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ROUND TABLE Q4 2020

Meritage Income Portfolios

Meritage Income Portfolios in a nutshell p. 2

Portfolio manager outlookSignature Canadian Bond Fund – (CI Investments) p. 3 RBC Global High Yield Bond Fund p. 5 BMO Dividend Fund p. 6EdgePoint Global Portfolio p. 7

Benefits of automatic rebalancing p. 8

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Meritage Income Portfolios in a nutshell

Meritage Income Portfolios

Underlying funds

Meritage Diversified

Fixed Income

Portfolio

Meritage Conservative

Income Portfolio

Meritage Moderate

Income Portfolio

Meritage Balanced Income

Portfolio

Meritage Growth Income

Portfolio

Meritage Growth Plus

Income Portfolio

Fixed income 100% 80.0% 65.0% 50.0% 35.0% 20.0%

TD Ultra Short Term Bond Fund 5.0% 5.0% — — — —

TD Canadian Core Plus Bond Fund 27.5% 31.0% 26.5% 20.0% 14.0% 7.5%

Signature Canadian Bond Fund - (CI Investments) 27.5% 31.0% 26.5% 20.0% 14.0% 7.5%

RBC Global High Yield Bond Fund 10.0% 6.5% 6.0% 5.0% 3.5% —

Manulife Strategic Income Fund 30.0% 6.5% 6.0% 5.0% 3.5% 5.0%

Canadian equity 15.0% 25.0% 40.0% 55.0% 65.0%

Beutel Goodman Canadian Dividend Fund — — — 10.0% 15.0% 17.5%

BMO Dividend Fund — 7.5% 10.0% 10.0% 15.0% 17.5%

RBC Canadian Dividend Fund — 7.5% 15.0% 20.0% 25.0% 30.0%

Global equity 5.0% 10.0% 10.0% 10.0% 15.0%

EdgePoint Global Portfolio — — 5.0% 5.0% 5.0% 10.0%

Capital Group Global Equity Fund — 5.0% 5.0% 5.0% 5.0% 5.0%

As at 2020-08-31

A steady flow of tax-efficient income

Multiple options Choice of six Portfolios designed to cater to a variety of investor profiles

Stable monthly distributions Ideal for planning and budgeting Distribution rate set for the year1 (from 3% to 6%)

Efficient distributions The monthly amounts paid out consist in part of net income and return of capital (ROC), which are efficient cash

flows compared to other sources of income ROC distributions are not taxable in the year they are received2

1 The distribution amount is said to be fixed for each Meritage Income Portfolio as it does not vary from one distribution to the next. However, it is not guaranteed and may vary according to market conditions. The Meritage Income Portfolios make monthly distributions at the end of each month. These monthly distributions are comprised of net income and return of capital. A return of capital reduces the value of the original investment and is not the same as the return on the investment. Returns of capital that are not reinvested may reduce the net asset value of the portfolio and the Portfolio’s subsequent ability to generate income. The amount of the monthly distribution per unit is reset at the beginning of each calendar year.

2 ROC distributions gradually reduce the adjusted cost base (ACB) and are considered tax-free until the fund units are sold, which could lead to a higher capital gain or a smaller capital loss. When the ACB reaches zero, subsequent ROC distributions are treated as capital gains in the year they are received.

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John Shaw, CFASignature Canadian Bond Fund – (CI Investments)

OPPORTUNITIES AND CHALLENGES

The COVID-19 pandemic will continue to shape the trajectory of future growth as countries open up their economies. But face the possibility of having to roll back those plans if a second wave takes hold.

We don’t believe a total lockdown will occur again in Canada or the U.S., but that partial roll backs are likely.

Under our base case we see the North American economy continuing to gradually return to more normal levels of output across most sectors excluding the travel and entertainment sectors.

Governments will need to continue supporting the fragile recovery as the unemployment rates are still too high. There is a high degree of uncertainty around our base case as there are so many significant variables.

Another major wild card this fall is the U.S. election on November 3. If Donald Trump does win again, will he continue to escalate the trade war with China or is that just an election ploy? But longer term, the U.S.’s reputation has been damaged as the world’s reserve currency with both the euro and yuan gaining in acceptance.

Globally, central banks have flooded the system with liquidity to smooth over the effects of shutting down economies. As well, governments have doled out huge amounts of money

to support double-digit unemployment and closed businesses. That was the easy part.

Now begins the tougher job of reducing the stimulus without stymieing the tentative growth. The unprecedented quantitative easing (QE) has supported lowered rates and tightened credit spreads in dramatic fashion in the spring.

QE will need to be used to maintain lower rates as the recovery continues but credit spreads can tighten further as the economy recovers and corporate debt levels are reduced over the next few quarters.

One opportunity the fund has capitalized on recently is the new Canadian bank additional Tier 1 capital instruments. They offer higher yields but that is to compensate the holder for the greater risk of junior subordinated bonds that could be converted into common equity at the discretion of the federal government’s Office of the Superintendent of Financial Institutions (OSFI).

[continued]

Portfolio manager outlook

“One opportunity the fund has capitalized on recently is the new Canadian bank

additional Tier 1 capital instruments.”

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FUND STRATEGY

The Signature Canadian Bond Fund is slightly short duration with a steepening bias relative to the benchmark.

Front end rates are expected to be lower for much longer as central banks support the recovery and hopefully spur higher rates of inflation.

At the same time government finances cannot afford higher interest rates so QE is likely to persist for longer, as well. This will likely keep interest rates contained well into 2021.

We are significantly overweight IG credit across the curve since the beginning of April as central banks supported

the recovery and for the first time in North America, they have been buying IG corporate bonds.

As well, the fund is overweight municipal and provincial debt as we believe the economy will continue to slowly improve with continued government support and rational approaches to dealing with the pandemic.

Views expressed regarding a particular company, security, industry, market sector, future events (such as market and economic conditions), company or security performance, upcoming product offerings or other projections are the views of only the portfolio managers, as of the time expressed and do not necessarily represent the views of National Bank of Canada and its subsidiaries (the “Bank”). Any such views are subject to change at any time based upon markets and other conditions, which could cause actual results to differ materially from what the portfolio managers presently anticipate(s) or project(s). The Bank disclaims any responsibility to update such views. These views are not a recommendation to buy or sell and may not be relied on as investment advice.

Portfolio manager outlook

“We are significantly overweight IG credit across

the curve since the beginning of April as central banks

supported the recovery.”

John Shaw, CFASignature Canadian Bond Fund – (CI Investments)

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OPPORTUNITIES

Despite the rally since March, we continue to see attractive opportunities in select high yield (HY) and emerging market (EM) bonds, which both offer a significant yield advantage over Canadian and U.S. government bonds.

We have tilted the EM component of the fund towards some of the riskier countries in Africa and Latin America where valuations are more attractive relative to historical averages.

In the U.S. HY portion of the fund, we have been actively taking profits on some of our holdings that have performed well in the recovery.

We see selective opportunities in energy and other sectors that have been negatively impacted by COVID-19 lockdowns such as airlines and leisure companies.

CHALLENGES

There still remains a high degree of uncertainty regarding the impact of the COVID-19 pandemic, the potential for a second wave and the path of the economic recovery.

While some infection curves in EM seem to be “flattening” and mobility indicators improve, economic data (outside of China) continues to be mixed, with no clear signs of having reached a bottom.

U.S. HY default rates have been rising and will likely continue to do so, but expectations for the severity of this default cycle

have moderated.

While the prospect of rising default rates often makes investors nervous, it is important to note that periods of strong high yield market returns often coincide with periods of rising defaults, emphasizing the importance of strong fundamental credit analysis.

FUND STRATEGY

The RBC Global High Yield Bond Fund is currently overweight EM and underweight HY relative to the neutral 50/50 weight.

In HY, the fund is broadly diversified but slightly tilted towards energy and companies more directly impacted by COVID-19.

At the moment, the EM allocation has a risk profile slightly more aggressive than the EM benchmark, balanced by a more attractive risk/reward trade-off in selective EM bonds but recognizing the ongoing concerns in a number of EM countries.

Views expressed regarding a particular company, security, industry, market sector, future events (such as market and economic conditions), company or security performance, upcoming product offerings or other projections are the views of only the portfolio managers, as of the time expressed and do not necessarily represent the views of National Bank of Canada and its subsidiaries (the “Bank”). Any such views are subject to change at any time based upon markets and other conditions, which could cause actual results to differ materially from what the portfolio managers presently anticipate(s) or project(s). The Bank disclaims any responsibility to update such views. These views are not a recommendation to buy or sell and may not be relied on as investment advice.

Portfolio manager outlook

“We see selective opportunities in energy and other sectors that have been

negatively impacted by COVID-19 lockdowns.”

David NavaRBC Global High Yield Bond Fund

Frank GambinoRBC Global High Yield Bond Fund

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OPPORTUNITIES AND CHALLENGES

COVID-19 has upended life and commerce around the world like no other time in memory. Companies have had to juggle employee and stakeholder safety, supply chain disruptions, changing tastes, e-commerce, delivery modes, and shareholder concerns as industry dynamics undergo seismic shif ts. Until a COVID-19 vaccine emerges these challenges will persist.

It is during these times that great and sustainable companies truly stand out in terms of leadership, decision-making, opportunity and corporate purpose. These companies use the upheaval and strength of their positioning to rise above and push the business forward, transform their offerings, enhance their economic moats and set themselves up for better and more durable long-term growth.

We saw this during the Great Financial Crisis of 2007–2009, where companies that invested in innovation, growth and people reaped longer term advantages.

These are the companies we look to partner with in our effort to grow our clients’ long-term wealth. We are long-term investors building concentrated portfolios, taking ownership in companies that we believe have long-term sustainable business models and dividend streams that are able to withstand both market and economic swings.

We have much more confidence in our ability to analyze the long-term success of a company than near term, which is often predicated on forces outside the company’s control and not reflective of underlying fundamentals.

FUND STRATEGY

Sharp dislocations in the marketplace tell us that emotions, sentiment and short-termism are at play and that long-term fundamentals are being overlooked. We view these as great opportunities to buy exceptional businesses on sale.

Patience is our advantage. To that end we increased our position in high conviction holdings such as Brookfield Asset Management (BAM.A), Prologis REIT (PLD-US) and Air Products and Chemicals (APD-US).

Views expressed regarding a particular company, security, industry, market sector, future events (such as market and economic conditions), company or security performance, upcoming product offerings or other projections are the views of only the portfolio managers, as of the time expressed and do not necessarily represent the views of National Bank of Canada and its subsidiaries (the “Bank”). Any such views are subject to change at any time based upon markets and other conditions, which could cause actual results to differ materially from what the portfolio managers presently anticipate(s) or project(s). The Bank disclaims any responsibility to update such views. These views are not a recommendation to buy or sell and may not be relied on as investment advice.

Portfolio manager outlook

“Sharp dislocations in the marketplace tell us that emotions, sentiment and

short-termism are at play and that long-term fundamentals

are being overlooked.”

Lutz ZeitlerManaging Director & Portfolio Manager Head of Canadian Fundamental Equities BMO Global Asset Management

BMO Dividend Fund

Philip HarringtonDirector & Portfolio Manager Canadian Equities BMO Global Asset Management

BMO Dividend Fund

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OPPORTUNITIES AND CHALLENGES

Although the worst-case scenario for the virus and the global economy seems to have been avoided, the investment climate remains uncertain. In periods of volatility, investors have consistently showed the desire to own perceived safety at any cost without regard to price.

The dislocation in valuation between obvious growers at the top of any market-cap-weighted index compared to the rest of the market is staggering. Since the 1950s, investors have almost never paid more on a relative basis than today for the comfort of owning obvious growth businesses.

Although many of these well-known businesses driving the market’s return may be great businesses, the inescapable reality of investing is that entry price dictates return. Regardless of how comfortable it may feel today to invest with the crowd, overpaying for any business is a losing strategy.

As investors focus on a small number of companies, the rest of the market has been largely overlooked. It’s our job to find businesses that will grow and without paying for that growth. We believe that the best way to do this is by having a view about the business that isn’t widely shared by others.

FUND STRATEGY

Historically, our investment approach has thrived following periods of severe market dislocation and we believe the COVID-19 crisis is no different.

Periods of extreme volatility like the Global Financial Crisis of 2007-2009 or the European sovereign debt crisis allowed us to buy great businesses with long runways for growth without having to pay for that future growth.

Year-to-date we have added several new ideas, some of which we have followed for well over a decade, and also increased portfolio weights in existing businesses – all at what we consider attractive valuations.

These are challenging times for the world and considerable uncertainty remains as we approach 2021. During difficult periods like this, it helps to have something to believe in. At EdgePoint, we firmly believe in our investment approach.

Thinking and acting like a rational business owner has proved to be a successful investment approach in the past, and we believe it will prove to be a successful approach in the future as well.

Views expressed regarding a particular company, security, industry, market sector, future events (such as market and economic conditions), company or security performance, upcoming product offerings or other projections are the views of only the portfolio managers, as of the time expressed and do not necessarily represent the views of National Bank of Canada and its subsidiaries (the “Bank”). Any such views are subject to change at any time based upon markets and other conditions, which could cause actual results to differ materially from what the portfolio managers presently anticipate(s) or project(s). The Bank disclaims any responsibility to update such views. These views are not a recommendation to buy or sell and may not be relied on as investment advice.

Portfolio manager outlook

Tye BousadaEdgePoint Global Portfolio

“Year-to-date we have added several new ideas, some of which we have followed for well over a decade, and also increased portfolio weights

in existing businesses.”

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Benefits of automatic rebalancing

Unrebalanced portfolio Rebalanced portfolio Graph return shape Larger and lower Thinner and taller

Result More likely to experience extreme returnsMore likely to experience moderate returns =

Reduced probability of lower returns can increase median return

Why it can help improve median returnsDisciplined rebalancing can help enhance long-term returns with more consistency, which is especially appreciated in times of volatility.

The graph depicts the return distributions of hypothetical rebalanced and unrebalanced portfolios. It is not intended to represent actual Meritage Portfolios. A rebalancing strategy does not guarantee a profit nor eliminate risk.

How we do itMeritage Income Portfolios are automatically rebalanced when:

+2.5% The market value of an underlying fund deviates more than 2.5% from its target asset allocation.

+5% An asset class varies by more than 5%.

Benefits Stable target asset allocation Lower volatility No overexposure to any asset class Lower risk

Lower probability

Higher probability

Increased median returns

Lower return

Reduced probability of lower returns

Increased consistency of returns

Higher return

The information and the data supplied in the present document, including those supplied by third parties, are considered accurate at the time of their printing and were obtained from sources which we considered reliable. We reserve the right to modify them without advance notice. This information and data are supplied as informative content only. No representation or guarantee, explicit or implicit, is made as for the exactness, the quality and the complete character of this information and these data. The opinions expressed are not to be construed as solicitation or offer to buy or sell shares mentioned herein and should not be considered as recommendations.Meritage Portfolios® (the “Portfolios”) are managed by National Bank Investments Inc., a wholly owned subsidiary of National Bank of Canada. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus of the Portfolios before investing. The Portfolios’ securities are not insured by the Canada Deposit Insurance Corporation or by any other government deposit insurer. The Portfolios are not guaranteed, their values change frequently and past performance may not be repeated.® MERITAGE PORTFOLIOS and the Meritage Portfolios logo are registered trademarks of National Bank of Canada, used under licence by National Bank Investments Inc.© 2020 National Bank Investments Inc. All rights reserved. Any reproduction, in whole or in part, is strictly prohibited without the prior written consent of National Bank Investments Inc. National Bank Investments is a member of Canada’s Responsible Investment Association and a signatory of the United Nations-supported Principles for Responsible Investment.

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