Investments

The Protected Asset TEP Fund (PATF) and
The Protected Asset TEP Fund2 (PATF2)

A low risk fund of traded endowment policies issued by a wide variety of British insurance companies. It offers very low risk and very low volatility. The fund is exclusively supplied by AAP who are the largest market makers in traded endowment plans. AAP are wholly owned by the TIS Group Ltd who have over £1 billion under management.

There are 2 versions of the fund, PATF has lower charges and no penalty for withdrawal at any time, whereas PATF2 was launched at the bottom of the market and has bought policies more cheaply, so PATF2 has a better performance than PATF, but has slightly higher charges and is intended for medium-long term investments.

Security – The majority of the underlying assets are endowment policies. These are issued by major UK insurance companies and are similar investments (endowment is a monthly savings plan and with profits bond is a lump sum investment). These have been a very popular form of investment in the UK as they smooth the volatility of the stock market and avoid the need for market timing. Each policy has the capital sum guaranteed and a bonus is added to this every year and this cannot be taken away provided the policy runs to maturity. At maturity an additional bonus is paid.

These policies invest in a diverse range of assets including equities, bonds, fixed interest securities and property. This approach has historically produced a smoothed return. The insurance company ensures this smooth return by retaining some of the profits in good years to boost the bonuses in bad years. Upon maturity the investor’s share of the retained profits is paid out as a terminal bonus.

This fund buys policies from the holders wishing to surrender them early. In this case the individual holding them would not receive all the accrued bonuses nor the terminal bonus. The PATF pays the individual more than the insurance company surrender price but less than the market value. It then holds the policy until maturity and keeps all the bonuses. The following chart illustrates this:

Hedging - The underlying assets of the fund are in sterling but these are hedged to US dollars and euros with the performance in these currencies being reduced by the interest rate differential between USD or euro and sterling interest rates.

Objective:

• To provide investors with capital growth and low risk through investment in a diversified portfolio of with profit Traded Endowment Policies (TEPs) issued by leading UK Life Assurance companies.

A very low cost investment as100% of capital invested is allocated to purchase shares in the fund. The fund has never had a loosing month (but it could in theory).

This fund will be subject to volatility and may go down in value as well as increase. This risk is reduced the longer the investment is held. Past performance is no guarantee of future performance.