Epoch U.S. Shareholder Yield Fund

Transcription

1 Epoch U.S. Shareholder Yield Fund (03/18) TD Mutual Funds for the period ended This contains financial highlights, but does not contain the complete annual financial statements of the investment fund. You can get a copy of the annual financial statements at your request, at no cost, by calling , by writing to us at TD Asset Management Inc., P.O. Box 100, 66 Wellington Street West, TD Bank Tower, Toronto-Dominion Centre, Toronto, Ontario, M5K 1G8, by to td.mutualfunds@td.com, or by visiting our website at tdassetmanagement.com or the SEDAR website at sedar.com Securityholders may also contact us or visit our website to get a copy of the investment fund s interim financial report, proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure at no cost.

2 n Management Discussion of Fund Performance Investment Objectives and Strategies The investment objective of (the Fund ) is to seek to provide growth and income by primarily investing in, or gaining exposure to, income-producing securities of U.S. issuers. In seeking to achieve this objective, the Fund invests primarily in a diversified portfolio of securities of U.S. issuers, of varying market capitalizations, that can produce excess free cash flows and whose management are committed to delivering shareholder yield by paying consistent and growing dividends, repurchasing shares or paying down debt without taking undue risk. Risk The risks of investing in the Fund remain as outlined in the simplified prospectus. Results of Operations The Investor Series units of the Fund returned 7.5 percent* for the year ended ( Reporting Period ), versus 6.2 percent for the Fund s product benchmark, Russell 1000 Value Total Return Index (C$) ( Russell 1000 Value TR Index (C$) ). Returns for other series of the Fund may vary, largely due to differences in fees and expenses. Unlike the benchmark, the Fund s return is quoted after the deduction of fees and expenses. Market Update Over the Reporting Period, U.S. stocks capped off their best year since U.S. stock markets were aided by favourable tax legislation, a synchronized global recovery and strong corporate results that generally topped Wall Street s expectations. Global stocks saw earnings per share rise by nearly 19 percent in the Reporting Period, the fastest growth since Large-capitalization stocks outperformed small-cap stocks, and growth outperformed value. The current U.S. Administration signed into law a sweeping tax overhaul that substantially lowered corporate tax rates from 35 to 21 percent. The new law also shifts U.S. tax policy from a worldwide system to a territorial one, and provides a one-time tax break of 15.5 percent for repatriated assets. U.S. corporations are estimated to have USD2.6 trillion in untaxed earnings parked overseas, with nearly USD500 billion held by the four largest stocks in the U.S. information technology sector. Key Contributors/Detractors The Fund s holdings continued to grow free cash flow and remained committed to consistently returning cash to share holders through a combination of cash dividends, share buybacks and debt reduction. Relative to the Fund s benchmark, strong stock selection contributed to performance, while sector allocations, which are an outcome of the Fund s bottom-up fundamental investment process, had a minimal impact on relative performance. Strong stock selection within the industrials sector was the largest contributor to the Fund s performance. Within the sector, The Boeing Co. ( Boeing ) and 3M Co., in particular, generated solid returns. An underweight allocation to the energy sector also contributed to performance as it was one of the market s weaker-performing sectors and one of only three sectors to post negative returns over the Reporting Period. On the other hand, an underweight allocation to the financials sector, which was one of the market s best-performing sectors, detracted from performance. The sector was boosted by a backdrop of rising interest rates in the U.S. and the promise of reforms under the country s current administration. Stock selection within the consumer staples sector also detracted from performance as the share prices of holdings such as Campbell Soup Co., The Kraft Heinz Co. ( Kraft Heinz ) and Molson Coors Brewing Co. ( Molson Coors ) declined. Top individual contributors to the Fund s performance included global pharmaceutical company AbbVie Inc. ( AbbVie ) and Boeing, the world s largest aerospace company. AbbVie was helped by continued positive momentum for the franchise drug Humira, encouraging uptake of the blood cancer drug Imbruvica and favourable new pipeline developments, which were all reflected in recent positive quarterly earnings reports. In addition, the company was able to raise its quarterly dividend and successfully repel a challenge to one of the patents protecting the Humira franchise. The company pays an attractive growing dividend that is well covered by free cash flow, and also regularly repurchases shares. Shares of Boeing, which serves commercial airlines and government defense and space programs globally, trended higher. This was helped by earnings reports reflecting continued favourable business development driven by strong demand for commercial aircraft, especially the newly launched Boeing 737 MAX. The company s cash flow generation is strong and its attractive growing dividend is well covered and supplemented with a material share repurchase program. Among the largest individual detractors from the Fund s performance were global brewing company Molson Coors and Kraft Heinz, a North American packaged food and beverage company. Shares of Molson Coors were under pressure as investors focused on reinvestment, pricing power and weak U.S. trends. With more reinvestment than investors had anticipated, the company s margin outlook was less compelling. Molson Coors continues to return cash to shareholders through dividends and debt reduction. Shares of Kraft Heinz lost momentum as investors digested the news about Whole Foods Market Inc. being acquired by Amazon.com Inc. and the potential consequences for food retailers. Kraft Heinz s sales growth has been disappointing, but management remains confident that the company s big bets (innovations that receive more assessing and consumer insights before launch) and whitespace initiatives are driving incremental growth, which is encouraging from a sustainable growth perspective. The company remains committed to returning cash to shareholders through dividends and debt reduction. * This section compares the returns relative to the Fund s product benchmark. See the Past Performance section for a comparison of the Fund s performance relative to the general market index. 1

3 Recent new additions to the Fund included information technology sector company Maxim Integrated Products Inc. ( Maxim Integrated ) and metals service provider Reliance Steel & Aluminum Co. Maxim Integrated is a large supplier of analog chips to the automotive, communications, computing, consumer and industrials markets. The company s cash flow growth should be driven by underlying demand principally in the industrials and automotive sectors. Industrial demand is being driven by factory automation and strength in automotive by Maxim Integrated s serial link technology, which is a beneficiary of the emergence of advanced driver assistance systems and electric vehicles. The company should also benefit from improved profitability as it streamlines its operations and leverages its fixed cost base. Cash is returned through a well-covered progressive dividend and regular share repurchases. Reliance Steel & Aluminum Co. is the largest metals service center company in North America. The company provides value-added processing services to customers across a wide variety of end-use markets, including automobile original equipment manufacturers, aerospace, non-residential construction, energy and heavy industry. The Portfolio Adviser believes that favourable market conditions across these customer segments, strategic investments in processing capability and ongoing bolt-on acquisitions should drive the company s growth in revenues, earnings, and cash flow. The company s attractive dividend is well covered and supplemented by opportunistic share repurchases. Recently, the Fund s position in Regal Entertainment Group ( Regal ) was eliminated following the announcement that the company had agreed to be acquired for cash by Cineworld Group plc. Regal operates a chain of movie theatres in the U.S. and is the largest theatre circuit in the country, with over 7,000 screens. The Private and O-Series units of the Fund experienced a significant increase in assets due to investor purchase activity. Recent Developments While the U.S. economy and market may be late in the economic cycle, the Portfolio Adviser anticipates that there is only a low probability of a recession in The U.S. federal funds interest rate is still negative taking inflation into account, company profits are growing solidly and 30 out of 33 global Purchasing Managers Indices (an indicator of the economic health of the manufacturing sector) are showing economic expansion. However, recessions are not rare. Since the late-1970s, the U.S. has experienced five of them. Further, during that period, there have been eleven financial crises globally. Debt and liquidity risk are key prerequisites for a financial crisis. While regulators and many investors are focused on debt, the Portfolio Adviser is more concerned with liquidity risk, which was at the core of the global financial crisis. Although the Portfolio Adviser does not see the next financial crisis as imminent, the Portfolio Adviser believes that several countries are at heightened risk of experiencing an economic downturn. The world s major central banks are moving toward tighter monetary policies. The Portfolio Adviser believes that higher interest rates and waning liquidity may be the most significant global macroeconomic risks, especially given that many assets are trading toward the high end of their historical ranges. Quantitative easing (a monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply) has had an enormously positive impact on markets following the global financial crisis. As quantitative easing is slowly being withdrawn, the Portfolio Adviser expects equity market volatility to gradually rise and the dispersion of returns across sectors and stocks to increase. In this environment, the Portfolio Adviser believes that it should prove even more important to favour companies with a demonstrated ability to produce free cash flow and allocate it wisely between return of capital options and reinvestment/ acquisition opportunities. The Portfolio Adviser has historically favoured such companies. According to the Portfolio Adviser, these attributes are likely to reward investors going forward as the monetary policy experiment of the last decade is unwound. Overall, the Portfolio Adviser remains confident in the ability of the Fund s holdings to continue to generate, grow and return cash to shareholders through cash dividends, share buybacks and debt reduction. The Portfolio Adviser remains positive on the outlook for shareholder yield, as low capital reinvestment needs, improving technology and tax reform in U.S. should boast the capital available to be returned to shareholders through dividends, share buybacks and debt reduction. Related Party Transactions Affiliates of TD Asset Management Inc. ( TDAM ) may earn fees and spreads in connection with various services provided to, or transactions with, the Fund, such as in connection with banking, custody, brokerage and derivatives transactions. Manager, Trustee and Portfolio Adviser: TDAM, a wholly-owned subsidiary of The Toronto-Dominion Bank ( TD ), is the manager, trustee and portfolio adviser of the Fund. TDAM has appointed Epoch Investment Partners, Inc., an affiliate of TDAM, as portfolio adviser for the Fund in addition to TDAM. The Fund pays TDAM an annual manage ment fee, which may vary for each series of Fund units, and an annual administration fee of 0.30 percent with respect to the Investor Series, Advisor Series, H-Series, T-Series and D-Series units of the Fund. 2

4 Distributor: Units of the Fund are distributed through brokers and dealers including TD Waterhouse Canada Inc. ( TDW ), a wholly-owned subsidiary of TD. TDW, like other dealers, is paid a trailer commission by TDAM for distributing certain series of units of the Fund. Trailer commissions are paid by TDAM out of the management fees it receives from the Fund and are based on the average value of assets held by each dealer. Registrar and Transfer Agent: TD is the registrar and transfer agent of the Fund, and as such maintains all unitholder records, processes purchase, switch, conversion and redemption orders, issues investor statements and prepares annual tax reporting information on behalf of the Fund. TD earns a foreign exchange spread when unitholders switch between units of funds denominated in different currencies. The Fund also maintains bank accounts and overdraft provisions with TD for which TD earns a fee. Administration and Securityholder Services: TDW, in addition to acting as a dealer, also provides administration and securityholder services to the Private Series units of the Fund for which such costs are reflected in the operating expenses for the Private Series units of the Fund. These services include securityholder account maintenance and reporting. Buying and Selling Securities: TDAM has established an independent review committee ( IRC ) which acts as an impartial and independent committee to review and provide recommendations or, if appropriate, approvals respecting any conflict of interest matters referred to it by TDAM. The IRC prepares, at least annually, a report of its activities for securityholders of the Fund. The report is available on the TDAM website at tdassetmanagement.com or at the securityholder s request at no cost by contacting TDAM (see front cover). The Fund did not engage in any portfolio transactions requiring IRC approval during the Reporting Period. 3

5 Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five fiscal years, as applicable. Net Assets per Unit ($) 1 INVESTOR SERIES * 2013 Net Assets, Beginning of Year N/A Total Revenue N/A Total Expenses (excluding distributions) (0.42) (0.39) (0.36) (0.23) N/A Realized Gains (Losses) for the Period 0.56 (0.11) N/A Unrealized Gains (Losses) for the Period N/A Total Increase (Decrease) from Operations N/A From Net Investment Income (excluding dividends) (0.07) (0.06) (0.02) (0.13) N/A From Dividends N/A From Capital Gains N/A Return of Capital N/A Total Annual Distributions 3 (0.07) (0.06) (0.02) (0.13) N/A Net Assets at December N/A ADVISOR SERIES * 2013 Net Assets, Beginning of Year N/A Total Revenue N/A Total Expenses (excluding distributions) (0.41) (0.40) (0.37) (0.23) N/A Realized Gains (Losses) for the Period 0.55 (0.02) 0.05 (0.01) N/A Unrealized Gains (Losses) for the Period N/A Total Increase (Decrease) from Operations N/A From Net Investment Income (excluding dividends) (0.09) (0.06) (0.02) (0.01) N/A From Dividends N/A From Capital Gains N/A Return of Capital N/A Total Annual Distributions 3 (0.09) (0.06) (0.02) (0.01) N/A Net Assets at December N/A F-SERIES * 2013 Net Assets, Beginning of Year N/A Total Revenue N/A Total Expenses (excluding distributions) (0.21) (0.22) (0.20) (0.14) N/A Realized Gains (Losses) for the Period 0.58 (0.05) 0.03 (0.01) N/A Unrealized Gains (Losses) for the Period N/A Total Increase (Decrease) from Operations N/A From Net Investment Income (excluding dividends) (0.26) (0.23) (0.20) (0.05) N/A From Dividends N/A From Capital Gains N/A Return of Capital N/A Total Annual Distributions 3 (0.26) (0.23) (0.20) (0.05) N/A Net Assets at December N/A Footnotes for the above table(s) can be found at the end of the Net Assets per Unit section. 4

6 Net Assets per Unit ($) 1 (continued) H-SERIES * 2013 Net Assets, Beginning of Year N/A Total Revenue N/A Total Expenses (excluding distributions) (0.49) (0.50) (0.51) (0.35) N/A Realized Gains (Losses) for the Period 0.64 (0.19) N/A Unrealized Gains (Losses) for the Period N/A Total Increase (Decrease) from Operations N/A From Net Investment Income (excluding dividends) (0.08) (0.07) (0.03) 0.00 N/A From Dividends N/A From Capital Gains N/A Return of Capital (1.34) (1.35) (1.30) (0.90) N/A Total Annual Distributions 3 (1.42) (1.42) (1.33) (0.90) N/A Net Assets at December N/A S-SERIES * 2013 Net Assets, Beginning of Year N/A Total Revenue N/A Total Expenses (excluding distributions) (0.25) (0.27) (0.28) (0.19) N/A Realized Gains (Losses) for the Period (0.07) 0.01 N/A Unrealized Gains (Losses) for the Period N/A Total Increase (Decrease) from Operations N/A From Net Investment Income (excluding dividends) (0.30) (0.27) (0.25) (0.38) N/A From Dividends (0.01) 0.00 N/A From Capital Gains N/A Return of Capital (1.14) (1.15) (1.06) (0.80) N/A Total Annual Distributions 3 (1.44) (1.42) (1.32) (1.18) N/A Net Assets at December N/A T-SERIES * 2013 Net Assets, Beginning of Year N/A Total Revenue N/A Total Expenses (excluding distributions) (0.51) (0.51) (0.50) (0.36) N/A Realized Gains (Losses) for the Period 0.67 (0.17) 0.08 (0.01) N/A Unrealized Gains (Losses) for the Period N/A Total Increase (Decrease) from Operations N/A From Net Investment Income (excluding dividends) (0.11) (0.08) (0.03) 0.00 N/A From Dividends N/A From Capital Gains N/A Return of Capital (1.32) (1.35) (1.31) (0.90) N/A Total Annual Distributions 3 (1.43) (1.43) (1.34) (0.90) N/A Net Assets at December N/A Footnotes for the above table(s) can be found at the end of the Net Assets per Unit section. 5

7 Net Assets per Unit ($) 1 (continued) D-SERIES * Net Assets, Beginning of Year N/A N/A Total Revenue N/A N/A Total Expenses (excluding distributions) (0.23) (0.22) (0.18) N/A N/A Realized Gains (Losses) for the Period 0.44 (0.08) 0.05 N/A N/A Unrealized Gains (Losses) for the Period N/A N/A Total Increase (Decrease) from Operations N/A N/A From Net Investment Income (excluding dividends) (0.15) (0.13) (0.10) N/A N/A From Dividends N/A N/A From Capital Gains N/A N/A Return of Capital N/A N/A Total Annual Distributions 3 (0.15) (0.13) (0.10) N/A N/A Net Assets at December N/A N/A PRIVATE SERIES * 2013 Net Assets, Beginning of Year N/A Total Revenue N/A Total Expenses (excluding distributions) (0.07) (0.07) (0.08) (0.03) N/A Realized Gains (Losses) for the Period 0.54 (0.07) N/A Unrealized Gains (Losses) for the Period N/A Total Increase (Decrease) from Operations N/A From Net Investment Income (excluding dividends) (0.37) (0.33) (0.30) (0.01) N/A From Dividends N/A From Capital Gains N/A Return of Capital N/A Total Annual Distributions 3 (0.37) (0.33) (0.30) (0.01) N/A Net Assets at December N/A O-SERIES * Net Assets, Beginning of Year N/A N/A N/A Total Revenue N/A N/A N/A Total Expenses (excluding distributions) (0.04) 0.00 N/A N/A N/A Realized Gains (Losses) for the Period N/A N/A N/A Unrealized Gains (Losses) for the Period (0.37) (0.05) N/A N/A N/A Total Increase (Decrease) from Operations (0.04) N/A N/A N/A From Net Investment Income (excluding dividends) (0.17) 0.00 N/A N/A N/A From Dividends N/A N/A N/A From Capital Gains N/A N/A N/A Return of Capital N/A N/A N/A Total Annual Distributions 3 (0.17) 0.00 N/A N/A N/A Net Assets at December N/A N/A N/A 1 This information is derived from the Fund s audited annual financial statements prepared in accordance with International Financial Reporting Standards. The Fund measures fair value of its investments based on close market prices, where the close market price falls within the bid-ask spread or based on quotations from recognized dealers. As such, the Fund s accounting policies for measuring the fair value of investments in the financial statements are substantively consistent with those used in measuring the net asset value ( NAV ) for transactions with unitholders. 2 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations is based on the weighted average number of units outstanding over the financial periods. These tables are not intended to be a reconciliation of the net assets per unit. 3 Distributions were paid in cash or reinvested in additional units of the Fund, or both. * Data reported represents results from the commencement of operations to December 31 of the year indicated. Please refer to the Year-by-year returns charts in the Past Performance section for commencement date. Initial offering price. 6

8 Ratios and Supplemental Data INVESTOR SERIES Total Net Asset Value ($000s) 1 15,967 12,544 9,228 5,069 N/A Number of Units Outstanding (000s) 1 1, N/A Management Expense Ratio (%) N/A Waivers or Absorptions (%) N/A Trading Expense Ratio (%) N/A Portfolio Turnover Rate (%) N/A Net Asset Value per Unit ($) N/A ADVISOR SERIES Total Net Asset Value ($000s) 1 9,229 9,378 2, N/A Number of Units Outstanding (000s) N/A Management Expense Ratio (%) N/A Waivers or Absorptions (%) N/A Trading Expense Ratio (%) N/A Portfolio Turnover Rate (%) N/A Net Asset Value per Unit ($) N/A F-SERIES Total Net Asset Value ($000s) 1 9,388 6,417 1, N/A Number of Units Outstanding (000s) N/A Management Expense Ratio (%) N/A Waivers or Absorptions (%) N/A Trading Expense Ratio (%) N/A Portfolio Turnover Rate (%) N/A Net Asset Value per Unit ($) N/A H-SERIES Total Net Asset Value ($000s) N/A Number of Units Outstanding (000s) N/A Management Expense Ratio (%) N/A Waivers or Absorptions (%) N/A Trading Expense Ratio (%) N/A Portfolio Turnover Rate (%) N/A Net Asset Value per Unit ($) N/A S-SERIES Total Net Asset Value ($000s) 1 2,984 2, N/A Number of Units Outstanding (000s) N/A Management Expense Ratio (%) N/A Waivers or Absorptions (%) N/A Trading Expense Ratio (%) N/A Portfolio Turnover Rate (%) N/A Net Asset Value per Unit ($) N/A T-SERIES Total Net Asset Value ($000s) 1 5,720 5,494 5, N/A Number of Units Outstanding (000s) N/A Management Expense Ratio (%) N/A Waivers or Absorptions (%) N/A Trading Expense Ratio (%) N/A Portfolio Turnover Rate (%) N/A Net Asset Value per Unit ($) N/A Footnotes for the above table(s) can be found at the end of the Ratios and Supplemental Data section. 7

9 Ratios and Supplemental Data (continued) D-SERIES Total Net Asset Value ($000s) N/A N/A Number of Units Outstanding (000s) N/A N/A Management Expense Ratio (%) N/A N/A Waivers or Absorptions (%) N/A N/A Trading Expense Ratio (%) N/A N/A Portfolio Turnover Rate (%) N/A N/A Net Asset Value per Unit ($) N/A N/A PRIVATE SERIES Total Net Asset Value ($000s) 1 240, ,145 56,263 14,870 N/A Number of Units Outstanding (000s) 1 16,387 13,593 4,452 1,350 N/A Management Expense Ratio (%) N/A Waivers or Absorptions (%) N/A Trading Expense Ratio (%) N/A Portfolio Turnover Rate (%) N/A Net Asset Value per Unit ($) N/A O-SERIES Total Net Asset Value ($000s) N/A N/A N/A Number of Units Outstanding (000s) N/A N/A N/A Management Expense Ratio (%) 2, N/A N/A N/A Waivers or Absorptions (%) N/A N/A N/A Trading Expense Ratio (%) N/A N/A N/A Portfolio Turnover Rate (%) N/A N/A N/A Net Asset Value per Unit ($) N/A N/A N/A 1 This information is provided as at December 31 of the past five fiscal years, as applicable. 2 Management expense ratio ( MER ) is based on total expenses (excluding distributions, commissions and other portfolio transaction costs) net of any waivers or absorptions for the stated period, including the Fund s proportionate share of the MER, if any, of the underlying fund(s) in which the Fund has invested in, and is expressed as an annualized percentage of daily average NAV during the period. Any waivers or absorptions may be discontinued at any time by TDAM at its discretion without notice. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average NAV during the stated period. 4 The Fund s portfolio turnover rate ( PTR ) indicates how actively the Fund s portfolio adviser manages its investments. A PTR of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the stated period. The higher a fund s PTR, the greater the trading costs payable by the fund in the period, and the greater the chance of an investor receiving taxable capital gains in the fiscal year. There is not necessarily a relationship between a high turnover rate and the performance of a fund. 5 The Fund does not pay any management fees or operating expenses with respect to the O-Series units of the Fund, but may have a MER as a result of its holdings in underlying fund(s), representing the weighted average MER of those underlying fund(s) for the reporting period. Less than $500 Less than 500 units 8

10 Management Fees As manager and trustee of the Fund, TDAM is responsible for the overall business and affairs of the Fund, including activities related to making units of the Fund available to investors, and providing, or arranging for the provision of, investment advisory services and marketing services to the Fund. In consideration for the provision of such services, each series of the Fund, other than Private Series and O-Series units, pays TDAM a management fee. Management fees are calculated and accrued as a percentage of the net asset value of each series of units of the Fund, as of the close of business on each business day for each series and are paid monthly to TDAM. Prior to July 27, 2017, the simplified prospectus disclosed the maximum management fee rate that TDAM could charge for each series of units of the Fund (so the actual management fee charged to the Fund might have been less than the maximum management fee rate). TDAM was able to charge the maximum management fee without notice to unitholders. Effective July 27, 2017, the simplified prospectus discloses a specified annual management fee rate. Where TDAM chooses to charge a management fee rate below the specified annual management fee rate, the difference represents a waiver of management fees. TDAM may waive all or a portion of the management fees being charged to the Fund, which may be discontinued at any time by TDAM at its discretion without notice to unitholders. The annual management fees and a breakdown of the major services rendered for each series, as a percentage of the management fees paid, are as follows: Past Performance The following charts show how the Fund has performed in the past, and can help you understand the risks of investing in the Fund. These returns include the reinvestment of all distributions and would be lower if an investor did not reinvest distributions. They do not include deduction of sales, switch, redemption, or other optional charges (which dealers may charge) or income taxes payable, and these returns would be lower if they did. The Fund s past performance does not necessarily indicate how it will perform in the future. Year-by-year returns The bar charts show how the Fund s performance has varied from year to year for each of the years shown. They show in percentage terms how an investment made on January 1 would have increased or decreased by December 31. Waived Annual Dealer Operating (expressed as a %) Mgmt. Fees Compensation Expenses Other Investor Series Advisor Series F-Series H-Series S-Series T-Series D-Series Private Series 0.00 N/A N/A N/A O-Series 0.00 N/A N/A N/A There are no management fees paid by the Fund in respect of Private Series units of the Fund and there are no management fees or expenses paid by the Fund in respect of O-Series units of the Fund. Unitholders in the O-Series pay a negotiated fee directly to TDAM. Unitholders in the Private Series pay a negotiated fee directly to TDAM, their dealer or TD Waterhouse Private Investment Counsel Inc. Effective March 28, 2017, the management fee rate charged to F-Series and S-Series was changed from 1.00% to 0.85%. Investment advisory, trustee, marketing services and other. 9

11 10

12 Annual Compound Returns The following table shows the annual compound total returns for each series of units of the Fund for each of the periods indicated ended on, compared with the following benchmarks: Product Benchmark: Russell 1000 Value TR Index (C$) This index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. General market indices: S&P 500 Total Return Index (C$) ( S&P 500 TR Index (C$) ) This index is comprised of 500 widely-held U.S. companies. Since Past 5 Past 3 Past (expressed as a %) inception years years year (Start date April 15, 2014) INVESTOR SERIES 13.0 N/A Product Benchmark 14.1 N/A S&P 500 TR Index (C$) 17.0 N/A (Start date April 15, 2014) ADVISOR SERIES 13.0 N/A Product Benchmark 14.1 N/A S&P 500 TR Index (C$) 17.0 N/A (Start date April 15, 2014) F-SERIES 14.5 N/A Product Benchmark 14.1 N/A S&P 500 TR Index (C$) 17.0 N/A (Start date April 15, 2014) H-SERIES 13.1 N/A Product Benchmark 14.1 N/A S&P 500 TR Index (C$) 17.0 N/A Since Past 5 Past 3 Past (expressed as a %) inception years years year (Start date April 15, 2014) S-SERIES 14.5 N/A Product Benchmark 14.1 N/A S&P 500 TR Index (C$) 17.0 N/A (Start date April 15, 2014) T-SERIES 13.3 N/A Product Benchmark 14.1 N/A S&P 500 TR Index (C$) 17.0 N/A (Start date February 10, 2015) D-SERIES 8.4 N/A N/A 8.4 Product Benchmark 9.1 N/A N/A 6.2 S&P 500 TR Index (C$) 11.7 N/A N/A 13.8 (Start date September 16, 2014) PRIVATE SERIES 15.1 N/A Product Benchmark 13.4 N/A S&P 500 TR Index (C$) 16.5 N/A (Start date December 20, 2016) O-SERIES 9.5 N/A N/A 10.1 Product Benchmark 4.9 N/A N/A 6.2 S&P 500 TR Index (C$) 12.1 N/A N/A 13.8 Over the Reporting Period, units of the Investor Series, H-Series and T-Series returned 7.5 percent, Advisor Series returned 7.6 percent, F-Series returned 9.1 percent, S-Series returned 9.0 percent, D-Series returned 8.4 percent andprivate Series and O-Series returned 10.1 percent. This compares to a return of 13.8 percent for the broader S&P 500 TR Index (C$). Variations in the returns for the different series of the Fund are largely due to differences in fees and expenses. Unlike the index, the Fund s return is quoted after the deduction of fees and expenses. Relative underperformance versus the broader index was primarily driven by the Fund s sector allocation in information technology. 11

13 Summary of Investment Portfolio as at % of Net Asset Value as at % of Net Asset Value ASSET ALLOCATION U.S. Equities 87.6 International Equities 8.5 Canadian Equities 0.7 Cash 3.1 Other Net Assets (Liabilities) 0.1 PORTFOLIO DETAILS Utilities 16.4 Consumer Staples 15.2 Industrials 13.8 Information Technology 11.6 Financials 10.3 Health Care 8.3 Telecommunication Services 5.2 Consumer Discretionary 4.8 Energy 4.4 Materials 3.6 Real Estate 3.2 Cash 3.1 Other Net Assets (Liabilities) 0.1 TOTAL NET ASSET VALUE (000s) $ 285,300 TOP 25 INVESTMENTS 1. Cash M Company AbbVie Inc Texas Instruments Incorporated Duke Energy Corporation WEC Energy Group Inc Royal Dutch Shell PLC Verizon Communications Inc Ameren Corporation Altria Group Inc Kimberly-Clark Corporation Microsoft Corporation Pfizer Inc Johnson & Johnson AT&T Inc British American Tobacco PLC Arthur J Gallagher & Co Philip Morris International Inc Vodafone Group PLC Welltower Inc Entergy Corporation The Boeing Company Occidental Petroleum Corporation DowDuPont Inc Lockheed Martin Corporation 1.4 Total % of Net Asset Value represented by these holdings 41.9 Note: Totals may not add due to rounding to one decimal place of individual figures. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund. Updates are available quarterly. You may obtain the most current quarterly information by contacting TD Mutual Funds at , by writing to us at TD Asset Management Inc., P.O. Box 100, 66 Wellington Street West, TD Bank Tower, Toronto, Ontario, M5K 1G8, or by to td.mutualfunds@td.com 12

14 Caution regarding forward-looking statements Certain portions of this report, including, but not limited to, Results of Operations and Recent Developments, may contain forward-looking statements including, but not limited to, statements about the Fund, its strategy, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, intends, plans, believes, estimates and similar forward-looking expressions or negative versions thereof. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future Fund action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future general economic, political and relevant market factors, such as interest rates, foreign exchange rates, equity and capital markets, and the general business environment, in each case assuming no changes to applicable tax or other laws or government regulation. Expectations and projections about future events are inherently subject to, among other things, risks and uncertainties, some of which may be unforeseeable. Accordingly, assumptions concerning future economic and other factors may prove to be incorrect at a future date. Forward-looking statements are not guarantees of future performance, and actual events could differ materially from those expressed or implied in any forward-looking statements made by the Fund. Any number of important factors could contribute to these digressions, including, but not limited to, general economic, political and relevant market factors in North America and internationally, interest and foreign exchange rates, equity and capital markets, business competition, technological change, changes in government relations, unexpected judicial or regulatory proceedings and catastrophic events. The above mentioned list of important factors is not exhaustive. You are encouraged to consider these and other factors carefully before making any investment decisions and you are urged to avoid placing any undue reliance on forward-looking statements. Further, there is no specific intention of updating any forward-looking statements contained herein whether as a result of new information, future events or otherwise. For Funds with references to FTSE TMX Canada indices: FTSE TMX Global Debt Capital Markets Inc FTSE is a trade mark of FTSE International Ltd and is used under licence. TMX is a trade mark of TSX Inc. and is used under licence. All rights in the FTSE TMX Global Debt Capital Markets Inc. s indices and/or FTSE TMX Global Debt Capital Markets Inc. s ratings vest in FTSE TMX Global Debt Capital Markets Inc. and/or its licensors. Neither FTSE TMX Global Debt Capital Markets Inc. nor its licensors accept any liability for any errors or omissions in such indices and/or ratings or underlying data. No further distribution of FTSE TMX Global Debt Capital Markets Inc. s data is permitted without FTSE TMX Global Debt Capital Markets Inc. s express written consent. TD Mutual Funds, TD Pools and the TD Managed Assets Program portfolios are managed by TD Asset Management Inc., a wholly-owned subsidiary of The Toronto-Dominion Bank and are available through authorized dealers. Epoch Investment Partners, Inc. ( Epoch ) is a wholly-owned subsidiary of The Toronto-Dominion Bank and an affiliate of TD Asset Management. TD Asset Management operates in Canada through TD Asset Management Inc. and in the U.S. through TDAM USA Inc. All trademarks are the property of their respective owners. The TD logo and other trade-marks are the property of The Toronto-Dominion Bank. 13