Renewable energy stocks: changing winds? Firetrail Investments October 2023 Decarbonisation is one of the most important challenges of our time, but it is also often one of the most difficult to successfully invest in. Renewable energy stocks have been among the most popular and talked about investments in recent years, thanks to low interest rates, government subsidies, and strong demand from consumers and investors who want to support a greener future. However, valuations of these stocks became very expensive, reflecting their current leadership rather than their future potential. In this article, we will explain why we have been cautious about investing in renewable energy stocks and where we see better opportunities in the energy sector. What are the challenges? One of the main challenges for renewable energy stocks is that they are very sensitive to changes in interest rates. Renewable energy projects have long-dated cashflows that depend on the future price of electricity and the cost of capital. When interest rates are low, these cashflows are more valuable and attractive to investors. However, when interest rates rise, as they have recently, these cashflows are discounted more heavily and lose some of their appeal. This is especially true for projects that rely on debt financing, which becomes more expensive as interest rates increase. Another challenge for renewable energy stocks is inflation. Renewable energy projects often require large upfront investments in equipment and infrastructure, such as solar panels, wind turbines, and transmission lines. These costs are subject to inflationary pressures, which can erode the profitability of the projects over time. Recent downgrades of wind turbine manufacturers have demonstrated that costs have risen dramatically. This means that renewable energy projects need to generate higher revenues to cover their rising costs, which may not be possible in a competitive market. A third challenge for renewable energy stocks is local regulation. Whilst there may be federal incentives, renewable energy projects often face opposition from local communities who do not want projects like a wind farm in their backyard. For example, wind farms can face resistance from residents who complain about noise, visual impact, wildlife disruption, and property value decline. Renewable energy projects may also face regulatory hurdles from environmental agencies, landowners, grid operators, and other stakeholders who have different interests and agendas. These factors can delay or derail renewable energy projects, reducing their expected returns. However, the biggest long term challenge for renewable energy stocks in our view is that most renewable energy sources provide intermittent rather than baseload power. This means that they depend on weather conditions and cannot guarantee a constant supply of electricity. This creates a problem for grid stability and reliability, which requires a balance between supply and demand at all times. Energy storage in batteries is often seen as a solution for this problem, but it still has a long way to go before becoming widespread and cost-effective. According to the International Energy Agency (IEA), battery storage capacity needs to increase by more than 40 times by 2040 to support the growth of renewables. Opportunities: Where to invest? Given these challenges, we have been looking for opportunities in both providers of existing baseload power from sources such as hydro and nuclear, as well as solutions for reducing energy demand. One example of the latter held within the Firetrail S3 Global Opportunities fund is Schneider Electric, a French company that provides products and services for energy efficiency and management. This is a solution that can be implemented now, as an immediate solution. Schneider Electric helps its customers reduce their electricity consumption and carbon footprint by offering solutions such as smart meters, sensors, software, automation, lighting, heating, cooling, and electric vehicle charging. Schneider Electric benefits from growing demand for energy efficiency solutions from various sectors such as buildings, industries, data centres, and infrastructure. Schneider Electric also has a diversified geographic exposure and a solid financial performance. S3 Characteristics are important! We believe that decarbonisation is important, but we also believe that we need to approach investing in the sector in a pragmatic way. We are not interested in chasing popular or overvalued stocks that may not deliver on their promises or expectations. We are interested in finding undervalued or overlooked stocks that offer sustainable earnings and cashflows, sustainable business models, as well as sustainable positive change. As one company executive we met recently said: "One of the most important facets of sustainability is remaining a going concern". We think this is very true in the current environment. Funds operated by this manager: Firetrail Absolute Return Fund, Firetrail Australian High Conviction Fund, Firetrail Australian Small Companies Fund, Firetrail S3 Global Opportunities Fund, Firetrail S3 Global Opportunities Fund (Hedged) Disclaimer This article is prepared by Firetrail Investments Pty Limited ('Firetrail') (ABN 98 622 377 913, AFSL 516821) as the investment manager of the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) ('the Funds'). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited ('Pinnacle') (ABN 22 100 325 184). The Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund. Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU For historic TMD's please contact Pinnacle client service Phone 1300 010 311 or Email [email protected] This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person's objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance. Whilst Firetrail, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication. Any opinions and forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future. Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this communication is prohibited without obtaining prior written permission from Firetrail. Pinnacle and its associates may have interests in financial products and may receive fees from companies referred to during this communication. This may contain the trade names or trademarks of various third parties, and if so, any such use is solely for illustrative purposes only. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with, endorsement by, or association of any kind between them and Firetrail.

Big opportunities for small cap investors in IPOs and secondary placements Firetrail Investments January 2022 2021 was an exciting year for initial public offerings (IPOs) and placements. 55 companies with an offer price greater than A$20 million made their debut on the ASX during the year. Up a staggering 62% from the year before! Secondary placements experienced a more modest increase, up 6% from 2020. Most equity capital market (ECM) activity took place in the small cap end of the market. Providing a material opportunity for institutional small cap managers like Firetrail to add value for their investors. In this article, we analyse the success of small cap IPOs and placements in 2021, provide key takeaways for investors, and what to expect in capital markets in 2022. We conclude that corporate activity will remain elevated in small companies throughout 2022. Creating meaningful opportunities for investment managers willing to do the work to identify the best opportunities. IPOs and placements outperformed in 2021 It wasn't just the sheer number of IPOs and placements that broke records in 2021. Together, new ASX-listings raised a total of A$12 billion! Among them were a record number of billion-dollar floats, such as APM, SiteMinder and PEXA. On the first day of trading, these IPO companies outperformed the market by an average of 20%. However, we did see this outperformance moderate by the end of the year. We saw the inverse occur in the market for secondary offerings. Average day one performance hovered around 10.1%. While calendar year performance rose to 15.4%! The total amount raised by secondary offers was A$37.7 billion. But that doesn't seem like an accurate reflection of performance from a market perspective. Careful stock selection is critical If we adjust for the size of the raise, the story changes. We see big declines for first day and calendar year performance for both IPOs and secondary placements. Suggesting that the relative performance is skewed by a handful of big winners. In the IPO space, performance was dominated by a few key players. DGL, a chemical manufacturing and storage group, and Trajan, an analytical science and devices company, experienced greater than 100% returns in the calendar year. To account for this asymmetry, we took the median performance for the calendar year. The median return for IPO stocks was just -4%. Providing a more accurate reflection of capital market performance. Clearly, an ability to pick winners is key to harnessing value from corporate activity. The chart below compares the relative performance of IPOs that raised more than $50 million. While average performance was strong, there were more losers than winners. Through deep fundamental analysis, Firetrail were able to pick the winners this year. The median return from our IPO participation was 18% for the 2021 calendar year (shaded in grey in Figure 1). Careful selection is also key for managers trying to maximise returns from secondary placements. In 2021, we saw a wide dispersion in results. The best returning secondary issuances were in companies in need of balance sheet repair. The average placement in this category delivered 33% excess. In many instances we observed that the 'raise' was already priced in by the market. Hence recapitalisation was the catalyst to refocus the market on business fundamentals. The market also rewarded companies raising capital to grow organically far more than M&A. Raisings for growth dominated the market (Figure 3). In contrast, there were few M&A bargains in 2021 due to intense competition for assets. Many companies were willing to pay listed multiples for strategic acquisitions. Opportunities will remain elevated in small caps in 2022 ECM events are a consistent source of opportunity and strong returns for small cap investors. Access to these opportunities is key, and the Firetrail team have a strong track record of leveraging our corporate relationships and fundamental expertise to access attractive corporate opportunities for our investors. Since the inception of the Firetrail Team's Small Companies strategy in 1998, previously the Macquarie Australian Small Companies Fund, these events have contributed an average 20% of the total excess returns, or ~3% p.a. Looking ahead to 2022, low interest rates and high valuations will continue to encourage companies to raise capital. We expect ECM activity to remain elevated and to continue delivering material opportunities for small cap investors like Firetrail. Conclusion 2021 was a year of frantic ECM activity and we see no sign of this abating as we move through 2022. As small cap investors, we are excited by the opportunity and potential returns offered by IPOs and secondary placements in the coming year. Our experience shows that meaningful returns are out there if managers are willing to do the work to find them! Funds operated by this manager: Firetrail Absolute Return Fund, Firetrail Australian High Conviction Fund Disclaimer This article is prepared by Firetrail Investments Pty Limited ('Firetrail') ABN 98 622 377 913 AFSL 516821 as the investment manager of the Firetrail Australian Small Companies Fund ARSN 638 792 113 ('the Fund'). This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person's objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance. Pinnacle Fund Services Limited ABN 29 082 494 362 AFSL 238371 ('PFSL') is the product issuer of the Fund. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited ('Pinnacle') ABN 22 100 325 184. The Product Disclosure Statement ('PDS') and the Target Market Determination ('TMD') of the Fund is available at www.firetrail.com. Any potential investor should consider the PDS before deciding whether to acquire, or continue to hold units in, the Fund. Whilst Firetrail, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication. The information is not intended for 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 Firetrail and its investment activities; its use is restricted accordingly. All such information should be maintained in a strictly confidential manner. Any opinions and forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future. Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this communication is prohibited without obtaining prior written permission from Firetrail. Pinnacle and its associates may have interests in financial products and may receive fees from companies referred to during this communication. This may contain the trade names or trademarks of various third parties, and if so, any such use is solely for illustrative purposes only. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with, endorsement by, or association of any kind between them and Firetrail.

Green by name, going greener by nature! Firetrail Investments November 2021 Can we be sure that we are removing the same amount of carbon dioxide from the atmosphere as we have emitted as a business? That was the simple question we looked to answer as we approached our business carbon neutrality this year with the same rigour as our stock analysis. In the process of measuring emissions, researching offset projects, and then purchasing offsets, we were surprised at what we found. Not only is carbon offsetting a largely unregulated industry, but most carbon offsets don't even remove carbon dioxide from the atmosphere! Read on to find out how Firetrail enhanced our carbon emissions offsetting process for FY21. By doing our homework, and focusing on what matters, we strived to ensure Firetrail genuinely is a carbon neutral business. Step one -  measure the emissions Firetrail expanded the scope of our emissions estimation process this year to include assessments on: Electricity usage Staff commutes and taxis Waste/water/paper/gas usage Flights and hotel stays Supply chain costs, including cleaning, software, and catering, and Working from home emissions when government restrictions were enforced, such as lighting, computer usage and heating We worked in collaboration with Pinnacle, who have engaged in offsetting their business emissions for the last few years and achieved Climate Active Carbon Neutral certification for their FY20 emissions. Pinnacle also released their inaugural Corporate Sustainability Report in FY21, including details on their carbon inventory assessment, which can be found here. Firetrail's calculated carbon emissions for FY21 were 134 tonnes of carbon dioxide equivalent. A breakdown of the contribution to total emissions is provided below. There are a couple of anomalies to highlight in the emissions for the past year. The Covid pandemic continued to impact daily life. This meant that business travel was virtually non-existent for the Firetrail team. We expect business travel to increase as border restrictions (both domestic and international) are eased, and as such expect that this portion of our carbon emissions will increases substantially in the future. We also avoided major lockdowns for the majority of the team in the July 2020-June 2021 period. However, we expect working from home emissions will be a feature of the FY22 carbon emissions due to the extended lockdowns at the beginning of the period. We admit our measurement process is not perfect, and estimation methods are evolving and improving over time as we get access to better data. Where relevant, we erred on the conservative side through this process. Firetrail will look to enhance our approach as we continue in our offsetting efforts in the year ahead. A tonne of carbon is not a tonne of carbon Once we calculated our total business emissions, we began the search for an appropriate way to offset them. The atmosphere cannot tell the difference between a tonne of carbon dioxide removed from the atmosphere and a tonne of carbon dioxide emitted into the atmosphere. It doesn't care how, or where this is done. It's all one planet and its all the same. But when it comes to offsetting, this isn't the case! What really matters to us is ensuring that if we are offsetting our emissions, that we are genuinely removing carbon dioxide from the atmosphere. Source: Bloomberg Carbon offset markets are evolving rapidly. Despite this evolution, less than 5% of carbon offsets are actually removing carbon dioxide from the atmosphere. These methods are Afforestation and Reforestation, and Carbon removal technologies (the far-right columns in the graph above). Most offsets still are firmly in the 'prevention' bucket, i.e. they are potentially stopping carbon from entering the atmosphere. The big question here is whether most of these projects would have gone ahead anyway. The efficacy of the two biggest sources of offsets is questionable: Renewable energy projects. The logic here is by building a solar farm or wind farm, you would displace energy that previously came from a fossil fuel source and should earn credits for it. There is no due diligence however on whether this occurs. Secondly the projects would have likely gone ahead anyway given the lower cost of renewables development. Fortunately - most voluntary carbon credit schemes are now starting to disallow these forms of credits. Avoided deforestation. Best described as "Unless you pay me, I will chop that forest down". It's very hard (if not impossible) to prove whether the trees would have stayed anyway. In many cases the land is protected by covenants or planning restrictions also. And even if the trees do stay - it's just status quo for the atmosphere! Of the two options which genuinely offset carbon emissions: Carbon removal technologies are very expensive. For the fee of 960 Euros (AUD ~$1,500), Climeworks will suck 1 tonne of CO2 out of the atmosphere. Read more here. Forest planting is a far lower cost option. As a tree grows, about half its mass is carbon, formed by breathing carbon dioxide in from the atmosphere. In Australia, the cost is ~$20 for this - depending on land prices. To ensure that offsets pass the pub test, offset projects should be a) a project that is not the status quo and b) truly reduces carbon in the atmosphere. Investing in the Flanders Carbon Project Our science based, fundamental approach led Firetrail to purchase offset units from a Queensland native vegetation regeneration project called 'The Flanders Carbon Project'. The project is subject to independent audit as well as review by the Clean Energy Regulator. Once we purchased these Australian carbon credit units ("ACCUs"), we cancelled them in the Australian National Registry of Emissions Units, so that no one else can buy them. Doing this and avoiding any double counting means the offsetting is real. At $33 per tonne, the cost of doing this was more than double the cost of other carbon offsets we investigated. The Flanders Carbon Project is situated in the southwest Darling Downs region of Queensland. Vegetation is growing and removing carbon dioxide from the atmosphere on land which was previously intensively overgrazed. The Flanders Project is spread over 32,000 hectares, and in FY21 140,976 tonnes of CO2 will be removed from the atmosphere. From an Australian national emissions perspective, the reforestation of Queensland is also critical. During the 2000s the rate of land clearing (destroying plants) was adding almost 100 million tonnes per annum to Australia's emissions. This process is now reversing through projects such as the Flanders project and reforestation - this can be seen in the dark green line below. Excluding this Australia's emissions reductions are minimal (ex-Covid impacts). Source: Australian National Greenhouse Gas Inventory Conclusion Firetrail are dedicated to playing our part in creating a positive future environment for all our stakeholders and continue to make significant progress in our approach to responsible investing and sustainability. Our journey to carbon neutrality was an eye-opening experience this year, as we enhanced our methodology on not only emissions measurement, but choice in offsets. Carbon markets are certainly evolving, and our advice would be to do your due diligence when embarking on your carbon offsetting endeavour! We are very happy to share more on what we have learnt thus far and hope to keep developing our knowledge through engagement with our clients, portfolio companies and peers. Disclaimer This article is prepared by Firetrail Investments Pty Limited ('Firetrail') ABN 98 622 377 913 AFSL 516821 as the investment manager of the Firetrail Australian Small Companies Fund ARSN 638 792 113 ('the Fund'). This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person's objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance. Pinnacle Fund Services Limited ABN 29 082 494 362 AFSL 238371 ('PFSL') is the product issuer of the Fund. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited ('Pinnacle') ABN 22 100 325 184. The Product Disclosure Statement ('PDS') and the Target Market Determination ('TMD') of the Fund is available at www.firetrail.com. Any potential investor should consider the PDS before deciding whether to acquire, or continue to hold units in, the Fund. Whilst Firetrail, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication. The information is not intended for 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 Firetrail and its investment activities; its use is restricted accordingly. All such information should be maintained in a strictly confidential manner. Any opinions and forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future. Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this communication is prohibited without obtaining prior written permission from Firetrail. Pinnacle and its associates may have interests in financial products and may receive fees from companies referred to during this communication. This may contain the trade names or trademarks of various third parties, and if so, any such use is solely for illustrative purposes only. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with, endorsement by, or association of any kind between them and Firetrail. Funds operated by this manager: Firetrail Absolute Return Fund, Firetrail Australian High Conviction Fund