Province Of Nova Scotia 18-K/A Annual report (foreign governments) (amended)

Exhibit 99.1

FORWARD-LOOKING STATEMENTS

     This exhibit includes forward-looking statements. The Province of Nova Scotia has based these forward-looking statements on its current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties, and assumptions about the Province of Nova Scotia, including, among other things:

• the Province of Nova Scotia’s economic and political trends; and

• the Province of Nova Scotia’s ability to control expenses and maintain revenues.

     In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this exhibit might not occur.

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Forecast Update to Provincial Budget

The forecast amounts set forth in this exhibit are from the Province’s Forecast Update dated, December 28, 2007, and all dollar amounts are expressed in Canadian dollars.

Overview

The Province of Nova Scotia’s surplus for 2007–2008 is forecast to increase to $139.0 million, up from $118.4 million budgeted. The unallocated surplus is now $2.3 million, down $13.1 million from $15.4 million budgeted.

The total amount to be allocated to the debt is forecast to be $136.6 million. This allows government to meet its commitment to reduce the provincial debt this year.

The forecast shows increased revenues from offshore forfeitures and personal income taxes, along with lower debt servicing costs.

These are offset by higher pension expenses, reduced revenues from petroleum royalties, and additional spending in key program areas and infrastructure.

(Unaudited data)

2007–2008 FISCAL SUMMARY							Increase
($ thousands)							(Decrease)
	Budget			Forecast			from Budget
Consolidated Fund
Revenue		7,673,643			7,750,785			77,142
Expenses
Departmental Expenses		6,917,294			6,959,221			41,927
Pension Valuation Adjustment		68,603			96,125			27,522
Debt Servicing Costs		954,338			931,415			(22,923	)
Total Expenses		7,940,235			7,986,761			46,526
		(266,592	)		(235,976	)		30,616
Consolidation and Accounting
Adjustments for Governmental Units		40,977			35,665			(5,312	)
Net Income for Government
Business Enterprises
Nova Scotia Gaming Corporation		139,600			133,700			(5,900	)
Nova Scotia Liquor Corporation		197,070			197,070			0
Other Enterprises		7,374			8,524			1,150
		344,044			339,294			(4,750	)
Provincial Surplus		118,429			138,983			20,554

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Components of the Debt Reduction Plan

Debt Retirement — Contingency	17,885	43,726	25,841
Offshore Offset Agreement	68,238	68,238	0
Restricted Surplus — TCA	16,882	24,660	7,778
Other	15,424	2,359	(13,065	)
	118,429	138,983	20,554

Revenues

Total revenues, including net income from Government Business Enterprises of $339.3 million, are forecast to be $8.1 billion, up $72.4 million over budget.

Provincial own-source revenues are forecast to be $72.2 million higher than budget. This increase is due to adjustments in several areas.

Provincial source revenues — “other” — are forecast to increase by $95.0 million. This is mainly due to anticipated revenues of $93.9 million from offshore forfeitures, as offshore companies notify the province that they will let their exploration licenses expire.

Total income tax revenues are projected to increase by $27.6 million compared to budget. This is attributed to a $45.6 million increase in personal income tax as a result of higher national taxable income, offset by a decline in corporate income tax of $18.0 million, due primarily to lower provincial corporate profits.

Harmonized sales tax revenues are forecast to drop $12.1 million as a result of lower than anticipated consumer spending.

Prior-year adjustments for previous years’ taxes increase revenues by $12.8 million.

Consumption tax revenues for tobacco and motive fuel products are also projected to fall. Tobacco tax revenues are expected to be $8.4 million lower than budget, attributed to reduced consumption and a rise in illegal distribution of cigarettes, while motive fuel tax revenues are expected to decline by $4.9 million overall, mostly due to lower diesel consumption.

The forecast for offshore petroleum royalties is $38.3 million lower than budget, as changes in the USA-Canadian dollar exchange rate affect the value of contracts for the sale of natural gas in the United States market.

Net Income for Government Business Enterprises

Net Income for Government Business Enterprises is forecast to be $4.8 million less than budgeted this year.

The Nova Scotia Gaming Corporation’s net income is expected to be $5.9 million lower than estimated at budget time, dropping from $139.6 million to $133.7 million. This decline is primarily a result of decreased ticket lottery sales.

This is partially offset by a $1.1 million increase in net income from the Halifax-Dartmouth Bridge Commission, due to lower expenses.

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(Unaudited data)

REVENUE						Increase
Fiscal 2007–2008						(Decrease)
($ thousands)	Budget		Forecast			from Budget
Provincial Revenue Sources
Personal Income Tax		1,718,283		1,763,852			45,569
Corporate Income Tax		386,905		368,935			(17,970	)
Harmonized Sales Tax		1,095,822		1,083,757			(12,065	)
Tobacco Tax		150,948		142,504			(8,444	)
Motive Fuel Taxes		252,235		247,382			(4,853	)
Interest Revenues		75,975		76,501			526
Registry of Motor Vehicles		94,488		95,700			1,212
Royalties — Petroleum		420,500		382,200			(38,300	)
Other Provincial Revenues		283,990		378,951			94,961
Prior Years’ Adjustments		0		12,776			12,776
TCA Cost Shared Revenue		6,151		4,969			(1,182	)
Total — Provincial Revenue Sources		4,485,297		4,557,527			72,230
Federal Revenue Sources
Equalization Payments		1,464,528		1,464,528			0
Offshore Oil and Gas Payments		68,238		68,238			0
Canada Health Transfer		638,954		638,954			0	)
Canada Social Transfer		280,335		279,649			(686	)
Wait Times Reduction Fund		34,389		34,389			0
Other Federal Sources		2,319		2,319			0
C48 Trust Funds		44,778		44,778			0
C52 Trust Funds		0		1,735			1,735
Prior Years’ Adjustments		0		(599	)		(599	)
TCA Cost Shared Revenue		10,731		19,691			8,960
Total — Federal Revenue Sources		2,544,272		2,553,682			9,410
Total Revenue		7,029,569		7,111,209			81,640

Expenses

Total expenses are forecast to increase $46.5 million to $8.0 billion. The increase in the Pension Valuation Adjustment and departmental expenses is offset by a decrease in debt servicing costs.

Departmental gross expenses^* are projected to increase by $41.9 million. This variance is a result of an increase in net program expenses of $43.2 million and an increase in ordinary recoveries of $3.6 million offset by a reduction in fees and other charges of $4.8 million.

^* The 2007–2008 Forecast Update presents expenses in both a gross and net format, consistent with the tabled budget. In 2007–2008, fees and other charges, and ordinary recoveries are recorded as revenues in the fiscal summary. In previous years, these amounts were netted from expenses. 2007–2008 expenses are appropriated on a net basis.

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Net Program Expenses

Net program spending is forecast to increase by $43.2 million to $6.4 billion.

Spending at the Department of Health is forecast to increase $3.1 million. Expenses will increase a total $14.0 million, of which $10.6 million is a change in classification of revenue and expense categories.

Additional spending of $6.4 million is forecast in Natural Resources for the forestry transition program; $5.0 million in Economic Development for community development initiatives; $7.0 million in Service Nova Scotia and Municipal Relations for the first responders and infrastructure programs; $1.0 million in Tourism Culture and Heritage for Strategic Community Investment Program; and $2.0 million in Restructuring for Democracy 250 and wage pressures.

An increase of $1.2 million for the tuition relief program is being forecast in Education and Universities. As a result of the lower than budgeted case load in income assistance, Community Services is forecasting less spending by $5.0 million.

Transportation and Infrastructure Renewal is forecasting an increase of $8.2 million. This includes $7.2 million for storm damage caused by flooding in August, Hurricane Noel, and ineligible recoveries for the 2003 flooding, as well as additional road work under the RIM program. An increase of $2.0 million in amortization has been partially offset by savings in various areas of the department.

Health Promotion and Protection is forecasting additional spending of $2.2 million of which $1.7 million is for HPV research and drug costs and $1.7 million is for the Immunization program, including the mumps vaccine. These costs are partially offset by federal funding and various savings in the department.

Pension Valuation Adjustment

The Pension Valuation Adjustment has increased by $27.5 million from budget, from $68.6 million to $96.1 million, due to a recent actuarial review.

The Province of Nova Scotia accounts for pensions and other retirement benefit costs on a basis that is consistent with Generally Accepted Accounting Principles. Assumptions in the calculation of the province’s pension costs are reviewed regularly.

Debt Servicing Cost

The forecast for Debt Servicing Costs reflects a savings of $22.9 million. Reduced borrowing requirements result in projected savings of $6.9 million in interest costs; lower interest rates are expected to reduce the cost of short-term debt by $7.1 million; and an actuarial review indicates a forecasted savings of $8.9 million for interest on pension and other obligations.

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(Unaudited data)

DEPARTMENTAL EXPENSES					Increase
Fiscal 2007–2008					(Decrease)
($ thousands)	Budget		Forecast		from Budget
Agriculture		63,195		63,725		530
Community Services		886,494		883,596		(2,898	)
Economic Development		76,362		81,237		4,875
Education and Universities		1,496,544		1,498,498		1,954
Energy		21,770		21,770		0
Environment and Labour		49,664		49,780		116
Finance		29,747		29,586		(161	)
Fisheries and Aquaculture		6,700		6,692		(8	)
Health		3,045,859		3,048,536		2,677
Health Promotion and Protection		58,618		60,845		2,227
Justice		232,763		235,057		2.294
Natural Resources		79,242		85,775		6,533
Public Service		138,295		139,889		1,594
Service Nova Scotia and Municipal Relations		227,219		237,764		10,545
Tourism, Culture and Heritage		54,364		55,704		1,340
Transportation and Infrastructure Renewal		329,037		337,346		8,309
Restructuring Costs		121,421		123,421		2,000
Total — Departmental Expenses		6,917,294		6,959,221		41,927

(Unaudited data)

NET PROGRAM EXPENSES					Increase
Fiscal 2007–2008					(Decrease)
($ thousands)	Budget		Forecast		from Budget
Agriculture		49,837		50,252		415
Community Services		781,783		776,713		(5,070	)
Economic Development		74,666		79,666		5,000
Education and Universities		1,439,250		1,440,438		1,188
Energy		20,261		20,261		0
Environment and Labour		34,767		34,767		0
Finance		25,619		25,509		(110	)
Fisheries and Aquaculture		5,773		5,765		(8	)
Health		2,959,112		2,973,131		14,019
Health Promotion and Protection		49,743		51,963		2,220
Justice		128,205		128,205		0
Natural Resources		76,902		83,268		6,366
Public Service		131,959		132,886		927
Service Nova Scotia and Municipal Relations		121,743		128,743		7,000
Tourism, Culture and Heritage		49,231		50,231		1,000
Transportation and Infrastructure Renewal		319,755		328,004		8,249
Restructuring Costs		118,143		120,143		2,000
Total — Net Program Expenses		6,386,749		6,429,945		43,196

Debt Reduction Plan

The Province of Nova Scotia is forecasting an increase of $33.6 million in the amount of surplus required for the debt reduction plan.

The surplus is forecast to increase to $139.0 million, up from $118.4 million budgeted. The unallocated surplus is now $2.3 million, down $13.1 from $15.4 million budgeted.

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Of the forecasted surplus of $139.0 million, $136.6 million will be applied to the debt to satisfy the government commitment to lower the net direct debt each year beginning in 2007–2008. This is made up of a $68.2 million legislated surplus from the offshore offset and an additional $68.4 million.

The $136.6 million is up from the budgeted amount of $103.0 million.

The increased allocation to the debt is primarily related to increased spending on Tangible Capital Assets (TCA). A total of $33.1 million has been added to the TCA budget for construction and repair of highways and bridges, schools, and information technology projects. This increase is offset by $7.8 million in cost-sharing of capital projects.

Economic Performance and Outlook-2007

Nova Scotia’s economy continues to grow, but at a slower pace than budget. Nova Scotia’s real Gross Domestic Product growth is forecast to be 1.6 per cent, down from the budget estimate of 2.3 per cent. Lower consumer spending and a decline in business investment are the main factors in the change.

Employment growth is running at 1.3 per cent for the first 11 months of 2007, which is higher than budget. The unemployment rate is consistent with budget, at 8.0 per cent. Labour income growth is 4.7 per cent for the first nine months of 2007, which is ahead of the budgeted growth rate of 3.7 per cent.

Inflation is expected to be lower than assumed at budget time, with the Consumer Price Index dropping to 1.8 per cent for the first eleven months of 2007, compared to a budget projection of 2.1 per cent.

Retail sales remain positive with a revised forecast growth rate of 3.9 per cent. However, this is down from the budgeted growth of 4.9 per cent.

Slower growth in commercial capital investment has resulted in a 10.0 per cent decline in non-residential construction for the first nine months of the year.

The export of goods in 2007 is still positive, but the slower US housing market coupled with the high Canadian dollar is having a negative impact on the export values of lumber, gypsum, and wood pulp. This reduction in export values is offset by the return to newsprint production at Stora Enso, an increase in natural gas production and more tire exports.

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