Your fund choices at Virgin Money

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1 Your fund choices at Virgin Money

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3 I believe everyone should be able to take advantage of the investment opportunities that the stock market brings. And I don t think investments have to be complicated. I always make it a rule not to invest in things I don t understand, and I don t see why it should be any different for our customers. So my team at Virgin Money focus on keeping things simple, and offering you the best investment opportunities they can. It s clearly a formula that works. Our investment funds have proven incredibly popular among UK investors, with over 200,000 customers investing over 3 billion with us. Here are our three investment options at a glance: The FTSE All-Share Tracker Fund spreads your investment across 600 or so of the leading companies in the UK stock market: one of the surest ways to benefit from any stock market growth. The Virgin Climate Change Fund invests in companies with the potential to outperform the rest of the market, who are also environmental leaders in their industries. The Virgin Bond and Gilt Fund invests in fixed interest investments and offers a better choice if you re not yet ready to invest in shares, but are seeking a better return than that offered by a deposit account. You can invest in one or all of them - mixing and matching your investment to suit your needs. And it s easy to move your money between them at any time. You can invest through a Virgin ISA with all its tax advantages, or through a Virgin Unit Trust. So, whoever you are, and whatever your investment needs, we hope we can help you. Kind regards Richard Branson Page 2 2

4 virginmoney.com l Contents 5 How stock market investments work 11 FTSE All-Share Tracker Fund Invests in the shares of the FTSE All-Share Index* (that s every one of the top 600+ companies listed on the UK Stock Market). 17 Climate Change Fund Aims to grow your money while at the same time being better for the planet. 21 Bond and Gilt Fund Aims to provide a good level of interest without putting your capital at too much risk. * FTSE, is a trade mark jointly owned by the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited under licence. For a full explanation of this trade mark, see the back cover. You can invest in just one or all three of our funds. Each offers a different potential return depending on the degree of risk you re prepared to accept. Climate Change Fund Remember... Stocks and shares are riskier than other types of investments and ordinary savings accounts. Your investment can go up and down in value and you could get back less than you invest. These are medium to long term investments and you should be prepared to invest for at least 5 years. Potential return FTSE All-Share Tracker Fund Bond and Gilt Fund Cash Deposit Risk Risk v Return graph 3

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6 virginmoney.com l How stock market investments work When you invest in the stock market your money buys shares in companies. When companies are profitable their share prices tend to rise. Companies can also pay out regular dividends to shareholders. These two factors can both increase the value of your investment. 5

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9 How do I invest in the stock market? Experienced investors often enjoy researching and buying their own shares direct. However, for most people, using unit trust based funds like our FTSE All-Share Tracker or Climate Change Fund is the easiest and most cost-effective way to invest in the stock market. Your money is pooled with that of other investors and used to buy shares in bulk. All the paperwork is done for you, at a fraction of the cost of doing it yourself. There are two main types of stock market fund you can choose from actively managed or index tracking. An actively managed fund like our Climate Change Fund, invests in the shares the fund manager thinks will rise most in value. If successful, your returns should be better than the stock market average. If the shares don t perform as well as expected, your returns can fall below the stock market. The potential gains are greater, but so are the risks. An index tracker like our FTSE All-Share Tracker Fund doesn t select individual shares. Instead, it invests in every share on a stock market index, using the potential of the whole market to grow your money. Most trackers lack the potential to grow your money as much as a top performing active fund, but they offer consistent performance on a par with the stock market, and are considered lower risk than most active funds. Your investment buys units in your chosen fund. The value of these units rises and falls depending on the value of the shares the fund has invested in. In the case of the Index Tracker, the fund invests in the top 600+ companies listed on the UK Stock Market. And for the Climate Change Fund, the investment will be in companies selected by the fund manager. How does my investment grow? One of the great myths about the stock market is that the only way to make money is by rising share prices, when really the key to growth is dividend payments. Shareholders normally get paid regular dividends by the companies they invest in. So when you invest in shares, through a fund like our FTSE All-Share Tracker or Climate Change Fund, you get the dividends added to your investment. So even in periods when share prices in general remain relatively flat, your investment can still be growing in the background thanks to share dividends buying you the extra units. Remember, past performance is not a reliable guide to the future. The value of investments can go down as well as up and you may get back less than you invest. 8

10 virginmoney.com l Is the stock market right for me? If you can afford to put money away for several years and your aim is to get the best return you can, few places can offer you a better return than the stock market. But this doesn t mean it s right for everyone. As a general rule of thumb many advisers recommend you should clear all debts (except perhaps your mortgage) and have some savings put away for emergencies (say equivalent to three months salary or more) before you think about investing in the stock market. Also don t invest if you are: Looking for a place for your rainy day money you can get at your money at any time, but as share prices go up and down daily, you could get back less than you invest. Also, occasional longer periods of stock market decline (known as bear markets) can sometimes mean you have to wait several years to see a decent return on your money. Afraid of risk and couldn t bear to see your savings fall in value. Hoping to make a quick return short term stock market investors stand a much higher risk of losing money than making it. 9

11 What about the risks? Investing in stock market shares is not without its risks. They can rise spectacularly in value over many years, go into periods of decline, or fall suddenly in value, meaning you might get back less than you invested. However, when you look at the overall trend of the stock market, it has typically been one of steady upward growth. And it s that long-term upward trend over the years that has made it a popular choice for investors looking to grow their money. Remember, past performance is not a reliable guide to the future. The value of investments can go down as well as up and you may get back less than you invest. The key thing to remember is, the longer you stay invested in the stock market the better you tend to do. The risks of not investing in the stock market are rarely spelled out, but are just as real. For instance, did you know that the real value of your savings in a bank or building society account can actually fall over time due to inflation? If your average deposit account only pays 0.25% after tax, and the cost of living goes up 2%, your savings aren t growing in real terms, they re shrinking. Other investments If you think investing in shares might not be right for you, look at our Bond and Gilt Fund on page 21. Or to see our full range of savings and investments, visit virginmoney.com If you re still not sure whether to invest you could talk to an independent financial adviser - visit to find one in your area

12 virginmoney.com l FTSE All-Share Tracker Fund Our All-Share Tracker Fund at a glance Our FTSE All-Share Tracker Fund invests in the long-term potential of the whole stock market. When the market s moving this is an investment that will keep track with it every step of the way. Our tracker buys shares in every one of the top 600+ companies listed on the UK Stock Market and because your savings lock on to the returns of the whole market, when it rises your investment automatically keeps track. 11

13 Remember, the value of investments can go down as well as up and you may get back less than you invest. 12

14 virginmoney.com l Index tracking the secret to stock market success The great appeal of index tracking is that it s one of the surest ways to benefit from the stock market, making the most of its historic long-term growth. It works on the principle that when share prices move, you automatically keep track. It s ideal for newcomers or those who simply don t want to research their own investments. You re in good company over 600 good companies Our fund charges Our FTSE All-Share Tracker Fund has no initial charges, no monthly charges and no exit charges. There s just a single 1% annual management fee. Virgin were one of the pioneers of low-cost index tracking in this country. One big reason for this success was our decision to lock our index tracking fund into the main benchmark of stock market performance in the UK the FTSE All-Share Index. This is made up of the top 600+ leading businesses quoted on the UK Stock Market, from big high street names to fast growing smaller firms, giving you a balanced spread of investments across the whole of British industry and further afield too. That means you re spreading your risk widely and because many of these companies are international, you effectively benefit from investment in overseas markets too

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16 virginmoney.com l Your questions answered 15

17 When is the best time to invest in the stock market? One of the biggest ironies of stock market investment is that when share prices are at their highest, this often attracts investors in greater numbers, even though you actually get fewer shares for your money. Yet when share prices have dropped, many investors avoid the stock market even though lower share prices would mean they d get more for their money. At Virgin Money we always stress that time, not timing, is the key to a successful investment. It s how long you invest for that s important rather than when you invest. Waiting around until the market s right can mean waiting forever. If you do happen to invest when share prices are low, think of it as a bonus. The golden rule is to invest your money as soon as you can, for as long as you can. It s a handy tip to know that during periods when the stock market is moving up and down a lot, many experts recommend you drip feed your money in smaller, regular amounts. You benefit from what s called pound cost averaging and it s based on the principle that if share prices fall during a particular month, your next monthly investment will buy you more shares for your money. Naturally if share prices rise, you ll get less for your money the following month, but your previous month s investment should be showing a profit. Over a sustained period of stock market volatility, pound cost averaging can reduce the effects and give you a much smoother return. Are all trackers the same? No. Some trackers have a bias toward certain sectors of the market. They may only invest in the top 100 companies, or in technology stocks or small companies. These investments can pay off, but if an individual sector performs badly, it can have a more serious impact on your returns than if you had invested across the market as a whole. Can I take my investment out of the stock market if I want? Yes. If you want a temporary haven from stock market shares, for whatever reason, then you can always switch some or all of your money into our Bond and Gilt Fund, free of charge and at any time. (This is particularly useful if you have an ISA and don t want to lose the tax benefits by withdrawing your investment altogether.) Please remember though, like shares, the value of your investment in our Bond and Gilt Fund can also go down as well as up and you may not get back the amount you invest. Also, if the stock market suddenly shoots up while you are out of it, you will miss out on that growth. 16

18 virginmoney.com l Climate Change Fund Our Climate Change Fund at a glance Our Climate Change Fund invests in high performing businesses that are also environmental leaders. It aims to grow your money while at the same time being better for the planet. Investing in the future The Climate Change Fund offers you the chance to invest in specially selected companies that we think will deliver the best investment returns and who are environmental leaders in their industries. For the most part, these companies are listed on the MSCI Europe Stock Market Index although occasionally, we may invest in global stocks. 17

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20 virginmoney.com l What makes the Climate Change Fund so special? The potential for stock market out performance Whatever your views about climate change, no-one can ignore the fact that it is very much in the spotlight. Businesses are beginning to realise that good environmental performance can have a positive effect on their profits, reputations and society as a whole. We believe that businesses which are environmentally switched on sit in pole position to become the high performers of tomorrow. This is the simple idea behind the Climate Change Fund investing in high performing businesses which are also environmental leaders, should deliver better investment returns whilst making a positive impact on the environment. A world class fund manager To bring you this fund, we teamed up with GLG one of the world s premier fund managers. They manage over $32 billion worth of investments as at March GLG typically manage investments for wealthy clients and access to their specialist funds isn t normally available to just anyone. The Virgin Climate Change Fund was the first fund to make GLG s expertise available to every investor in the UK. An innovative investment strategy The fund invests predominantly in Europe. At the fund manager s discretion it may also invest globally. No investment sector is excluded and we take a threepronged approach when deciding which companies to invest in % - 100% in lighter footprint companies GLG select companies they believe offer the potential to outperform the stock market. The GLG green filter is then applied to these companies to screen out any with a heavier environmental footprint. The ones remaining are the environmentally aware companies whose impact is in the lighter half for their industry. 2. Up to 15% in solution adopters These are companies taking a lead in their industries, actively adopting environmental best practice and seeking to minimize their environmental footprints. They are helping to clean up their industry by example. 3. Up to 10% in solution providers These are companies working at the cutting edge to solve the environmental challenges facing the world. They research, develop and manufacture innovative products and solutions to environmental problems. Investing in these stocks can be riskier which is why they make up the smallest proportion of the fund. 19

21 How does the GLG green filter work? After selecting companies with the best performance potential, we apply the GLG green filter to remove those with a higher than average environmental footprint for their sector. To do this, we use data provided by Trucost a global research organisation that is widely regarded as the benchmark provider of environmental footprint data. Trucost analyse company emissions and natural resource efficiency and present these as figures that allow us to rank each company as a heavier or lighter polluter in their sector. We only invest in those companies in the lighter half of their sector. Our charges Our fees are a 1.75% annual management charge, plus a performance related fee. To receive our performance fee, every six months the fund has to increase in value and beat two key benchmarks: 1. The Bank of England base rate. 2. The unit price at the start of the six months called our High Water Mark (HWM). When we do succeed, our fee is charged at 20% of whatever out-performance we deliver, above the Bank of England rate. For example, say the Bank of England rate is 0.5% per annum (or 0.25% over six months) and we grow the fund by 2.25% over the six month period. We have out-performed the Bank of England base rate by 2%, so we ll get a performance fee of 0.4% (20% x 2% = 0.4%) from the fund. If we don t beat our HWM and the Bank of England rate, we don t get a performance fee. As unit prices increase, so the HWM will increase too, encouraging us to constantly out-perform. If the unit price at the start of the six months is lower than the previous HWM, the previous HWM will continue to apply. If you buy more units half way through the six months, we set the High Water Mark for those units at the price you bought them. For a fuller explanation of how the performance fee is calculated, please read the Key Investor Information for this fund. Why do we have a performance fee? Performance fees are there to incentivise fund managers to give you better returns. The Virgin Climate Change Fund has a performance fee that is paid only if we out-perform our stated benchmarks. We think this is fair we only get this fee if we perform. Remember, the value of investments can go down as well as up and you may get back less than you invest. 20

22 virginmoney.com l Bond and Gilt Fund Our Bond and Gilt Fund at a glance If you re looking to grow your savings but you re not comfortable investing in shares, our Bond and Gilt Fund may be a better choice. Fixed interest investments like bonds and gilts are often considered a half way house between shares and a deposit account, in terms of risk and return. They are less risky than shares and offer the potential over the longer term to generate greater interest than most savings accounts. For added peace of mind, at Virgin we only invest in top-rated bonds and gilts. Remember though, your capital can also rise and fall in value in this fund and you may not get back all you invest. And it doesn t have the potential to grow your savings as much as shares. 21

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24 virginmoney.com l How bonds and gilts work Just like with shares, when you invest in corporate bonds you invest in companies by buying their bonds. Corporate bonds are basically IOUs issued by companies looking to raise finance from investors. In return they pay out a steady stream of interest. You can leave the interest to grow or have it paid out to you as an income every six months. One big plus with bonds is that they rarely go through the roller-coaster ride share prices often do. Also the regular interest payments to bondholders are guaranteed, whereas dividend payments to shareholders are not. And should a company get into trouble, any payments to bondholders will be considered before payments to shareholders. A gilt works in much the same way, except you re investing in the Government rather than a company, which makes them even more secure. The comparative stability of fixed interest investments like bonds and gilts makes them an excellent way of reducing your investment risk and providing a predictable return on your savings. They traditionally give better returns than bank or building society deposit accounts, and are less volatile than shares. Balancing risk and return One of the basic rules of investment is that risk and return go hand in hand, so bond funds offering spectacularly high returns are by definition taking more chances with your money. At Virgin Money we recognise that security of capital can be as important to you as a steady return on your investment, so we aim to strike the best balance between the two. When you invest in our Bond and Gilt Fund half your money goes into UK Government bonds, called gilts, and the other half goes into a wide range of top-rated corporate bonds issued by some of the leading and more credit-worthy UK and European companies.* Some fund managers may sail close to the wind by investing in high risk bonds (nicknamed junk bonds ) which pay inflated levels of interest to make them more attractive to investors. Don t be fooled. Bond funds offering apparently exceptional returns will by definition be taking more chances with your money. If the companies they invest in go bust, their bonds, and therefore your investment, could be worthless. * For details of the corporate bonds we invest in, see the performance leaflet we ve enclosed. 23

25 Growth or income? You can choose to have the interest from your bonds and gilts reinvested to help grow your investment, or you can have it paid out to you every six months as a regular income. Investing for growth If you re investing in our Bond and Gilt Fund to grow your savings, simply opt to have your income reinvested on the application form. You might also like to look at the enclosed performance leaflet to see how the fund has performed over the years, always bearing in mind that past performance isn t necessarily a guide to the future. Investing for income If you re investing for income, tick the box on your application form to have it paid out to you. The fund will then collect all the interest payments from companies and make sure your income is paid into your bank account twice a year. How much income you get every six months will depend on two main things. Firstly, how much you invest. And secondly, what the current interest yield is of our Bond and Gilt Fund. If you invest between 2 October and 1 April you ll receive your first income payment on, or shortly before, 1 June. If you invest between 2 April and 1 October, you ll receive your first income payment on, or shortly before, 1 December. Our fund charges Our Bond and Gilt Fund has no initial charges, no monthly charges and no exit charges. There s just a single 1% annual management fee

26 virginmoney.com l virginmoney.com Mon-Fri 8am-9pm, Sat 9am-6pm For calls from a BT landline there is a maximum charge of 3.9p per minute. Call charges from other networks may vary. Over to you At Virgin Money our philosophy is to make investing as straightforward as possible. If you like our approach and think one or more of our funds is what you re looking for, you ll find all the information you need to get your investment up and running in your enclosed pack. Remember you can invest in our funds direct through a Virgin Unit Trust or a tax-friendly ISA, or by transferring an existing ISA to us. We ve enclosed the application form you asked for, but if you like our investment approach and want to invest in more of our products, just go online at virginmoney.com or give us a call on to find out more. For now, it s over to you. 25

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28 Virgin Money Giving is a 100% not-for-profit fundraising website. Launched by Virgin Money, it s the official fundraising site of the London Marathon. It s designed purely to help people raise more money for charity, without taking a penny in profit. So if you re looking to raise any money for charity, visit virginmoneygiving.com FTSE is a trade mark of the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited under licence. All-Share is a trade mark of FTSE International Limited. The FTSE All-Share Index is calculated by FTSE International Limited. Virgin Money Personal Financial Service Limited and Virgin Money Unit Trust Managers Limited have obtained full licence from FTSE International Limited to use such copyright in the creation of this product. FTSE International Limited does not sponsor, endorse or promote this product. The Virgin Unit Trust and Stocks & Shares ISA are promoted by Virgin Money Personal Financial Service Ltd and provided by Virgin Money Unit Trust Managers Ltd. Both companies are registered in England and Wales (Company numbers and respectively). Registered Office - Jubilee House, Gosforth, Newcastle upon Tyne NE3 4PL. Authorised and regulated by the Financial Conduct Authority All calls are recorded and randomly monitored. The information contained in this brochure is correct as at March MF C everyone s better off virginmoney.com