N e W S , v i e W S A N d i N v e S t M e N t S t r A t e g i e S f r o M y o u r S c o t i A b A N k t e A M

VOLUME 8 • ISSUE 1

MARCH 2010

ecoNoMic updAte

the shape of recoveryrebound for some industries, new challenges for others

While the global economic recovery is underway, the turnaround is inconsistent across regions and accompanied by volatility everywhere. As Greece struggles to get a huge deficit under control, for example, deficit reduction seems well underway in India, where the government predicts rising total expenditures will be more than offset by current revenues. Meanwhile, Hong Kong’s recent budget includes important tax-relief measures, social programs and infrastructure spend-ing – all designed to stimulate economic growth. In Japan, industrial activity has picked up amid surging foreign sales, which jumped 8.6% month-over-month in January. Individual industry sectors are also at different stages of the turnaround.

No consistency in housingEarly-year data on housing show significant increases in both housing starts and home sales in Canada. Meanwhile, housing activity in Spain, Italy and Ireland continues to flounder. In the US, where consumer confidence fell in February after four consecutive monthly increases, home sales in January dropped to their lowest level since June 2009. Significant turnaround here is being delayed by more cautious bank lending and large inventories.

Longer-term challenges for auto manufacturersThe early stages of recovery in the global economy are also currently lifting the auto industry. However, Scotiabank economists are cautioning that the retirement of the baby boom generation in Canada and the US will dampen vehicle demand in these markets over the coming decade. Emerging markets are leading the recovery in the global auto market with

China, India and Brazil posting gains. GM sales in China, for example, exceeded sales in the US in January.

going for goldTourism was hit hard by the global recession and by last year’s H1N1 worries, but is steadily improving as labour markets stabilize, stock markets improve and consumer confidence climbs. Canada drew large numbers of US and overseas visitors as host of the Winter Olympics in February. However, the nation has suffered a slowdown in overall US visitors, who have been deterred by a strong Canadian dollar and weak employment and consumption figures in their own country.

in this editionAs an investor today, you must be ready to take advantage of the economic momentum that’s arising at the end of the recession. It is also important to avoid the pitfalls that might accompany recovery. To help you make sense of the most recent economic trends, this edition of investment advisor offers a look at the key factors affecting some important regions of the world currently. At Scotiabank, we believe investors will benefit from the recent appointment of a new portfolio manager for two Scotiabank Mutual Funds. This development means investors now have access to the expertise and experience of a team with proven success in all market conditions.

contentsREgIOnAL OUTLOOkTwo regions in economic perspective ...... page 2

pORTFOLIO MAnAgEMEnTDavis Advisors .................. page 3

InVESTMEnT SUCCESSSet your goals, create a plan to reach them ....... page 4

two regions in economic perspectiveWhat you need to know about these thriving nations

Economic changes are far from uniform around the globe. A look at two distinct regions demonstrates just how diverse the expected sources of growth and the current challenges can be. Here are some of the issues shaping the recovery in parts of the Caribbean and the Americas.

investment advisorMARCH 2010 • PAGE 2

regional outlook

caribbeancayman islands As both an international banking centre and a tourist destination, the Cayman

Islands have been affected by the global credit crisis and the overall economic downturn. The current economic revival is welcome and spirits have also been lifted by the nation’s first-time participation in the Winter Olympic Games in February.

Jamaica An innovative debt exchange program completed in February features the replacement of high-interest government

debt with bonds of much lower rates and extended maturities. The new program, which is supported by the International Monetary Fund, World Bank and Inter-American Development Bank, should relieve the heavy burden of local debt on government coffers.

trinidad and tobago Like other resource-rich countries, this nation’s economy is being supported by the global rebound. At the same time,

tourism – already well established in Tobago – is slated to make an increasing contribution to Trinidad’s economic development. Tourism is also benefitting from the recovery and, as in other years, the influx of tourists during this year’s Carnival celebrations testifies to this potential.

the AmericasMexico Manufacturing is driving industrial output and this progress reflects an improving auto industry. Scotiabank economists

anticipate a balanced recovery, linked to exports as well as to domestic-oriented services. Mexico’s financial system, for one, is well capitalized and ready to lend, and the world is taking increasing notice of the nation’s business leaders: this year, Mexican telecom tycoon Carlos Slim Helu topped Forbes magazine’s ranking of the world’s richest people.

peru Peru was one of the few Latin American countries to grow last year. However, gross domestic product of 1.1% in 2009 was

down considerably from the previous year’s growth of 9.8%. Expectations are for average growth of 4.5% to 5% in each of the next three years, with economic performance tied to the rebounding mining sector and renewed global demand for commodities.

chileThe hearts of the world are with the Chilean people as they struggle with fallout from the devastating earthquake of February 27.

New president Sebastien Piñera assumed leadership on March 11. While no significant policy change is expected, the leader-ship transition is expected to contribute to market volatility. As well, fluctuating global demand for materials – Chile is especially rich in copper – has made for gyrations in the value of the Chilean peso.

More reasons to choose Scotiabank Mutual funds Our primary goal for the family of Scotiabank Mutual Funds is to offer access to a set of high-quality profes-sionally managed investments that help investors realize their financial goals. Now, we are making changes to strengthen that purpose.

The investment strategy for the Scotiabank US Growth Fund has been updated to allow the Fund to be actively managed instead of tracking a broad stock market index. This new approach means the appointed portfolio manager can use its extensive resources to identify long-term investments with above-average growth potential and to ensure Fund assets are suitably diversified by sector, industry and company. Scotiabank Global Growth Fund will also benefit from a change in investment strategy and, as you’ll learn, we have carefully selected a portfolio manager whose experience and expertise should enhance both Funds going forward. To learn more about other changes to the Scotiabank Mutual Funds, please contact your Scotiabank Mutual Funds investment advisor.

investment advisorMARCH 2010 • PAGE 3

portfolio management

As we round the corner on one of the toughest economic downturns in history, we at Scotiabank are more committed than ever to supporting our customers as they work toward their long-term investment goals. With this focus, we are pleased to announce the appoint-ment of US-based Davis Advisors as Portfolio Managers of Scotiabank US Growth Fund and Scotiabank Global Growth Fund. This decision comes after a great deal of work to ensure the right fit: the investment philosophy of Davis Advisors aligns with Scotiabank’s own beliefs in risk management at every level of the investment process and in the importance of a long-term perspective in investing.

focused and research-driven Scotiabank US Growth Fund and Scotiabank Global Growth Fund have always emphasized high-quality invest-ments. Davis takes this focus on quality to a higher level. Based on the company’s

fundamental research process Davis selects stocks that are well priced and have strong potential to increase in value over a number of years.

proven investment processFor more than 40 years, Davis Advisors has adhered to the same time-tested investment discipline of equity investing based on a number of key factors; management quality, the strength of each business model, sustainable competitive advantages and valuations. They purchase durable companies at attractive prices and hold them for the long term with an emphasis on risk management.

“eating our own cooking”The company has a vested interest in the outcome of the portfolios they manage on behalf of investors: the Davis family, Davis Advisors employees and directors have almost $1.5 billion of their own money invested side-by-side with fellow shareholders in the various mutual funds managed by the firm.*

davis Advisors consistency and discipline key to manager’s success

As Portfolio Manager to Scotiabank Global Growth Fund and

Scotiabank US Growth Fund, Davis Advisors adheres to the

same time-tested investment discipline of buying durable

well-managed companies at attractive prices and holding them for the long term.

These tenets have proven effective through a wide variety of market and economic

conditions, and are exemplified by Davis Large Cap Value Portfolio, which has

outperformed the S&P 500® Index over every rolling 10-year period since 1970.

It is the only fund with this track record of consistency.**

investment philosophy: Success through discipline

* As of June 30, 2009

** No other mutual fund has beaten the S&P 500® Index over every rolling 10-year period from 2/17/69 to 12/31/09.

investment advisorMARCH 2010 • PAGE 4

investment success

Set your goals, create a plan to reach them Understand where you stand today, set your financial goals and pick the right mix of investments: these are the fundamental steps to achieving long-term investment success. They are also the key to the comprehen-sive approach of the Investment Selector, an easy-to-use tool designed by Scotiabank to find the mix of investments that meet your personal financial objectives. Working with your Scotiabank Mutual Fund investment advisor, Investment Selector starts with a short questionnaire to clarify your current goals. For example, assessing your comfort level with short-term market declines and knowing when you expect to need the money you’re investing will help determine your investor profile.

This profile guides the selection of a pre-set model portfolio that reflects your personal situation. Scotiabank Asset Allocation Portfolios are diversified among cash, fixed income and growth investments, and each holds a combination of assets that aligns with a specific investor profile. It’s an approach known to reduce portfolio volatility and can help maximize potential returns in the long term. Another important component of the Investment Selector is a full review of your current financial position and your personal investment portfolio. You create this record with a simple form that documents all your holdings – from term deposits and mutual funds to real estate and business interests. That way,

you know exactly where you stand and, with regular reviews and guidance from your Scotiabank Mutual Fund investment advisor, you can ensure your optimal asset allocation remains intact over time.

What do you want from life? Investment Selector is the first step toward your goals

• What’s your comfort level when your investments lose value in the short term?

• How soon do you expect to need the money you are investing?

As part of Scotiabank’s Investment Selector, answers to these and other relevant questions will help determine your Investor Profile, the basis for selecting a suitable investment mix – and the first step toward your goals.

To learn more about Scotiabank Mutual Funds, contact your Scotiabank Mutual Funds investment advisor.

You already know that one of the simplest and most important ways to achieve long-term investment success is by building a properly diversified portfolio. But it can be challenging to maintain that optimal asset mix as market fluctuations can easily skew your portfolio mix. Scotiabank Asset Management Service (AMS) automatically rebalances your portfolio holdings back to optimal levels as necessary. This ensures your asset mix continually reflects your financial goals, time horizon and risk tolerance.

Rebalancing with AMS also eliminates the risk that your emotions, including the urge to chase an asset class that may be outperforming at a given time, will derail your long-term plan. This strategy could even make market uncertainty work for you – you lock-in gains in your portfolio because AMS automatically takes gains from high performance markets and redistributes those investment dollars to other classes and investments.

Asset Management Service

Scotiabank Mutual Funds is the brand name under which the Scotiabank group of companies, including Scotiabank & Trust (Cayman) Ltd. and Scotia DBG Fund Managers Limited markets and distributes mutual funds.* Trademark of The Bank of Nova Scotia, used under licence (where applicable). The information contained herein is for informational purposes only and is

subject to change without notice. All performance data represents past performance and is not indicative of future performance. For that reason, it cannot be guaranteed by The Bank of Nova Scotia or any of its subsidiaries. Always consult your professional tax and legal advisors with respect to your particular circumstances. Nothing herein is intended to constitute an offer or solicitation to transact business for either products or services in any jurisdiction where such an offer or solicitation would be unlawful. Products and services described herein are only available in jurisdictions where they can be lawfully provided.

® Standard and Poor’s, S&P and S&P 500 are trademarks of The McGraw-Hill Companies and have been licensed for use by The Bank of Nova Scotia and its subsidiary companies.

Find out how to get the powerful benefits of asset allocation. Ask about Scotiabank AMS today!

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