16 | 2023 Investment Outlook | December 12, 2022 ƒ We are finding attractive opportunities within intellectual property-based and automation and productivity-enabling businesses, which we believe can produce large-dollar volume increases with minor additional capital investment. ƒ We continue to avoid commodity-related sectors given the capital-intensive nature of these businesses, unpredictable prices and underappreciated liabilities. ƒ While a stronger dollar and higher energy prices have created a major headwind for companies in Europe, it has also created pockets of opportunity, as we believe the share prices of some very attractive businesses have been penalized solely as the result of their location. What We Are Watching ƒ While it is too early to tell if inflation has peaked in the U.S., we are observing a lowering of input costs that should help improve our companies’ margins. ƒ We continue to assess the longer-term implications of a higher cost of capital and its overall impact on the competitive landscape. With the days of easy money behind us (for now), we expect fewer market entrants and less competition, which should benefit companies that have already established valuable businesses and brands. ƒ Stock-based compensation plans have been a low-cost funding mechanism for emerging and innovative businesses. Given the recent drawdown, we are monitoring whether companies will increase the use of cash compensation and any subsequent impact on profitability and dilution. ƒ Our portfolio companies appear to be increasingly focused on their cost structures and doing more with less, which should improve their free-cash-flow profitability. Will Price’s Law—that 50% of contributions are done by the square root of the total number of contributors—hold true? “We maintain our belief that equities will likely be the best- performing asset class over the long term, as they provide ownership in the creativity, ingenuity and productivity of hundreds of thousands of talented workers. While money can be inflated, talent cannot.” 1 It is important to note, however, that we are bottom-up, fundamentals-driven investors and do not believe that share price volatility necessarily equates to risk. Risk Considerations: There is no assurance that a strategy will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose money investing in this strategy. Please be aware that this strategy may be subject to certain additional risks. In general, equity securities’ values also fluctuate in response to activities specific to a company. Investments in foreign markets entail special risks such as currency, political, economic, and market risks. The risks of investing in emerging market countries are greater than the risks generally associated with investments in foreign developed countries. Illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk). Investments in small- and medium- capitalization companies tend to be more volatile and less liquid than those of larger, more established, companies. Derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, correlation and market risks. Privately placed and restricted securities may be subject to resale restrictions as well as a lack of publicly available information, which will increase their illiquidity and could adversely affect the ability to value and sell them (liquidity risk).