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The following video summarises key themes from the quarterly update. To read the full quarterly report, click here. Video view time: 8:32 0:05 What are the major themes running through equity markets in 2026? 3:09 How does Chester combat this as an Australian equity investor? 4:28 How is the portfolio positioned? Transcript Q1. What are the major themes running through equity markets in 2026? We think there's been four major themes that have impacted markets in the first six months of 2026. Clearly, the semiconductor trade for hardware associated with AI computing has been the major driver of global market returns. We would think we're in a bubble. That doesn't mean it's going to pop tomorrow because EPS momentum is still very strong, but we're increasingly nervous that the development of far cheaper Chinese models offering similar outcomes at a fraction of the cost is going to really lead to the risk of overdevelopment in the US models. And I think there's a very strong chance these large language models, OpenAI, Anthropic, never generate an acceptable return. So that's been the first theme. The second theme clearly has been geopolitical conflict with Iran that's now ongoing again, new strikes in the last week or so, and Russia and Ukraine, where there's still supply chain risk. There's Russian refineries being knocked out last week. We're all very concerned with the Strait of Hormuz in March and April, and I think we should still be concerned with that remaining shut going forward. So we don't, we think the energy complex is underpricing the risk of those ongoing geopolitical conflicts. So we think that's the other theme that's driven through markets, which I think the market's probably been too sanguine on, to be honest, over the first six months. The other thing which has been around for four or five years now is really the permeation of passive investing and a lot of the trend of industry funds to lower the tracking error of their overall portfolios by investing in the top 20 names. So we've seen this huge dispersion between the top 20 names and the rest of the market in Australia. And so we think fundamentally it's very difficult for us to pay 26 times earnings for CBA or 33 times earnings for Wesfarmers. And that's created this dislocation, we think, in markets, and we can see it every day. I reverse that and say, well, I think the good news is from this point into July 2026 as a starting point, that dispersion is unlikely to continue because I do think that deterioration of fundamentals for that part of the market is occurring in real time. It's really driven by the fourth trend which has emerged in May, which is the changes to the Australian government, or the budget changes that were implemented in May around negative gearing and capital gains tax. And I think that's led to a real slowdown in investor lending, which has led to a slowdown in auction clearance rates and clearly a slowdown in house prices. So when you think about CBA and Wesfarmers, very in tune with those trends, I think they're now facing headwinds for the first time. So we do think the starting point from July 2026 for the top 20 to continue that form is far harder. So they're kind of the four major themes we've witnessed over the last six months. Q2. How does Chester combat this as an Australian equity investor? We've been grappling with this sort of rise of passive investing and some of these themes for a little while. And so we strip back to what we do, we think, well, which is patience. So we think the best way for a long-term fundamental investor to outperform over the medium to long term is demonstrate that patience and invest fundamentally on cash flow-based outcomes. So we do tend to think with contrarian mindsets. A lot of our ideas come from unlocked, underappreciated or undiscovered assets. And we think we've got a really strong portfolio full of those names over the next two to three years. Over the last 12 years, some of the best ideas have taken three to four years to play out. So we are still quite confident that some of the names in the portfolio are far better priced and there's far more asymmetry to the trades than we can witness in the top 20 names right now. I think, given the geopolitical turmoil and some of the uncertainty around the AI CapEx spend, the quote we used from the quarterly was Ray Dalio, who said you should have a strategic asset allocation mix that assumes you don't know what the future is going to hold. I mean, I think that's never been more apparent than right now. So we think having a diverse portfolio across different sectors is the best way to combat some of the uncertainty that we'll see in 2026. Q3. How is the portfolio positioned? What we try and do, obviously with that diversification in mind, is find asymmetry of trades across different sectors. So we've mentioned a few names, and one of the biggest ones at the moment is Nufarm. We see Nufarm as trading at 50 cents in the dollar of book value, well diversified across crop protection, which is cyclical, but the seeds portfolio we think is dramatically undervalued in this conglomerate structure, the way Nufarm is trading now. We think the seeds business has really strong organic growth over the next two to three years that isn't being yet rewarded by the market. Light & Wonder is another one of our holdings. It's the number two player in the gaming software space to Aristocrat. It's trading on nine times PE one year forward. Aristocrat's trading at 21 times. That dispersion, we think, for the certainty of cash flows and the reliability and predictability of those cash flows for Light & Wonder, we think is materially mispriced and undervalued. So if they actually generate their returns, and they reiterated guidance last week, we can see Light & Wonder putting on 40 to 50% from this point over the next 12 or 18 months. Ampol is one that we've held for almost a year and clearly it's been in a strong upgrade cycle because of refining margins being far stronger in 2026 than last year. The market's been trying to look through that and reprice refining margins back to $10 a barrel. They're currently $40 a barrel. Each $1 a barrel above $10 is about 2% earnings. So we think there's still material upgrades to come with Ampol, and it is critical infrastructure having refining assets onshore in Australia. So we still think that is probably, arguably, underpriced in today's environment. Another one we've held for a little while, which has been a bit frustrating this year, is AUB Group, an insurance broker. And it sort of sold off in the first quarter on fears around AI disruption to the insurance broking industry, as many other insurance brokers globally did. But we would lean into that, thinking insurance broking is a very relationship-driven, human-to-human business, writing bespoke commercial lines for individual businesses. So we think AUB is still really well set up to deliver double-digit earnings into the future, all for a discount of about 25% of what it's historically traded on. So we think, again, the asymmetry of owning AUB here is really quite compelling on a two to three-year view. And the other one I'll mention is Lendlease. It's been actually quite frustrating for us. It's been the worst-performing stock in the portfolio over the last 12 months. Lendlease, three years ago, decided to separate their Australian business, investments, developments and construction, from the international assets, which they decided to divest, and bucket all these international assets into what they call the CRU, the Capital Release Unit. They've taken a long time to divest those assets, but they're now about 70% of the way through that divestment process. And because they've taken so long, they've had an inflated cost base as they've carried incremental costs to release those assets. It's led to some downgrades in 2026. It was a trough year of earnings anyway. At $3, our adjusted book value is $5.50, so we still think we're buying assets at a really big discount to the book value. There's a new CEO, Nick O'Neill, who I think will add stability and rigour to the process of Lendlease's operating business. And I think we'll see a far better Lendlease operating business over the next two years than we have seen for the last three years. So I think from this point, the asymmetry of owning Lendlease here is really quite compelling. A couple of names that are really quite contrarian and unloved, but we think, and over the last 12 years, that's what we've done, is find these ideas. And the alpha we've generated has come from this approach over the last 12 years. So we're optimistic that we can continue to find these ideas that deliver really strong risk-adjusted returns over the next two to three years.

Chester Asset Management is pleased to announce that the Chester High Conviction Fund has been named a finalist in the Australian Large Cap Equity category at the 2026 Money Management Fund Manager of the Year Awards. The recognition highlights the strength of Chester’s disciplined investment approach and continued focus on identifying long-term value opportunities in an evolving market environment. Rob Tucker, Managing Director and Portfolio Manager at Chester Asset Management, said: “Chester is thrilled to be nominated for this award. Given the rise of passive investing, we believe it’s more important than ever to stay disciplined around our valuation framework and patient with our conviction. Some of our best ideas have come from unloved, underappreciated, or undiscovered assets. Our long-held view is that inflation is a far more structural challenge throughout this decade than the previous two decades, which lends itself to the notion that valuation discipline will be increasingly important over the coming years.” The Fund Manager of the Year Awards recognise excellence, innovation and leadership across Australia’s investment management industry, with winners to be announced in June 2026. Chester Asset Management is honoured to be recognised alongside a strong field of finalists and congratulates all nominees across this year’s awards program. This logo relates to a 2026 Fund Manager of the Year Award (‘Award’) for the Chester High Conviction Fund in the Australian Large Cap Equity category that was announced May 2026. The Awards Program is owned by Prime ABN 92 126 853 085. Lonsec Research Pty Ltd AFSL 421 445 is the Exclusive Partner of the Awards Program The Awards Programs’ judging panel applies a robust methodology to determine Award finalists. An Award logo is limited to general advice. Investors should obtain the product PDS, consider the PDS and seek independent financial advice before making any decision about whether to acquire the product. An Award logo is not a recommendation to purchase, sell or hold the product. Past performance is not a reliable indicator of future performance.

Chester Asset Management is proud to announce that we have won the Australian Equities – Large Cap category at the 2025 Zenith Investment Partners Fund Awards. The annual awards, hosted by Zenith Investment Partners, recognise excellence across Australia’s funds management industry, celebrating outstanding investment performance, process, and client engagement. This recognition reflects the strength of Chester’s investment team, the consistency of its process, and a continued commitment to delivering long-term value for investors. At Chester, we believe that enduring results are built on a clear investment philosophy, disciplined portfolio construction, and genuine collaboration. This award reaffirms that our approach continues to deliver outcomes that matter. We thank our investors and partners for their ongoing trust and support, and Zenith Investment Partners for acknowledging our continued focus on excellence in Australian equities. More about the Zenith Fund Awards: https://www.zenithpartners.com.au/zenith-fund-awards-2025/

We’re happy to be named a finalist in the 2025 Zenith Fund Awards, in the Australian Equities – Large Cap category. This recognition reflects the Chester High Conviction Fund’s strong long-term performance, driven by our experienced team. A big thank you to Zenith Investment Partners for this recognition, and to the Chester and Copia teams for your hard work and dedication. Zenith Investment Partners Pty Ltd ABN 27 103 132 672 AFSL 226872 Fund Awards issued 23 October 2025 are solely statements of opinion and not a recommendation in relation to making any investment decisions. Fund Awards are current for 12 months and subject to change at any time. Fund Awards for previous years are for historical purposes only. Full details on Zenith Fund Awards at https://www.zenithpartners.com.au/zenith-fund-awards-2025/

In his latest quarterly review, Rob Tucker discusses the implications of the recently passed US “One Big Beautiful Bill,” highlighting how fiscal stimulus and political pressure on interest rates are driving a shift toward fiscal dominance. He explains that this environment is likely to benefit real assets such as gold, infrastructure, and commodities, while supporting a broader rotation toward valuation-driven investing. Rob also highlights standout opportunities within the portfolio, including CSL, which he believes is poised for a multi-year recovery, and Nufarm, which he sees as significantly undervalued with potential catalysts from a proposed sale of its seeds business. Watch the full video below.

Chester Asset Management is proud to announce that the Chester High Conviction Fund has been selected as one of three new additions to the Third Link Growth Fund, alongside Australian Eagle and Firetrail Investments. Third Link is a unique Australian equities fund of funds that donates its management fee, net of expenses, to charity. Since inception, the fund has given more than $23 million to not-for-profit organisations focused on youth, education and employment, while delivering strong, long-term investment performance. This is made possible by the generosity of underlying managers, like Chester, who rebate their management and performance fees in full. Chester’s High Conviction Fund brings a focused, research-driven portfolio of 25–40 high-conviction Australian equities. With over $1.5 billion in funds under management, the strategy has outperformed the S&P/ASX 300 Accumulation Index by 5.8% p.a. after fees since 2013¹ and has been recognised with industry accolades, including Money magazine’s Best Australian Shares Fund  (2023 & 2024) and Financial Newswire Fund Manager of the Year  (2023). “We are thrilled to be part of the Third Link Growth Fund and support its dual mandate of returns and impact,” said Rob Tucker, Portfolio Manager at Chester. “We are proud to contribute to a fund with such a meaningful purpose.” Third Link’s founder and portfolio manager Chris Cuffe AO added: “We’re thrilled to welcome Australian Eagle, Chester, and Firetrail to the Third Link Growth Fund. Their inclusion strengthens what is now a stellar line-up of investment managers. By leveraging their expertise, we aim to enhance investment performance for our investors, while continuing to support our nominated charities through the generous rebate of all management and performance fees.” Chester is honoured to contribute to Third Link’s mission, delivering strong investment outcomes while making a tangible difference in the community. ¹As at 30 April 2025

Addressing the Asymmetry in Pay and Performance Executive pay in corporate Australia has continued to climb—often regardless of whether company performance or broader economic conditions justify it. This growing asymmetry between pay and performance is no longer just a governance issue; it raises fundamental questions about alignment, accountability, and long-term value creation. At Chester Asset Management, we’ve developed a practical framework to assess whether executive remuneration structures are delivering fair outcomes. By bench-marking compensation against real-world indicators—such as average wages, housing affordability, and total shareholder returns—we aim to provide a clearer, more grounded view of what constitutes appropriate pay. In this paper, we examine the distinction between ‘owners’ of capital—executives with meaningful personal investment in their companies—and ‘stewards’ of capital, who may lack the same alignment with shareholders. We also assess the effectiveness of incentive structures, the impact of CEO tenure, and the increasingly important role of shareholder engagement in shaping outcomes. At a time when scrutiny is growing and stakeholder expectations are shifting, we believe it’s critical to bring greater transparency and purpose to the way executive pay is structured and justified.

“The secret to wealth is finding the asymmetric payoff—small risk, big reward” Nassim Taleb Introduction When this writer first set about a career in finance we were tasked with uncovering how much each ASX energy company was worth, with little more direction than a basic understanding of discounted cash flows and net present values. The task was easy enough; to develop an asset by asset model that delivered a valuation per share, but how do you consider: Potential changes in commodity prices like oil? Assets that have uncertainty in their delivery like Woodside’s Browse project? And massive binary exploration programs like Karoon’s? (it was affectionately called Kaboom back then) A lot of it came down to pricing of options. We managed and believe this early entrée into markets has helped frame how we invest today. With a view to minimising risk and maximising returns, identifying the mispricing of options or asymmetric investing is a key part of what we now do on a day-to-day basis. It is similar thinking that has helped us: take positions in Austal, when the consensus at the time was that it faced extinction with key programs like LCS ending, load up on Origin at below book value when the market was capitalising trough earnings, and buy Stockland when it was one of the most hated REIT stocks in the market (among a litany of other examples). More than one observer has recently posited to us the thought that “valuations don’t matter anymore in markets… only narratives”. We don’t think this could be further from the truth. Our experience in options analysis has been put to test in recent months, in more than just trying to back a Melbourne Cup winner. We have recently faced the questions does Chris Ellison (MIN) and Richard White (WTC) leave and what does that mean for their respective stock price? How fast do interest rates go down and what impact does that have on share prices? Who wins the US election and what is the result if they do?! We continue to believe a flexible mindset with a focus on valuations (including option value) will be supremely important in 2025 as dislocation opportunities potentially present themselves. Within this article we explore our learnings in valuing options within equities, some historical examples of this and some further details on asymmetry in markets. Exploration – EMV – Options Value We start almost in chronological order with this writer’s journey in pricing options within equities. It was where this writer first heard the term ‘EMV’, at least I don’t remember it in the Uni textbooks. EMV stands for expected monetary value which is defined as “a statistical technique used to evaluate the potential financial impact of uncertain events on a project or investment”. So it was perfect this was one of the first things we learned in our first job in markets at Core Energy. Specifically when it comes to oil and gas we were utilising it in the pricing of exploration plays. How does this work? Effectively it was asking the question: What is the cost of exploration? What is the probability of success? And, if it is a success what is the value of that success? Without introducing too much confusion the below is an example of how this works in theory. Source: Chester Asset Management It is saying if the mean potential accumulation is 100 million barrels of oil and we estimate the netback or NPV per barrel of oil at USD10/bbl with the play having a 20% chance of commercial success then the upside case is USD950m or risk weighted EMV is USD150m. What makes it an even more interesting exercise from a mathematically minded individual is a lot of these assumptions are/were prevalent in public announcements, particularly for the more junior companies, with exploration plays the geologists have defined what is the geological probability of success of the play and the mean expected recoverable size of the accumulation if successful. Hence these could be input into our models. Source: September 2024 Karoon announcement Note the art would often be translating a geological probability of success into a commercial chance of success and further translating what that mean in terms of netback value but it provided a useful framework for helping identify what exploration assets were potentially worth. Individually pricing a portfolio of assets (Sum of the Parts Analysis) Conjunctively with learning what an EMV was and what it meant for companies this writer was discovering that in resource investing it was most appropriate to price assets separately, i.e. calculate the collective value of a portfolio of assets by calculating their individual values and adding all of these up. This approach was particularly useful given: Most companies had a combination of producing assets and development assets and it was inappropriate to assume the development assets had the same risk level of a producing asset, I.e. for Woodside pricing the North West Shelf and their other producing assets in a separate way to valuing Browse and Sunrise Differing ownership interests across a host of assets with that ownership interest sometimes changing over time Assets in various jurisdictions which attract(ed) different forms of regulation needed to be modelled with only those assets attracting that regulation I.e. Sunrise which probably has the same timeline to development now as it did in 2010 is subject to special Timorese government interest Exploration assets on top have an expected monetary value which can be calculated separately and thrown into the mix This approach is not necessarily a revelation for any resource analyst, it is the accepted standard, but it is an approach that contrasts with the analysis of industrials where a companywide DCF is the norm. In some ways we get sucked into thinking there is a solitary base case for each company given there is consensus and most analysts just think in terms of being above or below that. Rightly or wrongly the sum of the parts approach, although not always appropriate can allow for the greater consideration of risk, cash flows and uncertain options and can hence provide asymmetric opportunities within industrial companies. It can allow for the pricing of binary options on top, which are largely excluded by the sell side unless they are a near certainty, even if, as we discuss for ASB and some biotechs below those options are extremely valuable. Some examples beyond Austal and biotechs, that we have ventured away from the norm in this approach in industrial investing include: Blast Dog for Imdex, the Seeds business for Nufarm, land developments within Stockland and the Sum of the Parts within Aurizon. What are your favourite embedded options within stocks? Some of the first observations we have made that we still reflect on today are: The larger the company the less value analysts generally add for exploration (and other options) particularly when contrasting more pureplay exploration companies, I.e. within commodity companies with producing assets development assets are often underpriced i.e. BHP, refer ROTE The same applies in biotechnology companies, which we explore looking at TLX, CU6 and NEU below We further note that there is a certain asymmetry that comes from commodity company investing as the assets in the ground have exposure to a commodity price that can fluctuate and as we know with options the higher the volatility the more the option is worth. We explore the special case for gold equities at the end of this paper. Austal Case Study Austal (ASB) is a great example of this options scenario in practice. This writer first analysed Austal in late 2018 and we first invested in ASB during the early stages of COVID. It became quite a polarising stock during that time when in April 2020 they missed out on the large future frigate(s) contract to Fincantieri. The narrative at the time was that ASB faced an existential threat with the run-off of their Littoral Combat Ship (LCS) and Expeditionary fast transport ships (EPF) contracts however, particularly once it was announced (in June 2020) that the US Government was granting them USD50m to expand capabilities into steel [1] (1) for us it then became a matter of if not when they would win more work. Hence it became a great opportunity to put to work our learnings in Sum-of-the-Parts options analysis. Similar to valuing and then risking the individual assets of Woodside we set about determining the potential contracts ASB was vying for and coming up with a theoretical value of the company. It took hours of reading but US congress papers are very detailed around the different contracts, including: number of ships, revenue per ship and deliveries per annum. Hence the assumptions we then had to make were average margin (US Shipbuilders including ASB historically average ~8% EBIT) and the probability of winning each contract. At the time our analysis looked something like this: Source: Chester Asset Management Hence the way we were viewing things it was a risked valuation of AUD3.30/share at a time the share price had gone <AUD2.00/share, but the NTA of the business was AUD2.05/share so it stood as a very asymmetric opportunity. Of course this analysis looks somewhat silly in hindsight as notably: ASB won the first of these options, the (USD3.3bn) Offshore Patrol Cutters (OPC) contract– 30/6/2022 Less than 12 months after winning OPC, ASB won the T-AGOS contract – 19/5/2023 ASB saw expanded programs with EPFs - medical ships – 21/12/2023 Missed out on the Philippines OPV contract which we though was a high probability – 27/6/2022 Has been announced as the exclusive manufacturer of ships for the Australian Government – 23/11/2023 That bet got even more asymmetric when after the first two of these points our probabilistic valuation had increased closer to AUD4.00/share and NTA of the business had jumped to AUD2.67/share however ASB had experienced some near term earnings headwinds, associated with the T-ATS contract which saw the share price drop <AUD2.00/share and trade at ~70% of NTA. At ~AUD3.20/share today, after a failed takeover bid from South Korean shipbuilder Hanwha and the award of a USD450m contract / grant from General Dynamic Boats / the US Government, for the building of submarines (SIB contract); and exclusivity for the building of ships for the Australian government; ASB is once again trading at an extreme level of upside asymmetry. Our understanding is that management is still determining the exact accounting treatment of the SIB contract but it has the potential to either a) be added straight to the asset base once complete, taking pro-forma NTA to AUD4.50/share or b) amortised over the medium term i.e. 10 years in which case USD45m would be added to earnings every year. Both of which are pretty bullish outcomes - either 70% upside to NTA or earnings! Although there is uncertainty remaining about ASB’s ability to execute on steel shipbuilding contracts. If they can and their portfolio options doesn’t push out to the right ASB is destined to produce FY2030 EBIT of AUD250-300m, which would have the company trading at <4x EBIT vs global shipbuilders trading on 15-20x (refer below). All this for 70% of pro-forma NTA means ASB remains one of the most asymmetric opportunities for us on the ASX. Source: Chester Asset Management, Bloomberg Orora Case Study Another recent example is Orora (ORA), where like many in the market during 2024 we were asking ourselves how much is too much on the downside? Source: Simpsons MEME, the Internet Below is some of our analysis from July 2024 when 8 months after the Saverglass acquisition completed we calculated you were effectively paying 25% of the Saverglass purchase price within ORA, in what was reported as a fairly competitive process. Source: Chester Asset Management, Bloomberg July Or looking at it another way, ORA took on additional debt to finance the deal which saw net debt (ex leases) increase ~AUD900m and the EV rise to AU3,572m from AUD2,972m (AUD600m) . With Saverglass contributing ~AUD280m EBITDA to ORA (pre AASB116) Saverglass was being valued at ~2.1x EBITDA. If you continued to believe in the quality of the rest of the business (and the management team), what should it have been down? This is not a perfect science but we inferred share price performance using ORA comps, remembering there were effectively downgrades to Saverglass and to OPS [2] (2) while Australian earnings were maintained in 2HFY24 Saverglass has some decent peers (refer below) For ORA’s Australian division we used the ASX300 (for want of a better comp) For ORA’s North American division BUNZL and Ball Corp were considered, note per Bloomberg both had seen downgrades similar to ORA’s North American division Source: Chester Asset Management, Bloomberg July 2024 Our analysis pointed us to the conclusion that per ORA’s peers it should have been down a lot less (4%) than it was Source: Chester Asset Management, Bloomberg July 2024 In rounding out the exercise we had to ask ourselves were Saverglass’ earnings overstated and was Saverglass’ downgrade in line with peers? To that point we noted that between 2019 and 2023 Saverglass’ earnings increased from EUR100m to EUR168m. Volumes during that period were up 13%, meaning price/mix/margin accounted for ~50% of the increase. Over that 5 year period ~EUR270m of capex was spent on growth projects. If we assumed a ROIC similar to ORA’s (15%) that equates to EUR40m of EBITDA. (EUR100m x 1.13) + EUR40m ~ EUR153m. Hence our bush maths didn’t point to massive overearning - maybe ~EUR10-15m. But with 11% volume decline in 2H24 the destocking set up a more reasonable base to consider going forward. Furthermore per the table below margins assumed are ~ 2.5% under at Saverglass vs peers if we consider accounting differences i.e. AASB16 [3] (3). Source: Chester Asset Management, Bloomberg July 2024 Furthermore on capex we noted that In the prior 5 years Saverglass’ capex had been ~EUR450m on sales averaging EUR560m, equating to 16% of sales. Peers are investing ~9% of sales in capex. Hence it appeared to us, that if anything previous owners were overinvesting in Saverglass reducing, our suspicion of dubious private equity practices. We also came to the conclusion in July that Saverglass’ depreciation was potentially more aggressive than ORA’s, which when adjusted could provide a buffer to insulate further earnings downgrades, which proved to be the case in August. Hence the Saverglass acquisition was poorly timed (unlucky is one word) but it did come from private equity. However there was enough evidence to show that comps had faced similar challenges and with the limited data we had there could be an interpretation that Saverglass outperformed peers in FY24, making the old adage applicable that management were “doing well in a tough environment”. Why rehash old news? Because the thinking is still valid today, particularly now that ORA have agreed to divest OPS to Veritiv [4] (4). we once again have to ask ourselves if trading at ~net cash and ~6x EBITDA or 9.5x EBIT is the right multiple for a global beverages company? We (and Lone Star) might argue it is at least one turn too low. Source: Chester Asset Management, Bloomberg December 2024 Biotechnology Companies EMV options, as described above, are everywhere we look in finance, but none more so than in Biotechnology. This writer has recently been fascinated by this space and highlights a few particular names we have been exploring for asymmetric opportunities. The calculations for these are in some ways very similar to the EMV calculation presented above for oil and gas with some slight differences. Replacing the size of the hydrocarbon accumulation however and the price of oil are estimates around: the total addressable market a drug addresses (TAM), the take-up rate and persistence of users and the price of a drug. A key determinant of persistence can often be if insurers or other entities cover the drug and hence there is limited gap for the patient. Probability of success factors, similar to a hydrocarbon accumulation, are somewhat idiosyncratic but in the absence of this analyst having the scientific background to assess these applications on individual merit we revert to historic probabilities of success and commercialisation. Hence at a general level we start with the question, what has been the probability of success of different trials, and what can that impute about stocks? Source: National Library of Medicine Paper (5) [5] From our reading including the National Library of Medicine paper from which the image above is lifted a drug that has completed phase III successfully has historically had an 88% chance of approval and a drug that is at a Phase III gate likely has a ~60% chance of being successful in that trial and passing to the approval stage. Hence we frame our thinking on biotech options around these cases (i.e. 50% for phase III trials and ~30% for phase II). We adjust this factor based on evidence that the drug has been successfully approved in another jurisdiction or has been pre-approved for critical use prior to final approval. Also noteworthy is the likelihood of a drug progressing from Phase I to final approval is about 8%. Success rates can also differ notably depending on the therapeutic area they are associated with. Telix The best example of a portfolio of different biotechnology assets is Telix Pharmaceuticals (TLX). For those unfamiliar with the company they are a biopharmaceutical company that focuses on the development of diagnostic and therapeutic products based on targeted radiopharmaceuticals or "molecularly targeted radiation" (MTR). The products in their pipeline are intended to address major unmet medical needs in oncology, particularly in prostate, renal, and brain cancers. The first of these products Illuccix is a diagnostic imaging agent developed by Telix after it acquired TheraPharm in December 2020. It is used for the imaging of prostate cancer using Positron Emission Tomography (PET) scans. The diagnostic agent targets the prostate- specific membrane antigen (PSMA), which is overexpressed in prostate cancer cells, allowing for a more precise localisation and visualisation of the disease. This can assist in better patient management and can influence treatment decisions. Telix is partnered with radiopharmaceutical giant Cardinal Health for distribution of Illucix in the US market. TLX has also developed drugs for the imaging and therapy of renal cancer (TLX-250) as well as brain (TLX-101) and multiple other applications such as rare diseases and bone marrow as well as an exciting portfolio of prostate therapeutics products TLX-591 and TLX-592. Source: Telix 1H 2024 Results Presentation Analysing TLX can be somewhat complex but we have tried to (dangerously) simplify our detailed model below i.e. we have attempted to impute potential market share of key drugs below and risk each of those products based on stage of development (without a scientific overlay). The outcome to us suggests bias to the upside on revenue and hence earnings on a 5+ year basis. However, we appreciate that this is assumption heavy and will be more binary than this exercise suggests, particularly with the uncertainties RFK Jr brings to the US healthcare space and the intricacies of CMS payment changes. Source Chester Asset Management, Telix Source: Telix 1H 2024 Results presentation In relation to the above: We have chosen to only compare revenue but note Illucix at present has a GM currently of 65% and we assume a similar margin for most products Illucix is the base product for Telix, by estimates off the back of theirs and competitor Lantheus’ most recent quarterlies they already have ~30% market share in the US of PSMA PET however this is expected to increase further with a confirmed (40%) CMS pass-through price drop for Pylarify and the commencement of TLX-007 for Telix Global sales are more opaque but it is seen as a ~USD1bn TAM opportunity and within 3 years TLX could be doing ~1/3 of their US sales from the rest of the world. Illucix globally (like almost all drugs) is anticipated to have a lower average selling price (ASP) but similar gross margins to the US TLX250 (Zircaix) for kidney cancer, they have a 4 year head start on the competition. Although there was a slight delay after TLX’s submission to the FDA, announcements appear to suggest technical hurdles have been passed and only administrative hurdles remain. It is likely to be priced at a higher ASP to Illucix and if successfully approved TLX could achieve material early market share in an uncontested market TLX-101 Pixclara (F-FET) is a brain cancer imaging agent, PET agent, for the characterisation of progressive or recurrent glioma. It has been granted priority review and we note already included in international clinical practice guideline the imaging of gliomas. TLX see it as strategic as it potentially paves the way for TLX-591. So, if the trials are successful for Pixclara than it somewhat derisks their Therapeutics Therapeutics prostate products TLX-591 and TLX-592. Prostate TAM is USD8-10bn and TAMs for all cancer therapeutics is ~USD40bn. Hence why TLX want to play in that market but it is competitive. ProstACT GLOBAL Phase III trial is progressing but will be a prolonged process In summary for TLX, based on our analysis we believe there are potentially further upgrades implicit in earnings projections as: Global PSMA PET markets are penetrated TLX-250 and TLX-101 are commercialised Application of imaging products expands as the number of scans increases TLX progresses its Therapeutics business and TLX-591 and 592 are commercialised and scaled Further applications are progressed and developed such as Musculo-skeletal Chester CY2027 earnings and beyond remain meaningfully above consensus Clarity When we talk about TLX we are often asked what we think about Clarity (CU6). CU6 is a clinical stage radiopharmaceutical company developing next generation theranostic (therapy and imaging) products based on platform SAR technology, ideally suited for use with copper isotopes which is said to enable superior imaging and therapeutic characteristics. Their products are hence likely to play in the same space as some of TLX’s products (notably 591 and 592). As noted above we do not have a medical background and hence assess the economic payoff at an information disadvantage to other market participants but note that unlike TLX, CU6 doesn’t have a base level of earnings but 2 Phase III trials currently related to Cu-SAR-bisPSMA. Hence by the maths of above we would have to assess their value at 50% of their estimated share of TAM. We have heard glowing commentary on the potential of their product however for us without the requisite skills to assess the science, we would class the economic payoff as too binary for us to entertain. That’s not to say that it isn’t the right investment for others with the requisite skills. I.e. if it was potentially going to capture AUD10bn of value and had a 50% chance of payoff at <AUD2bn market cap that payoff is undervalued. However for us its binary not asymmetric. It does highlight maybe similar to resource companies the market may be willing to recognise these options in pure development companies rather than companies producing earnings, which is highlighted in the example below. Neuren Neuren (NEU) is an Australian biopharmaceutical company specialising in developing therapies for neurodevelopmental disorders that emerge in early childhood. Their lead product, DAYBUE™ (trofinetide), is approved in the US for treating Rett syndrome in patients aged two years and older. NEU is also advancing NNZ-2591, currently progressing to Phase 3 clinical trials for conditions including Phelan-McDermid (PMS), Pitt Hopkins (PTHS) and Angelman (AS). The company has granted Acadia Pharmaceuticals an exclusive worldwide license for trofinetide in Rett syndrome and Fragile X syndrome, while retaining rights to NNZ-2591 for other indications. We have recently been fascinated with NEU of late given it is a self-funding clinical research company with this portfolio of attractive options. Although there are a host of factors impacting the short term view of NEU: change in US administration and management change at distributor Acadia we are increasingly gaining conviction the share price is underwritten by DAYBUE’s value and the potential of NNZ-2591, despite being extremely material under a successful commercialisation, is being priced at near zero within the share price. We preface this analysis by saying we aren’t experts on the science of their assets and have leveraged off the work of some of the covering analysts to gain views on success, but NEU are currently the leading drug contender for the indications of Phelan McDermmitt and Pitt Hopkins disease. They are potentially third in the case of Angelman but their progress potentially provides them with 3 lucrative shots on goal. Source: Neuren November 2024 Presentation Key things we don’t know are: Whether Phase III trials will be successful – but refer averages from the studies noted above (we have assumed 50% in the US for PMS and PTHS) Potential level of market penetration – we have assumed similar stabilised levels for DAYBUE which is arguably conservative given the lower levels of side effects noted to date How much NNZ-2591 will cost - however we have used DAYBUE (gross USD575k) as somewhat of a guide. And despite higher potential efficacy, lower side effects + rarer diseases potentially suggesting a higher price than DAYBUE the RFK Jnr factor, and average of other orphan drugs as a guide has led to us reducing this almost by half (gross USD300k) as well as a similar gross to net factor as DAYBUE and a global discount factor of 30-40% Timing of roll-out. We have assumed consistent 1 January 2028 for all markets and geographies – however note that a 6 or 12 month delay to that matter doesn’t make or break the point of the exercise The Commercial model – We have assumed DAYBUE is the only drug that is under licence to Acadia and 2591 they distribute themselves. Notably 2591 could cannibalise DAYBUE for Rett but we have assumed no change here. Whether they will achieve comparable economics globally to the US. We have assumed a lower level of economics The net effect of all of these assumptions is an EMV Sum of the Parts that looks like the following Source: Chester Asset Management, Neuren ASX announcements I.e. our analysis suggests that NNZ-2591 is being priced at close to zero within the NEU share price. We have to ask ourselves if NNZ-2591 was sitting as the sold drug within a company would it be valued at <AUD150m? Asymmetric?! Botanix Botanix Pharmaceuticals Limited (BOT) is an Australian dermatology company focused on developing and commercialising treatments for prevalent skin diseases and infections. Its lead product, Sofpironium Bromide (Sofdra), targets primary axillary hyperhidrosis (excessive underarm sweating). In June 2024 Sofdra received FDA approval to be distributed in the US which sets them on the path to commercialisation and ultimately free cash flow. BOT will be employing a direct to consumer telehealth model to distribute the product and have already signed agreements with (including with Ascent) covering over 40% of the US TAM ‘commercial lives’. There are currently an estimated 10m people with Hyperhidrosis in the US with the disease obviously a global not just US opportunity. Sofpironium Bromide is being distributed in Japan by Kaken Pharmaceuticals in a product called Ecclock. We invested in BOT prior to it receiving FDA approval when it was priced like this was a meaningful risk. We saw the opportunity as somewhat asymmetric vs the risk implied by the share price at the time due to: The fact it had previously been approved yet there was a check of its packaging The product (with a slightly different formulation) had been distributed in Japan Ecclock meaning it already had market validation Furthermore once FDA was approved we further strengthened our resolve on the name after 3. Dr David Nayagam at E&P conducted a survey of the (US) Hyperhidrosis Society which highlighted some key facts about the product including propensity for sufferers to try the product (high at 95% of patients likely or highly likely to try SOFDRA) and required improvement on current condition (~50% which is low) indicated high penetration and persistence rates. The survey also indicated potential patients love the idea of telemedicine and direct shipping; and 4. Now more recently the announcement, that insurers will cover the product eliminates what we had heard from others was seen as the key risk Note it is difficult to determine what is the appropriate ramp-up of the product but again we have an addressable TAM, a price and economics of comparable companies to provide some assumptions to assist us in determining commercial value. Source: Botanix November 2024 presentation There is also an analogue for Sofdra with Ecclock in Japan but notably their healthcare system is very different to that of the US and has meaningful friction points that limit the ability to easily refil a script. The upside on this though is that with our understanding that patients in Japan average only 1.5 fills on average the sales data out of Japan is indicating a potentially extreme penetration rate for sufferers willing to try Ecclock [6] (6). The trouble is however the lack of refills. Hence assumption heavy but we have been able to develop the following scenario table with the results of the study and the Ecclock example potentially skewing our thinking towards the higher end of the potential scenarios, up from our initial base case. Source: Chester Asset Management, August 2024 Imricor Imricor (IMR) Is a relatively recent addition to the Chester cares list. IMR produce MRI compatible catheters and systems to enable cardiac ablation procedures to treat cardiac arrythmias (irregular heartbeat). The catheters developed by IMR are a world first, other manufacturers only have capability for X-Rays but given the heart is a muscle, use of 2D X-Rays for these ablation procedures (minimally invasive procedure to normalise heartbeat) is not optimal. MRI procedures are more accurate, quicker and IMR believe economic, hence present as a more effective outcome for both patients and cardiologists. The business similar to BOT is founder-led by Steve Wedan, who first designed MRI and ultrasound systems at GE and has painstakingly developed the full suite of products to make cardiology labs MRI compatible over the course of 20 years. Although IMR is a Medtech not a biotechnology company we feel it has a similar setup to Botanix (BOT) in that it is subject to an FDA trial for Atrial Flutter (AFL) that is somewhat derisked given pre-existing approvals in Europe and the Middle East and a history of performing heart flutter procedures almost without fault in Europe. The trial is for up to 91 patients with an early exit at 76 patients, hopefully in early 2025. Similar to BOT there is also granular detail on the expected number of procedures to be performed in a lab each year, the cost of equipment, catheters and hence what the opportunity available to IMR is if they can achieve FDA approval and penetrate the US cardiology industry. Source: Imricor July 2024 presentation Despite the prescriptive nature of these elements there is still risk to the downside that FDA approval isn’t received for AFL, VT or AFIB particularly because to date there hasn’t been a VT (Ventricular Tachcardia) or AFIB (Atrial Fibrillation) procedure performed with MRI devices, with which we hold our breath in anticipation of an imminent VT procedure in Europe. Given this risk and the more assumption heavy nature of this valuation we utilise a higher cost of capital to discount potential cash flows and determine low, base and high scenarios. Differences in the assumptions include the number of labs they ramp up to, hence the number of procedures performed per annum and the number of catheters reordered. Notably X-Ray Catheter players (BioSense, Webstar, Medtronic, Boston Scientific) are operating with GMs of 80% and potentially EBITDA margins of 40%. Source Chester Asset Management, August 2024 Not as asymmetric as the others for now but an extremely interesting upside case if they can prove out the commercialisation model. Book Value Asymmetry Of the examples above we believe set-ups provided/provides asymmetry from a value perspective but we get the most comfort, as is the case with ASB when the stocks trade below book value. ASB is a great example of value asymmetry. Some of our more recent successful investments have come from investing in companies trading below book value with the market missing an element of the mark-to-market of those assets. As we have previously noted the biggest issue with this type of investing is that often in this situation, after identifying and purchasing an investment at below book value there is an impairment of that company which invalidates the book value of those assets. Hence it remains important for us that this isn’t the sole purpose of investing in the business but rather one prong of the investment thesis. And on a further note the asset we are investing in is somewhat of an essential service and not a discretionary item or a mine. We recently heard the quote “In mining there is no asset backed lending only cash based lending” [7] (7). I.e. if a mine doesn’t produce the cash it will be shut down and also value potentially lost. Notes where we have previously highlighted this in more detail include: Not A Sequel but an Origin Story Hidden Property value within a property stock Earnings Expectations Asymmetry As part of the work we do at Chester, we compare our projections of modelled companies with that of the market to identify if the market is mispricing earnings. Although this can at times be a challenge given most stocks have multiple analysts covering them when these situations are identified they can be extremely lucrative. We recently read a great research note by Harris “Kuppy” Kupperman titled “ What’s Driving Stocks ”, reproducing some work by the Macro Tourist Andrew Muir considering some of the negative aspects of this phenomenon but it really is a powerful force particularly when combined with a lens of stocks that are underappreciated or unloved and hence (cheaper than average). We could list a bunch of names where we have done this internally but some of the public examples are: Select Harvest Austal Imdex and ALQ Nufarm What we like about these situations is we can be wrong but it increases the chances of asymmetric returns, that if the company beats expectations the stock price will follow by at least the extent of the earnings beat, but often more as the stock experiences somewhat of a re-rate. The article does a better job of explaining why EPS expectations = share price movement. Below we discuss how the ASX listed gold stocks could be the perfect set-up as being relatively cheap but subject to longer term earnings upgrades based on the gold price. Information Asymmetry Information Asymmetry is also worth mentioning here and the work we do in reviewing annual reports ( Why it pays to read the Account Notes ) and insider activity ( Why it pays to follow the insiders - Part 2 ) to gain any form of informational edge and tip the scales in our favour. We particularly note the section in the article linked above titled ‘The Book Deal Trade’ as one of the more asymmetric opportunities we can think of. We have been working on one particular Book Deal Trade for the better part of 2024 and hope to inform of our efforts here early in 2025. We are super excited by it but acknowledge there are no guarantees in markets. The case for Gold Equities Last but not least we want to mention the asymmetry available in gold equities. We are well known at Chester for always having investments in gold equities at ~5-10% of the portfolio. We won’t rehash our investment pitch but essentially we are attracted to the defensive characteristics of it within our portfolio almost like an insurance policy. By its very definition however insurance is usually something that loses you money but you pay to have the protection. In the case of gold we don’t believe that to be the case. At Chester we don’t try to make commodity price calls, we rely on consensus prices for the commodities that we model, the primary exception being gold in which case we utilise a price more aligned with spot (or the futures curve), the lags in any period usually only represent the timing differences on when we last completed our detailed update and the gold price at the time (and also our desire to use a round number). The broker that is most closely aligned to this way of thinking is Canaccord Genuity but outside of that the street appears to use a commodity price assumption meaningfully below spot on a long term basis. Source: Chester Asset Management, Various broker reports Above is a sample of long term (LT) gold prices assumed by the sell side. In response to these differences we have asked a few select houses as to why and the responses are often a combination of: “that’s what we’ve always used”; “we are told to use that price"; or “higher costs will offset any differences in gold price” … But what if they don’t? Based on average all-in-sustaining costs (AISC) of the ASX gold companies of circa AUD2,000/oz it works out that they generate ~40% margins, providing ~2.5x leverage to the gold price. Putting it another way if the average (particularly ex Canaccord) were adjusted to spot there would be up to 100% average valuation increases or 65% to adjust to our most recent assumption of ~AUD3,600/oz. We don’t know where the spot gold price lands under a Trump Administration but we continue to contest that the spot price is as good as any other arbitrary number. DOGE may do their thing and potentially reduce US Government deficits but turning them into surpluses is another thing. Should gold price hold spot, and we don’t see a meaningful ratcheting up in opex and capex, the upgrades to long term free cash flows of these businesses are going to be material and maybe enough to get the pod shops involved. On this basis some gold equities are extremely cheap and getting cheaper. We show an example for WGX from September below (acknowledging some changes to WGX and consensus since) but the information is still valid. Notably WGX is the gold stock we have chosen to show but this is prevalent across most of the ASX names we look at, largely due to the gold prices assumed by the sell side. Source: Chester Asset Management August 2024 I.e. WGX’s leverage to the gold price is 2.5x Source: Chester Asset Management, August 2024 (notably some changes since) The above has shown to translate into higher FCF estimates of Chester vs the street. Closing Much like the holiday season, investing with options and asymmetry is about finding the gifts hidden beneath the surface. The right strategy can turn a modest outlay into a spectacular surprise—or at least save you from ending up with coal. Here’s to a happy holidays for all and uncovering some more asymmetric opportunities in 2025. [1] (1) (VIEW LINK) [2] (2) Orora’s North American business [3] (3) We believe European accounting standards haven’t necessarily adopted IFRS16 leases into depreciation hence we may be comparing their 25% EBITDA margins with ours, the difference being a 2.5% boost to our EBITDA margin. i.e. their ~25% compares to our ~22.5% pre AASB116. EUR739m x (100%-11%) x 22% ~ EUR145m [4] (4) Refer announcement 4 September 2024 [5] (5) The Current Status of Drug Discovery and Development as Originated in United States Academia: The Influence of Industrial and Academic Collaboration on Drug Discovery and Development [6] (6) On our calculations potentially as high as 20% of the patients seeking treatment in Japan i.e. 250-300k [7] (7) Sean Russo Money of Mines

In his latest quarterly review, Rob Tucker analyses sector performance, identifying which sectors are overvalued and where Chester is taking a constructive portfolio approach. Rob also explores how Chinese fiscal stimulus and the looming US election could shape market dynamics over the next 12 months, and highlights some standout stocks within the portfolio, including Westgold Resources and Austal. Watch the full video below.

We are pleased to announce that Lonsec has upgraded the Chester High Conviction Fund to its highest rating, " Highly Recommended ."   In its report, Lonsec stated, “The rating is underpinned due to increased conviction in the process which has generated persistent alpha since inception and is supplemented by conviction in Portfolio Manager, Rob Tucker, and the investment team, who are well-aligned with end-investors.”   Key findings include: “The Fund has generated strong performance outcomes relative to the benchmark and versus peers over the long term.” “The Manager has demonstrated a willingness to utilise the full suite of risk management tools at its disposal to protect the Fund on the downside.” “Strong boutique culture which promotes a high degree of alignment of interests with end investors.” Rob Tucker said “We are proud to have received this rating which underscores the strength of our investment process and the dedication of our team. It is a testament to our focus on delivering consistent, long-term results for our investors.” About the Fund   The Chester High Conviction Fund is an Australian equities fund that focuses on a concentrated portfolio of high-conviction stocks, aiming to outperform the S&P/ASX 300 Total Return Index.   Established on a strategy over 10 years strong, the Fund has demonstrated success with a seven-year track record and now manages over $1 billion in funds under management (FUM).   For more information, or to obtain a copy of the report, please contact the Copia Distribution Team . The rating issued October 2024 APIR OPS7755AU is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Ratings are general advice only, and have been prepared without taking account of your objectives, financial situation or needs. Consider your personal circumstances, read the product disclosure statement and seek independent financial advice before investing. The rating is not a recommendation to purchase, sell or hold any product. Past performance information is not indicative of future performance. Ratings are subject to change without notice and Lonsec assumes no obligation to update. Lonsec uses objective criteria and receives a fee from the Fund Manager. Visit lonsec.com.au for ratings information and to access the full report. © 2024 Lonsec. All rights reserved. Past performance is not a reliable indicator of future performance. Returns greater than 1 year are per annum. The total return performance figures quoted are historical, calculated using end-of month mid prices and do not allow for the effects of income tax or inflation. Total returns assume the reinvestment of all distributions. The performance is quoted net of all fees and expenses. The indices do not incur these costs. Inception of the Chester High Conviction Fund for performance calculation purposes is 8 October 2013 (based on the underlying High Conviction strategy returns).  The inception of the Unit Trust is 27 April 2017. ​

The August reporting season has highlighted two ongoing trends that have persisted over the past year. Firstly, the banking sector continues to outperform the resources sector, solidifying its position as a leading force within the ASX 300. Secondly, the technology sector's strong earnings per share (EPS) momentum continues to be rewarded with price-to-earnings (PE) expansion.

Chester Asset Management Portfolio Manager and Managing Director Rob Tucker highlights key stock decisions within the Chester High Conviction Fund during the June quarter. The three stocks - two buys and one exit - reflect Chester’s focus on asymmetrical risk – the upside versus downside risk of all stock positions in the portfolio. Rob describes what’s top of mind for Chester looking ahead. In light of a relatively calm equity market in the first half of 2024, Rob believes several macro factors, including geopolitical tensions and US political uncertainty may introduce greater volatility in the second half of 2024.