Quarterly Compass Portfolio Report Q2 – 2021 Quarterly Compass Portfolio Report 2

Introduction

Quilter International provides you with access to the Compass Portfolios (Portfolios), a range of risk- targeted portfolios managed by the multi-asset business of Quilter plc, Quilter Investors.

The table below lists the Quilter International Isle of Man and Quilter International Ireland products that provide access to these Portfolios and the corresponding Compass Portfolio name.

Fund name Quilter International Isle of Man (QIN IM)/ Quilter Investors Compass Portfolios Quilter International Ireland (QIN IE) Available through Quilter International Isle of Man/ Compass Portfolios Ireland Portfolio Bonds. Available through the Managed Capital Account, Executive Wealthbuilder Account and European Capital Account. Risk rating High risk QIN IM/QIN IE Compass Portfolio 5 Quilter Investors Compass 5 Portfolio

QIN IM/QIN IE Compass Portfolio 4 Quilter Investors Compass 4 Portfolio

Low risk QIN IM/QIN IE Compass Portfolio 3 Quilter Investors Compass 3 Portfolio

The Quilter Investors Compass Portfolios are the underlying funds for the Quilter International Compass Portfolios. Please visit www.quilterinternational.com/compassportfolios for further information about the Compass Portfolio range.

Investing can be complex, which is one of the reasons why Quilter International only sells its products through financial advisers. We recommend that you speak to your financial adviser if you have any questions, or if there is anything in this report which you need explained further. We have included a glossary on page 18. Quarterly Compass Portfolio Report 3

A note from the Portfolio Manager Global equity markets continued to make progress during the second quarter of 2021, while bond markets recovered from the previous quarter’s sell-off. This was a positive backdrop for the Compass Portfolios, which delivered positive returns across the board, albeit with the higher-risk portfolios outperforming the lower-risk ones due to the former’s higher weighting in equities. During the period, there were some rotations in the market between growth and value stocks and large cap versus small cap companies, which slightly reversed some of the trends we had witnessed in the first quarter. The Compass Portfolios tend to have more of a bias towards value, so this style tilt did drag slightly on overall performance. Across the range, the portfolios delivered the following returns in the second quarter: Compass 3 Portfolio 3.9%; Compass 4 Portfolio 5%; Compass 5 Portfolio 6.9%.

Key investment themes of the quarter: – The vaccine roll-out and economic re-openings boosted global equity markets; – Last quarter’s rotation into ‘value’ areas of the market reversed with ‘growth’ stocks significantly outperforming; – Yields fell in most government bond markets (meaning their prices rose) with higher-risk corporate bonds outperforming government bond assets; – Sterling weakened against the euro but held onto gains against the US dollar; – Oil prices hit a three-year high as demand for commodities picked up amid a spurt in global growth. Sacha Chorley Portfolio Manager Quarterly Compass Portfolio Report 4

Summary of Compass Portfolio 3

Asset allocation breakdown Allocation as at previous quarter end (%) % Change

Equities 6.10%

Fixed Income -6.70%

Alternatives 2.40% Cash -1.70%

20% 40% 60% 80%

Performance as at 30 June 2021 The Quilter Investors’ Compass 3 Portfolio’s percentage growth year by year

Compass 3 Compass 3 Compass 3 Compass 3 Compass 3 Holding Name Portfolio - A Portfolio - A Portfolio - A Portfolio - A Portfolio - A (AUD) Hedged (EUR) Hedged (GBP) Hedged (SGD) Hedged (USD)

Launch date 14/10/2016 19/04/2016 19/04/2016 19/04/2016 19/04/2016

2020 6.30% 6.00% 6.20% 7.20% 8.00%

2019 12.60% 10.30% 11.60% 12.90% 13.80%

2018 -9.70% -12.00% -11.00% -10.10% -9.30%

2017 11.60% 9.00% 9.90% 10.70% 11.50%

The Quilter Investors’ Compass 3 Portfolio’s percentage growth to month end

Compass 3 Compass 3 Compass 3 Compass 3 Compass 3 Holding Name Portfolio - A Portfolio - A Portfolio - A Portfolio - A Portfolio - A (AUD) Hedged (EUR) Hedged (GBP) Hedged (SGD) Hedged (USD)

3 months 3.90% 3.70% 3.90% 4.00% 3.90%

6 months 5.70% 5.50% 5.80% 5.90% 6.00%

1 year 21.30% 20.80% 21.40% 21.80% 22.10%

3 years 17.70% 13.40% 15.90% 19.20% 21.70%

5 years N/A 21.00% 25.80% 31.40% 35.90%

Since launch 28.40% 18.40% 23.20% 29.20% 33.60%

Where a fund invests in securities designated in a different currency to the currency of the Quilter International product or where an underlying fund is denominated in a different currency, investments may rise and fall purely as a result of exchange rate fluctuations. Past performance is not necessarily indicative of future performance. Any prediction, projection, or forecast on the economy, securities markets or the economic trends of the markets is not necessarily indicative of the future performance. The value and any income accruing to the investments, if any, may fall or rise. An investment is subject to investment risks, including the possible loss of the principal amount invested. Exchange rates may cause the value of overseas investments to rise or fall. Source: Factset. © Morningstar. All Rights Reserved. All information as at 30 June 2021 unless otherwise stated. Performance net of charges displayed relates to the underlying Portfolio as provided by Quilter Investors. The Old Mutual Compass Portfolio 3 (the “Original Fund”) was launched as a Sub-Fund of Merian Global Investors Series plc and was merged on 7 June 2019 into the Quilter Investors Compass 3 Portfolio, a Sub-Fund of Quilter Investors ICAV. The performance history for Quilter Investors Compass 3 Portfolio shown on the above table includes the performance of the Original Fund for the period from the Launch date to the date of the merger on 07/06/2019. Due to rounding and the use of the derivatives – financial instruments that derive their values from other underlying assets – the allocations may not add up to 100%. Quarterly Compass Portfolio Report 5

Summary of Compass Portfolio 4

Asset allocation breakdown Allocation as at previous quarter end (%) % Change

Equities 5.70%

Fixed Income -6.20%

Alternatives 1.80% Cash -1.30%

20% 40% 60% 80% 100%

Performance as at 30 June 2021 The Quilter Investors’ Compass 4 Portfolio’s percentage growth year by year

Compass 4 Compass 4 Compass 4 Compass 4 Compass 4 Holding Name Portfolio - A Portfolio - A Portfolio - A Portfolio - A Portfolio - A (AUD) Hedged (EUR) Hedged (GBP) Hedged (SGD) Hedged (USD)

Launch date 14/10/2016 19/04/2016 19/04/2016 19/04/2016 19/04/2016

2020 8.60% 8.50% 8.50% 9.80% 10.70%

2019 16.90% 14.60% 15.90% 17.30% 18.30%

2018 -12.70% -14.80% -13.90% -13.00% -12.10%

2017 16.80% 14.00% 14.90% 15.80% 16.70%

The Quilter Investors’ Compass 4 Portfolio’s percentage growth to month end

Compass 4 Compass 4 Compass 4 Compass 4 Compass 4 Holding Name Portfolio - A Portfolio - A Portfolio - A Portfolio - A Portfolio - A (AUD) Hedged (EUR) Hedged (GBP) Hedged (SGD) Hedged (USD)

3 months 4.90% 4.70% 4.90% 5.00% 5.00%

6 months 8.40% 8.30% 8.60% 8.80% 8.80%

1 year 29.90% 29.50% 30.10% 30.60% 31.00%

3 years 25.00% 20.60% 23.00% 26.90% 29.80%

5 years N/A 36.00% 40.90% 47.90% 53.40%

Since launch 42.70% 32.40% 37.00% 44.50% 50.10%

Where a fund invests in securities designated in a different currency to the currency of the Quilter International product or where an underlying fund is denominated in a different currency, investments may rise and fall purely as a result of exchange rate fluctuations. Past performance is not necessarily indicative of future performance. Any prediction, projection, or forecast on the economy, securities markets or the economic trends of the markets is not necessarily indicative of the future performance. The value and any income accruing to the investments, if any, may fall or rise. An investment is subject to investment risks, including the possible loss of the principal amount invested. Exchange rates may cause the value of overseas investments to rise or fall. Source: Factset. © Morningstar. All Rights Reserved. All information as at 30 June 2021 unless otherwise stated. Performance net of charges displayed relates to the underlying Portfolio as provided by Quilter Investors. The Old Mutual Compass Portfolio 4 (the “Original Fund”) was launched as a Sub-Fund of Merian Global Investors Series plc and was merged on 7 June 2019 into the Quilter Investors Compass 4 Portfolio, a Sub-Fund of Quilter Investors ICAV. The performance history for Quilter Investors Compass 4 Portfolio shown on the above table includes the performance of the Original Fund for the period from the Launch date to the date of the merger on 07/06/2019. Due to rounding and the use of the derivatives – financial instruments that derive their values from other underlying assets – the allocations may not add up to 100%. Quarterly Compass Portfolio Report 6

Summary of Compass Portfolio 5

Asset allocation breakdown Allocation as at previous quarter end (%) % Change

Equities 7.50%

Fixed Income -6.90%

Alternatives 0.00% Cash -0.60%

-20% 0% 20% 40% 60% 80% 100% 120%

Performance as at 30 June 2021 The Quilter Investors’ Compass 5 Portfolio’s percentage growth year by year

Compass 5 Compass 5 Compass 5 Compass 5 Compass 5 Holding Name Portfolio - A Portfolio - A Portfolio - A Portfolio - A Portfolio - A (AUD) Hedged (EUR) Hedged (GBP) Hedged (SGD) Hedged (USD)

Launch date 14/10/2016 19/04/2016 19/04/2016 19/04/2016 19/04/2016

2020 10.60% 11.00% 10.80% 12.30% 13.40%

2019 20.80% 18.50% 19.70% 21.20% 22.20%

2018 -14.60% -16.70% -15.90% -15.00% -14.00%

2017 22.70% 19.90% 20.90% 21.60% 22.80%

The Quilter Investors’ Compass 5 Portfolio’s percentage growth to month end

Compass 5 Compass 5 Compass 5 Compass 5 Compass 5 Holding Name Portfolio - A Portfolio - A Portfolio - A Portfolio - A Portfolio - A (AUD) Hedged (EUR) Hedged (GBP) Hedged (SGD) Hedged (USD)

3 months 6.70% 6.60% 6.80% 6.90% 6.90%

6 months 11.30% 11.10% 11.50% 11.60% 11.80%

1 year 39.50% 39.10% 39.70% 40.30% 40.80%

3 years 32.30% 28.20% 30.50% 34.90% 38.30%

5 years N/A 53.60% 58.60% 66.50% 73.70%

Since launch 53.60% 58.60% 66.50% 73.70% 68.20%

Where a fund invests in securities designated in a different currency to the currency of the Quilter International product or where an underlying fund is denominated in a different currency, investments may rise and fall purely as a result of exchange rate fluctuations. Past performance is not necessarily indicative of future performance. Any prediction, projection, or forecast on the economy, securities markets or the economic trends of the markets is not necessarily indicative of the future performance. The value and any income accruing to the investments, if any, may fall or rise. An investment is subject to investment risks, including the possible loss of the principal amount invested. Exchange rates may cause the value of overseas investments to rise or fall. Source: Factset. © Morningstar. All Rights Reserved. All information as at 30 June 2021 unless otherwise stated. Performance net of charges displayed relates to the underlying Portfolio as provided by Quilter Investors. The Old Mutual Compass Portfolio 5 (the “Original Fund”) was launched as a Sub-Fund of Merian Global Investors Series plc and was merged on 7 June 2019 into the Quilter Investors Compass 5 Portfolio, a Sub-Fund of Quilter Investors ICAV. The performance history for Quilter Investors Compass 5 Portfolio shown on the above table includes the performance of the Original Fund for the period from the Launch date to the date of the merger on 07/06/2019. Due to rounding and the use of the derivatives – financial instruments that derive their values from other underlying assets – the allocations may not add up to 100%. Quarterly Compass Portfolio Report 7

Holdings within the Compass Portfolios

Fund manager Compass Compass Compass Holding name (where applicable) Asset type Portfolio 3 Portfolio 4 Portfolio 5 EQUITY 57.50% 77.09% 101.70% ASIA PACIFIC (INC JAPAN) EQUITY 5.76% 9.83% 12.12% AB INTERNATIONAL HEALTH CARE NEW CITY COLLECTIVE 2.22% 2.12% 2.16% BAILLIE GIFFORD JAPANESE INCOME GROWTH BAILLIE GIFFORD COLLECTIVE 0.54% 0.76% 1.22% FIDELITY ASIA PACIFIC OPPORTUNITIES FIDELITY COLLECTIVE 1.65% 3.42% 3.61% ISHARES JAPAN INDEX BLACKROCK COLLECTIVE 0.02% 0.01% 0.74% ISHARES PACIFIC INDEX BLACKROCK COLLECTIVE 0.26% 0.77% 1.00% SCHRODER ORIENTAL INCOME SCHRODER COLLECTIVE 0.26% 0.48% 0.40% SPARX JAPAN SUSTAINABLE EQUITY SPARX COLLECTIVE 0.82% 1.04% 1.51% TOPIX SEPTEMBER 2021 FUTURE -0.55% 0.00% 0.00% USONIAN JAPAN VALUE USONIAN COLLECTIVE 0.54% 1.23% 1.48% EMERGING MARKETS EQUITY 1.12% 2.18% 4.96% ISHARES EMERGING MARKETS INDEX BLACKROCK COLLECTIVE 0.03% 0.03% 0.04% MERIAN GLOBAL EMERGING MARKETS MERIAN COLLECTIVE 0.00% 0.01% 0.04% MSCI EMERGING MARKETS MINI SEPTEMBER 21 FUTURE -1.36% -1.53% 0.00% PACIFIC NOS EM EQUITY NORTH OF SOUTH COLLECTIVE 1.57% 2.04% 2.38% QUILTER INVESTORS EMERGING MARKETS GROWTH JPMORGAN COLLECTIVE 0.29% 0.56% 1.08% SANDS EMERGING MARKETS GROWTH SANDS CAPITAL COLLECTIVE 0.59% 1.07% 1.42% EUROPEAN EQUITY 1.89% 4.03% 7.37% ISHARES EUROPE EX UK INDEX BLACKROCK COLLECTIVE 0.83% 3.03% 6.33% QUILTER INVESTORS EUROPE (EX UK) EQUITY HENDERSON COLLECTIVE 1.06% 1.00% 1.04% GLOBAL EQUITY 36.08% 35.58% 33.39% FIDELITY GLOBAL FOCUS FUND FIDELITY COLLECTIVE 5.60% 5.42% 6.34% QUILTER INVESTORS GLOBAL DYNAMIC EQUITY QUILTER INVESTORS COLLECTIVE 19.97% 19.48% 14.83% SANDS GLOBAL LEADERS FUND SANDS CAPITAL COLLECTIVE 5.33% 5.54% 7.06% WELLINGTON DURABLE ENTERPRISES WELLINGTON COLLECTIVE 5.18% 5.14% 5.16% NORTH AMERICAN EQUITY 10.56% 22.40% 39.29% BNY MELLON US EQUITY INCOME BNY MELLON COLLECTIVE 3.32% 5.49% 7.06% EMINI NASDAQ 100 SEPTEMBER 21 FUTURE 0.00% 0.00% 5.32% EMINI S&P 500 SEPTEMBER 21 FUTURE 0.00% 0.00% 2.94% ISHARES NORTH AMERICA INDEX BLACKROCK COLLECTIVE 0.87% 8.36% 10.47% QUILTER INVESTORS US EQUITY GROWTH JPMORGAN COLLECTIVE 3.29% 3.49% 6.76% SCHRODER US SMALL AND MID CAP SCHRODER COLLECTIVE 3.08% 5.06% 6.74% PRIVATE EQUITY 0.78% 0.79% 1.04% HARBOURVEST GLOBAL PRIVATE EQUITY HARBOURVEST COLLECTIVE 0.78% 0.79% 1.04% UK EQUITY 1.31% 2.28% 3.53% ISHARES UK INDEX BLACKROCK COLLECTIVE 0.52% 0.75% 1.24% QUILTER INVESTORS EQUITY 1 (MERIAN) MERIAN COLLECTIVE 0.01% 0.01% 0.01% UNICORN OUTSTANDING BRITISH COMPANIES UNICORN COLLECTIVE 0.78% 1.52% 2.28%

FIXED INCOME 20.93% 8.35% 1.83%

CORPORATE BONDS 3.84% 1.36% 0.00% QUILTER INVESTORS BOND 1 (TWENTY FOUR) TWENTY-FOUR COLLECTIVE 1.36% 0.53% 0.00% QUILTER INVESTORS BOND 2 (FIDELITY) FIDELITY COLLECTIVE 0.00% 0.01% 0.00% QUILTER INVESTORS BOND 3 (JPM) JPMORGAN COLLECTIVE 0.12% 0.04% 0.00% WELLINGTON GLOBAL CREDIT PLUS (USD HEDGED) WELLINGTON COLLECTIVE 2.36% 0.78% 0.00% EMERGING MARKET DEBT 1.44% 0.61% 0.00% INTER-AMERICAN DEVELOPMENT BANK 5.500% 23/08/21 BOND 0.15% 0.08% 0.00% ISHARES J.P. MORGAN USD EM BOND BLACKROCK COLLECTIVE 1.29% 0.53% 0.00%

GOVERNMENT BONDS 8.06% 3.52% 1.83%

10Y AUSTRALIA T-BOND SEPTEMBER 21 FUTURE 2.36% 0.75% 0.00%

GOVERNMENT OF THE UNITED STATES OF AMERICA 0.0% BOND 3.30% 1.52% 1.83% 28/10/2021 ISHARES GLOBAL GVT BOND UCITS ETF (USD HEDGED) BLACKROCK COLLECTIVE 0.38% 0.18% 0.00% UNITED STATES TREASURY BILL 3% MAY 2045 BOND 0.28% 0.27% 0.00% Quarterly Compass Portfolio Report 8

Holdings within the Compass Portfolios (cont’d)

Fund manager Compass Compass Compass Holding name (where applicable) Asset type Portfolio 3 Portfolio 4 Portfolio 5 GOVERNMENT BONDS 8.06% 3.52% 1.83% 10Y AUSTRALIA T-BOND SEPTEMBER 21 FUTURE 2.36% 0.75% 0.00% GOVERNMENT OF THE UNITED STATES OF AMERICA 0.0% 28/10/2021 BOND 3.30% 1.52% 1.83% ISHARES GLOBAL GVT BOND UCITS ETF (USD HEDGED) BLACKROCK COLLECTIVE 0.38% 0.18% 0.00% UNITED STATES TREASURY BILL 3% MAY 2045 BOND 0.28% 0.27% 0.00% UNITED STATES TREASURY NOTE 0.875% NOVEMBER 2030 BOND 1.62% 0.80% 0.00% UNITED STATES TREASURY NOTE 1.6% OCTOBER 2026 BOND 0.53% 0.00% 0.00% US GOVERNMENT BOND EXPOSURE (2Y) FUTURE -0.41% 0.00% 0.00% OTHER FIXED INCOME 7.59% 2.86% 0.00% AQR GLOBAL AGGREGATE BOND AQR COLLECTIVE 6.12% 2.10% 0.00% BIOPHARMA CREDIT PHARMAKON CAPITAL COLLECTIVE 0.17% 0.00% 0.00% HIPGNOSIS SONGS FUND LTD CEF CATCO COLLECTIVE 0.52% 0.50% 0.00% SEQUOIA ECONOMIC INFRASTRUCTURE SEQUOIA COLLECTIVE 0.26% 0.00% 0.00% WELLS FARGO SHORT-TERM HIGH YIELD WELLS FARGO COLLECTIVE 0.52% 0.26% 0.00% ALTERNATIVES 14.89% 11.97% 1.98% OTHER ALTERNATIVE (INC HEDGE FUNDS) 14.89% 11.97% 1.98% CZ ABSOLUTE RETURN ALPHA CZ COLLECTIVE 2.02% 1.60% 0.50% JANUS ABSOLUTE RETURN INCOME JANUS HENDERSON COLLECTIVE 2.84% 1.99% 0.25% MERIAN UK SPECIALIST R MERIAN COLLECTIVE 1.59% 1.55% 0.00% MYGALE EVENT DRIVEN MYGALE COLLECTIVE 3.13% 2.42% 0.25% NEUBERGER MACRO FX OPPORTUNITIES NEUBERGER BERMAN COLLECTIVE 2.09% 1.62% 0.25% SANDBAR ASSET SANDBAR GLOBAL EQUITY MARKET NEUTRAL COLLECTIVE 1.43% 1.23% 0.24% MANAGEMENT ALLIANZ FIXED INCOME MACRO FUND ALLIANZ COLLECTIVE 1.79% 1.56% 0.49% Cash 6.69% 2.61% -5.49% Total 100% 100% 100%

All references to we, us and our in the following section mean Quilter Investors. The structure of the Compass Portfolios provides access to the skills of managers in the institutional or corporate market as well as access to managers who are already available to individual investors through retail funds. Managers that we select in the institutional market are asked to manage a mandate (essentially this is simply a written agreement with us on how we want our investment to be managed on our behalf) – this allows us to control the investment boundaries, including the types of investment and the level of risk we want the manager to take. By tailoring the mandate we can also ensure each manager focuses on the areas where we think they are most skilled – giving them the best chance to outperform. These mandates may be held as Quilter Investors funds. Cash may include settled cash on deposit in various currencies. Where there are investments in derivatives, the holdings value of derivative contracts may be expressed on a notional basis to give a clear indication of the exposure each derivative contract is providing to the portfolio. As a result of expressing the derivatives in this manner, the cash total will include a cash offset (as if the derivative contract has been closed) which may cause the cash total to be understated compared to the actual cash held on deposit by the portfolio at each reporting point (a negative value may occur). Exposure held through the Quilter Investors Compass Portfolio’s (the “Portfolios”) position in the Quilter Investors Global Dynamic Equity Fund (QIGDEF): QIGDEF is a multi-manager fund in which the Portfolios invest in order to gain core exposure to global equities (company shares). This approach enables the Portfolios to gain the required exposures to global equities in a more efficient manner than buying the individual investment held within the QIGDEF separately. It also enables the Portfolios to gain exposure to investment strategies that would otherwise be inaccessible. Source: Quilter Investors, as at 30 June 2021. Due to rounding and the use of derivatives – the allocations may not total 100%. Quarterly Compass Portfolio Report 9

Markets in the second quarter of 2021

Life returning to normal, despite Delta concerns Vaccination programmes continued apace during the second quarter of the year, albeit with added urgency as the emergence of the more virulent Delta variant saw new cases starting to rise once again. News of more stimulus for the US economy also boosted markets, as President Joe Biden continued to make good on his campaign promises, this time to upgrade America’s crumbling infrastructure. However, inflation fears are beginning to stalk markets as economies have bounced back, fuelled by pent-up consumer demand and supply constraints. A spike in US inflation was especially notable; it hit 5% in May, while a smaller spike, to 2.1%, was seen in the UK. Even so, investors were reassured by the US and European central banks, which both maintained that any spike in inflation resulting from ultra-loose monetary policy would be transitory. In its June meeting, the Federal Reserve’s Open Market Committee (FOMC) also confirmed that it will continue to increase its monthly purchases of Treasury and mortgage-backed securities until substantial further progress has been made toward the committee’s maximum employment and price stability goals. The committee had previously made subdued references to the future need to start discussing ‘tapering’ – namely reducing its asset-purchase programme – implying that investors would have plenty of notice before any such moves were undertaken. Meanwhile, markets continued to respond positively to the vaccine roll-out with commodity and energy prices performing especially strongly in the expectation of rising post-pandemic demand. Brent crude prices rose from $63.52 per barrel at the end of March to over $75 by the end of June – levels not seen since 2018. Elsewhere, gold prices rallied early in the period but eased significantly in June thanks to the Federal Reserve’s assurances that the spike in inflation – a key driver of gold prices – would be fleeting. Even so, the price of gold finished the quarter higher than where it started, as did the prices of industrial metals, reflecting the backdrop of strong economic growth. Strong performance for equities (almost) across the board Given the more bullish investor sentiment, most equity markets made strong progress over the second quarter with the MSCI World Index adding 7.9% over the period. Companies in the US were especially strong performers. They led global markets thanks to an especially strong first quarter earnings season and the notable rotation back into growth stocks, which tend to dominate US equity markets. As a result, the MSCI USA Index gained 8.9% during the quarter. Meanwhile, the MSCI World Growth Index added 11% over the quarter compared to a more meagre 4.9% from the MSCI World Value Index, while larger company indices significantly outperformed smaller company indices. European equities also made strong progress, with the MSCI Europe ex-UK Index gaining 8.3% as the vaccine roll-out gathered pace and was bolstered by stronger economic data. In the UK, equity performance was more subdued as its so-called ‘Freedom Day’ was delayed by a month as cases of the Delta variant surged. Nevertheless, the FTSE 100 Index, which is dominated by companies geared to the global economy, gained 5.8%, while the more domestically-focused FTSE 250 Index of mid-cap stocks added 4.9%. Emerging market equity returns were slightly more muted as the Delta variant took hold in India and elsewhere in Asia. Nevertheless, the MSCI Emerging Markets Index was up by 5.1% in the quarter while its largest constituent, China, saw gains of just 2.3% according to the MSCI China Index as policy tightening took hold and Chinese government regulators continued to ramp up their scrutiny of local technology companies. Elsewhere, not even the prospect of the forthcoming Tokyo Olympics was enough to boost Japanese stocks as the country was forced to reimpose lockdown in a number of prefectures amid a rise in new coronavirus infections. Consequently, the MSCI Japan Index declined 0.3% over the quarter, despite making reasonable gains in June. Bond investors seek out riskier assets Ongoing support from central banks has taken more government bonds out of the market and this helped yields to fall during the second quarter (meaning their prices rose) after the steep rises seen in the previous quarter. As a result, the Bloomberg Barclays Global Aggregate Government - Treasuries Index (USD Hedged) was up by 0.6% during the quarter. Rising investor risk appetite in the face of falling government bond yields helped to drive interest in higher-risk corporate bonds (issued by companies), which outperformed. As such, the Bloomberg Barclays Global Aggregate - Corporate Index (USD Hedged) gained 2.4% while the Bloomberg Barclays Global High Yield Index (USD Hedged) rose 2.9%. Nevertheless, the FOMC meeting in June suggested a significant shift in the outlook for US interest rates as the spectre of inflation hung over the economy putting US households under further pressure. The Federal Reserve committee now expects two rate hikes in 2023, up from zero three months previously. This had the impact of bond yields falling (bond prices rising) at longer maturities. There is ongoing debate on whether technical factors such as quantitative easing and investor positioning exacerbated the moves. Quarterly Compass Portfolio Report 10

Understanding ‘value’ and ‘growth’ In general terms, ‘value investment’ approaches target those companies regarded as looking cheap relative to the value of their assets (also known as their ‘intrinsic’ or ‘book’ value). Value stocks tend to be either well-established but unloved businesses, which often offer high levels of dividend, or alternatively companies whose share prices have fallen materially, often due to perceived issues with the company’s business model or operating environment. Good examples of value stocks include banks, oil and mining, utility and industrial companies although any company whose valuation is below the market average is generally regarded as a ‘value stock’. Meanwhile, ‘growth investing’ is more focused on capital growth than on collecting dividends. Growth stocks tend to be more dynamic companies whose earnings are expected to increase faster than those of other companies in their industry sector or the broader market. They tend to pay limited dividends as they are busy reinvesting their profits in growing their businesses. Growth stocks are most commonly found in the technology sector with companies like the ‘FAANGs’ the most prominent example of recent years. Other ‘cyclical’ areas (meaning companies most impacted by the economic cycle) such as consumer goods, leisure and travel or the automobile sector often contain ‘growth’ stocks. The same is true of areas like biotech. Ultimately, any company with a disruptive business model, ground-breaking new technology or an irresistible new line of consumer goods can find itself classified as a ‘growth’ stock if its earnings growth starts to outpace that of the broader market.

(All data in US dollar terms and rounded to one decimal place unless otherwise stated.)

Performance analysis

With global equities delivering a fifth consecutive quarter of gains, our equity holdings were the chief contributor to performance in the period. However, the underlying performance was something of a mixed bag. The Compass Portfolios are currently positioned with a tilt towards value stocks and towards the end of the quarter we saw a shift in the growth/value style dynamic in favour of growth that weighed on our overall performance. That said, manager selection was a driver of returns, with both growth and value-biased managers delivering returns against a changing market backdrop. Within fixed income, our exposure to emerging market hard currency debt (ie where bonds are denominated in US dollars rather than the local currency) performed well throughout the quarter, as did our more high-yielding alternative income investment trust exposures. Our alternatives exposure also delivered positive returns in the period. We have adopted a slight overweight position to alternatives, relative to our strategic asset allocation (SAA) model, which is a reflection of both the low yields available on cash and the more attractive opportunities that are available in this space. This tactical decision benefited the Compass Portfolios during the quarter. Equity fund performance of the period The top equity fund performers of the quarter included the Pacific North of South Emerging Market Equity Fund where, despite the market backdrop, the value-biased strategy delivered strong positive returns relative to both emerging markets in general and the broader value index. The AB International Healthcare Fund delivered positive returns, even though, stylistically, it’s a value addition to the portfolios, it offers additional stock section benefits from its focus on higher-quality healthcare companies. However, some of our other value holdings struggled in the period, including the BNY US Equity Income Fund, which gave back some of its performance having performed particularly well in the first quarter of the year. In addition, the Usonian Japan Value Fund struggled in the period as it faced the headwinds of the value and small-cap style factors compounded by stock-specific challenges in the portfolio. The Schroder US Small and Mid Cap Fund has a quality focus that can help offset the challenges faced by small caps in the period, however, its performance was weighed down by stock picks in the energy and consumer sectors. Quarterly Compass Portfolio Report 11

Performance of fixed-income and alternative funds in the quarter Thanks to a rebound in bond markets following last quarter’s sell-off, the performance of our fixed-income holdings was a positive contributor to overall returns. The main driver of performance came from the ‘riskier’ end of the spectrum in the form of our more esoteric alternative income investment trusts. In particular, the BioPharma Credit Fund, the Fair Oaks Income Fund – which invests in US and European CLO (collateralised loan obligations) – and the Sequoia Economic Infrastructure Fund (Compass 3 only) all outperformed high-yield bonds in the quarter, which also outperformed thanks to rising investor risk appetite in the face of falling government bond yields. Meanwhile, the Wellington Global Credit Plus Fund delivered strong absolute returns, but slightly lagged behind the global corporate bond benchmark. Within the alternatives space, the Jupiter UK Specialist Fund was among the top performers. This UK focused long/short fund generated solid absolute returns over the period. This was closely followed by the Mygale Event Driven Fund, which also had a positive quarter. In contrast, the Allianz Fixed Income Macro Fund, managed by Mike Riddell, was slightly down during the quarter. However, part of the thesis for owning this manager is for the diversification of return streams and defensive positioning as it should theoretically perform strongly in down markets. Elsewhere, the Hipgnosis Songs Fund, which is a music royalty trust, delivered positive corporate returns albeit they were fairly flat in terms of price appreciation for the quarter. Meanwhile, the Sandbar Global Equity Market Neutral Fund, struggled a little during the period.

Portfolio activity

Investment activity was restrained during the quarter. In the equity portfolio, the main change was the decision to remove our overweight tactical tilts to emerging market equities to bring them back to neutral relative to our SAA model and to reduce our underweight exposure to European equities. During the period, the deterioration in emerging markets caused us to review the position driven by China’s tightening of monetary policy, through a curb on lending. In contrast, European data is improving and there are signs the momentum may be shifting from the US to Europe as re-opening continues across the continent. In addition, there are signs that monetary tightening is closer in the US than in Europe, while the latter is cheaper than the former on a valuation basis. Within fixed income, we removed our overweight tactical tilt to global investment-grade corporate bonds. It has performed well even after we locked-in profits in the first quarter of this year. As the risk/reward outlook for investment-grade bonds is now less favourable we made the decision to reduce the position to neutral, relative to our strategic asset allocation. Changes to the equity portfolio

Activity Fund name Rationale

Sold Jupiter Global Emerging We removed this lower conviction holding as part of our reduction of emerging market equity exposure. Markets Focus Fund (Previously Merian Global Emerging Markets Fund) Changes to the fixed-income and alternatives portfolios

Activity Fund Rationale

New holding iShares Global We introduced a new position here to diversify our government bond Government UCITS ETF

Sold Quilter Investors Bond 2 We exited this position as part of our moves to reduce our overall allocation to investment-grade Fund bonds to a neutral exposure (relative to our SAA) over the period.

Sold Wells Fargo US$ We exited our small position in order to concentrate our exposure into our preferred manager – Investment Grade Credit the Wellington Global Credit Plus Fund – as we reduced our investment-grade credit allocation over Fund the period.

Increased Wellington Global Credit We marginally increased our position here as we recycled the proceeds from the sale of the Wells Plus Fund Fargo bond fund as we consolidated our investment-grade exposure as part of the reduction in our allocation to the asset class. Quarterly Compass Portfolio Report 12

Investment outlook

The second quarter was fairly benign despite the macroeconomic uncertainty and market participants being a little bit jumpy. As we progress through the summer, the path of least resistance is likely to result in markets continuing to drift slightly higher – unless anything unexpected happens. From here, returns are set to be dominated by the progress different economies make following their respective re-openings. Given that vaccination rates continue to improve, our base case is that the current path will continue with a general increase in economic activity, but with possible pockets of uncertainty, such as Japan, which declared a state of emergency and banned spectators from the Olympics just weeks before the opening ceremony. That said, valuations are high and, at the margins, supportive policies are being withdrawn. As we get further into summer we might see some of the recent highs slow or fall back somewhat. This suggests it’s a fine balancing act and this is reflected in the Compass Portfolios by a fairly neutral outlook across asset classes. Quarterly Compass Portfolio Report 13

Glossary

Investing can be complex, which is one of the reasons why Quilter International only sells its products through financial advisers. In this glossary we have explained some of the terminology used in this report. We recommend that you speak to your financial adviser if you have any questions, or if there is anything in this report which you need explained further. Derivatives Financial instruments that are, in effect, legal contracts between several parties, which derive their values from other underlying assets. ‘Long/Short’ managers Long/short managers use an investment strategy that involves buying and selling equities using long and short positions. Having a long position means the manager owns the equity (or ‘stock’) and expects that it will rise in value in the future. A ‘short’ position generally means selling an equity the manager doesn’t own, in the expectation that its price will decrease in value, and they can buy it back at a lower price and make a profit. Mandate An investment mandate is a general philosophy or list of restrictions or permissions about how a pool of capital can be invested or put to work. Quantitative easing This is a form of unconventional monetary policy in which a central bank purchases longer-term securities from the open market in order to increase the money supply and encourage lending and investment.

Important information

You should be aware that investments, unit prices and income from units may fall as well as rise and you may not get back the amount you invested. Past performance is not a guide to future performance. Where a fund invests in securities designated in a different currency to the currency of the Quilter International product or where an underlying fund is denominated in a different currency, investments may rise and fall purely as a result of exchange rate fluctuations. Quilter International does not provide investment advice. This material is provided for information purposes only and should not be relied or acted on by the recipient. It is not a recommendation to buy, sell or hold a particular investment. Full details of the relevant products for the Compass Portfolios can be obtained from your financial adviser or from our website at www.quilterinternational.com. www.quilterinternational.com www.quilterinternational.com/hk Calls may be monitored and recorded for training purposes and to avoid misunderstandings. Quilter International Isle of Man Limited is registered in the Isle of Man under number 24916C. Registered and Head Office: King Edward Bay House, King Edward Road, Onchan, Isle of Man, IM99 1NU, British Isles. Phone: +44 (0)1624 655 555 Fax: +44 (0)1624 611 715. Licensed by the Isle of Man Financial Services Authority. Quilter International is registered in the Isle of Man as a business name of Quilter International Isle of Man Limited. Quilter International is the registered business name of Quilter International Isle of Man Limited Singapore Branch. Quilter International Isle of Man Limited Singapore Branch, CapitaGreen #06-02, 138 Market Street, Singapore 048946. Phone: +65 6216 7990 Fax: +65 6216 7999. Registered in Singapore Number T08FC7158E. Authorised by the Monetary Authority of Singapore to conduct life assurance business in Singapore. Member of the Life Insurance Association of Singapore. Member of the Singapore Finance Dispute Resolution Scheme. Quilter International Middle East Limited, registered in the Dubai International Financial Centre under number 0962 Office 7 and 8, Level 2 Gate Village 7, Dubai International Financial Centre (DIFC), PO Box 482062, Dubai, UAE. Quilter International Middle East Limited (QIME) is authorised by the Dubai Financial Services Authority (DFSA) to support licensed intermediaries in the distribution of Quilter International’s products issued by Quilter International Isle of Man Limited. Quilter International Middle East Limited is authorised and regulated by the Dubai Financial Services Authority. Quilter International’s Hong Kong office: Unit 3704, Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong. Phone: +852 3552 5888 Fax: +852 3552 5889. E-mail: [email protected]. Authorised by the Insurance Authority of Hong Kong to carry on long term business. Quilter International Ireland dac is regulated by the Central Bank of Ireland. Registered No 309649. Administration Centre for correspondence: King Edward Bay House, King Edward Road, Onchan, Isle of Man, IM99 1NU. Tel: +353(0)1 479 3900 Fax: +353(0)1 475 1020. Registered and Head Office address: Hambleden House, 19-26 Lower Pembroke Street, Dublin D02 WV96, Ireland. VAT number for Quilter International Ireland dac is 6329649S. Quilter International is registered in Ireland as a business name of Quilter International Ireland dac.

12879/INT21-1568/August 2021