2016 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE

Transcription

1 MD Family of Funds 2016 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE DISCLOSURE This annual management report of fund performance contains financial highlights but does not contain the complete annual financial statements of the investment fund. You can obtain a copy of the annual financial statements at your request, and at no cost, by calling , by writing to us at MD Financial Management Inc., 1870 Alta Vista Drive, Ottawa, Ontario, K1G 6R7, or by visiting our website at md.cma.ca or SEDAR at sedar.com. Security holders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.

2 A Message to MD Family of Funds Investors Dear MD Family of Funds Investor: As part of our commitment to keeping you informed about your MD Fund investments, please find attached the 2016 Annual Management Report of Fund Performance (MRFP). If you also opted to receive the fund s financial statements, they are included in this package. The annual MRFP is a regulatory document that supplements the annual financial statements. The document includes a brief discussion and analysis of the fund s investment activities, performance and financial highlights, as well as an explanation of how the markets and overall asset mix have affected the fund. The report is produced on a fund-by-fund basis, and your report only includes information on the funds you owned as of December 31, If you have any questions regarding these documents, please contact your MD Advisor or the MD Trade Centre at We thank you for your continued investment in the MD Family of Funds. MD Financial Management Inc. wholly owns or has a majority interest in its seven subsidiaries (the MD Group of Companies). It provides financial products and services, is the fund manager for the MD Family of Funds and offers investment counselling services. For a detailed list of the MD Group of Companies, visit md.cma.ca. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the mutual fund or returns on investment in the mutual fund. Standard performance data assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges payable by any securityholder which would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. You may obtain a copy of the prospectus before investing by calling your MD Advisor or the MD Trade Centre at

3 SERIES A, SERIES I AND SERIES T Investment Objectives and Strategies The MD Equity Fund (the Fund ) seeks to provide long-term capital growth, having due regard to the preservation of capital, with income production as a secondary consideration. The Fund invests in a diversified portfolio of Canadian equities of small-, mid- and large-cap companies. The Fund may invest in non-canadian securities. This is a multi-advisor fund with 10 separate Investment Advisors. Canadian equities are managed by Franklin Bissett Investment Management, QV Investors Inc., and Mackenzie Financial Corporation. The U.S. equities are managed by Barrow, Hanley, Mewhinney & Strauss, LLC and Fiduciary Management Inc. The international equities are advised by Earnest Partners, LSV Asset Management and Mondrian Investment Partners. CIBC Global Asset Management manages the cash reserves and foreign currency in the Fund. The Fund s Canadian cash reserves are advised by Mackenzie Financial Corporation-Mackenzie Sentinel investment team. Franklin Bissett Investment Management advises on the Fund s Canadian equity component. The asset manager s philosophy is to make long-term investments in high quality businesses. Using dedicated research provided by sector specific analysts, the co-pm team constructs the portfolio using the securities of businesses with clearly visible, full-cycle profitability that are trading at a low valuation compared to what they believe the business is worth. QV Investors Inc. advises on the Fund s all-cap Canadian value equity component. The name, QV Investors, stands for quality and value, and is directly aligned with their philosophy of buying businesses run by capable, committed, and candid people. Their team-based process is highly focused on risk management and protecting against the downside risk. Mackenzie All Cap Value Team identifies companies whose stock price, it believes, is below fair market value. Mackenzie s research process is disciplined, both quantitatively and qualitatively. Its style of value investing produces what it believes to be a well-diversified portfolio with low volatility without sacrificing long-term returns. Barrow Hanley uses a value strategy by constructing a portfolio of individual stocks that reflect all three value characteristics: price to earnings and price to book ratios at, or below the market and dividend yields at, or above the market index. In its strategy, Barrow Hanley primarily purchases the stocks of companies that have a 25-year history of paying cash dividends. Fiduciary s objective is to buy durable businesses at value prices in order to achieve outstanding investment results over a three to five year time horizon. The essential tenets to its investment philosophy are: utilize a business owner s approach to investing and thoroughly investigate the economics of the business and the qualities of the management of each company. Fiduciary s approach is contrarian in nature as it invests in companies that have stumbled or are temporarily out of favour with the market, and hence believed to be improperly priced; its goal is to invest in durable business franchises that are selling at low valuations and a significant discount to their intrinsic value. Earnest Partners uses a proprietary investment approach called Return Pattern Recognition, to identify the financial and market characteristics that have been in place when an individual company has produced outstanding performance. Earnest screens thousands of companies and selects for an in-depth fundamental review those exhibiting the set of characteristics that are believed to indicate future outperformance. Portfolios of stocks expected to have the best performance are combined using a statistical approach called downside deviation to measure and then constrain the likelihood of significantly underperforming the benchmark. LSV Asset Management (LSV) believes that superior long-term results can be achieved by systematically exploiting the judgmental biases and behavioral weaknesses that influence the decisions of many investors. These include the tendency to: extrapolate the past too far into the future, wrongly equate a good company with a good investment irrespective of price, ignore statistical evidence and develop a mind set about a company. LSV uses a quantitative investment model to choose out-of-favour (undervalued) stocks in the marketplace at the time of purchase that have potential for near-term appreciation. LSV believes that these out-of-favour securities will produce superior future returns if their future growth exceeds the market s low expectations. Mondrian Investment Partners is a value-oriented investment manager that seeks to invest in stocks where rigorous dividend discount analysis has isolated value in terms of the long-term flow of dividends. Dividend yield and future real growth play a central role in their decision making process and over time the dividend component is expected to be a meaningful portion of expected total return. CIBC Asset Management Inc. (CAM) is the Investment Advisor for the Fund s foreign cash reserves and its foreign currency exposure. In managing the foreign cash reserves, CAM seeks to maintain the equity market exposure and minimize the impact of cash on the Fund s performance. CAM seeks to manage the currency risk and add value by managing the Fund s exposure to foreign currency. CAM employs proprietary quantitative models focusing on key valuation, cyclical and momentum factors as well as qualitative analysis based on extensive internal research and insights from external sources. The Fund may not invest in companies that manufacture tobacco or tobacco-related products. Risk At times, a portfolio can be subject to any number of investment risks. The risk level of the Fund did not change significantly during the year. Descriptions of the investment risks associated with this Fund are detailed in the Simplified Prospectus. *The ratings for MD funds and pools have been revised using The Investment Funds Institute of Canada (IFIC) updated guidelines. IFIC developed these guidelines to provide a consistent approach to the measurement and description of fund volatility risk across the industry. The guidelines standardize terminology, categories and volatility risk descriptions. MD clients investment risk assessment will remain the same, the underlying risks of the MD Funds and MDPIM Pools have not changed. Results of Operations As part of MD Financial Management Inc. s investment management discipline, we carefully select and monitor each of our Investment Advisors and integrate them in a manner to ensure that the investment decisions, and fund s investments remain consistent with the objectives of the Fund. 1 MD Family of Funds Annual MRFP 2016

4 At the end of 2016, the approximate allocation of assets was divided among the Investment Advisors at the following weights: % of Assets Investment Advisor Investment Style 48% Franklin Bissett Investment Canadian Large-Cap (GARP) Management 14% QV Investors Inc. Canadian All-Cap Value 9% Mackenzie Financial Corporation Canadian Small-Cap Value / Cash Management 6% Fiduciary Asset Management US Large Cap Value 8% Barrow, Hanley, Mewhinney & US Large Cap Value Strauss 6% Mondrian Investment Partners International Large Cap Value 4% LSV Asset Management International All Cap Value 4% Earnest Partners International All Cap Core 2% CIBC Asset Management Currency and Foreign Cash Management For the year ended December 31, 2016, the Fund had a total return of 17.4% (series A), 19.3% (series I), and 17.3% (series T). Due to its large weighting (70%) and strong performance, the Fund s exposure to Canadian equities was the primary contributor to the Fund s overall return. US equities, held at an average weight of 12.0%, also contributed positively to returns primarily due to strong returns in Financials and Industrials. EAFE equities, held at an average weight of 14.0%, slightly contributed positively to performance due to a rebound in energy stocks. The Fund s currency management strategy contributed positively to performance in 2016 due to an underweight of the UK Pound and overweight in the Indonesia Rupiah and Japanese yen. From a sector perspective, a 16.4% average weight to the energy sector made the largest contribution to the Fund s performance as Canadian energy companies rebounded with the price of oil. In addition, the Fund s 31.6% average weight to financials (the largest sector weight in the Fund) in 2016 also contributed positively due to a high allocation to Canadian banks. With a return of 21.1% for the S&P/TSX Capped Composite Index, Canadian equities moved significantly higher in 2016 primarily due to the rebound of commodity prices as the energy and materials sectors were the primary sectors of strength in The price of oil, measured in USD by West Texas Intermediate, increased by 45.0% and the price of gold increased by 8.6% in The Canadian economy continues to grow at tepid rates with expectations for real GDP growth of just 1.3% for The Bank of Canada kept its key lending rate at 0.5% in 2016 but it would have considered lowering the rate if not for the $25 billion in expected federal expenditures over the next two years. As at December 31, 2016, the total net asset value of the Fund was $1.81 billion, an increase of 14% since the beginning of the year. The increase is mainly due to investment gains offset by distributions from the Fund during the period. Recent Developments STRATEGIC CHANGES There were no strategic changes to the Fund during the year. The Fund continues to be managed in a manner consistent with its investment mandate and is positioned to achieve its long-term objectives. The Investment Advisors have adhered to their investment disciplines and portfolio strategies. Related Party Transactions MD Financial Management Inc. is the Manager, Registrar and Trustee of the Fund. As Manager, MD Financial Management Inc. manages the overall business of the MD Fund and is responsible for: setting investment objectives, providing and/or retaining the services of third party service providers for fund accounting services, administration services, and promoting the sales of the Fund s units. As Registrar, MD Financial Management Inc. keeps track of the owners of units of the MD Fund, processes purchase, transfer and redemption orders, issues investor account statements, and issues annual tax reporting information. As the Fund is organized as a Trust, investing in the Fund means purchasing units of the Trust. As Trustee to the Fund, MD Financial Management Inc. holds actual title to the property in the Fund the cash and securities the Fund invests in on behalf of the unitholders. The principal distributor is MD Management Limited. As principal distributor, MD Management Limited markets the units of the MD Fund through its offices across Canada. MD Management Limited is owned by the Fund Manager, MD Financial Management Inc., which is owned by MD Financial Holdings Inc. Management Fees MD Financial Management Inc. provides the Fund with investment management and administrative services, including fund accounting and unitholder record-keeping. In return, MD Financial Management Inc. receives an annual management fee and an annual administration fee, both based on a fixed percentage of the daily net asset value of the Fund. Management fees are paid weekly and administration fees are paid monthly. MD Financial Management Inc. pays MD Management Limited, a related party, a fee for providing financial planning services. The amount shown is an estimate of the compensation paid to MD Management Limited. (As a percentage of management fees) Financial Planning Services 60.0% Investment management, administration and other 40.0% Past Performance The following bar chart shows the Fund s annual performance for each of the years shown, and illustrates how the Fund s performance changed from year to year. The chart shows, in percentage terms, how much an investment made on the first day of each calendar year would have grown or decreased by the last day of each calendar year. The performance information assumes that all distributions made by the Fund were reinvested in additional units of the Fund and does not take into account sales, redemption, distribution or other optional charges that would reduce returns. How the Fund has performed in the past does not necessarily indicate how the Fund will perform in the future. MD Family of Funds Annual MRFP

5 YEAR-BY-YEAR RETURNS % Return % Series A Series I* Series T -28.8% 25.5% 10.6% -8.8% -7.4% -6.0% 7.5% 9.2% 7.5% 25.1% 26.9% 24.9% 10.9% 12.7% 10.9% -2.6% -1.0% -2.6% 17.4% 19.3% 17.3% * Series I units do not charge a management fee at the fund level, and therefore may report higher returns. Series I units are available to qualified Institutional Investors who pay a separate negotiated management fee directly to MD Financial Management Inc. Series I and series T units are not reported here as they have been in existence for less than 12 months. ANNUAL COMPOUND RETURNS The following table shows the Fund s historical annual compound returns for the past one-, three-, five- and ten-year periods ended on December 31 and since inception of the new series, as compared to the return of a MD Equity Composite Index. MD Equity Fund Series A MD Equity Fund Series T** MD Equity Fund Series I MD Equity Composite Index S&P/TSX Capped Composite Index 1 year 3 years 5 years 10 years Since Inception* 17.44% 8.28% 11.28% 4.47% % 8.23% 11.24% % 19.25% 9.96% 13.00% % 15.94% 8.88% 11.00% 5.22% % 7.06% 8.25% 4.72% - MSCI World Index 4.41% 12.81% 17.33% 5.91% - *The Fund started series T units on November 23, 2010 and series I units on January 15, The series I units are available to institutional investors and pay a separate negotiated management fee and administration fee directly to MD Financial Management Inc. **The series T units existed through the reporting period, however, at times did not have any outstanding unitholders. Hence the one-year return is not an accurate reflection of the series T performance. Management uses the MD Equity Composite Index as the benchmark for this Fund because it best represents the weightings in the Fund. The MD Equity Composite Index is comprised of: 70% S&P/TSX Capped Composite Index, which measures the aggregate common share returns of Canada s largest companies. 30% MSCI World Index, which measures the aggregate common share returns of the world s largest companies. Although index returns are hypothetical as they do not reflect the true cost of owning or managing the underlying securities they are one of several useful indicators. By comparing the Fund s performance to the movements of the benchmark, we are able to assess how the Fund is doing. For example, some shortterm deviations can signal the need for change while others confirm the expectations of a longer-term strategy. If management were to ascertain that a fund s over- or underperformance was the result of excessive risk-taking or deviation from the investment mandate, we would, on behalf of all our unitholders, address these issues with the Investment Advisors, and make changes if necessary. Over the past year, the Fund outperformed its blended benchmark. Sector allocation was positive over the year primarily due to an underweight to the Health Care sector and more specifically Valeant, however this was somewhat offset by an underweight allocation to the materials sector which rebounded strongly with the price of gold in the first half of the year. Stock selection was very strong over the year, primarily due to stock selection within the energy and Health Care sectors, however stock selection within the financials and Materials sectors detracted from performance. From a country perspective, an overweight to EAFE securities contributed negatively to relative performance in Regarding Forward-Looking Statements This document contains forward-looking statements. Such statements are generally identifiable by the terminology used, such as plan, anticipate, intend, expect, estimate, or other similar wording. These forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in securities prices; fluctuation in interest rates and foreign currency exchange rates; and actions by governmental authorities. Future events and their effects on the Fund may not be those anticipated. Actual results may differ materially from the results anticipated in these forward-looking statements. 3 MD Family of Funds Annual MRFP 2016

6 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 years, if applicable. This information is derived from the Fund s audited annual financial statements. Years beginning on or after January 1, 2013 follow International Financial Reporting Standards ( IFRS ) and years prior to January 1, 2013 follow Canadian generally accepted accounting principles ( GAAP ). Net assets attributable to holders of redeemable units are referred to as net assets. THE FUND'S NET ASSETS PER UNIT 1 Year ended December 31 SERIES A Net assets beginning of the year $ $ $ $ $ Increase (decrease) from operations: Total revenue $ 0.80 $ 0.88 $ 0.82 $ 0.71 $ 0.66 Total expenses $ (0.44) $ (0.46) $ (0.48) $ (0.40) $ (0.34) Net realized gains (losses) for the year $ 0.96 $ 2.18 $ 3.79 $ 2.25 $ 1.46 Net unrealized gains (losses) for the year $ 3.39 $ (3.28) $ (0.91) $ 3.23 $ (0.20) Total increase (decrease) from operations 2 $ 4.71 $ (0.68) $ 3.22 $ 5.79 $ 1.58 Distributions: From income (excluding dividends) $ - $ - $ - $ - $ - From dividends $ (0.37) $ (0.27) $ (0.21) $ (0.24) $ (0.18) From capital gains $ - $ (1.61) $ (1.77) $ - $ - Return of capital $ - $ - $ - $ - $ - Total annual distributions 3 $ (0.37) $ (1.88) $ (1.98) $ (0.24) $ (0.18) Net assets end of the year $ $ $ $ $ Year ended December 31 SERIES I Net assets beginning of the year $ $ $ $ $ Increase (decrease) from operations: Total revenue $ 0.86 $ 0.94 $ 0.82 $ 0.73 $ 0.68 Total expenses $ - $ - $ - $ - $ - Net realized gains (losses) for the year $ 1.04 $ 2.29 $ 3.81 $ 2.24 $ 1.44 Net unrealized gains (losses) for the year $ 3.92 $ (3.62) $ (1.76) $ 3.52 $ (0.16) Total increase (decrease) from operations 2 $ 5.82 $ (0.39) $ 2.87 $ 6.49 $ 1.96 Distributions: From income (excluding dividends) $ (0.31) $ (0.20) $ (0.25) $ (0.18) $ (0.17) From dividends $ (0.59) $ (0.59) $ (0.69) $ (0.53) $ (0.38) From capital gains $ - $ (1.14) $ - $ - $ - Return of capital $ - $ - $ - $ - $ - Total annual distributions 3 $ (0.90) $ (1.93) $ (0.94) $ (0.71) $ (0.55) Net assets end of the year $ $ $ $ $ MD Family of Funds Annual MRFP

7 Financial Highlights (continued) THE FUND'S NET ASSETS PER UNIT 1 Year ended December 31 SERIES T Net assets beginning of the year $ 9.15 $ $ $ 9.39 $ 9.25 Increase (decrease) from operations: Total revenue $ 0.26 $ 0.30 $ 0.31 $ 0.28 $ 0.28 Total expenses $ (0.15) $ (0.16) $ (0.18) $ (0.16) $ (0.14) Net realized gains (losses) for the year $ 0.31 $ 0.74 $ 1.43 $ 0.88 $ 0.66 Net unrealized gains (losses) for the year $ 1.12 $ (1.15) $ (0.38) $ 1.28 $ (0.42) Total increase (decrease) from operations 2 $ 1.54 $ (0.27) $ 1.18 $ 2.28 $ 0.38 Distributions: From income (excluding dividends) $ - $ - $ - $ - $ - From dividends $ (0.11) $ (0.08) $ (0.07) $ (0.08) $ (0.08) From capital gains $ - $ (0.51) $ (1.15) $ - $ - Return of capital $ (0.46) $ (0.53) $ (0.56) $ - $ (0.46) Total annual distributions 3 $ (0.57) $ (1.12) $ (1.78) $ (0.08) $ (0.54) Net assets end of the year $ $ 9.15 $ $ $ This information is derived from the Fund s audited annual financial statements. Under GAAP, the Fund measured fair value of its investments in accordance with CICA Handbook Section 3855 which required the use of bid prices for portfolio investments in place of closing price. Net Assets that are calculated in accordance with GAAP differ from the Net Assets calculated for fund pricing purposes as disclosed in the Ratios and Supplemental Data table. There is no significant difference between the two under IFRS. 2 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations is based on the weighted average number of units outstanding over the financial year. This table is not intended to be a reconciliation of beginning to ending net assets per unit. 3 Distributions were paid in cash or reinvested in additional units of the Fund, or both. 5 MD Family of Funds Annual MRFP 2016

8 Financial Highlights (continued) RATIOS AND SUPPLEMENTAL DATA Year ended December 31 SERIES A Total net assets, end of the year 1 $ 1,328,223,904 $ 1,224,127,125 $ 1,387,038,324 $ 1,424,999,254 $ 1,324,260,885 Number of units outstanding 41,856,658 44,758,325 46,219,210 49,401,393 56,860,961 Management expense ratio % 1.54% 1.54% 1.54% 1.55% Management expense ratio before tax 1.40% 1.40% 1.40% 1.40% 1.40% Management expense ratio before waivers 1.53% 1.54% 1.54% 1.54% 1.55% or absorptions Trading expense ratio % 0.05% 0.06% 0.07% 0.13% Portfolio turnover rate % 39.39% 43.80% 44.46% 65.36% Net assets per unit $ $ $ $ $ Year ended December 31 SERIES I Total net assets, end of the year 1 $ 480,470,445 $ 374,953,216 $ 244,125,155 $ 295,780,110 $ 190,538,817 Number of units outstanding 14,092,337 12,753,598 7,709,739 10,215,825 8,130,374 Management expense ratio Management expense ratio before tax Management expense ratio before waivers or absorptions Trading expense ratio % 0.05% 0.06% 0.07% 0.13% Portfolio turnover rate % 39.39% 43.80% 44.46% 65.36% Net assets per unit $ $ $ $ $ Year ended December 31 SERIES T Total net assets, end of the year 1 $ 871,471 $ 741,287 $ 781,321 $ 749,738 $ 615,355 Number of units outstanding 86,165 81,032 74,236 67,461 65,532 Management expense ratio % 1.58% 1.57% 1.58% 1.58% Management expense ratio before tax 1.40% 1.40% 1.39% 1.40% 1.40% Management expense ratio before waivers 1.58% 1.58% 1.57% 1.58% 1.58% or absorptions Trading expense ratio % 0.05% 0.06% 0.07% 0.13% Portfolio turnover rate % 39.39% 43.80% 44.46% 65.36% Net assets per unit $ $ 9.15 $ $ $ This information is provided as at December 31 of the year shown. 2 Management expense ratio is based on total expenses (excluding commissions, withholding taxes and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. The Harmonized Sales Tax (HST) combines the GST rate of 5% with the PST rate of certain provinces. HST is calculated as a weighted average application based on the residency of shareholders and the value of their interests in each Series at a point in time, rather than the physical location of the manager. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the period. 4 The Fund's portfolio turnover rate indicates how actively the Fund's portfolio advisor manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher a fund's portfolio turnover rate in a year, the greater the trading costs payable by the fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of a fund. MD Family of Funds Annual MRFP

9 Summary of Investment Portfolio, December 31, 2016 NET ASSETS: $1,809.6 MILLION TOP 25 HOLDINGS (PERCENTAGE OF NET ASSETS) 71.0% Domestic Equities 26.0% Foreign Equities 3.0% Cash and Other Net Assets Canadian National Railway Company 3.5% Canadian Imperial Bank of Commerce 3.4% The Toronto-Dominion Bank 3.2% The Bank of Nova Scotia 3.0% Cash and short-term investments 3.0% Brookfield Asset Management Inc. Cl. A 3.0% Royal Bank of Canada 2.9% Bank of Montreal 2.5% Restaurant Brands International Inc. 2.5% Enbridge Inc. 2.1% Canadian Pacific Railway Company 1.9% Alimentation Couche-Tard Inc. Cl. B 1.8% Onex Corporation 1.7% ATCO, Ltd. 1.5% Saputo Inc. 1.4% Toromont Industries, Ltd. 1.3% Power Financial Corporation 1.2% Home Capital Group Inc. Cl. B Sub. Voting 1.2% Metro Inc. 1.2% Canadian Natural Resources, Ltd. 1.2% MacDonald, Dettwiler and Associates, Ltd. 1.1% ishares Core S&P/TSX Capped Composite Index ETF 1.1% Power Corporation of Canada 1.1% Rogers Communications Inc. Cl. B 1.1% Agrium Inc. 1.0% Note: Summary of Investment Portfolio may change due to ongoing portfolio transactions of the investment fund. A quarterly update is available. The Net Assets, Portfolio Allocation and Top 25 Holdings in the tables are based on the net assets as at December 31, Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. To obtain a copy of the prospectus, please call your MD Advisor, or the MD Trade Centre at PORTFOLIO ALLOCATION DOMESTIC EQUITIES Consumer Discretionary 7.6% Consumer Staples 3.5% Energy 14.9% Exchange Traded Funds 1.5% Financials 25.0% Industrials 10.1% Information Technology 1.9% Materials 2.5% Telecommunication Services 1.2% Utilities 2.8% 71.0% FOREIGN EQUITIES Australia 0.4% Austria 0.3% Belgium 0.0% Bermuda 0.3% Brazil 0.1% Cayman Islands 0.1% China 0.2% Colombia 0.0% Curacao 0.2% Czech Republic 0.0% Denmark 0.0% Finland 0.0% France 1.0% Germany 1.0% Hong Kong 0.1% India 0.1% Indonesia 0.0% Ireland 0.9% Israel 0.1% Italy 0.4% Japan 2.0% Jersey 0.1% Mexico 0.1% Netherlands 0.3% New Zealand 0.0% Norway 0.3% Singapore 0.3% South Korea 0.1% Spain 0.6% Sweden 0.3% Switzerland 1.6% Taiwan 0.3% Turkey 0.0% United Kingdom 2.7% United States 11.3% Exchange Traded Funds 0.8% 26.0% CASH AND SHORT-TERM INVESTMENTS 3.0% TOTAL NET ASSETS 100.0% The Cash and Short-Term Investments and Other Net Assets may appear negative due to the timing of cash flows between the trade date and settlement date for transactions on underlying securities. 7 MD Family of Funds Annual MRFP 2016

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