INSTITUTIONAL MANAGED PORTFOLIOS SIMPLIFIED PROSPECTUS DATED JULY 25, 2009 OFFERING CLASS W, CLASS A, CLASS F* AND CLASS I UNITS OF: Institutional Managed Income Pool Institutional Managed Canadian Equity Pool Institutional Managed US Equity Pool Institutional Managed International Equity Pool ( * when available) AND OFFERING CLASS Z UNITS OF: Institutional Managed Income Pool No securities regulatory authority has expressed an opinion about these units and it is an offence to claim otherwise.
INSTITUTIONAL MANAGED PORTFOLIOS PART A SIMPLIFIED PROSPECTUS DATED JULY 25, 2009 OFFERING CLASS W, CLASS A, CLASS F* AND CLASS I UNITS OF: Institutional Managed Income Pool Institutional Managed Canadian Equity Pool Institutional Managed US Equity Pool Institutional Managed International Equity Pool ( * when available) AND OFFERING CLASS Z UNITS OF: Institutional Managed Income Pool No securities regulatory authority has expressed an opinion about these units and it is an offence to claim otherwise. A complete simplified prospectus for the mutual funds listed on this page consists of this document and an additional disclosure document that provides specific information about the mutual funds in which you are investing. This document provides general information applicable to all of the Institutional Managed Pools. You must be provided with the additional disclosure document.
PART A TABLE OF CONTENTS Page INTRODUCTION 1 WHAT IS A MUTUAL FUND AND WHAT ARE THE RISKS OF INVESTING IN A MUTUAL FUND? 2 Class Risk 2 Credit Risk 2 Currency Risk 2 Derivative Risk 3 Emerging Market Risk 3 Equity Risk 3 Foreign Investment Risk 3 Interest Rate Risk 4 Investment Trust Risk 4 Large Redemption Risk 4 Market Risk 5 Securities Lending Risk 5 Short Selling Risk 5 Smaller Capitalized Companies Risk 5 ORGANIZATION AND MANAGEMENT OF THE INSTITUTIONAL MANAGED POOLS 6 PURCHASES, SWITCHES AND REDEMPTIONS 7 Institutional Managed Portfolios Program 7 Purchases 7 Switches 9 Redemptions 9 Short-term trading 11 OPTIONAL SERVICES 12 Periodic Investment Plans 12 Registered Plans 12 Automatic Withdrawal Plans 13 FEES AND EXPENSES 14 Impact of Sales Charges 16 DEALER COMPENSATION 17 Sales Commissions 17 Switch Fees 17 Investment Advisory Fees 17 Service Fees 17 Other Kinds of Dealer Compensation 17 Sales Practices of the Principal Distributors 18 Disclosure of Equity Interests 18 DEALER COMPENSATION FROM MANAGEMENT FEES 18
PART A TABLE OF CONTENTS (CONT D) INCOME TAX CONSIDERATIONS FOR INVESTORS 19 Units Held in a Non-Registered Account 19 Units Held in a Registered Plan 20 WHAT ARE YOUR LEGAL RIGHTS? 21 SPECIFIC INFORMATION ABOUT EACH OF THE POOLS DESCRIBED IN THIS DOCUMENT 22 Pool Details 22 What Does the Pool Invest In? 22 What are the Risks of Investing in the Pool? 24 Who Should Invest in this Pool? 24 Distribution Policy 24 Pool Expenses Indirectly Borne by Investors 24 This document is Part A of the simplified prospectus of: Institutional Managed Income Pool Institutional Managed Canadian Equity Pool Institutional Managed US Equity Pool Institutional Managed International Equity Pool collectively the Institutional Managed Pools or Pools. Additional information concerning each Institutional Managed Pool is contained in Part B of the simplified prospectus which must accompany this Part A.
INTRODUCTION This document contains selected important information about the Institutional Managed Pools to help you make an informed investment decision and to help you understand your rights as an investor. The Institutional Managed Pools are listed on the front cover of this document. Under the terms of this simplified prospectus, investors will buy units in the Institutional Managed Pools through the Institutional Managed Portfolios program (the Institutional Managed Portfolios Program ). This asset allocation and portfolio monitoring program helps investors and their advisors select and purchase the individual Institutional Managed Pools in appropriate proportions according to each investor's investment objectives, risk tolerance, time horizon and return expectations. United Financial Corporation has designed the Institutional Managed Portfolios (each, an Institutional Managed Portfolio ), each of which is made up of various allocations to the different Institutional Managed Pools and is characterized by a unique risk/return profile. Investors, with the help of their advisors, will go through a process to determine the asset mix and risk/return profile that is appropriate. Investors will select the most appropriate mix of Institutional Managed Pools and the corresponding Institutional Managed Portfolio will be used to implement that asset mix. Once invested, United Financial Corporation monitors the pool holdings on a quarterly basis and rebalances back to the target mixes for each Institutional Managed Portfolio as required. Class I units are not required to be purchased through the Institutional Managed Portfolios Program. Additional information about each Institutional Managed Pool is available in the following documents: the annual information form, the most recently filed annual financial statements and any interim financial statements filed after those annual financial statements, and the most recently filed annual management report of fund performance and any interim management report of fund performance filed after the annual management report of fund performance. These documents are incorporated by reference into this document, which means that they legally form part of this document just as if they were printed as part of this document. You can get a copy of these documents, at your request and at no cost, by calling us toll-free at 1-888-664-4784 or from an authorized dealer. Alternatively, these documents are available by contacting the United Financial Service Centre by email at service@unitedfinancial.ca. These documents and other information about the Institutional Managed Pools are also available on the Internet at www.sedar.com. The simplified prospectus of the Institutional Managed Pools is divided into two parts: Part A and Part B. Part A, which is this document, explains what mutual funds are, the different risks you could face when investing in mutual funds, and general information that applies to all the Institutional Managed Pools. Part B, which is a separate document, contains specific information about each Institutional Managed Pool. You must receive both Part A and Part B of the simplified prospectus. References to we, us and our refer to United Financial Corporation. 1
WHAT IS A MUTUAL FUND AND WHAT ARE THE RISKS OF INVESTING IN A MUTUAL FUND? A mutual fund will own different types of investments depending upon its investment objectives. Most mutual funds invest in securities like stocks, bonds and money market instruments. The Institutional Managed Pools also may invest indirectly in these securities by investing in other mutual funds called underlying funds managed by us or any of our affiliates or associates. The value of these investments will change from day to day, reflecting changes in interest rates, economic conditions and market and company news. As a result, the value of a mutual fund s units may go up and down, and the value of your investment in a mutual fund may be more or less when you redeem it than when you purchased it. Under exceptional circumstances, a mutual fund may even suspend redemptions. Please see page 9 Purchases, Switches and Redemptions Redemptions. The level of investment risk is not, however, the same for all mutual funds. In fact, the level of investment risk may vary considerably. A mutual fund may own securities of different types, or from different asset classes equities, bonds, real estate, cash depending on the mutual fund s investment objectives. For example, a mutual fund whose objective is long-term capital gains will likely invest mostly in equities. A mutual fund whose main objective is to preserve capital in the short term will likely have most of its holdings in money market securities. As a general rule, mutual funds with greater investment risk also offer a greater potential return. It is, therefore, important that you select the Institutional Managed Pools that are suitable for your unique investment objectives and risk tolerances. While your investment advisor will assist you in this process, it is also important that you have a general understanding of the various types of investment risk. To assist you, we have set out below a list of various investment risks of which you should be aware. Each of the Institutional Managed Pools is subject to general market risk. The pool-specific information in Part B of the simplified prospectus indicates which of the other investment risks listed below apply (or may apply) to each of the Institutional Managed Pools. Class Risk Mutual funds sometimes issue different classes of units or shares of the same fund. Each class has its own fees and expenses, which the fund tracks separately. However, if one class is unable to meet its financial obligations, the other classes are legally responsible for making up the difference. Credit Risk Credit risk is the risk that the government, corporation or other issuer of a debt security will be unable to make interest payments or pay back the original investment. Securities of an issuer that has suffered adverse changes in financial condition will have a low credit rating and generally have a high credit risk. Mutual funds that have investments in entities with high credit risk tend to be more volatile in the short term. A change in the quality rating of a debt instrument can affect the instrument s liquidity and make the instrument more difficult to sell. If any of these events occur, the mutual fund may even suffer a loss. Currency Risk When a mutual fund buys an investment priced in a foreign currency and the exchange rate between the Canadian dollar and the foreign currency changes unfavourably, it could reduce the value of the fund s investment. Of course, changes in the exchange rate can also increase the value of an investment. Derivative Risk A derivative is a kind of investment whose value is based on the performance of other investments or on the movement of interest rates, exchange rates or market indexes. Common types of derivatives and their application include: a forward contract, which is an agreement to buy or sell currency, commodities or securities at an agreed price for future delivery. Forward contracts are often used to reduce risk. For example, if you knew you would be buying goods priced in U.S. dollars in six months time, you might buy U.S. dollars now for delivery in six months to avoid the risk of the U.S. dollar rising in value. This strategy is known as hedging. 2
WHAT IS A MUTUAL FUND AND WHAT ARE THE RISKS OF INVESTING IN A MUTUAL FUND? (CONT D) an option, which generally gives the buyer the right, but not the obligation, to buy or sell currency, commodities or securities at an agreed price within a certain period of time. For example, you might hedge the share price of a stock you own by buying an option to sell it at its current price for the next six months. If the share price falls, all you will lose is the price of the option. Of course, if it goes up, you will not make as much, because you have paid for the option (even though you will not have used it). Derivatives can be used to reduce potential losses or enhance income. Derivatives are often used for hedging against potential losses because of changes in interest rates or foreign exchange rates. Derivatives also allow mutual funds to invest indirectly in foreign markets, without actually buying stocks on those markets. It is important to realize that derivatives have their own unique risks. Some examples of such risks are: some derivatives may not only limit a mutual fund s potential for loss, but also its potential for gain using derivatives for hedging may not always work and it could limit a mutual fund s opportunity to make a gain the price of a derivative may not accurately reflect the value of the underlying currency or security there s no guarantee that a mutual fund can close a derivative contract when it determines that it is in its best interests to do so. If an exchange imposes trading limits, that could also affect the ability of a mutual fund to close out its positions in derivatives. These events could prevent a mutual fund from making a profit or limiting its losses derivatives traded on foreign markets may be harder to trade and have higher credit risks than derivatives traded in North America the cost of entering and maintaining derivative contracts may reduce the mutual fund s total return to investors Emerging Market Risk In emerging market countries, securities markets may be smaller than in more developed countries, making it more difficult to sell securities in order to take profits or avoid losses. The value of mutual funds that buy these investments may rise and fall substantially and fluctuate greatly from time to time. Equity Risk The value of mutual funds that invest in equity securities will be affected by changes in the market price of those securities. The price of a share is influenced by the outlook for the company that issued it and by general economic and political conditions, as well as industry and market trends. When the economy is strong, the outlook for many (but not all) companies will be good, and share prices will generally rise. So will the value of the mutual funds that own these shares. On the other hand, share prices tend to decline with a general economic or industry downturn. Foreign Investment Risk Investments in foreign companies are influenced by economic and market conditions in the countries where the companies operate. Equities and fixed income securities issued by foreign companies and governments are often considered riskier than Canadian investments. One reason for this is that many countries have lower standards for accounting, auditing and reporting. Some countries are less politically stable than Canada and there is often less available information about individual investments. In some countries, there is a risk of nationalization, expropriation or currency controls. It can be difficult to trade investments on foreign markets and the laws of some countries do not fully protect investor rights. These risks and others can contribute to larger and more frequent price changes among foreign investments. U.S. investments are not considered to have foreign investment risk. the other party to a derivative contract may not be able to live up to its agreement to complete the transaction 3
WHAT IS A MUTUAL FUND AND WHAT ARE THE RISKS OF INVESTING IN A MUTUAL FUND? (CONT D) Interest Rate Risk The value of mutual funds that invest in debt securities and/or income trusts will be affected by changes in applicable interest rates. For example, the interest rate on a bond is set when it is issued. When interest rates fall, the price of existing bonds will rise because existing bonds pay higher rates than new bonds, and are therefore worth more. On the other hand, when interest rates rise, the price of existing bonds will fall, and so will the value of the mutual funds that hold them. The magnitude of the decline will generally be greater for longer-term debt securities than shorter-term debt securities. Mutual funds that invest in convertible securities also carry interest rate risk. These securities provide a fixed income stream, so their value varies inversely with interest rates, just like bond prices. However, since they can be converted into common shares, convertible securities are generally less affected by interest rate fluctuations than bonds. Investment Trust Risk Some mutual funds invest in real estate, royalty, income and other investment trusts which are investment vehicles in the form of trusts rather than corporations. To the extent that claims, whether in contract, in tort or as a result of tax or statutory liability, against an investment trust are not satisfied by the trust, investors in the investment trust, including the mutual funds, could be held liable for such obligations. Investment trusts generally seek to make this risk remote in the case of contract by including provisions in their agreements that the obligations of the investment trust will not be binding on investors personally. However, investment trusts could still have exposure to damage claims such as personal injury and environmental claims. Certain jurisdictions have enacted legislation to protect investors in investment trusts from the possibility of such liability. The Income Tax Act (Canada) contains rules regarding the income tax treatment of specified investment flowthroughs or SIFTs, which include certain publicly traded income trusts and limited partnerships. SIFTs are subject to tax at corporate rates on the non-portfolio earnings portion of their distributions. Further, unitholders of SIFTs are treated as if they had received an eligible dividend equal to the non-portfolio earnings less the related distribution tax paid by the SIFT and are taxed accordingly. These rules apply to trusts and limited partnerships that began to be publicly-traded after October 2006, and generally will only apply beginning with the 2011 taxation year to those income trusts and limited partnerships that were already publicly-traded on October 31, 2006 unless they exceed certain growth rates. To the extent that a mutual fund invests in an income trust or limited partnership to which these rules apply, after-tax returns may be reduced. Large Redemption Risk Some mutual funds may have particular investors who own a large proportion of the outstanding units or shares of the mutual fund. For example, other institutions such as banks and insurance companies or other fund companies may purchase securities of the mutual fund for their own mutual funds, segregated funds, structured notes or discretionary managed accounts. Retail investors may also own a significant amount of a mutual fund. If one of those investors redeems a large amount of their investment in the mutual fund, the mutual fund may have to sell its portfolio investments at unfavourable prices to meet the redemption request. This can result in significant price fluctuations to the net asset value of the mutual fund, and may potentially reduce the returns of the mutual fund. Market Risk The market value of a mutual fund s investments (whether they are equity or debt securities) will rise and fall based on company-specific developments and general stock and bond market conditions. Market value will also vary with changes in the general economic and financial conditions in the countries where the investments are based. Certain mutual funds will experience greater volatility and short term market value fluctuations than other mutual funds. 4
WHAT IS A MUTUAL FUND AND WHAT ARE THE RISKS OF INVESTING IN A MUTUAL FUND? (CONT D) Securities Lending Risk Certain mutual funds may enter into securities lending, repurchase and reverse repurchase transactions in order to generate additional income for the fund. See page 22 for a description of these kinds of transactions. There are risks associated with securities lending, repurchase and reverse repurchase transactions. The risks arise when the third party (i.e., the borrower, seller or buyer as the case may be) fails to live up to its obligations under the agreement evidencing the transaction. Over time, the value of the securities loaned under a securities lending transaction or sold under a repurchase transaction might exceed the value of the collateral or cash held by the mutual fund. If the third party defaults on its obligation to repay or resell the securities to the mutual fund, the cash or collateral may be insufficient to enable the mutual fund to purchase replacement securities and the mutual fund may suffer a loss for the difference. Likewise, over time, the value of the securities purchased by a mutual fund under a reverse repurchase transaction may decline below the amount of cash paid by the mutual fund to the third party. If the third party defaults on its obligation to repurchase the securities from the mutual fund, the mutual fund may need to sell the securities for a lower price and suffer a loss for the difference. For more information about how the Institutional Managed Pools engage in these transactions, see the information under the sub-heading What Does the Pool Invest In? beginning on page 22. Short Selling Risk Certain mutual funds may engage in a disciplined amount of short selling. A short sale is where a mutual fund borrows securities from a lender and then sells the borrowed securities (or sells short the securities) in the open market. At a later date, the same number of securities are repurchased by the mutual fund and returned to the lender. In the interim, the proceeds from the first sale are deposited with the lender and the mutual fund pays compensation to the lender. If the value of the securities declines between the time that the mutual fund borrows the securities and the time it repurchases and returns the securities, the mutual fund makes a profit for the difference (less any compensation the mutual fund pays to the lender). Short selling involves certain risks. There is no assurance that securities will decline in value during the period of the short sale sufficient to offset the compensation paid by the mutual fund and make a profit for the mutual fund, and securities sold short may instead increase in value. The mutual fund may also experience difficulties repurchasing and returning the borrowed securities if a liquid market for the securities does not exist. The lender from whom the mutual fund has borrowed securities may go bankrupt and the mutual fund may lose the collateral it has deposited with the lender. Each mutual fund that engages in short selling will adhere to controls and limits that are intended to offset these risks by selling short only securities of larger issuers for which a liquid market is expected to be maintained and by limiting the amount of exposure for short sales. Mutual funds also will deposit collateral only with lenders that meet certain criteria for creditworthiness and only up to certain limits. Although some mutual funds may not themselves engage in short selling, they may be exposed to short selling risk because the underlying funds in which they invest may be engaged in short selling. Smaller Capitalized Companies Risk The share prices of smaller capitalized companies are usually more volatile and less liquid than those of more established larger capitalized companies. The market value of the securities of such issuers will be influenced primarily by the performance of the issuing entity and stock market conditions generally. Smaller capitalized companies may be developing new products which have not yet been tested in the marketplace or their products may quickly become obsolete. They may have limited resources, including limited access to funds, or unproven management. The value of mutual funds that buy these investments may rise and fall substantially and with greater frequency and magnitude. 5
ORGANIZATION AND MANAGEMENT OF THE INSTITUTIONAL MANAGED POOLS The following entities are involved in the operation and management of the Institutional Managed Pools: MANAGER TRUSTEE CUSTODIAN The manager is responsible for managing the overall undertaking and operations of the Institutional Managed Pools. The trustee holds title to the assets owned by the Institutional Managed Pools on behalf of the unitholders. The custodian holds the securities owned by the Institutional Managed Pools. The custodian is independent of the Manager. United Financial Corporation 2 Queen Street East, Twentieth Floor Toronto, Ontario M5C 3G7 1-888-664-4784 http://www.unitedfinancial.ca United Financial Corporation Toronto, Ontario RBC Dexia Investor Services Trust Toronto, Ontario REGISTRAR AND TRANSFER AGENT The registrar and transfer agent is responsible for keeping track of the owners of units of the Institutional Managed Pools, processing purchase, switch and redemption orders, issuing account statements and providing annual tax reporting information. CI Investments Inc. Toronto, Ontario AUDITOR PRINCIPAL DISTRIBUTORS PORTFOLIO ADVISORS INDEPENDENT REVIEW COMMITTEE The auditor prepares an independent auditor s report in respect of the annual financial statements of the Institutional Managed Pools. The auditor is independent of the Institutional Managed Pools. The sales representatives of the principal distributors are responsible for dealing with investors who wish to purchase, switch or redeem units of the Institutional Managed Pools. United Financial Corporation and each principal distributor is a subsidiary of CI Financial Corp. The portfolio advisors manage the investment portfolio of each Institutional Managed Pool. United Financial Corporation is the portfolio advisor for each Institutional Managed Pool, but in some cases has contracts with other companies to act as sub-advisors to the Institutional Managed Pools. You will find the name of the portfolio advisor or sub-advisor for each Institutional Managed Pool in the pool details in Part B of the simplified prospectus. United Financial Corporation is an affiliate of CI Investments Inc. which has a profit sharing arrangement with Altrinsic Global Advisors, LLC. Epoch Investment Partners, Inc., Picton Mahoney Asset Management (carrying on business as Synergy Asset Management), QV Investors Inc. and Tetrem Capital Management Ltd. are independent of United Financial Corporation. United Financial Corporation, as portfolio advisor for each Institutional Managed Pool, is responsible for the advice provided by the sub-advisors. It may be difficult to enforce any legal rights against Altrinsic Global Advisors, LLC and Epoch Investment Partners, Inc. because these entities are resident outside of Canada and most or all of their assets are outside of Canada. References in the simplified prospectus to portfolio advisors include the sub-advisors, where appropriate. The independent review committee, or ( IRC ), provides independent oversight and impartial judgement on conflicts of interest involving the Institutional Managed Pools. Among other matters, the IRC prepares, at least annually, a report of its activities for unitholders of the Institutional Managed Pools which is available on our website at www.unitedfinancial.ca or upon request by any unitholder, at no cost, by calling: 1-888-664-4784 or e-mailing to: service@unitedfinancial.ca The IRC currently is comprised of four members, each of whom is independent of United Financial Corporation, its affiliates and the Institutional Managed Pools. Additional information concerning the IRC, including the names of its members, and governance of the Institutional Managed Pools is available in the annual information form of the Institutional Managed Pools. If approved by the IRC, an Institutional Managed Pool may change its auditor by sending you a written notice of any such change at least 60 days before it takes effect. Likewise, if approved by the IRC, we may merge an Institutional Managed Pool into another mutual fund provided the merger fulfills the requirements of the Canadian securities regulators relating to mutual fund mergers and we send you a written notice of the merger at least 60 days before it takes effect. In either case, no meeting of unitholders of the Institutional Managed Pool may be called to approve the change. PricewaterhouseCoopers LLP Toronto, Ontario Assante Capital Management Ltd. Toronto, Ontario Assante Financial Management Ltd. Toronto, Ontario Altrinsic Global Advisors, LLC Stamford, Connecticut CI Investments Inc. Toronto, Ontario Epoch Investment Partners, Inc. New York, New York Picton Mahoney Asset Management (carrying on business as Synergy Asset Management) Toronto, Ontario QV Investors Inc. Calgary, Alberta Tetrem Capital Management Ltd. Winnipeg, Manitoba United Financial Corporation Toronto, Ontario Each Institutional Managed Pool will not vote any of the securities it holds of underlying funds. However, we may arrange for you to vote your share of those securities. 6
PURCHASES, SWITCHES AND REDEMPTIONS You may purchase, switch (transfer from one Institutional Managed Pool to another) under certain circumstances or redeem units of an Institutional Managed Pool through a sales representative licensed with any one of the Principal Distributors listed on page 6 or any other dealer authorized by us. The price of a unit of a mutual fund is called its net asset value per unit (or NAV ). We calculate a separate NAV for each class of an Institutional Managed Pool s units by, in general terms, taking the fair value of the assets allocated to the class of units, subtracting the fair value of any liabilities (including operating expenses) of the class of units, and dividing the balance by the number of units investors in that class hold. A separate NAV for each class of units of an Institutional Managed Pool is calculated at the close of business on each day that we are open for a full day of business. All requests received by the Institutional Managed Pools registrar before 4:00 p.m. (ET) will be processed the same day at the NAV determined at the end of that day. Orders received after 4:00 p.m. (ET) will be processed the following valuation day at the NAV determined at the end of such day. Institutional Managed Portfolios Program The Institutional Managed Portfolios Program is an asset allocation service that is designed to help investors who purchase units of the Institutional Managed Pools maintain a predetermined mix of pools in their investment portfolio. The Institutional Managed Portfolios Program offers the same level of professional investment management services typically reserved for large institutional clients or pension funds. It uses a disciplined approach to investing and is intended to maximize longerterm returns for a given level of risk. When you join the Institutional Managed Portfolios Program, your financial advisor will ask you to complete a questionnaire. By relying on the answers to the questionnaire, together with other knowledge of you as an investor, your financial advisor will determine your investment objectives, risk tolerance, time horizon and return expectations and then recommend a mix of Institutional Managed Pools through an Institutional Managed Portfolio. You and your financial advisor will review these recommendations and will select the Institutional Managed Pools to be included in your portfolio. You or your financial advisor can adjust the recommended asset allocation as your needs change. We believe that the asset allocation process used in the Institutional Managed Portfolios Program has the potential to more closely align your investments with your goals while optimizing the risk-reward ratio over time. However, it has not been conclusively shown that this approach always yields greater investment return or reduces risk. The Institutional Managed Portfolios Program includes an automatic portfolio rebalancing service to investors. Unless we have agreed to different rebalancing parameters, approximately five business days before the end of each calendar quarter, we will review your holdings in the Institutional Managed Pools. If the market value of your investment in any Institutional Managed Pool varies by more than 5% from your target allocation, we will automatically switch your investments, as necessary, to return to all your target allocations. In order to qualify for the Institutional Managed Portfolios Program, you must hold or acquire units of the Institutional Managed Pools having a prescribed minimum aggregate net asset value. Currently an aggregate net asset value of $150,000 is required. We reserve the right to waive such minimum amount for any particular investor in our sole discretion. We also reserve the right to change the minimum required account size at any time upon giving 30 days prior written notice thereof to investors. If, as a result of us increasing the minimum required account size, an investor fails to qualify to own units of the Institutional Managed Pools, we may terminate such account. However, before terminating any such account, the investor will be notified and given 30 days to invest the amount necessary to increase the size of the account to an amount equal to or greater than the new minimum required aggregate net asset value. Additional details about the Institutional Managed Portfolios Program are available from your financial advisor. Purchases Each Institutional Managed Pool offers Class W, Class A, Class F and Class I units. Institutional Managed Income Pool also offers Class Z units, which generally are available only to investors that already hold Class Z units of 7
PURCHASES, SWITCHES AND REDEMPTIONS ( CONT D) Institutional Managed Income Pool. Class A, Class W, Class I and Class Z units are immediately available for purchase. We will make an announcement when Class F units become available for purchase. Class W, Class A and Class F units are available to all investors who participate in the Institutional Managed Portfolios Program and who establish and maintain a minimum required investment (currently $150,000) in the Institutional Managed Pools. Under the Institutional Managed Portfolios Program, if you invest in Class W or Class F units you may pay an annual investment advisory fee or a dealer fee to your dealer for ongoing services. For Class F units, there is an additional requirement that you must participate in an eligible wrap account program with your dealer. Class I units are available only to institutional clients and investors who have been approved by us and have entered into a Class I Account Agreement with us. The criteria for approval may include the size of the investment and the expected level of account activity. No management fees are charged to the Institutional Managed Pools with respect to the Class I units. Instead, each investor will negotiate a separate fee which is payable directly to us. Service fees payable by us to the dealer will be negotiated and disclosed in the Class I Account Agreement. Class W, Class A and Class Z units are offered for sale subject to an initial sales charge, meaning that you may pay a commission to your dealer at the time of purchase. The commission is negotiable between you and your dealer, but cannot exceed 5% of the total amount you invest. The initial sales charge does not apply to Class I and Class F units. Alternatively, Class A and Class Z units can be purchased subject to a deferred sales charge, meaning that you pay no commission when you invest in Class A or Class Z units. The entire amount of your investment goes toward buying units and we pay your dealer s commission directly. However, if you sell your Class A or Class Z units within a specified number of years after buying them, you will pay to us a redemption fee which is based on the cost of the Class A or Class Z units. There are two deferred sales charge options for Class A units: the standard deferred sales charge and the low-load sales charge. Only the standard deferred sales charge (not the low-load sales charge) is available to holders of Class Z units. Under the standard deferred sales charge, the redemption charge starts at 5.5% in the first year and decreases each year over a seven-year period. If you hold your Class A or Class Z units for more than seven years, you pay no redemption charge. Under the low-load sales charge available to Class A units, the redemption charge starts at 3% in the first year and decreases each year over a three-year period. If you choose the low-load sales charge, you may not sell your Class A units until the beginning of the fourth year without paying a redemption fee. See the section entitled Fees and Expenses on page 14 for the redemption fee schedules. If you choose the standard deferred sales charge option, you can sell or change some of your Class A or Class Z units each year without paying a fee or so that they are no longer subject to a redemption fee. See the section entitled Redemptions on page 9 for details. We may reject your purchase order within one business day of receiving it. If rejected, any monies sent with your order will be returned immediately. If we accept your order but do not receive payment within three business days, we will redeem your units on the next business day. If the proceeds are greater than the payment you owe, the difference will belong to the Institutional Managed Pool. If the proceeds are less than the payment you owe, your dealer will be required to pay the difference and is entitled to collect this amount and any associated expenses from you. The minimum amount for initial investment in the Institutional Managed Pools is determined by us and may be changed from time to time. Similarly, we may set a minimum amount for subsequent investments. The current minimum amount for an initial aggregate investment in Class W, Class A, Class F and Class Z units of the Institutional Managed Pools is $150,000. The minimum amount for a subsequent investment is $250. The minimum initial investment for Class I units is determined when you enter into a Class I Account Agreement with us. In order to avoid excessive administrative cost, we have the ability to close your account if the aggregate net asset value of the Class W, Class A, Class F or Class Z units held in it is less than $150,000. If this happens, you will be given at least 30 days notice during which time you may make an additional investment to increase the aggregate net assets held in your account to $150,000 or more. 8
PURCHASES, SWITCHES AND REDEMPTIONS ( CONT D) Switches In order to move from one Institutional Managed Portfolio to another, you can redeem the required number of units in your Institutional Managed Pools and then purchase the required number of units of the same class in other Institutional Managed Pools so as to be left with the resulting asset mix of the desired Institutional Managed Portfolio. You can also switch your investment from an Institutional Managed Pool to units or shares of an equivalent class in another mutual fund (a Related Fund ) managed by us or our affiliate, CI Investments Inc. Here too, a switch is actually a redemption of the units of the Institutional Managed Pools you then own and a corresponding purchase of units or shares in the Related Fund. You can switch Class Z units of Institutional Managed Income Pool to Class A units of a different Institutional Managed Pool. If you switch Class A or Class Z units that were purchased subject to the deferred sales charge, you will pay no redemption fee when you switch those units, but you may have to pay a redemption fee when you sell the new units or shares. The new units or shares will be subject to the same deferred sales charge which we will calculate based on the cost and date of purchase of the original Class A or Class Z units. The Institutional Managed Pool may charge you a shortterm trading fee of up to 2% of the total amount you redeem if you switch your units of the Institutional Managed Pool within 30 business days of buying them. See the section entitled Fees and Expenses on page 14 for details. A switch is a disposition for tax purposes. If you hold your units outside a registered plan, you may realize a taxable gain. See the section entitled Income Tax Considerations for Investors on page 19 for more details. You may also reclassify your units of one class into units of a different class of the same Institutional Managed Pool by contacting your dealer. You can only reclassify into a different class of units if you are eligible to buy them. If you reclassify Class A or Class Z units that are subject to a deferred sales charge, you will pay us a reclassification fee equal to the redemption fee you would pay if you redeemed those Class A or Class Z units. Reclassifying units from one class to another of the same Institutional Managed Pool is not a disposition for tax purposes except to the extent that units are redeemed to pay a reclassification fee. If those redeemed units are held outside a registered plan, you may realize a taxable capital gain. Redemptions You may redeem units at any time by submitting a written redemption request to us. This is most commonly done on your behalf by your dealer. If we receive a redemption request, we will attempt to notify you or your dealer promptly if any information necessary to process the request is missing. If we do not receive all of the documentation we need from you to complete the redemption order within 10 business days, we must repurchase these units for your account. If the redemption proceeds are greater than the repurchase amount, the difference will belong to the Institutional Managed Pool. If the redemption proceeds are less than the repurchase amount, you (if you submitted your redemption order directly to us) or your dealer (if it submitted this order) will be required to pay the Institutional Managed Pool the difference. If your dealer is required to pay the difference, it will then be entitled to collect this amount and any associated expenses from you. If your redemption proceeds are to be sent by wire transfer, your bank may charge an additional fee to receive such funds. If you redeem units before the cheque or electronic funds transfer for the purchase of those units has been collected, you will not receive the proceeds until your initial payment has cleared. This may take up to 15 days after your purchase was recorded (or longer in rare cases), depending on your financial institution. The Institutional Managed Pool may charge you a shortterm trading fee of up to 2% of the total amount you redeem if you sell your units of the Institutional Managed Pool within 30 business days of buying them. This fee does not apply to units you sell under an automatic withdrawal plan. Please also note that you may be required to pay a redemption charge on Class A or Class Z units bought under the deferred sales charge option if you redeem them within seven years after your purchase (under the standard deferred sales charge) or within three years after your purchase (for Class A units under the low-load sales charge). 9
PURCHASES, SWITCHES AND REDEMPTIONS ( CONT D) If you purchased Class A or Class Z units under the deferred sales charge and you sell those units before the deferred sales charge schedule has expired, we will deduct the redemption fee from your sale proceeds. The redemption fee applies once you have redeemed: all of your units which you purchased under the standard deferred sales charge by using the free redemption right described below, and all of your units previously purchased under the deferred sales charge option that are no longer subject to the redemption charge. We calculate the redemption fee as follows: number of Class A or cost per Class A the redemption X X Class Z units you are selling or Class Z unit fee rate The cost per Class A or Class Z unit for calculating the redemption fee is based on the cost and number of Class A or Class Z units of your original investment. As described below, if you previously sold some of these units under the free redemption right, you will have fewer units, so the cost per unit of that class will be higher. If your distributions were reinvested in the Institutional Managed Pools, you will have more Class A or Class Z units, so the cost per unit will be lower. The redemption fee rate depends on how long you have held your units. See the section entitled Fees and Expenses on page 14 for the redemption fee schedules. If you bought Class A or Class Z units before the date of this document and redeem or switch those units, the deferred sales charge described in the simplified prospectus that was in effect when you bought your original units will apply. Each year, you can sell some of your standard deferred sales charge units that would otherwise be subject to the standard deferred sales charge, at no charge. This is called your free redemption right. We calculate the available number of Class A or Class Z units as follows: 10% of the number of Class A and Class Z units you bought in the current calendar year using the standard deferred sales charge, multiplied by the number of months remaining in the calendar year (including the month of purchase) divided by 12, plus 10% of the number of Class A and Class Z units you held on December 31 of the preceding year that were purchased using the standard deferred sales charge and are subject to the standard deferred sales charge, minus the number of Class A and Class Z units you would have received if you had reinvested any cash distributions you received during the current calendar year. We may modify or discontinue your free redemption right at any time in our sole discretion. If you do not wish to sell the deferred sales charge units you would be entitled to sell under this free redemption right in any year, you can ask us to change those units from standard deferred sales charge units to initial sales charge units. You will not be charged a fee for this change, but this will affect the compensation that we will pay your financial advisor. See the section entitled Dealer Compensation on page 17 for details. The free redemption right only applies if your Class A or Class Z units remain invested for the full standard deferred sales charge schedule. If you have exercised your free redemption right and then redeem your Class A or Class Z units before the standard deferred sales charge schedule has expired, your cost per unit will be increased to compensate us for the Class A or Class Z units redeemed under the free redemption right. In other words, even if you redeemed Class A or Class Z units under the free redemption right, your standard deferred sales charge on a full redemption would be the same as if you had not redeemed any Class A or Class Z units under the free redemption right. Under extraordinary circumstances we may be required to suspend your right to redeem units. This could occur if: normal trading is suspended on any exchange on which securities or derivatives that make up more than 50% of an Institutional Managed Pool s value or its underlying market exposure are traded, provided those securities or derivatives are not traded on any other exchange that is a reasonable alternative for the Institutional Managed Pool; or with the approval of the securities regulators. We will not accept orders to buy units if we have at that time suspended investors rights to redeem their units. 10
PURCHASES, SWITCHES AND REDEMPTIONS ( CONT D) A redemption is a disposition for tax purposes. If you hold your units outside a registered plan, you may realize a capital gain. See the section entitled Income Tax Considerations for Investors on page 19 for more details. Short-term trading Redeeming or switching units of a mutual fund within 30 business days after they were purchased, which is referred to as short-term trading, may have an adverse effect on other investors in the mutual fund because it can increase trading costs to the mutual fund to the extent the mutual fund purchases and sells portfolio securities in response to each redemption or switch request. An investor who engages in short-term trading also may participate in any appreciation in the net asset value of the mutual fund during the short period that the investor was invested in the mutual fund, which reduces the amount of the appreciation that is experienced by other, longer term investors in the mutual fund. Certain types of mutual funds (such as money market funds) are intended as shortterm investments and therefore are not adversely affected by short-term trading. An Institutional Managed Pool may charge you a fee of up to 2% of the value of the units you redeem or switch if you engage in short-term trading. This fee is paid to the Institutional Managed Pool and is in addition to any other fees that may apply. No short-term trading fees are charged for any systematic transactions, such as periodic switches or redemptions, or trades as part of an automatic portfolio rebalancing service. We may waive the short-term trading fee charged by an Institutional Managed Pool for other trades if the size of the trade was small enough or the shortterm trade did not otherwise harm other investors in the Institutional Managed Pool. We also may refuse to accept purchase orders from you and we have the discretion to redeem some or all of your units of the Institutional Managed Pools if we believe you may continue to engage in short-term trading. See Short-term trading in the annual information form for additional information. The Institutional Managed Pools do not have any arrangements, formal or informal, with any person or company to permit short-trading trading. 11
OPTIONAL SERVICES We currently offer the following optional services in connection with the sale of units in the Institutional Managed Pools. Please ask your dealer for details. Any applicable fees are described in the next section of this document. Periodic Investment Plans Our pre-authorized chequing plan allows you to make regular investments in the Institutional Managed Pools in the amounts you choose. You can start the plan by completing an application, which is available from your dealer. Here are the plan highlights: your initial investment and each subsequent investment must be at least $250 for each account; we automatically transfer the money from your bank account to the Institutional Managed Pools in the same proportions as your target allocations under the Institutional Managed Portfolios Program; you can choose any day of the month to invest weekly, bi-weekly, monthly, bi-monthly, quarterly, semiannually or annually; if the date you choose is not a business day, your units will be bought the next business day; you can change or cancel the plan at any time by providing us 48 hours notice; and we will confirm your initial automatic purchase and all other transactions will be reported on your semi-annual and annual statements if your investments are made no less frequently than monthly, otherwise we will confirm each subsequent purchase. Unless you request it at the time you enrol in the periodic investment plan or at any other time from your dealer, you will not receive additional copies of the simplified prospectus or future simplified prospectuses of the Institutional Managed Pools, or amendments thereto, in connection with your purchases of units under this plan. These documents instead can be found on the Internet at either www.unitedfinancial.ca or www.sedar.com. Your rights to withdraw from an agreement to purchase units within two business days of receiving the simplified prospectus, or to cancel your purchase within forty-eight hours of receiving confirmation of your order, will apply to your first purchase of units under a periodic investment plan but not to subsequent purchases. Your rights to cancel your purchase or make a claim for damages if there is any misrepresentation in the simplified prospectus (or the documents incorporated by reference into the simplified prospectus) apply to both your initial and subsequent purchases under a periodic investment plan, even if you do not request copies of future simplified prospectuses and amendments thereto of the Institutional Managed Pools. You will be reminded annually in writing how you may request copies of simplified prospectuses, and amendments thereto, of the Institutional Managed Pools and of your rights described above. Registered Plans We can set up a registered plan to hold your investment in the Institutional Managed Pools. Possible plans include: Registered Retirement Savings Plans ( RRSPs ) Locked-In Retirement Accounts ( LIRAs ) Registered Retirement Income Funds ( RRIFs ) Locked-In Retirement Income Funds ( LIRFs ) Life Income Funds ( LIFs ) Registered Education Savings Plans ( RESPs ) Tax-Free Savings Accounts ( TFSAs ) Under these Registered Plans, The Canada Trust Company acts as trustee and holds title to the plan s assets. We arrange to register the plan on your behalf under the Income Tax Act (Canada) and, if necessary, under the provisions of any similar legislation of any province or territory in Canada. Class W and Class I units cannot be purchased using our RESP. 12