FC Quarterly Review - Q1 2022 v0.1

Quarterly Investment Report Q1 2022

We look at the key events and drivers for markets in the first quarter of 2022, and where we believe things are likely to go in Q2. Market Review Q1 2022 A war in Europe and a pivot by Central Banks from monetary easing to tightening were the key events driving financial markets in the first quarter of 2022. A war in Europe and a pivot by Central Banks from Staying in the UK, a raft of tax and price rises negatively monetary easing to tightening were the key events impacted real household incomes in the quarter. The driving financial markets in the first quarter of 2022. hit to the UK consumers’ wallets came in the form of a 54% rise in utility bills, a 1.25% NI contribution increase The Russian invasion of Ukraine has caused a and council tax rises. However, some of the pain was significant human toll and led to concerns about its offset by a strong labour market; unemployment close impact on the global economy. Russia is the 11th to record lows is leading to the first significant bout of largest economy in the world as measured by GDP wage inflation for several years. output, but is only 1/20th of the size of the US and 1/15th of the size of China, which mitigates the risk Given the volatility in markets in the quarter, global somewhat. equities ended the three months down 2.9%. The worst performing region was Europe ex UK, which fell However, Russia is the source of 10% of the world’s 7.4%. At the other end of the scale was Pacific ex Japan energy, and nearly 50% of the energy consumed in equities, which is has significant exposure to Australian Europe. As a result, we have seen soaring energy and banks and miners. The index rose 6.8% in the quarter. other commodity prices since the war began. These UK equities also delivered a positive return of 0.5%, helped lift inflation above 7% in the eurozone, above buoyed by strong returns from oil majors BP and Shell. 8% in the US and above 6% in the UK. The pivot by central banks negatively impacted fixed This inflation has prompted central banks across the income assets. Gilts fell 7.2% in the quarter while US world to raise interest rates. In the UK, the Monetary Treasuries were down 5.5%. The best performing fixed Policy Committee hiked rates to 0.75% and further income market was inflation linked bonds – which fell rate rises are likely as we move through 2022. only 2.9%. FlyingColours Market Insights - Q1 2022 2

Sector Performance We utilise the Investment Association (IA) sectors as both benchmarks against our portfolios and as indicators of specific market asset performance. Sector Q1 2022 IA Asia Pacific Excluding Japan -5.3% IA China/Greater China -19.3% IA Commodity/Natural Resources 11.6% IA Europe Excluding UK -4.9% IA Japan -6.3% IA Latin America 14.2% IA North America 3.1% IA Sterling Corporate Bond -6% IA UK All Companies -4% IA UK Gilts -6.9% IA UK Smaller Companies -7.6% Past performance should not be viewed as an indicator of future performance. Performance The FlyingColours Core Portfolios are a range of multi asset funds linked to an investor’s appetite for risk. This section, we look at how they have performed over the last quarter, and how this has impacted the overall cumulative and discrete performance over longer time periods. +60% +50% +40% +30% +20% +10% 0% -10% Name 3 Months 6 Months 1 year 3 Years 5 Years FC Core Defensive -2.9 -2.2 0.1 12 17.1 FC Core Conservative -2.3 -0.9 2.2 16.2 22.8 FC Core Balanced -1.7 0.4 4.4 20.0 27.8 FC Core Growth -1.1 1.7 6.5 23.5 32.5 FC Core Growth Plus -0.9 2.2 7.3 24.5 34.1 FC Core Aggressive -0.6 2.7 8.1 25.1 35.1 FlyingColours Market Insights - Q1 2022 3

Asset Allocation Negative Positive We are currently overweight UK, along with the introduction of inflation-linked bonds and gold equities We are currently overweight UK, along with the have delivered nicely. The inclusion of some value introduction of inflation-linked bonds and gold equities stocks has also benefited in decreased volatility and have delivered nicely. The inclusion of some value stocks some returns. has also benefited in decreased volatility and some returns. Negative Fund Selection HSBC FTSE 250 Index – UK mid-caps fell nearly 10% in the first quarter of 2022. Housing, retailers, travel Positive and leisure stocks were among the fallers. The lack of oil majors and miners in the mid-cap index meant Blackrock Gold and General – Gold equities benefited it markedly underperformed FTSE 100 names in the from a c.$100 rise in the gold spot price in the first quarter. quarter of 2022. In addition, gold stocks rallied as investors sought ways to protect from the rising inflation iShares UK Gilts All Stocks Index – UK Gilts sold off evident in the world today. heavily in the quarter after the Bank of England began raising interest rates to combat high inflation in the UK. Dimensional Global Value – Global value stocks delivered positive returns in the quarter, driven by strong Fidelity Index Europe ex UK – European equities were performance from energy and commodity positions. poor performers in the quarter, driven by the impact of This fund follows a systematic approach to investing, the Ukraine/Russia war which began in late February. seeking to outperform the MSCI World Value index by German industrials and autos were among the drivers overweighting firms that are profitable, cheap and have of the losses. lower market capitalizations. Legg Mason Western Macro Opportunistic Bond – HSBC Pacific Index – Pacific equities benefitted from The fund underperformed markedly in the quarter heavy exposure to Australian stocks, where many of as its emerging market debt exposure detracted, the world’s largest miners are domiciled. The Australian in particular its exposure to Russian bonds. The financials sector also delivered positive returns in the long duration stance also hurt returns. quarter. Fundsmith Equity – Fundsmith’s returns were hit Man GLG Japan CoreAlpha – Although Japanese by stock selection issues in the quarter. Leading equities fell in the first quarter, Man GLG Japan delivered detractors were Paypal, Meta Platforms and Intuit. 12% outperformance, driven by sound stock selection and sector allocation. A key driver of returns was iShares UK Gilts All Stocks Index – Gilts performed Mitsubishi Heavy Industries Ltd which rose 48% over poorly in the quarter after inflation pressures the three months. prompted the Bank of England to raise interest rates. This led to a sharp sell-off in government bond Dodge & Cox Worldwide US Stock – This actively- markets. managed US equity fund’s energy positions drove strong outperformance in the quarter. Occidental Petroleum Jupiter UK Mid Cap – The negative returns of UK was the leading contributor after its share price doubled mid-cap stocks this quarter were exacerbated by stock in Q1. selection issues from this actively-managed fund. A holding in The Hut Group was the key detractor, falling Fidelity Index UK – UK Equities delivered positive nearly 50% over the three months. returns in a quarter when other key equity markets struggled. The index’s oil majors, miners and banks all contributed to the strong performance. FlyingColours Market Insights - Q1 2022 4

The Next Quarter Outlook Looking forwards, we believe our emerging market equity and debt exposure may be next in line to generate future gains for our investments, given the valuations the assets are trading at today. Markets will remain volatile and choppy due to the political unrest in Ukraine, and the possibility the conflict will cross the border into Moldova. Europe is heavily dependant on Russian oil and gas and the continued uncertainty will see prices remain high, pushing up the cost of living even further. Russia’s demand for payments in Rubles and the threat to cut supplies if the west continues to interfere in the crisis, will only impact prices further. Commodity prices will continue to remain high. We will look to strengthen our position in this asset class, whilst retaining our holdings in gold as a hedge to the inflationary pressures we are currently witnessing. China is currently in big negative territory, as the nation battles a new COVID outbreak and its continued support for Russia. Risk – The Vital Ingredient Before you invest, your adviser will work closely with you to understand your financial goals, aspirations and current circumstances. These are all important components which lead to one key ingredient, risk. Most people are familiar with the phrase the greater the risk, the greater the potential reward. Making your money work harder, usually entails taking more risk with your capital. Finding the right balance is essential to achieving your goals, therefore the Flying Colours Portfolios provides a complete range to meet the requirements of our clients. For individuals with a higher level of risk, the Growth, Growth Plus and the Aggressive are far more heavily weighted to equities, with the bond exposure reducing the further up the risk ladder you go. Market Insights Q1 2022 5

Core Portfolio Breakdown Core Defensive Core Conservative ● Bonds 66.25 ● Bonds 48.75 L&G Short Dated £ Corporate Bd Idx I Acc 13.3 L&G Short Dated £ Corporate Bd Idx I Acc 9.3 Vanguard U.S. Govt Bd Idx £ H Acc 12.15 Vanguard U.S. Govt Bd Idx £ H Acc 6.65 BlackRock Corporate Bond 1-10 Year D Acc 10 BlackRock Corporate Bond 1-10 Year D Acc 8 L&G Global Inflation Linked Bd Idx I Acc 9.7 L&G Global Inflation Linked Bd Idx I Acc 7.2 iShares Overseas Govt Bd Idx (UK) D Acc 8.4 iShares Overseas Govt Bd Idx (UK) D Acc 8.4 iShares UK Gilts All Stks Idx (UK) D Acc 7.7 iShares UK Gilts All Stks Idx (UK) D Acc 5.7 L&G EM Govt Bond Lcl Ccy Index I Acc 4.65 L&G EM Govt Bond Lcl Ccy Index I Acc 3.5 7.7 ● UK Equities 0.9 ● UK Equities 14.45 HSBC FTSE 250 Index C Acc 6.8 Vanguard FTSE UK All Shr Idx Unit Tr£Acc 3.15 Fidelity Index UK P Acc 11.6 HSBC FTSE 250 Index C Acc 1.7 Fidelity Index UK P Acc 9.6 ● Cash & Money Market 2 8.65 Cash 4.8 ● Cash & Money Market Royal London Cash Plus Y Acc 4.8 Cash 2 Royal London Enhanced Cash Plus Y Acc 1.1 Royal London Cash Plus Y Acc 3.35 1.1 Royal London Enhanced Cash Plus Y Acc 3.3 ● European Equities 2.95 2.1 Fidelity Index Europe ex UK P Acc 2.95 ● European Equities 2.1 2.5 Fidelity Index Europe ex UK P Acc 5.5 ● US Equities 2.5 5.5 Vanguard U.S. Eq Idx £ Acc 2 ● US Equities 4.75 2 Vanguard U.S. Eq Idx £ Acc 4.75 ● Emerging Markets 1.8 3.8 Fidelity Index Emerging Markets P Acc 1.8 ● Emerging Markets 3.8 3.15 Fidelity Index Emerging Markets P Acc 3.4 ● Japanese Equities 2.25 3.4 Fidelity Index Japan P Acc 0.9 ● Japanese Equities 1.3 Fidelity Index Japan P Acc 6 ● Asia Pacific 1.3 4.3 HSBC Pacific Index Accumulation C ● Asia Pacific 1.7 HSBC Pacific Index Accumulation C 2.5 ● Global Equities 2.5 Dimensional Global Value GBP Acc ● Global Equities Vanguard Glb Small-Cp Idx £ Acc Dimensional Global Value GBP Acc Vanguard Glb Small-Cp Idx £ Acc ● Specialist BlackRock Gold and General D Acc ● Specialist BlackRock Gold and General D Acc FlyingColours Market Insights - Q1 2022 6

Core Portfolio Breakdown Core Balanced Core Growth ● Bonds 31.9 ● Bonds 14.9 L&G Short Dated £ Corporate Bd Idx I Acc 7.3 L&G Short Dated £ Corporate Bd Idx I Acc 3.8 Vanguard U.S. Govt Bd Idx £ H Acc 4.3 Vanguard U.S. Govt Bd Idx £ H Acc 2 BlackRock Corporate Bond 1-10 Year D Acc 4 BlackRock Corporate Bond 1-10 Year D Acc 1.5 L&G Global Inflation Linked Bd Idx I Acc 4.7 L&G Global Inflation Linked Bd Idx I Acc 2.2 iShares Overseas Govt Bd Idx (UK) D Acc 5.6 iShares Overseas Govt Bd Idx (UK) D Acc 2.6 iShares UK Gilts All Stks Idx (UK) D Acc 3.75 iShares UK Gilts All Stks Idx (UK) D Acc 1.75 L&G EM Govt Bond Lcl Ccy Index I Acc 2.25 L&G EM Govt Bond Lcl Ccy Index I Acc 1.05 21.3 28.1 ● UK Equities 2.7 ● UK Equities 3.55 Vanguard FTSE UK All Shr Idx Unit Tr£Acc 2.5 Vanguard FTSE UK All Shr Idx Unit Tr£Acc 3.3 HSBC FTSE 250 Index C Acc 9.5 HSBC FTSE 250 Index C Acc 9.45 Fidelity Index UK P Acc 6.6 Fidelity Index UK P Acc 11.8 L&G UK Index I Acc 5.6 L&G UK Index I Acc 2.6 2 2 ● Cash & Money Market 1.8 ● Cash & Money Market 0.6 Cash 1.8 Cash 4.1 Royal London Cash Plus Y Acc 3.1 Royal London Cash Plus Y Acc 4.1 Royal London Enhanced Cash Plus Y Acc 3.1 10.75 8.15 ● European Equities 10.75 ● European Equities 8.15 Fidelity Index Europe ex UK P Acc 9.1 Fidelity Index Europe ex UK P Acc 6.95 9.1 6.95 ● US Equities 7.45 ● US Equities 5.6 Vanguard U.S. Eq Idx £ Acc 7.45 Vanguard U.S. Eq Idx £ Acc 5.6 6.6 5 ● Emerging Markets 6.6 ● Emerging Markets 5 Fidelity Index Emerging Markets P Acc 11.55 Fidelity Index Emerging Markets P Acc 8.8 8.25 6.3 ● Japanese Equities 3.3 ● Japanese Equities 2.5 Fidelity Index Japan P Acc 4.85 Fidelity Index Japan P Acc 3.6 4.85 3.6 ● Asia Pacific ● Asia Pacific HSBC Pacific Index Accumulation C HSBC Pacific Index Accumulation C ● Global Equities ● Global Equities Dimensional Global Value GBP Acc Dimensional Global Value GBP Acc Vanguard Glb Small-Cp Idx £ Acc Vanguard Glb Small-Cp Idx £ Acc ● Specialist ● Specialist BlackRock Gold and General D Acc BlackRock Gold and General D Acc Market Insights - Q1 2022 7 FlyingColours

Core Portfolio Breakdown Core Growth Plus Core Aggressive ● Bonds 7.9 ● Bonds 0.75 L&G Short Dated £ Corporate Bd Idx I Acc 0.95 BlackRock Corporate Bond 1-10 Year D Acc 0.75 Vanguard U.S. Govt Bd Idx £ H Acc 0.6 32.9 BlackRock Corporate Bond 1-10 Year D Acc ● UK Equities 5.1 L&G Global Inflation Linked Bd Idx I Acc 2 Vanguard FTSE UK All Shr Idx Unit Tr£Acc 3.9 iShares Overseas Govt Bd Idx (UK) D Acc 1.25 HSBC FTSE 250 Index C Acc 12.1 iShares UK Gilts All Stks Idx (UK) D Acc 1.5 Fidelity Index UK P Acc 11.8 L&G EM Govt Bond Lcl Ccy Index I Acc L&G UK Index I Acc 2.25 1 ● UK Equities 0.6 ● Cash & Money Market 2 Vanguard FTSE UK All Shr Idx Unit Tr£Acc 30.65 Cash 0.25 HSBC FTSE 250 Index C Acc 4.25 Royal London Cash Plus Y Acc 4.85 Fidelity Index UK P Acc 3.6 4.85 L&G UK Index I Acc 11 ● European Equities 12.65 11.8 Fidelity Index Europe ex UK P Acc 12.65 ● Cash & Money Market 2 10.7 Cash 2 ● US Equities 10.7 4.5 Vanguard U.S. Eq Idx £ Acc 8.75 ● European Equities 4.5 8.75 Fidelity Index Europe ex UK P Acc 11.75 ● Emerging Markets 7.8 11.75 Fidelity Index Emerging Markets P Acc 7.8 ● US Equities 9.9 13.6 Vanguard U.S. Eq Idx £ Acc 9.9 ● Japanese Equities 9.7 8.1 Fidelity Index Japan P Acc 3.9 ● Emerging Markets 8.1 5.75 Fidelity Index Emerging Markets P Acc 7.2 ● Asia Pacific 5.75 7.2 HSBC Pacific Index Accumulation C ● Japanese Equities 12.6 Fidelity Index Japan P Acc 9 ● Global Equities 3.6 Dimensional Global Value GBP Acc ● Asia Pacific 5.4 Vanguard Glb Small-Cp Idx £ Acc HSBC Pacific Index Accumulation C 5.4 ● Specialist ● Global Equities BlackRock Gold and General D Acc Dimensional Global Value GBP Acc Vanguard Glb Small-Cp Idx £ Acc ● Specialist BlackRock Gold and General D Acc FlyingColours Market Insights - Q1 2022 8

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