ZURICH HORIZON INCOME PLUS FUND DUE DILIGENCE

Transcription

1 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE

2 2 / 3 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE

3 CONTENTS Zurich Horizon Monthly Income Plus Fund 4 About Zurich 5 Introducing Zurich Investment Services 6 Why Zurich selected T. Rowe Price 7 Investment manager 10 Investment process overview 11 More about the Zurich Horizon Monthly Income Plus Fund 14 Fund facts and useful information 17 Who is this fund suitable for? 19 Key risks explained 20 How safe is my clients money? 21 Glossary of terms 22 Contacts 23

4 4 / 5 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE ZURICH HORIZON MONTHLY INCOME PLUS FUND The Zurich Horizon Monthly Income Plus Fund has been designed specifically for clients requiring a smoothed monthly income whilst seeking to preserve capital over the long term. To achieve this we have selected investment manager T. Rowe Price International Ltd (T. Rowe Price) a global asset manager with proven expertise in fixed income investment solutions. The Monthly Income Plus Fund is a welcome addition to the Zurich Horizon family of funds, which also includes five multi-asset funds. Together, the expanded Zurich Horizon fund range has been designed to deliver solutions for advisers that are easy to understand, and easy to explain to clients. This document provides information for advisers to help support their due diligence assessment when recommending the Zurich Horizon Monthly Income Plus Fund.

5 ABOUT ZURICH ZURICH IN THE UK In the UK, Zurich provides customers with investment, pension and protection products under the Sterling and Zurich brands. The strategy in the UK is to build a competitive and sustainable business, delivering value to customers, distributors and shareholders through award winning propositions. Zurich has extensive experience in the investments, life and pensions market in the UK, offering customers quality products and services since The Zurich Horizon Monthly Income Plus Fund is operated by Zurich Investment Services (UK) Limited. The funds are exclusively available through Zurich in the UK. The Zurich Intermediary Platform is provided by Sterling ISA Managers Limited (SIML), which is part of Zurich s UK Life business part of a group of companies of which the ultimate parent is Zurich Insurance Group Ltd, a company registered in Switzerland (number CH /a). ABOUT ZURICH Zurich is one of the world s largest insurance groups, and one of the few to operate on a truly global basis. Our mission is to help our customers understand and protect themselves from risk. With over 55,000 employees serving customers in more than 170 countries, we aspire to become the best global insurer as measured by our shareholders, customers and employees. A GLOBAL BUSINESS Employees 55,000+ Countries 170+ Zurich offers a wide range of general and life insurance products and services for individuals, small businesses, mid-sized and large companies and multinational corporations. Zurich has a strong position in North America and Europe, and a growing position in Asia-Pacific, the Middle East and Latin America. FINANCIAL STRENGTH RATINGS Zurich Insurance Company Ltd AA-/stable Standard & Poor s Aa3/stable Moody s (As at September 2016) OUR VALUES Our values have stood us in good stead for more than 130 years and provide a sound foundation for the future. They are integrity, customer centricity, sustainable value creation, excellence and teamwork. A CRITICAL COMPONENT OF OUR SUCCESS These values shape Zurich s culture and define who we are, helping to set us apart in an increasingly competitive industry. They help us to keep the trust of our customers, our people, our shareholders and the communities in which we live and work.

6 6 / 7 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE INTRODUCING ZURICH INVESTMENT SERVICES Established in 2015, Zurich Investment Services (UK) Limited (ZISUK) is the Authorised Corporate Director of the Zurich Horizon Funds. The initial fund range of five risk profiled multi-asset funds is now complemented by the launch of the Monthly Income Plus Fund. ZISUK designs and manufactures investment solutions for the UK retail market, with a focus on delivering investment outcomes to meet specific client needs. ZISUK is not an investment manager. ZISUK delivers customised investment solutions for advisers and their clients by researching the market and selecting from the best asset managers. ZURICH INVESTMENT SERVICES (UK) Matching fund design to client needs Appointment of Depositary (which appoints the Custodian) & Investment Manager Ongoing oversight and risk management CLIENTS SEEKING CAPITAL GROWTH Horizon Multi-Asset fund range 5 risk profiled funds Investment Manager Columbia Threadneedle CLIENTS SEEKING INCOME Horizon Monthly Income Plus Global Fixed Income Fund Investment Manager T. Rowe Price

7 WHY ZURICH SELECTED T. ROWE PRICE T. Rowe Price is a global asset management firm focused on client success. The group has US$776.6bn in assets under management with US$182bn in fixed income as at 30 June Its guiding principle is If we take care of our clients they ll take care of us. Founded in 1937 and headquartered in Baltimore, USA, T. Rowe Price is an independent investment organisation focused solely on investment management. FINANCIAL STRENGTH T. Rowe Price Group Inc is listed on the NASDAQ stock exchange and shareholder equity is US$4.9bn as at 30 June T. Rowe Price has no outstanding long-term debt and therefore has no requirement for a published credit rating. As at 30 June 2016 the firm maintained substantial liquidity of approximately US$3.1bn annual net revenues were US$4.2bn and net income was US$1.2bn. A GLOBAL BUSINESS Investment professionals worldwide 489 Associates worldwide 6,000+ Countries with a local presence 16 As at 30 June 2016 GLOBAL INVESTMENT RESOURCES As at June 30, 2016 (Source: T. Rowe Price September 2016)

8 8 / 9 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE FIXED INCOME PEDIGREE T. Rowe Price s fixed income teams manage fixed income investments across all major sectors and markets. Their dedicated teams ensure that every investment decision is made by experts who are completely immersed in every aspect of their sector. Along with broad knowledge of global markets, they believe their focused expertise helps to uncover opportunities other companies might miss. BREAKDOWN OF US$182BN FIXED INCOME AUM BY SECTOR As at 30 June 2016 High Yield US$22.9bn Emerging Markets US$13.7bn Investment Grade Credit US$34.0bn Developed Sovereign US$26.0bn Securitised US$38.6bn Municipal US$22.5bn Cash/Stable Value US$24.2bn (Source: T. Rowe Price September 2016) NUMBER OF FIXED INCOME INVESTMENT ASSOCIATES WORKING FOR T. ROWE PRICE RESEARCH & ANALYSIS TRADING PORTFOLIO MANAGEMENT As at 30 June 2016

9 ATTRIBUTES THAT DIFFERENTIATE T. ROWE PRICE FOR FIXED INCOME (Source: T. Rowe Price September 2016)

10 10 / 11 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE INVESTMENT MANAGER The investment manager at T. Rowe Price with overall responsibility for the Horizon Monthly Income Plus Fund is Mike Della Vedova. MIKE DELLA VEDOVA, Portfolio Manager Based in London, Mike Della Vedova is a global high yield portfolio manager in the Fixed Income Division at T. Rowe Price. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd. Mike is co-chairman of the Investment Advisory Committee and co-portfolio manager of the Global High Income Bond Strategy and portfolio manager of the European High Yield Bond Strategy. Prior to joining the firm in 2009, he was a co-founder and partner of Four Quarter Capital, a credit hedge fund focusing on below investment-grade European corporate debt. Mike also spent six years as a senior analyst and assistant portfolio manager with Muzinich & Company Limited in London. He earned both an LL.B. and a B.Com. degree in finance from the University of New South Wales and a G.D.L.P. in legal practice from the University of Technology, Sydney, Australia. Mike also was admitted as a solicitor to the Supreme Court of New South Wales, Sydney. Mike is supported in this role by specialist fixed income analysts and traders. T. Rowe Price have teams of analysts who specialise in global investment grade credit and global high yield credit research as well as analysts focused on quantitative research. Traders also specialise in either global investment grade or global high yield assets. In addition portfolio specialist Stephen Marsh works closely with Mike in the day-to-day running of the fund. STEPHEN MARSH, Portfolio Specialist Stephen Marsh is a portfolio specialist in the Fixed Income Division at T. Rowe Price, based in London. He has a broad range of knowledge in fixed income, currency, credit and derivatives, enabling him to customise solutions for clients. Stephen is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd. and has 15 years investment experience. Prior to joining T. Rowe Price in 2015, he worked at SEI Investments as head of the European fixed income division and as a portfolio manager. He has also held investment roles at Merrill Lynch, RMB International and Liontrust Asset Management. Stephen earned a B.A. (with honors) in business studies from the University of Central Lancashire, majoring in economics. He also has earned the Chartered Financial Analyst designation.

11 INVESTMENT PROCESS OVERVIEW T. ROWE PRICE S INVESTMENT PROCESS T. Rowe Price operates a disciplined investment process a consistent disciplined approach to investing that seeks to endure through changing market cycles. The active management process starts with blending top-down macro themes with bottomup security analysis to meet the risk and return profiles and objectives of the fund. TOP-DOWN MACROECONOMIC VIEW Global Economies : Interest Rate and Currency : Sector Analysis Global perspective across risk factors Identification of major themes Baseline view across regions/countries PORTFOLIO CONSTRUCTION Identify the best investment ideas Align ideas with fund objectives Analysing macroeconomic themes means T. Rowe Price will look at: Macro Environment Understanding the fundamental strengths and weaknesses of markets, economies and central bank monetary policies and how they interact. This enables a balanced portfolio construction as well as insight to opportunities where credit markets may be distorted and investment opportunities may be available. Credit Availability Availability of corporate bonds and corporate bond yields can be affected by factors such as corporate confidence, government monetary policies, risk appetite for growth or to strengthen balance sheets. Credit availability will determine price and yield. Expert traders help to find the best deals when transactions are carried out. Corporate Aggression Bond availability and risk will be affected by factors such as what appetite companies have for risk taking and whether balance sheets are being strengthened or capital is being spent. Deliver intended results BOTTOM-UP SECURITY ANALYSIS Issuer Analysis : Conviction Scoring : Security Selection Proprietary country and company ratings Ranking of best ideas Relative value assessment

12 12 / 13 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE Bottom-up security analysis means that central to T. Rowe Price s approach to selecting bonds is a detailed assessment of: the business itself the valuation attractiveness of the business (with a focus on the capital structure). BUSINESS ASSESSMENT The Management s experience, credibility & track record Revenue streams Synergies from any mergers & acquisitions The Management s approach to reducing risk within their business WHY BUSINESS ASSESSMENT IS IMPORTANT Experienced, capabable management teams will increase confidence that the company will be able to repay its debt Cashflows need to be sufficiently strong to pay interest and ultimately repay the debt Is the organisation optimal? A sound understanding of risk will reduce risk of default. VALUATION ATTRACTIVENESS T. Rowe Price analysis Capital structure of the business WHY VALUATION ATTRACTIVENESS IS IMPORTANT A strong balance sheet will increase the likelihood that debt can be repaid Companies may raise money in different ways, some forms of debt will have a higher priority for repayment than others is the yield consistent with the likelihood of repayment? Is the price commensurate with the risk? How much debt does the company have?

13 PROPRIETARY CREDIT RATINGS T. Rowe Price has its own proprietary credit rating approach for corporate bonds and does not simply rely on ratings and analysis carried out by other credit rating agencies. This detailed understanding of credit risk enables it to actively manage risk within its investment portfolios to select bonds that it believes will deliver attractive yields whilst at the same time minimising the risk of defaults. ZISUK OVERSIGHT ZISUK has set the investment objectives and investment parameters that T. Rowe Price work to when managing the funds and will oversee the investment activity carried out. Monthly management committees and quarterly board meetings provide the formal structure for this. Investors in the fund can be reassured that ZISUK will oversee the activities of T. Rowe Price and will monitor areas such as: investment performance cash flows and yield credit risk currency hedging and derivative exposure liquidity risk.

14 14 / 15 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE MORE ABOUT THE HORIZON MONTHLY INCOME PLUS FUND THE AIM OF THE FUND The aim of the fund is to produce a monthly income whilst seeking to preserve capital over the long term. WHAT THE FUND INVESTS IN The fund invests principally in global corporate bonds, more than 50% of which may be subinvestment grade. The fund may also invest in government bonds globally or other fixed interest securities such as asset backed securities, as well as cash, near cash, money market instruments and money market funds. THE MANAGERS INVESTMENT STRATEGY The strategy of the Investment Manager is to select investments designed to pay a higher level of income than that generally achieved from investment grade global corporate bonds and similar fixed interest securities. The fund uses derivatives to reduce exposure to non-sterling currencies.

15 FUND FEATURES AND BENEFITS KEY THINGS WE THINK ADVISERS REALLY WANT TO KNOW FUND FEATURE WHY THIS IS IMPORTANT MONTHLY INCOME Achieved through direct investment in a variety of corporate bonds with a spread of coupon payment dates. Direct investment in corporate bonds gives greater control over the timing of income flows into the funds. This is because the manager can select a portfolio of corporate bonds based not only on their quality but also on the bonds ability to provide a timely income stream. In a fund of funds the ability to manage the timing of the income stream is more restricted as the underlying funds come with defined income distribution dates which will not offer the investment manager the same flexibility and choice. MONTHLY INCOME For clients income at a frequency most clients are used to and expect. For advisers avoids the administrative challenges of managing a portfolio of funds with different distribution dates and payment frequencies. SMOOTHED INCOME Zurich and T. Rowe Price will review the portfolio and the market to evaluate the income available for the next accounting year. A monthly distribution rate will be established that is intended to provide a regular smoothed income for the first 11 months of the fund s financial year with the expectation of a final slightly higher distribution in the last month (to ensure all the actual income available that year is distributed). SMOOTHED INCOME For clients more certainty of the income they will receive each month helping them to budget and plan. For advisers easier to manage client cash flows and fewer surprises for clients. The final payment is the payment made in August each year. Smoothed income is based on the distribution paid per unit in the fund held. Zurich and T. Rowe Price will monitor the income available throughout the year and will modify the smoothed income payments if necessary, to ensure a smoothed income stream continues. CAPITAL PRESERVATION A key feature of fixed income investments is the predictability of the expected payment stream. This is derived from the coupon payments and the repayment of nominal capital at maturity. T. Rowe Price will actively manage this payment stream by careful selection of investments at purchase and by following a buy and hold strategy where possible. Zurich will further support this by taking all charges from income so that charges do not deplete capital. The main risk to capital is through defaults and interest rate changes. T. Rowe Price actively manages default risk (one of the key reasons why ZISUK chose them to manage the fund). The global exposure of the fund ensures diversification and reduces the impact of interest rate changes in individual economies. CAPITAL PRESERVATION For clients a monthly income is provided, with the aim that capital will be preserved. This enables clients to continue to receive income for as long as they need it. For advisers with its focus on capital preservation this fund will help in discussions to align a client s capacity for loss with the selected portfolio, helping to ensure clients can continue to receive a sustainable income throughout the term of their investment.

16 16 / 17 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE TRANSPARENT CHARGES AND YIELDS The fund has no bid offer spread, no initial charge, no performance fee, no exit penalty. The only regular charge for the fund is taken through the annual management charge which is also the fund s OCF and is just 0.70%. The charge taken is deducted from income the fund could pay a higher income by deducting charges from capital but this would risk reducing the capital value of the fund. Deducting charges from income is clear and transparent. The yield figures are quoted after charges. TRANSPARENT CHARGES AND YIELDS For clients a fund which is easier to understand, with one annual fund charge (deducted daily) and one yield figure. For advisers no need to research or explain the differences between distribution yields and underlying yields. No hidden risk to capital built into the fund design. Easy to build into total cost of investing calculations. Investors in single priced funds (such as the Zurich Horizon Monthly Income Plus Fund) are protected from unexpected costs arising from other investors large transactions by a process called anti-dilution. ZISUK can apply a dilution adjustment to the price but would only do this in exceptional circumstances such as if a transaction was more than 2% of the fund. CURRENCY HEDGING The fund achieves diversification across a range of economies by holding investments in global bonds which can be denominated in currencies other than sterling. As Zurich has designed the fund for investors in the UK who will invest in sterling, currency hedging is built into the design to seek to remove this risk. Currency hedging is carried out by T. Rowe Price which will purchase derivatives (forward exchange contracts) from a range of counterparties to exchange future non-sterling cash flows back into sterling. This means the fund price and income stream will be less exposed to movements in exchange rates between sterling and other currencies. CURRENCY HEDGING For clients the value of the pound may change against other currencies but if a client is investing in sterling they want their return to be in sterling too. The client s outgoings are unlikely to change with exchange rates so it is only reasonable that the client should expect that their income won t have to change either. For advisers selecting a fund that is hedging its currency exposure means you can recommend a fund that offers the diversification of global investment and leave the management of the currency exposure risk to the investment management experts. ACTIVE MANAGEMENT, DIRECTLY INVESTING IN GLOBAL BONDS T. Rowe Price delivers the fund objective through directly investing in corporate and government bonds from around the globe. Its active management approach means that every bond the fund holds will have been researched and individually selected by the fund manager. The design of the fund puts the focus on managing credit exposure not geographic spread so T. Rowe Price can use its global expertise to select from the best opportunities from anywhere in the world. And as a global bond fund, designed with an emphasis on capital preservation, the fund is at the lower end of the risk spectrum the risk reward rating on the Key Investor Information Document bears this out with the fund rated as 3, the rating given to funds with low to medium volatility. ACTIVE MANAGEMENT, DIRECTLY INVESTING IN GLOBAL BONDS For clients an investment with low to medium volatility can still fall in value but the value is not likely to change as much as a fund with higher volatility (such as a fund investing in equities); this is important when the client has an eye on capital preservation as well as income. For advisers global bonds provide a lower risk fund but maintain investment diversification for your clients. This is achieved by investing across a range of geographies and sectors, as well as across differing credit ratings. Also, T. Rowe Price actively manage the selection of individual bonds held within the fund. This means you can be confident the risk of performance being reduced by defaults is being managed by a team of experts.

17 FUND FACTS AND USEFUL INFORMATION FINANCIAL CONDUCT AUTHORITY REGULATION The Zurich Horizon Monthly Income Plus Fund is a UK domiciled fund regulated by the Financial Conduct Authority and is structured as a UCITS singular fund (Undertaking in Collective Investments in Transferable Securities). AVAILABILITY The fund is exclusively available through Zurich. In addition to being able to select income or accumulation units, clients can invest in the fund through a range of tax wrappers via the Zurich Intermediary Platform. There is a choice of stocks and shares ISA, Investment Account and Retirement Account. AVAILABLE SHARE CLASSES AND CODES Share classes available on the Zurich Intermediary Platform are the Z share classes. Both income and accumulation are available. DISTRIBUTION DATES Income is paid monthly on the last business day of each calendar month. The fund will move ex-dividend on the first business day of the following month (so to receive an income distribution on the final day of December, investors must hold shares in the fund on the final day in November). TAX Distributions will be treated for tax purposes as interest distributions and will be paid net of basic rate tax. Legislation is expected to change so that, from 6 April 2017, interest distributions from funds are paid gross of tax. Once the change in tax treatment is confirmed, ZISUK intends to automatically convert net share classes to gross share classes to enable investors to benefit from gross distributions. For investors, interest distributions are taxed as savings income and may be covered by their Personal Savings Allowance. Share class Z Net Income Z Net Accumulation ISIN Code GB00BYZ87382 GB00BYZ87499 INVESTMENT ASSOCIATION SECTOR The Horizon Monthly Income Plus Fund is in the Investment Association Sterling Strategic Bond fund sector. CHARGES The Zurich Horizon Monthly Income Plus Fund has no initial charge, no performance fee and no bid offer spread. The Ongoing Charges Figure (OCF) and Annual Management Charge (AMC) are the same at 0.70%. Funds which are in this sector must invest at least 80% of their assets in sterling denominated (or hedged back to sterling) corporate bonds. Funds must intend to invest across the full fixed interest credit risk spectrum. Charges are taken from income and not capital, with distribution being paid net of charges. The share classes are clean, so there is no rebate to declare for tax purposes.

18 18 / 19 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE CREDIT RISK The credit risk breakdown of the fund will be shown on fund factsheets. More than 50% of the fund may be invested in sub-investment grade bonds and at any time at least 15% of its assets will be sub-investment grade bonds. Typically the fund is expected to hold a minimum of 30% of its assets in investment grade bonds. MODIFIED DURATION The modified duration of the fund will be shown on the fund factsheets. The fund will be managed to ensure the modified duration is a maximum of 7 years. YIELD The current distribution yield will be shown on the fund factsheets. As charges are taken from income, the underlying yield will be the same as the distribution yield. INFORMATION FOR CUSTOMERS Documentation for the Zurich Horizon fund range is available via the Zurich Horizon website at Up to date information about the funds can be found at any time in the Key Investor Information Documents (KIIDs) which are available on the website.

19 WHO IS THIS FUND SUITABLE FOR? The following information aims to help identify the types of clients the Zurich Horizon Monthly Income Plus Fund may be suitable for. CLIENTS WHO MAY BE INTERESTED IN THE ZURICH HORIZON MONTHLY INCOME PLUS FUND: Are seeking a smoothed, but not guaranteed monthly income stream. Are investing for the medium to long term (over 5 years). Are willing to take some investment risk. Value the brand strength and expertise of Zurich and the investment expertise of T. Rowe Price. Require a clear, straightforward, transparent and structured process. Are looking to generate income from their investments, and are typically either approaching or at-retirement. Wish to receive or re-invest a regular monthly income from the fund. Favour capital preservation over capital growth (in the long term) and can afford to suffer some loss of capital. KEY IDEAS UNDERPINNING THE FUND The Horizon Monthly Income Plus Fund looks to provide: A smoothed, monthly income. Capital preservation ahead of capital growth. Income derived from bond yields (coupons) and nominal repayments to avoid drawing income from capital. An emphasis on capital preservation through a buy-and-hold investment philosophy. Some of the best ideas from T. Rowe Price s global research capabilities. Global fixed income investment opportunities with currency exposure hedged. Active credit risk management. Active investment selection. Clear, simple and transparent charging. Portfolio design customized for Zurich. Are looking for the flexibility to be able to add to or sell their investment at any time. Require fund distributions taxed as interest to utilise their personal savings allowance or savings rate band.

20 20 / 21 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE KEY RISKS EXPLAINED The main risks associated with investments in the Zurich Horizon Monthly Income Plus Fund are shown on the Key Investor Information Document (KIID). They are: INVESTMENT RISK The value of investments may fluctuate and investors may not get back the full amount invested. INTEREST RATE RISK If interest rates rise the value of fixed interest investments may fall and vice versa. This is the nature of fixed interest investments and will affect all fixed interest funds. The Zurich Horizon Monthly Income Plus Fund invests globally so exposure to interest rates is diversified and not limited to just the UK. DEFAULT RISK If the company that issued a corporate bond fails or is unable to make coupon or maturity payments when they fall due, the bond is said to be in default. Incidences such as these can lead to the value of a fixed interest fund falling. Whilst managing default risk is an area of expertise for T. Rowe Price, there is a risk that investments may default. EXCHANGE RATE RISK The fund invests in bonds some of which will not be denominated in sterling. This can give rise to exchange rate risk (when the exchange rate between sterling and the currency a bond is denominated in changes). T. Rowe Price will use derivatives to hedge the fund s currency exposure back to sterling to mitigate this risk. LIQUIDITY RISK The fund invests in bonds which are generally readily tradeable liquid assets on major stock market exchanges. These are unlike assets (such as property) which are considered more illiquid. In circumstances where a bond needs to be sold quickly it may be difficult to sell at a fair market price. This could happen, for example, if a bond s credit rating fell sharply or if there was more general stock market disruption (as a result of extreme market conditions). The objective of the Zurich Horizon Monthly Income Plus Fund is to preserve capital over the long term. This is not guaranteed and the value of the fund may fall.

21 HOW SAFE IS MY CLIENTS MONEY? The Zurich Intermediary Platform is provided by Sterling ISA Managers Limited (SIML). Investments through the Zurich Intermediary Platform are held separately from SIML s own assets through Sterling ISA Managers (Nominees) Limited. The Zurich Horizon funds are operated by Zurich Investment Services (UK) Limited (ZISUK), the Authorised Corporate Director for the funds. Investments held in the Zurich Horizon funds are held separately from ZISUK s own assets by the Depository, Northern Trust Global Services Limited. If Sterling ISA Managers Limited, the provider of the Zurich Intermediary Platform, is in default your clients may be eligible to claim in total up to 50,000 based on the value of their Zurich Intermediary Platform account and any other account provided by Sterling ISA Managers Limited. If Zurich Investment Services (UK) Limited (ZISUK), the Authorised Corporate Director for the Zurich Horizon funds, is in default, your clients may be eligible to claim up to 50,000 of monies held in funds provided by ZISUK, if you have a claim against ZISUK. If any of the providers of assets or investment services available through your clients account cannot meet their financial obligations, your clients may be able to claim compensation from the Financial Services Compensation Scheme (FSCS).

22 22 / 23 ZURICH HORIZON MONTHLY INCOME PLUS FUND DUE DILIGENCE GLOSSARY OF TERMS Bond A loan issued to a company or government which normally pays a fixed rate of interest over a given time period and repays the amount borrowed at the end of the term. Coupon The interest rate paid by a bond. Credit rating An assessment of a borrowers ability to repay its debts. Currency Hedging A method of reducing exposure to exchange rate movements using derivatives. Default When the issuer of a bond is unable to make interest payments or repay the capital at maturity. Distribution Date The date income payments are made by the fund. Distribution Yield The estimated amount of the distribution that will be paid out to investors. Duration/Modified Duration A measure of the sensitivity of a bond (duration) or fund (modified duration) to changes in interest rates. The longer the duration, the more sensitive the investment is to interest rate movements. Long Term A period of at least ten years. Nominal The capital repaid by a bond at the end of the term. Effective Interest Method The method used to calculate the income available for payment by the fund. The calculation is based on the expected interest (coupon) payments on the investment held and any expected gain or loss at maturity based on the historic purchase price of the investment amortised over the term of the investment. Investment Grade Bond A bond which has a higher credit rating and therefore a lower risk of default. Investment Grade Bonds are generally classified with a credit rating of BBB-/Baa3 or above. Sub-Investment Grade A bond which has a lower credit rating than an Investment Grade Bond and therefore a higher risk of default. Sub-Investment Grade Bonds generally pay a higher rate of interest than Investment Grade bonds. Sub-Investment Grade Bonds are generally classified with a credit rating below BBB-/Baa3. Underlying Yield An adjusted yield that takes account of fund charges when deducted from capital rather than income. For the Horizon Monthly Income Plus Fund charges are taken from income so the Underlying Yield is equal to the Distribution Yield. Ex-dividend date The date before which an investor needs to invest in the fund to receive the next distribution payment.

23 CONTACTS ZURICH S EXPERT TEAMS ARE HERE TO HELP YOU ALL THE WAY. GENERAL SERVICING & ENQUIRIES For example: existing policy servicing, new business processing, claims and maturities, underwriting esupport TEAM For help with all technical and registration queries or zigesupport@uk.zurich.com We may record or monitor calls to improve our service. DOCUMENTATION, FUND PRICES AND LITERATURE For example: Key Investor Information Documents, daily fund prices and factsheets. IMPORTANT INFORMATION For use by professional financial advisers only. No other person should rely on, or act on any information in this document when making an investment decision. This document does not constitute an offer to sell or buy any shares in the funds. Whilst every care is taken over these comments, no responsibility is accepted for errors and omissions that may be contained therein. The value of investments and the income from them can fall as well as rise and is not guaranteed which means your clients could get back less than they invest. Changes in exchange rates will affect the value of investments made overseas. Investments in newer markets, smaller companies or single sectors offer the possibility of higher returns but may also involve a higher degree of risk. If you require further information on any of the funds, the Key Investor Information Document (KIID) and the prospectus are both available at The KIID is designed to help investors to make an informed decision before investing. You can view or download the funds KIIDs via our website.

24 For use by professional financial advisers only. No other person should rely on, or act on any information in this document when making an investment decision. The authorised Corporate Director of the Zurich Horizon Investment Funds ICVC is Zurich Investment Services (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered in England and Wales under registered number Registered Office: The Grange, Bishops Cleeve, Cheltenham, GL52 8XX. This document is issued by Zurich Intermediary Group Limited. Zurich Intermediary Group Limited, authorised and regulated by the Financial Conduct Authority. Registered in England and Wales under company number Registered Office: The Grange, Bishops Cleeve, Cheltenham, GL52 8XX A01 ( ) (10/16) TCL