TD International Growth Class

Transcription

1 TD Asset Management TD International Growth Class (08/17) TD Mutual Funds Corporate Class Funds for the period ended This contains financial highlights, but does not contain the complete annual financial statements of the investment fund. You can get a copy of the annual financial statements at your request, at no cost, by calling , by writing to us at TD Asset Management Inc., P.O. Box 100, 66 Wellington Street West, TD Bank Tower, Toronto-Dominion Centre, Toronto, Ontario, M5K 1G8, by to tdadvisor@td.com, or by visiting our website at tdassetmanagement.com or the SEDAR website at sedar.com Securityholders may also contact us or visit our website to get a copy of the investment fund s interim financial report, proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure at no cost.

2 ntd International Growth Class Management Discussion of Fund Performance Investment Objectives and Strategies The investment objective of the TD International Growth Class ( Fund ) is to seek to achieve long-term capital growth by investing primarily in, or gaining exposure to, stocks and other securities of companies outside Canada and the United States. To achieve this objective, the Fund may: invest in units of an underlying fund, TD International Growth Fund ( UF ), invest directly in such equities, and/or through the use of derivatives, to gain exposure to such equities. Risk The risks of investing in the Fund remain as outlined in the simplified prospectus. Results of Operations For the twelve-month period ended ( Reporting Period ), the Investor Series shares of the Fund returned 10.6 percent versus 20.2 percent for the Fund s product benchmark the MSCI EAFE Index (Net Dividend, C$) ( MSCI EAFE Index (ND, C$) ). Returns for other series of the Fund may vary, largely due to differences in fees and expenses. Unlike the benchmark, the Fund s return is quoted after the deduction of fees and expenses. During the Reporting Period, the Fund invested its assets solely in the O-Series units of the UF. The performance of the UF is similar to that of the Fund except for differences arising from fees and expenses. This Results of Operations and the following Recent Developments commentaries reflect the views of the UF s Portfolio Adviser for the same period as they directly impact the Fund. Market Update Bond yields trended lower at the start of the Reporting Period amid highly accommodative monetary policies by central banks around the globe. Early in the Reporting Period, bonds increasingly benefited from a flight to safety caused by the U.K. s decision to exit the European Union ( Brexit ). More and more countries began to embrace fiscal support, in addition to accommodative monetary policies, and bond yields worldwide climbed higher largely in unison. Credit spreads, the difference in yield between two bonds with similar maturities but different credit qualities, narrowed, while equities rallied, particularly developed world equities. As economic activity improved over the Reporting Period, most notably in the U.S. and China, global economic prospects and sentiment rose considerably. In addition to higher energy prices spurred by the Organization of the Petroleum Exporting Countries decision to cut oil production, prices of numerous non-energy-related commodities (i.e., industrial metals, agricultural) saw sharp increases in response to high demand, and alleviated pressure on commoditybased economies. In the U.S., consumers continued to drive the U.S. economy during the Reporting Period, as labour market conditions made further progress and pushed the unemployment rate lower to 4.4 percent in April 2017, its lowest level since May Inflation rose sharply following the recovery in energy prices; however, core inflation (ex-food and energy) continued to run near the U.S. Federal Reserve Board s ( Fed ) target of 2 percent. Markets moved toward more cyclical sectors based on U.S. President Trump s proposed pro-growth policies. The Fed increased interest rates twice (by 0.25 percent each) during the Reporting Period. International equities were up over the Reporting Period. The European equity market posted substantial gains over the Reporting Period, despite the U.K. officially launching the Brexit process. Japanese equity markets also advanced over the Reporting Period, benefiting from rising consumer prices, the Bank of Japan s program to buy exchange-traded funds and gross domestic product ( GDP ) growth. Following a pullback early in the Reporting Period, GDP growth advanced steadily, aided by an improvement in exports and consumer spending. Key Contributors/Detractors The UF generated a solid return for the Reporting Period, with ten of eleven sectors ending higher. However, the UF underperformed the benchmark. Stock selection and asset allocation detracted from relative performance, while currency hedging contributed to relative performance. Sector allocation and stock selection within the information technology sector contributed to the UF s relative performance. The UF s exposure to international technology companies contributed to performance. Alibaba Group Holding Limited returned approximately 54 percent as a result of a continued improvement in Chinese consumption. Currency hedging contributed to relative performance, as the UF s Portfolio Adviser reduced exposure to the British pound prior to U.K. s Brexit vote. Stock selection in the industrials and telecommunication services sectors detracted from relative performance. Nielsen Holdings plc declined approximately 23 percent as a result of its disappointing earnings. BT Group plc dropped about 33 percent as a result of an accounting scandal in Italy. Recent Developments Bill C-29, Budget Implementation Act, 2016, No.2, received Royal Assent on December 15, The bill implemented tax measures previously announced in the federal budget released on March 22, 2016 to amend the Income Tax Act (Canada) such that a switch of shares between two classes of a mutual fund corporation (including the classes of TD Mutual Funds Corporate Class Ltd.) is treated as a disposition of those shares at their fair market value and will trigger a capital gain or capital loss if the switch occurs on or after the effective date. The effective date was January 1, 2017, as of which investors would no longer be able to switch between classes on a tax-deferred basis. 1

3 A switch of shares from one series of a class to shares of another series of the same class will continue to generally not be considered a taxable disposition (except to the extent that shares are redeemed to pay any applicable fees) as the only difference between the series relates to management fees or expenses to be borne by investors. The UF s Portfolio Adviser continues to be mindful of a variety of macro economic factors that may influence investments and is cognizant of the potentially problematic structural issues that remain unresolved, such as high debt levels, low productivity and an aging population. Stocks and bond yields have generally risen over the past several months, driven by signs of improvement in the global economy and by enthusiasm for some of U.S. President Trump s policies, but this inflationary push may be waning. While geopolitical risks have risen recently, improvements in global economic fundamentals continued, helping to moderate the probability of extreme outcomes. Against this economic backdrop, the UF s Portfolio Adviser is optimistic about the performance of global equity markets. Recently, the UF s Portfolio Adviser shifted exposure from the U.K. to France prior to the French presidential election. Global markets perceived Macron s victory in a positive light. With political risks dominating European markets year to date, European stocks have more room to grow given their attractive valuations. In addition, European markets are finally able to focus more on earnings and macroeconomic data, which is a primary focus of the UF Portfolio Adviser s investment approach. The UF Portfolio Adviser s preference for quality global companies that possess above-average profit margins and earnings growth, as well as a robust return on equity, should be supported by a recovering economic backdrop. The UF Portfolio Adviser s investment approach continues to emphasize finding global equities with strong growth profiles that are reasonably priced and with return-on-equity ratios often above those of the overall market. Related Party Transactions Affiliates of TD Asset Management Inc. ( TDAM ) may earn fees and spreads in connection with various services provided to, or transactions with, the Fund, such as in connection with banking, custody, brokerage and derivatives transactions. Manager and Portfolio Adviser: TDAM, a wholly-owned subsidiary of The Toronto-Dominion Bank ( TD ), is the manager and portfolio adviser of the Fund. The Fund pays TDAM an annual management fee, which may vary for each series of Fund shares, and an annual administration fee of 0.30 percent with respect to the Investor Series and Advisor Series shares of the Fund. The Fund may also hold series of units of other funds managed by TDAM for which TDAM may be paid a fee. However, there is no duplication of fees. Distributor: Shares of the Fund are distributed through brokers and dealers including TD Waterhouse Canada Inc. ( TDW ), a wholly-owned subsidiary of TD. TDW, like other dealers, is paid a trailer commission by TDAM for distributing certain series of shares of the Fund. Trailer commissions are paid by TDAM out of the management fees it receives from the Fund and are based on the average value of assets held by each dealer. Registrar and Transfer Agent: TD is the registrar and transfer agent of the Fund, and as such maintains all shareholder records, processes purchase, switch, conversion and redemption orders, issues investor statements and prepares annual tax reporting information on behalf of the Fund. The Fund also maintains bank accounts and overdraft provisions with TD for which TD earns a fee. Buying and Selling Securities: TDAM has established an independent review committee ( IRC ) which acts as an impartial and independent committee to review and provide recommendations or, if appropriate, approvals respecting any conflict of interest matters referred to it by TDAM. The IRC prepares, at least annually, a report of its activities for securityholders of the Fund. The report is available on the TDAM website at tdassetmanagement.com or at the securityholder s request at no cost by contacting TDAM (see front cover). The Fund and/or the underlying fund in which the Fund invests did not engage in any portfolio transactions requiring IRC approval during the Reporting Period. 2

4 Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five fiscal years, as applicable. Net Assets per Share ($) 1 INVESTOR SERIES Net Assets, Beginning of Year Increase (Decrease) from Operations: Total Revenue Total Expenses (excluding distributions) (0.32) (0.35) (0.40) (0.36) (0.28) Realized Gains (Losses) for the Period Unrealized Gains (Losses) for the Period 0.94 (1.30) Total Increase (Decrease) from Operations (0.86) Distributions: From Net Investment Income (excluding dividends) From Dividends (0.15) (0.22) (0.32) (0.11) 0.00 From Capital Gains (0.20) (0.43) (0.12) Return of Capital Total Annual Distributions 3 (0.35) (0.65) (0.44) (0.11) 0.00 Net Assets at May ADVISOR SERIES Net Assets, Beginning of Year Increase (Decrease) from Operations: Total Revenue Total Expenses (excluding distributions) (0.34) (0.37) (0.41) (0.37) (0.28) Realized Gains (Losses) for the Period Unrealized Gains (Losses) for the Period 0.94 (1.17) Total Increase (Decrease) from Operations (0.69) Distributions: From Net Investment Income (excluding dividends) From Dividends (0.14) (0.22) (0.31) (0.02) 0.00 From Capital Gains (0.22) (0.24) (0.08) Return of Capital Total Annual Distributions 3 (0.36) (0.46) (0.39) (0.02) 0.00 Net Assets at May Footnotes for the above table(s) can be found at the end of the Net Assets per Share section. 3

5 Net Assets per Share ($) 1 (continued) F-SERIES Net Assets, Beginning of Year Increase (Decrease) from Operations: Total Revenue Total Expenses (excluding distributions) (0.17) (0.19) (0.26) (0.20) (0.02) Realized Gains (Losses) for the Period Unrealized Gains (Losses) for the Period 1.47 (1.42) Total Increase (Decrease) from Operations (0.75) Distributions: From Net Investment Income (excluding dividends) From Dividends (0.28) (0.42) (0.13) (0.33) 0.00 From Capital Gains (0.21) (0.12) (0.17) Return of Capital Total Annual Distributions 3 (0.49) (0.54) (0.30) (0.33) 0.00 Net Assets at May This information is derived from the Fund s audited annual financial statements. The Fund adopted International Financial Reporting Standards ( IFRS ) on June 1, 2014 and accordingly adjusted the immediately preceding financial year ended May 31, 2014 to reflect the amounts in accordance with IFRS. Previously, financial statements were prepared as per Canadian generally accepted accounting principles ( GAAP ) under which the Fund measured fair values of its investments based on bid prices for long positions and ask prices for short positions. As such, the net assets per share presented in the financial statements may have differed from the net asset value ( NAV ) per share calculated for fund pricing purposes. Under IFRS, the Fund measures fair values of its investments based on close market prices, where the close market price falls within the bid-ask spread or based on quotations from recognized dealers. As such, the Fund s accounting policies for measuring the fair value of investments in the financial statements are substantively consistent with those used in measuring the NAV for transactions with shareholders. All figures presented prior to June 1, 2013 were prepared in accordance with Canadian GAAP. 2 Net assets and distributions are based on the actual number of shares outstanding at the relevant time. The increase (decrease) from operations presented in the Net Assets per Share tables starting from June 1, 2013 are based on the weighted average number of shares outstanding over the financial periods. The increase (decrease) from operations prior to June 1, 2013 were calculated by aggregating each valuation day s increase (decrease) from operations divided by the number of shares outstanding on that date. These tables are not intended to be a reconciliation of the net assets per share. 3 Distributions were paid in cash or reinvested in additional shares of the Fund, or both. Ratios and Supplemental Data INVESTOR SERIES Total Net Asset Value ($000s) ,087 1, Number of Shares Outstanding (000s) Management Expense Ratio (%) Management Expense Ratio Before Waivers or Absorptions (%) Trading Expense Ratio (%) Portfolio Turnover Rate (%) Net Asset Value per Share ($) ADVISOR SERIES Total Net Asset Value ($000s) Number of Shares Outstanding (000s) Management Expense Ratio (%) Management Expense Ratio Before Waivers or Absorptions (%) Trading Expense Ratio (%) Portfolio Turnover Rate (%) Net Asset Value per Share ($) Footnotes for the above table(s) can be found at the end of the Ratios and Supplemental Data section. 4

6 Ratios and Supplemental Data (continued) F-SERIES Total Net Asset Value ($000s) Number of Shares Outstanding (000s) Management Expense Ratio (%) Management Expense Ratio Before Waivers or Absorptions (%) Trading Expense Ratio (%) Portfolio Turnover Rate (%) Net Asset Value per Share ($) This information is provided as at May 31 of the years shown, as applicable. 2 Management expense ratio ( MER ) is based on total expenses (excluding distributions, commissions and other portfolio transaction costs) for the stated period, including the Fund s proportionate share of the MER, if any, of the underlying fund(s) in which the Fund has invested, and is expressed as an annualized percentage of daily average NAV during the period. It excludes any operating expenses waived or absorbed by TDAM, which may be discontinued at any time by TDAM at its discretion without notice. 3 The trading expense ratio ( TER ) represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average NAV during the stated period. Where a Fund invests in securities of any underlying fund, the TER presented for the Fund includes the portion of TERs, if available, of the underlying fund(s) attributable to this investment. 4 The Fund s portfolio turnover rate ( PTR ) indicates how actively the Fund s portfolio adviser manages its investments. A PTR of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the stated period. The higher a fund s PTR, the greater the trading costs payable, directly or indirectly, by the fund in the period, and the greater the chance of an investor receiving taxable capital gains in the fiscal year. There is not necessarily a relationship between a high turnover rate and the performance of a fund. Less than $500 Less than 500 shares Management Fees As manager of the Fund, TDAM is responsible for the overall business and affairs of the Fund including activities related to making shares of the Fund available to investors, and providing, or arranging for the provision of, investment advisory services and marketing services to the Fund. In consideration for the provision of such services, each series of the Fund pays TDAM a management fee. Management fees are calculated and accrued as a percentage of the net asset value of each series of shares of the Fund, as of the close of business on each business day for each series and are paid monthly to TDAM. The maximum management fee is the maximum fee that can be charged to each series of shares of the Fund according to the simplified prospectus. TDAM may charge management fees that are less than the management fees TDAM is otherwise entitled to charge each series of shares of the Fund. The actual management fee is the annualized fee that was charged for the Reporting Period. TDAM may charge the maximum management fee without notice to shareholders. Management fees for the Reporting Period and a breakdown of the major services rendered for each series, as a percentage of the actual management fees, are as follows: Maximum Actual Dealer Waived (expressed as a %) Mgmt. Fee Mgmt. Fee Compensation Expenses Other Investor Series Advisor Series F-Series Includes management fees paid by the Fund and the proportionate management fees, if any, of the underlying fund in which the Fund has invested. However, there is no duplication of fees for the services provided. Investment advisory, marketing services and other. The maximum annual management fee rates of certain series of the Fund were changed effective March 28, For the Investor Series and Advisor Series of the Fund, from June 1, 2016 to March 27, 2017 the maximum annual management fee was 2.00 percent, and from March 28, 2017 to the maximum annual management fee was 1.90 percent. For the F-Series of the Fund, from June 1, 2016 to March 27, 2017 the maximum annual management fee was 1.15 percent, and from March 28, 2017 to the maximum annual management fee was 0.90 percent. 5

7 Past Performance The following charts show how the Fund has performed in the past, and can help you understand the risks of investing in the Fund. These returns include the reinvestment of all distributions and would be lower if an investor did not reinvest distributions. They do not include deduction of sales, switch, redemption, or other optional charges (which dealers may charge) or income taxes payable, and these returns would be lower if they did. The Fund s past performance does not necessarily indicate how it will perform in the future. Year-by-year returns The bar charts show how the Fund s performance has varied from year to year for each of the fiscal years shown. They show in percentage terms how an investment made on June 1 would have increased or decreased by May 31 for each year. Annual Compound Returns The following table shows the annual compound total returns for each series of shares of the Fund for each of the periods indicated ending on, compared with the following benchmarks: Product Benchmark: MSCI EAFE Index (ND, C$) This index includes stocks of companies in all the developed markets around the world excluding Canada and the United States, net of withholding taxes. General market indices: MSCI EAFE Index (ND, C$). Since Past 5 Past 3 Past (expressed as a %) inception years years year (Start date September 7, 2010) INVESTOR SERIES Product Benchmark General market: MSCI EAFE Index (ND, C$) (Start date September 7, 2010) ADVISOR SERIES Product Benchmark General market: MSCI EAFE Index (ND, C$) (Start date September 7, 2010) F-SERIES Product Benchmark General market: MSCI EAFE Index (ND, C$) Over the Reporting Period, shares of the Investor Series returned 10.6 percent, the Advisor Series returned 10.5 percent and the F-Series returned 12.0 percent versus 20.2 percent for the MSCI EAFE Index (ND, C$). Unlike the index, the Fund s return is quoted after the deduction of fees and expenses. The UF s stock selection and asset allocation in the information technology sector contributed to performance, while in the industrials and telecommunication services sectors, they detracted from performance. Currency hedging contributed to relative performance, as the UF s Portfolio Adviser managed through market risks, such as Brexit. 6

8 Summary of Investment Portfolio as at % of Net Asset Value as at % of Net Asset Value ASSET ALLOCATION International Equity Funds Other Net Assets (Liabilities) 0.0 TOP 25 INVESTMENTS 1. TD International Growth Fund, O-Series Total % of Net Asset Value represented by these holdings TOTAL NET ASSET VALUE (000s) $ 1,451 as at % of Net Asset Value INVESTMENT MIX OF UNDERLYING FUND United Kingdom 18.4 Japan 16.5 France 12.6 Germany 10.8 Switzerland 8.3 Netherlands 7.9 China 2.3 Australia 2.2 Sweden 2.0 Norway 1.7 Other Countries 10.6 Index Equivalents 2.8 Gold-Linked Securities 0.4 Cash 2.4 Other Net Assets (Liabilities) 1.1 TOP 25 INVESTMENTS OF UNDERLYING FUND 1. Nestle SA BNP Paribas SA AXA SA Cash SAP AG British American Tobacco PLC Allianz SE Westpac Banking Corporation Prudential PLC Vodafone Group PLC Roche Holding AG Imperial Brands PLC ORIX Corporation ING Groep NV LVMH Moet Hennessy Louis Vuitton SE Statoil ASA NN Group NV BP PLC Keisei Electric Railway Co., Ltd Mitsui Fudosan Co., Ltd Royal Dutch Shell PLC Toyota Motor Corporation Novartis AG HSBC Holdings PLC TOTAL SA 1.2 Total % of Net Asset Value represented by these holdings 45.5 Note: Totals may not add due to rounding to one decimal place of individual figures. The simplified prospectus and other information about underlying TD investment fund(s) are available on the internet at sedar.com, tdassetmanagement.com or upon request to TD Asset Management Inc. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and the underlying fund. Updates are available quarterly. You may obtain the most current quarterly information by contacting TD Mutual Funds at , by writing to us at TD Asset Management Inc., P.O. Box 100, 66 Wellington Street West, TD Bank Tower, Toronto, Ontario, M5K 1G8, or by to tdadvisor@td.com 7

9 Caution regarding forward-looking statements Certain portions of this report, including, but not limited to, Results of Operations and Recent Developments, may contain forward-looking state ments including, but not limited to, statements about the Fund, its strategy, risks, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, intends, plans, believes, estimates and similar forward-looking expressions or negative versions thereof. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future Fund action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future general economic, political and relevant market factors, such as interest rates, foreign exchange rates, equity and capital markets, and the general business environment, in each case assuming no changes to applicable tax or other laws or government regulation. Expectations and projections about future events are inherently subject to, among other things, risks and uncertainties, some of which may be unforeseeable. Accordingly, assumptions concerning future economic and other factors may prove to be incorrect at a future date. Forward-looking statements are not guarantees of future performance, and actual events could differ materially from those expressed or implied in any forward-looking statements made by the Fund. Any number of important factors could con tribute to these digressions, including, but not limited to, general economic, political and relevant market factors in North America and internationally, interest and foreign exchange rates, equity and capital markets, business competition, tech nological change, changes in government relations, unexpected judicial or regulatory proceedings and catastrophic events. The above mentioned list of important factors is not exhaustive. You are encouraged to consider these and other factors carefully before making any investment decisions and you are urged to avoid placing any undue reliance on forward-looking statements. Further, there is no specific intention of updating any forward-looking statements contained herein whether as a result of new information, future events or otherwise. For Funds with references to FTSE TMX Canada indices: FTSE TMX Global Debt Capital Markets Inc 2017 FTSE is a trade mark of FTSE International Ltd and is used under licence. TMX is a trade mark of TSX Inc. and is used under licence. All rights in the FTSE TMX Global Debt Capital Markets Inc s indices and/or FTSE TMX Global Debt Capital Markets Inc s ratings vest in FTSE TMX Global Debt Capital Markets Inc and/or its licensors. Neither FTSE TMX Global Debt Capital Markets Inc nor its licensors accept any liability for any errors or omissions in such indices and/or ratings or underlying data. No further distribution of FTSE TMX Global Debt Capital Markets Inc s data is permitted without FTSE TMX Global Debt Capital Markets Inc s express written consent. TD Mutual Funds Corporate Class funds are issued by TD Mutual Funds Corporate Class Ltd. TD Mutual Funds, TD Pools, TD Emerald Funds and the classes of TD Mutual Funds Corporate Class Ltd. are managed by TD Asset Management Inc., a wholly-owned subsidiary of The Toronto-Dominion Bank. All trademarks are the property of their respective owners. The TD logo and other trade-marks are the property of The Toronto-Dominion Bank. 8