Canadian Enhanced Income ETF Quarterly Report | July 2026

MCTP ETF Manager Review

Market in review

As geopolitical tensions in the Middle East showed signs of de-escalation and a ceasefire framework took hold, crude oil prices retraced from their earlier highs, and market leadership rotated towards Financials and Real Estate in Canada, both of which posted very positive absolute returns. Canadian banks were a standout, with the sector delivering returns approaching +30% on record earnings, robust capital markets activity, and continued balance sheet strength. Similarly, Canadian REITs benefited from improving sentiment, resilient fundamentals, and increasing M&A activity.

Against this backdrop, MCTP’s energy exposure, while still a positive contributor on a stock-selection basis, saw a moderation in absolute returns as producers gave back a portion of their Q1 gains. As a net exporter of energy and a key global supplier of critical minerals, including gold, potash, and uranium, Canada directly benefits from higher commodity prices and rising demand for secure and reliable supply. With supply disruptions unlikely to ease in the near term, we expect commodity prices to remain elevated, thereby supporting investor demand for Canada’s leading natural resource companies.

Despite this favourable backdrop, Canadian equities trade at a ~4x valuation discount to global markets.[1] We believe this gap undervalues the opportunity in Canada’s resource sector, especially given the robust cash flows, balance sheet quality, and attractive dividend yields across the Fund’s core sectors such as Energy, Financials, and Real Estate.

Quarter performance – contributors and detractors

Energy

Energy remained the Fund’s largest sector exposure in Q2’26 and detracted slightly from performance, returning -3.2% as crude prices retraced from Q1 highs following signs of de-escalation in the Middle East. Notably, performance within the sector was bifurcated, with pipeline and midstream operators whose earnings are underpinned by long-term, fee-based contracts rather than spot commodity prices, continued to deliver solid returns, while upstream producers gave back a portion of their outsized Q1 gains. The Fund’s energy exposure remains focused on high-quality producers and pipeline operators with conservative balance sheets, low leverage, disciplined capital allocation, and attractive dividend yields.

TC Energy (+8.8% in Q2), Pembina (+6.5%), and Keyera (+6.9%) were all positive contributors, reflecting continued momentum behind Canada’s pipeline and export infrastructure buildout. Enbridge was also additive, supported by rising utilisation of its Mainline pipeline and its expanding secured growth backlog. With respect to producers, Canadian Natural Resources, Tourmaline Oil, and Peyto Exploration & Development detracted from performance as crude and natural gas prices normalised. These companies remain core holdings in the portfolio with names like Canadian Natural boasting a 26-year track record of consecutive annual dividend increases. Overall, the sector’s underlying diversification across midstream, E&P, and royalty business models continues to support the durability of the Fund’s income profile.[2]

Financials

Financials were the largest positive contributor to performance after delivering an exceptionally strong absolute return of +22.6% in Q2’26, driven by record bank earnings, robust capital markets and advisory activity, as well as continued balance sheet strength across the sector. Every core banking holding in the portfolio participated: Toronto-Dominion (+33.8%), Bank of Montreal (+34.1%), Royal Bank of Canada (+31.5%), Power Corporation of Canada (+33.0%), and Canadian Imperial Bank of Commerce (+24.7%) each posted outsized gains, contributing meaningfully to absolute returns.[3]

While the Fund remains modestly underweight Financials, positioning within the sector was additive. Underweight exposure to Bank of Nova Scotia and lower-quality credit segments helped mitigate risk from credit concerns. We continue to view Canadian banks as structurally advantaged, supported by peer-leading ROE, rising CET1 capital ratios, and an increasingly supportive regulatory backdrop.

Real Estate

Real Estate was the Fund’s second-largest contributor to relative performance in Q2’26, benefiting from both the Fund’s overweight positioning and stock selection. Portfolio holdings returned +15.5% in aggregate, outpacing the benchmark’s +13.3% return, as improving sentiment, resilient underlying fundamentals, and a pickup in sector M&A activity supported valuations.

RioCan (+21.1%), Dream Industrial REIT (+14.5%), Killam Apartment REIT (+17.5%), H&R REIT (+14.0%), and First Capital REIT (+14.4%) were the most significant REIT contributors, reflecting robust leasing activity, mark-to-market rent uplift, and defensive, needs-based tenancy across the Fund’s core industrial and grocery-anchored retail exposure. We believe Canadian REITs offer an attractive combination of income and capital appreciation potential, particularly given the sector’s current discount to NAV as institutional and private capital increasingly re-engage with the sector.[4]

Buys and Sells

During the quarter, the Fund initiated a position in Surge Energy, an attractively valued, high free-cash-flow oil producer with a disciplined capital return framework including a 5.5% dividend yield. The Fund also initiated a position in GO Residential REIT, a multi-family residential REIT with an attractive portfolio of 8 luxury high-rise properties in NYC, trading at a ~50% discount to NAV.[5]

The Fund exited its position in Primaris REIT following a +30% return in Q2’26, driven by robust retail fundamentals. Additionally, the Fund sold its position in First Capital REIT after the announcement of its acquisition by KingSett Capital and Choice Properties in a $9.4B transaction, which represented a premium to NAV and delivered a +14% return to the Fund.[6] The Fund also trimmed its position in TD Bank to lock in profits following outsized gains in the first half of the year, while retaining meaningful exposure to one of Canada’s highest-quality banking franchises.

Industry overweights and underweights

Energy and Real Estate remain the Fund’s two largest sector overweights. The Fund’s Energy exposure is anchored in high-quality producers, pipeline operators, and royalty businesses with solid balance sheets, disciplined capital allocation, and long-duration, contracted cash flows, attributes we believe are increasingly valuable amid an evolving geopolitical backdrop. Real Estate remains a significant overweight given the sector’s persistent discount to NAV, which we believe is unsustainable over the medium term as institutional capital and M&A activity continue to re-engage with the sector.

The Fund remains underweight Financials relative to the benchmark, reflecting a preference for well-capitalised institutions with attractive valuations and high-teens ROE over a broader, benchmark-matching allocation. The Fund also holds no exposure to Technology, Communication Services, or Consumer Discretionary, sectors that fall outside MCTP’s core mandate of high-quality, dividend-growing businesses.

Macro Outlook

The first half of 2026 reaffirmed a familiar lesson for investors: geopolitics can dominate near-term sentiment, but earnings growth remains the durable driver of equity returns. The conflict in the Middle East, and resulting volatility around the Strait of Hormuz, kept commodity prices elevated and underscored the fragility of global supply routes even as a ceasefire framework took hold.

Canada has been a standout in this environment, with the S&P/TSX Composite outpacing the S&P 500 year-to-date, powered by double-digit earnings growth across energy and financials. This outperformance reflects more than commodity tailwinds – Ottawa’s Major Projects Office has fast-tracked over $125 billion in nation-building infrastructure, critical minerals, and trade-corridor investments, while expanding trade partnerships with Europe and Asia, including Germany’s landmark LNG offtake tied to Ksi Lisims. These infrastructure projects have reinforced Canada’s role as the world’s most reliable supplier of energy and natural resources.[7] As a result, we believe Canadian equities have room for further multiple re-rating, especially given the current trading discount to global peers.

Looking to the second half, we expect earnings growth to be the primary market driver, supported by an active pipeline of infrastructure projects and broadening market participation as previously lagging sectors recover. Canada’s relative political stability should also serve it well as the U.S. enters a contentious midterm cycle, which may introduce policy and regulatory noise south of the border. We further expect M&A activity in Canadian energy and real estate to remain elevated, as foreign capital targets undervalued, strategically vital assets across both sectors.

MCTP’s core exposure to energy, financials, and real estate positions the Fund to benefit directly from these tailwinds. By focusing on high-quality, dividend-growing companies with strong balance sheets and durable free cash flows, and capital appreciation potential as Canada’s structural advantages become increasingly recognised by global investors.

Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.

Key risks

  • Past performance is not indicative of future performance.
  • Energy infrastructure companies may be subject to specific industry and sector risks such as commodity price fluctuations and decrease in demand for energy during a recession.
  • The return on investment in energy infrastructure companies may be influenced by fluctuations in energy prices or changes to the US economic situation.
  • The Sub-Fund’s assets will be actively managed by the investment manager who will have discretion to invest assets to achieve the investment objective. There is no guarantee that the Sub-Fund’s investment objective will be achieved based on the investments selected.
  • When you invest in ETFs your capital is fully at risk and may not get back the amount originally invested.
  • Exchange rates can have a positive or negative effect on returns.
  • The value of equities and equity-related securities can be affected by daily stock and currency market movements.
  • Please note this is not an exhaustive list of risks. Other risks may apply and can be found in the Prospectus.

[1] Source: Middlefield, Bloomberg. Data as of 30.06.2026. MSCI World Index used as global index for comparison.

[2] Source: Middlefield, Bloomberg. Data as of 30.06.2026

[3] Ibid

[4] Ibid

[5] Source: Company Reports, Bloomberg as of 30.06.2026.

[6] Source: KingSett Capital, Bloomberg as of 30.06.2026.

[7] Source: Major Projects Office, Bloomberg as of 30.06.2026.

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