Investment Risks

The Defined Income Plan may not be a suitable for all investors. Keydata has taken all reasonable steps to minimise the potential risk to investors and to operate the Plan in accordance with its aims. However, you need to be aware of the following risks which may have an adverse affect on the performance of the Plan:

Changes to the predicted maturity rates

The actuarial modelling used to provide the financial model is based on recognised industry standards. There is a risk that a significant technological or pharmaceutical development could impact on the accuracy of the models and when the contracts are likely to mature. This could result in reductions in the value of contracts or delayed cash flow which could mean that capital might not be returned in full at the end of the term.

Insolvency and bankruptcy of parties

There is a risk to investors’ capital and the provision of income should any of the parties involved in delivery or management of the Plan become insolvent or be declared bankrupt.

Failure by parties to undertake their obligations

There is a risk that any of the parties involved in delivery or management of the Insurance Contracts within the portfolio fail in their legal or contractual obligations in relation to the operation of the Plan. Under these circumstances there could be a risk to investors capital or the provision of income.

Policy lapse

Should the Custody Agent fail to pay premiums due on the Insurance Contracts the value of the underlying assets will decrease. If this were to happen capital might not be returned in full at the end of the term.

Verification risk

There is a risk that the investment adviser does not check the Insurance Contracts against the investment criteria properly before approval is given to purchase the contract. This could effect the predicted maturity date of the contract. If this were to happen capital might not be returned in full at the end of the term.

Income requirements

Life Contracts within the portfolio may have to be sold before maturity to maintain sufficient cash for the Bond to meet its liabilities. These include the payment of income to investors and the payment of premiums on the Insurance Contracts. If this were to happen capital might not be returned in full at the end of the term.

Changes in the market for second-hand contracts

If the market for second-hand Insurance Contracts is less active in the future, it may take longer to sell or buy Insurance Contracts or the value of Insurance Contracts may become less than anticipated in future. If this were to happen capital might not be returned in full at the end of the term.

Interest rate changes

The value of insurance contracts is based in part on the prevailing interest rate at the time. Should interest rates increase, it is possible that the market value of an Insurance Contract may fall in value. If this were to happen capital might not be returned in full at the end of the term.

Currency exchange rate changes

The Life Insurance Contracts are denominated in US Dollars and the Bond is denominated in UK Sterling. Significant changes in the US$ / UK£ exchange rate could have an adverse affect on the sterling value of the Bond. If this were to happen capital might not be returned in full at the end of the term.

Changes to the legal, political and economic environment

The Plan has been developed in accordance with our understanding of current legislation and economic policy within the governing jurisdictions of all of the different parties involved with delivery of the Plan. A change of government or economic policy and legislation in any of these jurisdictions could have an adverse affect on the operation of the Plan and the value of the underlying assets of the Bond. In extreme circumstances, this could affect both the income generated in the Plan and the return of investors’ investment capital at the end of the term.

Changes to the tax treatment for investments

The projections for income and return of capital are based on our current understanding of UK tax law. A change to tax laws could adversely affect the income paid and could mean that capital is not returned in full at the end of the term.

Your circumstances could change

The Defined Income Plan is designed to be held for the full investment term. Should your circumstances change and the Plan is no longer suitable you may need to withdraw before the end of the term. If you need to withdraw by selling your investment at any time during the investment period, a withdrawal administration fee of £150+VAT will be levied. In addition, as all charges are reflected in the terms of the Plan, the value of your investment is likely to be less than the amount originally invested, particularly during the early years of the Plan.

The Plan is under- subscribed

In the event of low subscription the Plan will not be issued and capital, without interest, will be returned to investors.

The effect of inflation