Mirador Income and Stability Fund Quantitative Update for the Third Quarter of 2026

Quantitative Update and Commentary

1 - Portfolio Stability Data

Greatest Drawdowns as of September 30th, 2026

The most important measure for risk management is drawdown. Drawdown is the percentage measure of the decline from the most recent high for a portfolio, index, or security. By reducing drawdown, we make life more comfortable, so our clients sleep better, and we ensure that we have more capital intact for when things improve, which allows us to recover more quickly when the good times return.

Number of High-Water Marks (HWMs) as of September 30th, 2026

There is little benefit to less drawdown if we are not also providing new high-water marks when the markets are positive. A high-water mark is an all-time new high for a portfolio, index or security. HWMs don’t completely indicate performance, but they do measure positivity and consistency, which is helpful when combined with the rolling return numbers that follow later in this letter.

Standard Deviation as of September 30th, 2026

Statistically, standard deviation is the square root of the variance. Variance is the spread of a data set from an average and uses the squared value of the spread. Standard deviation is one of the most suitable and common measures of volatility or consistency in data sets such as the weekly returns for a portfolio or index. The lower the standard deviation, the lower the volatility, and the more consistent and stable the results are. The following table shows the standard deviation of Mirador’s benchmark, the benchmark components, and the Canadian Mirador Income and Stability Fund based on the weekly unit trust percentage returns:

Summary Commentary on the Above Portfolio Stability Data

• The MISF greatest drawdown for the quarter was also the greatest for the year. It was a tough quarter. Quarterly, we still did better than the XIU, but we trailed the SPY and the Benchmark. Annually, we still are the best, and we will work on managing volatility in Q4 to make our annual number even better. Our current drawdown is 2.73%, which should not take long to recover from.
• For the quarter, only the XIU had more HWMs than the MISF. We still have the most HWMs annually.
• The MISF volatility (standard deviation) is once again lower than all comparisons except for bonds. But our volatility was higher than normal, largely due to price swings in the energy, base metal, and precious metal sectors that were represented in the Premium Plus model. We will be watching these sectors extra carefully, as well as the related commodities, and if more positive trends fail to develop, we will make reductions. Bond volatility picked up as inflation fears hit the yield markets. We responded by decreasing the fixed income preferred allocation.

2 - Portfolio Cashflow Income and Results Data

Current Cashflow Picture as of September 30th, 2026

Stability in your portfolio value is a key goal of our work so that you remain comfortable with your investments and so that we preserve your capital as well as possible. But, high income is the key result for our investors who depend on the cashflow from their capital in order to live their best lives possible.

There are many types of investment income. The most common are interest, dividends, and capital gains. Less common are foreign income and call premiums. Mirador’s priority is to create current cash flow. We do this primarily via dividends, call premiums, and to a lesser extent, foreign income (REITs and exchange traded income trusts). We have been successful creating capital gains to grow capital and provide inflation protection, but capital gains are not cash flow, so they are not a top priority. Interest rates are too low, and interest is not tax effective, so we have been avoiding interest income investments in our recent history.

Income is best expressed in annual percentage terms. The following summarizes the currently indicated annual percent yields on some comparative income alternatives along with the Canadian Mirador Income and Stability Fund. Again, remember that of all these alternatives, the MISF is also the most tax efficient so in non-registered accounts it provides the best after-tax cash in your pockets.

Rolling Return Data as of September 30th, 2026

As you might recall, just as draw-down is the most important risk measure, rolling returns are much better for examining results (versus calendar defined periods). Rolling returns are simply the returns for a time period specified prior to the stated “as of date”.

Summary Commentary on the above Cashflow Income and Rolling Return Data

• The benchmark is 40% XBB (Canadian Bonds), 30% XIU (Canadian Stocks), 30% SPY (U.S. Stocks).
• Mirador’s income remains substantially higher than all the similar alternatives shown and is better than anything we know of with a similar risk profile.
• The current yield of the MISF of 7.35% is down from the January 1st, 2026, level of 7.5 due to the modest increase in the unit value YTD. Including income, the YTD total return is 7.71%. The main performance issue is how income securities like we own are under price pressure due to falling bond prices. This is part of a cycle that we need to be patient with. We can’t just stop investing for income, because this is the mandate we have established. Every mandate goes through good times and not-so-good times. We will get through this time fine. The key is to focus on the great monthly cashflow; it is paying us to be patient with the unit value. If we have a decent market correction, we will sell the Market Exposure securities at a decent profit and put those proceeds, along with the current high cash levels, to work in stocks whose yields have improved greatly due to the price correction.
• Our income is very tax efficient (approximately 9 to 9.5% interest equivalent).
• Our shorter-term rolling returns continue to suffer due to the oil, precious metals, and materials volatility, but these sectors are providing excellent cash flow through both dividends and call writing premiums. Also impinging our total returns is the higher levels of Market Exposure securities and cash, which produce only minor income.
• The longer-term returns continue to surpass the benchmark but lag the equity indexes, mostly due to the returns for technology and banks in the index components - sectors without enough yield for us to participate in.

3 - Current Subsystem and Sector Data

Current Subsystem Allocations

Current Sector Allocations

Please note that the above energy sector allocation includes nuclear, alternative / green energy, energy infrastructure, pipelines, as well as oil and gas production companies.

Summary Commentary on the above Subsystem and Sector Allocation Data

Since the last report, we made the following adjustments within the subsystems:

• Decreased Equity Income due to seasonality and overall market risk
• Increased Premium Plus to take advantage of low dividend paying sectors still doing well such as technology and financials
• Shifted even more of Equity Income from the riskier high yield category to the more stable dividend growth category
• Reduced preferred shares to somewhat diminish the effect of falling bond prices
• Added even more U.S. denominated international dividend stock exposure
• Market exposure is approximately the same at -14%, reflecting our continued concerns about:
  • Seasonality risks
  • Higher oil price and the wars causing inflation and resulting in bond yields rising, making them more attractive relative to stocks, which might lower stock prices
  • The possibility of an AI technology bubble is still being considered, and recent technology new issues have been a disaster – a sign of dwindling interest and demand.

Based on relative strength and relative income analysis, the main changes to sector exposure were as follows:

• A slight reduction in basic materials due to increased commodity volatility
• A large reduction in Telecom (Communications) because the sector is internationally under pressure from emerging technology (satellite (Starlink)) and voice over internet (i.e. Zoom etc.) reducing actual voice phone use, and dividend cuts due to over-leverage and dwindling cashflow
• Increase in oil stocks and other related energy subsectors which have stronger pricing power lately
• The large increase in ETFs is from the non-Canadian high dividend exposure to make up for the reduction in some of the higher-income Canadian sectors we needed to reduce to protect capital
• Financial exposure dropped because the one bank we owned was bought out and diced up. Most other banks now have yields in the 3% area which is not enough for us
• Large drop in mining due to the drop in gold and silver prices
• Large drop in real estate because higher bond yields lead to higher mortgage rates, which puts profit pressures on real estate values and real estate firms’ profitability

Well, that’s a wrap. It’s been extra challenging for the last 6 months or so. But we are keeping the income level high and the price declines as modest as possible given the overall capital market conditions. Everything goes through good and then not-so-good phases. Will work hard to make sure this not-so-good phase is not-so-bad! In fact, since the end of the quarter, the bond situation is showing signs of a possible reversal. The bond price pressure is our main challenge. If this does reverse, the fourth quarter could turn out pretty good. And remember that we will most likely have a year-end bonus distribution taking the total annual distribution into the 9% area.