Schroders Investment Trust ISA

Transcription

1 June 2012 Key Features of the Schroders Investment Trust ISA The Financial Services Authority is the independent financial services regulator. It requires us, Schroders, to give you this important information to help you decide whether our Investment Trusts are right for you. You should read this document carefully so that you understand what you are buying, and then keep it for future reference.

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3 Contents Page 1 About this Key Features document 2 2 Schroders range of Investment Trusts 2 3 Investment Trust ISA investments 2 4 How should I choose which trust to invest in? 3 5 The risks 3 6 Charges and expenses information 4 7 Advice 4 8 Schroder Japan Growth Fund plc 5 9 Schroder AsiaPacific Fund plc 6 10 Schroder Income Growth Fund plc 8 11 Schroder UK Mid Cap Fund plc 9 12 Schroder Oriental Income Fund Limited Schroder UK Growth Fund plc How do I invest? General information Glossary 16 1

4 About this Key Features document Thank you for your interest in the Schroders Investment Trust ISA. This document provides you with all the detailed information you should require to make an investment with Schroders. You should read it carefully and make sure you understand what you are buying before making any decisions. The Terms and Conditions are detailed in the application form booklet. If however, there is further information you require or you would like to learn more about the investment trusts, please contact your financial adviser or Schroders on *. Please note that at Schroders we can only provide you with information on our funds and are not able to advise you as to what investment trust is most suitable for you. For advice you should contact your Financial Adviser. If you do not have a financial adviser you can find one at Schroders range of Investment Trusts Investment trust is used in this documentation to describe a listed investment company that owns a portfolio of investments managed by Schroders. The investment trusts available in the Schroders ISA include UK investment trusts and overseas investment companies, but all are listed on the London Stock Exchange. Aims An investment trust aims to increase capital and/or income for their shareholders by investing in the shares of different companies, which enables shareholders to access a wider range of stocks than they would normally be able to invest in and so benefit from holding a diversified portfolio of shares in a single investment. Each investment trust has a specific aim, which determines the types of shares or securities in which it invests. These are detailed on each of the investment trust information pages. Investment Trust ISA investments What is an ISA? An ISA is a tax efficient investment product. The annual subscription limit is 11,280. Within this overall limit there is an annual limit of 5,640 for the amount which may be held as cash investments. The Schroders Investment Trust ISA The Schroders ISA allows you to invest up to 11,280 in a stocks and shares component (Schroders does not offer a cash ISA). Your Commitment To invest you will need a lump sum investment of at least 1,000. If you wish to top up your investment you can do so with any amount over 500. As an alternative, you may invest a minimum of 50 a month. You can start and stop investing whenever you like by informing us in writing. There is no minimum term that you must hold your investments for, although you should note that if you sell your shares shortly after purchasing them you are likely to make a loss on your initial capital due to the difference between the buying and selling price. *Please note, for your security, calls to Schroders may be recorded. 2

5 How should I choose which investment trust to invest in? Three factors you may wish to consider are: 1 Does the investment trust aim to achieve what you want it to? The aims and specific risks of each investment trust are set out on pages 5 to What are the charges? These are illustrated for each investment trust on pages 5 to Finally, you should check whether the share price is at a discount or a premium to the net asset value per share. Your risk of possibly losing capital will be increased if you sell when the share price is at a discount. For an explanation of this and other terminology, please refer to the glossary on page 18. The risks If you invest in investment trusts you should be aware that there are risks involved. Most importantly you may not get back what you originally invested when you sell. Both your initial capital sum and the income the investment may pay, can go down as well as up due to price changes in the financial markets outside Schroders control. You should be aware that the past performance of your investment is not an indicator of its future performance. The share price of an investment trust will not always reflect the underlying value of the investments in its portfolio. This is because the share price is determined by the demand and supply of shares traded on the stockmarket and not the value of the trust s investments. If the share price is higher than the net asset value per share this is known as a premium and if it is lower it is known as a discount. Therefore, shareholders may realise returns which are lower or higher than the net asset value performance of the shares in the investment trusts Market risk: which is the risk of losses due to adverse market movements in assets held by the investment trust, or rates or changes in the anticipated or calculated price fluctuations of these movements (volatility risk) Liquidity risk: the risk that a position cannot be liquidated (sold) in a timely manner at a reasonable price Inflation risk: inflation will reduce the purchasing power of your money in the future Change in tax regime: the favourable treatment of ISAs may not be maintained. For specific risks for each investment trust in the Schroders ISA please refer to pages 5 to 12. 3

6 Charges and expenses information The following information relates to the charges and expenses sections provided on pages 5 to 12. How did you do your calculations on pages 5 to 12? We chose our minimum investment amount of 1,000 for all our investments. We then deducted the buying costs, which include stamp duty of 0.5% and the market makers spread. Furthermore, we deducted the 0.5% dealing charge that is incurred when selling shares. The spread represents the costs you would incur if you bought and sold your shares immediately. If you would like to find out what the most recently quoted spread is, please contact Schroders or your financial adviser. We then assumed a growth rate of 7.0% a year. This is a notional growth rate, which will allow you to compare charges with other trusts. We also made allowance for the annual expenses incurred by each investment trust. These include the annual investment management fee plus other expenses such as audit and Directors fees. The annual ISA plan charge of 0.5% (plus VAT) was also taken into account. The calculation date for these tables was 1 June Advice How much will any advice cost? We only provide you with information about Schroders products and will not offer any advice based on individual circumstances. If you are in doubt as to whether a product is suitable, you should consult a financial adviser. 4

7 Schroder Japan Growth Fund plc What is the investment objective? Important fund information Specific fund risks The Company s principal investment objective is to achieve capital growth from an actively managed portfolio principally comprising securities listed on the Japanese stock markets, with the aim of achieving growth in excess of the TSE First Section Total Return Index over the longer term. Charges Buying charge Stamp Duty only 0.5% Selling charge 0.5% Annual Management Fee charged to the Trust* 1.0% Annual ISA charge Website address: *Fees are reduced to 0.95% on assets above 150 million. 0.5% + VAT Portfolios which invest in a smaller number of stocks carry more risk than funds spread across a larger number of companies. Where a trust holds investments denominated in currencies other than sterling, investors should note that exchange rates may cause the value of these investments, and the income from them, to rise or fall. The Trust may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so. Investments in smaller companies may be less liquid than in larger companies and price swings may therefore be greater than investment trusts that invest in larger companies. The fund invests solely in the securities of a particular country. There may be a greater risk than investing in funds which hold securities in a range of countries. Charges and expenses This table shows the effect of charges and expenses on an investment of 1000 assuming growth of 7.00% a year. Initial spread and costs: 1.10% Annual charge and administrative charges: 2.45%. At the end of the year Income paid out Income reinvested Income to date The last line of the table shows that over 10 years the effect of total charges and expenses on a lump sum investment could amount to 256. Putting it another way, this would have the same effect as bringing investment growth from 7.00% a year down to 5.81%. 5

8 Schroder AsiaPacific Fund plc What is the investment objective? The Company s principal investment objective is to achieve capital growth through investment, primarily in equities of companies located in the continent of Asia (excluding the Middle East and Japan), together with the Far Eastern countries bordering the Pacific Ocean, with the aim of achieving growth in excess of the MSCI All Countries Asia excluding Japan Index in sterling (Benchmark Index) over the longer term. Important fund information Charges Buying charge Stamp Duty only 0.5% Selling charge 0.5% Annual Management Fee charged to the Trust* 1.0% Annual ISA charge 0.5% + VAT Website address: * Fees are reduced to 0.95% on assets between 100 million 300 million and to 0.90% on assets between 300 million 400 million and to 0.85% on assets above 400 million. Specific fund risks Where a trust holds investments denominated in currencies other than sterling, investors should note that exchange rates may cause the value of these investments, and the income from them, to rise or fall. Investments in smaller companies may be less liquid than in larger companies and price swings may therefore be greater than investment trusts that invest in larger companies. Potential investors in the emerging markets and Asia should be aware that this involves a high degree of risk and should be seen as long term in nature. Less developed markets are generally less well regulated than the UK, they may be less liquid and may have less reliable arrangements for trading and settlement of the underlying holdings. Investments such as warrants, participation certificates, guaranteed bonds, etc. will expose the trust to the risk of the issuer of these instruments defaulting on paying the capital back to the trust. The Trust may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so. 6

9 Charges and expenses This table shows the effect of charges and expenses on an investment of 1000 assuming growth of 7.00% a year. Initial spread and costs: 0.84% Annual charge and administrative charges: 1.34%. At the end of the year Income paid out Income reinvested Income to date The last line of the table shows that over 10 years the effect of total charges and expenses on a lump sum investment could amount to 179 if income is paid out and 189 if income is re-invested. Putting it another way, this would have the same effect as bringing investment growth from 7.00% a year down to 6.20%. 7

10 Schroder Income Growth Fund plc What is the investment objective? The Company s principal investment objectives are to provide real growth of income, being growth of income in excess of the rate of inflation, and capital growth as a consequence of the rising income. Important fund information Charges Buying charge Stamp Duty only 0.5% Selling charge 0.5% Annual Management Fee charged to the Trust* 0. Annual ISA charge 0.5% + VAT Website address: * Approximate fee. The management fee is based partly on assets under management and partly on net income. There is also a symmetrical performance fee in place. 10% of net revenue return after tax plus 0.375% on assets up to 75 million, 0.35% on assets between 75 million and 125 million and 0.325% on assets greater than 125 million. Specific fund risks Trusts which invest in a smaller number of stocks carry more risk than investment trusts that invest across a larger number of companies. The Trust will invest solely in the companies of one country or region. This can carry more risk than investments spread over a number of countries or regions. As a result of the annual management fee and finance costs being charged partially to capital, the distributable income of the trust may be higher, but the capital value of the trust may be eroded. The Trust may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so. Charges and expenses This table shows the effect of charges and expenses on an investment of 1000 assuming growth of 7.00% a year. Initial spread and costs: 0.9 Annual charge and administrative charges: 1.55%. At the end of the year Income paid out Income reinvested Income to date The last line of the table shows that over 10 years the effect of total charges and expenses on a lump sum investment could amount to 176 if income is paid out and 216 where income is reinvested. Putting it another way, this would have the same effect as bringing investment growth from 7.00% a year down to 6.04%. 8

11 Schroder UK Mid Cap Fund plc What is the investment objective? The Company s investment objective is to invest in mid cap equities, with the aim of providing a total return in excess of the FTSE 250 Mid Cap Index (ex Investment Companies). Important fund information Charges Buying charge Stamp Duty only 0.5% Selling charge 0.5% Annual Management Fee charged to the Trust* 0.8% Annual ISA charge 0.5% + VAT Website address: * Fees are reduced to 0.6% on assets above 75 million. The Manager is also entitled to a performance fee subject to certain investment performance criteria being met. Specific fund risks Investments in smaller companies may be less liquid than in larger companies and price swings may therefore be greater than investment trusts that invest in larger companies. The Trust will invest solely in the companies of one country or region. This can carry more risk than investments spread over a number of countries or regions. As a result of the annual management fee and finance costs being charged partially to capital, the distributable income of the trust may be higher, but the capital value of the trust may be eroded. The Trust may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so. Charges and expenses This table shows the effect of charges and expenses on an investment of 1000 assuming growth of 7.00% a year. Initial spread and costs: 0.82% Annual charge and administrative charges: 1.63%. At the end of the year Income paid out Income reinvested Income to date The last line of the table shows that over 10 years the effect of total charges and expenses on a lump sum investment could amount to 171 if income is paid out and 190 if income is reinvested. Putting it another way, this would have the same effect as bringing investment growth from 7.00% a year down to 6.19%. 9

12 Schroder Oriental Income Fund Limited What is the investment objective? The Company s investment objective is to provide a total return for investors primarily through investments in equities and equity-related investments of companies which are based in, or which derive a significant proportion of their revenues from, the Asia Pacific region and which offer attractive yields. Important fund information Charges Buying charge Stamp Duty only N/A Selling charge 0.5% Annual Management Fee charged to the Trust* 0.75% Annual ISA charge 0.5% + VAT Website address: Schroder Oriental Income Fund Limited is a Guernsey resident company whose shares are listed on the London Stock Exchange. * The Manager is also entitled to a performance fee subject to certain investment performance criteria being met. Specific fund risks Potential investors in the emerging markets and the Far East should be aware that this involves a high degree of risk and should be seen as long term in nature. Less developed markets are generally less well regulated than the UK, they may be less liquid and may have less reliable arrangements for trading and settlement of the underlying holdings. Where a trust holds investments denominated in currencies other than sterling, investors should note that exchange rates may cause the value of these investments, and the income from them, to rise or fall. Investment in warrants, participation certificates, guaranteed bonds, etc. will expose the trust to the risk of the issuer of these instruments defaulting. The Trust may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so. Investments in smaller companies may be less liquid than in larger companies and price swings may therefore be greater than investment trusts that invest in larger companies. As a result of the annual management fee and finance costs being charged partially to capital, the distributable income of the trust may be higher, but the capital value of the trust may be eroded. 10

13 Charges and expenses This table shows the effect of charges and expenses on an investment of 1000 assuming growth of 7.00% a year. Initial spread and costs: 0.92% Annual charge and administrative charges: 2.30%. At the end of the year Income paid out Income reinvested Income to date The last line of the table shows that over 10 years the effect of total charges and expenses on a lump sum investment could amount to 192 if income is paid out and 221 where income is reinvested. Putting it another way, this would have the same effect as bringing investment growth from 7.00% a year down to 6.02%. 11

14 Schroder UK Growth Fund plc What is the investment objective? The Company s principal investment objective is to achieve capital growth predominantly from investment in UK equities, with the aim of providing a total return in excess of the FTSE All-Share Index. Important fund information Charges Buying charge Stamp Duty only 0.5% Selling charge 0.5% Annual Management Fee charged to the Trust 0.65% Annual ISA charge 0.5% + VAT Website address: Specific fund risks Trusts which invest in a smaller number of stocks carry more risk than investment trusts that invest across a larger number of companies. As a result of the annual management fee and finance costs being charged partially to capital, the distributable income of the trust may be higher, but the capital value of the trust may be eroded. The Trust may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so. The Trust will invest solely in the companies of one country or region. This can carry more risk than investments spread over a number of countries or regions. Charges and expenses This table shows the effect of charges and expenses on an investment of 1000 assuming growth of 7.00% a year. Initial spread and costs: 0.70% Annual charge and administrative charges: 2.2. At the end of the year Income paid out Income reinvested Income to date The last line of the table shows that over 10 years the effect of total charges and expenses on a lump sum investment could amount to 164 if income is paid out and 179 if income is reinvested. Putting it another way, this would have the same effect as bringing investment growth from 7.00% a year down to 6.25%. 12 The Trust will invest solely in the companies of one country or region. This can carry more risk than investments spread over a number of countries or regions.

15 How do I invest? Cancellation Income Complete and return application form number 1 in the application form booklet. Who do I make the cheque payable to? You should make your cheque payable to Schroder Investments Limited. When will my direct debit be collected? Your direct debit will be collected on or around the 10th of each month. ISA direct debits will automatically rollover into the next tax year unless you notify us differently. When will my investment be opened? We will invest your money on the day we receive your application, if it is before 12 noon, or otherwise on the following working day. How are share prices of the trusts determined? The price you pay for shares will be determined by the market makers on the basis of the supply and demand for the shares. The price that you pay per share will not normally be the same as the value of the underlying investments in the portfolio, known as the net asset value per share. If the price is higher than the net asset value, you are paying a premium, if the price is lower, you are buying shares at a discount. Will I have cancellation rights? If you have received advice from an authorised financial adviser, you are entitled to a cancellation period of 14 days, from the receipt of your notice of cancellation rights. During this time, if you change your mind, simply complete and return the cancellation form (which will be sent to you with your confirmation letter). We will sell the investments made on your behalf and send you the proceeds including a refund of any initial charges, less any fall in the share price. If you change your mind during the cancellation period, you will be able to open another ISA of the same type in the same tax year. However, if you change your mind after 14 days, you will have to sell your ISA, and will not be allowed to open another stocks and shares ISA in the same tax year. What documentation will I receive? Shortly after you invest you will receive a confirmation letter and contract note and if applicable a name slip which should be returned as instructed. It will show the price and date at which you have bought your shares. We do not issue share certificates so we suggest that you retain the contract note. A statement will be sent twice a year as at 5 April and 5 October. How and when will I receive my income? When a trust pays a dividend it will automatically be re-invested on the next monthly investment date to purchase further shares in the trust in which you have invested to maximise the potential long term investment returns. If you would like to have your dividends paid out to you, you must select this option on the application form you complete. Income will then be paid directly to your Bank/Building Society account on the dividend payment date. You may change your choice by advising the Administrator with the relevant details. What are the tax advantages? Any income you receive, or is accumulated, will not be liable to further income tax, irrespective of your tax status. Income tax suffered on interest distributions/ accumulations will be reclaimed by Schroders on your behalf. When you 13

16 How do I invest? (cont d) Switching Selling Transferring eventually come to sell your investment, there will be no chargeable gain or allowable loss arising in respect of Capital Gains Tax. What do I have to tell HM Revenue and Customs? Nothing you do not have to declare ISAs in your tax return. Can I invest if I am living abroad? You cannot open an ISA whilst living or working abroad unless you are a Crown Employee or the spouse of, or in a civil partnership with a Crown Employee working abroad. You can invest in one before you go, but you cannot make any further contributions to it whilst you are living abroad. Can I add to my investment? Yes. Let us know in writing how much you wish to add and into which company (or companies) and send us a cheque made payable to Schroder Investments Limited. Please quote your account number. Please remember, you cannot exceed your 11,280 annual contribution limit. Can I switch between trusts once my ISA is open? Yes. You can instruct us in writing to switch between companies. The shares will be sold at the relevant share price and new shares will be bought subject to stamp duty of 0.5% (except for Oriental Income Fund Limited) and a 0.5% dealing charge. Do I have to keep my investment for a minimum length of time? No, you can sell all or part of your investment whenever you like, subject to a 0.50% dealing charge. If you do want to sell part or all of your investment, simply write and let us know. Remember, it is the contributions into your ISA which count towards the annual limit (11,280). Once you have withdrawn cash from your ISA you will be unable to put it back in the same tax year. How do I sell my ISA and how quickly will I get my proceeds? You can instruct Schroders or your financial adviser to sell shares in writing, by telephone or by signed fax. We will sell your holdings on the day of receipt of your instructions, provided they are received before 12 noon. We will then send a cheque for the proceeds to you by the close of business four working days later. If (after you have sold your shares) you have less than the minimum investment of 1,000 we may sell all your remaining shares on your behalf. Can I transfer my ISA investments between different managers? If you have taken out an ISA in the current tax year, the rules require you to transfer out your entire ISA holding for that tax year. Because Schroders previously merged investment trust ISAs from different tax years, it will not always be possible for us to transfer your precise investments from a specific tax year. For transfer purposes, Schroders calculates your current tax year s ISA holding as the total of all your contributions over the current tax year. This may mean that if the value of your current year s ISA is lower than the sum of your current year s contributions, we may have to transfer investments from a previous year s ISA to make up the difference. However if you hold ISAs from previous tax years, you can indicate how much of your accrued ISA investments you wish to transfer. To make such a transfer, please complete application form number 2 from the Application Form booklet. 14

17 General information Up information Who is the plan manager of my ISA? The ISA manager is Schroder Investments Limited, 31 Gresham Street, London EC2V 7QA. Schroder Investments Limited is authorised and regulated by the Financial Services Authority and is entered on the FSA register under register number The principal business of the plan manager is the provision of ISA administration services and marketing of unit trusts. Who is the administrator of the Schroders Investment Trust ISA? International Financial Data Services (UK) Limited administers your investment on behalf of Schroder Investments Limited. What is the ISA administration address? Schroders, PO Box 1102, Chelmsford CM99 2XX. Where can I find out about the net asset value, premium or discount? The net asset value of each trust is published daily and is available from or the trust s individual website (details on pages 5 to 12). Information about the share price and the dividend is also available from Alternatively information is available in the Financial Times or monthly from the Association of Investment Companies ( ). Schroders can also give you information about dividends that have been paid as well as arranging for you to receive copies of the Annual Reports, if required. What is my best source of information about my ISA? Please contact Schroders for the Annual Reports and monthly Investment Trust Fact Sheets. These are available free of charge and the monthly factsheets can be found at All other information about Schroders Investment Trusts is available on request from Schroders at the following address: Schroders, Investor Services, PO Box 1102, Chelmsford CM99 2XX. Telephone number: *. Where can I find the latest prices and yields for my investment trust? The mid prices of the investment trusts and the latest yields can be found in the share prices section of the Financial Times newspaper. Prices can also be found on the internet at: Complaints You can write to the Head of Investor Services, Schroders, PO Box 1102, Chelmsford CM99 2XX. You can also request a copy of Schroders written internal complaints procedures by writing to the above address or contacting Schroders Investor Services on *. If Schroders fails to resolve your complaint satisfactorily you also have the right to refer the complaint to the Financial Ombudsman Service, South Quay Plaza, 183 Marsh Wall, London E14 9SR. What happens if Schroders is unable to meet its liabilities? In the event of Schroders being unable to meet its liabilities, you may be entitled to compensation under the Financial Services Compensation Scheme. Currently, the maximum level of compensation you can receive from the Scheme for a claim against an investment firm is 100% of the first 50,000 per person. For further information on the scheme, you can contact the Financial Services Authority or the Financial Services Compensation Scheme or visit * Please note, for your security telephone calls to Schroders may be recorded. 15

18 Glossary Assets Bonds Dividends (also refer to income ) Equity Gearing Income Investment Trust ISA Market Makers Net Asset Value Share price Spread Symmetrical performance fee The underlying investments an investment trust, which may comprise shares, bonds, cash etc. Depending on the type of portfolio. Bonds are fixed income securities where investors loan money to issuers for a set period at a fixed interest rate. In return, bond issuers make regular payments of interest and principal to the bond holder. Bonds are issued by companies and governments to finance projects. Payments made by a company to its shareholders. When an investment trust makes a revenue, the board decides to either reinvest the money in the company or pay its shareholders. The ownership interest in a corporation, represented by the shares of stock held by investors. This is why shares are often known as equities. Investment Trusts may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so. The return investors receive from their portfolios. The sort of investments that produce income include securities such as stocks, bonds and mutual funds. Income can take the form of dividends, interest and capital gain generated from securities and other forms of investment. An investment trust is a listed company that invests in the shares of different companies. Individual Savings Accounts (ISAs) are tax free wrappers you can invest cash or shares in. Please refer to Page 2 for more information. People who trade in the market as principals, and create a market in a specific stock by quoting prices at which they will buy or sell on demand. The total value of a trust measured by taking the total value of its assets, less its liabilities. The net asset value per share is calculated by dividing the resulting number by the number of ordinary shares in issue. This term is used to describe the underlying value of an investment trust s share. at a discount If the share price of a trust is lower than the net asset value (NAV) per share, the trust is said to be trading at a discount. The discount is shown as a percentage of the NAV. at a premium If the share price of a trust is higher then the net asset value (NAV) per share, the trust is said to be trading at a premium. The premium is shown as a percentage of the NAV. The dealing spread is the difference between the price at which you can buy (offer) and the price at which you can sell (bid). A fee that is paid to the Manager for out-performance and received back from the Manager for under-performance. For further explanation of financial terms visit Printed copies are available by contacting the company address overleaf. 16

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20 Issued in June 2012 by Schroder Investments Limited, 31 Gresham Street, London EC2V 7QA. Authorised and regulated by the Financial Services Authority. Please note that for investors security all telephone calls to Schroder Investor Services may be recorded. w41680 ITKF612