Variable Return

The Variable Return calculation is the formula used to determine the Variable Return on the Notes at the Maturity Date. The Variable Return, if any, on a Note is linked to the performance of the Portfolio and is calculated as follows:

‘‘NAVFINAL’’ means, at any time (expressed pro rata per Note), the notional proceeds from the liquidation of the Fund Account plus the maturity value of the Bond Account as calculated by the Calculation Agent, minus repayment of any accrued and unpaid Program Fees. An Investor cannot elect to receive the Variable Return, if any, prior to the Maturity Date and the Notes cannot be redeemed or retracted prior to the Maturity Date. There is a possibility that an Investor may not receive any Variable Return.

Fund Account Exposure

Fund exposure was 100% on the issue date (July 31, 2007) and has changed as noted below:

Performance Commentary

As at July 31, 2008 the performance of the BNS Arrow Multi-Strategy™ Fund Deposit Notes, Series 1 on a NAV basis is
-9.13% since inception. Weak global markets have caused Canadian equities to underperform over the past several months, negatively affecting the overall performance of the Notes. The Canadian yield curve rallied over the month, increasing the cost of principal protection and therefore decreasing distance in CPPI Notes. During the period from July 1, 2008 to July 31, 2008 there was no leveraging or de-leveraging event. As at July 31, 2008 the Notes have a fund exposure of 78%.

Fund Performance

Note: An investment in principal protected notes may not be suitable for all investors. Important information about these investments is contained in the Information Statement of each note. Investors should obtain and carefully read a copy prior to investing, paying particular attention to the associated risks. Past performance is not indicative of future returns. Commissions, trailing commissions, management fees and expenses all may be associated with these investments. Principal is guaranteed at maturity only for products purchased at their issue price and held to maturity. The investment return on the notes, if any, is uncertain in that an investor may not receive more than return of the principal amount at maturity. A person should reach a decision to invest in the notes only after carefully considering with his or her advisor, the suitability of this investment in light of his or her investment objectives and the information set out in the respective Information Statement.

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