TD High Yield Bond Fund

Transcription

1 (03/16) TD Mutual 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 td.mutualfunds@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 High Yield Bond Fund Management Discussion of Fund Performance Investment Objectives and Strategies The investment objective of the TD High Yield Bond Fund ( Fund ) is to seek to provide income and the opportunity for capital appreciation over the longer term. In seeking to achieve this objective, the Fund invests primarily in high-yield corporate bonds or other income producing securities located anywhere in the world. The Fund employs a bottom-up, buy-and-hold strategy emphasizing analysis of individual corporations in the context of a global macro economic environment, selecting securities based on methodical risk/return analysis aiming to maximize risk adjusted returns for the Fund. Risk The risks of investing in the Fund remain as outlined in the simplified prospectus. Results of Operations The Investor Series units of the Fund returned negative 5.7 percent* for the year ended ( Reporting Period ), versus negative 2.7 percent for the Fund s product benchmark, the BofA Merrill Lynch BB-B US High Yield Index (Hedged, 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. Market Update Relatively strong employment figures and real wage growth, along with a number of other economic indicators that pointed to areas of strength in the U.S. economy, prompted the U.S. Federal Reserve Board ( Fed ) to raise its federal funds interest rate by 0.25 percent in December This marked the Fed s first interest rate increase since before the global economic downturn of The interest rate hike also came at a time when central banks across the world were dropping their interest rates in response to continued economic weakness. These diverging central bank policies resulted in a stronger U.S. dollar compared to many other global currencies. The yield curve flattened over the Reporting Period. U.S. Treasuries rose at the shorter end of the yield curve, while intermediate and longer bonds ended the Reporting Period largely unchanged. Highyield corporate bonds declined, with prices and spreads somewhat volatile during the Reporting Period. The BofA Merrill Lynch US High Yield Master II Index declined approximately 5 percent. As a number of high-yield issuers tend to be resource-based companies, falling oil and commodity prices negatively impacted these issuers results and caused spreads to widen. In addition, fixed income market volatility increased as investors speculated about when the Fed would begin to raise interest rates and the pace of future interest rate increases. Slowing economic growth from China further affected demand for commodities. The high-yield bond market was challenged as a result of concerns about commodity-related issuers and the potential implications on liquidity. Key Contributors/Detractors Overall, sector and quality selection detracted from the Fund s relative performance. The Fund s 9 percent overweight exposure to CCC-rated bonds detracted from relative performance as these bonds underperformed B-rated and BB-rated high-yield bonds. However, the Fund s approximately 13 percent underweight exposure to U.S. dollardenominated energy bonds contributed to relative performance as the energy sector struggled with declining oil prices. Security selection, particularly in the resource and industrials sectors, detracted from relative performance. However, the Fund s yield advantage versus the BofA Merrill Lynch BB-B US High Yield Index (Hedged, C$), which was obtained through positive security selection, contributed to relative performance. High-yield bonds may potentially become illiquid securities. The Portfolio Adviser assesses the liquidity of securities at the time of purchase by the Fund. Existing holdings are assessed to determine liquidity by the Portfolio Adviser as part of the ongoing investment process. Consistent with National Instrument NI Mutual Funds, the Fund will hold cash and cash equivalents to ensure sufficient liquidity to meet unitholder redemptions. Assets The Investor Series, Premium Series, Advisor Series and S-Series units of the Fund experienced a significant decrease in assets due to investor redemption activity. The Premium F-Series units of the Fund experienced a significant increase in assets due to investor purchase activity. Recent Developments The Fund continues to emphasize capital preservation within active fixed income portfolios without sacrificing yield advantage relative to the BofA Merrill Lynch BB-B US High Yield Index (Hedged, C$). The Portfolio Adviser is mindful of macroeconomic factors, including slow global growth, elevated sovereign debt levels, demographic trends and inflationary/disinflationary pressures. However, within the context of slow growth, economic improvements in the U.S. and continuing high levels of central bank liquidity globally have helped to reduce the probability of extreme outcomes. The Portfolio Adviser anticipates that global central banks should maintain their accommodative stance for some time. As the U.S. economic outlook continues to improve, positive developments in the labour force and inflation provided the confidence necessary for the Fed to raise interest rates from historically low levels. However, much of the global economy is still using accommodative monetary policies to spur economic growth. The Portfolio Adviser anticipates that this divergence in monetary policy between the U.S. and other developed economies may create periods of increased volatility with a potential for reduced liquidity. * This section compares the returns relative to the Fund s product benchmark. See the Past Performance section for a comparison of the Fund s performance relative to the general market index. 1

3 The Portfolio Adviser anticipates that active management with a focus on quality and liquidity could serve the Fund well in the current environment. 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, Trustee and Portfolio Adviser: TDAM, a wholly-owned subsidiary of The Toronto-Dominion Bank ( TD ), is the manager, trustee and portfolio adviser of the Fund. The Fund pays TDAM an annual manage ment fee, which may vary for each series of Fund units, and an annual administration fee of 0.15 percent with respect to the Investor Series, Premium Series, Advisor Series, H-Series, T-Series and D-Series units of the Fund. Distributor: For certain series of units of the Fund, TD Investment Services Inc., a wholly-owned subsidiary of TD, is the principal distributor for which it is paid a trailer commission by TDAM. Units of the Fund are also 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 units 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 unitholder records, processes purchase, switch, conversion and redemption orders, issues investor statements and prepares annual tax reporting information on behalf of the Fund. 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 relied on standing instructions from the IRC in respect of one or more of the following transactions: (a) trades in securities of TD or any affiliate or associate thereof; (b) investments in the securities of an issuer where TD Securities Inc., TDW, or any other affiliate of TDAM (a Related Dealer ) acted as an underwriter during the distri bution of such securities and the 60-day period following the completion of the distribution of the underwritten securities; (c) purchases or sales of securities of an issuer from or to another investment fund or discretionary managed account managed by TDAM; and (d) purchases of securities from or sales of securities to a Related Dealer, where it acted as principal. The relevant standing instructions require that securities transactions with related parties conducted by TDAM (i) are free from any influ - ence by an entity related to TDAM and without taking into account any consideration relevant to an entity related to TDAM; (ii) represent the business judgment of TDAM uninfluenced by considerations other than the best interests of the Fund; (iii) comply with the applicable policies and procedures of TDAM; and (iv) achieve a fair and reasonable result for the Fund. TD earns a foreign exchange spread when unitholders switch between units of funds denominated in different currencies. The Fund also maintains bank accounts and overdraft provisions with TD for which TD earns a fee. 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 Unit 1 INVESTOR SERIES Net Assets, Beginning of Year $ 6.72 $ 6.53 $ 6.14 $ 5.92 $ 6.19 Total Revenue Total Expenses (excluding distributions) (0.12) (0.12) (0.12) (0.12) (0.12) Realized Gains (Losses) for the Period (0.45) (0.16) (0.35) 0.02 (0.04) Unrealized Gains (Losses) for the Period (0.22) (0.21) Total Increase (Decrease) from Operations 2 (0.33) From Net Investment Income (excluding dividends) (0.34) (0.10) (0.08) (0.47) (0.31) Return of Capital Total Annual Distributions 3 (0.34) (0.10) (0.08) (0.47) (0.31) Net Assets at December 31 $ 6.01 $ 6.72 $ 6.53 $ 6.11 $ 5.92 INSTITUTIONAL SERIES Net Assets, Beginning of Year $ 7.56 $ 7.31 $ 6.86 $ 6.61 $ 6.91 Total Revenue Total Expenses (excluding distributions) (0.04) (0.04) (0.04) (0.04) (0.04) Realized Gains (Losses) for the Period (0.50) (0.20) (0.42) 0.02 (0.04) Unrealized Gains (Losses) for the Period (0.30) (0.23) Total Increase (Decrease) from Operations 2 (0.33) From Net Investment Income (excluding dividends) (0.47) (0.16) (0.17) (0.62) (0.44) Return of Capital Total Annual Distributions 3 (0.47) (0.16) (0.17) (0.62) (0.44) Net Assets at December 31 $ 6.77 $ 7.56 $ 7.31 $ 6.83 $ This information is derived from the Fund s audited annual financial statements. The Fund adopted International Financial Reporting Standards ( IFRS ) on January 1, 2014 and accordingly adjusted the immediately preceding financial year ended December 31, 2013 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 unit presented in the financial statements may have differed from the net asset value ( NAV ) per unit 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 unitholders. All figures presented prior to January 1, 2013 were prepared in accordance with Canadian GAAP. 2 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations presented above starting from fiscal year 2013 are based on the weighted average number of units outstanding over the financial periods. The increase (decrease) from operations prior to 2013 were calculated by aggregating each valuation day s increase (decrease) from operations divided by the number of units outstanding on that date. This table is not intended to be a reconciliation of the net assets per unit. 3 Distributions were paid in cash or reinvested in additional units of the Fund, or both. 3

5 Net Assets per Unit 1 (continued) PREMIUM SERIES * Net Assets, Beginning of Year $ $ $ N/A N/A Total Revenue N/A N/A Total Expenses (excluding distributions) (0.17) (0.17) (0.02) N/A N/A Realized Gains (Losses) for the Period (0.54) (0.26) (0.43) N/A N/A Unrealized Gains (Losses) for the Period (0.54) N/A N/A Total Increase (Decrease) from Operations 2 (0.55) N/A N/A From Net Investment Income (excluding dividends) (0.55) (0.15) 0.00 N/A N/A From Dividends N/A N/A From Capital Gains N/A N/A Return of Capital N/A N/A Total Annual Distributions 3 (0.55) (0.15) 0.00 N/A N/A Net Assets at December 31 $ 9.30 $ $ N/A N/A ADVISOR SERIES Net Assets, Beginning of Year $ 7.85 $ 7.63 $ 7.18 $ 6.92 $ 7.24 Total Revenue Total Expenses (excluding distributions) (0.14) (0.14) (0.14) (0.14) (0.14) Realized Gains (Losses) for the Period (0.53) (0.18) (0.41) 0.02 (0.05) Unrealized Gains (Losses) for the Period (0.24) (0.24) Total Increase (Decrease) from Operations 2 (0.37) From Net Investment Income (excluding dividends) (0.40) (0.11) (0.10) (0.55) (0.37) Return of Capital Total Annual Distributions 3 (0.40) (0.11) (0.10) (0.55) (0.37) Net Assets at December 31 $ 7.02 $ 7.85 $ 7.63 $ 7.15 $ 6.92 F-SERIES Net Assets, Beginning of Year $ 7.43 $ 7.20 $ 6.76 $ 6.52 $ 6.81 Total Revenue Total Expenses (excluding distributions) (0.07) (0.07) (0.06) (0.06) (0.06) Realized Gains (Losses) for the Period (0.48) (0.18) (0.40) 0.02 (0.04) Unrealized Gains (Losses) for the Period (0.29) (0.23) Total Increase (Decrease) from Operations 2 (0.34) From Net Investment Income (excluding dividends) (0.44) (0.14) (0.15) (0.59) (0.42) Return of Capital Total Annual Distributions 3 (0.44) (0.14) (0.15) (0.59) (0.42) Net Assets at December 31 $ 6.65 $ 7.43 $ 7.20 $ 6.73 $ This information is derived from the Fund s audited annual financial statements. The Fund adopted International Financial Reporting Standards ( IFRS ) on January 1, 2014 and accordingly adjusted the immediately preceding financial year ended December 31, 2013 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 unit presented in the financial statements may have differed from the net asset value ( NAV ) per unit 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 unitholders. All figures presented prior to January 1, 2013 were prepared in accordance with Canadian GAAP. 2 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations presented above starting from fiscal year 2013 are based on the weighted average number of units outstanding over the financial periods. The increase (decrease) from operations prior to 2013 were calculated by aggregating each valuation day s increase (decrease) from operations divided by the number of units outstanding on that date. This table is not intended to be a reconciliation of the net assets per unit. 3 Distributions were paid in cash or reinvested in additional units of the Fund, or both. * Data reported represents results from the commencement of operations to December 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. 4

6 Net Assets per Unit 1 (continued) PREMIUM F-SERIES * Net Assets, Beginning of Year $ $ $ N/A N/A Total Revenue N/A N/A Total Expenses (excluding distributions) (0.08) (0.09) (0.01) N/A N/A Realized Gains (Losses) for the Period (0.88) (0.12) (0.34) N/A N/A Unrealized Gains (Losses) for the Period (0.34) (0.14) 0.39 N/A N/A Total Increase (Decrease) from Operations 2 (0.58) N/A N/A From Net Investment Income (excluding dividends) (0.60) (0.19) (0.01) N/A N/A From Dividends N/A N/A From Capital Gains N/A N/A Return of Capital N/A N/A Total Annual Distributions 3 (0.60) (0.19) (0.01) N/A N/A Net Assets at December 31 $ 9.39 $ $ N/A N/A H-SERIES Net Assets, Beginning of Year $ $ $ $ $ Total Revenue Total Expenses (excluding distributions) (0.26) (0.28) (0.30) (0.32) (0.32) Realized Gains (Losses) for the Period (0.91) (0.24) (1.02) 0.05 (0.10) Unrealized Gains (Losses) for the Period (0.67) (0.56) Total Increase (Decrease) from Operations 2 (0.83) From Net Investment Income (excluding dividends) (0.76) (0.23) (0.21) (1.20) (0.83) Return of Capital (0.44) (1.02) (1.05) (0.38) (0.51) Total Annual Distributions 3 (1.20) (1.25) (1.26) (1.58) (1.34) Net Assets at December 31 $ $ $ $ $ S-SERIES Net Assets, Beginning of Year $ $ $ $ $ Total Revenue Total Expenses (excluding distributions) (0.14) (0.15) (0.14) (0.14) (0.14) Realized Gains (Losses) for the Period (0.85) (0.60) (0.88) 0.04 (0.10) Unrealized Gains (Losses) for the Period (0.45) (0.56) Total Increase (Decrease) from Operations 2 (0.41) From Net Investment Income (excluding dividends) (0.90) (0.31) (0.34) (1.37) (0.96) Return of Capital (0.32) (0.95) (0.91) (0.36) (0.55) Total Annual Distributions 3 (1.22) (1.26) (1.25) (1.73) (1.51) Net Assets at December 31 $ $ $ $ $ This information is derived from the Fund s audited annual financial statements. The Fund adopted International Financial Reporting Standards ( IFRS ) on January 1, 2014 and accordingly adjusted the immediately preceding financial year ended December 31, 2013 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 unit presented in the financial statements may have differed from the net asset value ( NAV ) per unit 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 unitholders. All figures presented prior to January 1, 2013 were prepared in accordance with Canadian GAAP. 2 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations presented above starting from fiscal year 2013 are based on the weighted average number of units outstanding over the financial periods. The increase (decrease) from operations prior to 2013 were calculated by aggregating each valuation day s increase (decrease) from operations divided by the number of units outstanding on that date. This table is not intended to be a reconciliation of the net assets per unit. 3 Distributions were paid in cash or reinvested in additional units of the Fund, or both. * Data reported represents results from the commencement of operations to December 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. 5

7 Net Assets per Unit 1 (continued) T-SERIES Net Assets, Beginning of Year $ $ $ $ $ Total Revenue Total Expenses (excluding distributions) (0.26) (0.28) (0.31) (0.31) (0.32) Realized Gains (Losses) for the Period (0.90) (0.39) (0.85) 0.05 (0.10) Unrealized Gains (Losses) for the Period (0.58) (0.56) Total Increase (Decrease) from Operations 2 (0.73) From Net Investment Income (excluding dividends) (0.76) (0.22) (0.21) (1.20) (0.83) Return of Capital (0.44) (1.03) (1.05) (0.38) (0.51) Total Annual Distributions 3 (1.20) (1.25) (1.26) (1.58) (1.34) Net Assets at December 31 $ $ $ $ $ Q-SERIES Net Assets, Beginning of Year $ $ $ $ $ Total Revenue Total Expenses (excluding distributions) (0.09) (0.09) (0.08) (0.09) (0.09) Realized Gains (Losses) for the Period (1.04) (0.35) (0.92) 0.05 (0.10) Unrealized Gains (Losses) for the Period (0.60) (0.55) Total Increase (Decrease) from Operations 2 (0.70) From Net Investment Income (excluding dividends) (0.91) (0.32) (0.39) (1.42) (1.02) Return of Capital (0.30) (0.92) (0.84) (0.36) (0.52) Total Annual Distributions 3 (1.21) (1.24) (1.23) (1.78) (1.54) Net Assets at December 31 $ $ $ $ $ D-SERIES 2015* Net Assets, Beginning of Year $ N/A N/A N/A N/A Total Revenue 0.58 N/A N/A N/A N/A Total Expenses (excluding distributions) (0.13) N/A N/A N/A N/A Realized Gains (Losses) for the Period (0.36) N/A N/A N/A N/A Unrealized Gains (Losses) for the Period (0.90) N/A N/A N/A N/A Total Increase (Decrease) from Operations 2 (0.81) N/A N/A N/A N/A From Net Investment Income (excluding dividends) (0.41) N/A N/A N/A N/A From Dividends 0.00 N/A N/A N/A N/A From Capital Gains 0.00 N/A N/A N/A N/A Return of Capital 0.00 N/A N/A N/A N/A Total Annual Distributions 3 (0.41) N/A N/A N/A N/A Net Assets at December 31 $ 8.90 N/A N/A N/A N/A 1 This information is derived from the Fund s audited annual financial statements. The Fund adopted International Financial Reporting Standards ( IFRS ) on January 1, 2014 and accordingly adjusted the immediately preceding financial year ended December 31, 2013 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 unit presented in the financial statements may have differed from the net asset value ( NAV ) per unit 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 unitholders. All figures presented prior to January 1, 2013 were prepared in accordance with Canadian GAAP. 2 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations presented above starting from fiscal year 2013 are based on the weighted average number of units outstanding over the financial periods. The increase (decrease) from operations prior to 2013 were calculated by aggregating each valuation day s increase (decrease) from operations divided by the number of units outstanding on that date. This table is not intended to be a reconciliation of the net assets per unit. 3 Distributions were paid in cash or reinvested in additional units of the Fund, or both. * Data reported represents results from the commencement of operations to December 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. 6

8 Net Assets per Unit 1 (continued) O-SERIES Net Assets, Beginning of Year $ $ $ 9.84 $ 9.48 $ 9.91 Total Revenue Total Expenses (excluding distributions) Realized Gains (Losses) for the Period (0.78) (0.28) (0.58) 0.03 (0.06) Unrealized Gains (Losses) for the Period (0.35) (0.33) Total Increase (Decrease) from Operations 2 (0.39) From Net Investment Income (excluding dividends) (0.75) (0.26) (0.29) (0.94) (0.70) Return of Capital Total Annual Distributions 3 (0.75) (0.26) (0.29) (0.94) (0.70) Net Assets at December 31 $ 9.75 $ $ $ 9.80 $ This information is derived from the Fund s audited annual financial statements. The Fund adopted International Financial Reporting Standards ( IFRS ) on January 1, 2014 and accordingly adjusted the immediately preceding financial year ended December 31, 2013 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 unit presented in the financial statements may have differed from the net asset value ( NAV ) per unit 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 unitholders. All figures presented prior to January 1, 2013 were prepared in accordance with Canadian GAAP. 2 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations presented above starting from fiscal year 2013 are based on the weighted average number of units outstanding over the financial periods. The increase (decrease) from operations prior to 2013 were calculated by aggregating each valuation day s increase (decrease) from operations divided by the number of units outstanding on that date. This table is not intended to be a reconciliation of the net assets per unit. 3 Distributions were paid in cash or reinvested in additional units of the Fund, or both. Ratios and Supplemental Data INVESTOR SERIES Total Net Asset Value (000s) 1 $ 52,727 $ 78,752 $ 90,524 $ 96,687 $ 88,146 Number of Units Outstanding 1 8,776,825 11,726,041 13,864,786 15,752,740 14,828,533 Management Expense Ratio (%) Waivers or Absorptions (%) Net Asset Value per Unit $ 6.01 $ 6.72 $ 6.53 $ 6.14 $ 5.94 INSTITUTIONAL SERIES Total Net Asset Value (000s) 1 $ 90,583 $ 108,989 $ 108,758 $ 144,917 $ 110,381 Number of Units Outstanding 1 13,380,945 14,411,331 14,873,255 21,124,567 16,616,762 Management Expense Ratio (%) Waivers or Absorptions (%) Net Asset Value per Unit $ 6.77 $ 7.56 $ 7.31 $ 6.86 $ This information is provided as at December 31 of the past five fiscal years, as applicable. 2 Management expense ratio ( MER ) is based on total expenses (excluding distributions, commissions and other portfolio transaction costs) for the stated period 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 represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average NAV during the stated period. 4 The Fund s portfolio turnover rate indicates how actively the Fund s portfolio adviser manages its 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 stated period. The higher a fund s portfolio turnover rate, the greater the trading costs payable by the fund in the period, 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. 7

9 Ratios and Supplemental Data (continued) PREMIUM SERIES Total Net Asset Value (000s) 1 $ 2,878 $ 4,367 $ 1,597 N/A N/A Number of Units Outstanding 1 309, , ,967 N/A N/A Management Expense Ratio (%) N/A N/A 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 Unit $ 9.30 $ $ N/A N/A ADVISOR SERIES Total Net Asset Value (000s) 1 $ 98,866 $ 158,547 $ 188,058 $ 218,449 $ 199,093 Number of Units Outstanding 1 14,078,010 20,189,061 24,632,010 30,428,632 28,634,588 Management Expense Ratio (%) Waivers or Absorptions (%) Net Asset Value per Unit $ 7.02 $ 7.85 $ 7.63 $ 7.18 $ 6.95 F-SERIES Total Net Asset Value (000s) 1 $ 39,246 $ 57,625 $ 62,121 $ 63,452 $ 54,585 Number of Units Outstanding 1 5,904,128 7,752,187 8,625,879 9,389,089 8,341,382 Management Expense Ratio (%) Waivers or Absorptions (%) Net Asset Value per Unit $ 6.65 $ 7.43 $ 7.20 $ 6.76 $ 6.54 PREMIUM F-SERIES Total Net Asset Value (000s) 1 $ 9,011 $ 6,807 $ 579 N/A N/A Number of Units Outstanding 1 960, ,407 57,263 N/A N/A Management Expense Ratio (%) N/A N/A 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 Unit $ 9.39 $ $ N/A N/A H-SERIES Total Net Asset Value (000s) 1 $ 3,971 $ 4,527 $ 6,343 $ 3,344 $ 1,318 Number of Units Outstanding 1 304, , , ,089 84,767 Management Expense Ratio (%) Waivers or Absorptions (%) Net Asset Value per Unit $ $ $ $ $ This information is provided as at December 31 of the past five fiscal years, as applicable. 2 Management expense ratio ( MER ) is based on total expenses (excluding distributions, commissions and other portfolio transaction costs) for the stated period 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 represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average NAV during the stated period. 4 The Fund s portfolio turnover rate indicates how actively the Fund s portfolio adviser manages its 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 stated period. The higher a fund s portfolio turnover rate, the greater the trading costs payable by the fund in the period, 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. 8

10 Ratios and Supplemental Data (continued) S-SERIES Total Net Asset Value (000s) 1 $ 617 $ 1,356 $ 667 $ 731 $ 416 Number of Units Outstanding 1 46,199 88,875 42,440 46,799 26,925 Management Expense Ratio (%) Waivers or Absorptions (%) Net Asset Value per Unit $ $ $ $ $ T-SERIES Total Net Asset Value (000s) 1 $ 5,670 $ 8,009 $ 10,136 $ 10,509 $ 8,735 Number of Units Outstanding 1 435, , , , ,785 Management Expense Ratio (%) Waivers or Absorptions (%) Net Asset Value per Unit $ $ $ $ $ Q-SERIES Total Net Asset Value (000s) 1 $ 20,906 $ 24,418 $ 30,122 $ 64,041 $ 62,715 Number of Units Outstanding 1 1,570,083 1,609,821 1,936,170 4,155,629 4,103,733 Management Expense Ratio (%) Waivers or Absorptions (%) Net Asset Value per Unit $ $ $ $ $ D-SERIES Total Net Asset Value (000s) 1 $ 752 N/A N/A N/A N/A Number of Units Outstanding 1 84,431 N/A N/A N/A N/A Management Expense Ratio (%) N/A N/A N/A N/A Waivers or Absorptions (%) 1.51 N/A N/A N/A N/A Trading Expense Ratio (%) N/A N/A N/A N/A Portfolio Turnover Rate (%) N/A N/A N/A N/A Net Asset Value per Unit $ 8.90 N/A N/A N/A N/A O-SERIES Total Net Asset Value (000s) 1 $ 1,145,656 $ 1,317,376 $ 1,147,967 $ 1,167,740 $ 965,616 Number of Units Outstanding 1 117,553, ,871, ,270, ,686, ,374,188 Management Expense Ratio (%) 2, Waivers or Absorptions (%) Net Asset Value per Unit $ 9.75 $ $ $ 9.84 $ This information is provided as at December 31 of the past five fiscal years, as applicable. 2 Management expense ratio ( MER ) is based on total expenses (excluding distributions, commissions and other portfolio transaction costs) for the stated period 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 represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average NAV during the stated period. 4 The Fund s portfolio turnover rate indicates how actively the Fund s portfolio adviser manages its 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 stated period. The higher a fund s portfolio turnover rate, the greater the trading costs payable by the fund in the period, 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. 5 No fees or expenses are paid by this series. 9

11 Management Fees As manager and trustee of the Fund, TDAM is responsible for the overall business and affairs of the Fund including activities related to making units 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, other than O-Series units, pays TDAM a management fee. Management fees are calculated and accrued as a percentage of the net asset value of each series of units 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 units 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 units 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 unitholders. 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 Institutional Series Premium Series Advisor Series F-Series Premium F-Series H-Series S-Series T-Series Q-Series D-Series O-Series N/A N/A N/A There are no management fees or expenses paid by the Fund in respect of O-Series units of the Fund. Unitholders in the O-Series pay a negotiated administration fee directly to TDAM. Investment advisory, trustee, marketing services and other. 10

12 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 years shown. They show in percentage terms how an investment made on January 1 would have increased or decreased by December

13 12

14 Annual Compound Returns The following table shows the annual compound total returns for each series of units of the Fund for each of the periods indicated ended on, compared with the following benchmarks: Product Benchmark: BofA Merrill Lynch BB-B US High Yield Index (Hedged, C$) The BofA Merrill Lynch BB-B US High Yield Index is a subset of the BofA Merrill Lynch US High Yield Index which includes all securities rated BB1 through B3. The U.S. dollar exposure has been hedged into Canadian dollars. General market indices: BofA Merrill Lynch U.S. Broad Market Index (US$) This index is comprised of U.S. dollar denominated investment-grade debt publicly issued in the U.S. market. Past 10 Past 5 Past 3 Past (expressed as a %) years years years year INVESTOR SERIES TD High Yield Bond Fund Product Benchmark Market Index (US$) INSTITUTIONAL SERIES TD High Yield Bond Fund Product Benchmark Market Index (US$) ADVISOR SERIES TD High Yield Bond Fund Product Benchmark Market Index (US$) F-SERIES TD High Yield Bond Fund Product Benchmark Market Index (US$) Since Past 5 Past 3 Past (expressed as a %) inception years years year PREMIUM SERIES (Start date November 12, 2013) TD High Yield Bond Fund -0.2 N/A N/A -5.6 Product Benchmark 1.3 N/A N/A -2.7 Market Index (US$) 3.1 N/A N/A 0.6 PREMIUM F-SERIES (Start date November 12, 2013) TD High Yield Bond Fund 0.7 N/A N/A -4.8 Product Benchmark 1.3 N/A N/A -2.7 Market Index (US$) 3.1 N/A N/A 0.6 Since Past 5 Past 3 Past (expressed as a %) inception years years year H-SERIES (Start date September 15, 2009) TD High Yield Bond Fund Product Benchmark Market Index (US$) S-SERIES (Start date September 15, 2009) TD High Yield Bond Fund Product Benchmark Market Index (US$) T-SERIES (Start date September 15, 2009) TD High Yield Bond Fund Product Benchmark Market Index (US$) Q-SERIES (Start date September 15, 2009) TD High Yield Bond Fund Product Benchmark Market Index (US$) D-SERIES (Start date February 10, 2015) TD High Yield Bond Fund -7.0 N/A N/A N/A Product Benchmark -4.7 N/A N/A N/A Market Index (US$) -0.3 N/A N/A N/A O-SERIES (Start date April 6, 2010) TD High Yield Bond Fund Product Benchmark Market Index (US$) Over the Reporting Period, units of the Investor Series, Advisor Series, H-Series and T-Series returned negative 5.7 percent; Institutional Series and Q-Series returned negative 4.5 percent, F-Series and Premium F-Series returned negative 4.8 percent, S-Series returned negative 4.9 percent, Premium Series returned negative 5.6 percent and O-Series returned negative 4.0 percent versus 0.6 percent for the BofA Merrill Lynch US Broad Market Index (US$). Since its inception on February 10, 2015, units of the D-Series returned negative 7.0 percent versus negative 0.3 percent for the Market Index (US$) for the same period. Unlike the Market Index (US$), the Fund s return is quoted after the deduction of fees and expenses. The Fund s exposure to high-yield bonds detracted from relative performance versus the Market Index (US$). 13

15 Summary of Investment Portfolio as at % of Net Asset Value as at % of Net Asset Value ASSET ALLOCATION U.S. Corporate Bonds 69.8 Canadian Corporate Bonds 18.9 International Corporate Bonds 8.5 U.S. Common Equities 1.7 Index Equivalents 0.3 U.S. Preferred Equities 0.1 Canadian Common Equities 0.0 Short-Term Investments 0.3 Cash 0.0 Other Net Assets (Liabilities) 0.4 TERM ALLOCATION Maturing in 20+ Years 0.2 Maturing in Years 1.2 Maturing in 5-10 Years 41.4 Maturing in 1-5 Years 50.9 Maturing under 1 Year 3.5 U.S. Common Equities 1.7 Index Equivalents 0.3 U.S. Preferred Equities 0.1 Canadian Common Equities 0.0 Short-Term Investments 0.3 Cash 0.0 Other Net Assets (Liabilities) 0.4 CURRENCY WEIGHTING (after currency hedging) Canadian Dollar 91.0 United States Dollar 9.0 Euro 0.0 FIXED INCOME CREDIT RATING BBB 3.2 BB 50.5 B 31.1 CCC 10.9 CC 0.6 C 0.0 D 0.0 No Rating 0.9 Credit ratings are obtained from Standard & Poor s, Moody s or DBRS rating agencies. TOP 25 INVESTMENTS 1. HCA Inc. (USD) 6.50% due February 15, International Lease Finance Corporation (USD) 8.75% due March 15, CBRE Services Inc. (USD), Callable 5.00% due March 15, CHS/Community Health Systems Inc. (USD), Callable 5.125% due August 15, Nielsen Finance LLC/Nielsen Finance Co. (USD), Callable 5.00% due April 15, Cooper-Standard Holdings Inc Bombardier Inc. (USD) 7.50% due March 15, Best Buy Co., Inc. (USD), Callable 5.50% due March 15, Ally Financial Inc. (USD) 7.50% due September 15, Resolute Forest Products Inc. (USD), Callable 5.875% due May 15, NRG Energy Inc. (USD) 7.625% due January 15, Air Canada, Callable 7.625% due October 01, Kinetic Concepts Inc./KCI USA Inc. (USD), Callable 10.50% due November 01, Mattamy Group Corp. (USD), Callable 6.50% due November 15, Jabil Circuit Inc. (USD) 7.75% due July 15, Micron Technology Inc. (USD), Callable 5.25% due August 01, Nokia Corporation (USD) 5.375% due May 15, CIT Group Inc. (USD) 5.50% due February 15, Numericable SFR SA (USD), Callable 6.00% due May 15, Ally Financial Inc. (USD) 3.75% due November 18, Navistar International Corporation (USD), Callable 8.25% due November 01, VeriSign Inc. (USD), Callable 4.625% due May 01, T-Mobile US Inc. (USD), Callable 6.625% due November 15, Iron Mountain Canada Operations ULC, Callable 6.125% due August 15, Denali Borrower LLC/Denali Finance Corp. (USD), Callable 5.625% due October 15, Total % of Net Asset Value represented by these holdings 33.9 Note: Totals may not add due to rounding to one decimal place of individual figures. CURRENCY LEGEND (USD) United States Dollar TOTAL NET ASSET VALUE $ 1,470,882,704 The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the 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 td.mutualfunds@td.com 14

16 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. ( FTDCM ), FTSE International Limited ( FTSE ), the London Stock Exchange Group companies (the Exchange ) or TSX INC. ( TSX and together with FTDCM, FTSE and the Exchange, the Licensor Parties ). The Licensor Parties make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the index/indices ( the Index/Indices ) and/or the figure at which the said Index/Indices stand at any particular time on any particular day or otherwise. The Index/Indices are compiled and calculated by FTDCM and all copyright in the Index/Indices values and constituent lists vests in FTDCM. The Licensor Parties shall not be liable (whether in negligence or otherwise) to any person for any error in the Index/Indices and the Licensor Parties shall not be under any obligation to advise any person of any error therein. TMX is a trade mark of TSX Inc. and is used under licence. FTSE is a trade mark of the London Stock Exchange Group companies and is used by FTDCM under licence. TD Mutual Funds, TD Pools and TD Private Funds 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. 15