Investment Guide

From September 2013

Further information: www.gmgpensions.co.uk

This guide gives you detailed information about the investment of your Lifestyle account and is aimed at helping you get the most from your membership of the company pension plan. It is important that you understand how the Lifestyle Plan works and the choices open to you, so that you can make informed decisions about your future and play an active part in saving for your retirement.

We have tried to explain the issues as clearly as possible keeping the use of technical jargon to a minimum. The glossary, at the back of this guide, should also help your understanding. If you have any questions about the Lifestyle Plan please do not hesitate to contact the Pensions Department see back page for details. John Woodman Pensions Manager

Summary
Your Lifestyle account
Your contributions, together with the companys contributions and anything you transfer in, will all be allocated to your individual Lifestyle account. You will receive a benefit statement each year showing details of your individual account. The statement will show the value of the contributions you and the company have made during the year and will also give details of the way your account is invested. At retirement, your accumulated account is available for you to choose your Lifestyle Plan benefits.

members through their careers. However, there could be a number of reasons why you might want to override the automatic arrangements and make your own investment choices, perhaps after seeking independent financial advice. It is important to understand that in a money purchase arrangement such as the Lifestyle Plan it is the responsibility of members to ensure that the funds in which they are invested are best suited to their individual requirements. Whilst over the long-term the expectation remains that funds with high equity content (investment in companies on the stock market) will provide a higher return than funds invested in bonds or cash, albeit with higher volatility, this cannot be guaranteed.

investments are made in a broad range of shares or bonds in such a way that the return should be virtually identical to the overall return of the relevant index. You should remember though that investments in equities, corporate bonds and government stocks can all go up and down as a result of market movements generally. The Trustees have appointed Legal and General Investment Management Limited to carry out the index tracking strategy. The Trustees investment strategy is set out in their Statement of Investment Principles, which is available on our website www.gmgpensions.co.uk or from the Pensions Department (see back page for contact details).

Your investment choices

You have a choice over how to invest your own Lifestyle account. You can spread your investment amongst the available funds in whatever way you choose. However, if you dont feel comfortable managing your own investments, there is an automatic, default, arrangement. The default strategy has been designed to provide a carefully worked out investment strategy that can be suitable for many

The role of the Trustees

The role of the Trustees is to provide an appropriate range of funds for members and to review the investment strategies of the various funds from time to time, but it should be stressed this does not include the Trustees trying to forecast investment market movements. The investment strategy aims to reduce some volatility by investing in index tracking funds. This simply means that the

If you dont feel comfortable managing your own investments, there is an automatic, default arrangement.

Choosing your own funds

You can specify how you want your Lifestyle account to be invested, split between the nine available funds. More detailed information on each fund is contained later in this guide. The table opposite has been designed to help you assess the risk and reward you could expect from each fund. A risk/reward rating of 1 represents the lowest risk and 4 represents the highest risk in terms of volatility in the capital value of your lifestyle account. If you want, you can specify different mixes for a) your existing fund and b) future contributions. You should monitor the relative investment returns and make further changes as required. Adjustments to your investments will take place on the next available dealing day after receipt of your instructions. This normally occurs on a Wednesday of each week and on the last working day of every month but there are exceptions so you should check on our website www.gmgpensions.co.uk or with the Pensions Department if you require exact details.

Fund
Long Term Fund

What it is
Mainly invested in a wide spread of company shares both in the UK and abroad, together with a smaller amount in corporate bonds and gilts. The capital value of your pension account is not protected here, so this option would tend to be used when you are a number of years away from retirement or as part of your overall investment strategy. All company bonds. The returns received on bonds tend to be in line with prevailing interest rates which, in turn, affect the cost of annuities (pensions). Bonds therefore tend to be used more in the run up to retirement to keep the capital value of your investments in line with the cost of your pension. The objective of this fund is to preserve the capital value of your Lifestyle acount by investing in a well diversified range of investments, with a good geographical spread. This is probably not a suitable long term option as your investment here may not keep pace with inflation or the cost of buying an annuity at retirement. UK company shares only, based on the FTSE All Share (5% Capped) Index. As with the Long Term Fund, this fund looks to get good returns over a long period of time and has a wide spread of assets. A wide spread of company shares in Europe, North America, Japan, Pacific Basin and Emerging Markets. Again, long term and could be used as part of a mixed strategy to get your investments to beat inflation. To reduce the currency risk, 50% of these overseas shares have been hedged. This fund invests in a wide spread of global company shares, tracking a specially constructed index which has been designed to take account of ethical, social and environmental principles. Invests in bonds issued by companies. Bonds are considered a low risk option which will help your pension fund keep its value in terms of what it will buy. However, prices do go down as well as up. Invests in bonds issued by the UK government. Often considered the most secure option, these are also known as gilts. Invests in bonds issued by the UK government which give a return that keeps in line with inflation.

Risk/ Reward 3

Short Term Fund (Bonds) Short Term Fund (Cash) UK Equity Fund Overseas Equity Fund Ethical Global Equity Fund Corporate Bond Fund UK Government Stocks Fund UK Government Index-Linked Stocks Fund

3.5

3.5

3.5 2 1.5 1.5

Automatic (default) investment strategy

If you dont feel comfortable managing your own investments and specifying your own mix of funds, then your Lifestyle account will be invested in accordance with the default strategy. Under this arrangement, your account is normally invested in the Long Term Fund, which is currently invested in a mixture of Equities and Bonds. The value of these investments can be volatile from time to time and can sometimes suffer sharp setbacks in times of economic or political difficulty. Despite this volatility and the absence of guarantees, these types of investments are nevertheless generally considered appropriate for long term growth. The Trustees note about Extreme Market Volatility on our website (www.gmgpensions.co.uk) has important reminders about the long-term nature of saving for retirement and the protection built into the Lifestyle Plans default strategy.

As you approach retirement, it is usually helpful to try to reduce volatility by switching your Lifestyle Account into the Short Term Fund which is currently invested in Bonds and Cash. Whilst Bonds can fluctuate, they tend to move in line with interest rates generally thus giving some stability to the pension which you can purchase with your accumulated account. However, Bonds cannot protect against changes in other factors which insurance companies use to determine annuity rates such as mortality trends.

As you approach retirement, it is usually helpful to try to reduce volatility by switching your Lifestyle account into the Short Term Fund

Automatic switching default strategy

The Lifestyle Plan will normally automatically switch 10% of your accumulated account in each of the ten years before your Target Retirement Date (TRD) from the Long Term Fund to the Short Term Fund (in practice the first switch is 10% then, each year, four quarterly switches of 2.5%). Thus, during the last year the whole of your account will be in the Short Term Fund. For some members, the switching period is 5,6,7,8 or 9 years dependent on how far away from TRD they were at 1st April 2003. Assuming a ten year switching period, the table opposite shows the proportion of your account that will remain in the Long Term Fund at given periods before TRD. The remainder of your account will be invested in the Short Term Fund. See overleaf for more details about the switching arrangements and the choices you have in setting your TRD. The default strategy has been designed to provide a carefully worked out investment stategy that could be suitable for many members throughout their careers. However, there could be a number of reasons why you might want to override the automatic arrangements and make your own investment choices, perhaps after seeking independent financial advice.

Years to TRD

Proportion of your lifestyle account in the Long Term Fund

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

10 9 8 7 6 5 4 3 2 1

You should bear in mind that the automatic switching arrangements into the Short Term Fund may not be suitable if, for example, you are intending to choose a non-conventional annuity or income drawdown arrangement (see the brochure Your Pension Your Choice for more information regarding these choices at retirement).

Lifestyle Investment Switching Over 10 Years to Retirement

100%

75%

Choose your own Target Retirement Date (TRD)

It is important to set your own TRD at the date you think you are most likely to take your retirement benefits. TRD is automatically set to age 65 but for the purpose of the automatic switching you can set your own TRD to any age between 50 and 75. (Switching will take place over the 10 year period up to your chosen TRD.) You can change your TRD at any time. Remember that if you joined the Plan after 5th April 2006, you can only take your benefits from 55 onwards. If you change your TRD (form available on the website) the adjustment to your investments will take place on the next available dealing day. This often occurs on a Wednesday of each week and on the last working day of every month but there are exceptions so you should check on our website www.gmgpensions.co.uk or ask the Pensions Department if you require exact details.

Percentage of Your Fund

50%

25%

0%

11 10 9 8 7 6 5 4 3 2 1 0

Years to Target Retirement Date

Key
Short Term Fund (Cash) Short Term Fund (bonds) Long Term Fund

Focus on the three funds used in the default strategy

The Long Term Fund
The distribution of the Long Term Fund will vary from time to time but the following gives a broad indication of its structure. Up to date details can be obtained from the Pensions Department.
UK Equities Overseas Equities: North America Europe (excluding UK) Japan Asia Pacific (excluding Japan) Emerging Market TOTAL EQUITIES Coporate Bonds Fixed Interest Gilts Index-Linked Gilts TOTAL BONDS GRAND TOTAL Circa 14%

set backs in times of economic or political difficulty. Despite this volatility and the absence of guarantees, equities are nevertheless generally considered to provide an appropriate investment class for long term growth. Returns from overseas equities come through in different currencies, which mean that changes in exchange rates affect the returns in pounds sterling. 50% of this currency risk has been taken out (hedged) to reduce the volatility of this fund. In a low and stable inflation environment, investment in bonds can be expected to produce reasonable returns above inflation. The market for corporate bonds has expanded significantly over the past few years and such bonds offer a higher return than government bonds, albeit with a slightly higher degree of risk. In the light of volatility of equity markets, an element of high quality corporate bonds and government bonds are included in the Long Term Fund aiming to reduce volatility.

The objective of the Short Term Fund is to reduce volatility as you approach retirement. Whilst corporate bonds can fluctuate, they tend to move in line with interest rates generally thus giving some stability to the pension which you can purchase with your accumulated account. However, bonds cannot protect against changes in other factors which insurance companies use to determine annuity rates such as mortality trends. You should also bear in mind that the Short Term Fund might not be appropriate if you intend to choose a non-conventional annuity or income drawdown arrangement (see the brochure Your Pension Your Choice for more information regarding these choices at retirement).

The Short Term Fund (Cash)

This fund aims to preserve the capital value of your Lifestyle account by investing in a well diversified range of investments with a good geographical spread. Types of investment include certificates of deposit, commercial paper, floating rate notes, medium term notes, government bonds, corporate bonds and cash deposits. (See Glossary).

Circa 56%

70% 20% 5% 5% 30% 100%

The Short Term Fund (Bonds)

AAA Corporate Bonds (Over 15 Years) 6A Corporate Bonds (Over 15 Years) 50% 50%

The value of equities can be volatile from time to time and can sometimes suffer sharp

Monitoring fund performance

Every week, the unit prices for each of the funds are updated on our website www.gmgpensions.co.uk You can ask the Pensions Department for an update on your individual Lifestyle account at any time. The trustees employ independent advisers to monitor the funds investment returns. Each summer a detailed investment bulletin is produced giving details of the investment performance for each of the funds.

Changing your mix of investments

Adjustments can be made by completing the relevant Investment Choices form available from our website www.gmgpensions.co.uk or from the Pensions Department. Details of the forthcoming weekly dealing dates are shown on the website. You need to get your signed form to the Pensions Department by no later than 3.00 pm, two days before the dealing date. e.g. for a Wednesday dealing date the deadline is 3.00 pm on the Monday.

Financial advice
For further general pensions and financial advice you may want to consider getting your financial affairs reviewed by an Independent Financial Adviser (IFA) who would be able to advise on your pension situation as well as other aspects of your personal finances. You can find a local IFA via the website www.unbiased.com

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Available funds
Long Term Fund

The following table gives more technical details on each fund.

The UK equity element aims to track the FTSE All-Share Capped 5% Index. Each of the overseas equity elements aim to track the appropriate FTSE World Index. The 6A corporate bond element aims to track the iBoxx Non-Gilts (ex BBB) All Stocks Index. The fixed interest gilts aim to track the FTSE All Stocks Gilts index. The index-linked gilts aim to track the FTSE All Stocks Index-Linked Gilts index.

Short Term Fund The AAA corporate bonds element aims to track the iBoxx AAA Fixed Interest Over 15 Year Index and the (Bonds) 6A corporate bonds element aims to track the iBoxx Non-Gilts (ex BBB) Over 15 Year Index. Short Term Fund This fund aims to preserve the capital value of your lifestyle account by investing in a diversified range (Cash) of investments, with good geographical spread. UK Equity Fund This fund invests solely in UK equities, with the aim of tracking the performance of the FTSE All-Share Capped 5% Index. This fund forms the underlying UK equity element of the Long Term Fund. This fund invests in various overseas markets, aiming to track the appropriate FTSE World Index in each region. The distribution of the fund will vary from time to time but the following gives a broad indication of its structure. Up to date details can be obtained from the Pensions Department. North America 44% Europe (excluding UK) 25% Japan 9.5% Asia Pacific (excluding Japan) 9.5% Emerging Markets 12% The returns from these overseas equities come through in different currencies, which means that changes in exchange rates affect the returns in pounds sterling. 50% of this currency risk has been taken out (hedged) to reduce the volatility of this fund. This fund forms the underlying overseas equity element of the Long Term Fund. This fund aims to track a specially constructed index, the FTSE4 Good Global Index, which has been designed for investors who wish to take account of ethical, environmental, social and governance factors. Further background on the fund can be obtained from the Pensions Department. This fund invests in 6A corporate bonds, with the aim of tracking the iBoxx Non-Gilts (ex BBB) All Stocks Index. This fund forms the corporate bond element of the Long Term Fund. This is a fund invested in government stocks which aims to track the performance of the FTSE All Stocks Gilt Index. This fund invests in index-linked government stocks, with the aim of tracking the performance of the FTSE All Stocks Index-Linked Gilt Index.

Overseas Equity Fund

Ethical Global Equity Fund Corporate Bond Fund UK Government Stocks Fund UK Government Index-Linked Stocks Fund

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Glossary
This glossary aims to provide a relatively straightforward explanation of some of the technical expressions used in this Investment Guide. The exact interpretation of words used is always subject to the definitions used in the Trust Deed and Rules of the Lifestyle Plan.

Corporate Bonds
These are similar to government bonds, but they are issued by non government agencies and companies. Interest is paid at a fixed rate over the term of the bond and the capital is repaid at the end of the term. Corporate bonds are rated by independent organisations according to their ability to be able to pay the interest payments and the capital at the end of the term. Investment grade bonds are those rated AAA, AA, A and BBB, with the highest rating AAA, followed by AA, A and BBB. Corporate bonds rated below this are known as sub investment grade, high yield or junk bonds. The Lifestyle Plan funds only invest in investment grade bonds rated AAA, AA and A.

regions (eg Europe, North America, etc) refers to the stock market grouping for the particular pooled fund.

Floating Rate Note (FRN)

Also known as a floater. A note with a variable interest rate. The adjustments to the interest rate can be made on a 1, 3, 6 month or 1 year basis and are tied to a certain money-market index.

Certificate of Deposit (CD)

A tradable savings certificate entitling the bearer to receive interest by way of a discount at purchase or with a coupon. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are only issued by financial institutions (FI) and range from one month to one year.

FTSE All Share Index

The All Share Index is generally regarded as the most representative index of the overall UK stock market. The index currently comprises over 700 UK companies and represents over 95% of the value of the stock market.

Commercial Paper (CP)

Generally an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. CP can also be issued as asset backed securities. Maturities on CP rarely range any longer than 270 days. The debt is issued at a discount, reflecting prevailing market interest rates. CPs are similar to CDs but can be issued by corporate or Financial Institutions.

Equities
Ordinary shares in companies ie stock market investments. In the context of the Lifestyle Plan we usually mean investment in a pooled fund which comprises shares in a wide range of companies rather than shares in just one company. UK equities refers to pooled funds investing in companies quoted on the London Stock Exchange although most of these companies do have trading operations all over the world. Similarly each of the overseas

FTSE All Share (5% Capped) Index

As above, but no more than 5% of the Index is invested in any one company. The Lifestyle Plan uses this index for its UK Equities to reduce the risk of having too much money invested in one or more of the very large companies on the stock market.

Government Bonds or Stocks

Sometimes called Gilts. These are securities issued by the UK government and therefore

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the interest payments and the capital repaid at the end of the term are guaranteed and can be regarded as absolutely secure.

Medium Term Notes (MTN)

A corporate note continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to four years.

help estimate how long people are likely to live in retirement.

iBoxx Index
This is a specially constructed index designed to provide a reliable benchmark for index tracking of corporate bond investments.

Switching
In our default arrangement, the investments in your Lifestyle account are normally automatically moved from the Long Term Fund into the Short Term Fund as you approach retirement to gradually reduce volatility. For many members this is the most suitable arrangement and it is therefore a vitally important feature of the Lifestyle Plan. This is often referred to as lifestyle switching and is reflected in the name of our company pension plan!

Money Purchase Pension Scheme

The Lifestyle Plan is sometimes referred to as a Money Purchase pension scheme or a Defined Contribution pension scheme. This means that contributions made by you and the company are invested until you are ready to draw your benefits. The benefits at retirement may be partly in the form of a lump sum and the balance of your accumulated account is then normally used to buy an annuity with an insurance company. There are a variety of choices available to you at retirement see Lifestyle brochure Your Pension Your Choice for more information.

Index Tracking
This is the term given to an investment approach that is designed to specifically track the performance of a market index.

Lifestyle Account
We allocate all your contributions and the Companys contributions for you into your Lifestyle account which is then invested. Your Lifestyle account is therefore part of the overall funds of the Lifestyle Plan, but we keep track of the contributions and changes in value for each member separately.

Target Retirement Date (TRD)

This is the date you set for yourself to control the timing of the switching of your Lifestyle account from the Long Term Fund into the Short Term Fund. It does not mean you must retire at TRD. It is simply the way in which you can have personal control over your Lifestyle account in the years leading up to your expected retirement. You can change your TRD at any time to reflect the best estimate of when you think you may draw your benefits. (The default TRD is age 65).

Long Term Fund

This is part of the Lifestyle Plans funds. It is our own in-house description for the fund which is designed to meet the needs of a typical member during the majority of his or her career. It will be invested in the types of investments which suit this objective.

Mortality Trends
When insurance companies calculate how much pension (annuity) they will give in exchange for a sum of money (e.g. your Lifestyle account), they need to estimate the length of time that they will have to pay the pension, i.e. how long you will live. Mortality trends are used by insurance companies to

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Helpful Websites
www.unbiased.co.uk
Contains listings of local independent financial advisers plus a large amount of savings information

www.moneyadviceservice.org.uk

Jargon free guidance on a wide range of topics from the Money Advice Service in partnership with Government.

A financial education site sponsored by the pre-Retirement Association in association with a number of blue chip companies A constantly updated site with news and information on personal finance

www.learnaboutmoney.org

www.theguardian.com/uk/money

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Note: This guide is designed to explain the main aspects of the investment arrangements of the Lifestyle Plan. All aspects of the Plan are subject to the provisions of the Trust Deed and Rules.

Contact Details
For further information about the Lifestyle Plan, please contact the Pensions Department. See overleaf for details.

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The Pensions Department Guardian Media Group plc Centurion House, 129 Deansgate, Manchester M3 3WR Tel: + 44 (0)20 3353 2000 Fax: + 44 (0)20 3353 3125 Email: pensions@gmgplc.co.uk www.gmgpensions.co.uk

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