INVESTOR PENSION FUNDS GUIDE

Transcription

1 INVESTOR PENSION FUNDS GUIDE A choice of funds to make your pension work harder AXA: your partner in pensions

2 AXA PROFILE AXA helps people get the best out of life Across the world: We have 50 million customers worldwide We manage more than 546 billion for them (as at ) AXA is a people business. Our 130,000-strong team helps provide financial solutions for customers at every stage of life. 30,000 of them also give time and skills to local community projects. We are a large, strong organisation with a human face. Information correct as at 31 December

3 Investor Pension Funds USING THIS GUIDE Using the Investor pension funds guide What it is for and why it is important This guide describes the investment funds available for AXA s Investor range of pension products. Your financial adviser can help if things are not clear. A little extra help Investing can often be a complex and confusing area when it comes to the terminology used. So you may like to refer to the glossary at the back of the brochure, which explains some of the investment jargon in plain English. You will find it on page 22. How the guide works: four simple steps Step Section What s important in here? Page 1 Your investment journey The three different ways 4 you can invest with AXA. 2 Your attitude to risk It explains risk in terms of your 8 pension plan. It is important to understand that we define risk as the risk to your capital before charges have been made. 3 Our risk categories and Make sure you understand how 9 risk grades we grade each fund. 4 Our Investor 43 different funds across 9 levels 10 pension funds of risk. Their aims, who manages them and what they cost. 3

4 YOUR INVESTMENT JOURNEY Investor Pension Funds Step 1: Your investment journey to retirement We want to make life easier for you A journey - like a good story - has a beginning, middle and end. You certainly know the final destination: your retirement. But what happens along the journey is equally important. Choosing the right pension fund can be difficult. From funds specialising in investing in UK fixed interest securities to those focusing on specific global areas such as the Far East. Sometimes a huge choice can be daunting. We are here to help make life easier for you on your investment journey to retirement. We have three great ways to build your retirement fund Unlike some pension providers, we offer you three distinct ways of choosing your pension investment funds: - AXA Investment Managers UK - AXA Choice - AXA Partners First, you could choose from AXA s wide range of pension funds, managed by AXA Investment Managers UK. Second, there is a halfway house. AXA Choice enables you to take advantage of the talents of some of the UK s leading fund managers. The over-riding investment sectors for our two Choice funds are decided by AXA, but we choose and manage the leading fund managers in these sectors to make the detailed investment decisions when it comes to stock selection. Finally, AXA Partners provides access to a range of specially selected pension funds from the wider investment world, using leading names like Baillie Gifford, Close Fund Management, JPMorgan Fleming, Framlington and Newton. 4

5 Investor Pension Funds YOUR INVESTMENT JOURNEY Your investment destinations How AXA s Investor range offers you more Freedom to choose the best option Freedom to choose isn t something all pension providers believe in. Many companies insist you invest with them, and that s it. AXA s Investor range offers you more, much more. Three very different destinations for your taxefficient pensions savings. You might like the first destination, and decide to stay there. That s AXA IM UK. Or you may prefer the fact that we let external fund managers select individual holdings for particular funds. Alternatively, you might like to leave all the investment decisions to some of the most influential names in the business. It s all about choice: it s your pension, and your retirement, after all. Destination One: AXA Investment Managers UK Destination Two: AXA Choice Destination Three: AXA Partners You might like AXA to do all the investment work for you. AXA Investment Managers UK is based in the City of London. It is part of AXA Investment Managers, which operates from major centres around the world. Many of AXA IM UK s pension investment funds have track records stretching back to the 1970s. There is a huge range of choice for pension fund clients. But we recognise that some customers feel that putting all their eggs in the AXA basket isn t for them. You may want to complement investments in AXA funds with investments from other leading fund managers. We recognise that no investment organisation can deliver top performance, year-in, year-out. That s why we created AXA Choice. Here, AXA Investment Managers UK decide the over-riding sectors in which the funds will invest, and then we pass your money to specialist fund managers from outside of the AXA Group. These fund managers then choose the stocks within our prescribed sectors which they feel will achieve the most growth. It s also true that no investment fund can deliver outstanding performance year-in, year-out. But it is also true that some fund managers have better track records than others. That s why we created AXA Partners. Here, to compliment AXA's funds, you will find a range of externally-managed pension funds from some of the most respected names in specialist fund management. Each fund management organisation has a different style and each fund has been selected from a rigorous, disciplined process. They are: - Baillie Gifford - Framlington - Close Fund Management - Newton - JPMorgan Fleming Turn the page to find out more about them. 5

6 YOUR INVESTMENT JOURNEY Investor Pension Funds Meet the fund managers Great investment companies with different investment styles The fact is that some pension funds have better track records than others. That s why our three step approach is such a great concept. We acknowledge that there are other great institutions out there, all seeking to provide excellent investment returns for their clients. These pages provide a general overview of the six key fund managers you can invest with through AXA. These introductions have been written for you by the fund managers. For further information, please refer to the websites listed below each summary. AXA Investment Managers Baillie Gifford 6 Who are they? AXA Investment Managers (AXA IM) is a dedicated asset manager within the AXA Group, a world leader in financial protection and wealth management. With over e292 billion of assets under management, AXA IM is a multi-specialist asset manager offering a broad range of investment solutions. However they focus only on specific areas of expertise where they add real value to their clients. What s special about how they manage investments? AXA Investment Managers believe that superior returns on investment solutions can be gained through: - focusing their investment resources where they have a clear and competitive advantage, - fundamental, in-depth research, and as such they have three dedicated research areas investment strategy, equities and fixed income, - empowered investment teams, specialised by investment type or product. Figures as at 31 December More information: Who are they? Baillie Gifford is one of the UK s leading privately owned investment management companies. It manages assets for both UK and international clients in both institutional and retail markets. What s special about how they manage investments? Baillie Gifford s investment approach has been consistently applied across the firm for many years. Put simply, they are active investors buying shares in well-run companies with strong prospects for growth. They have a strong focus on individual companies and build their portfolios from the bottom up. They run concentrated portfolios in a committed manner, backing their skills and judgement. More information: Past performance is not a guide to future performance.

7 Investor Pension Funds YOUR INVESTMENT JOURNEY Close Fund Management JPMorgan Fleming Who are they? Close Fund Management is the specialist investment management arm of the Close Brothers Group, a substantial merchant banking group. Founded in the City of London at the end of the 19th century, Close Brothers has built an enviable reputation for high quality service, integrity and an uncompromising level of professionalism. What s special about how they manage investments? Close Fund Management has substantial expertise in providing investment vehicles that help investors gain exposure to equity markets whilst managing the risks. Its Close UK Escalator 100 is a good example of the company s pioneering and innovative skills. More information: Framlington Who are they? JPMorgan Fleming Asset Management has experience dating back to It is one of the largest asset management houses in the world, managing over US$500 billion across Europe, the Americas and Asia. What s special about how they manage investments? JPMorgan Fleming Asset Management has strong local knowledge of investment markets. Investment managers and analysts based in each country provide first-hand insights into local market trends, the changing business environment and a range of factors that influence the way a company or an economy behaves. This information is fed into a global network supported by four major investment management hubs, based in New York, London, Tokyo and Hong Kong. JPMorgan Fleming adopts disciplined, proven and strictly team-based investment processes. Figures as at 1 September More information: Newton Who are they? Framlington has built its reputation by delivering a range of specialist investment solutions to a diverse and international client base. For three decades it has developed its business based upon high standards of service, innovation and investment returns. What s special about how they manage investments? Framlington has a core style and sticks to it. The investment style is widely known as growth at a reasonable price. The company believes that effective stock selection is the key to success. Framlington manages money on behalf of pension funds and invests in quality growth companies at what it defines as a reasonable price. Original research is at the heart of their processes. More information: Who are they? Newton has managed money for over two decades and is owned by Mellon Financial Corporation, one of the largest asset management companies in the world. Newton manages money on behalf of pension funds, charities, institutions and private individuals. What s special about how they manage investments? Newton pursue a global thematic investment approach. It is applied across all the assets they manage. Thematic investing helps recognise trends that are likely to influence stock markets around the world. Their economists, analysts and fund managers all work together to identify the themes that form the bedrock of their investment portfolios. More information: Past performance is not a guide to future performance. 7

8 YOUR ATTITUDE TO RISK Investor Pension Funds Step 2: Your attitude to risk Make sure you know exactly what we mean 8 Risk means different things to different people Here s how we define it People have different ideas about what is meant by investment risk. For the purposes of this guide, our definition of risk is simply the risk to your capital before charges have been taken. By capital, we mean the value you build up in your pension arrangement. Wherever you invest, there is always a degree of risk. Plan charges are met by cancellation of units and this will impact on the level of capital if charges are greater than fund growth. Our product charges are not taken into account when risk grading funds. And some types of investments can be more risky than others. Our aim is to tell you all you need to know - and perhaps even a little more - to help make sensible decisions about your future. Think about your personal financial situation and risk Everyone s personal financial situation is different. For some people, a pension may not be the only source of income in retirement. For others, it may be. So consider the following questions: Do you have dependants? Do you have other financial commitments, such as a mortgage loan? Do you have savings or other pension arrangements? Do you have some flexibility over when you can retire? The answers you give to these questions may have an impact on how you view risk and on the pension funds you choose. Think about risk at different times in your life Risk can also mean different things to different people at different times in their lives. For example, your investment needs may change, particularly as you approach retirement. In this case, you may need to protect the retirement fund you have built-up and move your money to a lower-risk fund. If you have several decades to go until you retire, choosing a lower-risk fund could be a bad idea because it may not achieve the level of growth you need to fulfil your personal objectives. Changing your fund with your attitude to risk It s important that the funds you invest in reflect your current lifestage. This means that you may need to change the funds that you invest in. If you are keen to keep on top of your investment then you can choose which funds are best for you, and when you invest in them. Currently, there is no charge for switching between funds so you can make sure that your exposure to risk reflects your current needs. Speak to your financial adviser if you are unsure. You may also like to consider one of our Lifestyle Funds. You will find more information on page 17.

9 Investor Pension Funds OUR RISK CATEGORIES Step 3: Our risk categories and risk grades Make sure you know what we mean. Your attitude to risk really matters Over the page, you will find more information on the Investor range of pension funds. Before you begin to choose your particular fund, make sure you identify your personal attitude to investment risk. Categories and grades Each fund aims to satisfy one of five investor attitudes: Protected, Highly Secure, Moderately Secure, Moderately Speculative and Speculative. The funds are graded on a scale of 1 to 9. The lowest level of risk is 1, the highest is 9. So pension funds graded at level 9 are more likely to experience sharp falls or rises in capital value over the short term, compared with those in level 1. Protected (Grade 1) Highly Secure (Grade 2) Moderately Secure (Grades 3/4) Moderately Speculative (Grades 5/6/7) Speculative (Grades 8/9) You need a high level of capital security for your pension fund investment. Pension funds in this category are designed to make sure your retirement fund is protected from fluctuations in capital value before all charges have been taken. They are usually chosen as a temporary fund to protect against a volatile market or where you have spent many years building up a pension fund. You are prepared to experience slight fluctuations in the value of your capital. Funds in this category are usually chosen to consolidate gains made from other funds. You fully appreciate the long term benefits of investing in shares and are prepared to experience variations in the value of your capital. You fully appreciate the capital growth potential that shares can provide. You are prepared to accept increased variations in the value of your capital that comes with share-based investments, both in the UK and overseas. You fully appreciate the significant growth potential that investments in this category offer, but also accept the real risk of large fluctuations in the value of your capital. You would usually invest here as part of a wider portfolio. 9

10 OUR INVESTOR PENSION FUNDS Investor Pension Funds Step 4: Our Investor Pension Funds Huge choice, different levels of risk Our Investor Pension Fund range and risk essential questions answered How do I read the table? We have put the 43 funds into the categories shown based on our current view of their potential long-term performance. The suitability of any fund will depend on your personal circumstances and objectives. The funds are: Category Protected Highly Secure Moderately Secure Grade With Profits With Profits* Managed Funds Reserve Retirement Distribution Fund AXA Baillie Gifford Managed** AXA Framlington Exempt Balanced** Choice Income* Managed UK Equity Funds Fixed Interest Funds Fixed Interest Index-linked AXA Newton International Bond** Geographical Funds Global Distribution Other Funds Cash AXA Close UK Escalator 100** 10

11 Investor Pension Funds OUR INVESTOR PENSION FUNDS Can the table give me advice on choosing a fund? No. It is not designed to provide advice on the suitability of any of the funds for your personal situation. This table like the rest of this brochure is for information purposes only. How accurate are the risk grades? They are simply a general guide. Unit prices can go down as well as up and are not guaranteed. Past performance is not a guide to future performance. Unusual movements in investment markets especially over prolonged periods may mean the above risk categories may not prove to be accurate. Where can I get more information on each fund? Simply turn the page. Important information The charges for the plan you are considering could have an impact on the risk grading of some investment funds. The risk grades do not take account of our plan charges, which are met by cancelling units. By their nature, low risk funds are likely to achieve lower rates of growth. In some circumstances this could mean that the growth of your investment does not cover the plan charges. This would increase the overall risk to your initial investment. ** These funds are not available for stakeholder pensions ** These funds may be available for stakeholder pensions. Please speak to your financial adviser Moderately Speculative Speculative AXA Newton Managed** Global Managed Lifestyle Retirement Funds (Seven funds) Choice Growth* AXA JPMF Premier Equity Growth Fund* AXA Newton Higher Income** Ethical Higher Income UK Equity UK Tracker AXA JPMF UK Dynamic* UK Opportunities Global Equity Overseas AXA JPMF Global* AXA Framlington American Growth** AXA Newton Continental European* AXA Newton Oriental* AXA Framlington Health* Europe Japan North America Pacific Property 11

12 OUR INVESTOR PENSION FUNDS Investor Pension Funds Pension Fund Facts Make sure you know what each fund is designed to achieve This section covers important information on the pension funds we offer. Here you can find out who manages each fund and its aim. There is also a short profile of each pension fund. Please note that some of the funds have additional charges. For your convenience, where additional charges apply, these are listed at the bottom of the fund profile. Please refer to your illustration for details about charges for your plan. Charges are made by cancelling units. The funds are shown in alphabetical order, split between our risk categories. Protected Funds You need a high level of capital security for your pension fund investment. Pension funds in this category are designed to make sure your retirement fund is protected from fluctuations in capital value before all charges have been taken. They are usually chosen as a temporary fund to protect against a volatile market or where you have spent many years building up a pension fund. Cash Aim: to provide customers with a secure, temporary home for their investments while longer-term strategies are determined. AXA risk grade: 1 Profile: established in 1980, the fund consists of cash deposits in various institutions, which may include banks, building societies, discount houses and local authorities. Investments are also made in what are described as near cash instruments such as certificates of deposit, floating rate notes and Treasury Bills. Highly Secure Funds You are prepared to experience slight fluctuations in the value of your capital. Funds in this category are usually chosen to consolidate gains made from other funds. AXA Close UK Escalator 100 Fund Manager: Close Fund Management Aim: To provide investors with an exposure to some of the rise in the FTSE 100 share index coupled with protecting capital against falls. Product charges may reduce the value of your investment as units will be cancelled to meet our charges. AXA risk grade: 2 Profile: The managers provide security by investing a significant proportion of the fund in cash and other assets that are designed to protect the capital invested. Any capital growth comes from the fund investing in futures and options (which are types of derivative) that seek to produce growth from price rises in the shares of some of the UK s leading companies. The protection applies on set quarterly dates. Investment or encashment outside these dates may mean that the price you receive is lower than that quoted for the next quarterly protection day. Please note that the current quarter days are the third Fridays in March, June, September and December. The value of the investment could be reduced if: 12

13 Investor Pension Funds OUR INVESTOR PENSION FUNDS a) the growth in the unit price is less than our charges as we will cancel units to meet our charges over time, so you will have fewer units, or b) the growth in the underlying fund is less than the additional fund management charges and tax charges for the underlying fund. Charge: 0.3% pa Further information: please see the section Is there anything else I should know? (page 21) for more information on this fund. Reserve Aim: long-term growth with a high level of capital security. AXA risk grade: 2 Profile: established in 1989, this is a cautiously managed fund which invests in fixed interest, property and cash. The fund can also invest in UK shares. Moderately Secure Funds You fully appreciate the long-term benefits of investing in shares and are prepared to experience variations in the value of your capital. AXA Baillie Gifford Managed Fund Manager: Baillie Gifford Aim: to achieve above average returns over the long-term. AXA risk grade: 4 Profile: the fund invests in a balanced portfolio of UK and overseas equities and fixed income securities. The fund is diversified by holding different asset classes, by investing internationally, and by holding companies operating in a wide range of industries. Baillie Gifford believes that the selection of companies within a portfolio is the most important ingredient in producing above-average long-term performance. Charge: 0.3% pa AXA Framlington Exempt Balanced Fund Manager: Framlington Aim: capital growth through investments in a broad range of securities. AXA risk grade: 4 Profile: invests in all or any economic sectors in all or any parts of the world. These, in the manager s opinion, show above average profitability, management quality and growth, balancing risk and return. Charge: 0.3% pa AXA Newton International Bond Fund Manager: Newton Aim: to maximise the total return from income and capital growth in the world bond markets. AXA risk grade: 4 Profile: Highly focused fund investing predominantly in international government bonds. Uses a distinctive, thematic investment process with a proactive and committed approach to stock selection and currency management. Charge: 0.3% pa Choice Income Fund Manager: AXA MultiManager Aim: to achieve an above average level of income and to maintain capital over the medium to long-term. AXA risk grade: 4 Profile: the fund aims to attain this objective through actively managed investments in equity and fixed-income portfolios managed by top fund managers who run, on behalf of the AXA Choice Income Fund, specially tailored retail and institutional investments. The fund will invest primarily in the UK, although up to 20% of the fund s assets may be invested overseas. 13

14 OUR INVESTOR PENSION FUNDS Investor Pension Funds 14 Fixed Interest Aim: to provide long-term growth from both reinvested income and capital. AXA risk grade: 3 Profile: established in 1980, the fund invests mainly in UK Government stock. We have categorised this fund as moderately secure because occasionally government-backed bonds can fall dramatically in price. Global Distribution Aim: to provide an ongoing income together with capital growth over the medium to long-term. AXA risk grade: 4 Profile: the fund invests in equities from the US, UK, Europe, Japan and the Far East. It also invests in index-linked government bonds from around the world. Index-linked Aim: long-term growth that keeps pace with inflation. AXA risk grade: 3 Profile: established in 1984, the fund invests almost entirely in index-linked gilts. Index-linked gilts are issued by the UK government and produce an income and capital return linked to the Retail Prices Index. Occasionally, government-backed bonds like these can also fall dramatically in price. The fund manager may also invest in UK fixed interest stocks. Managed Aim: long-term growth from a globally diversified portfolio of securities and UK property. AXA risk grade: 4 Profile: established in 1980, the fund is composed of a professionally managed mix of holdings in the UK and overseas. This approach to investment means that the fund enjoys the benefits of a very wide range of assets, spreading risk across hundreds of individual holdings. Retirement Distribution Aim: steady long-term growth arising from reinvested income and capital growth from a diversified portfolio of UK securities. AXA risk grade: 3 Profile: the fund invests primarily in UK holdings, such as shares, fixed interest securities, convertible bonds and index-linked gilts. Established in 1992, the Retirement Distribution Fund is the largest pension investment fund of its kind. With Profits Aim: steady capital growth over the medium to long-term. AXA risk grade: 3 Profile: the term with profits comes from the early part of the last century when life assurance companies shared a proportion of their profits with investors. The With Profits Fund is designed for investors who feel uncomfortable with the way stockmarkets fluctuate from day to day. In this fund, your money is protected from the normal ups and downs of stockmarkets and your investment grows through the addition of bonuses. Additional costs: for With Profits investment, there are additional costs to the fund which we currently estimate reduce the return by 0.3% each year. If you choose to invest in the With Profits Fund, this will be reflected in the bonus rates added to your plan. Further information: please see the section Is there anything else I should know? (page 20) for more information on this fund.

15 Investor Pension Funds OUR INVESTOR PENSION FUNDS Moderately Speculative Funds You fully appreciate the capital growth potential that shares can provide. You are prepared to accept increased variations in the value of your capital that comes with share-based investments, both in the UK and overseas. AXA Framlington American Growth Fund Manager: Framlington Aim & Profile: the fund aims to achieve capital growth through investment, principally in US, Canadian and Mexican large and medium sized companies which show above average profitability, management quality and growth. AXA risk grade: 7 Charge: 0.3% pa AXA JPMF Global Fund Manager: JPMorgan Fleming Asset Management Aim: to provide capital growth over the long-term by investing throughout the world in any economic sector. AXA risk grade: 6 Profile: the fund invests throughout the world in any sector of industry and commerce. The fund mainly invests in blue chip companies. Charge: 0.6% pa AXA JPMF Premier Equity Growth Fund Manager: JPMorgan Fleming Asset Management Aim: to provide long-term capital growth through investment in stocks and shares. AXA risk grade: 5 Profile: the fund is managed using a rigorous and disciplined investment process that attempts to add value by focusing on the best growth and value stocks. The fund currently invests predominantly in a portfolio of UK equities. Charge: 0.6% pa AXA Newton Continental European Fund Manager: Newton Aim: To achieve capital growth from a carefully selected portfolio of continental European equities. AXA risk grade: 7 Profile: the fund invests on a global thematic basis with a focused portfolio of around 50 predominantly blue chip European stocks and with the freedom to take strong over and underweight positions. Charge: 0.3% pa AXA Newton Higher Income Fund Manager: Newton Aim: to achieve long-term capital growth primarily through the reinvestment of increasing income. AXA risk grade: 5 Profile: the fund will invest in high yielding equities with strong cash flow and dividend growth. Charge: 0.3% pa AXA Newton Managed Fund Manager: Newton Aim: to maximise the total return from income and capital growth from a portfolio of UK, EC and International securities. AXA risk grade: 5 Profile: with it s active management style the fund invests on a global basis in both equities and fixed interest securities. The main focus is on long-term growth themes and the fund then tries to identify value within these themes. Charge: 0.3% pa 15

16 OUR INVESTOR PENSION FUNDS Investor Pension Funds Choice Growth Fund Manager: AXA MultiManager Aim: to achieve capital growth over the medium to long-term. AXA risk grade: 6 Profile: the fund aims to attain this objective through actively managed investments in equity portfolios managed by top fund managers who run, on behalf of the AXA Choice Growth Fund, specially tailored retail and institutional investments. The fund will invest at least 50% of its assets in the UK, with the balance being invested overseas. Charge: 0.4% pa Ethical Aim: medium to long-term capital growth AXA risk grade: 5 Profile: established in 1998, the fund invests in a carefully selected portfolio of companies which aim to or already satisfy a number of predetermined ethical criteria. The fund sets out to achieve a realistic balance between meeting ethical criteria and achieving the best possible investment returns. Europe Aim: to provide capital growth by investing in a wide spread of European shares, excluding the UK. AXA risk grade: 7 Profile: established in 1986, the fund primarily consists of continental European shares identified as having significant growth potential. Global Managed Aim: long-term growth from a globally diversified portfolio of securities. AXA risk grade: 5 Profile: established in 1989, this is a managed fund which normally invests in UK and overseas shares. At least 80% of the fund is normally in equities and more than 50% of the fund is in sterling assets. Higher Income Aim: long-term growth from both income and capital. AXA risk grade: 5 Profile: the fund consists of UK shares identified as higher yield, which - in very simple terms - means they aim to produce attractive dividend income which is reinvested in the fund. Japan Aim: to provide long-term capital growth. AXA risk grade: 7 Profile: established in 1984, the fund invests primarily in Japanese shares, but can also invest in other assets. Global Equity Aim: to achieve capital growth from a wide spread of global shares. AXA risk grade: 6 Profile: established in 1980, the fund invests in shares on a global basis, including the UK. 16

17 Investor Pension Funds OUR INVESTOR PENSION FUNDS Lifestyle Funds The Funds: Lifestyle Retirement Fund 2010 Lifestyle Retirement Fund 2015 Lifestyle Retirement Fund 2020 Lifestyle Retirement Fund 2025 Lifestyle Retirement Fund 2030 Lifestyle Retirement Fund 2035 Lifestyle Retirement Fund 2040 AXA risk grade: 5 (initially) Important note: the year stated after each fund represents the end date for that particular fund. When the fund is between 6 and 9 years from the end date, it moves to risk grade 4. With 5 years or fewer to go to the end date, the fund moves to risk grades 3 to 2. So our Lifestyle Retirement Fund 2010 (above) has already moved into risk grade 4. Further information: please see the section Is there anything else I should know? (page 19) for more information on this fund. North America Aim: to provide long-term capital growth. AXA risk grade: 7 Profile: established in 1980, the fund invests in North American company shares. The fund invests primarily in the US, but may also invest in Canada. Overseas Aim: to achieve long-term capital growth. AXA risk grade: 6 Profile: established in 1980, the fund invests in the world s major stockmarkets, concentrating on North America, Europe and the Far East. It does not invest in UK shares. Property Aim: to achieve long-term capital growth. AXA risk grade: 5 Profile: established in 1980, the fund invests in commercial properties such as shops and offices. It achieves its growth from rental income and increases in property values. Further information: please see the section Is there anything else I should know? (page 21) for more information on this fund. UK Equity Aim: long-term growth from UK shares. AXA risk grade: 5 Profile: the shares of large, successful and well-managed UK companies form the backbone of a top quality portfolio of investments. UK Tracker Fund Manager: administered by AXA IM UK, currently managed by Barclays Global Investment Ltd. Aim: the fund s aim is to achieve a capital return as close as practically possible to the FTSE UK All-Share Index. AXA risk grade: 5 Profile: the fund aims to track the FTSE UK All-Share Index, which measures the performance of every company listed on the London Stock Exchange. Investments may not necessarily be made into every company on the Exchange, but the spread of companies and the amount of money invested in each of them is designed so that the fund should track the performance of the whole Index. Pacific Aim: to provide long-term capital growth. AXA risk grade: 7 Profile: established in 1984, the fund invests throughout the Far East region, excluding Japan. 17

18 OUR INVESTOR PENSION FUNDS Investor Pension Funds Speculative Funds You fully appreciate the significant growth potential that investments in this category offer, but also accept the real risk of large fluctuations in the value of your capital. You would usually invest here as part of a wider portfolio. AXA Framlington Health Fund Manager: Framlington Aim: the fund aims to achieve capital growth by investing in healthcare, medical services and medical product companies worldwide. AXA risk grade: 9 Profile: the fund manager invests subject to ethical guidelines. Investment will be in producers of pharmaceuticals, biotechnology firms, medical device and instrument manufacturers, distributors of healthcare products, care providers and managers, and other healthcare service companies. Charge: 0.8% pa AXA JPMF UK Dynamic Fund Manager: JPMorgan Fleming Aim: The fund s aim is to maximise long-term capital growth by investing primarily in UK equities. AXA risk grade: 8 Profile: the fund is designed for investors looking for aggressive exposure to the UK stock market. It focuses purely on maximising capital growth and is not restricted by benchmarks or confined by size, sector, or style. The fund managers take care to diversify the portfolio by never holding less than 50 stocks and exposure to any one sector is limited to 35% of the total fund value. Charge: 0.6% pa AXA Newton Oriental Fund Manager: Newton Aim: To achieve capital growth by investing in Asian and Pacific markets including Australia and New Zealand but excluding Japan. Profile: a concentrated portfolio of blue chips largely focused on North Asia. Emphasis on companies that are restructuring. The active management style adopted for this fund enables swift reactions to the fast moving Far Eastern markets. AXA risk grade: 8 Charge: 0.3% pa UK Opportunities Aim: the fund s aim is to achieve capital growth over the medium to long-term. AXA risk grade: 8 Profile: the fund will invest primarily in shares of quoted UK companies. The fund will hold a relatively concentrated portfolio chosen on the outlook for those particular companies rather than on a thematic or sector basis. 18

19 Investor Pension Funds FURTHER INFORMATION Is there anything else I should know? Important information about the pension funds AXA s Lifestyle Retirement Fund range and Default Investments Our Lifestyle Retirement Funds offer an alternative to having to change your investment funds as your needs change. With these funds, the funds change themselves. You select the pension fund with the year that is closest to your retirement date. If your planned retirement date falls between the dates of two different funds, you can invest partly in one, partly in another. The funds work by steadily changing as the years pass by. Funds with dates several decades into the future, (such as 2035 or 2040) concentrate on investing almost wholly in equities. As time goes by, the funds will gradually change to include lower risk investments such as government bonds. So, as you approach retirement, the funds aim to ensure that the value of your plan is being increasingly protected from potential stock market volatility. Under our stakeholder pension range, the Lifestyle Retirement Funds are the default investment. This means that, for all stakeholder plans, if you do not advise us of the pension fund(s) that you wish to invest in, your money will be invested in the most appropriate Lifestyle Fund for your retirement date. General information on the AXA funds This guide should be read in conjunction with the relevant pension product literature and plan documentation. Copies are available on request. The funds available to any contract may change at any time. Investment is in accordance with the regulations applicable to unit-linked funds. In investing and managing each fund AXA Investment Managers UK pay attention to any stated aim or objective of the fund but otherwise have full discretion in relation to management of the fund s investments. Unit prices, which reflect the value of investments, can go down as well as up and are not guaranteed. Some of the funds investments may be held in foreign currency and the value of an investment can rise and fall in line with exchange rates. The funds may hold as much cash as the fund managers feel appropriate to their particular markets at any time. In poor investment conditions we can refuse to move investments into or out of: 1) any unit-linked fund for up to one month; or 2) any fund which invests in property for up to six months. This could mean that you may not be able to cash in or switch your investment during this period. Afterwards, if you still want to move your investment, we use the bid value of the units as at the day the investment is actually moved. The funds may invest in whole or in part in authorised unit trusts or other collective investment vehicles 19

20 FURTHER INFORMATION Investor Pension Funds with similar objectives. These collective investment vehicles may be operated by a member or associate of AXA. Important information on the AXA Choice Fund range There are additional fund management charges for these funds. These additional charges are stated under the fund descriptions in the 'Pension Funds Facts' section of this brochure, starting on page 12. Important information on the AXA Partners fund range These funds invest in the underlying collective investment schemes (described as underlying funds below) operated by the investment companies shown. The AXA funds are not managed by or reassured to the operator or manager of that scheme. Nor are they directly linked to the underlying funds as they may not be fully invested in the underlying funds. In particular our funds may hold cash. The profiles described relate to the underlying fund. Investment in the AXA funds will be subject to the Fund Management charges under the AXA plan and not those applicable to the underlying funds. The underlying funds will, however, be subject to fees and expenses of operation which will affect the value of the AXA funds. There are additional fund management charges under these funds. These additional charges are stated under the fund descriptions from the Pension Funds Facts section of this brochure (page 12). The underlying funds will be managed and operated in accordance with their published scheme particulars and the regulations applicable to that type of investment. You can ask us for full details of the underlying funds. The With Profits Fund If you invest in the With Profits Fund, you are entitled to a share of the profits of AXA Sun Life plc. You receive your share of the profits as bonuses that are added to your plan. The amount available for bonuses is affected by several factors which include the cost of meeting any guarantees provided under new and existing policies in the With Profits Fund. The bonuses that are paid to investors in this fund are directly linked to the returns made during the term of the investment. You should be aware that in the last few years investments generally have seen lower levels of returns and if this continues, then it is likely that we will have to reduce their bonus rates. We place with profits investments for new plans into our new With Profits Fund. But if you re paying into an existing plan, we will place any with profits investments into the fund your policy is currently invested in. If your plan started before 1 April 2001 this could be our old With Profits Fund. Bonuses We add regular bonuses to your plan at least monthly by increasing the unit price. The regular bonus rate is set in line with the returns we expect to receive from the relevant assets of the With Profits Fund, while smoothing out any rise and fall in those returns. 20

21 Investor Pension Funds FURTHER INFORMATION Please remember that future bonuses cannot be guaranteed as they come from profits we have not yet earned. We regularly review our bonus rates and may change them at any time. When benefits are paid, we may also add: a terminal bonus; and a reorganisation bonus if your plan started before 1 April Market Value Reduction If the investment performance of the With Profits Fund is lower than that reflected in the bonuses we have already added, we may reduce the value of your units if you: decide to retire earlier or later than the date you selected as your chosen retirement age; move the value of your plan to another pension plan; or switch out of the With Profits Fund. This is called a market value reduction (MVR). We make this adjustment to protect other planholders so they do not lose out financially as a result of your actions. If we apply an MVR, you can normally choose to delay the action to a later date. We will not apply an MVR when you die. And if you retire at your chosen retirement age, we will not apply an MVR except to any one-off payments, transfer payments and switches you have made into the With Profits Fund in the previous five years. If you would like more information please ask for a copy of our With Profits Guide. The Property Fund The value of properties and other investments held in the Property Fund is generally a matter of a valuer s opinion and not fact. From time to time valuations within this fund are carried out by independent chartered surveyors. Derivatives Derivatives - including forward currency contracts and warrants - will only be used for efficient portfolio management or the reduction of risk. The use of derivatives may diminish returns or make returns more variable than they would otherwise be. If the derivative is purchased through a counterparty, the failure of that counterparty could affect the value of the fund and invalidate any attaching protection. Warrants often involve a high degree of gearing. This means that a relatively small movement in the price of an asset may result in a disproportionately large movement in price. This can be both favourable and unfavourable. AXA Close UK Escalator 100 This fund aims to provide a level of protection to your capital by locking in gains and offering a protected unit price on the next quarterly date. The value of your investment could be reduced if: (a) the growth in the unit price is less than our charges as we will cancel units to meet our charges over time, so you will have fewer units, or (b) the growth in the underlying fund is less than the additional fund management charges and tax charges for the underlying fund. 21

22 Investor Pension Funds GLOSSARY Glossary Your guide to investment in plain English Like many industries and professions, the investment world has its own jargon. This glossary covers many investment terms you may have seen used in this brochure and some others that you may find in associated communications from AXA and other investment organisations. What follows are not strict technical definitions of these terms, but they should give you enough information to understand what can often be complicated and confusing terminology. Asset Investment funds are full of assets. An asset is something that you can normally buy and sell, such as shares of a company or government bonds or property. Asset allocation or asset mix The mix of different things that make up an investment portfolio. For example, 60% may be in shares and 20% in fixed-interest investments and 20% in property investments. The asset mix can also refer to where in the world your money is invested - the geographical asset allocation. For example, 50% of a fund s shares may be in the UK, another 40% in North America and 10% in Japan. Asset management What goes on when we buy and sell assets for the investment funds. This includes research, building up investment portfolios and keeping an eye on their progress. Bear market A bear market is when share values fall over a long period. So if the stockmarket is bearish it means that share prices look set to fall. Benchmark, benchmarking This is simply how we compare like with like. Each fund has a benchmark league table of similar investment funds. We benchmark in two different ways: by asset allocation; and by performance. First, we can compare the fund s asset allocation with the average of other funds of its type. At any time a fund is either underweight, neutral or overweight in its holdings of a particular asset. Here s an example. An average investment fund in a league table has 50% in US shares. Our investment fund has 45% in US shares. So we say that our fund is underweight in US shares. And if our fund also had 50% it would be neutral. If it had 60% it would be overweight in US shares. Second, we can benchmark by performance. For example, to compare a UK Equity Fund with similar investment funds we measure how it performed against other funds in a league table of UK equity funds. Blue chip This term is used to describe the shares of the largest, most consistently profitable companies in any particular market. This list changes over time. In the UK, most blue chip shares form part of the FTSE 100 index. Bonds These are issued by governments or companies in order to raise funds. In exchange, the investor (or buyer of the bond) is paid a set amount of interest regularly. This is why they are also known as fixed-interest securities. Bonds issued by the UK Government and traded on the stockmarket are known as gilts. Bonds issued by companies usually carry a higher rate of interest since they don t have the Government s guarantee behind them. Bond prices move up and down with market conditions. Bonds in this context should not be confused with financial services products such as investment or life assurance bonds sold by financial services organisations. Bourse This is another word for a continental European stockmarket, such as the DAX in Germany or the CAC 40 in France. Bull market A bull market is a period of rising share values. If the stockmarket is bullish it is usually looking good because share prices look set to rise. Capital growth This is a term used to describe the aim of most of the investment funds in this brochure. It simply means the increase in the value of an investment fund. Cash This is money invested at competitive rates of interest. City London s financial centre, the City of London. It is also known as the square mile. 22

23 Investor Pension Funds GLOSSARY Derivatives Derivatives has become a catch-all generic term that has been used to describe specific types of financial instruments. In very basic terms these are financial instruments, such as 'options' and 'futures', whose worth is normally dependent on future value of stockmarkets and individual shares. Diversification This means spreading risk by investing in many different assets. Dividend This is a payment from a company s profits to its shareholders. Dow Jones The main US stockmarket league table, which measures the performance of the top 30 US company shares. Equities Investment jargon for company shares. Fixed interest or fixed-interest securities Please see the explanation for bonds. Flotation When a company s shares are sold on the stockmarket for the first time. It is also called a new issue. FTSE All-Share index This index shows the share prices of the top 700 companies in the UK. FTSE 350 index This index shows the share prices of the UK s top 350 companies. It is often used to choose high-yield shares. FTSE 100 index This index shows the share prices of UK s top 100 companies. It is also known as the Footsie. Fund Manager Fund managers look after investment funds for customers like you. They create portfolios, buy and sell assets and monitor the performance of the investment funds they manage. Gilts Please see the explanation for bonds. High-yield or high-yielding shares These are the shares of companies that pay dividends that are higher than average. Holdings The same as assets. The items that make up an investment fund. Income The money shareholders receive from dividends is described as income. It can also mean the interest payments from government bonds and other investments. Index-linked gilts or index-linked securities These are bonds issued by the UK Government that pay regular interest payments, which rise and fall in line with the Retail Prices Index. Market sector Stockmarkets are divided into market sectors, showing different industries and services. For example, chemicals, engineering and telecommunications. Neutral Please see the explanation for benchmark. Portfolio The assets in a particular investment fund. Overweight Please see the explanation for benchmark. Quartile This basically means 25%. For example, if a fund performed in the top quartile, this means that out of 100 funds, the fund was in the top 25 in terms of its performance over a given period of time. Securities Another term used for both stocks and shares. Shares Owning shares in a company means you own part of it. It also means you can have a share of the company s profits by receiving dividends. You also have a share in the value of the company s assets, through its share price. Stocks In the UK, stocks can mean both shares and Government bonds. Many years ago, stocks meant UK Government bonds only, hence the phrase stocks and shares. In the US, shares are widely known as stocks. Some UK-based fund management offices use the US terminology. Stock selection Choosing individual shares from a specific area of the market. UK fixed interest Please see the explanation for bonds. Underweight Please see the explanation for benchmark. Units Each fund is made up of units. Units are your personal share of the investment fund. Unit prices rise and fall with the overall value of the investment fund. Volatile, volatility Stockmarkets are described as volatile if they move up and down quickly. An asset that has many variations in its price is also described as volatile. 23