Anchor Managed Funds. (Class A units, Class F units, Verus Class A units and Verus Class F units) Simplified Prospectus.

Transcription

1 Anchor Managed Funds (Class A units, Class F units, Verus Class A units and Verus Class F units) Simplified Prospectus August 15, 2014 Anchor Managed Defensive Income Fund Anchor Managed Dividend Growth Fund Anchor Managed High Income Fund No securities regulatory authority has expressed an opinion about these units. It is an offence to claim otherwise. Anchor Managed Funds and the units they offer under this simplified prospectus are not registered with the U.S. Securities and Exchange Commission. Units of the funds may be offered and sold in the United States only in reliance on exemptions from registration.

2 TABLE OF CONTENTS Page INTRODUCTION... 3 SPECIFIC INFORMATION ABOUT EACH OF THE MUTUAL FUNDS DESCRIBED IN THIS DOCUMENT... 4 About the fund descriptions... 4 Fund details... 4 What does the fund invest in?... 4 Investing in other mutual funds... 4 Securities lending... 5 What are the risks of investing in the fund?... 5 Who should invest in this fund?... 5 Investment risk classification methodology... 5 Distribution policy... 6 ANCHOR MANAGED DEFENSIVE INCOME FUND... 7 ANCHOR MANAGED DEFENSIVE INCOME FUND ANCHOR MANAGED DIVIDEND GROWTH FUND ANCHOR MANAGED DIVIDEND GROWTH FUND ANCHOR MANAGED HIGH INCOME FUND ANCHOR MANAGED HIGH INCOME FUND WHAT IS A MUTUAL FUND AND WHAT ARE THE RISKS OF INVESTING IN A MUTUAL FUND? What is a mutual fund? Why invest in mutual funds? No guarantees What are the risks? Managing risk Specific risks of mutual funds Class risk Commodity risk Concentration risk Credit risk Distribution risk Equity risk Fund-of-funds risk Market risk Income trust risk... 32

3 TABLE OF CONTENTS (continued) Page Interest rate risk Issuer-specific risk Liquidity risk Real estate sector risk Securities lending risk ORGANIZATION AND MANAGEMENT OF THE FUNDS PURCHASES, SWITCHES AND REDEMPTIONS How to place orders How we calculate net asset value per unit About the classes of units How to buy the funds Minimum investments More about buying How to switch funds More about switching How to reclassify your units How to sell your units More about selling Suspending your right to buy, switch and sell units Short-term trading FEES AND EXPENSES Fees and expenses payable by the funds Fees and expenses payable directly by you DEALER COMPENSATION Trailing Commissions Equity interests Dealer compensation from management fees INCOME TAX CONSIDERATIONS FOR INVESTORS How your investment can earn money How earnings are taxed Units held in a Registered Plan Units held in a non-registered account Portfolio turnover rate WHAT ARE YOUR LEGAL RIGHTS?... 43

4 Introduction In this document, Manager, SMCAI, we, us, and our refer to Scotia Managed Companies Administration Inc. This simplified prospectus contains selected important information to help you make an informed investment decision about the funds and to understand your rights as an investor. This simplified prospectus is divided into two parts. The first part, from pages 4 to 28, contains specific information about each of the funds offered for sale under this simplified prospectus. The second part, from pages 29 to 43, contains general information that applies to all of the funds offered for sale under this simplified prospectus and the risks of investing in mutual funds generally, as well as the names of the firms responsible for the management of the funds. Additional information about each fund is available in its annual information form, its most recently filed fund facts, its most recently filed annual and interim financial statements and its most recently filed annual and interim management reports of fund performance. These documents are incorporated by reference into this simplified prospectus. That means they legally form part of this simplified prospectus just as if they were printed in it. You can get a copy of the funds annual information form, financial statements and management reports of fund performance, at no cost, by calling (416) or by asking your investment advisor or broker. You ll also find these documents on our website at These documents and other information about the funds are also available at

5 Specific information about each of the mutual funds described in this document The Anchor Managed Funds (each a fund ) are a family of three mutual funds providing investors with professionally managed solutions designed to suit their investment profile. The Anchor Managed Funds offered under this simplified prospectus offer Class A units and Verus Class A units (together the A Class units ) and Class F units and Verus Class F units (together the F Class units ). The classes have different management fees and are intended for different investors. The Class A units are available to all investors. The Class F units are generally available only to investors who have fee-based accounts with authorized brokers or dealers, including ScotiaMcLeod, a division of Scotia Capital Inc. There are no differences between Class A units and Verus Class A units or between Class F units and Verus Class F units. The Verus Class A units and Verus Class F units are only available to clients of Verus Wealth Management, a division of ScotiaMcLeod. The Verus Class A units are available to all Verus Wealth Management clients. The Verus Class F units are generally available only to Verus Wealth Management clients who have fee-based accounts. You ll find more information about the different classes of units under About the classes of units. About the fund descriptions On the following pages, you ll find detailed descriptions of each of the funds to help you make your investment decisions. Here s what each section of the fund descriptions tells you: Fund details This section gives you some basic information about each fund, such as its start date and its eligibility for registered plans, namely Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), Registered Education Savings Plans (RESPs), Registered Disability Savings Plans (RDSPs) and Tax-Free Savings Accounts (TFSAs) (each a Registered Plan ). All of the funds offered under this simplified prospectus are qualified investments under the Income Tax Act (Canada) ( Tax Act ) for Registered Plans. In certain cases, we may restrict purchases of units of certain funds by certain Registered Plans. What does the fund invest in? This section tells you about the fund s fundamental investment objectives and the strategies it uses in trying to achieve its objectives. Any change to the fundamental investment objectives must be approved by a majority of votes cast at a meeting of unitholders called for that purpose. Investing in other mutual funds The funds may, from time to time, invest all or a portion of their assets in other mutual funds, including exchange-traded funds commonly known as ETFs. Any mutual funds that we invest in may be managed 4

6 by us or one of our affiliates or associates. When deciding to invest in other mutual funds, the fund s portfolio advisor may consider a variety of criteria, including management style, investment performance and consistency, risk attributes and the quality of the fund s manager or portfolio advisor. Securities lending The funds may enter into securities lending transactions to generate additional income from securities held in a fund s portfolio. A mutual fund may lend securities held in their portfolio to qualified borrowers who provide adequate collateral. For a description of the strategies the funds use to minimize the risks associated with these transactions, see the discussion under Securities lending risk. What are the risks of investing in the fund? This section tells you about the risks of investing in the fund. You ll find a description of each risk in Specific risks of mutual funds. Who should invest in this fund? This section can help you decide if the fund might be suitable for your portfolio. It is meant as a general guide only. For advice about your portfolio, you should consult your investment advisor or broker. Investment risk classification methodology A risk classification rating is assigned to each fund to provide you with information to help you determine whether the fund is an appropriate investment for you. The methodology used to determine the risk ratings of the funds for purposes of disclosure in this simplified prospectus is based on an assessment of various statistical measures of risk of the fund relative to the same measures for a benchmark index. Statistical measures include: (i) volatility (historically, how much the price of a fund has moved up or down over time); (ii) semi-variance (historically, how much a fund s price has moved down over time); and (iii) maximum drawdown (historically, the largest drop in the fund s price from its previous high price). Where a fund has less than three years of return history, the fund risk is assessed based on the risk of the index which is most comparable to the investment strategy of the fund. Each fund is assigned a risk rating in one of the following categories: Low funds with the above statistical measures of risk that fall two bands below the Medium band. This category is typically associated with investments in money market funds and Canadian investment grade fixed income funds; Low to Medium funds with the above statistical measures of risk that falls one band lower than the Medium band. This category is typically associated with investments in balanced funds and global and/or corporate fixed income funds; Medium funds with the above statistical measures of risk that fall in same band as the benchmark index. This category is typically associated with investments that are diversified among a number of large-capitalization Canadian and/or international equity securities; Medium to High funds with the above statistical measures of risk that fall one band above the Medium band. This category is typically associated with investments that may concentrate their investments in specific asset classes, specific regions or in specific sectors of the economy; and 5

7 High funds with the above statistical measures of risk that fall two bands above the Medium band. This category is typically associated with investment in portfolios that may concentrate their investments in specific regions, specific companies or in specific sectors of the economy where there is a substantial risk of loss (e.g., emerging markets, precious metals). The Manager will review the investment risk rating for each fund annually as well as any time there is a material change in a fund s investment objective or investment strategies. The Manager recognizes that other types of risk, both measurable and non-measurable, may exist and reminds you that historical performance is not indicative of future returns and that a fund s historic volatility may not be indicative of its future volatility. A document describing the methodology that the Manager uses to identify the investment risk level of the funds is available on request, at no cost, by contacting us at or by ing us at managed.companies@scotiabank.com or by writing to us at the address on the back cover of this simplified prospectus. Distribution policy This section tells you about when the fund usually distributes any net income and capital gains, and where applicable, return of capital to unitholders. The funds may also make distributions at other times. Distributions on units held in Registered Plans and non-registered accounts may be reinvested in additional units of the fund, unless you tell your investment advisor or broker to inform us that you want to receive cash distributions. For information about how distributions are taxed, see Income Tax considerations for investors. Fund expenses indirectly borne by investors This table provides an example of the costs of investing in each class of a fund. These costs reflect the management expense ratio (MER) of each class of the fund that is paid out of the fund s assets. While you do not pay these costs directly, they do lower the fund s returns. See Fees and expenses in the Fund details table for each fund for more information. The example shows the expenses you would pay if: 1. you invested $1,000 in the fund for the time periods shown; 2. the fund earned 5% each year; and 3. the MER for the fund remained the same in all periods as it was in the fund s last financial year. The Manager cannot provide information regarding fund expenses indirectly borne by investors in respect of a fund or a class of a fund that has not completed a financial year or been previously distributed under a simplified prospectus. 6

8 Anchor Managed Defensive Income Fund Anchor Managed Defensive Income Fund Fund details Fund Type Canadian neutral balanced fund Start Date Class A units: August 17, 2012 Class F units: August 17, 2012 Type of Securities Class A units and Class F units of a mutual fund trust Eligible for Registered Plans? Yes Portfolio Advisor ScotiaMcLeod (a division of Scotia Capital Inc.), who employs Mr. Nicholas Majendie, C.A. What does the fund invest in? Investment objectives The fund s objectives are to provide stable quarterly cash distributions, preserve capital and offer potential for consistent long term capital appreciation. The fund seeks to generate lower volatility returns by investing a maximum of 50% of the total portfolio in Canadian equities with the balance invested in preferred shares and debt securities. To obtain exposure to these types of securities, the fund may invest in securities of other mutual funds. Any change to the fundamental investment objectives of the fund must be approved by a majority of votes cast at a meeting of unitholders called for that purpose. Investment strategies The fund s investments will include equities, preferred shares and debt securities. The fund s equity investments may consist of high dividend yielding common shares, real estate investment trusts (REITs), units of limited partnerships and equity exchange traded funds (ETFs) principally holding large Toronto Stock Exchange (TSX) listed Canadian companies. The fund s debt investments may include Canadian federal and provincial government debt, bond index ETFs and Canadian corporate bonds and debentures. Exposure to debt securities will primarily be obtained through index ETFs which provide liquidity and diversification. The fund will only invest in ETFs whose investment strategies and investment restrictions are generally consistent with the investment strategies of the fund. Under normal market conditions, the fund may invest a maximum of 7% of its assets in any single issuer (not including index-tracking ETFs) except in the case of the 6 major Canadian banks where the fund may invest up to 5% of its assets in common shares and up to 5% in preferred shares. No more than 10% of the fund s net assets are generally expected to be invested in foreign securities. Compliance with investment restrictions will be measured at the time of investment by the fund. 7

9 Anchor Managed Defensive Income Fund Equities It is anticipated that the fund will hold no less than 25% and no more than 50% of its assets in noncommodity Canadian equities of which a maximum of 10% may be invested in REITs. This portion of the portfolio will be diversified across a variety of non-commodity sectors and is expected to include 15 to 25 securities, each with at least $1 billion of market capitalization. The portfolio advisor uses fundamental analysis to identify equity investments that pay an attractive level of dividend income and have good capital growth prospects over a 3 to 5 year horizon. This involves evaluating the financial condition and management of each company, as well as the industry it operates in and the general economy. In managing the equity component of the fund, the portfolio advisor will: analyze the financial and managerial prospects for a portfolio investment and its relevant sector; assess the condition of credit markets and the yield curve, including the outlook on monetary conditions; conduct interviews with top management of portfolio investments to determine the corporate strategy and business plan, as well as to evaluate management capabilities; and have a clear bias towards a value investment style. Preferred Shares The fund may invest up to 20% of its assets in P-1 or P-2 rated preferred shares generally diversified across 6 to 12 issuers. P-1 rated preferred shares are considered to be high-grade/highest quality investments of superior quality which are supported by strong earning and balance sheet characteristics. Typically, financial institutions, pipelines, utility companies and companies whose senior bonds are rated AA to AAA, are rated P-1. P-2 rated preferred shares are considered to be high-grade investments of satisfactory/adequate quality as while protection of dividends and principal is still substantial, earnings, balance sheet and coverage ratios are not as strong as P-1 rated companies. Typically, financial institutions, pipelines, utility companies and companies whose senior bonds are rated A are rated P-2. The portfolio advisor uses fundamental analysis to identify preferred shares that pay an attractive level of dividends or distributions. Preferred shares will be selected based on an analysis of the issuer and the security including credit analysis, distributions levels, structure and duration. Debt Securities It is anticipated that exposure to debt securities will comprise no less than 25% and no more than 70% of the fund s assets of which: (i) a maximum of 35% of the debt held may be in Canadian corporate bonds; and (ii) a maximum of 12% of the debt held may be in high yield debt securities rated BBB or lower. For these purposes, debt securities also include Canadian government bonds and guaranteed investment certificates (GICs) with maturities of 1 year or more. Debt securities will be selected based on an analysis of overall credit markets, monetary policy, security structure and a credit analysis of the issuer. 8

10 Anchor Managed Defensive Income Fund Cash and Cash Equivalents For defensive or other strategic reasons, the fund may hold up to 50% of its assets in cash and cash equivalents such as short term paper. Short term paper will be comprised of high grade (R1-High) Canadian dollar denominated money market instruments with maturities less than one year including Canadian treasury bills, government bonds, bankers acceptances and guaranteed investment certificates (GICs). Other The fund may participate in securities lending transactions to achieve the fund s overall investment objectives and to enhance the fund s returns. For more information about securities lending transactions and how the fund limits the risks associated with securities lending see What are the risks? - Securities lending transaction risk. What are the risks of investing in the fund? The main risks of investing in this fund are: credit risk equity risk income/distribution risk income trust unit risk interest rate risk issuer specific risk concentration risk liquidity risk real estate sector risk fund-of-funds risk securities lending risk You ll find details about each of these risks under What is a mutual fund and what are the risks of investing in a mutual fund?. Who should invest in this fund? This fund may be suitable for you if: you want regular income; you want capital preservation and long term capital growth potential from exposure to investments in equities, preferred shares and debt securities of large Canadian companies and REITs; you can accept low-medium risk; and you re investing for the long term. Please see Investment Risk Classification Methodology for a description of how we determined the classification of this fund s risk level. Distribution policy The fund intends to make a distribution by the last business day of each calendar quarter that may consist of net income, net realized capital gains and/or return of capital. The amount of the quarterly distribution 9

11 Anchor Managed Defensive Income Fund may be adjusted throughout the year as market conditions change. Additional distributions of income and capital gains may be made in December of each calendar year. If the fund does not earn enough income and capital gains to meet the quarterly distribution, it may return capital to make up the difference. A return of capital will reduce the adjusted cost base of your units. Distributions on units held in both Registered Plans and nonregistered accounts may be reinvested in additional units of the same class of the units of the fund held by you, unless you tell your investment advisor or broker to inform us that you want to receive cash distributions. Fund expenses indirectly borne by investors This table is intended to help an investor compare the cost of investing in this fund with the cost of investing in other mutual funds or in another class of this fund, if applicable. See Purchases, switches and redemptions How to buy, redeem and switch for a description of each class and their availability. This table shows the fees and expenses paid by the fund that are indirectly borne by an investor. See Fees and expenses for more information. Class A units ($) Class F units ($) 1 Based on a $1,000 investment and 5% return each year. Actual performance may vary. 1 year 3 years 5 years 10 years $23.73 $72.98 $ $ $11.87 $36.49 $62.37 $

12 Anchor Managed Defensive Income Fund Anchor Managed Defensive Income Fund Fund details Fund Type Canadian neutral balanced fund Start Date Verus Class A units: August 17, 2012 Verus Class F units: August 17, 2012 Type of Securities Verus Class A units and Verus Class F units of a mutual fund trust Eligible for Registered Plans? Yes Portfolio Advisor ScotiaMcLeod (a division of Scotia Capital Inc.), who employs Mr. Nicholas Majendie, C.A. What does the fund invest in? Investment objectives The fund s objectives are to provide stable quarterly cash distributions, preserve capital and offer potential for consistent long term capital appreciation. The fund seeks to generate lower volatility returns by investing a maximum of 50% of the total portfolio in Canadian equities with the balance invested in preferred shares and debt securities. To obtain exposure to these types of securities, the fund may invest in securities of other mutual funds. Any change to the fundamental investment objectives of the fund must be approved by a majority of votes cast at a meeting of unitholders called for that purpose. Investment strategies The fund s investments will include equities, preferred shares and debt securities. The fund s equity investments may consist of high dividend yielding common shares, REITs, units of limited partnerships and equity ETFs principally holding large TSX listed Canadian companies. The fund s debt investments may include Canadian federal and provincial government debt, bond index exchange traded funds and Canadian corporate bonds and debentures. Exposure to debt securities will primarily be obtained through index ETFs which provide liquidity and diversification. The fund will only invest in ETFs whose investment strategies and investment restrictions are generally consistent with the investment strategies of the fund. Under normal market conditions, the fund may invest a maximum of 7% of its assets in any single issuer (not including index-tracking ETFs) except in the case of the 6 major Canadian banks where the fund may invest up to 5% of its assets in common shares and up to 5% in preferred shares. No more than 10% of the fund s net assets are generally expected to be invested in foreign securities. Compliance with investment restrictions will be measured at the time of investment by the fund. Equities It is anticipated that the fund will hold no less than 25% and no more than 50% of its assets in noncommodity Canadian equities of which a maximum of 10% may be invested in REITs. This portion of 11

13 Anchor Managed Defensive Income Fund the portfolio will be diversified across a variety of non-commodity sectors and is expected to include 15 to 25 securities, each with at least $1 billion of market capitalization. The portfolio advisor uses fundamental analysis to identify equity investments that pay an attractive level of dividend income and have good capital growth prospects over a 3 to 5 year horizon. This involves evaluating the financial condition and management of each company, as well as the industry it operates in and the general economy. In managing the equity component of the fund, the portfolio advisor will: analyze the financial and managerial prospects for a portfolio investment and its relevant sector; assess the condition of credit markets and the yield curve, including the outlook on monetary conditions; conduct interviews with top management of portfolio investments to determine the corporate strategy and business plan, as well as to evaluate management capabilities; and have a clear bias towards a value investment style. Preferred Shares The fund may invest up to 20% of its assets in P-1 or P-2 rated preferred shares generally diversified across 6 to 12 issuers. P-1 rated preferred shares are considered to be high-grade/highest quality investments of superior quality which are supported by strong earning and balance sheet characteristics. Typically, financial institutions, pipelines, utility companies and companies whose senior bonds are rated AA to AAA, are rated P-1. P-2 rated preferred shares are considered to be high-grade investments of satisfactory/adequate quality as while protection of dividends and principal is still substantial, earnings, balance sheet and coverage ratios are not as strong as P-1 rated companies. Typically, financial institutions, pipelines, utility companies and companies whose senior bonds are rated A are rated P-2. The portfolio advisor uses fundamental analysis to identify preferred shares that pay an attractive level of dividends or distributions. Preferred shares will be selected based on an analysis of the issuer and the security including credit analysis, distributions levels, structure and duration. Debt Securities It is anticipated that exposure to debt securities will comprise no less than 25% and no more than 70% of the fund s assets of which: (i) a maximum of 35% of the debt held may be in Canadian corporate bonds; and (ii) a maximum of 12% of the debt held may be in high yield debt securities rated BBB or lower. For these purposes, debt securities also include Canadian government bonds and guaranteed investment certificates (GICs) with maturities of 1 year or more. Debt securities will be selected based on an analysis of overall credit markets, monetary policy, security structure and a credit analysis of the issuer. Cash and Cash Equivalents For defensive or other strategic reasons, the fund may hold up to 50% of its assets in cash and cash equivalents such as short term paper. Short term paper will be comprised of high grade (R1-High) Canadian dollar denominated money market instruments with maturities less than one year including Canadian treasury bills, government bonds, bankers acceptances and GICs. 12

14 Anchor Managed Defensive Income Fund Other The fund may participate in securities lending transactions to achieve the fund s overall investment objectives and to enhance the fund s returns. For more information about securities lending transactions and how the fund limits the risks associated with securities lending see What are the risks?- Securities lending transaction risk. What are the risks of investing in the fund? The main risks of investing in this fund are: credit risk equity risk income/distribution risk income trust unit risk interest rate risk issuer specific risk concentration risk liquidity risk real estate sector risk fund-of-funds risk securities lending risk You ll find details about each of these risks under What is a mutual fund and what are the risks of investing in a mutual fund?. Who should invest in this fund? This fund may be suitable for you if: you want regular income; you want capital preservation and long term capital growth potential from exposure to investments in equities, preferred shares and debt securities of large Canadian companies and REITs; you can accept low-medium risk; and you re investing for the long term. Please see Investment Risk Classification Methodology for a description of how we determined the classification of this fund s risk level. Distribution policy The fund intends to make a distribution by the last business day of each calendar quarter that may consist of net income, net realized capital gains and/or return of capital. The amount of the quarterly distribution may be adjusted throughout the year as market conditions change. Additional distributions of income and capital gains may be made in December of each calendar year. If the fund does not earn enough income and capital gains to meet the quarterly distribution, it may return capital to make up the difference. A return of capital will reduce the adjusted cost base of your units. 13

15 Anchor Managed Defensive Income Fund Distributions on units held in both Registered Plans and nonregistered accounts may be reinvested in additional units of the same class of the units of the fund held by you, unless you tell your investment advisor or broker to inform us that you want to receive cash distributions. Fund expenses indirectly borne by investors This table is intended to help an investor compare the cost of investing in this fund with the cost of investing in other mutual funds or in another class of this fund, if applicable. See Purchases, switches and redemptions How to buy, redeem and switch for a description of each class and their availability. This table shows the fees and expenses paid by the fund that are indirectly borne by an investor. See Fees and expenses for more information. Verus Class A units ($) Verus Class F units ($) 1 Based on a $1,000 investment and 5% return each year. Actual performance may vary. 1 year 3 years 5 years 10 years $23.73 $72.98 $ $ $11.87 $36.49 $62.37 $

16 Anchor Managed Dividend Growth Fund Anchor Managed Dividend Growth Fund Fund details Fund Type Canadian dividend and income equity fund Start Date Class A units: August 17, 2012 Class F units: August 17, 2012 Type of Securities Class A units and Class F units of a mutual fund trust Eligible for Registered Plans? Yes Portfolio Advisor ScotiaMcLeod (a division of Scotia Capital Inc.), who employs Mr. Nicholas Majendie, C.A. What does the fund invest in? Investment objectives The fund s objectives are to provide stable quarterly cash distributions and potential for consistent, long term capital appreciation. The fund invests primarily in a portfolio of high dividend-yielding equities of large TSX listed Canadian companies and REITs and for defensive reasons, may invest in Canadian preferred shares and debt securities. To obtain exposure to these types of securities, the fund may invest in securities of other mutual funds. Any change to the fundamental investment objectives of the fund must be approved by a majority of votes cast at a meeting of unitholders called for that purpose. Investment strategies The fund s investments may include common shares, real estate investment trusts, preferred shares, stock and bond index ETFs, units of limited partnerships, TSX listed closed-end funds and Canadian public and private sector debt securities denominated in Canadian dollars. The fund will only invest in ETFs and closed-end funds whose investment strategies and investment restrictions are generally consistent with the investment strategies of the fund. The fund will hold no more than 7% of its assets in any single issuer (excluding index-tracking ETFs). No more than 10% of the fund s net assets are generally expected to be invested in foreign securities. Compliance with investment restrictions will be measured at the time of investment by the fund. Equities The fund may hold up to 100% of its assets in TSX listed Canadian equities (of which a maximum of 45% may be invested in commodity stocks) and up to 15% of its assets in REITs. This component of the portfolio will be diversified across a minimum of 5 sectors and generally be comprised of the equities of 20 to 30 issuers, each with a market capitalization of at least $500 million. The portfolio advisor uses fundamental analysis to identify equity investments that pay an attractive level of dividends or distributions and have good capital growth prospects over a 3 to 5 year horizon. This involves evaluating the financial condition and management of each company, as well as its industry and the economy. 15

17 Anchor Managed Dividend Growth Fund In managing the equity component of the fund, the portfolio advisor will: Preferred Shares analyze the financial and managerial prospects for a portfolio investment and its relevant sector; assess the condition of credit markets and the yield curve, including the outlook for monetary conditions; conduct interviews with top management of portfolio investments to determine the corporate strategy and business plan as well as to evaluate management capabilities; and have a clear bias towards a value based investment style. For defensive reasons, the fund may choose to hold up to 10% of its assets in P-1 or P-2 rated preferred shares. P-1 rated preferred shares are considered to be high-grade/highest quality investments of superior quality which are supported by strong earning and balance sheet characteristics. Typically, financial institutions, pipelines, utility companies and companies whose senior bonds are rated AA to AAA, are rated P-1. P-2 rated preferred shares are considered to be high-grade investments of satisfactory/adequate quality as while protection of dividends and principal is still substantial, earnings, balance sheet and coverage ratios are not as strong as P-1 rated companies. Typically, financial institutions, pipelines, utility companies and companies whose senior bonds are rated A are rated P-2. The portfolio advisor uses fundamental analysis to identify preferred shares that pay an attractive level of dividends or distributions. Preferred shares will be selected based on an analysis of the issuer and the security including credit analysis, distributions levels, structure and duration. Debt Securities For defensive reasons, the fund may choose to hold up to 30% of its assets in debt securities (excluding cash and short term paper). Exposure to debt securities will primarily be obtained through index ETFs to provide liquidity and diversification. Debt securities will primarily be investment grade securities although, at times in the investment cycle, up to 10% of the fund s assets may be invested directly or indirectly in high yield Canadian corporate bonds rated BBB or lower. For these purposes, debt securities also include Canadian government bonds and guaranteed investment certificates (GICs) with maturities of 1 year or more. Debt securities will be selected based on an analysis of overall credit markets, monetary policy, security structure and a credit analysis of the issuer. Cash and Cash Equivalents For defensive and other strategic reasons, the fund may choose to hold up to 30% of its assets in cash and cash equivalents such as short term paper. Short term paper will be comprised of high grade (R1-High) Canadian dollar denominated money market instruments with maturities less than one year including Canadian treasury bills, government bonds, bankers acceptances, commercial paper and GICs. Other The fund may participate in securities lending transactions to achieve the fund s overall investment objectives and to enhance the fund s returns. For more information about securities lending transactions and how the fund limits the risks associated with securities lending see What are the risks?- Securities lending transaction risk. 16

18 Anchor Managed Dividend Growth Fund What are the risks of investing in the fund? The main risks of investing in this fund are: equity risk commodity risk credit risk income/distribution risk income trust unit risk interest rate risk issuer specific risk liquidity risk real estate sector risk fund-of-funds risk securities lending risk You ll find details about each of these risks under What is a mutual fund and what are the risks of investing in a mutual fund?. Who should invest in this fund? This fund may be suitable for you if: you want regular income; you want long term capital growth potential from exposure to investments in equities of large Canadian companies and REITs, but also, at certain times, in Canadian preferred and debt securities; you want to maximize after-tax income by taking advantage of the Canadian dividend tax credit. This only applies to non-registered accounts because you generally don t pay tax at the time of receipt on distributions received from funds you hold in Registered Plans; you can accept medium risk; and you re investing for the long term. Please see Investment Risk Classification Methodology for a description of how we determined the classification of this fund s risk level. Distribution policy The fund intends to make a distribution by the last business day of each calendar quarter that may consist of net income, net realized capital gains and/or return of capital. The amount of the quarterly distribution may be adjusted throughout the year as market conditions change. Additional distributions of income and capital gains may be made in December of each calendar year. If the fund does not earn enough income and capital gains to meet the quarterly distribution, it may return capital to make up the difference. A return of capital will reduce the adjusted cost base of your units. Distributions on units held in Registered Plans and nonregistered accounts may be reinvested in additional units of the same class of units of the fund held by you, unless you tell your investment advisor or broker to inform us that you want to receive cash distributions. 17

19 Anchor Managed Dividend Growth Fund Fund expenses indirectly borne by investors This table is intended to help an investor compare the cost of investing in this fund with the cost of investing in other mutual funds or in another class of this fund, if applicable. See Purchases, switches and redemptions How to buy, redeem and switch for a description of each class and their availability. This table shows the fees and expenses paid by the fund that are indirectly borne by an investor. See Fees and expenses for more information. Class A units ($) Class F units ($) 1 Based on a $1,000 investment and 5% return each year. Actual performance may vary. 1 year 3 years 5 years 10 years $23.73 $72.98 $ $ $11.87 $36.49 $62.37 $

20 Anchor Managed Dividend Growth Fund Anchor Managed Dividend Growth Fund Fund details Fund Type Canadian dividend and income equity fund Start Date Verus Class A units: August 17, 2012 Verus Class F units: August 17, 2012 Type of Securities Verus Class A units and Verus Class F units of a mutual fund trust Eligible for Registered Plans? Yes Portfolio Advisor ScotiaMcLeod (a division of Scotia Capital Inc.), who employs Mr. Nicholas Majendie, C.A. What does the fund invest in? Investment objectives The fund s objectives are to provide stable quarterly cash distributions and potential for consistent, long term capital appreciation. The fund invests primarily in a portfolio of high dividend-yielding equities of large TSX listed Canadian companies and REITs and for defensive reasons, may invest in Canadian preferred shares and debt securities. To obtain exposure to these types of securities, the fund may invest in securities of other mutual funds. Any change to the fundamental investment objectives of the fund must be approved by a majority of votes cast at a meeting of unitholders called for that purpose. Investment strategies The fund s investments may include common shares, real estate investment trusts, preferred shares, stock and bond index ETFs, units of limited partnerships, TSX listed closed-end funds and Canadian public and private sector debt securities denominated in Canadian dollars. The fund will only invest in ETFs and closed-end funds whose investment strategies and investment restrictions are generally consistent with the investment strategies of the fund. The fund will hold no more than 7% of its assets in any single issuer (excluding index-tracking ETFs). No more than 10% of the fund s net assets are generally expected to be invested in foreign securities. Compliance with investment restrictions will be measured at the time of investment by the fund. Equities The fund may hold up to 100% of its assets in TSX listed Canadian equities (of which a maximum of 45% may be invested in commodity stocks) and up to 15% of its assets in REITs. This component of the portfolio will be diversified across a minimum of 5 sectors and generally be comprised of the equities of 20 to 30 issuers, each with a market capitalization of at least $500 million. The portfolio advisor uses fundamental analysis to identify equity investments that pay an attractive level of dividends or distributions and have good capital growth prospects over a 3 to 5 year horizon. This involves evaluating the financial condition and management of each company, as well as its industry and the economy. 19

21 Anchor Managed Dividend Growth Fund In managing the equity component of the fund, the portfolio advisor will: Preferred Shares analyze the financial and managerial prospects for a portfolio investment and its relevant sector; assess the condition of credit markets and the yield curve, including the outlook for monetary conditions; conduct interviews with top management of portfolio investments to determine the corporate strategy and business plan as well as to evaluate management capabilities; and have a clear bias towards a value based investment style. For defensive reasons, the fund may choose to hold up to 10% of its assets in P-1 or P-2 rated preferred shares. P-1 rated preferred shares are considered to be high-grade/highest quality investments of superior quality which are supported by strong earning and balance sheet characteristics. Typically, financial institutions, pipelines, utility companies and companies whose senior bonds are rated AA to AAA, are rated P-1. P-2 rated preferred shares are considered to be high-grade investments of satisfactory/adequate quality as while protection of dividends and principal is still substantial, earnings, balance sheet and coverage ratios are not as strong as P-1 rated companies. Typically, financial institutions, pipelines, utility companies and companies whose senior bonds are rated A are rated P-2. The portfolio advisor uses fundamental analysis to identify preferred shares that pay an attractive level of dividends or distributions. Preferred shares will be selected based on an analysis of the issuer and the security including credit analysis, distributions levels, structure and duration. Debt Securities For defensive reasons, the fund may choose to hold up to 30% of its assets in debt securities (excluding cash and short term paper). Exposure to debt securities will primarily be obtained through index ETFs to provide liquidity and diversification. Debt securities will primarily be investment grade securities although, at times in the investment cycle, up to 10% of the fund s assets may be invested directly or indirectly in high yield Canadian corporate bonds rated BBB or lower. For these purposes, debt securities also include Canadian government bonds and guaranteed investment certificates (GICs) with maturities of 1 year or more. Debt securities will be selected based on an analysis of overall credit markets, monetary policy, security structure and a credit analysis of the issuer. Cash and Cash Equivalents For defensive and other strategic reasons, the fund may choose to hold up to 30% of its assets in cash and cash equivalents such as short term paper. Short term paper will be comprised of high grade (R1-High) Canadian dollar denominated money market instruments with maturities less than one year including Canadian treasury bills, government bonds, bankers acceptances, commercial paper and GICs. Other The fund may participate in securities lending transactions to achieve the fund s overall investment objectives and to enhance the fund s returns. For more information about securities lending transactions and how the fund limits the risks associated with securities lending see What are the risks?- Securities lending transaction risk. 20

22 Anchor Managed Dividend Growth Fund What are the risks of investing in the fund? The main risks of investing in this fund are: equity risk commodity risk credit risk income/distribution risk income trust unit risk interest rate risk issuer specific risk liquidity risk real estate sector risk fund-of-funds risk securities lending risk You ll find details about each of these risks under What is a mutual fund and what are the risks of investing in a mutual fund?. Who should invest in this fund? This fund may be suitable for you if: you want regular income; you want long term capital growth potential from exposure to investments in equities of large Canadian companies and REITs, but also, at certain times, in Canadian preferred and debt securities; you want to maximize after-tax income by taking advantage of the Canadian dividend tax credit. This only applies to non-registered accounts because you generally don t pay tax at the time of receipt on distributions received from funds you hold in Registered Plans; you can accept medium risk; and you re investing for the long term. Please see Investment Risk Classification Methodology for a description of how we determined the classification of this fund s risk level. Distribution policy The fund intends to make a distribution by the last business day of each calendar quarter that may consist of net income, net realized capital gains and/or return of capital. The amount of the quarterly distribution may be adjusted throughout the year as market conditions change. Additional distributions of income and capital gains may be made in December of each calendar year. If the fund does not earn enough income and capital gains to meet the quarterly distribution, it may return capital to make up the difference. A return of capital will reduce the adjusted cost base of your units. Distributions on units held in Registered Plans and nonregistered accounts may be reinvested in additional units of the same class of units of the fund held by you, unless you tell your investment advisor or broker to inform us that you want to receive cash distributions. 21

23 Anchor Managed Dividend Growth Fund Fund expenses indirectly borne by investors This table is intended to help an investor compare the cost of investing in this fund with the cost of investing in other mutual funds or in another class of this fund, if applicable. See Purchases, switches and redemptions How to buy, redeem and switch for a description of each class and their availability. This table shows the fees and expenses paid by the fund that are indirectly borne by an investor. See Fees and expenses for more information. Verus Class A units ($) Verus Class F units ($) 1 Based on a $1,000 investment and 5% return each year. Actual performance may vary. 1 year 3 years 5 years 10 years $23.73 $72.98 $ $ $11.87 $36.49 $62.37 $

24 Anchor Managed High Income Fund Anchor Managed High Income Fund Fund details Fund Type Canadian dividend and income equity fund Start Date Class A units: August 17, 2012 Class F units: August 17, 2012 Type of Securities Class A units and Class F units of a mutual fund trust Eligible for Registered Plans? Yes Portfolio Advisor ScotiaMcLeod (a division of Scotia Capital Inc.), who employs Mr. Nicholas Majendie, C.A. What does the fund invest in? Investment objectives The fund s objectives are to provide stable quarterly cash distributions and potential for consistent long term capital appreciation. The fund invests in a concentrated portfolio of high dividend-yielding equities of large TSX listed Canadian companies and REITs. For defensive reasons, the fund may hold higher levels of cash or cash equivalents. To obtain exposure to these types of securities, the fund may invest in securities of other mutual funds. Any change to the fundamental investment objectives of the fund must be approved by a majority of votes cast at a meeting of unitholders called for that purpose. Investment strategies The portfolio will generally hold a total of 12 to 15 securities with no more than 10% of its assets in any single issuer (not including index-tracking ETFs). No more than 10% of the fund s net assets are generally expected to be invested in foreign securities. Compliance with investment restrictions will be measured at the time of investment by the fund. Equities The fund s equities may include TSX listed common shares, REITs, partly-paid shares (installment receipts), equity index ETFs, trust units and units of limited partnerships. The fund may invest up to 100% of its assets in equities of TSX listed Canadian companies of which no more than 33% are anticipated to be invested in commodity stocks. REITS are expected to be limited to 25% of the portfolio. Equities will be comprised of issuers with at least $1 billion of market capitalization selected primarily from the TSX 100 Index. In normal times, these investments will comprise higher dividend yielding equities of quality companies including issuers in the financial sector. In times of high risk, banks and life insurance company holdings may be eliminated. 23