1998 ANNUAL REPORT 1998 ANNUAL REPORT The Scotiabank Group Committed to customers, shareholders, employees and the communities where we work. Putting people first. ™Trademark of The Bank of Nova Scotia Scotiabank is one of North CONNECTING WITH SCOTIABANK America’s premier financial CORPORATE HEADQUARTERS FOR FURTHER INFORMATION institutions and Canada’s Scotiabank PUBLIC AND CORPORATE AFFAIRS Scotia Plaza Scotiabank most international bank, 44 King Street West 44 King Street West Toronto, Ontario Toronto, Ontario with assets of $234 billion. Canada M5H 1H1 Canada M5H 1H1 Tel.: (416) 866-6161 Tel.: (416) 866-3925 Fax: (416) 866-3750 Fax: (416) 866-4988 Our 42,000 employees E-mail: [email protected] E-mail: [email protected] provide retail, commercial, CUSTOMER SERVICE CENTRE 1-800-4-SCOTIA corporate and investment SHAREHOLDER SERVICES TRANSFER AGENT AND REGISTRAR MAIN AGENT ONLINE banking services to Montreal Trust Company of Canada 151 Front Street West, 8th Floor For product, corporate, financial and individuals, small and Toronto, Ontario shareholder information: www.scotiabank.ca and Canada M5J 2N1 www.scotiacapital.com Tel.: (416) 981-9633; 1-800-663-9097 medium-sized businesses, Fax: (416) 981-9507 E-mail: [email protected] corporations and ANNUAL REPORT CO-TRANSFER AGENT (U.S.A.) For copies of the annual report and other The Bank of Nova Scotia financial reports: governments – in 53 Trust Company of New York Tel: (416) 866-3925 23rd Floor, 1 Liberty Plaza Fax: (416) 866-4988 New York, N.Y. 10006 countries around the world, E-mail: [email protected] Tel.: (212) 225-5470 Fax: (212) 225-5436 and coast to coast across Telex: 00126777 WORLDWIDE DIRECTORY Canada. CO-TRANSFER AGENT (UNITED KINGDOM) IRG plc. For complete addresses, please refer to the Balfour House Worldwide Directory. To obtain a copy, contact: 390/398 High Road Public and Corporate Affairs Ilford, Essex 44 King Street West 1G1 1NQ Toronto, Ontario Tel.: 0181 639 2000 Canada M5H 1H1 Fax: 0181 478 7717 Tel.: (416) 866-3925 E-mail: [email protected] Fax: (416) 866-4988 E-mail: [email protected] SECRETARY’S DEPARTMENT Website: www.scotiabank.ca Scotiabank 44 King Street West Toronto, Ontario Canada M5H 1H1 OFFICE OF THE OMBUDSMAN TABLE OF CONTENTS Tel.: (416) 866-4790 Fax: (416) 866-5090 44 King Street West E-mail: [email protected] Toronto, Ontario Letter to Shareholders 2 Canada M5H 1H1 FINANCIAL ANALYSTS, PORTFOLIO Tel.: (416) 933-3299; 1-800-785-8772 Answers to Questions 6 MANAGERS AND OTHER INSTITUTIONAL Fax: (416) 933-3276 INVESTORS The Scotiabank Group 8 Tel.: (416) 866-5982 Glossary 20 Fax: (416) 866-7867 E-mail: [email protected] 1998 Financial Report 21 Front cover (from left): Iñigo Gutiérrez, TMM; Marie Powell, Scotiabank Jamaica; John Robinson with niece Lori Robinson, Eric C. Corporate Governance 94 Robinson Inc.; Dr. Robyn Olson; and Linda Music and Ashlea. Back cover (from left): Ken Cordner, Lakeside Shopping Village, Burlington, Ont., branch; Guadalupe Razo Camberos, Randy Crath Corporate Listings Directory 100 and Francisco Gómez Fernández, Banco Inverlat; John Eby and Michael Locke, Corporate Banking; Jean Walsh and Joy Read, Albany, P.E.I., branch; and Stephen Carroll and Michelle Ashcroft, Winnipeg Commercial Banking Centre. Shareholders’ Information 102 CAMILLE TEELUCKSINGH Scotia Plaza branch, Toronto LETTER TO SHAREHOLDERS For the fiscal year 1998 1997 1996 Shareholder returns Net income ($ millions) $1,394 $ 1,514 $ 1,069 Earnings per common share(1) $ 2.64 $ 2.95 $ 2.04 Dividends per common share(1) $ 0.80 $ 0.74 $ 0.65 Return on common shareholders’ equity 15.3% 20.2% 15.8% Return on common shareholders’ investment 6.1% 51.1% 52.3% Common share price (close, October 31)(1) $32.20 $ 31.08 $ 21.13 (1) Amounts have been adjusted to reflect the two-for-one stock split on February 12, 1998. PETER C. GODSOE Financial highlights A strategy that works Chairman of the Board & Scotiabank achieved solid results in 1998, We are convinced that our bank has put in Chief Executive Officer highlighting the strength and diversity of our place the correct strategies to ensure success core businesses. Net income was $1,394 mil- as we move toward the new millennium. Our lion, which represented a return on equity of guiding principles remain unchanged: execut- 15.3%. Income in 1998 was 8% lower than in ing more efficiently and more effectively 1997, as last year’s results included several than our competitors, concentrating on our unusual items. If these are excluded, earnings core businesses, building on our strengths, and in 1997 were $1,223 million. Compared to this, motivating and relying upon the employees of RETURN ON EQUITY (%) 1998 net income showed a solid increase the Scotiabank Group. Above all, we will stay 22 of 14%. focused on the needs of our customers. 20 Return to common shareholders – which Diversity – in our products, services, cus- 18 includes both dividends and appreciation in tomers, employees and locations – will remain an excluding special the market value of the Bank’s common shares important component of our long-term business 16 charges excluding 14 unusual – was 6.1% in 1998. This was lower than plans. This strategy allows us to explore new items 12 the excellent returns of 1996 and 1997, but opportunities in the markets we serve and to was nonetheless among the better returns withstand temporary setbacks in specific areas. 10 provided by a Canadian bank. Ownership of It spreads risk broadly, and offers many opportu- 8 Scotiabank has provided shareholders with a nities for profitable expansion in the future. 94 95 96 97 98 compound average return of 21.7% a year over Scotiabank has the most broadly based the past five years, and 21.4% a year over the multinational network of any Canadian bank. past decade. We plan to seek additional opportunities in NET INCOME ($ millions) The Bank has had consistent growth in the the international arena, especially in Asia and 1500 dividends on its common shares, with the divi- Latin America. Despite current economic diffi- dend rate having been increased in 33 of the past culties in several international markets, we are 1250 35 years. In 1998, dividends per share increased confident that these regions will grow and excluding special excluding unusual to 80 cents, 8% higher than the 74 cents of the prosper over the long term. 1000 charges items prior year. In addition, on December 2, 1998, the Domestically, we will keep building 750 Board of Directors announced an increase in the infrastructure and business processes the quarterly dividend on common shares to 21 required to support our increasing focus on 500 cents per share (84 cents annualized), effective customer relationship management. A crucial in the first quarter of 1999. element in our strategy is to continuously 94 95 96 97 98 2 SCOTIABANK KEY INITIATIVES improve the way we work, so that efficiency forward and knowledgeable – will be central and productivity climb steadily. For many to our activities. years, our superior productivity record has Last year’s acquisition of National Trust been an important competitive advantage, added to our successful retail banking opera- translating into better returns for our share- tions, and positioned us as one of the largest holders and better service for our customers. personal trust operations in Canada. This will be particularly important as we expand our Key initiatives wealth management capabilities. The addi- In the Retail Bank, our customer service is tion of National Trust has improved our acknowledged to be among the best in the ability to serve Canadians – particularly in industry. In its annual survey on customer Ontario, where most of its branches are service at financial institutions, released in located – and resulted in Scotiabank becoming October, Market Facts again named Scotia- the country’s second-largest mortgage lender. bank the top performing major bank for We are also working to enhance the overall service quality. service we provide to our commercial cus- During the coming year, we plan to tomers. By streamlining processes and devel- improve our service further, through our BRUCE R. BIRMINGHAM oping our back-office support capabilities, we branches, and by expanding our alternate President will strive to increase our market share of delivery channels. We will continue to sim- small and medium-sized enterprises. plify, centralize and automate routine branch RoyNat, one of two merchant banking functions to give branch staff more time to arms, helps promising small and medium- dedicate to customers. sized companies grow by providing a broad We are committed to giving our customers range of financing options. Scotia Merchant a growing variety of options to fulfil their Capital complements RoyNat, making sizable banking needs. Many now prefer the equity investments in larger companies that convenience and speed of alternate delivery are poised for growth. channels, such as ABMs, telephone and Inter- net banking, debit cards and smart cards, Wealth management to conduct their everyday transactions. Our Wealth management has become an increas- Internet banking service, Scotia OnLine, and ingly significant part of our business and, as its innovative Entrust security system, have the Canadian population ages, it will gain won high praise from customers, and awards importance. To improve our present position from both the Canadian Information Produc- and increase our share of the market, we are tivity Awards and Microbanker Inc., a pub- developing new ways to lever opportunities in lisher of banking technology newsletters. this key area. However, personal service still lies at the The integration of Cassels Blaikie, Scotia heart of Scotiabanking. Extensive employee Investment Management Limited and the invest- and customer research has revealed that our ment division of Scotiatrust created Scotia Cassels customers believe we deal with them on a Investment Counsel Limited in August l998, more personal level – much more directly which manages assets of more than $15 billion.