Investing with low interest rates:
INVESTMENT
advisor News, Views and Performance from Your Scotiabank Team
Discover what’s possible
VOL 1 | ISSUE 2 | APRIL 2012
Investing with low interest rates: Opportunities and challenges Interest rates are at record lows, and are expected to remain there for the next few years. That may be great for the economy, but what about your portfolio? With the U.S. and Europe facing slow growth, many countries are keeping interest rates at record lows. In fact, the U.S. has committed to keeping interest rates low until at least 2014. How do low interest rates help economic growth? Low interest rates encourage companies to borrow money to grow. As well, the borrowing costs on existing debt decreases. Mortgages that are refinanced at lower rates, can leave consumers with more spending money. Consumer spending is an important driver of growth in many economies, especially the U.S.
IN THIS ISSUE Investing with low interest rates: Opportunities and challenges PAGE 1 Economic Commentary PAGE 2 Six ways to keep your balance PAGE 3 Mutual Funds Performance PAGE 4
TALK TO OUR TEAM
What do you want from your investment portfolio in 2012? Send your thoughts to [email protected]
Investment advisor
V O L 1 | I S S U E 2 | A P R I L 2 0 12
1
How low rates affect your mutual fund investments Generally, low interest rates benefit stocks, but can reduce the returns from cash and fixed income investments. Cash. Lower interest rates mean investors should expect to receive a low return on their deposits and investments in money market mutual funds. Nevertheless, these investments still provide the most stability if your main priority is avoiding risk. Bonds. Low interest rates and low bond yields may also mean lower returns for bond fund investors. Bond funds may even drop in price if interest rates increase in the future. However, there are several investment strategies that can be used to boost returns. Bond funds are suitable for investors with a medium tolerance for risk and constitute a key component of a diversified investment portfolio. Stocks. Low interest rates can create economic growth and higher corporate profits, which are positive for equities. Equity mutual funds, therefore, offer the potential for growth to long term investors with a higher tolerance for risk.
With rates likely to remain low for a while, you may be wondering about the best way to pursue your investment goals. Here are two possible strategies if you are seeking to invest for the medium to long term and can tolerate fluctuations in the value of your investments: 1. Diversify your bonds. To find fixed income investments that offer a higher return, it pays to look at all kinds of bonds. For example, high quality corporate bonds may offer the potential for higher returns than government bonds with the same credit rating. The Scotiabank US Dollar Bond Fund is an option to consider as it invests in government bonds and bonds of high quality Canadian and US corporations, as well as major agencies. 2. D ip into equities. High quality stocks have outperformed bonds over the long term. Currently, many stocks are attractively valued, pay dividends and offer solid growth prospects. By investing in a Scotiabank equity mutual fund, you get exposure to a professionally diversified portfolio of high quality stocks that offer the potential for growth from both capital gains and dividends.
Economic Commentary* Global Outlook • Global growth forecasted at 3.4% in 2012, led by emerging markets • Europe expected to shrink by 0.5% in 2012; Germany to avoid recession • China growth revised down to 8.6% on global trade weakness • Colombia and Peru expected to expand by more than 5%
* Sources: Jamaica Information Service; Increase in GDP Expected for March Quarter – BoJ; February 21, 2012 Bloomberg; Trinidad’s Economy Will Expand 1.5% in 2012, Central Bank Says; February 9, 2012 Caycompass; Bush: Airport runway extension going inland; January 20, 2012 Scotia Economics, Global Forecast Update, March 6, 2012
2
Caribbean The Bank of Jamaica estimates the Jamaican economy expanded as much as 2% in the first quarter, marking five consecutive quarters of growth. Trinidad and Tobago’s economy is forecast to grow by 1.5% this year, as oil and gas production recovers and 15 new wells are drilled. The extension to the runway in Grand Cayman that is planned for this year will benefit the economy as the airport will be able to accommodate larger planes and more visitors. Europe Scotia Economics believes that the eurozone recession may not be as deep as feared. The European economy is expected to shrink by about 0.5% in 2012, followed by an expansion of 0.9% in 2013. Germany is expected to grow by 0.6% this year because of higher demand for goods by China. North America Scotia Economics expects the U.S. economy to grow by 2.1% in 2012 on stronger consumer spending and job growth. In Canada, slowing job growth and high household debt levels are expected to keep consumer spending on a modest growth trajectory, with GDP forecasted to rise by 2% in 2012. Emerging Markets Scotia Economics revised down expectations for China’s growth for 2012 to 8.6%, from 8.9%, in March 2012’s updated forecast, because of lower demand from Europe. The Latin American growth outlook is promising, with estimated growth of 5.5% in Colombia, 5.5% in Peru, 3.8% in Brazil and 3.9% in Chile. Mexico is expected to slow this year to 3.1%, from 3.9% last year.
Investment advisor
V O L 1 | I S S U E 2 | A P R I L 2 0 12
Six ways to keep your balance How can you generate higher investment returns, while keeping a solid footing in fixed income investments? With Scotiabank AMS Portfolio Solutions, you can find the perfect balance in one simple portfolio.
80% Equities 5% Cash 15% Fixed Income
55% Equities 10% Cash 35% Fixed Income
45% Equities 15% Cash 40% Fixed Income
30% Equities 15% Cash 55% Fixed Income
10% Equities 20% Cash 70% Fixed Income
Your Scotiabank advisor can help you find the right solution by considering your goals, the length of time you have to invest and your tolerance to risk.
Investment advisor
V O L 1 | I S S U E 2 | A P R I L 2 0 12
20% Cash 80% Fixed Income
Aggressive Growth Investor Profile: Your primary objective is to achieve a high level of growth over the long run. You accept that the value of your portfolio will fluctuate considerably from time to time.
Moderate Growth Investor Profile: Your primary objective is to achieve a high level of growth with some income potential. You accept that the value of your portfolio will fluctuate considerably from time to time.
Balanced Income & Growth Investor Profile: Your primary objective is growth with some income. You accept that the value of your portfolio will fluctuate moderately from time to time.
Income & Conservative Growth Investor Profile: Your primary objective is to earn a high level of income with some growth potential. You accept that the value of your portfolio will fluctuate modestly from time to time.
Conservative Income Investor Profile: Your primary objective is to earn a modest income while protecting your principal. You are willing to accept modest returns in exchange for greater security. You accept that the value of your portfolio will fluctuate modestly from time to time. Preservation of Capital Investor Profile: Your primary objective is to protect your principal. You only accept minimal risk that your investments might decline in value, even in the short term. You are willing to accept potentially the lowest return in exchange for the highest security.
3
Historical Fund & Portfolio performance data
MUTUAL FUNDS PERFORMANCE
For the period ending March 31, 2012. All data is reported in $US.
Average Annual Return
Funds
Inception Date Current Yield 1 Month 3 Months 6 Months
Scotiabank Money Market Fund
10/27/1999 0.04 0.00 0.01 0.01 0.01 0.05 0.06 1.16 1.67 2.18
Scotiabank US Dollar Bond Fund
12/21/1992
YTD
1 Year
3 Years
5 Years 10 Years
SI
N/A -1.05 -0.92 -0.73 -0.92 6.38 4.65 5.39 5.08 5.12
03/31/2009† 2.05** 0.55 1.19 2.65 1.19 3.68 — — — 10.37
Scotia Caribbean Income Fund Scotiabank Global Growth Fund
06/23/1994
N/A 0.10 12.18 20.36 12.18 -6.38 13.62 -8.34 1.13 3.61
Scotiabank US Growth Fund
10/27/1999
N/A 3.32 12.01 23.87 12.01 5.61 18.56 -1.31 0.88 -1.50
Scotiabank Canadian Growth Fund
06/23/1994
N/A -2.78 6.09 11.64 6.09 -14.53 17.48 1.27 8.28 8.06
**Dividend Yield over the last 12 months ending on March 31, 2012.
Asset Management Service Portfolios 1 Month
3 Months 6 Months
YTD
1 Year
3 Years
SI
Preservation of Capital -0.87 -0.77 -0.82 -0.77 5.01 3.55 N/A
N/A 3.28
Conservative Income -0.72 0.54 1.33 0.54 3.20 4.81 N/A
N/A 3.00
Income & Conservative Growth
-0.58
2.61
4.64
2.61
1.51
7.49
N/A
N/A 2.38
Balanced Income & Growth
-0.43
4.31
7.46
4.31
-0.41
9.25
N/A
N/A 1.55
Moderate Growth -0.38 5.40 9.33 5.40 -1.38 10.46 N/A
N/A 0.96
Aggressive Growth -0.21 7.87 13.65 7.87 -4.65 13.36 N/A
N/A -0.74
Calendar Year Return
Funds
Category
Assets NAV/Share 2011 2010 2009 2008 2007 2006 2005 2004 2003
Scotiabank Money Market Fund
Money Market
203,342,532
13.0580
0.05
0.05
0.15
2.10
4.74
4.55
2.82
1.04
0.55
Scotiabank US Dollar Bond Fund
US Dollar Bond
37,596,685
2.6147
6.94
5.12
1.55
8.55
7.10
3.08
2.53
3.36
2.02
Scotia Caribbean Income Fund
Caribbean Bond
63,430,122
3.5793
3.58
13.23
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Scotiabank Global Growth Fund
Global Equity
15,198,254
1.8677
-14.05
1.31
34.44
-49.82
-1.11
25.17
10.33
15.54
29.06
Scotiabank US Growth Fund
US Equity
8,415,572
8.2926
-1.09
9.74
23.66
-38.89
1.88
12.66
2.06
7.69
25.10
Scotiabank Canadian Growth Fund Canadian Equity
41,754,464
2.8569
-14.41
15.81
47.04
-44.88
28.14
15.14
22.27
20.56
43.99
Asset Management Service Portfolios
Calendar year return performance for 2008 started on January 22, 2008
Preservation of Capital 5.47 3.92 1.04 4.15 Conservative Income 3.07 4.48 4.51 0.02 Income & Conservative Growth
0.03
5.29
11.21
-8.19
Balanced Income & Growth
-2.77
5.87
16.25
-14.56
Moderate Growth
-4.29
6.50
19.13
-18.69
Aggressive Growth
-8.56
7.78
27.70
-28.59
Tell us what you think Do you have a comment or a question? Send us an email at: [email protected] or visit us at www.scotiabank.com/intl/mutualfunds
Important information concerning the investment goals, risk, charges and expenses of these funds are contained in the prospectus. Investors should carefully consider these before investing. Performance is subject to variations and is likely to change over time. Past performance should not be treated as an indicator of future performance. Scotiabank Mutual Funds is the brand name under which the Scotiabank group of companies, including Scotiabank & Trust (Cayman) Ltd., Scotia Investments Jamaica Limited, and International Investment Advisory Group markets and distributes mutual funds. This is for informational purposes only and is subject to change without notice. Always consult your professional tax and legal advisors with respect to your particular circumstances. Commissions, management fees and expenses all may be associated with mutual fund investments. Copies are available from the financial institution where you are buying the mutual fund. Share values and investment returns for the funds will fluctuate. The performance data provided assumes reinvestment of distributions and does not take into account sale charges or fees, redemptions, distributions or taxes that would have reduced returns. The annual fee for the Asset Management Service has been included in the performance returns for the Asset Management Service. Mutual Funds are not guaranteed and covered by your local Deposit Insurance Corporation, other government deposit insurer, The Bank of Nova Scotia, or its subsidiaries/affiliates. †Performance data was determined to be from the date management and custodian fees started to be paid by the fund – March 31, 2009, for registration date see the Fund’s prospectus. *Trademark of The Bank of Nova Scotia, used under license. ^ Scotia Caribbean Income Fund is not available for sale in the Cayman Islands. Net Asset Value information of the Scotiabank Mutual Funds can be found on Bloomberg, in the equities section, and on the Cayman Islands Stock Exchange (CSX), website www.csx.ky under “Scotiabank”. Nothing herein is intended to constitute an offer or solicitation to transact business for products or services in any jurisdiction where such an offer or solicitation would be unlawful. Products and services described herein are only available in jurisdictions where they can be lawfully provided. This does not constitute an invitation to purchase or sell shares of the Funds. Information also available directly from: Scotiabank & Trust (Cayman) Ltd., 6 Cardinal Ave, P.O. Box 689, Grand Cayman KY1-1107, Tel: (345) 949-7666 and/or Scotia Asset Management (Jamaica) Limited, 7 Holborn Road, Kingston 10, Kingston, Jamaica, W.I. Tel: (876) 960-6700/ 960-6699. 4
advisor News, Views and Performance from Your Scotiabank Team
Discover what’s possible
VOL 1 | ISSUE 2 | APRIL 2012
Investing with low interest rates: Opportunities and challenges Interest rates are at record lows, and are expected to remain there for the next few years. That may be great for the economy, but what about your portfolio? With the U.S. and Europe facing slow growth, many countries are keeping interest rates at record lows. In fact, the U.S. has committed to keeping interest rates low until at least 2014. How do low interest rates help economic growth? Low interest rates encourage companies to borrow money to grow. As well, the borrowing costs on existing debt decreases. Mortgages that are refinanced at lower rates, can leave consumers with more spending money. Consumer spending is an important driver of growth in many economies, especially the U.S.
IN THIS ISSUE Investing with low interest rates: Opportunities and challenges PAGE 1 Economic Commentary PAGE 2 Six ways to keep your balance PAGE 3 Mutual Funds Performance PAGE 4
TALK TO OUR TEAM
What do you want from your investment portfolio in 2012? Send your thoughts to [email protected]
Investment advisor
V O L 1 | I S S U E 2 | A P R I L 2 0 12
1
How low rates affect your mutual fund investments Generally, low interest rates benefit stocks, but can reduce the returns from cash and fixed income investments. Cash. Lower interest rates mean investors should expect to receive a low return on their deposits and investments in money market mutual funds. Nevertheless, these investments still provide the most stability if your main priority is avoiding risk. Bonds. Low interest rates and low bond yields may also mean lower returns for bond fund investors. Bond funds may even drop in price if interest rates increase in the future. However, there are several investment strategies that can be used to boost returns. Bond funds are suitable for investors with a medium tolerance for risk and constitute a key component of a diversified investment portfolio. Stocks. Low interest rates can create economic growth and higher corporate profits, which are positive for equities. Equity mutual funds, therefore, offer the potential for growth to long term investors with a higher tolerance for risk.
With rates likely to remain low for a while, you may be wondering about the best way to pursue your investment goals. Here are two possible strategies if you are seeking to invest for the medium to long term and can tolerate fluctuations in the value of your investments: 1. Diversify your bonds. To find fixed income investments that offer a higher return, it pays to look at all kinds of bonds. For example, high quality corporate bonds may offer the potential for higher returns than government bonds with the same credit rating. The Scotiabank US Dollar Bond Fund is an option to consider as it invests in government bonds and bonds of high quality Canadian and US corporations, as well as major agencies. 2. D ip into equities. High quality stocks have outperformed bonds over the long term. Currently, many stocks are attractively valued, pay dividends and offer solid growth prospects. By investing in a Scotiabank equity mutual fund, you get exposure to a professionally diversified portfolio of high quality stocks that offer the potential for growth from both capital gains and dividends.
Economic Commentary* Global Outlook • Global growth forecasted at 3.4% in 2012, led by emerging markets • Europe expected to shrink by 0.5% in 2012; Germany to avoid recession • China growth revised down to 8.6% on global trade weakness • Colombia and Peru expected to expand by more than 5%
* Sources: Jamaica Information Service; Increase in GDP Expected for March Quarter – BoJ; February 21, 2012 Bloomberg; Trinidad’s Economy Will Expand 1.5% in 2012, Central Bank Says; February 9, 2012 Caycompass; Bush: Airport runway extension going inland; January 20, 2012 Scotia Economics, Global Forecast Update, March 6, 2012
2
Caribbean The Bank of Jamaica estimates the Jamaican economy expanded as much as 2% in the first quarter, marking five consecutive quarters of growth. Trinidad and Tobago’s economy is forecast to grow by 1.5% this year, as oil and gas production recovers and 15 new wells are drilled. The extension to the runway in Grand Cayman that is planned for this year will benefit the economy as the airport will be able to accommodate larger planes and more visitors. Europe Scotia Economics believes that the eurozone recession may not be as deep as feared. The European economy is expected to shrink by about 0.5% in 2012, followed by an expansion of 0.9% in 2013. Germany is expected to grow by 0.6% this year because of higher demand for goods by China. North America Scotia Economics expects the U.S. economy to grow by 2.1% in 2012 on stronger consumer spending and job growth. In Canada, slowing job growth and high household debt levels are expected to keep consumer spending on a modest growth trajectory, with GDP forecasted to rise by 2% in 2012. Emerging Markets Scotia Economics revised down expectations for China’s growth for 2012 to 8.6%, from 8.9%, in March 2012’s updated forecast, because of lower demand from Europe. The Latin American growth outlook is promising, with estimated growth of 5.5% in Colombia, 5.5% in Peru, 3.8% in Brazil and 3.9% in Chile. Mexico is expected to slow this year to 3.1%, from 3.9% last year.
Investment advisor
V O L 1 | I S S U E 2 | A P R I L 2 0 12
Six ways to keep your balance How can you generate higher investment returns, while keeping a solid footing in fixed income investments? With Scotiabank AMS Portfolio Solutions, you can find the perfect balance in one simple portfolio.
80% Equities 5% Cash 15% Fixed Income
55% Equities 10% Cash 35% Fixed Income
45% Equities 15% Cash 40% Fixed Income
30% Equities 15% Cash 55% Fixed Income
10% Equities 20% Cash 70% Fixed Income
Your Scotiabank advisor can help you find the right solution by considering your goals, the length of time you have to invest and your tolerance to risk.
Investment advisor
V O L 1 | I S S U E 2 | A P R I L 2 0 12
20% Cash 80% Fixed Income
Aggressive Growth Investor Profile: Your primary objective is to achieve a high level of growth over the long run. You accept that the value of your portfolio will fluctuate considerably from time to time.
Moderate Growth Investor Profile: Your primary objective is to achieve a high level of growth with some income potential. You accept that the value of your portfolio will fluctuate considerably from time to time.
Balanced Income & Growth Investor Profile: Your primary objective is growth with some income. You accept that the value of your portfolio will fluctuate moderately from time to time.
Income & Conservative Growth Investor Profile: Your primary objective is to earn a high level of income with some growth potential. You accept that the value of your portfolio will fluctuate modestly from time to time.
Conservative Income Investor Profile: Your primary objective is to earn a modest income while protecting your principal. You are willing to accept modest returns in exchange for greater security. You accept that the value of your portfolio will fluctuate modestly from time to time. Preservation of Capital Investor Profile: Your primary objective is to protect your principal. You only accept minimal risk that your investments might decline in value, even in the short term. You are willing to accept potentially the lowest return in exchange for the highest security.
3
Historical Fund & Portfolio performance data
MUTUAL FUNDS PERFORMANCE
For the period ending March 31, 2012. All data is reported in $US.
Average Annual Return
Funds
Inception Date Current Yield 1 Month 3 Months 6 Months
Scotiabank Money Market Fund
10/27/1999 0.04 0.00 0.01 0.01 0.01 0.05 0.06 1.16 1.67 2.18
Scotiabank US Dollar Bond Fund
12/21/1992
YTD
1 Year
3 Years
5 Years 10 Years
SI
N/A -1.05 -0.92 -0.73 -0.92 6.38 4.65 5.39 5.08 5.12
03/31/2009† 2.05** 0.55 1.19 2.65 1.19 3.68 — — — 10.37
Scotia Caribbean Income Fund Scotiabank Global Growth Fund
06/23/1994
N/A 0.10 12.18 20.36 12.18 -6.38 13.62 -8.34 1.13 3.61
Scotiabank US Growth Fund
10/27/1999
N/A 3.32 12.01 23.87 12.01 5.61 18.56 -1.31 0.88 -1.50
Scotiabank Canadian Growth Fund
06/23/1994
N/A -2.78 6.09 11.64 6.09 -14.53 17.48 1.27 8.28 8.06
**Dividend Yield over the last 12 months ending on March 31, 2012.
Asset Management Service Portfolios 1 Month
3 Months 6 Months
YTD
1 Year
3 Years
SI
Preservation of Capital -0.87 -0.77 -0.82 -0.77 5.01 3.55 N/A
N/A 3.28
Conservative Income -0.72 0.54 1.33 0.54 3.20 4.81 N/A
N/A 3.00
Income & Conservative Growth
-0.58
2.61
4.64
2.61
1.51
7.49
N/A
N/A 2.38
Balanced Income & Growth
-0.43
4.31
7.46
4.31
-0.41
9.25
N/A
N/A 1.55
Moderate Growth -0.38 5.40 9.33 5.40 -1.38 10.46 N/A
N/A 0.96
Aggressive Growth -0.21 7.87 13.65 7.87 -4.65 13.36 N/A
N/A -0.74
Calendar Year Return
Funds
Category
Assets NAV/Share 2011 2010 2009 2008 2007 2006 2005 2004 2003
Scotiabank Money Market Fund
Money Market
203,342,532
13.0580
0.05
0.05
0.15
2.10
4.74
4.55
2.82
1.04
0.55
Scotiabank US Dollar Bond Fund
US Dollar Bond
37,596,685
2.6147
6.94
5.12
1.55
8.55
7.10
3.08
2.53
3.36
2.02
Scotia Caribbean Income Fund
Caribbean Bond
63,430,122
3.5793
3.58
13.23
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Scotiabank Global Growth Fund
Global Equity
15,198,254
1.8677
-14.05
1.31
34.44
-49.82
-1.11
25.17
10.33
15.54
29.06
Scotiabank US Growth Fund
US Equity
8,415,572
8.2926
-1.09
9.74
23.66
-38.89
1.88
12.66
2.06
7.69
25.10
Scotiabank Canadian Growth Fund Canadian Equity
41,754,464
2.8569
-14.41
15.81
47.04
-44.88
28.14
15.14
22.27
20.56
43.99
Asset Management Service Portfolios
Calendar year return performance for 2008 started on January 22, 2008
Preservation of Capital 5.47 3.92 1.04 4.15 Conservative Income 3.07 4.48 4.51 0.02 Income & Conservative Growth
0.03
5.29
11.21
-8.19
Balanced Income & Growth
-2.77
5.87
16.25
-14.56
Moderate Growth
-4.29
6.50
19.13
-18.69
Aggressive Growth
-8.56
7.78
27.70
-28.59
Tell us what you think Do you have a comment or a question? Send us an email at: [email protected] or visit us at www.scotiabank.com/intl/mutualfunds
Important information concerning the investment goals, risk, charges and expenses of these funds are contained in the prospectus. Investors should carefully consider these before investing. Performance is subject to variations and is likely to change over time. Past performance should not be treated as an indicator of future performance. Scotiabank Mutual Funds is the brand name under which the Scotiabank group of companies, including Scotiabank & Trust (Cayman) Ltd., Scotia Investments Jamaica Limited, and International Investment Advisory Group markets and distributes mutual funds. This is for informational purposes only and is subject to change without notice. Always consult your professional tax and legal advisors with respect to your particular circumstances. Commissions, management fees and expenses all may be associated with mutual fund investments. Copies are available from the financial institution where you are buying the mutual fund. Share values and investment returns for the funds will fluctuate. The performance data provided assumes reinvestment of distributions and does not take into account sale charges or fees, redemptions, distributions or taxes that would have reduced returns. The annual fee for the Asset Management Service has been included in the performance returns for the Asset Management Service. Mutual Funds are not guaranteed and covered by your local Deposit Insurance Corporation, other government deposit insurer, The Bank of Nova Scotia, or its subsidiaries/affiliates. †Performance data was determined to be from the date management and custodian fees started to be paid by the fund – March 31, 2009, for registration date see the Fund’s prospectus. *Trademark of The Bank of Nova Scotia, used under license. ^ Scotia Caribbean Income Fund is not available for sale in the Cayman Islands. Net Asset Value information of the Scotiabank Mutual Funds can be found on Bloomberg, in the equities section, and on the Cayman Islands Stock Exchange (CSX), website www.csx.ky under “Scotiabank”. Nothing herein is intended to constitute an offer or solicitation to transact business for products or services in any jurisdiction where such an offer or solicitation would be unlawful. Products and services described herein are only available in jurisdictions where they can be lawfully provided. This does not constitute an invitation to purchase or sell shares of the Funds. Information also available directly from: Scotiabank & Trust (Cayman) Ltd., 6 Cardinal Ave, P.O. Box 689, Grand Cayman KY1-1107, Tel: (345) 949-7666 and/or Scotia Asset Management (Jamaica) Limited, 7 Holborn Road, Kingston 10, Kingston, Jamaica, W.I. Tel: (876) 960-6700/ 960-6699. 4
