Bank of Nova Scotia and Scotiabank Tier 1 Trust

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption granted to a trust from continuous disclosure requirements under National Instrument 51-102 Continuous Disclosure Obligations and certification obligations under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, subject to certain conditions -- Trust established for purpose of effecting offerings of trust securities in order to provide bank with a cost-effective means of raising capital for Canadian bank regulatory purposes -- Trust became reporting issuer upon filing a prospectus offering trust securities -- Without relief, trust would have to comply with continuous disclosure and certification requirements -- Given the nature, terms and conditions of the trust securities and various covenants of the bank in connection with the prospectus offering, the meaningful information to public holders of trust securities is information with respect to the bank, rather than the trust.

June 30, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

THE BANK OF NOVA SCOTIA (the "Bank")

AND SCOTIABANK TIER 1 TRUST

(the "Trust" and, together with the Bank, the "Filers")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers for a decision (the "Exemption Sought") under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") that the requirements contained in the Legislation to:

(a)

(i) file interim financial statements and audited annual financial statements and deliver same to the security holders of the Trust pursuant to sections 4.1, 4.3 and 4.6 of National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102"),

(ii) file interim and annual management's discussion and analysis ("MD&A") and deliver same to the security holders of the Trust pursuant to sections 5.1 and 5.6 of NI 51-102,

(iii) file an annual information form pursuant to section 6.1 of NI 51-102, and

(iv) comply with any other requirements of NI 51-102

(collectively defined as the "Continuous Disclosure Obligations"); and

(b) file interim and annual certificates (collectively the "Officers' Certificates") pursuant to Parts 4, 5 and 6 of National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109") (the "Certification Obligations")

shall not apply to the Trust, subject to certain conditions.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of the provinces and territories of Canada other than Ontario.

Interpretation

The terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.

In this decision,

"Bank Act" means the Bank Act (Canada);

"Prospectus" means the final short form prospectus of the Bank and the Trust dated April 30, 2009 in respect of the Offering (as defined below);

"Tax Act" means the Income Tax Act (Canada);

Representations

This decision is based on the following facts represented by the Filers:

The Bank

1. The Bank is a Schedule 1 chartered bank subject to the provisions of the Bank Act. The corporate headquarters and executive offices of the Bank are located at Scotia Plaza, 44 King Street West, Toronto, Ontario M5H 1H1.

2. The authorized share capital of the Bank consists of an unlimited number of: (i) common shares without nominal or par value (the "Bank Common Shares"); and (ii) preferred shares without nominal or par value (the "Bank Preferred Shares").

3. The Bank Common Shares are listed and posted for trading on the Toronto Stock Exchange and the New York Stock Exchange.

4. The Bank is a reporting issuer, or the equivalent, in each province and territory of Canada that provides for a reporting issuer regime (each a "Reporting Jurisdiction" and, collectively, the "Reporting Jurisdictions") and is not, to the best of its knowledge, in default of any requirement of the securities legislation in the Reporting Jurisdictions.

The Trust

5. The Trust is a trust established under the laws of Ontario by Computershare Trust Company of Canada, as trustee (the "Trustee") pursuant to a declaration of trust dated as of August 19, 2008, as amended and restated on May 7, 2009 and as it may be further amended, restated and supplemented from time to time (the "Declaration of Trust").

6. The Trust's head and registered office is located at Scotia Plaza, 44 King Street West, Toronto, Ontario M5H 1H1. The Trust has a financial year-end of December 31.

7. The Trust completed an initial public offering (the "Offering") of 7.802% Scotiabank Tier 1 Securities -- Series 2009-1 Due June 30, 2108 (the "Scotia BaTS III Series 2009-1") in each Reporting Jurisdiction on May 7, 2009 and may, from time to time, issue further series of debt securities ("Scotia BaTS III"). As a result of the Offering, the capital of the Trust consists of: (i) Scotia BaTS III Series 2009-1; and (ii) voting trust units (the "Voting Trust Units"). All of the outstanding Voting Trust Units are held, directly or indirectly, by the Bank.

8. As a result of having obtained a receipt for the Prospectus in respect of the Offering, the Trust is a reporting issuer, or the equivalent, in each of the Reporting Jurisdictions. The Trust is not, to the best of its knowledge, in default of any requirement of the securities legislation in the Reporting Jurisdictions.

9. The Trust is a single purpose vehicle established for the purpose of effecting offerings of securities, including Scotia BaTS III Series 2009-1 and Voting Trust Units (collectively, the "Trust Securities"), in order to provide the Bank with a cost-effective means of raising capital for Canadian bank regulatory purposes by means of (i) creating and selling the Trust Securities; and (ii) acquiring and holding assets, which will consist primarily of a senior unsecured deposit note of the Bank (the "Bank Deposit Note") and other eligible assets as specified in the Prospectus (collectively, the "Trust Assets"). The Trust Assets will generate income for the payment of principal, interest, the redemption price, if any, and any other amounts, in respect of the Trust's debt securities, including the Scotia BaTS III Series 2009-1. The Trust will not carry on any operating activity other than in connection with offerings of Trust Securities and in connection with the Trust Assets.

Scotia BaTS III Series 2009-1

10. From the date of issue until June 30, 2108 the Trust will pay interest on the Scotia BaTS III Series 2009-1 in equal (subject to the reset of the interest rate) semi-annual instalments on June 30 and December 31 of each year (each an "Interest Payment Date"). Starting on June 30, 2019, and on every fifth anniversary of such date thereafter until June 30, 2104 (each such date, an "Interest Reset Date"), the interest rate on the Scotia BaTS III Series 2009-1 will be reset at an interest rate per annum equal to the Government of Canada Yield (as defined in the Prospectus) plus 7.05%.

11. Under an assignment, set-off and trust agreement entered into among the Bank, the Trust and BNY Trust Company of Canada as Indenture Trustee, dated May 7, 2009 (the "Assignment and Set-Off Agreement"), the Bank has agreed, for the benefit of the holders of Scotia BaTS III Series 2009-1, that if (i) the Bank elects, at its sole option, prior to the commencement of the interest period ending on the day immediately preceding the relevant Interest Payment Date, that holders of Scotia BaTS III Series 2009-1 invest interest thereon in a new series of Bank Preferred Shares (the "Bank Deferral Preferred Shares"); or (ii) for whatever reason, interest is not paid in full in cash on the Scotia BaTS III Series 2009-1 on any Interest Payment Date (in either case, an "Other Deferral Event"), the Bank will not declare dividends of any kind on the Bank Preferred Shares or, if no Bank Preferred Shares are then outstanding, on the Bank Common Shares (the "Dividend Restricted Shares") until the sixth month following the relevant Interest Payment Date (the "Dividend Stopper Undertaking"). Accordingly, it is in the interest of the Bank to ensure, to the extent within its control, that the Trust complies with the obligation to pay interest on each Interest Payment Date so as to avoid triggering the Dividend Stopper Undertaking.

12. On each Interest Payment Date on which a Deferral Event (as defined below) has occurred, holders of Scotia BaTS III Series 2009-1 will be required to invest interest paid thereon in a new series of Bank Deferral Preferred Shares. A "Deferral Event" means: (i) an Other Deferral Event; or (ii) the Bank has failed to declare cash dividends on all of the outstanding Bank Preferred Shares or, failing any Bank Preferred Shares being outstanding, on all of the outstanding Bank Common Shares, in accordance with its ordinary dividend practice in effect from time to time, in each case in the last 90 days preceding the commencement of the interest period for the Scotia BaTS III Series 2009-1 ending on the day preceding the relevant Interest Payment Date.

13. The Bank Deferral Preferred Shares will pay quarterly non-cumulative preferential cash dividends, as and when declared by the Board of Directors, subject to the provisions of the Bank Act, at the Perpetual Preferred Share Rate (as defined in the Prospectus), subject to any applicable withholding tax.

14. Prior to the issuance of any Bank Deferral Preferred Shares in respect of a Deferral Event, the Bank will not, without the approval of the holders of Scotia BaTS III Series 2009-1, delete or vary any terms attaching to the Bank Deferral Preferred Shares other than any amendments relating to the Bank Preferred Shares as a class.

15. The Scotia BaTS III Series 2009-1 will be automatically exchanged, without the consent of the holders thereof, for a series of newly-issued Bank Preferred Shares (the "Bank Preferred Shares R") if: (i) an application for a winding-up order in respect of the Bank pursuant to the Winding-up and Restructuring Act (Canada) is filed by the Attorney General of Canada or a winding-up order in respect of the Bank pursuant to that Act is granted by a court; (ii) the Superintendent advises the Bank in writing that the Superintendent has taken control of the Bank or its assets pursuant to the Bank Act; (iii) the Superintendent advises the Bank in writing that the Superintendent is of the opinion that the Bank has a risk-based Tier 1 Capital ratio of less than 5.0% or a risk-based Total Capital ratio of less than 8.0%; (iv) the board of directors of the Bank advises the Superintendent in writing that the Bank has a risk-based Tier 1 Capital ratio of less than 5.0% or a risk-based Total Capital ratio of less than 8.0%; or (v) the Superintendent directs the Bank pursuant to the Bank Act to increase its capital or provide additional liquidity and the Bank elects to cause the Automatic Exchange as a consequence of the issuance of such direction or the Bank does not comply with such direction to the satisfaction of the Superintendent within the time specified therein (the "Automatic Exchange").

16. Under the terms of a share exchange agreement between the Bank, the Trust and BNY Trust Company of Canada as Exchange Trustee (the "Share Exchange Agreement"), the Bank has granted to the Exchange Trustee for the benefit of the holders of the Scotia BaTS III Series 2009-1 the right to exchange such Scotia BaTS III Series 2009-1 for Bank Preferred Shares Series R upon an Automatic Exchange and the Exchange Trustee, on behalf of the holders of Scotia BaTS III Series 2009-1 has granted to the Bank the right to exchange such Scotia BaTS III Series 2009-1 for Bank Preferred Shares Series R upon an Automatic Exchange. Pursuant to the Share Exchange Agreement, the Bank has covenanted to take or refrain from taking certain actions so as to ensure that holders of Scotia BaTS III Series 2009-1 will receive the benefit of the Automatic Exchange, including obtaining the requisite approval of holders of the Scotia BaTS III Series 2009-1 to any amendment to the provisions of the Bank Preferred Shares Series R (other than any amendments relating to the Bank Preferred Shares as a class).

17. The Bank Preferred Shares Series R will pay quarterly non-cumulative preferential cash dividends, as and when declared by the Board of Directors, subject to the provisions of the Bank Act, at the Perpetual Preferred Share Rate (as defined in the Prospectus), subject to any applicable withholding tax.

18. If the Scotia BaTS III Series 2009-1 have not been exchanged for Bank Preferred Shares Series R pursuant to the Automatic Exchange, the Bank will not, without the approval of the holders of the Scotia BaTS III Series 2009-1, delete or vary any terms attaching to the Bank Preferred Shares Series R other than any amendments relating to the Bank Preferred Shares as a class.

19. The Scotia BaTS III Series 2009-1 have been structured to achieve Tier 1 regulatory capital for purposes of the guidelines of the Superintendent.

20. The Trust may, subject to approval of the Office of the Superintendent of Financial Institutions Canada ("Superintendent Approval"), at its option, on or after June 30, 2014, on giving not more than 60 nor less than 30 days' notice, redeem the Scotia BaTS III Series 2009-1, in whole or in part. The redemption price per $1,000 principal amount of Scotia BaTS III Series 2009-1 redeemed on any day that is not an Interest Reset Date will be equal to the greater of par and the Canada Yield Price, and the redemption price per $1,000 principal amount of Scotia BaTS III Series 2009-1 redeemed on any Interest Reset Date will be par together, in either case, with accrued and unpaid interest to but excluding the date fixed for redemption, subject to any applicable withholding tax (the "Redemption Price").

21. Upon the occurrence of certain regulatory or tax events affecting the Bank or the Trust, the Trust may, at its option, without the consent of holders of the Scotia BaTS III Series 2009-1 but subject to Superintendent Approval, on giving not more than 60 nor less than 30 days' notice to the holders of the Scotia BaTS III Series 2009-1, redeem all but not less than all of Scotia BaTS III Series 2009-1 at a price equal to par plus accrued and unpaid interest.

22. The Scotia BaTS III Series 2009-1 are direct unsecured obligations of the Trust, ranking at least equally with other subordinated indebtedness of the Trust from time to time issued and outstanding. In the event of the insolvency or winding-up of the Trust, the indebtedness evidenced by the Scotia BaTS III Series 2009-1 issued by the Trust will be subordinate in right of payment to the prior payment in full of all other liabilities of the Trust except liabilities which by their terms rank in right of equal payment with or subordinate to indebtedness evidenced by such Scotia BaTS III Series 2009-1.

23. The Bank will not assign or otherwise transfer its obligations under the Share Exchange Agreement or the Assignment and Set-Off Agreement, except in the case of a merger, consolidation, amalgamation or reorganization or a sale of substantially all of the assets of the Bank.

24. The Bank has covenanted that it will maintain direct or indirect ownership of 100% of the outstanding Voting Trust Units.

25. As long as any Scotia BaTS III Series 2009-1 are outstanding, and are held by any person other than the Bank or its affiliates, the Trust may only be terminated in certain limited circumstances with the approval of the Bank as the holder of the Voting Trust Units and with Superintendent Approval. However, the Bank will not approve the termination of the Trust unless the Trust has sufficient funds to pay the Redemption Price. The Bank will not create or issue any Bank Preferred Shares which, in the event of insolvency or winding-up of the Bank, would rank in right of payment in priority to the Bank Preferred Shares Series R or the Bank Deferral Preferred Shares.

26. The Scotia BaTS III Series 2009-1 are non-voting except in limited circumstances set out in the Declaration of Trust. The Voting Trust Units entitle the holder thereof (i.e. the Bank or an affiliate of the Bank) to vote in respect of certain matters regarding the Trust.

27. Pursuant to the administration agreement dated August 19, 2008, as amended and restated, entered into between the Trust and the Bank, the Trustee has delegated to the Bank certain of its obligations in relation to the administration of the Trust. The Bank, as administrative agent, will provide advice and counsel with respect to the administration of the day-to-day operations of the Trust and other matters as may be requested by the Trustee from time to time.

28. The Trust may, from time to time, issue further series of Trust Securities, the proceeds of which would be used to acquire additional Trust Assets.

29. Because of the terms of the Trust Securities, the Share Exchange Agreement, the Assignment and Set-Off Agreement and the various covenants of the Bank, information about the affairs and financial performance of the Bank, as opposed to that of the Trust, is meaningful to holders of Scotia BaTS III Series 2009-1. The Bank's filings will provide holders of Scotia BaTS III Series 2009-1 and the general investing public with all information required in order to make an informed decision relating to an investment in Scotia BaTS III Series 2009-1 and any other Trust Securities that the Trust may issue from time to time. Information regarding the Bank is relevant both to an investor's expectation of being paid the principal, interest and Redemption Price, if any, and any other amount on the Scotia BaTS III Series 2009-1 when due and payable.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

1. in respect of the Continuous Disclosure Obligations:

(a) the Bank remains a reporting issuer under the Legislation and has filed all continuous disclosure documents that it is required to file by the Legislation;

(b) the Bank files with the securities regulatory authority or regulator in each Reporting Jurisdiction, in electronic format under the Trust's SEDAR profile, the continuous disclosure documents listed in paragraph 1(a), above, of this Decision, at the same time as they are required under the Legislation to be filed by the Bank;

(c) the Trust pays all filing fees that would otherwise be payable by the Trust in connection with the filing of the continuous disclosure documents under NI 51-102;

(d) the Trust sends, or causes the Bank to send, the Bank's interim and annual financial statements and interim and annual MD&A, as applicable, to holders of Trust Securities, at the same time and in the same manner as if the holders of Trust Securities were holders of similar debt securities of the Bank;

(e) all outstanding securities of the Trust are either Scotia BaTS III Series 2009-1, additional series of debt securities having terms substantially similar to the Scotia BaTS III Series 2009-1 or Voting Trust Units;

(f) the rights and obligations of the holders of additional series of Scotia BaTS III are the same in all material respects as the rights and obligations of the holders of the Scotia BaTS III Series 2009-1, with the exception of economic terms such as the interest payable by the Trust and redemption dates and prices;

(g) the Bank is, directly or indirectly, the beneficial owner of all issued and outstanding voting securities of the Trust, including the Voting Trust Units;

(h) the Trust does not carry on any operating activity other than in connection with offerings of its securities and the Trust has minimal assets, operations, revenues or cash flows other than those related to the Bank Deposit Note or the issuance, administration and repayment of the Trust Securities;

(i) the Trust issues a news release and files a material change report in accordance with Part 7 of NI 51-102 as amended, supplemented or replaced from time to time, in respect of any material change in the affairs of the Trust that is not also a material change in the affairs of the Bank;

(j) in any circumstances where the Scotia BaTS III Series 2009-1 (or any additional series of the Trust's debt securities having terms substantially similar to the Scotia BaTS III Series 2009-1) are voting, the Trust will comply with Part 9 of NI 51-102; and

(k) the Trust complies with Parts 4A, 4B, 11 and 12 of NI 51-102.

2. in respect of the Certification Obligations:

(a) the Trust is not required to, and does not, file its own interim filings and annual filings (as those terms are defined in NI 52-109);

(b) the Trust is and continues to be exempted from the Continuous Disclosure Obligations and the Bank and the Trust are in compliance with the conditions set out in paragraph 1 above; and

(c) the Bank files with the with the securities regulatory authority or regulator in each of the Reporting Jurisdictions, in electronic format under the Trust's SEDAR profile, the Officers' Certificates of the Bank at the same time as such documents are required under the Legislation to be filed by the Bank.

3. this decision shall expire 30 days after the date that a material adverse change occurs in the representations of the Trust in this decision.