Baillie Gifford Investment Grade Bond Pension Fund

Transcription

1 BAILLIE GIFFORD LIFE LIMITED Key Features of the Baillie Gifford Life Limited Trustee Investment Policy This is an important document which you should read and keep. Please read this document carefully before making any decision to invest so that you understand what you are buying, and then keep it safe for future reference.

2 Contents Introduction 1 Its Aims 1 Your Investment 1 Risks 1 Questions and Answers 2 When is the Fund valued? How do I invest? Can investments be switched? How are units surrendered? The Effects of Deductions 3 What are the deductions for? Commission About the Fund 3 How is income treated? What about tax? How is the Fund priced? Further Information 4 Charges Cancellation Alteration, termination or assignment of the policy Law Baillie Gifford Life Limited Conflicts of interest Insurance mediation Compensation Complaints and further information Contact Details Back Cover

3 Baillie Gifford Investment Grade Bond Pension Fund Introduction This Key Features document ( KFD ) is intended mainly for the use by trustees of occupational pension schemes and self-invested personal pension schemes, and any reference to you or yours refers to the trustees of the pension scheme. Some UK occupational pension schemes (mainly in the public sector) are established under statute rather than by trust so do not have trustees. For the purposes of this KFD, the term trustees includes the managers of such schemes. The Financial Conduct Authority ( FCA ) is a financial services regulator. It requires us, Baillie Gifford Life Limited, to give you this important information to help you to decide whether our Trustee Investment Policy is right for you. You should read this document carefully so that you understand what you are buying, and then keep it safe for future reference. Its Aims Trustees of UK and certain HM Revenue & Customs approved overseas pension schemes are eligible to enter into a Trustee Investment Policy with Baillie Gifford Life Limited. A Trustee Investment Policy is an investment only product designed specifically to allow trustees of such pension schemes to invest over the long term in a number of pooled funds like the Baillie Gifford Investment Grade Bond Pension Fund (the Fund ). The objective of the Fund is to outperform by 0.75% per annum (before fees) the Bank of America Merrill Lynch Sterling non Gilt Index (UN00) over rolling three year periods, by investing in the Baillie Gifford Investment Grade Bond Fund. The Baillie Gifford Investment Grade Bond Fund is a Collective Investment Scheme in the form of a sub-fund of an Open Ended Investment Company ( OEIC ) authorised by the FCA and managed by Baillie Gifford & Co Limited, which is a wholly owned subsidiary of Baillie Gifford & Co. Baillie Gifford & Co is the investment adviser of the sub-fund of the OEIC. The Baillie Gifford Investment Grade Bond Fund invests mainly in a diversified portfolio of investment grade bonds denominated in sterling. It may also invest in other assets, including global investment grade and sub-investment grade bonds, global government bonds, supranational bonds, foreign currencies and exchange traded and over-the-counter financial derivatives, such as currency forwards, futures or swaps, for investment purposes as well as for hedging or risk reduction purposes. The primary aim of using derivatives is to enhance the return on the sub-fund or to implement positions more efficiently using a range of strategies. The sub-fund may also use derivatives to focus positions more accurately or to protect the sub-fund from possible adverse currency or market movements. More information on the investment strategy is available on request. Your Investment Investment is made by way of payment of premiums to a Baillie Gifford Life Limited pension policy, an insurance contract between Baillie Gifford Life Limited and the trustees, the terms of which are set out in the policy document, and the principal features of which are set out below. The main feature of the policy is that any benefits your pension scheme obtains are dependent on the investment performance of the assets of the fund(s) you choose. The policy is a single premium only policy. Although single premium additions to the initial single premium policy will be accepted, there are no regular premiums. Investment may be made on a daily basis and there is no minimum amount. When you invest in the Fund, units will be allocated to your pension scheme. You may surrender your whole policy, or part of the unit holdings allocated under it, on any business day. Risks Investment markets can go down as well as up and market conditions can change rapidly. The value of an investment in the Fund, and any income from it, can fall as well as rise and you may not get back the amount invested. 1

4 The Fund invests in overseas assets, priced in foreign currencies. Changes in the rates of exchange may cause the value of your units to go down. The Fund s concentrated portfolio and long-term approach to investment may result in large movements in the unit price. A dilution adjustment is applied to the share price of the underlying OEIC sub-fund whenever this sub-fund is expanding or contracting (known as swinging single pricing). Should you buy when the OEIC sub-fund is expanding and sell when the OEIC sub-fund is contracting, this will have a negative effect on the return from your investment. Under certain market conditions securities can be difficult to buy or sell and even small purchases or sales can cause their price to move significantly. To manage the effects of this the Authorised Corporate Director ( ACD ) has introduced a threshold for daily transactions in the OEIC sub-fund, outwith which the ACD will charge an increased dilution adjustment. As a result investors may face increased dealing costs. The ACD will keep the threshold under review in light of the prevailing conditions in the bond markets. Market values for securities which are difficult to trade may not be readily available, and there can be no assurance that any value assigned to such securities will accurately reflect the price the Fund might receive upon their sale. Derivatives may be used to obtain, increase or reduce exposure to assets and may result in the Fund being leveraged. This may result in greater movements (down or up) in the price of shares in the Fund. It is not our intention that the use of derivatives will significantly alter the overall risk profile of the Fund. A further risk exists in respect of the counterparty with whom the derivative transaction is made. Due care and diligence is exercised in the selection of counterparties, however, the possibility of the counterparty failing to pay sums due to the Fund still remains. Bonds issued by companies and governments may be adversely affected by changes in interest rates, expectations of inflation and any decline in creditworthiness of the bond issuer. The issuers of bonds in which the Fund invests may not meet their obligations which means that they may not be able to pay the bond income as promised or could fail to repay the capital amount used to purchase the bond. Where the Fund invests in an OEIC sub-fund, there is a risk that the sub-fund s assets are lost, and that access to them is compromised, as a result of insolvency, negligence, misuse of assets, fraud, poor administration or poor record keeping by the Custodian. This risk is greater in emerging markets and any loss may be borne by the Fund. Current tax rates and reliefs could be changed at any time and their value will depend upon the policyholder s circumstances. If you exercise your right to cancel your policy, you may not receive a full refund of the premiums paid if the value of your policy has fallen by the time of receipt of intention to cancel. Any fall in value may be deducted from the amount of the original premium and any rise will be added. Questions and Answers When is the Fund valued? The Fund is currently valued each business day. The unit price of the Fund is published on our website at The price takes into account changes in the values of the underlying investments. How do I invest? Trustees may set up a Trustee Investment Policy by sending us a completed proposal form. Once the proposal is accepted, we will arrange for the policy document to be completed, at which date we will also make arrangements with the scheme administrator for the payment of premiums. Investment may be made in cash or, by agreement between the parties, in the form of marketable securities. Units in our pension funds are allocated automatically at the single price which is calculated daily. We are required by the Money Laundering Regulations to verify the identity of investing schemes, and information requested alongside the proposal form will be used for this purpose. 2

5 Can investments be switched? Yes. You may switch your investment into other funds operated by Baillie Gifford Life Limited. This facility is currently offered free of charge; although, we may levy a charge for this in the future, in accordance with the policy terms. How are units surrendered? All or part of your investment may be surrendered at any time by completing and returning to us a Surrender Form to confirm your instructions. This should be signed by the trustees in accordance with the scheme s rules and any instructions given to Baillie Gifford. All payments will be made by telegraphic transfer, no later than seven business days after processing the unit transaction or the receipt of the properly completed documents, whichever is the later. Any bank charges on transmission may be deducted from the proceeds of the surrender. The Effects of Deductions The following table assumes an initial investment of 500,000, charges of 0.30% (which represents the current annual management charge of 0.25% and other charges of 0.05%), that income is reinvested, that there are no acceptance charges and the minimum management charge has not been levied. The last two columns assume that investments will grow at 4% per annum (we have used a growth rate of 4% instead of the standard rate of 5% as we feel this most appropriately reflects the growth prospect of the Fund). At end of year Total paid in to date ( ) Effect of deductions to date ( ) What the transfer value might be ( ) 1 500,000 1, , ,000 3, , ,000 5, , ,000 6, , ,000 9, , ,000 21, ,000 If you cash in during the early years you could get back less than you have paid in. What are the deductions for? The deductions are for investment management and administration. The last line in the table opposite shows that, over 10 years, the effect of the total deductions could amount to 21,800. Putting it another way, if the growth rate were to be 4%, which is in no way guaranteed, this would have the same effect of reducing it to 3.7% a year. Commission Baillie Gifford Life Limited will not pay commission to an adviser in respect of any investment made in connection with this policy. About the Fund How is income treated? There are no distributions from the Fund, all income and any tax recoveries are rolled up so increasing the value of units. All tax reclaims are dealt with by us thereby simplifying the task of the scheme administrator. 3

6 What about tax? The following is based on our understanding of current law and practice in November 2015, when this KFD was prepared. Tax relief will already have been given on payments into the pension scheme. No further tax relief is given for investment into this policy. Investment income and all capital gains are free from UK tax. Some investment income received, for example dividend income from overseas companies, has withholding tax deducted from it in accordance with the law of the foreign country concerned. In some cases, part may be subsequently recovered for the Fund from the overseas tax authority. Although we will seek to reclaim such overseas withholding taxes where possible and practicable, we cannot guarantee we will be successful in doing so. Under current law and practice, the UK pension fund management services provided by us are exempt from VAT. How is the Fund priced? Deals will be done daily at the single price prevailing for the dealing day. Prices are calculated using the swinging single pricing method, which means that the price of the units depends on whether the underlying OEIC sub-fund is expanding or contracting. When the OEIC sub-fund is expanding, i.e. the value of purchases exceeds the value of sales, all unit deals will be based on the offer price. The offer price is based on the buying price of the securities held by the OEIC sub-fund adjusted for dealing costs and stamp duty paid by the OEIC sub-fund when it acquires such securities. When the OEIC subfund is contracting, i.e. the value of sales exceeds the value of purchases, all unit deals will be based on the bid price. The bid price is based on the selling price of the underlying securities, adjusted for the dealing costs paid by the OEIC sub-fund when it disposes of such securities. Further Information Charges Details of the nature and current level of charges are set out below: Charges of 0.30% per annum will be deducted from the value of the Fund. These consist of: A management charge of 0.25%. With the agreement of Baillie Gifford Life Limited, the charge may instead be paid directly by the trustees or alternatively by the cancellation of units. Where the management charges earned from total funds invested with Baillie Gifford Life Limited are less than 20,000 per annum, a minimum management charge of 20,000 may be levied. Other expenses, including depositary and auditor s fees, incurred by the Baillie Gifford Investment Grade Bond Fund. In total these equate to 0.05% of the Fund s value, which is based on information extracted from the latest published Annual Reports of the sub-fund at the time of preparation of this KFD. There are no realisation, exit or switching charges, however a charge may be made for benefits paid in specie (where such transfers are at the request of the trustees) per line of stock transferred. Such charges are set annually and the current level is 75 per line of stock. Although there are currently no acceptance, realisation, exit or switching charges made, Baillie Gifford Life Limited may, at its discretion, levy such charges in the future, in accordance with the policy terms. We may also deduct from any premium, surrender or benefit amount, third party expenses (such as money transmission costs, custody transaction charges or other costs incurred by us arising specifically from the payment), which we consider reasonable, in accordance with the policy terms. Where a premium is paid by way of stock transfer, Baillie Gifford Life Limited may deduct any stock handling charges incurred from the value of the premium paid. 4

7 Where the Fund invests in a sub-fund of an OEIC, investment in the sub-fund takes place at the single price for the day. The price of the sub-fund is also calculated using the swinging single method as described above. The effect of this will be to increase the dealing price of the sub-fund when it is expanding and to decrease the dealing price of the sub-fund when it is contracting. This adjustment is known as dilution. The level of the dilution adjustment is set by the ACD of the OEIC sub-fund based on prevailing market conditions. Further information regarding the dilution adjustment is available on request. No account has been made of any dilution adjustment in the table on page 3. All charges may be varied by Baillie Gifford Life Limited giving no less than three months notice to the trustees. Baillie Gifford Life Limited also retains the right, under the policy terms, to charge the trustees any tax, or other charge or expense, in consequence of any premiums received under the policy ceasing to fall within the definition of pension business or any levy or charge made against Baillie Gifford Life Limited under the Financial Services Compensation Scheme. Cancellation Trustees may cancel units at any time to obtain the cash required for the payment of benefits to the scheme s members. Trustees are entitled to request that all or part of the Fund is converted to an annuity at any time. The terms on which this annuity can be made available will vary with interest rates and other factors and are only given when an annuity is requested. The policy is subject to cancellation rights and you will receive a notice of your legal right to cancel your policy ( Cancellation Notice ). You will then have 30 days in which you can change your mind and receive a refund of the premium paid by returning the correctly completed Cancellation Notice to Baillie Gifford Life Limited. If you exercise these rights, you may not receive a full refund of the premiums paid if the value of your policy has fallen by the time of receipt of intention to cancel. Any fall in value may be deducted from the amount of the original premium. Your right to cancel remains unaffected should any unforeseen event beyond your control make it impracticable for you to exercise your cancellation rights. Alteration, termination or assignment of the policy Baillie Gifford Life Limited may alter, amend or add to all or any of the terms and provisions in the policy upon giving the trustees three months notice of any such changes. This includes the ability to close any or all of the funds to further contributions or alter their availability to the trustees. We may terminate the policy on giving no less than one year s notice to the trustees. The trustees may terminate the policy at any time by surrendering all of their investment. The trustees or Baillie Gifford Life Limited may not assign all or any part of their rights or obligations under the policy without the written consent of either party, except under certain limited circumstances as specified in the policy terms. Law The policy is governed by English law. Baillie Gifford Life Limited Baillie Gifford Life Limited is wholly owned by Baillie Gifford & Co and is a company registered in Scotland (company registration No. SC182496), authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No ). It is authorised to carry out long-term insurance business. The registered office is: Calton Square, 1 Greenside Row, Edinburgh EH1 3AN. 5

8 Conflicts of interest The investment management of the Fund is undertaken by Baillie Gifford & Co, the parent of Baillie Gifford Life Limited. Baillie Gifford & Co and other persons associated with it may, from time to time, act as investment managers or advisers to other funds or portfolios which follow similar investment objectives to the Fund. It is therefore possible that Baillie Gifford & Co may in the course of its business have potential conflicts of interest with Baillie Gifford Life Limited. Baillie Gifford & Co will however have regard in such event to, amongst other things, its obligations to act in the best interests of Baillie Gifford Life Limited and the Fund so far as practicable, having regard to its obligations to other clients, when undertaking any investment where a potential conflict of interest may arise. Insurance mediation Baillie Gifford & Co is providing insurance mediation in respect of this policy. Baillie Gifford & Co conducts insurance mediation business solely with Baillie Gifford Life Limited. Compensation We are covered by the Financial Services Compensation Scheme. Policyholders who invest with us may be entitled to compensation from the scheme if we cannot meet our obligations. This depends on the type of business and the circumstances of the claim. Most long term insurance contracts are covered for 100% of the claim with no upper limit. Further information is available from the FCA or from the Financial Services Compensation Scheme, 10th Floor, Beaufort House, 15 St Botolph Street, London EC3A 7QU. Complaints and further information You may contact Baillie Gifford s Compliance Officer at: Calton Square, 1 Greenside Row, Edinburgh EH1 3AN. All complaints will be dealt with in accordance with our internal complaint handling procedures. Eligible complainants can refer complaints that we are unable to settle to the Financial Ombudsman Service ( FOS ) at the following address: The Financial Ombudsman Service Exchange Tower London E14 9SR [email protected] Making a complaint will not prejudice your right to commence legal proceedings. Details of the FOS eligibility criteria are available on request from Baillie Gifford. Full details of the Trustee Investment Policy are contained in the policy document, which is a legally binding contract made between Baillie Gifford Life Limited and the trustees. You may request a further copy of the policy document and further details of the Fund and its past performance from the address below. Annual audited accounts of Baillie Gifford Life Limited and details of the other funds operated by Baillie Gifford are available on request.

9 Contact Details Administration Lindsay Cockburn Tel Fax Marketing Roger Smillie Tel Fax Website Your call may be recorded for training or monitoring purposes. All data is at 31 March 2015 unless otherwise indicated. This document has been issued by Baillie Gifford Life Limited, Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland, United Kingdom. Copyright Baillie Gifford & Co Ref: BGL/KFD/IGBPF 1115