The Bank of Nova Scotia's CEO Hosts 181st Annual Meeting of Shareholders (Transcript)

Apr. 9.13 | About: The Bank (BNS)

The Bank of Nova Scotia (NYSE:BNS)

April 09, 2013 9:00 am ET


John Thomas Mayberry - Non-Executive Chairman, Member of Executive & Risk Committee, Member of Corporate Governance & Pension Committee, Member of Audit & Conduct Review Committee and Ex-Officio Member of Human Resources Committee

Deborah M. Alexander - Executive Vice President, General Counsel and Secretary

Sean D. McGuckin - Chief Financial Officer and Executive Vice-President

Richard Earl Waugh - Chief Executive Officer, Director and Member of Executive & Risk Committee

Brian J. Porter - President and Non-Independent Director

Sarabjit S. Marwah - Vice Chairman and Chief Operating Officer

Allan Shaw

John Thomas Mayberry

Good morning, ladies and gentlemen. It's my pleasure to welcome you to the Scotiabank's 181st Annual Meeting of Shareholders. My name is John Mayberry, and I'm the Chairman of your Board of Directors.

Welcome to everyone in the room, as well as to those joining us via webcast from around the world. Like many of us, I feel there's something special about hosting our Annual Meeting here in Halifax. It always feels like a homecoming, returning to where it all began, with the founding of our bank in 1832.

Throughout our long history, the bank's bond with this city and with the people of Nova Scotia, has remained a strong and ever-present part of Scotiabank's culture. At the time of our founding, as it remains today, the port of Halifax was a gateway to the world. Our bank offered essential support to local traders and merchants who were seeking opportunity in the Caribbean and across the Atlantic.

With deep roots here, Scotiabank shares in the rich maritime heritage of this region. We're pleased to see it continue with the initial investment and preparatory work, in advance of the contract with the Royal Canadian Navy for the construction of 21 new vessels starting in 2015.

As Nova Scotia's economy is poised to gain strength this year, with rebounds in manufacturing and natural gas production, and with business investment picking up, we look forward to working with our customers here to seize the opportunities that lay ahead.

When I opened our Annual Meeting 1 year ago in Saskatoon, I expressed my confidence in our bank's ongoing strength and stability during uncertain times, and I want to reiterate that today. Scotiabank had a very successful year in 2012 by staying true to our values and our business strategy, and continuing to grow through prudent -- organically, and through prudent investments in Canada and key emerging markets. This consistent approach drove strong performance, and it also led to some prestigious recognition, including being named Global Banker of the Year by The Banker magazine, which is a Financial Times publication. This is the first time a Canadian-based bank has received this award. The bank's entire team, which now totals over 82,000 people, can be very proud of this accomplishment.

Guided by strong core values of integrity, respect, spirit, commitment and insight, Scotiabankers are united by enduring dedication -- by an enduring dedication to the financial well-being of each customer. And I want to express my thanks, on behalf of the Board of Directors, for all of their efforts.

2012 was a year of significant change to the Senior Management Team. The Board was pleased to appoint Brian Porter as President, effective November 1, with responsibility for the bank's 4 business lines. Brian brings deep and diverse leadership experience from across the bank, as well as strength of character and a great respect for Scotiabank's unique culture.

In addition, Dieter Jentsch was appointed Group Head of International Banking. Wendy Hannam moved over to the role of Executive Vice President of Latin America; and Troy Wright became Executive Vice President, and President and CEO of Grupo Financiero Scotiabank Mexico.

We also welcomed 2 new people to the Senior Executive Team: Sue Graham Parker, Executive Vice President of Global Human Resources; and James McPhedran, Executive Vice President of Retail Distribution, Canadian Banking.

Last month, Sylvia Chrominska, Group Head of Global Human Resources and Communications, announced her retirement effective May 1. Sylvia has made a tremendous contribution to Scotiabank for over 30 years, and we thank her for her commitment and wish her all the best for the future.

The Board of Directors has great confidence in the strategy, the direction of the bank, stemming from the vision and the trusted leadership of Rick Waugh, Brian Porter, Sabi Marwah, and the entire Executive Management Team. While the bank continues to grow and evolve, the Board's approach to corporate governance remains consistent, rooted in a firm commitment to openness, transparity -- transparency, I should say, integrity and accountability. We maintain the belief that corporate governance at Scotiabank is a shared responsibility. It starts with me and my fellow Board Members, and it extends to the team of dedicated Scotiabankers located in some 55 countries around the world.

During the past year, the Board continued its strong oversight of the bank's risk management practices, which remains a top priority, and we work to ensure we keep pace with new reporting procedures and regulations in our industry.

Looking ahead, while we will likely continue to face strong headwinds, I'm more confident than ever in the strength of the bank and in the commitment of the global community of Scotiabankers, to deliver excellent service to our customers, to earn strong results for our shareholders, and to brighten the future of communities where we live, work and do business.

I'd now like to take a few moments to introduce a few members of the Scotiabank Management Team, who are with us on stage. On my far right is Deborah Alexander, our Executive Vice President, General Counsel and Corporate Secretary; Brian Porter, our President; Rick Waugh, our Chief Executive Officer. On my far left, Sean McGuckin, Executive Vice President and Chief Financial Officer; and Sabi Marwah, Vice Chairman and Chief Operating Officer.

So ladies and gentlemen, it's my pleasure, once again, to welcome you and thank you for joining us in the interest of the ongoing affairs of the bank.

In accordance with the bylaws of the bank, I, as Chairman of the Board, will act as Chairman of this meeting and Deborah Alexander will act as Secretary of the meeting.

I appoint Paul Keyes and Lara Donaldson, of Computershare Trust Company of Canada, as scrutineers for the meeting. And with the consent of the meeting, we welcome a number of guests who have joined us today. However, guests are reminded that only registered shareholders and duly appointed proxy holders may participate in the voting and in the discussions, but nevertheless, you're all very welcome.

I would also like to mention that for anyone in need of closed captioning, it is available. To the screen, it's to my right, I think. Simultaneous interpretation units are also available and these can be found in the hallway at the entrance to the meeting room. If you don't have one and would like one, please raise your hand and one of the ushers will be pleased to bring one to you. English is on Channel 1. French is on Channel 12. I'd also ask all of you, including the people at the table up here, if you'd turn off all cell phones, BlackBerries and other electronic devices.

So notice calling this meeting was duly published and sent to all persons to whom the bank is required to have it sent. As a quorum is present, I declare this meeting is properly constituted.

To facilitate the voting procedure on the motions coming before the meeting today, there will be 2 ballots. One ballot is for the election of directors, the appointment of the auditors and the advisory vote on Say on Pay. The second ballot is for the 3 shareholder proposals. Each resolution or proposal that will be placed before the meeting will be an ordinary resolution requiring a simple majority of the votes cast for approval. Ballots will be provided to any registered shareholder who has either not completed a proxy form or desires to vote on the motion in person rather than by a previously delivered proxy. Any person appointed as a proxy -- appointed as proxy by a shareholder, who has not indicated voting instructions on the proxy form, may also request a ballot.

If you'd like ballots and have not already obtained a package, please raise your hand now so that they may be handed out to you by the scrutineers.

Unknown Shareholder

Mr. Chairman, I'd like to intervene in the meeting at this time, if I may. Last week -- oh, I'm sorry, I should give my name. My name is Lowell Weir [ph], and I'm a proxy holder today from Bedford, Nova Scotia. The reason I've intervened at this time, is last week at the Annual General Meeting of the Toronto Dominion Bank, the bank agreed to provide shareholders with a complete copy of the minutes, for the first time. All we've ever gotten for years from the bank is a very short summary of the minutes that really contain no details. And I'm wondering if the Bank of Nova Scotia, showing -- would show the same kind of hospitality and the same kind of -- by agreeing to provide shareholders, post to the website, with a full copy of the minutes of this meeting. A complete copy of all the transcript is what they're doing.

John Thomas Mayberry

Debbie, we do put it on the website, don't we? Do we do put them on the website?

Deborah M. Alexander

No. Would you like me to answer?

John Thomas Mayberry


Deborah M. Alexander

Good morning, Mr. Weir [ph]. As you know, the bank does have a set of minutes that the shareholders can look at. They are a complete and accurate recitation of everything that happens at the meeting. We don't keep transcripts of voice conversations at our meetings. So you're more than welcome to see the minutes as a shareholder, like any other shareholder can.

Unknown Shareholder

With all due respect, Ms. Alexander, the minutes kept in the bank -- there are no relation. I've talked at meetings probably for an hour and I've never even seen my name in the minutes. The minutes contain what management wants to show the shareholders. And this is 2013. And it's 182 years of this bank and surely, shareholders have a right to be able to look at the website, look at what was actually said in the meeting. I mean, I don't think this is unreasonable.

Deborah M. Alexander

Mr. Weir [ph], we'll post the minutes for you on the website.

Unknown Shareholder

No, no. I want a complete transaction of the meeting, not your minutes.

John Thomas Mayberry

Mr. Weir[ph], I'm going to ask you to take your seat and we'll go through...

Unknown Shareholder

Well, I still want an answer here.

John Thomas Mayberry

At the proper time in the meeting, we will have...

Unknown Shareholder

This is a proper time in the meeting. It's the beginning of the meeting. It's the -- the minutes are being kept now. We want -- shareholders want to know, I want to know, can we, like TD shareholders, can we be treated like TD shareholders?

Deborah M. Alexander

Mr. Weir [ph], my understanding is that this meeting is being webcast and that it will be available on our website.

Unknown Shareholder

That's not the same thing. Let's stick to the topic. The topic is, is the bank prepared to post on its website a complete transcript of this meeting. Yes or no?

Deborah M. Alexander

Through the webcast...

Unknown Shareholder

Yes or no?

Deborah M. Alexander

Yes, Mr. Weir [ph], through the webcast.

Unknown Shareholder

That's not the webcast. It's not a transcript. It takes hours and half those time, they don't work. Post it in written form so a shareholder can read.

John Thomas Mayberry

Mr. Weir [ph], you heard the answer. I'm going to ask you to sit down, please.

Unknown Shareholder

Well, I didn't hear the answer. I didn't hear the answer.

John Thomas Mayberry

She said, yes. It will be on the webcast.

Unknown Shareholder

That's not the same -- that's not the question. The question...

John Thomas Mayberry

That may not be the answer you want...

Unknown Shareholder

That's not the question. I asked a question, I deserve an answer.

Deborah M. Alexander

Mr. Weir [ph], I am trying to accommodate you. The only way we'll have a transcript is...

Unknown Shareholder

Is the bank prepared to follow the lead of the TD? Are they going to follow again? That's the question here. Is the bank going to step up to the plate or not?

Deborah M. Alexander

I cannot answer for what the TD agreed to, because I wasn't there. But I can tell you what the bank can do and we can provide you with the webcast of this meeting, because that's the way...

Unknown Shareholder

But that's not what I asked.

Deborah M. Alexander

Mr. Weir [ph], that's the way in which we record it. We're not taking written transcripts of the meeting.

Unknown Shareholder

Well, I'm sure the bank has a written transcript of the meeting.

Deborah M. Alexander

Through the webcast.

Unknown Shareholder

Well, they have a written transcript of the meeting. Yes or no?

Deborah M. Alexander

We'll give you the webcast, Mr. Weir [ph].

Unknown Shareholder

Well, I mean, I think this is ridiculous to argue over this point. It's a basic point, and it's a fair point.

John Thomas Mayberry

We'll be happy to sit back down with you after the meeting and go over this, but we're not going to solve it here.

Anyway, I emphasize, again, that if you have sent in a proxy, there is no need to complete ballots except for the reasons I've mentioned. Ballots will be collected by the scrutineers twice during these proceedings. The first collection will follow the advisory vote on Say on Pay, and the second collection will follow voting on Shareholder Proposal #3. Please ensure that you print your name clearly on each ballot and sign it, and I will announce the results on the -- of the voting by ballots before the end of the meeting when I receive the scrutineers' report. The final tabulation will be available shortly after the meeting.

To facilitate the timely conduct of our business and to ensure that all shareholders who wish to raise issues at the meeting have an opportunity to do so, I would ask that the length of time for each speaker be limited to about 3 minutes. Your cooperation would be greatly appreciated.

It's gratifying to have most of the members of the Board of Directors with us today. They come from across the country, Singapore and the United States, and their attendance is a further display of their interest in the welfare of the bank and the shareholders they represent. The shareholders, as well as management, will, I am sure, join me in expressing appreciation to the Board of Directors for their counsel and their dedicated service to the bank throughout the year.

It's with pleasure that I introduce my fellow directors, and I would ask each to stand and remain standing as his or her name is called: Ron Brenneman; C.J. Chen; Ashleigh Everett; John Kerr; Thomas O’Neill; Indira Samarasekera; Susan Segal; Allan Shaw; Paul Sobey; and Barbara Thomas.

I would also like to introduce to you Aaron Regent, who is a nominee for election to the Board today, as is Brian Porter, who was introduced to you earlier in the meeting.

Ladies and gentlemen, that's your Board of Directors.

At the Annual Meeting on April 3, 2012, shareholders reappointed the firm of KPMG LLP to audit the affairs of the bank for the 2012 fiscal period. Representatives of KPMG, Mr. Bill Thomas and Mr. Scott Wetmore, are here with us today. It's a pleasure to welcome them to this meeting, and I ask Bill and Scott to please stand.

The consolidated financial statements of the bank, which comprise the consolidated statements of financial position as of October 31, 2012, October 31, 2011, and November 1, 2010, the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years ended October 31, 2012, and October 31, 2011, and notes comprising a summary of significant accounting policies and other explanatory information, were submitted by mail to shareholders as part of the bank's Annual Report, and they can be found starting on Page 101. The report of the independent registered public accounting firm related to internal controls, and the independent auditor's report of registered public accounting firm related to the financial statements as a whole, can also be found on pages 100 and 103, respectively.

Sean McGuckin, our CFO, will now address the meeting. Sean?

Sean D. McGuckin

Thank you, Mr. Chairman, and good morning, everyone. It is my pleasure to be here in Halifax and have the opportunity to speak to you about our fiscal 2012 results. Before I start, I would like to refer you to Slide #2 of this presentation, which contains Scotiabank's caution regarding forward-looking statements.

We are pleased to announce that in 2012, Scotiabank continued to deliver sustainable profitability and growth, with very strong contributions from all our business lines. We met or exceeded all financial and operational objectives. For the third consecutive year, Scotiabank generated record earnings, net income was almost $6.5 billion, an increase of 21% from last year. Earnings per share were $5.22 for the year, including a $0.61 gain from the sale of real estate assets.

Excluding these gains in 2012 and the acquisition gains in the prior year, earnings per share increased 8% year-over-year. Return on equity remained strong at 19.7%. Our focus on generating high quality, sustainable and diversified growth resulted in top line revenue growth of 14%, to almost $20 billion in revenues this year.

We completed the ING DIRECT acquisition early in the first quarter of 2013, and the transition is progressing well. ING DIRECT has $30 billion in customer deposits and is an important addition, as it provides an independent brand and a self-directed service channel to nearly 2 million customers. This acquisition now firmly positions Scotiabank as the third-largest retail bank operating in Canada, based on market share of personal deposits and lending in Canada.

Turning to credit. The credit environment continued to be stable this year, and the bank's credit portfolios continued to perform well and within our expected ranges and risk appetite, even under modeled stress scenarios. In 2012, a high level of internal capital generation, along with share issuance in support of our acquisitions, resulted in improved capital ratios, which are all above pre-crisis levels and remain strong.

As John mentioned, Scotiabank was also recognized as the first Canadian back to be named Global Bank of the Year by The Banker magazine, a Financial Times publication. We were also named Bank of the Year in the Americas and Bank of the Year in Canada, a very proud moment for all Scotiabankers.

We believe diversification creates stability and lowers risk. We ensure that we have diversification of our business lines by products, customers and geographies. This diversification has consistently proven to be very beneficial to the recent uncertain global economic conditions.

The bank has 4 business lines: Canadian Banking, International Banking, Global Wealth Management and Global Banking and Markets. Our medium-term target is for each business line to contribute between 20% to 30% of the bank's earnings. And finally, although we have a presence in high-growth international markets, we are anchored with a strong Canadian base. Our earnings are generated about 1/2 in Canada and 1/2 internationally.

We have delivered record results in 8 of the last 10 years, which is a clear indicator that our primary focus on achieving sustainable and profitable revenue growth is working very well. The record revenue in 2012 was well-balanced, and achieved, in part, by the progress we have made in key growth areas.

Our higher-growth Latin America and Asia platforms, our Global Wealth and Insurance businesses, and our focus on deposits and payments, will continue to drive revenue growth for the bank. As well, we expect to continue to grow our Global Wholesale Banking revenues by increasing both our client base and product offerings.

While our primary focus is maximizing returns through organic growth, as we deploy our internally generated capital to support sustainable and profitable revenue growth, acquisitions will continue to be part of our business strategy and complement our organic growth. As you can see, over the last 5 years, our revenue growth has averaged 8% per year.

Now looking closer at our 4 business lines, starting with Canadian Banking. Canadian Banking is our domestic, personal, commercial and small business segment. It generated $1.9 billion of net income in 2012, which translates into 16% year-over-year growth, the strongest growth among our Canadian bank peers. Canadian Banking contributed 31% of Scotiabank's fiscal 2012 earnings.

This strong performance in Canadian Banking was driven by very good asset and deposit growth, disciplined expense control and lower loan loss provisions. Our loan loss ratio, at 23 basis points, was the best among our peers.

And as mentioned earlier, we closed on our acquisition of ING DIRECT Canada, the largest acquisition in our history, just after our fiscal year end. This acquisition added $30 billion in very stable customer deposits, as well as high-quality assets. The key to the success of this transaction will be the growth of these deposits, which we will achieve by maintaining the customer value proposition of a low-cost, self-directed platform that allows a premium-valued savings rate.

Now turning to our International Banking division. International Banking's core personal and commercial businesses represent a very strong platform for future growth in the developing markets. This business will continue to benefit from the higher growth rates in the young, under-banked demographics in many of the geographies where we operate.

2012 was a good year for International Banking. Net income grew 11% and the segment contributed 27% of Scotiabank's consolidated earnings. We had strong revenue growth in our Latin America and Asia segments. We expanded our footprint with our 51% investment in Banco Colpatria, the sixth largest financial group in Colombia. We will continue to focus on organic growth in 2013 as our top priority, and as in the past, only look to acquisitions that would advance or complement our strategy.

The next slide illustrates the expected economic growth rates in key countries in which we operate. Despite some lingering global uncertainty, the economic outlook for growth in our key international geographies is considerably more attractive than the growth that is expected in Canada and the United States. We are excited about our prospects for growth in our International Banking division, which has been a key growth engine for Scotiabank, and will continue to be a tremendous source of strength, growth and diversification for the bank.

Now turning to our Global Wealth Management division, which encompasses our wealth and insurance businesses here in Canada and internationally. The segment delivered strong results, driven by both organic growth and acquisitions. Net income of $1.1 billion, up 19%, was driven by good revenue growth of 12%. Our productivity ratio of 58% was the best among our Canadian bank peers.

In Wealth Management, the acquisition of DundeeWealth, 2 years ago, has given us the Canadian scale we have been seeking for some time. In 2012, we were ranked #2 in mutual fund sales in Canada among the Canadian banks.

Our insurance businesses also had a good year. In Canada, we are making steady progress in increasing the cross-sell of insurance and rolling out new products, both creditor and direct insurance. Internationally, we continue to enjoy increases in sales of insurance, as a result of our investment in new customer contact centers, particularly in Mexico. We also recently completed the acquisition of a 51% interest in Colfondos, a pension management company in Colombia.

Global Banking and Markets, Scotiabank's wholesale business, is anchored by a corporate lending product, which we leveraged to cross-sell other products. The trading business is a client-focused business, diversified across many product offerings. Global Banking and Markets had a strong year in 2012 and generated net income of almost $1.5 billion. This represented year-over-year growth of 18%.

The consistent focus on expense management produced an industry-best productivity ratio of 42%, a wide margin over the next closest peer. Our approach in the wholesale banking business is to provide a broad range of products in select industries and geographies. Our key sectors include energy, mining and infrastructure, which aligns well with our Canadian expertise. And in 2012, we completed the acquisition of Howard Weil, a leading US-based energy investment boutique, which is recognized as 1 of the top boutiques and regional firms in the energy industry.

Here at Scotiabank, we have a strong cost and risk culture. Looking at expenses, Scotiabank has a track record of being a very efficient bank. We can see this when looking at the comparison of Scotiabank versus our peers with respect to the productivity ratio. We are very cognizant that now, especially in an environment where volume and revenue growth may be tougher to achieve, we must continue to be focused on managing costs. Last year, we generated positive operating leverage, where revenues grow faster than expenses, and we expect to do so again this year.

Risk management is also deeply ingrained in our culture, and every Scotiabanker is expected to think and act as a risk manager. Our risk management framework is applied on an enterprise-wide basis and consists of 3 key elements: Our risk governance framework, our risk appetite and our risk management techniques. Our strong risk management capabilities, coupled with our well-defined risk appetite, has produced a favorable credit-risk performance compared to our Canadian peers.

Turning to capital on the next slide. You can see that the bank continues to maintain a strong, high-quality capital position. Q1 of 2013 was the first quarter that Canadian banks were required to report capital ratios under the new Basel III requirements on an all-in basis. The common equity Tier 1 capital ratio was 8.2% at the end of the first quarter of fiscal 2013. This was up from 7.7% at the end of fiscal 2012, when adjusting for the announced ING DIRECT acquisition.

Our capital ratios are strong by international standards, and we will continue to prudently manage capital to support organic growth initiatives and selective acquisitions, which also supports sustainable growth and dividends.

On this slide, you will see that Scotiabank has an excellent long-term track record of delivering consistent and sustainable earnings and dividend growth. Over the last 20 years, both earnings and dividends per share, have grown at an average rate of over 10% per annum, even through a few economic downturns and credit cycles. We are also very proud of the fact that Scotiabank has paid dividends continuously for more than 175 years, and increased dividends in 47 out of the last 50 years.

Scotiabank has also had a very high return on equity. Over the last 5 fiscal years, Scotiabank's return on equity averaged 18.8% or 18.1%, excluding the real estate gains in 2012 and some one-time accounting gains in 2011. When you add it all up, we have been able to generate superior total shareholder returns for our shareholders over the medium and longer term. We are consistently at or near the top, in total shareholder returns, over the 5-, 10-, 15- or 20-year time horizon.

Finally, this slide shows our stated financial objectives for 2013. We expect earnings per share growth of 5% to 10% for 2013, excluding the real estate gains we recorded in 2012. For return on equity, we again are targeting the range of 15% to 18%. And with our continued focus on expense management, we have now improved our productivity target by reducing it to less than 56% versus our 2012 target of less than 58%.

We will continue to grow our capital position and maintain strong capital ratios. We had a very good start to the year and we expect to continue to build on this positive momentum. We are well positioned to meet our financial targets for 2013 and we remain committed to delivering positive operating leverage through prudent expense management.

Thank you. This concludes my remarks, I'll now pass it back to our Chairman.

John Thomas Mayberry

Thanks very much, John. Ladies and gentlemen, I would now ask for any comments directly related to the financial statements. Questions not related to the financial statements will be invited later in the meeting during the general question period. I note that while I'm inviting your questions, I'm going to refer all of these to Sean McGuckin, our Chief Financial Officer, to respond with.

With that, are there any questions?

Question-and-Answer Session

Unknown Shareholder

Lowe Weir [ph], a proxy holder today from Bedford, Nova Scotia. And I just want to have a little question on risk. On expense control, the Bank of Nova Scotia does the best job of anyone, there's no question about it so. And they've it for years and years, so we don't even have to go there. But risk concerns me. And the bank's expanded a lot over the last few years. It's really done a great job. And -- but I have a concern over risk. And I'll tell you why. Because quite frankly, back here, less than 5 years ago, the Canadian markets froze up and the bank -- some banks were insolvent, probably the Scotiabank was insolvent at that time. And that happened very quickly without warning. And in what was, at the time, very affluent times. And I guess that my concern with Bank of Nova Scotia, especially their expansion in Latin and South America, is what controls they have in place to prevent substantive losses in these markets, they are new markets, should there be some kind of event or interruption or risk factor take place there? Because I think there is a chance of substantial loss there. What mitigating factors has the bank taken up?

John Thomas Mayberry


Richard Earl Waugh

Yes, if I may Mr. Chairman. And that's a good question because I think it concerns all of us in management. Scotiabank is how we manage our risk, all our risks. If you really -- what we do in banking is take your deposits and then we have to redeploy them. That's what we do, is manage risk. And I think those banks that do that better than others, that is a very defining feature. So we think about it a lot and we do about it a lot. Going back to that crisis, there's only one thing I would like to mention, when you said that probably Scotiabank was insolvent, we were not. As a matter of fact, even at worst of all worst years, we made 16% return on capital and we're highly profitable and never even got close to our book value or our capital. Liquidity was certainly an issue, but we manage that...

Unknown Shareholder

But insolvency, if you have no liquidity, you're insolvent. I mean, this is a technical argument I don't want to get into today, but the reality is the government bailed the banks out. And call it whatever you may, the banks have -- they soft-played it, but the government bailed out the banks. That's the bottom line.

Richard Earl Waugh

Mr. Weir, the government did not bail us out. I just won't go into details. We did get liquidity from the Bank of Canada on which we pledged good, hard security and paid a very high fee for it, which was the traditional response of a central bank in any country. So I just do not agree with that assertion. But let me assure you that we are concerned as you are on risk management. And I think this team, and our results show us, if you look at our loan losses over any period of time. And that is one of the things that we are probably the best in Canada or one of the best in Canada, and we're definitely one of the best in the world. So we share your concerns and we will look, sir, and while we prudently manage it going forward.

Unknown Shareholder

Yes, but it doesn't really answer my question. I mean, I agree that probably do a good job in loan losses. That's not my point. My point is if some kind of event in these economies, which triggers a similar crisis as we had in 2009, and that could happen in South America. So I didn't get from your answer if the bank has any special plans or they have taken special risk measures to prevent this.

John Thomas Mayberry

Mr. Weir, I would say from a board perspective and from management's perspective, any investments we make, we never bet the bank. We make prudent investments that are bite-sized investments that we can handle and we grow them over time. But we very prudently do not bet the bank and take big risks on investments.

Unknown Shareholder

Well, I appreciate that. I'm not sure that's what I asked. But I appreciate that the bank does take a small bite at it. But anyway, I'm not...

Richard Earl Waugh

Specifically, on South America, we remind you, first of all, our #1 thing is we are very, very diversified, and we do not bet this bank on any one country because we remain so diversified. And even Canada is only 50% of our earnings. So through diversification, I think we've, in South America, we, I think, are very well, both on a funding and capital, and we share your concern and we will be looking at that in the future.

Unknown Shareholder

We have the same issue though in Canada here. I am going to take a second now because it's a valid point. We have a real estate market in Canada that seemed, and I'm going to call it a bubble, a lot of people wouldn't, but I'm going to call it a bubble. And we've seen what I call not reckless lending by the banks, but I'll call it aggressive mortgage lending by Canadian financial institutions and probably, although everyone denies it, there is a substantive amount of risk in that market. So I'll ask, am I misinterpreting this market or -- and what has the bank done to protect themselves?

Richard Earl Waugh

Our view of the real estate market, first of all, we still anticipate what I would call, in terms of housing, a soft landing. And all the metrics which we watch daily confirm that. Our delinquency rates with our customers are showing slightly elevated but not significant rises. And these are well under control, we anticipate no significant losses. And -- but we're watching that very carefully.

Unknown Shareholder

What happens if interest rates go up?

Richard Earl Waugh

Our customers, unfortunately, have to pay more money.

John Thomas Mayberry

Are there any questions related to the financial statements?

Okay. Then I'll turn the podium over to Brian Porter, our President, for some brief remarks.

Brian J. Porter

Thank you, John, and good morning, everyone. It is an honor for me to address the bank's Annual Meeting for the first time as your new President. I'd like to begin by thanking the Board of Directors and Rick Waugh for giving me this opportunity. It is a distinct privilege, and I am very fortunate to have been entrusted with this important role.

I'd like to acknowledge that it is particularly meaningful for me to be here in Nova Scotia today. As some of you know, my family and I have strong connections to the province, through the community and through a long-standing association with Dalhousie University.

In my new role, and in my previous roles in International Banking, Global Risk Management and Global Banking and Markets, I have traveled extensively to meet with employees, customers and many other stakeholders. In my meetings with employees, I have always been struck by 2 important observations. Firstly, I am impressed by our employees' expertise, their diversity and by their passion and enthusiasm for the work they do for our customers. And secondly, regardless of where I am, Scotiabank's strong culture is readily apparent. In fact, we believe our employees and our culture are key drivers of our success, now and in the future.

In terms of our customers, it's very important to me that I meet with them as often as possible. In fact, it is critical for all senior leaders of the bank to interact with customers frequently, so that we can understand their concerns and ensure that we are delivering on our commitments.

I also meet regularly with shareholders, community leaders, regulators, government officials and many others. One of the important impressions that I take away from these meetings is that Scotiabank is highly regarded in all circles, both here in Canada and abroad. To me, this reinforces the great reputation that Scotiabankers have all worked so hard to build and maintain.

So for the balance of my remarks today, I'll touch on 3 important areas: Firstly, I'll speak briefly about the bank's recent performance and why we are achieving the right kind of success. Secondly, I'll highlight some key opportunities we see in each of our 4 business lines. And lastly, I'll talk about our strategy.

Let me begin with our recent performance. As Sean recently pointed out, by a number of measures, the bank had a very successful 2012. A record year, in fact, in which we met or exceeded all our financial objectives. We believe we're achieving the right kind of success and there are 3 main reasons. We continue to demonstrate consistency and predictability in our performance. All 4 of our business lines are contributing in a very balanced way and we continue to have a wealth of opportunities in front of us, which have been generated by a healthy combination of organic initiatives and prudent acquisitions.

As a result, we have every confidence we can continue to generate high-quality earnings on a sustainable basis. In my mind, the quality of our earnings is every bit as important as the quantity, and we have continued to deliver in this regard.

In the year since the financial crisis, we have been able to take advantage of market opportunities because we have a strong balance sheet, we have the deep and pervasive risk culture and we have a disciplined approach to acquisitions. By doing so, we continue to build out our footprint, completing some 40 transactions for more than $13 billion, including our recent acquisition of ING DIRECT here in Canada and our investment in Banco Colpatria in Colombia.

As a result, we are tremendously well positioned going forward and our footprint is the envy of many financial institutions around the globe, which brings me to some of the key opportunities for each of our business lines. To begin with, in Canadian Banking, we have highlighted a focus on deposits and payments. Deposits are the lifeblood and circulatory system of any bank. Therefore, it is a key priority for us to ensure our deposits are growing lockstep with loans. It is important that we build a deposit base that is stable, well diversified and to ensure our growth is prudent, sustainable and well-funded.

We are pleased with our recent acquisition of ING DIRECT. We have solidified our position as having the third largest deposit base here in Canada. But deposits are only part of the exciting story with ING DIRECT. It has the potential to be much more. ING DIRECT has developed a unique value proposition, strong and profitable growth over the past several years provides ample proof of their successful business model. We believe there is considerable potential for us to leverage a similar model in some of our international markets over time.

Payments is another important focus. Payments encompass all the different ways that funds are transferred from one party to another, including debit cards, credit cards, electronic funds transfer, Internet banking and mobile banking. It's an area that's undergoing rapid innovation, with increased competition from traditional financial institutions and new entrants.

As one of the first Canadian banks to introduce mobile banking, we are continuing to progress with mobile payment technology and we look forward to giving our customers more options when making purchases in the near future.

We're also achieving innovative growth in our credit card business. Last year, we announced the launch of 3 American Express cards, which offers some of the best travel rewards in the Canadian marketplace.

Turning to International Banking. We are continuing to build our diversified, customer-focused personal and commercial footprint, particularly in the higher growth markets of Latin America and Asia. We have been acquisitive. Since 2007, we've added more than 8 million customers outside Canada, doubled the number of branches to 2,900 and grew revenue by a healthy 13% per annum.

And while we have grown our international footprint significantly, we continue to demonstrate patience, discipline and strategic thinking in our approach to acquisitions. These acquisitions not only increase our footprint and our customer base, but they also enhance opportunities to drive organic growth. And of course, we are also focused on making sure that all these acquisitions operate in accordance with Scotiabank's high standards in critical areas such as risk, governance, financial and operational controls, and sales and service.

Let me comment on the opportunities in our Global Wealth Management division. Here, we are driving strong organic growth as we continue to ramp up our newest business line. It's only been 2 years since we acquired Dundee Wealth Management, which continues to have a transformational effect on our business. We have now firmly positioned ourselves as one of the leading providers of wealth management services to Canadians. Our mutual fund business ranks second among the Canadian banks in assets under administration last year.

Internationally, Latin America is an important focus for expansion of our wealth and insurance operations. Most recently, we acquired a majority stake in Colfondos, Colombia's fourth largest pension fund company. Colfondos aligns nicely with our investments in Profuturo in Peru and Scotia Crecer in the Dominican Republic and adds significantly to our overall expertise in the pension fund management business.

Going forward, we see great opportunities for our wealth, insurance and cash management businesses here in Canada and internationally.

And finally, I'll turn to our fourth business line, Global Banking and Markets, which is our wholesale business. In a time of continued market volatility, our wholesale business stands out for its consistent, predictable and high-quality earnings. We're confident that our wholesale retail mix as a bank is appropriate and that it helps us achieve growing but stable results.

The quality of our business is underpinned by a well-diversified product suite and deep, long-lasting relationships with top-tier customers. We're banking the real economy with a focus on core industry sectors such as mining, energy and infrastructure. And there's tremendous potential as we expand our wholesale operations within our footprint in Latin America and Asia.

I'd like to conclude with some remarks about our strategy. There is no doubt in my mind we have the right strategy. We have the big picture right, and we believe our strategy is crystal clear. Our business model is effective, well-balanced and it positions us well for the future.

We have the key elements in place that are essential for success. Again, a strong balance sheet. We are committed to efficiency in expense management and we have a strong and deeply rooted risk culture.

We are focused on 3 critical areas that underpin our success, first and foremost, our customers. We're working well together to offer broader solutions seamlessly across the bank, and we're working to leverage the full benefits of our international footprint for all our customers.

Secondly, our people. The strength of our team is our biggest differentiator, and that's why we place great importance on having a diverse, talented group of employees and on developing our leadership depth and capabilities. In an organization of some 82,000 employees, our long-term success depends on having the right team with the right values, skills and experience. More than anything else, this will determine our ability to execute our strategy, today, tomorrow and in the future.

In my travels across the bank, I've had the privilege of seeing our team in action. I've witnessed the power and commitment of Scotiabankers, working together towards a common purpose, and that's delivering great results for our customers and our shareholders. Our team of Scotiabankers gives us all tremendous confidence in the future of the bank.

And finally, let me comment on our culture. We know that Scotiabank's culture is one of the most important factors to our success. I also know that it may be our biggest competitive advantage. Our culture governs how we operate, how we interact with our customers and other employees and how we contribute to the communities in which we live and work. On each of these dimensions, we can all be extremely proud. So I want to thank the entire Scotiabank team for your commitment to our customers, to your fellow employees and to the communities in which we live and work.

And finally, I also want to thank the shareholders for the trust you place in us and for your continued loyalty and support. Thank you.

John Thomas Mayberry

Thanks very much, Brian. We'll now proceed with the election of the Board of Directors of the bank for the ensuing year. The bank's bylaws fixed the minimum number of directors to be elected at the minimum required by the Bank Act, which is 7, and the maximum at 35, and require that prior to each Annual Meeting, the Board of Directors fix the number of directors to be elected at the meeting.

Prior to this Annual Meeting, your Board of Directors fixed the number to be elected at 14. The share ownership guidelines require that directors hold bank common shares and/or deferred stock units with a value of not less than $450,000.

As at October 31, 2012, all directors were above the target ownership level with the exception of Ms. Siegel, who was appointed to the board on December 2, 2011. Ms. Siegel is elected to receive 100% of her fees in deferred -- director-deferred share units and has until 2016 to reach the ownership level.

For your information, the shareholdings of each director are provided under the Director's Biographies in the Management Proxy Circular on Page 6.

I'd like to comment on our disclosure practices around voting for directors. Our goal is to be completely open and transparent and to disclose information as broadly as possible. It's not our practice to pre-disclose prior to the meeting. However, we're always open to improving our procedures if appropriate.

For the past 5 years, we have included -- indicated the results of the proxy vote at the Annual Meeting in advance of voting on the issues and we'll do so again today.

With that said, over 55% of the outstanding shares of the company were voted before this meeting by proxy. All directors have received at least 96% of these votes for their election to the board. The support for the appointment of the auditor is more than 99%. The advisory vote on Say on Pay received over 94% approval, and each of the shareholder proposals numbered 1 to 3 have received at least 96% of votes against.

Please note that in advance of today's meeting, the bank asked certain persons to move and second the motion for shareholders' consideration today. I should mention that the individuals who kindly agreed to put resolutions before the meeting today and those who are seconding them are all shareholders, proxy holders or employees. Thank you, all.

May we please have nominations for the election of directors?

Unknown Shareholder

Mr. Chairman, I want to intervene at this point because I have an objection with providing the amount of the voting before the actual vote -- the proxy vote. I don't think that's correct. I mean, you're influencing the election here. You're saying it's not worthwhile to vote. I mean, this is like announcing the early vote in election before the actual date of the vote. I don't know if this is legal at all. I mean, as a matter of fact, I think it affects the election and I'm going to file a complaint on this because I don't think it's right.

John Thomas Mayberry

Thank you for the input.

Richard Earl Waugh

If I could just add, Mr. Weir, just to your comment, the reason we did it was actually a request as a meeting like this from a shareholder to do so, so that he would have, I think it was a he -- would have better understanding of the process. So we responded to that. Thank you very much.

Willie Gagnon

[French] I am Willie Gagnon, I am here to ask Mr. Weir a comment. I don't know if you know that a shareholder could ask at any time a secret vote or a vote at hand that would override the proxy vote. I won't do it today, but it is a possibility that could cause you problems if you have the intention to give the results of the vote before the vote takes place in the hall -- in the meeting room, rather.

John Thomas Mayberry

[indiscernible] Could I have a motion for the shareholders' appointment?

Unknown Shareholder

Thank you. Mr. Chairman, my name is Stephen Kingston [ph], I'm a proxy holder. It's my pleasure this morning to nominate the directors for Scotiabank for the ensuing year. Before doing so, Mr. Chairman, I'd like to welcome you and the other directors to Halifax for this year's Annual Meeting of Shareholders, and to thank you for your excellent stewardship.

I move that the following persons are nominated to be elected as directors and to hold office until our next Annual Meeting: Ronald Brenneman of Calgary, Alberta; C.J. Chen of Singapore; Donald Dodge, Ottawa, Ontario; Ashleigh Everett, Winnipeg, Manitoba; John Kerr, Vancouver, British Columbia; John Mayberry, Burlington, Ontario; Thomas O’Neill, Toronto, Ontario; Brian Porter, Toronto, Ontario; Aaron Regent, Toronto, Ontario; Indira Samarasekera, Edmonton, Alberta; Susan Segal, New York, New York; Paul Sobey of Chance Harbour, Nova Scotia; Barbara Thomas, Belleair, Florida, U.S.A.; and Richard Waugh, Toronto, Ontario.

Thank you, Mr. Chairman.

John Thomas Mayberry

Thank you. May we have a seconder?

Unknown Shareholder

Good morning, Mr. Chairman, my name is Paul de Wolfe [ph], I'm an employee and a proxy holder, and I second the nominations.

John Thomas Mayberry

Thank you, Mr. Kingston and Mr. de Wolfe. Are there any further nominations for directors?

The election of directors is ballot #1, a yellow ballot. Please vote now by checking either the box for or the box withhold for each individual director.


John Thomas Mayberry

The Bank Act requires the affairs of the bank to be audited by a firm of accountants appointed by the shareholders at each Annual Meeting, and that the firm so appointed must have the qualifications and the independence required by the Bank Act. As mentioned earlier, for fiscal 2012, the firm of KPMG LLP served as our auditors. KPMG LLP meets the legislative qualifications and independence requirements and it is recommended by management that KPMG LLP be reappointed as the shareholders' auditor until the close of the next Annual Meeting to take place in 2014.

May I please have a motion to appoint the auditors?

Unknown Shareholder

Mr. Chairman, my name is Bill Sandford [ph] and I'm a proxy holder. I move that the firm of KPMG LLP be reappointed as the shareholders' auditors of the bank until the close of the next Annual Meeting of Shareholders. Thank you, Mr. Chairman.

John Thomas Mayberry

Thank you. May I have a seconder?

Unknown Shareholder

Mr. Chairman, my name is Patricia Hamblin [ph], I'm an employee and a proxy holder and I second this motion.

John Thomas Mayberry

Thank you Mr. Sandford and Ms. Hamblin.

Unknown Shareholder

Mr. Chairman, it's Lowe Weir, again, of Bedford, Nova Scotia, proxy holder. I have a question for the auditors. In Canada, over the last number of years, we've seen what I call shoddy auditing. And we've had in case in this country where 2 of the major 4 firms in this country have -- have had audits from the U.S. regulator, the PCAOB, and in those, the results of those audits essentially show that in over 50% of the audits, insufficient audit work was being done. And the items pointed out, quite frankly, were items where I've seen personally, because I go and review the books of some of the banks. I haven't gone to the Scotia, but I can come any time. But in the banks I have, clearly, the items that the PCAOB, had put forth, I've seen myself. And I want to ask KPMG here today; a, have they been audited by the PCAOB? And did they have a clean sheet or did they have items?

John Thomas Mayberry

Would either of the KPMG gentlemen care to respond?

Scott Wetmore

My name is Scott Wetmore. I'm the lead audit partner for the Bank of Nova Scotia team. I can respond by saying that as a global firm, we are subjected to reviews by the various regulators, including the CPAB in Canada and the PCAOB in the United States. And as it relates to the audit of the Bank of Nova Scotia, we have no significant issues arising from most regulatory reviews, which would prohibit us from conducting the audit of the bank.

Unknown Shareholder

I wasn't talking about the Bank of Nova Scotia. What I was talking about was, has KPMG been inspected by the PCAOB and if there was any outstanding issues that arose. It has nothing to do with the Bank of Nova Scotia.

Scott Wetmore

Yes, we have been inspected by the PCAOB. And the PCAOB's reports are public.

Unknown Shareholder

Was there any outstanding issues? The Canadian one was -- does not have it public. Did you have outstanding issues? I mean, this is like pulling hen's teeth. This is an auditor's job, you're supposed to audit the books. Give us the story here.

Scott Wetmore

I don't have the PCAOB's report in front of me, but I can tell you that there's no significant issues coming out of that review or the most recent review that would impact us as auditors of the bank or any other client of the firm.

Unknown Shareholder

That's so qualified, it doesn't answer the question.

John Thomas Mayberry

Well, that's sufficient. Now it could be -- we want to get back to the affairs of the meeting.

Unknown Shareholder

Well, that was the point. We are electing an auditor here. We have independent bodies that are saying these people are not doing their job. I think it...

John Thomas Mayberry

You were told there are no issues related to the Bank of Nova Scotia audit.

Unknown Shareholder

But that's not the point. How do you know that? I mean, I think that's supposed to be private information on an audit, relating individual information with relation to an audit. It's not supposed to be told to the customer.

John Thomas Mayberry

We'll ask you to please mark your ballots, on the yellow ballot. Please vote by checking either the For or the Withhold box.


John Thomas Mayberry

We'll now proceed with the advisory vote on our approach to executive compensation, commonly known as Say on Pay. Our approach to executive compensation is described in huge detail in the Compensation Discussion and Analysis section of our management proxy circular.

The bank's strategic focus is on 5 key priorities that position us for a continued long-term success. That is sustainable and profitable revenue growth, effective capital and balance sheet management, leadership development, prudent risk management and appetite and efficiency and expense management.

In achieving our strategic priorities, the bank uses a balanced scorecard to measure performance across multiple qualitative and quantitative dimensions. The scorecard is an important tool in the assessment of overall bank performance, and it's a key factor in the determination of annual incentive compensation for our executives.

Our executive compensation programs help the bank create and sustain shareholder value by attracting high-quality, high-caliber executives who can advance our strategy, motivating our executives to act in the best interest of our shareholders and other key stakeholders and rewarding executives for demonstrated leadership in the achievement of strategic objectives.

Because our philosophy is on pay-for-performance, we place strong emphasis on at-risk incentive compensation. We believe this philosophy aligns the interest of our Executive Team to the long-term interest of our shareholders.

Because our annual Say on Pay is an advisory vote, it is not binding upon the board. However, the board and the Human Resources Committee will take the outcome of the vote into account, together with other suggestions, that we receive from you when considering future executive compensation arrangements.

Are there any comments or questions from the floor?

Unknown Shareholder

Mr. Chairman, my name is George Bishop, and I am a proxy holder. I move that it be resolved on an advisory basis and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in this management proxy circular delivered in advance of the 2013 Annual Meeting of the Shareholders of the bank.

John Thomas Mayberry

Was there a quick comment?

Unknown Shareholder

Speaking of a consultive vote on gains right now, is that not the fact? Is that not what we're talking about? I did not understand. We're speaking of an advisory vote on Say on Pay? We noticed, if we look at the Annual Report on Page 194, it's the last page -- for the 84,000. On Page 105 of the same report, it's $5 billion to pay these people. The person who is best paid gains -- earns $11 million and others $32,000, which shows that the average salary is $70,000. Therefore, the salary of the person who is best paid is 158x the salary -- the average salary, which is astronomical.

The MÉDAC, the organization that I'm here to represent, is well aware of this. It knows. NEI Investments, a group that we belong to and, of course, Desjardins belongs to, has submitted a proposition to align the salaries with the average salaries, so that there is a ratio, an equitable ratio between what the high director receives and the average salary. Have you had any contact with this organization? We are well aware of what this group has proposed to many banks, and most of them have been removed after negotiations with the banks. Have you met with this group to discuss this?

John Thomas Mayberry

In relation to your proposal, this was about the vote on Say on Pay.

Unknown Shareholder

But we're talking about salaries, bonuses, are we not? Salaries, rather.

John Thomas Mayberry

Compensation format, which is laid out very extensively in the management proxy circular. The bank had record results. We've compared and benchmarked our compensation throughout the organization from top to bottom, 82,000 employees. And we believe it's competitive and appropriate for the business. The HR committee spends many, many, many days and hours on this subject.

Unknown Shareholder

So you haven't had any contacts with NE Investments -- NEI Investments, have you had contact with them?


Unknown Shareholder

[indiscernible], Bedford, Nova Scotia, proxy holder. I want to give my comments on the executive compensation. And I did the same at every bank, so don't feel slighted here. I believe that the formula and the mechanism is totally wrong, and I'll tell you why. I think the base salary is far too low. In Canadian banks, I think the base salaries should be much, much higher. I think the bonus, annual bonus, or 1-year bonus as I call it, for the year, should be substantial as well. And I think the long-term compensation -- I don't believe in this midterm compensation whatsoever because I don't understand it. I mean, here we have a bank, we have a 1-year plan and the plan is so wide here. That's one thing I'd like to see. I know I'm off topic, but can we narrow down the parameters here? But the key is if we had a much larger base salary, a much larger bonus to reflect the actual performance, and I'm not -- I think Mr. Waugh has done a great job here and I'm not criticizing his work whatsoever. But I don't like this midterm and long-term compensation. It doesn't seem to make any sense. I can see long-term compensation in the form of shares that are earned over time with restrictions. But midterm compensation, I don't understand that at all. Why we have -- why the bank has it -- why any bank has it? Let's have the annual performance, let's have the bonus and let's have long-term compensation in a meaningful way that flows with shareholders. What I'm saying is, long-term shareholders, they want to prosper just the same as a long-term employee.

John Thomas Mayberry

Thank you for the input. Mr. Kerr and his Human Resource Committee will consider that.

Unknown Shareholder

My name Patricia Davis, and I am an employee and a proxy holder, and I second this motion.

John Thomas Mayberry

This motion is on ballot #1, the yellow ballot. Please vote and hand in ballot #1, if you have one, to the scrutineers who are on the floor to collect them. Please hold on to the remaining blue ballot.

Raise your hand if you have a ballot to be collected.


John Thomas Mayberry

Okay. The next item on the agenda is our shareholder proposals. As indicated on Page 59 of the proxy circular, a shareholder proposal was jointly submitted by Mr. William Davis, NEI Investments, and the United Church of Canada. The proposal was withdrawn as a result of our commitment to undertake a review of the issues raised in their proposal.

Mr. Davis is here with us today. He will now briefly comment on the issues raised in the proposal.

Mr. Davis?

William Davis

Thank you, Mr. Chairman. I'm here speaking about executive compensation. I'm a shareholder and I hold the proxy of the United Church as well. And I'm sort of overcome by the need to have a little spontaneity in the meeting. So I had a serendipitous experience yesterday and I'm going to share it with the shareholders. I do have a prepared text, but I'm making a departure and I don't have the teleprompters to use.

So I go to the airport and coming to this meeting. And I get to the waiting room. I go look for a newspaper. And believe it or not, amongst all the Toronto newspapers is sitting on the counter a copy of the Sunday New York Times. But it's not the whole New York Times, it's the business section. I pick it up, and the lead article on the front page -- this is the April 7 Sunday business section, shareholders can go home and look it up on the Internet -- front page, "The Infinity Pool of Executive Pay.

First article I'm looking at. As shareholders say enough already, some boards are starting to listen. And I think the word "say" in there has something to do with the Say on Pay. I think I could read the whole article. It would be a fascinating introduction to the topic of executive compensation. I'm going to take 2 little excerpts out of it. There's a paper on peer groups produced by the Center for Corporate Governance of the University of Delaware and it offers the suggestion that directors should disregard or should terminate -- "eliminate" is the word -- peer groups, develop internally constructed standards appropriate to your own organization. Then there's a second comment from The Conference Board Inc. And the director there is quoted as saying, "There is growing dissatisfaction with benchmarking and where it's taking us." That's my serendipity for the moment, and I'll discard the paper. But I recommend it to anybody who can find it on the Internet.

I do have a -- a long wait for my text here. I was going to start by a little nostalgia, and I'm going to skip that because I'm substituting the serendipity for it. But it just had to do with being at the Annual Meeting here in Nova Scotia 29 years ago and dealing with South Africa. But I won't go into that at any length.

Back to my text, many feel that the level of executive compensation is one of the reasons that our economy and the capital system is under threat. Income disparity and the widening gap between those at the very top and the rest of society is doing a lot of things, particularly hollowing out the middle class, and we could go into all the stresses of people holding part-time jobs, working longer for less, having their benefits cut, having downsizings and outsourcing, all that sort of thing. All this is not new, but it's a concern that is getting increasing comments.

In the post-war period, top compensation was 25x the industrial wage. Now it's 250x. It's not just the so-called Occupy movement who is concerned. Shareholders are raising the question. You'll find resolutions on a number of shareholder -- or a number of proxy circulars about this subject. There's business schools, economists, the wider press are all drawing attention to the seriousness of the growing gap.

So the question is, why is this happening? Why does the wealthiest 1% now receive 10.6% of the national income? That's more than the entire share of the bottom 40%. And why is the trend accelerating? 30 years ago, the top 1% share was 7%, so it's grown 50% in that period of time. And we're contending, in the resolution that we filed and withdrew, we are contending that the present model of allocating resources is not only inequitable, it's worsening progressively.

Mr. McGuckin was celebrating the disciplined expense control that the bank has instituted, and I remind us all that executive compensation is one of those expenses. Ever since -- I guess it was 10 years ago, but ever since we decided we would like to know the compensation level of the top 5 officers, I'm hoping I think at the time that sunlight would be a good disinfectant. But ever since that point, there seems to be an upward trend in compensation committee striving for top quartile performance, offering more competitive levels of remuneration, creating an upward spiral.

One factor is the paradigm we are using to set executive compensation, it is unhappily rooted in horizontal metrics. We only compare our senior executives remuneration with people at the same lofty quantum without any question of the overall appropriateness of that level. We do not look at the remuneration of executives running large medical facilities or university complexes or at the average wage of staff employed in our own organizations nor is there any relationship to the cost of living.

Plato said no person should be worth more than 4x another. Mitt Romney's father is said to have declined a salary increase as CEO of an American corporation because it would raise his level to more than 10x his average employee.

So last fall, NEI investments, the United Church and I co-filed a shareholder proposal on executive compensation. Our proposal identified the problem, sought an exploration of how we have stumbled into this dangerous situation and how we might redress it. And we certainly are feeling that vertical metrics instead of horizontal metrics are in concert some horizontal metrics are really quite crucial.

This task will not be simple. We're locked into a paradigm and we're suffering from an accumulation of many years of excess. When this bank agreed to take these concerns seriously and to enter into a process of discussion, we 3 filers withdrew our proposal. And I think shareholders need to know that the proposal was brought through all 5 major banks. This problem is systemic and no one can be expected to go very far alone. All 5 banks have indicated a willingness to give serious attention to the situation.

We know we have to address a growing inequity, that's the task and so we are pleased to be into this game with the banks. But in conclusion, I want to say 1 thing very clear: My rhetoric may be a bit blunt, but this is not a hostile assault on our banks. There is no better place to seek leadership in facing a dangerous threat to our system than the banks. I hope shareholders and management will take it as a complement to the banks that we begin the change process with them.

Thank you.

John Thomas Mayberry

Thank you, Mr. Davis, for your comments. The board and the Compensation Committee of the board believe strongly that our compensation system is fair. It properly accommodates risk management. It also incents performance. And in a year of record results, we do not believe we've been reckless. But we have committed to work with the other banks and to investigate to see if there's a better way, and we'll be reporting back. Yes?

Unknown Shareholder

If it's appropriate, I would like as a beneficial shareholder and proxy holder to comment on Mr. Davis' position. I'm Andrew Pollacks of Calgary, Alberta, Canada. I own 50 shares of stock in Scotiabank, 1/2 board lot. And as a small shareholder, I'd just like to take the opposite point of view, if I may. You've got a competitive marketplace for executives. I'm a security guard. I'm very low income. But I don't complain about them making a lot of money because that pays my dividends. And if you get a CEO who'll work for half as much but do a job that's only half as good as Mr. Waugh, and instead of $6 billion, you make $3 billion next year from $6 billion plus, that's not good value for me as a small shareholder. I'm willing to support paying our executives well, even though I myself am not in that category with respect to income, because that brings value to me as a small shareholder if that means getting the best people to do the job in a competitive marketplace. And you're getting value for your money.

The investment you put into those senior executives -- I know it's a team effort of the bank as a whole, that brings those profits. But the leadership of Mr. Waugh and his executive team is a very substantial factor in bringing about those profits. And what we're paying them is well worth our while because they did make over $6 billion worth of profits for us last year. And so I wholeheartedly support as a person with my present net worth is a fraction of that of the average Canadian. I'm not wealthy. But I certainly support the executives being paid well because that's what pays my dividend as a low income, low net worth investor.

William Davis

I don't know, Mr. Chair, whether I'm entitled to respond or not. But I would like to make a very brief intervention, if I could.

John Thomas Mayberry

Yes, you may.

William Davis

We've done a considerable amount of research. Particularly NEI has done -- NEI Investments has done considerable amount of research. There is a good deal of pretty reliable information that suggests that the value of money as a motivator declines substantially once you've got your future pretty well secured 5x over. Another couple of million dollars on top is not a serious motivating factor. The thing that motivates people to do a job is that they're in a culture that they want to be in, they're doing work that is significant and important. And I think one has to look at the compensation from a point of view of it's not just money that motivates.

John Thomas Mayberry

It's a very complex issue and we appreciate all the comments.

We'll now move to Proposals 1 and 2, which were submitted by Mouvement d'éducation et de défense des actionnaires. They're better known as MÉDAC. These proposals and our responses are set out as Schedule A of the proxy circular, starting on Page 57.

Mr. Gagnon of MÉDAC is with us today, and I would like to invite him to give his comments in these propositions.

Willie Gagnon

I'm Mr. Gagnon for the Mouvement d'éducation et de défens of shareholders. I'll have 2 brief comments. It's a subject that we have at heart for many years. We have given many proposals over the years and we want more verticality over the analysis of composition of the shareholders. I also would like to note to Mr. Vice President that we withdrew 2 propositions, respecting presence of women in high positions in the business. We have 53% of all directors are women and it's very important. And I would like to share that with the board.

For women, although the highest people paid by the bank, there are hardly any women. I'm going to be happy to give extracts. I would like to show #1 who divulged a surveillance. The board should ensure that the shareholders trade the pension fund. The bank offers pension plans determined. There are many concerns undertaken by the management of these pension plans in the last few years. Some reference points to the excellent argument from the Institute of the CA, 20 questions that administrators of pension plans they should ask on their governance rules. And we will look at these pension plans for administrators, shareholders, employees, everyone involved.

These pension plans by determined [he's speaking very fast.] The long quotation given by the document impossible to -- possible to look at on the web. And the analysis of 500 pension plans with determined benefits by the agency shows that 2/3 -- 2/3, that is 66%, suffered from underfinancing. And this is an important aspect and a verbal certitude of the administration should be part of any general Annual General Meeting. I tell you to -- I ask you to look at Page 152 -- 158 of the Annual Report, where we talk about the pension. It is a pension plan. It's the second chart. It is shown that the obligations. . .


John Thomas Mayberry


Willie Gagnon

[French] So this is what I wanted to say about the first proposition. 19% of lack. How are you going to manage this? Do you have something in place to make this deficit smaller? I don't know if we want to do the vote before I go to the second proposition, or are we going to do a global vote?

Give us a vote at the same time, then.

I've asked you a question on the first motion. You can answer that towards the second motion.

The pension plan, it is proposed that the board has a policy which will offer all the employees, whatever their role in the hierarchy, the same pension -- type of pension plan with determined payments. The same barometers will be used to determine the years of service, looking at the fixed income solely and payable at a predetermined retirement age. Presently, the higher executives have better benefits than other employees. The pension plan for these people is determined at a fixed amount, which has been has predetermined. Whereas the other employees contribute where the revenue depends of an accumulated sum in the pension plan and the interest rates at any particular time or when the pension plan was purchased. So rather than a fixed amount, the executives have privileges in terms of using work credited and have a more generous calculation base, which means lots of variations.

How so? Not only do they receive something that is not linked to the performance of the organization. It's socially unacceptable given the difficult economic context that we live in, the inequality of the average employee of the organization. The executives continue to get extraordinary benefits in a discriminatory fashion. We, therefore, propose that all the employees of the bank, regardless where they are in the hierarchy, contribute to a similar pension plan using the same parameters to calculate the years of service using uniquely their fixed salaries and a predetermined retirement age. This policy should be applied to everyone, new directors, new employees from 2013. This motion speaks for itself. I have no questions. Evently [ph], I recall the question that I had in terms of the first motion on Page 158. There is a lack of $1 billion. What do you propose to do about this?

John Thomas Mayberry

I'm going to comment here. Proposal -- well, let me get the -- the board responds to those 2 proposals from MEDAC were well articulated in the circular, but I will ask Sean McGuckin to -- or Sabi to comment on the response to the question about the pension deficit.

Sarabjit S. Marwah

Thank you, Mr. Chairman. Good morning. I think we are certainly acutely aware of the deficit in the pension plan and have discussed that with the pension committee of the board on numerous occasions. And as you're aware that the deficit has arisen because of the long term -- the decline in long-term interest rates and -- but we take a very long-term view to it. We have taken action to really correct that and we'll be taking more action. But the bank is stable and strong, and we have no doubt that we are in a position to cover the deficit over the next couple of years.

Unknown Shareholder

Mr. Chairman, I'd like to say a few words in that proposal, if I may. Lowell Weir, Bedford, Nova Scotia, proxy holder. This year, I took a different approach. I haven't submitted any proposal this year. I normally always do. But I'm taking a different approach this year because of the proxy -- at the whole system on submitting the shareholder proposal, it doesn't work. It's broke. The bank proposes everyone, no matter what the odd time they might talk on one and try to push it to one side. But the reality is the system doesn't work.

And here's a clear example and I want to point that out. This is a very simple, straightforward question from shareholders. They want to know, is there unfunded liability in pension plans? I think that's a very relevant issue today because as Mr. Marwah had pointed out that what's happened here in this country unfortunately is low interest rates. The government has allowed the banks to recapitalize in the banks of the pensioners and the savers. And unfortunately, it's affected pensions, everyone's pension. So I think it's a very relevant question. It should be almost mandatory. I mean, it's in the financial statements. And obviously, I looked it up myself. But for a lot of people, I can't do it. And I think it's a relevant question. I can't imagine why the directors of this bank wouldn't look at that proposal and see it as straightforward and in the interest to shareholders. And I'd like to hear from the directors why they don't feel it's that way. We always -- it's bank manager -- bank management, which includes the directors, who always turn down these proposals. And say, "Oh, they're not fair or they shouldn't be in the book, and they shouldn't be allowed." But never they give a reason and the reasons often don't make sense. They're stupid. The bank's positions are never -- they never make sense, quite frankly. So I would like to know why the bank feels that a shareholder shouldn't know the amount of unfunded liability in a pension plan.

Sarabjit S. Marwah

With all due respect, sir, it's highly -- it's given in excruciatingly detailed in the financial statements, what the deficit is. I'm not sure how much more disclosure we can provide. It's there on Page 158 of the financial statements. It's line by line.

Unknown Shareholder

And how many shareholders read Page 158 of the financial statements? Now you tell me. You can count them on one hand right here, one hand.

John Thomas Mayberry

You asked if we disclose it. We disclose it.

Unknown Shareholder

Yes, but what I'm saying the practical disclosure. It's -- why would you reject this proposal? Why wouldn't you just disclose it? A little note, you've disclosed lots of other things.

John Thomas Mayberry

We do. Thank you for the input.

Unknown Shareholder

That's not an answer.

John Thomas Mayberry

Proposal #3 was submitted by Andrew Pollacks [ph], who is here again with us. I'd like him to briefly comment on the issues raised in his proposal.

Unknown Shareholder

I'm Andrew Pollacks [ph] of Calgary, Alberta, Canada. I own 50 shares of common stock in Scotiabank beneficially. And I'm also a proxy holder of my 50 beneficially held shares. I'd like to move and second my motion, which let's see -- just find it in the sheets here. There it is. Okay, I'd like to move and second Proposal #3 on the topic of director share of ownership results that all independent directors who serve on the Board of Directors of the Bank of Nova Scotia be obligated to retain the level of share ownership that is required of them as board members for at least 2 years after their resignations or retirements from the board of Scotiabank.

Now the rationale for this is to bring about an analogous situation for members of the Board of Directors as that, that is already in effect for the very senior management. Rick Waugh, when he retires, will have to retain 7x the salary portion of his income in Scotiabank's stock for 2 years after retirement. And the point of that is to give strong personal incentive to look toward the long-term interest of the bank, which I'm sure Rick Waugh would do anyway, even if he did not have that requirement. But it gives shareholders sort of a public display of the fact that Rick Waugh is required to hold a significant amount of stock in the bank for a couple of years after he leaves. And therefore, while he's here, he'd better be looking out for the long-term interest of the bank. Again, I'm sure he would do that anyway. But the fact that the directors don't have that requirement, I think when the executives do, I think is a deficit and the key objection to it seems to be that a lot of their required shareholdings are held in the form of deferred share units. And the value of making them hold significant amount of stock in the bank for a couple of years after they leave the board means that's just that much more incentive for them to look out for the best long-term interest of the bank. The person can't just quit and then 2 weeks later dump their shares, and the bank's a mess. Not that they would do that. Scotiabank, I would have no concerns about that happening, whether such proposal would be adopted or not. It just gives the shareholders a clear view of the fact that directors would be willing to commit to holding a significant amount of stock. In their case, it's $450,000 for a couple of years after they leave the board, therefore, giving that much more confidence in the fact that they'll be looking out for the long-term interest of the bank while they're on the board. Thank you very much for hearing my proposal. I do appreciate the fact that leaders of the banks such as yourselves will take the time to hear the proposals of small retail investors such as myself. And I know that they're normally defeated by a wide margin, but I still do appreciate having had a chance to be heard on this matter. Thank you very much.

John Thomas Mayberry

Thank you for the comments. In the 3 proposals, as I said, the board's position in response was well articulated. So in the interest of time, I'd invite shareholders to review the board's recommendation.

If there are no other comments from the floor, I'd ask you to mark the blue ballot for the Proposals 1, 2 and 3, and raise your hand if you've got ballots to be picked up by the scrutineers.


Okay. While the ballots are being counted, it's also my pleasure to introduce the honorary directors of the bank who are with us today. We're mindful of their many years associated with the bank and the board and their contributions that they've made serving not only the bank, but also our customers and our shareholders. I'd ask each of them to stand as their name is called and please remain standing.

Sir Graham Day; Pierre Jeanniot; Helen Parker; Elizabeth Parr-Johnston; Ced Ritchie, our longtime Chairman and CEO; and Arthur Scace. I'd also like to take this moment to say a few words and thank one of our directors, Allan Shaw, from Nova Scotia here who's retiring at the conclusion of this meeting and did not stand for reelection.

Allan joined our board in 1986 and has served on pretty much every board committee, but most recently on the Human Resource Committee and as Chairman of the Executive and Risk Committee. Thank you, Allan, for all of your hard work, loyalty and support. I've had the pleasure of working on the board for 18 years with Allan. And you had tremendous dedication to this bank and its stakeholders over the past 27 years and you'll be missed.

It's now my pleasure to indicate that the board has bestowed on Allan the title of Honorary Director. Ladies and gentlemen, please join me at acknowledging Allan Shaw.

As well, we're pleased to have with us a group of students from Halifax West High School, accompanied by their teacher, Mr. Andrew Gavas. The student representatives are John McDonald [ph], Blake McInnis, Zachary Butt [ph], Victoria McDonald [ph], Jasmine Opez [ph], James Kingress [ph]. Mr. Gavas, will you and your student group please stand?

Welcome, and thank you for joining us today to see democracy in action.

I would now ask Rick Waugh to address the meeting.

Richard Earl Waugh

Well, thank you, John, and good morning. And it's been an interesting meeting already. Certainly, I'm speaking on behalf of the management. We do welcome the remarks of shareholders and let me assure you -- I think as many of you who have spoken know, we do enter into a lot of discussions with you and other of these organizations both before. And we will continue to -- continue dialogues as the world goes forward. These are complicated issues, but they're all worthy of discussion, but time does limit us at the formal part of the meeting.

So I'll keep my remarks on script. And both Sean and Brian spoke about the importance of our international network and how are we working to integrate and make the most of our diverse businesses to the benefit of all our customers. And I'd like to broaden it out a little bit this morning and talk about at how I think it's very relevant to all of us that are Canadians.

We at Scotiabank, I think, have built a very solid Canadian -- been built on a very solid Canadian foundation, but and we are as Canada's most international bank. Our multinational footprint is obviously a big part of our history and we are today -- who we are today and certainly about the future.

First and foremost, as you've already heard, it gives us this balance and this is very important diversification, which is really at the heart of the strategy, I think, at the heart of how we've been able to perform. It also helps our people develop a global mindset and this is an absolute necessity as we do business in the 21st century.

I like to describe us as a multinational bank, which means, yes, we very much have a global mindset, but we act locally. We try very hard to meet the unique needs of our customers, large or small, at the local level and in each market which we serve. Yet, all of them are supported by the full resources and the best practices of Scotiabank with our nearly $70 billion in market capital, thanks to our shareholders and very much to our 82,000 employees here in Canada and around the world.

This is not quite the same as how many global banks operate. Many work out of very nice places in London and New York, but do not have the local involvement and the investment that a multinational bank, such as Scotiabank has. As we have many times tell our customers, we don't fly in and fly out. We stay as we have for over 120 years internationally. But our approach is also a very Canadian one. It's open-minded. It's respectful to differences of others, but also prudent and, I believe, very well thought-out.

There are things that we as Canadians do very well, but don't take advantage of nearly as much as we should or have to. So this brings us, I think, to a broader discussion about the future of our Canadian economy and the absolute need for this country to be more international in seeking markets for goods and services and for jobs and economic growth.

I've spoken about this before, but I will do now because I believe it is one of the biggest issues that face us and our Canadian economic future.

So today, I'd like to talk about why is it so critical for Canada's economic future that we expand beyond our traditional trading partners to high-growth emerging markets. I'll discuss how international expansion can help address key barriers to growth and importantly, our productivity. And finally, why Canada? And most importantly, those of us in the private sector, the business sector, must seize this opportunity and do so right now.

So let me begin with why this issue is so important to Canada's economic future. And there's 3 reasons to focus on. The first reason is that we need to face the realities of the global economy that we are in today. We've got to be in places where the growth is happening -- happening right now. And right now, Canadian's business community can do a lot better. By mid-century, emerging markets are predicted to account for 70% of global trade. Right now, less than 12% of Canada's exports go to these markets.

We hired several decades into globalization and still, roughly 3/4 of our exports go only to the United States. It's no wonder why Canada's export performance is the second worst in the G20. Many of us are too reliant on the past legacy of the weak Canadian dollar, an almost singular focus on natural resources and a near-complete reliance on the U.S. to buy what we are selling.

What's happening with the Keystone Pipeline should remind us that Americans are great friends, but their national agenda trumps all else. So we can't rely on them for our own prosperity. Relying on one customer has never been a good strategy.

So let me touch on the potential Scotiabank sees in emerging markets as a practical example. As Sean said earlier, in 2013, we expect GDP growth in the key international markets that we are in to be more than twice of what is the growth in Canada, in the U.S., not to mention, the European Union, which is barely expected to grow at all.

But GDP growth does not tell the whole story. These emerging markets have great demographics, fast-growing populations, lots of young people and a rapidly growing, yes, a rapidly growing middle class. Simply put, this opens up great opportunities for Canadian businesses.

Sean mentioned the term "underbanked," which means that people use fewer banking products and services. So there's a lot of potential for growth, for home loans, for car loans, for credit cards. One way we measure that is to look at the private sector loans as a percentage of a country's GDP. The higher the number, the more saturated the market is for banking products.

Canada and the U.S. are well over 100%. Colombia, where we just more recently entered, is only at 45%. Peru and Mexico, where we've been for a long time and where we're highly successful, is just 26%. And that means there's a lot of room to grow.

And I want to make it clear, the opportunities are not only in banking. Booming economies with an expanding middle class are good for all Canadian businesses in many industries. Take infrastructure, for example. Last year, as a part of my work with the Brazil-Canadian CEO Forum, I met the CEO of a company based right here in Halifax. This company installs LED lighting. And he told me that he had just signed a large contract to install streetlights in São Paulo, Brazil, one of the biggest cities in the world.

I asked him about the project and he told me that the neighborhood in which they were working had never had streetlights before. So everything needed to be designed and installed from the ground up. There probably isn't a single street in any Canadian city today without streetlights. But with that kind of -- with that kind of opportunity that does exist in emerging markets, all the time, we Canadians with whatever our strengths in products and services have great opportunities to go after that. I don't know if Chuck is in the audience today, Chuck, who is the fellow I just talked about from Amherst, Nova Scotia. I don't see him, so I won't bother introducing him, but a great example of what a small businessman can do at grabbing these opportunities.

The second reason this is important is for Canada's economic future is that simply it creates important jobs for Canadians. When a company's headquartered in Canada expands internationally, that doesn't mean it just creates jobs abroad. It also creates jobs at home: High-paying, skilled, head office jobs with great careers that Canada wants and needs. Our head office in Toronto contains key business and support functions that support our functions in over 55 countries. When we grow in Canada or abroad, so does our team at the head office. And we have highly educated and skilled professionals in a wide range of fields living and working, contributing to their local community economically and socially.

And of course, we rely on a lot of Canadian suppliers, our accountants, the lawyers, IT professionals, a lot of skilled jobs, a lot of jobs helping us and so on. This has a significant ripple effect through tax revenues, spinoffs for our local businesses, money and volunteers for charities and contributions to the culture and arts.

It also creates an environment to attract highly motivated and educated workers and entrepreneurs from around the world, who help us innovate with new ideas.

The third reason it's important for Canada's economy is because it produces and increases our productivity. Canada's struggles with productivity are well known. And I've spoken before about what I think the 3 key elements that will improve it are: efficiency, innovation and scale, increases productivity. Broadening our trade to international market addresses all 3 of these critical factors. Again, using Scotiabank as an example, we have improved our efficiency by centralizing functions. Our customer contact centers in Mexico, for example, services Mexico but also handles select calls from Canada. And we are now implementing plans to facilitate that contact center in Mexico to service all our other countries in Central America in the near future.

Not dissimilar is -- pardon me, in Halifax here, where we have our internationally award-winning customer contact center, which provides us great efficiency because it serves the whole of Canada.

We've improved innovation by adopting best practices from our acquisitions around -- from around the world. When we go to these markets, when we enter them, we are not only teaching, we are also learning. And when we discover a better way to do something, whether it is in HR or systems or shared services, customer services, we work very hard to learn about it and deploy it across our whole network.

We are also trying to provide innovation by building a diverse workforce, fostering this culture of collaboration right throughout. Diversity breeds innovation -- innovative thinking. It brings new perspectives and new ideas.

We do really try to strive to collaborate as openly and as often as we can to get these ideas to be spread around. We encourage mobility across our business lines across our geographical locations for that very same reason.

When people come to our headquarters in Scotiabank for the first time, they are very often surprised not only to see the diversity of our workforce, but also to hear so many languages, particularly Spanish, widely spoken in the hallways and the elevators.

And lastly, when it becomes to building scale, it is clear when looking around for acquisitions, this has allowed us to grow much faster than if we only had it located in Canada. It has allowed us to spread our costs to better -- to spread our costs throughout a much larger platform.

All of this increases our productivity, and I think it is one very important reason that we are a leader, both among Canadian and international banks in productivity and efficiency. And certainly when we see excellent opportunities here in Canada, we take advantage of them as we did with ING DIRECT Canada, with DundeeWealth and so on. But the reality is that the great opportunities like that do not come along very often.

To grow strategically and to get these efficiencies of scale, we are proactive on our international strategy and particularly in emerging markets. That does make us unique in Canada amongst our peers and certainly, it's something that even very few international banks have been doing successfully.

It's my view that Canadian businesses need to seize these international opportunities available to us not just big companies, but all companies. It's important to understand, this is not something we should look to our government to do for us. This is something that Canadian companies have to do on our own within a government framework that supports private sector's efforts. And I can tell you from experience, that works. And we need to do it now because Canada's window of opportunity is open now, and the timing will never be better for it.

Let me explain. For one thing, we do have the support of all our governments, most of them, several of our governments and even our Central Bank. In fact, they've asked Canadian companies to take action on this issue over and over again. And there are programs and resources available from government agencies to help pave the way. And the government has opened the door by signing numerous free trade and investment agreements in South America and Asia and other parts of the world.

So we have the tools we need. But as businesses, we need to change and take charge of our own markets. Canadians need to understand how well Canada is viewed abroad. I've traveled the world for many years, and I can tell you that in my experience, right now, Canada's brand has never been stronger than it's ever been. So the timing is right.

We are one of the very few developed countries to get through this financial crisis and recession in relatively good shape: our economy, our banks and our businesses. And people want to do business with us. We represent a lot of the best in the world: fiscal and economic health, a civil and democratic society that has values of diversity, free and open markets and arguably, the soundest banking system in the world.

And because we're not a large country, we aren't viewed as a threat either economically, politically or militarily. There are many ways that we contribute to them using our world-class expertise, yes, in banking, but also energy, mining, health services, infrastructure, transportation, high tech and many, many others. And it's all based on strong Canadian values and principles. We've come a long way over a long period of time, but we're very close to defining a truly Canadian unique culture that we can all be proud of and articulate.

But of course, we're not perfect, and we cannot be complacent. There have been some recent high-profile examples of Canadian multinationals making some serious mistakes. That's certainly not something that any of us wants to see, but it's a good reminder to all of us that we need to be ever vigilant to conduct our businesses in a balanced, responsible way and uphold the great Canadian reputations that has now been created.

I can tell you again from our experience that people, that companies and the governments that we deal with in emerging markets are overwhelming receptive of the Canadian way and our Scotiabank way. We are viewed as a stable partner with a strong culture for proven risk management and we're viewed as an enterprise of integrity and trust. Our respect for local issues and our willingness to help accomplish important economic and social goals in these countries. As I said earlier, we don't fly in and fly out. Scotiabank's reputation abroad is a big advantage for us and our country's reputation is a big advantage for us and for all Canadians, and it's one that we need to use now, but use more effectively.

So in concluding, I really would like and encourage that all Canadians make this issue of international trade a priority and support our businesses and support the government policies on these initiatives.

The economic need is clear. Dusting off the plan we used last century is not going to cut it in this century. The global economy has changed and Canada has to change with it. The business opportunities that are emerging in emerging markets are diverse and are plentiful and the private sector just cannot sit back and rely on tariffs or protectionism. We have to do it and take the lead. These benefits are tangible. Scotiabank's international operations, as you have seen, have made a significant and a growing contribution to our bottom line. They've improved the quality of our team, our business practices and growth practices and our productivity, and they are producing great careers for Scotiabank.

The risks are relative and are very manageable. Many of these countries have made big strides in the last couple of decades, even in the last few years in terms of the strength of their democracies, the rule of law and the quality of their institutions. And let's not forget that there are significant risks to the status quo.

Some Canadians make the mistake of thinking that we cannot compete on the world stage or that we don't need to compete, when in fact, we can and we must. So let's take advantage of the fact that Canada's brand is strong and we are well positioned to succeed in a wide range of diverse activities. And of course, here in Halifax, more than 2 centuries ago, traders from Halifax ventured abroad to new markets and have helped establish Canada as a great trading nation. And for 181 years, Scotiabank has been there to help our customers reach their goals.

Today, Canada is still a great trading nation, one that has the talent and the resources to take on the world and to win, and to win in the right way. Scotiabank is proof of that, you saw our Global Bank award from the Financial Times. And with our deep roots in Halifax, and indeed, in communities right across Canada, our international network and our diverse expertise and our values, we are ready and able to serve, help our customers reach their potential and help Canada reach its.

It is by fulfilling these important roles that we not only contribute to creating growth for customers and our communities, we also achieve the targets that we have set for you, our shareholders, this year and for years to come and why we will be able to attain these.

So thank you very much. And we now have, I think, a very great corporate video to show you.

Thank you very much.


John Thomas Mayberry

Allan Shaw would now like to address the bank's employees on behalf of the Board of Directors.

Allan Shaw

Thank you, John. Good morning. On behalf of the Board and the shareholders, I'd like to thank the employees and management for delivering the most recent of many very good years.

When Bank of Nova Scotia opened for business in 1832, Canada wouldn't exist as a country for another 35 years. In fact, upper and lower Canada and Nova Scotia, New Brunswick and Prince Edward Island together had less than 1 million inhabitants. The Irish Famine that decimated the country and brought so many immigrants to these shores was still a decade in the future. South of the border, the U.S. itself, still very new, comprised just 24 states and had a population of around 13 million. Over 2 million of those were enslaved. It would be 30 years before President Abraham Lincoln made slavery the issue that would sunder the fragile internal peace in America.

Aboard the Beagle, Charles Darwin was exploring South America. He wouldn't publish his challenging and revolutionary observations, the famous on the origin of species, for more than a quarter century.

Beethoven and Schubert had recently died. Brahms and Tchaikovsky were yet to be born. The earliest experiments that would eventually give us electricity and the telephone were decades away. Business and commercial and personal communication was written or verbal, dependent on ships, horses and foot travel. The founding of the Bank of Nova Scotia was a product of both necessity and opportunity. At that time, Halifax was the third largest city in British America. Only Montréal and Québec were larger. The sole bank in town was a private institution serving the needs of its 8 founders, the majority of whom are members of the governing council that ran the colony.

Here was a dynamic port full of merchants who had no institutional means of financing their trade ventures. The opportunity, once appreciated, was quickly seized. It was the start of what surely has been a most successful history. The bank's first shareholder meeting took place on May 10, 1832, in the Merchants Exchange coffeehouse. The Starbucks of those days, presumably.

Within 3 months, the bank had opened for business with a staff of 4. Growth across the region was strong and steady during the following decades. By the start of the 20th century, your bank was using its strong base in the maritime to launch a national presence and then even ventured offshore with a branch in Kingston, Jamaica.

Now if we look back just 25 years, we'll see some interesting numbers. In 1987, due to a provision, Scotiabank had a loss of $312 million. Last year, a profit of $6.5 billion. Our asset base has grown from $71 billion dollars to $668 billion. Capitalization, $2.1 billion to $64 billion. Return on net equity from a negative 25 years ago to 19.7% last year.

Share price was the equivalent of $3.19 then. $54.25 last year and more today. Currently, we have 82,000 employees compared to 26,000 then. But one number is notable for having shrunk: At yearend, there were just 13 directors compared to 33 in 1987. Now how good is that?

We have celebrated some significant milestones and the last 25 years have presented some big challenges, too. We have had to adapt to a huge increase in regulation. Today's international markets are much more volatile than they used to be. Being successful globally means understanding the fine points of myriad different jurisdictions and cultural dynamics. These changes have necessitated and fostered a much more collaborative and open relationship between the board and management and a sense of real teamwork.

I want to thank and congratulate the CEOs who were at the helm during those last 25 years of growth and success. Zed Redshae [ph], Peter Godsoe, and currently, Rick Waugh. Their leadership played a crucial role in Scotiabank's domestic and international reputation.

Rick, you continue to do a terrific job and you will leave big shoes to fill. And Brian, the board is fortunate to have an extremely strong management team with a tremendous depth of talent. Best wishes to you as president as you set the course for the bank's feature.

Your bank is a local, a national and a global success story. Perhaps in part, because it has never lost touch with its practical and modest roots right here in Halifax. I've been proud to be a Scotiabank director, and I extend my best wishes to the management and the Board for continued success in the future.

Thank you.

John Thomas Mayberry

Allan, on behalf of all Scotiabank employees, thank you very much for your comments.

Ladies and gentlemen, the scrutineers have reported the preliminary results on the balloting and the votes are as follows: For the election of directors, 97.7% for, 2.3% withheld. The auditors were appointed with an average of 99.35% with 0.6% withheld. Say on Pay advisory vote was 94.41% for, 5.59% against. Accordingly, these 3 motions are carried.

The shareholder proposals, Proposal #1, 2.22% for, 97.78% against; Proposal #2, 1.87% for, 98.13% against; Proposal #3, 3.17% for, 96.83% against. Accordingly, as announced earlier in the meeting, shareholder Proposals numbers 1, 2 and including 3 are defeated.

I'm pleased to inform you that an overwhelming majority of shareholders voted in favor of each of the directors and on behalf of the Board, I'd like to thank you for your strong support. And the averages are as follows: The business set out in the notice for this meeting is now being concluded. Time will be provided for relevant questions or observations that a shareholder or a proxy holder may wish to put before the meeting.

If a shareholder wishes to direct a question to the Chair, please identify yourself by name and as a shareholder or a proxy holder, and please use the microphones which are conveniently located around the room.

As I mentioned earlier, to permit time for as many questions as possible, we ask each speaker not to exceed 3 minutes. And we request that you ask 1 question at a time until all shareholders who would like to ask questions have had an opportunity to do so and then return with your second question.

At this point, I expect most of the questions will relate to the bank's operations, so I'll invite Rick to take my place at the podium to respond.

Richard Earl Waugh

Thank you, Mr. Chairman, and we'll now proceed with our first question, please.

Unknown Shareholder

Lowell Weir, Bedford, Novia Scotia, proxy holder. And my question actually doesn't deal with the operations. It deals with a proxy circular. And it's a bugbear with me, and I want to bring it up because I think it is a fair point. Two or 3 things: 1, first, I think that shareholder proposals should be at the start of the proxy circular with the business of the meeting. I completely disagree with this practice of the bank to shove them in the back of the book or somewhere in the middle of the book where you can't find them. And I'll tell you why. I mean, if you look at the actual proxy where you go to vote online now, it doesn't even state what the shareholder proposal is. And this is another point. To be fair and to be convenient in trying to look it up, when you're trying to vote your proxy now, it doesn't even tell you what it is. Shareholder pros #1, well, at least you can do the common decency to write down what the proposal is, so you don't have to dig to the back of the book, trying to find what the proposal is before you vote, before the system kicks you out because you're taking too much time. So I'm asking if the leadership here in the bank or management committee could look at the proxy and see if we could make some improvements in the proxy circular. Put be fair to the shareholders, put it in the business of the meeting. Second, on the proxy online, at least put in the proposals what it is so people can see what proposals they're voting on. And the second -- and the third thing that annoys me on the online is they have a flashing blue light which essentially says vote for our proposals. I mean, people should have the opportunity to read the proxy, to see what proposals they have, not have a big button up top that says vote our proposals. Management proposals flashing like a blue light -- it's a blue light flashing on that square. I don't think that's fair. So I'm going to leave that in your capable hands to look at. Thank you.

Richard Earl Waugh

Thank you, Mr. Weir. Thank you very much.

Unknown Shareholder

Mr. Waugh, the executive, shareholders, employees. My name is Chris Garner, and I'm a shareholder and an ex-employee of Scotiabank. On September 8, 2011, my 35-year employment with Scotiabank was terminated as a result of my advancing an age discrimination claim in the Supreme Court of Nova Scotia. The purpose of my appearance today is to put a face to this situation and to inform shareholders that trial has been set from January 30 -- 13th through 30th, 2014 Halifax, Nova Scotia. I would invite each of you to inform yourself of the serious issues arising from how I was treated resulting from my claim of age discrimination. You are most welcome to attend trial and I would urge you to hold the bank's senior officers to account, if you don't like what you hear or see as is your right. Thank you for your time.

Richard Earl Waugh

Thank you, sir. Yes?

Unknown Shareholder

My name is Nancy Rival and I'm from Halifax and I'm also a shareholder. This is my first Scotiabank AGM, and I find it really interesting how many times today I have heard the word transparency used by the executive speeches. I feel there tends to be a disconnect between senior executive and comments from the floor. For example, providing proper AGM minutes like TD, senior executive salaries, practicing fair HR issues like age discrimination. Thank you.

Richard Earl Waugh

Thank you very much. And as we said to Mr. Weir, that we will be considering these proposals as we go forward. Thank you.

Unknown Shareholder

I have to ask a question before you go. When you're talking about expansion, I think the bank has a good strategy and I appreciate the bank giving us strategy because most banks don't give a strategy. So I'm glad to see Scotiabank to have a strategy, it's probably a good strategy. The one element I thought was missing and maybe it's not missing, but it's -- is this Bank of Nova Scotia considering or will they ever consider going to the U.S. market? It's the biggest market in the world, it's the toughest. And if you're going to be a global bank, you can't be it unless you go to the U.S. But it's a tough, tough market. And I agree, I'm just wondering your thoughts on the U.S. market?

Richard Earl Waugh

Certainly. I'm glad to respond to that. I worked down there for 8, 9 years leading our U.S. operation. We are in the U.S., in New York and in Houston, with what we call wholesale operation and New York is really trading and corporate lending and acting as a broker-dealer for the U.S. government where we've now been recognized. Houston, of course, and ties in very much to our Calgary office is very energy focused, which is one of our core expertise and we're doing that. So that's our U.S. But you're right, we're not into retail as we would call it, or personal/commercial. And that has been a definite decision of not to do that. We find that market as not only being very competitive, very regulative and we have no core competencies, in our opinion, that we could be as successful as we can be in other markets, Canada, emerging markets. So we do have limited resources, capital, talent and people. And while we're large, we've always got to manage those very efficiently. The opportunities we have for us, we think, are much greater than United States. And that's not saying other banks may have legitimate views that they can do better in the United States given what options they have or do not have. But for us, our comparative advantages, our history as we've talked about, about our skill set, our experience, opportunities for us and the risk that you want us to watch very carefully, the risk reward of operating not just in credit risk and market risk, but operational risk are much, much better in Canada and emerging markets.

Unknown Shareholder

My name is Frank Lehman [ph], shareholder. My question today is for yourself, Mr. Waugh. The young people are here today from schools. I come from a large family. And I see on the media where the World Bank is putting in people from offshore for temporary work contracts, such as they have in some places like in Germany, they call them guest workers and so forth. And people are being trained in the role to give their jobs to these people. Is our bank doing the same thing?

Richard Earl Waugh

I think my remarks and the video will show how hard we're working on both strategies. So the actual jobs in Canada, for example, over the last 5 years have increased to, I think, it's about 13%. So we are actually -- even though we are always trying to be very efficient, which we always have to do and we have to make changes. We actually have grown our jobs in Canada, about 13%. I'm not aware of these details that have come up just over the last day or 2. But it's certainly not in our -- I'm not aware of the details and certainly not in our strategy to do temporary outsourcing of jobs to replace. That's not to say we don't welcome great Canadian immigration of new Canadians. We get a lot of benefit of that and we can make this, as our result shows, a win-win. So we're creating more jobs in Canada, we're still expanding and still making use of efficiencies of contact centers around Canada and around the world. So I feel that we're acting very responsible and I think our results show it.

Unknown Shareholder

Mr. Waugh, Andrew Pollacks ph] again from Calgary, Alberta, Canada, a retail shareholder of 50 shares. I'd like to know, in lay person's terms, how would you find the distinctions between your role as CEO, Mr. Porter's role as President, and Mr. Marwah's role as Chief Operating Officer, just so that I could have a clear -- and other shareholders, as well, in layman's terms, what each of you does and how they relate to each other, those different kinds of responsibilities?

Richard Earl Waugh

Sure. And we have a very clear mandate of whose responsibilities are because I think we need that clear mandate and accountability. But simply spoken, I'm the Chief Executive Officer and I have ultimate accountability to our shareholders, to our Board, for all the results. Brian, who is now President, all the business lines report to Brian. So as President, he has our 4 business lines, which we discussed with you earlier. All of those report to him and he has the responsibility and the accountability to direct those efforts on a day-to-day basis and to bring forth the strategy. Sabi is our Chief Operating Officer, and reporting to Sabi are what we call our support functions, our nonbusiness lines. So finance, treasury, technology, audit, those ones report to him. So Brian is running the businesses on a day-to-day. Sabi is running all the operational support functions, the day-to-day. We have a broad executive leadership management committee, which encompasses all our global heads, our executive and management from that. And we have quite a collaborative committee structure to do that. But then ultimately, it comes to myself as the Chief Executive Officer, who then reports, of course, and is accountable to the Board. So are there any more questions, please? This is part of the area you can ask the questions. You can ask the questions anytime, sorry, that are not necessarily tied to the financial or the business part of the business. That's why I'm not chairman, you see. This is the good part of -- and it's the good part of having an independent chairman.

So if there's no more questions, as they say, you should get off while you can get off, right? And so I wanted to thank you. It's always a pleasure for all of us, and certainly for the Board and for our executive management and all of our other managers. We have brought people from around the world to just experience the last 2 days. And it's always, we hear from our people, it's always been a great experience.

So thank you all very much for your support. Thank you.

John Thomas Mayberry

Thanks very much, Rick. We'll now conclude this meeting. Ladies and gentlemen, before leaving, I'd ask if you were given a simultaneous interpretation unit, please leave it on your chair. We truly appreciate your attendance and your interest and your input for the bank. I now declare this meeting closed. Thank you very much.

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