF RISK. FOR LEGAL & GENERAL PENSION FUND OPTIONS Managed by Legal & General Managed by external fund managers Legal & General Japanese Equity Index Fund Legal & General European Fund Legal & General European Equity Index Fund Legal & General Far Eastern Fund Legal & General US Equity Index Fund Legal & General UK Smaller Companies Fund Legal & General Ethical Legal & General North American Legal & General Global Equity Fixed Weights 6:4 Index Fund Legal & General Global Equity Fixed Weights 5:5 Legal & General International Legal & General Global Equity 7:3 Index Fund Legal & General UK Recovery Fund Legal & General Equity Fund Legal & General UK Equity Index Fund High risk GLG Esprit Continental Europe Fund Allianz RCM Dynamic Growth Newton International Growth GLG UK Growth JPM Life Growth GLG Global Equity Allianz RCM UK Equity Fund Aberdeen Life Global (ex UK) Equity Aberdeen Life Global Growth Fund JPM Life UK Disciplined Equity Fund Aberdeen Life UK Equity Fund Legal & General Consensus Fund Legal & General Managed Fund Moderate risk Newton Income Fund Newton Higher Income Fund Newton Balanced Fund GLG Balanced Fund Aberdeen Life Multi-Asset (ex Property) Fund JPM Life Moderate Fund Level of risk Legal & General Property Fund Legal & General Distribution Fund Legal & General over 15 Year Gilts Index Fund Legal & General Index-Linked Gilt Fund Cautious risk Legal & General Fixed Interest Fund Legal & General Fund Minimal risk.1

7 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 7 THE FUNDS. The information provided for each fund is as accurate and current as we can make it. For external funds we rely on the information provided by the companies managing them. The information in this document is correct as at September 21. THE FUND INFORMATION HEADINGS EXPLAINED The information for each fund is set out as shown in the example at the bottom of this page. Fund aim This is a general description of what the fund aims to achieve, as stated by the company managing the fund. There is no guarantee the fund manager will achieve the aim, and it is not a statement of what will actually happen. It is important to consider that the performance of a fund may not match your expectation, particularly in the short term. Fund specific risks In addition to the general risks of investing in a particular product, each fund carries some risks specific to the type(s) of assets it invests in. We make regular assessments of all the funds we offer and then decide which risks apply to each fund. Our assessment takes account of: The fund s aim. The assets the fund invests in. The fund manager s own opinion of the risks that apply to their fund. To find out what the fund specific risk numbers applied to each fund mean, please see the Fund specific risk definitions section on page 17. Some funds have many fund specific risks. This does not necessarily mean that investing in that fund is riskier than choosing one with less fund specific risks. A fund often has more fund specific risks because it invests in a wider variety of assets. What is important is the percentage of the fund that is exposed to each risk. A significant exposure to one risk can lead to a fund rising and falling in value more than one with a low exposure to several risks. For example: Fund A invests 2% in overseas equities, 3% in UK equities and 5% in fixed interest securities. It has four fund specific risks. Fund B invests 1% in overseas equities. It only has two fund specific risks. Fund B has fewer fund specific risks but because all of the investment is exposed to equities and the exchange rate risk, it is likely to be a higher risk fund than Fund A, where the investment is divided between a spread of risks. Investing in a fund with a mix of assets can reduce the impact of each specific risk. Alternatively, you can create an investment portfolio that invests in a mix of funds. Underlying fund type For external funds this tells you if the fund is invested in a unit trust or a sub fund of an OEIC as explained in the What is an authorised fund? section on page 3. For funds managed by Legal & General the underlying fund type is not included, as they re not directly invested in unit trusts or OEICs. LEGAL & GENERAL EXTERNAL EXAMPLE FUND Fund aim: To achieve long-term capital growth. Fund specific risks: 2, 3, 4 Underlying fund type: OEIC

8 8 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND FUND INFORMATION. Please go to the fund specific risk definitions section on page 17 if you haven t done so already, as you need to cross-reference the fund specific risk numbers. LEGAL & GENERAL S OWN FUNDS Legal & General Group The Legal & General Group, established in 1836, is one of the UK s leading financial services companies. As at 31 December 29, we were responsible for investing 334 billion worldwide on behalf of investors, policyholders and shareholders. We also had over 7 million customers in the UK for our life assurance, pensions, investments and general insurance plans. (Source Legal & General Group) LEGAL & GENERAL CASH FUND Fund aim: To provide capital protection with growth at short-term interest rates. The fund invests in the short-term money markets, such as bank deposits and Treasury Bills. Notes A: This fund does not invest in any asset types where the capital value can fall, such as fixed interest securities. The value of the fund s assets would only fall if a deposit holder or the UK Government were unable to meet their obligations. A: If the interest earned by the fund s assets is insufficient to cover the product charges, the value of your pension fund will fall. Fund specific risks: 17 LEGAL & GENERAL CONSENSUS FUND Fund aim: The fund combines the long-term growth potential offered through UK and overseas equities with the relative security provided by gilts, bonds and cash. The assets held within the fund are passively managed and based on the average investment mix of a large number of major pension funds using the three-monthly Combined Actuarial Performance Survey (excluding property). Fund specific risks: 2, 4, 8, 17 LEGAL & GENERAL DISTRIBUTION FUND Fund aim: The fund is a balanced fund and its investments include equities, fixed interest securities and property. The fund aims to offer good long term growth potential through a combination of capital growth and reinvested income, from a cautious, balanced portfolio, and is actively managed to achieve this objective. Fund specific risks: 2, 4, 8, 9, 13, 14

9 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 9 LEGAL & GENERAL EQUITY FUND Fund aim: To maximise the investment return by investing in a very broad mix of mainly UK companies. Fund specific risks: 3, 8 LEGAL & GENERAL ETHICAL FUND Fund aim: The fund is set up in such a way that it aims to reflect the performance (before charges) of the FTSE 35 index, not including companies whose business does not keep to a range of ethical and environmental guidelines. Fund specific risks: 3, 8, 15 LEGAL & GENERAL EUROPEAN FUND Fund aim: To provide the potential for long-term growth by investing in a portfolio exclusively invested directly or indirectly in European securities, other than those of the UK, which may be selected from all economic sectors. Fund specific risks: 2, 8 LEGAL & GENERAL EUROPEAN EQUITY INDEX FUND Fund aim: The fund is set up in such a way that its performance (before charges) aims to reflect that of the FTSE Europe (Excluding UK) Index with income reinvested. Fund specific risks: 2, 8 LEGAL & GENERAL FAR EASTERN FUND Fund aim: To provide the potential for long-term growth by investing directly or indirectly into a portfolio of Far Eastern securities, which may be selected from all economic sectors. Fund specific risks: 2, 8, 22 LEGAL & GENERAL FIXED INTEREST FUND Fund aim: To maximise the overall returns from interest received and capital values of a portfolio of investments in British Government stocks and other readily marketable fixed interest securities. This may also include quoted marketable stocks of overseas governments and companies. Fund specific risks: 4 LEGAL & GENERAL GLOBAL EQUITY 7:3 INDEX FUND Fund aim: The fund benefits from the returns of the UK and overseas equity markets by investing 7% in our UK Equity Index Fund and 3% in our overseas equity index funds. The overseas equities within the fund are based on the average investment mix of a large number of major pension funds using the three-monthly Combined Actuarial Performance Survey (excluding property). Fund specific risks: 2, 8

10 1 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND LEGAL & GENERAL GLOBAL EQUITY FIXED WEIGHTS 6:4 INDEX FUND Fund aim: The fund benefits from the returns of the UK and overseas equity markets by investing 6% in our UK Equity Index Fund and 4% in our overseas equity index funds. The overseas portion is split 14% North America, 14% Europe (not including the UK, 6% Japan, and 6% Pacific Basin (not including Japan). The fund aims to match these percentages but they could change. Fund specific risks: 2, 8 LEGAL & GENERAL GLOBAL EQUITY FIXED WEIGHTS 5:5 INDEX FUND Fund aim: To capture the sterling total returns of the UK and overseas equity markets with fixed asset allocation between the UK (5%) and overseas (5%). The overseas exposure is divided 17.5% in Europe (not including UK), 17.5% in North America, 8.75% in Japan and 6.25% in Asia Pacific (not including Japan). Fund specific risks: 2, 8 LEGAL & GENERAL INDEX LINKED GILT FUND Fund aim: To get the best return from a portfolio of mainly index-linked securities issued predominantly by the UK Government. Fund specific risks: 4, 11 LEGAL & GENERAL INTERNATIONAL FUND Fund aim: The fund seeks to secure long-term capital growth from a widespread portfolio of international securities. Occasionally shares of UK companies, a large proportion of whose profits arise from overseas earnings, may be included. Fund specific risks: 2, 8 LEGAL & GENERAL JAPANESE EQUITY INDEX FUND Fund aim: The fund is set up in such a way that its performance (before charges) aims to reflect that of the FTSE Japan Index with income reinvested. Fund specific risks: 2, 8 LEGAL & GENERAL MANAGED FUND Fund aim: To seek steady long-term growth, whilst at the same time safeguarding the fund against excessive risks. It invests principally in UK and international equities but also has some exposure to fixed interest securities, UK commercial property and cash, thus offering a more diversified investment than a pure equity fund. Fund specific risks: 2, 4, 8

11 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 11 LEGAL & GENERAL NORTH AMERICAN FUND Fund aim: To provide the potential for long-term growth by investing directly or indirectly into a portfolio of US securities, which may be selected from all economic sectors. Fund specific risks: 2, 8 LEGAL & GENERAL OVER 15 YEAR GILTS INDEX FUND Fund aim: To track the total return of the FTSE-A Government (Over 15 Year) Index to within +/-.25% each year for two years in three. Fund specific risks: 4, 11 LEGAL & GENERAL PROPERTY FUND Fund aim: To get the best return from a portfolio of first class freehold and leasehold interests in commercial and industrial property. This includes warehouse buildings, shopping units and office blocks. It is also permitted to invest up to 15% in other external property funds in order to take advantage of investment opportunities in niche or specialist sections. Fund specific risks: 14 LEGAL & GENERAL UK EQUITY INDEX FUND Fund aim: The fund is set up in such a way that its performance (before charges) aims to reflect that of the FTSE-All Share Index with income reinvested. Fund specific risks: 3, 8 LEGAL & GENERAL UK RECOVERY FUND Fund aim: To secure capital growth from UK securities which offer recovery prospects. The fund managers will select shares whose prices are believed to be undervalued and which generally do not reflect earnings potential. Fund specific risks: 3, 8 LEGAL & GENERAL UK SMALLER COMPANIES FUND Fund aim: The fund seeks to maximise capital growth from a portfolio of UK securities consisting largely of UK smaller companies selected from all economic areas. The fund primarily invests in companies which comprise the lowest 1% by capitalisation of the UK equity market. Fund specific risks: 3, 8 LEGAL & GENERAL US EQUITY INDEX FUND Fund aim: The fund is set up in such a way that its performance (before charges) aims to reflect that of the FTSE USA Index with income reinvested. Fund specific risks: 2, 8

12 12 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND FUND MANAGERS OTHER THAN LEGAL & GENERAL Aberdeen Unit Trust Managers Limited Aberdeen Asset Management plc is an international investment management group, managing assets for both institutional and private clients from offices around the world. Their clients access investment expertise across the three asset classes: equities, fixed income and property. They currently have over billion total group funds under management and advice as at 31 December 29. (Source: Aberdeen Unit Trust Managers Limited) LEGAL & GENERAL ABERDEEN LIFE GLOBAL (EX UK) EQUITY FUND Fund aim: To provide exposure to an actively managed portfolio of overseas equities an asset class that is expected to provide long-term returns that are ahead of inflation. Fund specific risks: 2, 8, 11, 22 Underlying fund type: OEIC LEGAL & GENERAL ABERDEEN LIFE GLOBAL GROWTH FUND Fund aim: To maximise the value of pensions savings, achieving long-term returns that are ahead of inflation through active investment primarily in UK and overseas equities. Fund specific risks: 2, 8, 22 Underlying fund type: OEIC LEGAL & GENERAL ABERDEEN LIFE MULTI-ASSET (EX PROPERTY) FUND Fund aim: To maximise the value of pension savings, achieving long-term returns that are ahead of inflation. Fund specific risks: 2, 4, 8, 22 Underlying fund type: OEIC LEGAL & GENERAL ABERDEEN LIFE UK EQUITY FUND Fund aim: The fund is actively managed and provides exposure to UK equities. It aims to outperform its benchmark which is currently calculated using index returns. Fund specific risks: 8, 11 Underlying fund type: OEIC

13 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 13 Allianz Global Investors Allianz Global Investors, a division of Allianz SE, is a network of investment specialists in the major institutional and retail markets around the world. Through PIMCO, RCM, Oppenheimer Capital, NFJ, Nicholas-Applegate and several other specialist firms Allianz Global Investors offers its clients a broad variety of investment competencies, covering all equity and fixed income investment styles as well as balanced products and alternative investments. With globally 993 billion assets under management (as at 31 March 29), Allianz Global Investors ranks amongst the top five investment management companies worldwide. Through its network of more than 4,6 employees around the globe, including c93 investment professionals, Allianz Global Investors is able to leverage local expertise and market knowledge to its clients all over the world. (Source: Allianz Global Investors) LEGAL & GENERAL ALLIANZ RCM DYNAMIC GROWTH FUND Fund aim: To achieve long term capital growth through active asset allocation and seeks to manage the risks of capital loss resulting from excessive market volatility. The fund manager aims to achieve the objective by investing in any economic sector internationally and by holding cash and/or near cash when considered appropriate. The fund may invest in collective investment schemes as well as directly in equities, fixed income securities (issued by corporate, government and/or supranational institutions) and money market instruments. The fund manager intends to gain indirect exposure to emerging market indices and alternative asset class indices including, but not limited to, private equity, commodities, hedge funds and real estate by investing in collective investment schemes, including exchange traded funds. The fund may also invest in derivative instruments such as futures, options, options on swaps, swap agreements (including equity and/or index based total return swaps, interest rate swaps and/or credit default swaps) and currency forward contracts. The fund may use options in order to generate synthetic cash positions. In particularly adverse market conditions the fund may also hold cash deposits up to 8% of the portfolio. Important note: The risk profile of the fund will increase through investment in derivative instruments and you should seek further advice with regard to your own circumstances. Fund specific risks: 2, 3, 22 Underlying fund type: OEIC LEGAL & GENERAL ALLIANZ RCM UK EQUITY FUND Fund aim: To achieve capital growth. The fund may invest in all economic sectors in the UK. The fund aims to achieve the objective by investing in a broadly based portfolio of UK companies. Fund specific risks: 11 Underlying fund type: OEIC

14 14 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND GLG Partners Investment Funds Limited Founded in 1995, GLG has established itself as one of the largest independent alternative asset managers in the world. GLG offers a diverse range of investment products encompassing equities, fixed interest and alternative investments. GLG s investment products aim to achieve consistent superior returns whilst maintaining client focused product development and customer service within traditional and alternative asset management. Funds under management as at 3 September 29 were US$21,628 million. (Source: GLG Partners UK Holdings Ltd) LEGAL & GENERAL GLG BALANCED FUND Fund aim: To provide capital growth over the long term. In order to achieve the funds objective, the fund invests in authorised unit trust schemes and open-ended investment companies operated or managed by the Manager or any of its associated companies. Fund specific risks: 2, 3, 4, 8, 22 Underlying fund type: OEIC LEGAL & GENERAL GLG ESPRIT CONTINENTAL EUROPE FUND Fund aim: To achieve above average capital growth through investing in the quoted securities of companies listed on European Stock Exchanges. To achieve the objective the fund is predominantly invested in securities of companies operating in Continental Europe. The fund invests in those securities which are believed to present special opportunities for capital growth. The fund may also invest in other investments to the extent permitted by the FSA Rules as applicable from time to time. Fund specific risks: 2, 3, 8 Underlying fund type: OEIC LEGAL & GENERAL GLG GLOBAL EQUITY FUND Fund aim: The fund invests in a portfolio of GLG s institutional funds, to produce exposure to UK and overseas equity markets. The portfolio s asset allocation is formally reviewed on a monthly basis by GLG s Asset Allocation Group which meets to consider key economic, financial and stockmarket data. Fund specific risks: 2, 3, 4, 8, 22 Underlying fund type: OEIC LEGAL & GENERAL GLG UK GROWTH FUND Fund aim: To achieve capital growth through investing in the quoted securities of companies operating in the UK. To achieve the objective, the fund is predominantly invested in the securities of companies listed on the London Stock Exchange, being constituents of the FTSE 35 Index. The majority of the securities held will be in companies which are constituents of the FTSE 1 Index, but a representation in the mid-cap area may also be maintained. Fund specific risks: 8 Underlying fund type: OEIC

15 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 15 JPMorgan Asset Management (UK) Ltd JPMorgan Asset Management (UK) Ltd was established in JPMorgan Asset Management (UK) Ltd belongs to a group of companies operating under the name of JPMorgan Asset Management, established in Assets under management as at 31 December 29 were US$1.2 trillion. (Source: JPMorgan Asset Management Ltd) LEGAL & GENERAL JPM LIFE GROWTH FUND Fund aim: To achieve superior returns by investing in the shares of a broad range of worldwide markets, including emerging markets. Fund specific risks: 2, 8, 22 Underlying fund type: OEIC LEGAL & GENERAL JPM LIFE MODERATE FUND Fund aim: To achieve superior returns by investing in the shares and bonds of a broad range of worldwide markets, including some emerging markets. Fund specific risks: 2, 4, 8, 22 Underlying fund type: OEIC LEGAL & GENERAL JPM LIFE UK DISCIPLINED EQUITY FUND Fund aim: To achieve strong capital growth by investing in the shares of UK companies. It aims to outperform its benchmark, the FTSE-All Share Index, by over 1% over 3 years before fees are taken into account. Fund specific risks: 3, 8 Underlying fund type: OEIC

16 16 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND Newton (BNY Mellon Asset Management) BNY Mellon Asset Management is the global asset management arm of BNY Mellon, one of the world s major financial services groups. With 729 billion* in assets under management, their multi- boutique model encompasses the skills of a number of world class specialist investment managers in their UK fund range, including Newton Investment Management (Newton). BNY Mellon Fund Managers Limited (BNY MFM) is the Authorised Corporate Director. The investment adviser of the Newton sub-funds is Newton. *As at 31 March 21. (Source: The Bank of New York Mellon Corporation) LEGAL & GENERAL NEWTON BALANCED FUND Fund aim: To achieve a balance between capital growth and income predominantly from a portfolio of UK and International securities. The fund may also invest in derivative instruments, forward transactions and collective investment schemes. Fund specific risks: 2, 3, 4, 8, 9, 22 Underlying fund type: OEIC LEGAL & GENERAL NEWTON HIGHER INCOME FUND Fund aim: To achieve increasing distributions on a calendar year basis with long-term capital growth. Fund specific risks: 8 Underlying fund type: OEIC LEGAL & GENERAL NEWTON INCOME FUND Fund aim: To achieve capital growth and income from a portfolio of predominantly UK securities. The fund may also invest in collective investment schemes. Fund specific risks: 2, 8 Underlying fund type: OEIC LEGAL & GENERAL NEWTON INTERNATIONAL GROWTH FUND Fund aim: To achieve capital growth from a portfolio of international securities. The fund may also invest in collective investment schemes. Fund specific risks: 2, 3, 8, 22 Underlying fund type: OEIC Note: The FTSE indices are calculated by FTSE International Limited ( FTSE ). FTSE does not sponsor, endorse or promote these products. All copyright in the indices values and constituent list belongs to FTSE. Legal & General Assurance Society Limited has obtained full licence from FTSE to use such copyright in the creation of these products. FTSE, FT-SE and Footsie are trade marks of the London Stock Exchange plc and The Financial Times Limited and are used by FTSE International Limited ( FTSE ) under licence. All-Share, and All-World are trade mark(s) of FTSE.

17 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 17 FUND SPECIFIC RISK DEFINITIONS. Listed below are all of the fund specific risks that could potentially apply to the funds. To find out which risks apply to a fund you need to cross-reference the numbers in the fund specific risks section of the fund information with the corresponding numbered definitions below. You ll note that there are some numbers missing from the list. This is because we use standard descriptions for a number of different products and some of those numbers do not apply to the funds available to the pension products covered within this document. 2. Currency changes The fund may hold assets in currencies that are not sterling (British pounds). If the value of these currencies falls compared to sterling this may cause the fund s value to go down. 3. Smaller companies The fund invests in smaller companies that tend to be riskier than large companies. This is because their shares can be harder to buy and sell, and the value of them may go up and down more often and by larger amounts, particularly in the short term. 4. Fixed interest securities The fund invests in fixed interest securities usually corporate and government bonds. Investment returns are particularly sensitive to longer term interest rates, typically those for five years and more. Fund values are likely to fall when these interest rates rise. The financial strength of a company or government issuing a fixed interest security determines their ability to make some or all of the payments due. If this financial strength weakens, the chances of them not making payments increases and this could reduce the fund s value. 8. Equities As the fund invests in equities (shares of companies), there s a higher risk of fund values falling than investing in most other asset types, particularly in the short term. 9. Derivatives This fund invests in derivatives and so may be higher risk than funds that invest in other types of assets. In addition, there are some derivatives whose value falls even though the market is rising. If any of the companies with whom the fund has taken out a derivative experiences financial difficulties, it may be difficult to value the derivative or for it to be sold. This may reduce the value of your investment. 11. Limited holdings Most funds spread investments across lots of individual holdings, rather than relying on the performance of just a few. The whole of this fund, or a large part of it, invests in relatively few individual holdings. This means that a fall in the value of an individual holding can have a major impact on the overall performance of the fund. 13. Sub investment grade corporate bonds Corporate bonds are assessed by independent analysts. They rate them depending on how likely the company who issues the bond is to fail to pay the interest due and/or to repay the original capital on the agreed date. They re divided into two categories: Investment grade. These are bonds with the least risk. Sub investment grade. These bonds are more risky than investment grade bonds. The fund invests in sub investment grade corporate bonds so there s an increased risk of fund values falling due to non-payment by the companies issuing the bonds. 14. Commercial property Property can be difficult to buy or sell. This could mean: cash remains uninvested and/or property may have to be sold for less than expected. If an unexpected large number and/or value of withdrawals are requested: The fund manager may be forced to sell properties quickly. This could mean that properties are sold for less than expected which could reduce the value of your investment. There are times when it s not possible to sell properties quickly. If this happened at the same time as you asking us to withdraw money from the fund, we might need to delay dealing with your request. You could wait for as long as six months. If the size of the fund falls significantly, the fund may have to hold fewer properties. This may lead to an increase in risk. Rental growth is not guaranteed and unpaid rent could affect the performance of your investment. The value of property is generally a matter of a valuer s opinion rather than fact. 15. Ethical The ethical standards used for this fund mean that it cannot invest in some companies or in certain sectors (for example tobacco or mining). These restrictions mean that the value of your investment may go up and down more often and by larger amounts than a fund without such restrictions, particularly in the short term. 17. Money market insolvency The fund invests in money market assets, which includes deposits in banks and other financial institutions. If any of these suffer financial difficulties or become insolvent, they may not pay back some or all of the amount invested with them. This could mean that you might not get back the full value of your investment. 2. Specialist The fund invests in companies from a particular market sector which means that there is a higher level of risk. The value of your investment may go up and down more often and by larger amounts than funds that are spread more widely, particularly in the short term. 22. Developing markets The fund invests in countries where investment markets are not as well developed as those in the UK. This means that investments are generally riskier than those in the UK because they: are not as well regulated, are more difficult to buy and sell, have less reliable arrangements for the safekeeping of assets.

18 18 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND LIFESTYLE PROFILES. WHAT IS A LIFESTYLE PROFILE? A Lifestyle Profile is an investment option where your payments initially go into one or more particular funds, typically invested in equities. As you get nearer to your, we steadily switch your pension fund into one or more funds considered to be lower risk. A Lifestyle Profile cannot be chosen together with any other fund selection. The Lifestyle Profile will apply to the whole of your plan. HOW DOES A LIFESTYLE PROFILE WORK? A Lifestyle Profile offers an automatic switching process during the final years of your plan, up to your selected. Your investment is gradually moved into one or more of the following funds: Fund Fixed Interest Fund Index-Linked Gilt Fund Over 15 Year Gilts Index Fund. These funds are generally regarded as less risky than funds that invest in equities. However, you will lose the potential benefits of investing in equities, as explained on page 2. Please remember that the values of these funds are not guaranteed and may go up or down. Lifestyle Profiles currently have operating periods of 3, 5 or 1 years. The frequency of switching is currently yearly, quarterly or monthly. The date of the first switch will be due 3, 5 or 1 years before your, depending on the operating period of the Lifestyle Profile. For example, if your is 5 April 225 and your chosen Lifestyle Profile has an operating period of 1 years, then the first switch will be due to take place on 5 April 215. On each anniversary, we will switch your pension fund into the correct proportions of each fund in accordance with your chosen Lifestyle Profile. For Lifestyle Profiles with quarterly or monthly switching frequencies, the switches will take place on the relevant corresponding date (for example, for monthly switching this could be the 5th of each month). Where the month has no corresponding date, the switch will be made on the last day of that month. Any payments made to your plan during the operating period of your chosen Lifestyle Profile, will be allocated into the applicable funds in the proportions specified for that date. WHAT PROFILES CAN I CHOOSE FROM? We have a range of profiles offering different fund mixes and switching periods. The details of each profile are set out over the following pages. You should refer to the Fund information section starting on page 8 for details of the funds referred to in each table. HOW MANY PROFILES CAN I HAVE? You can only invest in one profile at any one time. Also, whilst you are invested in a Lifestyle Profile it s not possible to invest in other funds. Once you start your plan it s possible to switch between profiles at any time, or even stop the lifestyle investment option and choose one or more of the funds available on the plan. IMPORTANT INFORMATION It s important to remember that the objective of a Lifestyle Profile is to reduce the amount of risk that your pension fund is exposed to as you get nearer to your selected retirement date. It is not a guarantee that the value of your pension fund will not reduce during this period. PROFILE INFORMATION The following pages provide: the fund the Lifestyle Profile starts in, the fund(s) the Lifestyle Profile switches into (and what proportions if applicable), how long before your the switching will begin, and how often the switches will take place. PROFILES WITH A 1 YEAR SWITCHING PERIOD Yearly switching profile These profiles start switching 1 years before your, and then on each anniversary of that date. CAUTIOUS MANAGED LIFESTYLE PROFILE Mix of funds during the 1 years prior to your Years to your selected More than Less than 1 Distribution Fixed Interest

19 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 19 MANAGED LIFESTYLE PROFILE Mix of funds during the 1 years prior to your GLOBAL EQUITY FIXED WEIGHTS 5:5 INDEX/OVER 15 YEAR GILTS LIFESTYLE PROFILE Mix of funds during the 1 years prior to your Years to your selected Managed Fixed Interest Years to your selected Global Equity Fixed Weights 5:5 Index Over 15 Year Gilts More than 1 1 More than Less than Less than UK EQUITY INDEX LIFESTYLE PROFILE Mix of funds during the 1 years prior to your Years to your selected UK Equity Index Fixed Interest More than Less than

20 2 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND Monthly switching profile This profile starts switching 1 years before your, and then every month after that. MONTHLY UK EQUITY INDEX LIFESTYLE PROFILE Mix of funds during the 1 years prior to your MONTHLY UK EQUITY INDEX LIFESTYLE PROFILE (CONTINUED) Mix of funds during the 1 years prior to your Months to your selected UK Equity Index Fixed Interest Months to your selected UK Equity Index Fixed Interest

21 STAKEHOLDER PENSION PLAN CHOOSING YOUR INVESTMENT FUND 21 PROFILES WITH A FIVE YEAR SWITCHING PERIOD Yearly switching profiles These profiles start switching five years before your, and then on each anniversary of that date. MONTHLY UK EQUITY INDEX LIFESTYLE PROFILE (CONTINUED) Mix of funds during the 1 years prior to your DUAL FUND LIFESTYLE PROFILE Mix of funds during the five years prior to your Months to your selected UK Equity Index Fixed Interest Years to your selected retirement date Managed Index-Linked Gilt More than Less than TRIPLE FUND LIFESTYLE PROFILE Mix of funds during the five years prior to your Years to your selected Managed Index- Linked Gilt Fund % Fixed Interest More than Less than GLOBAL EQUITY 7:3 INDEX/FIXED INTEREST LIFESTYLE PROFILE Mix of funds during the five years prior to your Years to your selected retirement date Global Equity Index Fixed Interest More than Less than 1 1