TD Asset Management. TD EXCHANGE-TRADED FUNDS Annual Financial Statements. TD Canadian Aggregate Bond Index ETF (03/18)

Transcription

1 TD Asset Management TD Canadian Aggregate Bond Index ETF (03/18) TD EXCHANGE-TRADED FUNDS for the period ended December 31, 2017

2 Management s Responsibility for Financial Reporting The accompanying audited financial statements have been prepared by TD Asset Management Inc. ( TDAM ), as manager of the Funds. The manager is responsible for the integrity, objectivity and reliability of the data presented. This responsibility includes selecting appropriate accounting principles and making judgments and estimates consistent with International Financial Reporting Standards ( IFRS ). The manager is also responsible for the development of internal controls over the financial reporting process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced, and the safeguarding of all assets of the Funds. The board of directors of TDAM is responsible for reviewing and approving the financial statements and overseeing management s performance of its financial reporting responsibilities. On behalf of TDAM, manager of t he Funds Bruce Cooper David Lambie Director and Chief Executive Officer Director and Chief Financial Officer March 16, 2018 March 16, 2018 December 31,

3 TD Canadian Aggregate Bond Index ETF INDEPENDENT AUDITOR S REPORT To the Unitholders and Trustee of: TD Canadian Aggregate Bond Index ETF (the Fund ) We have audited the accompanying financial statements of the Fund, which comprise the statements of financial position as at December 31, 2017 and 2016, and the statements of comprehensive income, changes in net assets attributable to holders of redeemable units and cash flows for the year ended December 31, 2017 and for the period from February 23, 2016 (inception date) to December 31, 2016, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of the financial statements of the Fund in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on the financial statements of the Fund based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements of the Fund present fairly, in all material respects, the financial position of the Fund as at December 31, 2017 and 2016, and its financial performance and its cash flows for the year ended December 31, 2017 and for the period from February 23, 2016 to December 31, 2016 in accordance with International Financial Reporting Standards. Chartered Professional Accountants, Licensed Public Accountants Toronto, Ontario March 16, 2018 December 31,

4 TD Canadian Aggregate Bond Index ETF STATEMENTS OF FINANCIAL POSITION (in 000s except per unit amounts) as at December 31, 2017 and 2016 STATEMENTS OF COMPREHENSIVE INCOME (in 000s except per unit amounts) for the period ended December 31, 2017 and for the period from February 23, 2016 (inception date) to December 31, 2016 December 31, December 31, Assets Current Assets Investments $ 77,706 $ 35,948 Cash Interest Receivable ,287 36,162 Liabilities Current Liabilities Distributions Payable Net Assets Attributable to Holders of Redeemable Units (Note 5) $ 78,101 $ 36,064 Net Assets Attributable to Holders of Redeemable Units Per Unit $ $ Income Securities Lending Income $ 7 $ 0 Net Gain (Loss) on Investments Interest for Distribution Purposes 1, Net Realized Gain (Loss) (383) (11) Net Change in Unrealized Appreciation/Depreciation (52) (966) Net Gain (Loss) on Investments 1,157 (584) Total Income (Net) 1,164 (584) Expenses (Note 6) Management Fees Independent Review Committee Fees 2 1 Total Expenses before Waivers Less: Waived Expenses (2) (1) Total Expenses (Net) Increase (Decrease) in Net Assets Attributable to Holders of Redeemable Units before Tax 1,102 (599) Tax Reclaims (Withholding Taxes) 0 0 Increase (Decrease) in Net Assets Attributable to Holders of Redeemable Units $ 1,102 $ (599) Weighted Average Units Outstanding for the Period 3,764 1,205 Increase (Decrease) in Net Assets Attributable to Holders of Redeemable Units Per Unit $ 0.29 $ (0.50) The accompanying notes are an integral part of the financial statements. December 31,

5 TD Canadian Aggregate Bond Index ETF STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS (in 000s) for the period ended December 31, 2017 and for the period from February 23, 2016 (inception date) to December 31, 2016 STATEMENTS OF CASH FLOWS (in 000s) for the period ended December 31, 2017 and for the period from February 23, 2016 (inception date) to December 31, Net Assets Attributable to Holders of Redeemable Units at Beginning of the Period $ 36,064 $ N/A Increase (Decrease) in Net Assets Attributable to Holders of Redeemable Units 1,102 (599) Distributions to Holders of Redeemable Units From Net Investment Income (1,454) (381) From Net Realized Gains on Investments 0 (14) Return of Capital (193) (79) (1,647) (474) Redeemable Unit Transactions Proceeds from Redeemable Units Issued 47,017 37,123 Reinvestments of Distributions to Holders of Redeemable Units 0 14 Redemption of Redeemable Units (4,435) 0 Net Increase (Decrease) from Redeemable Unit Transactions 42,582 37,137 Net Increase (Decrease) in Net Assets Attributable to Holders of Redeemable Units 42,037 36,064 Net Assets Attributable to Holders of Redeemable Units at End of the Period $ 78,101 $ 36,064 Redeemable Unit Transactions Redeemable Units Outstanding, Beginning of the Period 2,450 N/A Redeemable Units Issued 3,200 2,450 Redeemable Units Issued on Reinvestments 0 1 Redeemable Units Consolidated* 0 (1) Redeemable Units Redeemed (300) 0 Redeemable Units Outstanding, End of the Period 5,350 2,450 * Redeemable units issued on reinvestments immediately consolidated with the units held prior to the distribution Cash Flows from (used in) Operating Activities Increase (Decrease) in Net Assets Attributable to Holders of Redeemable Units $ 1,102 $ (599) Adjustment For: Net Realized (Gain) Loss on Sale of Investments Net Change in Unrealized Appreciation/ Depreciation of Investments Purchase of Investments (17,520) (4,891) Proceeds from Sale and/or Maturity of Investments 17,785 4,745 (Increase) Decrease in Interest Receivable (154) (152) Net Cash from (used in) Operating Activities 1, Cash Flows from (used in) Financing Activities Distributions Paid to Holders of Redeemable Units, Net of Reinvested Distributions (1,559) (362) Proceeds from Issuances of Redeemable Units Amounts Paid on Redemption of Redeemable Units (83) 0 Net Cash from (used in) Financing Activities (1,435) (18) Net Increase (Decrease) in Cash Cash (Bank Overdraft) at Beginning of the Period 62 0 Cash (Bank Overdraft) at End of the Period $ 275 $ 62 Interest for Distribution Purposes Received*, Net of Withholding Taxes 1, * Included as part of Cash Flows from (used in) Operating Activities. Excludes in-kind subscriptions of $46,810 (2016: $36,779). Excludes in-kind redemptions of $4,352 (2016: $0). The accompanying notes are an integral part of the financial statements. December 31,

6 TD Canadian Aggregate Bond Index ETF SCHEDULE OF INVESTMENT PORTFOLIO (in 000s except number of Shares or Units/Par Value) as at December 31, 2017 PAR VALUE DESCRIPTION COST FAIR VALUE PAR VALUE DESCRIPTION COST FAIR VALUE CANADIAN BONDS 97.8% FEDERAL BONDS & GUARANTEES 40.1% Canada Housing Trust No , % due June 15, 2018 $ 123 $ 120 1,598, % due December 15, ,705 1,637 1,239, % due June 15, ,263 1,244 1,699, % due December 15, ,719 1, , % due June 15, , % due June 15, , % due December 15, , % due June 15, , % due December 15, , % due September 15, , % due June 15, , % due June 15, Government of Canada 668, % due February 01, , % due March 01, , % due May 01, , % due June 01, , % due August 01, , % due September 01, ,385, % due November 01, ,374 1, , % due May 01, , % due June 01, , % due September 01, , % due March 01, ,908, % due September 01, ,911 1, , % due March 01, ,346, % due June 01, ,473 1, , % due September 01, ,361, % due March 01, ,294 1,289 1,241, % due June 01, ,350 1, , % due September 01, , % due March 01, , % due June 01, , % due June 01, ,040 1, , % due June 01, ,070, % due June 01, ,067 1, , % due June 01, , % due June 01, , % due June 01, ,070 1, , % due June 01, , % due June 01, ,317 1, , % due December 01, ,157, % due December 01, ,275 1,281 60, % due December 01, PSP Capital Inc. 30, % due October 22, ,024 31,298 PROVINCIAL BONDS & GUARANTEES 35.0% Hydro One Inc. 106, % due January 13, ,000 Callable 2.77% due February 24, , % due June 01, , % due January 31, ,000 Callable 3.72% due November 18, Hydro-Quebec 114, % due February 15, Labrador-Island Link Funding Trust 50, % due June 01, , % due December 01, 2045 $ 63 $ 63 40, % due December 01, Muskrat Falls / Labrador Transmission Assets Funding Trust 25, % due June 01, , % due June 01, , % due December 01, Province of Alberta 331, % due June 01, , % due September 01, , % due December 15, , % due June 01, , % due June 01, , % due June 01, , % due September 20, , % due December 01, , % due December 01, Province of British Columbia 317, % due December 18, , % due December 18, , % due December 18, , % due June 18, , % due June 18, , % due June 18, , % due June 18, , % due June 18, , % due June 18, Province of Manitoba 82, % due September 05, , % due June 03, , % due December 01, , % due June 02, , % due June 02, , % due March 05, , % due March 05, , % due September 05, Province of New Brunswick 2, % due March 26, , % due December 03, , % due June 02, , % due December 27, , % due January 27, , % due September 26, , % due June 03, , % due August 14, Province of Newfoundland and Labrador 181, % due June 02, , % due October 17, Province of Nova Scotia 43, % due June 01, , % due June 01, , % due June 01, , % due June 01, , % due June 01, , % due June 02, Province of Ontario 435, % due September 08, , % due June 02, , % due June 02, , % due June 02, , % due June 02, , % due June 02, December 31,

7 TD Canadian Aggregate Bond Index ETF SCHEDULE OF INVESTMENT PORTFOLIO (in 000s except number of Shares or Units/Par Value) as at December 31, 2017 PAR VALUE DESCRIPTION COST FAIR VALUE PAR VALUE DESCRIPTION COST FAIR VALUE 774, % due June 02, 2024 $ 844 $ 824 1,073, % due June 02, ,096 1, , % due June 02, , % due June 02, , % due March 08, , % due March 08, , % due June 02, , % due June 02, , % due June 02, , % due June 02, ,231 1, , % due June 02, ,175, % due June 02, ,258 1, , % due December 02, , % due June 02, Province of Quebec 952, % due December 01, ,030 1, , % due December 01, , % due December 01, , % due December 01, , % due September 01, , % due September 01, , % due September 01, , % due June 01, , % due December 01, , % due December 01, ,545, % due December 01, ,697 1,728 Province of Saskatchewan 100, % due June 03, , % due March 05, , % due June 01, , % due December 02, ,411 27,334 MUNICIPAL BONDS 1.5% City of Montreal 40, % due December 01, , % due September 01, , % due December 01, , % due June 01, City of Ottawa 78, % due July 14, City of Toronto 98, % due June 01, Municipal Finance Authority of British Columbia 304, % due November 20, , % due April 19, Regional Municipality of Peel 109, % due June 29, Regional Municipality of York 60, % due June 30, , % due December 15, , % due May 01, ,200 1,191 CORPORATE BONDS 21.2% 407 International Inc. 187,000 Callable 4.30% due May 26, ,000 Callable 2.43% due May 04, ,000 Callable 4.45% due November 15, ,000 Callable 3.98% due September 11, Aeroports de Montreal 95, % due September 26, Alectra Inc. 50,000 Callable 2.488% due May 17, 2027 $ 51 $ 49 Alimentation Couche-Tard Inc. 198, % due November 01, ,000 Callable 3.60% due June 02, AltaGas Ltd. 82,000 Callable 4.50% due August 15, AltaLink L.P. 90, % due November 08, , % due June 30, Bank of Montreal 176, % due June 04, , % due April 23, , % due March 16, ,000 Callable 6.17% due March 28, , % due September 10, ,000 Callable 3.34% due December 08, ,000 Callable 3.32% due June 01, ,000 Callable 2.57% due June 01, The Bank of Nova Scotia 349, % due October 28, , % due June 15, , % due April 27, , % due June 28, ,000 Callable 3.036% due October 18, ,000 Callable 3.367% due December 08, , % due December 02, ,000 Callable 2.58% due March 30, Bell Canada Inc. 252, % due June 18, , % due October 01, ,000 Callable 3.00% due October 03, ,000 Callable 2.90% due August 12, ,000 Callable 4.75% due September 29, BMW Canada Inc. 20, % due September 26, British Columbia Ferry Services Inc. 62, % due March 20, Brookfield Asset Management Inc. 122, % due March 01, ,000 Callable 4.82% due January 28, , % due June 14, Brookfield Renewable Partners ULC 197, % due October 13, Bruce Power L.P. 143,000 Callable 3.969% due June 23, Canadian Credit Card Trust II 144, % due March 24, Canadian Imperial Bank of Commerce 357, % due July 14, , % due March 21, , % due July 11, ,000 Callable 3.00% due October 28, ,000 Callable 3.42% due January 26, Canadian National Railway Company 30,000 Callable 3.60% due August 01, Canadian Natural Resources Limited 84,000 Callable 3.55% due June 03, Canadian Pacific Railway Company 38, % due November 17, December 31,

8 TD Canadian Aggregate Bond Index ETF SCHEDULE OF INVESTMENT PORTFOLIO (in 000s except number of Shares or Units/Par Value) as at December 31, 2017 PAR VALUE DESCRIPTION COST FAIR VALUE Capital Desjardins Inc. 20, % due May 05, 2020 $ 22 $ 21 Choice Properties Real Estate Investment Trust 179, % due July 05, CU Inc. 73, % due October 24, ,000 Callable 4.085% due September 02, Daimler Canada Finance Inc. 110, % due October 02, , % due July 08, Enbridge Gas Distribution Inc. 77, % due November 23, ,000 Callable 2.50% due August 05, ,000 Callable 4.00% due August 22, Enbridge Inc. 164, % due March 09, ,000 Callable 4.57% due March 11, Enbridge Income Fund 15,000 Callable 3.95% due November 19, Enbridge Pipelines Inc. 10,000 Callable 3.94% due June 30, ,000 Callable 4.55% due August 17, EPCOR Utilities Inc. 28, % due February 28, Fairfax Financial Holdings Limited 50,000 Callable 4.70% due December 16, Federation des caisses Desjardins du Quebec 102, % due November 19, , % due July 17, , % due January 17, , % due August 25, First Capital Realty Inc. 16, % due October 30, , % due July 31, Ford Credit Canada Company 90, % due July 02, , % due June 22, FortisBC Energy Inc. 10, % due May 13, GE Capital Canada Funding Company 50, % due January 26, General Motors Financial of Canada Ltd. 57, % due May 22, , % due June 01, Glacier Credit Card Trust 74, % due September 20, Greater Toronto Airports Authority 26,000 Callable 3.04% due September 21, , % due December 03, , % due June 07, Great-West Lifeco Inc. 70, % due August 13, , % due March 21, Health Montreal Collective L.P. 30, % due September 30, Honda Canada Finance Inc. 50, % due December 07, , % due March 01, PAR VALUE DESCRIPTION COST FAIR VALUE HSBC Bank Canada 186, % due November 26, 2018 $ 188 $ , % due September 29, , % due June 29, Intact Financial Corporation 58, % due June 16, Inter Pipeline Ltd. 96,000 Callable 4.637% due May 30, John Deere Canada Funding Inc. 20, % due January 17, Laurentian Bank of Canada 196, % due April 22, Loblaw Companies Limited 140,000 Callable 4.86% due September 12, , % due January 18, Lower Mattagami Energy Limited Partnership 46, % due May 18, The Manufacturers Life Insurance Company 228,000 Callable 2.389% due January 05, ,000 Callable 3.181% due November 22, Manulife Financial Corporation 189, % due June 26, METRO Inc. 52,000 Callable 3.20% due December 01, , % due October 15, National Bank of Canada 311, % due August 09, , % due July 26, , % due March 18, NAV Canada 30, % due April 19, , % due June 01, Nissan Canada Financial Services Inc. 70, % due April 09, North West Redwater Partnership/ NWR Financing Company Ltd. 117,000 Callable 2.80% due June 01, ,000 Callable 3.65% due June 01, ,000 Callable 3.70% due February 23, ,000 Callable 4.05% due July 22, Nova Scotia Power Inc. 11, % due June 15, ,000 Callable 4.50% due July 20, Ontario Power Generation 12,000 Callable 3.315% due October 04, Pembina Pipeline Corporation 62,000 Callable 3.54% due February 03, ,000 Callable 4.81% due March 25, RioCan Real Estate Investment Trust 30, % due February 12, Rogers Communications Inc. 55, % due March 13, , % due September 29, , % due June 06, ,000 Callable 4.00% due March 13, ,000 Callable 6.56% due March 22, Royal Bank of Canada 20, % due March 30, , % due July 12, , % due December 11, December 31,

9 TD Canadian Aggregate Bond Index ETF SCHEDULE OF INVESTMENT PORTFOLIO (in 000s except number of Shares or Units/Par Value) as at December 31, 2017 PAR VALUE DESCRIPTION COST FAIR VALUE 232, % due March 23, 2020 $ 232 $ , % due March 04, , % due September 13, , % due March 02, , % due December 05, ,000 Callable 3.04% due July 17, ,000 Callable 2.99% due December 06, ,000 Callable 3.45% due September 29, Shaw Communications Inc. 185, % due October 01, , % due November 09, Sun Life Financial Inc. 89,000 Callable 5.40% due May 29, Suncor Energy Inc. 29,000 Callable 3.10% due November 26, ,000 Callable 3.00% due September 14, TELUS Corporation 20, % due December 04, ,000 Callable 3.20% due April 05, ,000 Callable 2.35% due March 28, ,000 Callable 3.35% due April 01, ,000 Callable 4.85% due April 05, Teranet Holdings L.P. 179, % due December 16, , % due December 17, Toronto Hydro Corporation 157, % due November 12, The Toronto-Dominion Bank* 188, % due April 02, , % due March 08, , % due June 08, , % due December 22, , % due July 24, ,000 Callable 2.692% due June 24, ,000 Callable 3.224% due July 25, ,000 Callable 4.859% due March 04, Toyota Credit Canada Inc. 58, % due July 18, , % due July 21, , % due February 28, TransCanada PipeLines Limited 30,000 Callable 3.69% due July 19, ,000 Callable 3.30% due July 17, , % due November 15, Union Gas Limited 25,000 Callable 3.79% due July 10, , % due September 02, ,000 Callable 3.59% due November 22, Ventas Canada Finance Limited 30,000 Callable 4.125% due September 30, VW Credit Canada Inc. 168, % due June 24, Wells Fargo Canada Corporation 199, % due July 25, , % due January 29, Westcoast Energy Inc. 152, % due January 16, ,732 16,542 Total Canadian Bonds 77,367 76,365 PAR VALUE DESCRIPTION COST FAIR VALUE GLOBAL BONDS 1.7% GERMANY 0.0% KFW 30, % due February 04, 2025 $ 37 $ 35 UNITED KINGDOM 0.2% Heathrow Funding Ltd. 111, % due May 21, HSBC Holdings PLC 50, % due December 05, UNITED STATES 1.4% Anheuser-Busch InBev Finance Inc. 70,000 Callable 2.60% due May 15, ,000 Callable 4.32% due May 15, Apple Inc. 167,000 Callable 2.513% due August 19, AT&T Inc. 30, % due November 25, ,000 Callable 4.85% due May 25, Bank of America Corporation 60, % due June 22, Citigroup Inc. 156, % due June 09, The Goldman Sachs Group Inc. 20, % due February 01, , % due May 03, ,000 Callable 2.433% due April 26, Molson Coors International L.P. 101,000 Callable 2.84% due July 15, Morgan Stanley 153, % due February 07, The Walt Disney Company 50, % due October 07, Wells Fargo & Company 137, % due May 19, ,098 1,086 SUPRANATIONALS 0.1% Asian Development Bank 30, % due February 16, Inter-American Development Bank 20, % due January 26, Total Global Bonds 1,358 1,341 TOTAL INVESTMENT PORTFOLIO 99.5% $ 78,725 $ 77,706 OTHER NET ASSETS (LIABILITIES) 0.5% 395 TOTAL NET ASSETS 100.0% $ 78,101 * Related party to the Fund as an affiliated entity of TD Asset Management Inc. December 31,

10 TD Canadian Aggregate Bond Index ETF FUND-SPECIFIC NOTES TO THE FINANCIAL STATEMENTS (A) THE FUND (I) The Fund was incepted on February 23, 2016 and its start date was on March 22, The units of the Fund were available for purchase on the Toronto Stock Exchange ( TSX ) effective March 30, The TSX ticker symbol for the Fund is TDB. (II) TDAM is the trustee, manager, portfolio adviser and promoter of the Fund. (III) The presentation and functional currency of the Fund is the Canadian dollar. (IV) The investment objective of the Fund is to seek to track, to the extent reasonably possible and before the deduction of fees and expenses, the performance of a Canadian aggregate bond index that measures the investment return of Canadian dollardenominated investment grade publicly issued debt, including securities issued by governments and corporate issuers. In seeking to achieve this objective, the Fund currently invests in and holds a proportionate share of securities included in the S&P Canada Aggregate Bond Index. The Fund may also invest in other investment funds, exchange-traded funds, or derivatives, to obtain exposure to such securities. (V) Any related party holdings as at December 31, 2017 (December 31, 2016: 2.3%), are disclosed in the Schedule of Investment Portfolio. (VI) The mid price as at December 31, 2017 was $ (B) MANAGEMENT FEES (%) (Note 6) for the periods ended December 31, 2017 and 2016 Annual Rate (exclusive of GST and HST) Management Fee Waived Fund Year per Prospectus Management Fee Management Fee TDB The management fee reported represents the annualized fee from the start date to the period ended December 31, The amount payable (in 000s) to TDAM as at December 31, 2017 for management fees is $0 (December 31, 2016: $0), which is included in Accrued Liabilities on the Statements of Financial Position. (C) BROKERAGE COMMISSIONS AND SOFT DOLLARS (in 000s) for the periods ended December 31, 2017 and 2016 (Notes 3 and 6) Not significant or applicable to the Fund. (D) TAX LOSS CARRY FORWARDS (in 000s) (Note 7) as at December 31, 2017 Capital Losses $ 267 Non-Capital Losses (by year of expiry) None (E) SECURITIES LENT (Note 3) (I) Securities Lending Income A reconciliation of the gross amount generated from the securities lending transactions to the security lending income to the Fund is as follows for the periods ended December 31, 2017 and 2016: Amount Percentage of (in 000s) Total Amount (%) Gross Securities Lending Income $ 9 $ Agent fees The Bank of New York Mellon Corp. (2) 0 (22.2) 0.0 Securities Lending Income to the Fund before Tax Reclaims (Withholding Taxes) Tax Reclaims (Withholding Taxes) Net Securities Lending Income $ 7 $ (II) Securities Lent and Collateral Held (in 000s) The table below summarizes the aggregate securities lent and related collateral held by the Fund as at December 31, 2017 and December 31, December 31, Fair Value of Securities Lent $ 17,405 $ 0 Fair Value of Collateral Held 18,294 0 Collateral held is in the form of debt obligations of the Government of Canada and other countries, Canadian provincial and municipal governments or corporations and is not included in the Statements of Financial Position. (F) FINANCIAL RISK MANAGEMENT (Notes 3, 4 and 8) as at December 31, 2017 and 2016 (I) Interest Rate Risk The table below summarizes the Fund s direct exposure to interest rate risk as at December 31, 2017 and 2016 by remaining term to maturity. The table also illustrates the potential impact to the Fund s net assets had the prevailing interest rates changed by 1 percent, assuming a parallel shift in the yield curve, with all other variables held constant. The Fund s sensitivity to interest rate changes was estimated using the weighted average duration of the bond portfolio. In practice, the actual trading results may differ from these approximate sensitivity analysis amounts and the differences could be material. Total Exposure Term to Maturity (000s) December 31, December 31, Bonds Less than 1 year $ 8,498 $ 4, years 28,515 12, years 18,212 8,819 > 10 years 22,481 10,457 Total $ 77,706 $ 35,948 Impact on Net Assets (000s) $ 5,506 $ 2,481 Impact on Net Assets (%) (II) Currency Risk Not significant or applicable to the Fund. (III) Other Price Risk Not significant or applicable to the Fund. (IV) Credit Risk The table below summarizes the debt instruments by credit ratings as at December 31, 2017 and Percentage of Percentage of Total Bonds (%) Total Net Assets (%) Credit December 31, December 31, December 31, December 31, Rating* AAA AA A BBB Total * Credit ratings are obtained from Standard & Poor s, Moody s or DBRS rating agencies. December 31,

11 TD Canadian Aggregate Bond Index ETF FUND-SPECIFIC NOTES TO THE FINANCIAL STATEMENTS (V) Financial Instruments by the Level in the Fair Value Hierarchy (in 000s) The table below illustrates the classification of the Fund s financial instruments within the fair value hierarchy as at December 31, 2017 and December 31, 2017 Level 1 Level 2 Level 3 Total Bonds $ 0 $ 77,706 $ 0 $ 77,706 December 31, 2016 Bonds $ 0 $ 35,948 $ 0 $ 35,948 As at the end of the periods, transfers between Level 1 and Level 2 were nil. (VI) Reconciliation of Level 3 Fair Value Measurements (in 000s) Not significant or applicable to the Fund. (VII) Contractual Maturities Analysis for Financial Liabilities As at December 31, 2017 and 2016, the Fund s net assets are due on demand. All other financial liabilities of the Fund are due in less than three months. (G) INVESTMENT PORTFOLIO CONCENTRATION (%) (Note 8) As at December 31, 2017 and 2016, the Fund s investment portfolio concentration can be summarized as follows: December 31, December 31, Canadian Bonds Federal Bonds & Guarantees Provincial Bonds & Guarantees Municipal Bonds Corporate Bonds Global Bonds Germany United Kingdom United States Supranationals Other Net Assets (Liabilities) (H) INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIES (in 000s) (Note 3) as at December 31, 2017 and 2016 Not significant or applicable to the Fund. (I) OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES (in 000s) (Note 3) as at December 31, 2017 and 2016 Not significant or applicable to the Fund. December 31,

12 TD Canadian Aggregate Bond Index ETF The S&P Canada Aggregate Bond Index is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates ( SPDJI ), and has been licensed for use by TD Asset Management Inc. ( TDAM ). Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC, a division of S&P Global ( S&P ); Dow Jones, Dow Jones Industrial Average and DJIA are registered trademarks of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by TDAM. The TD Canadian Aggregate Bond Index ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in the TD Canadian Aggregate Bond Index ETF nor do they have any liability for any errors, omissions, or interruptions of the S&P Canada Aggregate Bond Index. December 31,

13 NOTES TO THE FINANCIAL STATEMENTS 1. THE FUND The TD Exchange-Traded Funds (collectively, the Funds and individually, the Fund ) are open-end mutual funds established as trusts under the laws of the Province of Ontario and governed by the Declaration of Trust, as amended from time to time. The Funds are authorized to issue an unlimited number of redeemable, transferrable units of an unlimited number of classes of units, each of which represents an equal, undivided interest in the net assets of the Funds. The Funds currently offers one class of units denominated in Canadian dollars. Units of the Funds are listed on the Toronto Stock Exchange ( TSX ). TD Asset Management Inc. ( TDAM ) is the trustee, manager, portfolio adviser and promoter of the Funds. TDAM has entered into an agreement with TD Securities Inc. ( TDS ) to act as a designated broker and dealer to perform certain duties for the Funds. TDAM, TDS and TD Waterhouse Canada Inc. ( TDW ) are wholly-owned subsidiaries of The Toronto-Dominion Bank ( TD ). The registered address of the Funds is P.O. Box 100, 66 Wellington Street West, TD Bank Tower, Toronto-Dominion Centre, Toronto, Ontario, M5K 1G8. The financial year-end of the Funds is December 31. The Statements of Financial Position are presented as at December 31, 2017 and The Statements of Comprehensive Income, Changes in Net Assets Attributable to Holders of Redeemable Units and Cash Flows are presented for the periods ended December 31, 2017 and Where a Fund was established during either reporting period, the information for such Fund is provided from the inception date, except Weighted Average Units Outstanding for the Period, which is calculated from the start date. The Funds start date as indicated in the Fund-Specific Notes to the Financial Statements is the date that the Funds commenced operations and not the inception date. These financial statements were authorized for issue by TDAM on March 16, BASIS OF PRESENTATION These financial statements have been prepared in compliance with International Financial Reporting Standards ( IFRS ) as published by the International Accounting Standards Board ( IASB ). These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative financial instruments) at fair value through profit or loss ( FVTPL ). 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Instruments The Funds recognize financial instruments at fair value upon initial recognition, plus transaction costs in the case of financial instruments not measured at FVTPL. Regular way purchases and sales of financial instruments are recognized at their trade date. The Funds nonderivative investments, which are designated at FVTPL, and derivative assets and liabilities, which are classified as held for trading ( HFT ), are measured at FVTPL. All other financial assets and liabilities are measured at amortized cost. Under this method, financial assets and liabilities reflect the amount required to be received or paid, discounted, when appropriate, at the contract s effective interest rate. The Funds have determined that they meet the definition of an investment entity and as a result, they measure subsidiaries, if any, at FVTPL. An investment entity is an entity that: obtains funds from one or more investors for the purpose of providing them with investment management services; commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and measures and evaluates the performance of substantially all of its investments on a fair value basis. The significant judgment that the Funds have made in determining that they meet this definition is that fair value is the primary measurement attribute used to measure and evaluate the performance of substantially all of the Funds investments. The Funds investments may also include associates and joint ventures which are designated at FVTPL. The Funds outstanding redeemable units may be redeemed for cash at a redemption discount to the closing price on the TSX. Such reduced redemption price causes cash flows on redemption not to be substantially based on net asset value ( NAV ). Consequently, the outstanding redeemable units of the Funds are classified as financial liabilities in accordance with the requirements of IAS 32, Financial Instruments: Presentation. The Funds accounting policies for measuring the fair value of their investments and derivatives are substantially similar to those used in measuring their NAVs for transactions with unitholders. The NAV is the value of the total assets of a fund less the value of its total liabilities determined, on each valuation date, in accordance with Part 14 of National Instrument , Investment Fund Continuous Disclosure, for the purpose of processing unitholder transactions. Net Assets Attributable to Holders of Redeemable Units, also referred to as net assets, refers to net assets calculated in accordance with IFRS. As at all dates presented, there were no differences between the Funds NAV per unit and net assets per unit. December 31,

14 NOTES TO THE FINANCIAL STATEMENTS The NAV per unit of a Fund is computed by dividing the NAV of the Fund by the total number of units of the Fund outstanding at such time on each valuation date. Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of financial assets and liabilities traded in active markets (such as publicly traded derivatives and marketable securities) are based on quoted market prices at the close of trading on the reporting dates. The Funds use the last traded market price for both financial assets and financial liabilities where the last traded price falls within that day s bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, TDAM determines the point within the bid-ask spread that is most representative of fair value based on the specific facts and circumstances. The Funds policy is to recognize transfers into and out of the fair value hierarchy levels at the end of the reporting periods. The fair values of financial assets and liabilities that are not traded in an active market, including over-the-counter derivatives, are determined using valuation techniques. The Funds use a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques include the use of comparable recent arm s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other techniques commonly used by market participants and which attempt to make the maximum use of observable inputs. The valuation methodology for specific types of investments held by the Funds is summarized below. (a) Securities not listed on any recognized public securities exchange are valued based on available quotations from recognized dealers in such securities, where readily available. If securities have no available broker-dealer bid/ask quotes, TDAM uses its own pricing model to price the securities. The pricing model will generally include the discounted cash flow valuation approach, the use of a credit spread based on the terms of the security and the use of such credit and yield analysis comparables as TDAM believes are relevant in the circumstances. Debt instruments are valued based on mid prices, where readily available. Other valuation techniques may be used, as described above, where applicable. (b) Short-term debt instruments are valued based on quotations received from recognized investment dealers. (c) Investments in underlying conventional mutual funds and TD Exchange-Traded Funds are generally valued at the NAV per series unit or NAV per class unit of the investment funds as reported by the investment funds managers. (d) The Funds may use foreign exchange forward contracts to hedge against or profit from fluctuations in foreign exchange rates. These contracts are valued on each valuation day based on the difference between the contract rates and the current forward rates at the measurement date applied to the contracts notional amount. The net change in unrealized appreciation or depreciation and the net realized gain or loss from closing out contracts are reflected in the Statement of Comprehensive Income as part of Net Gain (Loss) on Derivatives. Fair Value Hierarchy The Funds classify their investments into fair value measurements within a hierarchy that prioritizes the inputs to fair value measurement. The fair value hierarchy has the following three levels: Level 1 Quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is, derived from prices); and Level 3 Inputs that are not based on observable market data (that is, unobservable inputs). All fair value measurements are recurring. The carrying values of Cash, Subscriptions Receivable, Interest Receivable, Dividends Receivable, Receivable for Investments Sold, Bank Overdrafts, Payable for Investments Purchased, Redemptions Payable, Distributions Payable and Accrued Liabilities approximate their fair values due to their short-term nature. Fair values are classified as Level 1 when the related security or derivative is actively traded and a quoted price is available. If an instrument classified as Level 1 subsequently ceases to be actively traded, it is transferred out of Level 1. In such cases, an instrument is reclassified into Level 2, unless the measurement of its fair value requires the use of significant unobservable inputs, in which case it is classified as Level 3. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The classification within the hierarchy is based on the lowest level input that is significant to the fair value measurement. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. December 31,

15 NOTES TO THE FINANCIAL STATEMENTS Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgment. Observable data is considered to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. TDAM has a Global Fair Value Committee which oversees the performance of the fair value measurements included in the financial statements of the Funds, including any Level 3 measurements. TDAM utilizes a variety of methods (as listed in the Fair Value Measurement section) in determining the fair value of securities classified as Level 3. The committee also meets quarterly to perform reviews of the valuations of investments held by the Funds. The classification of the Funds financial instruments within the fair value hierarchy as at December 31, 2017 and 2016, and any transfers between levels at the end of the reporting periods as a result of changes in the lowest level input that is significant to the fair value measurement are disclosed in the Fund-Specific Notes to the Financial Statements, where applicable. Interest in Unconsolidated Structured Entities A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. TDAM has determined that all of the underlying funds in which the Funds invest are unconsolidated structured entities. In making this determination, TDAM evaluated the fact that decision making about underlying funds activities is generally not governed by voting or similar rights held by the Funds and other investors in any underlying funds. The Funds may invest in underlying funds whose investment objectives range from seeking to achieve short- to long-term income and capital growth potential. The Funds interests in these securities as at December 31, 2017 and 2016 are included at their fair value in the Statements of Financial Position, which represents the Funds exposure in these underlying funds. The Funds do not provide and have not committed to provide any additional significant financial or other support to the underlying funds. Realized gain or loss and the change in fair value of each of the underlying funds during the reporting periods are included in Net Gain (Loss) on Investments in the Statements of Comprehensive Income. Additional information on the Funds interests in underlying funds, where applicable, is provided in the Schedule of Investment Portfolio and Fund-Specific Notes to the Financial Statements. The Funds may also invest in mortgage-related and/or other asset-backed securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. Mortgage-related securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. The debt and equity securities issued by these securities may include tranches with varying levels of subordination. The Funds may invest in senior notes that have a first lien on assets and have minimum exposure to junior or subordinate tranches. These securities may provide a monthly payment which consists of both interest and principal payments. Other asset-backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans, and student loans. As at December 31, 2017 and 2016, the fair values of mortgage-related and other asset-backed securities of the Funds, where applicable, are disclosed as part of Investments in the Statements of Financial Position. These amounts represent the maximum exposure to losses at those dates. The change in fair value of mortgage-related and other asset-backed securities during the reporting periods are included in the Net Change in Unrealized Appreciation/Depreciation in the Statements of Comprehensive Income in Net Gain (Loss) on Investments. Translation of Foreign Currencies A Fund s functional currency, as disclosed in the Fund-Specific Notes to the Financial Statements, represents the currency that TDAM views to most faithfully represent the economic effects of the Fund s underlying transactions, events and conditions taking into consideration how units are issued or redeemed and how returns are measured. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates that transactions occur. Realized foreign exchange gains and losses on income are recognized in investment income in the Statements of Comprehensive Income. Assets and liabilities denominated in a foreign currency are translated into the functional currency using the exchange rate prevailing at the measurement date. Foreign exchange gains and losses on the sale of investments are included in Net Realized Gain (Loss). Unrealized foreign exchange gains and losses on investments held and other assets and liabilities are included in Net Change in Unrealized Appreciation/Depreciation. Realized and unrealized foreign exchange gains and losses relating to cash are presented as Foreign Exchange Gain (Loss) on Cash in the Statements of Comprehensive Income. December 31,