Stakeholder Discretionary Child Trust Fund Questions and Answers

Q. Do you only offer stakeholder CTFs on a discretionary basis?

A. Yes, if you wish to make your own investment decisions you need to open a non-stakeholder CTF.

Q. If I elect for a stakeholder CTF how will you invest the money?

A. Pilling & Co invest monies via a discretionary management facility. That is to say we decide on your behalf how to invest CTF money to provide a suitable risk and reward solution. All of our discretionary managed stakeholder CTFs will have the same approach until lifestyling takes effect at age 13.

In choosing our risk/reward profile we have taken into account the guidelines set out by the government in its information to stakeholder CTF providers. This means that investment can be made into equities, both in the UK and overseas, as well as proportions of cash and bonds, both corporate and government-issued, within a single priced fund. Pilling & Co’s investment managers will decide how this investment process is to be styled, whether it be via a single fund or multiple funds.

Pilling’s Investment Managers are currently allocating 100% of CTF monies to the Baillie Gifford Managed Fund. We provide details below to explain the nature of this investment and background performance.

Fund Aim
Aims to achieve above average returns over the long term by investing worldwide in securities in any economic sector. The Fund will be diversified by holding different asset classes, by investing internationally and by holding companies operating in a wide range of industries. The portfolio will also have holdings in some medium and smaller sized companies as well as the largest 'blue chips'. A portion of the Fund may be invested in derivatives, both for investment as well as hedging purposes.

Top Ten Holdings as at 27/02/09
Stock Name	%
BG Investment Grade Bond Fund	9.2
BG Emerging Markets Large Cap Co Fund	8.0
BG Overseas Bond Fund	5.8
BG Gilt Plus Fund	5.4
BG Emerging Markets Growth Fund	3.3
BG (British Gas) Group	2.8
British American Tobacco	1.9
GlaxoSmithKline	1.9
BG Emerging Markets Bond Fund	1.8
Imperial Tobacco	1.7

Discrete Annual Performance % Increase or Decrease
Dates	Class A -Inc	Sector Average*
31/12/03 to 31/12/04	8.6%	10.2%
31/12/04 to 31/12/05	18.4%	20.7%
31/12/05 to 31/12/06	9.0%	9.9%
31/12/06 to 31/12/07	8.3%	4.3%
31/12/07 to 31/12/08	-19.1%	-22.9%
Past success should not be seen as an indication of future performance

Cumulative Performance to 27th February 2009
	6 Months	1 Year	3 Years	5 Years
Class A - Inc	-23.7%	-24.5%	-19.9%	7.0%
Sector Ranking	95/147	66/136	37/107	39/87
Sector Average	-21.7%	-24.4%	-20.2%	9.2%

Launch Date: 1 April 1987
Fund Size: £282.38m
IMA Sector: Balanced Managed

About Baillie Gifford
Baillie Gifford is one of the UK's leading independently owned investment management firms.  It is owned and run by 33 of its senior executives who operate as a partnership, a structure which has endured for almost a century and which provides stability for clients and motivation for employees.  It enables them to manage the business for the future as well as the present, with the emphasis on genuine long–term thinking rather than short term targets.

As at 31 March 2009 their assets under management exceeded £40 billion (US$58 billion), a sizable figure but one achieved by steady organic growth rather than being artificially inflated by merger or acquisition.  More important is their ability to sensibly manage and support the needs of their clients.

At the heart of the firm is their investment approach, something which incorporates the development of people as well as philosophy and processes.  They are active managers and are prepared to back their judgement in the composition of portfolios and their management.  For their holdings they seek well-managed businesses where sustainable competitive advantages can be demonstrated.

Q. What is lifestyling?

A.   Lifestyling is the requirement for a stakeholder CTF to be switched into lower risk investments when the child reaches age 13. It is designed to protect the value of the fund over the last few years before the child reaches age 18.

Q. How often do you deal in the stakeholder CTF?

A.  We generally deal twice a month to invest new contributions and  to sweep up any cash on the account into the fund. In the event of a large number of contributions arriving shortly after investment day we may, at our discretion, add additional investment days to invest those new funds.

If we decide to switch funds or diversify into additional funds under the discretionary arrangement, then this may result in extra deals in that particular month.

Q. Will I know when deals are being carried out on my stakeholder CTF?

A. Investment decisions will be made without prior reference to you. However, you will receive an annual statement showing any transactions made in the CTF so you can always see what is going on with the account.

Q. Can I cancel the discretionary agreement?

A.  Yes, you must give us written notice to cancel the agreement and stipulate if you wish the investments to be sold. Your CTF will automatically be transferred to a non-stakeholder CTF with Pilling & Co (which will incur different charges and investment parameters) unless you ask us to transfer it to another CTF provider. If you elect for a stakeholder CTF on our application form you are agreeing to these terms and conditions under a discretionary management agreement.

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