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Te 2002 SCOTIABANN ANNUM REPORT Consolidated financial Statements • Management's Responsibility for Financial Information The management of the Bank of Nova Scotia (the Bank) a respon- sible far the integrty and objectivity of the financial information presentetl in this Annual Report. These comolitlated financial statements have been preparetl in accordance with Canadian gen- erally accepted accounting principles. including the accourning requirements of the Superirnendent of Financial Irtst¢utions Canada. The consolitlated financial statements, where necessary, inclutle amounts which are hasetl on the best estimates and jutlge- ment of management. Financial information presented elsewhere in this Annual Report is consistent with that shown in the accom- panying consolidated financial statements. Management has always recognized the importance of the Bank maintaining antl reinforcing the highest possible standards of conduct in all of its actions, including the preparation antl dissem- ination of statements fairy presenting the financial condition of the Bank. In this regard, management has tlevelopetl and main- tains asystem of accounting and reporting which provides far the necessary internal wntrols to ensure that tmnsactiore are proper- ly authorizetl antl recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized. The system rs augmented by written policies and procetlures, the rare- ful selection and Vaining of qualified staff, the establishment of organizational structures providing an appropriate antl well- defined division of responsibilities. and the communication of policies antl guidelines of business contluct throughout the Bank. The system of internal controk is further supported by a pro- fessional staff of internal auditors who conduct periodic autlits of all aspects of the Bank's operations. As well. [he Bank's Chief Auditor has full and free access to. and meets periodically with. the Autlii Committee of the Board of Directors. the Superintendent of Financial Irnti[utidrLS Canada examines and enquires irno the business antl affairs of the Bank, to the eMen[ deemed necessary, to satisfy himself that the provisions of the Bank Act having mfemnce to the safety of the intemsu of depositors. cretllors and shareholders of the Bank, am being duly observetl and that [he Bank is in a sountl financial contlition. The Autlit Committee, composed entirely of outside directors, reviews the consolidated financial statements with both manage- ment antl the independent auditors before such s[atemenu are approved by the Boartl of Directors antl submitted id the sham- hoiders of the Bank. The Conduct Review Committee of the Board of Directors. composed ernimty of outside directors, reviews and reports its findings to the Board of Directors on all related party Vansactions having a material impact on the Bank. KPMG LLP and PricewaterhouseCoopers LLP. the independent auditors appointed by the shareholders of the Bank, have ezam• tried the consolidated financial statements of the Bank in aaortlance with Canadian generally accepted auditing standards and have expressed their opinion upon completion of such exam- ination in the following report to the shareholders. In order to provide their opinion on these consolidated financial statements, the Shareholders' Autldors review the system of internal conVOls and CAr1duM their work to the extent that they corLSitler appropri- ate. The Shareholders' Auditors have full and free access to, antl meet periodically wlh, the Audi[ Committee ro discuss their audit and findings as to the integrity of the Bank's accounting, financial reporting antl related matters. Peter C. Godsce Chairman of the Board and Chief Executive Officer Toronto, December 3, 2002 Shareholders' Auditors' Report TO THE SHAREHOLDERS OF THE BANk OF NOVA SCOTIA We have audited the Consolidated Balance Sheets of the Bank of Nova Scotia as a[ October 31, 2002 and 2001, antl the Consolidated Statements of Income. Changes in Shareholders' Equity and Cash Flows for each of the years in the three-year peri- od erxled October 31, 2002. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial rtatements based on our autlits. We conducted our audits in accordance with Canadian gener- ally accepted auditing standards. Those standards require that we plan and perform an audR to obtain reasonable aswrance whether [he financial statements are free of material misstatement. Sarabjit S. Marwah Senior Executive Vice-President and Chief Financial Officer An audh includes examiMrg. on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and sgnifirarn estimates made by management as well as evaluating the overall financial statement presentation. In our opinion, these consolitlated financial statements present fairly, in all material respects. the financial position of the Bank as at October 37, 2002 and 2007, antl the resulu of its operations antl its cash flows for each of the years in the three-year period entled October 37. 2002 in accordance with Canadian generally aaepted aaounting principles, including the accounting require- ments of the Superirnentlent of Financial Institutions Canatla. • KPMG LLP PricewaterhouseCoopers LLP Chattered Accountants Chartered Acwuntants Tororrto, December 3, 2002