Investment Guide for Members

BRITISH AMERICANTOBACCOUKPENSION

FUND

This guide is for members who are:

● in the Defined Contribution Scheme;

● in the Defined Benefit section of the Fund and pay additional voluntary contributions (AVCs), or have previous pension benefits transferred-in and invested through the Defined Contribution Scheme;

● members of the old Rothmans money purchase plan.

Contents

Choosing your investments An introduction to your investment choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

A brief guide to investment A reminder of the main types of investment and the different risks these investments carry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

The available funds Details of the range of investment funds available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

The LifeStyle approach Information on using the LifeStyle approach, including an overview of how the investment strategy works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Making a decision How to put your investment strategy into place and where to go if you need any further help with making your decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Definitions An explanation of the terms used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

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The benefits you get from the Defined Contribution Scheme or your AVCs will depend on how much has accumulated in your Personal Account as well as the cost of buying a pension at retirement. The size of your Personal Account will depend on the contributions paid and the growth on your investments.

You can choose how your Personal Account is invested. Any choice should take into account your personal circumstances and the degree of risk you wish to take. The information contained in this guide, together with the fund fact sheets which you can obtain from the BAT Pensions Administration Team (see page 10 for details) or view online at www.hartlinkonline.co.uk/batpensions, aim to help you to make informed investment choices. Please read this guide carefully.

Choosing investments is important and the Trustee recommends that you speak to an independent financial adviser (IFA) before making any decision regarding your pension. See page 10 for details on how to find an IFA near you.

This guide provides a summary of the investment options offered under the British American Tobacco UK Pension Fund and does not cover all its detailed provisions. These are set out in the formal Rules – if you would like to see a copy of the Rules, please contact us at the address shown on page 10. If there is any difference between this guide and the Rules, the Rules will prevail.

Your options

You have two options for investing your Personal Account: you can make your own selection from the range of funds available (‘Self-Style’) or you can invest using a planned programme set by the Trustee (‘LifeStyle’).

If you do not wish to be actively involved in making investment decisions, you may wish to select the LifeStyle strategy. This is a specially designed investment strategy set by the Trustee which automatically switches your investments to help reduce unexpected fluctuations in the value of your Personal Account as you approach retirement and, as far as possible, to protect the amount of pension you can buy.

You should remember that the LifeStyle strategy may not necessarily be the most appropriate option for you. For example, if you are intending to retire early, or you intend to keep your Personal Account invested after your selected retirement age and defer purchasing your retirement benefits, it may be that investing using the strategy set by the Trustee is not appropriate for you.

The LifeStyle strategy is the default option for new members.

Choosing your investments

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Types of investment

Equities

Equities are shares in companies. In the past they have grown in value more than bonds, gilts or cash over longer periods. However, they can go up and down in value, sometimes significantly.

Equities are likely to carry the most ‘capital risk’ (see page 4). An investor might want to choose a fund that invests mainly in equities if they are aiming for higher long-term returns, but can accept the risks of loss of capital and fluctuating value.

You may be more willing to invest mainly in equities if, for example, retirement is still some way off or you have other secure investments or your BAT pension is only a small part of your retirement savings.

Bonds and gilts

Bonds are loans to a government, company or other organisation; UK Government bonds are called ‘gilts’. The level of capital risk falls somewhere between cash and equities.

Assuming the bond issuer does not default, the return on your investment over the lifetime of the bond is the interest you receive on the loan. This interest can either be ‘fixed’ (for example 5%) or ‘index-linked’ (which means that it varies in line with inflation). Bonds and gilts are traded on the stockmarket so their value can go down or up, although probably by less than the value of equities.

Bonds generally have a maturity date (when the loan is repaid) and bond funds usually hold a mix of bonds with different maturity dates. Bond prices usually fall when interest rates rise (and vice versa).

Investing in bonds closer to retirement might help protect the buying power of your Personal Account. This is because the cost of buying a pension depends partly on the price of bonds and gilts. In the past, bonds and gilts have given lower returns over longer periods than equities, but they are generally less volatile i.e. they are not so prone to large short-term fluctuations in value.

Cash

Cash funds invest in short-term interest bearing investments, short-term bonds and other money market instruments. The value of an investment in cash can occasionally fall in the short-term, although cash investments typically have the lowest capital risk of the main asset classes.

Returns on cash funds over the longer term may not keep pace with inflation, so the buying power of your investment may reduce. They can provide good security for your pension savings if you are about to retire, but may not provide good long-term returns, so your Personal Account may not grow enough to buy you the level of pension you would like.

Alternative assets

‘Alternative assets’ is the term used for any form of investment which offers broadly similar potential for growth to equities over the longer term, but which doesn’t depend solely on the stockmarket going up to generate this return. Examples include property, some higher-risk bonds, commodities and currency.

Like equities, these types of investments carry high capital risk. However, as the returns on these investments are not driven by the stockmarket, their value will rise and fall in a different way and at different times to equity funds. Therefore, investing in alternative assets alongside equities can help spread your risks.

A brief guide to investment

You can choose how your Personal Account is invested from a range of fund options. Here are some guidance notes to help you understand the characteristics of each investment type, the risks involved with investing and the different styles of investment management.

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Different types of riskAll investments carry a level of risk, but there are different types of risk. You need to decide how much of each type of risk you are prepared to take.

Capital risk

This is probably the best understood type of risk and is the risk that your investments may drop in value and not recover. This can happen with equities, bonds, alternative assets and even cash funds. This is different from volatility, which is the risk that investments may change in value over a short period of time. The younger you are, the less worried you might be about short-term ups and downs (volatility). Instead, you might want to look for long-term investment growth.

Inflation risk

This is the risk that your investments will not grow quickly enough to outpace the increase in the cost of living. Even if they do grow in value, but they don’t grow quicker than inflation, their ‘buying power’ (the amount of goods and services you can get for your money) goes down. This risk is higher with low capital risk funds, such as a cash fund.

Pension conversion risk

When you retire, the majority of your Personal Account will probably be used to buy a pension. The cost of buying a pension varies from time to time and moves broadly in line with the price of bonds and gilts. By switching your investments into a fund that invests in bonds and/or gilts when you are closer to retirement, you can help to protect them against this risk.

Default risk

With bonds, there is a risk that the bond issuer will default so you will not get back the capital you invested when the bond is due for repayment. The risk of this happening will vary between bond issuers. For example, the likelihood that the UK Government will default on the bonds it issues (called gilts) is very slim, but the risk will be higher for some companies.

Different styles of investment managementThere are two distinct ways of investing – active and passive management. They involve different risks and possible returns, so you need to understand how they both work. The Trustee has sought, where appropriate, to invest across a range of assets, managers, regions and approaches to investment, and will use actively managed or passively managed funds or a combination within each option as it deems appropriate.

Active management

An active manager aims to outperform a specific target (for example, a market index or other fund managers). Although the potential returns from active investments (if successful) can be higher than passive investments over the long term, there is also a risk that they will be worse. Charges for actively managed funds tend to be higher than for passively managed funds.

Passive management

A passive manager aims to match the performance of a chosen market index (sometimes known as ’index tracking‘). It follows the market whether it goes up or down and so returns do not depend on the success of the fund managers’ choices. Passive management reduces the possibility that your investments will do better than the market, but it also reduces the risk that they will do worse. Charges for passively managed funds tend to be lower than for actively managed funds.

SummaryIn summary, the three main issues you will need to consider when choosing your investments are:

● your investment goals (i.e. high growth, stability, etc);

● the amount of time until your retirement; and

● your attitude to risk.

Taking these issues into consideration, along with advice from an IFA, will help you determine:

● the type of asset(s) that could be suitable for you;

● the amount and type of risk you are prepared to take.

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• ten fund options based on a particular ‘asset class’ – equities, bonds, gilts, etc; • three fund options that target a particular level of risk and growth.

Please note that, where appropriate, the fund options may use a passively managed or actively managed approach or a combination of both.

The fundsThe ten fund options based on a particular asset class are shown in the table below.

Fund option Features

UK Equity Fund Invested in shares in UK companies. It may be seen as a potential investment for a member who is looking to build up savings over the long term and who is prepared to weather shorter-term UK stockmarket fluctuations.

Global Equity Fund Predominantly invested in shares in overseas companies, including some emerging markets. The Fund is actively managed. Hedging is used to remove part of the overseas currency exposure. It may be seen as a potential investment for a member who is many years from retirement, to build up savings over the long term, and who is prepared to weather shorter-term world stockmarket fluctuations.

Global Equity Tracker Fund

Predominantly invested in shares in overseas companies. The fund is passively managed. It may be seen as suitable for a member who is looking to build up savings over the long-term but who is looking for a lower level of cost than with actively managed funds.

Emerging Market Equity Tracker Fund

Predominantly invested in shares in emerging markets. The fund is passively managed. This fund may be seen as a potential investment for a member who is looking to build up savings over the long-term and who can weather shorter-term market fluctuations.

Diversified Beta Fund Invested in a variety of assets including global equities (UK, overseas and emerging market), bonds and alternatives such as property and high yield bonds. The fund manager adopts a risk-budgeting approach where assets are chosen based on their contribution to the fund’s overall level of risk. The fund aims to provide modest but steady growth over the long term. It may be seen as a potential investment for a member who is looking to build up their savings over the long term.

Diversified Alternatives Fund

Invested in a variety of assets including global equities (UK and overseas), bonds and alternative assets such as property, hedge funds and commodities. It may be seen as a potential investment for a member who is looking to build up savings over the long term. Investing in a wide range of assets designed to offer broadly similar potential for growth to equities over the longer term, but which doesn’t depend solely on the stockmarket going up to generate this return.

Gilt Fund Invested in UK Government gilts. It may be seen as a potential investment for a member who is seeking some protection against changes in the price of purchasing an annuity or against times of stockmarket volatility.

Index-Linked Gilt Fund

Invested in UK Government index-linked gilts. It may be seen as a potential investment for a member who is seeking some protection against changes in the price of purchasing an annuity (typically inflation-proofed annuities) or against times of stockmarket volatility.

Corporate Bond Fund

Invested in corporate bonds. It may be seen as a potential investment for a member who is seeking some protection against changes in the price of purchasing an annuity or as part of a wider portfolio of assets. Corporate bonds generally have the potential for a higher return than gilts, but with a higher level of risk that the issuer will default on the promise to return the money invested.

Money Market Fund Invested in cash and money market instruments. It may be seen as a potential investment for members who are nearing retirement and want to protect the part of their Personal Account that can be taken as tax-free cash at retirement, or for protection against falling asset values at other times.

The available funds

If you want to choose the Self-Style option and choose your own investments from the funds on offer, you can select a single fund or a combination of funds from:

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There are three further fund options which are designed to target a specific level of risk and growth and the Trustee has selected a wide spread of investments within each fund. These are shown in the table below.

Fund option Features

Adventurous Fund This fund gives a wide spread of investments, with around 70% in equities split between the UK Equity and Global Equity Funds and 15% each in the Diversified Beta Fund and the Diversified Alternatives Fund.

This fund may be seen as a potential investment for a member who is looking to build up savings over the long term and who can weather shorter-term market fluctuations.

Mixed Fund This fund gives a very wide spread of investments with around 35% in equities split between the UK Equity and Global Equity Funds, 35% in the three bond funds (as shown in the pie chart) and 15% each in the Diversified Beta Fund and the Diversified Alternatives Fund.

This fund may be seen as a potential investment for a member who is looking to build up savings over the long term, who can weather shorter-term market fluctuations, but who wishes to have some protection against changes in the price of purchasing an annuity, or against times of stockmarket volatility through investing partially in the gilt and bond funds.

Cautious Fund Investment split equally between the Gilt Fund, the Index-Linked Gilt Fund and the Corporate Bond Fund.

This fund may be seen as a potential investment for a member who is seeking a more stable return, with some protection against rises in the price of purchasing annuities or against times of stockmarket volatility.

50% Global Equity Fund

20% UK Equity Fund

15% Diversified Beta Fund

15% Diversified Alternatives Fund

25% Global Equity Fund

20% Corporate Bond Fund

15% Diversified Beta Fund

15% Diversified Alternatives Fund

10% UK Equity Fund

7.5% Index-Linked Gilt Fund

7.5% Gilt Fund

33.3% Gilt Fund

33.3% Index-Linked Gilt Fund

33.3% Corporate Bond Fund

The table below is a quick reference to the main types of investments that each of the funds holds.

Fund Main types of investment the fund holds

Alternatives Equities Bonds Cash

Asset class funds

UK Equity Fund Global Equity Fund Global Equity Tracker Fund Emerging Market Equity Tracker Fund

Diversified Beta Fund Diversified Alternatives Fund Gilt Fund Index-Linked Gilt Fund Corporate Bond Fund Money Market Fund Risk and growth based funds

Adventurous Fund Mixed Fund Cautious Fund

ChargesEach fund carries a Total Expense Ratio (TER) which the investment manager charges to manage the fund. This is the total charges applicable to each fund, expressed as a percentage. Fees include the annual management charge, administration charges and Fund expenses. The current charges are shown on the summary sheet, available online at www.hartlinkonline.co.uk/batpensions. If you invest in a particular fund, the relevant charges will be taken into account in the price of the units in your Personal Account. We will tell you if a change of manager materially alters the cost of investing in a fund.

Please note:

● each fund has a specific investment objective and performance target;

● the Trustee has sought a range of assets, managers, regions and approaches to investment. This will spread (and therefore aim to reduce) the risks involved in trying to achieve the desired returns. In addition, the structure of the funds enables the Trustee to monitor and manage the investment managers effectively. The way that the funds have been set up means that the managers can be replaced without the need to alter the fund options.

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The table below shows the risk assessment of each asset class fund. You should refer to page 4 for an explanation of the different types of risk. The risk assessments are only indicative and should not be relied on in making your investment decisions.

Fund Risk assessment of fund

Capital risk Pension conversion risk Inflation risk Default risk

Asset class funds

UK Equity Fund High High Medium Not applicable

Global Equity Fund High High Medium Not applicable

Global Equity Tracker Fund High High Medium Not applicable

Emerging Market Equity Tracker Fund

High High Medium Not applicable

Diversified Beta Fund Medium/High Medium Medium Medium

Diversified Alternatives Fund Medium/High Medium Medium Medium

Gilt Fund Medium Low* High Low

Index-Linked Gilt Fund Medium Low* Low** Low

Corporate Bond Fund Medium Low* High Medium

Money Market Fund Low High*** Low** Not applicable

Risk and growth based funds

Adventurous Fund High High Medium Not applicable

Mixed Fund Medium/High High Medium Low

Cautious Fund Medium Low Medium/High Low

* The bond funds are generally considered to be a good match for the price of purchasing a pension but it does depend on what type of pension you are planning to purchase. For example, if you are planning to purchase an inflation-linked pension then the Index-Linked Gilt Fund is likely to be the lowest risk asset. However, if you are planning to purchase a pension that is not linked to inflation then the Gilt Fund or Corporate Bond Fund are likely to be better suited.

** The Index-Linked Gilt Fund is a good match for expectations of future inflation but the Money Market Fund can be a better match for existing inflation or short-term inflation.

*** For that part of your pension that you take as tax-free cash, the Money Market Fund is low risk.

How to chooseGiven that you will ultimately use some or all of the value of your fund to buy a pension, you should begin with thinking about what you really want from your Personal Account. Are you looking for a certain level of pension in retirement? When do you want to retire? How far away are you from your intended retirement age?

Your aim is more than likely to maximise the growth of your Personal Account over the time period until your retirement, to give you as large a pension as possible. To meet this aim you may want to invest in funds that provide a good opportunity for growth. However, generally funds that provide the potential for higher growth also carry a higher level of capital risk.

If you are a long way from retirement you may feel you can cope with any short-term falls in the value of your Personal Account to benefit from any longer-term increases in the value of your investments. In contrast, as you approach retirement you may want to protect

your Personal Account from any short-term fluctuations in value. To do this, you may look to move your Personal Account into different types of funds that offer the opportunity for less growth but more protection as you approach retirement age.

To help with your decisions, you can use ‘Invest-it’, an online tool that is available at www.batpensions.com/InvestIt. This will help you to determine your attitude to investment, and to risk. It will also guide you through the decision-making process of where to invest. However, it does not provide financial advice.

There are many issues involved in making your investment decision. The Trustee recommends that you speak to an IFA (see page 10).

For more detail about each of the available funds, please see the fund fact sheets at www.hartlinkonline.co.uk/batpensions.

The LifeStyle approach initially invests in funds which are designed to grow your investments and this continues until you are within 10 years of your selected retirement age. It then changes your investment, gradually and automatically, into funds designed to protect the value of your benefits as you approach retirement. The funds that are used are the Adventurous Fund, the Mixed Fund, the Cautious Fund and the Money Market Fund in varying proportions depending on how far you are from your selected retirement age, as shown in the table below.

As the LifeStyle approach is a pre-set investment strategy linked to your selected retirement age (which you would have signalled on your Joiner’s Form when joining the Scheme) it is very important that you let the BAT Pensions Administration Team know if your plans change and you now intend retiring at a different age.

Your investments will be switched into the proportions shown in the table on a quarterly basis. For more detail about each of the funds that are used in the LifeStyle approach, please see the fund fact sheets at www.hartlinkonline.co.uk/batpensions.

You may switch between the LifeStyle approach and making your own fund choices at any time.

The default option

You should note that the LifeStyle approach is the default investment option. This means that if you do not make an investment selection when you first become a Defined Contribution Scheme member (or you start paying AVCs into the Fund) any contributions to your Personal Account will be invested using the LifeStyle approach assuming a retirement age of 60.

The LifeStyle approach

If you do not wish to be actively involved in making investment decisions, there is a LifeStyle strategy available. The LifeStyle strategy is a specially designed investment strategy (set by the Trustee in conjunction with its investment advisers) which automatically switches your investments as you approach retirement to help reduce unexpected fluctuations in the value of your Personal Account and, as far as possible, to protect the amount of pension you can buy with your savings.

0

20

40

60

80

100Money Market

Cautious

Mixed

Adventurous

% o

f you

r Pe

rson

al A

ccou

nt

Years to selected retirement age*

10 ormore

9 8 7 6 5 4 3 2 1 0

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* Your selected retirement age is the age by which your Personal Account will be switched completely out of the Adventurous Fund and Mixed Fund into the Cautious Fund and the Money Market Fund. You can select any age between 55 and 75. The age you choose will be kept confidential and does not oblige you to draw your benefits from the age you select. To change your selected retirement age contact the BAT Pensions Administration Team (see page 10 for details). If you do not make a personal choice your selected retirement age will be 60.

The age you choose will be used to calculate any illustrations that you are given, either on the website or on a benefit statement.

You can only have one selected retirement age at any time, which will apply to all your funds within the Scheme (including regular contributions, AVCs and transfers in).

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Your decision

Your investment strategy (and the option(s) you select) will be based on a number of factors, including your attitude to risk and the length of time until your retirement. You can make a choice by completing the Joiner’s Form. You should remember:

● you can invest in any number of funds from the range on offer;

● if you do not wish to be actively involved in making investment decisions you can select the LifeStyle approach;

● if you do not make an investment selection your Personal Account will be invested using the LifeStyle approach;

● if you do not specify a selected retirement age we will assume that your selected retirement age is 60;

● you should review your investment strategy regularly.

Reviewing your decision

You can change your investment strategy at any time (for your Personal Account and/or future contributions, if appropriate) by changing funds or switching in and out of the LifeStyle approach. If you would like to make a change you should contact the BAT Pensions Administration Team.

Help and information

If you have any questions, or would like more information about any aspect of the Scheme, please contact the BAT Pensions Administration Team:

Tel: +44 (0)114 229 7609Fax: +44 (0)114 273 0299

In writing: BAT Pensions Administration Team Capita Hartshead House 2 Cutlers Gate Sheffield S4 7TL United Kingdom

Email: batpensions@capita.co.uk Website: www.hartlinkonline.co.uk/batpensions

Making a decision

Important

Your choice of investment options will be based on a number of personal factors, including your attitude to taking risk and the length of time until your retirement. If you need advice based on your personal circumstances you should speak to an independent financial adviser. For details of your nearest independent financial adviser please visit www.unbiased.co.uk.

While the Trustee can provide you with information about the available investment options, it cannot offer you advice that is specific to your circumstances.

Please remember the value of your investments can go down as well as up and you may get back less than you invested.

The Trustee is responsible for monitoring the investment options offered to you. The Trustee may at any time without notice, close, terminate or merge any investment options, stop allocating further contributions to any investment option, or otherwise modify an option. The Trustee will always try to provide advance notice of any change to the range of investment options offered but this may not always be possible.

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DefinitionsThis guide uses certain words that may need further explanation. These are shown below to help you understand any terms that may not be familiar to you.

Active management – an active manager aims to outperform a specific target (for example, a market index or other fund managers). Although the potential returns from active investments (if successful) can be higher than passive investments over the long term, there is also a risk that they will be worse. Charges for actively managed funds tend to be higher than for passively managed funds.

Alternatives (or ‘alternative investments’) – this is the term used for any form of investment which offers similar potential for growth to equities over the longer term, but which doesn’t depend solely on the stockmarket going up to generate this return. Examples include property, some higher-risk bonds, commodities and currency.

Like equities, these types of investments carry high ‘capital risk’. However, as the returns on these investments are not driven by the stockmarket, their value may rise and fall in a different way and at different times to equity funds. Therefore, investing in alternative assets alongside equities would help to spread your risks.

Beta – this is the return due to a specific market or asset class, rather than manager skill. Normally it is measured by calculating the return on an index or benchmark. For traditional asset classes like equity, the majority of the investment return is expected to come from beta rather than manager skill.

Bonds – these are loans to a government, company or other organisations. The level of capital risk falls somewhere between cash and equities. The return on your investment is the interest you receive on the loan. This interest can either be ‘fixed’ (for example 5%) or ‘index-linked’ (which means that it varies in line with inflation). Bonds generally have a maturity date (when the loan is repaid) and bond funds usually hold a mix of bonds with different maturity dates. Bond prices usually fall when interest rates rise (and vice versa).

Investing in bonds closer to retirement might help to protect the buying power of your Personal Account. This is because the cost of buying a pension depends partly on the price of bonds and gilts. In the past, bonds and gilts have had lower returns over longer periods than equities, but they are generally less volatile i.e. they are not so prone to large short-term fluctuations in value.

Cash – these funds invest in short-term interest bearing investments, short-term bonds and other money market instruments. The value of an investment in cash can occasionally fall in the short term, although cash investments typically have the lowest capital risk of the main asset classes. Returns on cash funds over the longer term may not keep pace with inflation, so the buying power of your investment may reduce. They can provide good security for your pension savings if you are about to retire, but may not provide good long-term returns.

Diversification – the process of investing in a number of different asset classes and individual investments within those asset classes so as to reduce exposure to any one specific source of risk.

Equities – these are shares in companies. In the past they have grown in value better than bonds, gilts or cash over longer periods. However, they can go up and down in value, particularly in the short term. Equities are likely to carry a high capital risk that they could fall in value, so you might want to choose a fund that invests mainly in equities if you are aiming for higher long-term returns and are not too worried about losing value over shorter periods. You may be more willing to invest mainly in equities if, for example, retirement is still some way off or you have other secure investments or your BAT pension is only a small part of your retirement savings.

Fund – this is the British American Tobacco UK Pension Fund.

Gilts – bonds issued by the UK Government.

Hedging – when you invest in an overseas investment, your return comes from two sources: how the actual investment performs (whether it increases or decreases); and how the overseas currency moves in relation to Sterling (£). By hedging the currency moves, you only experience the relative movement in the investment. The currency movement element is removed.

Index fund – another term for a passively managed fund.

Money market – the market for short-term fixed income investments, typically with less than one year to maturity.

Passive management – a passive manager aims to match the performance of a chosen market index (sometimes known as index tracking). It follows the market whether it goes up or down and so returns do not depend on the success of the fund managers’ choices. Passive management reduces the possibility that your investments will do better than the market, but it also reduces the risk that they will do worse. Charges for passively managed funds tend to be lower than for actively managed funds.

Personal Account – an account set up in your name as a member of the Defined Contribution Scheme, a member of the Defined Benefit section of the Fund who has paid additional voluntary contributions (AVCs) or has previous pension benefits transferred-in and invested through the Defined Contribution Scheme or a member of the old Rothmans money purchase plan.

Risk – all investments carry a level of risk but there are different types, including capital risk, inflation risk and pension conversion risk. You need to decide how much of each type of risk you are prepared to take. Further details are given on page 4.

Trustee – British American Tobacco UK Pension Fund Trustee Limited.

Revised April 2014

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