Q2 2026 Fund Commentary

Commentary and opinions are provided by Value Partners Investments Inc..

Market commentary

The Canadian market has a substantial weighting toward commodity-based companies, as measured by the S&P/TSX Composite Total Return Index. The prices of crude oil, gold and silver fell significantly during the quarter, which weighed on underlying commodity-based stocks.

The U.S.-Iran conflict drove higher-than-normal market volatility during the quarter, with continuous shifts between ceasefire and conflict causing energy price swings and heightened inflation concerns. Market expectations for potential central bank interest-rate cuts were dampened, with the possibility of rate increases coming back into view. In the sub-advisor’s view, these events affected market volatility and valuation multiples across a number of sectors.

Performance

Alphabet Inc. contributed to the Fund’s performance, supported by continued growth in cloud-computing revenue and tokens per minute, as well as valuation multiple expansion. Sun Life Financial Inc. contributed to performance because of solid earnings growth and valuation multiple expansion. CVS Health Corp. contributed to performance because of a continued recovery in earnings growth and valuation multiple expansion.

Sector allocation was the most significant factor behind the Fund’s relative performance. Having no exposure to the materials and energy sectors contributed to performance, as both sectors produced negative total returns during the quarter. Stock selection in the communication services sector also contributed to performance.

Accenture PLC detracted from the Fund’s performance because of investor concerns about the potential impact of artificial intelligence (AI) on the company’s business, which caused valuation multiple contraction. Salesforce Inc. also detracted from performance because of similar investor concerns about the potential impact of AI on its business, which caused valuation multiple contraction. Not owning The Toronto-Dominion Bank also detracted from performance because the bank’s stock performed well during the quarter.

Stock selection in the information technology sector detracted from performance, driven by weakness in Accenture PLC and Salesforce Inc.

Portfolio activity

The sub-advisor increased Accenture PLC, Amazon.com Inc., Automatic Data Processing Inc., The Home Depot Inc., Intact Financial Corp., Mastercard Inc., Microsoft Corp., Salesforce Inc., Visa Inc. and Alphabet Inc. The sub-advisor reduced Amazon.com Inc., Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and Sun Life Financial Inc.

The sub-advisor sold CVS Health Corp. The company overcame many challenges over the last four years, but new challenges (including regulatory changes, pension benefit management reforms, reimbursement pressures and increased competition) may make the next couple of years just as difficult. The company’s stock had appreciated significantly since December 2024, and in the sub-advisor’s view, the expected return going forward was lower than other opportunities available to the Fund.

Outlook

In the sub-advisor’s view, the Canadian economy has been weak, with negative gross domestic product growth in three of the last four quarters, a population decline, central bank rates well below U.S. levels and unemployment rates well above U.S. levels. This trend could continue, with commodity prices already faltering and inflationary pressures building once again. The sub-advisor believes the U.S. economy is better positioned and is finding investment opportunities there.

In the sub-advisor’s view, investor enthusiasm for AI continues to draw investor flows regardless of stock price valuations. Investor pessimism toward software companies has pushed valuations lower, despite little evidence to date that software companies can’t adapt, innovate and continue to grow. The sub-advisor has positioned the Fund for future growth in earnings and dividends in durable businesses that are difficult to live without, difficult to compete with and difficult to replicate.