July 3, 2012

Report prepared by: Ryan Lewenza, CFA, CMT V.P., U.S. Equity Strategist

Mid-Year Update

In the “risk-off” environment seen for much of Q2, small caps and technology were hit the hardest, with the Russell 2000 Index and the Nasdaq Composite Index down 3.83% and 5.06%, respectively. The defensive telecommunications, utilities, and consumer staples sectors outperformed, gaining, 12.63%, 5.46%, and 2.11%, respectively. The cyclical sectors underperformed with financials down 7.27%, energy off 6.53%, and information technology declining 6.96%. While Q2 was a more difficult trading environment than Q1, it is important to note that the S&P 500 Index (S&P 500) is still up 8.31% year to date. Europe continues to be the most significant risk to the global markets, with news from the region largely driving the volatile day-to-day price action. Greece, with its potential to default (again) on its debt and possible exit from the eurozone, remains front and centre. However, the focus is quickly turning to Spain, whose economy at US$1.4 trillion is nearly 5 times larger than that of Greece. The key question is whether the eurozone debt crisis will escalate further, and push the global economy into a recession. Unfortunately the problems are largely political, making it difficult to predict one way or the other. All of this uncertainty bears a defensive posture at this time. Looking at simple P/E ratios, equity valuations look quite reasonable, and even cheap in certain areas of the market. However, with the prospect of slowing earnings and increasing global risks, we believe stocks will be hard pressed to see any significant P/E expansion, and therefore maintain our S&P 500 year-end price target range of 1,290-1,340, which assumes a year-end P/E target range of 1313.5x. Stepping back from the day-to-day market gyrations, we believe the S&P 500 will continue to trade range-bound between 1,200 and 1,400 through the summer, as the markets weigh the negatives of the European debt issues and slowing growth, with the positives of still healthy corporate earnings, reasonable valuations and supportive monetary policies. With the heightened risks we recently upgraded consumer staples to overweight from market weight. We continue to recommend an overweight in health care. Our sole cyclical overweight position is the information technology sector. The energy, utilities, telecommunications and industrials sectors remain at market weight. Finally, we maintain our underweight recommendation for the financials and consumer discretionary sector.

This Document is for distribution to Canadian clients only. Please refer to Appendix A in this report for important information.

U.S. Equity Strategy

July 3, 2012

Mid-Year Update
Increasingly the stock market resembles my golf game. It is characterized by extreme ups and downs that provide moments of elation and disappointment (often in the same round) but in the end always gets me to come back for more. Continuing with the golf analogy, the first half of the year (front 9) saw some birdies (strong first quarter with the S&P 500 up 12%) and some bogey’s (weak second quarter with the S&P 500 down 3.29%). With European debt concerns mounting, the approaching U.S. Presidential election and the looming U.S. “fiscal cliff”, the second half of the year (back nine) should provide spectators (investors) with lots of excitement (volatility). In the “risk-off” environment seen for much of Q2, small caps and technology were hit the hardest, with the Russell 2000 Index and the Nasdaq Composite Index down 3.83% and 5.06%, respectively. The defensive telecommunications, utilities, and consumer staples sectors outperformed, gaining, 12.63%, 5.46%, and 2.11%, respectively. The cyclical sectors underperformed with financials down 7.27%, energy off 6.53%, and information technology declining 6.96%.
Exhibit 1: Q2/12 Index Price Returns Indices Level Q2 Return YTD Return S&P 500 1,362.16 -3.29% 8.31% Dow Jones Industrial Average 12,880.09 -2.51% 5.42% NASDAQ Composite 2,935.05 -5.06% 12.66% Small Cap (Russell 2000) 798.49 -3.83% 7.77% Growth (Russell 1000) 634.43 -4.41% 9.22% Value (Russell 1000) 671.67 -2.85% 7.29% S&P 500 Sectors UTILITIES 187.80 5.46% 2.64% CONSUMER STAPLES 358.92 2.11% 6.97% HEALTH CARE 440.76 1.15% 9.67% TELECOMMUNICATION 148.67 12.63% 13.34% INFORMATION TECH 462.02 -6.96% 12.71% CONSUMER DISCRETION 345.81 -3.01% 12.06% ENERGY 503.27 -6.53% -3.37% INDUSTRIALS 310.06 -4.16% 6.07% MATERIALS 222.94 -4.78% 5.30% FINANCIALS 197.37 -7.27% 12.63%
Source: Baseline. As of June 29, 2012

While Q2 was a more difficult trading environment than Q1, it is important to note that the S&P 500 is still up 8.31% year to date. Let’s hope the back nine is on par with the front nine. Europe Remains the Focus While sounding like a broken record, Europe continues to be the most significant risk to the global markets, with news from the region largely driving the volatile day-to-day price action. Greece, with its potential to default (again) on its debt and potential exit from the eurozone, remains front and centre. However, the focus is quickly turning to Spain, whose economy at US$1.4 trillion is nearly 5 times larger than that of Greece. In early June, Spain agreed to a “bailout lite”, by accepting a €100 billion loan to help shore up its ailing banks. Initially, the news of the bailout sparked a rally in the equity markets, but this quickly faded as the realization that the €100 billion loan would dramatically increase Spain’s debt-toGDP ratio, which given its large deficits and unemployment of roughly 25%, could make it more difficult to meet debt obligations. In recognition of this, investors began to reduce exposure to Spanish bonds, which pushed Spain’s 10-year bond yield to recent highs of 7.28% (Exhibit 2). Sovereign bond yields at the 7% level are concerning since: 1) it is unsustainable in the long run from a funding perspective, and 2) it is the level that eventually forced Greece, Ireland and Portugal to seek financial assistance from authorities. We have seen purchasing manager indices’ (PMIs) decline across the globe in recent months, a worrisome sign that the European debt issues are beginning to take a toll on the global economy. The key question is whether the eurozone debt crisis will escalate further, and push the global economy into a recession. Unfortunately the problems are largely political, making it difficult to predict one way or the other. All of this uncertainty bears a defensive posture at this time. Exhibit 2: Spain’s Bond Yield Breaches Key 7% Level; European Debt Issues Spreading Into the Global Economy
%

7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 Jan-11

Spain 10-Year Government Bond Yield
Spain's 10-year bond yield is up 200 bps since March 2012.

Global Manufacturing PMIs Current Previous Brazil 49.3 49.3 China HSBC 48.7 49.1 France 45.3 44.7 Germany 44.7 45.2 Italy 44.8 43.8 Japan 50.7 50.7 U.K. 45.9 50.2 U.S. 53.5 54.8 Euro zone Global 44.8 50.6 45.1 51.4

1 Month Change 0.0 -0.4 0.6 -0.5 1.0 0.0 -4.3 -1.3 -0.3 -0.8

3 Months Ago 51.4 49.7 46.7 48.4 47.8 50.5 51.5 52.4 47.7 51.2

3 Month Change -2.1 -1.0 -1.4 -3.7 -3.0 0.2 -5.6 1.1 -2.9 -0.6

Mar-11

Jun-11

Sep-11

Nov-11

Feb-12

May-12

Source: Bloomberg Finance L.P. As of June 19, 2012

Source: Bloomberg Finance L.P. As of June 19, 2012

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U.S. Equity Strategy

July 3, 2012

Economic Update
With most of Europe likely in or near a recession, and China’s economic growth slowing, expectations for U.S. economic growth have come down. TD Economics recently adjusted their 2012 U.S. GDP growth forecast marginally to 2.1%, from their earlier 2.2% forecast. For us there is no change in our growth expectations, as we have been fairly consistent in the view that U.S. growth would likely be weak and below trend over the last few years. Much has been written about the similarities between the economic slowdown and equity market weakness this year and the previous two years. One glaring similarity is that of nonfarm payrolls, which rose dramatically in the first few months of 2010, 2011 and 2012, but then weakened markedly during the summer periods (Exhibit 3). We believe this is the most important data point to track right now, as upcoming readings will give us a better sense if the slowdown is transitory, or a harbinger of rougher times ahead. A silver lining to weaker nonfarm payrolls, is that the U.S. Federal Reserve (Fed) could be more willing to implement another round of quantitative easing, if they were to weaken significantly further. One indicator we track closely to help isolate turning points in the economy, is the Citigroup U.S. Economic Surprise Index, which measures the difference between forecasted and actual economic data points. As seen in Exhibit 3, the index continues to weaken, which captures the worse than expected data releases since January 2012. The positive take away here, is that when the index has historically declined to -100 (currently at -60), it often bottoms and begins to move higher. Essentially economists become so pessimistic making it easier to beat their low expectations. With expectations so low, we could soon begin to see better then expected data prints, which would be supportive to the equity market. Exhibit 3: Nonfarm Payrolls and Citigroup Economic Surprise Index Capture the Weakening Near-term Trends
(in thousands)

U.S. Nonfarm Payrolls
Early strong job gains in 2011 and 2012 faded into the spring.
246 220 202 251 223

Citigroup U.S. Economic Surprise Index
150 100
259

350 300 250 200
157

275

Economists too optimistic

50 0
143

150
110 112 84 54 96 85

-50
77

100 50 0

69

-100 Economists too pessimistic -150 -200 Jan-03

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11

Jul-11

Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12

Source: Bloomberg Finance L.P. As of June 19, 2012

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Source: Bloomberg Finance L.P. As of June 28, 2012

Central to our view that the U.S. would experience a muddle through recovery, is our belief that further deleveraging is required, which will act as a significant drag on future growth. In Exhibit 4 we chart the total U.S. debt outstanding excluding financials, and what is glaring is the parabolic rise in debt during the 1990s and 2000s. Debt over this period roughly doubled and now needs to be addressed. There has been some deleveraging by the U.S. consumer and the U.S. government likely to begin the process in the not too distant future. This in our view is why growth has and should continue to be anemic relative to the past. Finally, if things weren’t challenging enough with Europe, we remind readers of the approaching “fiscal cliff” which speaks to the large cuts to federal spending and tax increases coming in 2013. In total, if all planned spending cuts and tax increases occur, it would equate to a 4% drag to economic growth in 2013, according to the Congressional Budget Office. TD Economics assumes Washington will make some rational choices and delay some spending cuts and tax increases, which they forecast will result in a lower fiscal drag of 1.5%. However, in a world of continued deleveraging, and below trend growth, a 1.5% drag could still represent a significant headwind in 2013. Exhibit 4: Deleveraging is Largest Drag to Growth Long Term; Fiscal Cliff Will Impact Growth Short Term
(in billions)

$45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 -$5,000 -$10,000 '70 '74 '78

U.S. Debt Outstanding Nonfinancial Total
The U.S. went on a debt binge during the 2000s, with total debt outstanding excluding financials, doubling over this short period. We expect a long and slow deleveraging process, taking the debt load closer to its long-term trendline.
Long-term trendline

Impact from the Fiscal Cliff Changes in Specified Revenue Polices Expiration of certain income, estate, and gift taxes Expiration of reduced payroll tax Other expiring provisions Taxes included in Affordable Care Act Subtotal Changes in Specified Spending Policies Effects of automatic cuts from the Budget Control Act Expiration of enhanced unemployment benefits Reduction in payment rates for physicians Subtotal Other Changes in Revenues and Spending Total Change Without Effects of Economic Feedback

(in $ billions) 221 95 65 18 399 65 26 11 102 105 606 4.0% 1.5%

'82

'86

'90

'94

'98

'02

'06

'10

As a % of 2013 GDP TD Economics forecast of fiscal drag for 2013
Source: Congressional Budget Office, TD Economics. As of June 19, 2012

Source: Bloomberg Finance L.P. As of June 19, 2012

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U.S. Equity Strategy

July 3, 2012

Fundamental Update
With the recent weak PMI data across many core regions, global economic growth is likely to decelerate in the coming months. With roughly 40% of total revenues within in the S&P 500 coming from outside the U.S. it is only logical to assume S&P 500 revenues, and in turn earnings, will face some near-term headwinds as growth decelerates. Anecdotally, we have seen negative preannouncements from some large U.S. bellwether companies (i.e., FedEx Corp and Procter & Gamble Co.), which supports our belief that corporate earnings are likely to be weaker than expected. In fact, for the upcoming Q2 earnings season the bottom-up consensus estimate is pointing to S&P 500 quarterly earnings of $25.20/share, which if met, could represent the first Y/Y earnings decline seen in this recovery. We have been highlighting the potential for slower earnings growth for some time, with this quarter possibly being an important inflection point for corporate earnings. As such, we remain comfortable with our below consensus full-year S&P 500 earnings forecast of $99/share, which is roughly 5% below the consensus estimate of $104.20. That said, $99/share in possible earnings is still very robust and supportive of equities. Looking at simple P/E ratios, equity valuations look quite reasonable, and even cheap in certain areas of the market, whether looking at historical or forward earnings. The trailing P/E for the S&P 500 is currently 13.5x, which remains well below the long-term average of 16.5x. On a forward basis the S&P 500 looks more attractive, with a forward P/E of 12.8x, which is a 12% discount to its average forward P/E multiple since 2006 (Exhibit 5). However, with the prospect of slowing earnings and increasing global risks, we believe stocks will be hard pressed to see any significant P/E expansion, and therefore maintain our S&P 500 year-end price target range of 1,290-1,340, which assumes a year-end P/E target range of 13-13.5x. Exhibit 5: U.S. Stock Valuations Are Reasonable; Earnings Estimates Likely to Come Down Further Though
19 18 17 16 15 14 13 12 11 10 Jan-06
Average Since 2006

S&P 500 Forward P/E
$106 $106 $105 $105 $104 $104 $103 Jan-12

S&P 500 Current Year Earnings Estimates
S&P 500 2012 EPS estimates looked to have rolled over. Question is whether forward earnings will be revised lower in the coming months.

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Source: Bloomberg Finance L.P. As of June 19, 2012

Source: Bloomberg Finance L.P. As of June 19, 2012

With the front page headlines of Europe constantly reminding us of the risks to the global economy, we can often lose sight of some of the positives. Beyond, reasonable valuations, U.S. corporations have never been stronger, in our view. First, we note that U.S. nonfinancial companies have roughly $1.7 trillion in cash and other liquid assets on their balance sheets, roughly double what it was in 2000. This speaks to companies like Apple Inc. which has $105 billion in cash, or Microsoft Inc. with $60 billion. Second, when we look at cash as a percentage of total assets for companies in the S&P 500, we see very high levels for information technology (13.7% of total assets), health care (11.2%), and industrials at 9.3%. U.S. corporations are flush with cash, which puts them in a position of strength in a weakening global economy. Exhibit 6: U.S. Corporations Are Flush with Cash with the Info Tech Sector Having the Strongest Cash Position
in billions

U.S. Nonfinancial Corporations: Cash and Other Liquid Assets

$1,900 $1,700 $1,500 $1,300 $1,100 $900 $700 $500 2000 U.S. companies continue to shore up their already strong balance sheets by holding more cash and liquid assets.

Sector Information Technology Health Care Industrials Consumer Discretionary Materials Consumer Staples Energy Telecommunication Services Financials Utilities
2012

Total Cash as % Cash ($Mil) Assets ($Mil) of Total Assets 196,067 1,431,358 13.7% 138,352 1,230,177 11.2% 166,116 1,789,250 9.3% 112,995 1,375,585 8.2% 39,378 480,846 8.2% 63,196 1,095,998 5.8% 74,541 1,578,119 4.7% 24,698 658,208 3.8% 631,095 16,966,112 3.7% 15,176 1,023,866 1.5%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: Bloomberg Finance L.P. As of June 19, 2012

Source: Bloomberg Finance L.P. As of June 19, 2012

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U.S. Equity Strategy

July 3, 2012

Technical Update
Since bottoming in the Fall of last year, the S&P 500 had been in a strong intermediate uptrend. The beginning of the rally in September 2011 was fuelled by an improvement in economic data, and the realization that the Spring/Summer weakness was just that, and not the beginning of another recession. Then, as European sovereign debt issues began to mount, the European Central Bank (ECB) injected a massive amount of liquidity into the system to help address bank funding gaps. That added further fuel to the stock market and the S&P 500 advanced 12% in Q1/12 for its strongest first quarter since 1998. However, the uptrend was broken in early May, as the diminishing impacts of the liquidity injection began to wane, and the European debt crisis began its next chapter, with Spain and Italy grabbing investors’ attention. Right on cue with the “sell in May” phenomenon, the market came under significant selling pressure which we prognosticated could occur in our Q1/12 update (“Adding it all together, we believe there is the potential for more nearterm upside in the S&P 500, but this is likely to be capped in the resistance area of 1,440-1,550, before a pause/pullback comes in the Q2/Q3 period. In our view, locking in some gains heading into the Spring, following a steep rally, might not be a bad idea.”) On the market pullback the S&P 500 found support at the important 200-day moving average, which was encouraging (Exhibit 7). Stepping back from the day-to-day market gyrations, we believe the S&P 500 will continue to trade range-bound between 1,200 and 1,400 through the summer, as the markets weigh the negatives of the European debt issues and slowing growth, with the positives of still healthy corporate earnings, reasonable valuations and supportive monetary policies. Readers of our work know that we closely monitor the bond market for clues about the health of the economy and stock market, as we have found that the bond market is often smarter than the stock market. With the U.S. 10-year Treasury bond yield breaking to new record lows of 1.44% in June 2012, it is clear to us that the bond market sees significant deflationary headwinds on the horizon. For to us get more constructive on the U.S. equity markets we would like to see the S&P 500 break above 1,364 (would represent a higher high and possibly the start of a new uptrend) accompanied by an increase in the U.S. 10-year Treasury yield to above 1.80%, which has been technical support since Q4/11. Exhibit 7: S&P 500 Broke its Uptrend and Likely to Remain Range Bound; Government Bond Yield Hit New Lows
1,450 1,400 1,350 1,300

S&P 500 Index

%

4.0 3.5 3.0 2.5 2.0

U.S. 10-Year Treasury Yield

1,250 1,200 1,150 1,100 May-11
S&P 500 50-DMA 200-DMA

1.5
The S&P 500 bounced higher off its 200-day MA. It now needs to break above resistance of 1,360, for us to get more bullish on stocks technically.

1.0 0.5 0.0 Jan-11

The 10-year treasury yield hit a near-record low of 1.44% in June 2012. For us to get more optimistic on the U.S. stock market, we would like to see the 10-year yield move higher, back above 1.80%.

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Source: Bloomberg Finance L.P. As of June 19, 2012

Source: Bloomberg Finance L.P. As of June 19, 2012

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U.S. Equity Strategy

July 3, 2012

Sector Recommendations
Until we see a comprehensive solution to Europe’s debt problems and an improvement in the U.S. and global economies, we feel it’s best to position portfolios defensively. With the heightened risks we recently upgraded consumer staples to overweight from market weight. Exhibit 8 shows that during the 2008/09 financial crisis, the consumer staples sector held up relatively well, which is one reason we recently moved to an overweight stance. Additionally, we note that the steep decline in commodity prices should help reduce input costs for the consumer staples sector. We continue to recommend an overweight in health care. Our sole cyclical overweight position is the information technology sector due to its attractive valuations, strong balance sheets, and supportive secular technology trends (i.e., data storage and smart phone revolution). The energy, utilities, telecommunications, materials and industrials sectors remain at market weight. We find valuations for the energy and industrials sectors attractive, however, with global growth likely to slow, and the continued strength in the U.S. dollar, we believe there are better areas to overweight at present. High valuations for telecommunications and utilities keep us at market weight for now. Finally, we maintain our underweight recommendation for the financials and consumer discretionary sector. In times of distress, U.S. financials are highly correlated with European financials, which supports our underweight recommendation. Exhibit 8: Consumer Staples Outperform in Times of Distress; Info Tech Valuations Support Overweight Position
% 0
-10 -20 -30 -30.71 -40 -50 -60 -70 -80 -90
FINANCIALS INDUSTRIALS MATERIALS ENERGY CONS DISCRET INFO TECH UTILITIES TELECOM CONS STAPLES HEALTH CARE

S&P 500 Sector Returns During 2008 Financial Crisis

3.00 2.50 2.00 1.50

Information Technology P/E Relative to S&P 500
The information technology sector is trading at a large disount to its longterm average valuation.

-30.64

-53.39 -62.08 -76.60 -61.41

-51.52

-47.89

-44.11

-41.38

Long-Term Average
Consumer staples and health care performed the best during the 2008 financial crisis.

1.00 0.50 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Source: Bloomberg Finance L.P. As of June 19, 2012

Source: Bloomberg Finance L.P. Note: Price return data from May 19, 2008 to Mar 6, 2009

Conclusion The already fragile U.S. economic outlook is facing a number of potential headwinds including the pending fiscal cliff, slower global growth, and the potential for the eurozone debt crisis to deepen. There is the potential for continued volatility in equity markets over the near term. While the macro backdrop is troubling, the fundamentals for many companies remain solid. Strong corporate balance sheets, reasonable valuations and decent corporate earnings continue to support equities. We continue to advocate positioning portfolios defensively in this uncertain environment with an emphasis on large-cap, high quality, dividend-paying stocks. Exhibit 9: Sector Recommendations and Valuations
Sector Sector Price Dividend Name Weight Recommendation 28-Jun-12 Yield Financials 14.4% Underweight 192.32 1.8% Consumer Discretionary 11.1% Underweight 339.52 1.5% Industrials 10.4% Market weight 300.05 2.4% Materials 3.4% Market weight 216.62 2.3% Information Technology 19.9% Overweight 447.26 1.0% Energy 10.6% Market weight 488.25 2.1% Health Care 12.0% Overweight 429.72 2.1% Consumer Staples 11.3% Overweight 352.39 2.8% Utilities 3.7% Market weight 186.76 3.9% Telecommunications 3.2% Market weight 145.70 4.7% S&P 500 1,329.04 2.1% Source: Bloomberg Finance L.P., Baseline. As of June 28, 2012 Trail 11.0 16.4 13.4 13.1 12.9 10.0 12.5 16.5 14.9 20.1 13.1 P/E P/E Rel to 5 Yr Future EPS Forward 10 Yr Avg Growth Rate 10.6 0.60 9% 14.7 0.80 16% 12.3 0.80 12% 12.1 0.70 13% 11.6 0.50 14% 10.2 0.70 11% 12.4 0.80 8% 15.7 0.90 9% 15.3 1.10 3% 20.2 1.30 8% 12.4 0.80

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U.S. Equity Strategy

July 3, 2012

Appendix A – Important Disclosures
Technical Research Disclaimer The opinions expressed herein reflect a technical perspective and may differ from fundamental research on these issuers. Fundamental research can be obtained through your TD Waterhouse Investment Advisor or on the Markets and Research site within WebBroker. The technical research opinions contained in this report are based on historical technical data and expectations of the most likely direction of a market or security. No guarantee of that outcome is ever implied. Research Dissemination Policy TD Waterhouse makes its research products available in electronic format. TD Waterhouse posts its research products to its proprietary websites for all eligible clients to access by password and distributes the information to its sales personnel who may then distribute it to their retail clients under the appropriate circumstances either by email, fax or regular mail. No recipient may pass on to any other person, or reproduce by any means, the information contained in this report without the prior written consent of TD Waterhouse. Analyst Certification The TD Waterhouse Portfolio Advice & Investment Research analyst(s) responsible for this report hereby certify that (i) the recommendations and technical research opinions expressed in the research report accurately reflect the personal views of the analyst(s) about any and all of the securities or issuers discussed herein and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the provision of specific recommendations or views contained in the research report. Conflicts of Interest The TD Waterhouse Portfolio Advice & Investment Research analyst(s) responsible for this report may own securities of the issuer(s) discussed in this report. As with most other TD Waterhouse employees, the analyst(s) who prepared this report are compensated based upon (among other factors) the overall profitability of TD Waterhouse and its affiliates, which includes the overall profitability of investment banking services, however TD Waterhouse does not compensate analysts based on specific investment banking transactions. TD Waterhouse Disclaimer The statements and statistics contained herein are based on material believed to be reliable, but are not guaranteed to be accurate or complete. This report is for information purposes only and is not an offer or solicitation with respect to the purchase or sale of any investment fund, security or other product. Particular investments or trading strategies should be evaluated relative to each individual’s objectives. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance. This document does not provide individual, financial, legal, investment or tax advice. Please consult your own legal, investment, and tax advisor. All opinions and other information included in this document are subject to change without notice. The Toronto-Dominion Bank and its affiliates and related entities are not liable for any errors or omissions in the information or for any loss or damage suffered. TD Waterhouse Canada Inc. and/or its affiliated persons or companies may hold a position in the securities mentioned, including options, futures and other derivative instruments thereon, and may, as principal or agent, buy or sell such securities. Affiliated persons or companies may also make a market in and participate in an underwriting of such securities. TD Waterhouse represents the products and services offered by TD Waterhouse Canada Inc. (Member – Canadian Investor Protection Fund), TD Waterhouse Private Investment Counsel Inc., TD Waterhouse Private Banking (offered by The Toronto-Dominion Bank) and TD Waterhouse Private Trust (offered by The Canada Trust Company). TD Securities Disclaimer “TD Securities” is the trade name which TD Securities Inc. and TD Securities (USA) LLC jointly use to market their institutional equity services. TD Securities is a trade-mark of The Toronto-Dominion Bank representing TD Securities Inc., TD Securities (USA) LLC, TD Securities Limited and certain corporate and investment banking activities of The Toronto-Dominion Bank. Page 7

U.S. Equity Strategy

July 3, 2012

Trade-mark Disclosure Bloomberg and Bloomberg.com are trademarks and service marks of Bloomberg Finance L.P., a Delaware limited partnership, or its subsidiaries. All rights reserved. All trademarks are the property of their respective owners. ®/ The TD logo and other trade-marks are the property of The Toronto-Dominion Bank or a wholly-owned subsidiary, in Canada and/or in other countries.

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