Q4 2025 Fund Commentary

Commentary and opinions are provided by Invesco Canada Ltd..

Market commentary

Global equities rose amid increased volatility, with international stocks outperforming U.S. stocks. Artificial intelligence (AI) was a main driver of investor enthusiasm, but momentum in the U.S. faded during the fourth quarter of 2025. Investors grew more cautious about high valuations on information technology stocks.

Equity market leadership broadened, with value stocks showing resilience despite weaker labour conditions and a historic U.S. government shutdown.

Emerging market equities were among the top performers, supported by a broad information technology sector rebound across Asia. However, results varied. South Korean stocks rose because of corporate governance reforms and AI?related semiconductor demand. Chinese equities fell amid weak economic data and a stronger currency.

European equities rose, helped by the euro’s appreciation against the U.S. dollar and supported by improving manufacturing trends and expectations of fiscal stimulus in Germany.

Performance

The Fund’s relative exposures to Alphabet Inc. and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) contributed to performance. Alphabet reported strong results from its search business and YouTube platform, driving growth in advertising revenues. The company also benefited from revenue growth in its Google Cloud business. TSMC benefited from demand for high-performance computing chips related to AI infrastructure build-out.

Relative exposures to 3i Group PLC and Microsoft Corp. detracted from the Fund’s performance. 3i Group shares fell because of lower same-store sales results from its investment in discount retailer Action Nederland BV. Microsoft stock fell because of investor concerns that the company’s ramp-up in AI and data centre infrastructure may be difficult to monetize in the short term and lead to declining profit margins.

At a sector level, exposure to the consumer discretionary sector contributed to the Fund’s performance. Exposures to the financials and industrials sectors detracted from performance.

Portfolio activity

The sub-advisor added to the Fund holdings in Industria de Diseno Textil SA, Steel Dynamics Inc., The Cigna Group, Elevance Health Inc. and Construction Partners Inc. Fund holdings in London Stock Exchange Group PLC and Rio Tinto Ltd. were sold. Both were small weights in the Fund and were sold to redeploy capital to other opportunities.

Outlook

In the sub-advisor’s view, the advent of AI feels relatively new. Most corporations have yet to effectively incorporate AI into workflows. AI could lead to a material advancement in productivity for those companies that do successfully adopt it. Those that don’t adopt AI risk disruption.

The sub-advisor’s focus is on aligning with those company management teams that are adaptable in the face of this rapidly evolving technology. Alphabet is a good example, in the sub-advisor’s opinion. The Fund maintained a holding in Alphabet despite concern that the company’s core search business might suffer at the hands of OpenAI Inc.’s ChatGPT. In fact, competition spurred Alphabet to respond, adapt and improve its business.

However, the sub-advisor is nervous of the fast rate of investment in data centre capacity. The race for supremacy in AI could create capital misallocation risks, which could lead to a downturn for suppliers in the AI ecosystem.

The Fund is deliberately diversified. The Fund has exposure to all but one sector in the MSCI classifications (real estate). That diversification was a challenge in 2025 as market returns were concentrated in a small group of companies. In 2026, the sub-advisor sees the potential for falling interest rates and the effects of government policies to drive recovery in economic activity.