With respect to the Society’s public debt portfolio, up to 15% of the total fund can be invested in a bond mandate subject to the following constraints: debt instruments rated BBB+ to BBB- must not exceed 25%; asset-backed securities must have a minimum credit rating of AAA and not exceed 25% of the mandate; debt instruments of non-government entities must not exceed 80%; debt instruments of non-Canadian government entities must not exceed 20%; debt instruments of a single non-government or non-Canadian government entity must not exceed 10%; and debt instruments issued by the Government of Canada, provinces of Canada, or municipalities must not exceed 100%, 75%, or 10%, respectively. Also with respect to the Society’s public debt portfolio, up to 14% of the total fund can be invested in a bond mandate subject to the following constraints: debt instruments rated BBB+ to BBB- must not exceed 25%; asset-backed securities must have a minimum credit rating of AAA and not exceed 25% of the mandate; and there is a limitation of 10% for any one issuer. The remainder of the public debt portfolio is not permitted to invest in debt instruments of non-government entities.


Plan Asset Allocation (millions of Canadian dollars,


except as noted)


As at October 31, 2016 Debt


Equity


Alternative investments1 Other2


Total


As at October 31, 2015 Debt


Equity


Alternative investments1 Other2


Total


As at October 31, 2014 Debt


Equity Cash equivalents


Alternative investments1 Other2


Total 1


58-72%


24-34.5 0-4


0-12.5 n/a


58-76% 24-42 0-10 n/a


Acceptable range


40-70% 24-42 0-35 n/a


% of total


62% 33 5


n/a 100%


64% 30 6


n/a 100%


60% 32 2 6


n/a 100% $


Quoted –


1,165 31 –


$ 1,196 $ –


1,015 37 –


$ 1,052 $ –


1,228 –


40 –


$ 1,268


The Society’s alternative investments primarily include private equity funds, none of which is invested in the Bank and its affiliates. The principal pension plans also invest in investment vehicles which may hold shares or debt issued by the Bank.


RISK MANAGEMENT PRACTICES


The principal pension plans’ investments include financial instruments which are exposed to various risks. These risks include market risk (including foreign currency, interest rate, inflation, and price risks), credit risk, longevity risk and liquidity risk. Key material risks faced by all plans are a decline in interest rates or credit spreads, which could increase the defined benefit obligation by more than the change in the value of plan assets, or from longevity risk (that is, lower mortality rates). Asset-liability matching strategies are focused on obtaining an appropriate balance between earning an adequate return and having changes in liability values being hedged by changes in asset values. The principal pension plans manage these financial risks in accordance


with the Pension Benefits Standards Act, 1985, applicable regulations, as well as both the principal pension plans’ Statement of Investment Policies and Procedures (SIPP) and the Management Operating Policies and Procedures (MOPP). The following are some specific risk management


practices employed by the principal pension plans: • Monitoring credit exposure of counterparties • Monitoring adherence to asset allocation guidelines • Monitoring asset class performance against benchmarks


2


The TDPP is not permitted to invest in debt instruments of non- government entities.


The equity portfolios of both the Society and the TDPP are broadly diversified primarily across medium to large capitalization quality companies and income trusts with no individual holding exceeding 10% of the equity portfolio or 10% of the outstanding securities of any one company at any time. Foreign equities are permitted to be included to further diversify the portfolio. A maximum of 10% of a total fund may be invested in emerging market equities. For both the Society and the TDPP, derivatives can be utilized provided they are not used to create financial leverage, but rather for risk management purposes. Both the Society and the TDPP are also permitted to invest in other alternative investments, such as private equity, infrastructure equity and real estate.


The asset allocations by asset category for the principal pension plans (excluding PEA assets) are as follows:


Society1


Fair value Unquoted $ 2,962


407 208 43


$ 3,620


$ 2,852 346 227 74


$ 3,499


$ 2,489 84 93


188 101


$ 2,955


44-56% 44-56 n/a n/a n/a


44-56% 44-56 n/a n/a


Acceptable range


25-56% 44-65 0-20 n/a


% of total


43% 56 1


n/a 100%


50% 50


n/a n/a


100%


50% 50


n/a n/a n/a


100%


Quoted $ –


51 – –


$ 51


$ – –


n/a –


$ –


$ – –


n/a n/a –


$ –


TDPP1


Fair value Unquoted $ 413


488 11 44


$ 956


$ 369 374 n/a 33


$ 776


$ 277 280 n/a n/a 25


$ 582


Consists mainly of PEA assets, interest and dividends receivable, and amounts due to and due from brokers for securities traded but not yet settled.


The Bank’s principal pension plans are overseen by a single retirement governance structure established by the Human Resources Committee of the Bank’s Board of Directors. The governance structure utilizes retirement governance committees who have responsibility to oversee plan operations and investments, acting in a fiduciary capacity. Where required, approvals will also be sought from the applicable local body to comply with local regulatory requirements. Strategic, material plan changes require the approval of the Bank’s Board of Directors.


OTHER PENSION AND RETIREMENT PLANS CT Pension Plan


As a result of the acquisition of CT Financial Services Inc. (CT), the Bank sponsors a pension plan consisting of a defined benefit portion and a defined contribution portion. The defined benefit portion was closed to new members after May 31, 1987, and newly eligible employees joined the defined contribution portion of the plan. The Bank received regulatory approval to wind-up the defined contribution portion of the plan effective April 1, 2011. The wind-up was completed on May 31, 2012. Funding for the defined benefit portion is provided by contributions from the Bank and members of the plan.


180 TD BANK GROUP ANNUAL REPORT 2016 FINANCIAL RESULTS


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