Lubrizol Limited Group Personal Pension Plan Fund brochure

Transcription

1 Lubrizol Limited Group Personal Pension Plan Fund brochure

2 In this brochure we set out the options you have under the Lubrizol Limited Group Personal Pension Plan for investing your pension savings. We explain briefly what the main types of investment are. We also help you find out what type of investor you are and what sort of investment funds you should consider. Your employer, on the advice of Watson Wyatt Limited, has chosen: the core investment funds available to you the additional investment funds available to you the Lifecycle available to you - this shows how we'll invest your payments if you don't want to make a choice the Lifestyle Investment Programmes available to you.

3 Looking forward to the longest holiday of your life No doubt you are looking forward to your retirement when you can finally stop working and start enjoying the fruits of your labour. A long, happy and relaxing retirement is something to look forward to but, to have a good income when you retire, it is vital to start investing in a pension as soon as you possibly can. Any extra savings you make towards your retirement will provide more for you when you stop working. The sooner you start saving and the more you save, the higher your pension and in turn your standard of living should be. A major factor to affect your future standard of living is the way in which your pension savings grow over the years. This means you need to think seriously about how you want to invest your savings so that they can grow for your future. There are four types of investments in which your pension savings can invest through the funds you choose namely: SHARES FIXED INTEREST PROPERTY CASH Shares are issued by a A loan or bond taken Properties, mainly Includes money held on company to raise money out by a company or commercial, such as deposit (as with a bank or to develop the business. Government over a fixed offices which are bought building society account), Investors buy shares amount of time in return and then leased out to and also other money which can be traded for a fixed interest rate. create income from the market securities, which on the stock market. Different types of bonds rent charged. earn interest over time. Considered one of the best investments to achieve have different amounts of security and risk. Generally lower returns than shares but higher Normally considered to be a temporary haven during good long-term returns, These have the potential than cash. periods of investment shares can be quite for a better return than market volatility. However, volatile in the short term, cash in the long run but the real value of an and so should be avoided not as much as shares. investment in cash may be as short-term investments. They are considered lower eroded over time due to the Shares are also called risk than shares. effects of inflation. equities. 1

4 Preparing for the future Your pension fund After deciding to save into a pension plan, the next step is to ensure that you get the best possible return for your savings with the level of risk you are comfortable with. Choosing the funds you want to invest in is a very important decision but it doesn t have to be over complicated. Preparation is vital When you go on holiday you make a range of decisions where to go, how to get there, and how long to stay for. When you are choosing investment funds you need to make similar types of decisions. One vital thing to consider is the length of time you have until you retire. How young or old you are when you start your pension savings will affect the amount of risk you can take. Please see page 3 for an explanation of investment risk. Potential for growth The longer you save for, the more potential you have for growth, so the younger you are now, the more adventurous you can afford to be. The money that you pay into your pension is used to buy units in the fund or funds you choose. The sort of investment your money goes into will depend on your chosen fund. Our range of funds Within our range of funds we think you ll find a combination of funds to meet your investment needs. Investment expertise To ensure the funds we offer are of a high standard, we use the expertise of external consultancies to research fund manager performance. This rigorous research allows us to develop a range of funds for you to invest in, across a spectrum of asset classes with a mix of risk levels and management styles. The external fund groups we have selected are our investment partners. Each exhibits a strong overall business, skilled staff and a well-proven investment process. They are highly regarded, and together have all the necessary ingredients to be able to deliver consistent above-average returns over the longer term. FRIENDS has historically provided a wide range of funds and our investment specialists, F&C Asset Management plc, manage these. We also offer a choice of index-tracking funds, managed by Barclays Global Investors, at no extra charge. We also offer the opportunity to invest in funds managed by some of the industry s most respected and successful fund management companies. These funds carry extra charges. 2

5 Investment risk When choosing your funds, you should carefully consider how much risk you are prepared to take. Risk is a difficult concept to quantify and means different things to different people. We generally assume that risk means how much the value of your investment might fluctuate from day to day. How much you might get back from your investment and the degree of risk you are prepared to take are linked and your fund selection should reflect this. We ve placed each of our funds into risk bands ranging from high to low to help you in making your selection. The following key will help you understand the different levels of risk you can take when investing your money. Only you will know how much risk you are prepared to take but you should remember that even if you choose to take no investment risk at all, your money could buy you less in the long term because of the rise in the cost of living. To help you decide which funds to select, you might want to consider your answers to the following questions. How many years do you have to go until you retire? If your answer is only a few years then perhaps a fund rated Medium or above may not be suitable for you because, although it carries the potential for short-term gains, it also has the potential for short-term losses. If however, your answer is 15 years or more, then you could consider higher rated funds as these offer you the best potential for achieving above-average returns over the longer term. Risk band High Medium Medium Low + Low Your approach to investment risk You re an adventurous investor willing to accept high risk for the prospect of high returns As an adventurous investor, you will accept above-average but below high risk for the prospect of high returns You prefer a balanced approach to investment and are willing to accept above-average risk in the hope of higher returns You prefer a balanced approach to investment and are willing to accept average risk to achieve more attractive returns You will accept below-average risk to achieve more attractive returns Although a cautious investor, you re prepared to accept low levels of risk for the prospect of slightly higher returns You re a very cautious investor and are willing to take a minimal amount of risk only If the stock market went down and your plan value reduced significantly, how would you react? If you would be incredibly upset then perhaps investing in funds rated Low + or Low would be better for you. If on the other hand your reaction would be more balanced then perhaps one of the funds rated, or Medium may suit you better. To what extent are you relying on your pension when you retire? If you don t have any other savings or investments to rely on for your income in retirement then maybe you should think about investing in funds that are rated Low + or Low. However, if you already have a portfolio of investments then perhaps you could afford to be more adventurous with your pension savings and opt for a fund with a higher level of risk. 3

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7 Fund risk factors Please remember we don t guarantee the value of your plan. It can go up and down depending on how well the investments perform. You could get back less than you ve paid in. Some funds aim for income as well as capital growth, and others for income only. We reinvest any income in the fund to increase the value of the units. Where a fund invests overseas, the value can go up and down simply because of changes in currency exchange rates. Where a fund invests in fixed interest securities, the value may go up and down as interest rates change. For example, if interest rates rise, the value is likely to fall. Some funds invest in company bonds. High-yielding bonds are usually lower grade. These carry an increased risk both to the income and capital value of the fund, for example, if the company issuing the bond has financial difficulties and stops trading. Some funds invest in a concentrated number of stocks and so are riskier than broader-based funds. Where a fund invests in emerging markets, investment values can move sharply down or up. These markets tend not to be so well regulated as developed markets and political unrest is more likely. At times a fund may need to change the way its price is calculated, to ensure that those moving into, and out of the fund, are treated fairly. Funds that invest in property generally incur higher costs than those that don't. These costs, along with other factors, can have a positive or negative effect upon a fund's price and performance. Where a fund invests in property, sometimes the properties are not easy to sell, and we may need to delay up to six months the cashing in or switching of units. The value of property depends on the individual views of the valuers. In exceptional circumstances, we may need to delay the cashing in or switching of units for up to one month. We won t do this at your selected retirement age or on death. Some funds invest in smaller companies. The market for these is narrower than for larger companies and price swings can be greater. Fund charges We take an annual management charge out of the fund value over the lifetime of your plan. We show the annual management charge for each fund on pages 7, 9, and 10. Additional fees and expenses If you choose an external fund, you will invest in a Friends Provident pension fund that in turn invests in the external fund manager s fund. Most external fund managers funds have to pay expenses, such as fees to auditors, trustees and valuers. Similarly, if you choose a fund of funds, most external fund managers funds in which it invests have to pay such expenses. Changed circumstances Please note there may be circumstances when the external fund managers decide to increase the level of annual management charge for new and existing customers. If this happens, we ll offer you a free switch to another fund with an annual management charge at or below the previous level. We may even close the external fund concerned. Because our plans allow you to switch your funds free of charge, you can be confident that you ll always have the flexibility to ensure your fund choice meets your requirements. On pages 7, 9 and 10 we show the additional expenses for each fund at 31 December Expenses will change over time. We will show the latest value when we next update this brochure. 5

8 If you don t want to make an investment choice... The Lifecycle If you don t want to make a choice from the funds available, your payments will be invested in the Lifecycle. The Lifecycle will invest your payments in the BGI Global Equity (40:60) Index Fund and then gradually move your investment into lower risk funds as you get closer to your selected retirement age. If you choose the Lifecycle after you have joined all your money will be switched straightaway from the funds you've already chosen to the BGI Global Equity (40:60) Index Fund, where future payments will also be invested. The BGI Global Equity (40:60) Index Fund invests mainly in shares, both in the UK and overseas markets. The fund has 40% invested in UK companies and 60% invested in overseas companies split equally between the US, Europe (excluding UK) and the Far East. The fund aims to provide returns broadly consistent with the markets in which it invests. In the five years leading up to your selected retirement age the Lifecycle will switch your existing investments and any future payments into the BGI UK Corporate Bond Index Fund, the BGI Over 15 Years UK Gilt Index Fund and the Cash Fund. For more details about these funds please see the following pages. If you choose the Lifecycle within five years of your selected retirement age, all your money and your future payments will be switched straightaway from the funds you've already chosen to funds according to the table below. The proportions invested in each of these funds will vary slightly according to market movements. The final column shows the intended position of your investments at your selected retirement age (SRA). We carry out the Lifecycle switching monthly without charge. We will let you know before we start to switch your investments into lower risk funds, so that you can change your decision if you want. To opt-out of the Lifecycle or to switch into one of the Lifestyle Investment programmes shown on page 20, please write to us at the address shown on page 5 of the Key Features of the New Generation Personal Pension document, provided separately. Lifecycle Cash Fund BGI Over 15 Years UK Gilt Index Fund BGI UK Corporate Bond Index Fund BGI Global Equity (40:60) Index Fund YEARS TO RETIREMENT 6

9 Investment funds Core fund range Friends Provident offers a very wide range of investment funds. To assist with the decision making process, and with the advice of Watson Wyatt Limited, Lubrizol Limited has selected a core range of funds which they believe should meet the needs of the majority of members. This will be reviewed regularly so that the funds remain appropriate. You can choose from this core range, or funds from the additional range described on pages 11 to 18. Alternatively, you can choose a mix of funds from both ranges. This table shows the core range of funds available to you under the Lubrizol Limited Group Personal Pension Plan. Risk band Fund Fund type Annual charge Additional expenses Page (% a year as at 31/12/2007) BGI World (ex-uk) Equity Index Index 0.54% Nil 8 BGI Global Equity (40:60) Index Index 0.54% Nil 8 BGI UK Equity Index Index 0.54% Nil 8 Medium BGI UK Corporate Bond Index Index 0.54% Nil 8 Low + BGI Over 15 Years UK Gilt Index Index 0.54% Nil 8 BGI UK Index-Linked Gilt Index Index 0.54% Nil 8 Low Cash Actively managed 0.54% Nil 8 Fund types Index Actively managed An index is a set of shares that represents an individual market such as the FTSE All-Share Index. An index-tracking fund aims to invest in all the companies of a particular market in such a way as to track the return of that market as closely as possible. This type of fund doesn t aim to outperform the index it tracks, only to follow the index. The fund manager actively buys and sells investments with the aim of achieving higher returns than the fund s index or benchmark. 7

10 Core fund range The following tables show the core range of funds available in each investment category, together with the risk rating and fund aim. We show the annual management charge and additional expenses for each fund on page 7. UK Equity Fund Risk Aim BGI UK Equity Index The fund invests in the shares of UK companies and aims to achieve a return that is consistent with the return of the FTSE All-Share Index. This index is widely regarded as the benchmark for UK pension fund investment in shares of companies in the UK. International Equity Fund Risk Aim BGI Global Equity (40:60) Index The fund invests mainly in shares, both in the UK and overseas markets. The fund has 40% invested in UK companies and 60% invested in overseas companies split equally between the US, Europe (excluding UK) and the Far East. The fund aims to provide returns broadly consistent with the markets in which it invests. BGI World (ex-uk) Equity Index The fund invests in the shares of overseas companies (Europe, Japan, Far East, US and Canadian markets) according to market capitalisation weightings. Within each of those markets, the fund aims to generate returns consistent with those of each country s primary share market. Notes: Actual percentage splits between individual sectors may vary from those shown above. Fixed Interest Fund Risk Aim BGI Over 15 Years UK Gilt Index BGI UK Index-Linked Gilt Index Low + Low + The fund invests in UK Government fixed interest securities (gilts) that have a maturity period of 15 years or longer. The fund aims to achieve a return consistent with the FTSE UK Gilts Over 15 Years Index, which is widely regarded as the benchmark for the UK pension fund investment in the longer-dated end of the UK gilt market. The fund invests in UK Government index-linked securities (index-linked gilts) that have a maturity period of 5 years or longer. The fund aims to achieve a return consistent with the FTSE UK Gilts Index-Linked Over 5 Years Index. BGI UK Corporate Bond Index Medium The fund invests in investment grade corporate bonds denominated in Sterling. The fund aims to achieve a return consistent with the iboxx Non-Gilts Over 15 Years Index. This index consists of bonds with a maturity of 15 years or longer. Cash Fund Cash Risk Low Aim The fund invests in short-dated interest-bearing deposits and other money market securities with the major London clearing banks and other members of the London money market. It aims to provide investors with short-term liquidity and preservation of capital. However, it is possible, in extreme circumstances, that the value of the fund may fall. This fund is managed by F&C Asset Management plc. 8

11 Additional fund range This table shows the additional range of funds available to you under the Lubrizol Limited Group Personal Pension Plan. Risk band Fund Fund type Annual charge Additional expenses Page (% a year as at 31/12/2007) High Artemis Global Growth Actively managed 1.29% 0.13% 15 First State Global Emerging Markets Leaders Actively managed 1.29% 0.15% 15 JPM Natural Resources Actively managed 1.29% 0.20% 15 Artemis European Growth Actively managed 1.29% 0.07% 16 Baillie Gifford Japanese Equity Actively managed 0.99% 0.06% 16 Baillie Gifford North American Equity Actively managed 0.99% 0.01% 16 BGI European Equity Index Index 0.54% Nil 16 BGI Japan Equity Index Index 0.54% Nil 16 BGI Pacific Rim Equity Index Index 0.54% Nil 16 BGI US Equity Index Index 0.54% Nil 16 European Actively managed 0.54% Nil 16 First State Asia Pacific Leaders Actively managed 1.29% 0.10% 16 Lazard European Alpha Actively managed 0.89% 0.07% 16 Newton International Growth Actively managed 0.89% 0.19% 15 North American Actively managed 0.54% Nil 16 Pacific Basin Actively managed 0.54% Nil 16 Schroder Tokyo Actively managed 1.29% 0.22% 16 SSgA Pacific Enhanced Equity Index Actively managed 0.84% Nil 16 UBS Global Optimal Actively managed 0.89% 0.11% 15 UBS US Equity Actively managed 0.89% 0.07% 16 UK Smaller Companies Actively managed 0.54% Nil 13 AllianceBernstein Global 50:50 Style Blend Actively managed 0.91% 0.13% 14 AllianceBernstein Global Style Blend Actively managed 1.14% 0.15% 14 AllianceBernstein UK Style Blend Actively managed 0.94% 0.10% 12 Artemis Capital Actively managed 1.29% 0.16% 12 Artemis UK Special Situations Actively managed 1.29% 0.07% 12 Baillie Gifford International Actively managed 0.74% 0.10% 14 Baillie Gifford Overseas Equity Actively managed 0.84% Nil 14 Baillie Gifford UK Equity Actively managed 0.84% Nil 12 BGI Global Equity (50:50) Index Index 0.54% Nil 14 BGI Global Equity (60:40) Index Index 0.54% Nil 14 BlackRock UK Dynamic Actively managed 1.29% 0.24% 12 BlackRock UK Equity Actively managed 0.74% 0.05% 12 BlackRock UK Smaller Companies Actively managed 1.29% 0.24% 13 Friends Provident UK Special Situations Actively managed 1.29% 0.20% 13 Global Equity Fund of Funds Fund of funds 0.84% 0.05% 14 HSBC Amanah Global Equity Index Index 0.84% Nil 14 Invesco Perpetual High Income Actively managed 1.29% 0.22% 13 Investec UK Blue Chip Actively managed 1.04% 0.13% 13 Lazard UK Income Actively managed 0.84% 0.05% 13 M&G UK Select Actively managed 1.29% 0.18% 13 Newton Higher Income Actively managed 0.99% 0.05% 13 Overseas Equity Actively managed 0.54% Nil 14 Schroder Diversified Growth Actively managed 1.29% 0.10% 12 Schroder UK Mid 250 Actively managed 1.44% 0.18% 13 SSgA Global 50:50 Enhanced Equity Index Actively managed 0.84% Nil 14 SSgA Overseas Enhanced Equity Index Actively managed 0.84% Nil 14 UBS Global Equity 50:50 Actively managed 0.89% 0.07% 15 UBS UK Select Actively managed 0.89% 0.06% 13 UK Equity Actively managed 0.54% Nil 13 9

12 Additional fund range continued Risk band Fund Fund type Annual charge Additional expenses Page (% a year as at 31/12/2007) Medium AEGON High Yield Bond Actively managed 0.84% 0.14% 17 Baillie Gifford Managed Actively managed 0.74% 0.04% 11 Balanced Fund of Funds Fund of funds 0.84% 0.04% 11 Balanced Index Enhanced Fund of Funds Fund of funds 0.54% Nil 11 BGI Balanced Index Index 0.54% Nil 11 BGI Consensus Index 0.54% Nil 12 Cazenove UK Growth & Income Actively managed 1.29% 0.09% 12 F&C Global Real Estate Securities Actively managed 0.94% 0.36% 17 Managed Actively managed 0.54% Nil 12 Newton Balanced Actively managed 0.74% 0.16% 12 Newton Income Actively managed 0.74% 0.16% 12 Stewardship Actively managed 0.54% Nil 12 Stewardship Managed Actively managed 0.54% Nil 12 Medium AEGON Global Bond Actively managed 0.94% 0.12% 17 BGI Cautious Index Index 0.54% Nil 11 Cautious Fund of Funds Fund of funds 0.84% 0.03% 11 Cautious Managed Actively managed 0.54% Nil 11 Investec Cautious Managed Actively managed 1.04% 0.14% 11 JPM Cautious Total Return Actively managed 1.19% Nil 11 M&G Property Portfolio Actively managed 1.19% 0.24% 17 Property Actively managed 0.54% Nil 17 Stewardship Income Actively managed 0.54% Nil 12 With Profit Actively managed 0.54% Nil 18 Low + AEGON Sterling Corporate Bond Actively managed 0.84% 0.13% 17 Annuity Protector Actively managed 0.54% Nil 17 Fixed Interest Actively managed 0.54% Nil 17 Index Linked Actively managed 0.54% Nil 17 Invesco Perpetual Corporate Bond Actively managed 1.04% 0.20% 17 Fund types Index Actively managed Fund of funds An index is a set of shares that represents an individual market such as the FTSE All-Share Index. An index-tracking fund aims to invest in all the companies of a particular market in such a way as to track the return of that market as closely as possible. This type of fund doesn t aim to outperform the index it tracks, only to follow the index. The fund manager actively buys and sells investments with the aim of achieving higher returns than the fund s index or benchmark. Within just one fund, your investment is typically spread across many fund managers. Each fund is governed and controlled by a high level management committee at Friends Provident rather than an appointed manager. 10

13 Additional fund range The following tables show the additional range of funds available in each investment category, together with the risk rating and fund aim. We show the annual management charge and additional expenses for each fund on pages 9 and 10. Managed Fund Risk Aim BGI Cautious Index Medium The fund invests up to 60% in equity-tracking indices, with the balance invested in fixed interest tracking indices and cash. The equity part of the fund is split equally between UK shares and overseas shares. The overseas shares are split equally between the US, Europe (excluding UK) and the Far East. The fund aims to provide returns broadly consistent with the ABI Pension Fund 'Cautious (up to 60% Equity) Managed' Sector Average. Cautious Fund of Funds* Cautious Managed Investec Cautious Managed JPM Cautious Total Return Baillie Gifford Managed Balanced Fund of Funds* Balanced Index Enhanced Fund of Funds* Medium Medium Medium Medium Medium Medium Medium The fund invests up to 60% in shares, split between the UK and overseas markets, with the balance invested in fixed interest and cash. It aims to outperform the ABI Pension Fund Cautious (up to 60% Equity) Managed Sector Average over three year rolling periods. The fund may be appropriate for those investors aiming for moderate returns and less volatility through an investment which provides a broad exposure to a wide spread of asset classes. The fund aims for stable longer-term growth. It invests up to 60% in the shares of UK and overseas companies, with the balance invested in fixed interest, property and cash. This fund is managed by F&C Asset Management plc. reo The fund aims to provide a combination of income and long-term capital growth by investing conservatively in a diversified portfolio of shares, bonds and other fixed interest securities of high quality and marketability. The fund will invest a maximum of 60% of the portfolio value in shares. We reinvest any income in the fund to increase the value of the units. The fund aims to achieve a return, over the medium term, higher than is available from sterling money market instruments. It invests mainly in fixed income securities, convertible bonds, company shares and shorter-term securities from issuers in any country. The fund may invest in securities issued in emerging countries worldwide. We reinvest any income in the fund to increase the value of the units. This fund invests in emerging markets. The fund aims to achieve above-average returns over the long term by investing worldwide in securities in any economic sector. The fund will be diversified by holding different asset classes, by investing internationally, and by holding shares of companies operating in a wide range of industries. The fund invests up to 85% in shares, split between the UK and overseas markets, with the balance invested in fixed interest and cash. It aims to outperform the ABI Pension Fund Balanced (up to 85% Equity) Managed Sector Average over three year rolling periods. The fund may be appropriate for those investors who believe shares offer the best opportunity for increased long-term returns but who also want the peace of mind of having some of their investment in less risky fixed interest and cash. The fund aims for long-term growth by investing in all main investment types and geographic regions. It invests 70% in passive tracker funds that aim to perform in line with their respective indices. It invests the remaining 30% in actively managed funds with highly regarded managers who have the ability to add value over the longer term. BGI Balanced Index Medium The fund invests up to 85% in equity-tracking indices, with the balance invested in fixed interest tracking indices and cash. The equity part of the fund is split equally between UK shares and overseas shares. The overseas shares are split equally between the US, Europe (excluding UK) and the Far East. The fund aims to provide returns broadly consistent with the ABI Pension Fund Balanced (up to 85% Equity) Managed Sector Average. Notes: Actual percentage splits between individual sectors may vary from those shown above. *Actual percentage splits between individual sectors may vary from those shown above. Asset allocation within the funds is based on a formula driven model using Lipper data to allocate and rebalance holdings. We will hold assets in the same proportion as the average mix, defined on the Lipper database. The proportions held in each equity fund component of our funds will need to change over time to maintain the stated asset mix. Each month we will review the relative proportion held by each fund manager. If a fund has moved from its target position, rebalancing will initially be done by redirecting new money from overweight holdings to underweight holdings. If redirection does not achieve the desired rebalance, existing holdings will be traded until the stated asset mix is achieved. For more information on ethical and reo funds, please see page

14 Managed continued Fund Risk Aim BGI Consensus Medium The fund provides a low-cost alternative to traditional balanced fund management. It aims to perform in line with the average UK balanced pension fund through investment in index-tracking funds. Managed Newton Balanced Stewardship Managed Schroder Diversified Growth Medium Medium Medium The fund aims to provide you with a professional management service where our fund managers make all the investment decisions for you. They aim to achieve above-average growth over the longer term. The fund may invest in UK and overseas shares, fixed interest securities, property or cash as the managers decide. Normally we buy units in our other investment funds although, if the circumstances are right, we may invest direct. This fund is managed by F&C Asset Management plc. reo The fund aims to achieve a balance between capital growth and income mainly from a portfolio of UK and international securities. We reinvest any income in the fund to increase the value of the units. The fund aims for long-term capital growth, with some income, through investment in a wide spread of ethically-screened UK and overseas shares and bonds. We reinvest any income in the fund to increase the value of the units. This fund is managed by F&C Asset Management plc. ethical and reo The fund aims to deliver medium-term growth with a target of RPI plus 5% a year over five to seven years. It aims to achieve this target with less volatility than a portfolio dominated by shares. The fund invests in a wide range of asset classes including shares, high-yield bonds, commodities, property and emerging market debt. UK Equity Fund Risk Aim Stewardship Income Cazenove UK Growth & Income Newton Income Medium Medium Medium The fund aims for an above-average income with the prospect of long-term capital growth through investment in ethically-screened UK shares. We reinvest any income in the fund to increase the value of the units. This fund is managed by F&C Asset Management plc. ethical and reo The fund aims for long-term capital and income growth through investment mainly in the shares of UK companies. We reinvest any income in the fund to increase the value of the units. The fund aims to achieve capital growth and income from a portfolio of predominantly UK securities. We reinvest any income in the fund to increase the value of the units. Stewardship Medium The fund aims for long-term capital growth through investment in ethically-screened UK shares. This fund is managed by F&C Asset Management plc. ethical and reo AllianceBernstein UK Style Blend The fund aims to achieve long-term capital growth by investing in a portfolio of shares of mainly UK companies. Artemis Capital The fund aims to provide investors with a balanced spread of investments for long-term growth by seeking well-managed companies, primarily in the UK, where the fund managers believe there is superior potential for earnings growth. Artemis UK Special Situations Baillie Gifford UK Equity BlackRock UK Dynamic BlackRock UK Equity The fund aims to provide long-term capital growth by exploiting special situations. The fund invests principally in UK shares. It may also invest in shares of companies that are quoted on a regulated market outside the UK but which have their headquarters or a significant part of their activities in the UK. The fund aims to outperform the FTSE All-Share Index over rolling three-year periods. It invests mainly in the shares of UK companies. The fund aims to achieve capital growth, with income of secondary importance. The fund invests principally in a portfolio of quoted UK shares. We reinvest any income in the fund to increase the value of the units. The fund aims to maximise the total returns to investors from a combination of capital growth and income by investing largely in the ordinary shares of UK companies in any and all economic sectors. We reinvest any income in the fund to increase the value of the units. 12

15 UK Equity continued Fund Risk Aim BlackRock UK Smaller Companies The fund invests in the shares of smaller companies in the UK that the managers consider have above-average long-term growth prospects. Friends Provident UK Special Situations The fund aims to achieve long-term capital growth by investing in funds which seek out growth from undervalued or out-of-favour companies. The fund will invest at least 80% in the shares of UK companies with the remainder of the fund invested globally. It is a multi-manager fund that invests in the M&G Recovery Fund, the BlackRock UK Special Situations Fund and the Artemis Global Growth Fund. Invesco Perpetual High Income Investec UK Blue Chip Lazard UK Income M&G UK Select Newton Higher Income Schroder UK Mid 250 The fund aims to achieve a high level of income, together with capital growth. The fund invests primarily in companies listed in the UK, with the balance invested internationally. The fund managers may also include other investments they consider appropriate. We reinvest any income in the fund to increase the value of the units. The fund aims to achieve long-term capital growth primarily through investment in the shares of companies making up the FTSE 350 Index. The fund aims to give you an investment in the best of British companies. It holds a substantial stake in today s Blue Chips, the stocks that make up the well-known FTSE 100 Index. It complements this solid core with a selection of medium-sized businesses from the FTSE 250 Index that the fund manager believes will be among the success stories of tomorrow. The fund aims to achieve an income yield greater than that of the FTSE All-Share Index, while producing capital growth at a rate at least equivalent to that produced by the index. It invests in shares of UK companies. We reinvest any income in the fund to increase the value of the units. The fund aims to maximise total returns by investing in a range of UK shares. The fund aims for an increasing income with long-term capital growth from a portfolio of mainly UK shares. We reinvest any income in the fund to increase the value of the units. The fund aims to achieve long-term capital growth by investing in the medium-sized companies listed on the FTSE Mid 250 Index. The main advantage of investing in Mid 250 companies is that often these businesses have greater potential for continued growth than their larger counterparts. The fund manager invests in growing companies with a unique product or service for which demand is strong. This also requires him to be disciplined in his approach by selling stocks if there are signs that increasing competition means the company s product has lost its unique advantage. UBS UK Select The fund aims to achieve long-term capital growth through active management of a diversified portfolio invested mainly in UK shares. UK Equity The fund aims to provide long-term capital growth from a balanced portfolio of UK shares. This fund is managed by F&C Asset Management plc. reo UK Smaller Companies The fund aims for medium to long-term capital growth by investing mainly in UK smaller companies. This fund is managed by F&C Asset Management plc. reo 13

16 International Equity Fund Risk Aim AllianceBernstein Global 50:50 Style Blend AllianceBernstein Global Style Blend Baillie Gifford International Baillie Gifford Overseas Equity BGI Global Equity (50:50) Index The fund aims to achieve long-term capital growth by investing in a portfolio of UK and overseas companies. The fund aims to achieve long-term capital growth by investing in a portfolio of international shares. The fund s strategy is designed for investors who seek equity returns but also want broad diversification of related risks across styles, capitalisation and geographic regions. The fund aims to achieve capital growth through investing principally in the shares of companies worldwide, excluding the UK. The fund aims for capital growth by investing in shares internationally (excluding the UK) mainly through direct investment in listed securities. The fund invests in equity-tracking indices, both in the UK and overseas markets. It invests around 50% in the shares of UK companies and 50% in overseas companies, split equally between the US, Europe (excluding UK) and the Far East. The fund aims to provide returns broadly consistent with the ABI Pension Fund Global Equities Sector Average. BGI Global Equity (60:40) Index The fund invests primarily in shares, both in the UK and overseas markets. The fund has 60% invested in the shares of UK companies and 40% invested in overseas companies split equally between the US, Europe (excluding UK) and the Far East. The fund aims to provide returns broadly consistent with the markets in which it invests. Global Equity Fund of Funds* The fund invests wholly in the shares of UK and overseas companies. It aims to outperform the ABI Pension Fund Global Equities Sector Average over three year rolling periods. The fund may be appropriate for those investors aiming for increased long-term returns who are willing to accept the increased volatility which comes with a purely share based investment for the prospect of better returns. HSBC Amanah Global Equity Index The fund aims to create long-term capital growth through investment in a well-diversified portfolio of shares listed worldwide in a manner that is consistent with the investment principles of Shariah (Islamic) Law. It aims to track the performance of the Dow Jones Islamic Market Titans Index. The fund will not invest in financial institutions or companies with core activities including alcohol, arms, gambling, leisure, pork or tobacco. Nor will it use interest-based accounts or conventional fixed interest instruments such as bonds. Overseas Equity The fund aims for long-term capital growth by investing primarily in overseas shares. It may also include shares of UK companies that invest mainly overseas. This fund is managed by F&C Asset Management plc. reo SSgA Global 50:50 Enhanced Equity Index The fund invests in four SSgA Enhanced Equity Index funds: 50% is invested in the UK fund and 50% is divided equally between the Europe (excluding UK), North America and Pacific funds. Each fund aims to consistently outperform, in a risk controlled manner, its underlying market index. SSgA Overseas Enhanced Equity Index The fund invests equally in three SSgA Enhanced Equity Index funds: Europe (excluding UK), North America and Pacific. Each fund aims to consistently outperform, in a risk controlled manner, its underlying market index. Notes: Actual percentage splits between individual sectors may vary from those shown above. * Actual percentage splits between individual sectors may vary from those shown above. Asset allocation within the funds is based on a formula driven model using Lipper data to allocate and rebalance holdings. We will hold assets in the same proportion as the average mix, defined on the Lipper database. The proportions held in each equity fund component of our funds will need to change over time to maintain the stated asset mix. Each month we will review the relative proportion held by each fund manager. If a fund has moved from its target position, rebalancing will initially be done by redirecting new money from overweight holdings to underweight holdings. If redirection does not achieve the desired rebalance, existing holdings will be traded until the stated asset mix is achieved. 14

17 International Equity continued Fund Risk Aim UBS Global Equity 50:50 Newton International Growth The fund aims to achieve long-term capital growth through active management of a diversified portfolio with around 50% invested mainly in UK shares and around 50% in overseas shares. The fund aims to achieve capital growth by concentrating on the shares of companies around the world that offer the best growth prospects. UBS Global Optimal Artemis Global Growth First State Global Emerging Markets Leaders JPM Natural Resources High High High The fund aims to achieve long-term capital growth through active management of a diversified portfolio invested in overseas shares. The fund aims for capital growth from a diversified portfolio investing in any economic sectors in any part of the world. The fund aims to achieve long-term capital growth. The fund invests in shares of large and mid-capitalisation companies in emerging economies. It includes companies listed on developed market exchanges whose activities predominantly take place in emerging market countries. This fund invests in emerging markets. The fund aims for long-term capital growth by investing mainly in shares of companies throughout the world that produce or market commodities. 15

18 Regional Equity Fund Artemis European Growth Baillie Gifford Japanese Equity Baillie Gifford North American Equity BGI European Equity Index BGI Japan Equity Index BGI Pacific Rim Equity Index BGI US Equity Index Risk Aim The fund aims to provide long-term capital growth through investment principally in shares of companies in Europe (excluding the UK). The fund aims to provide capital growth through investment in the Baillie Gifford Japanese and Baillie Gifford Japanese Smaller Companies funds. The fund aims to maximise total returns through investment in any economic sector within the USA and Canada. The fund invests in the shares of companies in Europe to achieve a return that is consistent with the return of the FTSE All-World Developed Europe ex-uk Index. This index is widely regarded as the benchmark for UK pension fund investment in European company shares. The fund invests in the shares of Japanese companies and aims to achieve a return that is consistent with the return of the FTSE All-World Japan Index. The fund invests in the shares of companies in the Pacific Rim and aims to achieve a return that is consistent with the return of the FTSE All-World Developed Asia Pacific ex-japan Index. The fund invests mainly across the Australian, Hong Kong, Singapore and New Zealand markets. The fund invests in the shares of US companies and aims to achieve a return that is consistent with the return of the FTSE All-World USA Index. This index is widely regarded as the benchmark for UK pension fund investment in shares of companies in the US. European The fund aims for long-term capital growth by investing in any European stock market except the UK. Although most investment will be in the major markets, our fund managers believe the smaller markets also offer interesting opportunities and should be in the portfolio. The fund invests mainly in shares, but there may be times when fixed interest securities are an attractive investment for part of the portfolio. This fund is managed by F&C Asset Management plc. reo First State Asia Pacific Leaders The fund aims to achieve long-term capital growth. The fund invests in shares of large and mid-capitalisation companies in the Asia Pacific region (excluding Japan, including Australia). This fund invests in emerging markets. Lazard European Alpha North American The fund aims to achieve capital growth at a rate greater than that of the FTSE World Europe ex-uk Index, measured in Sterling. The strategy is to invest in the shares of a concentrated portfolio of companies in Europe, except the UK. The fund aims for capital growth by investing mainly in shares of US and Canadian companies. It may also invest in Mexican and Central and South American companies. This fund is managed by F&C Asset Management plc. reo Pacific Basin The fund aims for capital growth through active investment in the markets of Hong Kong, Japan, Korea, Singapore, Malaysia, Australia, New Zealand, the Philippines, Taiwan, Thailand and Indonesia. Our fund managers will consider other Asian markets as they open to outside investors. They actively manage the fund with particular regard to takeovers, recovery and growth stocks, smaller companies and new issues. Fixed interest securities may also feature. This fund invests in emerging markets. This fund is managed by F&C Asset Management plc. reo Schroder Tokyo SSgA Pacific Enhanced Equity Index The fund aims for capital growth by investing in the shares of Japanese companies. The emphasis is on undervalued companies with a proven track record and solid profits growth prospects. The fund aims to consistently outperform, in a risk controlled manner, the FTSE All-World Developed Asia Pacific Index. UBS US Equity The fund aims to achieve long-term capital growth through active management of a diversified portfolio invested mainly in US shares. Note: For more information on ethical and reo funds, please see page

19 Fixed Interest Fund Risk Aim AEGON Sterling Corporate Bond Low + The fund aims to maximise total returns by investing mainly in Sterling denominated bonds, including government bonds, investment grade corporate bonds and cash. Up to 10% of the fund may be invested in high yield bonds. Annuity Protector Low + The fund invests mainly in longer-dated British Government gilt-edged stocks, but may also invest in UK and overseas company bonds. It aims to provide protection against falls in annuity income rates. It does this by matching the investments as closely as possible to the cost of buying an annuity. As annuity income rates fall, the cost of buying an annuity rises and the investments should rise broadly in line. As annuity income rates rise, the cost of buying an annuity falls and the investments should fall broadly in line. This fund doesn t offer any guarantees. This fund is managed by F&C Asset Management plc. Fixed Interest Low + The fund invests in British Government gilt-edged stocks and UK company bonds. These provide a reliable income and can also offer potential for capital growth. When market conditions allow, our fund managers actively switch between stocks to increase growth. We reinvest any income in the fund to increase the value of the units. This fund is managed by F&C Asset Management plc. Index Linked Low + The fund invests in British Government stocks linked to the Retail Prices Index for both yearly interest and maturity payments. Our fund managers may consider investing in other index-linked stocks as they become available. We reinvest any income in the fund to increase the value of the units. This fund is managed by F&C Asset Management plc. Invesco Perpetual Corporate Bond AEGON Global Bond AEGON High Yield Bond Low + Medium Medium The fund aims to achieve a high level of overall return, with relative security of capital, through investment primarily in fixed interest securities. The fund managers may also include other investments they consider appropriate. The fund aims to maximise total returns by investing in global debt instruments. These may be in any currency, ranging from Government bonds through to high yield and emerging market corporate bonds. The fund will hold at least 50% in bonds denominated in Sterling and in other currencies hedged back to Sterling. The fund aims to maximise total returns by investing in a portfolio mainly of high yield bonds, selected investment grade bonds and cash. The fund may hold bonds denominated in Sterling and in other currencies hedged back to Sterling. Property Fund Risk Aim M&G Property Portfolio Medium The fund aims to maximise total returns to investors through a combination of long-term capital growth and income. It invests mainly in UK commercial property. Property Medium The fund invests in a diversified portfolio of high quality commercial properties that our fund managers carefully select for growth in rent and capital values over the longer term. We reinvest any income in the fund to increase the value of the units. This fund is managed by F&C Asset Management plc. F&C Global Real Estate Securities Medium The fund aims to achieve long-term capital growth by investing globally in listed real estate companies. Real estate companies are companies active in real estate businesses, including development, investing, trading, managing or any combination. 17

20 With-Profits Fund With Profit Risk Medium Aim The fund aims for stable longer-term growth by investing through the general funds of Friends Provident. The unit price increases in line with the rate of regular bonus we declare. This rate may go down or up at any time. We show the With Profit Fund series and the current rate of unit price increase in your personal illustration. After three years continuous investment in the fund, we may pay a final bonus when we cash in units to provide benefits on death, at retirement or if there is a transfer to another approved arrangement. The performance of the With Profit Fund depends on the investment profits and losses the fund makes and on the decisions we take about their distribution. We don t guarantee future bonuses. Please see Cost of guarantees and Market value reduction below. Before investing, it s important you read our With-Profits Summary. If you haven t received this, please contact us now. The summary explains the main points about with-profits, our current approach to managing the fund and deciding bonus levels, and the factors that can influence the value of your investment. Cost of guarantees As part of our With Profit Fund smoothing policy, we set aside some of the underlying investment value each year. This is to help cover the cost of the guarantees we provide to you and other With Profit Fund investors (we explain the guarantees we provide to you under the next heading). It has the same effect as reducing the investment return each year on your With Profit Fund units. If your personal illustration shows some or all of your payments invested in the With Profit Fund, the illustrations of future benefits allow for this. We regularly review the amount we need to set aside and it can go up or down. If we don t need all the amount set aside, we ll use it to improve returns. The With-Profits Summary Supplementary Information page on our website at shows how much we re currently setting aside. Market value reduction We may apply a market value reduction if you cash in or switch With Profit Fund units in some circumstances. We will apply this if we consider it necessary to safeguard the interests of other investors. For example, we may apply it during depressed market conditions when many investors are cashing in. The effect is to lower the unit price to reflect more accurately the reduced investment values. We guarantee we won t apply this reduction at your selected retirement age or on death. This fund is managed by F&C Asset Management plc. reo Stewardship ethical investment A pioneer of ethical investment in the UK, in 1984 Friends Provident was the first company to launch an ethical investment fund. Today, we re the UK market leader in ethical investment. Stewardship funds are for people who don t regard financial gain as the only reason for investment but look to wider issues. F&C concentrate investment in companies whose products and practices an Independent Committee of Reference considers to be of benefit to society. They seek to avoid companies that, on balance, the Committee feels are harming the world, its people or wildlife. reo F&C is one of the market leaders in socially responsible investment. To affirm this commitment, F&C applies a unique investment approach, called Responsible Engagement Overlay, to its equity funds. This is a commitment by F&C to use its influence as a shareholder to support and encourage companies in their efforts to move towards more socially responsible and sustainable business practices, for example, environmental management and labour standards. The reo approach doesn t exclude companies on ethical grounds, but instead encourages positive change within them. Please ask if you would like further information on Stewardship or reo. In addition, F&C engage with these approved companies under the reo programme described opposite. 18