ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE. Management Discussion of Fund Performance

Transcription

1 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE Global Equity Funds For the period ended December 31, 2014 This annual management report of fund performance contains financial highlights, but does not contain the complete annual financial statements of the mutual fund. A copy of the annual financial statements may be obtained on request, and at no cost, by calling or , by writing to us at National Bank Investments Advisory Service, 500, Place d Armes, 12th floor, Montreal, Quebec, H2Y 2W3, by visiting our website at by visiting SEDAR s website at or by contacting your advisor. You may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. Management Discussion of Fund Performance Investment Objective and Strategies The s investment objective is to ensure longterm capital growth, with a focus on dividend income. The Fund will invest directly or indirectly in a portfolio comprised mainly of dividend-paying equity securities of companies located around the world. The Fund aims to achieve high total investment return. The Fund may also invest in American Depositary Receipts (ADR s) and Global Depositary Receipts (GDR s). The portfolio manager may choose to invest approximately 30% of the net assets of the Fund in securities of mutual funds managed by the portfolio manager or by third parties, including exchange-traded funds managed by the portfolio manager or third parties. When selecting securities for the Fund, the portfolio manager uses an extensive database to screen for liquidity and evidence and/or potential for positive economic profit for each security. Based on key metrics, the portfolio manager determines the country allocation weights. Thereafter, a fundamental research is conducted to identify stocks with sustainable earning growth prospects not recognized by the market and which are trading at attractive valuations. The Fund may use derivatives in accordance with its investment objective and in compliance with applicable legislation. Risks Throughout the year, emerging markets were adversely impacted by U.S. dollar strength. Oil posted one of the largest losses since 2008 and most other commodities remained weaker on global growth sentiment. Europe struggled as guidance from the European Central Bank (ECB) on potential quantitative easing (QE) measures remained uncertain and sovereign growth prospects weak. Meanwhile, on the back of a recovering U.S. economy, the Federal Reserve put an end to its monthly bond purchases in the second half of the year. Nonetheless, the overall nature and levels of risk associated with the Fund remain as described in the latest simplified prospectus. It is thus suitable for investors who are seeking to invest in the long term, who wish to get exposure to global markets and are willing to tolerate a medium level of risk.

2 Results of Operations For the twelve-month period ended December 31, 2014, the s Advisor Series units returned 5.65% compared to 13.55% for the Fund s benchmark, the MSCI ACWI Index (CAD). Unlike the benchmark, the Fund s return is calculated after fees and expenses. Please see the Past Performance section for returns of the Fund s other series, which may vary mainly because of fees and expenses. Certain series of the Fund, as applicable, may make distributions at a rate determined by the portfolio manager. This rate may change from time to time. If the aggregate amount of distributions in such series exceeds the portion of net income and net realized capital gains allocated to such series, the excess will constitute a return of capital. The portfolio manager does not believe that the return of capital distributions made by such series of the Fund have a meaningful impact on the Fund s ability to implement its investment strategy or to fulfill its investment objective. The net asset value of the Fund rose from $57.6 million as at December 31, 2013 to $83.4 million as at December 31, This represents an increase of 45%. The increase stemmed mainly from net sales and variations attributed to interfund activity. Global equities ended the year 2014 mixed, driven by weak equity markets in Europe and emerging markets, as well as strong equity markets in the U.S. Indices in the developed world closed lower as Europe s economy showed signs of a relapse, while Japan continues to stimulate its weak economy. Fears of a slowing Chinese economy also contributed to a material decline in oil prices. A weaker Canadian dollar contributed to the performance of the MCSI All Country World Index, which ended the year with a gain of 13.55% (in CAD). At the sector level, Energy and Materials were the only two sectors that posted negative returns, while the other eight sectors within the MSCI All Country World Index ended in positive territory. Health Care, Information Technology and Utilities sectors outperformed, while Industrials and Telecommunications lagged. Investors seeking an alternative to fixed income instruments bought into interest sensitive securities, such as those within the Utilities sector. Others, seeking exposure to fast growing companies bought into technology and biotechnology stocks, to the detriment of Telecommunications, where profitability continues to be challenged by increased competition. Under these circumstances, the Fund underperformed its benchmark. The Information Technology Health Care, and Materials sectors were the leading detractors over the period, while Energy contributed positively (despite the dramatic decent in oil prices over the period). The Information Technology sector was negatively impacted by security selection and the Fund s underweight allocation towards the sector. NuFlare Technology, which develops and manufactures electron beam mask writers used within lithography processes in semiconductor manufacturing, is one of the Fund s holdings that detracted amid consecutive quarters of missed earnings and uncertainty in guidance related to the company s order book. An underweight allocation and security selection in Health Care also led to negative contributions within the Fund. Medical equipment and services provider Ship Healthcare is one of the Fund s holdings within this sector that detracted amid renewed uncertainty in earnings outlook. Lastly, in the Materials sector, Austria-based Voestalpine, a specialized steel manufacturer, was the main detractor amid persistent weakness in European industrial production. Recent Developments During the year, the Fund added to positions in AIA Group Ltd. and Samsonite. Positions were also taken in SHIP Healthcare Holdings, UBS, Unilever PLC, Ayala Land, Bank of Georgia and SmarTone. Among other securities, the Fund sold NuFlare, GlaxoSmithKline, Canon, Sage PLC and Umicore SA over the period. With regards to some of the Fund s purchases, AIA Group Ltd. (first established in Shanghai over 90 years ago) was the former insurance arm of AIG in Asia that was spun off from the parent company due to the global financial crisis. AIA maintains a diversified business both in terms of a range of life insurance-related products and also in geography, with a leading position and solid market share through wholly-owned subsidiaries across 17 countries. Samsonite, on the other hand, is a globally-recognized brand and the world s largest travel luggage company. Despite recent global macroeconomic challenges, Samsonite has achieved remarkable resilience with strong sales growth evident in all regions, particularly in North America and Asia, and in both retail and wholesale channels of distribution. On the sales side, the decision to exit NuFlare was based on a loss of confidence in management credibility following consecutive quarters of missed guidance and sales volatility over the past year. Also, GlaxoSmithKline was sold as company fundamentals continued to deteriorate. The company missed sales targets and operational inefficiencies have resulted from poor execution.

3 The outlook for global markets remains positive as global economic growth gains further momentum within an environment of benign inflation and accommodative monetary policy. The U.S. economy remains a key driver of growth as the end of the deleveraging cycle for businesses and consumers has led to rising trends in consumption and investment. China remains on track to grow at a more sustainable pace as authorities have taken measures to ease monetary and liquidity conditions over the past year in response to economic weakness. Prospects for Europe remain clouded by geopolitical, fiscal and structural impediments, while the anticipated QE stimulus from the European Central Bank remains uncertain. The threat of deflation still remains a possibility in Europe as prices fell to the lowest levels since 2009, and other issues including renewed contagion fears caused by Greek debt default, and geopolitical uncertainty from Russia, are all potential sources of volatility and further declines in the region and across global markets. The growing divergence in growth prospects and economic performance of global equities should present new opportunities for investors through prudent allocation and stock selection. As a long-term bottom-up investor, the portfolio manager remains focused on the fundamental attributes of companies such as earnings growth, margins and operating efficiency in order to identify companies that have the competitive advantage and ability to survive throughout the market cycle. The portfolio manager continues to find new ideas for positioning despite short-term performance challenges, with a focus on companies that have a proven ability to generate excess returns above the cost of capital. On September 23, 2014, the management fees for the Fund s F-series and F5 series were reduced to 0.95%. On May 21, 2014, a new F5 Series and T5 Series were created for the. During the period, investors in the Fund voted in favor of a proposal by National Bank Investments to change the manner in which certain operating expenses are charged to the Fund. The majority of the Fund s operating expenses will be replaced by fixed-rate administration fees, which will be subject to a transitional adjustment payment until December 31, This change came into effect on January 1, Significant accounting policies Adoption of IFRS These are the Fund's first financial statements prepared in accordance with International Financial Reporting Standards (hereafter, "IFRS") as published in the CPA Canada Handbook - Accounting. The Funds adopted this financial reporting framework on January 1, 2014, as required under Canadian securities legislation and the Canadian Accounting Standards Board. Previously, the Fund prepared its financial statements in accordance with Canadian generally accepted accounting principles as set out in Part V of the CPA Canada Handbook - Accounting ( Canadian GAAP ). The Fund has applied the same accounting policies to prepare its opening Statement of Financial Position in IFRS as at January 1, 2013 and throughout all periods presented, as these policies had always been in effect. Transition to IFRS First-time adoption of IFRS These annual financial statements are the Funds' first audited IFRS annual financial statements. The date of transition to IFRS is January 1, The Funds' IFRS accounting policies presented in the financial statement were used to prepare the financial statements for the year ended December 31, 2014, comparative information and the first Statement of Financial Position as at the date of transition. The Funds applied IFRS 1 First-time Adoption of International Financial Reporting Standards (IFRS 1) to prepare these first IFRS annual financial statements audited. The effect of the transition to IFRS on net assets, total comprehensive income, and cash flows is described in this note. First-time adoption exemptions Upon transition, IFRS 1 authorizes certain exemptions from retrospective application. As indicated below, the Funds have applied the following mandatory and optional exceptions: Mandatory exceptions: The financial assets and liabilities that were derecognized before January 1, 2013, according to previous GAAP, were not recorded according to IFRS. The Funds used estimates according to IFRS that are consistent with the estimates made under previous GAAP (after adjustments to reflect any difference between accounting policies), unless there is objective evidence that those estimates were in error.

4 Optional exception: The Funds have decided to adopt the exemption to designate a financial asset or financial liability as at FVTPL upon transition to IFRS. All financial assets designated at FVTPL upon transition (see Note 2) were previously recognized at fair value under Canadian GAAP, in accordance with Accounting Guideline (AcG) 18 Investment Companies. Statement of Cash Flows Under Canadian GAAP, the Funds were not required to provide a Statement of Cash Flows. IAS 1, states that a complete set of financial statements should include, without exception, a statement of cash flows for the considered and comparative period. Classification of redeemable units/shares issued by the Funds Under Canadian GAAP the Funds recognized their redeemable units/shares under equity. Under IFRS, IAS 32 requires that units or shares of an entity which include a contractual obligation for the issuer to repurchase or redeem that instrument for cash or another financial asset be classified as financial liability. As the Funds' units/shares do not meet the IAS 32 criteria to be classified as equity (in part because the units/shares series do not have identical characteristics: difference in distribution policy for management fees and commissions), they were reclassified as financial liabilities upon transition to IFRS, with the exception of the shares of National Bank AltaFund Investment Corp. and the National Bank Dividend Income Fund Inc., which are classified as equity. Revaluation of investments at FVTPL Under Canadian GAAP, the Funds measured fair value of their investments in accordance with Section 3855 Fnancial Instruments - Recognition and Measurement, which required the use of bid prices for long positions and ask prices for short positions, to the extent such prices are available. Under IFRS, the Funds measure the fair value of their investments using IFRS 13 Fair Value Measurement, under which fair value is based on a price within the bid-ask spread that is most representative of fair value. IFRS 13 also allows for the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value measurements within a bid-ask spread. The Funds decided to use the close price as disclosed in the financial statements. As a result, upon adoption of IFRS, an adjustment was recognized to adjust the carrying amount of the Funds investments, as presented in the table reconciling net assets and comprehensive income. Differences in presentation In addition to the adjustments mentioned above, the Funds reclassified certain amounts upon transition to comply with the presentation of financial statements under IFRS. Under GAAP, the Funds presented Income from foreign sources after deducting the income tax withheld at source by the foreign countries. Under IFRS, the withholdings at source of foreign income are reclassified and presented separately as a tax expense under the Statement of Comprehensive Income. Reconciliation of net assets attributable to holders of redeemable units/shares and the comprehensive income presented previously under Canadian GAAP and under IFRS As mentioned in section Revaluation of investments at FVTPL, an adjustment was recognized to modify the carrying amount of the Funds' investments as disclosed in the financial statements. Related Party Transactions National Bank of Canada ( the Bank ) and its affiliated companies roles and responsibilities related to the Fund are as follows: Trustee, Custodian, and Registrar Natcan Trust Company ( NTC ), a direct or indirect wholly-owned subsidiary of the Bank, is the Fund s trustee. In this capacity, it is the legal owner of the Fund s investments. NTC acts as registrar for the Fund s securities and the names of securityholders. NTC also acts as the Fund s custodian. The fees for NTC s custodial services are based on the standard rates in effect at NTC. Fund Manager The Fund is managed by National Bank Investments Inc. ( NBII ), which is a wholly-owned subsidiary of the Bank. Therefore, NBII provides or ensures the provision of all general management and administrative services required by the Fund s current operations, including investment consulting, the arrangement of brokerage contracts for the purchase and sale of the investment portfolio, bookkeeping and other administrative services required by the Fund. The Fund reimbursed the Fund manager for operating expenses, at cost, incurred in administering the Fund, including trustee, recordkeeping, custodial, legal, audit, investor servicing, and securityholder reporting fees. As described under the heading Management Fees, the Fund pays annual management fees to NBII as consideration for its services.

5 Distribution and Representative's Firms Compensation NBII acts as principal distributor for the Fund. In this capacity, NBII buys, sells and swaps securities through Bank branches and the National Bank Investments Advisory Service in Canadian provinces and territories, and through external registered representatives. Fund securities are also offered by National Bank Direct Brokerage Inc., CABN Investments Inc. National Bank Financial Inc. and other affiliated entities. Each month, representative's firm receive a commission representing a percentage of the average daily value of the securities held by their clients. Brokerage Fees The Fund may pay broker s commissions at market rates to a corporation affiliated with NBII. The brokerage fees paid by the Fund for the period are as follows: Period ended December 31, 2014 Total brokerage fees $67, Brokerage fees paid to National Bank Financial $7, Holdings As at December 31, 2014, National Bank Investments Inc. held Fund securities for a value of $3,329.39, which represented close to % of the net asset value of the Fund at that date. Transactions between National Bank Investments Inc. and the Fund were carried out in the normal course of business and at the Fund s net asset value as at the transaction date. Registered Plan Trust Services NTC receives a fixed amount per registered account for services provided as trustee for registered plans. Administrative and Operating Services The provision of certain services was delegated by the Fund manager, NBII, to National Bank Trust Inc. ("NBT"), a wholly-owned indirect subsidiary of the Bank. These include accounting, reporting and portfolio valuation services. The fees incurred for these services are paid to NBT by the Fund manager.

6 Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the accounting periods shown. Advisor Series The Fund's Net Assets per Unit Accounting Period Ended December 31 December 31 December 31 (80 days) $ $ $ Net Assets, Beginning of Accounting Period Shown Increase (Decrease) from Operations Total revenue Total expenses (0.31) (0.29) (0.05) Realized gains (losses) (0.02) Unrealized gains (losses) Transaction costs on purchase and sale of investments (0.02) (0.03) (0.02) Total Increase (Decrease) from Operations Distributions From net income (excluding dividends) 0.22 From dividends From capital gains Return of capital Total Annual Distributions Net Assets, End of Accounting Period Shown This information is derived from the Fund's audited annual financial statements. The net assets per unit presented in the financial statements might differ from the net asset value calculated for fund pricing purposes. The differences are explained in the notes to the financial statements. Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase or decrease from operations is based on the average number of units outstanding over the accounting period. Distributions were paid in cash or reinvested in additional units of the Fund, or both. Since January 1st, 2013, the net assets are calculated in accordance with IFRS. Previously, it was the accounting principles as set out in Part V of the CPA Canada Handbook - Accounting ( Canadian GAAP ). Ratios and Supplemental Data Accounting Period Ended December 31 December 31 December 31 (80 days) Total net asset value (000's of $) 19,426 33,397 14,334 Number of units outstanding 1,534,132 2,737,156 1,418,219 Management expense ratio (%) Management expense ratio before waivers or absorptions (%) Trading expense ratio (%) Portfolio turnover rate (%) Net asset value per unit ($) This information is provided as at the last day of the accounting period shown. Management expense ratio is based on total expenses including sales taxes for the accounting period indicated (excluding commission and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net value during the accounting period. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the accounting period. The Fund's portfolio turnover rate indicates how actively the Fund's portfolio manager manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the accounting period. The higher a Fund's portfolio turnover rate in an accounting period, the greater the trading costs payable by the Fund in the accounting period, and the greater the chance of an investor receiving taxable capital gains in the accounting period. There is not necessarily a relationship between a high turnover rate and the performance of a Fund.

7 Financial Highlights Series F The Fund's Net Assets per Unit Accounting Period Ended December 31 December 31 December 31 (80 days) $ $ $ Net Assets, Beginning of Accounting Period Shown Increase (Decrease) from Operations Total revenue Total expenses (0.17) (0.17) (0.03) Realized gains (losses) (0.03) Unrealized gains (losses) Transaction costs on purchase and sale of investments (0.02) (0.04) (0.02) Total Increase (Decrease) from Operations Distributions From net income (excluding dividends) 0.23 From dividends From capital gains Return of capital Total Annual Distributions Net Assets, End of Accounting Period Shown This information is derived from the Fund's audited annual financial statements. The net assets per unit presented in the financial statements might differ from the net asset value calculated for fund pricing purposes. The differences are explained in the notes to the financial statements. Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase or decrease from operations is based on the average number of units outstanding over the accounting period. Distributions were paid in cash or reinvested in additional units of the Fund, or both. Since January 1st, 2013, the net assets are calculated in accordance with IFRS. Previously, it was the accounting principles as set out in Part V of the CPA Canada Handbook - Accounting ( Canadian GAAP ). Ratios and Supplemental Data Accounting Period Ended December 31 December 31 December 31 (80 days) Total net asset value (000's of $) 14,502 13, Number of units outstanding 1,121,527 1,071,748 17,668 Management expense ratio (%) Management expense ratio before waivers or absorptions (%) Trading expense ratio (%) Portfolio turnover rate (%) Net asset value per unit ($) This information is provided as at the last day of the accounting period shown. Management expense ratio is based on total expenses including sales taxes for the accounting period indicated (excluding commission and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net value during the accounting period. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the accounting period. The Fund's portfolio turnover rate indicates how actively the Fund's portfolio manager manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the accounting period. The higher a Fund's portfolio turnover rate in an accounting period, the greater the trading costs payable by the Fund in the accounting period, and the greater the chance of an investor receiving taxable capital gains in the accounting period. There is not necessarily a relationship between a high turnover rate and the performance of a Fund.

8 Financial Highlights Series F5 The Fund's Net Assets per Unit Accounting Period Ended 2014 December 31 (225 days) $ Net Assets, Beginning of Accounting Period Shown Increase (Decrease) from Operations Total revenue 0.09 Total expenses (0.09) Realized gains (losses) 0.50 Unrealized gains (losses) 0.20 Transaction costs on purchase and sale of investments (0.01) Total Increase (Decrease) from Operations 0.69 Distributions From net income (excluding dividends) 0.13 From dividends From capital gains Return of capital 0.16 Total Annual Distributions 0.29 Net Assets, End of Accounting Period Shown This information is derived from the Fund's audited annual financial statements. The net assets per unit presented in the financial statements might differ from the net asset value calculated for fund pricing purposes. The differences are explained in the notes to the financial statements. Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase or decrease from operations is based on the average number of units outstanding over the accounting period. Distributions were paid in cash or reinvested in additional units of the Fund, or both. Since January 1st, 2013, the net assets are calculated in accordance with IFRS. Previously, it was the accounting principles as set out in Part V of the CPA Canada Handbook - Accounting ( Canadian GAAP ). Ratios and Supplemental Data Accounting Period Ended 2014 December 31 (225 days) Total net asset value (000's of $) 36 Number of units outstanding 3,575 Management expense ratio (%) 1.37 Management expense ratio before waivers or absorptions (%) Trading expense ratio (%) 0.13 Portfolio turnover rate (%) Net asset value per unit ($) This information is provided as at the last day of the accounting period shown. Management expense ratio is based on total expenses including sales taxes for the accounting period indicated (excluding commission and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net value during the accounting period. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the accounting period. The Fund's portfolio turnover rate indicates how actively the Fund's portfolio manager manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the accounting period. The higher a Fund's portfolio turnover rate in an accounting period, the greater the trading costs payable by the Fund in the accounting period, and the greater the chance of an investor receiving taxable capital gains in the accounting period. There is not necessarily a relationship between a high turnover rate and the performance of a Fund.

9 Financial Highlights Series O The Fund's Net Assets per Unit Accounting Period Ended December 31 December 31 (284 days) $ $ Net Assets, Beginning of Accounting Period Shown Increase (Decrease) from Operations Total revenue Total expenses Realized gains (losses) Unrealized gains (losses) Transaction costs on purchase and sale of investments (0.02) (0.03) Total Increase (Decrease) from Operations Distributions From net income (excluding dividends) 0.21 From dividends 0.09 From capital gains Return of capital Total Annual Distributions Net Assets, End of Accounting Period Shown This information is derived from the Fund's audited annual financial statements. The net assets per unit presented in the financial statements might differ from the net asset value calculated for fund pricing purposes. The differences are explained in the notes to the financial statements. Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase or decrease from operations is based on the average number of units outstanding over the accounting period. Distributions were paid in cash or reinvested in additional units of the Fund, or both. Since January 1st, 2013, the net assets are calculated in accordance with IFRS. Previously, it was the accounting principles as set out in Part V of the CPA Canada Handbook - Accounting ( Canadian GAAP ). Ratios and Supplemental Data Accounting Period Ended December 31 December 31 (284 days) Total net asset value (000's of $) 49,391 10,990 Number of units outstanding 4,043, ,646 Management expense ratio (%) Management expense ratio before waivers or absorptions (%) Trading expense ratio (%) Portfolio turnover rate (%) Net asset value per unit ($) This information is provided as at the last day of the accounting period shown. Management expense ratio is based on total expenses including sales taxes for the accounting period indicated (excluding commission and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net value during the accounting period. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the accounting period. The Fund's portfolio turnover rate indicates how actively the Fund's portfolio manager manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the accounting period. The higher a Fund's portfolio turnover rate in an accounting period, the greater the trading costs payable by the Fund in the accounting period, and the greater the chance of an investor receiving taxable capital gains in the accounting period. There is not necessarily a relationship between a high turnover rate and the performance of a Fund.

10 Financial Highlights Series T5 The Fund's Net Assets per Unit Accounting Period Ended 2014 December 31 (225 days) $ Net Assets, Beginning of Accounting Period Shown Increase (Decrease) from Operations Total revenue 0.13 Total expenses (0.16) Realized gains (losses) 0.15 Unrealized gains (losses) 0.25 Transaction costs on purchase and sale of investments (0.01) Total Increase (Decrease) from Operations 0.36 Distributions From net income (excluding dividends) 0.15 From dividends From capital gains Return of capital 0.14 Total Annual Distributions 0.29 Net Assets, End of Accounting Period Shown This information is derived from the Fund's audited annual financial statements. The net assets per unit presented in the financial statements might differ from the net asset value calculated for fund pricing purposes. The differences are explained in the notes to the financial statements. Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase or decrease from operations is based on the average number of units outstanding over the accounting period. Distributions were paid in cash or reinvested in additional units of the Fund, or both. Since January 1st, 2013, the net assets are calculated in accordance with IFRS. Previously, it was the accounting principles as set out in Part V of the CPA Canada Handbook - Accounting ( Canadian GAAP ). Ratios and Supplemental Data Accounting Period Ended 2014 December 31 (225 days) Total net asset value (000's of $) 1 Number of units outstanding 103 Management expense ratio (%) 2.55 Management expense ratio before waivers or absorptions (%) Trading expense ratio (%) 0.13 Portfolio turnover rate (%) Net asset value per unit ($) This information is provided as at the last day of the accounting period shown. Management expense ratio is based on total expenses including sales taxes for the accounting period indicated (excluding commission and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net value during the accounting period. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the accounting period. The Fund's portfolio turnover rate indicates how actively the Fund's portfolio manager manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the accounting period. The higher a Fund's portfolio turnover rate in an accounting period, the greater the trading costs payable by the Fund in the accounting period, and the greater the chance of an investor receiving taxable capital gains in the accounting period. There is not necessarily a relationship between a high turnover rate and the performance of a Fund.

11 Management Fees The Fund pays annual management fees to the Fund manager for its management services. The fees are calculated based on a percentage of the Fund s daily net asset value before applicable taxes and are paid on a monthly basis. A portion of the management fees paid by the Fund covers trailer fees and sales commissions paid to brokers. The remainder of the management fees primarily covers investment management and general administration services. The breakdown of major services provided in consideration of the management fees, expressed as an approximate percentage of the management fees is as follows: Advisor Series* and Series T5* Series Management Fees Distribution Others Front-end load 2.00% 50.00% 50.00% Back-end load 2.00% 25.00% 75.00% Low load - 1 to 3 years 2.00% 25.00% 75.00% Low load - 4 years and more 2.00% 50.00% 50.00% Series F and Series F5 0.95% % Series O N/A** % ( ) Includes all costs related to management, investment advisory services, general administration and profit. (*) Excluding sales commissions paid on the Advisors and T5 Series with low sales charges option and deferred sales charge option, which are not paid for out of the management fees. (**) There are no management fees paid by the Fund with respect to the Series O. Instead, Series O securityholders pay a negociated administration fee directly to National Bank Investments. Past Performance Information on the Fund s past performance is presented in the graphs below. The graphs assume that fund distributions during the periods presented were reinvested in full in additional fund securities and do not take into account sales, redemption charges, distributions, or optional charges that would have reduced returns. Past performance of a Fund or series of a Fund does not necessarily indicate how it will perform in the future. Annual Returns The bar chart indicates the Fund s annual performance for each series during the years shown, and illustrates how the Fund s performance has changed from year to year. It shows, in percentage terms, how much an investment made on the January 1, or made commencing from the start of the series, would have grown or decreased by December 31 of that year, or by June 30, as applicable. 30 Advisor Series Series F Series F5 Series O Series T Return (%) Year 1 Returns for the Advisor Series and for the Series F for the period from October 12, 2012 (inception date) to December 31, Returns for the Series O for the period from March 22, 2013 (inception date) to December 31, Returns for the Series F5 and for the Series T5 for the period from May 21, 2014 (inception date) to December 31,

12 Annual Compounded Performance The following table shows the annual compound returns for each series of the Fund and for each of the periods ended on December 31, 2014, compared with the following benchmark: MSCI ACWI Index (CAD) 1 year 3 years 5 years 10 years Since inception Advisor Series % 12.49% Benchmark 13.55% 25.04% Series F % 13.77% Benchmark 13.55% 25.04% Series F % Benchmark 7.50% Series O % 13.63% Benchmark 13.55% 36.67% Series T % Benchmark 7.50% 1 Inception date: October 12, 2012 Inception date: May 21, 2014 Inception date: March 22, 2013 A discussion of the Fund's relative performance in comparison to the index (or indices) can be found in the Results of Operations Section of this report. Index Description The MSCI ACWI Index measures global equity market performance. The index is based on market capitalization and is adjusted to reflect free float of securities, which is the proportion of outstanding shares that are deemed to be available for purchase in the public markets by international investors.

13 Summary of Investment Portfolio As of December 31, 2014 Portfolio Top Holdings % of Net Asset Value ACE Ltd. 3.8 J. P. Morgan Chase & Co. 3.8 Honeywell International Inc. 3.2 Cash, Money Market and Other Net Assets 2.5 MetLife Inc. 2.4 Raytheon Co. 2.4 Hannover rueckversicherung AG 2.2 Bristol-Myers Squibb Co. 2.1 Roche Holding AG 2.1 Thai Union Frozen Products PCL 2.1 Unibail-Rodamco SE 2.0 Anheuser Busch InBev NV 2.0 Voestalpine AG 2.0 Kinder Morgan Inc./Delaware 1.9 Capital One Financial Corp. 1.9 SmarTone Telecommunications Holdings Ltd. 1.9 Kraft Foods Group Inc. 1.8 Dun & Bradstreet Corp. 1.8 National Retail Properties Inc. 1.8 Close Brothers Group PLC 1.7 Lenovo Group Limited 1.6 UBS Group AG 1.6 Stanley Black & Decker Inc. 1.6 Samsung Electronics Co. Ltd. 1.6 Mondelez International Inc Net asset value $83,355,893 Regional Allocation % of Net Asset Value Americas 36.5 Europe 35.9 Asia Ex-Japan 20.8 Japan 4.3 Cash, Money Market and Other Net Assets 2.5 Sector Allocation % of Net Asset Value Financials 30.4 Industrials 12.6 Information Technology 11.0 Consumer Staples 11.0 Energy 8.6 Consumer Discretionary 6.7 Health Care 6.3 Telecommunication Services 5.6 Materials 5.3 Cash, Money Market and Other Net Assets 2.5 Asset Mix % of Net Asset Value International Equity 62.1 US Equity 34.0 Canadian Equity 1.4 Cash, Money Market and Other Net Assets 2.5 The above table shows the top 25 positions held by the Fund. In the case of a Fund with fewer than 25 positions, all positions are indicated. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the investment Fund. A quarterly update is available. Please consult our Web site at Notes on forward-looking statements This report may contain forward-looking statements concerning the Fund, its future performance, its strategies or prospects or about future events or circumstances. Such forward-looking statements include, among others, statements with respect to our beliefs, plans, expectations, estimates and intentions. The use of the expressions "foresee", "intend", "anticipate", "estimate", "assume", "believe" and "expect" and other similar terms and expressions indicate forward-looking statements. By their very nature, forward-looking statements imply the use of assumptions and necessarily involve inherent risks and uncertainties. Consequently, there is a significant risk that the explicit or implicit forecasts contained in these forward-looking statements might not materialize or that they may not prove to be accurate in the future. A number of factors could cause future results, conditions or events to differ materially from the objectives, expectations, estimates or intentions expressed in such forward-looking statements. Such differences might be caused by several factors, including changes in Canadian and worldwide economic and financial conditions (in particular interest and exchange rates and the prices of other financial instruments), market trends, new regulatory provisions, competition, changes in technology and the potential impact of conflicts and other international events. The foregoing list of factors is not exhaustive. Before making any investment decision, investors and others relying on our forward-looking statements should carefully consider the foregoing factors and other factors. We caution readers not to rely unduly on these forward-looking statements. We assume no obligation to update forward-looking statements in the light of new information, future events or other circumstances unless applicable legislation so provides.