Bond Market Insights and Outlook for 2024 JCB Jamieson Coote Bonds January 2024 Bonds finished 2023 strongly following the market categorically rejecting the 5.00% level in US and Australian 10-year bonds in October. This has provided a solid base for bonds in 2024 following the global peak in yields and the end to the global central bank hiking cycle. The market was comforted with the lower inflation readings and the weaker set of economic data. Bond supply dynamics also played a part when the narrative of increasing government deficits was alleviated with US Treasury projections in the order of 100 billion less than the market was expecting. Markets have moved to more aggressively price in easing from the US Federal Reserve (US Fed), Bank of England and European Central Bank given declining inflation with goods inflation the driver. While time will tell whether November's cash rate hike from the Reserve Bank of Australia (RBA) was the last in the cycle, our view is that we are either at, or at least very near, the peak in cash rates. If history is a guide, cash rates tend to remain on hold at the peak for an average of eight months.  While this is certainly not an exact science, based on what we currently know about the economic outlook and market pricing, we anticipate that the RBA will start to loosen monetary policy in 2024 following in the slipstream of its global central bank counterparts. Predicated on this view, any back up in yields will provide a decent opportunity to increase duration exposure, particularly in the 3-to-5-year sector where historically the curve steepens as markets approach their first rate cut. The monetary tightening has pushed the global credit impulse to its weakest level since the Global Financial Crisis, which implies weaker demand growth moving forward placing pressure on the jobs market. High delinquency rates and credit card balances currently support anemic consumer confidence and may begin testing both consumer resilience and the ability of employers to maintain employment with margins under pressure. The job market in 2024 will be the main determinant of whether we travel down the path of a 'hard landing' with the commensurate aggressive easing of short-term interest rates and much higher bond prices with the recent rally into year-end just an entrée to what can be served up. MARKET OUTLOOK: ARE RECESSIONARY SIGNAL LIGHTS STILL FLASHING RED? US recessionary indicators are all signaling a code red alert. An inverted yield curve persisting for 18 months, coupled with a 19-month sequential decline in the Leading Indicator Index, has an infallible record in predicting a US recession. In a soft-landing scenario, the US Fed will need to make approximately a 300 basis points cut just to reach a neutral rate setting. However, in the event of a full-blown recession, we are anticipating a need for around 500 basis points of easing. The December US Fed meeting validated the end of the hiking cycle in short term rates with US Fed Chairman, Powell commenting that "you want to cut rates well before inflation is at 2%" otherwise it would be too restrictive. The US Fed also downgraded its inflation forecast and alluded to three cuts in 2024 as Powell showed concern over keeping rates too high for too long. The inflation trajectory continues a downward path and heading into 2024 this is expected to persist - we still have some hefty inflation prints dropping out of the index so we should get inflation falling on a year-on-year basis for the first five months of the year if we continue to print similar numbers that have been recorded lately. Continued weakness in energy prices and lower wage growth through a deteriorating employment market would also be supportive of the slowing inflation period. The picture in Australia is also encouraging with the inflation story lagging the global softening prices thematic.  Given the transmission mechanism of Australian interest rates, we would anticipate this to play catch up in the first quarter of next year. As the new year commences, 2024 is ripe for geopolitical developments with 40 national elections on the calendar from Taiwan at the start of the year through to the US presidential election in November. The potential for a changing of the guard in foreign policy heightens the chances of an escalation or aggravation amongst countries and should fly in the face of the complacency that currently prevails in risk markets and encourage a flight-to-quality demand for sovereign bonds. After an extended period of ultra-low bond yields, followed by some painful years of adjustment higher, bonds are arguably in better shape now than they have been in several years, offering a sense of stability and optimism for investors in the current financial landscape. Funds operated by this manager: CC Jamieson Coote Bonds Active Bond Fund (Class A), CC Jamieson Coote Bonds Dynamic Alpha Fund, CC Jamieson Coote Bonds Global Bond Fund (Class A - Hedged)

Why government bonds remain a natural choice JCB Jamieson Coote Bonds November 2023 As we approach the eagerly anticipated end of the rate hiking cycle, investors are considering how to position portfolios for what comes next, while trying to navigate the current higher rate, higher inflation environment. Perhaps now, more than in any other cycle, the role of bonds in portfolios is being questioned after negative annual returns were experienced in 2022. In this article, we discuss why 2022 was such a difficult year for investors across the board, why higher rates aren't necessarily a bad thing for active bond investors and why the valuable role bonds play in a diversified investment portfolio hasn't changed. 2022 - AN EXCEPTION RATHER THAN THE RULE When it comes to making the case for bonds, perhaps the biggest objection comes from those who saw 2022 as a serious flaw in the argument. Bonds traditionally play the role of what many refer to as 'portfolio insurance' - offsetting equities' losses during market upheaval - but in 2022 they failed to perform this function.‍ SO, WHAT HAPPENED? Bond returns have two main enemies, inflation, which erodes their value, and rising interest rates, which reduces the value of existing bonds because higher rates of income are available elsewhere. In 2022, we had both inflation and higher rates in tandem, as central banks aggressively hiked rates in a bid to bring inflation back to tolerable levels. As active bond investors, we've managed portfolios through a number of crises, and to put 2022 in context, this was one of the biggest bond market sell-off events since the great depression. We see this as an exception to the rule, rather than a 'new normal'. While financial market downturns typically see equity markets sell off and bond markets surge, rapid rate rises and inflation result in both asset classes suffering. The history books are punctuated by market crises, and while history doesn't repeat, looking to a previous episode of severe negative returns in 1994, interestingly this was followed by a period of outperformance in 1995. 2023 hasn't been a turnaround year like 1995 was, but we remain of the view that 'boring bonds' can quickly turn around in a correction event and that timing the market is impossible. The old adage of 'time in the market, not timing the market' holds true in bonds also. Chart 1: Australian Government Bond Market and Equity Market Annual Returns since 1993 ‍Vertical axis Bond Market Returns, horizontal axis Australian Equity Market Returns Source: Bloomberg AusBond Treasury 0+ Yr Index vs S&P ASX 200 Accumulation Index. As at 27 November 2023. HIGHER RATES AREN'T ALL BAD Increasing interest rates in the context of an actively managed bond portfolio invested over the medium to long term is not necessarily bad. Higher rates restore their value and defensive properties relative to equities and active management enables bonds to be traded on the secondary market, before they mature, meaning that the negative effects of rising rates can be managed. In the post GFC period of ultra-low interest rates and bond yields, the ability of bonds to deliver meaningful returns and their defensive characteristics were much more limited than they are today in a higher interest rate regime. In essence, the cushions have now been re-inflated and bonds are now in better shape than they have been for years. If anything, the case for holding bonds has strengthened, particularly if rates have risen too high, too quickly and an economic downturn looks imminent. A TRIED AND TRUSTED DIVERSIFIER ‍ Regardless of the path ahead for cash rates, bonds remain a vital diversifier. Whichever way an investor constructs a portfolio, a diversified range of return sources across asset classes can help mitigate risk. The top left quadrant of the chart above illustrates events where bonds have provided positive returns, during crises where equity markets were strongly negative. This shows the value of diversification and the traditional portfolio defence role of government bonds in action. CONCLUSION Looking ahead, we believe the delayed impact of the rapid rise in interest rates on the economy could result in an economic downturn, with central banks cutting interest rates well into 2024 to stimulate economies. In that scenario, allocations to government bonds are typically sort after, driving bond prices and returns higher. About once every decade bond investors are rewarded for their patience and time in the market and we believe that the cyclical nature of the economy, and our analysis suggests that this time is coming.   Funds operated by this manager: CC Jamieson Coote Bonds Active Bond Fund (Class A), CC Jamieson Coote Bonds Dynamic Alpha Fund, CC Jamieson Coote Bonds Global Bond Fund (Class A - Hedged)

Compelling case for bonds as recession looms JCB Jamieson Coote Bonds August 2023 Central banks the world over have hiked rates with unprecedented velocity and ferociousness as they look to rein in inflation. With this hiking cycle now nearing its peak, Jamieson Coote Bonds senior portfolio manager, James Wilson says investors should assess their portfolios and take advantage of emerging opportunities in fixed income. KEY TAKEAWAYS The global economy looks set for recessionary conditions, following the historic trend of US Fed hiking cycles creating financial crises somewhere in the world. This current rate cycle is nearing its top, but stickiness in key inflation metrics mean interest rates are unlikely to fall below 2% anytime soon in Australia. This same stickiness is expected to support bond yields, making a compelling case for high-quality government bonds as equity and property markets grapple with significant volatility and global debt burden. BRACING FOR A SLOWDOWN Since March 2020, the geopolitical forces shaping markets have shifted dramatically. Markets have lurched from a global pandemic to the outbreak of Europe's first land war since conflict rocked the Balkans in the 1990s. Meanwhile, rising nationalist sentiment across other major economies has polarised the political landscape - particularly in the US. Economics and markets: a dose of reality Source: Jamieson Coote Bonds More recently, Mr Wilson said investors have contended with a "world of overshoots". "We've seen oil travel from -US$30 to over US$120, and back to somewhere in the eighties where we are now. "We've had the Bitcoin bubble. We've gone from US$5,000 to US$68,000 where we all wanted to be part of the big bubble there until it all popped and went back to US$16,000. And that's since recovered again. Now we are seeing equities being led by Artificial Intelligence. "All this is happening in a highly indebted world where US mortgage-holders are under trillions and trillions of dollars of debt."   It's not just mortgage debt that's expected to provide headwinds for markets. Mr Wilson noted that US credit card debt is hovering around the US$1 trillion mark1. Taken together, Mr Wilson said these indicators suggest the market is "cycling between the late 'upswing phase' and the 'economy slows' phase. In blunter terms, global markets appear to be heading towards recession. Where are we at in the business/investing cycle? Source: Jamieson Coote Bonds team analysis CHARTING A COURSE FORWARD Looking ahead, Mr Wilson said the uncertainty hanging over markets will likely remain, however clues to what might play out can be found by looking back to 2007, right before the Global Financial Crisis struck. "As we know, nothing really happened, and then everything happened," he said. "Rates hit 5%. You could buy a 3-month T-Bill for above 5% for more than a year, and then everything came crashing down." Precisely what will cause a recession this time around is more difficult to pinpoint, Mr Wilson said - and the lagging effects of monetary policy mean the trigger could still be a while off. When it does hit, however, Mr Wilson said the United Kingdom and Europe will likely feel its effects first.‍ "They've got big exposure to energy, and they're against the US dollar," he said. "Then the US and then Australia would go into recession as inflation and jobs will lead unemployment rates to go higher." Historically, Mr Wilson said, rate hiking cycles undertaken by the US Fed invariably create a financial crisis somewhere in the world. INFLATION EASING SLOWLY Inflation has become a hot-button issue for investors, policymakers and a majority of households over the past two years. The US Consumer Price Index (CPI) peaked at 9.1% in June last year, with Australian CPI reaching a peak of 7.8% in December that same year. Since then, CPI figures have steadily reduced. In the US, inflation is sitting just above 3%, while Australia's July CPI print came in at 6%. "These are outstanding moves," Mr Wilson said. "I know central bankers aren't making many friends hiking interest rates as the cost of living pressures that everyone's suffering from globally, but it's been the right idea. It's going to help economies." Mr Wilson added that the Citi Inflation Surprise index - which measures forecasters' expectations against realised inflation data - showed that since 2020, inflation was consistently higher than expected. In the past few months, this trend has been broken. "We're no longer seeing surprises to the upside," Mr Wilson said, "which means we're not getting the volatility in the data, which means we most likely aren't going to see binary moves in the actual bond yields." Although inflation expectations are starting to ease, Mr Wilson said he doesn't expect to see CPI dip below 2% "anytime soon", and that inflation will likely remain 'sticky' for some time. OPPORTUNITIES EMERGING FOR ACTIVE MANAGERS Leading into the Jackson Hole symposium, US bond markets are pricing in rate cuts between 120 and 130 basis points for the year ahead. "That isn't necessarily saying that we (Australia) are going to have 120 basis points of rate cuts. What that could be saying to bond traders is that there could be a 50% chance of close to 250 basis points of cuts," Mr Wilson said. In Australia, market pricing tells a different story - one more interest rate hike (likely before the end of the year) and no 'big' rate cutting cycle like US markets are expecting. Interestingly, Australia's three-year bond rate currently sits at 3.8% - 30 basis points below the cash rate. In the US, that gap between the three-year bond rate and the cash rate is closer to 100 basis points. "If you think about that level, Australian three-year bonds are actually quite cheap in that sense because they're not pricing in any of the rate cutting cycle. There are definitely opportunities to be owning those assets," Mr Wilson said. Mr Wilson also noted that bond and share market yield curves are "not too dissimilar", suggesting the credit stack is upside down.‍ Bond yields are genuinely compelling for investors Where are investors securing their yield from, and at what cost to the portfolio? Source: JCB team analysis, based on data from Bloomberg Similarly, property cap rates are starting to 'come into line' with bond yields, Mr Wilson said, making a 'compelling' case for bond investment. This is further evidenced by the state of US deficits, Mr Wilson said, which suggest there's a huge amount of issuance yet to come. "And at some price point, bonds will clear. There is a price that's going to cheapen up, but bonds will clear at some price and someone will buy the US treasuries and the Australian government bonds for that matter at a level." The money used to purchase those assets somewhere - whether credit, equities or something else, the money will come from somewhere to fund these purchases, Mr Wilson said. "We're already seeing that in asset allocations, that makes bonds a very compelling investment option over time, and we expect this to continue." 1. A Saphir, 'US credit card debt tops $1 trillion, overall consumer debt little changed', Reuters, August 9 2023, accessed 15 August 2023 Funds operated by this manager: CC Jamieson Coote Bonds Active Bond Fund (Class A), CC Jamieson Coote Bonds Dynamic Alpha Fund, CC Jamieson Coote Bonds Global Bond Fund (Class A - Hedged) Important Information This article has been prepared by JamiesonCooteBonds Pty Ltd ('JCB') ACN 165 890 282 AFSL 459018. This article is supplied on the following conditions which are expressly accepted and agreed to by each interested party ('Recipient'). The information is provided only to wholesale or sophisticated investor Recipients as defined by the Corporations Act 2001 (Cth). JCB is not licensed in Australia to provide financial product advice or other financial services to retail investors. The information in this article is general financial product advice only and has been prepared without taking into account the objectives, financial situation or needs of any particular person. The information is not intended for any general distribution or publication and must be retained in a confidential manner. Information contained herein consists of confidential proprietary information constituting the sole property of JCB and respecting JCB and its investment activities; its use is restricted accordingly. This article does not purport to contain all of the information that may be required to evaluate JCB or their funds and the Recipient should conduct their own independent review, investigations and analysis of JCB and of the information contained or referred to in this presentation. Neither JCB nor their representatives and respective employees or officers (collectively, 'the Beneficiaries') make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the information contained in this article or subsequently provided to the Recipient or its advisers by any of the Beneficiaries, including, without limitation, any historical financial information, the estimates and projections and any other financial information derived there from, and nothing contained in this article is, or shall be relied upon, as a promise or representation, whether as to the past or the future. Past performance is not a reliable indicator of future performance. The information in this article has not been the subject of complete due diligence nor has all such information been the subject of proper verification by the Beneficiaries. Except insofar as liability under any law cannot be excluded, the Beneficiaries shall have no responsibility arising in respect of the information contained in this article or subsequently provided by them or in any other way for errors or omissions (including responsibility to any person by reason of negligence). An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor's objectives, financial situation and needs. For further information and before investing, please read the Product Disclosure Statement ('PDS') which is available at www.jamiesoncootebonds.com.au.