Pinnacle Portfolios 2015 Simplified Prospectus - Scotiabank · Pinnacle Portfolios 2015 Simplified...

Pinnacle Portfolios 2015Simplified ProspectusNovember 12, 2015Series A Units

Pinnacle Income Portfolio

Pinnacle Balanced Portfolio

Pinnacle Growth Portfolio

No securities regulatory authority has expressed an opinion about these units. It is an offence to claim otherwise. The Portfoliosand the units they offer under this simplified prospectus are not registered with the U.S. Securities and Exchange Commission.Units of the Portfolios may be offered and sold in the United States only in reliance on exemptions from registration.

Table of Contents

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

FUND SPECIFIC INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Pinnacle Income Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Pinnacle Balanced Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Pinnacle Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

WHAT IS A MUTUAL FUND AND WHAT ARE THE SPECIFIC RISKS OF INVESTING IN AMUTUAL FUND? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ORGANIZATION AND MANAGEMENT OF THE PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

PURCHASES, SWITCHES AND REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

How we calculate net asset value per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

How to place orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

How to switch the Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

How to redeem Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Suspending your right to buy, switch and sell units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Short-term trading fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

OPTIONAL SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Registered Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Pre-Authorized Chequing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Automatic Withdrawal Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

IMPACT OF SALES CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

DEALER COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Dealer compensation from management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

INCOME TAX CONSIDERATIONS FOR INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Units held in a non-registered account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Units held in a Registered Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

WHAT ARE YOUR LEGAL RIGHTS? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

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Introduction

Portfolio means a mutual fund that is offered for sale under this simplified prospectus;

Manager, we, us, and our refer to 1832 Asset Management L.P.;

Scotiabank includes The Bank of Nova Scotia, and its affiliates, including, The Bank of Nova ScotiaTrust Company (Scotiatrust�), Scotia Securities Inc. and Scotia Capital Inc. (including ScotiaMcLeod� andScotia iTRADE�, each a division of Scotia Capital Inc.);

ScotiaFunds refers to all of our mutual funds and the series, thereof, which are offered under separatesimplified prospectuses under the ScotiaFunds� brand and includes the Scotia mutual funds offered underthis simplified prospectus;

Tax Act means the Income Tax Act (Canada); and

Underlying Fund refers to a mutual fund managed by the Manager and selected from the ScotiaPrivate Pools in which a Portfolio invests.

This simplified prospectus contains selected important information to help you make an informedinvestment decision about the Portfolios and to understand your rights as an investor. It is divided into twoparts. The first part, from pages 3 to 12, contains specific information about each of the Portfolios offeredfor sale under this simplified prospectus. The second part, from pages 13 to 35 contains generalinformation that applies to all of the Portfolios offered for sale under this simplified prospectus and therisks of investing in mutual funds generally.

Additional information about the Portfolios is available in their annual information form, their mostrecently filed Fund Facts, their most recently filed annual financial statements and interim financial reportsand their most recently filed annual and interim management reports of fund performance. These documentsare incorporated by reference into this simplified prospectus. That means they legally form part of thissimplified prospectus just as if they were printed in it.

You can get a copy of the Portfolios’ annual information form, their most recently filed Fund Facts,financial statements and management reports of fund performance at no charge by calling 1-800-268-9269(416-750-3863 in Toronto) for English, or 1-800-387-5004 for French, or by asking your mutual fundrepresentative. You will also find these documents on our website at www.scotiabank.com/pinnacleportfolios.

These documents and other information about the Portfolios and the underlying funds (as definedbelow) are also available at www.sedar.com, or on our website at www.scotiabank.com/pinnacleportfolios.

� Registered trademarks of The Bank of Nova Scotia, used under licence.

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Fund specific information

The Portfolios are a family of three no-load asset allocation funds managed by the Manager. EachPortfolio has been established as a mutual fund trust. Each Portfolio is associated with an investmentportfolio having specific investment objectives. Each unit of a series represents an equal, undivided interestin the portion of the Portfolio’s net assets attributable to that series. Expenses of each series are trackedseparately and a separate unit price is calculated for each series. The Portfolios offer Series A units.

The Portfolios invest in Underlying Funds, all of which are managed by the Manager and selectedfrom the Scotia Private Pools. The assets of the Portfolios consist primarily of investments in theUnderlying Funds. The Underlying Funds have been selected based on their ability to provide access toprofessionally managed portfolios. Exposure to the Underlying Funds allows you to diversify across some orall of the following four asset classes: (i) cash/cash equivalent; (ii) fixed income; (iii) equities; and(iv) non-traditional asset classes, such as real estate.

About the Portfolio descriptions

On the following pages, you will find detailed descriptions of each of the Portfolios to help you makeyour investment decisions. Here is what each section of the Portfolio descriptions tells you:

Portfolio details

This section gives you some basic information about each Portfolio including what kind of mutual fundit is, when it was established and its eligibility for Registered Plans (as defined below).

What does the Portfolio invest in?

This section tells you the fundamental investment objectives of each Portfolio and the strategies eachPortfolio uses in trying to achieve those objectives. Any change to the fundamental investment objectivesmust be approved by a majority of votes cast at a meeting of unitholders called for that purpose.

Portfolio advisor selection and monitoring

The Manager has retained the services of an independent investment consulting firm, NT GlobalAdvisors, Inc. (‘‘NTGA’’), a subsidiary of Northern Trust Corporation, to assist in the selection andmonitoring of portfolio advisors for the Underlying Funds. Based on consultation with and research onprospective portfolio advisors, NTGA evaluates and recommends a group of qualified portfolio advisors whoare best able to carry out the investment objectives and strategies of the Underlying Funds. Portfolioadvisors are then chosen by the Manager from this group based on each portfolio advisor’s specializedexpertise, performance, consistency, investment philosophy or style, investment objectives, restrictions andany supplemental guidelines developed from time to time by the Manager. On an ongoing basis, NTGA willmonitor and report to the Manager on the performance of the Underlying Funds’ portfolio advisors.

What are the risks of investing in the Portfolio?

This section tells you the risks of investing in a Portfolio. You will find a description of each risk inSpecific risks of mutual funds.

Investment risk classification methodology

A risk classification rating is assigned to each Portfolio to provide you with information to help youdetermine whether the Portfolio is appropriate for you. Each Portfolio is assigned a risk rating in one ofthe following categories: low, low to medium, medium, medium to high or high. The investment risk rating

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for each Portfolio is reviewed at least annually as well as if there is a material change in a Portfolio’sinvestment objective or investment strategies.

The methodology used to determine the risk ratings of the Portfolio for purposes of disclosure in thissimplified prospectus is based on a combination of the qualitative aspects of the methodology recommendedby the Fund Risk Classification Task Force of the Investment Fund Institute of Canada and the Manager’squantitative analysis of a Portfolio’s historic volatility. In particular, the standard deviation of each Portfoliois reviewed. Standard deviation is a common statistic used to measure the volatility of an investment.Portfolios with higher standard deviations are generally classified as being more risky. The Manager takesinto account other qualitative factors in making its final determination of each Portfolio’s risk rating.Qualitative factors taken into account include key investment policy guidelines which may include but arenot limited to regional, sectoral and market capitalization restrictions as well as asset allocation policies.

The Manager recognizes that other types of risk, both measurable and non-measurable, may exist andthat historical performance may not be indicative of future returns and a Portfolio’s historic volatility maynot be indicative of its future volatility.

The methodology that the Manager uses to identify the investment risk level of the Portfolios isavailable on request at no cost by contacting us toll free at 1-800-268-9269 (416-750-3863 in Toronto) forEnglish or 1-800-387-5004 for French or by email at [email protected] or by writing to us at theaddress on the back cover of this simplified prospectus.

Who should invest in this Portfolio?

This section can help you decide if a Portfolio might be suitable for your investment portfolio. It ismeant as a general guide only. For advice about your investment portfolio, you should consult your mutualfund representative. If you do not have a mutual fund representative, you can speak with one of ourrepresentatives by calling 1-800-268-9269 (416-750-3863 in Toronto) for English or 1-800-387-5004 for Frenchor visiting a ScotiaMcLeod office.

Distribution policy

This section tells you when a Portfolio usually distributes any net income and capital gains, andwhere applicable, return of capital, to unitholders. The Portfolios may also make distributions atother times.

Distributions on units held in Registered Plans and non-registered accounts are reinvested inadditional units of the Portfolio, unless you tell your mutual fund representative that you want to receivecash distributions. For information about how distributions are taxed, see Income tax considerationsfor investors.

Portfolio expenses indirectly borne by investors

The Portfolios pay their expenses out of their assets. This means investors in a Portfolio indirectly payfor these expenses through lower returns. This chart allows you to compare the costs of investing in aPortfolio with the cost of other mutual funds. The chart is for illustrative purposes as required bysecurities regulators and it shows the cumulative expenses you would have paid over various time periodsif you:

• invested $1,000 in the Portfolio; and

• earned a total annual return of 5%, which may be different than the Portfolio’s actual return inany given year.

The information assumes that the Portfolio had the same management expense ratio each year as itdid in the Portfolio’s last completed financial year. See Fees and expenses for more information about thecosts of investing in the Portfolios.

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Pinnacle Income PortfolioFund details

Type of fund: Global fixed income balanced fund

Date established: April 22, 2005

Type of securities: Series A units of a mutual fund trust

Eligible for Registered Plans? Yes

Portfolio advisor: The ManagerToronto, Ontario


Investment objectives

The Portfolio’s objective is to generate current income and long-term capital growth, with a biastowards income. It invests primarily in a mix of equity and income mutual funds managed by us.

Any change to the fundamental investment objectives must be approved by a majority of votes cast ata meeting of unitholders called for that purpose.

Investment strategies

The Portfolio is an asset allocation fund that allocates your investment between four asset classes:bonds, Canadian equities, foreign equities and equities of real estate companies. The majority of thePortfolio will be invested in bonds with the balance invested in equities which will include Canadian andforeign equities and may include equities of real estate companies and real estate investment trusts.Although up to 100% of the Portfolio’s assets may be invested in Underlying Funds, the Portfolio may holda portion of its assets in cash or money market instruments while seeking investment opportunities or fordefensive purposes.

The Portfolio can invest up to 60% of its assets in foreign securities.


The Portfolio indirectly has the same risks as the Underlying Funds it holds. The Portfolio takes onthe risks of an Underlying Fund in proportion to its investment in that Underlying Fund. As a result ofthese investments, the risks of the Portfolio include:

• asset-backed and mortgage-backed securities risk

• commodity risk

• credit risk

• currency risk

• derivatives risk

• emerging markets risk

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PINNACLE INCOME PORTFOLIO

• equity risk

• foreign investment risk

• fund-of-funds risk

• income trust risk

• interest rate risk

• issuer-specific risk

• liquidity risk

• real estate sector risk

• repurchase and reverse repurchase transaction risk

• securities lending risk

• small company risk

• U.S. withholding tax risk.

You will find details about each of these risks under What is a mutual fund and what are the risks ofinvesting in a mutual fund?

During the 12 months preceding October 21, 2015, up to 45.2% of the net assets of the portfolio wereinvested in Scotia Private Income Pool Series I, up to 15.2% of the net assets of the portfolio were investedin Scotia Private American Core-Plus Bond Pool Series I and up to 10.1% of the net assets of the portfoliowere invested in Scotia Private High Yield Income Pool Series I.


This Portfolio may be suitable for you if:

• you want a balanced holding, which is well diversified by asset class, investment style, geographyand market capitalization

• you can accept low to medium risk

• you are investing for the medium to long term

Please see Investment risk classification methodology for a description of how we determined theclassification of this Portfolio’s risk level.

Distribution policy

The Portfolio will distribute, in each taxation year of the Portfolio, sufficient income and net realizedcapital gains so that it will not have any liability for Canadian income tax under Part I of the Tax Act.Distributions will be paid or payable by December 31 of each year and at such other times as may bedetermined by the Manager.

Distributions on units held in Registered Plans and non-registered accounts are reinvested inadditional units of the Portfolio unless you tell your dealer that you want to receive cash distributions.

Fund expenses indirectly borne by investors

This example shows the Portfolio’s expenses on a $1,000 investment with a 5% annual return.

Fees and expenses payable over: 1 year 3 years 5 years 10 years

Series A units $23.47 $74.00 $129.70 $295.24

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Pinnacle Balanced PortfolioFund details

Type of fund: Global neutral balanced fund







The Portfolio’s objective is to achieve a balance of long-term capital growth and current income. Itinvests primarily in a mix of equity and income mutual funds managed by us.



The Portfolio is an asset allocation fund that allocates your investment between four asset classes:bonds, equities of real estate companies, Canadian equities and foreign equities. The majority of thePortfolio will be invested in equities which will include Canadian and foreign equities and equities of realestate companies and real estate investment trusts. The equities allocation will have a slight focus onCanadian equities. In addition, a significant allocation of the Portfolio will be invested in bonds.

Although up to 100% of the Portfolio’s assets may be invested in underlying funds including theUnderlying Funds, the Portfolio may hold a portion of its assets in cash or money market instruments whileseeking investment opportunities or for defensive purposes.





• commodity risk

• credit risk

• currency risk


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PINNACLE BALANCED PORTFOLIO


• equity risk






• liquidity risk





• U.S. withholding tax risk


During the 12 months preceding October 21, 2015, up to 30.6% of the net assets of the portfolio wereinvested in Scotia Private Income Pool Series I, up to 10.8% of the net assets of the portfolio were investedin Scotia Private Global Real Estate Pool Series I, up to 10.7% of the net assets of the portfolio wereinvested in Scotia Private Canadian Growth Pool Series I, up to 10.5% of the net assets of the portfoliowere invested in Scotia Private Canadian Value Pool Series I, and up to 10.2% of the net assets of theportfolio were invested in Scotia Private High Yield Income Pool Series I.




• you can accept medium risk

• you are investing for the medium to long term


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PINNACLE BALANCED PORTFOLIO

Distribution policy






Series A units $24.70 $77.87 $136.50 $310.71

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Pinnacle Growth PortfolioFund details

Type of fund: Global equity balanced fund







The Portfolio’s objective is to achieve long-term capital growth and provide some current income. Itinvests primarily in a mix of equity and income mutual funds managed by us.



The Portfolio is an asset allocation fund that allocates your investment between four asset classes:bonds, equities of real estate companies, Canadian equities and foreign equities. The Portfolio will beprincipally invested in equities which will include a significant position in Canadian equities and smallerpositions in foreign equities and equities of real estate companies and real estate investment trusts.Approximately 20% of the Portfolio will be invested in bonds.

Although up to 100% of the Portfolio’s assets may be invested in Underlying Funds, the Portfolio mayhold a portion of its assets in cash or money market instruments while seeking investment opportunities orfor defensive purposes.





• commodity risk

• credit risk

• currency risk


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PINNACLE GROWTH PORTFOLIO


• equity risk






• liquidity risk





• U.S. withholding tax risk


During the 12 months preceding October 21, 2015, up to 18.3% of the net assets of the portfolio wereinvested in Scotia Private Canadian Growth Pool Series I, up to 18.2% of the net assets of the portfoliowere invested in Scotia Private Canadian Value Pool Series I, up to 14.4% of the net assets of the portfoliowere invested in Scotia Private Income Pool Series I, and up to 10.4% of the net assets of the portfoliowere invested in Scotia Private Global Real Estate Pool Series I.




• you can accept medium to high risk

• you are investing for the long term


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PINNACLE GROWTH PORTFOLIO

Distribution policy






Series A units $30.14 $95.00 $166.52 $379.04

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What is a mutual fund and what arethe specific risks of investing in amutual fund?

For many Canadians, mutual funds represent a simple and affordable way to meet their financialgoals. But what exactly is a mutual fund, why invest in them, and what are the risks?

What is a mutual fund?

A mutual fund is an investment that pools your money with the money of many other people.Professional portfolio advisors use that money to buy securities that they believe will help achieve thePortfolio’s investment objectives. These securities could include stocks, bonds, mortgages, money marketinstruments, or a combination of these. For the Portfolios, these investments consist mainly of other mutualfunds — the Underlying Funds.

When you invest in a mutual fund, you receive units of the mutual fund. Each unit represents aproportionate share of all of the mutual fund’s assets. All of the investors in a mutual fund share in themutual fund’s income, gains and losses. Investors pay their share of the mutual fund’s expenses.

Why invest in mutual funds?

Mutual funds offer investors three key benefits: professional money management, diversification andaccessibility.

• Professional money management. Professional portfolio advisors have the expertise to make theinvestment decisions. They also have access to up-to-the-minute information on trends in thefinancial markets, and in-depth data and research on potential investments.

• Diversification. Because your money is pooled with that of other investors, a mutual fund offersdiversification into many securities that may not have otherwise been available to individualinvestors.

• Accessibility. Mutual funds have low investment minimums, making them accessible to nearlyeveryone.

No guarantees

While mutual funds have many benefits, it is important to remember that an investment in a mutualfund is not guaranteed. Unlike bank accounts or guaranteed investment certificates, mutual fund units arenot covered by the Canada Deposit Insurance Corporation or any other government deposit insurer, and yourinvestment in the Portfolios is not guaranteed by Scotiabank.

Under exceptional circumstances, a mutual fund may suspend your right to sell your units.

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What are the risks?

While everyone wants to make money when they invest, you could lose money, too. This is known asrisk. Like other investments, mutual funds involve some level of risk. The value of a Portfolio’s securitiescan change from day to day for many reasons, including changes in the economy, interest rates, and marketand company news. That means the value of mutual fund units can vary. When you sell your units in aPortfolio, you could receive less money than you invested.

The amount of risk depends on the Portfolio’s investment objectives and the types of securities itinvests in. A general rule of investing is that the higher the risk, the higher the potential for gains as wellas losses. Our Cash Equivalent Funds (offered under other simplified prospectuses) usually offer the leastrisk because they invest in highly liquid, short-term investments such as treasury bills. Their potentialreturns are tied to short-term interest rates. Our Income Funds (offered under other simplifiedprospectuses) invest in bonds and other fixed income investments. Our Income Funds typically have higherlong-term returns than our Cash Equivalent Funds, but they carry more risk because their prices canchange when interest rates change. Our Equity Funds (offered under other simplified prospectuses) exposeinvestors to the highest level of risk because they invest in equity securities, such as common shares,whose prices can rise and fall significantly in a short period of time.

Managing risk

While risk is an important factor to consider when you are choosing a mutual fund, you should alsothink about your investment goals and when you will need your money. For example, if you are saving for alarge purchase in the next year or so, you might consider investing in a mutual fund with low risk. If youwant your retirement savings to grow over the next 20 years, you can probably afford to put more of yourmoney in our Equity Funds.

A carefully chosen mix of investments can help reduce risk as you meet your investment goals. Yourmutual fund representative can help you build an investment portfolio that is suited to your goals and riskcomfort level.

If your investment goals or tolerance for risk changes, remember, you can and should change yourinvestments to match your new situation.

Specific risks of mutual funds

The value of the investments a mutual fund holds can change for a number of reasons. You will findthe specific risks of investing in each of the Portfolios in the individual fund descriptions section. Thissection tells you more about each risk. To the extent that a Portfolio invests in Underlying Funds, it hasthe same risks as its Underlying Funds. Accordingly, any reference to a Portfolio in this section is intendedto also refer to any Underlying Funds that a Portfolio may invest in. Not all of the following risks apply tothe Portfolios. However, they may apply to the Underlying Funds in which a Portfolio invests and thereforecan affect the value of the Portfolio. You should refer to the simplified prospectus of an Underlying Fund forinformation about the risks of investing in the Underlying Fund. The most common risks are:

Asset-backed and mortgage-backed securities risk

Asset-backed securities are debt obligations that are backed by pools of consumer or business loans.Mortgage-backed securities are debt obligations backed by pools of mortgages on commercial or residentialreal estate. To the extent that a Portfolio invests in these securities, it will be sensitive to asset-backed and

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mortgage-backed securities risk. If there are changes in the market perception of the issuers of these typesof securities, or in the creditworthiness of the parties involved, then the value of the securities may beaffected. When investing in mortgage-backed securities, there is also a risk that there may be a drop in theinterest rates charged on mortgages, a mortgagor may default on its obligations under a mortgage or theremay be a drop in the value of the property secured by the mortgage.

Commodity risk

Some Portfolios may invest directly or indirectly in gold or in companies engaged in the energy ornatural resource industries. The market value of such investments may be affected by adverse movementsin commodity prices. When commodity prices decline, this generally has a negative impact on the earningsof companies whose business is based in commodities, such as oil and gas.

Credit risk

A fixed income security, such as a bond, is a promise to pay interest and repay the principal on thematurity date. There is always a risk that the issuer will fail to honour that promise. This is called creditrisk. To the extent that a Portfolio invests in fixed income securities, it will be sensitive to credit risk.Credit risk is lowest among issuers that have a high credit rating from a credit rating agency. It is highestamong issuers that have a low credit rating or no credit rating. Issuers with a low credit rating usuallyoffer higher interest rates to make up for the higher risk. The bonds of issuers with poor credit ratingsgenerally have yields that are higher than bonds of issuers with superior credit ratings. Bonds of issuersthat have poor credit ratings tend to be more volatile as there is a greater likelihood of bankruptcy ordefault. Credit ratings may change over time. Please see Foreign investment risk in the case of investmentsin debt issued by foreign companies or governments.

Currency risk

When a mutual fund buys an investment that is denominated in a foreign currency, changes in theexchange rate between that currency and the Canadian dollar will affect the value of the mutual fund.When a mutual fund calculates its net asset value in U.S. dollars, changes in the exchange rate betweenU.S. dollars and an investment denominated in a currency other than U.S. dollars will affect the value ofthe mutual fund.

Derivatives risk

To the extent that a Portfolio uses derivatives, it will be sensitive to derivatives risk. Derivatives canbe useful for hedging against losses, gaining exposure to financial markets and making indirectinvestments, but they involve certain risks:

• Hedging with derivatives may not achieve the intended result. Hedging instruments rely onhistorical or anticipated correlations to predict the impact of certain events, which may or maynot occur. If they occur, they may not have the predicted effect.

• It is difficult to hedge against trends that the market has already anticipated.

• Costs relating to entering and maintaining derivatives contracts may reduce the returns ofa Portfolio.

• A currency hedge will reduce the benefits of gains if the hedged currency increases in value.

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• Currency hedging can be difficult in smaller emerging growth countries because of the limited sizeof those markets.

• Currency hedging provides no protection against changes in the value of the underlying securities.

• There is no guarantee that a liquid exchange or market for derivatives will exist. This couldprevent a Portfolio from closing out its positions to realize gains or limit losses. At worst, aPortfolio might face losses from having to exercise underlying futures contracts.

• The prices of derivatives can be distorted if trading in their underlying stocks is halted. Tradingin the derivative might be interrupted if trading is halted in a large number of the underlyingstocks. This would make it difficult for a Portfolio to close out its positions.

• The counterparty in a derivatives contract might not be able to meet its obligations. When usingderivatives, a Portfolio relies on the ability of the counterparty to the transaction to perform itsobligations. In the event that a counterparty fails to complete its obligations, the Portfolio maybear the risk of loss of the amount expected to be received under options, forward contracts orother transactions in the event of the default or bankruptcy of a counterparty.

• Derivatives trading on foreign markets may take longer and be more difficult to complete. Foreignderivatives are subject to the foreign investment risks described below. Please see Foreigninvestment risk.

• Investment dealers and futures brokers may hold a Portfolio’s assets on deposit as collateral in aderivative contract. As a result, someone other than the Portfolio’s custodian is responsible for thesafekeeping of that part of the Portfolio’s assets.

• The regulation of derivatives is a rapidly changing area of law and is subject to modification bygovernment and judicial action. The effect of any future regulatory changes may make it moredifficult, or impossible, for a Portfolio to use certain derivatives

Emerging markets risk

Some Portfolios may invest in foreign companies or governments (other than the U.S.) which may belocated in, or operate in, developing countries. Companies in these markets may have limited product lines,markets or resources, making it difficult to measure the value of the company. Political instability, possiblecorruption, as well as lower standards of business regulation increase the risk of fraud and other legalissues. In addition to foreign investment risk described below, these mutual funds may be exposed togreater volatility as a result of such issues.

Equity risk

Portfolios that invest in equities, such as common shares, are affected by changes in the generaleconomy and financial markets, as well as by the success or failure of the companies that issued thesecurities. When stock markets rise, the value of equity securities tends to rise. When stock markets fall,the value of equity securities tends to fall. Convertible securities may also be subject to interest rate risk.

Foreign investment risk

Investments issued by foreign companies or governments other than the U.S. can be riskier thaninvestments in Canada and the U.S. Foreign countries can be affected by political, social, legal ordiplomatic developments, including the imposition of currency and exchange controls. Some foreign markets

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can be less liquid, are less regulated, and are subject to different reporting practices and disclosurerequirements than issuers in North American markets. It may be more difficult to enforce a Portfolio’s legalrights in jurisdictions outside of Canada. In general, securities issued in more developed markets, such asWestern Europe, have lower foreign investment risk. Securities issued in emerging or developing markets,such as Southeast Asia or Latin America, have significant foreign investment risk and are exposed to theemerging markets risks described above.

Fund-of-funds risk

If a Portfolio invests in an Underlying Fund, the risks associated with investing in that Portfolioinclude the risks associated with the securities in which the Underlying Fund invests, along with the otherrisks of the Underlying Fund. Accordingly, a Portfolio takes on the risk of an Underlying Fund and itsrespective securities in proportion to its investment in that Underlying Fund. If an Underlying Fundsuspends redemptions, the Portfolio that invests in the Underlying Fund may be unable to value part of itsinvestment portfolio and may be unable to process redemption orders.

Income trust risk

An income trust, including a REIT, generally holds debt and/or equity securities of an underlyingactive business or is entitled to receive a royalty on revenues generated by such business. Distributions andreturns on income trusts are neither fixed nor guaranteed. The trusts are subject to the risks of theparticular type of underlying business, including supply contracts, the cancellation by a major customer ofits contract or significant litigation.

The governing law of the income trust may not limit, or may not fully limit, the liability of investorsin the income trust, including a Portfolio that invests in the income trust, for claims against the incometrust. In such cases, to the extent that claims, whether in contract, in tort or as a result of tax orstatutory liability against the income trust are not satisfied by the income trust, investors in the incometrust, including a fund that invests in the income trust, could be held liable for such obligations. Incometrusts generally seek to make this risk remote in the case of contract by including provisions in theiragreements that provide that the obligations of the income trust will not be binding on investors. However,investors in the income trust, including a fund that invests in the income trust, would still have exposureto damage claims not mitigated contractually, such as personal injury and environmental claims.

As the income tax treatment in Canada of certain publicly traded trusts (other than certain REITs)has changed, many trusts have converted or may convert to corporations, which has had, and may continueto have, an effect on the trading price of such trusts.

Interest rate risk

Portfolios that invest in fixed income securities, such as bonds, mortgages and money marketinstruments, are sensitive to changes in interest rates. In general, when interest rates are rising, the valueof these investments tends to fall. When rates are falling, fixed income securities tend to increase in value.Fixed income securities with longer terms to maturity are generally more sensitive to changes in interestrates. Certain types of fixed income securities permit issuers to repay principal before the security’smaturity date. There is a risk that an issuer will exercise this prepayment right after interest rates havefallen and the Portfolios that hold these fixed income securities will receive payments of principal before theexpected maturity date of the security and may need to reinvest these proceeds in securities that havelower interest rates.

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Issuer-specific risk

The market value of an individual issuer’s securities can be more volatile than the market as a whole.As a result, if a single issuer’s securities represent a significant portion of the market value of a Portfolio’sassets, changes in the market value of that issuer’s securities may cause greater fluctuation in thePortfolio’s unit value than would normally be the case. A less-diversified Portfolio may also suffer fromreduced liquidity if a significant portion of its assets is invested in any one issuer. In particular, thePortfolio may not be able to easily liquidate its position in the issuers as required to fund redemptionrequests.

Generally, mutual funds are not permitted to invest more than 10 per cent of their assets in any oneissuer. This restriction does not apply to investments in debt securities issued or guaranteed by theCanadian or U.S. government, securities issued by a clearing corporation, securities issued by mutual fundsthat are subject to the requirements of National Instrument 81-102 — Investment Funds (‘‘NI 81-102’’) andNational Instrument 81-101 — Mutual Fund Prospectus Disclosure, or index participation units issued by amutual fund.

Liquidity risk

Liquidity is a measure of how quickly an investment can be sold for cash at a fair market price. If aPortfolio cannot sell an investment quickly, it may lose money or make a lower profit, especially if it has tomeet a large number of redemption requests. In general, investments in smaller companies, smaller marketsor certain sectors of the economy tend to be less liquid than other types of investments. The less liquid aninvestment, the more its value tends to fluctuate.

Real estate sector risk

Some of mutual funds concentrate their investments in the real estate sector of the marketplace. Thesemutual funds are better able to focus on the real estate sector’s potential, however these mutual funds arealso riskier than mutual funds with broader diversification. Sector specific mutual funds tend to experiencegreater fluctuations in price because securities in the same industry tend to be affected by the samefactors. These mutual funds must continue to follow their investment objectives by investing in theirparticular sector even during periods when the sector is performing poorly.

Repurchase and reverse repurchase transaction risk

Some Portfolios may enter into repurchase or reverse repurchase agreements to generate additionalincome. When a mutual fund agrees to sell a security at one price and buy it back on a specified later datefrom the same party with the expectation of a profit, it is entering into a repurchase agreement. When amutual fund agrees to buy a security at one price and sell it back on a specified later date to the sameparty with the expectation of a profit, it is entering into a reverse repurchase agreement.

Portfolios engaging in repurchase and reverse repurchase transactions are exposed to the risk that theother party to the transaction may become insolvent and unable to complete the transaction. In thosecircumstances, there is a risk that the value of the securities bought may drop or the value of thesecurities sold may rise between the time the other party becomes insolvent and the time the Portfoliorecovers its investment.

To limit the risks associated with repurchase and reverse repurchase transactions, any suchtransactions entered into by a Portfolio will comply with applicable securities laws, including therequirement that each agreement be, at a minimum, fully collateralized by investment grade securities or

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cash with a value of at least 102% of the market value of the securities subject to the transaction. APortfolio will enter into repurchase or reverse repurchase agreements only with parties that we believe,through conducting credit evaluation, have adequate resources and financial ability to meet their obligationsunder such agreements. In addition, no Portfolio will expose more than 10% of the total value of its assetswith any one entity under securities lending, repurchase and reverse repurchase agreements. Prior toentering into a repurchase agreement, a Portfolio must ensure that the aggregate value of the securitiesthat have been sold pursuant to repurchase transactions, together with any securities loaned pursuant tosecurities lending transactions, will not exceed 50% of the net asset value of the Portfolio immediately afterthe Portfolio enters into the transaction.

Securities lending risk

Some Portfolios may enter into securities lending transactions to generate additional income fromsecurities held in a Portfolio’s investment portfolio. In lending its securities, a Portfolio is exposed to therisk that the borrower may not be able to satisfy its obligations under the securities lending agreement andthe lending Portfolio is forced to take possession of the collateral held. Losses could result if the collateralheld by the Portfolio is insufficient, at the time the remedy is exercised, to replace the securities borrowed.To address these risks, any securities lending transactions entered into by a Portfolio will comply withapplicable securities laws, including the requirement that each agreement be, at a minimum, fullycollateralized by investment grade securities or cash with a value of at least 102% of the market value ofthe securities subject to the transaction. A Portfolio will enter into securities lending transactions only withparties that we believe, through conducting credit evaluation, have adequate resources and financial abilityto meet their obligations under such agreements. In addition, no Portfolio will expose more than 10% of thetotal value of its assets with any one entity under securities lending, repurchase and reverse repurchaseagreements. Prior to entering into a securities lending agreement, a Portfolio must ensure that theaggregate value of the securities loaned, together with those that have been sold pursuant to repurchasetransactions, does not exceed 50% of the net asset value of the Portfolio immediately after the Portfolioenters into the transaction.

Series risk

Some Underlying Funds offer two or more series. Although the value of each series is calculatedseparately, there is a risk that the expenses or liabilities of one series of units may affect the value of theother series. If one series is unable to cover its liabilities, the other series are legally responsible forcovering the difference. We believe that this risk is very low.

Significant unitholder risk

Some Portfolios may have particular investors who own a large proportion of the outstanding units ofthe Portfolio. For example, institutions such as banks and insurance companies or other fund companiesmay purchase units of the Portfolios for their own mutual funds, segregated investment funds, structurednotes or discretionary managed accounts. Retail investors may also own a significant amount of units ofa Portfolio.

If one of those investors redeems a large amount of their investment in a Portfolio, the Portfolio mayhave to sell its portfolio investments at unfavourable prices to meet the redemption request, which canresult in significant price fluctuations to the net asset value of the Portfolio and may potentially reduce thereturns of the Portfolio. Conversely, if a large investor were to increase its investment in a Portfolio, that

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Portfolio may have to hold a relatively large portion in cash for a period of time until the portfolio advisorfinds suitable investments, which could also negatively impact the performance of the Portfolio.

Small company risk

The prices of shares issued by smaller companies tend to fluctuate more than those of largercorporations. Smaller companies may not have established markets for their products and may not havesolid financing. These companies generally issue fewer shares, which increases their liquidity risk.

U.S. withholding tax risk

Generally, the Foreign Account Tax Compliance provisions of the U.S. Hiring Incentives to RestoreEmployment Act of 2010 (or ‘‘FATCA’’) impose a 30% withholding tax on ‘‘withholdable payments’’ made toa mutual fund, unless the mutual fund enters into a FATCA agreement with the U.S. Internal RevenueService (the ‘‘IRS’’) (or is subject to an intergovernmental agreement as described below) to comply withcertain information reporting and other requirements. Compliance with FATCA may in certain cases requirea mutual fund to obtain certain information from certain of its investors and (where applicable) theirbeneficial owners (including information regarding their identity, residency and citizenship) and to disclosesuch information and documentation to the IRS.

Under the terms of the intergovernmental agreement between Canada and the U.S. to provide for theimplementation of FATCA (the ‘‘Canada-U.S. IGA’’), and its implementing provisions under the Tax Act, aPortfolio will be treated as complying with FATCA and not subject to the 30% withholding tax if thePortfolio complies with the terms of the Canada-U.S. IGA and its implementing provisions in the Tax Act.Under the terms of the Canada-U.S. IGA, a Portfolio will not have to enter into an individual FATCAagreement with the IRS but the Portfolio will be required to register with the IRS and to report certaininformation on accounts held by U.S. persons owning, directly or indirectly, an interest in the Portfolio, orheld by certain other persons or entities. In addition, the Portfolio may also be required to report certaininformation on accounts held by investors that did not provide the required residency and identityinformation, through the dealer, to the Portfolio. The Portfolio will not have to provide information directlyto the IRS but instead will be required to report information to the Canada Revenue Agency (the ‘‘CRA’’).The CRA will in turn exchange information with the IRS under the existing provisions of theCanada-U.S. Income Tax Convention. The Canada-U.S. IGA sets out specific accounts that are exempt frombeing reported, including certain tax deferred plans. By investing in a Portfolio the investor is deemed toconsent to the Portfolio disclosing such information to the CRA. If a Portfolio is unable to comply with anyof its obligations under the Canada-U.S. IGA, the imposition of the 30% U.S. withholding tax may affect thenet asset value of the Portfolio and may result in reduced investment returns to unitholders. It is possiblethat the administrative costs arising from compliance with FATCA and/or the Canada-U.S. IGA and futureguidance may also cause an increase in the operating expenses of a Portfolio.

Withholdable payments include (i) certain U.S. source income (such as interest, dividends and otherpassive income) and (ii) gross proceeds from the sale or disposition of property that can produceU.S. source interest or dividends. The withholding tax applies to withholdable payments made on or afterJuly 1, 2014 (or January 1, 2017 in the case of gross proceeds). The 30% withholding tax may also applyto any ‘‘foreign passthru payments’’ paid by a mutual fund to certain investors on or after January 1, 2017.The scope of foreign passthru payments will be determined under the U.S. Treasury regulations that haveyet to be issued.

The foregoing rules and requirements may be modified by future amendments of the Canada-U.S. IGA,the Tax Act, future U.S. Treasury regulations and other guidance.

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Organization and management of thePortfolios

Manager 1832 Asset Management L.P. As manager, we are responsible1 Adelaide Street East providing the services and facilities28th Floor necessary for the operation of theToronto, Ontario M5C 2V9 Portfolios, as well as all general

management and administrativeservices. The Manager may engage thirdparties to perform certain services on itsbehalf.

The general partner of the Manager,1832 Asset Management G.P. Inc., iswholly-owned by The Bank ofNova Scotia.

Trustee 1832 Asset Management L.P. As trustee, we have full control andToronto, Ontario have authority over the assets, business

and affairs of the Portfolios, on theterms outlined in the Portfolios’Declaration of Trust.

Principal Scotia Capital Inc. Scotia Capital Inc. has the exclusivedistributor Toronto, Ontario right to distribute and arrange

distribution of units of the Portfoliosanywhere in Canada where they qualifyfor sale. We or Scotia Capital Inc. mayhire participating dealers to assist inthe sale of units of the Portfolios.

Scotia Capital Inc. is a wholly-ownedsubsidiary of The Bank of Nova Scotia,which is the parent company of1832 Asset Management L.P.

Custodian The Bank of Nova Scotia The custodian holds the investments ofToronto, Ontario the Portfolios and keeps them safe to

ensure that they are used only for thebenefit of investors.


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Securities Lending The Bank of Nova Scotia In the event a Portfolio engages in aAgent Toronto, Ontario securities lending transaction,

repurchase transaction or reverserepurchase transaction, then The Bankof Nova Scotia will be appointed as thePortfolio’s securities lending agent. Thesecurities lending agent will act onbehalf of the Portfolio in administeringthe securities lending transactions,repurchase transactions and reverserepurchase transactions entered into bythe Portfolio. The general partner ofthe Manager, 1832 AssetManagement G.P. Inc., is wholly-ownedby The Bank of Nova Scotia.

Registrar International Financial Data The registrar makes arrangements toServices (Canada) Limited keep a record of all units of theToronto, Ontario Portfolios, processes orders and issues

tax slips to unitholders.

Auditor PricewaterhouseCoopers LLP The auditor is an independent firm ofToronto, Ontario Chartered Professional Accountants. The

firm audits the annual financialstatements of the Portfolios and providesan opinion as to whether they are fairlypresented in accordance withinternational financial reportingstandards (‘‘IFRS’’)

Portfolio Advisor 1832 Asset Management L.P. The portfolio advisor providesToronto, Ontario investment advice and makes the

investment decisions for the Portfolios.


Portfolio We have authority to retain portfolioSub-Advisor sub-advisors. If appointed for a Portfolio,

the portfolio sub-advisor providesinvestment advice and makes investmentdecisions for the Portfolio.

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Independent Review In accordance with NationalCommittee Instrument 81-107 — Independent

Review Committee for InvestmentPortfolios (‘‘NI 81-107’’), we, as managerof the Portfolios, have established anindependent review committee (‘‘IRC’’),with a mandate to review and provideinput on our policies and proceduresdealing with conflicts of interest inrespect of the Portfolios, and to reviewconflict of interest matters that wepresent to the IRC. The IRC currentlyhas five members, each of whom isindependent of the Manager and anyparty related to the Manager. The IRCwill prepare, at least annually, a reportof its activities for unitholders. Thisreport will be available on or beforeMarch 31st of each year, at no charge,on the Internet atwww.scotiabank.com/pinnacleportfolios.Additional information about the IRC,including the names of its members, isavailable in the Portfolios’ annualinformation form.

In certain circumstances, your approvalmay not be required under applicablesecurities laws to effect a Portfoliomerger or a change in the auditor of aPortfolio. Where the IRC is permittedunder applicable securities laws toapprove a merger in place ofunitholders, you will receive at least60 days’ written notice before the dateof the merger. For a change in theauditor of a Portfolio, your approval willnot be obtained, but you will receive atleast 60 days’ written notice before thechange takes effect.

The Portfolios invest in Underlying Funds that are managed by us or our associates or affiliates.Accordingly, the Portfolios will not vote any of the securities of any of those Underlying Funds. However, wemay arrange for you to vote your share of those securities.

The Portfolios have received an exemption from the securities regulatory authorities allowing them topurchase equity securities of a Canadian reporting issuer during the period of distribution of the securitiesand for the 60-day period following the period of distribution (the ‘‘Prohibition Period’’) pursuant to aprivate placement notwithstanding that an affiliate or associate of the Manager, such as Scotia Capital Inc.,acts as an underwriter or agent in the offering of equity securities. Any such purchase must be consistentwith the investment objective of the particular Portfolio. Further, the IRC of the Portfolios must approve theinvestment in accordance with the approval requirements of NI 81-107 and such purchase can only becarried out if it is in compliance with certain other conditions.

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The Portfolios have received an exemption from the securities regulatory authorities to permit thePortfolios to invest in equity securities of an issuer that is not a reporting issuer in Canada during theProhibition Period, whether pursuant to a private placement of the issuer in Canada or in the United Statesor a prospectus offering of the issuer in the United States of securities of the same class, even if anaffiliate of the Manager acts as underwriter in the private placement or prospectus offering, provided theissuer is at the time a registrant in the United States, the IRC approves of the investment and thepurchase is carried out in compliance with certain other conditions.

In addition to the above exemptive relief, the Portfolios may from time to time be granted exemptionsfrom NI 81-102 to permit them to invest during the Prohibition Period in securities of an issuer, in whichan affiliate or associate of the Manager, such as Scotia Capital Inc., acts as an underwriter or agent in theissuer’s distribution of securities of the same class, where the Portfolios are not able to do so inaccordance with NI 81-107 or the exemptive relief described above.

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Purchases, switches and redemptions

The Portfolios are ‘‘no-load’’. That means that you do not pay a sales commission when you buy,switch or sell these units through us or our affiliates. Selling your units is also known as redeeming.

The minimum initial investment in Series A units of a Portfolio is $25,000, and the minimumsubsequent investment is $100 per Portfolio. When the initial investment is made, your dealer will send youa confirmation that summarizes the details of the purchase. The Portfolios do not issue unit certificates; theManager arranges to keep records of unit ownership. We may change the minimum amounts for initial andsubsequent investments in a Portfolio at any time, from time to time, and on a case by case basis, subjectto applicable securities laws.

If the value of the investment(s) in your account falls below $100, we may sell your units and sendyou the proceeds. We will give you 30 days’ written notice before selling your units.

Units are non-transferable except with the written consent of the Manager for the sole purpose ofgranting a security interest therein.

How we calculate net asset value per unit

Separate net asset values are calculated for each series of a Portfolio at the end of each day based oneach series’ share of the Portfolio’s net asset value as determined in accordance with the Portfolio’sdeclaration of trust. The series net asset value per unit is calculated daily by dividing (i) the currentmarket value of the proportionate share of the assets allocated to the series, less the liabilities of the seriesand the proportionate share of the common expenses allocated to the series, by (ii) the total number ofunits of that series outstanding at such time.

The net asset value per unit is determined daily, at the close of regular trading on the Toronto StockExchange, normally 4:00 p.m. Toronto time. In unusual circumstances, we may suspend the calculation ofthe net asset value per unit of each series, subject to obtaining any necessary regulatory approval. The unitprice of a series usually varies day to day in response to changes in the value of the Portfolio’s securities.

Securities which trade on a public stock exchange are usually valued at their closing price on thatexchange. However, if the price is not a true reflection of the value of the security, we will use anothermethod to determine its value. This method is called fair value pricing and it will be used when asecurity’s value is affected by events which occur after the closing of the market where the security isprincipally traded. Fair value pricing may also be used in other circumstances.

All of the Portfolios offered under this simplified prospectus offer Series A units. Series A units of thePortfolios are available to all investors.

How to place orders

Your request to purchase units must be received before 3:00 p.m. Toronto time in order for thepurchase to be priced at the net asset value per unit determined at 4:00 p.m. on such day. If the order isreceived after 3:00 p.m., units will be issued at the net asset value calculated at 4:00 p.m. on the nextbusiness day. If the cash required to complete the transaction is not received within three trading days ofreceipt of the purchase order, the same number of units purchased will be redeemed. If the Portfolio’sredemption price is less than the purchase price, your dealer will pay the difference to the Portfolio and

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collect that amount from you. If the redemption price is greater than the purchase price for the units, thePortfolio will keep the difference.

The Manager has the right to reject any order within one business day after it has been received. Ifan application is rejected, the purchase price paid by you will be refunded immediately. We may reject yourorder if you have made several purchases and sales of a Portfolio within a short period of time, usually31 days.

If you purchase units of a Portfolio at a time when the Portfolio has a significant amount ofundistributed income and gains, the net asset value of the Portfolio and therefore the purchase price paidby you for the units will reflect the amount of the undistributed income and gains. Upon the subsequentdistribution by the Portfolio of such income and gains, you may be subject to tax on your share of thedistribution, notwithstanding that the distribution may reflect part of the purchase price paid by you forthe units.

How to switch the Portfolios

You can switch Series A units you purchased of a Portfolio for Series A units of another Portfolio aslong as you are eligible to hold the particular series of the Portfolio into which you switch. These types ofswitches will be considered a disposition for tax purposes and accordingly, you may realize a capital gainor loss. The tax consequences are discussed in Income tax considerations for investors in this document.

When we receive your order, we will sell units of the first Portfolio and then use the proceeds to buyunits of the second Portfolio. If you switch units within 31 days of buying them, you may have to pay ashort-term trading fee. See Short-term trading for details.

How to redeem Portfolios

All or some of the units held by you can be redeemed on any business day. Your request to redeemunits of the Portfolios must be received before 3:00 p.m. Toronto time in order for the redemption to bepriced at the net asset value per unit determined at 4:00 p.m. on such date. If the redemption request isreceived after 3:00 p.m., units will be redeemed at the net asset value per unit calculated at 4:00 p.m. onthe next business day.

If any documents which may be required by the Manager to complete the sale are not received withinten business days of the redemption request, the Manager will buy the same number of units sold. If thepurchase price is less than the sale price of the units, the Portfolio will keep the difference. If the purchaseprice is greater than the sale price for the units, your dealer is required to pay the Portfolio the difference.This amount will be collected from you.

Redemption proceeds will be deposited into your account within three business days after thedocuments required to complete the sale are received. Upon request, the Manager will mail you a cheque forthe proceeds of the sale, or will deposit the proceeds into an account designated by you, provided yourcheque for the purchase of any of the units being redeemed has cleared. If you sell units within 31 days ofbuying them, you may have to pay a short-term trading fee. See Fees and expenses payable by you —Short-term trading fee for details.

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Suspending your right to buy, switch and sell units

Securities regulations allow us to temporarily suspend your right to sell your Portfolio units andpostpone payment of your sale proceeds:

• during any period when normal trading is suspended on any exchange on which securities orderivatives that make up more than 50% by value or underlying market exposure of the totalassets of the Portfolio without allowance for liabilities are traded and there is no other exchangewhere these securities or derivatives are traded that represents a reasonable practical alternativefor the Portfolio, or

• with the approval of securities regulators.

We will not accept orders to buy Portfolio units during any period when we’ve suspended investors’rights to sell their units.

You may withdraw your sell order before the end of the suspension period. Otherwise, we will sellyour units at the net asset value per unit next calculated when the suspension period ends.

Short-term trading fee

Short-term trading by investors can increase a Portfolio’s expenses, which impacts all investors in thePortfolio, and can affect the economic interest of long-term investors. Short-term trading can affect aPortfolio’s performance by forcing the portfolio advisor to keep more cash in the Portfolio than wouldotherwise be required. If you redeem or switch securities of any series of a Portfolio within 31 days ofacquisition, we may, on behalf of the Portfolio, in our sole discretion, charge a short-term trading fee of 2%of the amount you redeem or switch. The fee may not apply to:

• transactions not exceeding a certain minimum dollar amount, as determined by the Manager fromtime to time;

• trade corrections or any other action initiated by the Manager or the applicable portfolio advisor;

• transfers of units of one Portfolio between two accounts belonging to the same unitholder;

• regularly scheduled registered retirement income fund (‘‘RRIF’’) or life income fund (‘‘LIF’’)payments; and

• regularly scheduled automatic withdrawal payments in Registered Plans.

Any formal or informal arrangements to permit short-term trading are described in the Portfolios’annual information form. If securities regulations mandate the adoption of specified policies relating toshort-term trading, the Portfolios will adopt such policies if and when implemented by the securitiesregulators. If required, these policies will be adopted without amendment to this simplified prospectus orthe Portfolios’ annual information form and without notice to you, unless otherwise required by suchregulations.

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Optional ServicesRegistered Plans

Each of the Portfolios is a qualified investment under the Tax Act for the following registered plans(collectively, ‘‘Registered Plans’’):

• registered retirement savings plans (‘‘RRSPs’’), including group RRSPs

• locked-in RRSPs and locked-in retirement accounts

• RRIFs

• LIFs and life registered income funds

• deferred profit sharing plans

• registered pension plans, including defined contribution pension plans

• registered education savings plans

• registered disability savings plans

• tax-free savings accounts (‘‘TFSAs’’)

Pre-Authorized Chequing Plan

Regular investing is an effective way to build wealth. In order to facilitate regular investing, theManager has established a Pre-Authorized Chequing Plan. Once the minimum initial investment in a seriesof units of a Portfolio has been made, you can authorize regular deductions from your bank account to buyunits. The minimum amount per authorized deduction is $100. You can suspend this authorization atany time.

If a Portfolio is merged into another mutual fund managed by the Manager, then any pre-authorizedcontribution plans and automatic withdrawal plans which were established for such Portfolio prior to themerger will be automatically re-established in comparable plans with respect to the applicable continuingmutual fund unless a unitholder advises otherwise.

If you make purchases using a pre-authorized contribution such as a Pre-Authorized Chequing Plan,you will receive Fund Facts for the Portfolio you have invested in only after your initial purchase unlessyou request that Fund Facts also be provided to you after each subsequent purchase. If you would like toreceive Fund Facts for subsequent purchases, please contact your broker or dealer. The current Fund Factsmay be found at www.sedar.com or at www.scotiafunds.com. Although you do not have a statutory right towithdraw from a subsequent purchase of mutual fund units made under a pre-authorized contribution(as that right only exists with respect to initial purchases under a pre-authorized contribution), you willcontinue to have a right of action for damages or rescission in the event the Fund Facts (or the documentsincorporated by reference into the simplified prospectus) contains a misrepresentation, whether or not yourequest Fund Facts for subsequent purchases.

Automatic Withdrawal Plan

If you have a minimum of $25,000 in a Portfolio, you may establish an automatic withdrawal accountto provide predetermined cash payments through automatic redemption of units of the Portfolio. You maysuspend this authorization at any time. The Manager reserves the right to terminate this arrangement foraccounts that fall below a market value of $5,000.

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Fees and expenses

This section describes the fees and expenses you may have to pay if you invest in the Portfolios. Youmay have to pay some of these fees and expenses directly. The Portfolios may have to pay some of thesefees and expenses, which reduces the value of your investment. The Portfolios are required to pay Goodsand Services Tax (‘‘GST’’) or Harmonized Sales Tax (‘‘HST’’) on management fees and operating expenses,based on the residence for tax purposes of the investors of the particular series. GST is currently chargedat a rate of 5% and HST is currently charged at a rate of between 13% and 15% depending on theprovince. Changes in existing HST rates, the adopting of HST by additional provinces, the repeal of HST byHST-participating provinces and changes in the breakdown of the residence of investors in each series maytherefore have an impact on the Portfolios year over year returns.

The Manager is not required to seek unitholder approval for the introduction of, or a change in thebasis of calculating, a fee or expense that is charged to a Portfolio or charged directly to unitholders of thePortfolio in a way that could result in an increase in charges to unitholders provided any such introduction,or change, will only be made if notice is sent to unitholders at least 60 days before the effective date ofthe change.

Fees and expenses payable by the Portfolios

Management Fees Each Portfolio pays us a management fee with respect to each series ofunits. The fee is calculated and accrued daily and paid monthly. Themanagement fees cover the costs of managing the Portfolio, arranging forinvestment analysis, recommendations and investment decision making forthe Portfolio, arranging for distribution of the Portfolios, marketing andpromotion of the Portfolio and providing or arranging for other services.The annual rates of the management fee which are a percentage of the netasset value net asset value of each Portfolio for Series A units of thePortfolios are as follows:

AnnualPortfolio management fee (%)

Pinnacle Income Portfolio 1.85%Pinnacle Balanced Portfolio 2.10%Pinnacle Growth Portfolio 2.40%

Investments in Underlying The series of an Underlying Fund in which a Portfolio invests will not payFunds a management fee directly to us, but an Underlying Fund pays its own fees

and expenses, which are in addition to the fees and expenses payable by aPortfolio that invests in the Underlying Fund.

No management or incentive fees are payable by a Portfolio if the paymentof those fees could reasonably be perceived as a duplication of fees payableby an Underlying Fund for the same services.

No sales or redemption fees are payable by a Portfolio when it buys or sellssecurities of an Underlying Fund that is managed by us or one of ourassociates or affiliates or if the payment of these fees could reasonably beperceived as a duplication of fees paid by an investor in the Portfolio.

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Management Fee In order to encourage very large investments in a Portfolio and to achieveDistributions effective management fees that are competitive for these large investments,

the Manager may agree to waive a portion of the management fee that itwould otherwise be entitled to receive from a Portfolio or a unitholder withrespect to a unitholder’s investment in the Portfolio. An amount equal tothe amount so waived may be distributed to such unitholder by the Portfolioor the Manager, as applicable (called a ‘‘Management Fee Distribution’’). Inthis way, the cost of Management Fee Distributions is effectively borne bythe Manager, not the Portfolios or the unitholder as the Portfolios or theunitholder, as applicable, are paying a discounted management fee.Management Fee Distributions are calculated and credited to the relevantunitholder on each business day and distributed on a monthly basis, firstout of net income and net taxable capital gains of the relevant Portfoliosand thereafter out of capital. All Management Fee Distributions areautomatically reinvested in additional securities of the relevant series of aPortfolio. The payment of Management Fee Distributions by the Portfolio orthe Manager, as applicable, to a unitholder in respect of a large investmentis fully negotiable between the Manager, as agent for the Portfolio, and theunitholder’s mutual fund representative or broker or dealer, and is primarilybased on the size of the investment in the Portfolio. The Manager willconfirm in writing to the unitholder’s mutual fund representative or brokeror dealer the details of any Management Fee Distribution arrangement.

Fixed Administration Fees Fixed Administration Feesand Other Operating The Manager pays certain operating expenses of the Portfolios. TheseExpenses expenses include regulatory filing fees and other day-to-day operating

expenses including, but not limited to, transfer agency and recordkeeping,accounting and fund valuation costs, custody fees, audit and legal fees,administration costs, bank charges, costs of preparing and distributingannual and semi-annual reports, prospectuses, annual information forms,Fund Facts and statements, investor communications and continuousdisclosure materials. The Manager is not obligated to pay any other expensecost or fee, including those arising from new government or regulatoryrequirements relating to the foregoing expenses, costs and fees. In return,each Portfolio pays a fixed administration fee to the Manager (the ‘‘fixedadministration fee’’). The fixed administration fee may vary by series ofunits and by Portfolio. Up to December 31, 2016, the fixed administrationfee payable by each Portfolio is subject to a transitional adjustmentpayment as described below under Transitional Adjustment Payment. TheManager may, in some years and in certain cases, pay a portion of a series’fixed administration fee or other fund costs. The fixed administration feeand other fund costs are included in the management expense ratio of aPortfolio. The fixed administration fee is calculated and accrued daily andpaid monthly. The maximum annual rates of the fixed administration fee,which are a percentage of the net asset value for each series of units ofeach Portfolio, are as follows:

FixedAdministration Fee

Portfolio %

Series A unitsPinnacle Income Portfolio 0.15%Pinnacle Balanced Portfolio 0.08%Pinnacle Growth Portfolio 0.15%

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Other Fund Costs

Each Portfolio also pays certain operating expenses directly, including thecosts and expenses related to the IRC of the Portfolios, costs associatedwith the conversion to IFRS and the ongoing audit costs associated withcompliance with IFRS, the cost of any government or regulatoryrequirements imposed commencing after May 14, 2014, including compliancewith Canadian OTC derivatives trade reporting rules, compliance with the‘‘Volcker Rule’’ under the Dodd-Frank Wall Street Reform and ConsumerProtection Act and other applicable U.S. regulations, and any new types ofcosts, expenses or fees not incurred prior to May 14, 2014, including thoserelated to external services that were not commonly charged in theCanadian mutual fund industry as of May 14, 2014, any fee introduced afterMay 14, 2014 by a securities regulator or other government authority thatis based on the assets or other criteria of the Portfolios, any transactioncosts, including all fees and costs related to derivatives, and any borrowingcosts (collectively, ‘‘other fund costs’’), and taxes (including, but not limitedto, GST or HST, as applicable).

The purchase price of all securities and other property acquired by or onbehalf of the Portfolios (including, but not limited to, brokerage fees,commissions and service charges paid in connection with the purchase andsale of such securities and other property) are considered capital costs paiddirectly by the Portfolios and therefore are not considered part of theoperating expenses of the Portfolios paid by the Manager.

Other fund costs will be allocated among Portfolios and each series of aPortfolio is allocated its own expenses and its proportionate share of thePortfolio’s expenses that are common to all series. Currently, each memberof the IRC is entitled to an annual retainer of $40,000 ($55,000 for theChair), and a per meeting fee of $1,500. Each ScotiaFund pays aproportionate share of the total compensation paid to the IRC each yearand reimburses members of the IRC for expenses incurred by them inconnection with their services as members of the IRC. Each Portfolio’sshare of the IRC’s compensation will be disclosed in the Portfolios’financial statements. The Manager may, in some years and in certain cases,pay a portion of a series’ fixed administration fee or other fund costs. Thefixed administration fee and other fund costs are included in themanagement expense ratio of a Portfolio.

Transitional Adjustment If in any month from August 22, 2014 to December 31, 2016 the aggregatePayment month end net asset value of all of the Participating Series (as defined

below) falls below 90% of the Starting Asset Level (as defined below), theManager will be entitled to receive a transitional adjustment payment(‘‘Transitional Adjustment Payment’’) for that month from all of theParticipating Series, in addition to the fixed administration fee. In all cases,in the event that the Transitional Adjustment Payment is payable in anymonth, the maximum amount that a Participating Series’ fixedadministration fee may increase is 0.03% (i.e. three basis points) in perannum terms.

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The Transitional Adjustment Payment in any month up to December 31,2016, if payable, will be equal to: (i) the fixed administration fee that wouldhave been payable to the Manager had the aggregate net asset value of allof the Participating Series equaled 90% of the Starting Asset Level for thatmonth; (ii) less the fixed administration fee payable for that month. TheTransitional Adjustment Payment is payable monthly.

The Transitional Adjustment Payment for any month will be allocatedproportionately among all of the Participating Series based on the fixedadministration fee payable for that month by each Participating Series andtherefore each Participating Series will pay its proportionate share of aTransitional Adjustment Payment regardless of whether such ParticipatingSeries’ net asset value remained constant, increased or decreased sinceAugust 22, 2014.

For the purposes of the preceding three paragraphs:

• ‘‘Participating Series’’ means each series of ScotiaFunds (otherthan those ScotiaFunds that are classes of Scotia CorporateClass Inc.), Scotia Private Pools and Pinnacle Portfolios that as ofAugust 22, 2014 is subject to a fixed administration fee; and

• ‘‘Starting Asset Level’’ means the aggregate net asset value of theParticipating Series as at the close of business on August 22,2014.

Management Expense Ratio Each Portfolio pays the following expenses relating to its operation and thecarrying on of its activities: (a) management fees paid to the Manager forproviding general management services; (b) the fixed administration fee(and, until December 31, 2016, possibly a Transitional Adjustment Payment)paid to the Manager; and (c) other fund costs (and taxes).

The expenses outlined in the previous paragraph are expressed annually byeach series of each Portfolio as its annual management expense ratio(‘‘MER’’) which are the total expenses of each series of the Portfolio for theyear expressed as a percentage of the series of the Portfolio’s average dailynet asset value during the year, calculated in accordance with applicablesecurities laws. Portfolio transaction costs and derivatives transaction costsare not included in the MER.

Fees and expenses payable by you

Short-term trading fee To discourage short-term trading, a Portfolio may charge a fee of 2% of theamount you sell or switch, if you sell or switch your units within 31 daysof buying them. For additional information please see Short-term tradingfee.

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Impact of sales charges

No sales commission or other sales charge is payable for any purchase, switch or redemption of unitsof the Portfolios.

Dealer compensation

Although dealers receive no up-front sales commissions in connection with the sale of units of thePortfolios, dealers (including ScotiaMcLeod) are compensated in connection with certain ongoing servicesthey provide to investors in the Portfolios. We may pay Scotia Securities Inc., ScotiaMcLeod or ScotiaiTRADE or other brokers and dealers a trailing commission on Series A units at an annual rate of up to1.3%. The fee is calculated daily and paid monthly and, subject to certain conditions, is based on the valueof Series A units investors are holding of each Portfolio sold by a broker or dealer.

We also pay trailing commissions to the discount broker for units you purchase through your discountbrokerage account.

Dealer compensation from management fees

The cost of the sales and trailing commissions and sales incentive programs was approximately46.69% of the total management fees we received from all of the ScotiaFunds during the financial yearended December 31, 2014.

Income tax considerations for investors

This section is a general summary of how Canadian federal income taxes affect your investment in aPortfolio. It assumes that you:

• are an individual (other than a trust);

• are a Canadian resident;

• deal with the Portfolio at arm’s length; and

• hold your units as capital property.

This summary assumes that the each of the Portfolios will qualify as a ‘‘mutual fund trust’’ withinthe meaning of the Tax Act at all material times. A Portfolio in the future may not qualify as a ‘‘mutualfund trust’’ and, in that event, reference is made to Income tax considerations for investors in the annualinformation form of the Portfolios. This section is not exhaustive and your situation may be different. Youshould consult a tax advisor about your own situation.

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Units held in a non-registered account

You must include in your income each year the net income and the taxable portion of any capital gainsof a Portfolio paid or payable to you in the year by the Portfolio (including Management Fee Distributions),whether you receive these amounts in cash or in additional units of the Portfolio. These amounts are taxedas if you earned them directly and you can claim any tax credits that apply to that income. Returns ofcapital are not taxable to you and generally will reduce the adjusted cost base of your units ofthe Portfolio.

The price of a unit of a Portfolio may include income and/or capital gains that the Portfolio hasearned, but not yet realized and/or distributed. If you buy units of a Portfolio before it makes adistribution, the distribution you receive may be taxable to you even though the Portfolio earned the amountbefore you invested in the Portfolio. For example, the Portfolio may make its only, or most significant,distribution in December. If you purchase units late in the year, you may have to pay tax on yourproportionate share of the income and capital gains earned by the Portfolio for the whole year, even thoughyou were not invested in the Portfolio during the whole year.

If a Portfolio’s investment portfolio has a high turnover rate, the Portfolio will recognize gains andlosses for tax purposes more frequently than a Portfolio with a lower turnover rate.

When you dispose of a unit of a Portfolio, including a redemption or a switch of units of a Portfoliofor units of another Portfolio or to pay the amount of any applicable deferred sales charges, you may realizea capital gain or loss. Your capital gain or capital loss will be equal to the difference between the proceedsof disposition (generally, the value received on the disposition less any reasonable disposition costs such asdeferred sales charges) and your adjusted cost base of the unit.

You must calculate the adjusted cost base of your units separately for each series of units of aPortfolio that you own. In general, the aggregate adjusted cost base of your units of a series of aPortfolio is:

• the total amount paid for all your units of that series of the Portfolio (including any salescharges paid);

• plus distributions reinvested (including Management Fee Distributions) in additional units of thatseries of the Portfolio;

• minus the return of capital component of distributions in respect of units of that series of thePortfolio; and

• minus the adjusted cost base of any units of that series you have previously redeemed orotherwise disposed of.

The adjusted cost base of each of your units of a series of a Portfolio will generally be equal to theaggregate adjusted cost base of all units of that series of the Portfolio held by you at the time of thedisposition divided by the total number of units of that series of the Portfolio held by you. To the extentthat the adjusted cost base of your units of a series of a Portfolio would otherwise be less than zero, thenegative amount will be deemed to be a capital gain realized by you in the year and your adjusted costbase of such unit will be increased by the amount of such deemed capital gain. You should keep detailedrecords of the purchase cost of your units and distributions you receive so you can calculate the adjustedcost base of your units.

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One-half of a capital gain is included in computing income as a taxable capital gain and one-half of acapital loss is an allowable capital loss which is deducted against your taxable capital gains for the year.Generally, any excess of your allowable capital loss over your taxable capital gains for the year may becarried back up to three taxation years or forward indefinitely and deducted against taxable capital gainsin other years.

If you dispose of units of a Portfolio and you, or your spouse or another person affiliated with you(including a corporation controlled by you) has acquired units of the same Portfolio within 30 days beforeor after you dispose of the units (such newly acquired units being considered ‘‘substituted property’’), yourcapital loss may be deemed to be a ‘‘superficial loss’’. If so, your loss will be deemed to be nil and theamount of your loss will instead be added to the adjusted cost base of the units which are ‘‘substitutedproperty’’.

Prior to March 15th in each year, we will issue to you a tax slip that shows you how much of eachtype of income and returns of capital, the Portfolio has distributed to you. You may be able to claim any taxcredits that apply to that income.

Units held in a Registered Plan

Provided a Portfolio is a ‘‘mutual fund trust’’ or a ‘‘registered investment’’ for purposes of the Tax Actat all material times, units of the Portfolio will be ‘‘qualified investments’’ for Registered Plans.

Provided that the annuitant or holder of a RRSP, RRIF or TFSA (i) deals at arm’s length with aPortfolio, and (ii) does not hold a ‘‘significant interest’’ (as defined in the Tax Act) in the Portfolio, theunits of the Portfolio will not be a prohibited investment for a RRSP, RRIF or TFSA.

Investors should consult with their tax advisors regarding whether an investment in a Portfolio willbe a prohibited investment for their RRSP, RRIF or TFSA.

If you hold units of a Portfolio in a Registered Plan, you do not pay any tax on distributions paid orpayable from the Portfolio or on any capital gains realized from redeeming or switching units held insidethe plan. Withdrawals from Registered Plans (other than TFSAs) may be subject to tax.

Please see the annual information form of the Portfolios for additional tax information.

What are your legal rights?

Securities legislation in some provinces and territories gives you the right to withdraw from anagreement to buy mutual funds within two business days of receiving the simplified prospectus or FundFacts, or to cancel your purchase within 48 hours of receiving confirmation of your order.

Securities legislation in some provinces and territories also allows you to cancel an agreement to buymutual fund units and get your money back, or to make a claim for damages, if the simplified prospectus,annual information form, Fund Facts or financial statements misrepresent any facts about the mutual fund.These rights must usually be exercised within certain time limits.

For more information, refer to the securities legislation of your province or territory or consultyour lawyer.

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You can find additional information about each Portfolio in the Portfolio’s annual information form, its mostrecently filed Fund Facts, its most recently filed annual and interim management reports of fundperformance and its most recently filed annual financial statements and interim financial reports. Thesedocuments are incorporated by reference into this simplified prospectus. That means they legally form partof this document just as if they were printed in it.

You can get a copy of the Portfolios’ annual information form, financial statements and managementreports of fund performance at no charge, by calling 1-800-268-9269 (416-750-3863 in Toronto) for English,or 1-800-387-5004 for French, or by asking 1832 Asset Management L.P. You will also find these documentson our website at www.scotiabank.com/pinnacleportfolios.

These documents and other information about the Portfolios, such as information circulars and materialcontracts, are also available at www.sedar.com.

Pinnacle PortfoliosSimplified Prospectus

Series A UnitsPinnacle Income PortfolioPinnacle Balanced PortfolioPinnacle Growth Portfolio

Managed by:

1832 Asset Management L.P.1 Adelaide Street East28th FloorToronto, OntarioM5C 2V9

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