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Transcript
Meritage Portfolios® Annual Information Form dated August 18, 2016 SECURITIES OF THE ADVISOR SERIES AND SECURITIES OF THE F SERIES (securities of the F5 Series, FT Series, O Series, T Series and T5 Series also offered where indicated) Equity Portfolios Meritage Canadian Equity Portfolio1-2-4 Meritage Canadian Equity Class Portfolio*1-3 Meritage Global Equity Portfolio1-2-4 Meritage Global Equity Class Portfolio*1-3 Meritage American Equity Portfolio1-4 Meritage International Equity Portfolio1-4 Investment Portfolios Meritage Conservative Portfolio1-4 Meritage Moderate Portfolio1-4 Meritage Balanced Portfolio1-4 Meritage Growth Portfolio1-2-4 Meritage Growth Class Portfolio*1-3 Meritage Aggressive Growth Portfolio1-2-4 (formerly Meritage Equity Portfolio) Meritage Aggressive Growth Class Portfolio*1-3 (formerly Meritage Equity Class Portfolio) Global Portfolios Meritage Global Conservative Portfolio1-4 Meritage Global Moderate Portfolio1-4 Meritage Global Balanced Portfolio (formerly Meritage Global Income and Growth Portfolio)1-4 Meritage Global Growth Portfolio1-2-4 Meritage Global Growth Class Portfolio*1-4 Meritage Aggressive Growth Portfolio1-2-4 Meritage Global Aggressive Growth Class Portfolio*1-4 ETF Portfolios Meritage Tactical ETF Fixed Income Portfolio3-5 Meritage Tactical ETF Moderate Portfolio1-4 Meritage Tactical ETF Balanced Portfolio1-4 Meritage Tactical ETF Growth Portfolio1-4 Meritage Tactical ETF Equity Portfolio1-4 Income Portfolios Meritage Diversified Fixed Income Portfolio2 Meritage Conservative Income Portfolio2 Meritage Moderate Income Portfolio2 Meritage Balanced Income Portfolio2 Meritage Growth Income Portfolio2 Meritage Aggressive Growth Income Portfolio 2 (formerly Meritage Equity Income Portfolio) * Class of shares of National Bank Funds Corporation (1) Securities of the F5 Series also offered (2) Securities of the O Series also offered (3) Securities of the T Series also offered (4) Securities of the T5 Series also offered (5) Securities of the FT Series also offered NO SECURITIES REGULATORY AUTHORITY HAS EXPRESSED AN OPINION ABOUT THESE SECURITIES AND IT IS AN OFFENCE TO CLAIM OTHERWISE. TABLE OF CONTENTS Introduction................................................................................................................................................... 1 Formation of the Portfolios and Other Major Events .................................................................................... 1 Formation of the Portfolios .............................................................................................................. 1 Other Major Events ......................................................................................................................... 2 Investment Restrictions ................................................................................................................................ 3 Exceptions Regarding Investment Restrictions and Regular Practices and Other Exemptions .................. 4 Standing Instructions of the Independent Review Committee ........................................................ 4 Debt Securities ................................................................................................................................ 4 Non-Exchange-Traded Related Issuer Securities .......................................................................... 5 Investments in Certain Exchange-Traded Funds ........................................................................... 5 Private Placements in which a Related Underwriter Participates ................................................... 5 Inter-Fund Trades ........................................................................................................................... 5 Fund on Fund Investing ............................................................................................................................... 5 Investor Meetings ......................................................................................................................................... 7 Description of Series .................................................................................................................................... 8 How Net Asset Value Per Security is Calculated ......................................................................................... 9 Valuation of Portfolio Securities ................................................................................................................. 10 Purchasing, Switching, Converting and Redeeming Securities ................................................................. 12 How to Purchase Securities .......................................................................................................... 12 Systematic Investment Plan .......................................................................................................... 12 How to Redeem Securities ........................................................................................................... 13 When We Might Refuse to Redeem Securities ............................................................................ 13 Systematic Withdrawal Plan.......................................................................................................... 14 Switching Between Securities ....................................................................................................... 14 Converting Securities .................................................................................................................... 14 Canadian Federal Income Tax Considerations.......................................................................................... 15 Taxation of all Portfolios ................................................................................................................ 16 Taxation of Trust Portfolios ............................................................................................................ 16 Taxation of Corporate Portfolios .................................................................................................... 17 Taxable Investors in Trust Portfolios .............................................................................................. 18 Taxable Investors in Corporate Portfolios ...................................................................................... 18 Dividends ....................................................................................................................................... 19 Timing of Purchase of Securities ................................................................................................... 19 Redemptions, Conversions and Switches ...................................................................................... 19 Capital Gains ................................................................................................................................. 20 Tax Statements ............................................................................................................................. 20 Non-Taxable Investors .................................................................................................................. 20 Eligibility for Registered Tax Plans ............................................................................................... 20 Responsibility for Portfolio Activity ............................................................................................................. 21 Management of the Portfolios ....................................................................................................... 21 Directors and Executive Officers of National Bank Investments................................................... 21 Directors and Executive Officers of National Bank Funds Corporation ........................................ 23 Portfolio Manager .......................................................................................................................... 23 Distributors .................................................................................................................................... 24 Decisions Regarding Brokerage Arrangements ........................................................................... 24 Trustee, Custodian and Registrar ................................................................................................. 24 Administrative and Operational Services ...................................................................................... 25 Auditors ......................................................................................................................................... 25 Principal Holders of Securities ...................................................................................................... 26 Affiliated Companies ..................................................................................................................... 31 Portfolio Governance ................................................................................................................................. 32 General.......................................................................................................................................... 32 Independent Review Committee ................................................................................................... 33 Risk Management ......................................................................................................................... 34 Policies for Derivative Transactions .............................................................................................. 34 Securities Lending, Repurchase and Reverse Repurchase Transactions ................................... 34 i TABLE OF CONTENTS (continued) Proxy Voting .................................................................................................................................. 35 Short-Term Trading ....................................................................................................................... 36 Conflicts of Interest ....................................................................................................................... 36 Management Fee Reduction ......................................................................................................... 36 Legal and Administrative Proceedings ....................................................................................................... 37 Material Contracts ...................................................................................................................................... 37 Certificates of the Portfolios, the Manager and the Promoter .................................................................... 39 ii Introduction This Annual Information Form contains information about the Meritage Portfolios. It supplements the information set out in the Simplified Prospectus for the Meritage Portfolios, which should be read together with this Annual Information Form. In this Annual Information Form, you and your refer to the investor. We, our, and us refer to National Bank Investments Inc. (“National Bank Investments” or the “Manager”), the manager of the Meritage Portfolios. The head office of each Portfolio is located at 1100 Robert-Bourassa Blvd., 10th Floor, Montréal, Quebec H3B 2G7. We have retained National Bank Trust Inc. (“National Bank Trust”) as Portfolio Manager of each of the Portfolios. We refer to all of the mutual funds described in this Annual Information Form as “Meritage Portfolios” or “Portfolios” and, individually, a “Portfolio”. If you invest in the Portfolios other than the Meritage Canadian Equity Class Portfolio, the Meritage Global Equity Class Portfolio, the Meritage Growth Class Portfolio, the Meritage Aggressive Growth Class Portfolio, the Meritage Global Growth Class Portfolio and the Meritage Global Aggressive Growth Class Portfolio (the “Corporate Portfolios”), you purchase units of a trust and are a “unitholder”. If you invest in the Corporate Portfolios, you purchase shares of a corporation and are a “shareholder”. The Portfolios other than the Corporate Portfolios are collectively called the “Trust Portfolios”. When you invest in the Corporate Portfolios, you purchase shares of National Bank Funds Corporation. The units and shares of the Portfolios are collectively called “securities” and the unitholders and shareholders are collectively called the “securityholders”. Formation of the Portfolios and Other Major Events We created the Trust Portfolios under declarations of trust pursuant to the laws of the Province of Ontario. Natcan Trust Company is the trustee of the Trust Portfolios. The Corporate Portfolios are classes of shares of National Bank Funds Corporation, a mutual fund corporation incorporated under the laws of Canada. Formation of the Portfolios The following table shows the dates at which the declaration of trust, in the case of the Trust Portfolios, and the articles of National Bank Funds Corporation, in the case of the Corporate Portfolios, were established, filed or amended, as the case may be, to create these Portfolios. Portfolio Date created Meritage Canadian Equity Portfolio September 25, 2006 Meritage Canadian Equity Class Portfolio March 23, 2011 Meritage Global Equity Portfolio September 25, 2006 Meritage Global Equity Class Portfolio March 23, 2011 Meritage American Equity Portfolio September 25, 2007 Meritage International Equity Portfolio September 25, 2007 Meritage Conservative Portfolio September 25, 2006 Meritage Moderate Portfolio September 25, 2006 Meritage Balanced Portfolio September 25, 2006 Meritage Growth Portfolio September 25, 2006 Meritage Growth Class Portfolio March 23, 2011 1 Meritage Aggressive Growth Portfolio September 25, 2006 Meritage Aggressive Growth Class Portfolio March 23, 2011 Meritage Diversified Fixed Income Portfolio October 29, 2013 Meritage Conservative Income Portfolio September 25, 2006 Meritage Moderate Income Portfolio September 25, 2006 Meritage Balanced Income Portfolio September 25, 2006 Meritage Growth Income Portfolio September 25, 2006 Meritage Aggressive Growth Income Portfolio September 25, 2006 Meritage Global Conservative Portfolio February 22, 2016 Meritage Global Moderate Portfolio February 22, 2016 Meritage Global Balanced Portfolio August 28, 2014 Meritage Global Growth Portfolio February 22, 2016 Meritage Global Growth Class Portfolio February 22, 2016 Meritage Global Aggressive Growth Portfolio February 22, 2016 Meritage Global Aggressive Growth Class Portfolio February 22, 2016 Meritage Tactical ETF Fixed Income Portfolio August 18, 2016 Meritage Tactical ETF Moderate Portfolio February 22, 2016 Meritage Tactical ETF Balanced Portfolio February 22, 2016 Meritage Tactical ETF Growth Portfolio February 22, 2016 Meritage Tactical ETF Equity Portfolio August 18, 2016 Other Major Events On May 20, 2008, the Portfolio Manager of the Meritage Portfolios, then Natcan Trust Company, was replaced by National Bank Trust. The persons principally responsible for the day-to-day management of the Portfolios have however remained the same. On November 1, 2008, Altamira Investment Services Inc., up to that date manager of the Meritage Portfolios, consolidated its activities with Altamira Financial Services Ltd. and National Bank Securities Inc., the manager of the National Bank Mutual Funds. The activities of the above-mentioned entities, all subsidiaries of National Bank of Canada, were merged and the name of the merged company was National Bank Securities Inc. Further to this merger, which was approved by the competent authorities, National Bank Securities Inc. became the Manager of the Meritage Portfolios. On May 12, 2014, National Bank Securities Inc. changed its name to National Bank Investments Inc. On June 12, 2009, the declaration of trust for the Trust Portfolios was amended in order to update the provisions of the declaration of trust then in force. The following changes occurred on October 29, 2013: i. The investment objectives of the Corporate Portfolios were changed to allow each Corporate Portfolio to invest directly in the corresponding Trust Portfolio. ii. The articles of incorporation of National Bank Funds Corporation were amended to allow the Corporation to redeem the shares of any series of the Corporate Portfolios. iii. The declaration of trust of the Trust Portfolios was amended to include the fixed-rate administration fee, to form the Meritage Diversified Fixed Income Portfolio and to add an O Series to certain Trust Portfolios. 2 On August 28, 2014, the declaration of trust for the Trust Portfolios was amended in order to add an F5 Series, an O Series and a T5 Series to certain Portfolios. The articles of incorporation of National Bank Funds Corporation were amended to reflect the addition of an F5 Series to the Corporate Portfolios. On January 15, 2016, the declaration of trust for the Trust Portfolios was amended in order to change the name of the Meritage Global Income and Growth Portfolio to the Meritage Global Balanced Portfolio. On August 18, 2016, the declaration of trust for the Trust Portfolios was amended to change the name of the Meritage Equity Portfolio to the Meritage Aggressive Growth Portfolio and the name of the Meritage Equity Income Portfolio to the Meritage Aggressive Growth Income Portfolio. On the same date, the articles of National Bank Funds Corporation were amended to change the name of the Meritage Equity Class Portfolio to the Meritage Aggressive Growth Class Portfolio. Investment Restrictions We manage the Portfolios according to securities laws. Except as described below, each Portfolio has adopted the standard investment restrictions and practices imposed by the applicable legislation, including Regulation 81-102 respecting Investment Funds (“Regulation 81-102”). These restrictions and practices are designed to ensure that the investments of the Portfolios are diversified and relatively liquid, and to ensure that the Portfolios are properly administered. The Portfolios are subject, namely, to section 4.1 of Regulation 81-102, which prohibits certain investments when certain related parties may have an interest in such investments. The fundamental investment objective of a Portfolio cannot be changed unless securityholders approve the change at a meeting specifically held for that purpose. The Meritage Portfolios are dealer managed funds. As such, and subject to certain exceptions or as otherwise previously authorized, the Portfolios may not knowingly make an investment in securities of an issuer if a director, officer or employee of the Portfolio Manager, or a partner, director, officer or employee of an affiliate or associate of the Portfolio Manager, is a partner, director or officer of the issuer, unless that partner, director, officer or employee: • • • did not participate in the investment decisions; did not have prior access to information concerning the investment decisions; and did not influence the investment decision other than through research, statistical and other reports generally available to clients. As the Meritage Portfolios are dealer managed funds, subject to certain exceptions discussed below, the Portfolio Manager may not knowingly make an investment on behalf of a Portfolio in securities that an affiliate or associate of the Portfolio Manager underwrote within sixty (60) days prior to the investment, unless: • • the securities are fully guaranteed by the Government of Canada or the government of a Canadian jurisdiction, or the affiliate or associate of the Portfolio Manager is a member of a selling group distributing 5% or less of the issue. We expect each of the Trust Portfolios to be a mutual fund trust and National Bank Funds Corporation to be a mutual fund corporation, and thus for their securities to be “qualified investments” for certain registered plans under the Income Tax Act (Canada) (the “Tax Act”) effective at all material times. If this is the case, the Portfolios shall not be subject to any investment restrictions arising out of their securities’ status as qualified investments. Although it is not expected to occur, in the event that a Portfolio ceases to have a certain status under the Tax Act, the Portfolio (in the case of a Portfolio that is a trust) or National Bank Funds Corporation (in the case of a Portfolio that is a class of shares of such corporation) would be required to restrict its own investments to investments that are qualified investments for certain types of registered plans under the Tax Act in order to avoid becoming liable for a penalty under the Tax Act. 3 Exceptions Regarding Investment Restrictions and Regular Practices and Other Exemptions Standing Instructions of the Independent Review Committee Under Regulation 81-107 respecting Independent Review Committee for Investment Funds (“Regulation 81-107”), we established an independent review committee (the “IRC”). The IRC complies with applicable securities legislation, including Regulation 81-107. For more information about the IRC, please see the section entitled “Portfolio Governance – Independent Review Committee” in this Annual Information Form. Subject to obtaining the approval of the IRC and compliance with the conditions set out in Regulation 81-102 and Regulation 81-107, Canadian securities legislation allows regular practices and investment restrictions to be modified. In accordance with the requirements of Regulation 81-102 and Regulation 81-107, the IRC has provided its approval in respect of the following actions relating to the Portfolios: a) purchasing or holding securities of a related issuer, including those of National Bank of Canada; b) investing in the securities of an issuer where a related entity acts as an underwriter during the offering of the securities or at any time during the sixty (60) day period following the completion of the offering of such securities; c) purchasing securities from or selling securities to another investment fund managed by the Manager or an affiliate of the Manager; d) purchasing debt securities from, or selling debt securities to, related dealers that are principal dealers in the Canadian debt securities market (in accordance with the exemptions regarding debt securities described hereunder). The Manager has implemented policies and procedures to ensure that the conditions applicable to each of the transactions noted above are met. The IRC has granted its approval in respect of such transactions in the form of standing instructions. The IRC reviews these related party transactions at least annually. Debt Securities The Portfolios have received an exemption from the Canadian Securities Administrators allowing them to engage in certain debt securities transactions. Without the exemption, the transactions would have been prohibited. Pursuant to the exemption, a Portfolio may, with the approval of the IRC in accordance with Regulation 81-107 and subject to certain other provisions of Regulation 81-107, purchase from or sell to related dealers that are principal dealers in the Canadian debt securities market, government or non-government debt securities in the secondary market, if the purchase or sale is consistent with the investment objective of the Portfolio or necessary to meet such objective. The Portfolios have also received an exemption from the Canadian Securities Administrators allowing them to invest in debt securities that do not have an approved rating (or designated rating) during an offering in which a related party acts as an underwriter or during the sixty (60) day period following the completion of such an offering. Without the exemption, such transactions would have been prohibited. Pursuant to this exemption, a Portfolio may make such investments, with the approval of the IRC, in accordance with Regulation 81-107, and subject to certain other provisions of Regulation 81-107, provided certain other conditions are met, including that the investment be consistent with the investment objective of the Portfolio or be necessary to meet such objective. 4 Non-Exchange-Traded Related Issuer Securities The Portfolios have received an exemption from the Canadian Securities Administrators allowing them to purchase on the secondary market securities of a related issuer that are not exchange-traded if certain conditions are met. In particular, the investment must be made in a security having obtained an approved rating (or designated rating) and must be consistent with the investment objective of the Portfolio or necessary to meet said objective. The investment must be approved by the IRC as described in Regulation 81-107 and is subject to certain other provisions of Regulation 81-107. The Portfolios have also received an exemption from the Canadian Securities Administrators allowing them to purchase on the primary market non-exchange-traded related issuer debt securities with a term of three hundred and sixty-five (365) days or more, other than asset-backed commercial paper, if certain conditions are met, in particular the approval of the IRC is obtained. Investments in Certain Exchange-Traded Funds The Portfolios have received an exemption from the Canadian Securities Administrators allowing them to invest in exchange-traded funds that hold gold, permitted gold certificates or specified derivatives of which the underlying interest is gold or permitted gold certificates (“Gold ETFs”), even though such ETFs are not index participation units under securities laws. Such Gold ETFs seek to replicate the performance of the price of gold. Private Placements in which a Related Underwriter Participates The Portfolios have received an exemption from the Canadian Securities Administrators allowing them to purchase equity securities of a reporting issuer in a private placement in which a related underwriter is participating, during the offering period of the securities and the sixty (60) day period following completion of the offering. Without the exemption, such transactions would have been prohibited. Pursuant to this exemption, the Portfolios may engage in such transactions subject to the approval of the IRC, as described in Regulation 81-107 and subject to certain provisions of Regulation 81-102. The purchase must also comply with the funds’ investment objectives. Inter-Fund Trades Pursuant to exemptions obtained by National Bank Trust, the Portfolios may purchase or sell securities (including debt securities) from or to the investment portfolio of an associate of a responsible person or of an investment fund (including investment funds not subject to Regulation 81-102) for which a responsible person acts as portfolio manager (the “inter-fund trades”). In addition, pursuant to these exemptions, each of the Portfolios is authorized to engage in inter-fund trades in respect of exchange-traded securities with another fund that is subject to Regulation 81-102 at the last sale price instead of the closing sale price. Without these exemptions, such inter-fund trades would have been prohibited. The exemptions are subject to various conditions. In particular, the inter-fund trades must be consistent with the Portfolio’s investment objective and must be submitted to the Portfolios’ IRC in accordance with Regulation 81-107 and must also comply with certain provisions of Regulation 81-107. Fund on Fund Investing To achieve their investment objectives, the Portfolios will invest in other mutual funds (the “underlying funds”). The Portfolios may enter into specified derivative transactions for which the underlying interest is based on the securities of underlying funds. Refer to the Simplified Prospectus for further information about fund on fund investing. Each of the Corporate Portfolios has obtained from the Canadian Securities Administrators an exemption from the application of certain rules applicable to funds of funds set out in Regulation 81-102. The 5 exemption allows the Portfolio to invest in securities of the underlying fund even if the underlying fund holds, directly or indirectly, more than 10% of its net assets in the securities of other mutual funds. Description of the Portfolio Securities Trust Portfolios The Trust Portfolios may issue an unlimited number of Advisor Series and F Series units. Certain Trust Portfolios may also issue F5 Series, FT Series, O Series, T Series and T5 Series units. The units of each series of a Trust Portfolio carry equal rights and privileges and have the right to participate equally in distributions (other than management fee distributions). When a Trust Portfolio is liquidated, all units of each series have the right to participate equally in the assets remaining in the Trust Portfolio, after payment of any liabilities, based on the relative net asset value per unit of each series. Unitholders of each series of a Trust Portfolio are entitled to one vote per whole unit held at a meeting of unitholders of the Trust Portfolio or of a particular series. Fractions of units may be issued and they carry the same rights and privileges and are subject to the same restrictions and conditions applicable to whole units, but do not carry any voting rights. You may redeem Trust Portfolio units or switch units from one Meritage Portfolio to another fund offered by National Bank Investments. Please see the section called “Purchasing, Switching, Converting and Redeeming Securities” for more information concerning, in particular, permitted switches and conversions. These rights can only be changed as permitted by applicable laws and the declaration of trust for the Meritage Portfolios. Corporate Portfolios The Corporate Portfolios issue mutual fund shares to represent an investor’s interest in the Corporate Portfolio. They currently offer Advisor Series, F Series and F5 Series shares. Certain Corporate Portfolios may also issue T Series or T5 Series shares. As each Corporate Portfolio is a class of shares of a corporation, your ownership in this fund is represented by shares. The Corporate Portfolio’s net income and net capital gains will be allocated among the various series of shares based on their relative net asset value. Dividends may be paid in respect of the shares of National Bank Funds Corporation when they are declared by the Board of Directors. The amount of the dividends per share paid will also be determined by the Board of Directors of National Bank Funds Corporation. The Board of Directors may declare dividends in respect of one class or series and not declare dividends in respect of another class or series. If a Corporate Portfolio (or a particular series of shares of a Corporate Portfolio) is ever terminated, each share that you own will share equally with each other share of the same series in the assets of the Corporate Portfolio after all of the Portfolio’s liabilities (or those allocated to the Portfolio being terminated) have been paid. Each Corporate Portfolio is a class of shares of National Bank Funds Corporation. These shares are not entitled to any votes, except as provided below. Shares of the Corporate Portfolios may be converted to shares of another series of the same Corporate Portfolio (provided the minimum investment amounts for the new series are met) or to shares of another Corporate Portfolio. They may, in certain circumstances, be switched for securities of a trust fund offered by National Bank Investments, as described in the section entitled “Purchasing, Switching, Converting and Redeeming Securities”. Shares of the Corporate Portfolios may be redeemed as described in the section entitled “How to Redeem Securities”. 6 National Bank Funds Corporation may redeem the securities of any series of a Corporate Portfolio. It is anticipated that this redemption right will be exercised only in limited circumstances such as where the Manager reasonably believes that the continued holding of shares of the Corporate Portfolio would be detrimental to National Bank Funds Corporation (such as to cause National Bank Funds Corporation to contravene the laws of a jurisdiction or become subject to the laws of another jurisdiction), or detrimental to a particular shareholder or group of shareholders in the Corporate Portfolio, or where the Corporate Portfolio or a series of the Corporate Portfolio is no longer economically viable. Investor Meetings None of the Portfolios hold regular meetings. National Bank Funds Corporation will hold meetings if required under applicable corporate legislation or in accordance with securities regulations. In such cases, each holder of a whole share will be entitled to one vote per share: (i) at meetings of shareholders of the Corporate Portfolio, other than in respect of matters that the holders of one series of shares of that Portfolio are entitled to vote on separately as a series; and (ii) at meetings of all shareholders of National Bank Funds Corporation, other than in respect of matters that the holders of another class are entitled to vote on separately as a class. As the holder of all the issued and outstanding common shares of National Bank Funds Corporation, we elect the directors and appoint the auditors of this corporation. Pursuant to securities regulations, we are required to convene a meeting of securityholders to ask them to consider and approve, by not less than a majority of the votes cast at the meeting (either in person or by proxy), any of the following material changes if they are ever proposed for a Portfolio (whether it be a Corporate Portfolio or a Trust Portfolio): • a change in the basis of calculation of the fees or expenses charged to the Portfolio or directly to securityholders by the Portfolio or its Manager for holding securities of a Portfolio which could result in an increase in such charges to the Portfolio or its securityholders, unless certain conditions under Regulation 81-102 are met; • the introduction of new fees or expenses to be charged to the Portfolio or directly to securityholders by the Portfolio or its Manager which could result in an increase in charges to the Portfolio or the securityholders, unless certain conditions under Regulation 81-102 are met; • a change in the Meritage Portfolio’s fund manager, unless the new fund manager is affiliated with the current Manager; • a change in the fundamental investment objective of the Portfolio; • any reorganization with another fund or any transfer of assets to another fund if, as a result of the transaction: - • the fund ceases to exist; and the securityholders of the Portfolio become securityholders of the other fund; any reorganization with another fund or any acquisition of assets from such other fund if, as a result of the transaction: - the fund continues to exist following the restructuring or the acquisition of assets; the securityholders of the other fund become securityholders of the Portfolio; and the change would be considered to be material by a reasonable investor who is considering whether to purchase or continue to hold securities of the Portfolio; 7 • the Portfolio restructures into a non-redeemable investment fund or an issuer that is not an investment fund; • a reduction in the frequency at which the Portfolio’s net asset value is calculated; and • any other matter which is required to be submitted to a vote of the securityholders of the Portfolio by the Portfolio’s constating documents, or any other document, or by applicable laws. If permitted by the Portfolio’s constating documents and the laws applicable to the Portfolio, securityholder approval will not be sought in the following circumstances: (i) prior to certain reorganizations that result in a transfer of the property of the Portfolio to another mutual fund, or from another mutual fund to the Portfolio; or (ii) prior to a change of auditors. However, in each such circumstance, securityholders of that Portfolio will receive written notice at least sixty (60) days before the effective date of any such change. The IRC of the Portfolio must also approve the change, and all other applicable conditions under Regulation 81-102 must have been met. Description of Series Each of the Portfolios may have an unlimited number of series of securities and may issue an unlimited number of securities of each series. Each series has equal rights and privileges (except with respect to management fee distributions and rebates paid to particular securityholders). Expenses of each series are tracked separately and a separate net asset value per security is calculated for each series. See the Simplified Prospectus for the Portfolios in the “Portfolio Details” section for each Portfolio or the cover page of this Annual Information Form to determine which series are offered for each Portfolio. Your choice of series and sales charge option, if applicable, will have an impact on the fees you pay and your dealer’s compensation. See “Fees” and “Dealer Compensation” in the Simplified Prospectus. The series are described hereafter: Advisor Series, T Series and T5 Series: These securities are offered according to one of the three following options: • • • with initial sales charge. In this case, you pay an initial sales charge which you negotiate with your dealer or broker when you purchase Portfolio securities. with deferred sales charge (“DSC”). In this case, you pay a redemption fee if you ask for your securities to be redeemed within six (6) years of purchase. with low sales charge. In this case, you pay a redemption fee if you ask for your securities to be redeemed within three (3) years of purchase. The distinction between these series lies in the distribution policy. See “About the series offered” and the “Portfolio Details” sections of the Simplified Prospectus for more information. F Series, F5 Series and FT Series: These securities are only offered to investors with a fee-based account with dealers who have entered into an agreement with us. These investors pay their dealer annual compensation based on asset value instead of commissions on each trade. The F Series, F5 Series or FT Series securities have lower management fees than securities of the Advisor Series, T Series or T5 Series because our expenses are lower for these series, as we do not pay any commissions to dealers who sell F Series, F5 Series or FT Series securities to their clients. Your dealer is responsible for deciding whether you are eligible to subscribe for and continue to hold F Series, F5 Series or FT Series securities. If you or your 8 dealer are no longer eligible to hold F Series, F5 Series or FT Series securities, we can convert them into Advisor Series, T Series or T5 Series securities (under the initial sales charge option) of the same Portfolio upon thirty (30) days’ notice or redeem them. The distinction between these series lies in the distribution policy. See “About the series offered” and the “Portfolio Details” sections of the Simplified Prospectus for more information. O Series: These securities are only offered to selected investors who have been approved by us and have entered into an O Series account agreement with us. The criteria for approval may include the size of the investment, the expected level of account activity and the investor’s total investment with us. No management fees are charged to the Portfolios with respect to O Series securities. Instead, management fees are negotiated with and paid directly by investors. We don’t pay any commissions or service fees to dealers who sell O Series securities. There are no sales charges payable by investors who purchase O Series securities. Although the money you and other investors pay to purchase securities of each series is tracked on a series by series basis in a Portfolio’s records, the assets of all series of a Portfolio are combined into a single pool to create one portfolio for investment purposes. Please refer to the Simplified Prospectus for additional information concerning the different series of securities. Under the management fee reduction plan for high net worth investors (the “reduction plan”), certain investors holding Advisor Series, F Series, F5 Series, T Series and T5 Series securities are eligible for a management fee reduction based on the size of their investment in one or more Meritage Portfolios and/or National Bank Mutual Funds, as the case may be. This reduction plan does not apply to O Series securities. In order for you to qualify for the reduction plan, we will have to determine whether you satisfy the criteria indicated in the Simplified Prospectus. Please see the prospectus for a detailed description and the terms and conditions of the reduction plan. How Net Asset Value Per Security is Calculated Whether you’re buying, switching, converting or redeeming securities, we base the transaction on the value of a Portfolio security. The value of a Portfolio is called the “net asset value” and the value of a security is called the “net asset value per security”. The net asset value of each Portfolio and the net asset value per security for each series of a Portfolio are established in accordance with Regulation 81-106 respecting Investment Fund Continuous Disclosure (“Regulation 81-106”). Accordingly, the net asset value is established (in Canadian dollars) at 4:00 p.m. Eastern Standard Time on each day where the Toronto Stock Exchange is open for trading (each, a “valuation day”). The net asset value by portfolio and by security may be obtained free of charge by calling 1 866 603-3601. Here’s how we calculate the net asset value per security for each series of a Portfolio: • We take the series’ proportionate share of all the investments and other assets of the Portfolio. • We subtract the series’ liabilities and its proportionate share of common Portfolio liabilities. That gives us the net asset value for the series. • We divide that number by the total number of securities held by investors in that series. That gives us the net asset value per security. 9 • As a general rule, we calculate the price of the shares of the Corporate Portfolios in the manner described above. However, National Bank Funds Corporation’s general expenses are first calculated and then allocated proportionately among all the funds comprising a class of shares of the corporation. We may allocate expenses to a particular Corporate Portfolio when it is reasonable to do so and when the expenses are related to that Portfolio. The price for purchases and redemptions of securities is the next net asset value per security of the series that is determined after receipt of the purchase or redemption order at our head office. We calculate a separate price for each series of securities of a Portfolio because the management fee rate and operating expenses attributable to each series are different. The price of each series of securities of a Portfolio will generally increase or decrease on each valuation day as a result of changes in the value of the portfolio assets owned by the Portfolio. When a fund pays distributions, the net asset value per security is reduced by the distribution amount per security at the distribution date. The net asset value of the Portfolios that invest in other mutual funds is based in whole or in part on the net asset value of the underlying funds. Except as set out below, the accounting methods used to determine the fair value of the securities in the Portfolios in accordance with International Financial Reporting Standards (IFRS) are similar to the methods used to determine their net asset value for purposes of transactions. The fair value of the Portfolios’ securities under IFRS corresponds to the price that would be received for the sale of an asset or paid for the transfer of a liability in a normal transaction between market participants at the date of the financial statements (“financial reporting date”). In calculating the net asset value, the fair value of the Portfolios’ securities that are traded on active markets (such as derivatives and listed negotiable securities) is based on market prices at the close of trading on the financial reporting date (the “closing price”). For purposes of IFRS, the Portfolios use the closing price for a Portfolio’s securities provided the closing price falls within the bid-ask spread for the day. If the closing price does not fall within the bid-ask spread, the Portfolio’s securities are valued at the bid price. Furthermore, management exercises its judgment in selecting the appropriate valuation technique for financial instruments that are not listed on an active market. The valuation techniques used are those that are currently applied by market participants. Following such an adjustment, the fair value of the Portfolios’ securities determined according to IFRS could differ from the values used to calculate the net asset value of the Portfolios. Valuation of Portfolio Securities We use the following principles in calculating the net asset value of the Portfolios: • for underlying mutual fund securities, except securities of exchange-traded funds, we use the net asset value per security of the underlying mutual fund provided by the underlying mutual fund’s manager for the relevant day or, where that day is not a valuation day for the underlying mutual fund, the net asset value per security as at the most recent valuation day of the underlying mutual fund. If the net asset value per security of an underlying mutual fund is not provided in a timely manner by the fund’s manager, the value of the securities of the underlying mutual fund will be estimated using the benchmark indexes. • for cash or cash equivalents, bills, demand notes and accounts receivable, prepaid expenses, cash distributions received and interest accrued and not yet received, we use their face value. If we determine that an asset is not worth its face value, we determine a reasonable value. 10 • for assets or liabilities in a foreign currency, we convert those assets or liabilities into Canadian dollars, in accordance with the exchange rates prevailing on the valuation day, which rates are provided by a recognized independent source (generally the Bank of Canada). • for bonds, debentures and debt instruments held by the Portfolios, we use the closing price on the valuation day when available. These prices are obtained from a recognized valuation service. For notes and other money market instruments, we use the total of the cost and accrued interest, which approximates the fair value. • for securities listed on a stock exchange, including securities of exchange-traded funds, we use the closing price on the valuation day when available. If none is available, we generally use, for each security, the average of the latest bid or ask price or any other similar quote that we determine best reflects the value of the asset on the valuation day. • for securities traded on stock exchanges outside North America, we value such securities so as to best reflect their fair value at the time of calculating net asset value. The information used to establish that fair market value comes from a recognized source. • for securities that are not listed on a stock exchange, we use a price that we determine best reflects the value of the asset concerned. The method used depends on the asset to be valued. • for exchange-traded option positions and debt-like securities, we use the average of the bid and ask prices on the valuation day. • for options on futures, we use the settlement price. • for over-the-counter options, we use a price that, in our opinion, best reflects the value of the asset concerned. • for listed warrants, we use the closing price on the valuation day when available. • we show the premium received when a covered clearing corporation option, option on futures or overthe-counter option is written as a deferred credit. The value of the deferred credit is equal to the current market value of an option that would have the effect of closing out the position. We treat any difference resulting from the revaluation as an unrealized gain or loss. We deduct the deferred credit when we calculate the net asset value of each Portfolio. • for a forward contract or a futures contract listed on a North American exchange, the value is determined based on the gain or loss, if any, that would arise as a result of closing out the position as at the valuation day. In the case of index futures that are traded on exchanges outside North America, we value such securities so as to best reflect their fair value at the time of calculating the net asset value. The information used to establish that fair value comes from a recognized source. • for interest rate swaps, we use the applicable discount rate based on the Canadian Dealer Offered Rate (CDOR) or the London Interbank Offered Rate (LIBOR) to determine the present value of the cash flows of each leg of the swap. The net sum of these discounted cash flows is the price of the swap. The discount rate comes from a recognized source. Where we cannot apply these principles, for example during a period when normal trading of a security on an exchange is suspended, we determine the net asset value in a manner that we think is fair. Over the last three years, we have not deviated from the valuation principles. The liabilities of the Corporate Portfolios include, without limitation, all bills, notes and accounts payable, all administrative or operating expenses payable or accrued, all contractual obligations for the payment of money or property, all allowances authorized or approved by the Portfolio manager for taxes (if any) or contingencies and all other liabilities of the corporation concerned. We determine in good faith whether 11 such liabilities are series expenses or common expenses of the Portfolio or of National Bank Funds Corporation. In calculating the share price for each series of shares, we will use the latest reported information available on each day on which the Toronto Stock Exchange is open. The purchase or sale of portfolio securities by a Corporate Portfolio will be reflected in the first calculation of the share price for each series of shares of the Portfolio concerned after the date on which the transaction becomes binding. We have delegated responsibility for valuation of the Portfolios and for Portfolio accounting to National Bank Trust. Purchasing, Switching, Converting and Redeeming Securities The Meritage Portfolio securities may be purchased, switched, converted and redeemed through registered dealers and brokers. Different fees will be applied for each series of a Portfolio and we calculate the net asset value per security of each series separately. Each Portfolio may issue an unlimited number of securities of each series. For more detailed information about how to purchase, switch, convert and redeem securities, please see the section in the Simplified Prospectus called “Purchases, Switches, Conversions and Redemptions”. You may have to pay fees when you purchase, switch, convert or redeem your securities through your registered dealer or broker. The minimum initial investment in any of the Portfolios is $500. Each additional investment in a Portfolio must be at least $50 for any type of account ($25 in a systematic investment plan). If you are redeeming securities of a Portfolio, the lowest amount you can redeem is $50. The minimum initial investment, minimum additional investment amount and minimum redemption amount for O Series securities are negotiated between the investor and National Bank Investments. How to Purchase Securities You may pay for Portfolio securities by cheque, bank draft or money order. If we receive your order by 4:00 p.m., Eastern Time, on a day that the Toronto Stock Exchange is open for business, we will process your order using its net asset value per security for that day. However, if we receive your order after 4:00 p.m. or on a day that is not a business day at the Toronto Stock Exchange, we will process your order on the next day net asset value is calculated for that Portfolio or series. When you place a buy order through your dealer or broker, we must receive payment no later than three (3) business days after an order is received. Under some circumstances, we may refuse to process part or all of an order to purchase securities. The securityholders likely to be refused are those who frequently trade in Portfolio securities in a short period of time. For more details, please see the section “Short-term trading” in the Simplified Prospectus. Any decision to reject an order or to charge a short-term trading fee will be made within one business day of receipt of the order. If we reject an order, we will return all money received immediately without interest. If you send us an order to purchase securities and you do not send us payment on time, you may have to pay your dealer or broker for any losses, depending on your arrangements with your dealer or broker. We do not issue certificates when you purchase securities of the Portfolios. Systematic Investment Plan If you want to make regular purchases in your portfolio, you can set up a systematic investment plan. A systematic investment plan allows you to invest a fixed amount of money in one or more Portfolios 12 selected by you at regular intervals. You may make weekly, bi-weekly, monthly or quarterly contributions. If you set up a systematic investment plan, we will withdraw the fixed amount of money from your bank account and invest the money in Portfolio securities at the net asset value determined on each valuation day that you make an automatic investment. There is no charge to enrol in the plan or to terminate your participation in the plan. The minimum amount you may invest in a Portfolio through the systematic investment plan is $25. The minimum amounts for O Series securities are negotiated with National Bank Investments. How to Redeem Securities If we receive a request from your dealer or broker to redeem securities before 4:00 p.m., Eastern Time, on a valuation day, we will redeem the securities at their net asset value on that valuation day. If we receive a request after 4:00 p.m., Eastern Time, or on a day that is not a business day at the Toronto Stock Exchange, we will redeem the securities at their net asset value calculated on the following valuation day. You may redeem all your securities. If you hold less than the minimum amount for a particular Portfolio, you will be required to redeem all your securities of that Portfolio or invest a sufficient additional amount to meet the minimum investment required for that Portfolio. In order to redeem securities, you should instruct your dealer or broker to send us a written request to redeem securities. This request may be sent to us electronically in accordance with our requirements. Your dealer or broker must send the request to us on the day he receives it. We will mail the proceeds from the sale to your dealer or broker or deposit it into your dealer or broker’s account without charge. We will pay you for securities redeemed as soon as possible, at the latest, within three (3) business days following the valuation day that is used to calculate the net asset value of the securities sold. Under some circumstances, we may purchase back on your behalf the securities you redeemed before we pay you for the securities. This will happen if we do not receive the instructions necessary to complete the transaction within ten (10) business days of the redemption. If we buy the securities back for less than you redeemed them for, we will pay the excess to the Portfolio. If we purchase the securities back for more than you redeemed them for, we will collect the difference (plus any applicable charges) from the dealer or broker who placed the order. The dealer or broker may have the right to collect this amount from you under the terms of your account agreement. Generally, we do not charge any fees when you redeem securities of the Portfolio, except for (i) shortterm trading fees (which may apply in certain circumstances if you redeem or switch your securities within thirty (30) days of purchase) and (ii) redemption charges for Advisor Series, T Series or T5 Series securities purchased under the deferred sales charge option if you request the redemption of your securities within six (6) years of purchase or (iii) redemption charges for Advisor Series, T Series or T5 Series securities purchased under the low sales charge option if you request the redemption of your securities within three (3) years of purchase. When We Might Refuse to Redeem Securities Under some exceptional circumstances, we may suspend your right to redeem your securities: • during times when normal trading is suspended on a Canadian or foreign exchange where securities or derivatives that make up more than 50% of the Portfolio’s total asset value are traded, if such securities are not traded on any other exchange that represents a reasonably practical alternative for the Portfolio, or • the Canadian Securities Administrators’ consent is obtained. 13 If we suspend redemption rights after you have requested a redemption, you may either withdraw your redemption request or redeem your securities at the net asset value determined after the suspension period ends. We will not accept orders to purchase securities of a Portfolio during any redemption suspension period. Systematic Withdrawal Plan You may opt to set up a plan to make systematic withdrawals from a Portfolio if you want a regular fixed payment to meet your financial needs. A withdrawal can be done weekly, bi-weekly, monthly or every three months. There is no charge to enrol in the plan or to terminate your participation in the plan. You must have invested a minimum of $10,000 in a Portfolio to benefit from this service. The minimum that must be kept in a Portfolio is $500 and the minimum periodic withdrawal is $50. For O Series securities, the minimum amounts are negotiated with National Bank Investments. Switching Between Securities National Bank Investments allows you to redeem securities of one Portfolio in order to purchase securities of the same series (and under the same purchase option, if applicable) of any other Portfolio, or of another fund managed by National Bank Investments, provided you meet the minimum initial investment requirements for the new fund. This transaction is called a “switch”, unless it involves a redemption of shares of a Corporate Portfolio for shares of another class of shares of National Bank Funds Corporation (in which case, the transaction is called a “conversion of securities”. Please refer to the section entitled “Converting Securities” for more information. When we receive your request to make a switch, we will sell your securities of one Portfolio and use the proceeds to buy securities of the other fund. When we redeem your securities in order to make a switch in an investment account, you may realize a gain or loss. If you realize a gain, you may have to pay income tax on it. Your dealer or broker must send a written request to us to switch securities of a Portfolio on your behalf. Your dealer or broker may also provide this information to us electronically in accordance with our requirements. You can switch your securities for securities of National Bank Mutual Funds only if such securities are offered in the same currency as the securities of your Portfolio. If you switch your Advisor Series, T Series or T5 Series securities, you may have to pay your dealer or broker switch fees that generally may amount to up to 2% of the value of the securities you convert. You and your dealer or broker negotiate the fee. See “Switching Securities“ in the Simplified Prospectus for more information about these types of transactions and the applicable conditions. Switching in a non-registered plan may lead to a capital gain or loss for tax purposes. Please see the sections entitled “Fees and charges payable directly by you”, “Impact of Sales Charges” and “Canadian Federal Income Tax Considerations” for more information. Converting Securities You may change securities of one series for securities of another series of the same Portfolio, or change shares of a Corporate Portfolio for shares of the same series or a different series of another class of shares of National Bank Funds Corporation (including the National Bank Short Term Yield Class), provided you have the right to obtain the securities of the series targeted by the transaction. Such a transaction is called a “conversion” of your securities. If you convert securities of a given Portfolio into Advisor Series, T Series or T5 Series securities, you can choose any of the three sales charge options for your new securities. 14 If you bought Advisor Series, T Series or T5 Series under the DSC or low sales charge option, you may convert them into securities under the initial sales charge option (Advisor Series, T Series or T5 Series, as the case may be) or into securities of any other series of the Portfolio, provided you meet the conditions applicable to the series. You may not convert your securities purchased under the DSC option into securities under the low sales charge option (or vice versa) or convert your securities purchased under the initial sales charge option into securities under the DSC or low sales charge option. The value of your investment will be the same after the conversion. You will, however, own a different number of securities because each series and each fund may have a different unit price. The Minister of Finance released proposed amendments to the Tax Act on July 29, 2016 that would eliminate the ability of shareholders of a mutual fund corporation to switch between different share classes of such a corporation on a tax-deferred basis, subject to certain exceptions. As a result, if these proposals are implemented, beginning in 2017 and unless an exception applies, the switch by a shareholder from one class of mutual fund shares of National Bank Funds Corporation into mutual fund shares of another class would result in a disposition at fair market value and a capital gain or a capital loss would generally be realized. Conversions occurring prior to 2017 will not result in a disposition for tax purposes and should not give rise to a capital gain or capital loss. The proposed measure would not apply to reclassifications of shares where a shareholder exchanges a share of one class of mutual fund shares for another share of the same class and both shares derive their value from the same property or group of properties. This exception is expected to permit shareholders to continue to switch between mutual fund shares of different series of the same fund on a tax-deferred basis. The proposals also contain an exception for an exchange of all the shares of a class of a mutual fund corporation that occurs in the context of certain capital reorganizations or amalgamations described in the Tax Act, provided certain specified conditions are met. The Manager is reviewing the proposals and considering what steps, if any, to take in response. We encourage investors to speak to their investment advisor and/or tax advisor about these changes and their options. Please see the sections entitled “Fees and charges payable directly by you”, “Impact of Sales Charges” and “Canadian Federal Income Tax Considerations” for more information. Canadian Federal Income Tax Considerations In the opinion of Osler, Hoskin & Harcourt LLP, the following is a summary of the principal Canadian federal income tax considerations under the Tax Act for the Portfolios and for prospective investors in a Portfolio who, for the purposes of the Tax Act, are resident in Canada, hold securities of the Portfolios as capital property, are not affiliated with any of the Portfolios and deal with the Portfolios at arm’s length. This summary is based upon the current provisions of the Tax Act and regulations thereunder, all specific proposals to amend the Tax Act and such regulations publicly announced by the Minister of Finance (Canada) prior to the date hereof and counsel’s understanding of the current published administrative and assessing policies and practices of the Canada Revenue Agency. This summary does not take into account or anticipate any other changes in law whether by legislative, administrative or judicial action and it does not take into account provincial, territorial or foreign income tax legislation or considerations. This summary is of a general nature only and is not exhaustive of all possible income tax considerations. Prospective investors should therefore consult their own tax advisors about their individual circumstances. This summary is based on the assumption that the Trust Portfolios will comply at all material times with conditions prescribed in the Tax Act and otherwise so as to qualify as “mutual fund trusts” as defined in the Tax Act, and that National Bank Funds Corporation will comply at all material times with conditions prescribed in the Tax Act and otherwise so as to qualify as a “mutual fund corporation” as defined in the Tax Act. Counsel is advised that it is anticipated that each of these entities will so qualify at all material times. 15 Taxation of all Portfolios Each of the Portfolios is required to compute its net income and net realized capital gains in Canadian dollars for the purposes of the Tax Act and may, as a consequence, realize income or capital gains by virtue of changes in the value of the U.S. dollar or other relevant currency relative to the Canadian dollar. Generally, a Portfolio and an underlying fund in which the Portfolio invests will include gains and deduct losses on income account in connection with its derivative activities, including forward contracts, futures contracts and options, except where such activities are undertaken to hedge capital property, and will recognize such gains or losses for tax purposes at the time they are realized. Where the amount of distributions paid by an underlying fund to a Portfolio in a year exceeds the underlying fund’s income and capital gains, such excess amount will not be included in income of the Portfolio (unless, where applicable, the underlying fund elects to treat the excess amount as income) but will reduce the adjusted cost base of the Portfolio’s securities of the underlying fund for the purpose of calculating a capital gain or loss on a future disposition by the Portfolio of the securities of the underlying fund. To the extent that the adjusted cost base of a security would otherwise be a negative amount at the end of the taxation year, the negative amount will be deemed to be a capital gain realized in that year by the Portfolio and the adjusted cost base of the security will then be nil as of the beginning of the next taxation year. Losses incurred by a Trust Portfolio or by National Bank Funds Corporation cannot be allocated to investors but may be carried forward and deducted by the Trust Portfolio or National Bank Funds Corporation in future years, subject to and in accordance with the rules in the Tax Act. In certain circumstances, a Trust Portfolio or National Bank Funds Corporation may be required to postpone the deduction of a loss realized by it on an investment in an underlying fund until the Trust Portfolio or National Bank Funds Corporation has sold all of its investment in that underlying fund. Recognition of loss realized on a disposition of capital property is required to be postponed when a Trust Portfolio or National Bank Funds Corporation, or a person affiliated with the Trust Portfolio or National Bank Funds Corporation, acquires a property (a “substituted property”) that is the same or identical to the property sold, within thirty (30) days before and thirty (30) days after the disposition and the Trust Portfolio, National Bank Funds Corporation, or such affiliated person, owns the substituted property 30 days after the original disposition (the “suspended loss rules”). In such case, the applicable Trust Portfolio or National Bank Funds Corporation cannot deduct the loss from its respective capital gains until the substituted property is sold and is not reacquired within thirty (30) days before and after the sale. If the Portfolio invests in an underlying fund which is a mutual fund trust (the “trust underlying fund”) and if appropriate designations are made by the trust underlying fund, generally, the nature of distributions from such trust underlying fund that are derived from taxable dividends (including eligible dividends) received from taxable Canadian corporations, foreign income and net realized capital gains will be preserved in the Portfolio for the purpose of computing its net income. Where such designations are made by the trust underlying fund in respect of foreign income, the Portfolio will also be considered for foreign tax credit purposes to have paid the foreign tax paid by the trust underlying fund to the extent that such foreign tax was not deducted by the trust underlying fund in determining its taxable income. A Portfolio may also receive distributions of ordinary income and of non-taxable amounts such as returns of capital from the trust underlying fund. If the Portfolio invests in an underlying fund which is a mutual fund corporation (the “corporate underlying fund”) and if appropriate designations are made by such corporate underlying fund, the dividends received from such corporate underlying fund may be considered as taxable capital gains to the extent they are derived from capital gains realized by the corporate underlying funds. The Portfolio may also receive from the corporate underlying fund distributions of taxable dividends or non-taxable amounts such as returns of capital. Taxation of Trust Portfolios Each of the Trust Portfolios is subject to income tax under the Tax Act on its income (including its net taxable capital gains) for each year less the portion thereof that is paid or payable to the investors of the Trust Portfolio in the year. The Manager has advised counsel that each Trust Portfolio will distribute enough of its net income and net realized capital gains to investors in each year so that the Trust Portfolio will not be 16 liable in any taxation year for ordinary income tax under Part I of the Tax Act on such net income and net realized capital gains (after taking into account any applicable losses of the Trust Portfolio and the capital gains tax refunds to which the Trust Portfolio is entitled). All of a Trust Portfolio’s deductible expenses, including expenses common to all series and management and other fees and expenses specific to a particular series of the Trust Portfolio, will be taken into account in determining the income or loss of the Trust Portfolio as a whole. Taxation of Corporate Portfolios Each of the Meritage Canadian Equity Class Portfolio, the Meritage Global Equity Class Portfolio, the Meritage Growth Class Portfolio, the Meritage Aggressive Growth Class Portfolio, the Meritage Global Growth Class Portfolio and the Meritage Global Aggressive Growth Class Portfolio consists of a separate class of shares of National Bank Funds Corporation. National Bank Funds Corporation’s structure has been designed for taxable investors because it allows such investors to convert shares of a Corporate Portfolio into shares of another Corporate Portfolio without triggering a capital gain or loss. However, the Minister of Finance released proposed amendments to the Tax Act on July 29, 2016 that would eliminate the ability of shareholders of a mutual fund corporation to switch between different share classes of such a corporation on a tax-deferred basis, subject to certain exceptions. As a result, if these proposals are implemented, beginning in 2017 and unless an exception applies, the switch by a shareholder from one class of mutual fund shares of National Bank Funds Corporation into mutual fund shares of another class would result in a disposition at fair market value and a capital gain or a capital loss would generally be realized. Conversions occurring prior to 2017 will not result in a disposition for tax purposes and should not give rise to a capital gain or capital loss. Please see the section entitled “Purchasing, Switching, Converting and Redeeming Securities” for additional details. Although National Bank Funds Corporation consists of a number of separate Corporate Portfolios, it must compute its income and net capital gains for tax purposes as a single entity. All of National Bank Funds Corporation’s revenues, deductible expenses, capital gains and capital losses in connection with all of its investment portfolios, and other items relevant to its tax position (including the tax attributes of all of its assets), will be taken into account in determining the income or loss of National Bank Funds Corporation and applicable taxes payable by National Bank Funds Corporation as a whole. As a result of National Bank Funds Corporation being required to calculate its income as a single entity, the overall result for a shareholder of a Corporate Portfolio may differ from what would be the case if the shareholder had invested in a mutual fund trust, or a single class mutual fund corporation, which made the same investments as the Corporate Portfolio. National Bank Funds Corporation may realize capital gains on the sale of its investments including on the sale of its investments attributable to a Corporate Portfolio that occurs when a shareholder of that Corporate Portfolio converts its investment into shares of another Corporate Portfolio. In addition, where National Bank Funds Corporation receives distributions from an underlying fund that are paid out of such fund’s realized capital gains and that are so designated, generally such distributions are treated as capital gains realized by National Bank Funds Corporation. The taxable portion of such capital gains (net of the allowable portion of capital losses) realized by or allocated to National Bank Funds Corporation will be subject to tax at normal corporate rates. Taxes payable on capital gains realized by or allocated to National Bank Funds Corporation are generally refundable on a formula basis when shares of National Bank Funds Corporation are redeemed by shareholders or when National Bank Funds Corporation pays capital gains dividends. Accordingly, if sufficient amounts are paid by National Bank Funds Corporation on the redemption of its shares or as capital gains dividends, generally National Bank Funds Corporation will not pay tax on capital gains realized by it or allocated to it. Conversion by shareholders from one Corporate Portfolio into another may cause National Bank Funds Corporation to realize capital gains earlier than would otherwise be the case and may therefore accelerate the payment of capital gains dividends. National Bank Funds Corporation will generally be subject to the refundable tax under Part IV of the Tax Act on taxable dividends (including from a SIFT trust or partnership or as designated by underlying funds) received by it from taxable Canadian corporations in an amount equal to 33.33 percent of such dividends, which tax will be refundable on the basis of $1.00 for each $3.00 of taxable dividends (other than capital gains dividends) paid by National Bank Funds Corporation to its shareholders. This rate is proposed to be increased to 38.33% for years after 2015, subject to proration for partial taxation years. 17 With respect to other income received by National Bank Funds Corporation, such as interest, foreign dividends and gains realized on income account, National Bank Funds Corporation will be subject to tax at the corporate rate applicable to mutual fund corporations, subject to permitted deductions for expenses and applicable credits for foreign taxes paid. The tax treatment of National Bank Funds Corporation and the Corporate Portfolios, including the tax treatment of realized losses and the tax treatment of dividends paid or received by a Corporate Portfolio, may be affected by National Bank Funds Corporation’s relationship with the National Bank group. Taxable Investors in Trust Portfolios A taxable investor in a Trust Portfolio will generally be required to include in the investor’s income for tax purposes for any year the amount (computed in Canadian dollars) of income and net taxable capital gains, if any, paid or payable by the Trust Portfolio to the investor or on the investor’s behalf in the year, including any management fee distributions paid out of the Trust Portfolio’s income or taxable capital gains, whether or not such amounts are reinvested in additional units of the Trust Portfolio. The amount of reinvested distributions is added to the adjusted cost base of the investor’s units to reduce the capital gain or increase the capital loss when the investor later redeems such units. Where the amount of distributions paid by a Trust Portfolio in a year exceeds the Trust Portfolio’s income and taxable capital gains, such excess amount will not be included in the income of investors (unless the Trust Portfolio elects to treat the excess amount as income) but will reduce the adjusted cost base of their units of the Trust Portfolio for purposes of calculating a capital gain or loss on a future disposition of their units. To the extent that the adjusted cost base of a unit would otherwise be a negative amount at the end of the taxation year, the negative amount will be deemed to be a capital gain realized in that year and the adjusted cost base of the unit to the investor will then be nil as of the beginning of the next year. Distributions paid by a Trust Portfolio may consist of capital gains, ordinary dividends (i.e., eligible and/or non-eligible dividends from a taxable Canadian corporation), foreign source income, other income and/or a return of capital. Each Trust Portfolio will designate to the extent permitted by the Tax Act the portion of the net income distributed to investors as may reasonably be considered to consist of such taxable dividends on shares of taxable Canadian corporations and net taxable capital gains. Any such designated amount will be deemed for tax purposes to be received or realized by investors in the year as a taxable dividend and as a taxable capital gain, respectively. In addition, each Trust Portfolio will similarly make designations in respect of its income considered to be from foreign sources, if any, so that, for the purpose of computing any foreign tax credit available to an investor, and subject to the rules in the Tax Act, the investor will be deemed to have paid as tax to the government of a foreign country that portion of the taxes paid to that country that is equal to the investor’s share of the Trust Portfolio’s income considered to be from sources in that country. Taxable Investors in Corporate Portfolios Dividends paid to investors in a Corporate Portfolio, other than “capital gains dividends” described below, will constitute taxable dividends paid by a taxable Canadian corporation. Such dividends paid, whether received in cash or reinvested in additional shares of the Corporate Portfolio, will be included in computing the investor’s income. A Corporate Portfolio may also make distributions to investors out of net realized capital gains by way of capital gains dividends, which will be treated as realized capital gains in the hands of investors. Such capital gains will be subject to the general rules relating to the taxation of capital gains which are described below. Distributions by a Corporate Portfolio may include a distribution out of the share capital of the Corporate Portfolio. Such a distribution will not be included in the investor’s income but will reduce the adjusted cost base of the investor’s shares in the Corporate Portfolio. If an investor’s adjusted cost base in shares of a Corporate Portfolio becomes a negative amount, the investor will be deemed to realize a capital gain equal to such amount and the investor’s adjusted cost base of these shares will then be zero. 18 A management fee rebate received by an investor in a Corporate Portfolio will generally be included in the investor’s income; however, in some circumstances the investor may be able to elect to reduce the adjusted cost base for tax purposes of the investor’s shares in the Corporate Portfolio rather than including the amount of the rebate in income. Dividends In the case of an investor who is an individual, the dividend gross-up and tax credit treatment normally applicable to taxable dividends paid by a taxable Canadian corporation will apply to amounts designated by Trust Portfolios as such a taxable dividend, and to dividends (other than capital gains dividends) received from a Corporate Portfolio. In the case of an investor that is a corporation, amounts designated by a Trust Portfolio as taxable dividends, and dividends (other than capital gains dividends) received from a Corporate Portfolio will be included in the corporation’s income for purposes of the Tax Act but normally will also be deductible in computing its taxable income. A private corporation that is entitled to deduct such dividends in computing its taxable income will generally be subject to the refundable tax under Part IV of the Tax Act. Certain other corporations that are controlled directly or indirectly by or for the benefit of an individual (other than a trust) or a related group of individuals (other than trusts) are also subject to the refundable tax under Part IV of the Tax Act. Corporations, other than private corporations, should consult their own tax advisors as to the possible application of tax under Part IV.1 of the Tax Act on amounts received as taxable dividends. Timing of Purchase of Securities When an investor buys securities of a Trust Portfolio or shares of a Corporate Portfolio just before a distribution or dividend (including a capital gains dividend) is paid, such investor will be taxed on his or her share of the distribution or dividend notwithstanding that the amount thereof may have been reflected in the price paid by the investor. If such distribution or dividend is reinvested by the investor in securities of the Trust Portfolio or shares of the Corporate Portfolio, such amount will be added to the adjusted cost base of the investor’s securities or shares. Redemptions, Conversions and Switches Upon the actual or deemed disposition of a security, including on the redemption of units or shares in a Portfolio and the switching of an investor’s investment from one Portfolio to another (other than a conversion of shares of one Corporate Portfolio into shares of another Corporate Portfolio), a capital gain (or a capital loss) will generally be realized by the investor to the extent that the proceeds of disposition of the security exceed (or are exceeded by) the aggregate of the adjusted cost base to the investor of the security and any costs of disposition. An investor will also be considered to realize a capital gain as a result of receiving distributions designated as such by a Trust Portfolio, and as a result of receiving capital gains dividends on shares in a Corporate Portfolio. For the purpose of determining the adjusted cost base to an investor of securities, when a security of a particular Portfolio is acquired, whether on the reinvestment of distributions or otherwise, the cost of the newly acquired security is averaged with the adjusted cost base to the investor of all other securities (of the same series) of the Portfolio held by the investor immediately before that time. The adjusted cost base is determined separately for each series. A conversion from one series of units to another series of the same Trust Portfolio is not considered to be a disposition of the former units, and consequently, such a conversion will not give rise to a capital gain (or capital loss). While an investor’s adjusted cost base per unit will change, the total adjusted cost base of the investor’s units will not. The conversion by an investor of shares of one Corporate Portfolio into shares of another Corporate Portfolio, or a conversion from one series of shares to another series of shares of the same Corporate 19 Portfolio, is not currently treated as a disposition of the converted shares for purposes of the Tax Act. As a result, under the current rules, the investor will not realize a capital gain or capital loss on this type of conversion. The investor’s cost of the shares acquired on such a conversion will be the adjusted cost base to the investor of the converted shares immediately before the conversion. For tax purposes this cost will be averaged with the adjusted cost base of any other shares of the same series and class owned by the investor in determining the investor’s adjusted cost base per share. The Minister of Finance released proposed amendments to the Tax Act on July 29, 2016 that would eliminate the ability of shareholders of a mutual fund corporation to switch between different share classes of such a corporation on a tax-deferred basis, subject to certain exceptions. As a result, if these proposals are implemented, beginning in 2017 and unless an exception applies, the switch by a shareholder from one class of mutual fund shares of National Bank Funds Corporation into mutual fund shares of another class would result in a disposition at fair market value and a capital gain or a capital loss would generally be realized. Conversions occurring prior to 2017 will not result in a disposition for tax purposes and should not give rise to a capital gain or capital loss. The proposed measure would not apply to reclassifications of shares where a shareholder exchanges a share of one class of mutual fund shares for another share of the same class and both shares derive their value from the same property or group of properties. This exception is expected to permit shareholders to continue to switch between mutual fund shares of different series of the same fund on a tax-deferred basis. The proposals also contain an exception for an exchange of all the shares of a class of a mutual fund corporation that occurs in the context of certain capital reorganizations or amalgamations described in the Tax Act, provided certain specified conditions are met. The Manager is reviewing the proposals and considering what steps, if any, to take in response. We encourage investors to speak to their investment advisor and/or tax advisor about these changes and their options. Capital Gains One-half of a capital gain realized or considered to be realized by an investor will be included in income as a taxable capital gain. One-half of any capital loss realized (an “allowable capital loss”) may be deducted against the investor’s taxable capital gains, subject to and in accordance with the detailed rules of the Tax Act. Tax Statements Taxable investors will be informed each year of the composition of the amounts distributed to them (in terms of net income, taxable dividends, including eligible dividends, net taxable capital gains, foreign source income, capital gains dividends and non-taxable amounts such as returns of capital, where applicable) and of the amount of any foreign taxes considered to be paid by a Trust Portfolio in respect of which the investor may claim a credit for tax purposes to the extent permitted by the Tax Act, where those items are applicable. Non-Taxable Investors Distributions or dividends from a Portfolio to an investor that is a registered pension plan, registered retirement savings plan, registered retirement income fund, deferred profit sharing plan, registered disability savings plan, registered education savings plan or tax-free savings account will not, except in certain limited circumstances, be taxable; however, amounts withdrawn from such entities will generally be taxable, other than withdrawals from tax-free savings accounts and certain withdrawals from registered education savings plans and registered disability savings plans. Eligibility for Registered Tax Plans Each of the Trust Portfolios will qualify as a “mutual fund trust” and National Bank Funds Corporation will qualify as a “mutual fund corporation” under the Tax Act effective at all material times. Provided that a Portfolio so qualifies as a mutual fund trust or a mutual fund corporation, securities of that Portfolio will be a qualified investment under the Tax Act for trusts governed by registered retirement savings plans 20 (“RRSPs”), registered retirement income funds (“RRIFs”), deferred profit sharing plans, registered disability savings plans, registered education savings plans and tax-free savings accounts (“TFSAs”). Holders of RRSPs, RRIFs and TFSAs should consult with their tax advisors as to whether securities of the Portfolios would be “prohibited investments” under the Tax Act in their particular circumstances. If an RRSP, RRIF or TFSA, together with non-arm’s length persons, holds 10% or more of the units of a fund that is a trust, or 10% or more of the shares of any series of a Corporate Portfolio, such securities may be “prohibited investments” for RRSPs, RRIFs and TFSAs. Responsibility for Portfolio Activity Management of the Portfolios National Bank Investments has entered into a management agreement with Natcan Trust Company, the trustee of each of the Trust Portfolios, and National Bank Funds Corporation. Under the terms of the agreement, National Bank Investments was appointed as Manager of each of the Portfolios. We are responsible for the management of the business and affairs of the Portfolios. We are also responsible for the investment decisions for the Portfolios, but have retained the services of a Portfolio Manager to assist us in discharging this duty. Under the management agreement, we are also responsible for providing office space; facilities; clerical help; statistical, bookkeeping and internal accounting services; and internal auditing services. The underlying funds are managed by other mutual fund managers. The head office of National Bank Investments is located at 1100 Robert-Bourassa Blvd., 10th Floor, Montréal, Quebec H3B 2G7. Our telephone number is 1-866-603-3601. Our website is www.nbcadvisor.com, and our e-mail address is [email protected]. We cannot change the fund manager of a Portfolio without the approval of the securities regulatory authorities and the approval of a majority of securityholders at a meeting of securityholders. We do not need such approvals to change the fund manager to an affiliate of National Bank Investments. The Manager may terminate the management agreement with at least ninety (90) days’ prior written notice. The management agreement may also be terminated by the Portfolios if the Manager does not respect the obligations set out in the management agreement, provided ninety (90) days’ prior notice is given and the approval of two thirds (2/3) of the votes cast at a meeting of the securityholders of the Portfolios is obtained. Directors and Executive Officers of National Bank Investments The following table lists the directors and executive officers of the Manager. We have included their names, the municipalities in which they live, their positions with the Manager and their respective principal positions. Unless indicated otherwise, each person has occupied his/her current principal position or a similar position within the same entity over the past five years. Name and Municipality of Residence Position with the Manager Principal Occupations Within the Last Five Years Geneviève Beauchamp3 Montréal, Quebec Chief Compliance Officer Senior Manager, National Bank Financial Inc. Prior thereto, Manager, Compliance, National Bank Direct Brokerage Inc. Philip Boudreau Salaberry-de-Valleyfield, Quebec Assistant Corporate Secretary (for the activities of National Bank Investments Inc. as an investment fund manager) 21 Senior Legal Advisor, National Bank of Canada. Prior thereto, Analyst, Corporate Finance, Autorité des marchés financiers. Name and Municipality of Residence Position with the Manager Principal Occupations Within the Last Five Years Martin-Pierre Boulianne1-2 Montréal, Quebec Corporate Secretary Senior Manager and Assistant Secretary, National Bank of Canada. Marie Brault Montréal, Quebec Vice-President, Legal Services Senior Manager, Specialized Products and Transactions, National Bank of Canada Éric Drolet Laval, Quebec Chief Compliance Officer Senior Advisor, National Bank of Canada. (for the activities of National Bank Investments Inc. as a mutual fund dealer) Bianca Dupuis Varennes, Quebec Officer responsible for approval of publication and Director Senior Manager, National Bank of Canada. Prior thereto, Assistant Vice-President, Laurentian Bank of Canada. Jonathan Durocher1 Outremont, Quebec President, Chief Executive Officer, Chairman of the Board, Director and Ultimate Designated Person (for the activities of National Bank Investments Inc. as an investment fund manager) Senior Vice-President, Investment Solutions, National Bank of Canada. Prior thereto, Vice-President, National Bank Financial Inc. and National Bank Financial Ltd.; Senior Advisor, National Bank Financial Inc. Diane Giard1 Montréal, Quebec Executive Vice-President, Chief Distribution Officer and Ultimate Designated Person (for the activities of National Bank Investments Inc. as a mutual fund dealer) Executive Vice-President, Personal and Commercial Banking, National Bank of Canada. Prior thereto, Executive Vice-President, Marketing and member of the Office of the President, National Bank of Canada; Senior Vice-President, Customer Experience and Distribution Strategy, The Bank of Nova Scotia; Senior Vice-President, Quebec & Eastern Ontario Region, Montréal, The Bank of Nova Scotia. Joe Nakhle St-Laurent, Quebec General Manager, Investment Solutions and Director Senior Manager, Investment Solutions, National Bank of Canada. Prior thereto, Senior Manager, Roland Berger Strategy Consultants Inc. Sébastien René3 St-Bruno de Montarville, Quebec Chief Financial Officer Senior Manager, National Bank of Canada. Annamaria Testani Westmount, Quebec Vice-President, National Sales Vice-President, National Sales (NBI), National Bank of Canada. Prior thereto, Director of Sales, National Bank Financial Inc.; Senior Vice-President, National Sales, Wellington West Capital Inc. Tina Tremblay-Girard Montréal, Quebec Vice-President, Administration and Strategy, and Director Senior Manager, Administration and Strategy, National Bank of Canada. Prior thereto, Senior Advisor, National Bank of Canada; Manager, National Bank of Canada. Natalia Sandjian Lachine, Quebec Officer responsible for financial planning Senior Advisor, Financial Planner, National Bank of Canada. Prior thereto, Financial Planner, National Bank of Canada 1 Also a director or officer of National Bank of Canada, which is affiliated with the Manager and provides services to the Portfolios or the Manager with respect to the Portfolios. The principal occupation of this person is referred to under “Principal Occupations Within the Last Five Years”. 2 Also a director or officer of National Bank Financial Inc. and/or National Bank Financial Ltd., which are affiliated with the Manager and provide services to the Portfolios or the Manager with respect to the Portfolios. The principal occupation of this person is referred to under “Principal Occupations Within the Last Five Years”. 22 3 Also a director or officer of National Bank Trust Inc. and/or Natcan Trust Company, which are affiliated with the Manager and provide services to the Portfolios or the Manager with respect to the Portfolios. The principal occupation of this person is referred to under “Principal Occupations Within the Last Five Years”. Directors and Executive Officers of National Bank Funds Corporation The following table lists the directors and executive officers of National Bank Funds Corporation. We have included their names, the municipalities in which they live, their positions with National Bank Funds Corporation and their respective principal positions. Unless indicated otherwise, each person has occupied his/her current principal position or a similar position within the same entity over the past five years. Name and Municipality of Residence Position with National Bank Funds Corporation Philip Boudreau Salaberry-de-Valleyfield, Quebec Assistant Corporate Secretary Senior Legal Advisor, National Bank of Canada. Prior thereto, Analyst, Corporate Finance, Autorité des marchés financiers. Martin-Pierre Boulianne1-2 Montréal, Quebec Corporate Secretary Senior Manager and Assistant Secretary, National Bank of Canada. The Giang Diep Candiac, Quebec Chief Financial Officer Senior Manager, Fund Administration, National Bank of Canada. Prior thereto, Manager, Review, Support and Taxation, National Bank of Canada. Jonathan Durocher1 Outremont, Quebec President, Chief Executive Officer, Chairman of the Board and Director Senior Vice-President, Investment Solutions, National Bank of Canada. Prior thereto, Vice-President, National Bank Financial Inc. and National Bank Financial Ltd.; Senior Advisor, National Bank Financial Inc. Claude Michaud Town of Mount Royal, Quebec Director Managing Director and Chief Operating Officer, DNA Capital Inc. Prior thereto, Chief Financial Officer, Samcon Inc.; Chief Executive Officer, Groupe Lagassé Inc. Joe Nakhle3 St-Laurent, Quebec Director Senior Manager, Investment Solutions, National Bank of Canada. Prior thereto, Senior Manager, Roland Berger Strategy Consultants Inc. Tina Tremblay-Girard Montréal, Quebec Director Senior Manager, Administration and Strategy, National Bank of Canada. Prior thereto, Senior Advisor, National Bank of Canada; Manager, National Bank of Canada. Principal Occupations Within the Last Five Years 1 Also a director or officer of National Bank of Canada, which is affiliated with the Manager and provides services to National Bank Funds Corporation or the Manager with respect to National Bank Funds Corporation. The principal occupation of this person is referred to under “Principal Occupations Within the Last Five Years”. 2 Also a director or officer of National Bank Financial Inc. and/or National Bank Financial Ltd., which are affiliated with the Manager and provide services to National Bank Funds Corporation or the Manager with respect to National Bank Funds Corporation. The principal occupation of this person is referred to under “Principal Occupations Within the Last Five Years”. 3 Also a director or officer of National Bank Trust Inc., which is affiliated with the Manager and provides services to National Bank Funds Corporation or the Manager with respect to National Bank Funds Corporation. The principal occupation of this person is referred to under “Principal Occupations Within the Last Five Years”. Portfolio Manager We have retained National Bank Trust as portfolio manager (the “Portfolio Manager”) for all the Portfolios. National Bank of Canada directly and indirectly owns all of the voting shares of National Bank Trust. We may terminate the portfolio management agreement with National Bank Trust upon thirty (30) days’ prior written notice. National Bank Trust may terminate this agreement upon ninety (90) days’ prior written notice to us. 23 The head office of National Bank Trust is located at 600 De La Gauchetière Street West, 28th Floor, Montréal, Quebec H3B 4L2. We pay National Bank Trust a fee for its services as Portfolio Manager. The Portfolios do not pay any portfolio management fees to National Bank Trust. The following is a list of persons who are principally responsible for the day-to-day management of the Portfolios. Included are their names, titles, length of service and business experience for the last five years. Name Title with National Bank Trust Length of service Previous positions in last five years Terry Dimock Chief Portfolio Manager Since July 6, 2015 Senior Portfolio Manager, Stanton Asset Management Inc.; self-employed consultant; President, Réseau social TeamMeUp s.e.c.; Senior Portfolio Manager, Caisse de dépôt et placement du Québec. Christian Nols Manager Since November 1, 2015 Manager, Strategic Portfolio Management, National Bank of Canada. Prior thereto, Senior Analyst, Strategic Portfolio Management, National Bank of Canada; Fixed Income Security Analyst, Optimum Asset Management. Gilles Côté Principal Analyst Since April 29, 2010 Principal Analyst, Managed Solutions, National Bank of Canada. Prior thereto, Senior Analyst, Credit and Investment Solutions, National Bank of Canada. Distributors The securities of the Portfolios may be purchased from registered dealers or brokers. Your dealer or broker may make arrangements with you that will require you to compensate it for any losses incurred by it in connection with your failure to settle a purchase or redemption of securities. Decisions Regarding Brokerage Arrangements The Portfolio Manager makes all decisions related to the purchase and sale of securities of underlying funds and other securities which may be purchased by the Portfolios. A Portfolio does not pay any sales fees or redemption fees in relation to its purchase or redemption of securities of an underlying fund that, to a reasonable person, would duplicate a fee payable by an investor in the Portfolio. The Portfolio Manager is responsible for the execution of portfolio transactions, including, as applicable, the selection of market and dealer and the negotiation of commissions and other terms. In effecting portfolio transactions, the Portfolio Manager seeks to obtain prompt execution of orders on favourable terms. Brokerage business may be allocated by the Portfolio Manager to National Bank Direct Brokerage Inc. (“NBDB”), National Bank Financial Inc. (“NBF”) or another affiliated dealer. While all brokerage transactions for the purchase or redemption of securities of underlying funds are currently executed by NBDB or NBF (in the case of the NBF Portfolios), these brokerage transactions may be executed by other affiliated or third party dealers or brokers in the future. Any portfolio transactions executed by affiliated dealers must be completed in accordance with all applicable regulatory requirements and on terms which are comparable to the terms offered by third party dealers and brokers. The Portfolio Manager may place orders with dealers or brokers that place orders for securities of the Portfolios. The Portfolio Manager will do this if order execution and prices offered by these dealers or brokers are comparable to the terms offered by other dealers and brokers. Trustee, Custodian and Registrar Natcan Trust Company is the trustee and custodian of the Trust Portfolios. As such, it holds the securities and other assets of the Portfolios. The head office of Natcan Trust Company is 600 De La Gauchetière Street West, 28th Floor, Montréal, Quebec H3B 4L2. Natcan Trust Company, as trustee of the Trust 24 Portfolios, may, at the request of the Manager, amend the declaration of trust without notice to or prior approval of the unitholders of the Trust Portfolios unless required by applicable laws. Nonetheless, where notice to or prior approval of the unitholders of the Trust Portfolios is not required by applicable laws, the Manager will give the unitholders of the Trust Portfolios prior notice of any proposed amendment to the declaration of trust if the Manager, acting reasonably, is of the opinion that the proposed amendment would constitute a material prejudice to the interest of the unitholders of the Trust Portfolios. The names and municipalities of residence of the principal executive officers of Natcan Trust Company in charge of the trust administration of the Trust Portfolios, as well as their positions with Natcan Trust Company, are as follows: Name and Place of Residence Position and Office Held with Natcan Trust Company Nicolas Milette Montréal, Quebec President and Chief Executive Officer Geneviève Beauchamp Montréal, Quebec Chief Compliance Officer Mélanie Frappier Sainte-Thérèse, Quebec Corporate Secretary In accordance with the terms of the depositary and custodial services agreement entered into between National Bank Investments and Natcan Trust Company, the assets of the Portfolios, other than foreign assets, are held by Natcan Trust Company at its head office indicated above. Under that same agreement, sub-custodians appointed by Natcan Trust Company may also hold assets, as set out in the custodial agreement entered into with the sub-custodians. The depositary and custodial agreement may be terminated by either party upon ninety (90) days’ prior notice, or immediately in the event of either party’s insolvency. Natcan Trust Company is also registrar of the Portfolios, in accordance with the terms of the registrar agreement entered into between National Bank Investments and Natcan Trust Company. This agreement may be terminated by either party upon thirty (30) days’ prior notice. The register of securities of each Portfolio is kept at the head office of Natcan Trust Company in Montréal, Quebec. Administrative and Operational Services In accordance with a service agreement entered into on August 18, 2016 with National Bank Investments, National Bank Trust provides administrative and operational services to the Portfolios, including valuing the Portfolios’ securities and performing the Portfolios’ accounting. The head office of National Bank Trust is located at 600 De La Gauchetière Street West, 28th Floor, Montréal, Quebec H3B 4L2. Auditors Raymond Chabot Grant Thornton LLP is the auditor of the Portfolios. The head office of Raymond Chabot Grant Thornton LLP is located at 600 De La Gauchetière Street West, Suite 2000, Montréal, Quebec, H3B 4L8. Securities Lending Agents The Manager has retained the services of Natcan Trust Company, as agent for securities lending transactions. Natcan Trust Company is an affiliate of the Manager and its head office is in Montréal, Quebec. Under this agreement, Natcan Trust Company, acting as agent of the Manager, may lend available securities of the Meritage Portfolios to borrowers previously identified by the Manager. The agreement provides that the amount of the collateral required to be delivered in connection with securities lending transactions must be equivalent to 102% of the market value of the loaned securities. Natcan Trust Company may not be held liable for losses sustained by the funds subject to the agreement 25 provided such losses do not result from its gross negligence, bad faith or wilful misconduct. Either party may terminate the agreement by giving at least sixty (60) days’ written notice to the other party. Principal Holders of Securities The following table shows the holders who own more than 10% of the voting securities of National Bank Investments and National Bank Funds Corporation as at July 28, 2016. Investor Name of entity Description of Class or Series Number of securities owned Percentage of Class or Series National Bank of Canada National Bank Investments Inc. Class A Preferred Shares 1,980,817 100.00% National Bank Acquisition Holding Inc.1 National Bank Investments Inc. Class B Preferred Shares 6,286,000 100.00% National Bank Trust Inc. National Bank Investments Inc. Class C Preferred Shares 155 94.5% National Bank of Canada National Bank Investments Inc. Common Shares 1,230,993 100.00% National Bank Investments Inc. National Bank Funds Corporation 100 100.00% 1. Class B Shares National Bank Acquisition Holding Inc. is a wholly owned subsidiary of National Bank of Canada. The following table shows the holders who own more than 10% of the voting securities of any series of securities of a Meritage Portfolio on July 28, 2016. They are the beneficial owners and the owners of record. Investor Name of Portfolio Description of Series Number of securities owned Percentage of Series * Individual Investor 1 Meritage Canadian Equity Portfolio F5 2,387.11 95.59% * Individual Investor 2 Meritage Canadian Equity Portfolio T5 2,987.45 40.07% 626721 B.C. Ltd. Meritage Canadian Equity Portfolio T5 4,356.99 58.45% National Bank Investments Inc. Meritage Canadian Equity Portfolio O 100.00 100.00% Bergamotes Holding Ltd. Meritage Canadian Equity Class Portfolio Advisor 22,745.51 12.49% * Individual Investor 3 Meritage Canadian Equity Class Portfolio F 25,362.10 16.46% * Individual Investor 4 Meritage Canadian Equity Class Portfolio F 25,368.45 16.46% * Individual Investor 5 Meritage Canadian Equity Class Portfolio F 25,373.36 16.46% * Individual Investor 6 Meritage Canadian Equity Class Portfolio F 26,527.99 17.21% * Individual Investor 7 Meritage Canadian Equity Class Portfolio T 6,014.95 10.60% Gest France et Louis Marti Meritage Canadian Equity Class Portfolio T 6,055.33 10.67% * Individual Investor 8 Meritage Canadian Equity Class Portfolio T 6,091.42 10.74% 9096-8173 Québec inc. Meritage Canadian Equity Class Portfolio T 6,999.57 12.34% 26 Investor Name of Portfolio Description of Series Number of securities owned Percentage of Series Meritage Canadian Equity Class National Bank Investments Inc. Portfolio F5 117.84 100.00% * Individual Investor 9 Meritage Global Equity Portfolio F5 2,015.37 25.84% * Individual Investor 10 Meritage Global Equity Portfolio F5 2,745.10 35.20% * Individual Investor 11 Meritage Global Equity Portfolio F5 2,929.17 37.56% 626721 B.C. Ltd. Meritage Global Equity Portfolio T5 8,195.92 33.81% * Individual Investor 12 Meritage Global Equity Portfolio T5 9,310.08 38.40% National Bank Investments Inc. Meritage Global Equity Portfolio O 100.00 100.00% * Individual Investor 13 Meritage Global Equity Class Portfolio T 6,057.62 11.57% * Individual Investor 7 Meritage Global Equity Class Portfolio T 7,238.62 13.82% * Individual Investor 14 Meritage Global Equity Class Portfolio T 7,328.87 13.99% National Bank Investments Inc. Meritage Global Equity Class Portfolio F5 116.27 100.00% * Individual Investor 15 Meritage American Equity Portfolio T5 2,001.82 10.23% Vison Detail inc. Meritage American Equity Portfolio T5 2,609.38 13.33% 7688440 Canada inc. Meritage American Equity Portfolio T5 2,867.07 14.65% * Individual Investor 16 Meritage American Equity Portfolio T5 5,889.23 30.08% National Bank Investments Inc. Meritage American Equity Portfolio F5 112.88 16.46% Lynn Engel Consulting Ltd. Meritage American Equity Portfolio F5 572.91 83.54% * Individual Investor 17 Meritage International Equity Portfolio F5 2,827.52 93.94% * Individual Investor 18 Meritage International Equity Portfolio T5 1,643.59 11.41% Dr. Karine Byrns D.C. inc. Meritage International Equity Portfolio T5 1,720.66 11.95% * Individual Investor 19 Meritage International Equity Portfolio T5 1,875.38 13.02% * Individual Investor 20 Meritage International Equity Portfolio T5 5,453.67 37.87% * Individual Investor 21 Meritage Conservative Portfolio T5 12,525.34 10.67% * Individual Investor 22 Meritage Conservative Portfolio T5 15,022.35 12.80% * Individual Investor 23 Meritage Conservative Portfolio F5 2,227.51 45.84% * Individual Investor 24 Meritage Conservative Portfolio F5 2,520.44 51.87% * Individual Investor 25 Meritage Moderate Portfolio F5 9,557.89 10.69% * Individual Investor 26 Meritage Moderate Portfolio F5 15,372.23 17.20% * Individual Investor 27 Meritage Moderate Portfolio F5 15,716.12 17.58% * Individual Investor 28 Meritage Moderate Portfolio T5 14,283.58 10.28% * Individual Investor 29 Meritage Moderate Portfolio T5 41,158.29 29.63% * Individual Investor 30 Meritage Balanced Portfolio F5 21,869.86 12.56% * Individual Investor 31 Meritage Balanced Portfolio F5 23,927.97 13.75% * Individual Investor 32 Meritage Balanced Portfolio T5 32,531.36 11.33% * Individual Investor 33 Meritage Balanced Portfolio T5 42,382.43 14.76% 27 Investor Name of Portfolio Description of Series Number of securities owned Percentage of Series * Individual Investor 34 Meritage Balanced Portfolio T5 60,827.47 21.18% * Individual Investor 35 Meritage Growth Portfolio F5 2,863.86 15.62% * Individual Investor 36 Meritage Growth Portfolio F5 11,125.22 60.68% NBC ING Finance Equity Meritage Growth Portfolio O 356,910.15 99.97% * Individual Investor 37 Meritage Growth Portfolio T5 6,711.41 12.84% * Individual Investor 38 Meritage Growth Portfolio T5 11,349.45 21.71% * Individual Investor 39 Meritage Growth Portfolio T5 11,412.88 21.84% * Individual Investor 40 Meritage Growth Portfolio T5 12,902.24 24.68% Norgar Investments Ltd. Meritage Growth Class Portfolio F 83,604.55 14.60% * Individual Investor 41 Meritage Growth Class Portfolio T 50,656.90 11.12% * Individual Investor 42 Meritage Growth Class Portfolio T 154,624.10 33.94% * Individual Investor 43 Meritage Growth Class Portfolio F5 5,414.40 15.55% * Individual Investor 44 Meritage Growth Class Portfolio F5 9,023.48 25.92% * Individual Investor 45 Meritage Growth Class Portfolio F5 10,977.98 31.53% * Individual Investor 46 Meritage Aggressive Growth Portfolio F5 6,174.34 98.17% * Individual Investor 47 Meritage Aggressive Growth Portfolio T5 4,362.43 17.76% * Individual Investor 48 Meritage Aggressive Growth Portfolio T5 4,511.35 18.37% * Individual Investor 49 Meritage Aggressive Growth Portfolio T5 13,273.69 54.04% National Bank Investments Inc. Meritage Aggressive Growth Portfolio O 111.80 100.00% Patika inc. Meritage Aggressive Growth Class Portfolio F 22,156.57 13.12% * Individual Investor 50 Meritage Aggressive Growth Class Portfolio F 25,294.53 14.98% Hutterite Brethren of Golden V Meritage Aggressive Growth Class Portfolio F 30,620.65 18.13% * Individual Investor 51 Meritage Aggressive Growth Class Portfolio F5 1,663.17 41.77% * Individual Investor 52 Meritage Aggressive Growth Class Portfolio F5 2,202.83 55.32% * Individual Investor 53 Meritage Aggressive Growth Class Portfolio T 6,139.91 11.20% * Individual Investor 54 Meritage Aggressive Growth Class Portfolio T 23,879.29 43.57% Meritage Divesified Fixed Income National Bank Investments Inc. Portfolio O 107.89 100.00% La Capitale Civil Service Insurer Inc. Meritage Conservative Income Portfolio O 2,008,946.99 98.30% La Capitale Civil Service Insurer Inc. Meritage Moderate Income Portfolio O 2,319,708.31 99.11% La Capitale Civil Service Insurer Inc. Meritage Balanced Income Portfolio O 5,562,434.34 98.72% 28 Investor Name of Portfolio Description of Series Number of securities owned Percentage of Series La Capitale Civil Service Insurer Inc. Meritage Growth Income Portfolio O 2,128,456.63 96.18% Lasuik Holdings Ltd. #2 Meritage Aggressive Growth Income Portfolio F 234,962.22 10.78% La Capitale Civil Service Insurer Inc. Meritage Aggressive Growth Income Portfolio O 393,812.72 93.12% T5 102.08 100.00% National Bank Investments Inc. Meritage Global Conservative Portfolio * Individual Investor 55 Meritage Global Conservative Portfolio Advisor 1,734.48 10.65% * Individual Investor 56 Meritage Global Conservative Portfolio Advisor 3,853.56 23.66% National Bank Investments Inc. Meritage Global Conservative Portfolio Advisor 7,424.11 45.59% Meritage Global Conservative Portfolio F 3,569.46 32.39% National Bank Investments Inc. Meritage Global Conservative Portfolio F 7,450.54 67.61% * Individual Investor 58 Meritage Global Conservative Portfolio F5 1,679.84 21.31% * Individual Investor 59 Meritage Global Conservative Portfolio F5 6,102.36 77.40% National Bank Investments Inc. Meritage Global Moderate Portfolio Advisor 7,451.43 11.39% * Individual Investor 60 Meritage Global Moderate Portfolio Advisor 10,513.33 16.07% * Individual Investor 61 Meritage Global Moderate Portfolio Advisor 22,906.83 35.02% * Individual Investor 62 Meritage Global Moderate Portfolio F 3,950.15 11.94% * Individual Investor 63 Meritage Global Moderate Portfolio F 4,154.12 12.56% * Individual Investor 64 Meritage Global Moderate Portfolio F 4,583.07 13.85% * Individual Investor 65 Meritage Global Moderate Portfolio F 6,737.86 20.37% National Bank Investments Inc. Meritage Global Moderate Portfolio F 7,462.83 22.56% National Bank Investments Inc. Meritage Global Moderate Portfolio F5 102.07 100.00% National Bank Investments Inc. Meritage Global Moderate Portfolio T5 102.07 100.00% * Individual Investor 66 Meritage Global Balanced Portfolio F5 11,198.01 10.85% Dr Claude Hemond inc. Meritage Global Balanced Portfolio F5 17,264.84 16.73% * Individual Investor 67 Meritage Global Balanced Portfolio T5 28,956.55 27.83% * Individual Investor 68 Meritage Global Growth Portfolio Advisor 40,663.95 12.14% * Individual Investor 69 Meritage Global Growth Portfolio Advisor 63,302.47 18.90% * Individual Investor 70 Meritage Global Growth Portfolio F5 972.76 21.65% * Individual Investor 71 Meritage Global Growth Portfolio F5 1,085.88 24.17% * Individual Investor 72 Meritage Global Growth Portfolio F5 2,332.36 51.91% National Bank Investments Inc. Meritage Global Growth Portfolio O 100.12 100.00% * Individual Investor 57 9096-5369 Québec inc. Meritage Global Growth Class Portfolio Advisor 13,073.07 52.17% * Individual Investor 73 Meritage Global Growth Class Portfolio Advisor 2,701.38 10.78% Meritage Global Growth Class National Bank Investments Inc. Portfolio Advisor 7,400.00 29.53% 29 Investor Name of Portfolio Description of Series Number of securities owned Percentage of Series 2296690 Ontario inc. Meritage Global Growth Class Portfolio F 1,947.42 10.21% Gestion Andrée Bernier inc. Meritage Global Growth Class Portfolio F 9,727.74 51.00% Meritage Global Growth Class National Bank Investments Inc. Portfolio F 7,400.00 38.79% Meritage Global Growth Class Portfolio F5 9,587.73 98.95% Meritage Global Growth Class National Bank Investments Inc. Portfolio T5 102.06 100.00% * Individual Investor 74 * Individual Investor 75 Meritage Global Aggressive Growth Portfolio Advisor 19,719.84 25.51% * Individual Investor 76 Meritage Global Aggressive Growth Portfolio Advisor 12,062.00 15.61% * Individual Investor 77 Meritage Global Aggressive Growth Portfolio F 4,058.89 10.02% * Individual Investor 78 Meritage Global Aggressive Growth Portfolio F 11,471.62 28.33% Meritage Global Aggressive Growth National Bank Investments Inc. Portfolio F 7,350.23 18.15% Meritage Global Aggressive Growth National Bank Investments Inc. Portfolio F5 102.05 100.00% Meritage Global Aggressive Growth National Bank Investments Inc. Portfolio O 100.01 100.00% Meritage Global Aggressive Growth National Bank Investments Inc. Portfolio T5 102.06 100.00% * Individual Investor 79 Meritage Global Aggressive Growth Class Portfolio Advisor 4,725.90 17.68% * Individual Investor 80 Meritage Global Aggressive Growth Class Portfolio Advisor 2,819.55 10.55% * Individual Investor 81 Meritage Global Aggressive Growth Class Portfolio Advisor 3,921.57 14.67% Meritage Global Aggressive Growth National Bank Investments Inc. Class Portfolio Advisor 7,400.00 27.68% Meritage Global Aggressive Growth National Bank Investments Inc. Class Portfolio F 7,400.00 100.00% Meritage Global Aggressive Growth National Bank Investments Inc. Class Portfolio F5 102.06 100.00% Meritage Global Aggressive Growth National Bank Investments Inc. Class Portfolio T5 102.07 100.00% * Individual Investor 82 Meritage Tactical ETF Moderate Portfolio F5 9,344.78 11.65% * Individual Investor 83 Meritage Tactical ETF Moderate Portfolio F5 11,651.36 14.53% * Individual Investor 84 Meritage Tactical ETF Moderate Portfolio F5 25,490.20 31.78% * Individual Investor 85 Meritage Tactical ETF Moderate Portfolio T5 2,446.18 100.00% 30 Investor Name of Portfolio Description of Series Number of securities owned Percentage of Series * Individual Investor 86 Meritage Tactical ETF Balanced Portfolio F 58,508.42 23.85% * Individual Investor 87 Meritage Tactical ETF Balanced Portfolio F5 24,494.40 71.44% * Individual Investor 88 Meritage Tactical ETF Balanced Portfolio F5 3,933.14 11.47% * Individual Investor 89 Meritage Tactical ETF Balanced Portfolio T5 14,950.62 28.86% * Individual Investor 90 Meritage Tactical ETF Balanced Portfolio T5 13,680.64 26.41% * Individual Investor 91 Meritage Tactical ETF Balanced Portfolio T5 20,107.14 38.81% * Individual Investor 92 Meritage Tactical ETF Balanced Portfolio T5 1,482.21 100.00% * Individual Investor 86 Meritage Tactical ETF Growth Portfolio F 37,706.64 23.52% Meritage Tactical ETF Growth National Bank Investments Inc. Portfolio F5 102.06 100.00% Meritage Tactical ETF Growth National Bank Investments Inc. Portfolio T5 102.06 100.00% * For purposes of investor confidentiality and privacy, the names of the individual investors have been omitted. This information is available upon written request to National Bank Investments at the email address [email protected]. As at July 28, 2016, all the members of the IRC beneficially owned, directly or indirectly, in the aggregate, less than 10% of the securities of each class or series of each Portfolio and not more 1% of each class or series of voting or equity securities of National Bank of Canada, the Manager or any person or company that provides services to the Portfolios or the Manager. As at July 28, 2016, all the directors and officers of National Bank Investments beneficially owned, directly or indirectly, in the aggregate, less than 10% of the securities of each class or series of each Portfolio and not more than 1% of each class or series of voting or equity securities of National Bank of Canada, the Manager or any person or company that provides services to the Portfolios or the Manager. As at July 28, 2016, all the directors and officers of National Bank Funds Corporation beneficially owned, directly or indirectly, in the aggregate, less than 10% of the securities of each class or series of each Portfolio and not more than 1% of each class or series of voting or equity securities of National Bank of Canada, the Manager or any person or company that provides services to the Portfolios or the Manager. Affiliated Companies The following diagram shows the relationship between the Manager and affiliated entities of the Manager that provide services to the Portfolios or the Manager in relation to the Portfolios. 31 National Bank of Canada National Bank Investments Inc. (direct wholly owned subsidiary) CABN Investments Inc. (direct wholly owned subsidiary) National Bank Funds Corporation (wholly owned subsidiary) NBCN inc. (indirect wholly owned subsidiary) Natcan Trust Company (direct and indirect wholly owned subsidiary) National Bank Financial Inc. and National Bank Financial Ltd. (indirect wholly owned subsidiaries) National Bank Direct Brokerage Inc. (direct wholly owned subsidiary) National Bank Trust Inc. (direct and indirect wholly owned subsidiary) For its services as Manager, National Bank Investments receives remuneration from the Portfolios under the management agreement. For its services as registrar and custodian of the Portfolios, Natcan Trust Company receives remuneration from National Bank Investments. For its services as Portfolio Manager, National Bank Trust also receives a fee from National Bank Investments. NBCN Inc. is the principal subcustodian of the assets of the Portfolios. Except as described above, no other person or company that provides services to the Portfolios or to us in our capacity as Manager of the Meritage Portfolios is affiliated with us. Please see the audited financial statements of the Portfolios for the amount of fees paid by the Portfolios to National Bank Investments and the other affiliated entities. CABN Investments Inc., National Bank Financial Ltd., National Bank Financial Inc. and National Bank Direct Brokerage Inc. may receive brokerage commissions on the portfolio transactions of the Meritage Portfolios. Securities may also be purchased through them. They may receive commissions from or charge fees to securityholders who purchase securities of the Portfolios through them, in the same way as any unaffiliated dealer. For further information, see the section in the Simplified Prospectus called “Dealer Compensation”. Portfolio Governance General National Bank Investments is responsible for governance of the Portfolios. We comply with the policies already referred to in this Annual Information Form and with the standing instructions and the Code of Ethics of National Bank of Canada. The Manager is responsible for the day-to-day administration and operation of the Portfolios. The Manager is assisted by members of its legal, compliance and finance departments. The Manager has retained the Portfolio Manager to provide investment advisory and portfolio management services to the Portfolios. The Manager monitors and evaluates the performance of the Portfolios and the Portfolios’ compliance with their investment objectives and restrictions. With regard to sales practices, the Manager complies with Regulation 81-105 – Mutual Fund Sales Practices. See “Directors and Executive Officers of National Bank Investments” for details about the Manager’s board of directors. 32 As members of the National Bank of Canada group of companies, the Manager and the Portfolio Manager adhere to policies and procedures relating to conflicts of interest, personal trading, privacy and confidentiality. The policies and procedures direct employees to do what is best for clients and avoid conflicts of interest. Independent Review Committee As required by Regulation 81-107, the Portfolios have an independent review committee. The independent review committee reviews conflict of interest matters submitted by the Manager with which the Manager is confronted in operating the mutual funds it manages and reviews and comments on the Manager’s written policies and procedures regarding conflict of interest matters. The IRC is fully compliant with Regulation 81-107. The members of the IRC all have expertise in the financial services industry: • Jean-François Bernier is Senior Vice-President and Managing Director of a securities brokerage firm. He was previously Director of Capital Markets for the Quebec Securities Commission (now the Autorité des marchés financiers). Mr. Bernier has a background as a lawyer. • Jean Durivage was the manager of institutional investor services for a securities brokerage firm, prior to which he was Senior Vice-President and Corporate Director of a major brokerage firm. • André D. Godbout was Senior Executive Vice-President and a corporate director of a securities brokerage firm. He has an MBA and a background as a lawyer. • Yves Julien, Chairman of the IRC, is a corporate financial consultant and has held a number of executive positions in a securities brokerage firm. • Jacques Valotaire is a Fellow of the Ordre des comptables agréés du Québec. Having first practised as an auditor and a consultant, he later migrated towards the insurance industry, where he held several executive positions with a prominent Canadian property and casualty insurance group. The IRC has a written mandate describing its powers, duties and standard of care. For the period from January 1, 2015 to December 31, 2015, total compensation paid to the IRC for the Portfolios represents $8,141.64. Such costs are allocated by the Manager among all of the Portfolios in a way the Manager considers fair and reasonable. Pursuant to Regulation 81-107, the IRC of the Portfolios assesses, at least annually, the adequacy and effectiveness of the following: • The Manager’s policies and procedures regarding conflict of interest matters; • Any standing instruction the IRC has provided to the Manager for the conflict of interest matters related to the Portfolios; • The compliance of the Manager and the Portfolios with any conditions imposed by the IRC in a recommendation or approval; • Any sub-committee to which the IRC has delegated any of its functions. In addition, the IRC reviews and assesses, at least annually, the independence and compensation of its members, its effectiveness as a committee, and the contribution and effectiveness of each member. 33 The IRC prepares, at least annually, an annual report of its activities within the time period prescribed under Regulation 81-107. You may obtain this report free of charge by calling us toll-free at 1-866-603-3601 or by asking your dealer or broker. You may also obtain a copy of this report by visiting our website at www.nbcadvisor.com, by sending an e-mail to [email protected], or by visiting the website www.sedar.com. Risk Management The Portfolio Manager uses a variety of methods to manage risk. These methods include: • • • • • mark-to-market security valuation; fair value accounting; effective market and currency exposure reporting; daily reconciliation of cash balances; and monthly reconciliation of security positions. Policies for Derivative Transactions Each Portfolio may use derivatives that are consistent with its investment objective and not contrary to the investment restrictions of the Portfolio, to the extent, and for the purposes, permitted by the Canadian Securities Administrators. The current Portfolio Manager of the Portfolios is not registered to manage derivatives as it is exempted from such a registration requirement. The Manager is responsible for setting policies that set out the objectives and goals for the use of derivatives by the Portfolios as well as the risk management procedures applicable to the use of derivatives. The Portfolio Manager or an affiliate of the Manager engaged to manage the use of derivatives by the Portfolios (in each case, the “Derivatives Specialist”) is required to comply with the policies set by the Manager with respect to the use of derivatives and to adopt procedures related to the measuring, monitoring and reporting of portfolio leverage and cash cover requirements. Any derivative trade entries must be reviewed at the time of the initial entry by a qualified staff member of the Derivatives Specialist. All derivatives will be checked specifically by the Derivatives Specialist for compliance with derivatives rules and to ensure that they are suitable for the Portfolio within the context of its investment objective and strategies. The Derivatives Specialist will be required to comply with any trading limits and other controls established by the Manager for the use of derivatives by the Portfolios. Valuation of derivatives will be carried out on each valuation day. See page 9, “How Net Asset Value Per Security is Calculated”. National Bank Trust (in its capacity as valuator of the Portfolios) will utilize normal exchange reporting sources for any exchange-traded derivatives and third party sources for any over-thecounter derivatives. On a daily basis, the Derivatives Specialist will review any variations in the value of an instrument held by a Portfolio. Variations beyond a prudent threshold level will result in a review of the pricing of the individual instrument to verify the accuracy of the price. The Manager will review, at least annually, the policies and procedures regarding the use of derivatives by the Portfolios to ensure that the risks associated with these transactions are being properly managed. Securities Lending, Repurchase and Reverse Repurchase Transactions National Bank Investments Inc. has entered into an agency agreement in connection with securities lending transactions (the “agreement”) on behalf of the Meritage Portfolios with the custodian of the funds, Natcan Trust Company, as agent (the “Agent”). Natcan Trust Company manages securities lending transactions for the Meritage Portfolios. The agreement complies with the relevant provisions of Regulation 81-102. National Bank Investments will manage the risks associated with securities lending transactions as set out under the heading “Securities lending risk” under Part A of the Portfolios’ Simplified Prospectus. The agreement also provides that the Agent must: 34 • ensure that the applicable provisions of Regulation 81-102 are complied with, and in particular that the aggregate value of the securities lent in lending transactions does not exceed 50% of the aggregate value of the assets of the fund concerned; • engage in securities lending transactions with dealers and institutions in Canada and abroad that have solid credentials and have first undergone a stringent credit evaluation (the “counterparties”); • maintain controls, risk management policies and procedures, internal records (including a list of approved counterparties based on generally accepted solvency standards), limits pertaining to operations and credit for each counterparty and diversification standards for property given as security; and • determine daily the market value of the securities lent by a Portfolio in connection with a securities lending transaction and the liquid assets or other securities held by the Portfolio. In the event the value of the security is less than 102% of the market value of the lent securities, the Agent will ask the counterparty to provide other liquid assets or securities given as security to the Portfolio to cover the shortfall. At least once a year, National Bank Investments Inc. and the Agent review the agents’ policies and procedures so that the risks associated with securities lending operations are duly managed. At the present time, National Bank Investments Inc. does not resort to risk assessment procedures or conduct simulations to test portfolio solidity in difficult conditions. National Bank Investments Inc. instead imposes certain limits and controls, such as those described above in regard to securities lending operations. Before initiating any securities repurchase and reverse repurchase transactions for the Portfolios, the Manager will enter into a written agreement. The agreement will comply with the applicable provisions of Regulation 81-102 and will also provide for the control measures described above, with the necessary adaptations. Proxy Voting National Bank Investments manages the proxy voting on behalf of the Portfolios in accordance with guidelines established in its proxy voting policy. The Manager has adopted this policy to ensure that all votes in respect of securities held by the Portfolios are exercised in accordance with the best interests of the Portfolios. The following text is a summary of the policy. The Manager will vote the securities of the underlying funds held by the Portfolios. The Manager may also abstain from voting with respect to certain securities. With respect to securities of issuers other than the underlying funds, the Manager has established guidelines to help determine when to support or oppose a proposal by a corporation or a shareholder. Such guidelines relate to issues concerning the board of directors, board committees, auditors, executive and director compensation, capitalization, various takeover protection measures, various shareholders’ rights issues, disclosure policies and corporate social responsibility. While the Manager will generally vote in accordance with the guidelines, there may be circumstances where it believes it is in the best interests of the Portfolios to vote differently. The ultimate direction in which proxies will be voted rests entirely with the Manager, in the best interest of the Portfolios. A copy of the Manager’s proxy voting policy may be obtained on request, at no cost, on the Portfolios’ website, at www.nbcadvisor.com, by calling toll-free 1 866 603-3601 or by e-mail at [email protected]. Any securityholder may also obtain free of charge any of the Portfolios’ proxy voting record for the most recent period ended June 30 upon request at any time after August 31 of that year. The report is also available on the Portfolios’ website, at the above-mentioned address. 35 Short-Term Trading The Portfolios have policies and procedures designed to prevent and detect short-term trading. These policies and procedures include surveillance measures allowing detection and follow-up on short-term trading, as well as providing for the possibility of charging short-term trading fees in certain circumstances. For more details, please see “Short-term trading” in the Simplified Prospectus. Conflicts of Interest The Meritage Portfolios may be subject to various conflicts of interest given that National Bank Trust, the Portfolio Manager, is involved in many management and advisory activities. It makes investment decisions or gives advice relating to the assets of a Portfolio, independently of decisions made or advice given to other clients or in respect of its own investments, if any. However, National Bank Trust may make the same investment or give the same advice for a Portfolio and one or more of its other clients. It may sell a security for one client and buy it for another at the same time. National Bank Trust or its employees may have an interest in securities bought or sold for a client. Where there is a limited supply of a security, National Bank Trust uses its best efforts to allocate investment opportunities fairly, but cannot guarantee absolute equality. In some cases, these and other conflicts of interest could adversely affect one or more Portfolios. Management Fee Reduction In certain cases, we may reduce the management fee for certain securityholders of a particular series of a Portfolio. Our decision to reduce the usual management fee depends on a number of factors, including the size of the investment, the expected level of activity in the account and the investor’s total investments. These investors receive a rebate for the management fees or Portfolio expenses that apply to their securities. We may raise or lower the amount of the reduction for certain investors from time to time. In the case of the Trust Portfolios, we reduce the management fee charged to the Portfolio or we reduce the amount charged to the Portfolio for certain expenses and the Portfolio pays an amount equivalent to the reduction to the investors concerned as a special distribution (the “management fee distribution”). These distributions are automatically reinvested in additional securities of the same series of the Portfolio. Management fee distributions are paid first out of net income and net realized capital gains of the Portfolio and thereafter out of capital. In the case of the Corporate Portfolios, we rebate the appropriate amount directly to each shareholder (the “management fee rebate”). These management fee rebates must generally be included in the shareholder’s income. This amount is automatically reinvested in additional securities of the same series of the Portfolio. A Portfolio will not be subject to tax on the amount of any management fee or Portfolio expense rebates or distributions. The amount of a management fee or Portfolio expense rebate or distribution from a Portfolio will be included in the investor’s income to the extent that it is paid out of the income of the Portfolio. For more information about the tax treatment of management fee distributions and rebates, see “Canadian Federal Income Tax Considerations” in this Annual Information Form. Prospective investors are also invited to consult their own tax advisors about their specific situation. 36 Legal and Administrative Proceedings On October 5, 2013, an out-of-court settlement was reached in a lawsuit pitting Mr. Robert Beauregard and 42792363 Canada Inc. (collectively, the “Plaintiffs”) against Natcan Investment Management Inc., National Bank of Canada, 9130-1564 Québec inc., National Bank Securities Inc. (now National Bank Investments Inc.) and Pascal Duquette (collectively, the “Defendants”). The Plaintiffs were suing the Defendants for wrongful dismissal and illegitimate removal as a shareholder and claiming an amount of approximately $36,292,585. The Portfolios were not involved in this lawsuit. On March 27, 2012, a motion to institute proceedings was filed with the Quebec Superior Court, District of Montréal, by Michael Quigley, Marc-André Gaudreau, Christian Cyr, Mark Jackson, Roger Rouleau, Gilles Chouinard and Pierre Sweeney (collectively the “Plaintiffs”) against National Bank Securities Inc. (now National Bank Investments Inc.), 9130-1564 Québec inc. and Natcan Investment Management Inc. (the “Defendants”). The Plaintiffs were all shareholders of 9130-1564 Québec inc., a company that holds shares in Natcan Investment Management Inc. (“Natcan”). The Plaintiffs instituted an oppression action against the Defendants alleging that they are entitled to the fair value of their shares further to the closing of the transaction with Fiera Sceptre Inc. (now Fiera Capital Corporation). On November 2, 2015, the Quebec Superior Court dismissed the Plaintiffs’ oppression action and allowed the Defendants’ cross demand. The Plaintiffs were ordered to pay $105,000 in costs, including expert costs. An appeal has been filed and was served on the Plaintiffs on December 1, 2015. The Portfolios are not involved in this lawsuit. Material Contracts The material contracts entered into by the Portfolios are the following: • The Master Declaration of Trust dated August 18, 2016; • The articles of incorporation of National Bank Funds Corporation dated October 22, 2001 and the articles of amendment dated March 23, 2011, May 28, 2013, October 29, 2013, August 28, 2014 and August 18, 2016; • The Amended and Restated Master Management Agreement dated August 18, 2016 between Natcan Trust Company, National Bank Funds Corporation and National Bank Investments described in the section “Management of the Portfolios”; • The Amended and Restated Investment Management Agreement dated August 18, 2016 between National Bank Investments and National Bank Trust described in the section “Portfolio Manager”; • The Amended and Restated Depositary and Custodial Services Agreement dated August 18, 2016 between National Bank Investments and Natcan Trust Company described in the section “Trustee, Custodian and Registrar”; • The Amended and Restated Master Registrar Agreement dated August 18, 2016 between National Bank Investments and Natcan Trust Company described in the section “Trustee, Custodian and Registrar”; • Service Agreement between National Bank Investments and National Bank Trust, dated August 18, 2016, described in the section “Administrative and Operational Services”. 37 You can examine any of these agreements during regular business hours at the following address: National Bank Investments Inc. 1100 Robert-Bourassa Blvd. 10th Floor Montréal, Quebec H3B 2G7 38 Certificates of the Portfolios, the Manager and the Promoter This Annual Information Form, together with the Simplified Prospectus and the documents incorporated by reference into the Simplified Prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by the Simplified Prospectus, as required by the securities legislation of each of the provinces and territories of Canada and do not contain any misrepresentations. August 18, 2016 National Bank Investments Inc., as Manager and Promoter of the Portfolios and on behalf of the Trustee of the Trust Portfolios “Jonathan Durocher” Jonathan Durocher President and Chief Executive Officer “Sébastien René” Sébastien René Chief Financial Officer On behalf of the Board of Directors of National Bank Investments Inc., as Manager and Promoter of the Portfolios and on behalf of the Trustee of the Trust Portfolios “Joe Nakhle” Joe Nakhle Director “Tina Tremblay-Girard” Tina Tremblay-Girard Director On behalf of National Bank Funds Corporation, for the Corporate Portfolios “Jonathan Durocher” Jonathan Durocher President and Chief Executive Officer “The Giang Diep” The Giang Diep Chief Financial Officer On behalf of the Board of Directors of National Bank Funds Corporation for the Corporate Portfolios “Joe Nakhle” Joe Nakhle Director “Tina Tremblay-Girard” Tina Tremblay-Girard Director 39 Meritage Portfolios National Bank Investments Inc. 1100 Robert-Bourassa Blvd. 10th Floor Montréal, Quebec H3B 2G7 Toll-free: 1-866-603-3601 Additional information about the Meritage Portfolios is available in the Portfolios’ management reports of fund performance, Fund Facts and financial statements. You can obtain a copy of these documents, at your request and at no cost, by calling toll-free 1-866-603-3601, from your dealer or broker, or by e-mail at [email protected]. These documents and other information about the Meritage Portfolios, such as information circulars and material contracts, are also available at www.nbcadvisor.com or at www.sedar.com.
