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Commentary

Q1 2026 Fund Commentary

Commentary and opinions are provided by EdgePoint Investment Group Inc., Mackenzie Financial Corporation, and Portfolio Solutions Group

Market Commentary

Global equities declined over the first quarter of 2026 and underperformed global bonds, which posted a small loss. (All returns are in Canadian-dollar terms on a total-return basis.) Global equities lost momentum as tensions in the Middle East escalated, causing economic uncertainty. The conflict largely closed off the Strait of Hormuz to oil shipments, which sent oil prices higher, raising concerns about inflation and whether central banks will need to lift interest rates this year.

The U.S. equity market declined, posting a low single-digit loss. The financials sector was the weakest-performing sector. Canadian equities increased and outperformed U.S. equities, getting robust performance from the energy sector. EAFE equities posted a small gain, underperforming Canadian equities but outperforming U.S. equities. Equities in the U.K. and Japan performed well. Emerging markets equities also gained and outperformed their developed market peers, with equities in Brazil and Mexico performing well.

The FTSE Canada Universe Bond Index posted a total return of 0.2% over the quarter. Government bond prices increased, while government yields edged higher. Government bonds outperformed corporate bonds, which posted a small gain. Corporate bond prices were hindered from widening credit spreads (the difference in yield between corporate and government bonds). Securitization bonds posted the largest increase in the corporate bond sector. High-yield bond prices rose on a total-return basis and outperformed investment-grade corporate bonds.

Global bond yields moved higher over the quarter, and global bond prices posted a small loss. The Bank of Canada, U.S. Federal Reserve Board, Bank of England, European Central Bank and Bank of Japan all held their policy interest rates steady over the quarter. The yield on 10-year Government of Canada bonds rose from 3.43% to 3.47%. Sovereign bond yields in the U.S., the U.K., Germany and Japan also increased.

Performance

The Fund’s government bond exposure contributed to performance. The Fund’s allocation to maturities across the Canadian yield curve also contributed during the quarter. Canada’s economic outlook diverged from the U.S. as growth weakened and the labour market cooled, prompting markets to reassess the BoC’s policy path. While Canadian yields moved higher, the Fund’s curve positioning captured relative value opportunities during the period.

The Fund’s corporate bond exposure detracted from performance. A holding in Royal Bank of Canada (4.00%, 2030/10/17) bonds detracted from performance during the quarter. Bonds within the financials sector underperformed the benchmark during the period, weighing on relative returns.

At the sector level, a lower relative allocation to the underperforming information technology sector had the largest positive impact on the Fund’s performance. A higher relative allocation to the outperforming industrials sector also contributed to performance.

Applied Materials Inc. and Canadian Natural Resources Ltd. contributed to performance during the quarter.

The consumer staples sector detracted from relative performance, primarily because of negative security selection. The energy sector also detracted from relative performance because of negative security selection.

Mattel Inc. and SAP SE detracted from performance during the quarter.

Portfolio Activity

The sub-advisor added to the Fund a holding in TransCanada PipeLines Ltd. (5.125%, 2056/08/20) bonds during the quarter, participating in the new issue. TransCanada PipeLines is a core Canadian energy infrastructure provider with a diversified portfolio of regulated and contracted pipeline assets. The addition reflects the sub-advisor’s constructive view on the company’s credit fundamentals and enhances the Fund’s diversified exposure within the energy sector.

The sub-advisor increased the Fund’s exposure to Hydro One Inc. (4.25%, 2035/01/04) bonds during the quarter because of the issuer’s resilient fundamentals and favourable yield profile given its predictable, long-term contracted cash flows and stable credit metrics.

The sub-advisor sold the Fund’s holding in Bank of Montreal (7.325%, 2082/11/26) limited recourse capital notes because of its long-dated structure and extension risk.

The sub-advisor added to the Fund holdings in S&P Global Inc., Tesco PLC, Amazon.com Inc., B3 SA - Brasil Bolsa Balcao and Nidec Corp.

The sub-advisor increased Fund position in Siemens Healthineers AG after the company stock’s valuation became compelling during the quarter’s sell-off. Siemens Healthineers is the largest diagnostic imaging company globally and uses that scale and research and development investment to further distance itself from competitors. The sub-advisor also increased the Fund’s positions in Kao Corp. because of compelling valuations amid share price volatility, and Quest Diagnostics Inc., as management continues to execute above the sub-advisor’s expectations.

The sub-advisor sold holdings in Koninklijke Philips NV and SLM Corp., reallocating proceeds to more attractive opportunities in the Fund.

The sub-advisor reduced Fund positions in Applied Materials Inc., MinebeaMitsumi Inc. and Ross Stores Inc., reallocating proceeds to more attractive opportunities.

Outlook

The first quarter of 2026 marked a transition in market leadership, with supply issues and geopolitical risks overtaking demand cycles as the primary drivers of volatility. Escalating tensions in the Middle East pushed oil prices sharply higher, reviving inflation concerns and increasing uncertainty around economic growth without yet showing clear evidence of economic deterioration. While headline volatility has eased at times, elevated implied volatility suggests markets are increasingly pricing a wider range of outcomes as global fragmentation, energy constraints and supply chokepoints weigh on investor confidence.

In this environment, the sub-advisor’s focus remains on portfolio resilience. The sub-advisor continues to emphasize broad diversification across regions and return drivers, avoiding overreliance on a smooth disinflation or predictable easing path. Core exposure to structural growth themes such as artificial intelligence remains important, but the sub-advisor is mindful of rising concentration risk and greater macro sensitivity in earnings expectations.

Fixed income remains a useful stabilizer, although less reliable than in past cycles, reinforcing the need for broader sources of diversification and liquidity as buffers against episodic shocks.

Disclaimer

The commentaries on the company specific information and purchases and sales were provided by the fund manager. Canada Life Investment Management Ltd. will not be liable for any loss, or damages whatsoever, whether directly or indirectly incurred, arising out of the use or misuse of errors or omissions in any information contained in this commentary. The data provided in this commentary is for information purposes only and, except where otherwise indicated, is current as of March 31, 2026.

The views expressed in this commentary are those of fund manager as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Prospective investors should review the offering documents relating to any investment carefully before making an investment decision and should ask their Advisor for advice based on their specific circumstances.

The content of this commentary (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.

This document may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of March 31, 2026. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

There can be no assurance that the Fund’s return or volatility targets will be met, or met over any particular time horizon. Targeted returns and volatility should be evaluated over the time period indicated and not over shorter periods. Targeted returns are not actual performance and should not be relied upon as an indication of actual or future performance.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.

Counsel Portfolios are managed by Canada Life Investment Management Ltd. Counsel Portfolios are distributed by Quadrus Investment Services Ltd., IPC Investment Corporation, and IPC Securities Corporation, and may also be available through other authorized dealers in Canada.