TD Global Risk Managed Equity Class

Transcription

1 TD Asset Management TD Global Risk Managed Equity Class (08/18) 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 or the SEDAR website at 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 Global Risk Managed Equity Class Management Discussion of Fund Performance Investment Objectives and Strategies The investment objective of the TD Global Risk Managed Equity Class (the Fund ) is to seek to achieve long-term capital appreciation by investing primarily in, or gaining exposure to, equity securities of issuers located anywhere in the world, while seeking to manage portfolio volatility. The Fund seeks to achieve the objective by obtaining exposure to a large number of equity securities of the MSCI World Index, broadly diversified across all sectors through investing in units of an underlying fund, TD Global Risk Managed Equity Fund ( UF ), investing directly in the equity securities and/or through the use of derivatives. The Fund also has exposure to a quantitative equity strategy which seeks to optimize exposure to stocks that are expected to outperform the overall market while seeking to limit exposure to stocks that are expected to underperform the overall market. The Fund may also invest in exchange-traded funds including those that seek to replicate the performance of gold. 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 3.9 percent versus 7.1 percent for the Fund s product benchmark MSCI World Index (Net Dividend, C$) ( MSCI World Index (ND, C$) ). 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, and purchase and/or redemption activity. 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 The global economy strengthened over the Reporting Period, with growth coming from a number of different areas of the economy. Global trade improved significantly, and many countries participated in the global economic strength, particularly export-heavy emerging markets regions. As economic activity accelerated, commodity prices climbed higher, especially for energy and industrial metals. The U.S. and China significantly contributed to global economic growth during the Reporting Period. However, trade tensions between the two countries caused heightened unease for market participants and resulted in higher equity market volatility over the latter half of the Reporting Period. In emerging markets, improved export activity and strong consumer spending supported the economies of China and India. A much-needed recovery in capital spending helped drive economic growth in both Russia and Brazil. During the Reporting Period, the central banks of some larger economic regions took advantage of improvements in their respective economies to raise interest rates. Despite a modest tightening in financial conditions, the monetary policies of these central banks remained largely supportive of additional capital spending, which was a key contributor to global economic expansion. Inflation climbed higher in many developed countries, which was primarily driven by higher oil prices, but core inflation remained below many central banks target ranges. Global equities gained over the Reporting Period in response to increased global trade that helped to support economies around the world. U.S. equities also advanced but were volatile in the latter half of the Reporting Period as a result of global trade tensions, geopolitical risks and inflationary pressures. European equities gained over the Reporting Period in response to stronger local economies and consumer spending, which were supported by the accommodative monetary policy of the European Central Bank. The Japanese equity market strengthened over the Reporting Period in response to robust exports that supported Japan s manufacturing and electronics industries. Although volatility increased during February and March 2018, the equity market stabilized subsequently, resulting in falling volatility levels. The UF s Portfolio Adviser continued to position the UF for a low-volatility environment. This meant altering the options position slightly to allow for more participation in market recoveries, while maintaining protection against potential market declines. As a result, the UF s Portfolio Adviser has kept the UF favourably positioned for a market increase by writing a lower number of call options (a call is an option contract giving the owner the right to buy a specified amount of a security at a set price within a specified time). The put options profile remains unchanged, as the UF s Portfolio Adviser bought put spreads on 100 percent of the UF s underlying exposure (a put is an option contract giving the owner the right to sell a specified amount of a security at a set price within a specified time). Key Contributors/Detractors The UF underperformed the benchmark, which returned 7.1 percent over the Reporting Period. However, the UF s absolute performance was in line with the UF s Portfolio Adviser s expectations of a strong participation rate in a rising equity market. Because of the defensive nature of the UF s options strategy, the UF is expected to underperform slightly in a strong equity market environment. As a result, the UF s options strategy detracted from overall performance versus the benchmark, but was in line with expectations given the strong market conditions. The UF is expected to provide substantial downside protection during declining market environments. 1

3 The UF hedged almost half of its U.S. dollar exposure during the Reporting Period. As a result of a weaker U.S. dollar, currency hedging contributed to performance. Active stock selection within the consumer discretionary, energy, and health care sectors detracted from performance, although this was partially offset by stock selection within the materials and industrials sectors. In the UF s international component, active stock selection within the energy and industrials sectors significantly contributed to performance. Assets The Fund experienced a significant increase in assets due to investor purchase activity. Recent Developments Looking ahead, the UF s Portfolio Adviser continues to be mindful of a variety of macroeconomic factors that may influence the performance of financial markets. Global economic indicators have continued to show general strength, albeit with greater dispersion among major regions. Nonetheless, trade, industrial production, job creation and construction activity are all positive. While these may support continued economic growth, any optimism should be balanced against potential risks, including geopolitical developments, trade protectionism and central banks actions. Given the above, the UF s Portfolio Adviser expects central banks around the world to continue reducing their stimulus measures, albeit gradually, which should keep interest rates at low levels. Inflation has moved upward in response to improving economic growth and production, and this trend may continue over the remainder of 2018, which may cause central banks to raise interest rates further. While solid fundamentals and an improving global economy tend to support equity prices, the UF s Portfolio Adviser believes rising inflation, central bank interest rate increases, geopolitical risks and trade tensions could lead to greater volatility in financial markets over the coming year. As a defensive strategy, the UF s Portfolio Adviser continued to protect the UF against market declines through buying put spreads (the UF s put spreads are designed to offset a market downturn of up to 10 to 12 percent). The UF is positioned to benefit from increased market volatility, as the premiums collected from the sale of call options are expected to increase with market volatility. The UF s Portfolio Adviser remains mindful of potentially problematic structural issues that remain unresolved, such as high debt levels, low productivity and an aging population. 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 0.20 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 paid to TDAM or its affiliates. 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 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 N/A N/A Increase (Decrease) from Operations: Total Revenue N/A N/A Total Expenses (excluding distributions) (0.24) (0.23) (0.15) N/A N/A Realized Gains (Losses) for the Period (0.04) N/A N/A Unrealized Gains (Losses) for the Period (0.08) N/A N/A Total Increase (Decrease) from Operations (0.26) N/A N/A Distributions: From Net Investment Income (excluding dividends) N/A N/A From Dividends 0.00 (0.31) 0.00 N/A N/A From Capital Gains (0.02) (0.07) 0.00 N/A N/A Return of Capital N/A N/A Total Annual Distributions 3 (0.02) (0.38) 0.00 N/A N/A Net Assets at May N/A N/A ADVISOR SERIES * Net Assets, Beginning of Year N/A N/A Increase (Decrease) from Operations: Total Revenue N/A N/A Total Expenses (excluding distributions) (0.24) (0.23) (0.16) N/A N/A Realized Gains (Losses) for the Period N/A N/A Unrealized Gains (Losses) for the Period (0.23) N/A N/A Total Increase (Decrease) from Operations (0.36) N/A N/A Distributions: From Net Investment Income (excluding dividends) N/A N/A From Dividends 0.00 (0.33) 0.00 N/A N/A From Capital Gains (0.02) (0.01) 0.00 N/A N/A Return of Capital N/A N/A Total Annual Distributions 3 (0.02) (0.34) 0.00 N/A N/A Net Assets at May N/A N/A 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 N/A N/A Increase (Decrease) from Operations: Total Revenue N/A N/A Total Expenses (excluding distributions) (0.09) (0.09) (0.06) N/A N/A Realized Gains (Losses) for the Period N/A N/A Unrealized Gains (Losses) for the Period (0.35) N/A N/A Total Increase (Decrease) from Operations (0.37) N/A N/A Distributions: From Net Investment Income (excluding dividends) N/A N/A From Dividends (0.06) (0.67) 0.00 N/A N/A From Capital Gains (0.03) (0.02) 0.00 N/A N/A Return of Capital N/A N/A Total Annual Distributions 3 (0.09) (0.69) 0.00 N/A N/A Net Assets at May N/A N/A 1 This information is derived from the Fund s audited annual financial statements prepared in accordance with International Financial Reporting Standards. The Fund measures fair 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 net asset value ( NAV ) for transactions with shareholders. 2 Net assets and distributions are based on the actual number of shares outstanding at the relevant time. The increase (decrease) from operations is based on the weighted average number of shares outstanding over the financial periods. 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. * Data reported represents results from the commencement of operations to May 31 of the year indicated. Please refer to the Year-by-year returns charts in the Past Performance section for commencement date. Initial offering price Ratios and Supplemental Data INVESTOR SERIES Total Net Asset Value ($000s) N/A N/A Number of Shares Outstanding (000s) N/A N/A Management Expense Ratio (%) N/A N/A Management Expense Ratio Before Waivers or Absorptions (%) N/A N/A Trading Expense Ratio (%) N/A N/A Portfolio Turnover Rate (%) N/A N/A Net Asset Value per Share ($) N/A N/A ADVISOR SERIES Total Net Asset Value ($000s) 1 4,284 1,917 2,520 N/A N/A Number of Shares Outstanding (000s) N/A N/A Management Expense Ratio (%) N/A N/A Management Expense Ratio Before Waivers or Absorptions (%) N/A N/A Trading Expense Ratio (%) N/A N/A Portfolio Turnover Rate (%) N/A N/A Net Asset Value per Share ($) N/A N/A 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 ($000s) 1 5,525 2,973 7,442 N/A N/A Number of Shares Outstanding (000s) N/A N/A Management Expense Ratio (%) N/A N/A Management Expense Ratio Before Waivers or Absorptions (%) N/A N/A Trading Expense Ratio (%) N/A N/A Portfolio Turnover Rate (%) N/A N/A Net Asset Value per Share ($) N/A N/A 1 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) net of any waivers or absorptions for the stated period, including the Fund s proportionate share of the MER, if any, of the underlying fund(s) in which the Fund has invested in, and is expressed as an annualized percentage of daily average NAV during the period. Any waivers or absorptions may be discontinued at any time by TDAM at its discretion without notice. 3 The trading expense ratio ( 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. 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. Prior to July 27, 2017, the simplified prospectus disclosed the maximum management fee rate that TDAM could charge for each series of shares of the Fund (so the actual management fee charged to the Fund might have been less than the maximum management fee rate). TDAM was able to charge the maximum management fee without notice to share - holders. Effective July 27, 2017, the simplified prospectus discloses a specified annual management fee rate. Where TDAM chooses to charge a management fee rate below the specified annual management fee rate, the difference represents a waiver of management fees. TDAM may waive all or a portion of the management fees being charged to the Fund, which may be discontinued at any time by TDAM at its discretion without notice to shareholders. The annual management fees and a breakdown of the major services rendered for each series, as a percentage of the management fees paid, are as follows: Waived Annual Dealer Operating (expressed as a %) Mgmt. Fees 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(s) managed by TDAM held by the Fund. However, there is no duplication of management fees paid to TDAM or its affiliates if the Fund invests in underlying fund(s) that are managed by TDAM. Investment advisory, marketing services and other. 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 World Index (ND, C$) This index includes stocks of companies in all the developed markets around the world, net of withholding taxes. General market indices: MSCI World Index (ND, C$). Since Past 5 Past 3 Past (expressed as a %) inception years years year (Start date September 15, 2015) INVESTOR SERIES 5.4 N/A N/A 3.9 Product Benchmark 10.9 N/A N/A 7.1 General market: MSCI World Index (ND, C$) 10.9 N/A N/A 7.1 (Start date September 15, 2015) ADVISOR SERIES 5.4 N/A N/A 3.9 Product Benchmark 10.9 N/A N/A 7.1 General market: MSCI World Index (ND, C$) 10.9 N/A N/A 7.1 (Start date September 15, 2015) F-SERIES 6.9 N/A N/A 5.3 Product Benchmark 10.9 N/A N/A 7.1 General market: MSCI World Index (ND, C$) 10.9 N/A N/A 7.1 Over the Reporting Period, shares of the Investor Series and Advisor Series returned 3.9 percent and the F-Series returned 5.3 percent versus 7.1 percent for the MSCI World Index (ND, C$). Unlike the index, the Fund s return is quoted after the deduction of fees and expenses. The UF s relative underperformance is largely the result of its stock selection and the cost of its options strategy. 6

8 Summary of Investment Portfolio as at % of Net Asset Value as at % of Net Asset Value ASSET ALLOCATION Global Equity Funds 99.8 Other Net Assets (Liabilities) 0.2 as at % of Net Asset Value TOP 25 INVESTMENTS 1. TD Global Risk Managed Equity Fund, O-Series 99.8 Total % of Net Asset Value represented by these holdings 99.8 TOTAL NET ASSET VALUE (000s) $ 10,600 as at % of Net Asset Value INVESTMENT MIX OF UNDERLYING FUND(S) United States 11.8 Japan 2.2 United Kingdom 1.8 Germany 0.6 Netherlands 0.6 Sweden 0.5 France 0.4 Norway 0.4 Australia 0.4 Switzerland 0.2 New Zealand 0.1 Other Countries 0.2 Index Equivalents 77.4 Options 2.1 Cash 1.7 Other Net Assets (Liabilities) (0.4) TOP 25 INVESTMENTS OF UNDERLYING FUND(S) 1. Apple Inc Cash Microsoft Corporation Alphabet Inc Amazon.com Inc The Boeing Company Facebook Inc Berkshire Hathaway Inc Intuit Inc JPMorgan Chase & Co Exxon Mobil Corporation The Progressive Corporation Johnson & Johnson MSCI Inc Yum! Brands Inc Ross Stores Inc Motorola Solutions Inc KLA-Tencor Corporation ConAgra Brands Inc Packaging Corporation of America Robert Half International Inc The Hershey Company Quanta Services Inc Royal Dutch Shell PLC Dollar General Corporation 0.6 Total % of Net Asset Value represented by these holdings 22.1 The holdings represent a combination of the underlying fund(s) holdings and their exposure to holdings of the exchange-traded funds the underlying fund(s) invested in. 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 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(s). 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 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 Strategic Managed Portfolios, 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