Year-End Market Report

2009
EQUITY MARKETS – Local Currency Returns
• In the early part of the year, investors continued to grapple with negative news indicating the worldwide recession could be deeper and longer than previously
thought. World equity markets hit multi-year lows in early March. Policy makers took emergency measures to stabilize the financial system and stimulate economic
activity and towards the middle of the year optimism began to mount that the worst of the global recession was over and a recovery was taking shape. Investors
became less risk-averse and increasingly turned from relatively safe government bonds to potentially higher-yielding assets like equities. By year-end, the
markets had rebounded to post positive returns for the 12 months.

End Level 2009 2009 C$

S&P/TSX 11746 30.7% 30.7% • Best annual gain since 1979; beat S&P 500 for 6th year in row – Total Return 35%.

DOW JONES 10428 18.8% 2.7% • American Express, Microsoft, IBM, Cisco Systems led the advance – TR 5.4% C$.
S&P 500 1115 23.5% 6.7% • Tech, materials, consumer discretionary led all 10 sectors higher – TR 8.6% C$.
NASDAQ 2269 43.9% 24.3% • 6 of 7 sectors rose, led by computers, telecom; banks fell – TR 24.9% C$.
RUSSELL 2000 625 25.2% 8.2% • Consumer discretionary, tech led 8 of 9 sectors higher; financials fell – TR 9.3% C$.

NIKKEI 225 10546 19.0% 0.2% • One of the smallest returns among world stock markets – TR 2.4% C$.
EAFE 1581 27.7% 10.4% • European stks up 60% since Mar; best yearly gain in 10 years – TR 13.6% C$.
MSCI WORLD 1168 27.0% 9.7% • Biggest advance since 2003 – TR 12.2% C$.

TSX SECTORS • In complete reverse of 2008, all 10 sectors advanced in 2009.

End Level 2009 End Level 2009
Information Technology 261 44.3% Industrials 1134 23.7%
Financials 1568 38.3% Utilities 1702 12.7%
Energy 2855 35.0% Consumer Discretionary 899 11.1%
Materials 3020 33.4% Consumer Staples 1546 6.1%
Health Care 325 28.6% Telecommunication Services 726 0.7%

Oil: West Texas Intermediate US$/b $79.36 $34.76 Gold: Spot US$/oz $1,096.95 $214.90

FIXED INCOME MARKETS YEAR-END RATES %

3-mo T-bill 10-yr Bond 30-yr Bond
Canada 0.34 3.61 4.08 • Over the year, Canadian 3-month T-bill yields fell about 54 basis points, while the
U.S. 0.06 3.84 4.64 yield on 10-year federal government bonds rose 92 bps and the yield on 30-year
Spread 0.28 -0.23 -0.56 federal bonds climbed 63 bps. U.S. Treasury yields were up across the board, as
well.
End Level 2009
DEX Universe Bond 737.1 5.4% • Overall, Canadian bonds posted positive returns on the year. Corporate bonds were
DEX Real Return Bond 399.1 14.5% strong, outperforming government issues, as credit spreads tightened from
Mer Lynch US High Yield Master II 685.0 57.5% historically wide margins and are now back to where they were before the failure of
Lehman Brothers in September 2008.
Last Meeting Current Rate Next Meeting
Bank of Canada Dec 8 0.25% Jan 19 • Overnight rate was cut from 1.50% to 0.25% in the early part of 2009.
U.S. Federal Reserve Dec 16 zero to 0.25% Jan 27 • Federal funds rate held to a target range of zero to 0.25% in 2009.

CURRENCIES
End Level 2009
Canadian dollar: CAD per USD 1.0532 15.7% • The C$ bounced back from a sharp drop versus the US$ in 2008, as optimism the
Japanese yen: JPY per USD 93.0200 -2.6% global economy is recovering spurred a rally in commodity prices and reduced the
Euro: USD per EURO 1.4321 2.5% US$'s appeal as a safe haven. The C$ finished the year at 95.54 cents US, after
British pound: USD per GBP 1.6170 10.8% hitting a low of 76.85 in March and a high of 97.65 in October.

Relative to the Canadian dollar (2009): euro (-11.9%); British pound (-5.0%); yen (-16.4%).

OUTLOOK
Although headwinds remain, the worst is probably behind us and policy makers are now considering the need to remove monetary stimulus in light of the
prospects for improving economic activity and rising inflation expectations. However, they will likely take a cautious approach in timing and scope.

The Bank of Canada (BoC) held the overnight rate at 0.25% at its meeting of 2009 in December, and reiterated that it intends to leave it unchanged until mid-
2010, conditional on the outlook for inflation. The BoC said that although areas of weakness remain, the global economy is showing further signs of improvement
and the global outlook is slightly better than it projected in its quarterly Monetary Policy Report in October. As for Canada, the BoC continues to expect steady
improvement in the economy, led by domestic demand. It still projects that inflation is unlikely to return to its 2.0% target before the second half of 2011.

The US Federal Reserve (Fed) also remained on hold in December and reaffirmed its commitment to keep the federal funds rate exceptionally low for an
extended period. The Fed noted that the economy is strengthening, and that household spending appears to be expanding, though it remains constrained by
ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. It still expects inflation to remain subdued for some time. At the same time, the
European Central Bank kept its key lending rate at a record-low 1.00% in December, noting the low borrowing rate was appropriate, as the region recovers
gradually from recession and inflation remains tame.

Overall, the current backdrop remains positive as 2010 gets underway. Accommodative monetary and fiscal policy should help fuel moderate economic growth,
which would support earnings without stirring inflationary pressures. And policy makers have generally indicated that they are committed to maintaining stimulus
measures for some time yet to provide substantial liquidity.

*This report has been prepared for information purposes only. The information has been drawn from sources believed to be reliable, but the accuracy or completeness is not guaranteed,
nor in providing it does The Toronto-Dominion Bank, its affiliates, subsidiaries or related entities or TD Asset Management Inc. assume any responsibility or liability for any errors or
omissions in the information or for any loss or damage suffered. Particular investment strategies should be evaluated relative to each individual's objectives.
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