2005 Annual Financial Report. TD Managed index. TD Managed Assets Program

Transcription

1 2005 Annual Financial Report TD Managed index PORTFOLIOS TD Managed Assets Program TD Managed Index Balanced Growth Portfolio December 31, 2005

2 TD Managed Assets Program ANNUAL FINANCIAL R E PORT Table of Contents Letter to Investors... 1 Management s Responsibility for Financial Reporting... 2 Auditors Report... 3 Statements of Net Assets... 4 Statements of Investment Operations... 5 Statements of Changes in Net Assets... 6 Statement of Investment Portfolio... 8 Notes to Financial Statements

3 March 22, 2006 Dear Investor, Please find enclosed your copy of the 2005 Annual Financial Report for TD Managed Assets Program (TD MAP). The benefits of creating the right balance of assets As an investor, it is important to create a portfolio with the right balance of assets for your goals. However, finding this balance can be a complex task, requiring you to choose from thousands of mutual funds and to stay informed about ever-changing economic and market conditions. Few investors have the time, information or tools to build and maintain a mutual funds portfolio with the optimal balance of funds. That s why your TD MAP Portfolio offers significant benefits to you. Having invested in TD MAP, you benefit by having your investments managed by our professional portfolio managers. They select the individual funds held within your TD MAP Portfolio, and monitor and rebalance the mix of funds as required to stay on track with the portfolio s objectives. You simply make one investment decision and we manage your investment based on that decision. New, easy-to-read format for your Annual Report The enclosed 2005 Annual Financial Report includes financial statements as well as notes to financial statements, the auditors report and information about all series of the Portfolios. In accordance with recent regulatory changes, you will be mailed a 2005 Management Report of Fund Performance, which includes a management discussion of fund performance, financial highlights, past performance and summary of investment portfolios for the TD MAP Portfolios you held as of December 31, Should you have any questions about your TD MAP Portfolio, please contact any TD Canada Trust branch, TD Waterhouse 1 or your Financial Advisor. Or call us toll-free at (English), (French) or (Chinese). You can also us at td.mutualfunds@td.com or visit Thank you for investing with us. Sincerely, Timothy P. Pinnington President TD Mutual Funds TD Mutual Funds and TD Managed Assets Program are managed by TD Asset Management Inc., a wholly-owned subsidiary of The Toronto-Dominion Bank. 1 TD Waterhouse Canada Inc. (TD Waterhouse) is a subsidiary of The Toronto-Dominion Bank. TD Waterhouse Member CIPF. TD Mutual Funds, TD Managed Assets Programs, TD MAP and TD Waterhouse are trade-marks of The Toronto-Dominion Bank. TD Asset Management Inc. is a licensed user.

4 TD Managed Index Balanced Growth Portfolio (The Portfolio ) Management s Responsibility for Financial Reporting The accompanying financial statements have been prepared by TD Asset Management Inc, ( TDAM ) as Manager of the Portfolio and approved by the Board of Directors. TDAM 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 significant accounting policies which management believes are appropriate for the Portfolio are described in Note 3 of the notes to the financial statements. Management maintains appropriate processes to provide reasonable assurance of the reliability of financial information and the safeguarding of all assets of the Portfolio. 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 is the external auditor of the Portfolio. 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. TD Asset Management Inc. Timothy P. Pinnington Rudy Sankovic Director and President, TD Mutual Funds Director and Chief Financial Officer February 23, 2006 February 23,

5 Auditors Report To the Unitholders and Trustee of: TD Managed Index Balanced Growth Portfolio (The Portfolio ) We have audited the accompanying statement of investment portfolio of the Portfolio as at December 31, 2005, the statements of net assets as at December 31, 2005 and 2004 and the statements of investment operations and changes in net assets for the years then ended. These financial statements are the responsibility of the Portfolio s management. 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 Portfolio s management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Portfolio as at December 31, 2005 and 2004, the results of its operations and the changes in its net assets for the years then ended in accordance with Canadian generally accepted accounting principles. Chartered Accountants Toronto, Ontario January 31,

6 TD Managed Index Balanced Growth Portfolio Statements of net assets (in 000s except per unit amounts and number of units) as at December 31, 2005 and Assets investments at Market Value (1) $ 48,680 $ 42,836 Cash Subscriptions Receivable Receivable for investment Sales ,760 42,906 Liabilities accrued Liabilities Redemptions Payable Distributions Payable 1 38 Payable for investment Purchases Net Assets $ 48,623 $ 42,773 Net Assets Representing Unitholders' Equity investor Series $ 48,192 $ 42,550 e-series $ 431 $ 223 $ 48,623 $ 42,773 Number of Units Outstanding investor Series 4,642,867 4,308,477 e-series 42,102 22,915 Net Asset Value Per Unit investor Series $ $ 9.88 e-series $ $ 9.73 (1) investments at Cost $ 48,288 $ 41,320 The accompanying notes to financial statements are an integral part of these statements

7 TD Managed Index Balanced Growth Portfolio Statements of investment Operations (in 000s except per unit amounts) for the years ended December 31, 2005 and Investment Income income Distributions Received From Underlying Funds $ 1,994 $ 814 Less: Withholding Taxes (44) (7) 1, Expenses (note 5) Management Fee Securityholder Reporting Costs Legal 0 1 Filing 7 4 audit 6 5 Bank Charges and interest gst Less: Waived expenses 0 (4) net investment income 1, net Realized gain on Sale of investments o 3, net Change in Unrealized appreciation/depreciation of investments (1,124) 2,099 Capital gains Distributions Received From Underlying Funds net gain on investments 2,391 2,180 Increase in Net Assets from Investment Operations $ 3,808 $ 2,576 o Net Realized Gain on Sale of Investments Proceeds from Sale of investments $ 9,941 $ 3,035 Cost of investments, Beginning of the Year 41,320 28,002 Cost of investments Purchased During the Year 13,597 16,279 54,917 44,281 Less: Cost of investments, end of the Year 48,288 41,320 Cost of investments Sold During the Year 6,629 2,961 Net Realized Gain on Sale of Investments $ 3,312 $ 74 Increase in Net Assets from Investment Operations investor Series $ 3,783 $ 2,563 e-series $ 25 $ 13 $ 3,808 $ 2,576 Increase in Net Assets from Investment Operations - Per Unit investor Series $ 0.88 $ 0.72 e-series $ 0.98 $

8 TD Managed Index Balanced Growth Portfolio Statements of Changes in net assets (in 000s except number of units) for the years ended December 31, 2005 and 2004 Investor Series increase in net assets from investment Operations $ 3,783 $ 2,563 Capital Unit Transactions Proceeds from Sale of Units 5,461 18,390 Reinvestments of Distributions 1, early Redemption Fees 2 1 amounts Paid on Redemptions (9,002) (5,619) amounts transferred from Terminating Portfolio (note 2) 5,361 n/a 3,470 13,132 Distributions to Unitholders From net investment income (1,407) (392) From net Realized gains on investments (204) 0 Total Distributions (1,611) (392) increase (Decrease) in net assets for the Year 5,642 15,303 net assets, Beginning of the Year 42,550 27,247 Net Assets, End of the Year $ 48,192 $ 42,550 Capital Unit Transactions Units Outstanding, Beginning of Year 4,308,477 2,925,181 Units issued from Sales 537,516 1,932,234 Units issued from Reinvestments 160,105 37,531 Units Redeemed (883,696) (586,469) Units exchanged for Units of Terminating Portfolio (note 2) 520,465 n/a Units Outstanding, End of the Year 4,642,867 4,308,477 The accompanying notes to financial statements are an integral part of these statements

9 e-series TOTAL $ 25 $ 13 $ 3,808 $ 2, ,573 18, , (48) (38) (9,050) (5,657) 119 n/a 5,480 n/a ,665 13,203 (10) (3) (1,417) (395) (2) 0 (206) 0 (12) (3) (1,623) (395) ,850 15, ,773 27,389 $ 431 $ 223 $ 48,623 $ 42,773 22,915 15,477 11,066 11,159 1, (4,850) (4,018) 11,755 n/a 42,102 22,915 7

10 TD Managed Index Balanced Growth Portfolio Statement of investment Portfolio as at December 31, 2005 NO. % OF TOTAL OF UNITS DESCRIPTION COST MARKET VALUE NET ASSETS FixeD income FUnD CANADIAN BOND 1,846,692 TD Canadian Bond index Fund, institutional Series $ 19,569,776 $ 19,445, equity FUnDS CANADIAN EQUITY 628,170 TD Canadian index Fund, institutional Series 7,980,481 8,404, U.S. EQUITY 958,820 TD U.S. index Fund (CDn$), institutional Series 6,890,083 6,941, ,112 TD U.S. RSP index Fund, institutional Series 5,209,324 5,028,018 12,099,407 11,969, INTERNATIONAL EQUITY 365,775 TD international index Fund, institutional Series 5,125,486 5,387, ,478 TD international RSP index Fund, institutional Series 3,512,839 3,472,038 8,638,325 8,859, Total equity Funds 28,718,213 29,234, TOTaL investment PORTFOLiO 48,287,989 48,680, Other net Liabilities (57,124) (57,124) (0.1) TOTaL net assets $ 48,230,865 $ 48,623, The accompanying notes to financial statements are an integral part of these statements

11 NOTES TO FINANCIAL STATEMENTS December 31, The Portfolio The TD Managed Index Balanced Growth Portfolio (the Portfolio ) is an open-ended mutual fund trust established under the laws of Ontario and is governed by Amended, Consolidated and Restated Declarations of Trust dated October 17, 2005 ( Declarations of Trust ). The Portfolio invests exclusively in specified mutual fund trusts ( Underlying Funds ). TD Asset Management Inc. ( TDAM ) is the manager, portfolio adviser and Trustee of the Portfolio. TD Investment Services Inc. ( TDIS ) is the principal distributor of the Portfolio. Both TDAM and TDIS are wholly-owned subsidiaries of The Toronto-Dominion Bank (the Bank ). The Portfolio is authorized to issue an unlimited number of units of multiple series that rank equally and are available for sale under a simplified prospectus. The various series offered by the Portfolio are as described below. The number of units of each series outstanding is presented in the Statements of Net Assets. Investor Series: offered to investors on a no-load basis. e-series: offered on a no-load basis and is transacted only via electronic means. Each series of units are sold under differing purchase options and may have higher or lower management fees, reflecting the extent of the investment advice provided. The management fee rates for each series of the Portfolio are provided in Note 5. In the year a Portfolio or Series is established, period represents inception to December 31 of the year, in all other cases period represents a year ended December Merger of Portfolios On October 7, 2005, the TD Managed Index Balanced Growth RSP Portfolio ( Continuing Portfolio ), as set out below, acquired all of the net assets of the TD Managed Index Balanced Growth Portfolio ( Terminated Portfolio ) in exchange for units in the equivalent series of each of the Continuing Portfolio. The value of the units issued in connection with this merger was equal to the market value of the net assets transferred from the respective Terminated Portfolio. The net assets acquired from the Terminated Portfolio and the number of units issued by the Continuing Portfolio as at October 7, 2005 was as follows: The name of the Portfolio was changed from the TD Managed Index Balanced Growth RSP Portfolio to TD Managed Index Balanced Growth Portfolio after the merger was completed. 3. Summary of Significant Accounting Policies These financial statements, prepared in accordance with Canadian generally accepted accounting principles ( GAAP ), include estimates and assumptions by management that affect the reported amounts of assets, liabilities, income, expenses, and realized and unrealized gains and losses during the reporting period. Actual results may differ from these estimates. The following is a summary of significant accounting policies followed by the Portfolio. (I) Valuation of Investments The investments in the Underlying Funds are valued at the closing net asset value of each Underlying Fund on the day of valuation. (II) Investment Transactions, Income and Expenses Investment transactions are accounted for as of the trade date. Realized gains and losses from investment transactions are calculated on an average cost basis. Interest income and expenses are accrued daily, and expenses are accrued separately to each series, while income, gains and losses are allocated to each series based on the respective net asset values. (III) Distributions from Underlying Funds Distributions received from Underlying Funds out of interest, foreign income and related withholding taxes, Canadian dividends and net capital gains are recognized when declared. (IV) Other Assets and Liabilities Other financial assets and financial liabilities recorded at cost are short-term in nature and therefore their carrying value approximates fair value. (V) Translation of Foreign Currencies The market value of investments and other assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate of exchange prevailing on each Valuation Date (as defined below). The Underlying Funds investment portfolios may consist of securities that are traded in foreign markets. The proceeds on the sale of such securities will be realized in the respective currency. Unhedged foreign currency positions are subject to gains and losses due to fluctuations in the respective exchange rates. Foreign currency purchases and sales of investments and foreign currency dividend and interest income are translated into Canadian dollars at the rate of exchange prevailing on the respective date of the transaction. Net Assets Transferred from Terminated Number of Units Issued Portfolio Portfolio (000s) Investor Series e-series TD Managed Index Balanced Growth Portfolio $ 5, ,465,755 9

12 (VI) Valuation of the Portfolio TDAM usually calculates the Net Asset Value ( NAV ) per series unit for the Portfolio as at 4 p.m. (Eastern time) on each day that the Toronto Stock Exchange is open for trading, but in some circumstances, it may be calculated at another time. Each day on which a NAV is calculated is referred to as a Valuation Date ( Valuation Date ). A separate NAV is calculated for each series of units of the Portfolio by taking the series proportionate share of the Portfolio s common assets less that series proportionate share of the Portfolio s common liabilities and deducting from this amount all liabilities that relate solely to a specific series. The NAV per series unit is determined by dividing the NAV of each series of the Portfolio by the total number of units of that series outstanding. (VII) Increase (Decrease) in Net Assets from Investment Operations per Unit Increase (decrease) in net assets from investment operations per unit reported on the Statements of Investment Operations is calculated as the increase (decrease) in net assets from investment operations divided by the average number of units of that series outstanding during the year. 4. Unitholders Equity Units of the Portfolio, which are redeemable at the option of the holder in accordance with the provisions of the Declarations of Trust, do not have any nominal or par value and the number of units which may be issued is unlimited. Units are issued or redeemed on a daily basis at the net asset value per unit next determined after the purchase order or redemption request, respectively, is received by TDAM. Purchases and redemptions include units exchanged from one series to another series within the Portfolio. 1.30%. The maximum management fee for each series is the amount that would be necessary to reach the cap, when combined with all expenses of the Portfolio and its share of the Underlying Funds expenses. Management Fees for Periods Ended December 31 (%) Series Years Portfolio Underlying Total Investor Series e Series Securityholder reporting costs, legal fees, filing fees, audit fees, bank charges, interest expenses and all taxes are payable by the Portfolio. A significant portion of the securitholder reporting costs disclosed on the Statements of Investment Operations were paid to the Bank for recordkeeping and communications services provided on behalf of the Portfolio. Such expenses were allocated to the Portfolio based on the costs incurred by the Bank for providing these services to the Portfolio. TDAM will waive or absorb a portion of the operating expenses payable by the Portfolio to the extent necessary to ensure that the MER does not exceed the stated cap. TDAM may, at its discretion, waive or absorb additional fees and expenses otherwise payable by the Portfolio. These additional waivers or absorptions may be terminated at any time without notice by TDAM, and at TDAM s discretion, may be continued indefinitely. The additional expenses waived by TDAM beyond the amount allowable under the Cap are disclosed in the table above and the Statements of Investment Operations. 5. Management Fee and Other Expenses (in 000s) Management Fee Other Expenses Waived Expenses Series Investor Series $ 369 $ 285 $ 162 $ 128 $ 0* $ 4 e-series 2 2 0* 0* 0* 0* * Less than $500 The Portfolio pays TDAM a management fee for the investment management and portfolio administration provided on behalf of the Portfolio. The management fee is a variable fee dependent upon the amount of all other fees and expenses that are paid by the Portfolio. The Management Expense Ratios ( MER ) of the Portfolio are capped such that the MER of the Investor Series cannot exceed 1.60%, and the MER of the e-series cannot exceed 6. Tax Status The Portfolio qualifies as a mutual fund trust under the Income Tax Act (Canada). All or substantially all of the net income for tax purposes and net taxable capital gains realized in any year are distributed to unitholders such that no income tax is payable by the Portfolio. The 2005 fund merger (Note 2) resulted in differences between the tax cost and the GAAP (accounting cost)

13 maintained for the investments of the Portfolio. The cost of the securities acquired during the merger was booked for tax purposes at the lower of the original average cost or market value, while for accounting purposes, these security acquisitions were booked at the market value on the date of the merger. The tax cost of the investments held by the Portfolio as at December 31, 2005 is $46,701,659 while the GAAP cost is $48,287, Brokerage Commissions and Soft Dollars The Portfolio did not incur any brokerage commissions in 2005 and 2004 to execute transactions in the Underlying Funds, nor did it receive any investment or research services from brokers in exchange for commissions paid by the Portfolio. Certain of the Underlying Funds have incurred brokerage commissions, a portion of which may have been received by the Underlying Fund s investment adviser in the form of investment or research services ( soft dollars ). Amounts for each Underlying Fund are disclosed in the Underlying Funds annual financial statements. 8. Prior Period Comparatives Certain comparative figures as at and for the year ended December 31, 2004 have been reclassified to the 2005 financial statements presentation. None of these reclassifications had an impact on the net asset value or net asset value per unit reported for the prior period. 9. Other Reports Audited financial statements for the year ended December 31, 2005 of the Underlying Funds are available, without charge, by writing to: TD Managed Assets Program c/o TD Asset Management Inc. TD Canada Trust Tower, 35 th Floor 161 Bay Street Toronto, Ontario M5J 2T2 11

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