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Keeping
Commitments
149TH ANNUAL REPORT 2004

Table of contents

  • Page 1
    149TH ANNUAL REPORT 2004 Keeping Commitments

  • Page 2
    Our Vision: To be the better bank Our Guiding Principles: Be customer driven Respect each other Execute with excellence Know our business Enhance our brand Increase shareholder value

  • Page 3
    ... (loss) applicable to common shares - reported basis Net income applicable to common shares - before amortization of intangibles Economic profit2 Financial position at year end Total assets Total risk-weighted assets Total shareholders' equity Total common equity Market capitalization Per common...

  • Page 4
    ...) 2 (millions of Canadian dollars) TOTAL SHAREHOLDER RETURN (percent) $1,500 60% 50 750 40 30 0 20 10 -750 0 -10 -1,500 01 02 03 04 -20 00 01 02 03 04 (millions of Canadian dollars) Economic profit 2004 $1,116 (percent) Average of four other major Canadian banks TD Bank 2004 18.9% 14...

  • Page 5
    ... CORPORATE GOVERNANCE MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL RESULTS 103 104 108 GLOSSARY TEN-YEAR STATISTICAL REVIEW QUARTERLY RESULTS MORE ABOUT US 109 110 112 Shareholder & Investor Information Senior Officers The Future Matters Our Annual Report provides our shareholders, customers...

  • Page 6
    ... drive the Bank's strategic direction. 2004 Bank Performance TD Bank Financial Group delivered very strong financial results in 2004. The market rewards clarity of strategy and resulting performance and we were witness to that in the appreciation of our stock price over the last year. The Board...

  • Page 7
    ...WHETHER INVESTORS OR BUSINESSES ...ALL WANT THE SAME THINGS IN THE END ...CONFIDENCE IN THE MARKETS ...AND LOWER RISK FOR SHAREHOLDERS. SO, VIGILANCE, CLARITY AND PROGRESS IN GOVERNANCE BENEFIT US ALL." CHAIRMAN OF THE BOARD OF DIRECTORS, JOHN THOMPSON AT THE ANNUAL MEETING OF THE CANADIAN COALITION...

  • Page 8
    ... commercial banking base and plan on growing this business aggressively. Finally, we see strong upside in growing our insurance business. Our low-cost, direct insurance model through TD Insurance and TD Meloche Monnex offers superior returns and growth prospects. Wealth Management Strategy In Canada...

  • Page 9
    ... THE CUSTOMER. ADD NEW CUSTOMERS EVERY DAY. AND THANK YOUR PEOPLE." PRESIDENT AND CEO ED CLARK AT THE ANNUAL MEETING IN EDMONTON, ALBERTA Right: Bernie Dorval, Executive Vice President, Deputy Chair, TD Canada Trust; Ed Clark, President and CEO; and Don Drummond, Senior Vice President, TD Economics...

  • Page 10
    ...growth over time in Personal and Commercial Banking. • Grow assets in Wealth Management by 10%. • Earn a return on invested capital of 15-22% in Wholesale Banking. In Summary In 2005 we will celebrate our 150th anniversary. We have provided banking services to Canadian consumers, businesses and...

  • Page 11
    ... and the management of TD Bank Financial Group are committed to leadership in corporate governance. We have designed our corporate governance policies and our practices to ensure that we are focused on our responsibilities to our shareholders and on creating long term shareholder value. We can...

  • Page 12
    ... Trading Inc. Toronto, Ontario Donald R. Sobey Chairman Emeritus Empire Company Limited Stellarton, Nova Scotia Michael D. Sopko Corporate Director and Retired Chairman and Chief Executive Officer Inco Limited Oakville, Ontario John M. Thompson Chairman of the Board The Toronto-Dominion Bank Toronto...

  • Page 13
    ... Board as part of the succession planning process for the position of CEO; • Oversee the selection, evaluation, development and compensation of other members of senior management; • Produce a report on executive compensation for the benefit of shareholders, which is published in TDBFG's annual...

  • Page 14
    ... financial reporting process. The Audit Committee, not management, is responsible for the relationship with the shareholders' auditors. The Audit Committee's processes reinforce this structure. The Audit Committee reviews the shareholders' auditors' plans, and the results of their audits and reviews...

  • Page 15
    ... ACCOUNTING POLICIES AND ESTIMATES ACCOUNTING AND REPORTING CHANGES HOW OUR BUSINESSES PERFORMED Personal and Commercial Banking Wholesale Banking Wealth Management Corporate FACTORS THAT MAY AFFECT FUTURE RESULTS 38 39 39 41 43 45 46 47 47 48 50 51 MANAGING RISK Strategic Risk Credit Risk Market...

  • Page 16
    12 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Management's Discussion and Analysis TD WATERHOUSE'S COMMITMENT TO FRANCES WARDLAW WAS TO HELP BUILD A FINANCIAL PLAN THAT WOULD ALLOW HER TO TAKE RESPONSIBILITY FOR HER FINANCIAL AFFAIRS. FOLLOWING A SIGNIFICANT CHANGE IN HOME LIFE, FRANCES WAS ...

  • Page 17
    ... for (benefit of) income taxes Non-controlling interest Net income before amortization of intangibles and preferred dividends Amortization of intangibles, net of income taxes Net income (loss) Preferred dividends Net income (loss) applicable to common shares - reported basis (Canadian dollars) Basic...

  • Page 18
    ...on loans and deposits in Wealth Management's Discount Brokerage business. Partially offsetting this increase was a decline in interest income earned on reduced assets in the non-core lending portfolio in the Corporate segment. Reconciliation of Economic Profit (Loss), Return on Invested Capital and...

  • Page 19
    ...of Canadian dollars) $2,500 2500 Investment and securities services Credit fees Service charges Loan securitizations Insurance Other 1,250 5,750 1,000 5,500 750 500 5,250 250 0 02 03 04 0 1250 1250 1000 750 500 250 0 02 03 04 Net interest income was $5,616 million in 2003, an increase of...

  • Page 20
    ...increased as a result of increases in mutual fund trailer payments due to higher assets under management, growth in business volumes in Private Investment Advice, Financial Planning and Private Client Services and increased levels of investment in upgrading technology, product training and marketing...

  • Page 21
    ...million due to adjustments relating to credit card customer reward programs. Mutual fund management fees increased by $9 million due to higher assets under management relating to higher sales volumes. Full service brokerage and certain other securities services revenues increased by $15 million from...

  • Page 22
    ... the U.S. Securities and Exchange Commission containing additional information about this transaction. A copy may be obtained by contacting the Shareholder Relations department as set out on page 109 of this Annual Report. In addition, the Bank has hedged the cash portion of the purchase price for...

  • Page 23
    ...The Bank through The Canada Trust Company acts as a trustee for personal and corporate trusts. In the capacity as a trustee, fees are earned. The Bank also sponsors numerous mutual funds. The Bank acts as the administrator of these funds and does not guarantee the principal or return to investors on...

  • Page 24
    ...in Note 2 of the Bank's Consolidated Financial Statements. Valuation of publicly traded securities is determined by using quoted market prices, which fluctuate from reporting period to reporting period. Valuation of private equity investments held by the Bank requires management judgement due to the...

  • Page 25
    ... by management and the Bank's actuaries. These assumptions include the discount rate, the rate of compensation increase, the overall health care cost trend rate and the expected long term rate of return on plan assets. The discount rate used to value liabilities is based on long term corporate AA...

  • Page 26
    ... a new component of shareholders' equity and a new statement entitled Statement of Comprehensive Income will be added to the Bank's primary Consolidated Financial Statements. • Financial assets will be required to be classified as available for sale, held to maturity or trading. • For fair value...

  • Page 27
    ... of capital markets and investment banking products and services that include: • Advice on corporate strategy and mergers and acquisitions; • Underwriting and distributing loan, debt and equity products; • Structuring tailored risk management solutions; and • Executing financial transactions...

  • Page 28
    ... TD CANADA TRUST'S COMMITMENT TO EVA AND JOHN KAUFMAN WAS TO ENSURE THAT THEY WERE ABLE TO MOVE INTO THEIR DREAM HOME. AFTER THEIR ORIGINAL BUILDER DISAPPEARED, TAKING THEIR DEPOSIT AND LEAVING THE HOUSE PARTIALLY CONSTRUCTED, THE KAUFMANS TURNED TO FINANCIAL ADVISOR DENNIS INFANTI FOR HELP. DENNIS...

  • Page 29
    ... growth, lower credit losses and a lower tax rate combined to improve earnings significantly year-over-year. Return on invested capital increased from 17% to 19% in fiscal 2003. Personal and Commercial Banking continued to drive growth in shareholder value by generating economic profit of $639...

  • Page 30
    ...-hour window after the customer transaction. On an annual basis, about 400,000 customers are surveyed to provide feedback on TD Canada Trust's service performance. 2 Other revenue includes internal commissions on sales of mutual funds and other Wealth Management products, fees for foreign exchange...

  • Page 31
    ... rates rise. • Business objectives for 2005 are to improve market share trends while also improving customer cross sell and maintaining margins. Personal deposits • Offers a complete range of Canadian and U.S. dollar chequing, savings and term investment products designed to promote primary...

  • Page 32
    ... coming years from an already best-inclass efficiency ratio, while benefiting employees and customers. • An improved underwriting approach, along with the most efficient direct insurance marketing business model in Canada, positions Meloche Monnex well for continued client growth. • Although the...

  • Page 33
    ... of capital market services for Wholesale Banking's established client base in Canada. • Operate as a niche investment bank outside of Canada by leveraging product capabilities or sector expertise. • Selectively use credit to support high return relationships. Review of Financial Performance...

  • Page 34
    ... THE LOAN PORTFOLIO BY PURCHASING PROTECTION • ACHIEVED SIGNIFICANT RWA REDUCTION • IMPROVED MARKET AND CREDIT RISK INFRASTRUCTURE TOTAL REVENUE (millions of Canadian dollars) NET INCOME (LOSS) BEFORE AMORTIZATION OF INTANGIBLES (millions of Canadian dollars) RETURN ON INVESTED CAPITAL BEFORE...

  • Page 35
    ... of Canadian dollars) Economic profit (loss) (millions of Canadian dollars) Return on invested capital - before amortization of intangibles Efficiency ratio - before amortization of intangibles Key Product Groups within Wholesale Banking Corporate Banking • Corporate banking revenues declined 11...

  • Page 36
    ... impairment charges for TD Waterhouse International. The remaining increase in expenses resulted from volume-related trade execution costs, higher trailer payments to sellers of TD Mutual Funds and higher sales force compensation in Private Investment Advice and Financial Planning resulting from...

  • Page 37
    ... trades per day (thousands) Waterhouse International in 2003. Increases in marketing and trade related expenses in the U.S. were more than offset by the impact of the higher Canadian dollar on U.S. results. TD Asset Management • TD Mutual Funds is the sixth largest mutual fund family in Canada...

  • Page 38
    ...Revenues3 (millions of Canadian dollars) 2004 $1,623 384 167 104 291 37 $2,606 2003 $1,462 327 152 102 243 18 $2,304 2002 $1,475 345 156 100 238 7 $2,321 Discount Brokerage Mutual Funds Private Client Group Investment Management Private Investment Advice Financial Planning Total 1 Assets under...

  • Page 39
    ... of TD Bank Financial Group is comprised of Audit, Compliance, Corporate and Public Affairs, Economics, Enterprise Technology Solutions (information technology), Finance, Human Resources, Legal, Marketing, Office of the Ombudsman, Real Estate, Risk Management and Security. Banking is an increasingly...

  • Page 40
    ... 10 YEARS, AND ONE OF THE LARGEST NON-RECOURSE PROJECT DEBT FINANCINGS FOR AN ENERGY PROJECT EVER COMPLETED. Left: Sid Dykstra, President and CEO OPTI Canada; George Crookshank, CFO OPTI Canada Right: Robert Mason, Managing Director Investment Banking; Dean Ariss, Managing Director Corporate Credit

  • Page 41
    ... Bank's ability to deliver products and services to customers and otherwise conduct business. Currency Rates Currency rate movements in Canada, the United States and other jurisdictions in which the Bank does business may have an adverse impact on the Bank's financial position as a result of foreign...

  • Page 42
    ... structured product transactions, and establishes and monitors policy involving reputational or legal risk Asset/Liability Committee • Chaired by EVP and Chief Financial Officer • Responsible for the oversight of the Bank's non-trading market risk, consolidated liquidity and funding position...

  • Page 43
    ...and stress-testing. • Annual self-assessments by significant business units and corporate oversight functions of the Bank of their key risks and internal controls. • Supporting appropriate performance measurement that allocates risk-based economic capital to businesses and charges a cost against...

  • Page 44
    ...the Bank establishes credit risk exposure limits by country, industry and affiliated group. The various risk categories are managed as follows: Country Risk Economic or political changes in a foreign country could affect cross-border payments - for goods and services, loans, dividends, trade-related...

  • Page 45
    ... loss from changes in the value of financial instruments. The value of a financial instrument can be affected by changes in: • Interest rates; • Foreign exchange rates; • Equity and commodity prices; • Credit spreads. We are exposed to market risk in our trading and investment portfolios, as...

  • Page 46
    ... extreme economic events, replicate worst-case historical experiences or introduce large but plausible moves in key market risk factors. Stress tests are produced and reviewed each week with the Executive Vice President and Chief Risk Officer, and every two weeks with the Market Risk and Capital...

  • Page 47
    ... changes in interest rates could have on the Bank's margins, earnings and economic value. For example if fixed rate assets were funded with short-term deposits, rising interest rates could increase our funding costs, which would reduce the net interest income earned on certain loans. The objective...

  • Page 48
    ... hedge the resulting financial position to the target risk profile of minimal residual economic exposure. Hedging to manage interest rate risk involves the use of derivatives, wholesale instruments and other capital market alternatives and, less frequently, product pricing strategies. The interest...

  • Page 49
    ...constraint that the Bank's capital ratios can change by no more than 10 basis points for an 8% change in foreign exchange rates. Why Product Margins Fluctuate Over Time As explained above, a fully-hedged approach to asset liability management locks in margins on fixed rate loans and deposits as they...

  • Page 50
    ... of loss resulting from inadequate or failed internal processes, people and systems or from external events. Operational risk is present in all our business activities; deposit taking, lending, trading, trust and advisory services, transaction processing and insurance. Operational risk encompasses...

  • Page 51
    ... turn can impact the brand, earnings and capital. Credit, market, operational, liquidity, investment and regulatory risks must all be managed effectively in order to safeguard the Bank's reputation. As business practices evolve to address new operating environments with respect to reputational risk...

  • Page 52
    ...'s preferred shareholders and holders of the Bank's subordinated debt. Who Manages the Bank's Capital Finance manages capital for the Bank and is responsible for acquiring, maintaining and retiring capital. The Board of Directors oversees capital management. Economic Capital The Bank uses in-house...

  • Page 53
    ... Canada. Note 11 of the Bank's Consolidated Financial Statements provides further details. Ratings Fitch Ratings revised the Bank's outlook on the Bank's AA long term ratings to stable from negative, citing the progress made in reducing the Bank's credit risk profile and bolstering capital. The Bank...

  • Page 54
    ... rewards for more rigorous and accurate risk management by reducing regulatory capital required under weaker or less sophisticated approaches. While the overall objective of the new Framework is to neither increase nor decrease the level of overall capital in the system, some financial institutions...

  • Page 55
    ... of Intangibles Analysis of Change in Net Interest Income Net Interest Rate Margin Average Earning Balances and Interest Rates Other Income Trading Related Income Non-interest Expenses and Efficiency Ratio Taxes Loans to Small and Mid-sized Business Customers Fees Paid to the Bank's Auditors 55 56...

  • Page 56
    ... of Canadian dollars) TD Waterhouse fees and commissions Full service brokerage and other securities services Mutual fund management Credit fees Net investment securities gains Trading income (loss) Service charges Loan securitizations Card services Insurance, net of claims Trust fees Gains on sale...

  • Page 57
    ... intangible assets Restructuring costs Marketing and business development Brokerage related fees Professional and advisory services Communications Capital and business taxes Postage Travel and relocation Other General total Total expenses Percentage increase (decrease) Efficiency ratio Net interest...

  • Page 58
    ...pilot audit), attest services not required by statute or regulation and interpretation of financial accounting and reporting standards. 1 4 Tax fees are fees for services performed by the Bank's auditors for tax compliance, tax advice and tax planning except those tax services related to the audit...

  • Page 59
    ... 11 Loans and Customers' Liability under Acceptances, Net of Allowance for Credit Losses Canada1 United States1 Other international1 Total (millions of Canadian dollars) By sector Residential mortgages Consumer instalment and other personal Total residential and personal Real estate development...

  • Page 60
    ... international1 Total (millions of Canadian dollars) By sector Residential mortgages Consumer instalment and other personal Total residential and personal Real estate development Commercial and industrial Residential Retail Real estate services Total real estate Agriculture Apparel and textile...

  • Page 61
    ... States1 Other international 1 Total (millions of Canadian dollars) By sector Residential mortgages Consumer instalment and other personal Total residential and personal Real estate development Commercial and industrial Residential Retail Real estate services Total real estate Agriculture Apparel...

  • Page 62
    ...(millions of Canadian dollars) Assets under administration Personal and Commercial Banking Retail custody and other Loans securitized Total Personal and Commercial Banking Wealth Management TD Waterhouse retail brokerage - Canada - United States and other international Other Wealth Management Total...

  • Page 63
    ...Subordinated notes and debentures Operating lease commitments Capital trust securities Network service agreements $ 488 $ 827 TABLE 18 Capital Stock and Dividends Per Share 2004 Capital Stock (thousands of shares) 2003 Capital Stock (thousands of shares) Dividends Per Share (Canadian dollars...

  • Page 64
    ... Capital Stock Note 12 Stock-based Compensation Note 13 Employee Future Benefits Note 14 Provision for (Benefit of) Income Taxes Note 15 Fair Value of Financial Instruments Note 16 Interest Rate Risk Note 17 Derivative Financial Instruments Note 18 Contingent Liabilities, Commitments and Guarantees...

  • Page 65
    ... of business conduct throughout the Bank. The Bank's Board of Directors, acting through the Audit Committee which is comprised of directors who are not officers or employees of the Bank, oversees management's responsibilities for the financial reporting and internal control systems. The Bank's Chief...

  • Page 66
    ... deposits with other banks Interest-bearing deposits with other banks Securities (Note 2) Investment Trading Securities purchased under resale agreements Loans (Note 3) Residential mortgages Consumer instalment and other personal Credit card Business and government Allowance for credit losses Loans...

  • Page 67
    ... income Investment and securities services Credit fees Net investment securities gains (Note 2) Trading income (loss) Service charges Loan securitizations (Note 4) Card services Insurance, net of claims Trust fees Gain on sale of mutual fund record keeping and custody business (Note 21) Write down...

  • Page 68
    64 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY For the years ended October 31 (millions of Canadian dollars) 2004 $ 1,535 - - (225) 1,310 3,179 - 99 174 (41) (38) 3,373 9 11 20 (130) (739) 1,004 (400) (265) 8,518 2,310...

  • Page 69
    ... of) credit losses Gain on sale of mutual fund record keeping and custody business Depreciation (Note 6) Goodwill impairment Amortization of intangible assets Restructuring costs (reversal) Stock option expense Write down of investment in joint ventures Net investment securities gains Changes in...

  • Page 70
    ...BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 Summary of Significant Accounting Policies (d) Translation of Foreign Currencies Foreign currency assets and liabilities are translated into Canadian dollars at prevailing year end rates...

  • Page 71
    ...credit spreads, commodity prices, equities or other financial measures. Such instruments include interest rate, foreign exchange, equity, commodity and credit derivative contracts. The Bank uses these instruments to manage the risks associated with its funding and investing strategies or for trading...

  • Page 72
    ... term deposit, loan and mutual fund intangibles resulting from acquisitions. The majority of these finite life intangible assets are amortized to income on a double declining basis over eight years, based on their estimated useful lives. (n) Land, Buildings and Equipment Land is reported at cost...

  • Page 73
    ... pro-rated on service and management's best estimates of investment returns on the plan's assets, compensation increases, retirement ages of employees and estimated health care costs. The discount rate used to value liabilities is based on long term corporate AA bond yields as of the valuation date...

  • Page 74
    70 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results NOTE 2 Securities Securities Maturity Schedule (millions of Canadian dollars) Within 1 year 1 to 3 years 3 to 5 years Remaining term to maturity 5 to 10 years Over 10 years No specific maturity 2004 Total 2003 Total Investment...

  • Page 75
    TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results 71 Securities - Unrealized Gains and Losses (millions of Canadian dollars) Book value Gross unrealized gains Gross unrealized losses 2004 Estimated market value Book value Gross unrealized gains Gross unrealized losses 2003 ...

  • Page 76
    ... monthly payment rate for personal and credit card loans. The excess spread for credit card loans reflects the net portfolio yield, which is interest earned less funding costs and losses. There are no expected credit losses for residential mortgage loans as these mortgages are government guaranteed...

  • Page 77
    ... GROUP ANNUAL REPORT 2004 • Financial Results 73 The following table presents key economic assumptions and the sensitivity of the current fair value of retained interests to two (millions of Canadian dollars) Residential Commercial Personal loans Credit card loans mortgage loans adverse changes...

  • Page 78
    ... of Canadian dollars) Notice 2 2003 Total Term 3 Total Personal Banks Business and government Total Non-interest-bearing deposits included above In domestic offices In foreign offices Interest-bearing deposits included above In domestic offices In foreign offices U.S. federal funds deposited...

  • Page 79
    TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results 75 Term Deposits (millions of Canadian dollars) Within 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years 2004 Total 2003 Total Personal Banks Business and government Total $ 25,114 10,526 43,632 $ 79,272 $ 12...

  • Page 80
    ... (d) the Bank has failed to comply with a direction of the Superintendent of Financial Institutions Canada to increase its capital or provide additional liquidity. The distribution rate on the trust securities is 7.60% per annum. No Non-cumulative Class A Redeemable First Preferred Share, Series A1...

  • Page 81
    TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results 77 NOTE 11 Capital Stock determined by dividing the then applicable redemption price per Series J share together with declared and unpaid dividends to the date of conversion by the greater of $2.00 and 95% of the average trading ...

  • Page 82
    ...terms of the plan, cash dividends on common shares are used to purchase additional common shares. At the option of the Bank, the common shares may be issued from the Bank's treasury at an average market price based on the last five trading days before the date of the dividend payment with a discount...

  • Page 83
    TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results 79 NOTE 12 Stock-based Compensation plan, 16.4 million common shares have been reserved for future issuance (2003 - 18.5 million). The outstanding options expire on various dates to March 2013. The Bank's predecessor plan, the 1993...

  • Page 84
    ... earnings per share. Dividends earned on Bank common shares held by the ESP are used to purchase additional common shares for the ESP in the open market. NOTE 13 Employee Future Benefits For 2004 the Bank's principal pension plan's net assets included funded investments in the Bank and its...

  • Page 85
    ... period Change in plan assets Plan assets at fair value at beginning of period Actual income on plan assets Gain (loss) on disposal of investments Members' contributions Employer's contributions Increase (decrease) in unrealized gains on investments Benefits paid General and administrative expenses...

  • Page 86
    82 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results Other Pension Plans As a result of the acquisition of CT, the Bank sponsors a second pension plan consisting of a defined benefit portion and a defined contribution portion. The defined benefit portion was closed to new members ...

  • Page 87
    TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results 83 The assumed health care cost increase rate for the next year used to measure the expected cost of benefits covered for the principal non-pension post-retirement benefit plans is 6.0%. The rate is assumed to decrease gradually to ...

  • Page 88
    ...(decrease) resulting from: Goodwill amortization and impairment Dividends received Rate differentials on international operations Future federal and provincial tax rate increases (reductions) Federal large corporations tax Gains on sale of investment real estate Other - net Provision for (benefit of...

  • Page 89
    ... GROUP ANNUAL REPORT 2004 • Financial Results 85 NOTE 15 Fair Value of Financial Instruments 2004 Carrying value Estimated fair value Carrying value (millions of Canadian dollars) 2003 Estimated fair value Consolidated Balance Sheet Assets Securities Loans Liabilities Deposits Subordinated...

  • Page 90
    ... Investment securities Effective yield Trading securities Securities purchased under resale agreements Effective yield Loans Effective yield Other Total assets Liabilities and shareholders' equity Deposits Effective yield Obligations related to securities sold short Obligations related to securities...

  • Page 91
    ... GROUP ANNUAL REPORT 2004 • Financial Results 87 Interest Rate Risk by Currency (billions of Canadian dollars) Floating rate Within 3 months 3 months to 1 year Total within 1 year 1 year to 5 years Over 5 years Noninterest sensitive 2004 Canadian currency on-balance sheet position Foreign...

  • Page 92
    ...credit spreads. This risk is managed by senior officers responsible for the Bank's trading business and is monitored separately by the Bank's Risk Management Group. The estimated fair value of exchange traded derivative financial instruments is based on quoted market rates plus or minus daily margin...

  • Page 93
    ...Swaps Cross-currency interest rate swaps Options written Options purchased Total foreign exchange contracts Credit derivatives Other contracts2 Fair value - trading Derivative financial instruments held or issued for non-trading purposes: Interest rate contracts Forward rate agreements Swaps Options...

  • Page 94
    ... of Canadian dollars) Current replacement cost 1 Credit equivalent amount 2004 Riskweighted amount Current replacement cost 1 Credit equivalent amount 2003 Riskweighted amount Interest rate contracts Forward rate agreements Swaps Options purchased Total interest rate contracts Foreign exchange...

  • Page 95
    TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results 91 NOTE 18 Contingent Liabilities, Commitments and Guarantees In addition, the Bank is committed to fund $424 million of merchant banking investments as opportunities arise. (b) During the year, the Bank entered into an agreement ...

  • Page 96
    ... 1, 2003, the Bank prospectively adopted the accounting guideline on disclosure of guarantees. A guarantee is defined to be a contract that contingently requires the Bank to make payments to a third party based on (i) changes in an underlying interest rate, foreign exchange rate, equity or commodity...

  • Page 97
    ... Wholesale Banking segment provides financial products and services to corporate, government, and institutional customers. The Wealth Management segment provides investment products and services to institutional and retail investors. The Bank's other business activities are not considered reportable...

  • Page 98
    94 TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results Results by Business Segment (millions of Canadian dollars) Personal and Commercial Banking Wholesale Banking 1,2 Wealth Management 2004 Net interest income Provision for (reversal of) credit losses Other income Non-interest ...

  • Page 99
    ... of the securities and trading technology platform and listed equity options market-making businesses of the Stafford group of firms (Stafford) and the LETCO group (LETCO). The purchase price consisted of an initial cash payment of approximately $428 million. The acquisition was accounted for by...

  • Page 100
    ... U.S. equity options business in Wholesale Banking. Dramatic volume and margin declines had a significantly negative impact on this business. Consequently, the Bank determined that it was necessary to shift its strategy and 2004 (millions of Canadian dollars) Human Resources Real Estate Technology...

  • Page 101
    ... f Guaranteesg Asset retirement obligationsh Other Income taxes and net change in income taxes due to the above itemsi Non-controlling interest in TD Mortgage Investment Corporation j Net income (loss) based on U.S. GAAP Preferred dividends Net income (loss) applicable to common shares based on...

  • Page 102
    ...plan, option holders could elect to receive cash for the options equal to their intrinsic value, being the excess of the market value of the share over the option exercise price at the date of exercise. In accounting for stock options with this feature, U.S. GAAP requires expensing the annual change...

  • Page 103
    TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Financial Results 99 (b) Employee Future Benefits Under Canadian GAAP, the Bank adopted the employee future benefits standard in fiscal 2001 on a retroactive basis without restatement. The Canadian standard requires the accrual of employee future ...

  • Page 104
    ... the Canadian dollar to be presented net of taxes in other comprehensive income. Under Canadian GAAP, the Bank presents foreign currency translation adjustments as a separate component of shareholders' equity. NOTE 25 Related Party Transactions The Bank makes loans to its officers and directors...

  • Page 105
    ..., TD Capital Trust II, and TD Mortgage Investment Corporation. Each subsidiary is incorporated in the country in which its head office is located. Canadian Commercial Mortgage Operations Company of Canada CT Financial Assurance Company First Nations Bank of Canada (89%) Meloche Monnex Inc. Security...

  • Page 106
    ... Corporation TD Waterhouse Investor Services, Inc. TD Waterhouse Canadian Call Center Inc. TD Waterhouse Technology Services, Inc. Toronto Dominion Holdings (U.S.A.), Inc. TD Equity Options, Inc. TD Options LLC Edge Trading Systems LLC TD Securities (USA) Inc. TD Professional Execution, Inc. Toronto...

  • Page 107
    ... securities to investors to fund the purchase of loans. Swaps: Contracts that involve the exchange of fixed and floating interest rate payment obligations and/or currencies on a notional principal for a specified period of time. Total Market Return: The change in market price plus dividends paid...

  • Page 108
    ... of Canadian dollars) 2004 Assets Cash resources and other Securities Securities purchased under resale agreements Loans (net) Other Total Liabilities Deposits Other Subordinated notes and debentures Non-controlling interest in subsidiaries Shareholders' equity Capital stock - preferred - common...

  • Page 109
    ... 32 882 $ 1995 $ 2,378 180 2,198 1,461 3,659 2,413 1,246 452 - 794 38 756 1 Earnings before amortization of intangibles is explained in the "How the Bank reports" section on page 13 of this Annual Report.

  • Page 110
    ...-weighted assets Efficiency ratio Net interest rate margin Common dividend payout ratio Dividend yield3 Price earnings ratio4 Net impaired loans as a % of net loans5 Net impaired loans as a % of common equity Provision for credit losses as a % of net average loans5 Tier 1 capital to risk-weighted...

  • Page 111
    ... 2002, the number of employees is on an "as at" full-time equivalent basis. Includes retail bank outlets, private client centre branches, and estates and trusts branches. Earnings before amortization of intangibles is explained in the "How the Bank reports" section on page 13 of this Annual Report.

  • Page 112
    ...TD BANK FINANCIAL GROUP ANNUAL REPORT 2004 • Quarterly Results QUARTERLY RESULTS Quarterly Results - Reported Basis 2004 Quarter ended (millions of Canadian dollars... income (loss) per common share Diluted net income (loss) per common share Return on common shareholders' equity $ 1.05 1.04 22.1%...

  • Page 113
    ... plan, please contact our transfer agent or visit our web site at www.td.com under Investor Relations/Shareholder Information. Debenture Services Trustee for debentures: Computershare Trust Company of Canada Corporate Trust Services 100 University Avenue, 8th Floor Toronto, Ontario M5J 2Y1 Dividend...

  • Page 114
    ...Toronto Compliance Philip D. Ginn Richmond Hill Computing Services Nico Meijer Toronto Trading Risk Personal and Commercial Banking Andrea S. Rosen Toronto Vice Chair and President, TD Canada Trust Bernard T. Dorval 1 Toronto Executive Vice President Business Banking and Insurance Deputy Chair TD...

  • Page 115
    ... 1 New York, New York Marketing TD Waterhouse USA Richard J. Rzasa Hoboken, New Jersey Technology Solutions TD Waterhouse USA Wholesale Banking Investment Management Robert E. Dorrance 1 Toronto Vice Chair Chairman and Chief Executive Officer TD Securities Michael W. MacBain Toronto Executive...

  • Page 116
    ..., so we're focused on building a supportive, healthy and rewarding workplace that allows them to perform at their best and achieve career satisfaction. We invest roughly $50 million per year on training and development, offer a wide range of benefits and work/life options, and have made workforce...

  • Page 117
    ... LONG-TERM RELATIONSHIPS AND SHAPE POSITIVE FUTURES FOR ALL OUR STAKEHOLDERS, WE CONTINUALLY STRIVE TO SUPPORT EACH OF THEIR NEEDS AND ACTIVELY PROMOTE THE SOCIAL, ECONOMIC AND ENVIRONMENTAL ENRICHMENT OF OUR SHARED SOCIETY. Below: Sherrida Nasir, Administrative Assistant, TD Bank Financial Group...

  • Page 118
    ... TD Canada Trust, 24 hours a day, seven days a week 1-866-222-3456 French: 1-866-233-2323 Cantonese/Mandarin: 1-800-328-3698 Telephone device for the deaf: 1-800-361-1180 General information: Contact Corporate and Public Affairs, 416-982-8578 Internet web site: www.td.com Internet e-mail: customer...