ScotiaFunds and Scotia Private Pools Annual Report

ScotiaFunds and Scotia Private Pools Annual Report 2011 Cash Equivalent Funds Scotia T-Bill Fund Scotia Premium T-Bill Fund Scotia Money Market Fund Scotia U.S. $ Money Market Fund Income Funds Scotia Short Term Bond Fund Scotia Private Short-Mid Government Bond Pool Scotia Mortgage Income Fund Scotia Bond Fund Scotia Canadian Income Fund Scotia Private Canadian Corporate Bond Pool Scotia U.S. $ Bond Fund Scotia Global Bond Fund Balanced Funds Scotia Private Advantaged Income Pool Scotia Diversified Monthly Income Fund Scotia Income Advantage Fund Scotia Canadian Balanced Fund Scotia Canadian Dividend Income Fund Scotia Canadian Tactical Asset Allocation Fund Scotia Global Balanced Fund Scotia U.S. $ Balanced Fund Equity Funds Canadian Equity Funds Scotia Private Canadian Preferred Share Pool Scotia Canadian Dividend Fund Scotia Canadian Blue Chip Fund Scotia Private Canadian Equity Pool Scotia Canadian Growth Fund Scotia Canadian Small Cap Fund Scotia Resource Fund Scotia Private North American Equity Pool Scotia Private Cyclical Opportunities Pool U.S. Equity Funds Scotia Private U.S. Dividend Pool Scotia Private U.S. Equity Pool Scotia U.S. Blue Chip Fund Scotia U.S. Value Fund International Equity Funds Scotia Private International Core Equity Pool Scotia International Value Fund Scotia European Fund Scotia Pacific Rim Fund Scotia Latin American Fund Global Equity Funds Scotia Global Dividend Fund Scotia Global Growth Fund Scotia Global Small Cap Fund Scotia Global Opportunities Fund Scotia Global Climate Change Fund Index Funds Scotia Canadian Bond Index Fund Scotia Canadian Index Fund Scotia U.S. Index Fund Scotia CanAm Index Fund Scotia Nasdaq Index Fund Scotia International Index Fund Scotia Portfolios Scotia Selected Portfolios Scotia Selected Income & Modest Growth Portfolio Scotia Selected Balanced Income & Growth Portfolio Scotia Selected Moderate Growth Portfolio Scotia Selected Aggressive Growth Portfolio Scotia Partners Portfolios Scotia Partners Diversified Income Portfolio Scotia Partners Income & Modest Growth Portfolio Scotia Partners Balanced Income & Growth Portfolio Scotia Partners Moderate Growth Portfolio Scotia Partners Aggressive Growth Portfolio Scotia Vision Portfolios Scotia Vision Conservative 2010 Portfolio Scotia Vision Aggressive 2010 Portfolio Scotia Vision Conservative 2015 Portfolio Scotia Vision Aggressive 2015 Portfolio Scotia Vision Conservative 2020 Portfolio Scotia Vision Aggressive 2020 Portfolio Scotia Vision Conservative 2030 Portfolio Scotia Vision Aggressive 2030 Portfolio Scotia INNOVA Portfolios Scotia INNOVA Income Portfolio Scotia INNOVA Balanced Income Portfolio Scotia INNOVA Balanced Growth Portfolio Scotia INNOVA Growth Portfolio Scotia INNOVA Maximum Growth Portfolio 1

Table of Contents 1 Global Economic Outlook Financial Statements Cash Equivalent Funds 3 Scotia T-Bill Fund 5 Scotia Premium T-Bill Fund 7 Scotia Money Market Fund 11 Scotia U.S. $ Money Market Fund Global Equity Funds 131 Scotia Global Dividend Fund 135 Scotia Global Growth Fund 139 Scotia Global Small Cap Fund 142 Scotia Global Opportunities Fund 145 Scotia Global Climate Change Fund Income Funds 14 Scotia Short Term Bond Fund 17 Scotia Private Short-Mid Government Bond Pool 20 Scotia Mortgage Income Fund 23 Scotia Bond Fund 26 Scotia Canadian Income Fund 29 Scotia Private Canadian Corporate Bond Pool 32 Scotia U.S. $ Bond Fund 35 Scotia Global Bond Fund Index Funds 148 Scotia Canadian Bond Index Fund 158 Scotia Canadian Index Fund 162 Scotia U.S. Index Fund 168 Scotia CanAm Index Fund 171 Scotia Nasdaq Index Fund 174 Scotia International Index Fund Scotia Portfolios Balanced Funds 38 Scotia Private Advantaged Income Pool 41 Scotia Diversified Monthly Income Fund 45 Scotia Income Advantage Fund 49 Scotia Canadian Balanced Fund 54 Scotia Canadian Dividend Income Fund 57 Scotia Canadian Tactical Asset Allocation Fund 70 Scotia Global Balanced Fund 72 Scotia U.S. $ Balanced Fund Equity Funds Canadian Equity Funds 75 Scotia Private Canadian Preferred Share Pool 77 Scotia Canadian Dividend Fund 81 Scotia Canadian Blue Chip Fund 84 Scotia Private Canadian Equity Pool 87 Scotia Canadian Growth Fund 90 Scotia Canadian Small Cap Fund 93 Scotia Resource Fund 96 Scotia Private North American Equity Pool 100 Scotia Private Cyclical Opportunities Pool U.S. Equity Funds 103 Scotia Private U.S. Dividend Pool 106 Scotia Private U.S. Equity Pool 109 Scotia U.S. Blue Chip Fund 112 Scotia U.S. Value Fund International Equity Funds 115 Scotia Private International Core Equity Pool 118 Scotia International Value Fund 122 Scotia European Fund 125 Scotia Pacific Rim Fund 128 Scotia Latin American Fund Scotia Selected@ Portfolios 177 Scotia Selected Income & Modest Growth Portfolio 179 Scotia Selected Balanced Income & Growth Portfolio 181 Scotia Selected Moderate Growth Portfolio 183 Scotia Selected Aggressive Growth Portfolio Scotia Partners Portfolios@ 185 Scotia Partners Diversified Income Portfolio 187 Scotia Partners Income & Modest Growth Portfolio 189 Scotia Partners Balanced Income & Growth Portfolio 191 Scotia Partners Moderate Growth Portfolio 193 Scotia Partners Aggressive Growth Portfolio Scotia Vision@ Portfolios 195 Scotia Vision Conservative 2010 Portfolio 197 Scotia Vision Aggressive 2010 Portfolio 199 Scotia Vision Conservative 2015 Portfolio 201 Scotia Vision Aggressive 2015 Portfolio 203 Scotia Vision Conservative 2020 Portfolio 205 Scotia Vision Aggressive 2020 Portfolio 207 Scotia Vision Conservative 2030 Portfolio 209 Scotia Vision Aggressive 2030 Portfolio Scotia INNOVA Portfolios» 211 Scotia INNOVA Income Portfolio 213 Scotia INNOVA Balanced Income Portfolio 215 Scotia INNOVA Balanced Growth Portfolio 217 Scotia INNOVA Growth Portfolio 219 Scotia INNOVA Maximum Growth Portfolio 221 Notes to the Financial Statements 237 Independent Auditors Report 239 Management s Responsibility for Financial Reporting

Global Economic Outlook Warren Jestin Senior Vice-President and Chief Economist Scotiabank Group Not So Fast Forward Financial markets have been buffeted in recent months by heightened investor anxiety over prospects for global growth, the sovereign debt crisis in Europe and the limited progress in bringing Washington s massive fiscal deficit under control. For debt- and deficit-heavy nations, the magnitude of the structural adjustments required for meaningful fiscal repair will dampen growth through middecade. The very high social costs and political risks associated with these very difficult fiscal decisions point to ongoing volatility in currency, equity and bond markets. Output growth in 2012 will struggle to reach 2% in the U.S., even if interest rates remain near historic lows and fiscal retrenchment is postponed, which seems very likely given the high levels of unemployment, fragility of the housing sector and financial difficulties confronting state and local governments. While some European nations will eke out gains, overall growth will be nonexistent in the eurozone as public sector retrenchment and private deleveraging push a number of distressed economies into or deeper into recession. Real GDP (Annual % Change) 10 8 6 4 2 0 Slower Global Growth in 2012 China 2011 Estimate 2012 Forecast 2013 Forecast * Canada U.S. Eurozone * 0.0% Sources: Bloomberg, BEA, Statistics Canada, Eurostat, and Scotia Economics January 3, 2012 Global Forecast Update. Economic momentum also has moderated in many emerging nations, though growth in 2012 should be close to 9% in China, 8% in India and 4% in Brazil. With the traditional developed nations stuck in the slow lane, emerging markets are accounting for over twothirds of global growth and will likely continue to do so through the balance of the decade. The Economist magazine suggests that, by the end of the decade, China may surpass the U.S. as the world s largest economy. Overall Canadian growth is likely to be similar to the U.S. in 2012, falling short of 2%. Domestic demand will be supported by resource sector mega-projects and public infrastructural investment. However, household spending gains will be dampened by a moderation in job creation and greater caution in taking on additional consumer debt, now at record levels relative to disposable income. With home ownership at an all-time high, housing activity will subside. While the Bank of Canada is likely to hold its benchmark interest rates at current levels into 2013, keeping interest rates near generational lows, Canadian fiscal policy will be less stimulative as Ottawa and many provincial governments move to bring their budgets back towards balance. Reduced global economic momentum will temper Canadian export gains, although resource producers will continue to enjoy relatively buoyant demand from China and other emerging markets. Manufacturers will continue to be challenged by the strong loonie and soft markets in Europe, and in the U.S. still the destination of over 70% of Canadian exports. Growth in the manufacturing sector will increasingly come from smalland medium-size enterprises that are focussed on higher value-added domestic markets and new global markets. Trends in the auto industry underline the shift that is occurring in the manufacturing sector. Canada now produces nearly one million fewer vehicles than a decade ago and is getting a much smaller share of the auto sector s North American investment than over the past decade. 1

In today s challenging global environment, Canada remains one of the best places to work and do business. Unlike the U.S. and Europe, Canada has fully regained the jobs lost during the financial crisis and recession of 2008-09. In today s challenging global environment, Canada remains one of the best places to work and do business. Unlike the U.S. and Europe, Canada has fully regained the jobs lost during the financial crisis and recession of 2008-09. The buoyancy in our housing and commercial real estate markets contrasts sharply with the depressed conditions evident in the U.S. and much of Europe. Ottawa plans to balance its budget deficit, now equivalent to 2% of GDP, by 2017, if not before. Despite a shortfall running around 8% of GDP, Washington has no plans to move decisively towards a more balanced fiscal setting. Canada s fiscal advantage is strategically important for longer-term growth and prosperity because it underpins an internationally competitive tax system. Our financial system, the strongest in the world, supports national growth at a time when banking problems in many developed countries have become an impediment to the revitalization of economic activity. Warren Jestin Senior Vice-President and Chief Economist Scotiabank Group 2

Scotia T-Bill Fund STATEMENT OF NET ASSETS As at ASSETS Investments at fair value $114,295,913 $138,183,677 Cash 54,772 101,347 Accrued investment income 9,912 11,927 114,360,597 138,296,951 LIABILITIES Distributions payable 276 300 Net Assets $114,360,321 $138,296,651 NET ASSETS PER SERIES Series A Units $114,360,321 $138,296,651 UNITS OUTSTANDING Series A Units 11,436,032 13,829,665 NET ASSETS PER UNIT Series A Units $ 10.00 $ 10.00 STATEMENT OF OPERATIONS For the periods ended STATEMENT OF CHANGES IN NET ASSETS For the periods ended NET ASSETS BEGINNING OF PERIOD Series A Units $138,296,651 $163,034,589 Series A Units 364,474 162,537 DISTRIBUTIONS TO UNITHOLDERS From net investment income Series A Units (364,472) (162,536) UNIT TRANSACTIONS Proceeds from issue Series A Units 43,947,776 67,198,912 Reinvested distributions Series A Units 361,593 161,328 Payments on redemption Series A Units (68,245,701) (92,098,179) (23,936,332) (24,737,939) INCREASE (DECREASE) IN NET ASSETS Series A Units (23,936,330) (24,737,938) NET ASSETS END OF PERIOD Series A Units $114,360,321 $138,296,651 INVESTMENT INCOME Interest $1,328,709 $ 892,303 Securities lending 28,502 46,694 1,357,211 938,997 EXPENSES Management fees (note 5) 1,220,985 1,571,808 Harmonized Sales Tax/Goods and Services Tax 117,560 84,749 Audit fees 16,128 17,018 Independent Review Committee fees 1,501 2,230 Custodian fees 2,522 2,783 Filing fees 20,554 22,674 Legal fees 2,862 1,955 Unitholder reporting costs 33,584 44,096 Unitholder administration and service fees 184,724 275,175 Overdraft charges 8 1,600,420 2,022,496 Absorbed expenses (607,683) (1,246,036) 992,737 776,460 Net investment income (loss) 364,474 162,537 Increase (decrease) in Net Assets from operations $ 364,474 $ 162,537 Series A Units $ 364,474 $ 162,537 PER UNIT Series A Units $ 0.03 $ 0.01 CASH EQUIVALENT FUNDS 3

Scotia T-Bill Fund (Continued) STATEMENT OF INVESTMENT PORTFOLIO As at 2011 Face MONEY MARKET INSTRUMENTS 99.9% Treasury Bills 62.9% Government of Canada 2,675,000 0.00% due Jan. 5, 2012 2,673,761 2,674,720 250,000 0.93% due Jan. 5, 2012 249,193 249,969 8,080,000 0.95% due Jan. 5, 2012 8,047,599 8,078,948 18,955,000 0.88% due Jan. 19, 2012 18,923,156 18,946,357 8,535,000 0.94% due Feb. 2, 2012 8,501,116 8,527,739 17,660,000 0.86% due Mar. 15, 2012 17,613,554 17,628,898 12,200,000 0.00% due Apr. 12, 2012 12,171,574 12,171,847 3,730,000 0.98% due Oct. 25, 2012 3,694,080 3,700,494 71,874,033 71,978,972 Short-Term Bonds 37.0% Alberta Capital Finance Authority (Floating Rate) 6,000,000 1.35% due Apr. 26, 2013 6,001,037 6,015,352 Financement Quebec (Floating Rate) 11,720,000 1.23% due Apr. 25, 2012 11,713,102 11,738,866 Government of Canada (Floating Rate) 9,900,000 1.65% due Sep. 15, 2014 9,979,722 9,986,451 Province of Ontario (Floating Rate) 3,000,000 2.27% due Apr. 2, 2013 3,038,449 3,054,729 Province of Manitoba (Floating Rate) 11,500,000 1.31% due May 2, 2012 11,497,592 11,521,544 42,229,902 42,316,941 TOTAL INVESTMENT PORTFOLIO 114,103,935 114,295,913 OTHER ASSETS, LESS LIABILITIES 0.1% 64,408 NET ASSETS 100.0% 114,360,321 SUMMARY OF INVESTMENT PORTFOLIO Investment Category 2011 2010 Treasury Bills 62.9 74.9 Short-Term Bonds 37.0 25.0 SUPPLEMENTARY SCHEDULES As at 2011 and 2010 Interest rate risk (note 3) The table below summarizes the Fund s exposure to interest rate risk by the remaining term to maturity of the Fund s portfolio of money market instruments. Money Market Instruments* 2011 2010 Less than 1 year $114,295,913 $138,183,677 1-3 years 3-5 years 5-10 years H 10 years Total $114,295,913 $138,183,677 * Excludes cash Credit risk (note 3) The table below summarizes the credit ratings of the money market instruments, excluding cash, held by the Fund. 2011 2010 Total Money Market Instruments (%) Total Money Market Instruments (%) Short-Term Rating R1-High 63.0 62.9 75.0 74.9 Bond Credit Rating AAA 14.0 14.0 3.3 3.3 AA 2.7 2.7 21.7 21.7 A 20.3 20.3 Total 100.0 99.9 100.0 99.9 Liquidity risk (note 3) The table below summarizes a maturity analysis of cash flows associated with the maturities of the Fund s financial liabilities: 2011 2010 Less than 3 months Less than 3 months Accounts payable and accrued liabilities $276 $300 value classification (note 2) The tables below illustrate the classification of the Fund s financial instruments within the fair value hierarchy as at 2011 and 2010, respectively. CASH EQUIVALENT FUNDS 2011 Money Market Instruments $ $114,295,913 $ $114,295,913 2010 Money Market Instruments $ $138,183,677 $ $138,183,677 During the periods ended 2011 and 2010, there were no transfers between Level 1 and Level 2. 4

Scotia Premium T-Bill Fund STATEMENT OF NET ASSETS As at ASSETS Investments at fair value $428,840,002 $571,884,886 Cash 1,413,023 96,010 Accrued investment income 37,371 49,553 Receivable for management fees rebate 82,419 116,291 430,372,815 572,146,740 LIABILITIES Distributions payable 7,803 13,713 Net Assets $430,365,012 $572,133,027 NET ASSETS PER SERIES Series A Units $430,365,012 $572,133,027 UNITS OUTSTANDING Series A Units 43,036,501 57,213,303 NET ASSETS PER UNIT Series A Units $ 10.00 $ 10.00 STATEMENT OF OPERATIONS For the periods ended STATEMENT OF CHANGES IN NET ASSETS For the periods ended NET ASSETS BEGINNING OF PERIOD Series A Units $ 572,133,027 $ 854,406,256 Series A Units 4,316,735 3,136,075 DISTRIBUTIONS TO UNITHOLDERS From net investment income Series A Units (4,316,732) (3,136,075) UNIT TRANSACTIONS Proceeds from issue Series A Units 614,215,039 477,199,961 Reinvested distributions Series A Units 4,219,165 3,070,049 Payments on redemption Series A Units (760,202,222) (762,543,239) (141,768,018) (282,273,229) INCREASE (DECREASE) IN NET ASSETS Series A Units (141,768,015) (282,273,229) NET ASSETS END OF PERIOD Series A Units $ 430,365,012 $ 572,133,027 INVESTMENT INCOME Interest $5,878,375 $4,308,656 Securities lending 155,497 232,792 6,033,872 4,541,448 EXPENSES Management fees net of rebates (note 5) 1,504,373 2,052,072 Harmonized Sales Tax/Goods and Services Tax 297,737 127,795 Audit fees 19,539 20,001 Independent Review Committee fees 189 259 Custodian fees 7,988 9,319 Filing fees 27,331 27,201 Legal fees 2,862 1,955 Unitholder reporting costs 11,000 12,502 Unitholder administration and service fees 71,205 76,817 Overdraft charges 31 21 1,942,255 2,327,942 Absorbed expenses (225,118) (922,569) 1,717,137 1,405,373 Net investment income (loss) 4,316,735 3,136,075 Increase (decrease) in Net Assets from operations $4,316,735 $3,136,075 Series A Units $4,316,735 $3,136,075 PER UNIT Series A Units $ 0.08 $ 0.04 CASH EQUIVALENT FUNDS 5

Scotia Premium T-Bill Fund (Continued) STATEMENT OF INVESTMENT PORTFOLIO As at 2011 Face MONEY MARKET INSTRUMENTS 99.7% Treasury Bills 62.1% Government of Canada 1,225,000 0.78% due Jan. 5, 2012 1,224,241 1,224,869 950,000 0.79% due Jan. 5, 2012 949,364 949,897 180,000 0.80% due Jan. 5, 2012 179,867 179,980 700,000 0.80% due Jan. 5, 2012 699,783 699,923 1,140,000 0.83% due Jan. 5, 2012 1,139,453 1,139,870 205,000 0.85% due Jan. 5, 2012 204,895 204,976 630,000 0.86% due Jan. 5, 2012 629,704 629,926 565,000 0.87% due Jan. 5, 2012 564,785 564,933 27,900,000 0.89% due Jan. 5, 2012 27,824,390 27,896,624 310,000 0.93% due Jan. 5, 2012 308,993 309,961 11,135,000 0.95% due Jan. 5, 2012 11,090,349 11,133,550 67,760,000 0.88% due Jan. 19, 2012 67,646,163 67,729,101 14,860,000 0.91% due Feb. 2, 2012 14,808,287 14,847,810 20,290,000 0.94% due Feb. 2, 2012 20,209,449 20,272,739 59,650,000 0.86% due Mar. 15, 2012 59,493,121 59,544,947 45,700,000 0.00% due Apr. 12, 2012 45,593,519 45,594,543 14,270,000 0.98% due Oct. 25, 2012 14,132,580 14,157,119 266,698,941 267,080,768 Short-Term Bonds 37.6% Alberta Capital Finance Authority (Floating Rate) 10,700,000 1.35% due Feb. 5, 2013 10,689,379 10,710,587 39,400,000 1.35% due Apr. 26, 2013 39,406,807 39,500,808 Financement Quebec (Floating Rate) 31,730,000 1.23% due Apr. 25, 2012 31,710,902 31,780,654 Canada Housing Trust No. 1 (Floating Rate) 34,680,000 1.65% due Sep. 15, 2014 34,959,270 34,982,842 Province of Manitoba (Floating Rate) 44,700,000 1.31% due May 2, 2012 44,691,244 44,784,343 161,457,602 161,759,234 TOTAL INVESTMENT PORTFOLIO 428,156,543 428,840,002 OTHER ASSETS, LESS LIABILITIES 0.3% 1,525,010 NET ASSETS 100.0% 430,365,012 SUPPLEMENTARY SCHEDULES As at 2011 and 2010 Interest rate risk (note 3) The table below summarizes the Fund s exposure to interest rate risk by the remaining term to maturity of the Fund s portfolio of money market instruments. Money Market Instruments* 2011 2010 Less than 1 year $428,840,002 $571,884,886 1-3 years 3-5 years 5-10 years H 10 years Total $428,840,002 $571,884,886 * Excludes cash Credit risk (note 3) The table below summarizes the credit ratings of the money market instruments, excluding cash, held by the Fund. 2011 2010 Total Money Market Instruments (%) Total Money Market Instruments (%) Short-Term Rating R1-High 62.3 62.1 75.2 75.2 Bond Credit Rating AAA 19.9 19.8 1.9 1.9 AA 2.1 2.1 A 17.8 17.8 20.8 20.7 Total 100.0 99.7 100.0 99.9 Liquidity risk (note 3) The table below summarizes a maturity analysis of cash flows associated with the maturities of the Fund s financial liabilities: 2011 2010 Less than 3 months Less than 3 months Accounts payable and accrued liabilities $7,803 $13,713 CASH EQUIVALENT FUNDS SUMMARY OF INVESTMENT PORTFOLIO Investment Category 2011 2010 Treasury Bills 62.1 75.2 Short-Term Bonds 37.6 24.7 value classification (note 2) The tables below illustrate the classification of the Fund s financial instruments within the fair value hierarchy as at 2011 and 2010, respectively. 2011 Money Market Instruments $ $428,840,002 $ $428,840,002 2010 Money Market Instruments $ $571,884,886 $ $571,884,886 During the periods ended 2011 and 2010, there were no transfers between Level 1 and Level 2. 6

Scotia Money Market Fund STATEMENT OF NET ASSETS As at ASSETS Investments at fair value $2,309,224,169 $2,065,087,054 Cash 38,573 96,215 Accrued investment income 249,813 240,814 2,309,512,555 2,065,424,083 LIABILITIES Distributions payable 3,712 9,355 Net Assets $2,309,508,843 $2,065,414,728 NET ASSETS PER SERIES Series A Units $ 690,727,895 $ 787,387,159 Advisor Series Units $ 2,534,401 $ 4,938,578 Premium Series Units $ 287,387,492 $ 271,441,130 Series I Units $ 11,916,112 $ 15,079,684 Series M Units $1,316,942,943 $ 986,568,177 UNITS OUTSTANDING Series A Units 69,072,790 78,738,716 Advisor Series Units 253,440 493,858 Premium Series Units 28,738,749 27,144,113 Series I Units 1,191,611 1,507,968 Series M Units 131,694,295 98,656,818 NET ASSETS PER UNIT Series A Units $ 10.00 $ 10.00 Advisor Series Units $ 10.00 $ 10.00 Premium Series Units $ 10.00 $ 10.00 Series I Units $ 10.00 $ 10.00 Series M Units $ 10.00 $ 10.00 STATEMENT OF OPERATIONS For the periods ended INVESTMENT INCOME Interest $29,874,715 $22,675,905 Securities lending 2,234 848 29,876,949 22,676,753 EXPENSES Management fees (note 5) 8,465,303 10,567,890 Harmonized Sales Tax/Goods and Services Tax 841,981 678,939 Audit fees 23,010 23,278 Independent Review Committee fees 3,747 4,793 Custodian fees 40,901 40,286 Filing fees 63,232 133,649 Legal fees 5,313 1,865 Unitholder reporting costs 78,740 91,874 Unitholder administration and service fees 527,416 637,516 Overdraft charges 174 896 10,049,817 12,180,986 Absorbed expenses (1,422,408) (3,337,119) 8,627,409 8,843,867 Net investment income (loss) 21,249,540 13,832,886 Increase (decrease) in Net Assets from operations $21,249,540 $13,832,886 Series A Units $ 2,525,110 $ 1,382,196 Advisor Series Units $ 12,492 $ 9,703 Premium Series Units $ 2,735,402 $ 2,173,143 Series I Units $ 175,042 $ 138,951 Series M Units $15,801,494 $10,128,893 PER UNIT Series A Units $ 0.03 $ 0.02 Advisor Series Units $ 0.03 $ 0.01 Premium Series Units $ 0.10 $ 0.06 Series I Units $ 0.13 $ 0.10 Series M Units $ 0.13 $ 0.09 STATEMENT OF CHANGES IN NET ASSETS For the periods ended NET ASSETS BEGINNING OF PERIOD Series A Units $ 787,387,159 $ 998,315,829 Advisor Series Units 4,938,578 7,269,580 Premium Series Units 271,441,130 557,115,939 Series I Units 15,079,684 11,781,019 Series M Units 986,568,177 1,179,202,404 2,065,414,728 2,753,684,771 Series A Units 2,525,110 1,382,196 Advisor Series Units 12,492 9,703 Premium Series Units 2,735,402 2,173,143 Series I Units 175,042 138,951 Series M Units 15,801,494 10,128,893 21,249,540 13,832,886 DISTRIBUTIONS TO UNITHOLDERS From net investment income Series A Units (2,525,114) (1,382,194) Advisor Series Units (12,492) (9,702) Premium Series Units (2,735,403) (2,173,143) Series I Units (175,041) (138,952) Series M Units (15,801,499) (10,128,893) (21,249,549) (13,832,884) UNIT TRANSACTIONS Proceeds from issue Series A Units 632,771,689 787,841,837 Advisor Series Units 2,054,394 5,308,677 Premium Series Units 356,892,543 440,361,661 Series I Units 30,000 4,799,980 Series M Units 2,600,789,015 1,877,667,766 Reinvested distributions Series A Units 2,498,493 1,367,624 Advisor Series Units 12,393 9,634 Premium Series Units 2,703,734 2,078,109 Series I Units 175,040 138,952 Series M Units 15,720,517 10,011,410 Payments on redemption Series A Units (731,929,442) (1,000,138,133) Advisor Series Units (4,470,964) (7,649,314) Premium Series Units (343,649,914) (728,114,579) Series I Units (3,368,613) (1,640,266) Series M Units (2,286,134,761) (2,080,313,403) 244,094,124 (688,270,045) INCREASE (DECREASE) IN NET ASSETS Series A Units (96,659,264) (210,928,670) Advisor Series Units (2,404,177) (2,331,002) Premium Series Units 15,946,362 (285,674,809) Series I Units (3,163,572) 3,298,665 Series M Units 330,374,766 (192,634,227) 244,094,115 (688,270,043) NET ASSETS END OF PERIOD Series A Units 690,727,895 787,387,159 Advisor Series Units 2,534,401 4,938,578 Premium Series Units 287,387,492 271,441,130 Series I Units 11,916,112 15,079,684 Series M Units 1,316,942,943 986,568,177 $ 2,309,508,843 $ 2,065,414,728 CASH EQUIVALENT FUNDS 7

Scotia Money Market Fund (Continued) STATEMENT OF INVESTMENT PORTFOLIO As at 2011 CASH EQUIVALENT FUNDS Face MONEY MARKET INSTRUMENTS 100.0% Bankers Acceptances 2.9% HSBC Bank Canada 44,000,000 0.00% due from Jan. 16, 2012 43,959,080 43,978,879 18,000,000 0.00% due from Jan. 30, 2012 17,967,420 17,983,434 Royal Bank of Canada 5,000,000 1.05% due Jan. 16, 2012 4,992,400 4,997,706 66,918,900 66,960,019 Bearers Deposit Notes 4.3% Bank of Nova Scotia, The 32,000,000 1.06% due Jan. 3, 2012 31,962,880 31,997,216 Caisse Centrale Desjardins 5,000,000 1.05% due Jan. 10, 2012 4,993,100 4,998,563 4,150,000 1.06% due Jan. 13, 2012 4,143,858 4,148,434 1,500,000 1.07% due Jan. 26, 2012 1,497,195 1,498,860 Manulife Bank of Canada 5,800,000 0.00% due Jan. 3, 2012 5,794,490 5,799,483 10,000,000 0.00% due Jan. 9, 2012 9,990,800 9,997,329 15,000,000 0.00% due Jan. 13, 2012 14,987,150 14,994,168 10,500,000 0.00% due Feb. 1, 2012 10,480,440 10,489,820 14,300,000 0.00% due Feb. 21, 2012 14,272,258 14,277,460 98,122,171 98,201,333 Commercial Paper 34.0% Caisse Centrale Desjardins 2,525,000 0.00% due Jan. 25, 2012 2,522,349 2,523,209 Canada Pension Plan Investment Board 19,900,000 0.00% due Jan. 11, 2012 19,892,438 19,894,058 8,300,000 0.00% due Jan. 20, 2012 8,294,771 8,295,453 Daimler Canada Finance Inc. 7,500,000 0.00% due Jan. 6, 2012 7,491,075 7,498,513 10,000,000 0.00% due Jan. 10, 2012 9,989,100 9,996,697 43,590,000 0.00% due Jan. 18, 2012 43,542,487 43,564,083 Enbridge Inc. 38,000,000 0.00% due Jan. 9, 2012 37,963,140 37,989,633 14,000,000 0.00% due Jan. 16, 2012 13,988,240 13,993,031 5,120,000 0.00% due Jan. 19, 2012 5,114,675 5,117,024 Fortis, Inc. 1,540,000 1.06% due Jan. 4, 2012 1,537,228 1,539,821 4,225,000 0.00% due Jan. 31, 2012 4,217,522 4,221,200 3,000,000 1.08% due Feb. 1, 2012 2,992,020 2,997,163 3,000,000 0.00% due Feb. 3, 2012 2,994,780 2,997,042 4,000,000 0.00% due Mar. 1, 2012 3,989,720 3,992,792 General Electric Company 12,000,000 1.06% due Jan. 6, 2012 11,984,280 11,997,904 4,000,000 1.07% due Jan. 17, 2012 3,992,520 3,998,013 3,425,000 1.20% due Feb. 1, 2012 3,405,306 3,421,419 Honda Canada Finance Inc. 6,000,000 0.00% due Jan. 13, 2012 5,993,700 5,997,725 5,000,000 0.00% due Jan. 18, 2012 4,995,600 4,997,360 24,500,000 0.00% due Jan. 27, 2012 24,478,725 24,480,602 7,700,000 1.13% due Jan. 30, 2012 7,679,056 7,692,860 16,000,000 0.00% due Mar. 15, 2012 15,956,960 15,962,897 Imperial Oil Limited 18,000,000 0.00% due Jan. 5, 2012 17,982,000 17,997,429 24,500,000 0.00% due Jan. 19, 2012 24,474,275 24,486,790 20,000,000 0.00% due Jan. 26, 2012 19,983,400 19,985,117 Nova Scotia Power Inc. 11,540,000 0.00% due Jan. 10, 2012 11,528,264 11,536,605 3,600,000 0.00% due Jan. 16, 2012 3,596,472 3,598,289 21,000,000 0.00% due Jan. 17, 2012 20,978,530 20,989,456 5,000,000 0.00% due Jan. 23, 2012 4,994,850 4,996,616 3,800,000 0.00% due Jan. 24, 2012 3,796,162 3,797,291 8,000,000 0.00% due Jan. 25, 2012 7,991,760 7,994,114 5,700,000 0.00% due Jan. 27, 2012 5,693,958 5,695,469 Omers Finance Trust 11,500,000 0.00% due Jan. 6, 2012 11,490,685 11,498,004 2,300,000 0.00% due Jan. 11, 2012 2,298,068 2,299,267 Face MONEY MARKET INSTRUMENTS (cont d) Commercial Paper (cont d) 61,520,000 0.00% to 1.11% due Jan. 20, 2012 61,452,957 61,483,914 9,100,000 0.00% due Jan. 25, 2012 9,090,991 9,093,376 17,884,000 0.00% due Mar. 9, 2012 17,837,680 17,846,837 1,000,000 0.00% due Mar. 14, 2012 997,270 997,780 Omnova Solutions Inc. 4,000,000 0.00% due Jan. 12, 2012 3,996,400 3,998,606 Telus Corporation Non-Voting 10,000,000 1.17% due Jan. 4, 2012 9,970,300 9,998,723 8,300,000 1.17% due Jan. 6, 2012 8,275,598 8,298,409 Thompson Corp 6,000,000 0.00% due Jan. 13, 2012 5,995,260 5,997,535 Toyota Credit Canada Inc. 25,000,000 1.23% due May 4, 2012 24,852,500 24,895,241 23,000,000 1.22% due May 7, 2012 22,873,040 22,902,103 12,380,000 0.00% to 1.21% due May 15, 2012 12,309,962 12,324,460 TransCanada PipeLines Ltd. 700,000 0.00% due Jan. 5, 2012 699,496 699,895 2,900,000 1.18% due Jan. 25, 2012 2,891,590 2,897,664 10,000,000 1.18% due Jan. 26, 2012 9,970,700 9,991,629 Union Gas Ltd. 13,315,000 0.00% due Jan. 4, 2012 13,309,141 13,313,438 43,170,000 0.00% due Jan. 13, 2012 43,145,554 43,153,941 Vancouver City 15,000,000 0.00% due Feb. 22, 2012 14,968,650 14,976,264 9,000,000 0.00% due Mar. 7, 2012 8,977,500 8,982,054 13,765,000 0.00% due Mar. 14, 2012 13,727,697 13,734,666 Volkswagen AG 5,000,000 1.21% due Jan. 4, 2012 4,984,650 4,999,340 9,600,000 1.21% due Jan. 9, 2012 9,573,696 9,597,148 8,500,000 1.21% due Jan. 24, 2012 8,474,755 8,493,268 10,000,000 1.17% to 1.20% due Feb. 1, 2012 9,970,980 9,989,550 4,000,000 0.00% due Mar. 2, 2012 3,987,960 3,991,797 15,000,000 0.00% due Mar. 16, 2012 14,954,400 14,962,330 10,000,000 0.00% due Mar. 19, 2012 9,970,300 9,973,930 Woodbridge Finance Corporation 9,900,000 0.00% due Jan. 11, 2012 9,890,298 9,896,766 7,500,000 0.00% due Jan. 13, 2012 7,492,875 7,497,105 4,000,000 0.00% due Jan. 18, 2012 3,996,480 3,997,888 8,835,000 0.00% to 0.39% due Jan. 19, 2012 8,827,956 8,831,405 4,500,000 0.00% due Mar. 5, 2012 4,486,815 4,490,883 11,000,000 0.00% due Mar. 8, 2012 10,970,055 10,976,704 4,000,000 0.00% due Mar. 12, 2012 3,988,680 3,991,044 10,100,000 0.00% due Mar. 15, 2012 10,071,013 10,076,369 784,807,315 785,395,008 Short-Term Bonds 58.8% Bank of Montreal (Floating Rate) 100,600,000 1.63% due Dec. 10, 2012 100,601,434 100,682,481 Bank of Nova Scotia, The (Floating Rate) 21,363,000 1.73% due Apr. 20, 2012 21,386,349 21,457,684 13,000,000 1.45% due Dec. 21, 2012 12,994,040 12,997,588 42,000,000 1.60% due Apr. 19, 2013 42,061,774 42,193,310 Caisse Centrale Desjardins (Floating Rate) 500,000 1.58% due Feb. 17, 2012 500,124 501,046 9,881,000 1.58% due Feb. 17, 2012 9,882,208 9,900,434 37,350,000 1.98% due Sep. 17, 2012 37,489,258 37,511,604 Canadian Imperial Bank of Commerce (Floating Rate) 19,700,000 1.62% due Jul. 19, 2013 19,700,000 19,709,437 Canadian Utilities Limited 4,316,000 4.88% due Nov. 1, 2012 4,443,343 4,477,503 CARDS II Trust (Floating Rate) 28,900,000 1.83% due May 15, 2012 28,937,922 29,002,619 Caterpillar Financial Services Limited 55,662,000 4.94% due Jun. 1, 2012 56,443,800 56,661,673 Deere & Company 28,479,000 4.80% due Apr. 20, 2012 28,768,997 29,034,177 3,960,000 5.30% due Jul. 27, 2012 4,047,016 4,135,987 8

Scotia Money Market Fund (Continued) STATEMENT OF INVESTMENT PORTFOLIO Face MONEY MARKET INSTRUMENTS (cont d) Short-Term Bonds (cont d) 15,000,000 5.30% due Jul. 27, 2012 15,329,628 15,666,639 EnCana Corporation 53,154,000 4.30% due Mar. 12, 2012 53,449,252 54,133,685 GE Capital Canada Funding Company 9,300,000 6.25% due Jul. 24, 2012 9,542,629 9,793,767 1,000,000 4.38% due Sep. 28, 2012 1,019,640 1,030,818 General Electric Company 28,155,000 5.29% due Aug. 17, 2012 28,798,654 29,345,037 Greater Toronto Airports Authority 55,560,000 6.25% due Jan. 30, 2012 55,780,112 57,223,842 6,500,000 6.25% due Dec. 13, 2012 6,801,101 6,819,971 Honda Canada Finance Inc. (Floating Rate) 2,600,000 1.46% due Mar. 26, 2012 2,599,392 2,599,601 Honda Canada Finance Inc. 45,577,000 5.68% due Sep. 26, 2012 46,947,893 47,622,939 Manulife Bank of Canada (Floating Rate) 8,000,000 1.65% due Jan. 5, 2012 8,000,080 8,008,943 Master Credit Card Trust 41,400,000 5.30% due Aug. 21, 2012 42,403,327 43,183,974 National Bank of Canada (Floating Rate) 18,000,000 1.55% due Feb. 13, 2012 18,001,085 18,013,824 48,000,000 1.35% due Oct. 10, 2012 48,000,000 48,034,802 NAV Canada 23,307,000 3.43% due Apr. 17, 2012 23,440,504 23,602,327 Province of Alberta (Floating Rate) 25,000,000 1.53% due Jun. 12, 2012 25,000,000 25,018,906 155,860,000 1.26% due Jun. 1, 2014 155,780,611 155,936,975 Province of Ontario (Floating Rate) 48,100,000 1.53% due Oct. 28, 2014 48,194,906 48,317,009 Royal Bank of Canada (Floating Rate) 23,850,000 1.93% due May 11, 2012 23,890,523 23,949,334 88,200,000 1.68% due Apr. 8, 2013 88,213,485 88,543,660 77,900,000 1.53% due Sep. 26, 2013 77,900,037 77,906,590 Shoppers Drug Mart Corporation 26,908,000 4.80% due Jan. 20, 2012 26,954,092 27,526,178 TELUS Corporation 46,257,000 4.50% due Mar. 15, 2012 46,536,085 47,142,252 Toronto-Dominion Bank, The (Floating Rate) 45,150,000 1.32% due Sep. 19, 2012 45,150,000 45,166,021 45,000,000 1.33% due Nov. 8, 2012 45,000,000 45,082,989 Toyota Credit Canada Inc. 1,115,000 5.05% due Jul. 27, 2012 1,136,527 1,160,397 Wells Fargo Company 23,107,000 5.10% due Jun. 26, 2012 23,504,955 23,517,835 Wells Fargo Financial Canada Corporation 1,384,000 6.05% due Aug. 27, 2012 1,423,902 1,452,344 3,195,000 5.20% due Sep. 13, 2012 3,271,822 3,321,117 10,974,000 4.40% due Dec. 12, 2012 11,256,743 11,280,490 1,350,583,250 1,358,667,809 TOTAL INVESTMENT PORTFOLIO 2,300,431,636 2,309,224,169 OTHER ASSETS, LESS LIABILITIES 0.0% 284,674 NET ASSETS 100.0% 2,309,508,843 SUMMARY OF INVESTMENT PORTFOLIO Investment Category 2011 2010 Bankers Acceptances 2.9 3.7 Bearers Deposit Notes 4.3 1.5 Commercial Paper 34.0 35.2 Promissory Notes 1.3 Treasury Bills 0.2 Short-Term Bonds 58.8 58.1 CASH EQUIVALENT FUNDS 9

Scotia Money Market Fund (Continued) SUPPLEMENTARY SCHEDULES As at 2011 and 2010 Interest rate risk (note 3) The table below summarizes the Fund s exposure to interest rate risk by the remaining term to maturity of the Fund s portfolio of money market instruments. Money Market Instruments* 2011 2010 Less than 1 year $2,309,224,169 $2,065,087,054 1-3 years 3-5 years 5-10 years H 10 years Total $2,309,224,169 $2,065,087,054 * Excludes cash Credit risk (note 3) The table below summarizes the credit ratings of the money market instruments, excluding cash, held by the Fund. 2011 2010 Total Money Market Instruments (%) Total Money Market Instruments (%) Short-Term Rating R1-High 13.4 13.4 12.6 12.6 R1-Middle 12.6 12.6 9.3 9.3 R1-Low 15.1 15.1 20.0 20.0 Bond Credit Rating AAA 11.0 11.0 14.0 14.0 AA 32.3 32.3 33.2 33.2 A 15.6 15.6 10.9 10.9 Total 100.0 100.0 100.0 100.0 Liquidity risk (note 3) The table below summarizes a maturity analysis of cash flows associated with the maturities of the Fund s financial liabilities: 2011 2010 Less than 3 months Less than 3 months Accounts payable and accrued liabilities $3,712 $9,355 value classification (note 2) The tables below illustrate the classification of the Fund s financial instruments within the fair value hierarchy as at 2011 and 2010, respectively. 2011 Money Market Instruments $ $2,309,224,169 $ $2,309,224,169 2010 Money Market Instruments $ $2,065,087,054 $ $2,065,087,054 During the periods ended 2011 and 2010, there were no transfers between Level 1 and Level 2. CASH EQUIVALENT FUNDS 10

Scotia U.S. $ Money Market Fund STATEMENT OF NET ASSETS As at U.S.$ U.S.$ ASSETS Investments at fair value $97,712,974 $106,878,465 Cash 80,865 99,375 Accrued investment income 177,800 177,134 97,971,639 107,154,974 LIABILITIES Distributions payable 7 10 Net Assets $97,971,632 $107,154,964 NET ASSETS PER SERIES Series A Units $97,971,632 $107,154,964 UNITS OUTSTANDING Series A Units 9,797,163 10,715,496 NET ASSETS PER UNIT Series A Units $ 10.00 $ 10.00 STATEMENT OF OPERATIONS For the periods ended STATEMENT OF CHANGES IN NET ASSETS For the periods ended U.S.$ U.S.$ NET ASSETS BEGINNING OF PERIOD Series A Units $107,154,964 $113,786,744 Series A Units 54,016 58,082 DISTRIBUTIONS TO UNITHOLDERS From net investment income Series A Units (54,015) (58,084) UNIT TRANSACTIONS Proceeds from issue Series A Units 86,271,878 89,264,527 Reinvested distributions Series A Units 53,820 58,069 Payments on redemption Series A Units (95,509,031) (95,954,374) (9,183,333) (6,631,778) INCREASE (DECREASE) IN NET ASSETS Series A Units (9,183,332) (6,631,780) NET ASSETS END OF PERIOD Series A Units $ 97,971,632 $107,154,964 U.S.$ U.S.$ INVESTMENT INCOME Interest $ 336,299 $ 369,455 EXPENSES Management fees (note 5) 1,073,423 1,153,917 Harmonized Sales Tax/Goods and Services Tax 27,968 25,878 Audit fees 8,549 17,018 Independent Review Committee fees 203 242 Custodian fees 3,995 4,094 Filing fees 22,182 19,595 Legal fees 2,862 1,955 Unitholder reporting costs 10,191 12,175 Unitholder administration and service fees 66,931 67,907 Overdraft charges 268 9 1,216,572 1,302,790 Absorbed expenses (934,289) (991,417) 282,283 311,373 Net investment income (loss) 54,016 58,082 Increase (decrease) in Net Assets from operations $ 54,016 $ 58,082 Series A Units $ 54,016 $ 58,082 PER UNIT Series A Units $ 0.01 $ 0.01 CASH EQUIVALENT FUNDS 11

Scotia U.S. $ Money Market Fund (Continued) CASH EQUIVALENT FUNDS STATEMENT OF INVESTMENT PORTFOLIO As at 2011 Face U.S. $ U.S. $ U.S. $ MONEY MARKET INSTRUMENTS 99.7% Treasury Bills 0.2% Province of Ontario 175,000 0.00% due Mar. 20, 2012 174,965 174,968 Promissory Notes 5.4% Canadian Wheat Board, The 750,000 0.00% due Jan. 6, 2012 749,980 749,995 Province of Quebec 3,425,000 0.06% due Jan. 12, 2012 3,424,589 3,424,932 Province of Quebec 1,160,000 0.00% due Mar. 21, 2012 1,159,768 1,159,771 5,334,337 5,334,698 Banker s Acceptance 2.9% HSBC Bank Canada 600,000 0.00% due Jan. 18, 2012 599,946 599,964 HSBC Bank Canada 800,000 0.29% due Feb. 7, 2012 799,480 799,756 Toronto-Dominion Bank, The 1,400,000 0.00% due from Jan. 18, 2012 1,399,884 1,399,938 2,799,310 2,799,658 Bearers Deposit Notes 12.8% Bank of Montreal 600,000 0.22% due Feb. 13, 2012 599,568 599,839 Caisse Centrale Desjardins 2,300,000 0.00% due Mar. 16, 2012 2,298,919 2,299,126 Caisse Centrale Desjardins 2,300,000 0.62% due Sep. 11, 2012 2,285,671 2,289,962 HSBC Bank Canada 3,000,000 0.00% due Jan. 6, 2012 2,999,670 2,999,945 National Bank of Canada 1,100,000 0.40% due Apr. 10, 2012 1,097,800 1,098,766 Toronto-Dominion Bank, The 2,300,000 0.00% due Jan. 9, 2012 2,299,820 2,299,948 Toronto-Dominion Bank, The 969,000 0.20% due Jan. 23, 2012 968,271 968,876 12,549,719 12,556,462 Commercial Paper 20.5% John Deere Credit Inc. & John Deere Ltd. 2,700,000 0.08% due Jan. 23, 2012 2,699,622 2,699,860 Nestle Capital Canada Ltd. 2,200,000 0.23% due Aug. 3, 2012 2,196,205 2,196,964 Province of Ontario 1,500,000 0.00% due Jan. 18, 2012 1,499,940 1,499,943 Province of Ontario 6,440,000 0.08% due Mar. 13, 2012 6,438,712 6,438,965 Suncor Energy, Inc 155,000 0.00% due Jan. 4, 2012 154,955 154,995 Suncor Energy, Inc 2,000,000 0.40% due Jan. 18, 2012 1,998,240 1,999,599 Thomson Reuters Corp. 2,400,000 0.00% due from Jan. 17, 2012 to Jan. 30, 2012 2,399,034 2,399,258 TransCanada Keystone Pipeline, LP 1,400,000 0.48% due Feb. 2, 2012 1,398,264 1,399,384 TransCanada Keystone Pipeline, LP 600,000 0.00% Mar. 13, 2012 599,082 599,272 TransCanada PipeLines Limited 740,000 0.00% due Mar. 2, 2012 738,924 739,237 20,122,978 20,127,477 Short Term Bonds 57.9% American Honda Finance Corporation (Floating Rate) 2,500,000 0.85% due Jan. 17, 2012 2,500,712 2,505,000 Bank of Montreal (Floating Rate) 4,000,000 0.55% due Aug. 14, 2012 3,997,148 3,999,912 Face U.S. $ U.S. $ U.S. $ MONEY MARKET INSTRUMENTS (cont d) Short Term Bonds (cont d) Bank of Nova Scotia, The (Floating Rate) 4,500,000 0.79% due Mar. 12, 2012 4,499,906 4,501,664 Canadian Imperial Bank of Commerce (Floating Rate) 2,800,000 0.60% due Jan. 13, 2012 2,800,043 2,803,621 300,000 0.78% due Oct. 1, 2012 300,078 300,489 1,700,000 0.58% due Oct. 15, 2012 1,700,000 1,700,396 Caterpillar Financial Services Limited (Floating Rate) 2,830,000 0.74% due Jul. 24, 2012 2,833,434 2,835,517 General Electric Capital Corporation 2,700,000 5.25% due Feb. 21, 2012 2,718,493 2,840,162 International Business Machines Corporation (Floating Rate) 2,841,000 0.58% due Jun. 15, 2012 2,842,034 2,842,716 KFW International Finance, Inc. 1,492,000 1.25% due Jun. 15, 2012 1,498,056 1,498,834 National Australia Bank Limited (Floating Rate) 1,500,000 0.87% due Jan. 8, 2013 1,500,487 1,503,399 Province of Nova Scotia 1,500,000 5.75% due Feb. 27, 2012 1,512,987 1,542,456 Province of Ontario (Floating Rate) 5,755,000 0.94% due May 22, 2012 5,763,828 5,769,524 3,100,000 0.63% due Nov. 19, 2012 3,101,173 3,103,287 5,100,000 0.60% due May 7, 2013 5,108,704 5,113,074 Province of Ontario 1,762,000 4.95% due Jun. 1, 2012 1,795,562 1,802,588 Royal Bank of Canada (Floating Rate) 1,200,000 0.69% due Dec. 12, 2012 1,200,162 1,200,572 3,500,000 0.57% due Jan. 28, 2013 3,499,762 3,503,114 Royal Dutch Shell PLC (Floating Rate) 4,842,000 0.92% due Jun. 22, 2012 4,851,565 4,852,543 Toyota Credit Canada Inc. (Floating Rate) 2,500,000 0.81% due Jan. 11, 2013 2,500,000 2,500,843 56,524,134 56,719,711 TOTAL INVESTMENT PORTFOLIO 97,505,443 97,712,974 OTHER ASSETS, LESS LIABILITIES 0.3% 258,658 NET ASSETS 100.0% 97,971,632 SUMMARY OF INVESTMENT PORTFOLIO Investment Category 2011 2010 Treasury Bills 0.2 Promissory Notes 5.4 Bankers Acceptances 2.9 1.4 Bearers Deposit Notes 12.8 22.4 Commercial Paper 20.5 28.2 Short-Term Bonds 57.9 47.7 12

Scotia U.S. $ Money Market Fund (Continued) SUPPLEMENTARY SCHEDULES As at 2011 and 2010 Interest rate risk (note 3) The table below summarizes the Fund s exposure to interest rate risk by the remaining term to maturity of the Fund s portfolio of money market instruments. Money Market Instruments* 2011 (U.S.$) 2010 (U.S.$) Less than 1 year $97,712,974 $106,878,465 1-3 years 3-5 years 5-10 years H 10 years Total $97,712,974 $106,878,465 * Excludes cash Credit risk (note 3) The table below summarizes the credit ratings of the money market instruments, excluding cash, held by the Fund. 2011 2010 Total Money Market Instruments (%) Total Money Market Instruments (%) Short-Term Rating R1-High 17.6 17.6 33.6 33.4 R1-Middle 14.1 14.1 14.2 14.2 R1-Low 10.2 10.2 4.3 4.3 Bond Credit Rating AAA 6.5 6.4 6.2 6.2 AA 44.6 44.4 37.2 37.1 A 7.0 7.0 4.5 4.5 Total 100.0 99.7 100.0 99.7 Liquidity risk (note 3) The table below summarizes a maturity analysis of cash flows associated with the maturities of the Fund s financial liabilities: 2011 2010 Less than 3 months (U.S.$) Less than 3 months (U.S.$) Accounts payable and accrued liabilities $7 $10 value classification (note 2) The tables below illustrate the classification of the Fund s financial instruments within the fair value hierarchy as at 2011 and 2010, respectively. 2011 Level 1 (U.S.$) Level 2 (U.S.$) Level 3 (U.S.$) Total (U.S.$) Money Market Instruments $ $97,712,974 $ $97,712,974 2010 Level 1 (U.S.$) Level 2 (U.S.$) Level 3 (U.S.$) Total (U.S.$) Money Market Instruments $ $106,878,465 $ $106,878,465 During the periods ended 2011 and 2010, there were no transfers between Level 1 and Level 2. CASH EQUIVALENT FUNDS 13

Scotia Short Term Bond Fund STATEMENT OF NET ASSETS As at ASSETS Investments at fair value $28,030,940 $5,708,736 Cash 961,747 99,061 Accrued investment income 168,260 40,907 29,160,947 5,848,704 LIABILITIES Payable for securities purchased 426,064 Accrued expenses 105 105 426,064 Net Assets $29,160,842 $5,422,640 NET ASSETS PER SERIES Series M Units $29,160,842 $5,422,640 UNITS OUTSTANDING Series M Units 2,910,014 549,793 NET ASSETS PER UNIT Series M Units $ 10.02 $ 9.86 STATEMENT OF OPERATIONS For the periods ended STATEMENT OF CHANGES IN NET ASSETS For the periods ended * NET ASSETS BEGINNING OF PERIOD Series M Units $ 5,422,640 $ Series M Units 1,038,038 (20,404) DISTRIBUTIONS TO UNITHOLDERS From net investment income Series M Units (623,986) (23,394) UNIT TRANSACTIONS Proceeds from issue Series M Units 30,134,490 6,246,277 Reinvested distributions Series M Units 508,974 11,352 Payments on redemption Series M Units (7,319,314) (791,191) 23,324,150 5,466,438 INCREASE (DECREASE) IN NET ASSETS Series M Units 23,738,202 5,422,640 NET ASSETS END OF PERIOD Series M Units $29,160,842 $5,422,640 * Fund s inception date August 26, 2010. * INVESTMENT INCOME Interest $ 680,501 $ 32,882 Securities lending 1,169 681,670 32,882 EXPENSES Management fees (note 5) 14,118 665 Harmonized Sales Tax/Goods and Services Tax 5,652 542 Audit fees 13,150 10,702 Custodian fees 1,421 266 Filing fees 13,940 2,324 Legal fees 3,504 448 Unitholder reporting costs 6,554 2,888 Unitholder administration and service fees 42,798 10,036 Overdraft charges 11 284 101,148 28,155 Absorbed expenses (74,465) (26,630) 26,683 1,525 Net investment income (loss) 654,987 31,357 Net realized gain (loss) on investments sold 13,384 (10,998) Net gain (loss) foreign exchange (20) Change in unrealized appreciation (depreciation) of investments 369,687 (40,763) Net gain (loss) on investments 383,051 (51,761) Increase (decrease) in Net Assets from operations $1,038,038 $(20,404) Series M Units $1,038,038 $(20,404) PER UNIT Series M Units $ 0.51 $ (0.05) INCOME FUNDS 14

Scotia Short Term Bond Fund (Continued) STATEMENT OF INVESTMENT PORTFOLIO As at 2011 Face BOND AND DEBENTURE INSTRUMENTS 96.1% Federal Bonds 34.2% Canada Housing Trust No. 1 275,000 3.55% due Sep. 15, 2013 284,801 286,454 1,170,000 1.43% due Mar. 15, 2015 1,172,340 1,173,698 5,780,000 3.15% due Jun. 15, 2015 5,922,193 6,137,232 2,255,000 2.75% due Jun. 15, 2016 2,344,387 2,373,866 9,723,721 9,971,250 Provincial Bonds 15.5% Province of British Columbia 380,000 8.50% due Aug. 23, 2013 450,984 425,054 Province of Manitoba 660,000 5.05% due Dec. 3, 2013 712,179 707,981 Province of Ontario 550,000 4.75% due Jun. 2, 2013 586,685 577,536 2,650,000 3.15% due Sep. 8, 2015 2,776,473 2,805,868 4,526,321 4,516,439 Mortgage-Backed Securities 0.3% Schooner Trust 75,000 4.36% due Sep. 12, 2020 78,305 79,541 Corporate Bonds 39.2% 407 International Inc. 600,000 5.10% due Jan. 20, 2014 640,259 639,340 Bank of Montreal 550,000 3.10% due Mar. 10, 2016 547,155 565,807 Bayerische Motoren Werke AG 600,000 3.22% due Mar. 28, 2013 610,934 608,103 Bell Canada 550,000 3.60% due Dec. 2, 2015 551,974 570,921 Canadian Imperial Bank of Commerce 600,000 2.65% due Nov. 8, 2016 599,387 603,727 Canadian Natural Resources Limited 150,000 4.95% due Jun. 1, 2015 162,368 162,864 Caterpillar Financial Services Limited 100,000 5.20% due Jun. 3, 2013 107,618 104,794 Enbridge Pipelines Inc. 300,000 2.93% due Sep. 8, 2015 299,710 309,781 EnCana Corporation 600,000 4.30% due Mar. 12, 2012 613,708 603,202 GE Capital Canada Funding Company 600,000 4.65% due Feb. 11, 2015 633,954 634,891 Golden Credit Card Trust 250,000 3.82% due May 15, 2015 258,895 263,361 Greater Toronto Airports Authority 550,000 4.70% due Feb. 15, 2016 587,804 604,137 Honda Canada Finance Inc. 600,000 5.68% due Sep. 26, 2012 630,038 616,710 Hydro One Inc. 300,000 2.95% due Sep. 11, 2015 299,362 310,396 National Bank of Canada 550,000 3.58% due Apr. 26, 2016 553,750 574,301 NAV Canada 550,000 4.71% due Feb. 24, 2016 588,629 607,010 OMERS Realty Corporation 600,000 4.05% due May 5, 2014 627,194 633,077 Royal Bank of Canada 600,000 4.53% due May 7, 2012 617,466 606,567 Thomson Reuters Corporation 500,000 6.00% due Mar. 31, 2016 559,135 568,222 Toronto-Dominion Bank, The 600,000 5.14% due Nov. 19, 2012 630,357 619,652 VW Credit Canada, Inc. 600,000 2.55% due Nov. 18, 2013 601,886 603,627 Wells Fargo Financial Corporation Canada 600,000 3.97% due Nov. 3, 2014 617,290 626,773 11,338,873 11,437,263 Face BOND AND DEBENTURE INSTRUMENTS (cont d) Short-Term Bond 6.9% Canada Housing Trust No. 1 (Floating Rate) 2,025,000 1.41% due Sep. 15, 2015 2,034,796 2,026,447 TOTAL INVESTMENT PORTFOLIO 27,702,016 28,030,940 OTHER ASSETS, LESS LIABILITIES 3.9% 1,129,902 NET ASSETS 100.0% 29,160,842 SUMMARY OF INVESTMENT PORTFOLIO Investment Category 2011 2010 Federal Bonds 34.2 19.0 Provincial Bonds 15.5 29.7 Mortgage-Backed Securities 0.3 1.4 Corporate Bonds 39.2 47.9 Short-Term Bond 6.9 Money Market Instruments 7.3 INCOME FUNDS 15

Scotia Short Term Bond Fund (Continued) SUPPLEMENTARY SCHEDULES As at 2011 and 2010 Interest rate risk (note 3) The table below summarizes the Fund s exposure to interest rate risk by the remaining term to maturity of the Fund s portfolio of bond and debenture instruments. Interest Rate Exposure* 2011 2010 Less than 1 year $ 2,446,131 $ 983,915 1-3 years 5,212,739 2,029,661 3-5 years 20,372,070 1,796,294 5-10 years 504,419 Total $28,030,940 $5,314,289 * Excludes cash, money market instruments and preferred shares as applicable As at 2011, had the prevailing interest rates increased or decreased by 0.25%, assuming a parallel shift in the yield curve and all other variables held constant, Net Assets would have decreased or increased, respectively, by $184,104, or approximately 0.6% of the total Net Assets ( 2010 $32,814, or approximately 0.6% of the total Net Assets). In practice, actual results may differ from this sensitivity analysis and the difference could be material. Credit risk (note 3) The table below summarizes the credit ratings of the bond and debenture instruments, excluding cash and money market instruments but including preferred shares, held by the Fund. 2011 2010 Total Bond and Debenture Instruments (%) Total Bond and Debenture Instruments (%) AAA 46.3 44.4 27.1 26.6 AA 30.8 29.7 35.9 35.2 A 22.3 21.4 34.5 33.7 BBB 0.6 0.6 2.5 2.5 Total 100.0 96.1 100.0 98.0 Liquidity risk (note 3) The table below summarizes a maturity analysis of cash flows associated with the maturities of the Fund s financial liabilities: 2011 2010 Less than 3 months Less than 3 months Accounts payable and accrued liabilities $105 $426,064 value classification (note 2) The tables below illustrate the classification of the Fund s financial instruments within the fair value hierarchy as at 2011 and 2010. 2011 Bond and Debenture Instruments $ $28,030,940 $ $28,030,940 2010 Bond and Debenture Instruments $ $ 5,314,289 $ $ 5,314,289 Money Market Instruments 394,447 394,447 $ $5,708,736 $ $5,708,736 During the periods ended 2011 and 2010, there were no transfers between Level 1 and Level 2. INCOME FUNDS 16