Market Data as of Friday February 3,2012 9:00 a.m.

World Indices
Change S&P / TSX Composite Index Dow Jones Industrial Average S&P 500 Nasdaq FTSE-100 (London) CAC 40 (Paris) DAX (Frankfurt) Nikkei (Tokyo) Hang Seng (H.K.) 12553.48 12705.41 1325.54 2859.68 5796.07 3398.28 6750.23 8831.93 20756.98 0.00 0.00 0.00 0.00 5.35 21.62 94.60 -44.89 17.53 % 0.00% 0.00% 0.00% 0.00% 0.09% 0.64% 1.42% -0.51% 0.08% YTD 5.03% 3.99% 5.41% 9.78% 4.12% 7.55% 14.44% 4.45% 12.60% Aluminum (lb) Copper (lb) Nickel (lb) Zinc (lb) Gold (oz) Silver (oz) Crude (bbl) Nat. Gas (mmBtu) Lumber (Mbf)

Commodities Highest Volume Futures

Bid 1.00 3.79 9.47 0.96 1753.00 33.99 96.88 2.49 253.50 Change 0.00 0.01 -0.01 0.01 -3.80 -0.16 0.52 -0.06 0.70 % 0.27% 0.37% -0.14% 0.67% -0.22% -0.46% 0.54% -2.39% 0.28%

Canadian Bonds
Bid 3 Month 6 Month 2 Year 5 Year 10 Year 30 Year BoC Overnight Rate Prime Rate 0.86 0.91 1.02 1.35 2.01 2.62 1.00 3.00 Change 0.00 0.00 0.04 0.06 0.07 0.07 0.00 0.00

U.S. Bonds
Bid 3 Month 6 Month 2 Year 5 Year 10 Year 30 Year Fed Funds Rate Prime Rate 0.08 0.10 0.23 0.76 1.92 3.13 0.25 3.25 Change -0.01 0.01 0.00 0.05 0.10 0.12 0.00 0.00

Currencies
Bid $CDN/$U.S. $U.S./$CDN $U.S./Sterling $U.S./$Euro Yen/$U.S. 0.9979 1.0021 1.5762 1.3089 76.55 Change -0.0038 0.0038 -0.0070 -0.0072 0.31

Index Futures
Dow Jones Nasdaq S&P 500 12666.00 2516.50 1335.80 0.00 25.00 13.10

Market Data is indicative. Source Reuters.

Economic Releases
Canada
Feb 3 Participation Rate for Jan - EST: 66.6 Feb 3 Net Change in Employment for Jan - EST: 22K Feb 3 Unemployment Rate for Jan - EST: 7.5% Feb 3 Part Time Employment Change for Jan EST: -Feb 3 Full Time Employment Change for Jan - EST: --

United States
Feb 3 Avg Hourly Earning MOM All Emp for Jan - EST: 0.2% Feb 3 Unemployment Rate for Jan - EST: 8.5% Feb 3 Change in Private Payrolls for Jan - EST: 163K Feb 3 ISM Non-Manf. Composite for Jan - EST: 53.2 Feb 3 Avg Hourly Earning YOY All Emp for Jan - EST: 1.9% Feb 3 Chg in Household Survey Emply for Jan - EST: -Feb 3 Change in Manufact. Payrolls for Jan - EST: 13K Feb 3 Avg Weekly Hours All Employees for Jan - EST: 34.4 Feb 3 Change in Nonfarm Payrolls for Jan - EST: 145K Feb 3 Revisions: Establishment Employment Survey Annual Revisions Feb 3 Factory Orders for Dec - EST: 1.5% Feb 3 Underemployment Rate (U6) for Jan - EST: --

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Rating Changes
Company New Old

Target Price Changes

Company New Old

None to report

CEMEX Fibria Celulose S.A.

U$8.00 U$9.00

U$4.10 U$9.75

Companies Reporting Today

Scotia Estimates Last Year Previous Quarter

Company

Quarter

E.CL SA

US$0.05

US$0.03

US$0.07

Canadian Equities
Global Fertilizers

Potash Discipline Continues

MOS will cut up to 20% of its potash production through May. How much potash? We estimate that MOS will cut up to 625,000 mt of production, assuming a four-month production cut of 20% on 9.3M mt of annual production (10.3M mt of operational capability). Impact to MOS. If one were to assume that the production cuts translated into lost sales (not a great assumption), we estimate MOS' earnings would decline by 19 for 2012. We view this as a positive for POT. Why? With MOS joining URKA and POT in potash production cuts, it reduces the probability that POT announces further cuts (although, by no means should this be ruled out). IPI remains our top short-term potash pick. IPI does not really sell into offshore markets that are facing demand destruction, does not face pressure by Canpotex to cut production, and only has small capacity relative to peers. Next steps. China should like this news, and may now be willing to settle soon, as everything is in their favour: (1) producers cutting production; (2) demand destruction in India; (3) soft demand elsewhere; (4) and aboveaverage inventories. We expect China to settle at $440 to $470/mt (CFR). Isaacson Ben

IAMGOLD Corporation (IMG - U$19.25)

Rating: 1-Sector Outperform

Target: U$26.00

Releases Rare Earth Resource

IMG released its initial rare earth resource from the REE zone. IMG declared an inferred resource of 466.8 Mt grading 1.65% (7.7 Mt) Total Rare Earth Oxides (TREO) following its 2011 drill program on the rare earth elements (REE) zone adjacent to its Niobec Niobium mine (Quebec). A 2,750m drill program was initiated in January and will further define the lateral extent of the resource and establish the overall limits of the REE mineralization. A second phase of drilling is also planned for resource definition and to explore at depth. IMG is currently assuming a recovery of ~53.5%. A scoping study is expected to be released in the future; no timeline was provided. We estimate the value (based on FOB China prices) for the rare earth elements of ~$102/kg of insitu rock. We have no value of this asset in our model currently, but initial indications are positive. We maintain our one-year target of $23.00 per share and current 1-SO rating. Tanya Jakusconek Disclosures*:

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MEG Energy Corp. (MEG - $46.50)

Rating: 2-Sector Perform

Target: $50.00

MEG Continues to Deliver With Record Quarter

MEG reported Q4/11 adjusted CFPS of $0.61, well above our estimate of $0.43 and consensus of $0.46. Record production of 30 Mbbl/d was above our estimate of 27.5 Mbbl/d and consensus of 28.3 Mbbl/d and well ahead of design capacity of 25 Mbbl/d. The SOR of 2.3x is very impressive and among the lowest in the industry. The conversion of two infill wells and a new well pair should help bolster production through 1H/12. Two OTSGs are expected to be online early in Q2, which will provide steam to an additional 1-2 well pairs to be on production later in the year. Proved (1P) reserves increased 17% to 708 MMbbl and proved plus probable (2P) reserves increased 7% to 2,060 MMbbl. Best estimate contingent resources (2C) increased slightly from 3.7 billion barrels to 3.8 billion barrels. We maintain our 2-Sector Perform rating and one-year target of $50. Polak Mark Disclosures*: Scotia Capital (USA) Inc. had an investment banking services client relationship during the past 12 months. Scotia Capital (USA) Inc. or its affiliates has managed or co-managed a public offering in the past 12 months. Scotia Capital (USA) Inc. or its affiliates has received compensation for investment banking services in the past 12 months.

Genworth MI Canada Inc. (MIC - $23.14)

Rating: 2-Sector Perform

Target: $27.00

Q4/11 Initial Take

Genworth MI Canada Inc. reported Q4/11 operating EPS of $0.80, beating our estimate of $0.76 and consensus of $0.77. The stronger-than-expected earnings were the result of a more favourable tax rate and higher than forecast premiums earned. That said, we see the risk of the beat being viewed as lower quality, given the reduced tax rate and sequential bump in premiums earned benefiting from what we believe to be a higher than normal quarterly adjustment to the premium recognition curve. Loss ratio of 39.4% was just above our forecast of 38.5% and represented a sequential deterioration of 296 bp and was 714 bp higher YOY. The higher loss ratio was primarily due to increased reserve strengthening related to elevated severity rates in Alberta. This was partially offset by a $21M recovery in paid claims. Net premiums written of $123M were a bit shy of our estimate of $127M and were down 8.1% YOY. Q4/11 BVPS rose 10% YOY. Following the 10:30 a.m. call, we will revisit our forecast, target, and rating with a full comment on results. Hardie Phil Disclosures*: The Fundamental Research Analyst/Associate has visited material operations of this issuer. Scotia Capital (USA) Inc. or its affiliates has received compensation for investment banking services in the past 12 months.

U.S. Equities
None to report

Fixed Income Morning Comments

Current PAG Recommendations 1. Term Call Given the recent decline in yields, we no longer see value in the mid to long end of the curve and recommend investors stay short at this time. 2. Sector Call Underweight Canada's, overweight provincials, municipals and corporates 3. Currency Call We recommend Canadian investors remain in Canadian dollars for their fixed income holdings. 4. Alternative Strategies Market weight high yield, market weight emerging markets debt, underweight inflation protected debt.

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Treasuries Outperform Canada Bonds As Markets Trade Without Much Conviction US Treasury bonds outperformed Canada bonds yesterday, although markets appeared to trade without a great deal of conviction. The market remained largely poised for some direction from Chairman Bernanke's testimony yesterday, which led bonds to trade sideways for good part of the day. There was some modest price movement of the back of the lower than expected Jobless Claims data but bonds seemed to lack conviction. Despite anticipation of Chairman Bernanke's comments, the Chairman's statement was largely benign leaving the field, once again, without a great deal if direction. Bond markets perked up after Chicago Fed President Evans' called for a very aggressive asset purchase program by the Fed. This sent bonds higher but the rally was short lived as traders squared up ahead of today's non-farm payroll report. Canadian bond yields rose between 0.01-0.04% across the curve while Treasuries yields rose modestly in the long end +0.02% and fell in the 5-10 year area -0.01-0.02%. It will be a relatively active data day today in both Canada and the US. This morning Canadian employment data disappointed, printing at a gain of 2.3K versus the 22K consensus expectation. Details of the report did appear stronger than the headline print suggested with both public and private sector jobs rising but self-employment acted as a strong downward pull. In the US, we have January Non-Farm payrolls at 8:30am. Consensus expectations are calling for a print of 140K. Scotia is calling for a print of 180K. As well, we will see January ISM non-manufacturing data at 10am. Consensus is calling for a print of 53.1. As well, we will have December factory orders. Scotia is calling for a print of 1.5%. Scotiabank GBM Corporate Notes: Robert Follis Genworth MI Canada out with Q4 results with net income of $79 million, down slightly from last years $85 million, while full year net income was $323 million vs $343 million. Net Premiums written in Q4 declined to $123 million vs $134 million, driven by typical winter seasonality, while net premiums earned was flat at $156 million. Losses on Claims rose to $62 million vs 450 million, as the loss ratio rose 7 pts to 39% as a result of an increase in new delinquencies as well as reserve strengthening for higher claim severity, particularly in Alberta. The combined ratio was at 56% vs 52% y/y. A more favorable tax rate provided some offset to the higher losses. The overall delinquency rate was 0.20%, lower by 1 bps q/q, and down 6 bps y/y. On the capital front, Genworths Minimum capital ratio strengthened to 162% vs 156% y/y. S&P came out and noted that Genworths ratings are unaffected by the agencies Jan 30th downgrade of the related company, Genworth Mortgage Insurance Corporation by two notches. The agency views the two companies as related, but that there is a negligible link between the creditworthiness of GMICO and Genworth Canada. Net a decent quarter of results which will leave ratings unchanged and is neutral for spreads. Spectra Energy Q4 results slightly missed Street expectations, though were solid enough for credit quality at its Canadian subsidiaries, in our view. Union Gas EBIT was down 5.5% in Q4, due to the unusually warm weather, but EBIT was up 3.9% for the year, to US$425 million. Westcoast Energy (excluding UGL) EBIT rose 4.6% in Q4, and an exceptionally high 25% for the full-year, driven mainly by the ongoing organic expansion in the gathering and processing segment in Horn River. 2012 capex guidance for Union Gas is about flat, at $300 million. Westcoast capex guidance for 2012 is $625 million, down from $820 million last year, but still much higher than the run rate of the past decade, and enough to ensure new issuance in 2012, we think. On the call, parent Spectra Energy said that it expects to maintain "a solid BBB balance sheet" and "strong investment grade credit ratios" while growing EBIT about 6% in 2012. We see results as supportive of both Union Gas and Westcoast spreads. (Please contact your investment executive for a copy of the original report) Current PAG Recommendations 1. Term Call Scotia Economics is forecasting a flatter yield curve over the next 12-15 months. With current 10 and 30 year yields trading well below Scotia Capitals current rate forecast, we do not expect the rally in bonds to continue; therefore we recommend investors stay short at this time. 2. Sector Call We recommend investors look to the provincial, municipal, and corporate sectors for yield enhancement. Credit spreads (the yield pick-up over Canada bonds) still remain attractive. 3. Currency Call Scotia Economics and consensus forecast expectations are for the Canadian dollar to outperform most major currencies over the next year, therefore we recommend Canadian investors remain in Canadian dollars for their fixed income holdings at this time. 4. Alternative Strategies: Within a broadly diversified portfolio our recommendations are as follows:

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a) High Yield In conjunction with our continued positive equity market outlook for the next 12 months (based on the outlook for economic recovery), we recommend investors maintain a market weight position in high yield debt. b) Emerging Markets Emerging markets sovereign debt has rallied significantly over the past 12 months. With the benchmark JPMorgan Emerging Markets Bond Index Plus (EMBI+) at a yield-to-maturity of 6.19% and a return of 7.61% for the last year, we now feel this sector is fairly valued. There remains value in the corporate and local currency sectors; however we suggest being market weight high yield and emerging markets debt at this juncture. c) Inflation Protected Bonds with current real yields in the area of 0.39%, and the market pricing in an effective long term inflation rate of just 2.12%, we see limited value in Canadian Real Return Bonds, and hence recommend an underweight exposure to the sector, Andrew Mystic Associate Director, Portfolio Advisory Group Fixed Income

Important Disclosures
%SFI, ACM.A, AGF.B, AGU, ALFA_A, ASR, CF, CF.N, CIX, CMQ.UN, CRR.UN, CS, CSH.UN, CUF.UN, CUQ, CWT.UN, CX, DH, DI.UN, ECL, ETC, FBR, FCR, FN, FSZ, GCG.A, GMP, GNW, GO, GS, HCG, HEQ, HF, IAG.N, IFC, IGM, IPI, KOF, KRN, LW, MAA, MBC, MEG, MGO, MIC, MOS, MRT.UN, MSI, NGD, OCX, PFG, PMZ.UN, POT, POW, PWF, REF.UN, REI.UN, RGLD, SDF, SE, SII, SQM, ST, WED, WPX, X, YAR

Company
AGF.B AGU ACM.A CWT.UN CF CMQ.UN CS CX CSH.UN CIX KOF CUF.UN CUF.UN CRR.UN CX DH DI.UN ECL ECL FBR FSZ FCR FN MIC GS GMP GS ASR GO HF HCG HEQ IGM IFC IPI

Ticker
AGF Management Limited Agrium Inc. Astral Media Inc. Calloway REIT Canaccord Financial Inc. CANMARC REIT Capstone Mining Corp. CEMEX Chartwell Seniors Housing REIT CI Financial Corp. Coca-Cola FEMSA COMINAR REAL ESTATE INVT TR Cominar REIT Crombie REIT CYBERPLEX INC Davis + Henderson Corporation Dundee International REIT E.CL SA ECOLAB INC Fibria Celulose S.A. Fiera Sceptre Inc. First Capital Realty Inc. First National Financial Corporation Genworth MI Canada Inc. Gluskin Sheff + Associates Inc. GMP Capital Inc. GOLDMAN SACHS GROUP INC Grupo Aeroportuario del Sureste Guide Exploration Hanfeng Evergreen Inc. Home Capital Group Inc. HOMEQ Corporation IGM Financial Inc. Intact Financial Corporation Intrepid Potash, Inc.

Disclosures*
S P,,T T G,,I,,U G,,I,,T,,U G,,I,,T,,U I,,P,,T,,U I,,M2,,T I I,,S,,S3 M3 S,,U G,,I,,S,,U B25,,G,,I,,U I G,,I,,T,,U G,,U M5,,P,,T J P,,T J G,,I,,U I I,,T J G,,I,,T,,U I M3,,T G,,I,,U T G,,I,,J,,U T I,,S G,,I,,U P,,T

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SDF KRN LW MAA MEG MGO MRT.UN NGD OCX POT POW PWF PMZ.UN PFG REI.UN RGLD SQM SE SII ST CUQ MOS X WED WPX

K+S AG Karnalyte Resources Inc. Leisureworld Senior Care Corporation MagIndustries Corp. MEG Energy Corp. Migao Corporation Morguard REIT New Gold Inc. Onex Corporation Potash Corporation of Saskatchewan, Inc. Power Corporation of Canada Power Financial Corporation Primaris Retail REIT Principal Financial Group, Inc. RioCan REIT Royal Gold Inc. Sociedad Quimica y Minera de Chile Spectra Energy Corp. Sprott Inc. Stonegate Agricom Ltd. The Churchill Corporation The Mosaic Company TMX Group Inc. Westaim Corporation, The Western Potash Corp.

T I,,U G,,I,,U P,,T G,,I,,N1 T I I,,P,,T U T I,,S S G,,I,,U T G,,I,,U I P,,T T I G,,I,,U J,,T G,,N1,,U R,C,A,S,,U,,U7 J I

Each research analyst named in this report or any subsection of this report certifies that (1) the views expressed in this report in connection with securities or issuers that he or she analyzes accurately reflect his or her personal views; and (2) no part of his or her compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by him or her in this report. The Fundamental Research Analysts' compensation is based on various performance and market criteria and is charged as an expense to certain departments of Scotia Capital Inc., including investment banking. Scotia Capital Inc. and/or its affiliates: expects to receive or intends to seek compensation for investment banking services from issuers covered in this report within the next three months; and has or seeks a business relationship with the issuers referred to herein which involves providing services, other than securities underwriting or advisory services, for which compensation is or may be received. These may include services relating to lending, cash management, foreign exchange, securities trading, derivatives, structured finance or precious metals. For Scotia Capital Research analyst standards and disclosure policies, please visit http://www.scotiacapital.com/disclosures

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*
A

Legend
Scotia Capital Restriction -- U.S. (American) securityholder.

A1 This entity is a connected issuer of Scotia Capital Inc. Scotia Capital Inc. acts as administrator for a fee and is an influential A2 This entity is a connected issuer of Scotia Capital Inc. Scotia Capital Inc. acts as administrator for a fee and has certain
directors and employees in common.

A3 Scotia Capital Inc. acts as administrator for a fee. B1 The CEO and President of Petro-Canada is a director of The Bank of Nova Scotia. B2 The Executive Vice-Chairman of Cascades Inc. is a director of The Bank of Nova Scotia. B3 The President & CEO of Empire Company Limited is a director of The Bank of Nova Scotia. B4 The Chairman & CEO of Onex Corporation is a director of The Bank of Nova Scotia. B6 The Non-Executive Chairman of MDS Inc. is a director of The Bank of Nova Scotia. C
Scotia Capital Restriction -- Canada

D5 Robert Williams, Vice Chairman, Equity Capital Markets is a Director for Enerflex Systems Ltd (TSX). D6 Brian McChesney, Managing Director, Industry Head Structured Products is a Director for Gold World Resources Inc (TSX
Ventures).

The Fundamental Research Analyst/Associate, in his/her own account or in a related account, owns securities of the following issuer(s) under his/her coverage: following issuer(s): issuer(s):

H3 The Head of Equity Research/Supervisory Analyst, in his/her own account or in a related account, owns securities of the H4 The Canadian Index Analyst/Associate, in his/her own account or in a related account, owns securities of the following H6 The Portfolio Strategist/Associate, in his/her own account or in a related account, owns securities of the following issuer(s): H7 The Quantitative Analyst/Associate, in his/her own account or in a related account, owns securities of the following issuer(s): P R S
The issuer paid a portion of the travel-related expenses incurred by the Fundamental Research Analyst/Associate to visit material operations of the following issuer(s): Scotia Capital Restriction Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of the following issuer(s): information regarding a substantial number of competitors of the Bank where such comparable information is known or ascertainable by SCI and in equal prominence to the information in respect of the Bank. The Fundamental Research Analyst/Associate has visited material operations of the following issuer(s):

S1 The Bank of Nova Scotia (the Bank) is the parent company of Scotia Capital Inc. (SCI). This Report includes comparative T

T2 The Fundamental Research Associate has visited material operations of the following issuer(s): U
Within the last 12 months, Scotia Capital Inc. has undertaken an underwriting liability with respect to equity securities of, or has provided advice for a fee with respect to, the following issuer(s):

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Scotia Capital Equity Research Ratings Distribution*

Distribution by Ratings, Equity, and Equity-Related Financings

SCOTIA CAPITAL INC. (SCI) is a member of the Canadian Investor Protection Fund (CIPF). Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither SCI nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.

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This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity futures contracts. SCI, its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities and/or commodities and/or commodity futures contracts mentioned herein as principal or agent. Directors, officers or employees of SCI may serve as directors of corporations referred to herein. SCI and/or its affiliates may have acted as financial advisor and/or underwriter for certain of the corporations mentioned herein and may have received and may receive remuneration for same. This research and all the information opinions and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent of SCI. SCI is a wholly owned subsidiary of a Canadian chartered bank. SCI is regulated by FSA for conduct of investment business in the UK. U.S. Residents: Scotia Capital (USA) Inc., a wholly owned subsidiary of SCI, accepts responsibility for the contents herein, subject to the terms and limitations set out above. Any U.S. person wishing further information or to effect transactions in any security discussed herein should contact Scotia Capital (USA) Inc. at 212-225-6500. The Research Analyst who prepared this report is compensated based upon, among other factors, the overall profitability of Scotia Capital and revenues generated from various departments, including investment banking. The content may have been based, at least in part, on material provided by Credit Suisse First Boston Corporation ("CSFB"), our correspondent research service. CSFB has given ScotiaMcLeod general permission to use its research reports as source materials, but has not reviewed or approved this report, nor has it been informed of its publication. CSFB may from time to time have long or short positions in, effect transactions in, and make markets in securities referred to herein. CSFB may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any company mentioned in this report. Credit Suisse First Boston LLC (CSFB) is an independent third party to Scotia Capital Inc. Each of Scotia Capital Inc. and CSFB are subject to laws that govern the conduct of their research analysts and what each firm and its research analysts must disclose about their relationship to or interest in the companies mentioned in their research reports. Scotia Capital Inc.s reports are prepared subject to Canadian laws, while CSFBs research reports are subject to the laws of the United States and/or other jurisdictions. While we believe that CSFB has enacted policies and procedures designed to ensure that it and its research analysts comply with the laws applicable to them, Scotia Capital Inc. has no control over CSFB or the preparation its research reports. CSFB research reports do not contain disclosures that, had Scotia Capital Inc. prepared the reports, Scotia Capital Inc. and its research analysts may have been required to make about their relationships to or interests in the companies mentioned in the CSFB reports. Unless your ScotiaMcLeod advisor recommends buying or selling any security mentioned in a CSFB research report provided to you, we are providing you with the report for information purposes only. If you have any questions about any research report we provide you or would like to discuss any investment, please contact your ScotiaMcLeod advisor.

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