Scotia INNOVA Portfolios 2011 Simplified Prospectus€¦ · Scotia INNOVA Portfolios® 2011 Simplified Prospectus November 30, 2011 Series A units. Series T units available where

2011Scotia INNOVA Portfolios®

Simplified Prospectus

November 30, 2011 Series A units. Series T units available where noted.

Note that the designation of units of each fund has changed from ‘Class’to ‘Series’.

No securities regulatory authority has expressed an opinion about theseunits. It is an offence to claim otherwise.

Scotia INNOVA Portfolios and the units they offer under this simplifiedprospectus are not registered with the U.S. Securities and ExchangeCommission. Units of the Portfolios may be offered and sold in the UnitedStates only in reliance on exemptions from registration.

Scotia INNOVA Income Portfolio (Series T units available)

Scotia INNOVA Balanced Income Portfolio (Series T units available)

Scotia INNOVA Balanced Growth Portfolio (Series T units available)

Scotia INNOVA Growth Portfolio

Scotia INNOVA Maximum Growth Portfolio

Table of Contents

Introduction ....................................................................i

Fund specific information ............................................1

Scotia INNOVA Income Portfolio ......................................4Scotia INNOVA Balanced Income Portfolio ........................6Scotia INNOVA Balanced Growth Portfolio ........................8Scotia INNOVA Growth Portfolio ....................................10Scotia INNOVA Maximum Growth Portfolio ....................12

What is a mutual fund and what are the risks ofinvesting in a mutual fund? ..................................14

Organization and management of theScotia INNOVA Portfolios ......................................18

Purchases, switches and redemptions........................19Optional services..........................................................21Fees and expenses ......................................................22Dealer compensation ..................................................24Income tax considerations for investors....................24What are your legal rights? ........................................26

i

Introduction

In this document, Manager, SAM, we, us, and our refer toScotia Asset Management L.P.. Scotiabank Group includes TheBank of Nova Scotia (Scotiabank), The Bank of Nova ScotiaTrust Company (Scotiatrust), Scotia Asset Management L.P.,Scotia Securities Inc. and Scotia Capital Inc. Portfolios orScotia INNOVA Portfolios refers to the mutual funds and theseries thereof offered under this simplified prospectus.ScotiaFunds refers to all of our mutual funds and the seriesthereof which are offered under separate simplifiedprospectuses under the ScotiaFunds brand and includes thePortfolios or Scotia INNOVA Portfolios offered under thissimplified prospectus.

This simplified prospectus contains selected importantinformation to help you make an informed investment decisionabout the Portfolios and to understand your rights as aninvestor. It’s divided into two parts. The first part, frompages 1 to 13 contains specific information about each of thePortfolios offered for sale under this simplified prospectus. Thesecond part, from pages 14 to 26 contains general informationthat applies to all of the Portfolios offered for sale under thissimplified prospectus and the risks of investing in mutualfunds generally, as well as the names of the firms responsiblefor the management of the Portfolios.

Additional information about the Portfolios is available in theirannual information form, their most recently filed Fund Facts,their most recently filed annual and interim financialstatements and their most recently filed annual and interimmanagement reports of fund performance. These documentsare incorporated by reference into this simplified prospectus.That means they legally form part of this simplified prospectusjust as if they were printed in it.

You can get a copy of the Portfolios’ annual information form,financial statements and management reports of fundperformance at no charge by calling 1-800-268-9269 (416-750-3863 in Toronto) for English, or 1-800-387-5004 forFrench, or by asking your mutual fund representative. You’ll also find these documents on our website atwww.scotiafunds.com.

These documents and other information about the Portfoliosare also available at www.sedar.com.

1

Fund specific information

The portfolios offered under this simplified prospectus are partof the ScotiaFunds family of funds. ScotiaFunds offer a numberof series of units. Only Series A and Series T units of theScotia INNOVA Portfolios are offered for sale under thissimplified prospectus.

The Scotia INNOVA Portfolios are a family of 5 mutual fundsproviding investors with professionally managed solutionsdesigned to suit their investment profile. Each of the ScotiaINNOVA Portfolios may invest in a mix of other mutual funds,each of which follow a different investment objective andstrategy. In the alternative, in addition to investing in mutualfunds a Portfolio may also choose to obtain exposure to aparticular investment strategy by investing directly in equitysecurities and fixed income securities. Each Portfolio willfollow a strategic asset allocation investment strategy.

All of the Scotia INNOVA Portfolios offered for sale under thissimplified prospectus offer Series A units and some of theScotia INNOVA Portfolios also offer Series T units. Series Aunits and Series T units are available to all investors. Series Tunits are intended for investors seeking stable monthlydistributions. Monthly distributions on Series T units of aPortfolio may consist of net income, net realized capital gainsand/or a return of capital. Any net income and net realizedcapital gains in excess of the monthly distributions will bedistributed annually at the end of each year. You’ll find moreinformation about the different Series of units under theheading About the Series A and Series T units.

The Scotia INNOVA Portfolios give you:

• strategic asset allocation

• market capitalization diversification

• geographic diversification

• portfolio advisor style diversification

• ongoing oversight of the asset mix, fund selection andindividual security selection

• ongoing portfolio rebalancing to ensure that the appropriatelong-term asset mix is maintained.

The selection of investments for the Scotia INNOVA Portfoliosis subject to a multi-step investment process. Prior toincluding an underlying fund in, or removing an underlyingfund from, the Scotia INNOVA Portfolios, we conduct athorough review of appropriate underlying funds anddetermine if the Portfolio will invest in an underlying fund orif the Portfolio will invest directly in the securities held by anunderlying fund.

When determining whether to include a particular underlyingfund or investment, we consider the asset mix of each of theScotia INNOVA Portfolios which are designed for differenttypes of investors with unique risk/reward profiles.

Each Scotia INNOVA Portfolio is diversified by asset class,capitalization, geography and investment style. We monitor theunderlying funds in which the Portfolios invest regularly andconsider the underlying funds’ quantitative and qualitativeattributes, and the diversification benefits that they bring toeach of the Scotia INNOVA Portfolios. When deciding to investin an underlying fund, we may consider a variety of criteria,including management style, investment performance andconsistency, risk attributes and the quality of the fund’smanager or portfolio advisor.

About the portfolio descriptions

On the following pages, you’ll find detailed descriptions of eachof the Portfolios to help you make your investment decisions.Here’s what each section of the Portfolio descriptions tells you:

Portfolio details

This section gives you some basic information about eachPortfolio, such as its start date and its eligibility for registeredplans, including Registered Retirement Savings Plans (RRSPs),Registered Retirement Income Funds (RRIFs), RegisteredEducation Savings Plans (RESPs), Registered DisabilitySavings Plans (RDSPs) and Tax-Free Savings Accounts (TFSAs).

All of the Portfolios offered under this simplified prospectusare, or are expected to be, qualified investments under theIncome Tax Act (Canada) (“Tax Act”) for registered plans. Incertain cases, we may restrict purchases of units of certainPortfolios by certain registered plans.

What does the portfolio invest in?

This section tells you the Portfolio’s fundamental investmentobjectives and the strategies it uses in trying to achieve thoseobjectives. Any change to the fundamental investmentobjectives must be approved by a majority of votes cast at ameeting of unitholders called for that purpose.

About derivatives

Derivatives are investments that derive their value from theprice of another investment or from anticipated movements ininterest rates, currency exchange rates or market indexes.

2

Derivatives are usually contracts with another party to buy orsell an asset at a later time and at a set price. Examples ofderivatives are options, forward contracts and swaps.

• Options generally give holders the right, but not theobligation, to buy or sell an asset, such as a security orcurrency, at a set price and a set time. Option holdersnormally pay the other party a cash payment, called apremium, for agreeing to give them the option.

• Forward contracts are agreements to buy or sell an asset,such as a security or currency, at a set price and a set time.The parties have to complete the deal, or sometimes makeor receive a cash payment, even if the price has changed bythe time the deal closes.

• Swaps are agreements between two or more parties toexchange principal amounts or payments based on returnson different investments.

A Portfolio can use derivatives as long as it uses them in a waythat’s consistent with the Portfolio’s investment objectives andwith Canadian securities regulations. All of the Portfolios mayuse derivatives to hedge their investments against losses fromchanges in currency exchange rates, interest rates and stockmarket prices. Some of the Portfolios may also use derivativesto gain exposure to financial markets or to invest indirectly insecurities or other assets. This can be less expensive thanbuying securities or assets directly.

When a Portfolio uses derivatives for purposes other thanhedging, it holds enough cash or money market instruments tofully cover its positions, as required by securities regulations.

Investing in other mutual funds

The Portfolios may invest some or all of their assets in othermutual funds from time to time. When deciding to invest inother mutual funds, the portfolio advisor may consider avariety of criteria, including management style, investmentperformance and consistency, risk attributes and the quality ofthe fund’s manager or portfolio advisor.

Portfolios that engage in repurchase and reverserepurchase transactions

The Portfolios may enter into repurchase or reverse repurchase agreements to generate additional income fromsecurities held in a Portfolio. When a mutual fund agrees tosell a security at one price and buy it back on a specified laterdate (usually at a lower price), it is entering into a repurchasetransaction. When a mutual fund agrees to buy a security atone price and sell it back on a specified later date (usually ata higher price), it is entering into a reverse repurchase

transaction. For a description of the strategies the Portfoliosuse to minimize the risks associated with these transactions,see the discussion under Repurchase and reverse repurchasetransaction risk.

Portfolios that lend their securities

The Portfolios may enter into securities lending transactions togenerate additional income from securities held in thePortfolio. A mutual fund may lend securities held in itsportfolio to qualified borrowers who provide adequatecollateral. For a description of the strategies the Portfolios useto minimize the risks associated with these transactions, seethe discussion under Securities lending risk.

What are the risks of investing in the portfolio?

This section tells you the risks of investing in the Portfolio.You’ll find a description of each risk in Specific risks ofmutual funds.

Who should invest in this portfolio?

This section can help you decide if the Portfolio might besuitable for your investment portfolio. It’s meant as a generalguide only. For advice about your investment portfolio, youshould consult your mutual fund representative. If you don’thave a mutual fund representative, you can speak with one ofour representatives at any Scotiabank branch or by calling aScotiaMcLeod office.

Investment risk classification methodology

A risk classification rating is assigned to each Portfolio toprovide you with information to help you determine whetherthe Portfolio is appropriate for you. Each Portfolio is assigneda risk rating in one of the following categories: low, low tomedium, medium, medium to high or high. The investment riskrating for each Portfolio is reviewed at least annually as well asif there is a material change in a fund’s investment objective orinvestment strategies.

The methodology used to determine the risk ratings of thePortfolio for purposes of disclosure in this simplifiedprospectus is based on a combination of the qualitative aspectsof the methodology recommended by the Fund RiskClassification Task Force of the Investment Fund Institute ofCanada and the Manager’s quantitative analysis of a Portfolio’shistoric volatility. The Manager takes into account otherqualitative factors in making its final determination of eachPortfolio’s risk rating. In particular, the standard deviation ofeach Portfolio is reviewed. Standard deviation is a commonstatistic used to measure the volatility and risk of an

3

investment. Portfolios with higher standard deviations aregenerally classified as being more risky. Qualitative factorstaken into account include key investment policy guidelineswhich may include but are not limited to regional, sectoraland market capitalization restrictions as well as assetallocation policies.

The Manager recognizes that other types of risk, bothmeasurable and non-measurable, may exist and that historicalperformance may not be indicative of future returns and afund’s historic volatility may not be indicative of its futurevolatility.

The methodology that the Manager uses to identify theinvestment risk level of the Portfolios is available on requestat no cost by contacting us toll free at 1-800-268-9269(416-750-3863 in Toronto) for English or 1-800-387-5004 forFrench or by email at [email protected] or by writing to us atthe address on the back cover of this simplified prospectus.

Distribution policy

This tells you when the Portfolio usually distributes any netincome and capital gains, and where applicable, returns ofcapital, to unitholders. The Portfolios may also makedistributions at other times.

Distributions on units held in registered plans and non-registered accounts are reinvested in additional units of thePortfolio, unless you tell your mutual fund representative thatyou want to receive cash distributions. For information abouthow distributions are taxed, see Income tax considerationsfor investors.

Portfolio expenses indirectly borne by investors

This is an example of how much a Portfolio might pay inexpenses. It is intended to help you compare the cost ofinvesting in a Portfolio with the cost of investing in othermutual funds. Each Portfolio pays it owns expenses, but theyaffect you because they reduce the Portfolio’s returns.

The table shows how much the Portfolio would pay inexpenses on a $1,000 investment with a 5% annual return.The information in the tables assumes that the Portfolio’smanagement expense ratio (MER) was the same throughouteach period shown as it was during its last completed financialyear. You’ll find more information about fees and expenses inFees and expenses.

4

Fund details

What does the fund invest in?

Investment objectives

The Portfolio’s objective is to achieve a balance of currentincome and long term capital appreciation, with a significantbias towards income. It invests primarily in a diversifiedmix of mutual funds, and/or equity securities and/or fixedincome securities located anywhere in the world.

Any change to the fundamental investment objectivesmust be approved by a majority of votes cast at a meetingof unitholders for that purpose.

Investment strategies

The Portfolio is an asset allocation fund that allocatesyour investment between two asset classes: fixed incomeand equities.

The table below outlines the target weighting for eachasset class in which the Portfolio invests.

The underlying funds, equity securities and fixed incomesecurities in which the Portfolio invests may change fromtime to time, but in general we will keep the weighting foreach asset class no more than 10% above or below theamounts set out above. You’ll find more information oninvesting in underlying funds in Investing in other mutualfunds. Although up to 100% of the Portfolio’s assets may beinvested in underlying funds, once the Portfolio reaches asufficient size, the portfolio advisor may determine that itis more efficient to invest the Portfolio directly insecurities in one or more asset classes.

Fund type Canadian fixed income balanced fund

Start date Series A units: January 19, 2009Series T units: January 11, 2010

Type of securities Series A units and Series T units of a mutual fund trust

Eligible forregistered plans?

Yes

Portfolio advisor Scotia Asset Management L.P.Toronto, Ontario

Asset Class Target Weighting

Fixed Income 75% (65% Canadian and 10% Foreign)

Equities 25% (12% Canadian and 13% Foreign)

The portfolio advisor may use derivatives such as options,futures, forward contracts and swaps to hedge againstlosses from changes in stock prices, commodity prices,market indexes or currency exchange rates and to gainexposure to financial markets. It will only use derivativesas permitted by securities regulations.

What are the risks of investing in the fund?

To the extent that the Portfolio invests in underlyingfunds, it indirectly has the same risks as the underlyingfunds it holds. The Portfolio takes on the risks of anunderlying fund in proportion to its investment in thatfund. To the extent it invests directly in equity and fixedincome securities, the Portfolio will have the risksassociated with investing directly in such equity and fixedincome securities.

The risks applicable to the Portfolio include:

• asset-backed and mortgage-backed securities risk

• commodity risk

• credit risk

• currency risk

• derivatives risk

• emerging markets risk

• equity risk

• foreign investment risk

• fund-of-funds risk

• interest rate risk

• issuer-specific risk

• liquidity risk

• repurchase and reverse repurchase transaction risk

• securities lending risk

• series risk

• small company risk.

You’ll find details about each of these risks under What isa mutual fund and what are the risks of investing in amutual fund?.

Scotia INNOVA Income Portfolio

SC

OT

IA

INN

OV

A

INC

OM

E

PO

RT

FO

LIO

SC

OT

IA I

NN

OV

A P

OR

TF

OL

IOS

5

During the 12 months preceding November 1, 2011, up to30.1% of the net assets of the portfolio were invested inSeries I units of Scotia Canadian Income Fund, up to22.6% of the net assets of the Portfolio were invested inSeries I units of Scotia Private Short-Mid GovernmentBond Pool and up to 15.1% of the net assets of thePortfolio were invested in Series I units of ScotiaCanadian Private Corporate Bond Pool.

Who should invest in this fund?

This Portfolio may be suitable for you if:

• you want a balanced holding with a significant biastowards income, which is diversified by asset class,investment style, geography and market capitalization

• you can accept low to medium risk

• you’re investing for the medium to long term.

Please see Investment Risk Classification Methodology fora description of how we determined the classification ofthis Portfolio’s risk level.

Distribution policy

For Series A units, the Portfolio distributes any netincome and net realized capital gains by the end ofDecember of each calendar year.

Investors holding Series T units will receive stablemonthly distributions consisting of net income, netrealized capital gains and/or, a return of capital. Thedollar amount of your monthly distribution is reset at thebeginning of each calendar year. The distribution amountwill be a factor of the payout rate for Series T units(which is expected to remain at or about 3%), of theaverage daily net asset value per unit of the Series T unitsduring the previous calendar year, and the number ofSeries T units of the Portfolio you own at the time ofthe distribution.

The payout rate for Series T units of the Portfolio may beadjusted in the future, if we determine that marketconditions require an adjustment of distributions or thatpayment of a distribution would have a negative effect onthe investors in the Portfolio. Distributions by thisPortfolio are not guaranteed to occur on a specific dateand neither we nor the Portfolio is responsible for any feesor charges incurred by you because the Portfolio did noteffect a distribution on a particular day.

A portion of the distribution for Series T units is expectedto consist of a return of capital, which is not taxable in theyear received. The payout rate on Series T units of thePortfolio may be greater than the return on the Portfolio’sinvestments. Please see Income Tax Considerations forInvestors for more details.

The Portfolio will distribute any excess net income andnet realized capital gains annually in December.

Distributions on units held in registered and non-registered accounts are reinvested in additional units ofthe Portfolio, unless you tell your dealer that you want toreceive cash distributions.

Fund expenses indirectly borne by investors

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

Fees and expensespayable over 1 year 3 years 5 years 10 years

Series A units $ 18.76 59.13 103.65 235.93

Series T units $ 18.76 59.13 103.65 235.93

SC

OT

IA

INN

OV

A

INC

OM

E

PO

RT

FO

LIO

SC

OT

IA I

NN

OV

A P

OR

TF

OL

IOS

6

Fund details



The Portfolio’s objective is to achieve a balance of currentincome and long term capital appreciation, with a biastowards income. It invests primarily in a diversified mix ofmutual funds, and/or equity securities and/or fixed incomesecurities located anywhere in the world.






Fund type Canadian neutral balanced fund




Yes










• commodity risk

• credit risk

• currency risk



• equity risk





• liquidity risk



• series risk



Scotia INNOVA Balanced Income Portfolio

SC

OT

IA

INN

OV

A

BA

LA

NC

ED

IN

CO

ME

P

OR

TF

OL

IOS

CO

TIA

IN

NO

VA

PO

RT

FO

LIO

S

7

During the 12 months preceding November 1, 2011, up to24.1% of the net assets of the Portfolio were invested inSeries I units of Scotia Canadian Income Fund, up to18.1% of the net assets of the Portfolio were invested inSeries I units of Scotia Private Short-Mid GovernmentBond Pool and up to 12.1% of the net assets of thePortfolio were invested in Series I Scotia Private CanadianCorporate Bond Pool.



• you want a balanced holding with a bias towards income,which is diversified by asset class, investment style,geography and market capitalization

• you can accept low to medium risk


Please see Investment Risk Classification Methodology fora description of how we determined the classification of thisPortfolio’s risk level.

Distribution policy




A portion of the distribution for Series T units is expectedto consist of a return of capital, which is not taxable in theyear received. The payout rate on Series T units of thePortfolio may be greater than the return on the Portfolio’sinvestments. Please see Income Tax Considerations forInvestors for more details.






Series A units $ 20.09 63.33 111.01 252.69

Series T units $ 20.09 63.33 111.01 252.69

SC

OT

IA

INN

OV

A

BA

LA

NC

ED

IN

CO

ME

P

OR

TF

OL

IOS

CO

TIA

IN

NO

VA

PO

RT

FO

LIO

S

8

Fund details



The Portfolio’s objective is to achieve a balance of currentincome and long term capital appreciation, with a biastowards capital appreciation. It invests primarily in adiversified mix of mutual funds, and/or equity securitiesand/or fixed income securities located anywhere in theworld.






Fund type Global neutral balanced fund




Yes










• commodity risk

• credit risk

• currency risk



• equity risk





• liquidity risk



• series risk



Scotia INNOVA Balanced Growth Portfolio

SC

OT

IA

INN

OV

A

BA

LA

NC

ED

G

RO

WT

H

PO

RT

FO

LIO

SC

OT

IA I

NN

OV

A P

OR

TF

OL

IOS

9

During the 12 months preceding November 1, 2011, up to16.3% of the net assets of the Portfolio were invested inSeries I units of Scotia Canadian Income Fund, up to13.9% of the net assets of the Portfolio were invested inSeries I units of Scotia Canadian Dividend Fund, up to12.2% of the net assets of the Portfolio were invested inSeries I units of Scotia Private Short-Mid GovernmentBond Pool and up to 10.3% of the net assets of thePortfolio were invested in Series I units of Scotia PrivateInternational Equity Pool.



• you want a balanced holding with a bias towards equity,which is diversified by asset class, investment style,geography and market capitalization

• you can accept medium risk



Distribution policy




A portion of the distribution for Series T units is expectedto consist of a return of capital, which is not taxable in theyear received. The payout rate on Series T units of thePortfolio may be greater than the return on the Portfolio’sinvestments. Please see Income Tax Considerations forInvestors on page 31 for more details.






Series A units $ 21.42 67.53 118.37 269.45

Series T units $ 21.32 67.21 117.81 268.16

SC

OT

IA

INN

OV

A

BA

LA

NC

ED

G

RO

WT

H

PO

RT

FO

LIO

SC

OT

IA I

NN

OV

A P

OR

TF

OL

IOS

10

Fund details



The Portfolio’s objective is to achieve a balance of longterm capital appreciation and current income, with asignificant bias towards capital appreciation. It investsprimarily in a diversified mix of mutual funds, and/orequity securities and/or fixed income securities locatedanywhere in the world.





The underlying funds, equity securities and fixed incomesecurities in which the Portfolio invests may change fromtime to time, but in general we will keep the weighting foreach asset class no more than 10% above or below theamounts set out above. You’ll find more information oninvesting in underlying funds in Investing in other mutualfunds. Although up to 100% of the Portfolio’s assets may beinvested in underlying funds, once the Portfolio reaches asufficient size the portfolio advisor may determine that itis more efficient to invest the Portfolio directly insecurities in one or more asset classes.

Fund type Global equity balanced fund

Start date Series A units: January 19, 2009

Type of securities Series A units of a mutual fund trust


Yes




Equities 75% (33.5% Canadian and 41.5% Foreign)






• commodity risk

• credit risk

• currency risk



• equity risk





• liquidity risk



• series risk




SC

OT

IA

INN

OV

A

GR

OW

TH

P

OR

TF

OL

IOS

CO

TIA

IN

NO

VA

PO

RT

FO

LIO

S

11

During the 12 months preceding November 1, 2011, up to17.1% of the net assets of the Portfolio were invested inSeries I units of Scotia Canadian Dividend Fund, up to12.2% of the net assets of the Portfolio were invested inSeries I units of Scotia Private International Core EquityPool, up to 10.2% of the net assets of the Portfolio wereinvested in Series I units of Scotia Canadian Income Fundand up to 10.1% of the net assets of the Portfolio wereinvested in Series I units of Scotia Private CanadianEquity Pool.



• you want a balanced holding with a significant biastowards equity, which is diversified by asset class,investment style, geography and market capitalization

• you can accept medium risk

• you’re investing for the long term.


Distribution policy

The Portfolio distributes any net income and net realizedcapital gains by the end of December of each calendar year.

Distributions on units held in registered plans and nonregistered accounts are reinvested in additional units ofthe Portfolio, unless you tell your dealer that you want toreceive cash distributions.




Series A units $ 22.86 72.06 126.30 287.50

SC

OT

IA

INN

OV

A

GR

OW

TH

P

OR

TF

OL

IOS

CO

TIA

IN

NO

VA

PO

RT

FO

LIO

S

12

Fund details



The Portfolio’s objective is long term capital appreciation.It invests primarily in a diversified mix of mutual fundsand/or equity securities located anywhere in the world.



The Portfolio is an asset allocation fund that allocatesyour investment amongst various equities.


The underlying funds, and equity securities in which thePortfolio invests may change from time to time, but ingeneral we will keep the weighting between Canadian andForeign equities no more than 10% above or below theamounts set out above. You’ll find more information oninvesting in underlying funds in Investing in other mutualfunds. Although up to 100% of the Portfolio’s assets may beinvested in underlying funds, once the Portfolio reaches asufficient size, the portfolio advisor may determine that itis more efficient to invest the Portfolio directly insecurities in one or more asset classes.

Fund type Global equity fund

Start date Series A units: January 19, 2009

Type of securities Series A units of a mutual fund trust


Yes



Equities 100% (45.5% Canadian and 54.5% Foreign)



To the extent that the Portfolio invests in underlyingfunds, it indirectly has the same risks as the underlyingfunds it holds. The Portfolio takes on the risks of anunderlying fund in proportion to its investment in thatfund. To the extent it invests directly in equity securities,the Portfolio will have the risks associated with investingdirectly in such equity securities.


• commodity risk

• currency risk



• equity risk





• liquidity risk



• series risk




SC

OT

IA

INN

OV

A

MA

XIM

UM

G

RO

WT

H

PO

RT

FO

LIO

SC

OT

IA I

NN

OV

A P

OR

TF

OL

IOS

13

During the 12 months preceding November 1, 2011, up to23.6% of the net assets of the Portfolio were invested inSeries I units of Scotia Canadian Dividend Fund, up to16.6% of the net assets of the Portfolio were invested inSeries I units of Scotia Private International Core EquityPool, up to 14.9% of the net assets of the Portfolio wereinvested in Series I units of Scotia Private CanadianEquity Pool and up to 11.1% of the net assets of thePortfolio were invested in Series I units of Scotia PrivateGlobal Equity Pool.



• you want an all equity holding, which is diversified byinvestment style, geography and market capitalization

• you can accept medium to high risk

• you’re investing for the long term.


Distribution policy

The Portfolio distributes any net income and net realizedcapital gains by the end of December of each calendar year.

Distributions on units held in registered plans and nonregistered accounts are reinvested in additional units ofthe Portfolio, unless you tell your dealer that you want toreceive cash distributions.




Series A units $ 24.70 77.87 136.50 310.71

SC

OT

IA

INN

OV

A

MA

XIM

UM

G

RO

WT

H

PO

RT

FO

LIO

SC

OT

IA I

NN

OV

A P

OR

TF

OL

IOS

14

What is a mutual fund and what are the risks of

investing in a mutual fund?

For many Canadians, mutual funds represent a simple andaffordable way to meet their financial goals. But what exactlyis a mutual fund, why invest in them, and what are the risks?

What is a mutual fund?

A mutual fund is an investment that pools your money with themoney of many other people. Professional portfolio advisorsuse that money to buy securities that they believe will helpachieve the fund’s investment objectives. These securitiescould include stocks, bonds, mortgages, money marketinstruments, or a combination of these.

When you invest in a mutual fund, you receive units of thefund. Each unit represents a proportionate share of all of themutual fund’s assets. All of the investors in a mutual fundshare in the fund’s income, gains and losses. Investors also paytheir share of the fund’s expenses.

Why invest in mutual funds?

Mutual funds offer investors three key benefits: professionalmoney management, diversification and accessibility.

• Professional money management. Professional portfolioadvisors have the expertise to make the investmentdecisions. They also have access to up-to-the-minute information on trends in the financial markets, and in-depth data and research on potential investments.

• Diversification. Because your money is pooled with that ofother investors, a mutual fund offers diversification intomany securities that may not have otherwise been availableto individual investors.

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

No guarantees

While mutual funds have many benefits, it’s important toremember that an investment in a mutual fund isn’tguaranteed. Unlike bank accounts or guaranteed investmentcertificates (GICs), mutual fund units aren’t covered by theCanada Deposit Insurance Corporation (CDIC) or any othergovernment deposit insurer, and your investment in the fund isnot guaranteed by Scotiabank.

Under exceptional circumstances, a mutual fund may suspendyour right to sell your units. See Suspending your right to buy,switch and sell units for details.

What are the risks?

While everyone wants to make money when they invest, youcould lose money, too. This is known as risk. Like otherinvestments, mutual funds involve some level of risk. Thevalue of a fund’s securities can change from day to day formany reasons, including changes in the economy, interestrates, and market and company news. That means the value ofmutual fund units can vary. When you sell your units in a fund,you could receive less money than you invested.

The amount of risk depends on the fund’s investmentobjectives and the types of securities it invests in. A generalrule of investing is that the higher the risk, the higher thepotential for gains as well as losses. Cash equivalent fundsusually offer the least risk because they invest in highly liquid,short-term investments such as treasury bills. Their potentialreturns are tied to short-term interest rates. Income fundsinvest in bonds and other fixed income investments. Thesefunds typically have higher long-term returns than cashequivalent funds, but they carry more risk because their pricescan change when interest rates change. Equity funds exposeinvestors to the highest level of risk because they invest inequity securities, such as common shares, whose prices canrise and fall significantly in a short period of time.

Managing risk

While risk is an important factor to consider when you’rechoosing a mutual fund, you should also think about yourinvestment goals and when you’ll need your money. Forexample, if you’re saving for a large purchase in the next yearor so, you might consider investing in a fund with low risk. Ifyou want your retirement savings to grow over the next20 years, you can probably afford to put more of your money inequity funds.

A carefully chosen mix of investments can help reduce risk asyou meet your investment goals. Your mutual fundrepresentative can help you build a portfolio that’s suited toyour goals and risk comfort level.

If your investment goals or tolerance for risk changes,remember, you can and should change your investments tomatch your new situation.

15

Specific risks of mutual funds

The value of the investments a mutual fund holds can changefor a number of reasons. You’ll find the specific risks ofinvesting in each of the Scotia INNOVA Portfolios in theindividual fund descriptions starting on page 4. This sectiontells you more about each risk.

Asset backed and mortgage backed securities risk

Asset backed securities are debt obligations that are backedby pools of consumer or business loans. Mortgage-backedsecurities are debt obligations backed by pools of mortgageson commercial or residential real estate. If there are changesin the market perception of the issuers of these types ofsecurities, or in the creditworthiness of the parties involved,then the value of the securities may be affected. In the useof mortgage backed securities, there is also a risk that theremay be a drop in the interest rates charged on mortgages, amortgagor may default on its obligations under a mortgage orthere may be a drop in the value of the property secured bythe mortgage.

Commodity risk

Some funds may invest directly or indirectly in gold or incompanies engaged in the energy or natural resourceindustries. The market value of such a mutual fund’sinvestments may be affected by adverse movements incommodity prices. When commodity prices decline, thisgenerally has a negative impact on the earnings of companieswhose business is based in commodities, such as oil and gas.

Credit risk

A fixed income security, such as a bond, is a promise to payinterest and repay the principal on the maturity date. There’salways a risk that the issuer will fail to honour that promise.This is called credit risk. Credit risk is lowest among issuersthat have a high credit rating from a credit rating agency. It’shighest among issuers that have a low credit rating or nocredit rating. Issuers with a low credit rating usually offerhigher interest rates to make up for the higher risk. The bondsof issuers with poor credit ratings generally have yields thatare higher than bonds of issuers with superior credit ratings.Bonds of issuers that have poor credit ratings tend to be morevolatile as there is a greater likelihood of bankruptcy ordefault. Credit ratings may change over time.

Currency risk

When a mutual fund buys an investment that’s denominatedin a foreign currency, changes in the exchange rate betweenthat currency and the Canadian dollar will affect the value ofthe fund.

Derivatives risk

Derivatives can be useful for hedging against losses, gainingexposure to financial markets and making indirectinvestments, but they involve certain risks:

• Hedging with derivatives may not achieve the intendedresult. Hedging instruments rely on historical or anticipatedcorrelations to predict the impact of certain events, whichmay or may not occur. If they occur, they may not have thepredicted effect.

• It’s difficult to hedge against trends that the market hasalready anticipated.

• Costs relating to entering and maintaining derivativescontracts may reduce the returns of a fund.

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

• Currency hedging can be difficult in smaller emerginggrowth countries because of the limited size of those markets.

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

• There’s no guarantee that a liquid exchange or market forderivatives will exist. This could prevent a fund closing outits positions to realize gains or limit losses. At worst, a fundmight face losses from having to exercise underlying futurescontracts.

• The prices of derivatives can be distorted if trading in theirunderlying stocks is halted. Trading in the derivative mightbe interrupted if trading is halted in a large number of theunderlying stocks. This would make it difficult for a fund toclose out its positions.

• The other party in a derivatives contract might not be ableto meet its obligations.

• Derivatives trading on foreign markets may take longer andbe more difficult to complete. Foreign derivatives aresubject to the foreign investment risks described below.

• Investment dealers and futures brokers may hold a fund’sassets on deposit as collateral in a derivative contract. As aresult, someone other than the fund’s custodian is respon-sible for the safekeeping of that part of the fund’s assets.

16

Emerging markets risk

The Portfolios and some underlying funds may invest in foreigncompanies or governments (other than the U.S.) which may belocated in, or operate, in developing countries. Companies inthese markets may have limited product lines, markets orresources, making it difficult to measure the value of thecompany. Political instability, possible corruption, as well aslower standards of business regulation increase the risk offraud and other legal issues. In addition to foreign investmentrisk described below, these mutual funds may be exposed togreater volatility as a result of such issues.

Equity risk

Funds that invest in equities, such as common shares, areaffected by changes in the general economy and financialmarkets, as well as by the success or failure of the companiesthat issued the securities. When stock markets rise, the valueof equity securities tends to rise. When stock markets fall, thevalue of equity securities tends to fall. Convertible securitiesmay also be subject to interest rate risk.

Foreign investment risk

Investments issued by foreign companies or governments otherthan the U.S. can be riskier than investments in Canada andthe U.S. Foreign countries can be affected by political, social,legal or diplomatic developments, including the imposition ofcurrency and exchange controls. Some foreign markets can beless liquid, are less regulated, and are subject to differentreporting practices and disclosure requirements than issuersin North American markets. It may be more difficult to enforcea fund’s legal rights in jurisdictions outside of Canada. Ingeneral, securities issued in more developed markets, suchas Western Europe, have lower foreign investment risk.Securities issued in emerging or developing markets, such asSoutheast Asia or Latin America, have significant foreigninvestment risk and are exposed to the emerging markets risksdescribed above.

Fund-of-funds risk

If a mutual fund invests in an underlying fund, the risksassociated with investing in that mutual fund include the risksassociated with the securities in which the underlying fundinvests, along with the other risks of the underlying fund.Accordingly, a mutual fund takes on the risk of an underlyingfund and its respective securities in proportion to itsinvestment in that underlying fund. If an underlying fundsuspends redemptions, the fund that invests in the underlyingfund may be unable to value part of its portfolio and may beunable to process redemption orders.

Interest rate risk

Mutual funds that invest in fixed income securities, such asbonds, mortgages and money market instruments, are sensitiveto changes in interest rates. In general, when interest rates arerising, the value of these investments tends to fall. When ratesare falling, fixed income securities tend to increase in value.Fixed income securities with longer terms to maturity aregenerally more sensitive to changes in interest rates. Certaintypes of fixed income securities permit issuers to repayprincipal before the security’s maturity date. There is a riskthat an issuer will exercise this prepayment right after interestrates have fallen and the funds that hold these fixed incomesecurities will receive payments of principal before theexpected maturity date of the security and may need toreinvest these proceeds in securities that have lowerinterest rates.

Issuer-specific risk

The market value of an individual issuer’s securities can bemore volatile than the market as a whole. As a result, if asingle issuer’s securities represent a significant portion of themarket value of a fund’s assets, changes in the market value ofthat issuer’s securities may cause greater fluctuation in thefund’s unit value than would normally be the case. A less-diversified fund may also suffer from reduced liquidity if asignificant portion of its assets is invested in any one issuer.In particular, the fund may not be able to easily liquidate itsposition in the issuers as required to fund redemptionrequests.

Generally, mutual funds are not permitted to invest more than10 per cent of their assets in any one issuer. This restrictiondoes not apply to investments in debt securities issued orguaranteed by the Canadian or U.S. government, securitiesissued by a clearing corporation, securities issued by mutualfunds that are subject to the requirements of NationalInstrument 81-102 – Mutual Funds and National Instrument81-101 – Mutual Fund Prospectus Disclosure, or indexparticipation units issued by a mutual fund.

Liquidity risk

Liquidity is a measure of how quickly an investment can besold for cash at a fair market price. If a fund can’t sell aninvestment quickly, it may lose money or make a lower profit,especially if it has to meet a large number of redemptionrequests. In general, investments in smaller companies,smaller markets or certain sectors of the economy tend to beless liquid than other types of investments. The less liquid aninvestment, the more its value tends to fluctuate.

17

Repurchase and reverse repurchase transaction risk

The Portfolios and some underlying funds may enter intorepurchase or reverse repurchase agreements to generateadditional income. When a mutual fund agrees to sell asecurity at one price and buy it back on a specified later datefrom the same party with the expectation of a profit, it isentering into a repurchase agreement. When a mutual fundagrees to buy a security at one price and sell it back on aspecified later date to the same party with the expectation ofa profit, it is entering into a reverse repurchase agreement.Mutual funds engaging in repurchase and reverse repurchasetransactions are exposed to the risk that the other party to thetransaction may become insolvent and unable to complete thetransaction. In those circumstances, there is a risk that thevalue of the securities bought may drop or the value of thesecurities sold may rise between the time the other partybecomes insolvent and the time the fund recovers itsinvestment. Mutual funds that engage in these transactionsreduce this risk by holding, as collateral, enough of the otherparty’s cash or securities to cover that party’s repurchase orreverse repurchase obligations. To limit the risks associatedwith repurchase and reverse repurchase transactions, thecollateral held in respect of the repurchase or reverserepurchase obligations must be marked to market on eachbusiness day and be fully collateralized at all times withacceptable collateral which has a value at least equal to 102%of the securities sold or cash paid for the securities by themutual fund. Prior to entering into a repurchase agreement, amutual fund must ensure that the aggregate value of thesecurities of a mutual fund that have been sold pursuant torepurchase transactions, together with any securities loaned,does not exceed 50% of its total asset value at the time thatthe mutual fund enters into the transaction.

Securities lending risk

The Portfolios and some underlying funds may enter intosecurities lending transactions to generate additional incomefrom securities held in a mutual fund’s portfolio. A mutualfund may lend securities held in its portfolio to qualifiedborrowers who provide adequate collateral. In lending itssecurities, a mutual fund is exposed to the risk that theborrower may not be able to satisfy its obligations under thesecurities lending agreement and the lending mutual fund isforced to take possession of the collateral held. Losses couldresult if the collateral held by the mutual fund is insufficient,at the time the remedy is exercised, to replace the securitiesborrowed. Mutual funds must receive collateral worth no lessthan 102% of the value of the loaned securities and borrowersmust adjust that collateral daily to ensure this level is

maintained. Prior to entering into a securities lendingagreement, a mutual fund must ensure that the aggregatevalue of the securities loaned together with those that havebeen sold pursuant to repurchase transactions, does notexceed 50% of its total asset value.

Series risk

Some Portfolios and some underlying funds may offer two ormore series of units of the same fund. Although the value ofeach series is calculated separately, there’s a risk that theexpenses or liabilities of one series of units may affect thevalue of the other series. If one series is unable to cover itsliabilities, the other series are legally responsible for coveringthe difference. We believe that this risk is very low.

Small company risk

The prices of shares issued by smaller companies tend tofluctuate more than those of larger corporations. Smallercompanies may not have established markets for theirproducts and may not have solid financing. These companiesgenerally issue fewer shares, which increases theirliquidity risk.

18

Organization and management of the Scotia INNOVA Portfolios

Portfolios that invest in underlying funds that are managed by us or our associates or affiliates, will not vote any of the securities ofthose underlying funds. However, we may arrange for you to vote your share of those securities.

The Portfolios have received an exemption from the Canadian Securities Administrators allowing them to purchase equity securitiesof a Canadian reporting issuer during the period of distribution of the securities and for the 60-day period following the period ofdistribution pursuant to a private placement notwithstanding that a related underwriter, such as ScotiaMcLeod, participates inoffering the securities of such issuer. Any such purchase must be consistent with the investment objective of the particularPortfolio. Further, the Independent Review Committee of the Portfolios must approve the investment and such purchase can only becarried out if it is in compliance with certain other conditions.

Independent ReviewCommittee

In accordance with National Instrument 81-107 Independent Review Committee for Investment Funds, we, as managerof the ScotiaFunds, have established an Independent Review Committee (“IRC”), with a mandate to review, and provideinput on our policies and procedures dealing with conflicts of interest in respect of the Portfolios, and to review conflictof interest matters that we present to the IRC. The IRC currently has three members, each of whom is independent ofthe Manager and any party related to the Manager. The IRC will prepare, at least annually, a report of its activities forunitholders. This report will be available on or before March 31st of each year, at no charge, on the Internet atwww.scotiafunds.com, or by requesting a copy by e mail at [email protected]. Additional information about the IRC,including the names of its members, is available in the Portfolios’ annual information form.

In certain circumstances, your approval may not be required under securities legislation to effect a fund merger or achange in the auditor of a fund. Where the IRC is permitted under securities legislation to approve a fund merger inplace of the unitholders, you will receive at least 60 days written notice before the date of the merger. For a change inthe auditor of a fund, your approval will not be obtained, but you will receive at least 60 days written notice before thechange takes effect.

Portfolio advisor

Scotia Asset Management L.P.Toronto, Ontario

As portfolio advisor, we provide investment advice and make the investment decisions for the Portfolios.

Auditors

Ernst & Young LLPToronto, Ontario

The auditor is an independent firm of chartered accountants. The firm audits the annual financial statements of thePortfolios and provides an opinion as to whether they are fairly presented in accordance with Canadian generallyaccepted accounting principles.

In May, 2012, the auditors of all Funds will become Pricewaterhouse Coopers LLP.

Registrar


As registrar, we make arrangements to keep a record of all unitholders of the Portfolios, process orders and issue taxslips to unitholders.

Custodian

ScotiabankToronto, Ontario

The custodian holds the investments of the Portfolios and keeps them safe to ensure that they are used only for thebenefit of investors.

Scotiabank is the parent company of Scotia Asset Management L.P.

Principal distributor

Scotia Securities Inc.Toronto, Ontario

As principal distributor, Scotia Securities Inc. markets and sells units of the Portfolios where they qualify for sale inCanada. We or Scotia Securities Inc. may hire participating dealers to assist in the sale of units of the Portfolios.

Scotia Securities Inc. is a wholly-owned subsidiary of Scotiabank, which is the parent company of Scotia AssetManagement L.P.

Trustee


As trustee, we control and have authority over each Portfolio’s investments in trust for unitholders under the termsdescribed in the master declaration of trust.

Manager

Scotia Asset Management L.P.Scotia Plaza52nd Floor40 King Street WestToronto, OntarioM5H 1H1

As manager, we are responsible for the overall business and operation of the Portfolios. This includes:

• arranging for portfolio advisory services

• providing or arranging for administrative services.

Scotia Asset Management L.P. is a wholly-owned subsidiary by Scotiabank.

19

Purchases, switches and redemptions

Series A and Series T units of the Portfolios are no load. Thatmeans you don’t pay a sales commission when you buy, switchor sell these units through us or our affiliates. Selling yourunits is also known as redeeming.

How to place orders

You can open an account and buy, switch or sell the Portfolios:

• by calling or visiting any branch of the Scotiabank Group, oroffice of ScotiaMcLeod;

• through Scotia OnLine at www.scotiabank.com, once you’vesigned up for this service.

You can also open an account and place orders through otherregistered brokers or dealers. They may charge you a salescommission or other fee. Brokers and dealers must sendorders to us on the same day that they receive completedorders from investors.

All transactions are based on the price of the Portfolios’ units— or its net asset value per unit (NAVPU). All orders areprocessed using the next NAVPU calculated after the Portfolioreceives the order.

How we calculate net asset value per unit

We usually calculate the NAVPU of each series of each Portfoliofollowing the close of trading on the Toronto Stock Exchange(the TSX) on each day that the TSX is open for trading. Inunusual circumstances, we may suspend the calculation ofthe NAVPU.

The NAVPU of each series of a Portfolio is the current marketvalue of the proportionate share of the assets allocated to theseries, less the liabilities of the series and the proportionateshare of the common expenses allocated to the series, dividedby the total number of outstanding units in that series.Securities which trade on a public stock exchange are usuallyvalued at their closing price on that exchange. However, if theprice is not a true reflection of the value of the security, wewill use another method to determine its value. This method iscalled fair value pricing and it will be used when a security’svalue is affected by events which occur after the closing of themarket where the security is principally traded. Fair valuepricing may also be used in other circumstances.

All of the Portfolios are valued in Canadian dollars.

About the Series A and Series T units

The Portfolios are currently available in Series A units. Certainof the Portfolios are also available in Series T units. The seriesare intended for different investors:

• Series A units are available to all investors. All of thePortfolios offer Series A units.

• Series T units are intended for investors seeking stablemonthly distributions. Monthly distributions on Series Tunits of a Portfolio will consist of net income, net realizedcapital gains and/or a return of capital. Any net income andnet realized capital gains in excess of the monthly distribu-tions will be distributed annually at the end of each year.

How to buy the Portfolios

Minimum investments

The minimum amount for the initial investment in any seriesof units of the Portfolios for all accounts is $50,000. Theminimum amount for each additional investment in any seriesof units of the Portfolios is $100. If you buy, sell or switch unitsthrough non affiliated dealers you may be subject to higherminimum initial or additional investment amounts. See PreAuthorized Contributions for details.

We can redeem your units if the value of your investment inany Portfolio drops below the minimum initial investment.

More about buying

• We can reject all or part of your order within one businessday of the Portfolio receiving it. If we reject your order, we’llimmediately return any money received, without interest.

• We may reject your order if you’ve made several purchasesand sales of the Portfolio within a short period of time,usually 31 days. See Short-term trading for details.

• You have to pay for your units when you buy them. If wedon’t receive payment for your purchase within threebusiness days after the purchase price is determined, we’llsell your units on the next business day. If the proceedsfrom the sale are more than the cost of buying the units, thePortfolio will keep the difference. If the proceeds are lessthan the cost of buying the units, we must pay the shortfall.We may collect the shortfall and any related costs from thedealer or broker who placed the order, or from you, if youplaced the order directly with us.

• Your broker, dealer or we will send you a confirmation ofyour purchase once your order is processed. If you buy unitsthrough pre-authorized contributions, you will receive aconfirmation only for the initial investment and when youchange the amount of your regular investment.

20

How to switch Portfolios

You can switch from a Portfolio to another ScotiaFund, as longas you’re eligible to hold the particular series of theScotiaFund into which you switch. When we receive your order,we’ll sell units of the Portfolio and then use the proceeds tobuy units of the other ScotiaFund. If you switch units within31 days of buying them, you may have to pay a short termtrading fee. See Short-term trading for details.

More about switching

• The rules for buying and selling units also apply to switches.

• You can switch between ScotiaFunds valued in the samecurrency.

• If you hold your units in a non registered account, you willexperience a taxable disposition which for most unitholdersis expected to result in a capital gain or loss.

• Your broker, dealer or we will send you a confirmation onceyour order is processed.

How to reclassify your units

You can change your units of one series to another series ofunits of the same Portfolio, as long as you’re eligible to holdthat series. If you change units of one series to another series,the value of your investment won’t change (except for any feesyou pay to reclassify your units), but the number of units youhold will change. This is because each series has a differentunit value. Your dealer may charge you a fee to reclassify yourunits. Changing units from one series to another series of thesame Portfolio is not a disposition for tax purposes.

How to sell your units

In general, your instructions to sell must be in writing, andyour bank, trust company, broker or dealer must guaranteeyour signature. We may also require other proof of signingauthority.

We’ll send your payment to your broker or dealer within threebusiness days of receiving your properly completed order.If you sell units within 31 days of buying them, you may haveto pay a short term trading fee. See Short-term tradingfor details.

You can also sell units on a regular basis by setting up anautomatic withdrawal plan. See Optional services for details.

More about selling

• You must provide all required documents within 10 businessdays of the day the redemption price is determined. If youdon’t, we’ll buy back the units as of the close of business onthe 10th business day. If the cost of buying the units is lessthan the sale proceeds, the Portfolio will keep the difference.If the cost of buying the units is more than the saleproceeds, we must pay the shortfall. We can collect theshortfall and any related costs from the broker or dealerwho placed the order, or from you, if you placed the orderdirectly with us.

• Sell orders placed for a corporation, trust, partnership,agent, fiduciary, surviving joint owner or estate must beaccompanied by the required documents with proof ofsigning authority. The sell order will be effective onlywhen the Portfolio receives all required documents,properly completed.

• If you hold your units in a non-registered account, you willexperience a taxable disposition which for most unitholdersis expected to result in a capital gain or loss.

• Your broker, dealer or we will send you a confirmation onceyour order is processed. If you sell units through theautomatic withdrawal plan, you will receive a confirmationonly for the first withdrawal.

Suspending your right to buy, switch and sell units

Securities regulations allow us to temporarily suspend yourright to sell your Portfolio units and postpone payment of yoursale proceeds:

• during any period when normal trading is suspended on anyexchange on which securities or derivatives that make upmore than 50% of the Portfolio’s value or its underlyingmarket exposure are traded and there’s no other exchangewhere these securities or derivatives are traded, or

• with the approval of securities regulators.

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

You may withdraw your sell order before the end of thesuspension period. Otherwise, we’ll sell your units at theNAVPU next calculated when the suspension period ends.

21

Optional services

This section tells you about the accounts, plans and servicesthat are available to investors in the ScotiaFunds. Call us at1-800-268-9269 (416-750-3863 in Toronto) for English, or1-800-387-5004 for French, or contact your branch of theScotiabank Group for full details and application forms.

Pre Authorized Contributions

Following your initial investment, you can make regular preauthorized contributions (PAC) to the Portfolio you chooseusing automatic transfers from your bank account at anyCanadian financial institution.

More about Pre Authorized Contributions

• Pre Authorized contributions are available for non registered accounts, RRSPs, RESPs, RDSPs and TFSAs.The minimum investment amount for a PAC is $100.

• You can choose to invest weekly, bi-weekly, semi-monthly,monthly, bi-monthly, quarterly, semi-annually or annually. Ifyou choose to invest less frequently than monthly using preauthorized contributions, the minimum amount for eachinvestment will be determined by multiplying the minimuminvestment amount by twelve and then dividing the sum bythe number of investments you make over the course ofone calendar year. For example, if you choose to investquarterly, the minimum investment for each quarter will be$300 ($100 x 12÷4).

• We’ll automatically transfer the money from your bankaccount to the Portfolio you choose.

• You can change how much you invest and how often youinvest, or cancel the plan by contacting your mutual fundrepresentative.

• We can change or cancel the plan at any time.

• If you make purchases using pre authorized contributions,you will receive a renewal simplified prospectus for thePortfolio only if you request it. If you would like to receive acopy of a renewal prospectus along with any amendment,please contact us at 1-800-268-9269, or fax your request toor visit your nearest Scotiabank Group branch. The currentprospectus and any amendments may be found atwww.sedar.com or at www.scotiafunds.com. Although youdo not have a statutory right to withdraw from a purchaseof mutual fund units made under a pre-authorized contribution, you will continue to have a right of action fordamages or rescission in the event a renewal prospectuscontains a misrepresentation, whether or not you requesta renewal prospectus.

Automatic Withdrawal Plan

Our automatic withdrawal plan lets you receive regular cashpayments from your Portfolios. The minimum balance neededto start the plan is $50,000 and the minimum amount for eachwithdrawal is $50.

More about the automatic withdrawal plan

• The automatic withdrawal plan is only available for non-registered accounts.

• You can choose to receive payments monthly, quarterly,semi-annually or annually.

• We’ll automatically sell the necessary number of units tomake payments to your bank account at any Canadianfinancial institution or by cheque.

• If you sell units within 31 days of buying them, you mayhave to pay a short term trading fee. See Short-termtrading for details.

• If you hold your units in a non-registered account, you mayrealize a capital gain or loss. Capital gains are taxable.

• You can change the Portfolio and the amount or frequencyof your payments, or cancel the plan by contacting yourmutual fund representative.

• We can change or cancel the plan, or waive the minimumamounts at any time.

If you withdraw more money than your Portfolio units areearning, you’ll eventually use up your investment.

Registered plans

We offer Scotia RRSPs, RRIFs, RDSPs, LIRAs, LRSPs, LIFs,LRIFs, PRIFs and TFSAs. You can make lump sum investments,or if you prefer, you can set up a regular investment plan usingPre-Authorized Contributions. See Minimum Investmentsfor details.

You can also hold units of the Portfolios in self-directedregistered plans with other financial institutions. You maybe charged a fee for these plans.

Fees and expenses

This section describes the fees and expenses you may have topay if you invest in the Portfolios. You may have to pay some ofthese fees and expenses directly. The Portfolios may have topay some of these fees and expenses, which may reduce thevalue of your investment. The Portfolios are required to payHarmonized Sales Tax (“HST”) on management fees andoperating expenses in respect of each series of units, based onthe residence for tax purposes of the investors of theparticular series of units. Changes in existing HST rates, theadopting of HST by additional provinces, the repeal of HST byHST-participating provinces and changes in the breakdown of

the residence of investors in each series of units may thereforehave an impact on the Portfolios year over year.

Because Series A and Series T units of the Portfolios areno-load, a meeting of unitholders is not required to approveany increase in a fee or expense charged to a Portfolio, if theentity charging the fee or expense is a non-arm’s length partyto the Portfolios. Any such increase will only be made if suchunitholders are notified of the increase at least 60 days beforethe date on which the increase will take effect.

Funds that invest in

other funds

Each underlying fund pays its own fees and expenses, which are in addition to the fees and expensespayable by a Portfolio that invests in the underlying fund.

No management or incentive fees are payable by a Portfolio if the payment of those fees couldreasonably be perceived as a duplication of fees payable by an underlying fund for the same services.

No sales or redemption fees are payable by a Portfolio when it buys or sells securities of an underlyingfund that is managed by us or one of our associates or affiliates or if the payment of those fees couldreasonably be perceived as a duplication of fees paid by an investor in the Portfolio.

Operating expenses Each series of a Portfolio is allocated its own expenses and its proportionate share of the Portfolio’sexpenses that are common to all series. Operating expenses may include legal fees and other costsincurred in order to comply with legal and regulatory requirements and policies, audit fees, custodialfees, taxes, brokerage commissions, unitholder communication costs and other administration costs.These expenses also include the costs in connection with the operation of the IRC (such as the costsof holding meetings, insurance premiums for the IRC, and fees and expenses of any advisor engagedby the IRC), the fees paid to each IRC member, and the reasonable expenses associated with theperformance of his or her duties as an IRC member. Currently, each member of the IRC is entitled toan annual retainer of $35,000 ($47,000 for the Chair), and a per meeting fee of $1,500 for attendingeach IRC meeting. Each ScotiaFund pays a proportionate share of the total compensation paid to theIRC each year and reimburses members of the IRC for expenses incurred by them in connection withtheir services as members of the IRC. Each Portfolio’s share of the IRC’s compensation will bedisclosed in the Portfolios’ financial statements. We may choose to absorb any of these expenses.

Fees and expenses payable by the funds

Management fees Each Portfolio pays us a management fee with respect to each series of units for providing generalmanagement services. The fee is calculated and accrued daily and paid monthly. The maximumannual rates of the management fees for Series A and Series T units is as follows:

Fund

Maximum annual

management fee (%)

Scotia INNOVA Income Portfolio 1.60

Scotia INNOVA Balanced Income Portfolio 1.70

Scotia INNOVA Balanced Growth Portfolio 1.80

Scotia INNOVA Growth Portfolio 1.90

Scotia INNOVA Maximum Growth Portfolio 2.00

22

23

Other fees Pre Authorized Contributions: NoneAutomatic Withdrawal Plan: None

Fees and expenses payable directly by you

Sales charges None

Redemption fee None

Fees for switches andreclassifications

None

Short-term trading Short-term trading by investors can increase a Portfolio’s expenses, which affects all investors in thePortfolio, and can affect the economic interest of long-term investors. Short-term trading can affect aPortfolio’s performance by forcing the portfolio advisor to keep more cash in the Portfolio than wouldotherwise be required. To discourage short-term trading, a Portfolio may charge a fee of 2% ofthe amount you sell or switch, if you sell or switch your units within 31 days of buying them. Theshort-term trading fee does not apply to:

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

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

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

• regularly scheduled RRIF or LIF payments; and

• regularly scheduled automatic withdrawal plan payments.

Any formal or informal arrangements to permit short-term trading are described in the Portfolios’annual information form. If securities regulations mandate the adoption of specified policies relatingto short-term trading, the Portfolios will adopt such policies if and when implemented by thesecurities regulators. If required, these policies will be adopted without amendment to this simplifiedprospectus or the Portfolios’ annual information form and without notice to you, unless otherwiserequired by such regulations.

Registered plan fees The trustee may charge a withdrawal or transfer fee of up to $50.

Impact of sales charges Series A and Series T units of the Portfolios are no-load. That means you don’t pay a sales commissionwhen you buy, switch or sell units of these series through Scotia Securities Inc. or Scotia Capital Inc.(including ScotiaMcLeod, ScotiaMcLeod Direct Investing and Scotia iTRADE). You may pay a salescommission or other fee if you buy, switch or sell units through other registered brokers or dealers.

24

Income tax considerations for investorsThis section is a summary of how investing in the Portfolioscan affect your taxes. It assumes that you’re an individual(other than a trust), a Canadian resident and you hold yourunits as capital property. More detailed information is providedin the Portfolios’ annual information form. Because tax lawsvary by province and every investor’s situation is different, werecommend that you get advice from a tax expert.

How your investment can earn money

A Portfolio earns money in the form of income and capitalgains. Income includes the interest and dividends the Portfolioearns on its investments (including from underlying funds)and gains on certain derivatives. Capital gains are earnedwhen the Portfolio sells investments for a profit.

You earn money in the form of distributions when a Portfoliopays you your share of the net income and net realized capitalgains it has earned. In general, a Portfolio will distributeenough of its net income and net realized capital gains eachyear to unitholders so it won’t have to pay income tax.

You can also earn money in the form of a capital gain when yousell or switch your units for a profit. You can realize a capitalloss if you sell or switch your units at a loss.

How earnings are taxed

The tax you pay depends on whether you hold your units in aregistered plan or in a non-registered account.

Dealer compensationThis section explains how we compensate employees, brokersand dealers when you invest in Series A and Series T units ofthe Portfolios.

Sales commissions

We may pay our employees an up-front sales commission of upto 1% of the amount you invest.

Service fees

We may pay employees, brokers and dealers a service fee onSeries A and Series T units at an annual rate of up to 1%. Thefee is calculated daily and paid monthly and, subject to certainconditions, is based on the value of Series A or Series T unitsinvestors are holding of each Portfolio sold by an employee,broker or dealer.

Sales incentive programs

We may award prizes, such as cash or merchandise, toScotiabank employees or branches of Scotia Securities Inc.for sales of Portfolio units. We estimate that the annual costof these prizes will not be more than $1 for each $1,000investment by a unitholder. The maximum value of any prizethat may be awarded to a Scotiabank employee is $1,000 eachyear. Members of the Scotiabank Group may include sales ofunits of the Portfolios in their general employee incentive

programs. These programs involve many different ScotiabankGroup products. We may offer other incentive programs, aslong as Canadian securities regulators approve them.

The Portfolios and their unitholders pay no charges forincentive programs.

Other forms of dealer support

We may participate in co operative marketing programs withdealers to help them market the Portfolio. We may pay up to50% of the cost of these co-operative marketing programs inaccordance with the rules set out in National Instrument81-105 Mutual Fund Sales Practices.

Equity interests

Scotiabank owns, directly or indirectly, 100% of ScotiaSecurities Inc., Scotia Capital Inc. (which includesScotiaMcLeod, Scotia McLeod Direct Investing and ScotiaiTRADE), DWM Securities Inc. and Dundee Private InvestorsInc. Each of the above dealers may sell units of the Portfolios.

Dealer compensation from management fees

The cost of the sales and service commissions and salesincentive programs was approximately 3.68% of the totalmanagement fees we received from all of the ScotiaFundsduring the financial year ended December 31, 2010.

25

Units held in a registered plan

If you hold units of a Portfolio in an RRSP, RRIF, RDSP, RESP,TFSA or other registered plan, you pay no tax on distributionsfrom the Portfolio on those units or on any capital gains thatyour registered plan receives from selling or switching units.When you withdraw money from a registered plan (other thana TFSA), it will generally be subject to tax at your marginal taxrate. You should consult with a tax expert about the specialrules that apply to RESPs and RDSPs.

Units held in a non-registered account

Distributions from the Portfolios

If you hold units of a Portfolio in a non-registered account, youmust include your share of the Portfolio’s distributions of netincome and the taxable portion of its distributions of netrealized capital gains (including any management feedistributions) in your income, whether you receive thedistributions in cash or we reinvest them for you. In general,these distributions are taxable to you as if you received theincome or gain directly.

Distributions may include a return of capital. When a Portfolioearns less income and capital gains than the amountdistributed, the difference is a return of capital. A return ofcapital is not taxable, but will reduce the adjusted cost base ofyour units of the Portfolio. If the adjusted cost base of yourunits is reduced to less than zero, you will be deemed torealize a capital gain to the extent of the negative amount andthe adjusted cost base of your units will be increased to nil.Distributions on Series T units may include returns of capital.You should consult a tax expert about the tax implications ofreceiving a return of capital.

The unit price of a Portfolio may include income and/or capitalgains that the Portfolio has accrued or realized, but not yetdistributed. If you buy units of a Portfolio just before it makesa distribution, you’ll be taxed on that distribution once it ismade, even though the Portfolio earned the amount before youowned it. For example, the Portfolios make their only, or mostsignificant, distribution of income and capital gains inDecember. If you buy units late in the year, you may have topay tax on the income and capital gains the Portfolio earnedfor the whole year. That means you’ll end up paying tax onPortfolio earnings that you had little or no benefit from.

We’ll issue a tax slip to you each year that shows you howmuch of each type of income and return of capital eachPortfolio distributed to you. You can claim any tax credits thatapply to those earnings. For example, if a Portfolio’sdistributions include Canadian dividend income, you’ll qualifyfor a dividend tax credit. The characterization of distributionsmade during the year will not be determined with certainty forCanadian tax purposes until the end of each Portfolio’staxation year.

Capital gains (or losses) you realize

In general, you must also include in computing your incomeone-half of any capital gains you realize from selling orswitching your units. You will have a capital gain if your saleproceeds, less any costs of the sale, are more than the adjustedcost base of your units. You will have a capital loss if your saleproceeds, less any costs of the sale, are less than the adjustedcost base of your units. You may use capital losses you realizeto offset capital gains.

Changing units from one series of a Portfolio to another seriesof the same Portfolio is not a disposition for tax purposes, sono capital gain or loss will result.

Calculating adjusted cost base

Your capital gain or loss for tax purposes is the differencebetween the amount you receive when you sell or switch yourunits and the adjusted cost base of those units, less any costsof the sale. You must calculate your adjusted cost baseseparately for each series of units of a Portfolio that you own.

In general, the aggregate adjusted cost base of your units of thePortfolio equals:

• your initial investment, plus

• additional investments, plus

• reinvested distributions, minus

• any return of capital distributions, minus

• the adjusted cost base of any previous redemptions.

You should keep detailed records of the purchase cost of yourinvestments and distributions you receive on those units so youcan calculate their adjusted cost base. You may want to getadvice from a tax expert.

26

What are your legal rights?Securities legislation in some provinces gives you the right towithdraw from an agreement to buy mutual funds within twobusiness days of receiving the simplified prospectus, or tocancel your purchase within 48 hours of receiving confirmationof your order.

Securities legislation in some provinces and territories alsoallows you to cancel an agreement to buy mutual fund units

and get your money back, or to make a claim for damages, ifthe simplified prospectus, annual information form or financialstatements misrepresent any facts about a Portfolio. Theserights must usually be exercised within certain time limits.

For more information, refer to the securities legislation of yourprovince or territory or consult your lawyer.

Portfolio turnover rate

Each Portfolio discloses its portfolio turnover rate in itsmanagement report of fund performance. A Portfolio’s portfolioturnover rate indicates how actively the Portfolio’s portfolioadvisor manages its portfolio investments. A portfolio turnoverrate of 100% is equivalent to the Portfolio buying and sellingall of the securities in its portfolio one time in the course of ayear. The higher a Portfolio’s portfolio turnover rate in a year,

the greater the trading costs payable by the Portfolio in theyear and the greater the likelihood that gains or losses will berealized by the Portfolio. Any distribution of net income or thetaxable portion of the net realized capital gains paid orpayable by the Portfolio to you, in a non-registered account,must be included in your income for tax purposes for that year.There is not necessarily a relationship between a high turnoverrate and the performance of a Portfolio.

You can find additional information about each Portfolio in its annual information form, its most recently filed annual andinterim financial statements and management reports of fund performance, and its most recently filed fund facts. Thesedocuments are incorporated by reference into this simplified prospectus. That means they legally form part of this documentjust as if they were printed in it.

You can get a copy of these documents at no charge, by calling 1-800-268-9269 for English or 1-800-387-5004 for French,or by contacting your mutual fund representative, or by writing to: Scotia Asset Management L.P., Scotia Plaza, 52nd Floor,40 King Street West, Toronto, Ontario M5H 1H1.

You can also find these documents on our website at www.scotiafunds.com.

These documents and other information about the Portfolios, such as information circulars and material contracts, are alsoavailable at www.sedar.com.

Scotia INNOVA Portfolios®

Series A units. Series T units available where noted.

Scotia INNOVA Income Portfolio (Series T units available)

Scotia INNOVA Balanced Income Portfolio (Series T units available)

Scotia INNOVA Balanced Growth Portfolio (Series T units available)



® Registered trademark of The Bank of Nova Scotia, used under license.

2920611

Documents

Scotia INNOVA Portfolios 2011 Simplified Prospectus€¦ · Scotia INNOVA Portfolios® 2011 Simplified Prospectus November 30, 2011 Series A units. Series T units available where