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DECEMBER 2022 R OA D M A P

CONTENTS PAGE 4 A Welcome from our Investment Committee Chair PAGE 6 2023 The Road Ahead PAGE 8 Thematic One Geopolitics PAGE 10 Thematic Two Capex and the Commodity Supercycle PAGE 12 Thematic Three The Underappreciated Opportunities on the Path to Net Zero PAGE 14 Fixed Income PAGE 16 Australian Equities PAGE 18 International Equities PAGE 20 Alternatives

The E P Investment Committee IC brings together a group of investment specialists who are appointed by the Board of E P Financial Group Our mandate is to oversee and be accountable for the Strategic Asset Allocation which form the basis of your portfolio We do this with a rigorous risk lens and our priority is to create outperformance relative to respective benchmarks Honor McFadyen Independent Chair E P Investment Committee Since joining as Chair of the Investment Committee in April 2022 volatility has been present in markets and consequently been front of mind Creating liquidity in respective client portfolios has been a priority for the IC throughout the year In coming months we will explore the following themes which our CIO Tim Rocks discusses in more detail below This volatility includes economic geopolitical social and more recently a heightened focus on cyber activity The combination of these risks has introduced underperformance in most asset class returns in 2022 3 Credit vulnerability We are focused on analysing fixed income and alternative asset allocations to add diversity to client portfolios Since the selloff in 2022 fixed income returns based on higher inflation and aggressive central bank tightening has meant some products higher in the capital structure of a company have returns that are competitive and stable The market s perceived peaking of inflation in the US has seen fixed income markets rally currencies correct and credit markets starting to provide some solid running yield opportunities WELCOME At no time in my career has there been such a focus on building a portfolio of quality assets that provides sufficient protection to weather the inevitable drawdowns in current market volatility Portfolio diversification with sufficient cash based secure assets allows for opportunistic investing capability or necessary retirement drawdown 4 Roadmap December 2022 EVANS PARTNERS 5 Roadmap December 2022 1 AUD currency volatility and the commodity supercycle 2 The path to net zero 4 Geopolitical risks 5 Energy transformation The key message I wish to leave is that you our respected client your risk appetite and investment targets are integral in creating the appropriate investment portfolio which will limit drawdowns in times of volatility and provide healthy investment returns over the medium term The IC is your advocate in ensuring that products are aligned with the firm s investment ethos and suitable for your portfolio based on your risk and return appetite Thankyou for your support during 2022 and we hope you have a healthy and safe holiday period We look forward to seeing you in 2023 EVANS PARTNERS

The next economic cycle to be a strong one US GDP AND RECESSIONS Three major waves of spending are at their early stages and could last for at least a decade Investment in the renewable energy transition Healthcare spending increases to address deficiencies exposed by COVID A major re evaluation of manufacturing supply chains Aside from this equity markets are increasingly factoring in the macro risks As markets are forward looking and will move ahead of changes in the economic cycle we need to maintain a balanced approach will involves keeping one eye on the short term risks and the other on the long term potential for markets and your long term investment goals Tim Rocks Chief Investment Officer Source Refinitiv USFed St Louis Fed E P US RETAIL INVENTORY 2023 THE ROAD AHEAD When making investment recommendations it is important to have the right timeframe in mind At the time of writing markets are volatile policy makers are aggressively tightening geopolitical risk seems high and the economic outlook is particularly uncertain But most investors have a timeframe that is measured in decades or years rather than months so it is important to maintain some perspective 2023 is likely to see a number of major events There are two things we can say with some confidence Most central banks will stop raising interest rates in the first quarter of next year Secondly economies will definitely deteriorate through the early part of the year Therefore questions all investors need to consider are How deep will recessions be And will there be any complicating factors such as financial crises or an escalation of geopolitical risks How quickly will inflation recede What will be the strength of the economic recovery once it gets underway We believe there are some reasons for optimism on all these fronts Not every recession is a crisis The GFC and early COVID recessions were not typical Typical recessions particularly those generated by central banks are relatively shallow and brief Eight of 6 Roadmap December 2022 Source Pitchback E P As of 31 August 2022 US JOB VACANCIES the past 12 US recessions have been generated by central banks and most followed this pattern A typical recession can become something worse if stresses appear in the financial system as notably occurred in the GFC However there are no obvious financial imbalances at the present Conservative lending tighter banking regulation and the resulting increase in capital and liquidity buffers for banks in most major economies both reduce the probability of a recession and would reduce their severity if they did occur Inflation fears could disappear quicker than predicted Source Refinitiv Datastream E P Goods prices could stabilise quickly Supply chain issues have led to many firms stockpiling inventory When the economy slows inventory liquidation may lead to goods deflation And while it is too early to say with confidence when inflation will ease it will be driven by the labour market which remains tight in many markets When this softens it is expected that central banks will reverse course very quickly EVANS PARTNERS Scan here to watch Tim s Roadmap summary 7 Roadmap December 2022 EVANS PARTNERS

The Middle East US TRADE RELATIONSHIP WITH CHINA Even though the region disappeared from the geopolitical spotlight in recent years the potential for escalation and energy disruption is never far away Iran s domestic politics appears unstable and the faltering regime may take extreme action possibly starting conflict with Iraq Israel or Saudi Arabia Europe The European Union is the most stable it has been in decades It was more effective in dealing with the COVID crisis than the sovereign debt crisis of 2011 14 This is because the Union has reunited behind a common threat from Russia and because few countries wish to repeat the UK s exit experience They have made significant advances towards a fiscal union which is encouraging Source Refinitiv Datastream E P EUROPEAN NATURAL GAS PRICES Tim Rocks Chief Investment Officer THEMATIC ONE GEOPOLITICS Geopolitical issues are expected to escalate over the coming years with the bilateral relationships between the US and China and the US and Russia steadily deteriorating However these political developments often impact markets and economies far less than feared Even if there is a short term hit to economies this is eventually swamped by policy response or increased military or other spending Geopolitical events should be assessed based on the likely impact to earnings for major markets and companies However the Russia Ukraine conflict is potentially different due to its impact on commodity prices and energy supply to Europe These risks will continue into 2023 Russia Ukraine US and European involvement have transformed the conflict into a proxy war The conflict will likely continue and while we do not expect much will occur over winter whether it escalates or continues as a stalemate is unknown Another complicating factor is the sustained energy shortages in Europe which may prompt them to negotiate as it has increasing domestic political implications The impact on oil markets will be mitigated by increased Chinese and Indian purchases of Russian oil 8 Roadmap December 2022 Source Refinitiv Datastream E P BRENT OIL PRICE China and Taiwan While these tensions are high profile with the US and China both using them to play to domestic political audiences actual conflict in Taiwan seems unlikely in the foreseeable future This is because of China s dependence on Taiwan for technology components and the economic entanglement of the US and China Nevertheless the relationship between the US and China is only likely to worsen from here The semiconductor ban recently announced by the US represents a significant escalation and will likely see some form of retaliation in 2023 Source Refinitiv Datastream E P US Domestic political tensions will remain high right through until the 2024 election although the economic impact of these tensions may not be significant EVANS PARTNERS 9 Roadmap December 2022 EVANS PARTNERS

4 Healthcare COVID exposed healthcare system deficiencies in many countries and they will now focus spend aggressively to prepare for the next pandemic China stands out here with their healthcare spending per capita a fraction of global norms This is a key reason why China has maintained a zero COVID approach Their hospital system cannot cope with the scale of outbreak that has occurred in many western countries ANNUAL INVESTMENT TO REACH NET ZERO This spending will create strong tailwinds for economies and earnings and means there will be a different set of winners in the next economic cycle The last 30 years has been dominated by consumer and technology companies The next cycle could be dominated by companies exposed to construction and the construction materials The greater commodity demand from this construction effort as well as limited new mine supply are setting the world up for the next commodity supercycle Tim Rocks Chief Investment Officer THEMATIC TWO from the International Energy Agency from McKinsey Source Refinitiv E P HEALTH SPENDING PER CAPITA While the short term environment is challenged the medium term outlook is increasingly interesting as we are on the cusp of a major wave of capex that could last several years Europe s energy crisis has reinforced the spending urgency and will likely frontload a lot of it into the next decade 1 The green energy transition The scale of investment needed to transition to clean energy sources is simply enormous with estimates ranging from 50 trillion to 90 trillion by 2050 The spend will be in projects to transform electrical networks to accommodate renewables infrastructure to facilitate electric vehicles and retrofitting buildings to improve carbon efficiency Europe s desire to reduce their dependence on Russian energy will cause a dramatic acceleration of their green energy transition In Australia AGL s announcement that it would be shutting coal supply from 2035 will fast track the local transition Estimates are that Australia will need to spend 320 billion or close to 25 of one year s GDP to achieve this transition 10 Roadmap December 2022 COPPER DEMAND AND COMMITTED SUPPLY This will benefit a broad range of metals The battery metals lithium cobalt and graphite are the more obvious winners but copper aluminium and iron ore demand will also rise as governments ramp up spending on turbines and distribution infrastructure CAPEX AND THE COMMODITY SUPERCYCLE This wave of capex is driven by 4 coinciding factors Source IEA E P 2 Manufacturing reshoring Companies no longer want to rely on China for any key input or have their production process at the mercy of a geopolitical or health flare up This is driving an urgent need to redesign manufacturing sectors to address issues exposed by COVID and to reflect greater geopolitical risk 3 Defence Defence spending seems set to jump in response to rising geopolitical tensions Germany has already announced a radical change in approach and has committed to spending 100 billion EVANS PARTNERS Source OECD E P 11 Roadmap December 2022 EVANS PARTNERS

Food and agricultural technology are seeing a start to a revolution in food production CHART 3 GLOBAL LED LIGHTING PENETRATION RATES 2012 2020 Precision fermentation the process whereby proteins are artificially replicated is rapidly evolving and costs are falling Artificial replication processes are already used to produce much of the world s insulin collagen and vanilla While the industry is still in its infancy dairy should be the easiest major food product to be disrupted since only 3 3 of milk is cow protein with the rest being water sugars and fat There are numerous compelling attractions for artificial proteins around environmental impact food security and safety Growing and maintaining cattle is an inefficient form of food production Cattle protein production is 4 energy efficient compared with precision fermentation at 40 80 efficient The beef and dairy cattle industry is one of the main contributors to global greenhouse gases Substitution would materially reduce the energy needs and associated emissions of raising livestock including methane William Hart Director ESG THEMATIC THREE THE UNDERAPPRECIATED OPPORTUNITIES ON THE PATH TO NET ZERO Decarbonisation is likely to dominate economic and market landscapes over the next three decades As companies and countries make the journey to net zero there will be substantial opportunities created due to the scale of transition underway In most decarbonisation forecasts markets and analysts primarily focus on two key areas 1 The substitution of fossil fuel generated electricity with alternative sources such as renewables 2 The replacement of combustion engines in transportation with battery electric substitutes While each of these areas are undoubtedly important we believe there are other aspects of the transition that are underappreciated Below are two areas likely to present compelling longer term opportunities Energy efficiency or reducing the energy required for the same output is central to reducing emissions While there is generally an up front cost it reduces cost over 12 Roadmap December 2022 the long term offers resilience to future energy price movements and eases exposure to prospective carbon liabilities There are numerous conventional technologies that improve energy efficiency LED lighting is perhaps the poster child reducing energy usage in lighting by 75 with a useful life 5 10x that of a filament globe Source E P IEA EMISSIONS BY PROTEIN SOURCE The environmental benefits however will go beyond this Supply chains will be much smaller and less emissions intensive Abattoirs and cold storage logistics chains will be substantially curtailed and overall transportation will be slashed because food will be produced closer to where it will be consumed There are also major implications for fresh water supply There will be less water use from agriculture and less water contamination from pesticides fertilisers and hormones The final step will be the opportunity to convert significant tracts of agricultural land back to nature through reforestation further improving carbon credentials via sequestration While statistics vary it has been estimated globally that animal agriculture may consume as much as one third of all freshwater consumption with one third of the world s ice free land also used for livestock or livestock feed While it is important to recognise where precision fermentation sits within its development cycle a society that is seeking to rapidly decarbonise and place a priority on natural capital should value these characteristics highly Investors should watch these advancements closely as developments will have significant implications for a range of industry areas Source Poore and Nemeck 2018 COST OF PROTEIN FROM PRECISION FEREMNTATION Source RethinkX E P There are significant opportunities in carbon intensive building and efficiency opportunities in both new builds and retrofits Efficiency upgrades improve factors like heating ventilation and air conditioning and utilising digitisation to automate and manage energy loading Demand for this is creating opportunities in areas such as insulation heat pumps smart sensors controls and associated electrical componentry EVANS PARTNERS 13 Roadmap December 2022 EVANS PARTNERS

For now it makes sense for investors to concentrate on high quality floating rate debt but we would encourage investors to start thinking about increasing exposure to longer term government fixed rate bonds given the higher yields on offer We should also be on the look out for opportunities being created by ongoing market volatility US 10 YEAR GOVERNMENT YIELD Tim Rocks Chief Investment Officer FIXED INCOME Source Robert Shiller Thompson Reuters Datastream E P CORPORATE BOND SPREADS 2022 was transformative for the interest rate landscape This was the year that the 40 year bull market of declining inflation and interest rates came to an end with major implications for credit and bond investors and broader portfolio composition The rapid change in official short term interest rates requires a total resetting of investments in this part of the portfolio Factors that are part of this reassessment include 14 Credit markets have been slower to reflect the changing macro environment than equities over 2022 Corporate spreads typically jump during economic downturns as investors begin to worry about debt serviceability This effect has been less pronounced but spreads on investment grade and high yield credit could still spike higher as economic conditions deteriorate We recommend that investors only consider the high quality end of the market until the extent of the downturn and impact on corporate balance sheets is clearer This downturn will be an important test for private debt markets This is a relatively new asset class that has undertaken very rapid growth since the financial crisis Private markets stepped in to fill a void created by the exit of banks from many riskier parts in the market after the GFC This exit was mostly driven by regulatory change and increased capital requirements Recessions are always an important stress test for new asset classes Roadmap December 2022 Government debt has become more attractive as yields have risen Floating rate stands out in the short term as interest rates continue to rise but longterm debt is also attractive again with yields back around 4 Returns for hybrids have risen in line with the increase in short term interest rates such that current yields tomaturity are 5 5 6 Additional increases in rates could push them up further This is attractive relative to other parts of the market but we would caution that spreads are surprisingly low given the potential economic risks over the next year Source Refinitiv Datastream E P AUSTRALIA TERM DEPOSIT RATE Term deposit rates are starting to rise again after being close to zero for a number of years They have not yet increased enough to a viable investment option however Source Refinitiv Datastream E P EVANS PARTNERS 15 Roadmap December 2022 EVANS PARTNERS

Commodity and energy companies have a history of underperforming during market downturns because of the cyclical nature of prices and volumes However they will be major beneficiaries of the coming capex boom so they could recover very quickly On the flipside a number of sectors have held up relatively well and could underperform in the next phase This includes healthcare and financials ASX 200 VALUATIONS Tim Rocks Chief Investment Officer AUSTRALIAN EQUITIES Source Refinitiv E P The good news for Australian equity investors is that the market has significantly adjusted to the change in the macro environment By October measures of Australian market valuation such as the forward price earnings ratio had fallen by around 30 since the peak This means that much risk has been priced in and the potential downside from here is reduced The other good news is that there is less macro risk in Australia compared with other areas of the globe Inflation has risen in Australia but is far less entrenched than in the US In the US the inflation virus has spread to wages but this has not happened here This will mean that interest rates will not have to rise as high The US economy also has to deal with a large jump in its currency whereas in Australia a falling dollar will cushion some of the economic downside This should mean that earnings risks are lower in Australia and should be less of a drag on sentiment We also see Australia as well positioned to benefit from the forces that will drive the next economic cycle If as we expect the next cycle is dominated by major capex programs in the energy healthcare and manufacturing sectors commodity demand will increase and this will benefit Australian producers and the overall economy be prepared for the change in market leadership that is likely to occur when economies begin to recover Four sectors have seen the largest falls in valuations small companies property trusts commodities and energy Small companies have suffered the most from the change in investor sentiment Fund managers have seen outflows and have been forced sellers and this has had a big impact on prices given lower market liquidity However these companies have the most to gain when the cycle turns Roadmap December 2022 Source Refinitiv Datastream E P AUSTRALIA DOLLAR Property trusts have been affected because they tend to have relatively high levels of debt and investors have been concerned about the potential for stress from rising rates These effects do appear to be overdone and fears will recede once interest rates peak The adjustment to overall market valuations has not been uniform across sectors Some sectors have been particularly affected while others have held up relatively well Investors should consider repositioning portfolios to 16 US AU WAGE GROWTH Source Refinitiv Datastream E P EVANS PARTNERS 17 Roadmap December 2022 EVANS PARTNERS

US COMPANIES NET PROFIT MARGIN Source Refinitiv Datastream E P CHINA H SHARES Tim Rocks Chief Investment Officer INTERNATIONAL EQUITIES The short term outlook for global equities is complicated There is a larger set of more complex risks facing global companies and it is less clear that valuations have sufficiently accounted for those risks This makes us more cautious in the short term but investors should not become too negative We expect a strong recovery at some point in 2023 as inflation and interest rate risks fade and a new economic cycle starts The US faces greater macro risks than Australia Inflation has become more entrenched evidenced by the jump in wages growth that is now creating a broader range of price increases across services industries including dining tourism healthcare and education This necessitates a large policy response from the US Federal Reserve which makes a recession far more likely The rising US dollar is another headwind and could have a big impact on earnings since around 40 of US company profits are generated offshore These earnings risks do not appear to be adequately factored into either analysts forecasts which raises the prospects of ongoing earnings downgrades or equity valuations in aggregate Margins for US companies have been at a record high and are likely to fall back towards long term averages Some parts of the market particularly smaller companies are becoming more attractive but overall the US market remains vulnerable to further volatility as the economy and earnings slow 18 Roadmap December 2022 Europe faces the largest economic risk in the short term and it seems likely that this will be the first region to slide into recession Policy makers are not as aggressive in Europe but the impact of higher energy prices and potential gas rationing over the winter is hard to quantify Market valuations have certainly fallen but it is much harder to assess whether these risks are sufficiently priced given the uncertainty of the outlook Nevertheless investors should monitor for opportunities because like all assets that fall substantially in value the recovery will be strong when it does occur Holders of European assets will also eventually enjoy a rebound in the Euro that has slumped to record lows Emerging markets face a different set of risks China is critical to the outlook for emerging markets and it seems likely that there will be a significant shift in momentum in 2023 that investors are not positioned for The economy has been under significant pressure due to the property slowdown and rolling COVID lockdowns Over the next year policy measures will support property and the rolling out of locally produced mRNA vaccines will allow an end to the zero COVID policy Greater political certainty and easing regulatory risk also seems likely With the region at record low valuations this does seem like an interesting entry point even if volatility continues in the short term EVANS PARTNERS Source Refinitiv Datastream E P EURO Source Refinitiv Datastream E P 19 Roadmap December 2022 EVANS PARTNERS

NUMBER OF US LISTED COMPANIES Source Refinitiv Datastream E P PRIVATE EQUITY VC BACKED PUBLIC LISTINGS Tim Rocks Chief Investment Officer ALTERNATIVES Alternative assets serve a number of important roles in portfolios There are two broad categories of alternatives that play different roles growth alternatives and defensive alternatives Growth alternatives include private equity and venture capital These typically provide exposure to parts of the economy that are either not or poorly represented in public equity markets The private equity market has changed significantly in recent years and in our view is now essential for investors seeking a well diversified exposure to high returning assets Part of the reason for this is the changing nature of public markets The number of listed companies in the US has halved since the golden days in the 1990s Fewer companies are listing and they are doing so later in their lifetime They are more likely to be mature when they do so which means that much of their rapid growth will already be behind them For example when Amazon listed in 1997 it had only 256 employees and 16 million in revenue It is about 6000 times larger today and this all occurred in public markets The new generation of Amazons are being incubated for 10 years in venture capital funds and much of the cream will be gone by the time they are listed Defensive alternatives include less volatile assets that should provide a more stable source of return over time or which are lowly or negatively correlated with traditional asset classes This could include infrastructure 20 Roadmap December 2022 Source Pitchback E P As of 31 August 2022 investments hedge funds and gold These defensive assets have been particularly important to portfolios in recent years when returns from interest rate securities have been very low Our preferred defensive alternative is unlisted infrastructure Such funds typically have large exposure to transport infrastructure such as airports and freight terminals where volumes are surging as conditions normalise after COVID Many assets are now being revalued higher as COVID writedowns in asset values proved to be too aggressive Many assets also have inflation protection due to CPI linked pricing Over the period ahead it is likely that at the margin we will be allocating a smaller part of portfolios to alternative assets For growth alternatives this partly reflects the fall in value of public equities that make them more attractive relative to private assets and is presenting an increasing number of attractive opportunities For defensive alternatives the significant increase in interest rates also means that traditional defensive assets are more of a viable alternative as well It is also the case that there is less need for low correlation assets such as gold at the bottom of an economic and market cycle EVANS PARTNERS 21 Roadmap December 2022 EVANS PARTNERS

Disclaimer This document was prepared by Evans and Partners Pty Ltd ABN 85 125 338 785 AFSL 318075 Evans and Partners Evans and Partners is a wholly owned subsidiary of E P Financial Group Limited ABN 54 609 913 457 E P Financial Group and related bodies corporate The information may contain general advice or is factual information and was prepared without taking into account your objectives financial situation or needs Before acting on any advice you should consider whether the advice is appropriate to you Seeking professional personal advice is always highly recommended Where a particular financial product has been referred to you should obtain a copy of the relevant product disclosure statement or offer document before making any decision in relation to the financial product Past performance is not a reliable indicator of future performance The information may contain statements opinions projections forecasts and other material forward looking statements based on various assumptions Those assumptions may or may not prove to be correct E P Financial Group its related entities officers employees agents advisors nor any other person make any representation as to the accuracy or likelihood of fulfilment of the forward looking statements or any of the assumptions upon which they are based While the information provided is believed to be accurate E P Financial Group takes no responsibility in reliance upon this information The Financial Services Guide of Evans and Partners contains important information about the services we offer how we and our associates are paid and any potential conflicts of interest that we may have A copy of the Financial Services Guide can be found at www evansandpartners com au Please let us know if you would like to receive a hard copy free of charge 22 Roadmap December 2022 EVANS PARTNERS