4. Significant capital transactions In the first quarter of 2006,
the Bank initiated a new normal course issuer bid to purchase up to
50 million of the Bank's common shares. This represents
approximately 5 per cent of the Bank's outstanding common shares.
The bid will terminate on the earlier of January 5, 2007, or the
date the Bank completes its purchases. During the third quarter,
the Bank purchased 1.3 million common shares at an average cost of
$44.84. For the nine months ended July 31, 2006, 6.9 million common
shares were purchased at an average price of $45.62. On February 8,
2006, the Bank redeemed all of its $300 million 7.4% subordinated
debentures that were due to mature in 2011. 5. Sales of loans
through securitizations The Bank securitizes residential mortgages
through the creation of mortgage-backed securities. No credit
losses are expected, as the mortgages are insured. For the quarter
ended July 31, 2006, the key weighted-average assumptions used to
measure the fair value at the dates of securitization were a
prepayment rate of 13.2%, an excess spread of 0.8% and a discount
rate of 4.6% (13.0%, 0.9% and 4.4% respectively, for the nine
months ended July 31, 2006). The following table summarizes the
Bank's sales. For the three For the nine months ended months ended
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July 31 April 30 July 31 July 31 July 31 ($ millions) 2006 2006
2005 2006 2005
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Net cash proceeds(1) $ 683 $ 698 $ 451 $ 1,815 $ 1,678 Retained
interest 16 22 15 49 50 Retained servicing liability (5) (6) (3)
(13) (11)
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694 714 463 1,851 1,717 Residential mortgages securitized 699 712
450 1,848 1,682
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Net gain (loss) on sale $ (5) $ 2 $ 13 $ 3 $ 35
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(1) Excludes insured mortgages which were securitized and retained
by the Bank of $661 for the three months ended July 31, 2006 (April
30, 2006 - $246; July 31, 2005 - $194), and $1,175 for the nine
months ended July 31, 2006 (July 31, 2005 - $956). These assets are
classified as investment securities and have an outstanding balance
of $2,067 as at July 31, 2006. 6. Variable interest entities During
the third quarter of 2006, the Bank sold $4 billion of residential
mortgages to a related entity that is consolidated under the
variable interest entity accounting guideline. The purpose of this
transaction was to facilitate financing of the Bank's own
operations, and did not have a material impact on the consolidated
assets of the Bank. 7. Allowance for credit losses The following
table summarizes the change in the allowance for credit losses. For
the three For the nine months ended months ended
---------------------------------------------------------------------
July 31 April 30 July 31 July 31 July 31 ($ millions) 2006 2006
2005 2006 2005
---------------------------------------------------------------------
Balance at beginning of period $ 2,717 $ 2,445 $ 2,599 $ 2,475 $
2,704 Write-offs (142) (120) (188) (393) (490) Recoveries 50 56 53
145 137 Provision for credit losses 74 35 85 184 194 Other,
including foreign exchange adjustment 7 301 23 295 27
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Balance at the end of period(1)(2)(3) $ 2,706 $ 2,717 $ 2,572 $
2,706 $ 2,572
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(1) As at July 31, 2006, includes $342 relating to acquisitions of
new subsidiaries (April 30, 2006 - $342; July 31, 2005 - $35),
which may change as the valuation of the acquired loan assets is
finalized. (2) As at July 31, 2006, $11 has been recorded in other
liabilities (April 30, 2006 - $11; July 31, 2005 - $7). (3) As at
July 31, 2006, the general allowance for credit losses was $1,330
(April 30, 2006 - $1,330; July 31, 2005 - $1,375). 8. Employee
future benefits Employee future benefits include pensions and other
post-retirement benefits, post-employment benefits and compensated
absences. The following table summarizes the expenses for the
Bank's principal plans(1). For the three For the nine months ended
months ended
---------------------------------------------------------------------
July 31 April 30 July 31 July 31 July 31 ($ millions) 2006 2006
2005 2006 2005
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Benefit expenses Pension plans $ 18 $ 22 $ 23 $ 64 $ 68 Other
benefit plans 31 32 30 94 82
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$ 49 $ 54 $ 53 $ 158 $ 150
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(1) Other plans operated by certain subsidiaries of the Bank are
not considered material and are not included in this note. 9.
Acquisitions During the second quarter of 2006, the Bank completed
the acquisitions of (i) the Canadian operations of the National
Bank of Greece on February 3, 2006, (ii) Maple Trust Company on
March 31, 2006, and (iii) two Peruvian banks, Banco Wiese Sudameris
and Banco Sudamericano on March 9, 2006, with the intention of
merging the banks and owning approximately 78% of the combined
entity. Prior to the transaction, the Bank owned 35% of Banco
Sudamericano. The combined investment in these companies was
approximately $700 million, which includes amounts invested
directly in the acquired businesses. In addition to the purchase of
Maple Trust Company, as part of the acquisition of the Canadian
mortgage operations of Maple Financial Group Inc., the Bank
purchased mortgages from the Group. For the two Canadian
acquisitions, the estimated total goodwill of $144 million and
other intangibles of $52 million have been recorded in the
Consolidated Balance Sheet. These amounts may be refined as the
Bank completes its valuation of the assets acquired and liabilities
assumed. The Bank has not completed its assessment and valuation of
the assets acquired and liabilities assumed for the Peruvian banks.
As a result, the amount of the purchase price in excess of the
carrying value of the assets and liabilities has not been fully
allocated to the acquired assets and liabilities in the
Consolidated Balance Sheet. The consolidation of these acquisitions
did not have a material effect on the Bank's consolidated financial
statements. In the third quarter of 2006, the Bank announced the
acquisition of Corporacion Interfin, the parent company of Banco
Interfin in Costa Rica. The investment in the acquisition is
approximately $330 million. The acquisition is expected to close in
the fourth quarter. SHAREHOLDER & INVESTOR INFORMATION
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Direct deposit service Shareholders may have dividends deposited
directly into accounts held at financial institutions which are
members of the Canadian Payments Association. To arrange direct
deposit service, please write to the Transfer Agent. Dividend and
Share Purchase Plan Scotiabank's dividend reinvestment and share
purchase plan allows common and preferred shareholders to purchase
additional common shares by reinvesting their cash dividend without
incurring brokerage or administrative fees. As well, eligible
shareholders may invest up to $20,000 each fiscal year to purchase
additional common shares of the Bank. Debenture holders may apply
interest on fully registered Bank subordinated debentures to
purchase additional common shares. All administrative costs of the
plan are paid by the Bank. For more information on participation in
the plan, please contact the Transfer Agent. Dividend dates for
2006 Record and payment dates for common and preferred shares,
subject to approval by the Board of Directors. Record Date Payment
Date January 3 January 27 April 4 April 26 July 4 July 27 October 3
October 27 Valuation Day Price For Canadian income tax purpose, The
Bank of Nova Scotia's common stock was quoted at $31.13 per share
on Valuation Day, December 22, 1971. This is equivalent to $2.594
after adjusting for the two-for-one stock split in 1976, the
three-for-one stock split in 1984, the two-for-one stock split in
1998. The stock dividend in 2004 did not affect the Valuation Day
amount. The stock received as part of the 2004 stock dividend is
not included in the pre-1971 pool. Duplicated communication If your
shareholdings are registered under more than one name or address,
multiple mailings will result. To eliminate this duplication,
please write to the Transfer Agent to combine the accounts. Website
For information relating to Scotiabank and its services, visit us
at our website: http://www.scotiabank.com/. Conference call and Web
broadcast The quarterly results conference call will take place on
August 29, 2006, at 2:30 p.m. EDT and is expected to last
approximately one hour. Interested parties are invited to access
the call live, in listen-only mode, by telephone, toll-free, at
1-800-796-7558 (please call five to 15 minutes in advance). In
addition, an audio webcast, with accompanying slide presentation,
may be accessed via the Investor Relations page of
http://www.scotiabank.com/. Following discussion of the results by
Scotiabank executives, there will be a question and answer session.
Listeners are invited to submit questions by e- mail to . A
telephone replay of the conference call will be available from
August 29, 2006, to September 12, 2006, by calling (416) 640-1917
and entering the identification code 21198157 followed by the
number sign. The archived audio webcast will be available on the
Bank's website for three months. Contact information Investors:
Financial analysts, portfolio managers and other investors
requiring financial information, please contact Investor Relations,
Finance Department: Scotiabank Scotia Plaza, 44 King Street West
Toronto, Ontario, Canada M5H 1H1 Telephone: (416) 866-5982 Fax:
(416) 866-7867 E-mail: Media: For other information and for media
enquiries, please contact the Public, Corporate and Government
Affairs Department at the above address. Telephone: (416) 866-3925
Fax: (416) 866-4988 E-mail: Shareholders: For enquiries related to
changes in share registration or address, dividend information,
lost share certificates, estate transfers, or to advise of
duplicate mailings, please contact the Bank's Transfer Agent:
Computershare Trust Company of Canada 100 University Avenue, 9th
Floor Toronto, Ontario, Canada M5J 2Y1 Telephone: 1-877-982-8767
Fax: 1-888-453-0330 E-mail: Co-Transfer Agent (U.S.A.)
Computershare Trust Company, Inc. 350 Indiana Street Golden,
Colorado 80401 U.S.A. Telephone: 1-800-962-4284 For other
shareholder enquiries, please contact the Finance Department:
Scotiabank Scotia Plaza, 44 King Street West Toronto, Ontario,
Canada M5H 1H1 Telephone: (416) 866-4790 Fax: (416) 866-4048
E-mail: Rapport trimestriel disponible en francais Le Rapport
annuel et les etats financiers de la Banque sont publies en
francais et en anglais et distribues aux actionnaires dans la
version de leur choix. Si vous preferez que la documentation vous
concernant vous soit adressee en francais, veuillez en informer
Relations publiques, Affaires de la societe et Affaires
gouvernementales, La Banque de Nouvelle-Ecosse, Scotia Plaza, 44,
rue King Ouest, Toronto (Ontario), Canada M5H 1H1, en joignant, si
possible, l'etiquette d'adresse, afin que nous puissions prendre
note du changement. The Bank of Nova Scotia is incorporated in
Canada with limited liability. DATASOURCE: Scotiabank CONTACT:
PRNewswire - - 08/29/2006
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