51543: SW Wealth Funds Brochure - Scottish Widows

1 SW Wealth FUNDSAVAILABLE THROUGH THE INVESTMENT PORTFOLIO BOND AND THE RETIREMENT ACCOUNTSW Wealth Funds1 PAGE 2 WHY INVEST IN THE SW Wealth Funds ?PAGE 3 THE STRUCTURE OF THE SW Wealth FUNDSPAGE 4 ASSET TYPESPAGE 5 ABSOLUTE RETURN FUNDSPAGE 6 TECHNICAL DETAILS OF THE SW Wealth Funds STRUCTUREPAGE 8 fund CHARGESPAGE 10 OUR INVESTMENT APPROACHES PAGE 12 SPECIFIC RISK FACTORS YOU NEED TO KNOW ABOUT THE SW Wealth FUNDSPAGE 13 THE SW Wealth FUNDSWEALTH DEFENSIVE FUNDPAGE 14 Wealth CAUTIOUS FUNDPAGE 15 Wealth DISCOVERY FUNDPAGE 16 Wealth BALANCED FUNDPAGE 17 Wealth PROGRESSIVE FUNDPAGE 18 Wealth DYNAMIC FUNDPAGE 19 Wealth ADVENTUROUS FUNDPAGE 20 Wealth HIGHER YIELD DISCOVERY fund (PENSION ONLY)PAGE 21 Wealth HIGHER YIELD BALANCED FUNDPAGE 23 Wealth LIQUIDITY fund (LIFE ONLY)SW Wealth Funds2 WHY INVEST IN THE SW Wealth Funds ?The SW Wealth Funds are a range of seven growth Funds , two higher yield Funds and also a fund which invests in cash type assets known as the SW Wealth Liquidity majority of the SW Wealth Funds are available to the Investment Portfolio Bond and the Retirement Account.

2 The exceptions are the SW Wealth Liquidity fund (only available through the Investment Portfolio Bond) and the SW Higher Yield Discovery fund (only available through the Retirement Account).The Wealth Liquidity fund is a single manager fund investing in short term cash based investments. The descriptions and explanations in this Brochure apply to the growth and higher yield SW Wealth Funds unless stated value of your investment and any income from it is not guaranteed and can go down as well as up. You may not get back the original amount you are a long-term investment. The retirement benefits you receive from your pension plan will depend on a number of factors including the value of your plan when you decide to take your benefits which isn t guaranteed, and can go down as well as up. The value of your plan could fall below the amount(s) paid in. A range of Funds to suit your individual needs and investment different SW Wealth Funds reflect varying attitudes to risk allowing you to select the fund which best fits your approach to risk and reward.

3 Multi-manager investment multi-manager approach aims to add value by selecting a team of specialists within their field who together can perform more effectively than a single investment specialist. Investing with many managers rather than one can spread such as staff departures, company mergers, acquisitions and other disruptions to the investment management activities can t be avoided the multi-manager approach may help to dilute any effect as there is more than one fund Manager within the fund . A wide range of asset classes and underlying SW Wealth Funds have a multi-asset approach which gives the fund Managers access to a wide range of assets such as commodities, equities and fixed interest securities. In addition different investment strategies are used, for example the SW Wealth Funds give access to Absolute Return means that they have more flexibility in aiming to achieve the objectives of the Wealth Funds3 THE STRUCTURE OF THE SW Wealth FUNDSD iversification of your investment is important as it can help to spread risk.

4 Diversification means ensuring that investments are spread across different asset classes or strategies. Effective diversification means looking at the behaviour of asset classes and selecting those that are thought to perform differently in any particular set of market of the growth and higher yield Wealth Funds invests in a combination of two Investment Portfolio Service (IPS) OEIC Funds . The splits for all of the Funds are as at the 3rd April 2018 are shown below. The Wealth Liquidity fund wholly invests in the Aberdeen Global Liquidity IPS Funds and the Aberdeen Global Liquidity fund are managed by a subsidiary of Aberdeen Standard note that these percentages may change and we may also change the selection of Funds that we make available and restrict the amount you can invest in Growth Portfolio OEIC (Share Class X)IPS Income Portfolio OEIC (Share Class X)IPS Higher Income Portfolio OEIC (Share Class X)Aberdeen Global Liquidity Fund98% Defensive FundWealth Cautious FundWealth Discovery FundWealth Balanced FundWealth Progressive FundWealth Dynamic FundWealth Adventurous FundWealth Higher Yield Discovery FundWealth Higher Yield Balanced FundWealth Liquidity Fund2% Open Ended Investment Company (OEIC) is a type of Collective Investment Scheme where a number of investors are able to pool their investments and have them professionally managed.

5 An OEIC gets bigger and more shares are created as more people invest. The fund shrinks and shares are cancelled as people withdraw their ASSET ALLOCATION AND TACTICAL ASSET ALLOCATIONAs well as being the fund manager for the ten SW Wealth Funds , Aberdeen Standard Investments ( ASI ) is also the manager of the three IPS OEIC Funds . These three OEIC Funds are multi-asset, multi-manager Funds . They invest in Funds managed by ASI and other specialists from outside the Lloyds Banking Group, identified by ASI s experienced Multi-Manager of the growth and higher yield Wealth Funds has a Strategic Asset Allocation (SAA), blending asset types to provide returns in line with a specific level of risk. For example lower risk Funds will typically have a higher weighting in bonds and higher risk Funds will typically have a higher weighting in UK and international equities. The IPS OEIC Funds are combined as shown above to give the nine risk rated Wealth Widows will carry out an annual review of the SAA to ensure that they are as close as possible to the best mix of assets for the permitted level of risk.

6 As well as SAA, ASI also uses Tactical Asset Allocation (TAA), which aims to enhance long-term total returns by capitalising on short term opportunities, identified by a skilled team of specialists who research and understand specific sectors and asset types. TAA changes are subject to strict controls to ensure that excessive over or underweight positions (holding more or less of a particular asset type than the SAA outlines) versus the SAA do not occur as this could potentially alter the risk profile of the splits shown above allow the SW Wealth Funds to invest, via the IPS OEIC Funds , into a blend of asset classes and investment strategies including bonds (gilts, corporate bonds and high yield bonds), equities (UK and international), property, commodities, cash and absolute return Funds . General explanations of these asset types and Absolute Return Funds are on pages 4 and 5 of this Wealth Funds4 ASSET TYPESB elow are general descriptions of the main asset types used within the SW Wealth , also known as fixed interest securities or fixed income securities, are essentially loans, an agreement between a borrower and a lender.

7 Bonds are the means by which companies, governments or local authorities borrow money directly from the public. They generally have the following characteristics: a fixed investment term; the issuer of the bond agrees to make interest payments, normally every six months during the term; at the end of the term the issuer should repay the original remember that when bonds are included in an investment fund the fund will include many different bonds with different interest rates and terms. The SW Wealth Funds don t have a fixed & PROPERTY SHARESP roperty investment Funds can invest in commercial property (offices, shops, warehouses, factories, etc.) and land. fund managers may also develop the properties held within their fund . Returns on the Funds are determined by changes in the market value of properties held by the fund , and any rental income. This is known as direct or bricks and mortar managers can also invest in property shares. These are shares in companies that generate returns from their property activities, such as rental income from their property portfolios or capital gains from property management and development.

8 This is known as indirect property is a less liquid asset than other assets such as fixed interest securities or equities and values could be affected if properties need to be sold in a short timescale. Property valuation is generally a matter of judgement by an independent valuer rather than fact and values can go up or are shares in a company listed on a stock exchange. Equities are also known as stocks, shares or securities. Once you invest in a company s shares you become a shareholder. The shareholders of a company are effectively the company s owners and usually have the right to vote on important matters concerning the company. Equity investments may offer a share in the profits of the company in the form of dividend payments. A dividend is simply the sum of money that a company decides to divide among its are physical goods. These can include precious metals such as gold, non-precious metals such as iron, agricultural products such as corn and energy products such as oil and natural gas.

9 The SW Wealth Funds currently invest in commodities through Exchange Traded Funds which are a type of investment which track the performance of underlying shares or Wealth Funds5 ABSOLUTE RETURN FUNDSA bsolute Return Funds are a form of alternative investment strategy, typically targeting a higher rate of return than cash investments and aiming to provide positive returns regardless of market conditions over a specific time period (such as 12 months).These Funds can invest in a wide range of assets and use different strategies. For example, Absolute Return Funds can use strategies which mean they can benefit when an asset price falls as well as strategies which mean they can benefit if assets rise in value. They can use derivatives, which are agreements to buy or sell assets in the future, or can borrow money which is then used to generate investment strategies increase the possibility for loss as well as profit in the short term but overall have potential to provide a profit over the long term.

10 Please remember that investments in Absolute Return Funds are at risk, and there is no guarantee that these Funds will deliver positive returns over the specific, or any, time Wealth Funds6 TECHNICAL DETAILS OF THE SW Wealth Funds STRUCTUREThe Wealth Funds invest in a number of asset types (see pages 2 to 5) and are risk rated according to the Scottish Widows investment approaches which apply to them. The risk spectrum ranges from the Secure investment approach at the lowest end to the Specialist investment approach at the highest end. There are currently no Wealth Funds within the Secure or Specialist investment approaches. For further information, please see pages 10 and charts below show the relative risk/return characteristics of the Wealth Funds and are intended for illustrative purposes only. The table below each chart shows the Tactical Asset Allocation of each fund as at the 2nd March two Wealth Higher Yield Funds have an income based aim and to help achieve this have a higher allocation to high yield bonds in comparison to the seven Wealth Growth Funds .