Mutual Funds. Annual Financial Report

Transcription

1 Mutual Funds 2007 Annual Financial Report

2 Asset Management Trade-marks of AllianceBernstein Canada, Inc.; Brandywine Global Investment Management, LLC; Connor, Clark & Lunn Investment Management Ltd.; Jarislowsky Fraser Limited; Martin Currie Inc.; McLean Budden Limited; Morgan Stanley Investment Management Inc.; OppenheimerFunds, Inc.; T.Rowe Price Associates, Inc. are used with permission.

3 TD Mutual Funds 2007 Annual Financial Report 2 TD Asset Management Inc. 3 TD Mutual Funds 5 Index and Quantitative Management 6 Active Fundamental Fixed Income and Equity Management 7 Fund Advisers 10 Performance Summary 10 Investor Series 13 Advisor Series 15 F-Series 18 Management s Responsibility for Financial Reporting 19 Auditors Report Financial Statements MONEY MARKET FUNDS 20 TD Canadian T-Bill Fund 22 TD Canadian Money Market Fund 27 TD Premium Money Market Fund 32 TD U.S. Money Market Fund FIXED INCOME FUNDS 36 TD Short Term Bond Fund 40 TD Mortgage Fund 43 TD Canadian Bond Fund 48 TD Canadian Core Plus Bond Fund 52 TD Corporate Bond Capital Yield Fund 56 TD Real Return Bond Fund 59 TD Global Bond Fund 64 TD High Yield Income Fund 70 TD Income Advantage Portfolio BALANCED FUNDS 74 TD Monthly Income Fund 81 TD Balanced Income Fund 86 TD Diversified Monthly Income Fund (formerly TD Monthly High Income Fund) 92 TD Balanced Growth Fund 98 TD Dividend Income Fund CANADIAN EQUITY FUNDS 105 TD Dividend Growth Fund 109 TD Income Trust Capital Yield Fund 112 TD Canadian Blue Chip Equity Fund 116 TD Canadian Equity Fund 120 TD Canadian Value Fund 124 TD Canadian Small-Cap Equity Fund U.S. EQUITY FUNDS 128 TD North American Dividend Fund 131 TD U.S. Blue Chip Equity Fund 135 TD U.S. Blue Chip Equity Currency Neutral Fund 138 TD U.S. Quantitative Equity Fund 142 TD U.S. Large-Cap Value Fund 146 TD U.S. Large-Cap Value Currency Neutral Fund 149 TD U.S. Mid-Cap Growth Fund 153 TD U.S. Mid-Cap Growth Currency Neutral Fund 156 TD U.S. Small-Cap Equity Fund 161 TD U.S. Small-Cap Equity Currency Neutral Fund 164 TD U.S. Equity Advantage Portfolio 167 TD U.S. Equity Advantage Currency Neutral Portfolio GLOBAL EQUITY FUNDS 170 TD Global Dividend Fund 174 TD Global Value Fund 177 TD Global Select Fund 181 TD Global Multi-Cap Fund 185 TD Global Sustainability Fund 189 TD International Equity Fund 194 TD International Equity Growth Fund 198 TD European Growth Fund 201 TD Japanese Growth Fund 204 TD Asian Growth Fund 207 TD Pacific Rim Fund 209 TD Emerging Markets Fund 213 TD Latin American Growth Fund 216 TD Global Equity Advantage Portfolio SECTOR FUNDS 219 TD Resource Fund 224 TD Energy Fund 228 TD Precious Metals Fund 233 TD Entertainment & Communications Fund 237 TD Science & Technology Fund 240 TD Health Sciences Fund INDEX FUNDS 245 TD Canadian Bond Index Fund 255 TD Balanced Index Fund 257 TD Canadian Index Fund 262 TD Dow Jones Industrial Average SM Index Fund 265 TD U.S. Index Fund 272 TD U.S. Index Currency Neutral Fund 276 TD Nasdaq Index Fund 280 TD International Index Fund 292 TD International Index Currency Neutral Fund 296 TD European Index Fund 304 TD Japanese Index Fund 310 Notes to Financial Statements 333 Redeeming Your Investments 2007 Annual Financial Report TD Mutual Funds 1

4 TD Asset Management Inc. TD Asset Management Inc. TD Asset Management Inc. gives you access to some of the world s leading money managers. Providing expertise in international and specialized market segments for several TD Mutual Funds are some of the world s most respected money managers, including T. Rowe Price Associates, Inc., OppenheimerFunds, Inc., Morgan Stanley Investment Management Inc., Brandywine Global Investment Management, LLC, Martin Currie Inc. and AllianceBernstein Canada, Inc. TD Asset Management Inc. Board of Directors Robert MacLellan William Hatanaka Timothy Pinnington Barbara Palk Chairman, Group Head, President, President, TD Asset Management Wealth Management TD Mutual Funds TD Asset Management Chairman and Chief Executive Officer, TD Waterhouse Canada Inc. Rudy Sankovic Michael Thorfinnson Bill Fulton William Gazzard Jane Stubbington Senior Vice President Chief Operating Officer Senior Vice President, Senior Vice President, Associate Vice President, and Chief Financial Officer, and Chief Risk Officer, Private Client Group, Compliance, Legal, TD Wealth Management TD Asset Management TD Waterhouse TD Bank TD Bank Investment Performance Oversight Committee Our Investment Performance Oversight Committee provides a forum to review the performance of the TD Mutual Funds family and the level of success achieved by the investment professionals who manage the funds. The Committee meets regularly to review management style, processes, and fund statistics, including performance and levels of risk. 2 TD Asset Management Inc. TD Mutual Funds 2007 Annual Financial Report

5 TD Asset Management Inc. TD MUTUAL FUNDS Karen Buck Vice President Channel Distribution Services Huck Oon Associate Vice President, Product Design & Management Lee Pomeroy Vice President, Retail Sales Karl Schulz Vice President, Manager Research & Portfolio Strategy Terry Fullerton National Sales Manager, Advisor Sales Channel WEALTH MANAGEMENT OPERATIONS Jerry Beniuk Vice President, Asset Maintenance Brad Ciccarelli Associate Vice President, Asset Valuation & Maintenance Irene Urshon Vice President, Account Management & Trading 2007 Annual Financial Report TD Mutual Funds TD Asset Management Inc. 3

6 TD Asset Management Inc. TD Asset Management Inc. (TDAM), a member of the TD Bank Financial Group and part of the TD Wealth Management group of companies, is one of Canada s largest investment manage - ment firms, with leading market positions in active, quantitative and passive portfolio management. TDAM is a fully integrated investment management business offering a wide-range of products and solutions to institutional and retail mutual fund clients including alternative investments and portfolio integra - tion services such as transition management, rebalancing and overlay. As of December 31, 2007, TDAM and its affiliates had over C$170B in asset under management on behalf of pension, insurance, endowment/foundation and corporate clients, as well as high net worth and retail mutual funds. TD Mutual Funds Under the TD Mutual Funds name, TDAM provides a diverse range of 70 mutual funds and 15 professionally managed portfolios. TDAM manages retail and institutional mutual fund assets on behalf of more than 1.4 million investors and TD Mutual Funds is one of the most broadly diversified fund families in Canada. Funds are available at TD Canada Trust branches (through TD Investment Services Inc. representatives), TD Waterhouse Discount Brokerage, Financial Planning and Private Investment Advice, as well as leading investment dealers, independent brokers, advisors, and financial planners. As of December 31, 2007, TDAM was the fourth largest mutual fund company in Canada, with approximately C$55.8 billion invested in the TD Mutual Funds. Protecting Client Assets TDAM AND RISK MANAGEMENT The goal of TDAM s Risk Management department is to foster a risk management culture throughout the firm that increases personal accountability and integrity of the investment manage - ment process, product management, and delivery. Led by TDAM s Chief Risk Officer, the team independently governs our control environment by thoroughly monitoring, measuring, and mitigating risk. Risk Management staff work side-by-side with our Portfolio Management team to integrate risk management objectives into the investment decision-making process. TRADING POLICY In managing client assets, it is essential that our clients interests have priority. Accordingly, TDAM has implemented clear policies and practices to help ensure against inappropriate trading practices. PERSONAL TRADING POLICY TDAM maintains a strict personal trading policy that includes pre-approval of trades. The policy is managed by TDAM Institutional Compliance and applies to all employees at all levels in both front and back office capacities who may have access to specific information about the funds activity and composition. An employee s failure to comply with the policy may result in termination of employment. Investment Personnel Underpinning TDAM is a dedicated team of internal investment professionals. Employees at TDAM are required to adhere to TDAM s Corporate Policies, TD Bank s Code of Conduct, and TD Privacy Code policies. Also, employees at TDAM that have attained the right to use the Chartered Financial Analyst (CFA) designation are bound by the CFA Institute s Code of Ethics and Standards of Professional Conduct. 4 TD Asset Management Inc. TD Mutual Funds 2007 Annual Financial Report

7 TD Asset Management Inc. Fund Adviser for Index & Quantitative Funds TD INCOME ADVANTAGE PORTFOLIO TD CANADIAN BOND INDEX FUND TD BALANCED INDEX FUND TD CANADIAN INDEX FUND TD U.S. BLUE CHIP EQUITY CURRENCY NEUTRAL FUND TD U.S. QUANTITATIVE EQUITY FUND TD U.S. LARGE-CAP VALUE CURRENCY NEUTRAL FUND TD U.S. MID-CAP GROWTH CURRENCY NEUTRAL FUND TD U.S. SMALL-CAP EQUITY CURRENCY NEUTRAL FUND TD U.S. EQUITY ADVANTAGE PORTFOLIO TD U.S. EQUITY ADVANTAGE CURRENCY NEUTRAL PORTFOLIO TD DOW JONES INDUSTRIAL AVERAGE SM INDEX FUND TD U.S. INDEX FUND TD U.S. INDEX CURRENCY NEUTRAL FUND TD NASDAQ INDEX FUND TD GLOBAL EQUITY ADVANTAGE PORTFOLIO TD INTERNATIONAL INDEX FUND TD INTERNATIONAL INDEX CURRENCY NEUTRAL FUND TD EUROPEAN INDEX FUND TD JAPANESE INDEX FUND Index Management Indexing, or passive management, provides broad diversification across a market. Indexing does not take active risk versus market benchmark indices; it is a conservative, low risk investment style. Investors achieve the diversification and market performance at a relatively low cost. Quantitative Portfolio Management Our quantitative investment philosophy is founded on the belief that pricing anomalies in securities markets can be exploited in a highly risk-controlled manner. This is achieved through rigorous statistical analysis and econometric techniques to capture value added on a consistent incremental basis. Our quantitative models are robust, adaptive, and the data is continuously updated. They produce highly diversified portfolios with well-controlled risk factors relative to their respective benchmarks. Mark Bell Managing Director, TDAM Robin Lacey Managing Director, TDAM Kevin LeBlanc Vice Chair, TDAM Fund Adviser for Active Fundamental Fixed Income and Equity Funds TD CANADIAN T-BILL FUND TD CANADIAN MONEY MARKET FUND TD PREMIUM MONEY MARKET FUND TD U.S. MONEY MARKET FUND TD SHORT TERM BOND FUND TD MORTGAGE FUND TD CANADIAN BOND FUND TD CANADIAN CORE PLUS BOND FUND TD CORPORATE BOND CAPITAL YIELD FUND TD REAL RETURN BOND FUND TD GLOBAL BOND FUND TD HIGH YIELD INCOME FUND TD MONTHLY INCOME FUND TD DIVERSIFIED MONTHLY INCOME FUND TD DIVIDEND INCOME FUND TD DIVIDEND GROWTH FUND TD INCOME TRUST CAPITAL YIELD FUND TD CANADIAN EQUITY FUND TD CANADIAN VALUE FUND TD NORTH AMERICAN DIVIDEND FUND TD GLOBAL DIVIDEND FUND TD GLOBAL SUSTAINABILITY FUND TD EUROPEAN GROWTH FUND TD JAPANESE GROWTH FUND TD RESOURCE FUND TD ENERGY FUND TD PRECIOUS METALS FUND INDEX AND QUANTITATIVE MANAGEMENT Left to right: Dino Bourdos, Wilcox Chan, Pearl Moffat, Joel McGurrin, Ingrid Macintosh and John Ellis Craig Gaskin, Marija Finney, Lynne Boivin, Jean Masson and Bruce Geddes 2007 Annual Financial Report TD Mutual Funds TD Asset Management Inc. 5

8 TD Asset Management Inc. Active Fundamental Fixed Income and Equity Management Our philosophy is to seek to provide superior risk-adjusted returns that are sustainable over the long-term. This should be achieved through diligent fundamental analysis to identify well-priced, highquality investments with long-term growth potential. Quantitative analysis is also used to assist with portfolio construction. Satish Rai Vice Chair, TDAM Ken Miner Vice Chair, Fixed Income, TDAM Bruce Cooper Managing Director, Equities, TDAM On the active fundamental fixed income side, we believe that an expertise in credit research and an in-depth understanding of the relationships between yield, credit and the term-to-maturity enhance returns. Our approach does not employ active duration calls as a source of added value. As we have a credit focus, our investment process follows a bottom-up approach to security selection. On the active fundamental equity side, we primarily use a bottomup process, where our managers evaluate individual securities on a fundamental basis utilizing extensive internally generated research. This approach is complemented by the identification and evaluation of macroeconomic trends at an industry, sector, country, or global economic level and the potential impact on portfolios. TDAM s award-winning active investment management team has a track record of adding value over the long-term. ACTIVE FUNDAMENTAL FIXED INCOME MANAGEMENT Left to right: Davide Pagliaro, Matt Knox, Scott Colbourne, David McCulla and Adam Wagstaffe Nevena Sergo, Greg Kocik, Geoff Wilson, Anthony Foss and Nicholas Leach Cherie Chan, Michael Craig, Xin Chen, Rob Pemberton, Olga Bylaard and Elaine Lindhorst ACTIVE FUNDAMENTAL EQUITY MANAGEMENT Left to right: Charles Edwardes-Ker, Douglas Warwick, Simone Loke, Rachel Volynsky, Michael O Brien, David Mau and Scott Margach John Smolinski, Thomas George, Carrie Yakimovich, Les Grober, David Sykes, Margot Naudie and Justin Flowerday Jonathan Shui, Ari Levy, Michael Lough, Chad Gilfillan, Craig Bethune and Todd Graham 6 TD Asset Management Inc. TD Mutual Funds 2007 Annual Financial Report

9 Fund Advisers TD Asset Management Inc. manages each of the TD Mutual Funds. Where appropriate, TDAM has engaged selected portfolio advisers to provide specialized expertise for certain asset categories. This section profiles these firms. AllianceBernstein Canada, Inc. AllianceBernstein L.P. is a research-driven organization that is global in scope and client-focused in its mission. It delivers to clients around the world investment services in key asset classes: Bernstein Value Equities, Alliance Growth Equities, AllianceBernstein Blend Strategies, AllianceBernstein Fixed Income and AllianceBernstein Alternative Investments. Their depth of research, worldwide presence and breadth of services allow for a full array of investment products, both global and local, in all major markets. As of December 31, 2007 the firm had approximately $800 billion in assets under management for retail investors, high-net-worth individuals and families, and major institutions and corporations. All Bernstein products and services are managed in accordance with a value-oriented philosophy across all geographies and markets for 40 years. Bernstein strategies seek to buy stocks with the greatest amount of long-term earnings for the best price. Investors often overreact to near-term events, assuming that current conditions will remain unchanged. This causes securities to become mispriced relative to their true values or long-term earnings prospects and can create compelling buying opportunities. FUND SUB-ADVISER TO THE TD INTERNATIONAL EQUITY FUND Left to right: Henry D Auria and Kevin Boreen Brandywine Global Investment Management, LLC Since its founding in 1986, Brandywine Global has pursued one investment approach: value investing. Through in-depth research studies and practical experience, the company s founding partners determined that value-style investing, regardless of the market, can provide excellent risk-adjusted returns over full investment cycles, and believe this strategy is particularly important in today s global markets. Brandywine Global offers an array of equity, fixed income, and balanced portfolios that invest in U.S., international, and global markets. As of December 31, 2007, Brandywine managed over $49 billion in assets. The company is headquartered in Philadelphia, with satellite offices in Chicago, San Francisco, and Singapore. The firm is a whollyowned, independently operated subsidiary of Legg Mason, Inc. FUND SUB-ADVISER TO THE TD GLOBAL VALUE FUND Left to right: Paul Ehrlichman and Safa Muhtaseb Connor, Clark & Lunn Investment Management Ltd. Connor, Clark & Lunn Investment Management Ltd., which commenced operations in Vancouver in 1982, is an affiliate of the Connor, Clark & Lunn Financial group. Connor, Clark & Lunn is one of Canada s largest and fastest-growing investment managers, with over $22 billion in assets under management on behalf of its institutional, private, and retail clients. Their investment philosophy is capital preservation while striving to provide superior long-term performance through a consistent and disciplined investment process. By analyzing and quantifying the risk/reward trade-offs in financial markets and asset classes, Connor, Clark & Lunn has been able to successfully achieve superior investment performance with lower risk. The firm is a private Canadian company owned by its employees. FUND SUB-ADVISER TO THE TD CANADIAN SMALL-CAP EQUITY FUND Left to right: Gordon MacDougall and Gary Baker 2007 Annual Financial Report TD Mutual Funds Fund Advisers 7

10 Fund Advisers Jarislowsky Fraser Limited Jarislowsky Fraser Limited is a well-regarded investment counselling firm founded in 1955 as an investment research organization. The firm currently manages assets exceeding C$57 billion on behalf of pension funds, pooled funds, endowment funds, and corporate and private portfolios for clients in North America and Europe. Jarislowsky Fraser remains one of the few totally independent investment managers, with no corporate affiliations. Their investment philosophy is to seek growth at a reasonable price, based on fundamental analysis and extensive management interviews. Jarislowsky Fraser takes an active role in protecting the interests of minority shareholders and has been recognized as a leader in corporate governance issues. FUND SUB-ADVISER TO THE TD BALANCED INCOME AND TD CANADIAN BLUE CHIP EQUITY FUNDS McLean Budden Limited Based in Toronto, McLean Budden has over 60 years of investment management experience and is one of the oldest investment managers in Canada. Corporate and public pension funds, endowments and foundations, multi-employer funds, insurance companies, private investors, mutual fund investors, and money purchase funds all rely on McLean Budden Limited to manage their global investments. The firm currently has approximately C$42 billion in assets under management. The basic philosophy of McLean Budden s investment management process is to exceed the fund s objectives without incurring unnecessary risk to achieve this goal. McLean Budden is able to successfully implement their investment philosophy over time by emphasizing team research and maintaining the depth and stability of global investment expertise needed for today s investors. FUND SUB-ADVISER TO THE TD BALANCED GROWTH FUND Left to right: Margot Ritchie and James Morton Mary Hallward Martin Currie Inc. Martin Currie Inc. is a subsidiary of Martin Currie Ltd., an Edinburgh, Scotland based investment management company with worldwide assets under management totalling more than C$30.9 ( 15.7) billion as of December 31, Founded in 1881, Martin Currie Ltd. has a strong legacy of investing in international equities for clients worldwide. In North America, they provide services to pension funds, foundations, and mutual fund clients. Describing themselves as a big boutique, the company has the solidity, professionalism and robustness of process of a large company, combined with the distinctiveness, client focus, and personal ownership of a small company. Martin Currie Ltd. is a private employee-owned company. FUND SUB-ADVISER TO THE TD ASIAN GROWTH AND TD PACIFIC RIM FUNDS Left to right: Richard Evans, Jason McCay and John Millar 8 Fund Advisers TD Mutual Funds 2007 Annual Financial Report

11 Fund Advisers Morgan Stanley Investment Management Inc. With over 30 years of global investment experience, Morgan Stanley Investment Management offers the personalized attention and service of a boutique, the intelligence and creativity of some of the brightest professionals in the industry, and the global resources of Morgan Stanley. Headquartered in New York, the firm has more than US$582 billion in assets under management as of December 31, Morgan Stanley offers a comprehensive suite of U.S. and global equity, fixed income, asset allocation, cash management, and alternative investment strategies for a range of institutional clients, including tax-exempt institutions and multi-employer plans, retirement savings plans and pension funds, endowments and foundations, corporations, governments, and high-net-worth individuals. FUND SUB-ADVISER TO THE TD INTERNATIONAL EQUITY GROWTH, TD EMERGING MARKETS AND TD LATIN AMERICAN GROWTH FUNDS T. Rowe Price Associates, Inc.; T. Rowe Price International, Inc. T. Rowe Price Associates and T. Rowe Price International are sub - sidaries of T. Rowe Price Group, an investment management firm based in Baltimore, Maryland, offering individuals and institutions around the world investment management excellence, world-class service, and guidance. T. Rowe Price has over 65 years of invest - ment experience. Assets under manage ment were over US$400 billion as of December 31, T. Rowe Price s disciplined, riskaware investment approach focuses on diversification, style consistency, and funda mental research. Reflecting its commitment to rigorous investment analysis, T. Rowe Price supports one of the industry s largest proprietary research efforts, undertaken by ana - lysts, economists, and statisticians. The T. Rowe Price invest ment approach strives to achieve superior performance but is always mindful of the risks incurred relative to the potential rewards. FUND SUB-ADVISER TO THE TD U.S. LARGE-CAP VALUE, TD U.S. BLUE CHIP EQUITY, TD U.S. MID-CAP GROWTH, TD U.S. SMALL-CAP EQUITY, TD ENTERTAINMENT & COMMUNICATIONS, TD SCIENCE & TECHNOLOGY, TD HEALTH SCIENCES AND TD GLOBAL MULTI-CAP FUNDS Left to right: Michael Hillman, Ana Cristina Piedrahita, W. Scott Piper, Ruchir Sharma, David Sugimoto and Hans van den Berg OppenheimerFunds, Inc. OppenheimerFunds, Inc. is one of the largest and most respected investment management companies in the U.S. At December 31, 2007, OppenheimerFunds, Inc., including subsidiaries and controlled affiliates, managed more than $260 billion in assets, including more than 60 mutual funds having more than 6 million shareholder accounts. OppenheimerFunds products include mutual funds, variable annuities, qualified retirement plans, and separately managed portfolios. The Company is committed to achieving strong performance over the long-term using a disciplined, collaborative approach to investment management. OppenheimerFunds, Inc. is a member of the MassMutual Financial Group and is not affiliated with Oppenheimer & Co, Inc. or Oppenheimer Capital. FUND SUB-ADVISER TO THE TD GLOBAL SELECT FUND Left to right: R. Scott Berg, Brian Berghuis, Henry Ellenbogen, Robert Gensler, Kris Jenner, Gregory McCrickard, Larry Puglia, Brian Rogers, Jeff Rottinghaus, J. David Wagner and John Wakeman Rajeev Bhaman 2007 Annual Financial Report TD Mutual Funds Fund Advisers 9

12 Performance Summary Investor Series: as at December 31, 2007 Unit Price Yield* Annualized Compounded Rates of Return Start Current Effective 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date MONEY MARKET FUNDS TD Canadian T-Bill Fund $ % 3.20% 3.38% 3.18% 2.70% 2.30% 2.90% 3.57% 11/91 TD Canadian Money Market Fund /88 TD Premium Money Market Fund /97 TD U.S. Money Market Fund (US$) /88 TD U.S. Money Market Fund P (US$) /04 Unit Price Annualized Compounded Rates of Return Start 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date FIXED INCOME FUNDS TD Short Term Bond Fund $ % 2.8% 2.4% 3.2% 4.4% 5.9% 01/89 TD Mortgage Fund /75 TD Canadian Bond Fund /88 TD Canadian Core Plus Bond Fund /07 TD Corporate Bond Capital Yield Fund /06 TD Real Return Bond Fund /94 TD Global Bond Fund /94 TD High Yield Income Fund /98 TD Income Advantage Portfolio /03 BALANCED FUNDS TD Monthly Income Fund $ % 7.2% 9.2% 12.5% 10.0% 06/98 TD Balanced Income Fund % /88 TD Diversified Monthly Income Fund /87 TD Balanced Growth Fund /87 TD Dividend Income Fund /94 CANADIAN EQUITY FUNDS TD Dividend Growth Fund $ % 8.4% 13.3% 16.1% 10.7% 11.4% 09/87 TD Income Trust Capital Yield Fund /06 TD Canadian Blue Chip Equity Fund /87 TD Canadian Equity Fund /88 TD Canadian Value Fund /94 TD Canadian Small-Cap Equity Fund /86 The Unit Price represents the net asset value per unit for purposes of purchases and redemptions by unitholders (Transactional NAV) and may differ from the GAAP NAV disclosed in the Statement of Net Assets. A reconciliation of the two NAVs is provided in Note 3 in the Notes to Financial Statements. Past performance is based on Transactional NAVs. * This is an annualized historical yield based on the seven-day period ended on December 31, 2007 (annualized in the case of effective yield by compounding the seven-day return) and does not represent an actual one-year return. P Premium Series 1 Regulatory restrictions limit publishing performance returns for Funds or Portfolios with a history of less than one year. 2 In December 2006, the investment objective of the TD Global Bond Fund (formerly TD Global RSP Bond Fund) changed. 3 In December 2006, the investment objective of the Fund (formerly TD Monthly High Income Fund) changed to permit the Fund to invest primarily in income-producing securities. The Fund was previously required to invest primarily in Canadian equities, bonds and short-term instruments. If the change had been in effect previously, the Fund s performance indicated above could have been materially different. 10 Performance Summary TD Mutual Funds 2007 Annual Financial Report

13 Performance Summary Investor Series: as at December 31, 2007 Unit Price Annualized Compounded Rates of Return Start 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date U.S. EQUITY FUNDS TD North American Dividend Fund 2 (CDN$) $ % 0.5% -0.2% 1.1% -1.3% 4.8% 12/90 TD North American Dividend Fund 2 (US$) /00 TD U.S. Blue Chip Equity Fund (CDN$) /96 TD U.S. Blue Chip Equity Fund (US$) /99 TD U.S. Blue Chip Equity Currency Neutral Fund /06 TD U.S. Quantitative Equity Fund /93 TD U.S. Large-Cap Value Fund /03 TD U.S. Large-Cap Value Currency Neutral Fund /06 TD U.S. Mid-Cap Growth Fund (CDN$) /94 TD U.S. Mid-Cap Growth Fund (US$) /99 TD U.S. Mid-Cap Growth Currency Neutral Fund /06 TD U.S. Small-Cap Equity Fund (CDN$) /97 TD U.S. Small-Cap Equity Fund (US$) /99 TD U.S. Small-Cap Equity Currency Neutral Fund /06 TD U.S. Equity Advantage Portfolio /04 TD U.S. Equity Advantage Currency Neutral Portfolio /06 GLOBAL EQUITY FUNDS TD Global Dividend Fund $ % 1.2% 09/06 TD Global Value Fund /06 TD Global Select Fund % 3.6% 6.9% 1.9% /94 TD Global Multi-Cap Fund /06 TD Global Sustainability Fund 1, /07 TD International Equity Fund /87 TD International Equity Growth Fund /06 TD European Growth Fund /94 TD Japanese Growth Fund /94 TD Asian Growth Fund /94 TD Pacific Rim Fund /94 TD Emerging Markets Fund /92 TD Latin American Growth Fund (CDN$) /94 TD Latin American Growth Fund (US$) /99 TD Global Equity Advantage Portfolio /98 The Unit Price represents the net asset value per unit for purposes of purchases and redemptions by unitholders (Transactional NAV) and may differ from the GAAP NAV disclosed in the Statement of Net Assets. A reconciliation of the two NAVs is provided in Note 3 in the Notes to Financial Statements. Past performance is based on Transactional NAVs. 1 Regulatory restrictions limit publishing performance returns for Funds or Portfolios with a history of less than one year. 2 In December 2006, the investment objective of the Fund (formerly TD U.S. Equity Fund) changed to permit the Fund to invest primarily in income-producing securities in North America. The Fund was previously required to invest primarily in large-cap companies in the U.S. If the change had been in effect previously, the Fund s performance indicated above could have been materially different. 3 In December 2006, the investment objective of the TD U.S. Quantitative Equity Fund (formerly TD AmeriGrowth RSP Fund) changed. 4 In December 2006, the investment objective of the Portfolio (formerly TD Global Asset Allocation Fund) changed to permit the Portfolio to invest directly or indirectly in equity securities, including through other mutual funds. The Portfolio was previously required to primarily use derivatives to obtain exposure to global stocks, bonds and currency markets. If the change had been in effect previously, the Portfolio s performance indicated above could have been materially different. Please see page 336 for index disclosures Annual Financial Report TD Mutual Funds Performance Summary 11

14 Performance Summary Investor Series: as at December 31, 2007 Unit Price Annualized Compounded Rates of Return Start 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date SECTOR FUNDS TD Resource Fund $ % 17.1% 24.4% 23.3% 13.3% 10.0% 01/94 TD Energy Fund /94 TD Precious Metals Fund /94 TD Entertainment & Communications Fund (CDN$) /97 TD Entertainment & Communications Fund (US$) /99 TD Science & Technology Fund (CDN$) /94 TD Science & Technology Fund (US$) /99 TD Health Sciences Fund (CDN$) /96 TD Health Sciences Fund (US$) /99 INDEX FUNDS TD Canadian Bond Index Fund $ % 3.0% 3.8% 4.6% 5.3% 5.6% 05/97 TD Balanced Index Fund /98 TD Canadian Index Fund /85 TD Dow Jones Industrial Average SM Index Fund (CDN$) /98 TD Dow Jones Industrial Average SM Index Fund (US$) /98 TD U.S. Index Fund (CDN$) /98 TD U.S. Index Fund (US$) /86 TD U.S. Index Currency Neutral Fund 1, /98 TD Nasdaq Index Fund 2, /99 TD International Index Fund /97 TD International Index Currency Neutral Fund 3, /98 TD European Index Fund /98 TD Japanese Index Fund /98 The Unit Price represents the net asset value per unit for purposes of purchases and redemptions by unitholders (Transactional NAV) and may differ from the GAAP NAV disclosed in the Statement of Net Assets. A reconciliation of the two NAVs is provided in Note 3 in the Notes to Financial Statements. Past performance is based on Transactional NAVs. 1 In December 2006, the investment objective of the TD U.S. Index Currency Neutral Fund (formerly TD U.S. RSP Index Fund) changed. 2 In December 2006, the name of the TD Nasdaq RSP Index Fund was changed to TD Nasdaq Index Fund. 3 In December 2006, the investment objective of the TD International Index Currency Neutral Fund (formerly TD International RSP Index Fund) changed., Please see page 334 for index disclosures., Please see page 335 for index disclosures. Please see page 336 for index disclosures. 12 Performance Summary TD Mutual Funds 2007 Annual Financial Report

15 Performance Summary Advisor Series: as at December 31, 2007 Unit Price Yield* Annualized Compounded Rates of Return Start Current Effective 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date MONEY MARKET FUNDS TD Canadian Money Market Fund $ % 3.84% 3.57% 3.19% 2.64% 2.18% 2.27% 11/00 Unit Price Annualized Compounded Rates of Return Start 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date FIXED INCOME FUNDS TD Short Term Bond Fund $ % 2.6% 2.2% 2.7% 12/03 TD Canadian Bond Fund % /00 TD Canadian Core Plus Bond Fund /07 TD Corporate Bond Capital Yield Fund /06 TD Real Return Bond Fund /01 TD Global Bond Fund /03 TD High Yield Income Fund /02 TD Income Advantage Portfolio /03 BALANCED FUNDS TD Monthly Income Fund $ % 7.2% 9.2% 12.4% 13.0% 11/02 TD Balanced Income Fund /02 TD Diversified Monthly Income Fund /07 TD Balanced Growth Fund /00 TD Dividend Income Fund /03 CANADIAN EQUITY FUNDS TD Dividend Growth Fund $ % 8.2% 13.1% 15.9% 12.7% 11/01 TD Income Trust Capital Yield Fund /06 TD Canadian Blue Chip Equity Fund /02 TD Canadian Equity Fund /00 TD Canadian Value Fund /00 TD Canadian Small-Cap Equity Fund /02 The Unit Price represents the net asset value per unit for purposes of purchases and redemptions by unitholders (Transactional NAV) and may differ from the GAAP NAV disclosed in the Statement of Net Assets. A reconciliation of the two NAVs is provided in Note 3 in the Notes to Financial Statements. Past performance is based on Transactional NAVs. * This is an annualized historical yield based on the seven-day period ended on December 31, 2007 (annualized in the case of effective yield by compounding the seven-day return) and does not represent an actual one-year return. 1 Regulatory restrictions limit publishing performance returns for Funds or Portfolios with a history of less than one year. 2 In December 2006, the investment objective of the TD Global Bond Fund (formerly TD Global RSP Bond Fund) changed. 3 In December 2006, the investment objective of the Fund (formerly TD Monthly High Income Fund) changed to permit the Fund to invest primarily in income-producing securities. The Fund was previously required to invest primarily in Canadian equities, bonds and short-term instruments. If the change had been in effect previously, the Fund s performance indicated above could have been materially different Annual Financial Report TD Mutual Funds Performance Summary 13

16 Performance Summary Advisor Series: as at December 31, 2007 Unit Price Annualized Compounded Rates of Return Start 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date U.S. EQUITY FUNDS TD North American Dividend Fund 2 $ % 01/07 TD U.S. Blue Chip Equity Fund % 0.3% 0.7% 1.0% /00 TD U.S. Blue Chip Equity Currency Neutral Fund /06 TD U.S. Large-Cap Value Fund /02 TD U.S. Large-Cap Value Currency Neutral Fund /06 TD U.S. Mid-Cap Growth Fund /00 TD U.S. Mid-Cap Growth Currency Neutral Fund /06 TD U.S. Small-Cap Equity Fund /02 TD U.S. Small-Cap Equity Currency Neutral Fund /06 TD U.S. Equity Advantage Portfolio /04 TD U.S. Equity Advantage Currency Neutral Portfolio /06 GLOBAL EQUITY FUNDS TD Global Dividend Fund $ % 1.2% 09/06 TD Global Value Fund /06 TD Global Select Fund % 3.5% 6.7% /00 TD Global Multi-Cap Fund /06 TD Global Sustainability Fund 1, /07 TD International Equity Fund /03 TD International Equity Growth Fund /06 TD Japanese Growth Fund /06 TD Asian Growth Fund /06 TD Emerging Markets Fund /00 TD Latin American Growth Fund /06 TD Global Equity Advantage Portfolio /07 SECTOR FUNDS TD Resource Fund $ % 16.9% 24.2% 23.2% 24.9% 11/02 TD Energy Fund /06 TD Precious Metals Fund /06 TD Entertainment & Communications Fund /00 TD Science & Technology Fund /00 TD Health Sciences Fund /00 The Unit Price represents the net asset value per unit for purposes of purchases and redemptions by unitholders (Transactional NAV) and may differ from the GAAP NAV disclosed in the Statement of Net Assets. A reconciliation of the two NAVs is provided in Note 3 in the Notes to Financial Statements. Past performance is based on Transactional NAVs. 1 Regulatory restrictions limit publishing performance returns for Funds or Portfolios with a history of less than one year. 2 In December 2006, the investment objective of the Fund (formerly TD U.S. Equity Fund) changed to permit the Fund to invest primarily in income-producing securities in North America. The Fund was previously required to invest primarily in large-cap companies in the U.S. If the change had been in effect previously, the Fund s performance indicated above could have been materially different. 3 In December 2006, the investment objective of the Portfolio (formerly TD Global Asset Allocation Fund) changed to permit the Portfolio to invest directly or indirectly in equity securities, including through other mutual funds. The Portfolio was previously required to primarily use derivatives to obtain exposure to global stocks, bonds and currency markets. If the change had been in effect previously, the Portfolio s performance indicated above could have been materially different. Please see page 336 for index disclosures. 14 Performance Summary TD Mutual Funds 2007 Annual Financial Report

17 Performance Summary F-Series: as at December 31, 2007 Unit Price Yield* Annualized Compounded Rates of Return Start Current Effective 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date MONEY MARKET FUNDS TD Canadian Money Market Fund $ % 4.35% 4.36% 3.93% 3.36% 2.89% 2.84% 11/00 TD Premium Money Market Fund /07 Unit Price Annualized Compounded Rates of Return Start 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date FIXED INCOME FUNDS TD Short Term Bond Fund $ % 3.3% 2.9% 3.1% 11/04 TD Canadian Bond Fund % /00 TD Canadian Core Plus Bond Fund /07 TD Corporate Bond Capital Yield Fund /06 TD Real Return Bond Fund /01 TD Global Bond Fund /05 TD High Yield Income Fund /03 TD Income Advantage Portfolio /05 BALANCED FUNDS TD Monthly Income Fund $ % 7.8% 10.4% 11/05 TD Balanced Income Fund /05 TD Diversified Monthly Income Fund /07 TD Balanced Growth Fund % 10.1% /00 TD Dividend Income Fund /05 CANADIAN EQUITY FUNDS TD Dividend Growth Fund $ % 9.6% 14.5% 17.5% 14.3% 11/01 TD Income Trust Capital Yield Fund /06 TD Canadian Blue Chip Equity Fund /03 TD Canadian Equity Fund /00 TD Canadian Value Fund /00 TD Canadian Small-Cap Equity Fund /05 The Unit Price represents the net asset value per unit for purposes of purchases and redemptions by unitholders (Transactional NAV) and may differ from the GAAP NAV disclosed in the Statement of Net Assets. A reconciliation of the two NAVs is provided in Note 3 in the Notes to Financial Statements. Past performance is based on Transactional NAVs. * This is an annualized historical yield based on the seven-day period ended on December 31, 2007 (annualized in the case of effective yield by compounding the seven-day return) and does not represent an actual one-year return. 1 Regulatory restrictions limit publishing performance returns for Funds or Portfolios with a history of less than one year. 2 In December 2006, the investment objective of the TD Global Bond Fund (formerly TD Global RSP Bond Fund) changed. 3 In December 2006, the investment objective of the Fund (formerly TD Monthly High Income Fund) changed to permit the Fund to invest primarily in income-producing securities. The Fund was previously required to invest primarily in Canadian equities, bonds and short-term instruments. If the change had been in effect previously, the Fund s performance indicated above could have been materially different Annual Financial Report TD Mutual Funds Performance Summary 15

18 Performance Summary F-Series: as at December 31, 2007 Unit Price Annualized Compounded Rates of Return Start 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date U.S. EQUITY FUNDS TD North American Dividend Fund 2 $ % 01/07 TD U.S. Blue Chip Equity Fund % 1.8% 2.1% 2.4% /00 TD U.S. Blue Chip Equity Currency Neutral Fund /06 TD U.S. Large-Cap Value Fund /03 TD U.S. Large-Cap Value Currency Neutral Fund /06 TD U.S. Mid-Cap Growth Fund /00 TD U.S. Mid-Cap Growth Currency Neutral Fund /06 TD U.S. Small-Cap Equity Fund /05 TD U.S. Small-Cap Equity Currency Neutral Fund /06 TD U.S. Equity Advantage Portfolio /05 TD U.S. Equity Advantage Currency Neutral Portfolio /06 GLOBAL EQUITY FUNDS TD Global Dividend Fund $ % 2.6% 09/06 TD Global Value Fund /06 TD Global Select Fund % 4.9% 8.2% /00 TD Global Multi-Cap Fund /06 TD Global Sustainability Fund 1, /07 TD International Equity Fund /05 TD International Equity Growth Fund /06 TD Japanese Growth Fund /06 TD Asian Growth Fund /06 TD Emerging Markets Fund /00 TD Latin American Growth Fund /06 TD Global Equity Advantage Portfolio /07 The Unit Price represents the net asset value per unit for purposes of purchases and redemptions by unitholders (Transactional NAV) and may differ from the GAAP NAV disclosed in the Statement of Net Assets. A reconciliation of the two NAVs is provided in Note 3 in the Notes to Financial Statements. Past performance is based on Transactional NAVs. 1 Regulatory restrictions limit publishing performance returns for Funds or Portfolios with a history of less than one year. 2 In December 2006, the investment objective of the Fund (formerly TD U.S. Equity Fund) changed to permit the Fund to invest primarily in income-producing securities in North America. The Fund was previously required to invest primarily in large-cap companies in the U.S. If the change had been in effect previously, the Fund s performance indicated above could have been materially different. 3 In December 2006, the investment objective of the Portfolio (formerly TD Global Asset Allocation Fund) changed to permit the Portfolio to invest directly or indirectly in equity securities, including through other mutual funds. The Portfolio was previously required to primarily use derivatives to obtain exposure to global stocks, bonds and currency markets. If the change had been in effect previously, the Portfolio s performance indicated above could have been materially different. Please see page 336 for index disclosures. 16 Performance Summary TD Mutual Funds 2007 Annual Financial Report

19 Performance Summary F-Series: as at December 31, 2007 Unit Price Annualized Compounded Rates of Return Start 1 Yr 2 Yrs 3 Yrs 5 Yrs 10 Yrs Life Date SECTOR FUNDS TD Resource Fund $ % 18.2% 23.8% 11/05 TD Energy Fund /06 TD Precious Metals Fund /06 TD Entertainment & Communications Fund % 16.7% /00 TD Science & Technology Fund /00 TD Health Sciences Fund /00 INDEX FUNDS TD Canadian Bond Index Fund $ % 3.4% 4.2% 5.0% 6.1% 11/00 TD Canadian Index Fund /00 TD Dow Jones Industrial Average SM Index Fund (CDN$) /00 TD Dow Jones Industrial Average SM Index Fund (US$) /00 TD U.S. Index Fund (CDN$) /00 TD U.S. Index Fund (US$) /00 TD U.S. Index Currency Neutral Fund 1, /00 TD Nasdaq Index Fund 2, /00 TD International Index Fund /00 TD International Index Currency Neutral Fund 3, /00 TD European Index Fund /00 TD Japanese Index Fund /00 The Unit Price represents the net asset value per unit for purposes of purchases and redemptions by unitholders (Transactional NAV) and may differ from the GAAP NAV disclosed in the Statement of Net Assets. A reconciliation of the two NAVs is provided in Note 3 in the Notes to Financial Statements. Past performance is based on Transactional NAVs. 1 In December 2006, the investment objective of the TD U.S. Index Currency Neutral Fund (formerly TD U.S. RSP Index Fund) changed. 2 In December 2006, the name of the TD Nasdaq RSP Index Fund was changed to TD Nasdaq Index Fund. 3 In December 2006, the investment objective of the TD International Index Currency Neutral Fund (formerly TD International RSP Index Fund) changed., Please see page 334 for index disclosures., Please see page 335 for index disclosures. Please see page 336 for index disclosures Annual Financial Report TD Mutual Funds Performance Summary 17

20 Management s Responsibility for Financial Reporting The accompanying financial statements have been prepared by TD Asset Management Inc. as Manager of the Funds and approved by the Board of Directors. 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 Canadian generally accepted accounting principles. 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 TD Asset Management Inc. is responsible for reviewing and approving the financial statements and overseeing management s performance of its financial reporting responsibilities. PricewaterhouseCoopers LLP are the external auditors of the Funds. They have audited the financial statements in accordance with Canadian generally accepted auditing standards to enable them to express their opinion on the financial statements. Their report is included on the following page of this Annual Report. On behalf of TD Asset Management Inc., Manager of the Funds Timothy Pinnington Rudy Sankovic Director and President Director and TD Mutual Funds Chief Financial Officer February 28, 2008 February 28, Management s Responsibility for Financial Reporting TD Mutual Funds 2007 Annual Financial Report

21 Auditors Report To the Unitholders of: TD Canadian T-Bill Fund TD Canadian Money Market Fund TD Premium Money Market Fund TD U.S. Money Market Fund TD Short Term Bond Fund TD Mortgage Fund TD Canadian Bond Fund TD Canadian Core Plus Bond Fund TD Corporate Bond Capital Yield Fund TD Real Return Bond Fund TD Global Bond Fund TD High Yield Income Fund TD Income Advantage Portfolio TD Monthly Income Fund TD Balanced Income Fund TD Diversified Monthly Income Fund TD Balanced Growth Fund TD Dividend Income Fund TD Dividend Growth Fund TD Income Trust Capital Yield Fund TD Canadian Blue Chip Equity Fund TD Canadian Equity Fund TD Canadian Value Fund TD Canadian Small-Cap Equity Fund (collectively, the Funds ) TD North American Dividend Fund TD U.S. Blue Chip Equity Fund TD U.S. Blue Chip Equity Currency Neutral Fund TD U.S. Quantitative Equity Fund TD U.S. Large-Cap Value Fund TD U.S. Large-Cap Value Currency Neutral Fund TD U.S. Mid-Cap Growth Fund TD U.S. Mid-Cap Growth Currency Neutral Fund TD U.S. Small-Cap Equity Fund TD U.S. Small-Cap Equity Currency Neutral Fund TD U.S. Equity Advantage Portfolio TD U.S. Equity Advantage Currency Neutral Portfolio TD Global Dividend Fund TD Global Value Fund TD Global Select Fund TD Global Multi-Cap Fund TD Global Sustainability Fund TD International Equity Fund TD International Equity Growth Fund TD European Growth Fund TD Japanese Growth Fund TD Asian Growth Fund TD Pacific Rim Fund TD Emerging Markets Fund TD Latin American Growth Fund TD Global Equity Advantage Portfolio TD Resource Fund TD Energy Fund TD Precious Metals Fund TD Entertainment & Communications Fund TD Science & Technology Fund TD Health Sciences Fund TD Canadian Bond Index Fund TD Balanced Index Fund TD Canadian Index Fund TD Dow Jones Industrial Average SM Index Fund TD U.S. Index Fund TD U.S. Index Currency Neutral Fund TD Nasdaq Index Fund TD International Index Fund TD International Index Currency Neutral Fund TD European Index Fund TD Japanese Index Fund We have audited the accompanying statements of investment portfolio of each of the Funds as at December 31, 2007, the statements of net assets as at December 31, 2007 and 2006 (as applicable) and the statements of investment operations and changes in net assets for the periods then ended as indicated in Note 1. These financial statements are the responsibility of the Manager of the Funds. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Manager of the Funds, as well as evaluat ing the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of each of the Funds as at December 31, 2007 and 2006 (as applicable), and the results of each of their operations and the changes in each of their net assets for the periods then ended as indicated in Note 1, in accordance with Canadian generally accepted accounting principles. PricewaterhouseCoopers LLP Chartered Accountants, Licensed Public Accountants Toronto, Ontario February 28, Annual Financial Report TD Mutual Funds Auditors Report 19