Investing for the long term

Transcription

1 Investing for the long term ScotiaFunds Semi-Annual Report to Unitholders June 30, 2009

2 Table of Contents 1 Economic Outlook Financial Statements Cash Equivalent Funds 3 Scotia T-Bill Fund 5 Scotia Premium T-Bill Fund 7 Scotia Money Market Fund 12 Scotia U.S. $ Money Market Fund Income Funds 15 Scotia Mortgage Income Fund 18 Scotia Canadian Income Fund 21 Scotia U.S. $ Bond Fund 24 Scotia Global Bond Fund Balanced Funds 28 Scotia Diversified Monthly Income Fund 33 Scotia Canadian Balanced Fund 40 Scotia Canadian Tactical Asset Allocation Fund Equity Funds Canadian Equity Funds 53 Scotia Canadian Dividend Fund 57 Scotia Canadian Blue Chip Fund 61 Scotia Canadian Growth Fund 65 Scotia Canadian Small Cap Fund 68 Scotia Resource Fund U.S. Equity Funds 71 Scotia U.S. Growth Fund 75 Scotia U.S. Value Fund International Equity Funds 78 Scotia International Value Fund 81 Scotia European Fund 85 Scotia Pacific Rim Fund 89 Scotia Latin American Fund Global Equity Funds 92 Scotia Global Growth Fund 96 Scotia Global Small Cap Fund 100 Scotia Global Opportunities Fund 103 Scotia Global Climate Change Fund Index Funds 106 Scotia Canadian Bond Index Fund 118 Scotia Canadian Index Fund 122 Scotia U.S. Index Fund 128 Scotia CanAm» Index Fund 131 Scotia Nasdaq Index Fund 134 Scotia International Index Fund Scotia Portfolios Scotia Selected@ Portfolios 137 Scotia Selected Income & Modest Growth Portfolio 139 Scotia Selected Balanced Income & Growth Portfolio 141 Scotia Selected Moderate Growth Portfolio 143 Scotia Selected Aggressive Growth Portfolio Scotia Partners TM Portfolios 145 Scotia Partners Income & Modest Growth Portfolio 147 Scotia Partners Balanced Income & Growth Portfolio 150 Scotia Partners Moderate Growth Portfolio 153 Scotia Partners Aggressive Growth Portfolio Scotia Vision@ Portfolios 156 Scotia Vision Conservative 2010 Portfolio 158 Scotia Vision Aggressive 2010 Portfolio 160 Scotia Vision Conservative 2015 Portfolio 162 Scotia Vision Aggressive 2015 Portfolio 164 Scotia Vision Conservative 2020 Portfolio 166 Scotia Vision Aggressive 2020 Portfolio 168 Scotia Vision Conservative 2030 Portfolio 170 Scotia Vision Aggressive 2030 Portfolio Scotia INNOVA Portfolios TM 172 Scotia INNOVA Income Portfolio 174 Scotia INNOVA Balanced Income Portfolio 176 Scotia INNOVA Balanced Growth Portfolio 178 Scotia INNOVA Growth Portfolio 180 Scotia INNOVA Maximum Growth Portfolio Scotia Cassels Funds 182 Scotia Cassels Short-Mid Government Bond Fund 185 Scotia Cassels Advantaged Income Fund 189 Scotia Cassels Canadian Corporate Bond Fund 193 Scotia Cassels Canadian Equity Fund 196 Scotia Cassels North American Equity Fund 199 Scotia Cassels U.S. Equity Fund 202 Scotia Cassels International Equity Fund 207 Scotia Cassels Cyclical Opportunities Fund 210 Notes to Financial Statements

3 Global Economic Overview T he global economy is showing signs of turning the corner, with economic news likely to move increasingly from the bad towards the good side of the ledger in the months ahead. Enormous fiscal stimulus has put China at the vanguard of nations starting down the road to recovery, with the U.S. appearing to be in the pole position among developed countries. In the U.S., massive government stimulus should soon gain traction, bolstering income and supporting spending while households reduce debt and rebuild savings. Monthly job losses appear to be cresting, with consumers and businesses becoming more optimistic about prospects for the balance of the year. Automakers are restarting some idled plants now that inventories are within their comfort zone and sales have started to recover. U.S. housing activity also has bottomed after three years of unrelenting decline. While the recovery will be more visible, U.S. growth through 2010 will only partially backfill the hole created by the recent steep drop in activity. It will take longer to reverse the 22% drop in U.S. household net worth since mid-2007, to revitalize housing and to restructure the financial and motor vehicle industries. Regulatory reform and tighter lending practices will restrict debt leverage and raise borrowing costs for higher risk activities. Pedal-to-the-metal government stimulus also will be reined in next year as Washington is forced to reduce its US$2 trillion fiscal deficit, States struggle to balance budgets and the Federal Reserve nudges up interest rates from unprecedented lows. The European and Japanese economies are also showing tentative signs of turning the corner. In both areas, however, economic retrenchment over the winter was much deeper than in the U.S. and the period of convalescence is likely to be much longer and more difficult. For these regions, recent GDP losses won t be recouped until well beyond In this environment, emerging markets will provide a large share of global locomotion. Even in a year when global output is shrinking by nearly 3%, China and India are expected to expand by 5-7%. Their production growth will drive commodity markets and their investments from massive foreign exchange surpluses will have an increasing influence on global currencies and interest rates. United States A growing body of financial and economic data suggests that the worst of the U.S. downturn has passed. Sizeable rallies in stocks and commodity markets since early March highlight a growing sense of confidence that the problems in the U.S. banking sector have been contained. Although some macroeconomic indicators are still retrenching consumer spending, residential construction, and business investment, for example the pace of decline has clearly slowed. In other cases existing home sales, for example the data point to renewed stabilization after a prolonged period of weakness. But for other indicators such as motor vehicle sales and durable goods orders a gradual upswing is underway. With Washington s massive and increased funding for job creation gaining traction, the stage is set for a resumption of renewed growth in the second half of the year even in previously hard-hit sectors like motor vehicles. Although the U.S. economy may be in the process of turning the corner from contraction to expansion, Americans are likely to remain cautious spenders. U.S. households are addressing their over-extended balance sheets by saving more and spending less. Reinforced by continuing soft labour markets, generally tight credit conditions, and recently, renewed increases in energy prices, the personal savings rate has jumped to a 15-year high of 6.9%. Nonetheless, sharply lower interest rates have provided a significant opportunity for many over-extended borrowers to refinance their liabilities and, in some cases, increase their borrowing. The principal driver of U.S. growth in the months ahead will be the thrust provided by massive government spending. We estimate that government expenditures will account for roughly 50% of the expected gains in U.S. real GDP through the end of 2010, thereby providing the supportive economic growth environment needed to facilitate what should be a lengthy period of balance sheet convalescence. In this environment, the risks of a much deeper recession and deflation have been significantly reduced. But at the same time, renewed inflationary concerns associated with the aggressive easing in monetary and fiscal policies are unlikely to be realized. There is still considerable labour and industrial slack in both the U.S. and global economies, and the recent run-up in oil prices could work towards sustaining a very low inflation period if it dampens the incipient recovery. Even so, the highly stimulative policy initiatives undertaken in the United States should help restoke demand and inflation pressures, but later rather than sooner. Canada The Canadian economy contracted at a 5 1 2% annual rate in the first three months of 2009, the largest quarterly output decline since the early 1990s recession, with a further, though more moderate, output decline expected in the second quarter. As one of the most export-oriented economies of the G7, Canada is being hard-hit by the sharp falloff in global trade and investment flows. The deterioration in economic activity is more broadly based, with a loss of momentum evident across goods- and service-producing industries. 1

4 Looking ahead, the outlook is more encouraging. With inventories now being aggressively pared back, Canadian production should piggyback on any strengthening in U.S. and international demand for manufactured and commodity-related goods. However, the biggest contributor to the improving growth outlook is the massive ramping up of federal and provincial stimulus that should amount to 3% of GDP in FY09/10. Governments are committed to major funding initiatives on infrastructure, social housing, and training, in addition to substantial permanent and temporary tax relief, as well as enhanced automatic stabilizers like employment insurance benefits. Auto and home sales have been posting steady gains in recent months, albeit from depressed levels, suggesting historically low borrowing costs and competitive pricing are recharging consumer spending and housing activity. Businesses are still shedding workers, but the pace of layoffs has moderated from earlier in the year. Nonetheless, the consumer/housing recovery is expected to be sluggish relative to past cycles, as households focus on rebuilding their savings and repairing their heavily leveraged balance sheets. Businesses are also likely to remain cautious spenders, with the recovery in business investment restrained by significant excess production capacity and weak corporate earnings. Rising commercial and industrial vacancy rates will in turn hold back non-residential construction, though increased infrastructurerelated outlays will provide a substantial boost to the broader construction sector, with related manufacturing and service industry spinoffs. Mexico and Latin America Most developing countries within the Western Hemisphere are effectively positioned to manage the adverse economic impact of the cyclical downturn. Countries embracing institutional and structural reforms, such as Brazil, Peru and Chile, will emerge from the crisis in a stronger position to face the competitive challenges of the new business/credit cycle. Among the major Latin American economies, Mexico has been the most adversely affected by the U.S. cyclical economic downturn and ensuing systemic financial stress. Real GDP is projected to decline by 6% this year however, the country is well positioned to regain a moderate growth trajectory in 2010, alongside the recovery in the U.S. industrial sector. Brazil, which has emerged as a powerful force in the hemisphere, has become a key magnet of foreign capital investment into the region. Its robust institutional framework, its pool of powerful multinational corporations in many sectors, and its effective public-private partnerships will all be factors placing the country in a steady long-term growth path. Chile and Peru will reap the benefits of a sustained recovery in global demand for commodities, of the positive spillover effects from Brazilian economic strength and of a more synchronized business approach in economic sectors such as mining, financial services, energy and utilities. Europe and Asia A combination of monetary stimulus, direct government spending measures and a cessation of inventory drawdown will serve as a catalyst for modest economic recovery across Western Europe in the second half of The momentum will slowly build in 2010 alongside a gradual strengthening in private sector spending. Nevertheless, the pickup in the months ahead will be too little and too late to prevent a sharp contraction in output for the year as a whole; we expect the euro zone economy to shrink by about 4 1 2% in 2009, with the UK contracting by just over 3 1 2%. The severity of the recession is undermining public sector balance sheets across Western Europe. By the end of 2010, the ratio of government debt-to-gdp for the euro zone as a whole will be well over 80%. The UK, which has seen its public sector finances decimated by the cost of massive financial sector rescue operations, will see its ratio exceed 80% (a doubling in three years), and is officially projected to reach 90% in Economic recovery is under way across most of the Asia/Pacific region, although the pattern is inconsistent and vulnerable to intermittent setbacks. A bottoming out in industrial activity and in exports is now evident. With the global inventory correction drawing to a conclusion, credit markets beginning to thaw and government stimulus measures starting to take hold, the foundations are being laid for an economic revival. The timing and vigour of the pickup in economic activity through the second half of 2009 will be insufficient to prevent markedly weaker output numbers for the year as a whole across the region. The People s Republic of China (PRC) and India will remain the pacesetters; we expect the two economies to register growth of 8% and 5 1 2%, respectively, in While exports account for a relatively small proportion of Japan s GDP, the potential for domestically-led growth has been constrained by demographic factors and by fiscal constraints. As a result, Japanese economic activity proved inordinately sensitive to the downturn in global trade, a problem that was compounded by yen appreciation. Warren Jestin Senior Vice-President and Chief Economist Scotiabank Group 2

5 Scotia T-Bill Fund (Unaudited) STATEMENT OF NET ASSETS As at June 30, 2009 December 31, 2008 ASSETS Investments at fair value $185,932,382 $196,072,472 Cash 73,287 99,889 Accrued investment income 2,131 9, ,007, ,181,620 LIABILITIES Distributions payable 464 1,336 Accrued expenses 70, ,555 70, ,891 Net Assets $185,937,318 $195,989,729 NET ASSETS PER CLASS Class A Units $185,937,318 $195,989,729 UNITS OUTSTANDING Class A Units 18,593,732 19,598,973 NET ASSETS PER UNIT Class A Units $ $ STATEMENT OF OPERATIONS For the six month periods ended June 30, INVESTMENT INCOME Interest $ 850,596 $2,940,951 Securities lending 23,765 22, ,361 2,963,216 EXPENSES Management fees (note 4) 691, ,157 Audit fees 8,460 6,411 Independent Review Committee fees 1, Custodian fees 1,580 6,207 Filing fees 11,414 10,431 Legal fees 5,147 3,590 Unitholder reporting costs 29,579 31,742 Unitholder administration, service fees and GST 239, , ,614 1,209,254 Absorbed expenses (251,569) (219,622) 737, ,632 Net investment income (loss) 137,316 1,973,584 Increase (decrease) in Net Assets from operations $ 137,316 $1,973,584 Class A Units $ 137,316 $1,973,584 PER UNIT Class A Units $ 0.01 $ 0.11 STATEMENT OF CHANGES IN NET ASSETS For the six month periods ended June 30, NET ASSETS BEGINNING OF PERIOD Class A Units $195,989,729 $172,961,727 Class A Units 137,316 1,973,584 DISTRIBUTIONS TO UNITHOLDERS From net investment income Class A Units (137,316) (1,973,584) UNIT TRANSACTIONS Proceeds from issue Class A Units 40,618,493 47,643,041 Reinvested distributions Class A Units 135,705 1,946,710 Payments on redemption Class A Units (50,806,609) (43,834,874) (10,052,411) 5,754,877 INCREASE (DECREASE) IN NET ASSETS Class A Units (10,052,411) 5,754,877 NET ASSETS END OF PERIOD Class A Units $185,937,318 $178,716,604 STATEMENT OF INVESTMENT PORTFOLIO Face SHORT-TERM NOTES 76.5% Treasury Bills 76.5% 44,300,000 Government of Canada 0.13% due Jul. 9, ,291,168 44,298,732 32,675,000 Government of Canada 0.21% due Jul. 23, ,659,316 32,670,892 41,685,000 Government of Canada 0.18% due Aug. 6, ,670,410 41,677,497 6,380,000 Government of Canada 0.92% due Sep. 3, ,339,551 6,369,768 17,200,000 Government of Canada 0.34% due Dec. 10, ,173,168 17,174, ,133, ,191,015 SHORT-TERM BONDS 23.5% 33,500,000 Canada Housing Trust 4.65% due Sep. 15, ,754,626 34,207,559 9,300,000 Province of Ontario 6.20% due Nov. 19, ,468,001 9,533,808 43,222,627 43,741,367 TOTAL INVESTMENT PORTFOLIO 185,356, ,932,382 OTHER ASSETS, LESS LIABILITIES 0.0% 4,936 NET ASSETS 100.0% 185,937,318 SUMMARY OF INVESTMENT PORTFOLIO Net Assets (%) Investment Category June 30, 2009 December 31, 2008 Treasury Bills Promissory Notes 0.7 Commercial Paper 1.9 Short-Term Bonds CASH EQUIVALENT FUNDS 3

6 Scotia T-Bill Fund (Unaudited Continued) DISCUSSION OF FINANCIAL INSTRUMENT RISK A. Risk management The investment objective of the Scotia T-Bill Fund (the Fund ) is to provide income and liquidity, while maintaining a high level of safety. It invests primarily in Government of Canada Treasury Bills and other short-term debt instruments guaranteed by the Government of Canada. Managing risk is among the most important factors in the portfolio management process, guiding investment decisions made for the Fund. The Fund s investment practice includes portfolio monitoring to ensure compliance with stated investment guidelines. The Manager seeks to minimize potential adverse effects of risks on the Fund s performance by employing and overseeing professional and experienced portfolio advisors that regularly monitor the Fund s securities and financial market developments. B. Liquidity risk The Fund s exposure to liquidity risk arises primarily from the daily cash redemption of units. The Fund primarily invests in securities that are traded in active markets and can be readily disposed. In addition, the Fund aims to retain sufficient cash and cash equivalent positions to maintain liquidity, and has the ability to borrow up to 5% of its Net Asset Value for the purpose of funding redemptions. Any illiquid securities are identified in the Statement of Investment Portfolio. C. Currency risk Currency risk is the risk that financial instruments which are denominated in a currency other than Canadian dollars, which is the Fund s reporting currency, will fluctuate due to changes in exchange rates. and December 31, 2008, the Fund did not have exposure to currency risk. D. Interest rate risk Interest rate risk arises from interest-bearing financial instruments. The Fund has minimal sensitivity to changes in interest rates due to the short-term nature of instruments held. The table below summarizes the Fund s exposure to interest rate risk by remaining term to maturity of the Fund s portfolio of debt instruments. Bond and Short Term Notes* June 30, 2009 ($) December 31, 2008 ($) Less than 1 year 185,932, ,072, years 3-5 years 5-10 years H 10 years Total 185,932, ,072,472 E. Credit risk Credit risk is the risk that the counterparty of a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund. The Fund s main credit risk is concentrated in debt securities. All investment transactions are settled (paid for) upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is only made on a purchase once the securities have been received by the broker. Where the Fund invests in debt instruments this represents the main concentration of credit risk. The market value of debt instruments includes consideration of the creditworthiness of the issuer, and accordingly, represents the maximum credit risk exposure to the Fund. The Fund enters into securities lending transactions with counterparties whereby the Fund temporarily exchanges securities for collateral with a commitment by the counterparty to deliver the same securities on a future date. Credit risk associated with these transactions is considered minimal as all counterparties have a sufficient, approved credit rating and the market value of cash or securities held as collateral must be at least 102% of the fair value of the securities loaned as at the end of each trading day. Debt instruments, excluding cash, held by the Fund have credit ratings as follows: Total Debt Securities (%) June 30, 2009 December 31, 2008 Net Assets (%) Total Debt Securities (%) Net Assets (%) Short-Term Rating R1-High R1-Middle R1-Low Bond Credit Rating AAA AA A Total F. Other price risk Other price risk is the risk that the fair value of the Fund s financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate or currency risk). and December 31, 2008, the Fund did not have significant exposure to other price risks. * Excludes cash CASH EQUIVALENT FUNDS 4

7 Scotia Premium T-Bill Fund (Unaudited) STATEMENT OF NET ASSETS As at June 30, 2009 December 31, 2008 ASSETS Investments at fair value $931,784,239 $1,001,204,867 Cash 99,240 80,064 Accrued investment income 10,560 48, ,894,039 1,001,333,505 LIABILITIES Distributions payable 4,703 67,481 Accrued expenses 138, , , ,275 Net Assets $931,750,370 $1,000,974,230 NET ASSETS PER CLASS Class A Units $931,750,370 $1,000,974,230 UNITS OUTSTANDING Class A Units 93,175, ,097,423 NET ASSETS PER UNIT Class A Units $ $ STATEMENT OF OPERATIONS For the six month periods ended June 30, INVESTMENT INCOME Interest $4,263,149 $16,958,902 Securities lending 143, ,821 4,406,436 17,099,723 EXPENSES Management fees (note 4) 2,246,588 2,552,064 Audit fees 10,517 9,292 Independent Review Committee fees Custodian fees 5,776 31,217 Filing fees 19,642 17,144 Legal fees 2,116 1,380 Unitholder reporting costs 7,219 7,904 Unitholder administration, service fees and GST 162, ,999 2,454,051 2,797,132 Rebated and absorbed expenses (948,839) (1,118,198) 1,505,212 1,678,934 Net investment income (loss) 2,901,224 15,420,789 Increase (decrease) in Net Assets from operations $2,901,224 $15,420,789 Class A Units $2,901,224 $15,420,789 PER UNIT Class A Units $ 0.03 $ 0.15 STATEMENT OF CHANGES IN NET ASSETS For the six month periods ended June 30, NET ASSETS BEGINNING OF PERIOD Class A Units $1,000,974,230 $1,011,167,581 Class A Units 2,901,224 15,420,789 DISTRIBUTIONS TO UNITHOLDERS From net investment income Class A Units (2,901,224) (15,420,789) UNIT TRANSACTIONS Proceeds from issue Class A Units 357,897, ,515,778 Reinvested distributions Class A Units 2,932,182 14,954,273 Payments on redemption Class A Units (430,053,617) (545,172,330) (69,223,860) 8,297,721 INCREASE (DECREASE) IN NET ASSETS Class A Units (69,223,860) 8,297,721 NET ASSETS END OF PERIOD Class A Units $ 931,750,370 $1,019,465,302 STATEMENT OF INVESTMENT PORTFOLIO Face SHORT-TERM NOTES 77.3% Treasury Bills 77.3% 204,560,000 Government of Canada 0.13% due Jul. 9, ,520, ,554, ,185,000 Government of Canada 0.21% due Jul. 23, ,096, ,161, ,130,000 Government of Canada 0.18% due Aug. 6, ,061, ,094,517 30,300,000 Government of Canada 0.53% due Sep. 3, ,224,250 30,271, ,020,000 Government of Canada 0.34% due Dec. 10, ,857, ,863, ,760, ,945,617 SHORT-TERM BONDS 22.7% 163,100,000 Canada Housing Trust No % due Sep. 15, ,311, ,517,165 44,200,000 Province of Ontario 6.20% due Nov. 19, ,008,694 45,321, ,320, ,838,622 TOTAL INVESTMENT PORTFOLIO 929,081, ,784,239 OTHER ASSETS, LESS LIABILITIES 0.0% (33,869) NET ASSETS 100.0% 931,750,370 SUMMARY OF INVESTMENT PORTFOLIO Net Assets (%) Investment Category June 30, 2009 December 31, 2008 Treasury Bills Promissory Notes 1.6 Commercial Paper 2.2 Short-Term Bonds CASH EQUIVALENT FUNDS 5

8 Scotia Premium T-Bill Fund (Unaudited Continued) DISCUSSION OF FINANCIAL INSTRUMENT RISK A. Risk management The investment objective of the Scotia Premium T-Bill Fund (the Fund ) is to provide income and liquidity, while maintaining a high level of safety. It invests primarily in Government of Canada Treasury Bills and other short-term debt instruments guaranteed by the Government of Canada. Managing risk is among the most important factors in the portfolio management process, guiding investment decisions made for the Fund. The Fund s investment practice includes portfolio monitoring to ensure compliance with stated investment guidelines. The Manager seeks to minimize potential adverse effects of risks on the Fund s performance by employing and overseeing professional and experienced portfolio advisors that regularly monitor the Fund s securities and financial market developments. B. Liquidity risk The Fund s exposure to liquidity risk arises primarily from the daily cash redemption of units. The Fund primarily invests in securities that are traded in active markets and can be readily disposed. In addition, the Fund aims to retain sufficient cash and cash equivalent positions to maintain liquidity, and has the ability to borrow up to 5% of its Net Asset Value for the purpose of funding redemptions. Any illiquid securities are identified in the Statement of Investment Portfolio. C. Currency risk Currency risk is the risk that financial instruments which are denominated in a currency other than Canadian dollars, which is the Fund s reporting currency, will fluctuate due to changes in exchange rates. and December 31, 2008, the Fund did not have exposure to currency risk. D. Interest rate risk Interest rate risk arises from interest-bearing financial instruments. The Fund has minimal sensitivity to changes in interest rates due to the short-term nature of instruments held. The table below summarizes the Fund s exposure to interest rate risk by remaining term to maturity of the Fund s portfolio of debt instruments. Bond and Short Term Notes* June 30, 2009 ($) December 31, 2008 ($) Less than 1 year 931,784,239 1,001,204, years 3-5 years 5-10 years H 10 years Total 931,784,239 1,001,204,867 E. Credit risk Credit risk is the risk that the counterparty of a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund. The Fund s main credit risk is concentrated in debt securities. All investment transactions are settled (paid for) upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is only made on a purchase once the securities have been received by the broker. Where the Fund invests in debt instruments this represents the main concentration of credit risk. The market value of debt instruments includes consideration of the creditworthiness of the issuer, and accordingly, represents the maximum credit risk exposure to the Fund. The Fund enters into securities lending transactions with counterparties whereby the Fund temporarily exchanges securities for collateral with a commitment by the counterparty to deliver the same securities on a future date. Credit risk associated with these transactions is considered minimal as all counterparties have a sufficient, approved credit rating and the market value of cash or securities held as collateral must be at least 102% of the fair value of the securities loaned as at the end of each trading day. Debt instruments, excluding cash, held by the Fund have credit ratings as follows: Total Debt Securities (%) June 30, 2009 December 31, 2008 Net Assets (%) Total Debt Securities (%) Net Assets (%) Short-Term Rating R1-High R1-Middle R1-Low Bond Credit Rating AAA AA A Total F. Other price risk Other price risk is the risk that the fair value of the Fund s financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate or currency risk). and December 31, 2008, the Fund did not have significant exposure to other price risks. * Excludes cash CASH EQUIVALENT FUNDS 6

9 Scotia Money Market Fund (Unaudited) STATEMENT OF NET ASSETS As at June 30, 2009 December 31, 2008 ASSETS Investments at fair value $2,538,932,653 $2,105,558,116 Cash 49,260 99,495 Accrued investment income 87, ,830 2,539,069,516 2,105,861,441 LIABILITIES Distributions payable 4,711 14,185 Accrued expenses 1,204,945 1,078,562 1,209,656 1,092,747 Net Assets $2,537,859,860 $2,104,768,694 NET ASSETS PER CLASS Class A Units $1,095,368,430 $1,040,858,259 Advisor Class Units $ 10,447,229 $ 9,497,322 Premium Class Units $ 352,096,434 $ 34,769,740 Class I Units $ 14,112,739 $ 13,561,211 Scotia Private Client Units $1,065,835,028 $1,006,082,162 UNITS OUTSTANDING Class A Units 109,536, ,085,826 Advisor Class Units 1,044, ,732 Premium Class Units 35,209,643 3,476,974 Class I Units 1,411,274 1,356,121 Scotia Private Client Units 106,583, ,608,216 NET ASSETS PER UNIT Class A Units $ $ Advisor Class Units $ $ Premium Class Units $ $ Class I Units $ $ Scotia Private Client Units $ $ STATEMENT OF OPERATIONS For the six month periods ended June 30, INVESTMENT INCOME Interest $20,746,657 $36,687,552 Securities lending ,746,668 36,687,583 EXPENSES Management fees (note 4) 5,813,321 4,812,937 Audit fees 12,207 9,420 Independent Review Committee fees 2,507 1,753 Custodian fees 19,558 57,119 Filing fees 48,599 35,222 Legal fees 8,061 8,583 Unitholder reporting costs 55,638 53,416 Unitholder administration, service fees and GST 730, ,201 6,689,991 5,620,651 Absorbed expenses (71,664) (110,615) 6,618,327 5,510,036 Net investment income (loss) 14,128,341 31,177,547 Increase (decrease) in Net Assets from operations $14,128,341 $31,177,547 Class A Units $ 3,516,064 $14,396,874 Advisor Class Units $ 32,896 $ 13,920 Premium Class Units $ 843,533 $ Class I Units $ 119,536 $ 320,236 Scotia Private Client Units $ 9,616,312 $16,446,517 PER UNIT Class A Units $ 0.03 $ 0.15 Advisor Class Units $ 0.03 $ 0.11 Premium Class Units $ 0.06 $ Class I Units $ 0.09 $ 0.21 Scotia Private Client Units $ 0.09 $ 0.21 STATEMENT OF CHANGES IN NET ASSETS For the six month periods ended June 30, NET ASSETS BEGINNING OF PERIOD Class A Units $1,040,858,259 $ 809,889,441 Advisor Class Units 9,497,322 Premium Class Units 34,769,740 Class I Units 13,561,211 15,692,820 Scotia Private Client Units 1,006,082, ,608,345 2,104,768,694 1,625,190,606 Class A Units 3,516,064 14,396,874 Advisor Class Units 32,896 13,920 Premium Class Units 843,533 Class I Units 119, ,236 Scotia Private Client Units 9,616,312 16,446,517 14,128,341 31,177,547 DISTRIBUTIONS TO UNITHOLDERS From net investment income Class A Units (3,516,064) (14,396,874) Advisor Class Units (32,896) (13,920) Premium Class Units (843,533) Class I Units (119,536) (320,236) Scotia Private Client Units (9,616,312) (16,446,517) (14,128,341) (31,177,547) UNIT TRANSACTIONS Proceeds from issue Class A Units 644,077, ,649,016 Advisor Class Units 11,610,636 4,818,548 Premium Class Units 425,756,728 Class I Units 1,204, ,127 Scotia Private Client Units 1,007,723, ,679,407 Reinvested distributions Class A Units 3,479,420 14,246,690 Advisor Class Units 32,533 13,920 Premium Class Units 837,958 Class I Units 119, ,236 Scotia Private Client Units 9,524,347 16,348,013 Payments on redemption Class A Units (593,047,248) (564,870,063) Advisor Class Units (10,693,262) (684,101) Premium Class Units (109,267,992) Class I Units (772,823) (1,543,392) Scotia Private Client Units (957,495,168) (740,418,239) 433,091, ,121,162 INCREASE (DECREASE) IN NET ASSETS Class A Units 54,510, ,025,643 Advisor Class Units 949,907 4,148,367 Premium Class Units 317,326,694 Class I Units 551,528 (662,029) Scotia Private Client Units 59,752,866 14,609, ,091, ,121,162 NET ASSETS END OF PERIOD Class A Units 1,095,368,430 1,035,915,084 Advisor Class Units 10,447,229 4,148,367 Premium Class Units 352,096,434 Class I Units 14,112,739 15,030,791 Scotia Private Client Units 1,065,835, ,217,526 $2,537,859,860 $1,869,311,768 CASH EQUIVALENT FUNDS 7

10 Scotia Money Market Fund (Unaudited Continued) STATEMENT OF INVESTMENT PORTFOLIO CASH EQUIVALENT FUNDS Face SHORT-TERM NOTES 61.0% Treasury Bills 2.5% 4,000,000 Province of Newfoundland and Labrador 0.24% due Aug. 20, ,998,360 3,998,698 60,000,000 Province of Ontario 0.26% due Sep. 16, ,962,200 59,967,297 63,960,560 63,965,995 Promissory Notes 0.1% 2,200,000 Province of Prince Edward Island 0.24% due Aug. 11, ,199,230 2,199,415 Bankers Acceptances 13.4% 5,000,000 Bank of Montreal 0.26% due Jul. 2, ,999,150 4,999,965 12,800,000 Bank of Montreal 0.45% due Oct. 30, ,771,072 12,780,977 8,000,000 Bank of Nova Scotia, The 0.29% due Jul. 8, ,998,240 7,999,560 8,000,000 Canadian Imperial Bank of Commerce 0.25% due Jul. 6, ,998,960 7,999,726 10,900,000 Canadian Imperial Bank of Commerce 0.26% due Aug. 6, ,896,185 10,897,197 6,000,000 Canadian Imperial Bank of Commerce 3.31% due Aug. 12, ,814,900 5,977,851 18,000,000 Canadian Imperial Bank of Commerce 3.30% due Aug. 26, ,429,580 17,911,758 26,000,000 Canadian Imperial Bank of Commerce 2.00% due Nov. 10, ,246,780 25,726,102 32,025,000 Canadian Imperial Bank of Commerce 0.65% due Apr. 28, ,818,758 31,854,455 4,200,000 National Bank of Canada 0.24% due Jul. 2, ,199,916 4,199,972 10,000,000 National Bank of Canada 0.26% due Jul. 16, ,998,300 9,998,938 18,000,000 Royal Bank of Canada 0.25% due Jul. 3, ,996,940 17,999,755 45,000,000 Royal Bank of Canada 0.25% due Jul. 6, ,991,450 44,998,473 17,800,000 Royal Bank of Canada 0.24% due Jul. 7, ,796,796 17,799,288 20,000,000 Royal Bank of Canada 0.23% due Jul. 8, ,996,400 19,999,100 8,600,000 Royal Bank of Canada 0.27% due Jul. 15, ,598,108 8,599,117 6,000,000 Toronto-Dominion Bank, The 0.26% due Jul. 2, ,998,740 5,999,958 24,300,000 Toronto-Dominion Bank, The 0.25% due Jul. 3, ,294,167 24,299,667 15,000,000 Toronto-Dominion Bank, The 0.25% due Jul. 6, ,995,950 14,999,494 8,800,000 Toronto-Dominion Bank, The 0.25% due Jul. 22, ,798,240 8,798,726 38,000,000 Toronto-Dominion Bank, The 0.25% due Jul. 28, ,991,640 37,992, ,630, ,833,025 Bearers Deposit Notes 5.4% 63,000,000 Bank of Montreal 3.48% due Sep. 8, ,886,980 62,599, ,000 Manulife Bank of Canada 0.33% due Jul. 2, , ,993 2,000,000 Manulife Bank of Canada 0.33% due Jul. 3, ,999,560 1,999,963 25,000,000 Manulife Bank of Canada 0.34% due Jul. 9, ,993,000 24,998,133 Face SHORT-TERM NOTES (cont d) Bearers Deposit Notes (cont d) 46,000,000 Manulife Bank of Canada 0.35% due Aug. 17, ,960,900 45,979, ,640, ,376,896 Commercial Paper 39.6% 5,000,000 Borealis Finance Trust 0.29% due Jul. 2, ,999,200 4,999,960 5,000,000 Borealis Finance Trust 0.33% due Jul. 17, ,996,700 4,999,277 15,000,000 Borealis Finance Trust 0.33% due Jul. 20, ,989,650 14,997,413 21,000,000 Borealis Finance Trust 0.30% due Jul. 22, ,994,960 20,996,350 20,500,000 Borealis Finance Trust 0.32% due Jul. 28, ,490,430 20,495,153 55,200,000 Borealis Finance Trust 0.33% due Aug. 6, ,158,893 55,182,312 3,000,000 Borealis Finance Trust 0.30% due Aug. 14, ,998,440 2,998,910 5,300,000 Caterpillar Financial Services Limited 0.80% due Jul. 23, ,289,347 5,297,453 5,000,000 Caterpillar Financial Services Limited 0.65% due Aug. 7, ,991,900 4,996,707 8,000,000 Caterpillar Financial Services Limited 0.55% due Aug. 10, ,988,480 7,995,200 6,800,000 Caterpillar Financial Services Limited 0.50% due Aug. 14, ,792,792 6,795,934 25,000,000 Canada Pension Plan Investment Board 0.24% due Aug. 4, ,993,250 24,994,402 7,000,000 Coca-Cola Enterprises Inc. 0.27% due Jul. 7, ,999,230 6,999,692 10,000,000 Coca-Cola Enterprises Inc. 0.27% due Jul. 8, ,998,900 9,999,487 10,000,000 Coca-Cola Enterprises Inc. 0.25% due Jul. 9, ,998,900 9,999,450 15,000,000 Coca-Cola Enterprises Inc. 0.26% due Jul. 13, ,998,200 14,998,729 15,000,000 Coca-Cola Enterprises Inc. 0.27% due Jul. 14, ,998,250 14,998,577 5,000,000 Coca-Cola Enterprises Inc. 0.27% due Jul. 15, ,999,450 4,999,487 30,000,000 CPPIB Capital Inc. 0.25% due Jul. 9, ,994,000 29,998,345 18,400,000 CPPIB Capital Inc. 0.25% due Jul. 15, ,395,967 18,398,224 16,000,000 Enbridge Inc. 0.35% due Jul. 9, ,996,605 15,998,790 5,050,000 Enbridge Inc. 0.34% due Jul. 13, ,049,344 5,049,437 15,400,000 Enbridge Inc. 0.33% due Jul. 20, ,396,555 15,397,395 13,000,000 EnCana Corporation 0.60% due Jul. 21, ,980,630 12,995,743 3,100,000 EnCana Corporation 0.50% due Jul. 28, ,096,683 3,098,852 10,800,000 EnCana Corporation 0.40% due Jul. 29, ,794,816 10,796,701 10,000,000 EnCana Corporation 0.50% due Aug. 10, ,987,500 9,994,505 22,300,000 EnCana Corporation 0.50% due Aug. 11, ,271,902 22,287, ,000 EnCana Corporation 0.45% due Aug. 13, , ,894 8,500,000 EnCana Corporation 0.45% due Aug. 20, ,490,395 8,494,780 8

11 Scotia Money Market Fund (Unaudited Continued) STATEMENT OF INVESTMENT PORTFOLIO Face SHORT-TERM NOTES (cont d) Commercial Paper (cont d) 4,000,000 EnCana Corporation 0.45% due Aug. 24, ,995,600 3,997,330 6,000,000 GE Capital Canada Funding Company 0.61% due Jul. 10, ,994,900 5,999,100 10,000,000 Honda Canada Finance Inc. 0.95% due Aug. 6, ,976,100 9,990,648 10,000,000 Honda Canada Finance Inc. 0.00% due Sep. 9, ,965,725 9,980,904 3,000,000 Honda Canada Finance Inc. 1.25% due Oct. 23, ,982,120 2,988,352 4,000,000 Honda Canada Finance Inc. 3.00% due Nov. 6, ,883,800 3,959,138 3,500,000 Honda Canada Finance Inc. 1.25% due Nov. 13, ,477,845 3,483,920 31,000,000 Honda Canada Finance Inc. 1.25% due Nov. 17, ,808,980 30,853,357 12,000,000 Honda Canada Finance Inc. 3.05% due Nov. 27, ,648,640 11,854,979 10,000,000 Hydro One Inc. 0.21% due Jul. 17, ,998,400 9,999,086 60,000,000 Imperial Oil Limited 0.26% due Jul. 23, ,987,400 59,990,760 13,000,000 John Deere Limited 0.29% due Jul. 8, ,998,440 12,999,272 12,700,000 John Deere Limited 0.55% due Jul. 24, ,683,617 12,695,619 2,800,000 Nova Scotia Power Inc. 0.39% due Jul. 6, ,799,216 2,799,849 10,700,000 Nova Scotia Power Inc. 0.37% due Jul. 9, ,698,980 10,699,144 9,700,000 Nova Scotia Power Inc. 0.39% due Jul. 10, ,698,545 9,699,065 7,000,000 Nova Scotia Power Inc. 0.38% due Jul. 14, ,997,900 6,999,059 16,000,000 Nova Scotia Power Inc. 0.38% due Jul. 20, ,995,070 15,996,858 13,000,000 Nova Scotia Power Inc. 0.38% due Jul. 21, ,996,360 12,997,304 2,000,000 Nova Scotia Power Inc. 0.38% due Jul. 22, ,999,280 1,999,568 7,000,000 Nova Scotia Power Inc. 0.38% due Jul. 23, ,997,970 6,998,405 73,800,000 Shoppers Drug Mart Corporation 0.28% due Jul. 3, ,796,070 73,798,870 10,000,000 Suncor Energy, Inc. 0.65% due Aug. 24, ,989,300 9,990,370 5,000,000 Suncor Energy, Inc. 0.75% due Jul. 2, ,996,100 4,999,897 7,500,000 Suncor Energy, Inc. 0.72% due Jul. 31, ,491,625 7,495,581 14,300,000 Suncor Energy, Inc. 0.75% due Aug. 20, ,270,971 14,285,339 33,600,000 Suncor Energy, Inc. 0.75% due Aug. 25, ,529,104 33,562,143 2,000,000 TELUS Corporation 0.66% due Jul. 28, ,996,720 1,999,027 5,000,000 TELUS Corporation 0.49% due Sep. 23, ,993,900 4,994,369 6,000,000 Terasen Gas Inc. 0.26% due Jul. 30, ,998,680 5,998,765 6,000,000 Terasen Gas Inc. 0.30% due Sep. 24, ,995,500 5,995,797 4,300,000 Toyota Credit Canada Inc. 1.69% due Jul. 16, ,264,267 4,297,039 78,000,000 Toyota Credit Canada Inc. 1.28% due Nov. 5, ,581,140 77,654,576 Face SHORT-TERM NOTES (cont d) Commercial Paper (cont d) 42,300,000 Toyota Credit Canada Inc. 1.24% due Nov. 12, ,081,309 42,108,467 11,000,000 TransCanada PipeLines Ltd. 0.48% due Aug. 27, ,986,580 10,991,775 3,000,000 Woodbridge Finance Corporation 0.42% due Jul. 9, ,998,530 2,999,727 24,480,000 Woodbridge Finance Corporation 0.56% due Aug. 5, ,446,202 24,466,892 10,000,000 Woodbridge Finance Corporation 0.52% due Aug. 10, ,987,100 9,994,330 20,000,000 Woodbridge Finance Corporation 0.52% due Aug. 11, ,974,205 19,988,329 10,200,000 Woodbridge Finance Corporation 0.49% due Aug. 18, ,187,046 10,193,455 3,000,000 Woodbridge Finance Corporation 0.45% due Aug. 19, ,996,670 2,998,187 1,004,477,052 1,005,249,289 SHORT-TERM BONDS 39.0% 7,235,000 Bank of Montreal 4.30% due Sep. 4, ,283,310 7,383,067 26,951,000 Bank of Montreal 7.00% due Jan. 28, ,870,060 28,667,421 1,071,000 Bank of Montreal 0.95% due Feb. 1, ,072,151 1,073,813 5,000,000 Bank of Montreal (Floating Rate) 1.71% due Jul. 14, ,051,528 5,069,569 15,000,000 Bank of Nova Scotia, The 4.29% due Sep. 22, ,042,542 15,217,406 34,000,000 Bank of Nova Scotia, The ( Floating Rate) 0.63% due Oct. 22, ,017,988 34,022,708 48,000,000 Bank of Nova Scotia, The 3.45% due Nov. 5, ,121,305 49,187,497 13,200,000 Bank of Nova Scotia, The 0.84% due Feb. 7, ,158,249 13,174,519 6,000,000 Bank of Nova Scotia, The ( Floating Rate) 1.25% due Jun. 15, ,044,252 6,047,309 2,850,000 Canadian Utilities Limited 10.20% due Nov. 30, ,952,306 2,976, ,064,000 CARDS II Trust 4.38% due Oct. 15, ,328, ,256,353 15,000,000 CARDS II Trust 0.49% due Mar. 22, ,836,021 14,839,053 45,686,000 Caterpillar Financial Services Limited 4.60% due Jul. 14, ,722,793 46,692,293 27,000,000 Enbridge Inc. 3.95% due Feb. 15, ,178,813 27,576,541 10,000,000 Enbridge Pipeline Inc. 6.85% due Oct. 26, ,153,531 10,275,184 6,610,000 GE Capital Canada Funding Company (Floating Rate) 0.53% due Aug. 17, ,591,768 6,595,968 4,070,000 GE Capital Canada Funding Company 5.65% due Oct. 23, ,090,533 4,133,257 16,260,000 GE Capital Canada Funding Company (Floating Rate) 0.89% due Feb. 12, ,044,547 16,063,754 23,345,000 GE Capital Canada Funding Company 3.65% due Jun. 7, ,722,961 23,776,507 2,871,000 GE Capital Canada Funding Company 0.50% due Jul. 21, ,824,728 2,825,087 12,000,000 General Electric Capital Corporation (Floating Rate) 0.45% due Jan. 8, ,898,655 11,901,987 10,000,000 Genesis Trust 4.20% due Sep. 15, ,009,630 10,131, ,345,000 Genesis Trust 4.00% due Mar. 15, ,530, ,826,083 17,719,000 Golden Credit Card Trust 6.19% due Jul. 15, ,751,584 18,254,539 CASH EQUIVALENT FUNDS 9

12 Scotia Money Market Fund (Unaudited Continued) STATEMENT OF INVESTMENT PORTFOLIO CASH EQUIVALENT FUNDS Face SHORT-TERM BONDS (cont d) 21,000,000 Golden Credit Card Trust 4.05% due Jun. 15, ,550,701 21,585,533 10,000,000 Greater Toronto Airports Authority (Floating Rate) 0.54% due May 14, ,931,789 9,938,703 1,055,000 Hydro One Inc. 7.15% due Jun. 3, ,117,515 1,123,080 6,790,000 John Deere Credit Inc. 4.75% due Jul. 21, ,794,527 6,937,079 23,000,000 John Deere Credit Inc. 4.60% due Jan. 25, ,214,948 23,670,880 17,397,000 John Deere Credit Inc. 4.45% due Apr. 16, ,792,722 17,951,362 32,000,000 Landwirtschaftliche Rentenbank 4.25% due Sep. 1, ,174,502 32,621,676 45,000,000 Master Credit Card Trust 4.38% due Nov. 21, ,132,070 45,346,310 5,615,000 National Bank of Canada 4.66% due Sep. 10, ,630,303 5,709,938 60,000,000 National Bank of Canada 0.69% due Jun. 4, ,000,000 60,030,054 7,574,000 NAV Canada (Floating Rate) 0.51% due May 3, ,523,976 7,530,030 5,900,000 Nova Scotia Power Inc. 4.22% due May 17, ,052,417 6,082,186 25,000,000 Province of Alberta 0.69% due Jun. 12, ,000,000 25,008,438 50,000,000 Province of Ontario 0.69% due Dec. 14, ,048,766 50,063,765 4,000,000 Province of Quebec Stripped Coupon due Dec. 1, ,981,707 3,981,707 5,000,000 Royal Bank of Canada 0.84% due Sep. 27, ,006,186 5,006,529 44,255,000 Thomson Reuters Corp. 4.35% due Dec. 1, ,429,750 44,582,284 2,500,000 Toronto-Dominion Bank, The (Floating Rate) 0.88% due Nov. 19, ,501,023 2,503,538 13,500,000 Toronto-Dominion Bank, The (Floating Rate) 1.37% due May 2, ,617,999 13,632,422 6,997,000 TransAlta Corporation 6.60% due Oct. 13, ,038,701 7,137,118 10,515,000 TransCanada PipeLines Ltd % due Oct. 20, ,753,182 10,969,910 14,215,000 Westcoast Energy Inc. 7.20% due Jan. 26, ,489,405 14,927, ,080, ,308,033 TOTAL INVESTMENT PORTFOLIO 2,525,987,555 2,538,932,653 OTHER ASSETS, LESS LIABILITIES 0.0% (1,072,793) NET ASSETS 100.0% 2,537,859,860 SUMMARY OF INVESTMENT PORTFOLIO Net Assets (%) Investment Category June 30, 2009 December 31, 2008 Treasury Bills 2.5 Promissory Notes 0.1 Bankers Acceptances Bearers Deposit Notes Commercial Paper Term Deposits 7.0 Short-Term Bonds

13 Scotia Money Market Fund (Unaudited Continued) DISCUSSION OF FINANCIAL INSTRUMENT RISK A. Risk management The investment objective of the Scotia Money Market Fund (the Fund ) is to provide income and liquidity, while maintaining a high level of safety. It invests primarily in high quality, short-term fixed income securities issued by Canadian federal, provincial and municipal governments, Canadian chartered banks and trust companies, and corporations. Managing risk is among the most important factors in the portfolio management process, guiding investment decisions made for the Fund. The Fund s investment practice includes portfolio monitoring to ensure compliance with stated investment guidelines. The Manager seeks to minimize potential adverse effects of risks on the Fund s performance by employing and overseeing professional and experienced portfolio advisors that regularly monitor the Fund s securities and financial market developments. B. Liquidity risk The Fund s exposure to liquidity risk arises primarily from the daily cash redemption of units. The Fund primarily invests in securities that are traded in active markets and can be readily disposed. In addition, the Fund aims to retain sufficient cash and cash equivalent positions to maintain liquidity, and has the ability to borrow up to 5% of its Net Asset Value for the purpose of funding redemptions. Any illiquid securities are identified in the Statement of Investment Portfolio. C. Currency risk Currency risk is the risk that financial instruments which are denominated in a currency other than Canadian dollars, which is the Fund s reporting currency, will fluctuate due to changes in exchange rates. and December 31, 2008, the Fund did not have exposure to currency risk. D. Interest rate risk Interest rate risk arises from interest-bearing financial instruments. The Fund has minimal sensitivity to changes in interest rates due to the short-term nature of instruments held. The table below summarizes the Fund s exposure to interest rate risk by remaining term to maturity of the Fund s portfolio of debt instruments. Bond and Short Term Notes* June 30, 2009 ($) December 31, 2008 ($) Less than 1 year 2,492,918,080 2,105,558, years 46,014, years 5-10 years H 10 years Total 2,538,932,653 2,105,558,116 E. Credit risk Credit risk is the risk that the counterparty of a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund. The Fund s main credit risk is concentrated in debt securities. All investment transactions are settled (paid for) upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is only made on a purchase once the securities have been received by the broker. Where the Fund invests in debt instruments this represents the main concentration of credit risk. The market value of debt instruments includes consideration of the creditworthiness of the issuer, and accordingly, represents the maximum credit risk exposure to the Fund. The Fund enters into securities lending transactions with counterparties whereby the Fund temporarily exchanges securities for collateral with a commitment by the counterparty to deliver the same securities on a future date. Credit risk associated with these transactions is considered minimal as all counterparties have a sufficient, approved credit rating and the market value of cash or securities held as collateral must be at least 102% of the fair value of the securities loaned as at the end of each trading day. Debt instruments, excluding cash, held by the Fund have credit ratings as follows: Total Debt Securities (%) June 30, 2009 December 31, 2008 Net Assets (%) Total Debt Securities (%) Net Assets (%) Short-Term Rating R1-High R1-Middle R1-Low Bond Credit Rating AAA AA A BBB Total F. Other price risk Other price risk is the risk that the fair value of the Fund s financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate or currency risk). and December 31, 2008, the Fund did not have significant exposure to other price risks. * Excludes cash CASH EQUIVALENT FUNDS 11

14 Scotia U.S. $ Money Market Fund (Unaudited) STATEMENT OF NET ASSETS As at June 30, 2009 December 31, 2008 U.S.$ U.S.$ ASSETS Investments at fair value $111,710,478 $104,892,407 Cash 47,998 97,531 Accrued investment income 175, , ,934, ,168,950 LIABILITIES Distributions payable Accrued expenses 53, ,957 53, ,502 Net Assets $111,881,165 $105,066,448 NET ASSETS PER CLASS Class A Units $111,881,165 $105,066,448 UNITS OUTSTANDING Class A Units 11,188,117 10,506,645 NET ASSETS PER UNIT Class A Units $ $ STATEMENT OF CHANGES IN NET ASSETS For the six month periods ended June 30, U.S.$ U.S.$ NET ASSETS BEGINNING OF PERIOD Class A Units $105,066,448 $103,452,736 Class A Units 76,974 1,265,225 DISTRIBUTIONS TO UNITHOLDERS From net investment income Class A Units (76,974) (1,265,225) UNIT TRANSACTIONS Proceeds from issue Class A Units 75,675, ,606,211 Reinvested distributions Class A Units 76,356 1,255,731 Payments on redemption Class A Units (68,937,242) (78,973,072) 6,814,717 27,888,870 INCREASE (DECREASE) IN NET ASSETS Class A Units 6,814,717 27,888,870 NET ASSETS END OF PERIOD Class A Units $111,881,165 $131,341,606 STATEMENT OF OPERATIONS For the six month periods ended June 30, CASH EQUIVALENT FUNDS U.S.$ U.S.$ INVESTMENT INCOME Interest $467,254 $1,933,228 EXPENSES Management fees (note 4) 369, ,724 Audit fees 8,576 5,785 Independent Review Committee fees Custodian fees 2,707 7,339 Filing fees 10,531 9,899 Legal fees 2,022 1,305 Unitholder reporting costs 6,352 7,131 Unitholder administration, service fees and GST 60,239 72, , ,758 Absorbed expenses (70,069) (47,755) 390, ,003 Net investment income (loss) 76,974 1,265,225 Increase (decrease) in Net Assets from operations $ 76,974 $1,265,225 Class A Units $ 76,974 $1,265,225 PER UNIT Class A Units $ 0.01 $