Capital Investment Portofilio

Contents

1. Providing investment solutions
2. Why Scottish Provident International?
3. Why the Isle of Man?
4. A flexible and rewarding investment
5. A tax efficient investment
6. Additional options
7. Further information
8. Important Notes Capital Invesment Portofilio

Providing investment solutions

Global investment opportunities. More and more people now recognise the benefits of investment in 'real' assets such as stocks and shares. While bank deposits are a sensible investment for short-term savings and as a source of emergency cash, in the medium to longterm it is investments in real assets which have historically given greatest growth.

But the sheer diversity of global stock markets generally puts such investment opportunities outside the reach of most individual investors. The typical investor does not have the market knowledge or trading experience to take advantage of these markets and, in any event, could soon be overwhelmed by the paperwork, cost and time involved in keeping track of an extensive portfolio.

Professional management For the vast majority of investors, investment through 'pooled funds' offers a cost effective solution which can bring the benefits of a world-wide investment portfolio within reach. Pooled funds operate by grouping the capital of many investors, enabling them to benefit from professional investment management and reduce the potential risks of stock market investment by avoiding overdependence on particular stocks, markets or geographic sectors. The investment manager is also able to place deals more cost effectively because he is trading stocks in large quantities.

The ideal solution The Capital Investment Portfolio is a pooled investment which links you with Scottish Provident International's award winning investment funds* and enables you to share in the exciting and rewarding world of international financial markets.

The Capital Investment Portfolio has been specifically designed for the medium to long-term international investor. It gives you the opportunity to create your own world-wide investment portfolio, but in a plan which is legally structured as a life assurance policy and which is straightforward and simple to operate.

* Standard & Poor's Micropal Awards 1998, 1997, 1996 and 1995.

Why Scottish Provident International?

A solid pedigree Scottish Provident International operates from the Isle of Man. Since it was established in 1991, the company has enjoyed a period of strong growth, with funds under management in excess of £ 1 billion*.

Scottish Provident International is a wholly owned subsidiary of Abbey National plc, one of the top 6 banks in the UK by market capitalisation, whilst the Abbey National Group serves some 15 million customers in the UK and overseas.

Scottish Provident International is committed to providing both individual and corporate clients with an innovative range of investment, savings, retirement and protection solutions. Success has been built upon a continued commitment to investment excellence, innovative product design and providing clients and their advisers with the highest quality service.

Investment expertise Scottish Provident International benefits from the investment expertise of Aberdeen Asset Management Limited.

The investment philosophy and approach of Aberdeen Asset Managers focuses on achieving "growth at a reasonable price". The stock selection criteria targets companies, on reasonable or low valuations, that are likely to deliver above average growth in earnings and dividends, over the long term.

The resources of Aberdeen deliver a strong presence in all of the key economic markets of the world. This global spread provides regional expertise, superior market knowledge and research to deliver consistent investment performance. This complements the global representation of Scottish Provident International to provide dedicated support in all key regions in which the company operates.

*Funds under management as at 1st January 2001.

Why the Isle of Man?

The Isle of Man is well established as a tax efficient financial centre with a sound reputation for security and political stability. Strict supervision of the activities of the insurance companies is exercised by the Isle of Man Government and comprehensive compensation arrangements are in place to further safeguard the interests of the international investor.

Investors throughout the world receive comprehensive protection through the Isle of Man Life Assurance (Compensation of Policyholders) Regulations 1991.

Companies on the island fully subscribe to anti-money laundering laws and directives.

Why the Capital Investment Portfolio?
The Capital Investment Portfolio allows you access to world-wide investment opportunities within the tax efficient structure of a unit linked, whole of life assurance policy. There is no maximum time for which you must invest, allowing you to take full advantage of the long-term growth potential this type of investment can offer.

Investment choice If you wish, you can link your investment to one or any number of the funds offered by Scottish Provident International - there is no maximum number. This way investors can tailor the right investment mix to suit their needs and attitude to investment returns and risk.

A comprehensive range of funds

• managed
• equity
• specialist
• bond
• deposit

A flexible and rewarding investment

Finding the right solution When building a portfolio, it can be wise to spread the investment over a variety of funds, creating the preferred balance between risk and reward.

To help the investor decide which fund or funds are most suitable for them, Scottish Provident International has given each fund a risk/reward rating.

The risk/reward rating is designed to give an indication of the weighting of each Scottish Provident International fund relative to other funds we offer. The rating should be used in conjunction with consideration of the investor's personal circumstances and intended investment term.

For full details, please refer to the Investment Fund Guide.

Phased switching Timing is one of the most crucial factors affecting the performance of an equity based investment, but getting the timing right can be difficult. If you do not wish to make the decision about when to invest in a particular equity based fund you can take advantage of our phased switching facility.

With this facility, you can initially place your money in one of our lower risk deposit funds. Each month, Scottish Provident International will then automatically switch a proportion of the value of the investment into the fund or funds of your choice. By taking advantage of this facility, you need not worry about the timing of the investment and at the same time may be able to take advantage of any fluctuations in investment markets.

Extra investment potential Normally 100% of your money is allocated to units in the fund or funds of your choice. However, larger investments benefit from an increased allocation rate as outlined below:

Additional investments can also benefit from increased allocation rates. Where an additional investment brings the total invested under one Portfolio into a higher allocation band, the higher allocation applies to all of the additional investment. The initial investment remains unaffected.

For example, an initial investment of £40,000 will receive an allocation rate of 100%. If an additional investment of £20,000 is made the additional investment will receive an allocation rate of 10 1 % as total investments now exceed £50,000.

Switching your investment With the Capital Investment Portfolio you can easily and cost effectively alter your investment to take into account market movements or any changes in personal circumstances or investment objectives. You can switch funds up to 24 times each year free of charge giving you considerable flexibility.

Choice of currency You can choose to have your Portfolio denominated in Sterling, US Dollars, Japanese Yen or Euro. The chosen currency will be used to specify the amount of money invested, however, investments may be made in any freely convertible currency.

The minimum initial investment to the Capital Investment Portfolio is GBP 1 0,000/USD 1 5,000/JPY 1,700,000/EUR 15,000. However, additional investments can be made at any time. These will be allocated to the funds you specify and will be divided equally amongst the existing policies which make up your Portfolio. The minimum additional investment is GBP2,500/USD4,000/JPY425,000/EUR4,000.

A tax efficient investment

The Capital Investment Portfolio provides you with the opportunity to structure a highly tax efficient investment.

Investment growth Under Isle of Man law, there is no liability to tax on the income or capital gains of the funds linked to the Capital Investment Portfolio. So, apart from any withholding tax deducted at source on income from some assets held in some countries, your investment effectively grows tax free.

joint investment Setting up your investment on a joint basis can provide further flexibility. By including two or as many as six lives on your Portfolio at outset, the death benefit will become payable when the last life assured dies. The Portfolio will continue until that time, providing additional flexibility to cash in the Portfolio at the most tax efficient time, or when investment conditions are more suitable.

A range of trusts For even greater tax efficiency, you can also write your Capital Investment Portfolio in trust. Scottish Provident International offers a comprehensive range of trust wordings which includes a wording designed to meet the diverse financial planning needs of those who are not resident in the UK but who are still treated as domiciled in the UK. This valuable facility is currently available free of charge.

Multiple policy option Your Capital Investment Portfolio can be set up as a series of up to 100 separate policies which can be dealt with independently. This important feature offers you greater flexibility for effective tax planning and allows you to easily distribute the Portfolio proceeds to your selected beneficiaries.

Additional options

Additional life assurance cover Normally the benefit paid on death is 101% of the encashment value of units allocated to your Portfolio. However, if there are no more than two lives assured, and you are in reasonably good health, you may apply for additional life assurance cover up to the limits set out in the Information Guide which should be read in conjunction with this brochure. A charge will be made and deducted from your Portfolio monthly.

Share Exchange Scheme If you have an existing holding of stocks and shares, this can be exchanged for units in the Capital Investment Portfolio. Scottish Provident International will look after the paperwork involved in the sale, which can be a cost effective and convenient alternative to selling the shares yourself.

Access to your investment The Capital Investment Portfolio is designed to provide investment growth over the medium to long term. However, you can have access to your money at any time. If you need to you can completely cash in one or more of the individual policies making up your Portfolio and receive the value of units in any freely available currency. Alternatively, it may be more tax efficient to simply take a partial cash withdrawal from each of your policies.

Regular withdrawals If you wish to augment your income, you can arrange to take advantage of the regular withdrawal facility. With this facility you can arrange to receive a payment monthly, quarterly, half-yearly or yearly.

For any withdrawal, an early encashment charge applies, which covers the original cost of establishing the Portfolio. However, withdrawals of up to 10% of the Portfolio value may be taken each year without the early encashment charge applying. For additional investments, the early encashment rules apply from the date of the additional investment.

Further information

Portfolio charges To meet the costs involved in setting up and maintaining your Capital Investment Portfolio, charges are levied.

A choice of charging structures is available and full details are included in the Capital Investment Portfolio Information Guide which should be read in conjunction with this brochure.

Personal taxation The personal tax treatment of your Capital Investment Portfolio depends on your country of residence or domicile and personal circumstances. You are strongly advised to consult your professional financial adviser to discuss your own taxation position as Scottish Provident International cannot give individual tax advice.

The tax treatment of any benefits you take from your Capital Investment Portfolio will depend on your country of residence or domicile and personal circumstances at the time. For example if you are a UK resident you will have a possible income tax liability on a chargeable event (such as a surrender or a withdrawal exceeding 5% p.a.) which is reportable through Self Assessment. You should be aware that when you create a chargeable event Scottish Provident International is required to provide details of the chargeable event to the Inland Revenue if the value of the gain is in excess of half the basic rate threshold.

If you become a US taxpayer, you should be aware that your Capital Investment Portfolio does not qualify as a life insurance or an annuity contract for US tax purposes. As a result, increases in the cash value would be subject to current federal income taxation and death benefit proceeds would not be excludable from the recipient's income.

Before you apply, you should satisfy yourself that you are allowed to make this type of investment and are not prevented from doing so by any exchange controls or legislation that may apply to you. You are strongly advised to consult your financial adviser to discuss your own taxation position, as Scottish Provident International cannot give personal taxation advice.

Keeping track of your investment Each year you will receive a statement showing the value of your Portfolio. If you wish, you can follow the performance of the investment funds in which you are invested by reviewing the unit prices which are published in the Financial Times. If you are in any doubt as to which funds you hold investments in, please contact us direct.

Important Notes Capital Invesment Portofilio

The Capital Investment Portfolio is available exclusively through independent financial advisers and the Company does not provide individual investment advice.

Scottish Provident International is supervised by the Isle of Man Insurance and Pensions Authority. As a Scottish Provident International policyholder the investor receives the protection of the Isle of Man life Assurance (Compensation of Policyholders) Regulations 1991. The Company reserves the right to adjust the returns from investments to cater for any levy or charge made on the Company under these regulations or similar legislation.

Holders of policies issued by the Company will not be protected by the UK Policyholders Protection Act 1975 if the Company should be unable to meet its liabilities to them.

It is important to know that unit prices reflect the value of the underlying assets of the funds and so can go down as well as up. Past performance is not necessarily a guide to future performance. Where a fund invests in overseas securities, the unit prices may also rise and fall purely on account of exchange rate fluctuations.

The Capital Investment Portfolio is not available in certain jurisdictions such as the Isle of Man, South Africa, Hong Kong or the United States or its territories*. Nor is it being offered to citizens in the US or its territories*. if you become resident or a citizen in some jurisdictions, some aspects of your portfolio may have to be curtailed or modified to maintain compliance with local regulations. For example, if you purchase a portfolio and later become resident in the United States or its territories*, there will be restrictions placed on your portfolio while you are resident there. These include the inability to switch the funds placed with the Company among the investment options as otherwise permitted under the portfolio and the inability to make additional investments.

You are obliged to notify us of a change of address, residence or citizenship.

* United States territories refers to Puerto Rico, US Virgin Islands, Northern Mariana Islands, Guam, American Samoa, Wake Island and the Trust Territory (a group of islands in the South Pacific including the Marshall Islands).

The information contained in this brochure is based on the Company's understanding of Isle of Man legislation and UK Revenue law and practice as at July 2001. While every care has been taken, the Company cannot accept responsibility for its interpretation or any subsequent changes.

Potential investors should discuss their own particular situation with their professional adviser to ensure that they are eligible to invest in the Capital Investment Portfolio.