Guaranteed Investment Fund

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1 Guaranteed Investment Fund As at 30th September 2018 Management of some of the Guaranteed Investment Fund tranches was transferred from Insight Investment to St Andrews Life Assurance (SALA). The tables in this factsheet show who manages each tranche and from which date. The factsheet also provides information about the fund sizes, asset splits and past performance of the Guaranteed Investment Fund.

2 Information for the tranches managed by SALA The Guaranteed Investment Fund tranches managed by SALA are invested 100% into the Global Liquidity Fund and the investment manager is Aberdeen Standard Investments (ASI), a subsidiary of Standard Life Aberdeen. Market update US and Japan drive global equities gains The world s two largest economies, the United States and China, dominated events as a political showdown ended with the United States imposing $200 billion of trade tariffs on China, which retaliated with $60 billion of tariffs on US imports. Despite strained international relations, global equities achieved modest gains, buoyed by US shares and a strong performance from Japanese equities. The MSCI All World Composite Index rose by 0.5% (a gain of 0.1% in sterling) in September. Brexit uncertainty remained a key factor for UK assets, while European shares and bonds were affected by worries over Italy s budget deficit and debt. Turkey was in the spotlight as it raised interest rates to 24% in an effort to combat soaring inflation and a sharp decline in the value of the lira against the dollar. In emerging markets, major economic problems affecting Argentina, Venezuela and South Africa had a negative impact. The International Monetary Fund granted Argentina a loan of $57 billion, the biggest in its history, to tackle a currency crisis and rocketing inflation. The MSCI Emerging Markets Index fell by 1.2% (total returns in local currency) and by 0.9% in sterling. Both the S&P 500 and the Dow Jones Industrial Average were propelled to record highs by a buoyant US economy and strong corporate earnings. The S&P 500 advanced by 0.5% in dollar terms (0.2% in sterling) and even regulatory worries, which sparked falls in major technology shares, failed to halt what is now the longest bull market in Wall Street history. The yield on US 10-Year Treasuries rose throughout September, breaching 3%. UK shares gained, despite warnings from Bank of England Governor Mark Carney that failure to agree a Brexit deal could have serious consequences for the UK economy. The FTSE All-Share Index rose by 0.7% in terms of total returns. The FTSE 100 Index rose by 1.2% as the index includes a number of major exporters which benefit from dollar gains against the pound. UK government bonds (gilts) and sterling experienced volatile trading over the month. Sterling fell sharply against the dollar on 21 September when Prime Minister Theresa May said Brexit talks had reached an impasse and the 10-year gilt yield fell three basis points to 1.56%. September saw mixed indicators for global economic growth. The US economy grew by 4.2% in the second quarter, its fastest pace for almost four years. In Europe, meanwhile, the pace slowed and the European Central Bank (ECB) trimmed its growth forecasts for the 19-country Eurozone to 2.0% in 2018 and 1.8% in In the UK, revised quarterly data showed that the economy grew by just 0.5% in the first half, its weakest performance since This was partly offset by news of better-than-expected service sector activity in August. Services account for around 80% of the UK economy. There was more evidence that central banks are adopting different interest rate policies. The US Federal Reserve increased interest rates to 2.25% in September, the third increase this year, while the ECB held rates steady. The Bank of England (BoE) also kept rates unchanged after an increase in August. The ECB, which is reducing its bond buying stimulus by 50% from October, indicated that Eurozone rates will remain steady through to the summer of The BoE suggested rates could rise if the economy strengthens. Factors affecting the BoE s next move will include the surprise jump in inflation to 2.7% in August. Worries over Italy s strained finances, European banks exposure to Italian debt, and a reduction in Eurozone growth forecasts all weighed on European equities, particularly Italian bank shares. Italy announced a plan to run a budget deficit of 2.4% for three years, stoking concerns over its national debt, which is 131% of its gross domestic product, the second highest debt ratio in the Eurozone after Greece. The Euro STOXX 50 rose by 0.3% in euro terms (it fell 0.2% in sterling). An appreciation in the dollar versus the yen helped Japanese equities, as many large exporters will see the value of their overseas sales increase due to the higher value of the dollar. Japan recently overtook China as the second-largest stock market after the United States. The Nikkei 225 Index rose by 5.5% in local currency terms (2.6% in sterling), its biggest monthly gain since October Japanese shares were boosted by an influx of foreign buyers, which helped drive the Nikkei to a 27-year high. Meanwhile, the FTSE Developed Asia Pacific ex Japan Index declined by 0.5% (0.6% in sterling terms). Oil prices were the stand-out gainers among commodities. The benchmark Brent Crude price broke through $80 against a backdrop of falling production from key oilproducing nations, including Venezuela, as well as concerns over the effect of US sanctions against Iran on supply and OPEC s willingness to increase output. Source: Scottish Widows, October 2018.

3 Asset split as at 30th September 2018 Certificate of Deposit 34.6% Time Deposit 32.1% Floating Rate Note 12.3% Commercial Paper 11.9% Call Account 3.4% Govt Other 2.6% Government 2.2% Cash 0.8% Source: ASI, October Figures may not total 100% due to rounding. Funds managed by SALA Discrete annual performance % Tranche Managed from Fund size m GIF MAR November % 0.0% 0.0% 1.0% -0.6% 2. GIF JUN November % 0.0% 0.0% 1.0% -0.6% 3. GIF SEP November % -0.6% -0.3% 1.3% -0.6% 4. GIF DEC January % 0.0% 0.0% 4.1% -0.6% 5. GIF MAR January % 0.0% 0.0% 2.9% -0.7% 6. GIF JUN January % 0.0% 0.0% 4.9% -0.6% 7. GIF SEP January % 0.0% 0.0% 4.0% -0.6% 8. GIF DEC January % 0.0% 0.0% 3.0% -0.6% 9. GIF MAR January % 0.0% 0.0% 8.1% -0.6% 10. GIF JUN January % 0.0% 0.0% 5.7% -0.6% 11. GIF SEP January % 0.0% 0.0% 3.6% -0.6% 12. GIF DEC January % 0.0% 0.0% 4.1% -0.6% 13. GIF MAR January % 0.0% 0.0% 2.6% -0.6% 14. GIF JUN January % 0.0% 0.0% 3.3% -0.6% 15. GIF SEP January % 0.0% 0.0% 3.9% -0.6% 16. GIF DEC January % -0.5% -0.1% 4.2% -0.6% 17. GIF MAR January % -0.1% 0.0% 2.9% -0.6% 18. GIF JUN January % -0.3% 0.0% 0.0% 0.0% 19. GIF SEP January % -0.5% 0.0% 0.0% 0.0% Source: Scottish Widows, October Period covered is 1 October 2013 to 30 September Figures are in Sterling and are net of any charges. These figures refer to the past and past performance is not a reliable indicator of future results.

4 Information for the tranches managed by Insight Investment Fixed Income Gilt yields rose over the quarter. Markets anticipated a rate hike and yields rose ahead of the Bank of England s Monetary Policy Committee (MPC) meeting at the beginning of August, in which it unanimously voted to raise UK interest rates to 0.75%. In the accompanying policy statement the MPC commented that recent data confirmed that the softness of Q1 growth was temporary and that the economy had recovered momentum in Q2. It also highlighted that the labour market had continued to tighten and that unit labour cost growth had firmed. However, there were some signs of moderating economic growth. Over the quarter the yield curve rose overall, with shorter-maturity yields rising as a result of the UK interest rate increase and longer-maturity yields tracking global yields upwards. Uncertainty over Brexit negotiations continued to have an impact on sentiment. UK Equity Markets UK equities were down over the three months, underperforming relative to other major markets. Brexit uncertainty and softening economic data put pressure on share prices, though sterling weakness provided some support late in the quarter. The Bank of England s decision to raise interest rates to 0.75% in August was widely expected. Governor Mark Carney confirmed that he would remain in his role until early As in the bond markets, uncertainty over Brexit negotiations continued to have an impact on sentiment. Manager s comments The initial asset allocation for each tranche is set by market conditions at launch, interest rates and equity market volatility, and the need to underwrite the guarantee. Early tranches, which benefited from growth in equity markets before the credit crisis, had to reduce exposure to equities as a result of the significant market correction in More recent tranches are confronted with low interest rates and initially with high volatility. To meet the minimum return guarantee, exposure to equity had to start from relatively low levels. During the third quarter of 2018 the FTSE 100 Index returned -1.7% and annualised volatility was 9.4%. In the previous quarter, the index return and volatility were 8.2% and 12.0%, respectively. We will continue to monitor market conditions closely and will adjust exposure accordingly to ensure we deliver on the guarantee. Source: Insight Investment, October 2018.

5 Funds managed by Insight Investment Asset allocation % Discrete annual performance % Tranche Managed from Fund size m Equities Cash/ fixed interest GIF DEC GIF MAR GIF JUN GIF SEP GIF DEC 09 Inception % 54.5% 1.5% -6.2% 0.2% 2.4% 0.4% Inception % 56.1% 1.6% -5.5% 0.3% 2.4% 0.3% Inception % 67.0% 1.1% -5.2% 0.0% 1.6% -0.2% Inception % 75.6% 0.7% -4.8% -0.2% 0.9% -0.3% Inception % 81.5% 0.5% -3.6% -0.1% 0.8% -0.1% Source: Scottish Widows, October Period covered is 1 October 2013 to 30 September Figures are in Sterling and are net of any charges. These figures refer to the past and past performance is not a reliable indicator of future results.

6 It s easy to get in touch Come in and see us (lines open Monday to Friday 8.30am 6pm, Saturday 9am 12.30pm) halifax.co.uk/investments Do you need extra help? If you d like this in Braille, large print, audio CD or another format please ask in branch. If you have a hearing or speech impairment you can contact us using the Next Generation Text (NGT) Service (available 24 hours a day, 7 days a week). If you re Deaf and a BSL user, you can use the SignVideo service available at halifax.co.uk/accessibility/signvideo Halifax Financial Services is a trading name of Scottish Widows Limited. Scottish Widows Limited is registered in England and Wales No Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number / (10/18)